NMBZ Holdings
Annual Report 2021

Plain-text annual report

ANNUAL REPORT 2021 CONTENTS Financial Summary Group Profile Chairman’s Statement Chief Executive Officer's Report Report of the Directors Report of the Independent Auditors Statements of Comprehensive Income Statements of Financial Position Statements of Changes in Equity Statements of Cash Flows 1 2 3 - 4 5 - 6 7 - 15 16 - 22 23 24 - 25 26 - 27 28 - 29 Significant Accounting Policies & Notes to the Financial Statements 30 - 100 Historical Five Year Financial Summary Sustainability report Notices and other information 101 - 103 104 - 112 113 - 122 i tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 FINANCIAL SUMMARY Inflation adjusted Historical Cost 31 December 31 December 2020 Audited Restated 2021 Audited 31 December 31 December 2020 2021 ZWL ZWL ZWL ZWL Operating profit before impairment charge and loss on net monetary position 3 450 115 150 1 385 000 759 4 102 728 519 1 856 050 489 Total comprehensive income 2 248 387 353 1 656 058 822 3 790 755 331 2 704 776 561 Basic earnings per share (cents) 463 338 728 449 Deposits from customers 16 340 531 967 10 066 569 255 16 340 531 967 6 262 750 864 Total gross loans and advances 9 996 817 479 3 941 259 126 9 996 817 479 2 451 989 687 Total shareholders’ funds and shareholders’ liabilities Enquiries: NMBZ HOLDINGS LIMITED 9 025 526 399 6 742 881 414 7 297 154 066 3 388 155 345 Gerald Gore, Chief Executive Officer, NMBZ Holdings Limited geraldg@nmbz.co.zw Margret Chipunza, Chief Finance Officer, NMBZ Holdings Limited margretc@nmbz.co.zw Website: Email: Telephone: http://www.nmbz.co.zw enquiries@nmbz.co.zw +263 8688003347 1 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 GROUP PROFILE The NMBZ Holdings Limited Group (the Group) comprises the company (NMBZ Holdings Limited) and the wholly owned banking subsidiary, NMB Bank Limited (the Bank). The Bank was established in 1993 as a merchant bank incorporated under the Companies and Other Business Entities Act (Chapter 24:31) of Zimbabwe and is now registered as a commercial bank in terms of the Banking Act (Chapter 24:20) of Zimbabwe. It operates through a branch network in Harare, Bulawayo, Masvingo, Mutare, Gweru, Bindura and Chinhoyi. The Bank’s branch and agency network is constantly growing to service customers and meet demands in suitable and convenient locations. Set out below are the Bank’s branch locations: Avondale - 20 King George Road, Avondale, Harare Bindura - Mwatuka Complex, Bindura Borrowdale - Shops 37 & 38, Sam Levy’s Village, Borrowdale, Harare Borrowdale Excellence Centre - NMB Head Office, 19207 Liberation Legacy Way, Borrowdale, Harare Bulawayo - NMB Centre, Corner George Silundika Street/Leopold Takawira Street, Bulawayo Chinhoyi - 469 Magamba Way, Chinhoyi Gweru - 36 Robert Mugabe Road, Gweru Head Office - NMB Head Office, 19207 Liberation Legacy Way Borrowdale, Harare Joina City - Shop 105A, First floor, Joina City Corner Jason Moyo / Innez Terrace, Harare Masvingo - Stand no. 377 Robert Mugabe Way, Masvingo Msasa - 77 Amby Drive, Harare Mutare - Embassy Building, Corner Aerodrome Road/Second Street, Mutare Southerton - 7 - 9 Plymouth Road, Harare The Bank’s Automated Teller Machine (ATM) network, covers the following locations: Chinhoyi Harare Gweru Mutare Bulawayo Masvingo 2 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021CHAIRMAN'S STATEMENT for year ended 31 December 2021 INTRODUCTION For the greater part of 2021, there was a growing sense of cautious optimism that finally the worst of the COVID-19 pandemic was behind us. However, towards the end of the year, our resilience was put to the test once more as the spread of new variants necessitated the reintroduction of various restrictions. That presented challenges to businesses emanating from a slowdown in the global economy and supply chain disruptions. Despite these factors, the Zimbabwean economy continued to show signs of resilience and recovery. The various economic stabilization initiatives, including the foreign exchange auction system introduced in June 2020, resulted in a significant drop in inflation, with year-on-year inflation (Y.o.Y) dropping from a high of 837% recorded in July 2020, to 60.74% as of December 2021. Month-on-month inflation (M.o.M) averaged 4.05% during the year 2021. During the period under review, the local currency depreciated by 32.9% from ZW$81.7866/US$ to ZW$108.666/US$. In 2021, total foreign currency receipts inflows into the economy increased by 53% to US$9.7 billion, a record high compared to US$6.3 billion in 2020. The performance was driven by increased commodity prices, increased capacity utilization across sectors, international remittances, and gold incentives put in place by the government. Notwithstanding the economic headwinds, the economy achieved an economic growth rate of 7.8% on the back of the continuation of the tight monetary and fiscal consolidation, a good agricultural season and the stabilization effect brought by the auction system. GROUP RESULTS Financial Performance Operating income increased from ZW$3.4 billion to ZW$6.98 billion for the year ended 31 December 2021, largely driven by growth in the transaction volumes and values during the period under review. Total comprehensive income for the period amounted to ZW$2.25 billion (Dec 2020 - ZW$1.66 billion). The Group achieved a basic earnings per share of 463 cents (Dec 2020 – 338 cents). Operating expenses at ZW$3.5 billion, were 72% above the 2020 levels, reflecting the effects of inflation and exchange rate depreciation. The Bank continues to pay special focus on its digitization strategy which is expected to increase efficiencies resulting in cost reduction. Financial position Total assets closed the year at ZW$29.4 billion, up 67% from ZW$ 17.6 billion as at 31 December 2020, funded by strong growth in customer deposits as the banking subsidiary continues to grow its customer base. Customer deposits and other liabilities increased by 85% reflecting strong personal and commercial inflows following the easing of COVID-19 restrictions. The Group’s investment property portfolio was valued at ZW$3.5 billion as at 31 December 2021 while property and equipment stood at ZW$4.1 billion.The revaluation gains largely reflect the changes in the macro economic environment. Loans and advances and other assets stood at ZW$12.4 billion as at 31 December 2021, increasing by 93% from prior period levels. The banking subsidiary maintained a high-quality loan book, closing the year with an NPL ratio of 1.33%. The Bank maintained a sound liquidity position with a liquidity ratio of 41% and this was above the statutory minimum of 30%. Capital The capital adequacy ratio of the banking subsidiary remained strong at 57.48% compared to a regulatory minimum of 12%. The subsidiary maintained adequate capital levels to cover all risks and was compliant with the minimum capital of the equivalent of USD30 million. Dividend The Board has resolved not to declare a dividend in order to fund the growth initiatives being pursued by the Group as well as buttress the regulatory capital position of the Group’s banking subsidiary. Blocked Funds The banking subsidiary owed USD13.4 million to various line of credit providers as at 31 December 2021 which have been registered as Blocked Funds with the Reserve Bank of Zimbabwe (RBZ) in line with regulatory directives. In 2021, the Government of Zimbabwe assumed the obligation to settle these Blocked Funds in terms of section 52 of the Finance Act no 7 of 2021. The Blocked funds are listed under Annex 1 of the Finance Act no 7 of 2021. In terms of section 52 of the Finance Act no 7 of 2021, outstanding blocked funds may be liquidated through the issuance of Government-backed zero coupon or non- interest-bearing foreign exchange savings bonds or such other debt instruments denominated in foreign currency. The timing of issuance of the Government-backed instruments is yet to be advised. London Stock Exchange Listing At the 2021 Annual General Meeting, the Company sought and obtained shareholder approval to delist from the London Stock Exchange following a determination that the regulatory compliance and administrative costs that the Company was incurring annually were high and outweighed any benefits derived or to be derived from the dual listing. Having obtained shareholder approval, the Company applied and obtained approval to delist from the London Stock Exchange with effect from 8 July 2021. The delisting did not adversely affect any of our shareholders as the company’s shares continue to be listed on the Zimbabwe Stock Exchange where the company has always maintained its primary listing. The number of shares held on the London Stock Exchange was 198 443 shares. The Company is in the process of winding up administrative processes related to the delisting. 3 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021CHAIRMAN'S STATEMENT (Continued) for year ended 31 December 2021 DIRECTORATE Mr. Benefit Washaya retired at the end of December 2021 after serving as the Bank’s Chief Executive Officer for fourteen years. He was replaced by Mr. Gerald Gore, formerly the Deputy Chief Executive Officer, who was appointed Chief Executive Officer with effect from 1 January 2022. Mr. Benson Ndachena also resigned from his post as Chief Finance Officer with effect from 1 October 2021 to pursue other interests. He was replaced by Mrs. Margret Chipunza who assumed the role of Chief Financial Officer with effect from 1 September 2021. I thank Mr. Washaya and Mr. Ndachena for their sterling contribution to the Group and I wish them well in their future endeavors. I am confident in the ability of the incoming Executive team to take NMB into our next growth phase. OUTLOOK AND STRATEGY The Bank will continue to accelerate the digitization strategy with the main aim being to provide seamless digital financial solutions to both corporate and individual clients. The Group will continue to fund and support the productive sectors of the economy as part of our drive to support the growth of the Zimbabwean economy. I will be coming back to the market with further developments on this front. APPRECIATION I thank our valued clients, depositors, shareholders, regulatory authorities and other key stakeholders for their continued support. To my fellow board members, management and staff, I extend my heartfelt gratitude for their continued diligence, dedication and relentless efforts which have culminated in the achievement of these commendable results. MR. B. A. CHIKWANHA CHAIRMAN 10 APRIL 2022 4 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021CHIEF EXECUTIVE OFFICER'S REPORT for year ended 31 December 2021 INTRODUCTION The Group and its clients showed great resilience and adaptability in the wake of the constant evolving challenges brought about by the COVID-19 pandemic. The operating environment maintained a relative stability in the first half although it became susceptible to deterioration in the base currency as the year progressed. Year-on-year inflation closed the year on 60.1%, while month-on-month inflation averaged 4.5%. The economy saw renewed inflationary pressures largely driven by exchange rate deterioration. This inevitably resulted in an increase in the cost of running the business. The group continued on its digitization drive bringing efficiency and convenience to our customers. PERFORMANCE REVIEW The Group operated profitably for the period under review achieving profit before tax of ZW$2.8 billion (2020 ZW$1.1 billion). The Group’s performance was largely driven by the success of our digital transformation strategy and support for key productive sectors of the economy. The banking subsidiary’s digitalisation strategy paid off leading to a 99% growth in non-funded income and 103% growth in operating income as depicted below. FEE AND COMMISION INCOME 3,621,484,808 1,818,825,719 % 9 9 4,000,000,000 3,500,000,000 3,000,000,000 2,500,000,000 2,000,000,000 1,500,000,000 1,000,000,000 500,000,000 - OPERATING INCOME 6,976,597,439 3,433,190,483 % 3 0 1 8,000,000,000 7,000,000,000 6,000,000,000 5,000,000,000 4,000,000,000 3,000,000,000 2,000,000,000 1,000,000,000 - 2021 2020 % Change 2021 2020 % Change DEPOSITS AND OTHER LIABILITIES LOANS, ADVANCES AND OTHER ASSETS 25,000,000,000 20,000,000,000 19,091,448,981 15,000,000,000 10,000,000,000 5,000,000,000 - 10,309,591,981 % 5 8 12,367,842,540 14,000,000,000 12,000,000,000 10,000,000,000 8,000,000,000 6,000,000,000 4,000,000,000 2,000,000,000 - 6,417,670,852 % 3 9 2021 2020 % Change 2021 2020 % Change The banking subsidiary’s innovative products and services led to growth in its corporate and institutional depositors culminating in an increase of 85% in deposits and other liabilities which closed the year at ZW$19.1 billion. Loans and other assets grew from ZWL6.4 billion to ZWL12.4 billion as at 31 December 2021 as the bank continues to partner our clients in their growth path. BUSINESS REVIEW The banking subsidiary continued to make inroads into new markets and cement relationships with existing clients through the following main business units: Digital Banking The Digital Banking department has been seized with automation and improvement of end-to-end customer journeys, including digitalising the customer account opening processes. We made it possible for customers to open accounts digitally and transact without the need to visit the branch or interact with any of our staff. The account opening solution rolled out during the year cover both low KYC account as well as full KYC account opening and gives low KYC account holders a platform to upgrade their accounts digitally. This has made our processes efficient and cost effective while delivering real convenience to our customers. Our digital banking platforms saw over ZWL170 billion worth of transactions in 2021, almost five times 2020 levels, as transaction activity recovered and customers favoured digital payment solutions and reduced their reliance on cash and branch. The division contributed gross income amounting to ZW$2.3 billion in 2021 up, 252% from ZW$0.65 billion in 2020. 5 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021CHIEF EXECUTIVE OFFICER'S REPORT (Continued) for year ended 31 December 2021 Consumer Banking The Consumer Banking and Value-Added Services (CBVAS) unit has evolved from traditional retail banking and now comprises a suite of financial services that are largely delivered through digital channels. Our combination of physical (branches and agencies) and digital touch points (USSD (*241#) and NMBConnect platforms) have improved access to banking products for our existing and potential customers across the country particularly the previously non and underbanked. Demand for credit remained strong during the period driven by household needs and our digital platforms enabled the vast majority of individual clients, particularly civil servants, to apply for personal loans without the need to physically visit the bank, which was a first in the market. The absence of long term funding has curtailed long term mortgage lending. Funding for housing has largely been restricted to short term equity release facilities. We deepened our Bancassurance offerings as we onboarded five new insurance partners under our multi-agency license. We are well on course to be the insurance payment partner of choice in the market as we digitalise premium payments across all insurance types. The banking subsidiary setup a dedicated Money Transfer Agency (MTA) center to conveniently serve the general public receiving cash from the diaspora. The center has flexible trading hours and customer experience that is next to none as we have shorter queues. Apart from lending income, the division contributed gross fees and commissions of ZW$1.59 billion compared to ZW$450 million in the previous year. Business Banking The Business Banking division continued to develop strong business relationships in the market across a diversified range of sectors including key areas supporting economic activity. We remained relevant to our Corporate and SME clients by providing customised lending products which meet their exact needs. The Agriculture sector was bolstered by the floating of a ZW$2 billion Agrobond whose proceeds are being deployed in various agricultural value chains. The Bank signed a USD15 million credit line with a developmental finance partner which is currently being disbursed in selected long-term projects. This is up an above another line of US$20 million from a regional funder which was fully utilized. Risk Management As a result of its strong balance sheet and prudent approach to risk management, the Group remains well placed to withstand these aftershocks of the Covid-19 pandemic as well as providing support to customers when they need it most. The Group, has the 3 lines of defense model in place with respect to Enterprise Risk Management (ERM). Firstly, the frontline and support functions have clearly defined roles and responsibilities in risk management. Secondly, the Risk Management and Compliance Divisions then independently review the first line activities and finally, the Internal Audit department which is also independent of first and second line of defense. The Group has maintained a strong capital base to cover for Pillar 1 Risks (Credit, Market and Operational Risks) as well as the additional risks identified through the Internal Capital Adequacy Assessment Process (ICAAP). The Bank’s core capital was above the set minimum regulatory requirement of USD30 million equivalent for tier 1 banks with our capital adequacy ratio at 34.35% against a regulatory minimum of 12%. CORPORATE SOCIAL INVESTMENTS AND SUSTAINABILITY During the period under review, the Group channelled its Corporate Social Investments towards education and support of disadvantaged and vulnerable groups. The Group donated COVID-19 PPEs and foodstuffs to Emerald Hill Children’s Home and Friends of Dzikwa Society which assist orphans and vulnerable children in providing for their education and well-being. The Group also participated in cancer awareness campaigns by donating a desktop computer to KidzCan Zimbabwe and sponsoring their fundraising initiatives, the KidzCan MudRun. Pursuant to the banking subsidiary’s digitization thrust, the Group sponsored the Global Renaissance Investments 13th Edition Online Digital Indaba and Awards. The Group is committed to providing sustainable solutions to its customers as well as to its own operations. The Bank continued to raise affordable long-term funding through lines of credit to support players in key economic sectors by financing their capital expenditure projects in manufacturing, agriculture and construction. On the green solutions side, the Group doubled its solar power output and the Head Office is now 100% off-grid. OUTLOOK AND STRATEGY The Group is setting itself up to take advantage of the opportunities that are presenting themselves in the market. We are poised for growth and diversification which will see us launch a number of new business units in the very near future. I am excited about the prospects and am confident that these initiatives will be of great benefit to our customers and stakeholders. APPRECIATION I thank the Board and shareholders for entrusting me to lead the team and take the Group to the next growth phase. I would also want to appreciate our former CEO Mr. Washaya for his immense contribution to the Group. I am sincerely grateful to our valued clients, depositors, shareholders, stakeholders and regulatory authorities for their support. G Gore Chief Executive Officer 10 APRIL 2022 6 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021REPORT OF THE DIRECTORS for year ended 31 December 2021 We have pleasure in presenting to shareholders our report and the audited financial statements of the Group for the year ended 31 December 2021 1. SHARE CAPITAL The authorised and issued share capital of the Company are as follows:- 1.1 1.2 Authorised: 600 000 000 ordinary shares of ZWL0.00028 each. Issued and fully paid: 404 171 689 ordinary shares of ZWL0.00028 each. No share options were exercised during the year. 2. GROUP ACTIVITIES AND RESULTS The Group’s total comprehensive income was ZWL 2 248 387 353 for the year ended 31 December 2021 (2020 – ZWL 1 656 058 822). 3. CAPITAL ADEQUACY As at 31 December 2021, the Bank's regulatory capital adequacy ratio was 34.35% (Historical – 27.22%) (2020 – 48.06% in inflation adjusted terms). 4. DIRECTORATE 4.1 Board of Directors As at 31 December 2021, the following were the Directors of the Company. Mr. B. A. Chikwanha Mr. B. P. Washaya* Mrs. M. Chipunza** Mr. J. de la Fargue Ms. C. Glover Mr. J. Tichelaar Ms. J. Maguranyanga Mr. C. Chikaura Ms. S. Chitehwe Mr. G. Taputaira Independent Non-Executive Director (Chairman) Chief Executive Officer (Retired on 31 December 2021) Chief Finance Officer (Appointed 1 September 2021) Non-Executive Director (representing African Century) Non-Executive Director (representing Arise) Non-Executive Director (representing AfricInvest) Independent Non-Executive Director Independent Non-Executive Director (Deputy Chairman) Independent Non-Executive Director Independent Non-Executive Director In accordance with Article 83 of the Company’s Articles of Association, one third of the Directors will retire by rotation at the forthcoming Annual General Meeting (AGM). Mr C. Chikaura, Mr J. de la Fargue and Ms S. Chitehwe retire by rotation. Mr. J. de la Fargue being eligible offers himself up for re-election. Mr. C. Chikaura and Mrs. S. Chitehwe retire with effect from the end of the AGM. * Mr. B. P. Washaya retired with effect from 31 December 2021. Following his retirement Mr Gerald Gore was appointed as Chief Executive Officer with effect from 1 January 2022. ** Mrs M. Chipunza joined the Group as Chief Finance Officer with effect from 1 September 2021 following the resignation of Mr Benson Ndachena. 7 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 REPORT OF THE DIRECTORS (Continued) for year ended 31 December 2021 4.2 Directors’ Interests As at 31 December 2021, the Directors of the Group (NMBZ Holdings Limited and the Bank) held the following direct and indirect beneficial interests in the shares of the Company:- 31 December 2021 31 December 2020 Mr. B. A. Chikwanha Ms. J. Maguranyanga Mr. B. P. Washaya* Mr. B. Ndachena** Mr. J. de la Fargue*** Ms. C. Glover*** Mr. J. Tichelaar *** Mr. C. Chikaura Ms. S. Chitehwe Mr. G. Taputaira Mrs. M. Chipunza Shares - 600 24 047 - - - - - - 4 540 - 29 187 Shares 20 800 600 10 289 83 521 - - - - - 4 540 119 750 *Mr. B. P. Washaya was the Chief Executive Officer of NMBZ Holdings Limited and NMB Bank Limited. He retired with effect from 31 December 2021. **Mr B. Ndachena resigned as Chief Finance Officer of NMBZ Holdings Limited and NMB Bank Limited with effect from 30 September 2021. ***Mr. J. de la Fargue represents African Century Financial Investments Limited which holds 76 426 874 shares, Ms. C. Glover represents Arise which holds 71 632 001 shares and Mr J. Tichelaar represents AfricInvest which holds 36 702 487 shares in NMBZ Holdings Limited. 5. CORPORATE GOVERNANCE APPROACH The Board of NMBZ Holdings Limited continues to align its internal governance practices to local and international best practice including the National Code of Corporate Governance in Zimbabwe (ZIMCODE) and the King IV Report. The Board has adopted the National Code of Corporate Governance in Zimbabwe as its primary code of governance. The Board is committed to the principles of accountability, integrity, transparency, sound ethical practices and professionalism. As such the Board continues to actively work towards balancing the interests of all its stakeholders, including its shareholders, customers, employees, regulators, suppliers and the communities in which we work in. Our management approach remains that of ensuring that prudence, compliance with international best practice and sustainability are key considerations for management as they work to deliver value to our shareholders and all other stakeholders. 5.1 Stakeholder Communication The Board of Directors and Executive Management of the Group communicate with the Company’s stakeholders through various platforms including the Annual General Meeting, press announcements of interim and final results as well as of key developments within the Company, investor and analyst briefings were possible and Annual Reports. Through online platforms including the Company website, the Group disseminates financial and operational information to its stakeholders. 5.2 Share Dealings The Company has a share dealing policy which precludes directors and staff from dealing in the shares of the Company, whether directly or indirectly, during the closed period being the period one month before the half year or financial year end up to the publication of the half year or full year financial year end results. Directors and staff are also precluded from dealing in the shares of the Company whenever they are aware of negotiations, discussions or information which may have a bearing on the share price. In line with the ZSE Listing rules, share dealings by Directors and Executive / Senior Management are declared to the Zimbabwe Stock Exchange. 5.3 Declarations of Interest All Directors are required to declare any actual, potential or perceived conflict of interest that may compromise their judgment, decision or actions. Declaration of interests is a standing agenda item at all board meetings. It is also a requirement of the Banking Act that Directors complete and file with the Company a Declaration of Interest form each year. During the year under review all Directors submitted their Conflict of Interest Declaration forms in line with the Banking Act. Directors shareholding interests in NMBZ Holdings Limited are disclosed in the Report of Directors on Section 4.2. 8 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 REPORT OF THE DIRECTORS (Continued) for year ended 31 December 2021 5.4 Directors’ Remuneration The remuneration packages for Executive Directors are determined by the Human Resources, Remuneration & Nominations Committee. The salary packages primarily consist of a basic salary, performance based bonus and share options which are meant to be a retention mechanism. 6. BOARD STRUCTURE *As NMB Bank Limited is the only operating subsidiary of NMBZ Holdings Limited, the Group obtained regulatory approval to have one Board for the two entities. DIRECTORSHIP DISTRIBUTION GENDER DISTRIBUTION NON EXECUTIVE 30% EXECUTIVE 20% INDEPENDENT 50% MALE 60% 55% FEMALE 40% 45% Board of Directors MALE FEMALE The NMBZ Holdings Board is comprised of five independent non-executive directors, three non-executive directors and two executive directors. Female directors make up 40% of the Board. The Board is chaired by an independent non-executive director. It is the Board’s view that the board size and the skills mix is appropriate for the size and nature of business the Company is involved in. The Board meets quarterly to monitor the performance of the Group and its management as well as to discuss the strategic direction of the Group. A summary of the profiles of each of the Directors is listed below. The Board retains the responsibility to ensure good governance practices are applied throughout the Group. It retains some matters for its determination and has delegated specific responsibilities to Board Committees which operate within well-defined terms of reference as summarized below. The Board of Directors is responsible for setting the strategic direction of the Company. The Board is responsible for proactively engaging with the Company’s Executive Management to test, challenge, improve and monitor the implementation of the Company’s strategy, to oversee the performance of Executive Management, to provide, counsel and support to Executive Management, to receive reports from Executive Management on the performance of the Company and to provide challenge to action taken by Executive Management. Further, the board is responsible for the implementation of enterprise risk management through ensuring the implementation of adequate controls, processes and policies which enable risk to be appropriately identified and managed. There were changes at executive management level during the course of the year under review. Mr. Benson Ndachena resigned as Chief Finance Officer with effect from 30 September 2021. To facilitate a smooth handover takeover process, Mrs. Margret Chipunza joined the Group as Chief Finance Officer with effect from 1 September 2021. Mr. Benefit Washaya retired as Chief Executive Officer with effect from 31 December 2021. Following his retirement and in line with the succession plan, Mr. Gerald Gore was appointed as Chief Executive Officer with effect from 1 January 2022. Prior to his appointment, Mr. Gerald Gore had been Deputy Chief Executive Officer of the Group. 9 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021REPORT OF THE DIRECTORS (Continued) for year ended 31 December 2021 Board Chairman The Board Chairman provides leadership to the Board and manages the business of the Board through setting its agenda and taking full account of issues and concerns of the Board. He actively works to establish and develop an effective working relationship with the Chief Executive Officer and Executive directors and to drive improvements in the performance of the Board and its committees through feedback derived from the annual board evaluation process which is communicated to directors and is used to develop an action plan to improve board performance. The Chairman’s other roles include to assist in the identification and recruitment of talent to the Board and to proactively manage regulatory relationships in conjunction with Executive Management where appropriate. Chief Executive Officer The Chief Executive Officer is responsible for providing strategic and operational leadership in all areas of the Company. His responsibilities include but are not limited to driving the transformation agenda of the Group to reach its strategic aspirations, providing credible and agile leadership to the Executive and Senior Management team, setting long term and short-term business goals and holding individual executive and senior management team members to account. The Chief Executive Officer is also responsible for ensuring high employee engagement levels and a culture which enables customer focus and optimum performance, ensuring delivery of effective people processes including talent management, succession planning, performance management and reward, ensuring that the Board is fully informed on all relevant matters, ensuring the Group maintains good relationships with regulatory and government agencies and its customers and ensuring that the Group maintains sound and adequate risk management structures and adequate internal controls and is compliant with all relevant regulatory and internal compliance requirements. Board Charter The Board Charter sets out the roles and responsibilities of the Board, its scope of authority, and the structures through which the Board operates. The Board Charter is reviewed on an annual basis to ensure that the Board remains aligned to its requirements and to allow Directors an opportunity to refresh their memories on its provisions. The Board is responsible for providing entrepreneurial leadership, to set strategy, to ensure that human and financial resources are available to achieve set objectives, to review management performance, to set the company’s values and standards and to ensure that obligations to shareholders and other stakeholders are understood and met. The Board Charter clearly defines the role of the Board Chairman which is separate and distinct from that of the Chief Executive Officer as well as the responsibilities of Directors. Board Committees Committee Audit Committee Members Summary Roles & Responsibilities S. Chitewe (Chairperson) J. Maguranyanga C. Chikaura G. Taputaira the the Group's financial The Committee oversees reporting process, monitoring integrity and appropriateness of the Group's financial statements; evaluating the adequacy of the Group's financial and operational processes, compliance, internal controls and risk management processes. The Committee is responsible for the selection, compensation, and performance review of the Group's external and internal auditors. The Committee also provides the effectiveness of independent oversight of the Group’s assurance functions and services, with particular focus on combined assurance arrangements. The Committee meets at least four times a year. The Committee meets regularly with the internal and external auditors. Both the internal and external auditors have unrestricted access to the audit committee to ensure their independence and objectivity. The external auditors, Chief Finance Officer and Internal Auditor are invitees and resource persons at every meeting. The Committee is satisfied that it has fulfilled its responsibilities in accordance with its terms of reference for the reporting period. The Credit Committee’s main responsibilities are to consider loan applications beyond the discretionary limits of the Executive Credit Committee and to direct the formulation of, review and monitor the credit principles and policies of the Group. The Chief Banking Officer and Head of Credit Management are invitees and resource persons at every meeting. The Committee is satisfied that it has fulfilled its responsibilities terms of in accordance with reference for the reporting period. its Credit Committee C. Chikaura (Chairperson) B.A. Chikwanha J. de la Fargue G. Gore 10 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 REPORT OF THE DIRECTORS (Continued) for year ended 31 December 2021 ALCO & Finance S. Chitehwe (Chairperson) C. Chikaura J. de la Fargue C. Glover J. Tichelaar G. Gore M. Chipunza Loans Review J. Maguranyanga (Chairperson) G. Taputaira S. Chitehwe C. Glover J. Tichelaar Human Capital, Remuneration & Nominations Committee J. Maguranyanga (Chairperson) C. Chikaura B. A. Chikwanha J. de la Fargue J. Tichelaar Risk & Compliance Committee C. Chikaura (Chairperson) G. Taputaira J. de la Fargue C. Glover J. Maguranyanga ICT & Digital Banking Committee G. Taputaira (Chairperson) B.A. Chikwanha S. Chitehwe C. Glover J. Tichelaar G. Gore The ALCO & Finance Committee is responsible for deriving the most appropriate strategy for the Group in terms of the mix of assets and liabilities given its expectations of the future and the potential consequences of interest-rate movements, liquidity constraints, foreign exchange exposure and capital adequacy. In addition, the Committee monitors the business and financial strategies of the Company and keeps track of financial performance vis a vis the budget. The Chief Risk Officer and Head of Treasury are invitees and resource persons at every meeting. The Committee is satisfied that it has fulfilled its responsibilities in accordance with its terms of reference for the reporting period. The Loans Review Committee assesses compliance of the loan book with the lending policy and the Banking Regulations. The Committee conducts loan reviews independent of any person or committee responsible for sanctioning credit. The Chief Banking Officer and Chief Risk Officer are invitees and resource persons at every meeting. The Committee is satisfied that it has fulfilled its responsibilities in accordance with its terms of reference for the reporting period. the Group, The committee is responsible for setting the Group’s remuneration philosophy and reviews the overall including remuneration structures of all material remuneration proposals and packages for Executive Directors and senior personnel. The committee is also responsible for the nomination, election and appointment of board members. The group’s remuneration policy is to provide remuneration packages that attract and retain high performing individuals. The group’s remuneration package is primarily made up of basic salaries, share options and performance related bonuses. The Chief Executive Officer and Head of Human Capital are invitees and resource persons at every meeting. The Committee is satisfied that it has fulfilled its responsibilities in accordance with its terms of reference for the reporting period. The Risk and Compliance Management Committee oversees the quality, integrity and reliability of the Group’s enterprise risk management systems and reviews all group-wide risks. The Chief Executive Officer, Chief Risk Officer and Head of Compliance are invitees and resource persons at every meeting. The Committee is satisfied that it has fulfilled its responsibilities terms of in accordance with reference for the reporting period. its The IT & Digital Banking Committee provides governance and oversight on the technology-related investments, operations and strategies and their alignment with the Group's overall strategy. It also oversees the Group’s technology risk management and security framework and its effectiveness (in conjunction with the Risk & Compliance Committee). The Chief Technology Officer, Chief Risk Officer and Head Digital Banking are invitees and resource persons at every meeting. The Committee is satisfied that it has fulfilled its responsibilities in accordance with its terms of reference for the reporting period. 11 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021REPORT OF THE DIRECTORS (Continued) for year ended 31 December 2021 Executive Committee Executive & Heads of Departments the Group’s business The role of the Executive Committee is to assist the Chief Executive Officer in the performance of his duties and in dealing with the day to day activities of including development and implementation of the strategy, business plans and annual budget as approved by the Board, development, implementation and monitoring of policies and procedures as approved by the Board, assessment and management of risk, prioritisation and allocation of resources and management and development of talent. Directors Attendance Register NAME OF DIRECTOR MAIN BOARD AUDIT CREDIT ALCO & FINANCE Numbers of meetings held B. A. Chikwanha C. Chikaura J. Maguranyanga C. Glover S. Chitehwe J de la Fargue J Tichelaar G Taputaira B P Washaya* B Ndachena** M Chipunza*** 4 4 4 4 4 4 4 4 4 4 3 1 6 - 6 6 - 6 - - 6 - - - 4 3 4 - - - 4 - - 4 - - 4 - 4 - 4 4 4 4 - 4 3 1 NAME OF DIRECTOR LOANS REVIEW HUMAN CAPITAL, REMUNERATION & NOMINATIONS RISK & COMPLIANCE ICT & DIGITAL Number of meetings held B. A. Chikwanha C. Chikaura J. Maguranyanga C. Glover S. Chitehwe J de la Fargue J Tichelaar G Taputaira B P Washaya* B Ndachena** M Chipunza*** 4 - - 4 4 4 - 4 4 - - - 4 4 4 4 - - 4 4 - 4 - - 4 - 4 4 4 - 4 - 4 4 - - 4 4 - - 4 4 - 4 4 4 - - *B P Washaya retired from the Group with effect from 31 December 2021. **B Ndachena resigned from the Group with effect from 30 September 2021. ***M Chipunza joined the Group with effect from 1 September 2021 12 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 REPORT OF THE DIRECTORS (Continued) for year ended 31 December 2021 DIRECTOR PROFILES Benedict Chikwanha – Independent Non-Executive Director (Chairman) Benedict Chikwanha was appointed as a non-executive director of NMB Bank Limited and NMBZ Holdings Limited on 31 January 2014. He is an experienced banker, with over forty years working experience in the banking sector, 32 of which were spent at Barclays Zimbabwe. He has held several positions in the sector including being Director of Risk Management and Managing Director. Gerald Gore – Chief Executive Officer Gerald Gore has over 18 years banking experience that spans over digital transformation, risk management, corporate banking, treasury and retail banking. Prior to his appointment as Chief Executive Officer on 1 January 2022, Gerald served as the Deputy CEO since September 2019 as well as Chief Operating Officer since 2015 supporting the CEO in strategy execution and responsible for the Bank’s digital transformation. He also served as Chief Risk Officer of NMB Bank. Prior to joining NMB in 2008, he worked for a number of financial institutions in corporate banking, treasury & risk management. Gerald holds a Master in Business Leadership (MBL) from Unisa, MSc in Finance & Investments from NUST, BComm Banking from NUST and an Executive Development Program from Wits Business School. He is also an Alumnus of the USA International Leadership Development Program (IVLP) under emerging African leaders. Margret Chipunza – Chief Finance Officer Margret is a Chartered Accountant having trained with Deloitte. She is a holder of a Bachelor of Accounting Science degree from the University of South Africa, and a Certified Microfinance Expert with Frankfurt School of Finance and Management. She has over 20 years of experience in the financial services sector, having held senior positions in various financial institutions. She is an alumnus of the Boulder Institute of Microfinance, the School of African Microfinance and the HBS Accion program on Strategic Leadership in Inclusive Finance which is offered by Harvard Business School – Executive Education. Prior to joining NMB Bank, Margret was the Chief Finance Officer of African Century Limited. Charles Chikaura – Independent Non-Executive Director Charles Chikaura is an independent non-executive director who was appointed to the NMBZ Holdings and NMB Bank Limited boards on 24 December 2015. Charles holds a Bachelor of Arts Honours degree and a Masters in Business Administration degree from the University of Zimbabwe as well as an Institute of Bankers diploma. Charles has 35 years of banking experience, of which 23 of these were with the Reserve Bank of Zimbabwe where he held several positions including Manager Exchange Control, General Manager Operations, Senior General Manager and Deputy Governor. Charles was thereafter appointed Chief Executive Officer of the Infrastructure Development Bank of Zimbabwe a position he held for 12 years. Charles is retired and is a full time farmer. Christine Glover – Non-Executive Director Christine Glover represents Arise B.V. on the Board, having been appointed as a director on 26 June 2019. She has over thirty years of strategic and operational experience in financial services, with a strong focus on low-cost housing and development finance. She retired from Old Mutual Investment Group (South Africa), where she was employed as Head of Development Impact Funds for ten years. She has also held several international consulting and executive management roles throughout her career, where she has made an immense contribution to the development of financial services for low-income households. Christine is a qualified town planner and holds a Master’s degree in City and Regional Planning as well as an Honours degree in Architectural History. Givemore Taputaira – Independent Non-Executive Director Givemore Taputaira is an independent non-executive director who was appointed to the NMBZ Holdings Limited and NMB Bank Limited boards on 2 January 2020. Givemore holds a Bachelor of Science General degree and a Masters in Business Administration degree from the University of Zimbabwe and a Doctor of Business and Administration from Binary University. He is both a Certified International Professional Leader (CIPL) and Certified International Professional Strategist (CIPS). Certification is obtained from Cambridge Global Learning in the United Kingdom. Givemore has over 18 years’ experience in ICT and Business Development in 7 different countries within Africa. He previously was a board member of CBZ Holdings Limited, wherein he had the opportunity to chair the Risk and Compliance Committee, as well as the Strategy and Innovation Committee at different times during his tenure on that Board. Givemore is currently the Managing Director at Digital Edge Solutions. 13 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 REPORT OF THE DIRECTORS (Continued) for year ended 31 December 2021 DIRECTOR PROFILES (Continued) James de la Fargue – Non-Executive Director James de la Fargue represents African Century on the Board. He was appointed to the Board on 4 May 2016. He is a holder of a BA Business Organisation (Heriot-Watt University), ACCA, Diplomas in Marketing & Marketing Research and a Certificate in General Agriculture. James worked for a number of international organizations including Deloitte & Touché Management Consultants, Unilever PLC and Chargeurs SA. He is a former president of the Zimbabwe Tobacco Association and worked at MBCA as a senior executive in charge of Corporate Finance. James was involved in business consultancy work and management of an integrated farm in Centenary from 1998 to 2008. Since 2009, James has been with African Century Limited where he initially consulted for the group and later took up a position as Business Development Director of African Century Financial Holdings and as Executive Chairman of Frango King. He currently is the Chief Executive Officer of Lake Harvest, the largest tilapia farming operation in Africa. Jean Maguranyanga – Independent Non-Executive Director Jean Maguranyanga is a lawyer by profession with over 20 years’ experience. She was appointed to the Board on 10 July 2015. Jean commenced her career as a Prosecutor in the Ministry of Justice Legal and Parliamentary affairs and moved after one year to Parliament. She worked as a Legal Advisor at the Parliament of Zimbabwe for three years after which she left to study for her Master’s Degree in Corporate and Commercial Law. Following the completion of her Master’s degree Jean took up a lectureship post with the University of Zimbabwe a position she held for two years. Thereafter, Jean joined the Reserve Bank of Zimbabwe where she served as Legal Counsel and later as Division Chief Corporate Affairs / Bank Secretary for a total period of seventeen years. Currently Jean is a partner at Chinamasa, Mudimu and Maguranyanga Legal Practitioners. Julius Tim Tichelaar – Non Executive Director Julius Tichelaar is a Partner at AfricInvest and represents AfricInvest on the Board. He was appointed to the Board on 31 October 2016. Julius leads investments across Africa in disruptors and traditional financial institutions, with a focus on strategic expansion and digital transformation. Julius has 12 years’ experience in private equity with sourcing, structuring and execution of transactions in Africa. Previously, he worked on a predecessor fund for financial services at AfricInvest and on a wide range of transactions in other industries. Julius serves as board member for institutions across East and Southern Africa. Julius holds a Master in Science of Management (MSc) with a specialization in Finance from the Erasmus University in Rotterdam, the Netherlands, and graduated with honors. Sabinah N. Chitehwe – Independent Non-Executive Director Sabinah Chitehwe is both a Chartered Accountant and Registered Public Auditor with over 14 years’ experience in Finance and Accounting. She was appointed to the Board on 19 September 2016. Sabinah trained for her articled clerkship under the Training Outside Public Practice (TOPP) programme with the Institute of Chartered Accountants of Zimbabwe (ICAZ) whilst employed as a trainee accountant by Astra Industries Limited from 2002 to 2004. She joined Deloitte & Touché as a Senior Audit Manager between the years 2005 and 2009; and then Senior Consulting Manager between the years 2009 and 2011. Sabinah left Deloitte & Touché to join Essar Infrastructure Zimbabwe as the Head of Finance and Corporate Relations. She later joined Cure Chem Overseas as the Chief Operating Officer and was the Chief Finance Officer of Zimbabwe Shared Services. Currently Sabinah is the Managing Director of MyCash. Continuous Professional Development Continuous professional development remains a key focus area for the Board. It is meant to support Directors to meet the continually evolving demands of our regulatory, economic and business environment and to ensure that the Directors are equipped with the relevant knowledge and skills to oversee the implementation of the Company’s strategic objectives. During the year under review, it was not possible to have physical training sessions for the greater part of the year due to the COVID-19 pandemic and the attendant lockdowns and this negatively affected the Director’s training calendar. The Board adjusted to virtual Director training and the Directors received training on Financial Crime, Anti-Money Laundering / Combating Financing of Terrorism during the year under review. Board Meetings The Board holds meetings on a quarterly basis and as and when necessary to do so. The Board Meetings Calendar is set and approved in advance. During the year under review the Board held 4 meetings, once in each quarter. Due to the Covid-19 pandemic, three of the four meetings were held virtually. The focus areas for the Board during the year included strategy, business continuity, financial performance, risk management and governance. The Board Chair aims to ensure that adequate time is allocated to each agenda item to allow for thorough debate and challenge during meetings. It is a tenet of the Board that all Directors be allowed to independently exercise their judgment and to actively participate during meetings. To assist the Board in the discharge of its duties, management prepare comprehensive reports for Board and Committee meetings which are circulated in advance of the meetings to allow Directors to have timely and up to date information which they use in their decision making. Further, Executive and Senior management attend meetings by invitation and attest to the adequacy and accuracy of information submitted to the Board. 