ZBFH Audited Results For FY Ended 31 Dec 13

AUDITED GROUP FINANCIAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2013
AUDITORS STATEMENT The financial results should be read in conjunction with the complete set of financial statements for the year ended 31 December 2013,which have been audited by KPMG and an unmodified audit opinion issued thereon. The auditor's report on these financial results is available for inspection at the Companys registered address. GROUP CHIEF EXECUTIVE'S REPORT Liquidity remained generally elusive throughout the year with no viable credit expansion initiatives in sight. Consequently, the misalignment of term structures between funders and borrowers continued to put a strain on the financial intermediation processes with the result that credit risk continued to increase as operating fundamentals for companies deteriorated. Interest margins remained very tight whilst growth in income earning assets was constrained. On the other hand, the Zimbabwe Stock Exchange posted mixed performances throughout 2013, resulting in marked volatility in the Group's earnings. On the back of a 1% increase in total deposits from US$216.7 million in 2012 to US$218.6 million in 2013, the Group could only afford an increase of 1% in its total assets which closed the year at US$332.0 million. The advances book receded by 2% from US$136.2 million to US$133.8 million as the Group focused more on recovery efforts whilst growth was deliberately restricted with greater emphasis being placed on high quality assets with credible security. As in the prior year, the Group continued to keep a significant portion of its assets in non-interest earning classes in order to provide liquidity cover. The liquidity ratios were maintained at above 35% for all regulated entities throughout the year whilst cash alone, at US$69.2 million, constituted 21% of the total assets for the Group at the close of the year. Despite a 1% reduction in operating expenses, the net profit for the year reduced by 92% from US$10.9 million in 2012 to US$0.9 million in 2013. This is on the back of a marked reduction in total net revenue which reduced from US$69.0 million to US$63.2 million. A 19% reduction in commissions and fees and a 55% reduction in fair value credits are the major contributors to the negative outturn. Additionally, a transfer of US$4.1 million was made to the life fund in 2013 compared to a transfer from the fund of US$1.7 million in 2012, thus a 341% negative outturn on the shareholder's pool of funds over the two years. These movements are largely influenced by the performance of the assets underpinning the life fund. Out of the US$0.9 million Group profit, only US$0.3 million is attributable to the owners of the holding company. Operations Review: Banking In addition to the general slowdown in business, banking operations in the Group were adversely affected by the restriction on amounts chargeable as banking fees and interest on lending products in terms of the Memorandum of Understanding concluded between banks and the RBZ in February 2013. Additionally, a cautious approach to asset creation was adopted during the year with emphasis on safety ahead of profits. In spite of the above challenges, both ZB Bank and ZB Building Society were able to post modest profits for the year. ZB Bank Limited (the Bank): ZB Bank posted a profit of US$0.8 million in 2013, dropping from US$5.6 million in 2012. Net interest income and commissions reduced by 4% and 10% respectively, constrained by limited portfolio growth and restricted rates and fees. Deposits dropped by 2% to close at US$199.3 million, thus restricting overall growth in total assets to only 1%. Non-performing loans at US$28.9 million constituted 17.3% of the aggregate loan book with a total of 37% of the non-performing book having been set aside as specific provisions and interest reserves. The balance is considered to be adequately covered by the security at hand. The Bank opened 3 new branches throughout the year and also expanded its point of sale (POS) network by installing 10 new automated teller machines (ATM) machines and numerous new POS machines. Integration of payment systems has been completed for a number of customers, particularly utility suppliers and academic institutions, yielding substantial improvement in customer experience. A weekend loan facility was launched during the year to cater for the informal sector whilst a holiday facility, Stay Now, Pay Later was introduced in partnership with a leading hospitality group. ZB Building Society (the Society): The Group posted a disappointing profit for the year of $0.9 million (2012:$10.9 million) This was due to a reduction in income which was not met by a commensurate decrease in costs. The decline in income was partly due to management's deliberate decision not to increase the lending book. This was done to curb the increase in the loans to deposit ratio which was restricted to 61%. The Memorandum of Understanding concluded between the Reserve Bank of Zimbabwe (RBZ) and the Bankers Association of Zimbabwe had a significant impact on the Group's revenues derived from banking commissions and charges. The Group has embarked on a group wide cost cutting exercise, benefits of which will be more visible in the future. The performance is discussed in more detail by the Group Chief Executive Officer in his report. Dividends The Directors have not recommended a dividend for the year ended 31 December 2013. Future Prospects The Group welcomes measures taken by the RBZ to defer the requirement for a capital level of US$100 million for commercial banks to the year 2020. Consequently, the Group has strategically slowed down the search for new equity partners in order to avoid the possibility of a dilutive transaction at unfavourable prices. It is also hoped that the approach will give ample opportunity for the Group to engage with parties that will deliver strategic value to the business. The merger of the Group's banking operations stalled on account of technical issues and the need to expose the relative valuations to detailed scrutiny. The transaction is now expected to be concluded before the end of the first half of 2014. Material issues The Company and its subsidiaries continue to be listed as Specially Designated Nationals (SDNs) by the Office of Foreign Assets Control (OFAC) of the United States of America's Treasury Department. The legal matter in which Transnational Holdings Limited has been challenging the acquisition of Intermarket Holdings Limited by ZB Financial Holdings has remained pending. Acknowledgement The Board and I would like to thank Mr. Elisha Mushayakarara, our longstanding Group Chief Executive, who retired from the Group on 31 May, 2013. Mr. Mushayakarara served the Group with distinction. We wish him well in his retirement and success in his new endeavours. Mr. Ronald Mutandagayi, the former Managing Director of ZB Bank was appointed Group Chief Executive on 1 June, 2013. The Board welcomes Mr. Mutandagayi to his new position and acknowledges his efforts in the seven months he has been in office. The Board wishes him a long and successful career with the Group. Sadly, during the year the Group lost its Executive Head of Human Resources and Training, Mrs Pumla Simela Ncube, who passed on in October, 2013. The Board and all at ZBFH remember Mrs Simela Ncube with much fondness and recognise her contributions to the Group. Ms Iris Chirisa, an IT Consultant, was appointed to the Board in December 2013. The Board welcomes Ms Chirisa to the Group. On behalf of the Board, I would like to thank management and staff for remaining steadfast in a tough economic environment. I also wish to thank all our business stakeholders and authorities for their continued support. Finally, I would like to thank all the directors in the Group for their commitment and wise counsel during the year. B P Nyajeka Chairman 24 March, 2014 The Society posted a profit of US$2.0 million in 2013, a reduction of 10% from the US$2.2 million posted in 2012. Total income reduced from US$7.9 million to US$7.7 million. The Society experienced a reduction in deposits of 11% whilst loans and advances increased by 25% on the back of investment supported mortgage facilities. The selling of stands at Springvale project in Ruwa continued during the year, with 100 stands having been reserved for the development of super structures. Insurance ZB Life Assurance: Gross premium income increased by 9% to close at US$7.4 million in 2013. The underwriting surplus closed at 29% with claims and benefits having decreased by the same magnitude of 29% to US$2.9 million. A fair value credit of US$3.8 million contributed 39% to the net revenue posted by the Life Assurance Company. The Company posted a profit of US$0.4 million against a loss of US$0.4 million in 2012 after a transfer to the life fund amounting to US$4.1 million (2012 transfer from the life fund of US$1.7 million) As a consequence of the positive performance of the underlying assets, the life fund increased from US$20.4 million in 2012 to US$24.5 million in 2013. A new product, the Unit Linked Endowment Plan, was launched in the last quarter of 2013 whilst selling of the Morecover Funeral Plans was escalated. The agency force was increased in order to stimulate market penetration. ZB Reinsurance: Gross premium increased by 28% from US$16.1 million in 2012 to close at US$20.6 million in 2013. The retention ratio of 72% was a reduction from 83% achieved in 2012. A loss ratio of 48% was achieved. This represents an improvement from the 54% posted in 2012. The combined ratio was maintained at 96% with a 47% solvency ratio being achieved, well above the regulatory threshold of 25%. The Company posted a profit of US$1.2 million up from US$0.8 million in 2012. Fund Management and Stock-broking Operations The low volumes of trade on the Zimbabwe Stock Exchange and the general lack of liquidity on the market continued to affect the performance of the asset management and the stock-broking companies. ZB Asset Management Company closed the year with funds under management of US$56.2 million, a 17% increase from the prior year. The Company posted a loss of US$0.03 million, representing an improved outturn of 110% from the prior year. On the other hand, ZB Securities posted a loss of $0.3 million, worsening from a loss of $0.2 million in 2012. Operations Outlook Given the amplified challenges in growing operating assets and revenues, cost containment will receive even greater attention during 2014. Measures will also be taken to stimulate revenue growth in order to preserve and grow value in the enterprise. Additionally, a review of the investment portfolio will be conducted in order to engender operational efficiencies. Group Human Resources The Group staff complement as at 31 December 2013 stood at 1 628, comprising of 1 005 permanent employees and 623 contract staff, inclusive of 171 agents for the Life Assurance business. A cordial industrial relations atmosphere prevailed throughout the year. A total of 980 attendances were recorded at 53 training courses as the Group continues to improve its skills. Interest income Interest expense Net interest income Allowance for loan impairment Net income from lending activities Gross insurance premium income Insurance expenses Net insurance premium income Other operating income Fair value adjustments Total income Operating expenses Operating income Transfer from / (to) life assurance funds Share of associate companies' profit, net of tax Profit before taxation Income tax expense Profit for the year Other comprehensive income: Items that will not be classified to profit or loss Gains on property revaluation Share of associate companies' revaluation reserve, net of tax Income tax relating to components of other comprehensive income Other comprehensive income for the year net of tax Total comprehensive income for the year Profit attributable to: Owners of parent Non-controlling interest Profit for the year Total comprehensive income attributable to: Owners of the parent Non-controlling interests Total comprehensive income for the year Earnings per share Basic and fully diluted earnings per share (dollars) Dividend per share Audited
31 December
Appreciation I would like to express gratitude to our valued customers for their continued support. I also thank the Board Chairman and all Directors in the Group for the wise counsel they rendered since my assumption of the position of Group Chief Executive on 1 June, 2013. Finally, I wish to acknowledge and commend our management and staff for their unwavering commitment to duty. R Mutandagayi Group Chief Executive Officer 24 March, 2014
FINANCIAL HIGHLIGHTS
STATEMENT OF FINANCIAL POSITION 2013 Total Assets Total Capital And Reserves Return on Equity Total Capital to Total Assets Ratio (Group) Loan Loss Provision Ratio (Group) Liquidity Ratio (Group) STATEMENT OF PROFIT OR LOSS 2013 Total Income Transfer from/(to) Life Fund Profit After Taxation Basic Earnings Per Share Cost Efficiency Ratio** 64 953 237 (4 060 867) 868 105 0.002 91.20% 2012 70 712 667 1 700 962 10 859 001 0.05 84.75% % CHANGE (8%) (339%) (92%) (96%) (6%) 20.27% 3.09% 38.77% 20.39% 4.06% 38.26% 1% (24%) 1.33% Restated 2012 % CHANGE 1% 1% (93%)
332 030 902 328 101 221 67 291 750 1.29% 66 897 409 18.15%
ZB FINANCIAL HOLDINGS LIMITED AUDITED FINANCIAL STATEMENTS 31 DECEMBER 2013
AUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 31 December 2013 Restated Audited 31 December 2012 US$ Restated Audited 1 January 2012 US$
Audited 31 December 2013 US$ ASSETS Cash and cash equivalents 69 160 246 Money market investments 15 605 190 Mortgages and other advances 133 805 128 Investment securities 23 963 517 Investments in associates 14 171 551 lnventories, trade and other receivables 3 663 858 Investment properties 16 633 934 Property and equipment 44 378 989 Intangible assets 8 734 237 Deferred tax asset 1 914 252 Total assets LIABILITIES Deposits and other accounts Amounts due to other banks Short term borrowings Trade and other payables Current tax liabilities Life assurance funds Deferred tax liabilities Total liabilities EQUITY Share capital Share premium Other components of equity Retained income 1 751 906 27 081 696 16 306 395 11 814 783 56 954 780 10 336 970 67 291 750 332 030 902 218 615 988 168 059 3 750 000 13 262 913 470 646 24 467 521 4 004 025 264 739 152 332 030 902
Total income excluding allowances for loan impairment CHAIRMAN'S STATEMENT Environment Macroeconomic conditions remained difficult in 2013, owing to the slowdown in economic activity, with the under-performance of the real sectors being reflected in the rising number of company closures and job losses. While in quantitative terms, Gross Domestic Product (GDP) increased at a decreasing pace in 2013, registering an estimated real growth of 3.4% (2012: 10.6%), this did not translate into a noticeable upturn in economic activity and an improvement in liquidity in the economy. On the back of the depreciating value of the Rand relative to the United States Dollar and diminishing aggregate demand, as a result of acute domestic liquidity shortages, inflation remained generally low in 2013, averaging 1.64% year-on-year. The economy also endured a slowdown in the annual growth of money supply, from 21.09% in January 2013 to 3.29% in December 2013, reflecting the absence of fiscal space and meaningful capital inflows by way of export earnings, credit lines and foreign direct investment. Outlook In the outlook period, full implementation of the Zimbabwe Agenda for Sustainable Socio-Economic Transformation (ZIMASSET) is expected to provide some growth impetus to the economy, particularly in agriculture, mining and quarrying, Information and communication technology (ICT), construction, small and medium enterprises (SMEs) and real estate sectors. However, this should be premised on the availability of funding mechanisms, which should help to improve the liquidity conditions in the economy. The full assumption of the role of lender of last resort by the Reserve Bank of Zimbabwe will also assist in stabilizing and strengthening the financial sector. The Group's Performance
69 726 565 13 192 365 136 195 690 20 509 581 12 945 367 5 058 447 16 780 703 43 044 354 9 718 994 929 155 328 101 221
51 954 400 6 613 975 117 857 764 20 069 238 11 350 068 4 934 830 9 412 049 39 706 525 8 303 614 661 986 270 864 449
216 727 944 109 353 6 716 657 12 485 768 757 460 20 406 654 3 999 976 261 203 812
169 179 024 62 524 5 203 433 16 762 794 1 566 803 22 107 616 3 240 971 218 123 165
1 751 906 27 204 178 16 567 880 11 272 600 56 796 564 10 100 845 66 897 409 328 101 221
1 751 906 27 337 466 12 660 903 4 060 464 45 810 739 6 930 545 52 741 284 270 864 449
Non-controlling interests Total equity Total equity and liabilities
AUDITED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For the year ended 31 December 2013
Restated Audited
31 December
2013 US$ 36 042 073 (14 411 034) 21 631 039 (1 734 701) 19 896 338 27 909 541 (19 878 573) 8 030 968 32 719 859 2 571 371 63 218 536 (59 235 737) 3 982 799 (4 060 867) 1 148 051 1 069 983 (201 878) 868 105
2012 US$ 34 985 757 (13 741 149) 21 244 608 (1 750 174) 19 494 434 22 837 204 (17 445 115) 5 392 089 38 332 984 5 742 986 68 962 493 (59 931 478) 9 031 015 1 700 962 1 594 364 12 326 341 (1 467 340) 10 859 001
93 901 78 138 (4 695)
4 933 933 936 (924 352)
167 344 1 035 449
4 010 517 14 869 518
320 863 547 242 868 105
8 988 464 1 870 537 10 859 001
509 867 525 582 1 035 449
11 668 664 3 200 854 14 869 518
0.002 -
0.051 0.003
ZBFH 272
01
AUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 31 December 2013
Properties revaluation reserve US$ Attributable to equity Nonholders of controlling parent interests US$ US$
Share capital US$ Restated balance at 1 January 2012
Share premium US$
General reserve US$
Retained income US$
- Loan loss provisioning - Deferral of earnings on loan products using the effective interest method, and - Ascertaining degree of control or significant influence.
Total US$