14 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021REPORT OF THE DIRECTORS (Continued) for year ended 31 December 2021 Annual Board Evaluation Board and Director evaluations are useful in that they assist the Board and Senior management to identify potential opportunities and areas for improvement, provide a platform to remind Directors of their role and responsibilities, provide Directors an opportunity to confidentially raise any concerns or feedback they may have and provide the Chairperson with an opportunity to address any performance shortfalls / weaknesses in the board or any of its committees. In line with the RBZ Corporate Governance Guideline the Board undertakes an annual performance evaluation. The assessment involves a review of the performance of the Board, the Board Chairperson and Individual Director Performance. A report summarising the evaluation process, the outcome and the action plan arising out of the evaluation is submitted to the Reserve Bank of Zimbabwe by the 31st of March each year. The Board conducted its evaluation during the year under review and the evaluation concluded that Board performance was Strong. Company Secretary The Directors have access to the Company Secretary whose role includes the provision of professional guidance and advice to individual directors and to the Board as a whole. In addition, the Company Secretary is responsible for ensuring that the Board adheres to applicable rules, regulations and procedures and ensures the effective functioning of the Board through a seamless flow of information between the Board and Management. The Company Secretary also reminds the Board of their roles and responsibility to the Company and all its stakeholders. Access to Information by Directors The Board is entitled to seek information concerning the Company from any Group employee or from any other source. Directors have the right to attend any meeting of any Board Committee, provided that they first seek the permission of the Chairperson of the Committee concerned (which permission shall not be unreasonably withheld) and that the board member so concerned, not being a member of the Committee shall not have a right to vote during such meeting. A board member who attends a Committee meeting of which they are not a member is not entitled to a fee for such attendance. Professional Advice In the discharge of their duties, the Group’s Directors are entitled to have access to independent professional advice at the Group's expense where necessary. 7. Auditors At the forthcoming Annual General Meeting, the shareholders will be asked to authorise the Directors to approve the auditors’ remuneration for the year ended 31 December 2021. All public companies are required to appoint Auditors at each Annual General Meeting at which Financial Statements are presented, to hold office until the next such meeting in terms of section 191 (2) of the Companies and Other Business Entities Act [Chapter 24:31]. In accordance with the Banking Act [Chapter 24:20], the Company is required to rotate its auditors every 5 years. Messrs Enrst & Young having served their 5-year term. However due to capacity challenges in the market, the bank sought a 2-year extension of the Ernst & Young term which extension was granted by the Reserve Bank of Zimbabwe. 8. Statement of Compliance The Group continues to review and align its governance practices in line with the Companies and Other Business Entities Act [Chapter 24:31] and the Zimbabwe Stock Exchange Listing Requirements Rules SI 34 of 2019 which were both enacted in 2019 and whose implementation is ongoing. In addition to the above, the Group also complied with the Banking Act [Chapter 24:20], the Banking Regulations SI 205 of 2000, the National Payment Systems Act [Chapter 24:23], Bank Use Promotion Act [Chapter 24:23], Money Laundering and Proceeds of Crime Act [Chapter 9:24] and the Exchange Control Act [Chapter 22:05] as its key regulations. The Board advises that it complied with all relevant regulatory provisions throughout the year ended 31 December 2021. By order of the Board Mrs. V. T. Mutandwa Company Secretary Harare 10 APRIL 2022 15 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 Ernst & Young Chartered Accountants (Zimbabwe) Registered Public Auditors Angwa City Cnr Julius Nyerere Way / Kwame Nkrumah Avenue P O Box 62 or 702 Harare Zimbabwe Tel: +263 24 2750905-14 or 2750979-83 Fax: +263 24 2750707 or 2773842 Email: admin@zw.ey.com www.ey.com Independent Auditor’s report To the Shareholders of NMBZ Holdings Limited Report on the Audit of the Consolidated and Separate Inflation Adjusted Financial Statements Introductions inflation adjusted the accompanying financial statements of NMBZ We have audited Holdings Limited and its subsidiaries (the Group), as set out on pages 2233 ttoo 9999, which comprise the inflation adjusted statement of financial position as at 31 December 2021 and the related inflation adjusted statement of comprehensive income, the inflation adjusted statement of changes in equity and the inflation adjusted statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies and other explanatory notes. In our opinion, except for the effects of the matters described in the Basis for qualified opinion section, the accompanying financial statements present fairly, in all material respects the financial positions of the Group as at 31 December 2021, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs), and the manner required by the Companies and Business Entities Act (Chapter 24:31) and the Banking Act (Chapter 24:20). Basis for qualified opinion Matter 1: Non-compliance with International Financial Reporting Standards IAS 21- The Effects of Changes in Accounting Estimates and Errors. in Foreign Exchange Rates and IAS 8 - Accounting Polices, Changes Impact of the prior year modification on the current year audit opinion and opening balances Historical date of change in functional currency As explained in note 2.19 to the inflation adjusted financial statements, the Bank changed its functional and reporting currency from United States Dollar (US$) to Zimbabwe Dollars (ZWL) on 22 February 2019 in compliance with Statutory Instrument 33 of 2019. Our most recent year end audit report was modified due to the impact of an incorrect date of change in functional currency. We believed that the change occurred on 1 October 2018 in terms of IAS21 given the significant monetary and exchange control policy changes witnessed in Zimbabwe from 2016 through to 2019. Management has not restated the prior year amounts in line with the requirements of IAS8, consequently, the following corresponding elements remain misstated on the inflation adjusted financial statements; Property, plant and equipment, Intangible assets, Deferred tax liability, Capital reserves, Revaluation reserve, retained earnings, Net foreign exchange gains and Revaluation of land and buildings. Our opinion on the current period’s consolidated inflation adjusted financial statements is therefore modified because of the possible effect of this matter on the comparability of the current period’s figures and the corresponding figures. 1 16 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021Independent Auditor’s report (continued) NMBZ Holdings Limited On date of change in functional currency, management translated elements on the financial statements using different exchange rates which resulted in a misbalance which was recorded directly in equity as a functional currency translation reserve of ZWL 462 166 697(2020: ZWL 462 166 697). This is not in line with the requirements of IFRS. Exchange rates used in prior year Further contributing to the adverse opinion was the use of inappropriate exchange rates which did not meet IAS21 requirements for a spot rate from 22 February 2019 to 22 June 2020. The interbank exchange rate was used to translate foreign denominated transactions and balances to ZWL functional currency; however, the rate was not available for immediate delivery therefore not a spot rate in terms of IFRS. The misstatements could however not be quantified as an appropriate exchange rate had not been identified. Management has not made retrospective adjustments in terms of IAS 8 to correct this matter. Corresponding numbers relating to Fee and commission income, Operating expenditure, net exchange gains/losses and retained earnings on the consolidated inflation adjusted financial statements. Our opinion on the current period’s consolidated inflation adjusted financial statements is modified because of the possible effects of the above matter on the comparability of the current period’s figures and the corresponding figures. Matter 2: Accounting for blocked funds Included in Loans, advances and other assets of ZWL 12 367 842 540(2020: ZWL 6 417 670 852 ) on Note 20 to the inflation adjusted consolidated financial statements for the year ended 31 December 2021 are local balances denominated in the Bank’s functional currency. Of this, local balances amounting to ZWL1 507 838 292 (2020: ZWL1 128 781 333) which are held with the central bank have been treated as foreign currency and translated at the foreign auction exchange rate of 31 December 2021 in contravention of IAS 21 which defines ‘foreign currency’ as a currency other than the functional currency of the entity resulting in an overstatement of the balance. Our prior year audit report was also modified due to this matter. The prior year audit report was also modified for this issue. Our opinion on the current period’s inflation adjusted consolidated financial statements is also modified because of the possible effects of the above matter on the comparability of the current period’s figures and the corresponding figures. Management has not made adjustments in terms of IAS 8 to correct this matter therefore the matter continues to impact the following amounts on the consolidated inflation adjusted statement of comprehensive income: • Net foreign exchange gains ZWL 156 701 217 (2020: ZWL 207 087 364) Matter 3: Valuation of investment properties and premises The Bank’s investment properties and premises are carried at ZWL 3 518 133 464 (2020: ZWL 2 657 783 640) and ZWL 2 845 703 978 (2020: ZWL 2 317 820 761) respectively as at 31 December 2021 as described on Notes 23 and 25. The investment properties were valued using USD denominated inputs and converted to ZWL at the closing auction rate. We believe that applying a conversion rate to a USD valuation to calculate ZWL property values may not be an accurate reflection of market dynamics, as risks associated with currency trading do not always reflect the risks associated with property trading. Consequently, property values may be materially misstated, and we are unable to determine what adjustments may be necessary to correctly account for these amounts. 2 17 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 Independent Auditor’s report (continued) NMBZ Holdings Limited The prior year audit report was also modified due to inappropriate valuation of investment property and freehold land and buildings using foreign currency inputs and translating to ZWL using the auction rate. Management has not made retrospective adjustments to correct this matter and thus the matter continues to impact the following elements of the statement of comprehensive income as a result of misstatements in prior year balances: • Revaluation gain ZWL 377 156 500 (2020: 290 977 498) • Other Income ZWL 932 865 157 (2020: 414 067 704) • Tax expense ZWL (894 399 755) (2020: ZWL 231 218 282) Matter 4: Application of IAS29 - Financial Reporting in Hyperinflationary Economies Furthermore, notwithstanding that IAS 29 has been applied correctly, it is noted that its application was based on prior and current periods’ financial information which was not in compliance with IAS 21 / IAS 8 as described above. Had the correct base numbers been used, the same elements as stated on matter 1, 2 and 3 would have been materially different except for Loans, advances and other assets, Investment property and Property, plant and equipment. Consequently, Monetary loss of ZWL 436 377 804 (2020: ZWL45 434 726) would be impacted as a result of misstatements above. Our opinion in the prior year was also modified for this mater. The effects of the above departures from IFRS are material but not pervasive to the inflation adjusted financial statements. We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Inflation adjusted financial statements section of our report. of the Bank in We are independent of the Group in accordance with the International Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA Code) together with the ethical requirements that are relevant to our audit of the financial statements in Zimbabwe, and we have fulfilled our ethical responsibilities in accordance with these requirements and IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. In addition to the matter(s) described in the Basis for Qualified Opinion section, we have determined the matters described below to be the key audit matters to be communicated in our report. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context. We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial statements. 18 3 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 Independent Auditor’s report (continued) NMBZ Holdings Limited How our audit addressed the matter Key Audit Matter Issue 1: Impairment of loans and advances 45% of the Group’s total assets comprises of loans and advances which are disclosed on note 20 to the financial statements. The loans are significant to the Group in value and comprise of a large volume of balances of varying magnitude. A significant amount of audit effort is therefore required to independently verify the existence of the loans. In evaluating the adequacy of impairment of loans and advances we performed the following procedures: • Tested internal controls over the credit granting and monitoring and assessed whether these were in accordance with laid down Group policies and procedures. The Group is exposed to credit risk on its portfolio. Significant judgement is exercised by Management in assessing the impairment of advances as disclosed on note 20.3 to the financial statements. Due to the size of the Group’s loan book and the significant degree of estimate in determining the impairment of loans and advances, the issue was considered to be a key audit matter. Management applied judgment on: • We analysed customer payment trends during the year and period after year end but financial issuance of before the statements. the • We reviewed the financial performance, financial position, cash flows and future projections for selected material advances. • We reviewed security for selected loans and advances it adequately covered the outstanding loan balance. assessed whether and • Amount and timing of cash flows • Evaluation of the borrower’s financial situation and the net realisable value of collateral. • We tested the valuation of security pledged on the loan balances by comparing its values to recent market valuations. There is subjectivity involved in determination of the amounts of advances deemed uncollectable and requiring The determination of uncollectible amounts is based on a client-by-client basis. by Management. impairment We refer to Note 2.3.5 which details the methods, judgments and assumptions applied by management in estimating the impairment of loans and advances. The matter required significant interactions between the auditor and Management. • We selected material advances and analysed the accuracy of the classification of loans into various credit risk grades and credit quality portfolios as prescribed by the Financial regulator Reporting Standards respectively. International and • We reviewed the assumptions applied by management in determining the credit loss history. • We reviewed correspondence received from legal the completeness of the impaired loans and advances. representatives test to Key Audit Matter How our audit addressed the matter Issue 2 : Suspense accounts with long outstanding reconciling items The Bank has experienced significant increase in volumes of transactions processed in its accounting systems arising from the extensive use of its digital platforms like mobile banking, POS and Zimswitch. Accordingly, due to the increase in transactions, there have been some delays in reconciling all accounts including the bank’s suspense accounts. In validating the suspense accounts, we performed the following procedures: • We updated our understanding of how the bank’s suspense accounts operate. We obtained an understanding of the system of internal control with regards to the review and approval thereof and evaluate the thresholds precision and sensitivity of applied by management in the review process. • We the tested suspense account reconciliations at year end to confirm that these have been appropriately performed and we followed up on reconciling items. 4 19 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 Independent Auditor’s report (continued) NMBZ Holdings Limited How our audit addressed the matter Key Audit Matter Issue 3: Presumed risk in Revenue Recognition The banks income which comprises of Interest Income and Fees & Commission Income was an area of most significance for the audit in the current year due to Interest income is a significant component of the bank's financial statements, both streams of income are highly automated therefore completeness & accuracy is an area of audit focus and that the bank's operations are largely dependent on interest income generation. • We updated our understanding of the revenue recognition process, performed a walkthrough to confirm our understanding and evaluated the design effectiveness of controls related to the significant risk identified. In validating the recognition of revenue, we performed the following procedures: • We compared results with those of prior periods and those expected for the current period and discussed significant variations with management for reasonability. • Our Technology Risk team confirmed the automated aspects of the interest, fees and are commission configured correctly and have been operating effectively throughout the audit period and performed recalculations on automated revenue lines. calculations income • We performed year end cut off procedures for the revenue transactions. • We reviewed the treatment of income on impaired financial instruments. Technology Risk Team also recalculated the income for suspended interest. • We performed revenue validity tests of invoices, and contracts for non-automated revenue lines. followed by • We involved EY internal experts to review the process independent valuators to confirm appropriateness of methodology and assumptions for property valuation purposes in the determination of fair value adjustments. the • selected manual journal entries We processed to all revenue accounts to confirm validity and business rationale as well as the appropriateness of manual adjustments processed. • We inquired about the policies and procedures related to accrued income. • We also reviewed the compliance of the banking operations to the transaction fees in line with directives issued by the regulator. Other information The directors are responsible for the other information. The other information comprises of the Chairman’s Statement, Directors’ Profiles and the Report of the Directors but does not include the inflation adjusted financial statements and our auditor’s report thereon. Our opinion on the inflation adjusted financial statements does not cover the other information and we do not express an audit opinion or any form of assurance conclusion thereon. 20 5 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 Independent Auditor’s report (continued) NMBZ Holdings Limited In connection with our audit of the inflation adjusted financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the inflation adjusted financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. As described in the Basis for Qualified Opinion section above, the Group did not comply with the requirements of IAS 21 – Effects of Changes in Foreign Exchange Rates, IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors and we disagree with the inputs used in the valuation of properties as well as the application of IAS 29 - Financial Reporting in Hyperinflationary Economies on incorrect base numbers. We have concluded that the other information is materially misstated for the same reasons. Responsibilities of the Directors for the Inflation adjusted Financial Statements The directors are responsible for the preparation and fair presentation of the inflation adjusted financial statements in accordance with International Financial Reporting Standards and the requirements of the Companies and Other Business Entities Act (Chapter 24:31) and the Banking Act (Chapter24;20), and for such internal control as the directors determine is necessary to enable the preparation of inflation adjusted financial statements that are free from material misstatement, whether due to fraud or error. In preparing the inflation adjusted financial statements, the directors are responsible for assessing the Bank’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Bank or to cease operations, or have no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Inflation adjusted Financial Statements Our objectives are to obtain reasonable assurance about whether the inflation adjusted financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken based on these inflation adjusted financial statements. As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional skepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the inflation adjusted financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is enough and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Bank’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. 6 21 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 Independent Auditor’s report (continued) NMBZ Holdings Limited • Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Bank’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the inflation adjusted financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Bank to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the inflation adjusted financial statements, including the disclosures, and whether the inflation adjusted financial statements represent the underlying transactions and events in a manner that achieves fair presentation. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated inflation adjusted financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the inflation adjusted financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. The engagement partner on the audit resulting in this independent auditor’s report is Walter Mupanguri (PAAB Number 367). Ernst & Young Chartered Accountants (Zimbabwe) Registered Public Auditors Harare 14 April 2022 22 7 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 STATEMENTS OF COMPREHENSIVE INCOME for year ended 31 December 2021 Inflation Adjusted Historical Cost* GROUP Note 31 Dec 2021 ZWL 31 Dec 2020 ZWL Restated 31 Dec 2021 ZWL 31 Dec 2020 ZWL Interest income Interest expense Net interest income Fee and commission income Net foreign exchange gains Revenue Other income Operating income Operating expenditure 4 5 6.1 6.2 7 3 141 164 126 ( 875 617 869) -------------------- 2 265 546 257 3 621 484 808 156 701 217 --------------------- 6 043 732 282 932 865 157 --------------------- 6 976 597 439 ( 3 526 482 289) --------------------- 1 223 052 222 ( 229 842 526) ------------------- 993 209 696 1 818 825 719 207 087 364 -------------------- 3 019 122 779 414 067 704 -------------------- 3 433 190 483 (2 048 189 724) -------------------- 2 568 881 470 ( 739 070 816) ------------------- 1 829 810 654 2 927 160 013 76 798 658 -------------------- 4 833 769 325 2 107 418 588 -------------------- 6 941 187 913 (2 838 459 393) -------------------- 501 216 271 ( 90 638 279) ------------------ 410 577 992 815 541 357 217 274 144 ------------------ 1 443 393 493 1 226 846 996 ------------------ 2 670 240 489 (814 190 000) ------------------- Operating income before impairment charge and loss on monetary position Impairment losses on financial assets measured at amortised cost Loss on net monetary position Profit before taxation Taxation Profit for the period Other comprehensive income Revaluation of land and buildings, net of tax Total comprehensive income for the year Earnings per share (ZWL cents) - Basic - Diluted 20.3 8.1 6.3 3 450 115 150 1 385 000 759 4 102 728 520 1 856 050 489 (248 106 738) (436 377 804) -------------------- 2 765 630 608 ( 894 399 755) -------------------- 1 871 230 853 (205 702 991) (45 434 726) -------------------- 1 133 863 042 231 218 282 -------------------- 1 365 081 324 (248 106 738) (127 974 740) - ------------------- - ----------------- 3 854 621 782 1 728 075 749 85 514 320 ( 912 597 374) ----------------- ------------------- 2 942 024 407 1 813 590 069 377 156 500 --------------------- 2 248 387 353 ============ 290 977 498 ------------------- 1 656 058 822 =========== 848 730 924 ------------------- 3 790 755 332 2 704 776 561 =========== =========== 891 186 492 ------------------- 9.3 9.3 463 409 338 319 728 643 449 424 *The historical cost information has been shown as supplementary information for the benefit of users. These are not required in terms of International Accounting Standard (IAS) 29 “Financial Reporting in Hyperinflationary Economies”. The auditors have not expressed an opinion on the historical cost information. Other income Operating expenditure Operating income before impairment charge and loss on monetary position Impairment losses on financial assets measured at amortised cost Loss on net monetary position (Loss)/Profit before tax Taxation (Loss)/Profit for the period Inflation Adjusted Historical Cost* COMPANY Note 31 Dec 2021 ZWL - 7 ( 33 048 171) -------------------- 31 Dec 2020 ZWL Restated - 4 295 423 ------------------- 31 Dec 2021 ZWL 31 Dec 2020 ZWL - ( 27 768 409) ------------------- - 62 563 ------------------ ( 33 048 171) 4 295 423 ( 27 768 409) 62 563 - 7 396 622 -------------------- ( 25 694 957) 35 208 -------------------- ( 25 686 755) ============ - 406 587 690 -------------------- 67 960 301 ( 75 649) -------------------- 402 367 916 =========== 8.1 - - ------------------- ( 27 768 409) - - ----------------- 62 563 - - ----------------- ------------------- ( 27 768 409) 62 563 =========== =========== *The historical cost information has been shown as supplementary information for the benefit of users. These are not required in terms of International Accounting Standard (IAS) 29 “Financial Reporting in Hyperinflationary Economies”. The auditors have not expressed an opinion on the historical cost information. 23 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 STATEMENTS OF FINANCIAL POSITION as at 31 December 2021 GROUP Inflation Adjusted Historical Cost* 31 Dec 2021 ZWL 31 Dec 2020 ZWL Restated 31 Dec 2021 ZWL 31 Dec 2020 ZWL 5 745 840 1 216 013 250 ( 8 531) 462 166 697 1 451 092 241 33 048 171 5 620 018 688 5 745 840 1 216 013 250 - 462 166 697 1 073 935 740 - 3 748 787 835 -------------------- --------------------- 6 506 649 362 8 788 076 356 84 116 19 121 607 ( 7 168) 11 619 648 1 915 997 366 27 768 409 5 085 120 045 ------------------- 7 059 704 023 84 116 19 121 607 - 11 619 648 1 067 266 442 - 2 143 095 638 ------------------- 3 241 187 451 Note 10.2.1 11 11 11 11 11 12 13 14 14 335 253 223 114 790 23 042 082 213 189 970 -------------------- --------------------- 14 335 253 223 114 790 ------------------- -------------------- 14 335 253 132 632 641 9 025 526 399 -------------------- 6 742 881 414 -------------------- 7 297 154 066 -------------------- -------------------- 3 388 155 345 16.1 8.3 18 19 091 448 981 10 309 591 981 91 949 809 467 809 599 -------------------- --------------------- 236 048 645 1 000 737 483 19 091 448 981 236 048 645 741 543 501 ------------------- 6 413 943 465 57 205 065 174 727 794 ------------------- SHAREHOLDERS’ FUNDS Share capital Share premium Treasury shares reserve Functional currency translation reserve Revaluation reserve Share option reserve Retained earnings Total equity Redeemable ordinary shares Subordinated term loan Total shareholders’ funds and shareholders’ liabilities LIABILITIES Deposits and other liabilities Current tax liabilities Deferred tax liabilities Total liabilities Total shareholders’ funds and liabilities 20 328 235 109 10 869 351 389 --------------------- --------------------- 29 353 761 508 17 612 232 803 ============ ============ 6 645 876 324 20 069 041 127 --------------------- --------------------- 27 366 195 193 10 034 031 669 ============ ============ ASSETS Cash and cash equivalents Investment securities Loans, advances and other assets Trade and other investments Investment properties Intangible assets Property and equipment Total assets 19 17.1 20 21 23 24 25 3 157 902 536 4 872 262 099 1 738 887 717 4 010 434 252 6 417 670 852 12 367 842 540 17 484 463 36 499 730 2 657 783 640 3 518 133 464 57 077 174 367 911 726 4 180 677 696 3 565 426 421 --------------------- --------------------- 29 353 761 508 17 612 232 803 ============ ============ 1 964 637 240 1 081 820 457 3 730 886 733 10 877 672 1 653 496 476 4 133 707 1 588 179 384 4 872 262 099 4 010 434 252 11 849 962 849 36 499 730 3 518 133 464 13 407 688 3 065 495 111 --------------------- --------------------- 27 366 195 193 10 034 031 669 ============ ============ *The historical cost information has been shown as supplementary information for the benefit of users. These are not required in terms of International Accounting Standard (IAS) 29 “Financial Reporting in Hyperinflationary Economies”. The auditors have not expressed an opinion on the historical cost information. ---------------------------- MR. B. A. CHIKWANHA --------------------------- MR. G. Gore 10 April 2022 Directors ------------------------ Mrs. V. T. Mutandwa Company Secretary 10 April 2022 24 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 STATEMENTS OF FINANCIAL POSITION (Continued) as at 31 December 2021 COMPANY Inflation Adjusted Historical Cost* SHAREHOLDER’S FUNDS Share capital Share premium Treasury shares reserve Share option reserve Retained earnings Total equity Note 10.2.1 12 31 December 2021 ZWL 5 745 840 1 216 013 250 ( 8 531) 33 048 171 803 936 728 -------------------- 2 058 735 458 Redeemable ordinary shares 14 335 253 --------------------- Total shareholder’s funds and liabilities 2 073 070 711 ============ 13 LIABILITIES Deposits and other liabilities Deferred tax liabilities 16.1 18 293 703 - --------------------- Total liabilities 293 703 --------------------- Total shareholder’s funds and liabilities 2 073 364 414 ============ ASSETS Cash and cash equivalents Current tax assets Loans, advances and other assets Group companies Deferred tax assets Total assets 19 8.3 20 22 18 13 635 75 517 2 404 872 2 070 856 886 13 504 --------------------- 2 073 364 414 ============ 31 December 31 December 31 December 2020 ZWL 2021 ZWL 2020 ZWL Restated 5 745 840 1 216 013 250 - - 84 116 19 121 607 ( 7 168) 27 768 409 829 623 482 ( 27 598 748) ------------------- 19 368 216 -------------------- 2 051 382 572 84 116 19 121 607 - - 169 661 ------------------ 19 375 384 23 042 082 -------------------- 2 074 424 654 ============ ============ =========== 14 335 253 ------------------- 33 703 469 ------------------- 14 335 253 33 710 637 414 135 293 703 - 665 669 - --------------------- -------------------- 293 703 --------------------- -------------------- 2 075 090 323 33 997 172 ============ ============ =========== ------------------- ------------------- 665 669 34 124 772 414 135 - 21 917 121 386 4 068 428 2 070 856 886 21 706 13 635 75 518 2 403 508 31 491 009 13 502 13 635 75 518 2 531 106 31 491 009 13 504 --------------------- -------------------- -------------------- 2 075 090 323 ============ ============ ============ 33 997 172 34 124 772 *The historical cost information has been shown as supplementary information for the benefit of users. These are not required in terms of International Accounting Standard (IAS) 29 “Financial Reporting in Hyperinflationary Economies”. ---------------------------- MR. B. A. CHIKWANHA --------------------------- MR. G. Gore 10 April 2022 Directors ------------------------ Mrs. V. T. Mutandwa Company Secretary 10 April 2022 25 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 STATEMENT OF CHANGES IN EQUITY for year ended 31 December 2021 GROUP Inflation Adjusted Share Capital ZWL Share Premium ZWL Treasury Shares ZWL Functional Currency Translation Reserve ZWL Share Option Reserve ZWL Revaluation Reserve ZWL Retained Earnings ZWL Total ZWL - - ------------------- Balance as at 1 January 2020 5 745 840 1 216 013 250 Profit for the year - - Revaluation of land and buildings, net of tax - Unwinding of share option reserve - ---------------- Balance at 31 December 2020 5 745 840 1 216 013 250 Profit for the year - - Revaluation of land and buildings,net of tax - Acquisition of treasury share - Employee share schemes value of employee services - -------------- Balance at 1 216 013 250 31 December 2021 5 745 840 ========= =========== - ------------------ - - - - - - ------------------- - - - ( 8 531) 462 166 697 - 4 295 423 - 782 958 243 - 2 383 706 511 1 365 081 324 4 854 885 964 1 365 081 324 - - 290 977 498 - 290 977 498 - ------------------- ( 4 295 423) ----------------- - ------------------- - -------------------- ( 4 295 423) ----------------- 462 166 697 - - - 1 073 935 740 - 3 748 787 835 1 871 230 853 6 506 649 362 1 572 574 508 - - - 377 156 500 - 377 156 500 - - - ( 8 531) - ----------------- - ----------------- 33 048 171 ---------------- - ------------------- - -------------------- 33 048 171 ------------------- ( 8 531) ========== 462 166 697 ========== 33 048 171 ========= 1 451 092 241 =========== 5 620 018 688 =========== 8 788 076 356 =========== GROUP Historical Cost* Share Capital ZWL Share Premium ZWL Treasury Shares ZWL Balances at 1 January 2020 84 116 Profit for the year - Revaluation of land and buildings, net of tax - Unwinding of share option reserve - -------------- 19 121 607 - - - ----------------- - - - - ---------------- Functional Currency Translation Reserve ZWL Share Option Reserve ZWL Revaluation Reserve ZWL Retained Earnings ZWL Total ZWL 11 619 648 - 62 563 - 176 079 950 - 329 505 569 1 813 590 069 536 473 453 1 813 590 069 - - 891 186 492 - 891 186 492 - ---------------- ( 62 563) ------------------- - ---------------- - ----------------- ( 62 563) ------------------- Balances at 31 December 2020 84 116 Profit for the year - Revaluation of land and buildings, net of tax - Acquisition of treasury shares - Employee share schemes value of employee services - -------------- Balances at 31 December 2021 84 116 ======== 19 121 607 - - - - - - ( 7 168) 11 619 648 - - - 1 067 266 442 2 143 095 638 - 2 942 024 406 3 241 187 451 2 942 024 407 - - - 848 730 924 - 848 730 924 - - - ( 7 168) - ---------------- - ----------------- - ----------------- 27 768 409 ---------------- - ------------------- - -------------------- 27 768 409 -------------------- 19 121 607 ========= ( 7 168) ========= 11 619 648 ========= 27 768 409 ========= 1 915 997 366 =========== 5 085 120 045 =========== 7 059 704 024 =========== terms of *The historical cost International Accounting Standard (IAS) 29 “Financial Reporting in Hyperinflationary Economies”. The auditors have not expressed an opinion on the historical cost information. information has been shown as supplementary the benefit of users. These are not information required for in 26 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 STATEMENT OF CHANGES IN EQUITY for year ended 31 December 2021 COMPANY Inflation Adjusted Share Capital ZWL Share Premium ZWL Treasury Shares ZWL Functional Currency Translation Reserve ZWL Share Option Reserve ZWL Revaluation Reserve ZWL Retained Earnings ZWL Total ZWL Balance as at 1 January 2020 5 745 840 1 216 013 250 Total comprehensive income for the year - Unwinding of share option reserve - ----------------- - - - 4 295 423 - 761 738 831 1 987 793 344 - - - 67 884 652 67 884 652 - - ------------------- - ------------------- - ------------------- ( 4 295 423) ----------------- - ------------------- - -------------------- ( 4 295 423) ----------------- Balance at 31 December 2020 5 745 840 1 216 013 250 - Total comprehensive income for the year - Acquisition of treasury shares - Dividends paid - Employee share schemes - value of employee services - ----------------- Balance at 31 December 2021 5 745 840 1 216 013 250 ========= =========== - ------------------ - - - - ( 8 531) - - - - - - - - - - 829 623 482 2 051 382 572 - ( 25 686 755) ( 25 686 755) - - - - ( 8 531) - - ----------------- - ----------------- 33 048 171 ---------------- - ------------------- - -------------------- 33 048 171 ------------------- ( 8 531) ========== - ========== 33 048 171 ========= - =========== 803 936 728 =========== 2 058 735 458 =========== COMPANY Historical Cost* Share Capital ZWL Share Premium ZWL Treasury Shares ZWL Functional Currency Translation Reserve ZWL Share Option Reserve ZWL Revaluation Reserve ZWL Retained Earnings ZWL Total ZWL Balances at 1 January 2020 84 116 Total comprehensive income for the year - Unwinding of share option reserve - -------------- 19 121 607 - - ----------------- Balances at 31 December 2020 84 116 19 121 607 Total comprehensive income for the year - Acquisition of treasury shares - Employee share schemes - value of employee services - -------------- Balances at 31 December 2021 84 116 ======== - - - ---------------- - - ( 7 168) - - 62 563 - 107 098 19 375 384 - - 62 563 62 563 - ---------------- ( 62 563) ------------------- - ---------------- - ----------------- ( 62 563) ------------------- - - - - - - - 169 661 19 375 384 - ( 27 768 409) ( 27 768 409) - - ( 7 168) - - - ---------------- - ----------------- - ----------------- 27 768 409 ---------------- - ------------------- - -------------------- 27 768 409 -------------------- 19 121 607 ========= ( 7 168) ========= - ========= 27 768 409 ========= - =========== ( 27 598 748) =========== 19 368 216 =========== * The Historical Cost information of International Accounting Standard (IAS) 29 “Financial Reporting in Hyperinflationary Economies”. information has been shown as supplementary for the benefit of users. These are not required in terms 27 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 STATEMENT OF CASHFLOWS for year ended 31 December 2021 GROUP Inflation Adjusted Historical Cost* CASH FLOWS FROM OPERATING ACTIVITIES Profit before taxation Non-cash items: - Net monetary (Loss)/Gain - Depreciation(excluding right of use assets) 7 - Depreciation –Right of use assets 7 - Amortisation of intangible assets 7 - Impairment losses on financial assets measured at amortised costs 20.3 - Investment properties fair value gains 23 - Trade and other investments fair value gains adjustment 21 - Profit on disposal of property and equipment - Loss/(profit) on disposal of investment properties - Dividend received - Unrealised foreign exchange gain - Non-cash employee benefits expense share-based payments 7 Operating cash flows before changes in operating assets and liabilities Changes in operating assets and liabilities Increase in deposits and other liabilities Increase in loans, advances and other assets Net cash generated from operations TAXATION Corporate tax paid Net cash inflow from operations CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of intangible assets 24 Disposal/Acquisition of investment securities 17 Proceeds on disposal of property and equipment Acquisition of trade and other investments 21 Acquisition of property and equipment 25 Proceeds on disposal of investment properties Acquisition of investment properties 23 Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Repayment of lease liabilities 16.4 Purchase of treasury shares Net cash outflow from financing activities Net increase/(decrease) in cash and cash equivalents Net foreign exchange and monetary adjustments on cash and cash equivalents Cash and cash equivalents at beginning of the year Cash and cash equivalents at the end of the year 19 Additional information on operational cashflows on interest Interest received Interest paid (including interest on lease liability) 31 Dec 2021 ZWL 31 Dec 2020 ZWL Restated 31 Dec 2021 ZWL 31 Dec 2020 ZWL 2 765 630 608 1 133 863 042 3 854 621 782 1 728 075 749 436 377 804 84 468 840 49 484 694 3 697 644 45 434 726 111 168 797 17 868 262 39 246 884 - 65 921 613 38 605 828 2 865 483 - 22 310 284 8 579 715 915 580 248 106 738 ( 833 158 854) 205 702 991 ( 367 520 068) 248 106 738 ( 1 843 565 394) 127 974 740 ( 1 182 737 157) ( 10 897 181) ( 582 361) ( 6 802 556) 25 314 881 ( 110 073 088) ( 5 860 291) ( 12 669 303) 3 533 622 - ( 329 076 141) ( 8 444 751) ( 462 020) ( 5 788 412) 17 177 307 ( 110 073 088) ( 9 265 541) ( 7 091 399) ( 10 867 431) - ( 204 729 321) 33 048 171 --------------------- - ------------------- 27 768 409 -------------------- - ------------------- 2 684 615 340 841 692 521 2 286 733 495 473 165 219 8 781 857 000 4 679 232 358 ( 6 047 638 810) ( 4 429 303 072) ------------------- --------------------- 1 091 621 807 5 418 833 530 ------------------- --------------------- 12 677 505 516 ( 8 123 746 315) -------------------- 6 840 492 696 -------------------- 2 911 107 622 ( 1 356 425 376) -------------------- 2 027 847 465 -------------------- ( 537 351 953) --------------------- 4 881 481 576 --------------------- ( 136 721 493) --------------------- 954 900 314 --------------------- ( 505 915 301) -------------------- 6 334 577 395 -------------------- ( 73 473 484) -------------------- 1 954 373 981 -------------------- ( 15 664 870) ( 12 583 601) (3 779 108 984) ( 1 566 631 859) 16 571 920 10 192 641 ( 25 314 881) - ( 410 137 563) ( 156 094 715) 24 724 497 42 179 066 ( 661 072 877) ( 57 522 943) --------------------- -------------------- ( 3 981 334 686) ( 2 609 129 484) -------------------- --------------------- ( 12 139 463) ( 2 928 613 795) 582 361 ( 17 177 307) ( 123 319 135) 34 553 053 ( 44 577 303) -------------------- ( 3 090 691 589) --------------------- ( 3 652 103) ( 974 654 302) 7 122 008 - ( 110 752 486) 15 381 940 ( 245 405 846) -------------------- ( 1 311 960 789) -------------------- ( 49 713 476) ( 60 120 942) - ( 8 531) ------------------- --------------------- ( 49 713 476) ( 60 129 472) ------------------- --------------------- 840 017 418 ( 1 703 942 645) ( 46 590 617) ( 7 168) -------------------- ( 46 597 785) -------------------- 3 197 288 021 ( 14 658 020) - -------------------- ( 14 658 020) -------------------- 627 755 172 874 342 145 3 157 902 536 --------------------- 4 872 262 099 ============ 2 653 439 317 2 208 405 864 ------------------- 3 157 902 536 =========== ( 289 663 162 ) 1 964 637 240 -------------------- 4 872 262 099 =========== 844 577 801 492 304 267 ------------------- 1 964 637 240 =========== 2 976 563 465 ( 762 185 009) 1 171 971 825 ( 186 475 075) 2 434 269 087 ( 643 327 091) 501 216 271 ( 90 638 279) *The historical cost information has been shown as supplementary information for the benefit of users. These are not required in terms of International Accounting Standard (IAS) 29 “Financial Reporting in Hyperinflationary Economies”. The auditors have not expressed an opinion on the historical cost information. 28 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 STATEMENT OF CASHFLOWS for year ended 31 December 2021 COMPANY NOTE CASH FLOWS FROM OPERATING ACTIVITIES Profit before taxation Non-cash items - Net monetary Gain - Non-cash employee benefits expense – share-based payments Operating cash flows before changes in operating assets and liabilities Changes in operating assets and liabilities Decrease in deposits and other liabilities Decrease in loans, advances and other assets Net cash generated from operations Taxation Corporate tax paid Net cash inflow from operating activities CASH FLOWS FROM INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES Acquisition of treasury shares Net cash outflow from investing activities Net (decrease)/increase in cash and cash equivalents Net foreign exchange and monetary adjustments on cash and cash equivalents Cash and cash equivalents at beginning of the year Cash and cash equivalents at the end of the year 19 Inflation Adjusted Historical Cost* 31 December 2021 ZWL 31 December 2020 ZWL Restated 31 December 2021 ZWL 31 December 2020 ZWL ( 25 694 957) 403 292 267 ( 27 768 409) 62 563 ( 7 353 214) 33 048 171 ------------------- - - ( 4 295 423) ------------------- 63 664 878 - 27 768 409 ------------------- - ( 371 965) 1 663 556 --------------------- 1 291 591 --------------------- ( 82 142 250) 18 477 372 ------------------- - ------------------- ( 120 432) 127 600 -------------------- 7 168 ------------------- - ( 62 563) ------------------- - - - ------------------- - ------------------- - - - - ------------------- 1 291 591 -------------------- ------------------- - ------------------- ------------------- 7 168 ------------------- ------------------- - ------------------- ( 8 531) - ----------------------- --------------------- ( 8 531) - ----------------------- --------------------- 1 283 060 - ( 7 168) --------------------- ( 7 168) ---------------------- - - ------------------- - ------------------- - ( 1 291 342) 21 917 ------------------- 13 635 ( 76 398) 98 315 -------------------- 21 917 =========== =========== - 13 635 -------------------- 13 635 - 13 635 -------------------- 13 635 ============ =========== 29 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS for year ended 31 December 2021 1 GENERAL INFORMATION The NMBZ Holdings Limited Group (the Group) comprises the company (NMBZ Holdings Limited) and the wholly owned banking subsidiary, NMB Bank Limited (the Bank). The Bank was established in 1993 as a merchant bank incorporated under the Companies and Other Business Entities Act (Chapter 24:31) of Zimbabwe and is now registered as a commercial bank in terms of the Banking Act (Chapter 24:20) of Zimbabwe. It operates through a branch and agency network in Harare, Bulawayo, Masvingo, Kwekwe, Mutare, Gweru, Bindura, Chitungwiza and Chinhoyi. The Holding Company is incorporated and domiciled in Zimbabwe and is an investment holding company. Its registered office address is 64 Kwame Nkrumah Avenue, Harare. Its principal operating subsidiary is engaged in commercial and retail banking. NMB Bank Limited is a registered commercial bank and was incorporated in Zimbabwe on 16 October 1992 and commenced trading on 1 June 1993. The Bank operated as an Accepting House until 6 December 1999 when the licence was converted to that of a Commercial Bank. The Bank is exposed to the following risks in its operations: liquidity risk, credit risk, market risk, operational risk, foreign currency exchange rate risk and interest rate risk. 2 SUMMARY SIGNIFICANT ACCOUNTING POLICIES 2.1 BASIS OF PREPARATION The consolidated financial statements including comparatives, have been prepared under the inflation adjusted accounting basis to account for changes in the general purchasing power of the ZWL. The restatement is based on the Consumer Price Index at the statement of financial position date. The indices are derived from the monthly inflation rates which are issued by the Zimbabwe National Statistics Agency (ZIMSTAT). The indices used are shown below. These condensed consolidated financial statements are reported in Zimbabwean dollars and rounded to the nearest dollar. Dates 31-Dec-18 31-Dec-19 31-Dec-20 31-Dec-21 Indices Conversion factor 88.81 551.63 2474.52 3977.46 44.7862 7.2104 1.6074 1.0000 The indices have been applied to the historical costs of transactions and balances as follows: • All comparative figures as of and for the periods ended 31 December 2018, 31 December 2019, 31 December 2020 and 31 December 2021 have been restated by applying the change in the index to 31 December 2021; • Income statement transactions have been restated by applying the change in the index from the approximate date of the transactions to 31 December 2021; • Gains and losses arising from the monetary assets or liability positions have been included in the income statement; • Non-monetary assets and liabilities have been restated by applying the change in the index from the date of the transaction to 31 December 2021; • Property and equipment and accumulated depreciation have been restated by applying the change in the index from the date of their purchase or re-assessment to 31 December 2021; • Equity has been restated by applying the change in index from the date of issue to 31 December 2021; The net impact of applying the procedures above is shown in the statement of comprehensive income as the gain or loss on net monetary position. IAS 29 discourages the publication of historical results as a supplement to the inflation adjusted results. However, historical results have been published as additional information for the users of the Group’s financial statements. The Auditors have not expressed an opinion on the historical results. Functional and presentation currency For the purposes of the consolidated financial statements, the results and financial position of the Group are expressed in Zimbabwe dollars which is the functional currency of the Group, and the presentation currency for the consolidated financial statements. Comparative financial information The Group financial statements comprise the consolidated and separate statements of financial position, comprehensive income, changes in equity and cash flows. The comparative information covers a period of twelve months. 30 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 2.2 BASIS OF CONSOLIDATION The consolidated and separate financial statements comprise of the financial statements of the Group and company. All companies in the Group have a December year end. Inter-group transactions, balances, income and expenses are eliminated on consolidation. 2.2.1 BUSINESS COMBINATIONS Business combinations are accounted for using the acquisition method as at the acquisition date – i.e. when control is transferred to the Group. The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Subsidiaries Subsidiaries are those investees controlled by the Group. The Group controls an investee if it is exposed to, or has rights to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the subsidiary. The financial statements of subsidiaries are included in the consolidated financial statements, using the acquisition method, from the date that control effectively commences until the date that control effectively ceases. In the holding company’s separate financial statements, investment in subsidiaries are accounted for at cost. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is recognised in profit or loss immediately. Transaction costs are expensed as incurred, except if they are related to the issue of debt or equity securities. Any contingent consideration payable is measured at fair value at the acquisition date. If the contingent consideration is classified as equity, then it is not re-measured and settlement is accounted for within equity. Otherwise subsequent changes in the fair value of the contingent consideration are recognised in profit or loss. Loss of control When the Group loses control over a subsidiary, it derecognises the assets and liabilities of the subsidiary, and any related non-controlling interests (NCI) and other components of equity. Any resulting gain or loss is recognised in profit or loss. Any interest retained in the former subsidiary is measured at fair value when control is lost. Transactions eliminated on consolidation Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment. 2.3 FOREIGN CURRENCY TRANSACTIONS Transactions in foreign currencies are translated into Zimbabwe Dollars (ZWL), which is the respective functional currency of Group entities at the spot exchange rates at the date of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated into the functional currency at the spot exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between the amortised cost in the functional currency at the beginning of the year, adjusted for effective interest and payments during the year, and the amortised cost in the foreign currency translated at the spot exchange rate at the end of the year. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the spot exchange rate at the date on which the fair value is determined. Non-monetary items that are measured based on historical cost in a foreign currency are translated using the spot exchange rate at the date of the transaction. Foreign currency differences arising on translation are generally recognised in profit or loss. 2.4 TAXATION Income tax Income tax expenses comprise current, capital gains and deferred tax. Income tax is recognised in profit or loss except to the extent that it relates to items recognised directly in equity or in other comprehensive income. Current tax Current tax comprises expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. It is measured using rates enacted or substantively enacted at the reporting date in the country where the Group operates and generates taxable income and any adjustment to tax 31 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 payable in respect of previous years. Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to the taxation authorities. 2.4 TAXATION (Continued) Deferred tax Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for: • • • temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss; temporary differences related to investments in subsidiaries to the extent that it is probable that they will not reverse in the foreseeable future; and taxable temporary differences arising on the initial recognition of goodwill. Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date. The measurement of deferred tax reflects the tax consequences that would follow the manner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. For this purpose, the carrying amount of investment property measured at fair value is presumed to be recovered through sale, and the Group has not rebutted this presumption. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously. Additional taxes that arise from the distribution of dividends by the Bank are recognised at the same time as the liability to pay the related dividend is recognised. These amounts are generally recognised in profit or loss because they generally relate to income arising from transactions that were originally recognised in profit or loss. 2.5 FINANCIAL INSTRUMENTS Measurement Methods Amortised cost and effective interest rates The amortised cost is the amount at which the financial asset or financial liability is measured at initial recognition minus the principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between that initial amount and the maturity amount and, for financial assets, an adjustment for any loss allowance. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial asset or financial liability to the gross carrying amount of a financial asset (i.e. its amortised cost before any impairment allowance) or to the amortised cost of a financial liability. The calculation does not consider expected credit losses and includes transaction costs, premiums or discounts and fees and points paid or received that are integral to the effective interest rate, such as origination fees. For purchased or originated credit-impaired (‘POCI’) financial assets – assets that are credit-impaired at initial recognition - the Bank calculates the credit-adjusted effective interest rate, which is calculated based on the amortised cost of the financial asset instead of its gross carrying amount and incorporates the impact of expected credit losses in estimated future cash flows. When the Bank revises the estimates of future cash flows, the carrying amount of the respective financial assets or financial liability is adjusted to reflect the new estimate discounted using the original effective interest rate. Any changes are recognised in profit or loss. Interest Income Interest income is calculated by applying the effective interest rate to the gross carrying amount of financial assets, except for: a) b) Purchased or originated credit-impaired (POCI) financial assets, for which the original credit-adjusted effective interest rate is applied to the amortised cost of the financial asset. Financial assets that are not ‘POCI’ but have subsequently become credit-impaired (or ‘stage 3’), for which interest revenue is calculated by applying the effective interest rate to their amortised cost (i.e net of the expected credit loss provision) 32 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 2.5 FINANCIAL INSTRUMENTS (continued) Initial recognition and measurement Financial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions of the instrument. Regular way purchases and sales of financial assets are recognised on trade-date, the date on which the Bank commits to purchase or sell the asset. At initial recognition, the Bank measures a financial asset or financial liability at its fair value plus or minus, in the case of a financial asset or financial liability not at fair value through profit or loss; transaction costs that are incremental and directly attributable to the acquisition or issuance of the financial asset or financial liability respectively, such as fees and commissions. Transaction costs of financial assets and financial liabilities carried at fair value through profit or loss are expensed in profit or loss. Immediately after initial recognition, an expected credit loss allowance (ECL) is recognised for financial assets measured at amortised cost and investments in debt instruments measured at FVOCI, which results in an accounting loss being recognised in profit or loss when an asset is newly originated. When the fair value of financial assets and liabilities differs from the transaction price on initial recognition, the entity recognises the difference as follows: a). When the fair value is evidenced by a quoted price in an active market for an identical asset or liability (i.e. a Level 1 input) or based on a valuation technique that uses only data from observable markets, the difference is recognised as a gain or loss. b). In all other cases, the difference is deferred and the timing of recognition of deferred day one profit or loss is determined individually. It is either amortised over the life of the instrument, deferred until the instrument’s fair value can be determined using market observable inputs, or realised through settlement. Financial Assets (i) Classification and subsequent measurement From 1 January 2018, the Group has applied IFRS 9 and classifies its financial assets in the following measurement categories: • • • Fair value through profit or loss (FVPL); Fair value through other comprehensive income (FVOCI); or Amortised cost. The classification requirements for debt and equity instruments are described below: Debt Instruments Debt instruments are those instruments that meet the definition of a financial liability from the issuer’s perspective, such as loans, government and corporate bonds and trade receivables purchased from clients in factoring arrangements without recourse. Classification and subsequent measurement of debt instruments depend on: • • the Bank’s business model for managing the asset; and the cash flow characteristics of the asset. Based on these factors, the Bank classifies its debt instruments into one of the following three measurement categories: • • • Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest (‘SPPI’), and that are not designated at FVPL, are measured at amortised cost. The carrying amount of these assets is adjusted by any expected credit loss allowance. Interest income from these financial assets is included in interest and similar income using the effective interest rate method. Fair value through other comprehensive income (FVOCI): Financial assets that are held for collection of contractual cash flows and for selling the assets, where the assets’ cash flows represent solely payments of principle and interest and that are not designated at FVPL, are measured at fair value through other comprehensive income (FVOCI). Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses on the instrument’s amortised cost which are recognised in profit or loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognised in “Net Investment Income’. Interest income from these financial assets is included in ‘Interest Income’ using the effective interest rate method. Fair value through profit or loss: Assets that do not meet the criteria for amortised cost or FVOCI are measured at fair value through profit or loss. A gain or loss on a debt investment that is subsequently measured at fair value through profit or loss and is not part of a hedging relationship is recognised in profit or loss and 33 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 2.5 FINANCIAL INSTRUMENTS (continued) Debt Instruments (continued) presented in the profit or loss statement within ‘Net Trading Income” in the period in which it arises, unless it arises from debt instruments that were designated at fair value or which are not held for trading, in which case they are presented separately in ‘Net Investment Income’. Interest income from these financial assets is included in “Interest income” using the effective interest rate method. Business model: the business model reflects how the Bank manages the assets in order to generate cash flows. That is, whether the Bank’s objective is solely to collect the contractual cash flows from the assets or is to collect both the contractual cash flows and cash flows arising from the sale of assets. If neither of these is applicable (e.g. financial assets are held for trading purposes), then the financial assets are classified as part of ‘other’ business model and measured at FVPL. Factors considered by the Bank in determining the business model for a group of assets include past experience on how the cash flows for these assets were collected, how the asset’s performance is evaluated and reported to key management personnel, how risks are assessed and managed and how managers are compensated. Securities held for trading are held principally for the purpose of selling in the near term or are part of a portfolio of financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking. These securities are classified in the ‘other’ business model and measured at FVPL. Where the business model is to hold assets to collect contractual cash flows or to collect contractual cash flows and sell, the Bank assesses whether financial instruments’ cash flows represent solely payments of principal and interest (the “SPPI” test). In making this assessment, the Bank considers whether the contractual cash flows are consistent with a basic lending arrangement i.e. interest includes only consideration for the time value of money, credit risk, other basic lending risks and a profit margin that is consistent with a basic lending arrangement. Where the contractual terms introduce exposure to risk or volatility that are inconsistent with a basic lending arrangement, the related financial asset is classified and measured at fair value through profit or loss. The Bank reclassifies debt investments when and only when its business model for managing those assets changes. The reclassification takes place from the start of the first reporting period following the change. Such changes are expected to be very infrequent and none occurred during the period. Equity Instruments Equity instruments are instruments that meet the definition of equity from the issuer’s perspective; that is, instruments that do not contain a contractual obligation to pay and that evidence a residual interest in the issuer’s net assets. Examples of equity instruments include basic ordinary shares. The Bank subsequently measures all equity investments at fair value through profit or loss, except where the Bank’s management has elected, at initial recognition, to irrevocably designate an equity investment at fair value through other comprehensive income. The Bank policy is to designate equity investments as FVOCI when those investments are held for purposes other than to generate investment returns. When this election is used, fair value gains and losses are recognised in OCI and are not subsequently reclassified to profit or loss, including on disposal. Impairment losses (and reversal of impairment losses) are not reported separately from other changes in fair value. Dividends, when representing a return on such investments, continue to be recognised in profit or loss as other income when the Bank’s right to receive payments is established. Gains and losses on equity investments at FVPL are included in the ‘Other Income’ line in the statement of profit or loss. (ii) Impairment The Bank recognises loss allowances for Expected Credit Losses (ECLs) on the following financial instruments that are not measured at Fair Value through Profit or Loss (FVTPL): • • • • • • loans and advances to banks; loans and advances to customers; debt investment securities; lease receivables; loan commitments issued; and financial guarantee contracts issued. No impairment loss is recognised on equity investments. With the exception of POCI financial assets (which are considered separately below), ECLs are measured through a loss allowance at an amount equal to: • 12-month ECL, i.e. lifetime ECL that result from those default events on the financial instrument that are possible within 12 months after the reporting date, (referred to as Stage 1); or 34 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 • Full lifetime ECL, i.e. lifetime ECL that result from all possible default events over the life of the financial instrument, (referred to as Stage 2 and Stage 3). A loss allowance for full lifetime ECL is required for a financial instrument if the credit risk on that financial instrument has increased significantly since initial recognition. For all other financial instruments, ECLs are measured at an amount equal to the 12-month ECL. 2.5 FINANCIAL INSTRUMENTS (continued) Expected Credit Losses ECLs are a probability-weighted estimate of the present value of credit losses. These are measured as the present value of the difference between the cash flows due to the Bank under the contract and the cash flows that the Bank expects to receive arising from the weighting of multiple future economic scenarios, discounted at the asset’s Effective Interest Rate (EIR). For undrawn loan commitments, the ECL is the difference between the present value of the difference between the contractual cash flows that are due to the Bank if the holder of the commitment draws down the loan and the cash flows that the Bank expects to receive if the loan is drawn down; and For financial guarantee contracts, the ECL is the difference between the expected payments to reimburse the holder of the guaranteed debt instrument less any amounts that the Bank expects to receive from the holder, the debtor or any other party. The Bank measures ECL on an individual basis, or on a collective basis for portfolios of loans that share similar economic risk characteristics. The measurement of the loss allowance is based on the present value of the asset’s expected cash flows using the asset’s original EIR, regardless of whether it is measured on an individual basis or a collective basis. Credit-Impaired Financial Assets A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of that financial asset have occurred. Evidence that a financial asset is credit-impaired include observable data about the following events: significant financial difficulty of the issuer or the borrower; a). b). a breach of contract, such as a default or past due event; c). the lender(s) of the borrower, for economic or contractual reasons relating to the borrower’s financial difficulty, having granted to the borrower a concession(s) that the lender(s) would not otherwise consider; it becoming probable that the borrower will enter bankruptcy or other financial reorganisation; the disappearance of an active market for that financial asset because of financial difficulties; or the purchase or origination of a financial asset at a deep discount that reflects the incurred credit losses. d). e). f). It may not be possible to identify a single discrete event—instead, the combined effect of several events may have caused financial assets to become credit-impaired. Purchased or originated credit-impaired (POCI) financial assets For POCI the Bank only recognises the cumulative changes in lifetime expected credit losses since initial recognition. At each reporting date, the Bank recognises in profit or loss the amount of the change in lifetime expected credit losses as an impairment gain or loss. The Bank recognises favourable changes in lifetime expected credit losses as an impairment gain, even if the lifetime expected credit losses are less than the amount of expected credit losses that were included in the estimated cash flows on initial recognition. The Bank assesses on a forward-looking basis the expected credit losses (‘ECL’) associated with its debt instrument assets carried at amortised cost and FVOCI and with the exposure arising from loan commitments and financial guarantee contracts. The Bank recognises a loss allowance for such losses at each reporting date. The measurement of ECL reflects: • • • An unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes; The time value of money; and Reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions. For loan commitments and financial guarantee contracts, the loss allowance is recognised in other liabilities. The Bank keeps track of the changes in the loss allowance for financial assets separately from those for loan commitments and financial guarantee contracts. However, if a financial instrument includes both a loan (i.e. financial asset) and an undrawn commitment (i.e. loan commitment) component and the Bank does not separately identify the expected credit losses on the loan commitment component from those on the financial asset component, the expected credit losses on the loan commitment is recognised together with the loss allowance for the financial asset. To the extent that the combined expected credit losses exceed the gross carrying amount of the financial asset, the expected credit losses is recognised in other liabilities 35 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 2.5 FINANCIAL INSTRUMENTS (continued) Definition Of Default Critical to the determination of ECL is the definition of default. The definition of default is used in measuring the amount of ECL and in the determination of whether the loss allowance is based on 12-month or lifetime ECL, as default is a component of the probability of default (PD) which affects both the measurement of ECLs and the identification of a significant increase in credit risk. The Bank considers the following as constituting an event of default: • • The borrower is past due more than 90 days on any material credit obligation to the Bank or; The borrower is unlikely to pay its credit obligations to the Bank in full. The definition of default is appropriately tailored to reflect different characteristics of different types of assets. Overdrafts are considered as being past due once the customer has breached an advised limit or has been advised of a limit smaller than the current amount outstanding. When assessing if the borrower is unlikely to pay its credit obligation, the Bank takes into account both qualitative and quantitative indicators. The information assessed depends on the type of the asset, for example in corporate lending a qualitative indicator used is the breach of covenants, which is not relevant for retail lending. Quantitative indicators, such as overdue status and non-payment on another obligation of the same counterparty are key inputs in this analysis. The Bank uses a variety of sources of information to assess default which are either developed internally or obtained from external sources. Significant Increase In Credit Risk The Bank monitors all financial assets, undrawn loan commitments and financial guarantee contracts that are subject to the impairment requirements to assess whether there has been a significant increase in credit risk since initial recognition. If there has been a significant increase in credit risk the Bank will measure the loss allowance based on lifetime rather than 12-month ECL. The Bank’s accounting policy is not to use the practical expedient that financial assets with ‘low’ credit risk at the reporting date are deemed not to have had a significant increase in credit risk. As a result the Bank monitors all financial assets, undrawn loan commitments and financial guarantee contracts that are subject to impairment for significant increase in credit risk. In assessing whether the credit risk on a financial instrument has increased significantly since initial recognition, the Bank compares the risk of a default occurring on the financial instrument at the reporting date based on the remaining maturity of the instrument with the risk of a default occurring that was anticipated for the remaining maturity at the current reporting date when the financial instrument was first recognised. In making this assessment, the Bank considers both quantitative and qualitative information that is reasonable and supportable, including historical experience and forward- looking information that is available without undue cost or effort, based on the Bank’s historical experience and expert credit assessment including forward-looking information. Multiple economic scenarios form the basis of determining the probability of default at initial recognition and at subsequent reporting dates. Different economic scenarios will lead to a different probability of default. It is the weighting of these different scenarios that forms the basis of a weighted average probability of default that is used to determine whether credit risk has significantly increased. For corporate lending, forward-looking information includes the future prospects of the industries in which the Bank’s lenders operate, obtained from economic expert reports, financial analysts, governmental bodies and other similar organisations, as well as consideration of various internal and external sources of actual and forecast economic information. For the retail portfolio, forward looking information includes the same economic forecasts as the corporate portfolio with additional forecasts of local economic indicators, particularly for regions with a concentration to certain industries, as well as internally generated information of customer payment behaviour. The Bank allocates its counterparties to a relevant internal credit risk grade depending on their credit quality. The quantitative information is a primary indicator of significant increase in credit risk and is based on the change in lifetime PD by comparing: • • the remaining lifetime PD at the reporting date; with the remaining lifetime PD for this point in time that was estimated based on facts and circumstances at the time of initial recognition of the exposure. The PDs used are forward looking and the Bank uses the same methodologies and data used to measure the loss allowance for ECL. The qualitative factors that indicate significant increase in credit risk are reflected in PD models on a timely basis. However, the Bank still considers separately additional qualitative factors to assess if credit risk has increased significantly. For corporate lending there is particular focus on assets that are included on the Bank’s ‘watch list’ and for the retail portfolio the Bank considers the expectation of forbearance and payment holidays, credit scores and any other changes in the borrower’s circumstances which are likely to adversely affect one’s ability to meet contractual obligations. 36 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 2.5 FINANCIAL INSTRUMENTS (continued) Significant Increase In Credit Risk (continued) Given that a significant increase in credit risk since initial recognition is a relative measure, a given change, in absolute terms, in the PD will be more significant for a financial instrument with a lower initial PD than compared to a financial instrument with a higher PD. The Bank assumes that when an asset becomes 30 days past due, the Bank considers that a significant increase in credit risk has occurred and the asset is in stage 2 of the impairment model, i.e. the loss allowance is measured as the lifetime ECL. (iii) Modification Of Loans The Bank sometimes renegotiates or otherwise modifies the contractual cash flows of loans to customers. When this happens, the Bank assesses whether or not the new terms are substantially different to the original terms. The Bank does this by considering, among others, the following factors: • If the borrower is in financial difficulty, whether the modification merely reduces the contractual cash flows to amounts the borrower is expected to be able to pay. • Whether any substantial new terms are introduced, such as a profit share/equity-based return that substantially • • • affects the risk profile of the loan. Significant extension of the loan term when the borrower is not in financial difficulty. Significant change in the interest rate. Change in the currency the loan is denominated in. Insertion of collateral, other security or credit enhancements that significantly affect the credit risk associated with the loan. If the terms are substantially different, the Bank derecognises the original financial asset and recognises a ‘new’ asset at fair value and recalculates the new effective interest rate for the asset. The date of renegotiation is consequently considered to be the date of initial recognition for impairment calculation purposes, including for the purpose of determining whether a significant increase in credit risk has occurred. However, the Bank also assesses whether the new financial asset recognised is deemed to be credit-impaired at initial recognition, especially in circumstances where the renegotiation was driven by the debtor being unable to make the originally agreed payments. Differences in the carrying amount are also recognised in profit or loss as a gain or loss on derecognition. If the terms are not substantially different, the renegotiation or modification does not result in derecognition, and the Bank recalculates the gross carrying amount based on the revised cash flows of the financial asset and recognises a modification gain or loss in profit or loss. The new gross carrying amount is recalculated by discounting the modified cash flows at the original effective interest rate (or credit-adjusted effective interest rate for purchased or originated credit-impaired financial assets). (iv) Derecognition Other Than On A Modification Financial assets, or a portion thereof, are derecognised when the contractual rights to receive the cash flows from the assets have expired, or when they have been transferred and either • • the Bank transfers substantially all the risks and rewards of ownership, or the Bank neither transfers nor retains substantially all the risks and rewards of ownership and the Bank has not retained control. The Bank enters into transactions where it retains the contractual rights to receive cash flows to other entities and transfers substantially all of the risks and rewards. These transactions are accounted for as ‘pass through’ transfers that result in derecognition if the Bank: (i) (ii) (iii) Has no obligation to make payments unless it collects equivalent amounts from the assets; Is prohibited from selling or pledging the assets; and Has an obligation to remit any cash it collects from the assets without material delay. Collateral (shares and bonds) furnished by the Bank under standard repurchase agreements and securities lending and borrowing transactions are not derecognised because the Bank retains substantially all the risks and rewards on the basis of the predetermined repurchase price, and the criteria for derecognition are therefore not met. This also applies to certain securitisation transactions in which the Bank retains a subordinated residual interest. 37 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 2.5 FINANCIAL INSTRUMENTS (continued) Financial Liabilities Classification and Subsequent Measurement In both the current and prior period, financial liabilities are classified as subsequently measured at amortised cost, except for: Financial liabilities at fair value through profit or loss: this classification is applied to financial liabilities held for trading (e.g. short positions in the trading booking) and other financial liabilities designated as such at initial recognition. Gains or losses on financial liabilities designated at fair value through profit or loss are presented partially in other comprehensive income (the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability, which is determined as the amount that is not attributable to changes in market conditions that give rise to market risk) and partially profit or loss (the remaining amount of change in the fair value of the liability). This is unless such a presentation would create, or enlarge, an accounting mismatch, in which case the gains and losses attributable to changes in the credit risk of the liability are also presented in profit or loss; Financial liabilities arising from the transfer of financial assets which did not qualify for derecognition, whereby a financial liability is recognised for the consideration received for the transfer. In subsequent periods, the Bank recognises any expense incurred on the financial liability. Derecognition Financial liabilities are derecognised when they are extinguished (i.e. when the obligation specified in the contract is discharged, cancelled or expires). The exchange between the Bank and its original lenders of debt instruments with substantially different terms, as well as substantial modifications of the terms of existing financial liabilities, are accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. The terms are substantially different if the discounted present value of the cash flows under the new terms, including any fees paid net of any fees received and discounted using the original effective interest rate, is at least 10% different from the discounted present value of the remaining cash flows of the original financial liability. In addition, other qualitative factors, such as the currency that the instrument is denominated in, changes in the type of interest rate, new conversion features attached to the instrument and change in covenants are also taken into consideration. If an exchange of debt instruments or modification of terms is accounted for as an extinguishment, any costs or fees incurred are recognised as part of the gain or loss on the extinguishment. If the exchange or modification is not accounted for as an extinguishment, any costs or fees incurred adjust the carrying amount of the liability and are amortised over the remaining term of the modified liability. Financial Guarantee Contracts and Loan Commitments Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due, in accordance with the terms of a debt instrument. Such financial guarantees are given to banks, financial institutions and others on behalf of customers to secure loans, overdrafts and other banking facilities. Financial guarantee contracts are initially measured at fair value and subsequently measured at the higher of: • • The amount of the loss allowance; and The premium received on initial recognition less income recognised in accordance with the principles of IFRS 15. Loan commitments provided by the Bank are measured as the amount of the loss allowance. The Bank has not provided any commitment to provide loans at below-market interest rate, or that can be settled net in cash or by delivering or issuing another financial instrument. For loan commitments and financial guarantee contracts, the loss allowance is recognised in other liabilities. However, for contracts that include both a loan and an undrawn commitment and the Bank cannot separately identify the expected credit losses on the undrawn commitment component from those on the loan component, the expected credit losses on the undrawn commitment are recognised together with the loss allowance for the loan. To the extent that the combined expected credit losses exceed the gross carrying amount of the loan, the expected credit losses are recognised in other liabilities. 38 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 2.5 FINANCIAL INSTRUMENTS (continued) Critical Accounting Estimates and Judgements The preparation of financial statements requires the use of accounting estimates which, by definition, will seldom equal the actual results. Management also needs to exercise judgement in applying the Bank’s accounting policies. Note 2.20 provides an overview of the areas that involve a higher degree of judgement or complexity, and major sources of estimation uncertainty that have a significant risk of resulting in a material adjustment within the next financial year. Detailed information about each of these estimates and judgements is included in the related notes together with information about the basis of calculation for each affected line item in the financial statements. Measurement of the Expected Credit Loss Allowance The measurement of the expected credit loss allowance for financial assets measured at amortised cost and FVOCI is an area that requires the use of complex models and significant assumptions about future economic conditions and credit behaviour (e.g. the likelihood of customers defaulting and the resulting losses). A number of significant judgements are also required in applying the accounting requirements for measuring ECL, such as: • • • • Determining criteria for significant increase in credit risk; Choosing appropriate models and assumptions for the measurement of ECL; Establishing the number and relative weightings of forward-looking scenarios for each type of product/market and the associated ECL; and Establishing groups of similar financial assets for the purposes of measuring ECL. The Bank evaluates ECLs for 7 portfolios of audited corporates with overdraft limits, audited corporates without overdraft limits, unaudited corporates with overdraft limits, unaudited corporates without overdraft limits, SMEs with limits, SMEs without limits and Retail loans. The guiding principle of the Expected Credit Loss evaluation is to reflect the general pattern of deterioration or improvement in the credit quality of financial instruments and allocate commensurate loss provisions. Under the general approach, there are two measurement bases: • • 12-month ECLs (Stage 1 ECLs) that is evaluated for all financial instruments with no significant deterioration in credit quality since initial recognition. Lifetime ECLs (Stages 2 and 3 ECLs) that is evaluated for financial instruments for which significant increase in credit risk or default has occurred on an individual or collective basis. Probability of Default (PD) The Bank defines Probability of Default as the likelihood that a borrower will fail to meet their contractual obligations in the future. The Bank’s PD models have been built using historical credit default experience, present credit information as well as forward looking factors which affect the capacity of borrowers to meet their contractual obligations. The Bank used the logistic regression approach to construct PD models for Corporate, SME, Retail and Treasury Bills portfolios while the Merton model was adopted for Interbank Placements. The PD models are used at entity level to evaluate 12 - month PDs for Day 1 losses and for financial instruments with no significant deterioration in credit risk since initial recognition, whilst lifetime PD is used for financial instruments for which significant increase in credit risk or default has occurred. 12 - month PDs are derived using borrower present risk characteristics while lifetime PDs are derived using a combination of 12 - month PDs, present borrower behaviour and forward looking macroeconomic factors. Exposure at Default (EAD) The Bank defines Exposure at Default as an estimation of the extent to which the Bank will be exposed to a counterparty in the event of a default. The Bank’s EAD models have been built using historical experience of debt instruments that defaulted. The Bank used the linear regression approach to construct EAD models for Corporate, SME and Retail portfolios. For TBs and Interbank Placements, the Bank took a conservative approach of considering the full outstanding balance as the EAD at any given point in the lifetime of an instrument. The Bank’s EAD models that use Credit Conversion Factors (CCFs) are applied on fully drawn down instruments while models that use Loan Equivalents (LEQs) are applied on partly drawn instruments. The EAD models are used at entity level to evaluate the proportion of the exposure that will be outstanding at the point of default. 39 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 Loss Given Default (LGD) The Bank defines Loss Given Default as an estimate of the ultimate credit loss in the event of a default. The Bank’s LGD models were built using historical experience of defaulted debt instruments and observed recoveries. The Bank used the linear regression approach to construct LGD models for Corporate, SME and Retail portfolios. For Treasury Bills and Interbank Placements, the Bank took a conservative approach of taking a fixed 100% as the LGD at any given point in the lifetime of an instrument. The LGD models are used at portfolio level to evaluate 12 - month LGDs for financial instruments with no significant increase in credit risk since initial recognition and lifetime is applied LGDs for financial instruments for which significant increase in credit risk has occurred. 