3. LIFE ASSURANCE FUNDS Restated Audited
31 December
1.5
Adoption of new accounting standards: IAS 28 (as revised in 2011) Investments in Associates and Joint Ventures became effective from 1 January, 2013 and superseded IAS 28 (as revised in 2008). Paragraph 28.18 of IAS 28 (as revised in 2011) provides election for the equity accounting for investment-linked insurance funds. Previously these were designated as 'at fair value through profit or loss' in accordance with IAS 39 as a result of a scope exemption carried in paragraph 28.1 of IAS 28 (as revised in 2008). The Group controls the significant interest in Mashonaland Holdings Limited (Mash), a Zimbabwe Stock Exchange listed company, through a joint investment in the company by the life fund and proprietary funds. Hitherto, the whole investment has been accounted for as a trade investment 'at fair value through profit or loss', on the basis that it was an investment by an investment linked fund. The investment linked insurance fund..' exemption as contemplated by IAS 28 (as revised in 2008), or alternatively election to account 'at fair value through profit or loss..' in terms of IAS28.19 (IAS 28 (as revised in 2011) is restricted only to the qualifying investment, that is to say, does not extend to the proprietary portion of the investment. In the case of the investment in Mash the Group controlled a total of 32% with an effective 11% being due to the equity holders of the parent company. Application of the standard in relation to the Mash investment has resulted in a retrospective change of the accounting basis from ..fair value through profit or loss to equity accounting as an associate for the portion owned by the shareholders of the Group, therefore comparative information has been restated. The effect this change has on prior year numbers is indicated below:31 Dec 2012 31 Dec 2011
As previously stated Restated As previously stated 30 828 317 272 579 415 218 123 165 Restated US$ 20 069 238 270 864 449 218 123 165
1 751 906 27 337 466 1 664 867
10 996 036
4 060 464 45 810 739 6 930 545 52 741 284
Audited
31 December
Profit or loss Profit for the year Other comprehensive income, net of tax Revaluation of property Transactions with owners of the parent Distributions Dividend paid Other movements Treasury shares Regulatory reserve in respect of doubtful debts Transfer from retained income
8 988 464
8 988 464 1 870 537 10 859 001
2013 US$ Balance at beginning of year Changes in policyholders' liabilities - Premium income - Investment and other income - Benefits paid and surrenders - Marketing and administration expenses - Surplus distribution Balance at end of year 20 406 654 4 060 867 7 358 605 5 201 108 (2 880 004) (4 953 029) (665 813) 24 467 521
2012 US$ 22 107 616 (1 700 962) 6 307 106 5 399 568 (3 639 596) (6 690 243) (3 077 797) 20 406 654
2 680 200
2 680 200 1 330 317
4 010 517
(133 288)
66 854
(580 105) (1 129 369) (66 854)
(580 105) (133 288) 30 554 -
(30 554) -
(580 105) (133 288) -
- 1 159 923 -
Restated balance at 31 December 2012 1 751 906 27 204 178 2 824 790 Profit or loss Profit for the year Other comprehensive income, net of tax Revaluation of property Transaction with owners of the parent Distributions Dividend paid Other movements Treasury shares (122 482) Regulatory reserve in respect of doubtful debts (132 739) Transfer to retained income (317 750) Balance at 31 December 2013 1 751 906 27 081 696 2 374 301
13 743 090
11 272 600 56 796 564 10 100 845 66 897 409
320 863
320 863
547 242
868 105
Life assurance funds are due to contributing policyholders at the Life Company as determined by the terms and conditions or practices applicable to each policy. Policy contracts issued by the Life Company transfer insurance or financial risk, or, in some instances, both, from one party to another. Insurance contracts result in the Group accepting significant insurance risk from the policyholder by agreeing to compensate the policyholder if a specified uncertain future event (the insured event) adversely affects the policyholder. Investment contracts, on the other hand, are those that transfer financial risk with no significant insurance risk. Financial risk is the risk of possible future change in one or more of a specified interest rate, financial instrument price, commodity price, index of prices or rates, credit rating or any other variable. Insurance contracts are valued in terms of the Financial Soundness Valuation (FSV) basis, on a gross premium valuation methodology and the liability is reflected in the statement of financial position. The liability is based on assumptions of the best estimate of future experience, plus compulsory margins for prudent liabilities, plus additional discretionary margins. Such valuation is carried out annually by independent actuaries. Life fund liabilities are supported by the following net assets: Audited Restated Audited
31 December
189 004
189 004
(21 660)
167 344
13 932 094
(461 439) 182 759 500 000
(461 439) (122 482) 50 020 182 250
(57 187) (50 020) (182 250)
(518 626) (122 482) -
11 814 783 56 954 780 10 336 970 67 291 750
AUDITED CONSOLIDATED STATEMENT OF CASH FLOWS