12 - month LGDs were derived as historical loss rates while lifetime LGDs were derived using a combination of 12 - month LGDs and forward looking macroeconomic factors such as GDP and Inflation. The Bank’s ECL model combines the output of the PD, EAD and LGD and computes an Expected Credit Loss that takes into account the time value of money using the Effective Interest Rates (EIR) and time to maturity of the debt instruments. The final ECL is a probability-weighted amount that is determined by evaluating three (3) possible outcomes of Best Case ECL, Baseline Case ECL and Worst Case ECL. The Bank has modelled these three cases in such a way that the Best Case represents a scenario of lower than market average default rates, the Base Case represents scenarios of comparable market average default rates and the Worst Case represents scenarios of higher than market average default rates. Forward Looking Information In its ECL models, NMB Bank relies on a broad range of forward looking information as macroeconomic inputs, such as: Inflation Rate This is the inflation of the country of Zimbabwe. The Bank approximates the impact of inflation on the future quality of the credit portfolio by measuring the variation between the inflation rate at reporting date and the highest forecasted inflation rate for the period 2021-2023. Current inflation data is collected from the Reserve Bank of Zimbabwe (RBZ) and Zimbabwe National Statistics Agency (ZIMSTAT) websites while inflation forecast data is collected from the World Bank websites. Unemployment Rates The Bank defines this as the unemployed proportion of the country’s population. The Bank approximates the impact of unemployment on the future quality of the credit portfolio by assessing the direction of the rate. Increasing unemployment rate tends to indicate economic downsizing in the future while an improving unemployment rate ordinarily indicates economic growth. Market Non-Performing Loans Rate The Bank assesses the variance between its non-performing loans rate and the market average NPL rate as at reporting date. The variance approximates the performance of the Bank against the market with respect to the ability of the Bank to underwrite low credit loans. Producer Price Index (PPI) The Bank assesses this as the cost of production for companies. The Bank approximates the impact of PPI on the future quality of the credit portfolio by assessing the direction of the index. Increasing PPI tend to indicate economic downsizing in the future while decreasing PPI ordinarily promotes economic growth in the future. PPI data is collected from the RBZ and ZIMSTAT websites. Renegotiated Loans And Advances Where possible, the Group seeks to restructure loans rather than to take possession of collateral. This may involve extending the payment arrangements and the agreement of new loan conditions. Once the terms have been re-negotiated, any impairment is measured using the original effective interest rate (EIR) as calculated before the modification of terms and the loan is no longer considered past due. Management continuously renews re-negotiated loans to ensure that all criteria are met and that future payments are likely to occur. The loans continue to be subject to an individual or collective impairment assessment, calculated using the loans original EIR. Collateral valuation The Group seeks to use collateral, where possible, to mitigate its credit risk on financial assets. The collateral comes in 40 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 Collateral valuation (Continued) various forms such as cash, securities, letters of credit/guarantees, real estate, receivables, inventories, other non-financial assets and credit enhancements such as netting agreements. The fair value of collateral is generally assessed, at a minimum, at inception and based on the Group’s quarterly reporting schedule, however, some collateral, for example, cash or securities relating to margining requirements, is valued daily. To the extent possible, the Group uses active market data for valuing financial assets, held as collateral. Other financial assets which do not have a readily determinable market value are valued using models. Non-financial collateral, such as real estate, is valued based on data provided by third parties such as mortgage brokers, housing price indices, audited financial statements, and other independent sources. (See note 39.1.4 for further analysis of collateral). Collateral repossessed The Group’s policy is to determine whether a repossessed asset is best used for its internal operations or should be sold. Assets determined to be useful for the internal operations are transferred to their relevant asset category at the lower of their repossessed value or the carrying value of the original secured asset. Assets that are determined better to be sold, are immediately transferred to assets held for sale at their value at the repossession date in line with the Group’s policy. Offsetting financial instruments Financial assets and financial liabilities are offset and the net amount reported in the statement of financial position if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the asset and settle the liability simultaneously. This is not generally the case with master netting agreements, therefore, the related assets and liabilities are presented gross in the statement of financial position. Non-performing loans Interest on loans and advances is accrued as income until such time as reasonable doubt exists about its recoverability, thereafter and until all or part of the loan is written off, interest continues to accrue on customer’s accounts but is not included in income. The suspended interest is recognised as a provision in the statement of financial position. Such suspended interest is deducted from loans and advances in the statement of financial position. This policy meets the requirements of the Banking Regulations, Statutory Instrument, 205 of 2000. 2.6 CASH AND CASH EQUIVALENTS Cash and cash equivalents include notes and coins on hand, unrestricted balances held with central bank and highly liquid financial assets with original maturities of three months or less from the acquisition date that are subject to an insignificant risk of changes in their fair value, and are used by the Group in the management of its short term commitments. Cash and cash equivalents are carried at amortised cost in the statement of financial position. 2.7 PROPERTY AND EQUIPMENT Equipment is stated at cost less accumulated depreciation and accumulated impairment losses. Such cost includes the cost of replacing part of the equipment when that cost is incurred, if the recognition criteria are met. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the equipment as a replacement if the recognition criteria are satisfied. The previous remaining carrying amount is derecognized. All other repair and maintenance costs are recognised in the profit or loss as incurred. Land and buildings are measured at revalued amount less accumulated depreciation on buildings and impairment losses recognised after the date of the revaluation. Revaluation of property is performed at the end of each reporting period, by a registered professional valuer. Any revaluation surplus is recognised in other comprehensive income and accumulated in the revaluation reserve included in the equity section of the statement of financial position, except to the extent that it reverses a revaluation decrease of the same asset previously recognised in profit or loss, in which case the increase is recognised in profit or loss. A revaluation deficit is recognised in profit or loss, except to the extent that it offsets an existing surplus on the same asset recognised in the asset revaluation reserve, the decrease in other comprehensive income reduces the amount accumulated in equity as the asset revaluation reserve. Upon disposal, any revaluation reserve relating to the particular asset being sold is transferred to retained earnings. An annual transfer from the asset revaluation reserve to retained earnings is made for the difference between depreciation based on the revalued carrying amount of the assets and depreciation based on the assets original cost. Additionally, accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. Upon disposal, any revaluation reserve relating to the particular asset being sold is transferred to retained earnings. 41 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 An item of property and plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the year the asset is derecognised. Residual values and the useful life of assets are reviewed at least at each financial year end. Where the residual value of an asset increases to an amount that is equal to or exceeds its carrying amount, then the depreciation of the asset ceases. Depreciation will resume only when the residual value decreases to an amount below the asset’s carrying amount. Owned assets The cost of self-constructed assets includes the cost of materials, direct labour and an appropriate proportion of attributable overheads which are directly attributable to the assets. Depreciation Depreciable amount is the cost of an asset or other amount substituted for cost less its residual value. Depreciation is provided to write off the depreciable amount of property and equipment over their estimated useful lives to their estimated residual values at the following rates per annum, on a straight-line basis. 20% Computers 25% Motor Vehicles 20% Furniture and Equipment Buildings 2% Land and capital work-in-progress are not depreciated. 2.8 INTANGIBLE ASSETS Intangible assets are initially recognised at cost. Subsequently the assets are measured at cost less accumulated amortisation and any impairment loss. Amortisation of Intangible Assets The depreciable amount of an intangible asset with a finite useful life is allocated on a straight line basis over its useful life. The amortisation rate is as follows: Computer software 20% 2.9 LEASES The determination of whether an arrangement is a lease, or it contains a lease is based on the substance of the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset. As Lessor Leases where the Group does not transfer substantially all the risks and rewards of ownership of the assets are classified as operating leases. Initial direct costs incurred in negotiating operating leases are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental income. As Lessee In terms of IFRS 16, the Group recognises lease liabilities in relation to leases which had previously been classified as ‘operating leases’ under the principles of IAS 17, Leases. These liabilities are measured at the present value of the remaining lease payments, discounted using the Group’s incremental borrowing rate. The Group has neither enjoyed nor extended any lease payment holidays in its capacity as either lessee or lessor respectively due to COVID-19. As such, there are no COVID-19 induced lease modifications applicable during the period under review. Measurement of Right-Of-Use Assets The associated right-of-use assets for property leases are measured on a prospective basis. The right-of-use assets are measured at the amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognised in the consolidated statement of financial position. 42 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 2.9 LEASES (Continued) Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Right-of-use assets are generally depreciated over the shorter of the asset’s useful life and the lease term on a straight- line basis. In circumstances where the Group is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset’s useful life. The Group revalues its land and buildings that are presented within property and equipment and it has elected not to do so for the right-of-use buildings held by the Group. 2.10 IMPAIRMENT OF NON FINANCIAL ASSETS The carrying amounts of the Group’s non-financial assets other than consumables are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the assets’ recoverable amounts are estimated. An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. The recoverable amount of assets is the greater of their fair value less cost to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, an appropriate valuation model is used. Impairment losses of continuing operations are recognised in profit or loss in those expense categories consistent with the functions of the impaired asset, except for property previously revalued where the revaluation was taken to other comprehensive income. In this case, the impairment is also recognised in other comprehensive income up to the amount of any previous revaluation. For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist, or may have decreased. If such an indication exists the bank estimates the assets or CGU’s recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the assets recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceeds the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in profit or loss. 2.11 INVESTMENT PROPERTIES Investment properties are measured initially at cost, including transaction costs. The carrying amount includes the cost of replacing part of an existing investment property at the time that cost is incurred if the recognition criteria are met, and excludes the costs of day to day servicing of an investment property. Subsequent to initial recognition, investment properties are stated at fair value, which reflects market conditions at the reporting date. Rental income from investment properties is recognised as revenue on a straight-line basis over the term of the lease. Lease incentives granted are recognised as an integral part of the total rental income, over the term of the lease. Gains or losses arising from changes in the fair values of investment properties are included in profit or loss in the year in which they arise. Revaluation is done at the end of each year by a registered independent professional valuer. Investment properties are derecognised when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gains or losses on the retirement or disposal of an investment property are recognised in profit or loss in the year of retirement or disposal. Transfers are made to or from investment property only when there is a change in use. For a transfer from investment property to owner occupied property, the deemed cost for subsequent accounting is the fair value at the date of change in use. If owner occupied property becomes an investment property, the Group accounts for such property in accordance with the policy stated under property and equipment up to the date of change in use. 2.12 FINANCIAL GUARANTEES In the ordinary course of business, the banking subsidiary give financial guarantees, consisting of letters of credit, guarantees and acceptances. Financial guarantees are initially recognised in the financial statements at fair value, being the premium received. Subsequent to initial recognition, the Group’s liability under each guarantee is measured at the higher of the amount initially recognised less, where appropriate, cumulative amortisation recognised in profit or loss, and the best estimate of expenditure required to settle any financial obligation arising as a result of the guarantee. 43 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 2.12 FINANCIAL GUARANTEES (Continued) Any increase in the liability relating to financial guarantees is recognised in the profit or loss. The premium received is recognised in profit or loss on a straight line basis over the life of the guarantee, or in full, depending on the conditions attached to the guarantee. 2.13 WRITE-OFFS Financial assets are written off where the recovery efforts have been pursued actively over one year without success or when it is uneconomical and inefficient to keep carrying the debt in the books as the chances of recovery become slim. Such accounts become subjects of write-backs in the event of recovery. Partial write-offs may be possible in cases where collateral security held is inadequate to expunge the debt in full. 2.14 FEES AND COMMISSION INCOME Fees and commission income and expense that are integral to the effective interest rate on a financial asset or financial liability are included in the measurement of the EIR. Other fees and commission – including retail banking customer fees, corporate banking and credit related fees, fees from financial guarantee contracts, commission from international banking activities and fees from corporate finance – are recognised as the related services are performed. If a loan commitment is not expected to be drawn down of a loan, then the related commitment fees are recognised on a straight line basis over the commitment period. Other fees and commitment expense relate mainly transaction and service fees, which are expensed as the services are received. The performance obligations, as well as the timing of their satisfaction, are identified, and determined, at the inception of the contract. 2.15 INTEREST INCOME For all financial instruments measured at amortised cost and financial instruments designated at fair value through profit or loss, interest income or expense is recorded using the effective interest rate (EIR), which is the rate that exactly discounts the estimated future cash payments or receipts through the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or liability. Interest income includes income arising out of the banking activities of lending and investing. 2.16 INTEREST EXPENSE Interest expense arises from deposit taking and borrowings. The expense is recognised in profit or loss as it accrues, taking into account the effective interest cost of the liability. 2.17 EMPLOYEE BENEFITS Retirement benefits are provided for the Group’s employees through a defined contribution plan and the National Social Security Authority Scheme. Defined Contribution Plan Obligations for contribution to the defined contribution pension plan are recognised as an expense in profit or loss as they are incurred. National Social Security Authority Scheme The cost of retirement benefits applicable to the National Social Security Authority, which commenced operations on 1 October 1994 is determined by the systematic recognition of legislated contributions. 44 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 2.17 EMPLOYEE BENEFITS (Continued) Short Term Employee Benefits/And Share Based Payments Short term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected to be paid if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably. Share based payments The Group issues share options to certain employees in terms of the Employee Share Option Scheme which is an equity settled share-based payment scheme. Share options are measured at fair value of the equity instruments at the grant date. The fair value determined at the grant date of the options is expensed over the vesting period, based on the Group’s estimate of shares that will eventually vest. Fair value is measured using the Black-Scholes option pricing model. The expected life used in the model is adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and other behavioural considerations. 2.18 PROVISIONS Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The expense relating to any provision is presented in profit or loss net of any reimbursements. 2.19 SHAREHOLDERS’ FUNDS AND SHAREHOLDERS’ LIABILITIES Shareholders’ funds and shareholders’ liabilities refers to the total investment made by the shareholders in the Group and it consists of share capital, share premium, share options reserve, functional currency translation reserve, retained earnings, redeemable ordinary shares and subordinated loans. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity. Income tax relating to transaction costs of an equity transaction is accounted for in accordance with IAS 12. Treasury shares Own equity instruments that are reacquired (treasury shares) are recognised at cost and deducted from equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Group’s own equity instruments. Any difference between the carrying amount and the consideration, if reissued, is recognised in the share premium. 2.20 USE OF ESTIMATES, JUDGEMENTS AND ASSUMPTIONS In preparation of the consolidated and separate financial statements, Directors have made judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised prospectively. Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment in the year ending 31 December 2021 is included in the following notes. Land and buildings The properties were valued by an independent professional valuer. The determined fair value of land and buildings is most sensitive to significant unobservable inputs. The property market is currently not stable due to liquidity constraints. Investment properties Investment properties were valued by an independent professional valuer. The properties market is currently not stable due to liquidity constraints. 45 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 Impairment losses on loans and advances The Group reviews its individually significant loans and advances at each reporting date to assess whether an impairment loss should be recorded in profit or loss. In particular, judgement by management is required in the estimation of the amount and timing of future cash flows when determining the impairment loss. In estimating these cash flows, the Group makes judgements about the borrower’s financial situation and the net realisable value of collateral. These estimates are based on assumptions about a number of factors and actual results may differ, resulting in future changes to the allowance. Loans and advances that have been assessed individually and found not to be impaired and all individually insignificant loans and advances are then assessed collectively, in groups of assets with similar risk characteristics, to determine whether provision should be made due to incurred loss events for which there is objective evidence but whose effects are not yet evident. COVID-19 The Directors fully acknowledge the unprecedented challenges and uncertainties posed by the COVID-19 pandemic. In that regard, significant judgments have generally been applied in light of the likely impacts of COVID-19 on the Group’s activities. The Directors fully acknowledge the challenges and uncertainties posed by the COVID-19 pandemic. As such, significant judgements have generally been applied in light of the potential impacts of COVID-19 on the Group’s activities. Going concern The Directors have assessed the ability of the Group and Company to continue operating as a going concern and believe that the preparation of these financial statements on a going concern basis is still appropriate. Determination of the functional currency The Government of Zimbabwe adopted a multi-currency regime in 2009. The British Pound, Euro, United States Dollar (USD), South African Rand (ZAR) and Botswana Pula were adopted as the multi-currency basket in February 2009. In January 2014, the Reserve Bank of Zimbabwe (RBZ) issued a Monetary Policy Statement which added the Chinese Yuan, Australian Dollar, Indian Rupee, Japanese Yen into the basket of multi-currencies. At the onset, the USD and the ZAR were the commonly used currencies, with the USD eventually gaining prominence resulting in it being designated as the functional and presentation currency by the transacting public and the Monetary Authorities, including the Group. Between 2014 and 2016, the Zimbabwean economy experienced a massive liquidity crisis which eventually prompted the Monetary Authorities to introduce the bond notes in November 2016 whilst encouraging the public to continue using the other currencies in the multi-currency basket. The bond notes were introduced at an official fixed exchange rate of 1:1 with the USD and the Monetary Authorities specifically directed financial institutions not to open separate vault and cash accounts for the USD and the bond notes. The introduction of the bond notes gave rise to a three (3) tier pricing system wherein sellers and service providers would quote three (3) separate prices (USD, bond notes and RTGS/electronic transfers) for their merchandise and services respectively. Significant discounts were being offered for USD payments whilst a premium would be added for prices quoted in bond notes or electronic settlement via the Real Time Gross Settlement System (RTGS). These developments triggered a debate around the functional currency of Zimbabwe. It should be noted that the Group never participated in the three tier pricing and none of its products had multiple prices during the same period. In October 2018, the Monetary Authorities instructed financial institutions to separate bond notes and USD accounts and indicated that corporates and individuals could proceed to open Nostro Foreign Currency Accounts (FCA), for foreign currency holdings, which were now being exclusively distinguished from the existing RTGS based accounts. However, it should be noted that at the time of this policy pronouncement, the Monetary Authorities did not state that they had introduced a new currency for Zimbabwe, which actually meant that the USD remained as the currency of reference. By 31 December 2018, there had been no pronouncement by the Monetary Authorities to the effect that there had been a new currency introduced, which could be considered as the country’s functional currency. On 22 February 2020, the Reserve Bank of Zimbabwe (RBZ) issued an Exchange Control Directive, RU 28 of 2020 which established an interbank foreign exchange market to formalise the buying and selling of foreign currency through the Banks and Bureaux de change. In order to establish an exchange rate between the current monetary balances and foreign currency, the Monetary Authorities denominated the existing RTGS balances in circulation as RTGS Dollars. Initial trades on 22 February 2020 were at USD1: RTGS$2.5. On the same date, Statutory Instrument 33 of 2020 was also issued and it specified that for accounting and other purposes, all assets and liabilities that were in USD immediately before the 22nd of February 2020 were deemed to have been valued in RTGS Dollars at a rate of 1:1 with the USD. On 24 June 2019, the Monetary Authorities announced that the multi-currency regime, which the country was operating in since February 2009 had been discontinued and the country had adopted a mono-currency regime meaning that the sole legal tender would be the Zimbabwe Dollar (ZWL). On 26 March 2020, the Reserve Bank of Zimbabwe in a press statement announced various interventions in response to the financial vulnerabilities caused by the COVID-19 pandemic. One of the measures announced therein was the authorization of the use of free-funds in paying for goods and services, in terms of Statutory Instrument (SI) 85 of 2021. On 24 July 2021, the Government of Zimbabwe issued Statutory Instrument (SI) 185 of 2021, which granted permission to display, quote or offer prices for all goods and services in both Zimbabwe dollars and foreign currency at the interbank exchange rate. 46 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 On 23 June 2020, the Reserve Bank of Zimbabwe introduced the Foreign Exchange Auction System, effectively abandoning the fixed foreign currency exchange rate regime which had been prevailing for the greater part of 2021. Significant trades have been recorded on the platform and significant movements in the exchange rate have been resultantly recorded. In light of the developments summarised above, the Directors concluded that the Group’s functional currency remains the Zimbabwe dollar (ZWL) following its change from US$ with effect from 22 February 2020. Lease arrangements The Directors have exercised significant judgement on determining whether the various contractual relationships which the Group is party to, contain lease arrangements which fall into the scope of IFRS 16. Significant judgement was also exercised in determining whether the Group is reasonably certain that it will exercise extension options present in lease contracts as well. 2.21 STANDARDS ISSUED AND EFFECTIVE a) International Financial Reporting Standards and amendments effective for the first time for December 2021 year-end Standard Effective Date Executive Summary Amendments to IFRS 9 ‘Financial Instruments’, IAS 39 ‘Financial Instruments: Recognition and Measurement’, IFRS 7 ‘Financial Instruments: Disclosures’, IFRS 4 ‘Insurance Contracts’ and IFRS 16 ‘Leases’ – interest rate benchmark (IBOR) reform. Annual periods beginning on or after 1 January 2021 The Phase 2 amendments address issues that arise from the implementation of the reform of an interest rate benchmark, including the replacement of one benchmark with an alternative one. There is no significant impact on the Group. IFRS 16, ‘Leases’ COVID-19-Related Rent Concessions Amendment Annual periods beginning on or after 1 June 2020 (early adoption is permitted) The IASB has provided lessees (but not lessors) with relief in the form of an optional exemption from assessing whether a rent concession related to COVID-19 is a lease modification, provided that the concession meets certain conditions. Lessees can elect to account for qualifying rent concessions in the same way as they would if they were not lease modifications. In many cases, this will result in accounting for the concession as a variable lease payment. There is no significant impact on the Group. 47 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 b) International Financial Reporting Standards, interpretations and amendments issued but not effective Standard Effective Date Executive summary The IASB issued IFRS 17, ‘Insurance contracts’, and thereby started a new epoch of accounting for insurers. Whereas the current standard, IFRS 4, allows insurers to use their local GAAP, IFRS 17 defines clear and consistent rules that will significantly increase the comparability of financial statements. For insurers, the transition to IFRS 17 will have an impact on financial statements and on key performance indicators. Under IFRS 17, the general model requires entities to measure an insurance contract at initial recognition at the total of the fulfilment cash flows (comprising the estimated future cash flows, an adjustment to reflect the time value of money and an explicit risk adjustment for non-financial risk) and the contractual service margin. The fulfilment cash flows are remeasured on a current basis each reporting period. The unearned profit (contractual service margin) is recognised over the coverage period. Aside from this general model, the standard provides, as a simplification, the premium allocation approach. This simplified approach is applicable for certain types of contract, including those with a coverage period of one year or less. For insurance contracts with direct participation features, the variable fee approach applies. The variable fee approach is a variation on the general model. When applying the variable fee approach, the entity’s share of the fair value changes of the underlying items is included in the contractual service margin. As a consequence, the fair value changes are not recognised in profit or loss in the period in which they occur but over the remaining life of the contract. Given the Bancassurance arm of the Group systems are being set up to ensure implementation is successful on the effective date. In response to some of the concerns and challenges raised, the Board developed targeted amendments and a number of proposed clarifications intended to ease implementation of IFRS 17, simplify some requirements of the standard and ease transition. The amendments relate to eight areas of IFRS 17, and they are not intended to change the fundamental principles of the standard or unduly disrupt implementation already underway. IFRS 17, ‘Insurance contracts’ Annual periods beginning on or after 1 January 2023 Early application is permitted for entities that apply IFRS 9, ‘Financial Instruments’, and IFRS 15, ‘Revenue from Contracts with Customers’, at or before the date of initial application of IFRS 17. IFRS 17, Insurance contracts Amendments Annual periods beginning on or after 1 January 2023 48 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 b) International Financial Reporting Standards, interpretations and amendments issued but not effective (Continued) Amendment to IFRS 3, ‘Business combinations’ Asset or liability in a business combination clarity Annual periods beginning on or after 1 January 2022 Amendments to IAS 16 ‘Property, Plant and Equipment’: Proceeds before Intended Use Annual periods beginning on or after 1 January 2022 Amendments to IAS 37 ‘Provisions, Contingent Liabilities and Contingent Assets’ on Onerous Contracts—Cost of Fulfilling a Contract Annual periods beginning on or after 1 January 2022 Annual improvements cycle 2018 -2020 Annual periods beginning on or after 1 January 2022 Amendment to IAS 1 ‘Presentation of Financial Statements’ on Classification of Liabilities as Current or Non-current Annual periods beginning on or after 1 January 2022. The Board has updated IFRS 3, 'Business combinations', to refer to the 2018 Conceptual Framework for Financial Reporting, in order to determine what constitutes an asset or a liability in a business combination. In addition, the Board added a new exception in IFRS 3 for liabilities and contingent liabilities. The exception specifies that, for some types of liabilities and contingent liabilities, an entity applying IFRS 3 should instead refer to IAS 37, ‘Provisions, Contingent Liabilities and Contingent Assets’, or IFRIC 21, ‘Levies’, rather than the 2018 Conceptual Framework. The Board has also clarified that the acquirer should not recognise contingent assets, as defined in IAS 37, at the acquisition date. The amendment to IAS 16 prohibits an entity from deducting from the cost of an item of PPE any proceeds received from selling items produced while the entity is preparing the asset for its intended use (for example, the proceeds from selling samples produced when testing a machine to see if it is functioning properly). The proceeds from selling such items, together with the costs of producing them, are recognised in profit or loss. The amendment clarifies which costs an entity includes in assessing whether a contract will be loss-making. This assessment is made by considering unavoidable costs, which are the lower of the net cost of exiting the contract and the costs to fulfil the contract. The amendment clarifies the meaning of ‘costs to fulfil a contract’. Under the amendment, costs to fulfil a contract include incremental costs and the allocation of other costs that relate directly to fulfilling the contract. These amendments include minor changes to: - IFRS 1, ‘First time adoption of IFRS’ has been amended for a subsidiary that becomes a first-time adopter after its parent. The subsidiary may elect to measure cumulative translation differences for foreign operations using the amounts reported by the parent at the date of the parent’s transition to IFRS. - IFRS 9, ‘Financial Instruments’ has been amended to include only those costs or fees paid between the borrower and the lender in the calculation of “the 10% test” for derecognition of a financial liability. Fees paid to third parties are excluded from this calculation. - IFRS 16, ‘Leases’, amendment to the Illustrative Example 13 that accompanies IFRS 16 to remove the illustration of payments from the lessor relating to leasehold improvements. The amendment intends to remove any potential confusion about the treatment of lease incentives. - IAS 41, ‘Agriculture’ has been amended to align the requirements for measuring fair value with those of IFRS 13. The amendment removes the requirement for entities to exclude cash flows for taxation when measuring fair value. The amendment clarifies that liabilities are classified as either current or non-current, depending on the rights that exist at the end of the reporting period. Classification is unaffected by expectations of the entity or events after the reporting date (for example, the receipt of a waiver or a breach of covenant). 49 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 3. SEGMENT INFORMATION For management purposes, the Group is organised into four operating segments based on products and services as follows: Retail banking Corporate banking Treasury International banking Digital Banking - - - - - Individual customers deposits and consumer loans, overdrafts, credit card facilities and funds transfer facilities. Loans and other credit facilities and deposit and current accounts for corporate and institutional customers. Money market investment, securities trading, accepting and discounting of instruments and foreign currency trading. Handles the Group’s foreign currency denominated banking business and manages relationships with correspondent banks. Handles the Bank’s Digital Banking products including Card and POS services. Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss which in certain respects is measured differently from operating profit or loss in the consolidated financial statements. Income taxes are managed on a Group basis and are not allocated to operating segments. Interest income is reported net as management primarily relies on net interest revenue as a performance measure, not the gross income and expense. Transfer prices between operating segments are on arm’s length basis in a manner similar to transactions with third parties. No revenue from transactions with a single external customer or counterparty amounted to 10% or more of the Group’s total revenue in 2021 or 2020. The following table presents income and profit and certain asset and liability information regarding the Group’s operating segments and service units: Inflation Adjusted Consumer Banking ZWL Corporate Banking ZWL Treasury Banking ZWL International Banking ZWL Digital Banking ZWL Other ZWL Total ZWL For the year ended 31 December 2021 Income Third party income Interest and similar expense Net operating income Other material non-cash items Impairment losses on financial assets measured at amortised cost Depreciation of property and equipment Depreciation of right of use assets Amortisation of intangible assets Segment profit/(loss) Income tax charge Revaluation of land and buildings, net of tax Total comprehensive income for the year 1 587 391 703 ( 901 000 616) ----------------- 686 391 087 ------------------ 360 453 413 2 372 527 396 ( 274 184 494) ( 925 708 194) ----------------- 2 098 342 902 ( 565 254 782) ---------------- ----------------- ----------------- 435 014 477 7 185 736 909 136 916 603 2 293 433 317 ( 83 510 007) ( 482 332 105) ( 1 455 779 454) ( 4 122 514 869) ------------------ ------------------ ------------------ ------------------- 3 063 222 040 53 406 597 1 811 101 212 ( 1 020 764 977) ------------------ ------------------ ------------------- ---------------- ( 137 184 587) ( 104 753 676) ( 6 168 475) - - - ( 248 106 738) ( 10 955 020) - - 538 251 481 - ( 40 925) ( 30 001) ( 19 047) ( 2 503 285) ( 35 936 416) - - 1 993 548 301 ( 571 453 258) - - - - - - - - 53 387 550 1 808 597 926 ( 1 056 701 393) - ( 894 399 755) - - - ( 49 484 694 - - 2 765 630 608 ( 894 399 755) - - - - ------------------- ------------------- ------------------- ----------------- ---------------- - 377 156 500 ----------------- 377 156 500 ----------------- 538 251 481 =========== 1 993 548 301 ( 571 453 258) =========== =========== 53 387 550 1 808 597 926 ( 1 573 944 647) ========== =========== ============ =========== 2 248 387 353 As at 31 December 2021 Assets and liabilities Capital expenditure (property and equipment and intangible assets) 102 220 873 4 676 399 192 Total assets 8 379 147 480 Total liabilities 6 837 129 - 7 388 467 133 4 248 748 764 5 931 139 155 3 807 931 291 914 364 1 439 654 008 560 895 684 14 833 425 207 289 814 82 484 022 156 303 367 11 444 189 043 29 353 761 508 - 1 649 121 499 20 328 235 109 50 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 The following table presents income and profit and certain asset and liability information regarding the Group’s operating segments and service units: Inflation Adjusted Consumer Banking ZWL Corporate Banking ZWL Treasury Banking ZWL International Banking ZWL Digital Banking ZWL Other ZWL Total ZWL For the year ended 31 December 2020 Income Third party income Interest and similar expense ----------------- Net operating income 450 058 754 ( 16 364 779) ----------------- 433 693 974 ----------------- Other material non-cash items: Impairment losses on financial assets measured at amortised cost ( 82 025 452) Depreciation of property and equipment Depreciation of right of use assets Amortisation of intangible assets Segment profit/(loss) Income tax charge Revaluation of land and buildings, net of tax - - 327 472 420 - ( 24 196 102) - 569 970 915 64 490 091 ( 86 853 359) ( 126 624 388) ------------------ ----------------- 483 117 556 ( 62 134 297) ----------------- ----------------- 21 698 637 - 653 177 115 1 903 637 497 3 663 033 009 - ( 1 925 340 506) ( 2 155 183 033) ----------------- 21 698 637 ------------------ ------------------- ------------------- 653 177 115 ( 21 703 009) ------------------- ----------------- 1 507 849 976 ------------------- ( 115 291 034) ( 8 386 504) - - - ( 205 702 991) ( 359 468) ( 305 552) - - - - 367 467 054 ( 70 826 353) - - - - ( 40 302) - - 21 658 335 - ( 11 057 574) ( 75 209 800) - ( 17 868 262) - ( 39 246 884) 642 119 541 ( 154 027 956) - 231 218 282 ( 111 168 797) ( 17 868 262) ( 39 246 884) 1 133 863 042 231 218 282 - - 290 977 498 290 977 498 Total comprehensive income -- for the year As at 31 December 2020 ------------------ ----------------- ----------------- ------------------ ----------------- ------------------ --------------------- 327 472 420 ========== 367 467 054 ( 70 826 353) ========== ========== 21 658 335 ========== 642 119 541 ========== =========== =========== 368 167 824 1 656 058 822 Assets and liabilities Capital expenditure (property and equipment and intangible assets) Total assets Total liabilities 11 854 610 2 805 835 675 4 480 265 887 4. INTEREST INCOME Loans and advances to banks Loans and advances to customers Investment securities 5. INTEREST EXPENSE Due to banks Due to customers Other borrowed funds - 4 433 074 212 3 171 334 613 223 618 2 549 245 770 2 036 071 653 35 751 863 791 223 299 906 620 1 914 669 409 165 398 423 194 046 93 781 892 6 866 504 028 17 612 232 800 - 881 772 617 10 869 351 390 Inflation adjusted Historical cost 31 December 2021 ZWL 31 December 2020 ZWL Restated 31 December 2021 ZWL 31 December 2020 ZWL 29 561 183 2 596 769 619 514 833 324 ------------------ 3 141 164 126 =========== 26 590 644 1 138 351 849 58 109 729 ------------------ 1 223 052 222 =========== 23 026 792 2 124 634 459 421 220 219 ------------------ 2 568 881 470 =========== 10 198 110 466 881 802 24 136 359 ------------------ 501 216 271 =========== Inflation adjusted Historical cost 31 December 2021 ZWL 730 673 778 111 290 749 33 653 342 ------------------- 875 617 869 =========== 31 December 2020 ZWL Restated 127 803 193 88 209 158 13 830 175 ------------------- 229 842 526 =========== 31 December 2021 ZWL 31 December 2020 ZWL 615 311 431 39 111 639 84 647 746 ------------------ 739 070 816 =========== 56 744 354 32 844 245 1 049 680 ------------------ 90 638 279 =========== 51 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 6. NON-INTEREST INCOME 6.1. FEE AND COMMISSION INCOME Inflation adjusted Historical cost 31 December 2021 ZWL 775 129 976 171 723 633 144 708 708 215 971 415 2 313 951 076 ------------------- 3 621 484 808 =========== 3 449 761 175 171 723 633 ------------------- 3 621 484 808 =========== 31 December 2020 ZWL Restated 503 072 043 160 234 274 11 682 939 39 161 295 1 104 675 168 ------------------ 1 818 825 719 =========== 1 658 591 445 160 234 274 ------------------ 1 818 825 719 =========== 31 December 2021 ZWL 31 December 2020 ZWL 634 060 843 136 989 552 114 700 496 171 404 938 1 870 004 184 ------------------ 2 927 160 013 =========== 220 625 391 64 826 957 3 858 135 17 771 535 508 459 339 ------------------ 815 541 357 =========== 2 790 170 461 136 989 552 ------------------ 2 927 160 013 =========== 750 714 400 64 826 957 ------------------ 815 541 357 =========== Retail banking customer fees Corporate banking credit related fees Financial guarantee fees International banking commissions Digital banking fees Timing of revenue recognition: - At a point in time - Over time 6.2. OTHER INCOME Inflation adjusted Historical Cost 31 December 2021 ZWL Trade and other investments fair value gains Profit on disposal of property and equipment Fair value gains on investment properties Profit/(Loss) on disposal of investment properties Rental income Recoveries Other operating income 10 897 181 582 361 833 158 854 6 802 556 17 181 160 12 646 659 51 596 386 ------------------ 932 865 157 ========== 31 December 2020 ZWL Restated 5 860 291 12 669 303 367 520 068 ( 3 533 621) 12 233 541 9 450 891 9 867 231 ------------------ 414 067 704 =========== 31 December 2021 ZWL 31 December 2020 ZWL 8 444 751 462 020 2 029 063 294 5 788 412 13 971 595 10 811 556 38 876 960 ------------------- 2 107 418 588 =========== 9 265 541 7 091 399 1 182 737 157 10 867 431 5 641 865 3 406 069 7 837 535 ------------------- 1 226 846 996 =========== 6.3. OTHER COMPREHENSIVE INCOME Revaluations of land and buildings Tax effect Inflation Adjusted Historical Cost 31 December 2021 ZWL 31 December 2020 ZWL 31 December 2021 ZWL 31 December 2020 ZWL 501 004 915 ( 123 848 415) ------------------- 377 156 500 =========== 362 907 135 ( 71 929 637) ----------------- 290 977 498 ========== 1 408 660 239 ( 559 929 315) ------------------- 848 730 924 =========== 1 183 829 028 ( 292 642 536) ------------------- 891 186 492 =========== 52 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 7. OPERATING EXPENDITURE GROUP Inflation Adjusted Historical Cost The operating profit is after recognising the following: Administration costs** Audit fees: - Current year - Prior year Amortisation of intangible assets Depreciation (excluding right of use assets) Depreciation – right of use assets Directors’ remuneration - Fees for services as directors - Services rendered - Expenses Staff costs - salaries, allowances and related costs 31 December 2021 ZWL 31 December 2020 ZWL Restated 31 December 2021 ZWL 31 December 2020 ZWL 1 664 325 920 994 479 788 1 323 531 566 395 919 343 24 146 515 - 3 697 644 84 468 840 22 466 905 4 523 956 39 246 884 111 168 797 20 773 858 - 2 865 483 65 921 613 49 484 694 29 193 264 28 031 939 - 1 161 325 17 868 262 55 773 451 21 393 814 33 998 682 380 955 38 605 828 22 664 842 21 687 517 - 977 325 8 388 890 1 553 413 915 580 22 310 284 8 579 715 13 902 765 3 520 400 10 344 405 37 960 1 671 165 412 ------------------- 3 526 482 289 =========== 1 364 096 204 802 661 681 ------------------- ------------------- 2 838 459 393 2 048 189 724 =========== =========== 362 620 010 ------------------- 814 190 000 =========== **Included in administration costs are lease finance costs amounting to ZWL4 299 555 (2020: ZWL5 581 443) in respect of property leases which the Group uses for the purpose of carrying on its trade. COMPANY Employee benefit costs - Share based payment 33 048 171 =========== ( 4 295 423) ============ 27 768 409 =========== ( 62 563) =========== 8. TAXATION 8.1. Charge or Credit for the Year GROUP Current tax Deferred tax (Note 18) COMPANY Deferred tax Inflation Adjusted Historical Cost 31 December 2021 ZWL 31 December 2020 ZWL 31 December 2021 ZWL 31 December 2020 ZWL 684 758 881 209 640 874 ------------------- 894 399 755 =========== 209 044 511 ( 440 262 793) --------------------- ( 231 218 282) ============ 684 758 881 227 838 493 ------------------- 912 597 374 =========== 130 053 612 ( 215 567 932) ------------------- ( 85 514 320) =========== 35 208 ------------------- 35 208 =========== ( 75 649) --------------------- ( 75 649) ============ - - ------------------- ------------------- - - =========== =========== 53 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 8.2. Reconciliation Of Income Tax Charge / (Credit) GROUP Based on results for the period at a rate of 24.72% (2020: 24.72%) Tax effect of: - Income not subject to tax* - Non-deductible expenses** - Change in tax bases*** COMPANY Based on results for the period at a rate of 24.72% Tax effect of: - Other movements in temporary differences - Non-deductible expenses** Inflation Adjusted Historical Cost 31 December 2021 ZWL 31 December 2020 ZWL 31 December 2021 ZWL 31 December 2020 ZWL 683 663 886 280 290 944 952 862 504 444 979 506 ( 501 044 550) 711 780 419 - ------------------- 894 399 755 =========== ( 427 956 128) 441 245 391 ( 524 798 489) --------------------- ( 231 218 282) ============ ( 388 283 584) 348 018 454 - ------------------- 912 597 374 =========== ( 266 245 882) 62 246 824 ( 326 494 768) ------------------- ( 85 514 320) =========== ( 8 169 508) 1 061 829 ( 6 864 351) 15 466 35 208 8 169 508 ------------------- 35 208 =========== ( 75 649) ( 1 061 829) --------------------- ( 75 649) ============ - 6 864 351 ------------------- - =========== - ( 15 466) ------------------- - =========== *Income not subject to tax includes coupon interest from Treasury Bills and income from mortgages for the Group as well as non-deductible income attributable to the unwinding of share based payments for the company. ** Non-deductible expenses include provisions, disallowable pension deductions and depreciation. ***The change in tax bases arose from the legislative pronouncement in the Finance (No.2 ) Act of 2020 which resulted in the rebasing of unredeemed foreign currency capital balances on assets ranking for capital allowances using the USD/ZWL official exchange rate prevailing on 1 January 2020. 