Audited
31 December
Restated Audited
31 December
2013 US$ Cash flows from operating activities Interest received Dividend received Interest paid Income taxes paid Net cash generated from operating activities Cash flows used in investing activities Purchase of investment properties Proceed on disposal of investment property Purchase of intangible assets Purchase of property and equipment Proceeds on disposal of property and equipment Purchase of investment securities Proceeds on disposal of investment securities Net cash used in investing activities Cash flows used in financing activities Purchase of treasury shares Dividend paid Net cash used in financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of year Effects of exchange rates fluctuating on cash and cash equivalents Cash and cash equivalents at end of year Cash and cash equivalents comprise: Cash Local bank accounts Foreign bank accounts (14 060 347) 36 042 073 255 960 (14 411 034) (1 474 435) 6 352 217
2012 US$ 6 135 686 34 985 757 526 088 (13 741 149) (2 709 199) 25 197 183
Trade investments Total assets Total liabilities Total equity attributed to shareholders of parent company Outside shareholders interests Reported Income before taxation Reported profit after taxation Reported profit attributed to shareholders' of parent company Reported profit attributed to outside shareholders interests Reported other comprehensive income Reported other comprehensive income attributed to shareholders' of parent company Reported other comprehensive income attributed to outside shareholders' interests
29 003 851 326 729 967 261 203 812
20 106 623 328 101 221 261 203 812
52 097 021 13 429 134
56 796 564 10 100 845
43 500 928 10 955 318
45 810 739 6 930 545
31 December
2013 US$ Listed equities Unlisted equities Gold fund Government and public utilities stock Investment properties Funds on deposit Gross assets Less: Deferred tax liabilities Trade and other payables Income tax payable Net assets 9 771 756 3 570 794 406 497 268 567 2 780 736 8 397 825 25 196 175 (342 872) (389 934) 4 152 24 467 521
2012 US$ 7 781 506 3 328 267 581 912 402 959 2 828 736 5 908 442 20 831 822 (245 197) (174 442) (5 529) 20 406 654
9 148 672 7 772 786
12 326 341 10 859 001
8 968 877 7 029 666
8 968 877 7 029 666
6 598 735
8 988 464
5 800 787
5 800 787
1 174 052
1 870 537
1 228 879
1 228 879
94 985 (1 164 816) (4 180 173) 137 672 (1 927 510) 963 782 (6 076 060)
(143 934) (3 035 445) (2 786 480) 122 205 (2 808 498) 3 009 191 (5 642 961)
4 010 517
4 010 517
1 992 759
1 992 759
9 278 934
11 668 664
7 589 608
7 589 608
2 504 370
3 200 854
1 432 816
1 432 816
The assets and liabilities indicated above are included under appropriate sections in the consolidated statement of financial position. 4 4.1 CONTINGENT LIABILITIES Contingent liabilities Restated Audited 31 December 2012 US$ 25 366 068
(122 482) (518 626) (641 108) (364 951) 69 726 565
(133 288) (580 105) (713 393) 18 840 829 51 954 400
2 2.1
SEGMENT INFORMATION Segment results

Fund management US$ Reinsurance and life assurance US$ Other operations US$
Banking US$ 31 December 2013 External revenue Net interest income Net fee and commission income Net trading income Net income from other financial instruments at fair value through profit or loss Other revenue Total segment revenue Other material non-cash items: Depreciation Armotisation of intangible assets Reportable segment profit before taxation Reportable segment assets Reportable segment liabilities
Consolidated US$
Audited 31 December 2013 US$ In respect of guarantees 23 832 413
(201 368) 69 160 246
(1 068 664) 69 726 565
19 747 201 29 585 141 -
20 433 670 352 -
190 818 8 030 968 -
(62 114) (3 872 084) 186 557
19 896 338
5.
34 414 377 186 557
RISK MANAGEMENT Capital risk management The Group's capital consists of equity attributable to the shareholders of the parent Company, comprising the issued share capital, reserves and retained income and debt, which includes direct loans plus the residual funding from deposit taking activities after deducting the associated liquid or near-liquid assets. The Group's operating target is to maintain operating assets at a level that is lower than the available operating funds at all times in order to restrict recourse on shareholders' equity for operational funding. This objective was met at all times during the course of the year under review. Consequently, gearing was maintained at nil throughout the year. The banking, asset management and insurance operations in the Group are subject to prescribed minimum regulatory capital requirements and minimum capital adequacy and solvency ratios as prescribed from time to time. Management of the Group monitors the level of capital adequacy on a continual basis, employing techniques adopted from the guidelines developed by the Basel Committee and contained in the Basel II capital accord as implemented by the supervisory authorities for each of the affected entities. For the life assurance business, regular actuarial reviews are undertaken to establish the solvency of the business
5.1
43 262 442 17 555 385 8 342 419 69 160 246
41 295 499 21 235 916 7 195 150 69 726 565
70 363 3 408 851 52 811 556
37 773 41 202 769 760
4 097 714 1 235 686 13 555 186
(1 634 479) 1 464 154 (3 917 966)
2 571 371 6 149 893 63 218 536
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2013 1 1.1 BASIS OF PREPARATION Reporting currency The financial statements of the Group are presented in United States dollars (US$), which is the Groups functional currency. All information presented has been rounted to the nearest dollar. 1.2 Statement of compliance The financial statements are based on accounting records maintained under the historical cost convention as modified by the revaluation of property and equipment and certain financial instruments, and have been prepared in accordance with International Financial Reporting Standards (IFRSs), promulgated by the International Accounting Standards Board (IASB) which includes standards and interpretations approved by IASB, the International Financial Reporting Interpretations Committee (IFRIC) interpretations, and in the manner required by the Companies Act (Chapter 24:03), the Banking Act (Chapter 24:20), the Asset Management Act (Chapter 24:26), the Building Society Act (Chapter 24:02), the Insurance Act (Chapter 24:07) and the relevant regulations made thereunder. 1.3 Basis of consolidation The Group financial results incorporate the financial results of the Company, its subsidiaries and associate companies. Subsidiaries are entries controlled by Group. The Group controls an entity when it is exposed to, or has rights to variables returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The results of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases. Control exists when the Group has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The financial results of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. All intra-group balances, transactions, income and expenses; profits and losses resulting from intra-group transactions that are recognised in assets and liabilities are eliminated in full. Non-controlling interests represent the portion of profit and net assets that is not held by the Group and are presented separately in the consolidated statement of profit or loss and other comprehensive income and within equity in the consolidated statement of financial position, separately from parent shareholders' equity. 1.4 Key sources of estimation uncertainty Significant assumptions and estimations as at the date of financial reporting, with a material impact on the reported outturn have been made in the following areas: - Fair value adjustment for unquoted investments - Valuation of property and equipment and investment properties -Useful lives and residual values of property and equipment - Estimation of incurred but not reported (IBNR) insurance claims - Valuation of the life fund
2 216 074 1 942 907
11 989 9 200
275 363 134 804
237 321 12 651
2 740 747 2 099 562
3 269 013
(47 613)
2 198 325
(4 349 742)
1 069 983
307 317 246 244 645 029
910 994 235 678
44 896 864 31 772 499
(21 094 202) (11 914 054)
332 030 902 264 739 152
5.2
Banking US$ Restated 31 December 2012 External revenue Net interest income Net fee and commission income Net trading income Net income from other financial instruments at fair value through profit or loss Other revenue Total segment revenue Other material non-cash items: Depreciation Armotisation of intangible assets Reportable segment profit before taxation Reportable segment assets Reportable segment liabilities Fund management US$ Reinsurance and life assurance US$ Other operations US$ Consolidated US$
Financial risk management The Group maintains active trading positions in a variety of non-derivative financial instruments in anticipation of customer demand. The Group manages its trading activities by type of risk involved and on the basis of the categories of trading instruments held. Regular feedback on risk related matters is provided to the Board through the Board Risk Committee. The Group defines financial risk collectively to include liquidity risk, market risk and credit risk.
19 712 262 31 283 481 -
25 302 618 513 -
216 979 5 392 089 -
(460 109) (1 777 765) 383 690
19 494 434 35 516 318 383 690
5.2.1 Liquidity risk Definition Liquidity risk arises in the general funding of the Group's activities and in the management of positions. It includes the risk of being unable to fund liabilities at appropriate maturities and rates and the risk of being unable to liquidate an asset at a reasonable price and in an appropriate time frame. Identification techniques This risk is identified through gap and maturity analysis. Measurement methods Liquidity risk is measured using the gap analysis techniques and the term structure of assets and liabilities. Impact evaluation Liquidity risk is considered moderate for the Group due to the pervasive mismatch of assets and liabilities in all time brackets and a generally illiquid market out turn which makes the mobilization of funds difficult in the event of adverse systemic events occurring on the market. Not withstanding the above the, Group maintained a level of liquid resources at above 30% of available deposits in order to cater for customer transactional demands. Strategies for management/mitigation The Group has access to a diverse funding base and can raise funds using a broad range of instruments including deposits, liabilities evidenced by paper and share capital. The Group has funding flexibility and this limits dependence on any one source of funding. Liquidity risk is managed by Group Treasury in consultation with the Assets and Liabilities Committee (ALCO).
ZBFH 272
5 817 622 17 815 644 74 629 009
(184 518) 393 357 852 654
(1 235 282) 6 632 194 11 005 980
1 345 164 (17 016 130) (17 525 150)
5 742 986 7 825 065 68 962 493
2 418 780
8 144
260 254
103 727
2 790 905
1 449 621
9 200
97 702
8 450
1 564 973
11 325 888
(376 771)
888 489
488 735
12 326 341
307 401 997 245 131 609
971 396 263 201
36 658 921 27 116 985
(16 931 093) (11 307 983)
328 101 221 261 203 812
02
Monitoring and controlling mechanisms The funding gap is monitored through a number of management reports including maturity profiles. The Group continually assesses risk by identifying and monitoring changes in funding required to meet business objectives and targets set in terms of the overall Group strategy. Other tools used are the imposition of dealer limits, reporting on facility utilizations and excesses that require management attention. Adequacy and effectiveness of risk management systems The liquidity risk management and control mechanisms in place are adequate, effective and are adhered to by all staff members. Restated Audited 31 December 2012 US$ 82 918 930 216 727 944 38.26% 30% Strategies for management/mitigation The Group manages its exposure to equity price risk by maintaining a diversified portfolio. Adequacy and effectiveness of risk management system The risk management system has proved adequate and effective in managing equity price risk. Sensitivity analysis A 10% increase / decrease in the value of listed shares as at 31 December 2013 would result in an increase / decrease of US$2.6 million to the reported Group's profit and an increase / decrease of US$2.6 million in equity. 5.2.3Credit risk Definition Credit risk is the risk that a counter party will not honour its obligations to the Group as and when they become due. Identification techniques Prior to granting facilities, the Group conducts an assessment proposal through a credit scoring system which classifies as good or bad depending on points scored. Thereafter facilities extended to clients are reviewed on a regular basis and classified accordingly. Measurement methods The risk is measured through assessing the risk of default using a credit risk-rating matrix. Impact evaluation Credit risk is rated moderate due to increased market wide company failures as well as apparently increased debt burden on individuals due to a proliferation of credit facilities. Strategies for management/mitigation The Group has a credit risk management process which operates through a hierarchy of exposure discretions. All exposures above a certain level require the approval of the Board Credit Committee's which comprises executive and non-executive directors. Exposures below the Board Credit Committee's discretion are approved according to a system of tiered exposure discretions consisting of Divisional and Group Credit Committees. A substantial portion of the Group's individual and corporate borrowings is insured for nonperformance whilst security of various other forms is obtained for large exposures. Monitoring and controlling mechanisms Regular credit audits and reviews are conducted and problem accounts are highlighted and management action is taken as appropriate. Adequacy and effectiveness of risk management systems The credit risk management and control techniques alluded to above are adequate and effective and all staff members are required to adhere to them. The table below shows the credit exposure by client quality classification: Restated Audited 31 December 2012 US$

5.3 Other business risks
5.3.1Operational risk Definition Operational risk is inherent in all business activities and this is the potential of loss arising from deficiencies in internal control systems, poor operational standards, errors and deliberate acts of fraud and collusion to override internal control systems. Identification techniques The Board Audit Committee, through the medium of the internal audit function, assesses the efficacy of the internal accounting controls and makes recommendations for improvement to the Board of Directors. Measurement methods The risk is measured by the extent of loss due to system failure reported during the period. Impact evaluation The Group has assessed this risk category as medium based on the adequate internal control system. Strategies for management/mitigation The Group manages the risk through staff training and development, segregation of duties, reviewing the work performed and regular internal and independent audits. Further, the Group has administration manuals to guide staff in the execution of their duties and these manuals are reviewed regularly. In addition, the Group has comprehensive insurance arrangements in place to mitigate the impact of any loss events. Monitoring and controlling mechanisms Any losses incurred as a result of this risk are reported through the line to the Board Audit Committee and lessons learnt from each incident are used as case studies in training staff, improving the control procedures and the control environment. Adequacy and effectiveness of risk management systems Management is confident that the operational risk management systems noted above are adequate, effective and are adhered to in all material respects by all staff members. 5.3.2 Legal, reputational and compliance risks Definition Legal risk is the risk that the Group can be involved in litigation resulting in loss of money and/or impaired reputation. Compliance risk refers to the risk of failure to comply with material rules, regulations and laws. Identification techniques All agreements entered into by the Group are reviewed by the Legal Department to make sure that they are consistent with normal market practices. Measurement methods The Group has a Compliance Department which monitors and ensures that the Group is complying with all the rules, regulations and laws of the country in all material respects. The Group Compliance Officer reports to the Board Audit Committee on a quarterly basis on all compliance related issues. Impact evaluation The Group considers this risk as low in the view of the adequate systems of internal controls. Strategies for management through mitigation The Group manages this risk through staff training and development, regular and independent audits. Monitoring and controlling mechanisms Any losses incurred are reported to the Board Audit, Board Risk and Board Executive Committees. Lessons learnt are used in staff training to avoid recurrences. Adequacy and effectiveness of the risk management system The management system for legal, reputational and compliance risks is adequate and effective and all staff members adhere to the system. 5.2.3Credit risk Definition Credit risk is the risk that a counter party will not honour its obligations to the Group as and when they become due. Identification techniques Prior to granting facilities, the Group conducts an assessment proposal through a credit scoring system which classifies as good or bad depending on points scored. Thereafter facilities extended to clients are reviewed on a regular basis and classified accordingly. Measurement methods The risk is measured through assessing the risk of default using a credit risk-rating matrix. Impact evaluation Credit risk is rated moderate due to increased market wide company failures as well as apparently increased debt burden on individuals due to a proliferation of credit facilities. 5.3.3Technological risk
Audited 31 December 2013 US$ Total liquid assets Total liabilities to the public Liquidity ratio at 31 December Minimum statutory liquidity ratio 5.2.2 Market risk 84 765 436 218 615 988 38.77% 30%
Market risk arises from adverse movements in the market place which cause interest rate, foreign exchange rate and equity price fluctuations in the markets in which the Group operates. 5.2.2.1Interest rate risk Definition The Group's operations are subject to the risk of interest rate fluctuations to the extent that interestearning assets and interest bearing liabilities mature or reprice at different times or in differing amounts. Risk management activities are aimed at optimising net interest income, given market interest rate levels consistent with the Group's business strategies.interest rate levels consistent with the Group's business strategies. Identification techniques Interest rate risk is identified using the term structure of assets and liabilities. Measurement methods Rate sensitive assets and liabilities are analyzed and a maturity profile established. Impact evaluation The Group has evaluated this risk as low. Adequate systems are in place to ameliorate the risk. Strategies for management / mitigation The Assets and Liabilities Committee (ALCO) reviews the gap analysis and appropriate action is taken to keep risk within acceptable limits. In the main, lending is linked to the Group's prime rate and is funded through short-term borrowings thus narrowing the gap. Monitoring and controlling mechanisms ALCO meets regularly to discuss the future direction of interest rates after the economic fundamentals have been analyzed. Decisions are then taken on rate sensitive assets and liabilities. If economic fundamentals turn out differently, ad-hoc ALCO meetings are convened to discuss the said issues and chart a way forward. Adequacy and effectiveness of risk management systems The interest rate risk management systems noted above are adequate and effective in dealing with the interest rate risk. Sensitivity analysis A 2% change in the rate sensitive assets would result in the reported profits being increased or decreased by US$40 101 and the total assets in the statement of financial position being increased or decreased by US$5.1 million using an average margin of 1.05% per annum. A 2% change in the rate sensitive liabilities would result in the reported profits being increased or decreased by US$34 736 and the total liabilities in the statement of financial position being increased or decreased by US$4.4 million using an average margin of 1.05% per annum. 5.2.2.2Foreign exchange risk Definition Foreign exchange risk is the risk that arises from adverse changes in foreign exchange rates and emanates from a mismatch between foreign currency inflows and outflows. Identification techniques The risk is identified through the analysis of the Group's open foreign exchange positions. Measurement methods The risk is measured through the Group's open foreign exchange positions. Impact evaluation The Group has evaluated this risk as low in view of the low volumes traded and the multi-currency environment. Strategies for management/mitigation The risk is managed through ALCO directives, compliance with the requirements of the Reserve Bank of Zimbabwe and market analysis techniques. Monitoring and controlling mechanisms The risk is controlled through the use of dealer limits placed on the overall foreign exchange position. Adequacy and effectiveness of risk management system Management is confident that the foreign exchange risk management systems in place are adequate, effective and are complied with in all material respects by all staff members. Foreign currency position The carrying amount of the Group's non United States dollar monetary assets and liabilities as at 31 December 2013 were as follows: Restated Audited 31 December 2012 US$ 8 212 628 (4 580 859) 3 631 769
Audited 31 December 2013 US$ Classification Good Sub-standard Doubtful Loss Total
141 536 522 298 582 6 077 435 22 127 145 170 039 684
135 315 901 1 609 899 3 721 065 20 914 895 161 561 760
Balances includes guarantees which are reported as off balance sheet exposures. loans and advances to customers 31 Dec 2013 31 Dec 2012 US$ US$ Carrying amount Assets at amortised cost Individually impaired: Grade 6: Impaired Grade 7: Impaired Grade 8: Impaired Grade 9: Impaired Grade 10: Impaired Gross a-mount Allowance for: Impairment Interest reserve Carrying amount Collectively impaired: Grades 1-4: Low fair risk Grade 5: Watch list Gross amount Allowance for: Impairment Carrying amount Neither past due no impaired: Grades 1-4: low fair risk Carrying amount Total carrying amountamortised cost Asset at fair value through profit and loss: Neither past due no impaired: Grades 1-4: lowfair risk Carrying amount fair value Total carrying amount 133 805 128 136 195 640 Investment securities 31 Dec 2013 31 Dec 2012 US$ US$ 6 783 507 8 314 132
1 213 552 6 766 736 298 582 5 518 332 23 075 325 36 872 527 (2 224 438) (8 094 776) 26 553 313 103 331 110 4 477 750 107 808 860 (557 045) 133 805 128
952 099 606 755 787 437 2 921 000 20 914 895 26 182 186 (4 535 117) (6 692 953) 14 954 116 118 432 089 3 558 827 121 990 916 (749 342) 121 241 574
5 536 856 5 536 856
5 535 900 5 535 900
Definition This includes innovation, or the lack thereof, obsolescence, explosions and dependability of the technological platform. Identification techniques An Information Technology Committee which reviews developments and proposes enhancements to the technological platform is in place. The Group also has Business Continuity Plans (BCP) and Disaster Recovery Plans (DRP) and these are tested and maintained up to date. Access to computer systems is restricted to authorized personnel through a hierarchy of authority levels. Impact evaluation The Group considers this risk as moderate in view of the stability of the current technology platform, the in-house expertise that has been gained over the years and the strong support available from the vendor of the platform. Measurement methods The Group measures the risk through setting and monitoring the maximum tolerances for system downtimes, ensuring that the reports are available at the appropriate times and generally that operational efficiency is being achieved. Strategies for management/mitigation The Group manages this risk through staff training and development, regular and independent audits. Issues are also escalated to the vendor as appropriate and these are always resolved expeditiously. Further, the Group updates BCPs and DRPs regularly and also conducts business continuity and disaster recovery tests twice per year. Monitoring and controlling mechanisms The deadlines for the production of all reports are monitored strictly. Any system breakdowns are attended to and reported promptly to ensure that appropriate corrective action is instituted. The Group constantly reviews new technologies and adopts them where appropriate. All computer rooms are temperature controlled and well ventilated. Access is restricted to authorized persons only. There are various levels of access to the system based on the seniority of the officers concerned. Adequacy and effectiveness of risk management systems The management system for identifying, monitoring and controlling technological risk is adequate and effective and all staff members adhere to the system. 5.3.4Solvency risk Definition Solvency risk is the risk that the Group may incur liabilities that are far in excess of its ability to pay leading to financial distress.
ZBFH 272
107 251 815
136 195 690
5 536 856
5 535 900
Audited 31 December 2013 US$ Total assets Total liabilities Net foreign currency position 8 042 289 (4 252 146) 3 790 143
1 246 651
1 312 504
133 805 128
136 195 690
1 246 651 6 783 507
1 312 504 6 848 404
The Group's main exposure to foreign currency risk arises from the commitments for licence and support fees for information technology platforms that were sourced from foreign suppliers. Sensitivity analysis A 10% change in exchange rates would result in the reported profit being reduced or increased by US$281 418 [2012: US$269 659] and equity being reduced or increased by US$379 014 [2012: US$363 177]. 5.2.2.3Equity price risk Definition Equity price risk is the possibility that equity prices will fluctuate affecting the fair value of equity investments that derive their value from a particular equity investment or index of equity prices. Identification techniques The Group tracks the performance of all its equity investments using the price lists issued by members of the Zimbabwe Stock Exchange. Measurement methods Based on the price lists from the members of the Zimbabwe Stock Exchange, the Group quantifies the risk. Impact evaluation Equity price risk is assessed as moderate due to a significant concentration in a few counters which are strategic to the Group's operations.
Strategies for management / mitigation: The Group has a credit risk management process, which operates through a hierarchy of exposure discretions. All exposures above a certain level require the approval of the Board Credit Committee which comprises executive and non-executive directors. Exposures below the Board Credit Committee's discretion are approved according to a system of tiered exposure discretions delegated to management committees. A substantial portion of the Group's individual and corporate borrowings is insured for nonperformance whilst security of various other forms is obtained for large exposures. Monitoring and controlling mechanisms: Regular credit audits and reviews are conducted and problem accounts are highlighted and management action is taken as appropriate. Adequacy and effectiveness of risk management systems: The credit risk management and control techniques alluded to above are adequate and effective and all staff members are required to adhere to them. The Group has issued financial guarantees in respect of clients graded 1 to 4, and for which the maximum amount payable by the Group, assuming all guarantees are called on, is $23 832 413 (2012:$25 366 068). Sensitivity analysis A 10% change in the assets classified as good to marginal category to a loss classification would result in the reported profit being reduced by US$7 970 688 and the total assets in the statement of financial position reducing by US$11 535 003.
03
Overall Risk Matrix ZB Building Society Identification techniques The Group strictly monitors the assets and liabilities and has set limits to the liabilities that can be incurred and the placements arising therefrom. The loan/deposit ratio is monitored regularly and corrective action instituted where appropriate. Impact evaluation The Group considers this risk as low as there are adequate systems of identifying, monitoring and controlling solvency risk. Measurement methods The Group measures this risk through setting maximum levels for loan/deposit ratios and reviewing the relationship between liabilities and assets through maturity profiles and term structures. Strategies for management/mitigation The Group manages the risks through setting limits for the loan/deposit ratio and ensuring that these limits are not exceeded. Adequacy and effectiveness of risk management systems The management system for identifying, monitoring and controlling solvency risk is adequate and effective and all staff members adhere to the system. 5.3.5Underwriting risk Definition Underwriting risk in reinsurance business is the probability of losses incurred in a given reinsurance period exceeding premium in the corresponding period. On the other hand in life assurance business underwriting risk is the risk that the actual exposure to mortality and disability risks will exceed the best estimate of the statutory valuator, thereby causing financial loss. Impact evaluation The underwriting risk in reinsurance business would only materialize in the case of a catastrophe. The risk in case of a catastrophe has been reinsured and is limited to US$75 000 (2012: US$75 000) and concentration of insurance risk is in fire and motor classes, as management consider these classes to be profitable. There is no concentration of risk in terms of exposure to single customers. Measurement methods In life assurance business, all applications for life and disability cover are assessed using sound underwriting techniques and methods, including HIV testing, where necessary. Mortality and disability investigations are periodically carried out and actuarial assumptions are adjusted accordingly. Strategies for management/mitigation In reinsurance business, this is normally mitigated by the purchase of reinsurance from the London insurance market annually. All mortality and disability risks above periodically determined retention levels are reassured with professional reassurance firms. Details of underwriting risk in reinsurance business are as follows:
Level of Aggregate Inherent Risk Adequacy of Aggregate Risk Management Systems Overall Composite Risk Direction of Overall Composi Risk ZB Life Assurance Board Total meetings Name 4 Meetings attended
Type or Risk
Credit Risk Liquidity Risk Interest Rate Risk Foreign Exchange Risk Strategic Risk Operational Risk Legal & Compliance Risk Reputational Risk Overall Risk
Low Moderate Minor Minor Moderate Moderate Moderate Moderate Moderate
Acceptable Acceptable Acceptable Acceptable Acceptable Acceptable Acceptable Acceptable Acceptable
Low Moderate Low Low Moderate High Moderate Moderate Moderate
Stable Stable Stable Stable Stable Increasing Stable Stable Stable
C Mandizvidza (Chairman) A G Chinembiri (Managing Director) R Mutandagayi E T Z Chidzonga M Gumbo C Makoni K P Matsikidze L Mawire M Mkushi E N Mushayakarara*
* Resigned from the board with effect from 31 May 2013
4 4 4 3 3 4 4 4 4 2
Overall Risk Matrix ZB Asset Management Company Limited