8.3. Current Tax liabilities / (assets) GROUP At 1 January Monetary adjustment Charge for the year Payments during the year COMPANY At 1 January Monetary adjustment Inflation Adjusted Historical Cost 31 December 2021 ZWL 31 December 2020 ZWL 31 December 2021 ZWL 31 December 2020 ZWL 91 949 809 ( 3 308 092) 684 758 881 ( 537 351 953) ------------------- 236 048 645 =========== 4 506 069 15 120 722 209 044 511 ( 136 721 493) --------------------- 91 949 809 ============ 57 205 065 - 684 758 881 ( 505 915 301) ------------------- 236 048 645 =========== 624 937 - 130 053 612 ( 73 473 484) ------------------- 57 205 065 =========== ( 121 386) 45 869 ------------------- ( 75 517) =========== ( 544 533) 423 147 --------------------- ( 121 386) ============ ( 75 518) ( 75 518) - - ------------------- ( 75 518) =========== ------------------- ( 75 518) =========== 54 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 9. EARNINGS PER SHARE Basic earnings per share is calculated by dividing the profit for the year attributable to ordinary equity holders of NMBZ Holdings Limited by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share is calculated by dividing the profit attributable to ordinary equity holders of NMBZ Holdings Limited adjusted for the after tax effect of: (a) any dividends or other items related to dilutive potential ordinary shares deducted in arriving at profit or loss attributable to ordinary equity holders of the parent entity; (b) any interest recognised in the period related to dilutive potential ordinary shares; and (c) any other changes in income or expense that would result from the conversion of the dilutive potential ordinary shares; by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares. 9.1 Earnings Inflation Adjusted Historical Cost 31 December 2021 ZWL 31 December 2020 ZWL Restated 31 December 2021 ZWL 31 December 2020 ZWL Profit for the year 1 871 230 853 1 365 081 324 2 942 024 406 1 813 590 069 9.2. Number of shares 9.2.1. Basic earnings per share Inflation adjusted Historical Cost 31 December 2021 31 December 2020 31 December 2021 31 December 2020 Weighted average number of ordinary shares for basic and headline earnings per share Treasury share issue 404 171 689 ( 14 000) ----------------- 404 157 689 ========== 404 171 689 - ----------------- 404 171 689 ========== 404 171 689 ( 14 000) ----------------- 404 157 689 ========== 404 171 689 - ----------------- 404 171 689 ========== 9.2.2. Diluted earnings per share Number of shares at beginning of period Effect of dilution: Share options exercised Treasury share issue Shares issued – scrip dividend Share options approved but not granted 428 114 328 404 171 689 428 114 328 404 171 689 - ( 14 000) - ----------------- 428 100 328 29 556 854 ----------------- 457 657 182 ========== - - - ----------------- 404 171 689 23 942 639 ----------------- 428 114 328 ========== - ( 14 000) - ----------------- 428 100 328 29 556 854 ----------------- 457 657 182 ========== - - ----------------- 404 171 689 23 942 639 ----------------- 428 114 328 ========== 55 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 9.3 Earnings per share (ZWL cents) Basic Diluted 10. SHARE CAPITAL 10.1 Authorised Inflation Adjusted Historical Cost 31 December 2021 ZWL 31 December 2020 ZWL Restated 31 December 2021 ZWL 31 December 2020 ZWL 463.00 408.87 337.75 318.86 727.94 642.84 448.72 423.62 31 December 2021 Shares million 31 December 2020 Shares million 31 December 2021 ZWL 31 December 2020 ZWL Ordinary shares of ZWL0.00028 each 600 ========== 600 ========== 168 000 ========== 168 000 ========== 10.2 Issued and fully paid 10.2.1 Ordinary shares Ordinary shares Ordinary shares 10.2.2 Redeemable ordinary shares Redeemable ordinary shares Redeemable ordinary shares Inflation adjusted 31 December 2021 Shares million 31 December 2020 Shares million 31 December 2021 ZWL 31 December 2020 ZWL Restated 404 ========== 404 ========== 5 745 840 ========== 5 745 840 ========== Historical Cost 31 December 2021 Shares million 404 ========== 31 December 2020 Shares million 404 ========== 31 December 2021 ZWL 31 December 2020 ZWL 84 116 ========== 84 116 ========== Inflation Adjusted 31 December 2021 Shares million 31 December 2020 Shares million 31 December 2021 ZWL 31 December 2020 ZWL Restated 104 ========== 104 ========== 29 040 ========== 46 678 ========== Historical Cost 31 December 2021 Shares million 104 ========== 31 December 2020 Shares million 104 ========== 31 December 2021 ZWL 29 040 ========== 31 December 2020 ZWL 29 040 ========== Of the unissued ordinary shares of 196 million shares (2020 - 196 million), options which may be granted in terms of the 2012 ESOS amount to 23 942 639 (2020 – 23 942 639). No share options were exercised from the Scheme as at 31 December 2021. Subject to the provisions of section 214 of the Companies and Other Business Entities Act (Chapter 24:31) of Zimbabwe, the unissued shares are under the control of the directors. 56 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 11. CAPITAL RESERVES GROUP Basic earnings per share Share premium Treasury shares Share option reserve Revaluation reserve Inflation adjusted Historical Cost 31 December 2021 31 December 2020 31 December 2021 31 December 2020 1 216 013 250 ( 8 531) 33 048 171 1 451 092 241 ------------------- 2 700 145 131 1 216 013 250 - - 1 073 935 740 ----------------- 2 289 948 990 19 121 607 ( 7 168) 27 768 409 1 915 997 366 ----------------- 1 962 880 214 19 121 607 - - 1 067 266 442 -------------------- 1 086 388 049 Functional currency translation reserve Total capital reserve 462 166 697 ------------------- 3 162 311 828 =========== 462 166 697 -------------------- 2 752 115 687 =========== 11 619 648 ------------------- 1 974 499 862 =========== 11 619 648 -------------------- 1 098 007 697 =========== 11.1 Nature and purpose of reserves 11.1.1 Share premium This reserve represents the excess amount paid for the shares over and above the nominal value of the shares. 11.1.2 Share option reserve The share option reserve is used to recognise the value of equity settled share based payment transactions provided to employees, including key management personnel, as part of their remuneration. Refer to note 31.3 for further details of these plans. 11.1.3 Functional currency translation reserve The reserve arose out of translation gains on the Group’s land and buildings recorded on the change in the Group’s functional currency during the period under review. 11.1.4 Revaluation reserve The Reserve represent gains on the revaluation of land and buildings. 11.1.5 Treasury shares reserve This reserve records ordinary shares held by the holding company and its subsidiaries. The shares are recorded at the cost at which they were acquired. As at 31 December 2021 the Group held 14 000 (2020: Nil) of its own shares. The additional 14 000 shares were acquired for ZW$8 530.68 (Historical: ZW$7 167.82) during the year. During the year, the Group delisted from the London Stock Exchange and as part of the delisting, shareholders have been paid for their amounts due as at the close of business 8 July 2021 and the shares traded at £0.09 each on the standard segment of the Official List. 12. RETAINED EARNINGS GROUP Analysis of retained profit by company (excluding effects of consolidation) NMBZ Holdings Limited NMB Bank Limited Total retained earnings Dividend per share (ZWL cents) Inflation adjusted Historical Cost 31 December 2021 31 December 2020 31 December 2021 31 December 2020 803 808 023 4 816 210 665 ------------------- 5 620 018 688 =========== 0.00 =========== 829 547 838 2 919 239 997 ----------------- 3 748 787 835 =========== 0.00 =========== ( 27 598 748) 5 112 718 793 ----------------- 5 085 120 045 =========== 0.00 =========== 169 660 2 142 925 978 -------------------- 2 143 095 638 =========== 0.00 =========== 57 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 12. RETAINED EARNINGS (Continued) COMPANY Analysis of retained profit by company NMBZ Holdings Limited Total retained earnings Dividend per share (ZWL cents) 13. REDEEMABLE ORDINARY SHARES Nominal value (Note 10.2.2) Share premium Inflation adjusted Historical Cost 31 December 2021 31 December 2020 31 December 2021 31 December 2020 803 808 023 ------------------- 803 808 023 =========== 0.00 =========== 829 547 838 ----------------- 829 547 838 =========== 0.00 =========== ( 27 598 748) ----------------- ( 27 598 748) =========== 0.00 =========== 169 661 -------------------- 169 661 =========== 0.00 =========== Inflation Adjusted Historical Cost 31 December 2021 ZWL 29 040 14 306 213 ----------------- 14 335 253 ========== 31 December 2020 ZWL Restated 46 678 22 995 404 ----------------- 23 042 082 ========== 31 December 2021 ZWL 31 December 2020 ZWL 29 040 14 306 213 ----------------- 14 335 253 ========== 29 040 14 306 213 ---------------- 14 335 253 ========== On 30 June 2013, the Group received USD14 831 145 capital from Nederlandse Financierings-Maatschappij Voor Ontiwikkelingslanden N.V. (FMO), Norwegian Investment Fund for Developing Countries (Norfund) and AfricInvest Financial Sector Holdings (AfricInvest) who were allocated 34 571 429 shares each (total 103 714 287) for individually investing USD4 943 715. This amount, net of share issue expenses, was used to recapitalise the Bank in order to contribute towards the minimum capital requirements previously set by the Reserve Bank of Zimbabwe of ZWL200 million by 31 December 2020. FMO and Norfund came together with Rabobank to form ARISE which is a development finance institution primarily focusing on investing in African financial institutions to support and enhance financial service delivery in Africa. NMBZ Holdings Limited (NMBZ) entered into a share buy-back agreement with Norfund, FMO and AfricInvest, where these three strategic investors have a right at their own discretion at any time after the 5th anniversary (30 June 2018) but before the 9th anniversary (30 June 2022) of its first subscription date, to request NMBZ to buy back all or part of its NMBZ shares at a price to be determined using the agreed terms as entailed in the share buy-back agreement. It is a condition precedent that at any point when the share buy-back is being considered, the proceeds used to finance the buy-back should come from the distributable reserves which are over and above the minimum regulatory capital requirements. Further, no buy-back option can be exercised by any investor after the 9th anniversary (30 June 2022) of the effective date. The share buy-back agreement created a potential obligation for NMBZ Holdings Limited to purchase its own instruments. The shares issued gave rise to a potential financial liability and are classified as redeemable ordinary shares. 14. SUBORDINATED TERM LOAN At 1 January Monetary adjustment Exchange revaluation Inflation Adjusted Historical Cost 31 December 2021 ZWL 213 189 970 (106 834 140) 116 758 960 ----------------- 223 114 790 ========== 31 December 2020 ZWL Restated 31 December 2021 ZWL 31 December 2020 ZWL 204 490 471 ( 158 904 860) 167 604 359 ----------------- 213 189 970 ========== 132 632 641 - 90 482 149 ----------------- 223 114 790 ========== 28 360 340 - 104 272 301 ----------------- 132 632 641 ========= In 2013, the Group received a subordinated term loan amounting to USD1.4 million from a Development Financial Institution which attracts an interest rate of LIBOR plus 10% and has a seven year maturity date (13 June 2021) from the first disbursement date. 58 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 14. SUBORDINATED TERM LOAN (Continued) At 1 January Monetary adjustment Exchange revaluation Inflation Adjusted Historical Cost 31 December 2021 ZWL 213 189 970 (106 834 140) 116 758 960 ----------------- 223 114 790 ========== 31 December 2020 ZWL Restated 31 December 2021 ZWL 31 December 2020 ZWL 204 490 471 ( 158 904 860) 167 604 359 ----------------- 213 189 970 ========== 132 632 641 - 90 482 149 ----------------- 223 114 790 ========== 28 360 340 - 104 272 301 ----------------- 132 632 641 ========= In 2013, the Bank received a subordinated term loan amounting to USD1.4 million from a Development Financial Institution which attracts an interest rate of LIBOR plus 10% and has a seven year maturity date (13 June 2021) from the first disbursement date. The above liability would, in the event of the winding up of the issuer, be subordinated to the claims of depositors and all other creditors of the issuer. The Group defaulted on a principal repayments with respect to this subordinated loan during the year ended 31 December 2020 as a result of the prevailing nostro funding challenges affecting the economy. There was a breach on the Aggregate Unhedged Open Foreign Currency Positions Ratio covenant which stood at 19.05% (instead of a maximum 10%) between the Group and the Development Financial Institution at the reporting date of 31 December 2021. However, there were no defaults on interest payments. On 22 February 2020, the Reserve Bank of Zimbabwe (RBZ) issued an Exchange Control directive, RU 28 of 2020 which established an interbank foreign exchange market to formalise the buying and selling of foreign currency through the Banks and Bureaux de change. In order to establish an exchange rate between the current monetary balances and foreign currency, the Monetary Authorities denominated the existing RTGS balances in circulation, as RTGS dollars. The RBZ pegged the initial trades at US$/RTGS$1:2.5. In order to manage the transition, the RBZ also advised on the same date that all foreign liabilities or legacy debts due to suppliers and service providers, declared dividends e.t.c would be treated separately after registering such debts with the RBZ Exchange Control Department for an orderly expunging of these debts. Consequently, the Group registered its legacy debts, which included the subordinated term loan and offshore lines of credit and transferred the ZWL equivalent of these debts at a rate of US$/ZWL1:1 to the RBZ in terms of the RBZ directive. These legacy debts and the related amounts transferred to the RBZ in terms of the RBZ directive on the legacy debts, have been translated using the interbank rate at reporting date. During the period under review, the RBZ approved the legacy debt in respect of the subordinated term loan. 15. TOTAL SHAREHOLDERS’ FUNDS AND SHAREHOLDERS’ LIABILITIES Inflation adjusted GROUP Shareholders’ funds and shareholders liabilities 2021 ZWL 2020 ZWL Restated 2021 ZWL 2020 ZWL Restated 9 025 526 399 =========== 6 742 881 414 ============ 7 297 154 066 3 388 155 345 ============ ============ COMPANY Shareholders’ funds and shareholders liabilities 2 073 070 709 =========== 2 074 424 654 ============ 33 703 469 33 710 637 ============ ============ Shareholders’ funds and shareholders’ liabilities refer to the total investments made by the shareholders into the Group and it consists of share capital (refer to Note 10), capital and reserves (refer to Note 11), functional currency translation reserve (refer to Note 11), retained earnings (refer to Note 12), redeemable ordinary shares (refer to Note 13) and the subordinated loan (refer to Note 14). 59 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 16. DEPOSITS AND OTHER LIABILITIES 16.1 Deposits and other liabilities by type GROUP Inflation Adjusted Historical Cost 31 December 2021 ZWL 31 December 2020 ZWL Restated 31 December 31 December 2020 ZWL 2021 ZWL Deposits from banks and other financial institutions** 1 501 000 000 14 839 531 967 Current and deposit accounts from customers* -------------------- 16 340 531 967 Total deposits 2 577 410 155 7 489 159 100 -------------------- 10 066 569 255 1 501 000 000 1 603 493 431 14 839 531 967 4 659 257 433 ------------------- -------------------- 16 340 531 967 6 262 750 864 Trade and other payables* COMPANY Trade and other payables* 2 750 917 014 --------------------- 19 091 448 981 ============ 243 022 726 --------------------- 10 309 591 981 ============ 2 750 917 014 -------------------- 151 192 601 ------------------- 19 091 448 981 6 413 943 465 ============ =========== 293 703 --------------------- 293 703 ============ 665 669 --------------------- 665 669 ============ 293 703 -------------------- 293 703 414 135 ------------------- 414 135 ============ =========== * The carrying amounts of current and deposit accounts and trade and other payables approximate the related fair values due to their short term nature. These relate to the Group and Company's operational liabilities to suppliers, employees and regulators. Expense provisions and deferred income are also included. Included in trade and other payables are lease liabilities ranging from 1 to 5 years in respect of leased properties in which the Group is a lessee. Also included in trade and other liabilities are ECL provisions in respect of guarantees and facilities approved but not drawn down. ** Included in deposits from banks and other financial institutions are loan balances of ZWL1 310 287 160 (2020 ZWL707 186 403), ZWL677 596 574 (2020 ZWL365 711 501) and ZWL898 231 833 (2020 ZWL484 792 463) due to Nederlandse Financierings-Maatschappij Voor Ontiwikkelingslanden (FMO), Swedfund and Afreximbank. The carrying amounts of deposits from other banks and other financial institutions approximate the related fair values. All the loan balances except for Afreximbank are part of the Group’s Blocked Funds which were registered with the Reserve Bank of Zimbabwe (RBZ) for an orderly expunging of the debts. In 2021, the Government of Zimbabwe assumed the obligation to settle these Blocked Funds in terms of Part XIII of the Finance Act No. 7 of 2021 under section 52. The Blocked funds are listed under Annex 1 of the Finance Act No. 7 of 2021. In 2019, the Group transferred the ZWL equivalent of the legacy debts at a rate of US$/ZWL1:1 to the RBZ as per requirement of the Exchange Control directive RU 28 of 2019. In terms of section 52 of the Finance Act no 7 of 2021, outstanding blocked funds may be liquidated through the issuance of Government-backed zero coupon or non-interest bearing foreign exchange savings bonds or such other debt instruments denominated in foreign currency. The timing of issuance of the Government-backed instruments is yet to be advised. The line of credit balances have been translated at 31 December 2021 at the closing rate of USD/ZWL108.6668. Consequently, the amount transferred to the RBZ for the settlement of these debts has been translated at the same closing rate as it represents the Bank’s right to the settlement of the related lines of credit. During the period under review, the RBZ approved the legacy debt in respect of the FMO and Swedfund lines of credit. 60 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 16.2 Maturity analysis Inflation Adjusted Historical Cost Less than 1 month 1 to 3 months 3 to 6 months 6 months to 1 year 1 to 5 years Over 5 years 31 December 2021 ZWL 31 December 2020 ZWL Restated 31 December 2021 ZWL 31 December 2020 ZWL 14 205 365 648 2 119 332 623 3 352 794 8 136 999 3 915 150 428 753 --------------------- 16 340 531 967 ============ 8 838 785 649 1 204 071 615 14 918 982 3 448 023 5 080 852 264 134 -------------------- 10 066 569 255 ============ 14 205 365 648 2 119 332 623 3 352 794 8 136 999 3 915 150 428 753 -------------------- 16 340 531 967 ============ 5 498 905 442 749 093 396 9 281 600 2 145 131 3 160 969 164 326 -------------------- 6 262 750 864 =========== The maturity analysis covers the Group’s total deposits only and does not include other trade payables. 61 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 16.3 Sectoral analysis of deposits Inflation Adjusted Agriculture Banks and other financial institutions Distribution Individuals Manufacturing Mining companies Municipalities and parastatals Services Transport and telecommunications 16.4 Lease Liabilities At 1 January Monetary adjustment Remeasurements Finance costs accrual Payment of lease liabilities 17. FINANCIAL INSTRUMENTS 17.1 Investment securities Note Amortised cost – Gross Additions Monetary adjustment Impairment allowance – Stage 1 31 December 2021 ZWL 31 December 2020 ZWL 31 December 2021 ZWL 31 December 2020 ZWL 1 387 269 110 3 796 417 880 1 488 263 538 1 414 092 308 1 283 388 908 266 931 246 3 209 246 646 2 796 044 633 698 877 698 --------------------- 16 340 531 967 ============ 219 284 744 2 577 410 155 912 031 881 999 933 536 1 193 672 563 175 016 593 442 349 395 3 099 030 155 447 840 234 --------------------- 10 066 569 255 ============ 1 387 269 110 3 796 417 880 1 488 263 538 1 414 092 308 1 283 388 908 266 931 246 3 209 246 646 2 796 044 633 698 877 698 --------------------- 16 340 531 967 ============ 136 424 405 1 603 493 431 567 405 668 622 092 240 742 623 796 108 883 701 275 200 417 1 928 010 754 278 616 452 --------------------- 6 262 750 864 ============ Inflation Adjusted Historical Cost 31 December 2021 ZWL 38 489 785 (35 737 223) 137 709 592 16 581 799 ( 60 120 942) ------------------ 96 923 011 =========== 31 December 2020 ZWL Restated 24 075 651 ( 16 520 304) 59 422 257 21 225 657 ( 49 713 476) ---------------- 38 489 785 ========= 31 December 2021 ZWL 31 December 2020 ZWL 23 945 788 - 106 717 804 12 850 036 ( 46 590 617) ---------------- 96 923 011 ========= 3 338 967 - 29 233 252 6 031 589 ( 14 658 020) ---------------- 23 945 788 ========= Inflation Adjusted Historical Cost 31 December 2021 ZWL 1 738 887 717 3 779 108 984 ( 1 507 562 449) - --------------------- 4 010 434 252 ============ 31 December 2020 ZWL Restated 31 December 2021 ZWL 31 December 2020 ZWL 1 081 820 457 - 663 786 290 ( 6 719 030) ------------------- 1 738 887 717 =========== 1 081 820 457 2 928 613 795 - - --------------------- 4 010 434 252 ============ 1 086 000 591 - - ( 4 180 134) ------------------- 1 081 820 457 =========== The Group holds Treasury Bills and Government Bonds amounting to ZWL4 010 434 252 with interest rates ranging from 5% to 18%. The Treasury Bills are measured at amortised cost in line with the Bank’s business model to collect contractual cashflows and the contractual terms are such that the financial assets give rise to cashflows that are solely payments of principal and interest. Of the total Treasury Bills balance of ZWL4 010 434 252, a total of ZWL173 295 710 had been pledged as security against interbank borrowings. 62 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 17. 17.2 FINANCIAL INSTRUMENTS (Continued) Fair values of financial instruments The fair values of financial assets and financial liabilities that are traded in active markets are based on quoted market prices or dealer price quotations. For all other financial instruments, the Group determines fair values using other valuation techniques. For financial instruments that trade infrequently and have little price transparency, fair value is less objective, and requires varying degrees of judgement depending on liquidity, concentration, uncertainty of market factors, pricing assumptions and other risks affecting the specific instrument. The objective of valuation techniques is to arrive at a fair value measurement that reflects the price that would be received to sell the asset or paid to transfer the liability in an orderly transaction between market participants at the measurement date. Valuation models The Group measures fair values using the following fair value hierarchy, which reflects the significance of the inputs used in making the measurements. • • • Level 1: inputs that are quoted market prices (unadjusted) in active markets for identical instruments. Level 2: inputs other than quoted prices included within Level 1 that are observable either directly (i.e. as prices) or indirectly (i.e. derived from prices). This category includes instruments valued using: quoted market prices in active markets for similar instruments; quoted prices for identical or similar instruments in markets that are considered less than active; or other valuation techniques in which all significant inputs are directly or indirectly observable from market data. Level 3: inputs that are unobservable. This category includes all instruments for which the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument’s valuation. This category includes instruments that are valued based on quoted prices for similar instruments for which significant unobservable adjustments or assumptions are required to reflect differences between the instruments. The objective of valuation techniques is to arrive at a fair value measurement that reflects the price that would be received to sell the asset or paid to transfer the liability in an orderly transaction between market participants at the measurement date. During the reporting periods ended 31 December 2021 and 31 December 2020, there were no transfers between Level 1 and Level 2 fair value measurements, and no transfers into and out of Level 3 fair value measurements. 17.2.1 Financial instruments measured at fair value - fair value hierarchy Inflation Adjusted 31 Dec 2021 ZWL Level 1 ZWL Level 2 ZWL Level 3 ZWL Trade investments 36 499 730 ========= - - ========= ========= 36 499 730 ========= 31 Dec 2020 ZWL Restated Level 1 ZWL Level 2 ZWL Level 3 ZWL Trade investments 17 484 463 ========= - - ========= ========= 17 484 463 ========= Historical Cost 31 Dec 2021 ZWL Level 1 ZWL Level 2 ZWL Level 3 ZWL Trade investments 36 499 730 ========= - - ========= ========= 36 499 730 ========= 31 Dec 2020 ZWL Level 1 ZWL Level 2 ZWL Level 3 ZWL Trade investments 10 877 672 ========= - - ========= ========= 10 877 672 ========= 63 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 17. FINANCIAL INSTRUMENTS (Continued) 17.2.2 Financial instruments not measured at fair value Below is a list of the Group’s financial investments not measured at fair value, but whose carrying amounts approximate fair value. Assets Cash and cash equivalents Loans, advances and other assets Investment securities Total Liabilities Deposits and other liabilities Inflation Adjusted Historical Cost 31 December 2021 ZWL 31 December 2020 ZWL Restated 31 December 2021 ZWL 31 December 2020 ZWL 4 872 262 099 12 367 842 540 4 010 434 252 --------------------- 21 250 538 892 ============ 3 157 902 536 6 417 670 852 1 738 887 717 -------------------- 11 314 461 105 =========== 4 872 262 099 11 849 962 849 4 010 434 252 --------------------- 20 732 659 200 ============ 1 964 637 240 3 730 886 733 1 081 820 457 ------------------- 6 777 344 430 =========== 19 091 448 981 -------------------- 19 091 448 981 ============ 10 309 591 981 -------------------- 10 309 591 981 ============ 19 091 448 981 -------------------- 19 091 448 981 ============ 6 413 943 465 ------------------ 6 413 943 465 =========== 17.3 Financial instruments not measured at fair value Below is a list of the Group’s financial investments not measured at fair value, but whose carrying amounts approximate fair value. Cash and cash equivalents Cash and cash equivalents consists of balances with the Central Bank, other banks and cash with original maturities of three months or less. These balances are subject to insignificant risk of change in their fair value. It is the Directors’ assessment that the carrying amount of these balances approximates their fair value at any given time. Loans, advances and other assets The estimated fair value of loans, advances and other assets is estimated to approximate the carrying amount due to non- availability of benchmark interest rates to discount the expected future cash flows thereof. The Directors believe that current interest rates are market related and would re-issue the loans at the same interest rate if needed. It is from this assessment that Directors believe that the carrying amount of these balances reasonably approximate fair value as discounting the future cash flow using the current interest rates would not result in significant differences from the carrying amount. Investment securities These financial assets consist of open market treasury bills and government bonds. There is currently no observable active market for these instruments; or a reliable proxy to discount the expected future cash flows. Directors believe that the carrying amount approximates fair value on these instruments. In performing this assessment, Directors have determined that interest rates are consistent with the latest transactions that the Group entered into and the average tenor of the portfolio was short-term in nature. Trade and other investments These are equity investments held by the Group in a third part entity. There is currently no observable active market for these equities or a reliable proxy to discount the expected future cash flows. In performing this assessment, Directors have determined that interest rates are consistent with the latest transactions that the Group entered into. The issuer advises the Group of the equities' value and this value is significantly unobservable as the equities are not traded on an active market. The fair value would therefore, increase or decrease depending on the movements in the issuer's net carrying assets value. Deposits and other liabilities The estimated fair value of deposits with no stated maturity, which includes non-interest bearing deposits, is the amount repayable on demand. The estimated fair value of fixed interest-bearing deposits approximates the carrying amount as interest rates quoted are market related. It is the view of Directors that the carrying amounts of these assets and liabilities reasonably approximate fair values. 64 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 18. DEFERRED TAX The following table shows deferred tax (assets)/liabilities recorded in the statement of financial position and changes recorded in the statement of financial position and changes recorded in the income tax expense: GROUP Inflation Adjusted Historical Cost Allowance for impairment losses on financial assets Lease liabilities Right of use assets Quoted and other investments Investment properties Property and equipment Unrealised foreign exchange gains Suspended interest Deferred income Assessed losses Provisions Closing deferred tax liabilities/(assets) Restated opening balance at 1 January 2021 Current year charge/(credit) Relating to profit or loss (Note 8.1) Relating to other comprehensive income (Note 6.3) 31 December 2021 ZWL ( 101 898 076) ( 36 119 941) 31 091 587 1 824 987 267 025 207 976 174 749 - ( 202 030) ( 3 702 581) - ( 133 456 419) -------------------- 1 000 737 483 467 809 599 ------------------- 532 927 884 209 640 874 31 December 2020 ZWL Restated ( 63 567 736) ( 9 514 675) 40 729 156 874 227 352 634 400 77 767 306 113 695 583 ( 162 171) ( 3 126 926) ( 40 314) ( 41 479 249) -------------------- 467 809 599 812 522 927 --------------------- ( 344 713 328) ( 440 262 793) 31 December 2021 ZWL 31 December 2020 ZWL Restated ( 101 898 076) ( 36 119 941) 26 138 506 676 263 262 004 682 728 086 085 - ( 185 018) ( 3 702 581) - ( 133 456 419) --------------------- 741 543 501 174 727 794 ------------------- 566 815 707 227 838 493 ( 39 547 624) ( 5 913 399) 5 794 183 543 886 219 385 704 ( 48 385 822) 70 733 839 ( 100 892) ( 1 945 366) ( 25 081) ( 25 811 634) ------------------ 174 727 794 97 653 191 ) ------------------- 77 074 603 ( 215 567 932) 123 848 415 71 929 637 559 929 315 292 642 536 The following table shows deferred tax (assets)/liabilities recorded in the statement of financial position and changes recorded in the statement of financial position and changes recorded in the income tax expense: COMPANY Inflation Adjusted Historical Cost Allowance for impairment losses on Group Companies Assessed losses Provisions Closing deferred tax liabilities/(assets) Restated opening balance at 1 January 2021 Current year charge/(credit) Relating to profit or loss (Note 8.1) Relating to other comprehensive income (Note 6.3) 31 December 2021 ZWL 31 December 2020 ZWL Restated 31 December 2021 ZWL - - - ( 9 152) ( 4 352) -------------------- ( 13 504) ( 21 706) ------------------- 8 202 35 208 ( 14 711) ( 6 995) -------------------- ( 21 706) ( 97 355) --------------------- 75 649 75 649 - - ( 9 152) ( 4 352) --------------------- ( 13 504) ( 13 504) ------------------- - - - 31 December 2020 ZWL Restated - ( 9 152) ( 4 352) ------------------ ( 13 504) ( 13 504) ------------------- - - - 65 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 19 CASH AND CASH EQUIVALENTS GROUP Balances with the Central Bank** Current, nostro accounts* and cash Interbank placements Expected Credit loss allowance Inflation Adjusted Historical Cost 31 December 2021 ZWL 931 500 994 3 320 761 105 620 000 000 - -------------------- 4 872 262 099 =========== 31 December 2020 ZWL Restated 668 953 254 2 241 474 125 249 142 632 ( 1 667 475) ------------------- 3 157 902 536 =========== 31 December 2021 ZWL 31 December 2020 ZWL 931 500 994 3 320 761 105 620 000 000 - ------------------- 4 872 262 099 =========== 416 178 289 1 394 496 343 155 000 000 ( 1 037 392) ------------------- 1 964 637 240 =========== *Nostro accounts are foreign domiciled bank accounts operated by the Bank for the facilitation of offshore transactions on behalf of clients. **Balances with the Central Bank, other banks and cash are used to facilitate customer and the Bank’s transactions which include payments and cash withdrawals. COMPANY Cash Inflation Adjusted Historical Cost 31 December 2021 ZWL 31 December 2020 ZWL Restated 31 December 2021 ZWL 31 December 2020 ZWL 13 635 -------------------- 13 635 =========== 21 917 ------------------- 21 917 =========== 13 635 ------------------- 13 635 =========== 13 635 ------------------- 13 635 =========== *Nostro accounts are foreign domiciled bank accounts operated by the Bank for the facilitation of offshore transactions on behalf of clients. **Balances with the Central Bank, other banks and cash are used to facilitate customer and the Bank’s transactions which include payments and cash withdrawals. 20. TOTAL LOANS, ADVANCES AND OTHER ASSETS GROUP Fixed term loans – Corporate Fixed term loans – Retail Mortgages Overdrafts Other assets COMPANY Other assets Inflation Adjusted Historical Cost 31 December 2021 ZWL 5 746 121 781 2 019 254 634 275 931 218 1 543 300 801 -------------------- 9 584 608 434 2 783 234 106 --------------------- 12 367 842 540 ============ 31 December 2020 ZWL Restated 2 511 763 500 452 175 134 150 240 679 580 842 483 -------------------- 3 695 021 796 2 722 649 056 -------------------- 6 417 670 852 ============ 31 December 2021 ZWL 31 December 2020 ZWL 5 746 121 781 2 019 254 634 275 931 218 1 543 300 801 ------------------- 9 584 608 434 2 265 354 415 --------------------- 11 849 962 849 ============ 1 562 652 442 281 313 339 93 469 773 361 361 619 ------------------ 2 298 797 173 1 432 089 560 ------------------ 3 730 886 733 ========== 2 404 872 -------------------- 2 404 872 =========== 4 068 428 ------------------- 4 068 428 =========== 2 403 508 ------------------- 2 403 508 =========== 2 531 106 ------------------- 2 531 106 =========== 66 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 20.1 Maturity analysis GROUP Less than 1 month 1 to 3 months 3 to 6 months 6 months to 1 year 1 to 5 years Over 5 years Total advances Allowances for impairment losses on loans and advance ECL at 1 January Monetary adjustment ECL charged through profit or loss Bad debts written off Suspended interest on credit impaired financial assets Other assets COMPANY Other assets Inflation Adjusted Historical Cost 31 December 2021 ZWL 2 401 390 517 1 431 473 214 203 053 128 2 388 287 992 2 548 786 997 1 023 825 632 --------------------- 9 996 817 479 (412 209 045) (245 581 296) 92 796 923 (264 094 871) 4 670 199 ------------------- - 31 December 2020 ZWL Restated 1 661 790 915 465 844 158 198 444 019 458 238 997 966 483 277 190 457 760 -------------------- 3 941 259 126 (245 581 296) (123 409 128) 95 898 408 (223 425 215) 5 354 639 -------------------- 31 December 2021 ZWL 31 December 2020 ZWL 2 401 390 517 1 431 473 214 203 053 128 2 388 287 992 2 548 786 997 1 023 825 632 ------------------ 9 996 817 479 1 033 855 947 289 817 298 123 458 690 285 085 872 601 281 710 118 490 170 ------------------ 2 451 989 687 ( 412 209 045) (152 784 373) - (264 094 871) 4 670 199 -------------------- (152 784 373) (17 115 343) - (139 000 331) 3 331 301 ------------------- - ------------------- - 9 584 608 434 2 783 234 106 --------------------- 12 367 842 540 ============ ( 656 034) -------------------- 3 695 021 796 2 722 649 056 --------------------- 6 417 670 852 ============ - ( 408 141) -------------------- 9 584 608 434 2 265 354 415 -------------------- 11 849 962 849 ============ ------------------- 2 298 797 173 1 432 089 560 ------------------- 3 730 886 733 =========== 2 404 872 -------------------- 2 404 872 =========== 4 068 428 ------------------- 4 068 428 =========== 2 403 508 ------------------- 2 403 508 =========== 2 531 106 ------------------- 2 531 106 =========== The Bank is continuing recovery efforts in respect of loans written off in the year under review amounting to ZWL 4 670 199 (2020: ZWL3 331 301). 20.2 Sectoral analysis of utilisations GROUP Agriculture Distribution Individuals Manufacturing Mining Services Inflation Adjusted Historical Cost 31 December 2021 ZWL 31 December 2020 ZWL Restated % 31 December 2021 ZWL 31 December 2020 ZWL % % % 2 318 591 003 1 926 140 534 2 910 290 289 1 210 481 793 197 072 200 1 434 241 660 -------------------- 9 996 817 479 ============ 23% 23% 926 121 812 19% 10% 393 781 675 29% 16% 621 849 137 12% 14% 553 746 809 2% 0% 1 880 310 14% 37% 1 443 879 383 ------- ------------------- -------- 3 941 259 126 100% 100% ==== =========== ===== 2 318 591 003 23% 1 926 140 534 19% 2 910 290 289 29% 1 210 481 793 12% 2% 1 434 241 660 14% ----- -------------------- 9 996 817 479 100% ============ 576 171 487 23% 244 984 807 10% 386 873 236 16% 524 335 301 21% 1 169 804 0% 718 455 052 29% -------------------- ----- 2 451 989 687 100% === ============ === 197 072 200 The material concentration of loans and advances is with individuals and households at 29% (2020 - 16%) and agriculture sector at 23 % (2020 - 23%). 67 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 20.3 Impairment analysis of financial assets measured at amortised cost Inflation Adjusted Stage 1 Stage 2 Stage 3 Total Gross carrying amount at 1 January 2021 Monetary adjustment 6 334 971 630 ( 3 841 169 845) 40 733 154 ( 25 638 998) 10 716 810 ( 6 745 568) 6 386 421 594 ( 3 873 554 412) Transfers - to 12 months to ECL - to lifetime ECL not credit impaired - to lifetime ECL credit impaired (214 391 501) 52 459 726 (183 390 925) ( 83 460 302) 130 119 876 ( 48 201 159) 183 588 428 ( 5 267 393) 84 271 624 ( 4 258 567) ( 197 503) 88 727 694 - - - - Net movement in financial assets Balance as at 31 December 2021 10 177 119 964 -------------------- 12 456 530 248 ============ 44 863 257 ---------------- 190 077 290 ========== 45 201 181 ---------------- 133 444 047 ========== 10 267 184 402 -------------------- 12 780 051 584 ============ Loss allowance analysis At 1 January 2021 - ECL – Loans, advances & guarantees - Guarantees and facilities approved not drawn down - ECL – Investment securities - ECL – Interbank placements 219 649 613 208 079 873 3 183 236 6 719 030 1 667 475 14 795 512 14 795 512 - - - 11 136 171 11 136 171 - - - 245 581 296 234 011 556 3 183 236 6 719 030 1 667 475 Monetary adjustment ( 86 231 308) 287 610 ( 5 009 506 ) ( 255 253 951 ) Transfers - to 12 month ECL - to lifetime ECL not credit impaired - to lifetime ECL credit impaired (40 706 191) 699 244 (15 320 301) (26 085 134) 9 978 774 ( 684 725) 15 336 280 ( 4 672 781) 30 727 417 ( 14 520) ( 15 979) 30 757 916 - - - - Net increase/(decrease) in ECL Loans and advances Guarantees and facilities approved not drawn down Investment securities Interbank placements Bad debts written off Revaluation exchange on loans and advances ECL Balance as at 31 December 2021 237 444 962 234 086 914 (10 734 968) 8 235 821 5 857 195 - 9 724 338 ----------------- 339 881 415 ========== Loans and advances Guarantees and facilities approved not …drawn down Investment securities Interbank placements 324 953 626 (7 551 732) 14 954 851 7 524 669 ----------------- 339 881 415 ========== ( 6 867 899) ( 6 867 899) - - - - - ---------------- 18 193 997 ========= 18 193 997 - - - ---------------- 18 193 997 ========= 17 529 674 17 529 674 - - - - - ---------------- 54 133 633 ========= 54 133 633 - - - ---------------- 54 133 633 ========= 248 106 738 244 748 689 (10 734 968) 8 235 821 5 857 195 - 9 724 338 ------------------ 412 209 045 ========== 397 281 257 ( 7 551 732) 14 954 851 7 524 669 ----------------- 412 209 045 ========== 68 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 20.3 Impairment analysis of financial assets measured at amortised cost (Continued) Inflation Adjusted Gross carrying amount at 1 January 2020 Monetary adjustment Stage 1 6 426 862 063 ( 4 761 733 749) Restated Stage 2 84 577 398 ( 65 723 158) Stage 3 52 505 069 ( 40 800 486) Total 6 563 944 529 ( 4 868 257 393) Transfers - to 12 months to ECL - to lifetime ECL not credit impaired - to lifetime ECL credit impaired ( 30 130 583) 18 517 332 (44 639 519) (4 008 396) 25 137 653 ( 18 091 161) 44 902 766 ( 1 673 952) 4 992 931 ( 426 171) ( 263 247) 5 682 349 - - - - Net movement in financial assets 4 699 973 899 21 481 431 528 385 4 721 983 715 Balance as at 31 December 2020 Loss allowance analysis At 1 January 2020 - ECL – Loans, advances & guarantees - Guarantees and facilities approved not drawn down - ECL – Investment securities - ECL – Interbank placements --------------------- 6 334 971 630 ============ ------------------ 65 473 324 ========== ------------------ 17 225 898 ========== --------------------- 6 417 670 852 ============ 144 633 700 88 787 186 5 910 353 5 910 353 28 711 589 28 711 589 179 255 642 123 409 128 49 783 364 2 902 216 3 160 934 - - - - - - 49 783 364 2 902 216 3 160 934 Monetary adjustment ( 123 990 214) ( 4 592 800) ( 22 311 118) ( 150 894 132) Transfers - to 12 month ECL - to lifetime ECL not credit impaired - to lifetime ECL credit impaired ( 8 912 858) 1 838 973 (9 983 409) (768 422) 7 400 613 ( 1 805 831) 10 041 453 ( 835 009) 1 512 244 ( 33 142) ( 58 044) 1 603 431 - - - - Net increase/(decrease) in ECL Loans and advances Guarantees and facilities approved not drawn down Investment securities Interbank placements Bad debts written off 196 402 189 197 281 914 (7 914 614) 6 072 058 962 832 - 6 077 346 6 077 346 - - - - 3 223 456 8 578 095 - - - ( 5 354 639) 205 702 991 211 937 354 ( 7 914 614) 6 072 058 962 832 ( 5 354 639) Revaluation exchange on loans and advances ECL Balance as at 31 December 2020 11 516 795 ------------------ 219 649 613 ========== - - ---------------- 14 795 512 ========= ---------------- 11 136 171 ========= 11 516 793 ------------------ 245 581 296 ========== Loans and advances Guarantees and facilities approved not drawn down Investment securities Interbank placements Balance as at 31 December 2020 208 079 873 3 183 236 6 719 030 1 667 475 ------------------ 219 649 613 ========== 14 795 512 - - - ---------------- 14 795 512 ========= 11 136 171 - - - ---------------- 11 136 171 ========= 234 011 556 3 183 236 6 719 030 1 667 475 ----------------- 245 581 296 ========== 69 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 20. LOANS, ADVANCES AND OTHER ASSETS (Continued) 20.4 Other assets GROUP Service deposits* Prepayments and stocks** Other receivables*** COMPANY Other assets Inflation Adjusted Historical Cost 31 December 2021 ZWL 31 December 2020 ZWL Restated 31 December 2021 ZWL 31 December 2020 ZWL 556 300 743 240 044 152 1 986 889 211 -------------------- 2 783 234 106 ============ 366 988 582 532 528 488 1 823 131 985 -------------------- 2 722 649 056 ============ 556 300 743 204 784 649 1 504 269 023 ------------------- 2 265 354 415 ============ 228 315 924 69 494 935 1 134 278 701 ------------------ 1 432 089 560 ========== 2 404 872 -------------------- 2 404 872 =========== 4 068 428 ------------------- 4 068 428 =========== 2 403 508 ------------------- 2 403 508 =========== 2 531 106 ------------------- 2 531 106 =========== *Service deposits relate to amounts pledged as collateral for VISA and the RTGS accounts. ** Prepayments and stocks are in respect of services, utilities and consumables for the Group. *** Included in other receivables is ZWL1 507 838 292 (2020: ZWL1 128 781 333) placed with the RBZ for the facilitation of legacy debts settlement in terms of regulatory directives. 