Level of Aggregate Inherent Risk Adequacy of Aggregate Risk Management Systems Overall Composite Risk Direction of Overall Composit Risk ZB Bank Board Total meetings Name Z R Churu (Chairman) S K Chiganze (Acting Managing Director)* G Chikomo DR C U Hokonya G N Mahlangu C Mandizvidza P M Matupire R Mutandagayi C Nyachowe S A Sibanda V B Sibanda
* Appointed in acting capacity from 1 June 2013 to 31 December 2013.
5 Meetings attended 5 2 4 5 4 5 5 2 5 5 4
Type or Risk
Strategic Risk Operational Risk Legal & Compliance Risk Reputational Risk Financial Risk Overall Risk
Moderate High Moderate Moderate Moderate Moderate
Acceptable Acceptable Acceptable Acceptable Acceptable Acceptable
Moderate High Moderate Moderate Moderate Moderate
Stable Increasing Stable Stable Stable Stable
Interpretation of risk matrix 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 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. 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 recognized 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 polices 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 organization. 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 twelve months Decreasing - based on current information, risk is expected to decrease in the next twelve months. Stable - based on the current information, risk is expected to be stable in the next twelve months. 5.4.2External credit ratings Some of the Group's significant trading companies subscribe to an internationally recognised rating agency, Global Credit Rating Group (GCR)3, and the ratings for the last three (3) years were as follows: Long-term debt rating scale: Entity ZB Bank Limited ZB Building Society ZB Reinsurance Company 2013 BBB+ BBBBBB+ 2012 BBB+ BBBBBB+ 2011 BBB+ BBBBBB+ 2010 BBB+ BBBBBB+
ZB Building Society Board Total meetings Name T P B Mpofu (Chairman) E Mungoni (Acting Managing Director) S K Chiganze S Mahlangu C Makoni E Munemo E N Mushayakarara* R Mutandagayi M T Sachak C Sandura S A Sibanda
5 Meetings attended 5 4 4 2 5 5 2 4 4 4 5
Intermarket Banking Corperation Limited Board Total meetings Name P M Matupire (Chairman) K Bangure (Managing Director) D T Machingaidze M Mkushi R Mutandagayi
4 Meetings attended 4 3 4 4 4
Audited 31 December 2013 US$ Total insurance risk before retrocession Retroceded risk Insurance risk after reinsurance 5.4 Risk rating 6 000 000 (5 000 000) 1 000 000
Restated Audited 31 December 2012 US$ 6 000 000 (4 000 000) 2 000 000
ZB Reinsurance Company Board Total meetings Name R Mutandagayi (Chairman) B Shumba (Managing Director) F B Chirimuuta D T Machingaidze C J Murandu*** E N Mushayakarara** C Nyachowe P Murambinda*
* Appointed to the board on 13 November 2013 ** Resigned from the board with effect from 31 May 2013 *** Resigned from the board with effect from 1 May 2013
4 Meetings attended 3 4 4 4 2 2 4 1
5.4.1Regulatory risk rating The Reserve Bank of Zimbabwe conducts regular offsite and onsite examinations of the institutions that it regulates. The last on-site examination of the Group was concluded on the 21st of October, 2009, using data as at 30 September 2009. Being a Bank Holding Group (BHC), the condition of ZB Financial Holdings Limited was assessed using the RFI/(C)D rating system which is an acronym for Risk Management; Financial Condition; Potential Impact of the parent Group and non-depository subsidiaries on the subsidiary depository institutions; Composite rating based on an evaluation and rating of its managerial and financial condition; and assessment of the subsidiary Depository institutions. ZB Bank Limited and ZB Building Society were assessed using the Risk Assessment System (RAS) and the CAMELS rating model whilst ZB Asset Management Group was rated using the CEFM model. The individual components of the rating systems were rated as follows: RFI/(C)D/CAMELS/CEFM Component Latest Rating ZB Building Society n/a n/a n/a n/a n/a 2 2 3 4 3 2 3
ZB Asset Management Company Limited Total meetings Name Z R Churu (Chairman) S Mutamuko ( Managing Director) S K Chiganze C T Masvosva C J Murandu* R Mutandagayi S Nhongo P M Nyamadzawoh
4 Meetings attended 4 4 4 1 3 4 4 4
Risk Management Financial Condition Impact Composite rating Depository Institutions Capital Adequacy Asset Quality Management Earnings Liquidity and Funds Under Management Sensitivity to Market Risk Composite rating
ZB Bank n/a n/a n/a n/a n/a 2 2 2 3 3 2 2
ZB Asset Management n/a n/a n/a n/a n/a 2 n/a 3 3 2 n/a 2
ZB Financial Holdings Group 3 2 2 2 2 n/a n/a n/a n/a n/a n/a 2
ZB BANK LIMITED
(Registered Commercial Bank)
AUDITED FINANCIAL STATEMENTS 31 DECEMBER 2013
AUDITED STATEMENT OF FINANCIAL POSITION As at 31 DECEMBER 2013
All ratings above fall within the Investment Grade. The current ratings expire on 30 May 2014. 6. COMPLIANCE WITH REGULATIONS Notes In 2011 the Insurance Act (Chapter 24:07) required Life Assurance entities to maintain at least 30% of their investments in prescribed assets for long term insurance and 35% at market value. The minimum percentage was not maintained throughout the year ended 31 December 2013, although the Group complied with the transitional requirements which provide that all insurance companies and pension funds should apply 40% of their net monthly cash flows to purchase prescribed assets as stipulated in Circular 4/2005, issued by the Insurance and Pensions Commissioner. The provisions were revised in 2012 to require that at least 7.5% of non-pension fund investments and at least 10% of pension fund investments be held as prescribed assets. The Group intends to ensure full compliance with the revised provisions subject to the availability of appropriate investment in instruments. Commercial banks and building societies in Zimbabwe were required to maintain a minimum capital level of US$25 million and US$20 million respectively as at 31 December 2012. Intermarket Banking Corporation Limited (IBCL) and ZB Building Society (ZBBS) did not meet these requirements during the year under review. The Group has adopted a strategic position to merge IBCL, ZBBS and ZB Bank which obviates the need for a further capital injection. This will require the approval of the Reserve Bank of Zimbabwe. The directors are not aware of any other material cases of non-compliance with regulations governing the operations of all companies within the Group.
DIRECTORS RECORD OF ATTENDANCE AT BOARD MEETINGS FOR MAJOR BUSINESS UNITS DURING THE YEAR ENDED 31 DECEMBER 2013 ZB Financial Holdings Limited (ZBFH) Board Total meetings Name
Audited 31 December 2013 US$
Key: 1 = Strong; 2 = Satisfactory; 3 = Fair; 4 = Weak; 5 = Critical Summary of Risk Assessment