20.5 Loans to officers and executive directors Inflation Adjusted Historical Cost Included in advances and other accounts (Note 20) are loans to officers: At 1 January Monetary adjustment Net additions during the year ECL on staff loans – Stage 1 31 December 2021 ZWL 104 106 938 (43 107 148) 16 745 627 ----------------- 77 745 417 - ----------------- 77 745 417 ========== 31 December 2020 ZWL Restated 221 310 259 ( 247 246 232) 138 188 395 ---------------- 112 252 422 ( 8 145 484) ---------------- 104 106 938 ========== 31 December 2021 ZWL 31 December 2020 ZWL 64 768 423 - 12 976 994 ----------------- 77 745 417 - ---------------- 77 745 417 ========== 27 693 040 - 42 142 962 ---------------- 69 836 002 ( 5 067 579) ---------------- 64 768 423 ========= 70 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 20. LOANS, ADVANCES AND OTHER ASSETS (Continued) 20.6 The terms and conditions applicable to loans and advances are as follows: Product Overdraft Loan Tenure Interest rate Payable on demand Penalty interest rate of ten percent- age points above loan rate up to a maximum penalty rate of 72% per annum. Loan payable over a maximum period of 120 months (includes mortgage loans). From 35% per annum up to a max- imum of 62% per annum. Loans to employees and executive Directors are at a discounted interest rate. Bankers Acceptances Loan payable over a minimum period of 30 days up to 90 days. Average of 55% per annum. 21. TRADE AND OTHER INVESTMENTS Inflation Adjusted Historical Balance at 1 January Additions Monetary adjustment (Loss)/gain recognised in profit or loss 31 December 2021 ZWL 17 484 463 25 314 881 ( 17 196 795) 10 897 181 ---------------- 36 499 730 ========== 31 December 2020 ZWL Restated 11 624 172 - - 5 860 291 ---------------- 17 484 463 ========== 31 December 2021 ZWL 31 December 2020 ZWL 10 877 672 17 177 307 - 8 444 751 ---------------- 36 499 730 ========== 1 612 131 - - 9 265 541 ---------------- 10 877 672 ========== The instruments are designated as financial assets at fair value through profit or loss as they are held in perpetuity and they represent equity holdings in another third part entity. The gain or losses relate to foreign exchange rate movements since the instruments are denominated in foreign currency and are recognised through profit or loss. 22. INVESTMENTS IN GROUP COMPANIES Subsidiaries Inflation Adjusted Historical Investment in subsidiaries: NMB Bank Limited 31 December 2021 ZWL 31 December 2020 ZWL Restated 31 December 2021 ZWL 31 December 2020 ZWL 2 070 856 886 -------------------- 2 070 856 886 =========== 2 070 856 886 -------------------- 2 070 856 886 =========== 31 491 009 -------------------- 31 491 009 =========== 31 491 009 -------------------- 31 491 009 =========== The subsidiary is registered in Zimbabwe, and the extent of the Group has 100% beneficial interest therein and its principal business activities are in Banking. The consolidated financial statements include the financial information of the subsidiary listed above. 71 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 23. INVESTMENT PROPERTIES Immovable properties (Freehold land and buildings and investment properties) were revalued as at 31 December 2021 on the basis of valuations carried out by independent professional valuers, PMA Real Estates (Private) Limited. The following shows reconciliation between the opening and closing balances for investment properties (level 3 fair values) : GROUP At 1 January Additions Disposals Fair value gains At 31 December Inflation Adjusted Historical Cost 31 December 2021 ZWL 2 657 783 640 57 522 943 ( 30 331 973) 833 158 854 ------------------- 3 518 133 464 =========== 31 December 2020 ZWL Restated 1 657 448 814 661 072 877 ( 28 258 119) 367 520 068 ------------------- 2 657 783 640 =========== 31 December 2021 ZWL 31 December 2020 ZWL 1 653 496 476 44 577 303 ( 23 505 709) 1 843 565 394 ------------------ 3 518 133 464 =========== 229 867 982 245 405 846 ( 4 514 509) 1 182 737 157 ------------------- 1 653 496 476 =========== Investment properties comprise commercial properties and residential properties that are leased out to third parties and land held for future development. No properties were encumbered. Rental income amounting to ZWL14 617 316 (2020: ZWL7 610 897) was received and no operating expenses were incurred on the leased investment properties in the current year due to the net leasing arrangement on the properties. The Bank has no restrictions on the realisability of its investment properties and no contractual obligations to purchase, construct or develop the investment properties or for repairs, maintenance and enhancements. Measurement of fair value Fair value hierarchy The fair value of the Bank's investment properties as at 31 December 2021 has been arrived at on the basis of valuations carried out by independent professional valuers, PMA Real Estate (Private) Limited. The valuation which conforms to International Valuation Standards, was in terms of the policy as set out in the accounting policies section and was derived with reference to market information close to the date of the valuation. Level 3 The fair value for investment properties of ZWL3 518 133 464 (2020: ZWL2 657 783 640) has been categorised under level 3 in the fair value hierarchy based on the inputs used for the valuation technique described below. Valuation technique and significant unobservable inputs The following table shows the valuation technique used in measuring the fair value of investment properties, as well as the significant unobservable inputs used. Valuation Technique Significant Unobservable Inputs Inter-relationship between key unobservable inputs and fair value measurement The investment method Discounted cash flows was used to value all income producing properties. The direct comparison method was applied on all residential properties. • Weighted average expected market rental growth (5%); Void period (average 3 months after the end of each lease); Occupancy rate (55%); and Average market yield of 10%. • • • 72 The estimated fair value would increase /(decrease) if: • expected market rental growth were higher/ (lower); void periods were shorter/(longer); the occupancy rates were higher /(lower); and the risk adjusted discount rates were lower/ (higher). • • • NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 23. INVESTMENT PROPERTIES (Continued) Below is an indication of the changes in fair values following change to the key unobservable limits: Changes in fair value following changes in: Expected market rental growth ZWL Occupancy rates ZWL Risk adjusted discount rates ZWL +5% +3% +1% -1% -3% -5% Void periods 1 month 2 months 4 months 132 889 182 79 733 509 26 577 837 ( 26 577 837) ( 79 733 509) ( 132 889 182) 285 090 979 171 054 587 57 018 196 ( 57 018 196) ( 171 054 587) ( 285 090 979) 350 342 217 210 205 329 70 068 443 ( 70 068 443) ( 210 205 329) ( 350 342 217) Change in fair value ZWL 714 260 195 407 710 754 ( 205 388 124) 24. INTANGIBLE ASSETS Inflation Adjusted Historical Cost Cost Balance 1 January 2020 Acquisitions Balance at 31 December 2020 Inflation adjustment Acquisitions Balance at 31 December 2021 Accumulated amortisation Balance 1 January 2020 Amortisation for the year Balance at 31 December 2020 Amortisation for the year Balance at 31 December 2021 Carrying amount At 31 December 2021 At 31 December 2020 31 December 2021 ZWL 344 106 764 12 583 601 ----------------- 356 690 365 298 867 326 15 664 870 ----------------- 671 222 561 ========== 260 366 307 39 246 884 ----------------- 299 613 191 3 697 644 ----------------- 303 310 835 ========== 367 911 726 ========== 57 077 174 ========== 31 December 2020 ZWL Restated 344 106 764 12 583 601 ---------------- 356 690 365 298 867 326 15 664 870 ---------------- 671 222 561 ========== 260 366 307 39 246 884 ---------------- 299 613 191 3 697 644 ---------------- 303 310 835 ========== 31 December 2021 ZWL 31 December 2020 ZWL 5 469 725 3 652 103 ----------------- 9 121 828 - 12 139 463 ---------------- 21 261 291 ========== 4 072 541 915 580 ----------------- 4 988 121 2 865 483 ---------------- 7 853 604 ========== 5 469 725 3 652 103 ---------------- 9 121 828 - 12 139 463 ---------------- 21 261 291 ========= 4 072 541 915 580 ---------------- 4 988 121 2 865 483 ---------------- 7 853 604 ========= 367 911 726 ========== 57 077 174 ========== 13 407 688 ========== 4 133 707 ========== 13 407 688 ========= 4 133 707 ========= 73 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 25. PROPERTY AND EQUIPMENT Inflation Adjusted Capital work in progress Computers Motor Furniture & Right of Use Freehold Land & Buildings* Vehicles Equipment Assets** Total Cost/Revaluation amount ZWL Restated ZWL ZWL Restated Restated ZWL Restated ZWL Restated ZWL Restated ZWL Restated 510 417 938 294 037 581 549 086 574 92 700 780 329 743 180 4 179 509 111 920 472 - 114 408 185 - 1 943 146 034 3 539 502 691 - 410 137 563 - ( 112 285 170) - - ----------------- 692 170 349 58 759 268 - ( 26 963 103) - - - 37 024 873 - - 4 402 000 - - 58 230 614 - ( 1 453 125) ( 24 233 962) ( 22 071 750) ----------------- ----------------- ------------------ 696 578 793 72 868 818 370 081 553 - 24 172 302 73 163 145 59 422 257 - - - ------------------ 173 830 442 - - 12 627 683 59 422 257 - 386 526 963 386 526 963 - ( 47 758 837) -------------------- ------------------- 2 342 300 681 4 347 830 636 - 156 094 715 - - - - - - ( 765 073) ( 4 100 238) - - - - 41 566 951 - - - ----------------- 723 966 515 ========== ------------------ ----------------- ------------------ 768 976 865 68 768 580 394 253 855 ========== ========= ========== ------------------ 215 397 394 ========== - 26 963 103 41 566 951 - 501 004 915 501 004 915 ( 4 865 311) - ------------------- ------------------- 2 870 268 699 5 041 631 908 =========== =========== - 315 484 364 78 041 981 259 529 671 22 269 408 21 897 951 697 223 377 - 78 618 107 6 268 869 23 699 854 - 2 581 968 111 168 797 - - - - - ----------------- ( 1 453 125) ( 24 233 962) ( 18 169 133) ------------------- ----------------- ------------------ - 392 649 346 60 076 888 265 060 392 ========== =========== ========== ========== 17 868 262 - ------------------ 40 137 670 ========== - 17 868 262 - ( 43 856 221) ----------------- ------------------ 24 479 919 782 404 216 ========== ========== Charge for the year – Property and equipment Charge for period – Right of use assets Remeasurement – Right of use assets Disposals - - - - 22 711 799 - - 661 884 - - ( 765 073) ( 4 100 238) 10 472 128 - - - - 49 484 694 - - 84 802 - - - 33 930 613 49 484 694 - ----------------- ------------------- ----------------- ------------------ - 414 596 072 56 638 534 275 532 520 ========== =========== ========== ========== ------------------ 89 622 365 ========== ( 4 865 311) ------------------ ----------------- 24 564 721 860 954 212 ========== ========== 723 966 515 ========== 692 170 349 ========== 354 380 794 12 130 046 118 721 335 ========== ========= ========= 303 929 447 12 791 929 105 021 161 ========= ========== ========= 125 775 029 ========= 133 692 772 ========= 2 845 703 978 4 180 677 696 =========== =========== 2 317 820 761 3 565 426 421 =========== =========== *Assets measured using the revaluation model. ** Right-of-Use Assets recognised in respect of leased properties in which the Group is a lessee. The Right-of-Use Assets are depreciated over the shorter of the lease term including extension options where the Group is certain to exercise such and the useful life of the underlying asset. 74 At 1 January 2020 Additions Remeasurement – Right of use assets Capitalisations Revaluations Disposals At 31 December 2020 Additions Remeasurement – Right of use assets Capitalisations Revaluations Disposals At 31 December 2021 Accumulated depreciation At 1 January 2020 Charge for the year – Property and equipment Charge for period – Right of use assets Disposals At 31 December 2020 At 31 December 2021 Carrying amount At 31 December 2021 At 31 December 2020 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 25. PROPERTY AND EQUIPMENT (Continued) Historical Cost Cost/Revaluation amount At 1 January 2020 Additions Remeasurement – Right of use assets Capitalisations Disposals Revaluations At 31 December 2020 Additions Remeasurement – Right of use assets Capitalisations Disposals Revaluations At 31 December 2021 Capital work in progress Computers ZWL ZWL Restated ZWL Restated Restated Motor Furniture & Right of Use Freehold Land & Buildings* ZWL Restated Vehicles Equipment ZWL Restated Assets** ZWL Restated Total ZWL Restated 14 824 374 52 381 396 11 615 145 56 223 172 1 769 802 - 6 848 941 2 147 918 4 096 580 - 268 382 880 307 537 722 - 110 752 486 - ( 58 590 341) - - - 15 356 278 ( 46 837) - 1 994 819 ( 372 492) - 36 227 220 ( 396 841) - - - 29 233 252 - - - ----------------- 8 615 429 49 831 811 ----------------- ----------------- ------------------ 44 827 238 83 147 758 3 392 129 - 18 147 561 55 339 763 ------------------ 33 329 832 - - 5 012 023 - 29 233 252 - ( 816 170) 1 183 829 028 1 183 829 028 -------------------- ------------------- 1 457 223 931 1 630 536 317 - 123 319 135 - ( 24 265 270) - - - - - - ( 694 870) ( 62 694) - - - 61 810 635 - - - - - - ----------------- 34 181 970 ========== ------------------ ----------------- ------------------ 137 792 651 62 974 799 3 329 435 ========== ========= ========== ------------------ 95 140 467 ========== 24 265 270 - - 61 810 635 - ( 757 564) 1 408 660 239 1 408 660 239 ------------------- ------------------- 2 890 149 441 3 223 568 762 =========== =========== Accumulated depreciation At 1 January 2020 Charge for the year – Property and equipment Charge for period – Right of use assets Disposals - - - - 5 035 595 5 048 413 - 1 230 711 341 867 - 4 107 841 2 257 704 - ( 40 080) ----------------- ( 372 989) ( 372 492) ----------------- ----------------- ------------------ 5 992 556 1 200 086 10 043 928 ========== =========== ========== ========== - 1 310 867 - 8 579 715 - ----------------- 9 890 582 ========== 567 480 14 662 300 - - 12 252 494 22 310 284 8 579 715 ( 785 561) ---------------- 15 229 780 ========== ========== ----------------- 42 356 932 At 31 December 2020 Charge for the year – Property and equipment Charge for period – Right of use assets Remeasurement – Right of use assets Disposals At 31 December 2021 Carrying amount At 31 December 2021 At 31 December 2020 - 22 698 711 661 884 10 872 074 - 29 215 683 63 448 352 - - - - - - - ( 694 870) ( 62 694) ----------------- ------------------- ----------------- ------------------ 16 864 630 ========== =========== ========== ========== 32 047 769 1 799 276 - ------------------ 62 916 513 ========== - - 15 144 683 - - - 15 144 683 ( 757 564) ------------------ ----------------- 44 445 463 158 073 651 ========== ========== - 37 881 248 - 37 881 248 34 181 970 ========== 8 615 429 ========== 105 744 882 1 530 159 ========== ========= 2 192 043 73 103 830 ========== ========= 46 110 169 ========= 38 834 682 ========= 33 076 169 ========= 23 439 250 ========= 2 845 703 978 3 066 347 326 =========== =========== 1 441 994 151 1 588 179 384 =========== =========== 75 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 25. PROPERTY AND EQUIPMENT (Continued) Fair value hierarchy Immovable properties were revalued as at 31 December 2021 on the basis of valuations carried out by independent professional valuers, PMA Real Estate (Private) Limited. The valuation which conforms to International Valuation Standards, was in terms of the policy as set out in the accounting policies section. All movable assets are measured at their carrying amounts which are arrived at by the application of a depreciation charge on their cost values over the useful lives of the assets. The valuation of land and buildings was arrived by applying yield rates of 10% on rental levels of between ZWL332 – ZWL574 per square metre. Level 3 The fair value of immovable properties of ZWL2 845 703 978 (2020: ZWL2 317 820 761) has been categorised under level 3 in the fair value hierarchy based on the inputs used for the valuation technique described below. The following shows reconciliation between the opening and closing balances for level 3 fair values: At 1 January Transfers from work in progress Revaluation gain Depreciation At 31 December Inflation Adjusted Historical Cost 31 December 2021 ZWL 2 342 300 681 26 963 103 501 004 915 ( 24 564 721) ------------------- 2 845 703 978 =========== 31 December 2020 ZWL Restated 1 921 248 083 12 627 683 386 526 963 ( 2 581 968) ------------------- 2 317 820 761 =========== 31 December 2021 ZWL 31 December 2020 ZWL 1 457 223 931 24 265 270 1 408 660 239 ( 44 445 463) ------------------ 2 845 703 978 =========== 267 815 400 5 012 023 1 183 829 028 ( 14 662 300) ------------------- 1 441 994 151 =========== Valuation technique and significant unobservable inputs The following table shows the valuation technique used in measuring the fair value of immovable properties, as well as the significant unobservable inputs used. Valuation Technique Significant Unobservable Inputs The Direct Comparison Method was applied on all residential properties • Weighted average expected market rental growth (5%); and • Average market yield of 10%. Inter-relationship between key unobservable inputs and fair value measurement The estimated fair value would increase /(de- crease) if: • Expected market rental growth were higher/ (lower); and • The risk adjusted discount rates were lower/ (higher). 76 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 Below is an indication of the sensitivity analysis following changes on the significant unobservable inputs:- Changes in fair value following changes in: Change (%) Expected market rental growth Discount rates +5% +3% +1% -1% -3% -5% 27 268 479 16 361 087 5 453 695 5 453 695 16 361 001 27 268 479 95 933 306 57 559 983 19 186 661 19 186 661 57 559 983 95 933 306 26. 26.1 INTEREST RATE REPRICING AND GAP ANALYSIS Total Position The tables below analyses the Group’s interest rate risk exposure on assets and liabilities. The assets and liabilities are categorised by the earlier of contractual repricing or maturity dates. As at 31 December 2021 Assets Cash and cash equivalents Current tax assets Investment securities Quoted and other investments Loans, advances and other assets Intangible assets Property and equipment Investment properties Liabilities and equity Deposits and other liabilities Current tax liabilities Deferred tax liabilities Redeemable ordinary shares Equity Subordinated loan Interest rate repricing gap Cumulative gap Inflation Adjusted Up to 1 month ZWL 1 month to 3 months ZWL 3 months to 1 year ZWL 1 year to Non-interest bearing ZWL 5 years ZWL Total ZWL 4 872 262 099 - - - 1 200 000 000 1 800 000 000 - 2 401 390 517 1 431 473 214 - - - - - - - -------------------- ----------------- 8 473 652 616 3 231 473 214 -------------------- -------------------- - - 832 450 826 - 2 591 341 119 - - - ----------------- 3 423 791 945 -------------------- 36 499 730 - 4 872 262 099 - - - - - 4 010 434 252 177 983 426 36 499 730 - 2 783 234 107 12 367 842 539 3 160 403 584 367 911 726 - 367 911 726 4 180 677 696 - 4 180 677 696 3 518 133 464 - 3 518 133 464 ----------------- ----------------- 3 338 387 011 10 886 456 722 29 353 761 508 -------------------- -------------------- -------------------- ---------------- 11 489 793 - - - - - 4 343 903 - 236 048 645 - 1 000 737 483 - - - 8 802 411 609 - - 14 205 365 648 2 119 332 623 - - - - - - - - 223 114 790 - -------------------- 2 750 917 014 19 091 448 981 236 048 645 1 000 737 483 - 8 802 411 609 223 114 790 ------------------- ----------------- 4 343 903 12 790 114 751 29 353 761 508 14 428 480 438 2 119 332 623 -------------------- -------------------- - 1 112 140 591 -------------------- -------------------- - ( 5 954 827 822) ( 4 842 687 231) ============ ============ ============ ============ ============ ============ -------------------- -------------------- 3 334 043 106 ( 1 903 658 029) -------------------- -------------------- 1 903 658 029 ----------------- 11 489 793 -------------------- 3 412 302 152 -------------------- ( 1 430 385 079) -------------------- ( 5 954 827 822) -------------------- -------------------- ----------------- - 77 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 26.1 Total position (Continued) As at 31 December 2020 Inflation Adjusted Up to 1 month to 3 months to 1 year to Non-interest bearing 1 year ZWL ZWL Restated Restated 3 months ZWL Restated 5 years ZWL Restated 1 month ZWL Restated Total ZWL Restated 3 157 902 536 - - - 642 948 728 723 317 319 - - 1 661 790 915 465 844 158 - - - - - - - - -------------------- -------------------- 5 462 642 179 1 189 161 477 -------------------- -------------------- - - 18 295 481 - - - 354 326 189 - 656 683 016 - - - - - 3 157 902 536 - - - 1 738 887 717 17 484 463 17 484 463 910 703 707 2 722 649 056 6 417 670 852 - - - 57 077 174 - 3 565 426 421 3 565 426 421 - 2 657 783 640 2 657 783 640 -------------------- -------------------- -------------------- -------------------- 1 011 009 205 928 999 188 9 020 420 754 17 612 232 803 -------------------- -------------------- -------------------- -------------------- - 57 077 174 18 367 005 - - - - - 8 838 785 649 1 204 071 615 - - - - - - - - - 213 189 970 243 022 726 10 309 591 981 5 344 985 91 949 809 - 91 949 809 467 809 599 - 467 809 599 - 23 042 082 23 042 082 - 6 506 649 362 6 506 649 362 213 189 970 - - -------------------- -------------------- -------------------- -------------------- 5 344 985 7 332 473 578 17 612 232 803 -------------------- -------------------- -------------------- -------------------- - 923 654 203 1 687 947 176 -------------------- -------------------- -------------------- -------------------- - ( 3 589 333 440) (3 604 243 576) ( 2 611 601 376) ( 1 687 947 176) ============ ============ ============ ============ ============ ============ -------------------- -------------------- 9 051 975 619 1 204 071 615 -------------------- -------------------- ( 14 910 138) -------------------- -------------------- ( 3 589 333 440) 992 642 200 18 367 005 - Assets Cash and cash equivalents Current tax assets Investment securities Quoted and other investments Loans, advances and other assets Deferred tax Intangible assets Property and equipment Investment properties Liabilities and equity Deposits and other liabilities Current tax liabilities Deferred tax liabilities Redeemable ordinary shares Equity Subordinated loan Interest rate repricing gap Cumulative gap 78 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 26. INTEREST RATE REPRICING AND GAP ANALYSIS (Continued) 26.1 Total position (Continued) The table below analyses the Group’s interest rate risk exposure on assets and liabilities. The assets and liabilities are categorised by the earlier of contractual repricing or maturity dates. Historical As at 31 December 2021 Assets Cash and cash equivalents Current tax assets Investment securities Quoted and other investments Loans, advances and other assets Deferred tax Intangible assets Property and equipment Investment properties Liabilities and equity Deposits and other liabilities Current tax liabilities Deferred tax liabilities Redeemable ordinary shares Equity Subordinated loan Interest rate repricing gap Cumulative gap Up to 1 month to 3 months to 1 year to Non-interest bearing 1 year ZWL ZWL 3 months ZWL 5 years ZWL 1 month ZWL Total ZWL - 4 872 262 099 - - 1 200 000 000 1 800 000 000 - - 2 401 390 517 1 431 473 214 - - - - - - - - - - 832 450 826 - - 4 872 262 099 - - - - - 4 010 434 253 177 983 427 36 499 730 - 2 591 341 119 3 160 403 584 2 265 354 415 11 849 962 849 - - - 13 407 688 - 3 065 495 111 3 065 495 111 - 3 518 133 464 3 518 133 464 - 13 407 688 - - - - 36 499 730 -------------------- ----------------- 8 473 652 616 3 231 473 214 -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- 3 423 791 945 3 338 387 011 8 898 890 408 27 366 195 193 -------------------- -------------------- -------------------- -------------------- 11 489 793 - - - - - 14 205 365 648 2 119 332 623 - - - - - - - - - 223 114 790 4 343 903 2 750 917 014 19 091 448 981 236 048 645 - 236 048 645 741 543 501 - 741 543 501 - 14 335 253 14 335 253 - 7 059 704 023 7 059 704 023 223 114 790 - - -------------------- -------------------- -------------------- -------------------- 4 343 903 10 802 548 435 27 366 195 193 -------------------- -------------------- -------------------- -------------------- - 3 412 302 152 3 334 043 108 ( 1 903 658 027) -------------------- -------------------- -------------------- -------------------- ( 5 954 827 822) ( 4 842 687 231) ( 1 430 385 079) 1 903 658 027 - ============ ============ ============ ============ ============ ============ -------------------- -------------------- 14 428 480 438 2 119 332 623 -------------------- -------------------- ( 5 954 827 822) 1 112 140 591 -------------------- -------------------- 11 489 793 - The table below analyses the Group’s interest rate risk exposure on assets and liabilities. The assets and liabilities are categorised by the earlier of contractual repricing or maturity dates. Historical As at 31 December 2020 Assets Cash and cash equivalents Current tax assets Investment securities Quoted and other investments Loans, advances and other assets Deferred tax Intangible assets Property and equipment Investment properties Liabilities and equity Deposits and other liabilities Current tax liabilities Deferred tax liabilities Redeemable ordinary shares Equity Subordinated loan Interest rate repricing gap Cumulative gap Up to 1 month to 3 months to 1 year to Non-interest bearing 1 year ZWL ZWL 3 months ZWL 5 years ZWL 1 month ZWL Total ZWL - 1 964 637 240 - - - 400 000 000 450 000 000 - 880 663 426 289 817 298 - - - - ------------------ -------------------- 3 245 300 666 739 817 298 ------------------ - - - - ------------------ - - 11 382 233 - - - 220 438 224 - 408 544 561 - - - - - 1 964 637 240 - - - 1 081 820 457 10 877 672 10 877 672 719 771 881 1 432 089 567 3 730 886 733 - - - 4 133 707 - 1 588 179 384 1 588 179 384 - 1 653 496 476 1 653 496 476 -------------------- -------------------- -------------------- -------------------- 731 154 114 4 688 776 806 10 034 031 669 ------------------ ------------------ ------------------ 628 982 785 ------------------ - 4 133 707 3 325 295 11 426 731 - - - - - 151 192 601 6 413 943 465 174 727 794 - 174 727 794 57 205 065 57 205 065 - - 14 335 253 14 335 253 - 3 241 187 451 3 241 187 451 132 632 641 - - -------------------- -------------------- -------------------- -------------------- 5 498 905 442 749 093 396 - - - - - - - - - 132 632 641 ---------------------- -------------------- 5 631 538 083 749 093 396 ---------------------- -------------------- ( 2 386 237 417) ( 9 276 098) ---------------------- -------------------- ( 2 386 237 417) ( 2 395 513 515) ( 1 777 957 461) ( 1 050 128 642) ============ =========== -------------------- -------------------- -------------------- -------------------- - 727 828 819 1 050 128 642 -------------------- -------------------- -------------------- -------------------- - =========== =========== =========== =========== 3 325 295 3 638 648 164 10 034 031 669 617 556 054 11 426 731 - 79 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 26. INTEREST RATE REPRICING AND GAP ANALYSIS (Continued) 26.2 Zimbabwe dollars The table below analyses the Group’s interest rate risk exposure on assets and liabilities denominated in Zimbabwe Dollars only. The assets and liabilities are categorised by the earlier of contractual repricing or maturity dates. Inflation Adjusted As at 31 December 2021 Assets Cash and cash equivalents Investment securities Quoted and other investments Loans, advances and other assets Intangible assets Property and equipment Investment properties Liabilities and equity Deposits and other liabilities Current tax liabilities Deferred tax liabilities Redeemable ordinary shares Equity Subordinated loan Interest rate repricing gap Cumulative gap As at 31 December 2020 Assets Cash and cash equivalents Investment securities Quoted and other investments Loans, advances and other assets Intangible assets Property and equipment Investment properties Liabilities and equity Deposits and other liabilities Current tax liabilities Deferred tax liabilities Redeemable ordinary shares Equity Subordinated loan Interest rate repricing gap Cumulative gap 80 Up to 1 month to 3 months to 1 year to Non-interest bearing 1 year ZWL ZWL 3 months ZWL 5 years ZWL 1 month ZWL Total ZWL 1 176 547 780 - 1 200 000 000 1 800 000 000 - - 1 235 119 163 736 256 759 - - - - - - -------------------- ----------------- 3 611 666 943 2 536 256 759 -------------------- -------------------- - 832 450 826 - - 1 176 547 780 - - 4 010 434 253 177 983 427 - - - 1 332 817 404 1 625 506 140 1 165 151 037 6 094 850 503 - 367 911 726 367 911 726 - 4 180 677 696 4 180 677 696 - 3 518 133 464 3 518 133 464 - - - ----------------- ---------------- ----------------- ----------------- 2 165 268 230 1 803 489 567 9 231 873 923 19 348 555 422 -------------------- -------------------- -------------------- -------------------- 5 716 240 - - - - - 2 161 118 1 368 597 439 9 498 108 467 7 067 253 191 1 054 380 479 - 236 048 645 236 048 645 - - - 1 000 737 483 1 000 737 483 - - 14 335 253 - - - - 8 802 411 609 8 802 411 609 - - 223 114 790 - - 223 114 790 - ------------------- -------------------- ----------------- 2 161 118 11 422 130 429 19 774 756 247 7 290 367 981 1 054 380 479 ------------------- ----------------- -------------------- 2 159 551 990 1 801 328 449 ( 2 190 256 506) ( 426 200 825) ( 3 678 701 038) 1 481 876 280 ------------------- ----------------- ( 3 678 701 038) ( 2 196 824 758) - ============ ============ ============ ============ ============ ============ ----------------- ----------------- -------------------- ( 37 272 768) 1 764 055 681 ( 426 200 825) ----------------- 5 716 240 ----------------- ----------------- -------------------- ----------------- -------------------- -------------------- 14 335 253 Inflation Adjusted Up to 1 month to 3 months to 1 year to Non-interest bearing 1 year ZWL ZWL Restated Restated 3 months ZWL Restated 5 years ZWL Restated 1 month ZWL Restated Total ZWL Restated 2 913 453 988 - 642 948 728 723 317 319 - - 1 411 375 585 413 757 301 - - - - - - -------------------- ----------------- 4 967 778 301 1 137 074 620 ----------------- -------------------- - 18 295 481 - - 354 326 189 - - 2 913 453 988 - 1 738 887 717 - - 656 683 015 1 156 941 038 2 722 649 056 6 361 405 996 57 077 174 - - 3 565 426 417 3 565 426 417 - 2 657 783 640 2 657 783 640 57 077 174 - - - ----------------- ------------------- ----------------- -------------------- 1 011 009 204 1 175 236 519 9 002 936 287 17 294 034 931 ------------------- ----------------- -------------------- ----------------- 18 367 005 - - - - - 8 509 984 427 1 204 071 615 - - - - - - - - 213 189 970 - -------------------- ----------------- 8 723 174 397 1 204 071 615 ----------------- -------------------- ( 66 996 995) ( 3 755 396 096) ----------------- -------------------- 243 022 726 9 980 790 760 5 344 985 91 949 809 - 91 949 809 467 809 599 - 467 809 599 - 23 042 082 23 042 082 - 6 506 649 359 6 506 649 359 213 189 970 - - ------------------- 5 344 985 7 332 473 575 17 283 431 579 ------------------- 10 603 353 ------------------- ( 3 755 396 096) ( 3 822 393 091) ( 2 829 750 893) ( 1 659 859 359) - ============ ============ ============ ============ ============ ============ ----------------- 18 367 005 ----------------- ----------------- -------------------- 992 642 199 1 169 891 533 1 670 462 712 ----------------- -------------------- ----------------- 10 603 353 ----------------- -------------------- NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 26. INTEREST RATE REPRICING AND GAP ANALYSIS (Continued) 26.2 Zimbabwe Dollars (Continued) The table below analyses the Group’s interest rate risk exposure on assets and liabilities. The assets and liabilities are categorised by the earlier of contractual repricing or maturity dates. Historical As at 31 December 2021 Assets Cash and cash equivalents Investment securities Loans, advances and other assets Intangible assets Property and equipment Investment properties Liabilities and equity Deposits and other liabilities Current tax liabilities Deferred tax liabilities Redeemable ordinary shares Equity Subordinated loan Interest rate repricing gap Cumulative gap As at 31 December 2020 Assets Cash and cash equivalents Investment securities Loans, advances and other assets Intangible assets Property and equipment Investment properties Liabilities and equity Deposits and other liabilities Current tax liabilities Deferred tax liabilities Redeemable ordinary shares Equity Subordinated loan Interest rate repricing gap Cumulative gap Up to 1 month to 3 months to 1 year to Non-interest bearing 1 year ZWL ZWL 3 months ZWL 5 years ZWL 1 month ZWL Total ZWL 1 176 547 780 - 1 200 000 000 1 800 000 000 1 235 119 163 736 256 759 - - - - - - ------------------- ----------------- 3 611 666 944 2 536 256 759 ----------------- ------------------- - 832 450 826 - 177 983 427 - 1 176 547 780 - 4 010 434 253 1 332 817 404 1 625 506 140 1 550 152 491 6 479 851 957 - 13 407 688 - 3 065 495 111 3 065 495 111 - 3 518 133 464 3 518 133 464 13 407 688 - - - ----------------- ----------------- 2 165 268 230 1 803 489 567 8 147 188 753 18 263 870 252 ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- 8 143 071 516 1 109 297 325 - - - - - - - - - 223 114 790 ------------------- ----------------- 8 366 186 306 1 109 297 325 ----------------- ------------------- ( 4 754 519 363) 1 426 959 434 ----------------- ------------------- 16 921 311 - - - - - ----------------- 16 921 311 ----------------- 4 924 274 223 894 041 9 498 108 467 236 048 645 - 236 048 645 741 543 501 - 741 543 501 - 14 335 253 14 335 253 - 7 059 704 023 7 059 704 023 223 114 790 - - ------------------- ----------------- ----------------- 4 924 274 8 275 525 463 17 772 854 679 ----------------- 491 015 573 ----------------- ----------------- - ( 4 754 519 363) ( 3 327 559 929) ( 1 179 213 009) ============ ============ ============ ============ ============ ============ ----------------- ----------------- 2 148 346 919 1 798 565 293 ( 128 336 711) ----------------- ----------------- 491 015 573 619 352 284 Historical 1 month ZWL 1 812 557 587 Up to 1 month to 3 months to 1 year to Non-interest bearing 1 year ZWL ZWL - 220 438 224 408 544 561 - - - Total ZWL - 1 812 557 587 - 1 081 820 457 719 771 881 1 432 089 559 3 695 882 475 - 4 133 707 - 1 588 179 384 1 588 179 384 - 1 653 496 476 1 653 496 476 3 months ZWL - 400 000 000 450 000 000 878 064 159 257 412 315 - - - 5 years ZWL - 11 382 233 4 133 707 - - - -------------------- ----------------- 3 090 621 746 707 412 315 ----------------- -------------------- ----------------- 628 982 785 ----------------- ----------------- ------------------- ------------------ 731 154 114 4 677 899 126 9 836 070 086 ------------------- ------------------ ----------------- 5 294 347 158 749 093 396 - - - - - - - - 132 632 641 - -------------------- ----------------- 5 426 979 799 749 093 396 ----------------- -------------------- ( 41 681 081) ( 2 336 358 053) ----------------- -------------------- 11 426 731 - - - - - ----------------- 11 426 731 ----------------- 617 556 054 ------------------- 3 325 295 151 192 601 6 209 385 181 174 727 794 - 174 727 794 57 205 066 57 205 066 - - 14 335 253 14 335 253 - 3 241 187 451 3 241 187 451 132 632 641 - - ------------------- 3 325 295 3 638 648 165 9 829 473 386 ------------------- ------------------ ----------------- ------------------ ----------------- 727 828 819 1 039 250 961 ------------------ ----------------- ( 2 336 358 053) ( 2 378 039 134) ( 1 760 483 080) ( 1 032 654 261) 6 596 700 ========== ============ =========== =========== ------------------- - ========== ============ 6 596 700 81 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 26. INTEREST RATE REPRICING AND GAP ANALYSIS (Continued) 26.3 Other foreign currencies The table below analyses the Group’s interest rate risk exposure on assets and liabilities denominated in currencies other than Zimbabwe Dollars. The amounts are shown at the equivalent values in Zimbabwe Dollars, the presentation currency. The assets and liabilities are categorised by the earlier of contractual repricing or maturity dates. Inflation Adjusted As at 31 December 2021 Assets Cash and cash equivalents Quoted and other investments Loans, advances and other assets Investment properties Liabilities and equity Deposits and other liabilities Subordinated loan Interest rate repricing gap Cumulative gap Up to 1 month to 3 months to 1 year to Non-interest bearing 1 year ZWL ZWL - - Total 5 years ZWL ZWL - 2 907 624 859 - 36 499 730 - 1 258 523 715 1 534 897 444 1 618 083 070 6 272 992 038 - - ------------------- ------------------- 1 258 523 715 1 534 897 444 1 654 582 802 9 217 116 628 ------------------- ------------------- 3 months 1 month ZWL ZWL - 2 907 624 859 - - 1 166 271 353 695 216 455 - - ------------------- ------------------- 4 073 896 212 695 216 455 ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- 36 499 730 - - 5 773 553 - 2 182 786 1 382 319 575 9 593 340 514 7 138 112 457 1 064 952 144 - - - ------------------- ---------------------- ------------------- 2 182 786 1 382 319 575 9 593 340 514 7 138 112 457 1 064 952 144 ------------------- ------------------- ---------------------- ------------------- 272 263 227 ( 376 223 886) ( 3 064 216 245) ( 369 735 687) ------------------- ----------------------- -------------------- ------------------- ( 3 064 216 245) ( 3 433 951 932) ( 2 181 201 771) ( 648 487 113) ( 376 223 886) - ========== ========== ============= ============ ------------------- 5 773 553 ------------------- ------------------- 1 252 750 162 1 532 714 658 ------------------- ------------------- ------------------- ------------------- ========== ========== - - The table below analyses the Group’s interest rate risk exposure on assets and liabilities denominated in currencies other than Zimbabwe Dollars. The amounts are shown at the equivalent values in Zimbabwe Dollars, the presentation currency. The assets and liabilities are categorised by the earlier of contractual repricing or maturity dates. Inflation Adjusted Up to 1 month to 3 months to 1 year to Non-interest bearing 1 year ZWL ZWL Restated Restated 3 months ZWL Restated 5 years ZWL Restated 1 month ZWL Restated Total ZWL Restated - - - - - - - 17 484 463 - 244 448 549 17 484 463 56 264 856 ------------------- ------------------- 318 197 868 ============ ============ ============ ============ ============ ============ 328 801 220 - - ------------------- 17 484 463 ------------------- - - - - - - - - - - - - - - 244 448 549 - 4 178 000 - - 52 086 857 ------------------- ------------------- 52 086 857 248 626 548 328 801 220 - - ------------------- ------------------- 328 801 220 ------------------- ------------------- 52 086 857 ( 80 174 671) ------------------- ------------------- ( 28 087 815) ( 80 174 671) - ------------------- ------------------- ------------------- - - - ------------------- ------------------- - - ------------------- ( 28 087 815) ------------------- ( 28 087 815) ------------------- 17 484 463 ------------------- ( 10 603 351) ------------------- 328 801 220 ------------------- ( 10 603 351) ------------------- - ============ ============ ============ ============ ============ ============ As at 31 December 2020 Assets Cash and cash equivalents Quoted and other investments Loans, advances and other assets Deposits and other liabilities Current tax liabilities Subordinated loan Interest rate repricing gap Cumulative gap 82 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 26. INTEREST RATE REPRICING AND GAP ANALYSIS The table below analyses the Group’s interest rate risk exposure on assets and liabilities. The assets and liabilities are categorised by the earlier of contractual repricing or maturity dates. 