RAS Component ZB Bank Moderate Acceptable Moderate Stable Latest Rating ZB Building Society Moderate Acceptable Moderate Stable ZB Asset Management Moderate Acceptable Moderate Stable ZB Financial Holdings Group Moderate Acceptable Moderate Stable
ASSETS Cash and cash equivalents Treasury bills Advances and other accounts Investment securities inventories, trade and other receivables Investment in subsidiary Intangible assets Property and equipment Deferred tax asset Current tax asset Total assets LIABILITIES Deposits from customers Deposits from banks Short term borrowing Offshore borrowing Trade and other payables Current tax liabilities Total liabilities EQUITY 1 2 3 4 5 6 67 705 012 5 000 000 132 198 843 6 475 056 6 948 922 21 359 724 8 600 597 8 156 149 320 737 611 522 257 376 562 68 334 530 1 000 000 130 703 562 6 460 322 11 469 185 21 373 848 9 428 528 6 603 920 473 570 255 847 465
Aggregate inherent risk Quality of aggregate risk management systems Overall composite risk Direction of overall composite risk
Overall Risk Matrix ZB Financial Holdings Limited

Level of Aggregate Inherent Risk Adequacy of Aggregate Risk Management Systems Overall Composite Risk Direction of Overall Composite Risk
7 10
Type or Risk
Minor Moderate Moderate Moderate Moderate High Moderate Moderate Moderate
Low Moderate Moderate Moderate Moderate Moderate Moderate Moderate Moderate
9 10
199 301 261 11 810 141 3 750 000 6 380 331 221 241 733
202 354 202 1 910 141 4 966 657 1 750 000 7 224 480 461 942 218 667 422
Overall Risk Matrix ZB Bank Limited

Level of Aggregate Inherent Risk Adequacy of Aggregate Risk Management Systems Overall Composite Risk Direction of Overall Composite Risk
7 Meetings attended 7 3 5 7 6 7 6 7 3 1
Type or Risk
Minor Moderate Moderate Moderate Moderate High Moderate Moderate Moderate
Low Moderate Moderate Moderate Moderate High Moderate Moderate Moderate
B P Nyajeka (Chairman) R Mutandagayi (Group Chief Executive)* E Hamandishe DR C U Hokonya F Kapanje T mafunda T P B Mpofu E Munemo E N Mushayakarara ** I Chirisa***
* Appointed to the board on 1 June 2013 ** Resigned from the board with effect from 31 May 2013 *** Appointed to the board on 16 December 2013
Share capital Share premium Revaluation reserves General reserves Retained income Total equity
11
1 610 402 19 651 941 1 185 058 1 781 982 11 905 446 36 134 829
1 610 402 19 651 941 1 185 058 1 964 741 12 767 901 37 180 043
Total equity and liabilities
257 376 562
255 847 465
ZBFH 272
04
ZB BANK LIMITED