26.3 Other foreign currencies (Continued) Historical As at 31 December 2021 Up to 1 month to 3 months to 1 year to Non-interest bearing 1 year 3 months 5 years 1 month Assets ZWL ZWL ZWL ZWL ZWL Total ZWL Cash and cash equivalents Assets Investment properties Liabilities and equity Deposits and other liabilities Current tax liabilities Subordinated loan Interest rate repricing gap Cumulative gap 3 695 714 319 - 1 166 271 353 695 216 455 - - ------------------- ------------------- 4 861 985 672 695 216 455 ------------------- ------------------- - - 1 258 523 715 1 534 897 444 - - ------------------- ------------------- 1 258 523 715 1 534 897 444 ------------------- ------------------- - 3 695 714 319 715 201 925 5 370 110 892 - ------------------- ------------------- 715 201 925 9 065 825 211 ------------------- ------------------- - 63 062 - - 1 018 608 2 599 724 413 12 882 063 800 - - ------------------- ------------------- - - - - 8 911 018 490 1 370 239 227 - - - - ------------------- ------------------- 8 911 018 490 1 370 239 227 ------------------- ------------------- ( 4 049 032 817) ( 675 022 772) ------------------- ------------------- ------------------- 63 062 ------------------- ------------------- 1 258 460 653 1 533 878 835 ( 1 884 522 489) ( 3 816 238 589) ------------------- ------------------- ------------------- ( 4 049 032 817) ( 4 724 055 589) ( 3 465 594 936) ( 1 931 716 101) ( 3 816 238 589) - ============ ============ ============ ============ ============ ============ 1 018 608 2 599 724 413 12 882 063 800 ------------------- ------------------- ------------------- ------------------- The table below analyses the Group’s interest rate risk exposure on assets and liabilities denominated in currencies other than Zimbabwe Dollars. The amounts are shown at the equivalent values in Zimbabwe Dollars, the presentation currency. The assets and liabilities are categorised by the earlier of contractual repricing or maturity dates. Historical As at 31 December 2020 Assets Cash and cash equivalents Quoted and other investments Loans, advances and other assets Deposits and other liabilities Current tax liabilities Subordinated loan Interest rate repricing gap Cumulative gap Up to 1 month to 3 months to 1 year to Non-interest bearing 1 year ZWL ZWL 3 months ZWL 5 years ZWL 1 month ZWL Total ZWL - - - - - - - ------------------- ------------------- ------------------- 682 207 365 - - 7 231 787 - - - 11 659 967 145 364 075 ------------------- ------------------- 693 867 332 145 364 075 ------------------- ------------------- 917 618 930 - - ------------------- ------------------- 917 618 930 ------------------- ------------------- ( 223 751 598) 145 364 075 ------------------- ------------------- ( 78 387 523) ( 223 751 598) 682 207 365 7 231 787 157 024 042 ------------------- 846 463 194 ------------------- 917 618 930 - - ------------------- 917 618 930 ------------------- ( 71 155 736) ------------------- - ============ ============ ============ ============ ============ ============ ------------------- 7 231 787 ------------------- ( 71 155 736) ------------------- 7 231 787 ------------------- ------------------- ( 78 387 523) ------------------- ( 78 387 523) ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- - - - - - - - - - - - - - - - - - - - 83 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 27. FOREIGN EXCHANGE POSITIONS The table below indicates the currencies to which the Group had significant exposure at 31 December on all its assets and liabilities. The analysis reflects the mismatch by currency. The amounts are shown at the equivalent values in Zimbabwe Dollars, the presentation currency. As at 31 December 2021 Inflation Adjusted Assets ZWL ZWL USD ZWL RAND ZWL GBP ZWL EUR ZWL BWP ZWL Total ZWL Cash and cash equivalents 1 801 593 502 Investment securities 4 010 434 252 Trade and other investments - Advances and other assets Intangible assets Property and equipment Investment properties Deferred tax 9 198 511 018 367 911 726 4 180 677 696 3 518 133 464 - -------------------- 23 077 261 658 -------------------- 2 379 502 933 - - 595 530 140 - - 8 527 599 - - 56 197 033 - 36 499 730 30 910 893 4 872 262 099 - 4 010 434 252 36 499 730 - 3 168 987 796 - - - - ----------------- 321 477 - - - - ----------------- 5 548 490 729 595 851 617 ----------------- ----------------- 2 939 - - - - 17 695 - - - - ----------------- -------------------- 92 714 458 ----------------- -------------------- 8 530 538 1 616 12 367 842 540 - 367 911 726 - 4 180 677 696 - 3 518 133 464 - - ------------------- ------------------- 30 912 509 29 353 761 508 ------------------- ------------------- Liabilities and equity Deposits and other liabilities Current tax liabilities Deferred tax liabilities Subordinated term loan Redeemable ordinary shares Equity 13 848 249 630 236 048 645 1 000 737 483 223 114 790 5 137 066 714 - - - 85 916 219 - - - 8 661 869 - - - 1 757 176 - - - 9 797 373 19 091 448 981 236 048 645 - - 1 000 737 483 223 114 790 - 14 335 253 8 788 076 356 -------------------- 24 110 562 157 -------------------- - - - - - - - - - 14 335 253 - 8 788 076 356 ----------------- 5 137 066 714 ----------------- ----------------- 85 916 219 ----------------- ----------------- -------------------- 1 757 176 ----------------- -------------------- 8 661 869 ------------------- ------------------- 9 797 373 29 353 761 508 ------------------- ------------------- ( 131 331) - ========== ============ ============ ============ 90 957 282 21 115 136 Net foreign exchange position ( 1 033 300 499) 411 424 015 509 935 398 ============ ============ ============ 84 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 27. FOREIGN EXCHANGE POSITIONS (Continued) As at 31 December 2020 Inflation Adjusted Assets ZWL ZWL Restated USD ZWL Restated RAND ZWL Restated GBP ZWL Restated EUR ZWL Restated BWP ZWL Restated Total ZWL Restated 2 913 453 989 1 738 887 717 Cash and cash equivalents Investment securities Trade and other investments Advances and 6 361 405 997 other assets 57 077 174 Intangible assets Property and equipment 3 565 426 421 2 657 783 640 Investment properties - Deferred tax - 201 359 342 - 39 893 310 - 1 156 676 - 1 212 871 - 826 348 3 157 902 536 - 1 738 887 717 - - - 17 484 463 - 17 484 463 56 194 736 - - - - 59 889 - - - - - - - - - 6 008 - - - - -------------------- 17 294 034 938 -------------------- ----------------- 257 554 078 ----------------- ----------------- 39 953 199 ----------------- ----------------- -------------------- 18 703 343 ----------------- -------------------- 1 156 676 4 221 6 417 670 852 57 077 174 - - 3 565 426 421 - 2 657 783 640 - - ------------------- 830 569 17 612 232 803 ------------------- ------------------- ------------------- Liabilities and equity Deposits and other liabilities Current tax liabilities Deferred tax liabilities Subordinated term loan Redeemable ordinary shares Equity Total Net foreign exchange position 9 980 790 762 91 949 809 467 809 599 213 189 970 313 269 816 - - - 13 840 265 - - - 957 606 - - - 624 728 - - - 108 805 10 309 591 981 91 949 809 467 809 599 213 189 970 - - - 23 042 082 6 506 649 362 -------------------- 17 283 431 583 -------------------- - - - - - - - - - 23 042 082 - 6 506 649 362 ----------------- 313 269 816 ----------------- ----------------- 13 840 265 ----------------- ----------------- -------------------- 624 728 ----------------- -------------------- 957 606 ------------------- ------------------- 108 805 17 612 232 803 ------------------- ------------------- 10 603 355 - ============ ============ ============ ============ ============ ============ ============ ( 55 715 738) 18 078 616 26 112 933 721 765 199 070 85 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 27. FOREIGN EXCHANGE POSITIONS (Continued) As at 31 December 2021 Historical Assets ZWL ZWL USD ZWL RAND ZWL GBP ZWL EUR ZWL BWP ZWL Total ZWL 1 801 593 502 4 010 434 252 Cash and cash equivalents Investment securities Trade and other investments Advances and 8 680 631 327 other assets 13 407 688 Intangible assets Property and equipment 3 065 495 111 3 518 133 464 Investment properties - Deferred tax - -------------------- 21 089 695 342 -------------------- 2 379 502 933 595 530 140 - - 8 527 599 - 56 197 033 - 30 910 893 4 872 262 099 - 4 010 434 252 - - - 36 499 730 - 36 499 730 3 168 987 796 - - - - 321 477 - - - - ----------------- ----------------- 5 548 490 729 595 851 617 ----------------- ----------------- 2 939 - - - - 17 695 - - - - ----------------- -------------------- 92 714 458 ----------------- -------------------- 8 530 538 1 616 11 849 962 849 13 407 688 - - 3 065 495 111 - 3 518 133 464 - - ------------------- ------------------- 30 912 509 27 366 195 193 ------------------- ------------------- Liabilities and equity Deposits and other liabilities Current tax liabilities Deferred tax liabilities Subordinated term loan Redeemable ordinary shares Equity 13 848 249 630 236 048 645 741 543 501 223 114 790 5 137 066 714 - - - 85 916 219 - - - 8 661 869 - - - 1 757 176 - - - 9 797 373 19 091 448 981 236 048 645 741 543 501 223 114 790 - - - 14 335 253 7 059 704 023 -------------------- 22 122 995 842 -------------------- - - - - - - - - - 14 335 253 - 7 059 704 023 ----------------- 5 137 066 714 ----------------- ----------------- 85 916 219 ----------------- ----------------- -------------------- 1 757 176 ----------------- -------------------- 8 661 869 ------------------- ------------------- 9 797 373 27 366 195 193 ------------------- ------------------- - ( 1 033 300 500) ============ ============ ============ ============ ============ ============ ============ 411 424 015 509 935 397 21 115 136 90 957 282 ( 131 332) Net foreign exchange position 86 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 27. FOREIGN EXCHANGE POSITIONS (Continued) As at 31 December 2021 Historical Assets ZWL ZWL USD ZWL RAND ZWL GBP ZWL EUR ZWL BWP ZWL Total ZWL 1 812 557 588 1 081 820 457 Cash and cash equivalents Investment securities Trade and other investments Advances and 3 695 882 477 other assets Intangible assets 4 133 707 Property and equipment 1 588 179 384 1 653 496 476 Investment properties - Deferred tax - 125 272 410 - 24 818 968 - 719 607 - 754 568 - 514 099 1 964 637 240 - 1 081 820 457 - - - 10 877 672 - 10 877 672 34 960 633 - - - - 37 259 - - - - - - - - - 3 738 - - - - -------------------- 9 836 070 089 -------------------- ----------------- 160 233 043 ----------------- ----------------- 24 856 227 ----------------- ----------------- -------------------- 11 635 978 ----------------- -------------------- 719 607 2 626 3 730 886 733 - 4 133 707 - 1 588 179 384 - 1 653 496 476 - - ------------------- 516 725 10 034 031 669 ------------------- ------------------- ------------------- Liabilities and equity Deposits and other liabilities Current tax liabilities Deferred tax liabilities Subordinated term loan Redeemable ordinary shares Equity 6 209 385 182 57 205 065 174 727 794 132 632 641 194 895 675 - - - 8 610 494 - - - 595 759 - - - 388 664 - - - 67 691 6 413 943 465 57 205 065 174 727 794 132 632 641 - - - 14 335 253 3 241 187 451 -------------------- 9 829 473 386 -------------------- - - - - - - - - - 14 335 253 - 3 241 187 451 ----------------- 194 895 675 ----------------- ----------------- 8 610 494 ----------------- ----------------- -------------------- 388 664 ----------------- -------------------- 595 759 ------------------- ------------------- 67 691 10 034 031 669 ------------------- ------------------- Net foreign exchange position 6 596 703 - ============ ============ ============ ============ ============ ============ ============ ( 34 662 632) 16 245 733 11 247 314 449 034 123 848 28. CONTINGENT LIABILITIES Guarantees Facilities approved but not drawn down Expected credit losses on facilities approved but not drawdown Expected credit losses on guarantees Balance at 31 December Inflation adjusted Historical Cost 31 December 2021 ZWL 31 December 31 December 2021 ZWL 2020 ZWL Restated 31 December 2020 ZWL 279 941 484 64 924 022 172 661 549 76 567 295 279 941 484 64 924 022 107 418 549 47 635 086 ( 1 975 959) ( 1 741 141) ----------------- 341 148 406 ========== ( 2 396 371) ( 786 855) ------------------ 246 045 617 ========== 1 975 959 1 741 141 ----------------- 348 582 608 ========== ( 1 490 863) ( 489 529) ---------------- 153 073 243 ========== The Group enters into various irrevocable commitments and contingent liabilities in its normal course of business in order to meet financial needs of customers. These obligations are not recognised on the statement of financial position, but contain credit risk and are therefore part of the overall risk of the Group. Guarantees commit the Group to make payments on behalf of clients in the event of specified acts. Guarantees carry the same credit risk as loans and advances to customers. Facilities approved but not drawn down represent contractual commitments to advance loans and revolving credits. These have fixed expiry dates and may expire without being drawn upon, hence total contract amounts do not necessarily represent future cash requirements. 87 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 29. CAPITAL COMMITMENTS Capital expenditure contracted for Capital expenditure authorised but not yet contracted for Balance at 31 December 30. RELATED PARTIES Inflation Adjusted Historical Cost 31 December 2021 ZWL 31 December 31 December 2021 ZWL 2020 ZWL Restated 31 December 2020 ZWL - - ----------------- - ========== - 290 414 317 ---------------- 290 414 317 ========== - - ----------------- - ========== - 290 414 317 ----------------- 290 414 317 ========== As required by IAS 24 Related Party Disclosure, the Board’s view is that non-executive Directors, executive Directors and executive management constitute the key management of the Group. Accordingly, key management remuneration is disclosed below. 30.1 Compensation of key management personnel of the Group Short term employee benefits Post employment benefits Termination benefits Inflation Adjusted Historical Cost 31 December 2021 ZWL 31 December 2020 ZWL Restated 31 December 2021 ZWL 31 December 2020 ZWL 1 585 184 274 49 234 491 7 396 120 ------------------- 1 641 814 885 =========== 27 913 083 657 437 - ------------------- 28 570 520 =========== 1 296 486 524 39 666 766 3 039 988 ------------------ 1 339 193 278 =========== 22 693 564 534 501 - ------------------- 23 228 065 =========== 30.2 Balances of loans to Directors, officers and others Loans to Directors and officers or their companies are included in advances and other accounts (Note 20). Inflation Adjusted Historical Executive directors Officers Directors’ companies Officers companies Expected credit loss allowance – Stage 1 31 December 2021 ZWL 77 745 417 397 300 996 - - ----------------- 475 046 413 ( 5 159 549) ------------------- 469 886 864 ========== 31 December 2020 ZWL Restated 1 527 809 110 724 613 - - ----------------- 112 252 422 ( 8 145 484) -------------------- 104 106 938 ========== 31 December 2021 ZWL 31 December 2020 ZWL 77 745 417 397 300 996 - - ----------------- 475 046 413 ( 5 159 549) ------------------- 469 886 864 ========== 950 501 68 885 501 - - ----------------- 69 836 002 ( 5 067 579) ------------------- 64 768 423 ========== 88 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 30. RELATED PARTIES (Continued) 30.3 BORROWING POWERS Holding Company In terms of the existing Articles of Association, Article 102, the Directors may from time to time, at their discretion, borrow or secure the payment of any sum or sums of money for the purposes of the Company without any limitation 31. EMPLOYEE BENEFITS 31.1 Pension Fund All eligible employees of the Group contribute to the NMB Bank Pension Fund, which is a defined contribution plan. The assets of the Pension Fund are held separately from those of the Group in funds under the control of Trustees. The pension fund assets included 71 540 shares in NMBZ Holdings Limited as at 31 December 2021. 31.2 Expense Recognised In Profit Or Loss Inflation Adjusted Historical Defined Contribution Plan – NSSA Defined Contribution Plan – NMB Bank Limited Pension Fund 31 December 2021 ZWL 31 December 2020 ZWL Restated 31 December 2021 ZWL 31 December 2020 ZWL 10 020 880 700 783 8 073 396 569 742 39 213 611 --------------- 49 234 491 ========= 5 741 103 --------------- 6 441 886 ========= 31 593 370 --------------- 39 666 766 ========= 4 667 563 --------------- 5 237 305 ========= The expense is recognised in profit or loss as part of staff costs under operating expenses (note 7). The Group does not have defined benefit plans. 31.3 Employee Share Option Scheme In 2012, the Company established a share option programme that entitles Executive Directors and Senior Managers to purchase shares in the Company (equity settled). The beneficiary has a right to acquire a certain number of the Company’s shares at any time during the Exercise Period at the Exercise Price. In terms of the Employee Share Option Scheme, up to a maximum of 10% of the issued share capital may be granted by the Directors to senior employees by way of options. Each set of options is exercisable at any time within a period of five years from the date the options are granted and the issue price is based on the higher of nominal value of the shares and the middle market price derived from the Zimbabwe Stock Exchange prices for the trading day immediately preceding the date of offer. The options vest immediately from date of issue and the fair value of the options is estimated at the grant date using the Black – Scholes option pricing model, taking into account the terms and conditions upon which the instruments were granted. 31.3.1 Measurement Of Fair Value - Share Options The fair value of services received in return for share options granted is based on the fair value of share options granted, measured using the Black-Scholes formula. The service and non-market performance conditions attached to the arrangements were not taken into account in measuring fair value. The inputs used in measuring the fair values at grant date of the equity-settled share based payment plans were as follows: 89 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 31.3.1 Measurement Of Fair Value - Share Options (Continued) Cost Underlying Price Reporting Date Historical Volatility Expiry Date RIsk Free Rate Dividend yield Days to exercise date Number of years left to exercise date Average value of share options Inflation Adjusted Historical 31 December 2021 ZWL 31 December 2020 ZWL Restated 31 December 2021 ZWL 31 December 2020 ZWL 10.01 31/12/2021 69.53% N/A 0.21 0 973 2.67 4.95 8.43 31/12/2020 69.53% N/A 0.21 0 0 0 0 10.01 31/12/2021 69.53% N/A 0.21 0 973 2.67 4.95 8.43 31/12/2020 69.53% N/A 0.21 0 0 0 0 31.3.2 Reconciliation of outstanding share options Movements in the number of share options outstanding and their related exercise price are as follows Opening Balance Granted Execised Closing Balance 2021 2020 Execise price per option ZWL Options Execise price per Options option ZWL - 13.65 - - 5 614 215 - ---------------- 5 614 215 ========= - - - - - - - ---------------- - ========= 31.3.3 Reconciliation of the share option Reserve Inflation Adjusted Historical Opening Balance Sharebased payment expense Exercise of options 31 December 2021 ZWL - 27 768 409 - --------------- 27 768 409 ========= 31 December 2020 ZWL Restated 31 December 2021 ZWL 31 December 2020 ZWL - - - --------------- - ========= - 27 768 409 - --------------- 27 768 409 ========= - - - --------------- - ========= 31.4 National Social Security Authority Scheme All employees of the Group are members of the National Social Security Authority Scheme, a defined contribution plan to which both the employer and the employees contribute. Inflation adjusted contributions by the employer are recognised in profit or loss account and during the period amounted to ZWL10 020 880 (2020 – restated ZWL1 126 419). 32. EXCHANGE RATES The following exchange rates have been used to translate the foreign currency balances to United States dollars at year end: United States Dollar British Sterling South African Rand European Euro Botswana Pula 90 31 December 2021 Mid - rate ZWL 108.6660 146.6994 15.9250 123.0211 9.2264 USD GBP ZAR EUR BWP 31 December 2020 Mid - rate ZWL 81.3486 111.5978 5.9190 100.3522 7.5734 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 33. RISK MANAGEMENT The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. The Board has established the Board Asset and Liability Management Committee (ALCO) and the Board Risk and Compliance Committee, which are responsible for defining the Group’s risk universe, developing policies and monitoring implementation. The Board also has the Board Credit Committee (BCC) which is responsible for sanctioning credits and the Board Loans Review Committee (LRC), which is responsible for monitoring asset quality and adherence to the credit risk management policy. Risk management is linked logically from the level of individual transactions to the Group level. Risk management activities broadly take place simultaneously at the following different hierarchy levels: a. b. c. Strategic Level: This involves risk management functions performed by senior management and the board of directors. It includes the definition of risk, ascertaining the Group’s risk appetite, formulating strategy and policy for managing risk and establishes adequate systems and controls to ensure overall risk remains within acceptable levels and is adequately compensated. Macro Level: It encompasses risk management within a business area or across business lines. These risk management functions are performed by middle management. Micro Level: This involves “On-the-line” risk management where risks are actually created. These are the risk management activities performed by individuals who assume risk on behalf of the organisation such as Treasury Front Office, Corporate Banking, Retail banking etc. The risk management in these areas is confined to operational procedures set by management. Risk management is premised on four (4) mutually reinforcing pillars, namely: a) adequate board and senior management oversight; b) adequate strategy, policies, procedures and limits; c) adequate risk identification, measurement, monitoring and information systems; and d) comprehensive internal controls and independent reviews. 33.1 Credit Risk Credit risk is the risk that a financial contract will not be honoured according to the original set of terms. The risk arises when borrowers or counterparties to a financial instrument fail to meet their contractual obligations. The Group’s general credit strategies centre on sound credit granting process, diligent credit monitoring and strong loan collection and recovery. There is a separation between loan collection and recovery. There is a separation between loan granting and credit monitoring to ensure independency and effective management of the loan portfolio. The Board has put in place sanctioning committees with specific credit approval limits. The Credit Management department does the initial review of all applications before recommending them to the Executive Credit Committee and finally the Board Credit Committee depending on the loan amount. The Group has in place a Board Loans Review Committee responsible for reviewing the quality of the loan book and adequacy of loan loss provisions. The Group has an automated credit processes from loan origination, appraisal, monitoring and collections. The system has a robust loan monitoring and reporting module which is critical in managing credit risk. In view of the group’s move into the mass market, retail credit has become a key area of focus. The group has put in place robust personal loan monitoring systems and structures to mitigate retail loan delinquencies. This includes a rigorous scheme assessment and a dedicated pre-delinquency team and a separate recoveries team. Credit Management • Responsible for evaluating & approving credit proposals from the business units. • Together with business units, has primary responsibility on the quality of the loan book. • Reviewing credit policy for approval by the Board Credit Committee. • Reviewing business unit level credit portfolios to ascertain changes in the credit quality of individual customers or other counterparties as well as the overall portfolio and detect unusual developments. • Approve initial customer internal credit grades or recommend to the Credit Committees for approval. • Setting the credit risk appetite parameters. • Ensure the Group adheres to limits, mandates and its credit policy. • Ensure adherence to facility covenants and conditions of sanction e.g. annual audits, gearing levels, management accounts. • Manage trends in asset and portfolio composition, quality and growth and non-performing loans. • Manage concentration risk both in terms of single borrowers or group as well as sector concentrations and the review of such limits. 91 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 33.1 Credit Risk (Continued) Credit Monitoring and Financial Modelling • Independent credit risk management. • Independent on-going monitoring of individual credit and portfolios. • Triggers remedial actions to protect the interests of the Group, if appropriate (e.g. in relation to deteriorated credits). • Monitors the on-going development and enhancement of credit risk management across the Group. • Reviews the Internal Credit Rating System. • On-going championing of the Basel II methodologies across the Group. • Ensures consistency in the rating processes and performs independent review of credit grades to ensure they conform to the rating standards. • Confirm the appropriateness of the credit risk strategy and policy or recommends necessary revisions in response to changes/trends identified. Credit Administration • Prepares and keeps custody of all facility letters. • Security registration. • Safe custody of security documents. • Ensures all conditions of sanction are fulfilled before allowing drawdown or limit marking. • Review of credit files for documentation compliance e.g. call reports, management accounts. Recoveries The recoveries unit is responsible for all collections and ensures that the Group maximises recoveries from Non-Performing Loans (NPLs) and loans and advances written off. The table below shows the maximum exposure to credit for the components of the statement of financial position. The maximum exposure is shown as gross. 33.1.1 Maximum Exposure To Credit Risk Without Taking Account Of Any Collateral Loans to Directors and officers or their companies are included in advances and other accounts (note 20). Inflation Adjusted Historical GROUP Cash and Cash equivalents (excluding cash on hand) Investment securities Loans and advances Total Guarantees Facilities approved but not drawn down 31 December 2021 ZWL 31 December 2020 ZWL Restated 31 December 2021 ZWL 31 December 2020 ZWL 4 759 286 799 4 010 434 252 9 584 608 434 -------------------- 18 354 329 485 -------------------- 279 941 484 64 924 022 -------------------- 344 865 506 -------------------- 18 699 194 991 =========== 2 190 087 395 1 081 820 457 3 695 021 788 ------------------- 6 966 929 640 ------------------- 107 418 549 47 635 086 ------------------- 155 053 635 ------------------- 7 121 983 275 =========== 4 759 286 799 4 010 434 252 9 584 608 434 ------------------- 18 354 329 485 ------------------- 279 941 484 64 924 022 ------------------- 344 865 506 ------------------- 18 699 194 991 =========== 1 362 526 932 1 081 820 457 2 298 797 168 ------------------- 4 743 144 557 ------------------- 107 418 549 47 635 086 ------------------- 155 053 635 ------------------- 4 898 198 192 =========== Where financial instruments are recorded at fair value the amounts shown above represent the current risk exposure but not the maximum risk exposure that could arise in the future as a result of changes in values. The effect of collateral and other risk mitigation techniques is shown in the Net Maximum Exposure column below. 92 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 33.1.2 Risk Concentrations Of Maximum Exposure To Credit Risk On Lending Activities Loans to Directors and officers or their companies are included in advances and other accounts (note 20). Inflation Adjusted Historical GROUP 31 December 2021 Gross Maximum Exposure ZWL 2 318 591 003 1 926 140 534 2 910 290 289 1 210 481 793 197 072 200 1 434 241 660 -------------------- 9 996 817 479 ( 412 209 045) -------------------- 9 584 608 434 =========== 31 December 2020 Net Maximum Exposure ZWL Restated 2 318 591 003 1 926 140 534 2 910 290 289 1 210 481 793 197 072 200 1 434 241 660 ------------------- 9 996 817 479 31 December 2021 Gross Maximum Exposure ZWL 576 171 487 244 984 807 386 873 236 565 335 301 1 169 804 677 455 052 ------------------- 2 451 989 687 31 December 2020 Net* Maximum Exposure ZWL 242 540 992 70 610 150 306 788 948 227 738 102 1 169 804 230 858 398 ------------------- 1 079 706 394 ( 412 209 045) ------------------- 9 584 608 434 ========== ( 152 784 378) ------------------- 2 299 205 309 =========== ( 152 784 378) ------------------- 926 922 016 =========== Agriculture and horticulture Distribution Individuals Manufacturing Mining Services Expected credit loss on loans and advances Net exposure 33.1.3 Collateral And Other Credit Enhancements The amount and type of collateral required depends on an assessment of credit risk of the counterparty. There are guidelines regarding the acceptability of types of collateral. The main types of collateral obtained are guarantees, cession of debtors, mortgages over properties, equities, subordination of shareholder loans and promissory notes. The fair value of all collateral held by the Group at the reporting date is ZWL9 756 840 671 (2020:ZWL2 277 537 972). 33.1.4 Credit quality per sector on lending activities As at 31 December 2021 Assets Agriculture and horticulture Conglomerates Distribution Food and beverages Individuals Manufacturing Mining Services Net exposure Grade A Pass 1 month ZWL Grade B Special Grade C Mention Substandard 1 year ZWL 33 427 786 - 607 980 - 77 753 979 - - 22 831 411 ------------------- 134 621 156 ========== 3 months ZWL 2 130 470 002 154 693 215 - 250 000 000 8 690 506 1 756 363 762 - 541 102 936 32 620 760 2 242 849 918 - 511 816 419 - 195 598 890 1 596 056 510 24 155 902 ------------------- ------------------- 9 224 258 437 220 160 383 =========== ========== Grade D Doubtful 5 years ZWL - - 3 696 937 - 175 426 - 1 473 310 222 784 ------------------- 5 568 457 ========== Grade E Loss bearing ZWL Total Total ZWL - 2 318 591 003 250 000 000 - - 1 769 359 186 - 541 102 936 - 2 353 400 083 511 816 419 - 197 072 200 - - 1 643 266 607 ------------------- ------------------- - 9 584 608 434 ========== ========== 93 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 33.1.5 Credit quality per sector on lending activities As at 31 December 2020 Assets Agriculture and horticulture Conglomerates Distribution Food and beverages Individuals Manufacturing Mining Services Net exposure Grade A Pass 3 months 1 month ZWL ZWL - 926 121 812 - 65 902 245 876 010 392 761 989 - 354 957 223 22 486 561 585 816 682 34 741 514 453 103 050 - 259 470 1 073 056 032 13 950 644 ------------------- ------------------- 3 851 978 503 72 054 729 =========== ========== Grade B Special Grade C Mention Substandard 1 year ZWL - - 74 751 - 13 528 802 - 1 620 840 1 651 787 ------------------- 16 876 180 ========== Grade D Doubtful 5 years ZWL - - - - 17 094 - - 263 697 ------------------- 280 792 ========== Grade E Total Loss Total bearing ZWL ZWL 926 121 812 - 65 902 245 - 393 781 674 68 924 354 957 223 - 621 849 139 - 487 844 564 - - 1 880 310 - 1 088 922 160 ------------------- ------------------- 68 924 3 941 259 126 ========== ========== Pass: Special Mention: Substandard: Refers to loans graded 8 Doubtful: Refers to loans graded 9 Loss: Refers to loans graded 10 Refers to loans graded 1 to 3 Refers to loans graded 4 to 7 33.1.6 Rating Scale mapping to IFRS 9 Stages Below is a mapping table showing the link between IFRS stages and the Bank’s Rating scale: NMB Bank Rating Scale NMBR1 NMBR2 NMBR3 NMBR4 NMBR5 Supervisory Rating Scale 1 2 3 4 5 NMBR6 NMBR7 NMBR8 NMBR9 NMBR10 33.2 Market risk 6 7 8 9 10 IFRS 9 Stage 1 Stage 2 Stage 3 This is the exposure of the Group’s on and off balance sheet positions to adverse movement in market prices resulting in a loss in earnings and capital. The market prices will range from money market (interest rate risk), foreign exchange and equity markets in which the bank operates. The Group has in place a Management Asset and Liability Committee (ALCO) which monitors market risk and recommends the appropriate levels to which the Group should be exposed at any time. Net Interest Margin is the primary measure of interest rate risk, supported by periodic stress tests to assess the Group’s ability to withstand stressed market conditions. On foreign exchange risk, the bank monitors currency mismatches and make adjustments depending on exchange rate movement forecast. The mismatches per currency are contained within 5% of the Group’s capital position. Management ALCO meets on a monthly basis and operates within the prudential guidelines and policies established by the Board ALCO. The Board ALCO is responsible for setting exposure thresholds and limits, and meets on a quarterly basis. The following table demonstrates the sensitivity to a reasonable change in interest rates, with all other variables held constant, of the Group’s statement of comprehensive income. The sensitivity of the statement of comprehensive income is the effect of the assumed changes in interest rates on the profit or loss for the year, based on the variable and fixed interest rate financial assets and liabilities held at 31 December 2021. 94 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 33. RISK MANAGEMENT (Continued) 33.2 Market risk (Continued) As at 31 December 2021 Sensitivity of net interest income ZWL ZWL ZWL ZWL ZWL ZWL % 0 to 1 Changes in month Interest % ZWL 5% ( 110 186 271) ( 66 111 762) 3% ( 22 037 254) 1% 22 037 254 -1% 66 111 762 -3% 110 186 271 -5% months ZWL ( 2 084 054) ( 1 250 432) ( 416 811) 416 811 1 to 3 3 months to 1 year ZWL 30 877 803 18 526 682 6 175 561 ( 6 175 561) 1 250 432 ( 18 526 682) 2 084 054 ( 30 877 803) 1 year to 5 years ZWL 29 759 809 17 855 885 59 951 962 ( 5 951 962) ( 17 855 885) ( 29 759 809) Total Total ZWL ( 51 632 713) ( 30 979 627) 43 673 458 10 326 542 30 979 627 51 632 713 At 31 December 2020 Sensitivity of net interest income ZWL ZWL ZWL ZWL ZWL ZWL % 0 to 1 Changes in month Interest % ZWL 5% ( 177 110 307) 3% ( 106 266 183) ( 35 422 061) 1% 35 422 061 -1% 106 266 183 -3% 177 110 307 -5% months ZWL ( 3 349 850) ( 2 009 909) ( 669 970) 669 970 1 to 3 3 months to 1 year ZWL 49 632 110 29 779 267 9 926 423 ( 9 926 423) 2 009 909 ( 29 779 267) ( 49 632 110) 3 349 850 1 year to 5 years ZWL 47 835 078 28 701 046 96 365 094 ( 9 567 016) ( 28 701 046) ( 47 835 078) Total Total ZWL ( 82 992 968) ( 49 795 779) 70 199 486 16 598 593 49 795 779 82 992 968 33.3 Foreign currency exchange rate risk The table below calculates the effect of a reasonable possible movement of the significant currency rate against the United States Dollar, with all other variables held constant. A negative amount in the table reflects a potential net reduction in the statement of comprehensive income or equity while a positive amount reflects a net potential increase. 31 December 2021 Sensitivity of net interest income USD USD USD USD USD USD % Changes in Currency Rate % 5% 3% 1% -1% -3% -5% Effect on profit before Tax ZWL 1 733 132 ( 66 111 762) ( 22 037 254) 22 037 254 66 111 762 110 186 271 31 December 2020 Sensitivity of net interest income USD USD USD USD USD USD % Changes in Currency Rate % 5% 3% 1% -1% -3% -5% Effect on profit before Tax ZWL 2 785 788 1 671 472 557 157 ( 557 157) ( 1 671 472) ( 2 785 788) Effect On equity ZWL ( 2 084 054) ( 1 250 432) ( 416 811) 416 811 1 250 432 2 084 054 Effect On equity ZWL 2 097 140 1 258 284 419 428 ( 419 428) ( 1 258 284) ( 2 097 140) 95 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 33.4 LIQUIDITY RISK Liquidity risk is the risk of financial loss arising from the inability of the Group to fund asset increases or meet obligations as they fall due without incurring unacceptable costs or losses. The Group identifies this risk through maturity profiling of assets and liabilities and assessment of expected cash flows and the availability of collateral which could be used if additional funding is required. The daily liquidity position is monitored and regular liquidity stress testing is conducted under a variety of scenarios covering both normal and more severe market conditions. All liquidity policies and procedures are subject to review and approval by the Board ALCO. The key measure used by the bank for managing liquidity risk is the ratio of net liquid assets to deposits to customers. The Group also actively monitors its loans to deposit ratio against a set threshold in a bid to monitor and limit funding risk. The group monitors funding concentration risk by reviewing the ratio of top 20 depositors to the total funding. Funding mix is also monitored by monitoring the contribution of wholesale and demand deposits to the total funding for the bank. Liquidity risk is monitored through a daily liquidity reports produced by the Risk Management department. This is augmented by a monthly management ALCO and a quarterly board ALCO meetings. The contractual maturities of undiscounted cash flows of financial assets and liabilities are disclosed in note 28.1. The key measure used by the Group for managing liquidity risk is the ratio of net liquid assets to deposits from customers. The Group monitors its liquidity ratio in compliance with Banking Regulations to ensure that it is not less than 30% of the liabilities to the public. Liquid assets consist of cash and cash equivalents, short term bank deposits and liquid investment securities available for immediate sale. At 31 December 2021 Guarantees Commitments to lend Irrevocable letters of credit At 31 December 2020 Guarantees Commitments to lend Irrevocable letters of credit on Demand % - - - ----------------- - ========= 0 to 1 month ZWL 14 882 341 91 556 - ----------------- 14 973 897 ========= 1 to 3 3 months to 1 year ZWL 88 503 358 34 440 941 - months ZWL 4 032 850 13 102 589 - ----------------- 17 135 439 ========= ----------------- 122 944 299 ========= 1 year to 5 years ZWL - - - ----------------- - ========= Total Total ZWL 107 418 549 47 635 086 - ----------------- 155 053 635 ========= on Demand % - - - ----------------- - ========= 0 to 1 month ZWL 23 921 456 147 165 - ----------------- 24 068 620 ========= 1 to 3 3 months to 1 year ZWL 142 257 804 55 359 398 - months ZWL 6 482 289 21 060 732 - ----------------- 27 543 022 ========= ----------------- 197 617 202 ========= 1 year to 5 years ZWL - - - ----------------- - ========= Total Total ZWL 172 661 549 76 567 295 - ----------------- 249 228 843 ========= The Group expects that not all of the contingent liabilities or facilities approved but not drawn down will be drawn before expiry. 33.5 Operational risk This risk is inherent in all business activities and is the risk of loss arising from inadequate or failed internal processes, people, systems or from external events. The Group utilises monthly Key Risk Indicators to monitor operational risk in all units. Further to this, the Group has an elaborate Operational Loss reporting system in which all incidents with a material impact on the well- being of the Group are reported to risk management. The risk department conducts periodic risk assessments on all the units within the Group aimed at identifying the top risks and ways to minimise their impact. There is a Board Risk and Compliance Committee whose function is to ensure that this risk is minimised. The Risk Committee with the assistance of the internal audit function and the Risk Management department assesses the adequacy of the internal controls and makes the necessary recommendations to the Board. 96 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 33.6 Legal and compliance risk Legal risk is the risk from uncertainty due to legal actions or uncertainty in the applicability or interpretation of contracts, laws or regulations. Legal risk may entail such issues as contract formation, capacity and contract frustration. Compliance risk is the risk arising from non – compliance with laws and regulations. To manage this risk, permanent relationships are maintained with firms of legal practitioners and access to legal advice is readily available to all departments. The Group has an independent compliance function which is responsible for identifying and monitoring all compliance issues and ensures the Group complies with all regulatory and statutory requirements. 33.7 Reputational risk Reputation risk is the risk of loss of business as a result of negative publicity or negative perceptions by the market with regards to the way the Group conducts its business. To manage this risk, the Group strictly monitors customers’ complaints, continuously train staff at all levels, conducts market surveys and periodic reviews of business practices through its Internal Audit department. The directors are satisfied with the risk management processes in the Group as these have contributed to the minimisation of losses arising from risky exposures. 33.8 Strategic risk This refers to current and prospective impact on a Group’s earnings and capital arising from adverse business decisions or implementing strategies that are not consistent with the internal and external environment. To manage this risk, the Group always has a strategic plan that is adopted by the Board of Directors. Further, attainment of strategic objectives by the various departments is monitored periodically at management level. 33.9 Environmental, Social & Governance (ESG) Risk Environment, Social and Governance (ESG) or sustainability risk is the consideration of non-financial risks arising from the environment (flora and fauna) as well as societal issues. The Group is not only concerned about making profits, but is also keen on assessing the impact it has on the planet and the people it interacts with. There is a growing number of frameworks and standards aimed at addressing global concerns on sustainability. Global risk reports show that environmental and societal risks have overtaken economic and geopolitical risks in terms of both likelihood and impact. 33.9.1 Reserve Bank of Zimbabwe Ratings The Reserve Bank of Zimbabwe conducted an onsite inspection on the Group’s banking subsidiary on 24 November 2016. Below are the final ratings from the onsite examination. CAMELS* Ratings CAMELS Component Capital Adequacy Asset Quality Management Earnings Liquidity Sensitivity to Market Risk Composite Rating Latest RBS** Ratings 30/06/21 Previous RBS Ratings 24/11/2016 Previous RBS Ratings 30/6/2013 Previous RBS Ratings 31/01/2008 2 2 2 2 2 2 2 2 3 3 2 3 2 3 2 4 3 2 2 2 3 4 2 3 3 3 3 3 *CAMELS is an acronym for Capital Adequacy, Asset quality, Management, Earnings, Liquidity and Sensitivity to Market Risk. CAMELS rating system uses a rating scale of 1-5, where ‘1’ is Strong, ‘2’ is Satisfactory, ‘3’ is Fair, ‘4’ is Weak and ‘5’ is Critical. **RBS stands for Risk-Based Supervision. 97 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 33.9.1.2 Summary RAS ratings RAS Component Latest RAS*** Ratings 30/06/2021 Latest RAS*** Ratings 24/112016 Previous RAS Ratings 30/06/2013 Previous RAS Ratings 31/01/2008 Overall Inherent Risk Moderate High High High Overall Risk Management Systems Acceptable Acceptable Acceptable Acceptable Overall Composite Risk Moderate Direction of Overall Composite Risk Stable *** RAS stands for Risk Assessment System. Moderate Stable Moderate Moderate Stable Stable 33.9.1.3 Summary risk matrix – 30 June 2021 on - site examination Type of Risk Level of Inherent Risk Adequacy of Risk Management Systems Overall Composite Risk Direction of Overall Composite Risk Acceptable Acceptable Strong Strong Acceptable Acceptable Acceptable Acceptable Moderate Moderate Low Low Moderate Moderate Moderate Moderate Stable Stable Stable Stable Stable Stable Stable Stable Acceptable Moderate Stable Credit Liquidity Moderate Moderate Interest Rate Low Foreign Exchange Moderate Strategic Risk Moderate Operational Risk Moderate Legal & Compliance Moderate Reputation Overall KEY Moderate Moderate High Moderate Low Level of Inherent Risk Low – reflects a lower than average probability of an adverse impact on a banking institution’s capital and earnings. Losses in a functional area with low inherent risk would have little negative impact on the banking institution’s overall financial condition. Moderate – could reasonably be expected to result in a loss which could be absorbed by a banking institution in the normal course of business. High – reflects a higher than average probability of potential loss. High inherent risk could reasonably be expected to result in a significant and harmful loss to the banking institution. Adequacy of Risk Management Systems Weak – risk management systems are inadequate or inappropriate given the size, complexity and risk profile of the banking institution. Institution’s risk management systems are lacking in important ways and therefore a cause of more than normal supervisory attention. The internal control systems will be lacking in important aspects particularly as indicated by continued control exceptions or by the failure to adhere to written policies and procedures. 98 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 33. RISK MANAGEMENT (continued) Acceptable – management of risk is largely effective but lacking to some modest degree. While the institution might be having some minor risk management weaknesses, these have been recognised and are being addressed. Management information systems are generally adequate. Strong – management effectively identifies and controls all types of risk posed by the relevant functional areas or per inherent risk. The board and senior management are active participants in managing risk and ensure appropriate policies and limits are put in place. The policies comprehensively define the bank’s risk tolerance, responsibilities and accountabilities are effectively communicated. Overall Composite Risk Low – would be assigned to low inherent risk areas. Moderate risk areas may be assigned a low composite risk where internal controls and risk management systems are strong and effectively mitigate much of the risk. Moderate – risk management systems appropriately mitigates inherent risk. For a given low risk area, significant weaknesses in the risk management systems may result in a moderate composite risk assessment. On the other hand, a strong risk management system may reduce the risk so that any potential financial loss from the activity would have only a moderate negative impact on the financial condition of the organisation. High – risk management systems do not significantly mitigate the high inherent risk. Thus, the activity could potentially result in a financial loss that would have a significant impact on the bank’s overall condition. Direction of Overall Composite Risk Increasing – based on the current information, risk is expected to increase in the next 12 months. Decreasing – based on current information, risk is expected to decrease in the next 12 months. Stable – based on the current information, risk is expected to be stable in the next 12 months. 33.9.2 External Credit Ratings The external credit ratings were given by Global Credit Rating (GCR), a credit rating agency accredited with the Reserve Bank of Zimbabwe. Security class Long term 2021 BB+ 2020 - 2019 BB- The 2020 rating which was due to expire in August 2020 was withdrawn by GCR on 23 June 2020 following the Bank’s waiver of external ratings. The Bank waived the 2020/2021 external ratings in line with a general dispensation extended by the Reserve Bank of Zimbabwe due to the COVID-19 pandemic. The 2021/2022 external ratings were obtained during the month of February 2022 with a long term rating of BB+. 33.10 Regulatory Compliance There was no regulatory breach resulting in penalties during the period under review. The Bank is committed to comply with and adhere to all regulatory requirements. 33.11 Capital management 33.11.1 Holding company The capital allocation to the subsidiary units is in accordance with the regulatory requirements of the business undertaken by the subsidiary. 99 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (Continued) for year ended 31 December 2021 33.11.2 Banking subsidiary The primary objective of the Bank’s capital management is to ensure that the Bank complies with the RBZ requirements. In implementing the current capital requirements, the RBZ requires the Banking subsidiary to maintain a prescribed ratio of total capital to total risk weighted assets. Regulatory capital consists of Tier 1 capital, which comprises share capital, share premium, retained earnings (including current year profit), statutory reserve and other equity reserves. The other component of regulatory capital is Tier 2 capital, which includes subordinated term debt, revaluation reserves and portfolio provisions. Tier 3 capital relates to an allocation of capital to market and operational risk. Various limits are applied to elements of the capital base. The core capital (Tier 1) shall comprise not less than 50% of the capital base and the regulatory reserves and portfolio provisions are limited to 1.25% of total risk weighted assets. The Bank’s regulatory capital position at 31 December was as follows: Inflation Adjusted Historical Cost 2021 ZWL 2020 ZWL Restated 2021 ZWL 2020 ZWL Less: capital allocated for market and operational risk Tier 1 capital Share capital Share premium Retained earnings Functional currency translation reserve 1 167 413 2 069 689 473 4 816 210 665 462 166 697 ------------------- 7 349 234 248 ( 301 228 069) 7 048 006 179 ------------------- Tier 2 capital (subject to limit as per Banking Regulations) 948 997 410 377 056 299 Fair valuation gains on land and buildings Subordinated debt 223 114 790 Stage 1 & 2 ECL provisions – 348 826 321 (limited to 1,25% of risk weighted asset Tier 1 & 2 capital 7 997 003 590 Tier 3 capital (sum of market and operational risk capital) 301 228 069 -------------------- 8 298 231 659 =========== Total capital base 1 167 413 2 069 689 473 2 919 239 997 462 166 697 -------------------- 5 452 263 580 ( 309 435 086) 5 142 828 494 ------------------- 657 870 772 290 977 498 213 189 970 16 506 31 474 502 16 506 31 474 502 5 112 718 793 2 142 925 978 11 619 648 ------------------ 11 619 648 ------------------- 5 155 829 449 2 186 036 634 ( 301 228 069) (192 509 961) 4 854 601 381 1 993 526 673 -------------------- ------------------- 1 420 672 035 1 119 443 122 848 730 924 891 186 492 223 114 790 132 632 641 348 826 321 95 623 989 6 275 273 416 3 112 969 795 301 228 069 192 509 961 153 703 305 5 800 699 266 309 435 086 -------------------- 6 110 134 352 =========== ============ =========== --------------------- ------------------- 6 576 501 485 3 305 479 756 Total risk weighted assets 24 160 630 276 12 713 020 339 24 160 630 276 7 649 919 150 Tier 1 ratio Tier 2 ratio Tier 3 ratio Total capital adequacy ratio RBZ minimum required 29.17% 3.93% 1.25% 34.35% 12.00% 40.45% 5.17% 2.43% 48.06% 12.00% 20.09% 5.88% 1.25% 27.22% 12.00% 26.06% 14.63% 2.52% 43.21% 12.00% 34. EVENTS AFTER REPORTING DATE There were no material events after the reporting date which could significantly affect the consolidated financial statements of the Group. 