3. AUDITED STATEMENT OF PROFIT OR LOSS For the year ended 31 December 2013 Audited 31 December 2013 US$ 32 668 375 (14 204 800) 18 463 575 3.10 (1 290 686) 17 172 889 14 15 26 747 776 (347) 43 920 318 16 (42 960 238) 960 080 17 (152 833) 807 247 Audited 31 December 2012 US$ 31 739 763 (12 547 291) 19 192 472 (1 189 445) 18 003 027 29 791 762 524 791 48 319 580 (42 066 326) 6 253 254 (663 969) 5 589 285 3.7 3.3 3.2 3.1 ADVANCES AND OTHER ACCOUNTS Loans, overdrafts and other accounts Term loans funded from Agrobills Finance leases Bills discounted Gross advances Less: Allowance for loan impairment Less: Interest reserved Net advances Off balance sheet exposures in respect of guarantees Gross loan book Maturity analysis - On demand - Within 1 month - Between 1 and 6 months - Between 6 and 12 months - After 12 months Non-performing debt Non-performing loans and advances Less: Allowance for loan impairment Less: Interest reserved Value to be received from security held 0.01 0.03
DEFERRED TAXATION
Recognised in Balance at 1 January US$ 2013 Property and equipment Portifolio provision and deferred income Unrealised exchange (losses) /gains Fair value adjustments to financial assets Assessed loss
profit or
Balance at 31
December
loss US$
US$
103 723 666 5 328 964 33 954 747 143 007 377 (2 713 758) (8 094 776) 132 198 843
94 967 551 4 826 936 2 206 757 40 285 546 142 286 790 (4 890 275) (6 692 953) 130 703 562
962 927 (1 476 842) (6 007) 46 352 (473 570)
(81 717) 624 718 (74 603) 696 (316 261) 152 833
881 210 (852 124) (80 610) 47 048 (316 261) (320 737)
Notes Interest income Interest expense Net interest income Allowance for loan impairment Net income from lending activities Trading and other income Fair value adjustments Total income Operating expenses Profit before taxation Income tax expense Profit for the period Earnings per share Basic and fully diluted earnings per share(dollars)
AUDITED STATEMENT OF CHANGES IN EQUITY For the year ended 31 December 2013 Share capital US$ Balance at 1 January 2012 Profit or loss Profit for the year Transactions with the owners of the Bank Distributions Dividend to equity holders Other movements Regulatory reserve in respect of doubtful debts Balance at 1 January 2013 Profit or loss Profit for the yearTransactions with the owners of the Bank Distributions Dividend to equity holders Other movements Regulatory reserve in respect of doubtful debts Balance as at 31 December 2013
13 13
Recognised in Balance at 1 January US$ 2012 Property and equipment Provision and deferred income Unrealised exchange (losses)/gains Fair value adjustments to financial assets Prepaid expenses
profit or
Balance at 31
December
loss US$
US$
23 832 413 166 839 790
25 366 068 167 652 858
40 597 062 39 036 725 18 893 837 23 246 855 10 424 364 132 198 843
32 021 491 14 499 253 51 499 831 22 055 133 10 627 854 130 703 562 8. DEPOSITS FROM CUSTOMERS Current accounts Savings and call accounts Term deposits Other
1 456 592 (1 456 870) (76 869) 36 272 49 060 8 185
(493 665) (19 972) 70 862 10 080 (49 060) (481 755)
962 927 (1 476 842) (6 007) 46 352 (473 570)
28 892 239 (2 713 758) (8 094 776) 18 083 705
26 182 186 (4 890 275) (6 692 953) 14 598 958
For the secured non performing loans, security exists in the form of liens registered over funded accounts, bonds registered over landed property and guarantees in various forms. The Group discounts the value of the security at hand using internal thresholds for prudential purposes. Generally no security value is placed on ordinary guarantees. The internally discounted value of security held in respect of the nonperforming book amounted to US$18 737 376 as at 31 December 2013 (2012: US$22 541 048). Audited 31 December 2013 US$ 3.8 Sectoral analysis of advances Private Agriculture Mining Manufacturing Distribution Construction Transport Communications Services Financial Audited 31 December 2012 US$
21 367 657 68 870 259 109 050 640 12 705 199 301 261
21 025 867 78 420 058 102 868 481 39 796 202 354 202
Share Revaluation premium reserve US$ US$
General reserve US$
Retained income US$
Total US$
Maturity analysis of customer deposits On demand Within 1 month Between 1 and 6 months Between 6 and 12 months Deposit concentration Private Agriculture Mining Manufacturing Distribution Construction Transport Services Financial Communications 9. TRADE AND OTHER PAYABLES Interest accrued on deposits Items in transit Accruals and sundries Amounts clearing to other banks 10 CURRENT TAX At the beginning of the year Charge to profit or loss Tax payments Current tax(asset)/ liability 11. CAPITAL Share capital Authorised; 300 000 000 (2012: 300 000 000) ordinary shares of US$0.01 each Issued and fully paid; 161 040 166 ordinary shares of US$0.01 each (2012: 161 040 166) 12 CAPITAL ADEQUACY Ordinary share capital Share premium Reserves Loans to group entities and directors Tier 1 capital General reserve Revaluation reserve Tier 2 capital Total capital base Credit risk weighted assets Operational risk equivalent assets Market risk equivalent assets Total risk weighted assets Tier 1 capital ratio Tier 2 capital ratio Capital adequacy ratio
90 250 062 79 107 890 29 943 309 199 301 261 32 748 973 7 040 086 1 778 338 7 579 056 6 006 253 2 086 962 1 803 316 37 379 626 79 602 988 23 275 663 199 301 261
99 485 336 75 543 362 27 320 208 5 296 202 354 20 30 678 516 6 436 299 3 972 018 6 409 440 21 539 705 1 677 936 2 141 204 25 059 367 73 655 966 30 783 751 202 354 202
1 610 402 19 651 941
1 185 058
762 182
10 996 550 34 206 133
5 589 285 5 589 285
(2 615 375) (2 615 375)
1 202 559
(1 202 559)
1 610 402 19 651 941
1 185 058 1 964 741
12 767 901 37 180 043
28 125 738 18 808 191 28 549 575 19 197 042 10 794 624 3 428 509 2 656 832 2 167 632 13 833 774 15 445 460 143 007 377 (2 713 758) (8 094 776) 132 198 843
30 538 275 23 244 625 23 811 579 30 793 332 12 930 911 1 411 631 1 200 820 705 621 7 741 371 9 908 625 142 286 790 (4 890 275) (6 692 953) 130 703 562
807 247
807 247
Less: Allowance for loan impairment Less: Interest reserved
1 457 179 237 835 4 517 258 168 059 6 380 331
1 071 861 894 334 5 148 932 109 353 7 224 480
(1 852 461) (1 852 461)
(182 759)
182 759
1 610 402 19 651 941
1 185 058 1 781 982
11 905 446 36 134 829
Audited 31 December 2013 US$ 3.9 Finance lease receivables Loans and advances to customers include the following finance lease receivables for leases of certain equipment where the Bank is the lessor. Gross investment in finance leases: Less than 1 year Between 1 and 5 years Gross investment in finance leases Unearned finance charges Net investment in finance leases Less than 1 year Between 1 and 5 years 3.10 Allowance for loan impairment Balance at beginning of the year Write offs against provisions Charge to profit or loss Balance at end of the year Comprising: - Specific provision - Portfolio provision 4 890 275 (3 467 203) 1 290 686 2 713 758
461 942 (1 073 464) (611 522)
1 173 083 1 145 724 (1 856 865) 461 942
AUDITED STATEMENT OF CASH FLOWS For the year ended 31 December 2013 Audited 31 December 2013 US$ Cash (used in)/generated from operating activities Interest received Dividend received Interest paid Income taxes paid Net cash generated from operating activities Cash flows from investing activities Proceeds on disposal of property and equipment Purchase of investment securities Purchase of property and equipment Purchase of intangible assets Net cash used in investing activities Cash flows from financing activities Dividend paid Net cash used in financing activities Net increase in cash and cash equivalents Audited 31 December 2012 US$
3 000 000
3 000 000
(12 075 148) 32 668 375 721 677 (14 204 800) (1 073 464)
4 999 649 31 739 763 2 047 166 (12 547 291) (1 856 865)
1 400 552 5 089 843 6 490 395 (1 161 431) 5 328 964 1 259 042 4 069 922 5 328 964
464 173 2 321 356 2 785 529 (578 772 ) 2 206 757 401 096 1 805 661 2 206 757
1 610 402
1 610 402
1 610 402 19 651 941 13 870 188 (2 482 503) 32 650 028 (182 759) 1 185 058 1 002 299 33 652 327 176 823 738 69 328 463 3 768 738 249 920 939 13.06% 0.40% 13.46%
1 610 402 19 651 941 12 767 901 (2 388 435) 31 641 809 1 964 741 1 185 058 3 149 799 34 791 608 182 135 271 59 857 477 5 693 019 247 685 767 12.77% 1.27% 14.05%
6 036 640
24 382 422
70 573 (3 456 246) (1 114 976) (4 500 649)
40 465 (2 790) (2 085 453) (3 048 531) (5 096 309)
3 700 830 1 189 445 4 890 275
(1 852 461) (1 852 461)
(2 615 375) (2 615 375)
2 224 438 489 320 2 713 758
4 535 116 355 159 4 890 275
(316 470)
16 670 738
4.
INVESTMENT SECURITIES Fair value through profit or loss equity investments: Credit Insurance Company Limited Zimswitch Technologies (Private) Limited Trade investments Held at amortised cost: Bank balances Swift shares 659 664 278 535 938 199 740 877 183 544 924 421 13
Cash and cash equivalents at the beginning of the year Effect of exchange rate fluctuations on cash and cash equivalents Cash and cash equivalents at 31 December Cash and cash equivalents comprise: - Cash on hand - Local bank accounts - Foreign bank accounts
68 334 530 (313 048) 67 705 012
51 687 122 (23 330) 68 334 530
The Bank complied with all capital requirements during the course of the year. NET INTEREST INCOME Interest income Advances Overdrafts Placements with other banks Treasury bills Other interest receivable categories Total interest income Interest expense Retail deposits Placements from other banks Other interest expense categories Total interest expense Net interest income
36 418 825 23 437 287 7 848 900 67 705 012
40 584 871 20 802 864 6 946 795 68 334 530 5.
5 534 098 2 759 6 475 056
5 533 262 2 639 6 460 322
NOTES TO THE AUDITED FINANCIAL STATEMENTS For the year ended 31 December 2013 Audited 31 December 2013 US$ 1. CASH AND CASH EQUIVALENTS Balance with the Reserve Bank of Zimbabwe Balances with other banks and cash 17 437 287 50 267 725 67 705 012 5 000 000 20 802 864 47 531 666 68 334 530 1 000 000 Audited 31 December 2012 US$
INVENTORIES, TRADE AND OTHER RECEIVABLES Inventories Accrued interest Remittances in transit Advance payments and sundry assets Amounts clearing from other banks 414 252 92 706 4 528 201 1 876 275 37 488 6 948 922 405 734 22 596 7 565 456 3 454 851 20 548 11 469 185
25 292 171 6 070 929 693 600 45 735 565 940 32 668 375
22 596 986 7 952 398 633 387 15 622 541 370 31 739 763
12 729 964 908 904 565 932 14 204 800 18 463 575
11 211 564 833 494 502 233 12 547 291 19 192 472
6.
INVESTMENT IN SUBSIDIARY COMPANY Opening net asset value Fair value (loss)/gain to profit or loss Closing net asset value 21 373 848 (14 124) 21 359 724 21 048 036 325 812 21 373 848 14
TRADING AND OTHER INCOME Commission and fees Exchange income Dividends from other investments Recovery of shared costs Profit on sale of investments Rent received (Loss) / profit on sale of property and equipment Sundry 24 721 724 175 853 721 677 603 117 191 749 (27 691) 361 347 26 747 776 25 484 701 1 068 372 2 047 166 761 145 146 989 41 108 10 683 231 598 29 791 762
ZBFH 272
2.
TREASURY BILLS
The Bank invested in treasury bills floated by the Reserve Bank of Zimbabwe over a period of 180 days at a rate of 8.50%. Treasury bills are accounted for as held to maturity investments.
05
ZB BANK LIMITED

Audited 31 December 2013 US$ 15 FAIR VALUE ADJUSTMENTS Arising from fair value through profit or loss instruments: Investment securities Investment in subsidiary company 16 OPERATING EXPENSES Staff expenses Communication expenses Computer and information technology Occupation expenses Transport expenses Travelling expenses Administration expenses Included in administration expenses are the following: Audit fees Depreciation charges on property and equipment Amortisation of intangible assets Impairment loss on intangible assets Impairment loss on investment securities 17 TAXATION Current income tax expense Deferred taxation Corporate tax was assessed at a level of 25.75% (2012: 25.75%) of taxable income. 18 CONTINGENT LIABILITIES In respect of guarantees
19. RISK MANAGEMENT
ZB BUILDING SOCIETY AUDITED FINANCIAL STATEMENTS 31 December 2013

AUDITED STATEMENT OF CASH FLOWS For the year ended 31 December 2013 Audited 31 December 2013 US$ Audited 31 December 2013 US$ Audited 31 December 2012 US$ Cash (outflow) / inflow from operating activities Interest received Dividend received Interest paid Net cash (outflow) / inflow from operating activities 1 2 3 4 5 6 2 029 362 8 500 000 12 651 218 1 464 623 17 342 3 485 000 4 468 464 4 163 638 36 779 647 7 715 277 6 900 000 10 133 266 1 670 361 11 428 3 450 000 4 336 140 4 159 039 38 375 511 Cash flows from investing activities Purchase of equipment Purchase of money market instruments Proceeds on disposal of money market instruments Proceeds on disposal of property and equipment Dividend paid Net (decrease) / increase in cash and short term funds Cash and cash equivalents at the beginning of year Cash and cash equivalents at the end of year 7 8 9 18 395 691 1 247 627 573 923 20 217 241 10 10 954 814 8 896 953 6 710 639 20 746 964 1 993 467 564 307 23 304 738 954 814 8 896 953 5 219 006 Cash and cash equivalents comprise of: Cash on hand Local bank accounts (5 604 533) 2 742 386 134 803 (684 285) (3 411 629) Audited 31 December 2012 US$ 7 014 827 2 430 760 47 669 (517 986) 8 975 270
AUDITED STATEMENT OF FINANCIAL POSITION As at 31 December 2013
Notes 13 777 (14 124) (347) 198 979 325 812 524 791 ASSETS Cash and cash equivalents Money market placements Loans and advances Other assets Investment securities Investment properties Investment in subsidiaries Property and equipment Total assets Equity and liabilities Deposits from customers Provision and other liabilities Deferred taxation liabilities Total liabilities Ordinary share capital Ordinary share premium Reserves Total equity attributable to equity holders of the parent Total equity and liabilities
18 112 376 904 498 3 848 928 4 502 169 487 046 542 532 14 562 689 42 960 238
17 286 595 1 058 399 3 216 475 4 480 336 510 156 526 354 14 988 011 42 066 326
(206 133) (86 500 000) 84 900 000 34 175 (502 328)
(53 967) (46 700 000) 43 000 000 23 034 (600 429)
(5 685 915) 7 715 277 2 029 362
4 643 908 3 071 369 7 715 277
142 316 1 926 831 1 942 907 -
143 962 1 949 423 1 449 621 55 092 151
748 084 1 281 278 2 029 362
823 694 6 891 583 7 715 277
152 833 152 833
1 145 724 (481 755) 663 969
Audited 31 December 2013 US$ 1. CASH AND CASH EQUIVALENTS Cash on hand Local bank accounts 748 084 1 281 278 2 029 362
16 562 406 36 779 647
15 070 773 38 375 511
AUDITED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