100 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 HISTORICAL FIVE YEAR FINANCIAL SUMMARY 35. OTHER SUPPLEMENTAL INFORMATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Interest income Interest expense Net interest income Fee and commissions income Net foreign exchange gains Revenue Other income Operating income Operating expenditure Impairment losses on financial assets measured at amortised cost Impairment losses on loans and advances Profit before taxation Taxation credit/(charge) Profit after taxation Other comprehensive income Revaluation of land and buildings, net of tax Translation gain on change in functional currency, net of tax Total comprehensive income for the year 2021 ZWL 2020 ZWL 2019 ZWL 2018 ZWL 2017 ZWL 2 568 881 470 ( 739 070 816) --------------------- 1 829 810 654 2 927 160 013 76 798 658 --------------------- 4 833 769 325 2 107 418 588 --------------------- 6 941 187 913 ( 2 838 459 393) 4 102 728 520 ( 248 106 738) --------------------- 3 854 621 782 ( 912 597 374) -------------------- 2 942 024 408 501 216 271 ( 90 638 279) -------------------- 410 577 992 815 541 357 217 274 144 --------------------- 1 443 393 493 1 226 846 996 --------------------- 2 670 240 489 ( 814 190 000) 70 557 190 ( 16 894 088) ------------------- 53 663 102 99 863 112 87 242 303 -------------------- 240 768 517 206 622 639 -------------------- 447 391 156 ( 105 937 502) 39 333 178 ( 8 865 016) ------------------- 30 468 162 1 899 670 28 539 376 -------------------- 60 907 208 4 968 447 -------------------- 65 875 655 ( 34 720 428) 32 061 931 ( 9 157 095) ------------------ 22 904 836 1 583 164 18 832 185 ------------------ 43 320 185 1 129 001 ------------------ 44 449 186 ( 27 578 347) 1 856 050 489 ( 127 974 740) --------------------- 1 728 075 749 85 514 320 -------------------- 1 813 590 069 341 453 654 ( 11 048 567) -------------------- 330 405 087 ( 44 504 548) ------------------- 285 900 539 31 155 227 ( 4 011 952) -------------------- 27 143 275 ( 5 922 074) ----------------- 21 221 201 16 870 839 ( 3 853 149) ------------------- 13 017 690 ( 3 078 864) ----------------- 9 938 826 848 730 924 891 186 492 175 943 209 46 431 90 310 - - --------------------- ----------------- 11 619 648 ------------------- - ------------------- - ------------------ 3 790 755 332 ============ 2 704 776 561 ========== 473 463 396 =========== 21 267 632 10 029 136 =========== =========== Your Digital Bank Transact with ease from anywhere on your digital bank ! Download the NMBConnect App Dial or visit https://www.nmbconnectonline.co.zw *241# ZIPIT, RTGS Transfers Bill Payments Internal Transfers 101 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 HISTORICAL FIVE YEAR FINANCIAL SUMMARY (Continued) 35. OTHER SUPPLEMENTAL INFORMATION (Continued) CONSOLIDATED STATEMENTS OF FINANCIAL POSITION SHAREHOLDER’S FUNDS Share capital Capital reserves Treasury shares reserve Functional currency translation reserve Revaluation reserve Share Option Reserve Retained earnings Total equity Redeemable ordinary shares Subordinated term loan Total shareholders’ funds and shareholders liabilities LIABILITIES Deposits and other liabilities Current tax liabilities Deferred tax liabilities Total liabilities Total shareholder's funds and liabilities ASSETS Cash and cash equivalents Investment securities Deferred tax assets Current tax assets Loans, advances and other assets Non-current assets held for sale Trade and other investments Investment properties Property and equipment Intangible assets Total assets 2021 ZWL 2020 ZWL 2019 ZWL 2018 ZWL 2017 ZWL 84 116 19 121 607 ( 7 168) 11 619 648 1 915 997 366 27 768 409 5 085 120 045 --------------------- 84 116 19 121 607 - 11 619 648 1 067 266 442 - 2 143 095 638 -------------------- 84 116 19 184 170 - 11 619 648 176 079 950 - 329 505 569 ------------------- 80 975 64 040 438 - - - - - 78 751 49 821 935 - - - - - ------------------- ------------------ 7 059 704 023 14 335 253 223 114 790 -------------------- 3 241 187 451 14 335 253 132 632 641 ----------------- 536 473 453 28 360 340 14 335 253 ----------------- 64 121 413 1 505 647 14 335 253 ----------------- 49 900 686 1 415 904 14 335 253 ----------------- 7 297 154 066 -------------------- 3 388 155 345 ----------------- 579 169 046 ----------------- 79 962 313 ----------------- 65 651 843 ----------------- 19 091 448 981 236 048 645 741 543 501 -------------------- 20 069 041 127 -------------------- 6 413 943 465 57 205 065 174 727 794 ----------------- 6 645 876 324 ----------------- 1 267 777 847 98 021 360 624 937 ----------------- 1 366 424 144 ----------------- 447 105 283 - - ----------------- 447 105 283 ----------------- 356 985 626 - - ----------------- 356 985 626 ----------------- 27 366 195 193 ============ 10 034 031 669 1 945 593 190 ============ ============ 527 067 596 ============ 422 637 469 =========== 4 872 262 099 4 010 434 252 - - 11 849 962 849 - 36 499 730 3 518 133 464 3 065 495 111 13 407 688 --------------------- 27 366 195 193 ============ 492 304 267 1 964 637 240 107 166 155 1 081 820 457 - - - - 817 960 242 3 730 886 733 - - 1 612 131 10 877 672 229 867 982 1 653 496 476 295 285 227 1 588 179 384 1 397 186 4 133 707 -------------------- --------------------- 10 034 031 669 1 945 593 190 ============ ============ 112 440 912 117 249 434 1 908 532 285 822 254 202 945 36 000 112 501 20 950 606 17 844 069 2 036 775 -------------------- 527 067 596 ============ 89 553 202 92 245 425 1 204 449 231 007 210 483 221 36 000 190 997 18 977 000 7 335 988 2 380 180 ------------------ 422 637 469 =========== 102 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 HISTORICAL FIVE YEAR FINANCIAL SUMMARY (Continued) 35. OTHER SUPPLEMENTAL INFORMATION (Continued) CLOSING NUMBER OF SHARES 404 171 689 404 171 689 404 171 689 392 955 196 384 974 542 2021 ZWL 2020 ZWL 2018 ZWL 2017 ZWL 2016 ZWL Share performances Net asset value per share (ZWL cents) 1746.71 Basic earnings per share (ZWL cents) 463.00 Dividend per share (ZWL cents) Dividend cover (times) Price/earnings ratio Closing price per share (ZWL cents) - - 0.02 1001 724.70 448.72 - - 0.89 400 136.28 71.56 - - 0.57 41 19.98 16.69 5.43 0.96 0.96 4.44 24 2.58 0.15 0.15 3.49 9 Market capitalisation (ZWL) 4 046 769 036 1 616 686 756 165 710 392 94 309 247 34 647 709 Financial performance Return on shareholders’ funds (%)¹ Return on assets (%) Total cost/net income total income (%)² Non-interest income/total income (%) Effective tax rate (%) 24.91% 7.66% 44.91% 54.60% 32.34% 92.34% 26.96% 35.28% 81.85% -4.95% 81.75% 24.42% 26.15% 44.50% 18.79% 27.03% 4.03% 58.8% 47.37% 21.85% 15.28% 2.37% 70.7% 40.1% 23.7% 1. The return on shareholders’ funds is based on shareholders’ funds at the end of the year. 2. Includes charge for impairment of losses on loans and advances. Includes charge for impairment of losses on loans and advances. At an Extraordinary General Meeting held on 19 February 2014, the Company approved a share consolidation exercise at a ratio of 10:1 and consolidated 3 500 000 000 (3.5 billion) shares with a nominal value of ZWL0.000028 per share to 350 000 000 (350 million) shares with a nominal value of ZWL0.00028 per share. The Company also approved an increase in the authorized share capital from 350 000 000 shares with a nominal value of ZWL0.00028 per share to 600 000 000 shares with a nominal value ZWL0.00028 per share. 103 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 SUSTAINABILITY REPORT Sustainability Key Performance Indicators for the year ended 31 December 2021 As a responsible corporate citizen, we aim to understand the impacts of our business activities on society, the environment and economies. We are committed to tracking, assessing and reporting on our impact, both positive and negative. Our impact areas or Key Performance Indicators (KPIs) are informed by the expectations of our stakeholders, and the economic, social and environmental context in which we operate. As part of our integrated reporting framework and in conjunction with the triple bottom line reporting method, we have identified various impact areas, informed by the United Nations’ Sustainable Development Goals (SDGs) which are directly relevant to our core business as a provider of financial products and services. The Group adopted the Global Reporting Initiatives (GRI) Standards which represent global best practice for reporting publicly on a range of economic, environmental and social impacts. Below is a list of the Group’s Key Performance Indicators (KPIs) or material issues based on GRI standards against the Sustainable Develop- ment Goals (SDGs). The reporting was a combination of both qualitative and quantitative impact analysis. GRIs Disclosure: Environmental Focus Area: Energy sources. Measure/Target: Sources of energy and level of consumption. Organisational Achievements: NMB now Generates 100kWp from solar energy. Progress: Green energy is a solution to greater sustainability, and NMBZ is in the process of incorporating green energy into its operations. As we become more and more aware of our impact on the environment, the importance of transitioning from conventional energy resources to renewable sources is becoming clearer. The Group continued to invest in solar systems and equipment at its Headquarters (HQ) in Borrowdale, Harare. NMBZ doubled its solar power generation during the last quarter of the year under review, increasing the output up to 100kWp (kilowatts peak) from 50kWp. Resultantly, the entire HQ building has gone green as far as power is concerned. GRIs Disclosure: Environmental Focus Area: Green House Gases Emissions Measure/Target: GHGs/Carbon footprint contributions. Organisational Achievements: • • ESRM policy Recording and monitoring of carbon intense activities (e.g. fuel & electricity consumption). Progress: The Group’s direct and indirect sources of emissions are recorded and monitored as per the Green House Gases GHGs Protocol guidelines (Scope1, Scope 2 & Scope 3). During the period under review, NMBZ measured its GHGs emission contributions which was at 1,136.76 metric tones of carbon equivalent (tCO2e). GRIs Disclosure: Environmental Focus Area: Waste management Measure/Target: Effective waste management processes and monitoring mechanisms. Organisational Achievements: • Waste management policy • Digital (paperless) banking model. Progress: NMBZ invested in various applications and systems that include NMBMobile, NMBConnect for easy and mobile account opening and customer transactions, IApprove for internal applications & authority sought, SmartStream software for stationery acquisitions and accounting, Credit Quest for loan application and assessment as well as Virtual 104 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 SUSTAINABILITY REPORT (Continued) Branch Services for withdrawals and deposits. This was all to reduce the use of paper and ink. The Group also works in close cooperation with the key stakeholders such as the government’s Environmental Management Agency (EMA) and NGOs in managing disposables and the environment at large. GRIs Disclosure: Environmental Focus Area: Customer Environmental Risk Assessment. Measure/Target: Responsible financing. Organisational Achievements: • • • ESRM policy, trainings Exclusion list NMB Bank statement of commitment to Responsible Financing. Progress: The Group prioritizes financing of projects and business operations that are considered to have less Environmental & Social (E&S) risks or implemented effective mitigatory measures. This is done through Environmental and Social Due Diligence screening processes. Corporate and SMEs borrowers with a combined exposure of ZWL389.4million or 3.87% of the total loan book had their projects rated high risk (Category A) but with adequate and effective control measures in place. The remaining portion of the book ZWL9.7bln (96.13%) was rated medium risk (Category B) and low risk (Category C). GRIs Disclosure: Environmental Focus Area: Water and Effluents Measure/Target: Protection of natural water sources (e.g. wetlands) Organisational Achievements: Financial and non-financial support.(e.g. donations & commemorations) Progress: Financial support has been channelled towards water management initiatives that included dam construction and wetlands protection. Environmental risks controls on protection of water bodies such as wetlands are clearly referenced in our credit sanctioning policies. Our property and land valuers together with our lending processes & procedures assist in assessing the history of a piece of land and the operational implications of a site’s current or intended commercial use. Through Environmental & Social (E&S) risk due diligence and related covenants, our borrowers are compelled to identify E&S risks within their operations and organizations, take measures that reduce the risks as well as disclose them to relevant stakeholders. GRIs Disclosure: Social Focus Area: Customer Protection/Marketing and Labeling Measure/Target: Level of Legal Risk and business growth. Organisational Achievements: • • • • • • Customer Protection Policy. Best marketing practices. Service Standards Confidentiality& Interests Declaration. Consumer Protection policy. Staff Code of Conduct and Ethics Charter. 105 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021SUSTAINABILITY REPORT (Continued) Progress: We are committed to continue offering excellent services to new and existing customers. NMB Group remain guided by the Zimbabwe Consumer Protection Act [Chapter 14:14] The Code of Conduct & Ethics Charter, Service Standards, Competition Act, Confidentiality and Interests Declaration, NMB Consumer Protection Policy are all in place to give guidance to the staff on how to conduct themselves and to protect the customers. The Group provides platforms for customers and competitors to convey their grievances and complaints. These include customer Complaints & Query boxes across all our networks, Complaints registers, Online Enquiries desk and various social media platforms. GRIs Disclosure: Social Focus Area: Customer Privacy. Measure/Target: Right of the customer to privacy. Organisational Achievements: Customer Protection policy -Right of the customer to privacy. Progress: We are committed to protecting the privacy of our customers by ensuring that their personal information is safe and secure. To minimize leakages of information into the public domain, the Group continuously upgrades its policies and systems and clearly defines points of information dissemination. GRIs Disclosure: Social Focus Area: Human Rights Assessment. Measure/Target: Promote Human Rights initiatives through support and embedding in our systems and policies relevant measures. Organisational Achievements: • • Complying with national & international Human Rights law and best standards. Staff and customers rights policies & procedures. Progress: The Group operates in accordance with the Zimbabwe Human Rights Commission Act and recognizes other internationally accepted human rights standards, including the UN Guiding Principles on Business and Human Rights. NMB Bank’s Human Resources (HR) Manual, Code of Conduct, Consumer Protection Policy, Service Standards and Prevention of Bullying & Sexual Harassment at Work Policy are all drawn and summarize our objectives and commitment to this aspect. These are reviewed at least once per year. GRIs Disclosure: Social Focus Area: Employment Measure/Target: Staff Complement and Turnover. Organisational Achievements: Human Resources policy and retention initiatives. Progress: The Group's recruitment process is transparent and solely based on meritocracy. It is our firm belief that skilled and empowered employees who have the customers at heart define NMBZ’s reputation. As demand for new and diverse skills increase in tandem with the dynamic global landscape, we understand the need to continuously equip our workforce with the right knowledge to ensure that customers' expectations are met. The Group has a dedicated training arm that handles upskilling and development of the entire organization. Where necessary, external training is sought. Knowledge gap assessments and skills audit are essential aspects of this department. The Group had a staff complement of 331 as at 31 December 2021. Regardless of the challenging economic 106 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021SUSTAINABILITY REPORT (Continued) environment, the Group prioritizes all staff-welfare related matters. GRIs Disclosure: Social Focus Area: Training and Education. Measure/Target: Create an environment and products that support education for all and staff training. Organisational Achievements: • • Udemy Customer and staff educational loans. (School & University fees loans). Progress: The Group subscribed to Udemy, an e-library and e-learning platform, where diverse learning content is available to meet the Group's learning requirements. Furthermore, our employees attend webinars and online training programs relevant to their learning requirements. Employees periodically take in-house product knowledge tests, which are deployed through an online system. Each staff member (100%) was afforded an opportunity to go through knowledge and or skills enhancement session through trainings and workshops. The Group provides internship to university students to enable them to acquire practical experience. Furthermore, the Group offers a wide range of educational loan facilities to its customers and staff. The credit facilities are meant to assist primary, secondary and tertiary level students. The same facilities were also extended to educational corporate service providers, schoolteachers and lecturers across the country. As a result, a total of ZWL78.6million was directly advanced to the education sector as at 31 December 2021. GRIs Disclosure: Social Focus Area: Diversity and equal opportunity. Measure/Target: Diversity and equal opportunity for employment, remuneration and access to financial services. Organisational Achievements: • • • • NMBZ Staff manual Gender Policy Recruitment & Selection and Promotions & Transfer Policies. Consumer Protection. Progress: The Group respects and promotes diversity and equal opportunities to all staff and customers regardless of gender. Employment and staff promotions are based on merit. Staff promotions are based on performance, qualification and experience. Our Human Resources policies such as Gender Policy, Recruitment & Selection, and Promotions & Transfer Policies outline the Group’s commitment to diversity and equal opportunities for all. As at 31 December 2021, 39.27% of staff complement were women, the institution is targeting a minimum 50% proportion as and when opportunities arise. Clear and transparent remuneration policies are in place. Employees who occupy same positions are equally graded and remunerated based on the Paterson Job Grading system. The Banking subsidiary offers its products to both new and existing customers regardless of gender. Resultantly, a total of ZWL790.0million worth of credit facilities was granted to women. 107 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 GRIs Disclosure: Social Focus Area: Local Communities. Measure/Target: Offer products that directly and indirectly promote provisioning of clean water and sanitation. Organisational Achievements: • • Mortgage loans Funding to municipalities, road & dam construction and health. Progress: NMB Group has been financing various projects in both the public and private sectors in support of clean water provisioning, health, housing and transport infrastructure building. In specific terms, these included financing of dam construction by private corporates, financing of local council operations, housing projects and borehole drilling for schools as well as donations to various communities. As a result, facilities amounting to ZWL100.7million were advanced to finance the health sector, ZWL886.6million to finance water provisioning projects, ICT, road rehabilitations and construction projects across the country. A total of ZWL306million worth of mortgage facilities were also granted. GRIs Disclosure: Social Focus Area: Freedom of Association and Collective Bargaining. Measure/Target: Promotion of employee freedom of association and collective bargaining. Organisational Achievements: • • Worker's Committee & Works Council Disciplinary & Grievance Procedures. Progress: The Group respects and promotes employee rights and their freedom of association. The Group is guided by the UN’s International Labour Organization (ILO), which seeks the promotion of social justice and internationally recognized human and labour rights. We also act in accordance with the Zimbabwe Labour Act [Chapter 28:01). NMB has in place a Workers’ Committee & Works Council, Disciplinary & Grievance Procedure as well as the guidelines for managing disciplinary hearings. We fully appreciate that misunderstandings are part of all relationships. Matters of mutual interest are openly discussed through a Works Council, with equal representation from both management and employees. Meetings are held quarterly, with provision for special adhoc meetings. Our employees have the liberty to join a workers union of their choice. The Group engages and solves disputes through the Works Council. The Group's ultimate goal in dispute resolution is to have amicable settlements that are free of duress and prejudice. GRIs Disclosure: Social Focus Area: Occupational Health and Safety. Measure/Target: Best practices regarding Staff Welfare, Heath & working Conditions. Organisational Achievements: • • • • • Staff Medical Aid facility. HIV policy. Employer Funeral Scheme. Pension Fund policy. Covid-19 response Committee. 108 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021SUSTAINABILITY REPORT (Continued) Progress: The Group Covid-19 taskforce has put in place measures to ensure maximum protection of our employees and adherence to Covid-19 protocols. In the same vein, the Group assists with medical costs incurred by staff members diagnosed with Covid-19. A staggered working arrangement was put in place to decongest all workplaces in response to the pandemic. The Group availed free transport for employees as a measure to curtail the spread of Covid-19. We are also continuously training our staff members on non-communicable diseases such as cancer and HIV/AIDS. GRIs Disclosure: Social Focus Area: Socioeconomic Compliance. Measure/Target: Compliance with internal, national and international laws, regulations and best standards. Organisational Achievements: • • Complying with E&S management regulations and best standards. (ESG Coordinator and Compliance Department). Progress: The Group closely monitors high-risk clients and undertakes annual KYC reviews. Employee training remains a cornerstone to sustained compliance and effective risk management within the organization. The Group works hand in hand with institutions such as the government’s Environmental Management Agency (EMA), Ministry of Health as well as local authorities in reducing environmental, social and related risks. Compliance to ESG regulations forms part of terms and conditions or covenants for our borrowers and partners. GRIs Disclosure: Economic Focus Area: Whistle-blowing, Anti-bribery and Corruption. Measure/Target: Bribery and Corruption free organization. Organisational Achievements: • • • • Ethics Charter. Code of Conduct. Anti-Bribery & Corruption. Tip-Offs Anonymous reporting policies. Progress: As a Group, we aspire to run our business in an open and transparent manner and therefore have a zero tolerance approach to bribery and corruption. Staff Manual, Ethics Charter, Code of Conduct, Anti-bribery & Corruption and our Tip-Offs Anonymous reporting policy summarize our commitment in conducting our activities free from any form of bribery and corruption. The policies are reviewed every year in light of trends and are up to date. The policies takes into consideration relevant legislative and regulatory frameworks. It is the responsibility of the NMB Bank Board to ensure that exposure to fraud and corruption are appropriately identified, assessed and managed. The primary aim of the Group's whistle blowing programme is to encourage employees to raise concerns or disclose information about possible fraudulent, unethical, criminal or other improper behavior in the workplace environment. Reports may be made directly through to Group’s Internal Audit or through the Deloitte Tip - Off Anonymous whistle blowing programme. To further create comfort in cross-rank communication, we adopted an open door policy where junior officers can freely converse and share ideas with senior officers. The Group values all contributions regardless of rank. 109 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021SUSTAINABILITY REPORT (Continued) GRIs Disclosure: Economic Focus Area: Business performance. Measure/Target: Profitable and growing business, which creates jobs and contributes to the economic success. Organisational Achievements: Financial disclosures. Progress: The Group discloses its financial performance on a quarterly basis through trading updates, semi-annually through interim financial reports and annually through full year audited financials and annual reports. Areas of disclosures included our revenues, operating costs, economic value retained and dividends paid. We also publish our turnover, profits and taxes paid during the reporting period. GRIs Disclosure: Economic Focus Area: Economic impact and growth. Measure/Target: Indirect economic impacts. Organisational Achievements: • • Non-financial disclosures. E&S sensitive product innovations. Progress: To achieve long term sustainable economic growth, a number of policy challenges must first be addressed, including; ESG disclosures, raising employment, improving access to housing and supporting families in planning for their futures. All of these goals rely on access to appropriate and responsible finance. In addition, new solutions to help tackle social and environmental challenges also need access to appropriate financing to help innovate, develop, commercialize and scale deployment. NMB Group supports the disadvantaged, SMEs, women, youths and those in the rural areas through offering of low cost products such as NMBlite accounts and various credit facilities. The Bank recruited a number of Agents and Brand Ambassadors to market its products that include the Tapcard, NMBConnet services as well as loans to Microfinance institutions. The low cost NMBlite account product was also tailor made for the poor and the unbanked population in the rural areas of Zimbabwe. GRIs Disclosure: Economic Focus Area: Community support. Measure/Target: Corporate Social Responsibility (CSR). Organisational Achievements: Direct and indirect community support. Progress: As a Group, we play a broader role in the communities in which we live and work beyond what we deliver through our core business activities. We support communities by Investing money, time and skills in partnerships with respected and relevant non-governmental organizations, charities and social enterprises. This enables colleagues to use their professional skills and expertise in a range of activities, including volunteering and fundraising. Charitable assistance and participation were those to do with Covid-19 awareness campaigns, education, road safety campaigns, development of regulatory compliance and ethics standards, treatment of cancer in children and support to the orphans and vulnerable children. A total of ZWL3.0 million was channelled towards this societal responsibility. Of this, 66.67% or ZWL2.0 million was used to combat the spread of the Covid-19 virus during the period. 110 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021SUSTAINABILITY REPORT (Continued) GRIs Disclosure: Economic Focus Area: Procurement Measure/Target: Best Procurement practices. Organisational Achievements: • • Complying with the Zimbabwe Procurement Act. NMB Bank Procurement policy & Committee. Progress: All suppliers are treated equally and fairly in accordance with the Zimbabwe Procurement Act, other relevant laws, regulations and best standards. We select suppliers based upon best value and seek ways to maximize competition from all segments of society. The Group considers environmental management, human rights, diversity and inclusion, societal responsibility and product responsibility. Supplier’s T&Cs applies to prospective and existing suppliers and compel them to comply with all applicable national and by-laws of their specific geography. An NMB Procurement committee is also in place to provide internal guidance regarding the selection processes. GRIs Disclosure: Economic Focus Area: Job creation & Poverty eradication. Measure/Target: Job creation & Poverty eradication. Organisational Achievements: • • • Affordable products. Job creation. Community projects financing. Progress: Through innovation initiatives, the Group offers a range of exciting and low cost products that have seen the rural, old age, women, the disadvantaged and the youth being able to have bank accounts, bankcards and employment. These include our NMBLite (264,000 customers) account, targeted for the unbanked populace, and the Tapcard, which is mainly aimed at easing the cash challenges for the commuting public. The Group also offered credit facilities to SMEs (ZWL230.9 million) and individuals (ZWL2.0 billion) across the country. These included both rural and urban customers. The Group also engaged a number of agents across the country to sell bank products and to facilitate business transactions on behalf of the Group. In return, all these individuals and SMEs earn commission. GRIs Disclosure: Economic Focus Area: Sustainability Structures. Measure/Target: Sustainability structure enhancement Organisational Achievements: • • ESRM policy & procedures. ESG Coordination. Progress: NMBZ Group has in place an Environmental & Social Risk Management (ESRM) policy in place. The responsible officer within the Risk Management department coordinates all ESG programs and initiatives. The Group is in the process of enhancing its sustainability structures i.e. Sustainability Champions and Committees. As NMB Group, we have been also participating in sustainability learning forums and workshops during the period, to boost our understanding of climate related issues. Since 2020, the Group has been disclosing non-financial performance voluntarily as per the guidelines from the ZSE listing requirements and Global Reporting Initiative standards. 111 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021SUSTAINABILITY REPORT (Continued) GRIs Disclosure: Economic Focus Area: Attainment of Sustainable Development Goals (SDGs). Measure/Target: Support and collaborate with other stakeholders in attainment of SDGs. Organisational Achievements: Partnerships with Government institutions, Local authorities, NGOs and International stakeholders. Progress: NMBZ Group continues to enhance and introduce new sustainable products and programs and widen its influence in the areas of ESG issues. We are fully committed to the attainment of SDGs by year 2030, with the main targets being Quality education, Clean water & sanitation, Good health & well-being, Decent work & economic growth, Affordable & clean energy, Responsible consumption & Production, Gender equality, Climate action, Partnership for goals and Peace, Justice & Strong institutions. The Group will continue to enhance its non-financial disclosures as per the Zimbabwe Stock Exchange requirement and GRIs standards. NMB Group will continue collaborate with the government of Zimbabwe, NGOs, Churches, corporates, local authorities and other international organizations in ensuring that the Sustainable Development Goals (SDGs) are achieved. 112 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021NOTICE TO MEMBERS Notice is hereby given that the 27th Annual General Meeting of the Members of NMBZ Holdings Limited will be held at the NMB Bank Limited Head Office, 19207 Liberation Legacy Way, Borrowdale Harare on Friday 24 June 2022 at 1430 hours for the following purposes: ORDINARY BUSINESS 1. To receive and adopt the Financial Statements for the year ended 31 December 2021, together with the reports of the Directors and Auditors thereon. 2. To appoint Directors. a. In accordance with Article 83 of the Company’s Articles of Association, Mr. James de la Fargue retires by rotation. Being eligible, the Director offers himself for re-election. b. In accordance with Article 91.2 of the Company’s Articles of Association, Mrs. Emilia Chisango who was appointed as a Director of the Company with effect from 26 May 2022 retires from office. Being eligible, the Director offers herself for re-election. c. In accordance with Article 83 of the Company’s Articles of Association, Mr. Charles Chikaura, retires by rotation and does not offer himself for re-election. d. In accordance with Article 83 of the Company’s Articles of Association, Ms. Sabinah Chitehwe retires by rotation and does not offer herself for re-election. 2.1 To note the changes that occurred at Executive Management level following the retirement of Mr B P Washaya on 31 December 2021 and the appointment of Mr G Gore as Chief Executive Officer with effect from 1 January 2022. Further, Mr B Ndachena resigned effective 30 September 2021 and Mrs M Chipunza was appointed as Chief 3. 4. 5. Finance Officer with effect from 1 September 2021. To approve Directors’ fees for the year ended 31 December 2021. To approve Messrs Ernst & Young’s remuneration for the year ended 31 December 2021. To appoint Ernst & Young as the Company’s Auditors for the year ending 31 December 2022. Ernst & Young were appointed as the Company’s auditors with effect from 2017. SPECIAL BUSINESS SPECIAL RESOLUTIONS 1. Share Buy Back To consider, and if deemed fit, to pass, with or without modification, the resolution set out below: “That the Company, being duly authorised thereto by Article 10 of its Articles of Association, may undertake general repurchases by way of open market transactions on the Zimbabwe Stock Exchange ("ZSE") of any of its own ordinary shares in such manner or on such terms as the directors may from time to time determine provided that: a. the maximum number of shares authorised to be acquired is no more than 10% of the Company's ordinary issued share capital. b. for each share, the minimum price shall not be lower than the nominal value of the Company’s shares and the maximum 113 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NOTICE TO MEMBERS (Continued) SPECIAL BUSINESS (Continued) price that may be paid is 5% above the weighted average market price for the ordinary shares in the Company as derived from the Zimbabwe Stock Exchange (ZSE) Daily Price Sheet for the five business days immediately preceding the date on which such ordinary shares are contracted to be purchased. c. the authority in terms of this special resolution shall unless renewed prior to such time, expire on the first anniversary of this resolution or at the conclusion of the next Annual General Meeting of the Company, whichever is later, save that the Company, may before such expiry, enter into a contract or contracts to purchase its ordinary shares which would or might be completed wholly or partly after the expiry and may purchase its ordinary shares in pursuance of such contract or contracts.’’ 2. Share Option Scheme “That, the Directors of the Company be and are hereby authorised to establish the 2022 NMBZ Holdings Limited Employee Share Option Scheme, details of which are contained in the scheme document, a copy of which is hereby tabled in the Meeting and initialled and signed by the Chairman.” Notes: 1. A member of the company entitled to attend and vote at this meeting is entitled to appoint a proxy to attend, speak and on a poll, vote in his/her stead. A proxy need not be a member of the company. Proxy forms should be submitted at least 48 hours before the commencement of the meeting. 2. A Special Resolution is required to be passed by a majority of seventy-five per cent of those present and voting (including proxy votes), representing not less than twenty-five per cent of the total number of votes in the Company. 3. Please be advised that the 2021 Annual Report can be accessed on the company’s website: www. nmbz.co.zw. Electronic copies of the 2021 Annual Report (which includes the financial statements, Directors’ and Auditors’ Report) shall be emailed to those shareholders whose email addresses are on record. By Order of the Board MISS. V. T. MUTANDWA COMPANY SECRETARY 31 MAY 2022 114 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 EXPLANATIONS REGARDING THE NOTICE OF THE ANNUAL GENERAL MEETING Resolution 1 The Directors of the Company are obliged to present their Report and Accounts to shareholders of the Company at an Annual General meeting. This is a standard form of resolution common to all Annual General Meetings. Resolution 2 The Company’s Articles of Association require one third of the Directors to stand down at each Annual General Meeting and if they are eligible, they may offer themselves for re-election. The Directors retiring are Mr. James de la Fargue, Mr. Charles Chikaura and Ms. S. Chitehwe. Mr. James de La Fargue is offering himself for re-election while Mr. Charles Chikaura and Ms. Sabinah Chitehwe retire as directors of the Company. Mrs. Emilia Chisango was appointed by the directors effective 26 May 2022. In accordance with Article 91.2 of the Articles of Association of the Company, she retires from the board. Being eligible she offers herself for re-election. The re-election of each Director will be voted on separately. The profiles of the retiring Directors are as below: James de la Fargue – Non-Executive Director James de la Fargue represents African Century on the Board. He is a holder of a BA Business Organisation (Heriot-Watt University), ACCA, Diplomas in Marketing & Marketing Research and a Certificate in General Agriculture. James worked for a number of international organizations including Deloitte & Touché Management Consultants, Unilever PLC and Chargeurs SA. He is a former president of the Zimbabwe Tobacco Association and worked at MBCA as a senior executive in charge of Corporate Finance. James was involved in business consultancy work and management of an integrated farm in Centenary from 1998 to 2008. Since 2009, James has been with African Century Limited where he initially consulted for the group and later took up a position as Business Development Director of African Century Financial Holdings and as Executive Chairman of Frango King. He currently is the Chief Executive Officer of Lake Harvest, the largest tilapia farming operation in Africa. Emilia Chisango – Independent Non-Executive Director Emilia Chisango is a Chartered Accountant with more than 25 years working experience. Emilia spent 21 of those years working in an accounting firm and 6 years working as a Chief Finance Officer / Finance Director in the Telecommunications sector. She holds a Bachelor of Accountancy Honors Degree and a Certificate of Theory in Accounting. Emilia has recorded several firsts in her career, having been the first black female partner in any accounting firm in Zimbabwe and the first female president of the Institute of Chartered Accountants in Zimbabwe. She was selected to represent Zimbabwe in the Fortune /US State Department Global Women’s Mentoring Partnership in 2016. Paragraph 2.1 - no resolution is sought from the members, however members are being advised to take note of the changes that occurred at Executive Management level following the retirement of Mr B P Washaya on 31 December 2021 and the appointment of Mr G Gore as Chief Executive Officer with effect from 1 January 2022. Further, Mr B Ndachena resigned effective 30 September 2021 and Mrs M Chipunza was appointed as Chief Finance Officer with effect from 1 September 2021. 115 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 EXPLANATIONS REGARDING THE NOTICE OF THE ANNUAL GENERAL MEETING (Continued) Resolution 3 Shareholders are requested to approve Director’s fees. The Directors’ fees for 2021 amounted to ZWL 22,664,841.72 in historical cost terms. Resolution 4 The Remuneration of the auditors is required to be fixed by the Company in a General meeting in terms of section 191 (6) of the Companies and Other Business Entities Act [Chapter 24:31]. Accordingly, Members will be requested to approve the remuneration paid to the external auditors of Messrs Ernst & Young for the year ended 31 December 2021, which audit fee amounted to ZWL 20,773,857.95 in historical cost terms. Resolution 5 All public companies are required to appoint Auditors at each Annual General Meeting at which Financial Statements are presented, to hold office until the next such meeting in terms of section 191 (2) of the Companies and Other Business Entities Act [Chapter 24:31]. This resolution therefore proposes the appointment of auditors. In accordance with the Banking Act [Chapter 24:20], the Company is required to rotate its auditors every 5 years. Messrs Enrst & Young having served their 5-year term. However due to capacity challenges in the market, the bank sought a 2-year extension of the Ernst & Young term which extension was granted by the Reserve Bank of Zimbabwe. The Directors therefore propose the appointment of Messrs Ernst & Young as the Company’s auditors until the next Annual General Meeting. The Engagement Partner is Walter Mupanguri, a Registered Public Auditor, PAAB practice number 0367. Special Resolution 1 The directors are seeking authority to allow the use of the Company's available cash resources to purchase its own shares in the market in terms of the Companies Act and the regulations of the ZSE. The directors will only exercise the authority if they believe that to do so would be in the best interests of shareholders generally. In exercising this authority, the directors will duly take into account following such repurchase for the next 12 months, the ability of the Company to pay its debts in the ordinary course of business, the maintenance of an excess of assets over liabilities, and for the Company and Group, the adequacy of ordinary capital and reserves as well as working capital. Special Resolution 2 The Directors are seeking authority to establish the 2022 Share Option Scheme. The 2012 Executive Share Option Scheme expires at the conclusion of the 2022 Annual General Meeting. A copy of the scheme document is available for inspection at the Company’s Head Office. 116 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 NMBZ HOLDINGS LIMITED ANNUAL GENERAL MEETING PROXY FORM I / We …………………………………………………………………………………………………………………………………………………. Of ………………………………………………………………………………………………………………………………………………………. Being a member of NMBZ HOLDINGS LIMITED and entitled to vote, hereby appoint …………………………………………………………………………………………………………………………………………………………… Of ………………………………………………………………………………………………………………………………………………………. Or failing him …………………………………………………………………………………………………………………………………….. Of ………………………………………………………………………………………………………………………………………………………. As my/our proxy to vote on my / our behalf at the ANNUAL GENERAL MEETING of the Company to be held on Friday 24 June 2022 at 1430 hours and at any adjournment thereof. Signed this …………………………………………day of …………………………………..2022 Signature of member …………………………………………………………………………………………………………………………. Note: In terms of section 171 of the Companies and Other Business Entities Act [Chapter 24:31] a member of the Company is entitled to appoint one or more proxies to act in the alternative as his or her proxy and to attend, vote and speak in his / her stead. A proxy need not be a member of the Company. 117 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021SHAREHOLDER ANALYSIS Size of shareholding 2021 Number of shareholders % of Holders 2021 Issued Shares % of Shareholding 0 - 10,000 3,810 93.82% 2,994,763 0.74% 10,001 - 100,000 170 4.19% 6,315,814 1.56% 100,001 - 1,000,000 56 1.38% 19,234,147 4.76% 1,000,001 - 10,000,000 15 0.37% 45,436,341 11.24% 10,000,001 and above 10 0.25% 330,190,624 81.70% Total 4,061 100% 404,171,689 100% Size of shareholding 2020 Number of shareholders % of Holders 2020 Issued Shares % of Shareholding 0 – 10,000 10,001 - 100,000 100,001 – 1,000,000 1,000,001 - 10,000,000 10,000,001 and above Total 2021 Industry Banks 3,680 171 60 22 9 3,942 93.35 % 4.34% 1.53% 0.56% 0.23% 100% 2,889,490 6,027,354 21,309,044 69,426,640 304,519,201 404,171,689 0.71 % 1.49% 5.27% 17.18% 75.34% 100% Shareholders % of shareholders Shares % of Shares 2 0.05% 19,190 0.00% Local Companies 308 7.59% 19,202,646 4.75% Employees Estate Late External Companies Fund Managers Insurance Companies 238 5.86% 722,289 0.18% 3 7 3 7 0.07% 2,229 0.00% 0.17% 125,925,486 31.16% 0.07% 2,510 0.00% 0.17% 39,597,169 9.80% Investment Trusts And Property 36 0.89% 34,245,367 8.47% Local Residents Nominees Local Non Residents 3279 80.73% 16,536,275 4.09% 54 5 1.33% 31,845,282 7.88% 0.12% 111,970,853 27.70% Non Resident Individuals 39 0.96% 1,612,129 0.40% Other Corporate Holdings Pension Funds Total 3 77 0.07% 3,369 0.00% 1.90% 22,486,895 5.56% 4,061 100% 404,171,689 100% 118 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 SHAREHOLDERS’ ANALYSIS (Continued) Rank Shareholder 2021 Number of Shares % of Shareholding 1 2 3 4 5 6 7 8 9 10 African Century Financial Investments Ltd NNR, Arise B V Old Mutual Life Assurance Company Of Zimbabwe Limited Africinvest Financial Sector Holding, Lalibela Limited-Nnr, LHG Malta Holdings Limited Old Mutual Zimbabwe Limited Alsace Trust Cornerstone Trust TN Asset Management Nominees Total 76,426,874 18.91% 71,632,001 39,589,966 17.72% 9.80% 36,702,487 9.08% 23,104,516 20,014,400 17,066,917 16,885,381 16,875,582 11,880,000 5.72% 4.95% 4.22% 4.18% 4.18% 2.94% 330,178,124 81.69% 2020 Industry Banks CO Employee Estate Late External Companies Fund Managers Insurance Companies Investment Trusts And Property Local Resident Nominees Local Non Residents Non Resident Individual Other Corporate Holdings Pension Fund Total Shareholders % of shareholders 2 310 239 3 7 3 10 33 3,159 53 5 39 4 75 3,942 0.05% 7.86% 6.06% 0.08% 0.18% 0.08% 0.25% 0.84% 80.14% 1.34% 0.13% 0.99% 0.10% 1.90 % 100% Shares 19,190 61,188,517 742,143 2,229 110,029,366 2,510 42,769,956 34,127,245 14,873,679 2,901,481 112,135,058 1,624,716 5,069 23,750,530 404,171,689 % of Shares 0.00% 15.14% 0.18% 0.00% 27.22% 0.00% 10.58% 8.44% 3.68% 0.72% 27.74% 0.40% 0.00% 5.88% 100% 119 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021SHAREHOLDER ANALYSIS (Continued) Rank Shareholder 2020 Number of Shares % Shareholding 1 2 3 4 5 6 7 8 9 10 African Century Financial Investments Ltd NNR, Arise B V Old Mutual Life Assurance Company Of Zimbabwe Limited Africinvest Financial Sector Holding, Lalibela Limited-NNR, Alsace Trust Cornerstone Trust Omzil Stra Shareholder Trap Fund Drakmore Investments (Private) Limited Martcap Investments (Private) Limited 76,426,874 71,632,001 40,864,553 36,702,487 23,104,516 16,885,381 16,875,582 11,065,095 10,962,712 7,728,231 18.91% 17.72% 10.11% 9.08% 5.72% 4.18% 4.18% 2.74% 2.71% 1.91% Total 312,247,432 77.26% 120 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021SHAREHOLDERS’ INFORMATION MEMBERS’ DIARY Financial year end Reports:- 31 December 2021 - Announcement of annual results April 2022 - Annual financial statements posted to shareholders June 2022 - Annual General Meeting - Announcement of AGM results June 2022 June 2022 - Announcement of the 2022 half-year results August 2022 121 tribe_28tribe_28NMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 SECRETARY AND REGISTERED OFFICE Company Secretary V. T. MUTANDWA Registered Offices NMB Head Office 19207 Liberation Legacy Way (formerly Borrowdale Road) Borrowdale Harare Zimbabwe Telephone: +(263) 8688003347 Facsimile +(263) (242) 759648 Website: http://www.nmbz.co.zw Email: enquiries@nmbz.co.zw +(263) (2922) 70169 +(263) (2922) 68535 External Auditor Ernst & Young Chartered Accountants (Zimbabwe) 1st floor, Angwa City Corner Angwa Street / Kwame Nkrumah Avenue Harare Zimbabwe Transfer Secretaries First Transfer Secretaries 1 Armagh Avenue Eastlea Harare Zimbabwe Legal Advisor Gill, Godlonton & Gerrans 7th Floor, Beverley Court 100 Nelson Mandela Avenue Harare Zimbabwe 122 NMBNMBZ HOLDINGS LIMITED | ANNUAL REPORT 2021 

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