823 694 6 891 583 7 715 277
23 832 413
25 366 065 Audited 31 December 2013 US$ 2 742 386 (684 285) 2 058 101 326 458 2 384 559 5 112 603 173 239 7 670 401 14 (5 712 152) 1 958 249 15 (7 350) 1 950 899 Audited 31 December 2012 US$ 2 430 760 (517 986) 1 912 774 (322 047) 1 590 727 5 776 931 503 054 7 870 712 (5 667 115) 2 203 597 (26 117) 2 177 480 3.1 2. MONEY MARKET PLACEMENTS At amortised cost Fixed deposits
Up to 1 months US$
2 to 6 months US$
7 to 12 months US$
Above 12 months US$
Carrying Amount US$
Notes Interest income Interest expense Net interest income Allowances for impairment Net income from lending activities 11.1 11.2 11 3.3
8 500 000
6 900 000
3.
Interest rate gap analysis

As at 31 December 2013 ASSETS Cash and cash equivalents Treasury bills Advances and other accounts 7 900 377 79 633 787 87 534 164 LIABILITIES Deposits from customers Deposits from other banks Offshore borrowing (169 357 951) (3 060 141) (172 418 092) (84 883 928) (84 883 928) (29 943 310) (8 750 000) (38 693 310) (3 002 394) (87 886 322) 11 503 289 (76 383 033) - (199 301 261) - (11 810 141) (3 750 000) (3 750 000) (3 750 000)(214 861 402) 6 674 363 (69 708 670) (69 708 670) 5 000 000 30 690 916 35 690 916 53 512 11 449 777 11 503 289 7 953 889 5 000 000
LOANS AND ADVANCES Categories of loans and advances Mortgage loans Residential properties Commercial properties
8 641 996 739 430 9 381 426
5 992 122 5 992 122 4 535 327 4 535 327 10 527 449 (394 183 ) 10 133 266
Trading and other income Fair value adjustments Total income
12 13
10 424 363 132 198 843 10 424 363 145 152 732
Consumer loans Overdrafts Other loans and advances Gross loans and advances Less specific and portfolio allowances Loans and advances Maturity analysis Within 1 month Between 1 and 6 months Between 6 and 12 months After 12 Months
3 104 569 232 948 3 337 517 12 718 943 (67 725) 12 651 218
Operating expenses Profit before taxation Income tax expense Profit for the year Other comprehensive income: Items that will not be reclassified to profit or loss Property revaluation reserve Related tax (expense) / credit Other comprehensive income for the year, net of tax Total comprehensive income for the year Earnings per share Basic and diluted earnings per share (cents)
Period gap Cumulative gap
The table below sets out the remaining contractual maturities of the banks financial assets and financial liabilities Gross nominal inflow/ (outflow) US$
Up To 1 month US$ Liquidity gap analysis as at 31 December 2013 Financial asset by type Cash and cash equivalents Treasury bills Advances and other accounts Investment securities
2 To 6 Month US$
7 to 12 Month US$
Above 12 Month US$
Carrying amount US$
45 328 (2 266)
(733 444) 36 672 3.2
248 609 1 095 158 1 784 158 9 591 018 12 718 943
940 089 3 570 458 6 016 902 10 527 449 10 377 610 69 481 3 851 76 507 10 527 449
43 062
(696 772)
1 993 961
1 480 708
Sectoral analysis Individuals Agriculture Distribution Construction Services
12 713 581 194 5 168 12 718 943
66 761 116 79 784 203 146 545 319
445 192 5 212 500
498 704 -
67 705 012 5 212 500 138 100 902 6 475 056 217 493 470
67 705 012 5 000 000 132 198 843 6 475 056 211 378 911
2.09
1.55
3.3
31 680 645 14 154 521 12 481 533 - 6 475 056 37 338 337 14 653 225 18 956 589
AUDITED STATEMENT OF CHANGES IN EQUITY

Share capital US$ Share premium US$ Revaluation reserve US$ General reserve US$ Retained earnings US$ Total equity US$
Specific and portfolio allowances for impairment Balance at beginning of year (Credit) /charge to statement of comprehensive income Balance at end of year 394 183 (326 458) 67 725 72 136 322 047 394 183
Financial liability by type Deposits from customers Deposits from other banks Offshore borrowings
(169 357 951) (31 004 454) (3 060 141) (8 888 288) (172 418 092) (39 892 742)
- (200 362 405) (199 301 261) (11 948 429) (11 810 141) (4 007 804) (4 007 804) (3 750 000) (4 007 804) (216 318 638) (214 861 402) 1 174 832 (3 482 491) (3 482 491)
Balance as at 31 December 2011 Total comprehensive income Profit for the year Other comprehensive income net or tax Revaluation reserve Tax on comprehensive income Total other comprehensive income Total comprehensive income Transactions with\ owners of the Building Society Dividends to equity holders Other movements Regulatory reserve in respect of doubtful debts Balance at 31 December 2012 Total comprehensive income Profit for the year Other comprehensive income, net of tax Revaluation reserve Tax on comprehensive income Total other comprehensive income Total comprehensive income Transactions with owners of the Building Society Dividends to equity holders Other movements Regulatory reserve in respect of doubtful debts Balance at 31 December 2013
954 814
8 896 953
629 917
73 190
3 635 620 14 190 494
2 177 480
2 177 480
Comprising: Portfolio allowances Specific allowances
15 372 52 353 67 725
394 183 394 183
(25 872 773) (2 554 405) 14 653 225 14 948 785 (25 872 773) (28 427 178) (13 773 953) 1 174 832
(666 589) 36 672
(66 855) -
(733 444) 36 672
4.
OTHER ASSETS Interest receivable Sundry debtors and other accounts Inventories Intercompany balances 172 397 242 833 392 575 656 818 1 464 623 69 973 152 995 503 160 944 233 1 670 361
20.
LIQUIDITY RATIOS Audited 31 December 2013 US$ Audited 31 December 2012 US$ 69 334 530 202 354 202 34% 34% 39% 30% 30%
954 814
8 896 953
(629 917) -
73 190
(66 855)
(696 772)
5 746 245 15 671 202
Total liquid assets Total liabilities to the public Liquidity ratio at 31 December 2013 Average for the year Maximum for the year Minimum for the year Minimum statutory liquidity ratio
72 705 012 199 301 261 36% 38% 43% 32% 30%
(600 429)
(600 429)
3.
LOANS AND ADVANCES
954 814
8 896 953
(73 190) -
73 190 5 219 006 15 070 773
5.
INVESTMENT PROPERTIES Fair value at beginning of year Fair value gain / (loss) Transfer from owner occupied properties Fair value at end of year 3 450 000 35 000 3 485 000 3 163 500 (763 500 ) 1 050 000 3 450 000
21. EXTERNAL CREDIT RATING The Bank subscribes to an internationally recognised rating agency Global Credit Company, and the ratings for the last three years were as follows:2013 BBB+ 2012 BBB+ 2011 BBB+
1 950 899
1 950 899
45 328 (2 266)
45 328 (2 266)
6.
INVESTMENT IN SUBSIDIARIES Finsure Investments (Private) Limited (51%) Opening net asset value Fair value gain Closing net asset value 4 018 750 144 009 4 162 759 2 836 941 1 181 809 4 018 750
Long term date rating
43 062 43 062
1 950 899
43 062 1 993 961
The current rating expires on 30 May 2014 and falls within an investment grade. 22. COMPLIANCE WITH BANKING REGULATIONS
(502 328)
(502 328)
The Directors are not aware of any non compliance with the Banking Act (Chapter 24:20) and the Banking Regulations 2000 contained in the Statutory Instrument 205 of 2000. Directors Z R Churu (Chairman), S K Chiganze, G Chikomo, Dr C U Hokonya, G N Mahlangu, C Mandizvidza, P M Matupire, C Nyachowe, S A Sibanda, V B Sibanda
954 814
8 896 953
43 062
(73 190) (73 190)
73 190
6 740 767 16 562 406
Wentspring Investments (Private) Limited (100%) Opening net asset value Fair value (loss) / gain Closing net asset value Total investments as at 31 December 2013 317 390 (11 685) 305 705 4 468 464 236 814 80 576 317 390 4 336 140
ZBFH 272
06
ZB BUILDING SOCIETY AUDITED FINANCIAL STATEMENTS 31 December 2013
NOTES TO THE AUDITED FINANCIAL STATEMENTS For the year ended 31 December 2013 Audited 31 December 2013 US$ 7. DEPOSITS FROM CUSTOMERS Savings accounts Fixed deposits Term deposits 9 927 051 6 629 464 1 839 176 18 395 691 8. PROVISIONS AND OTHER LIABILITIES Interest payable Creditors and other accounts Deferred income Group management fees Intercompany balances Leave pay provision 169 009 220 333 558 908 163 493 80 217 55 667 1 247 627 9. DEFERRED TAXATION
Balance 1 January US$ 2013 Property and equipment Investment property Fairvalue adjustments to financial assets Current year movement US$ 3 months $US Balance at 31 December US$ 16.1 Interest rate gap analysis
Audited 31 December 2013 US$ 14. OPERATING EXPENSES Operating expenses comprise the following expenses: Staff costs Communication expenses Computer and information technology Occupation expenses Commission and fees Administration expenses
1 524 834 54 327 300 673 344 488 321 760 3 166 070 5 712 152
1 970 195 59 473 29 464 304 165 826 084 2 477 734 5 667 115
Finsure House 7th Floor Sam Nujoma Street/Kwame Nkrumah Avenue P O Box 2594 Harare Telephone: 790880/9 Facsimile: 792960 E-mail: zb@zb.co.zw Website: www.zbbs.co.zw
Finsure House 5th Floor Sam Nujoma Street/Kwame Nkrumah Avenue P O Box 2594 Harare Telephone: 759735-7 Facsimile: 751877 E-mail: info@zbre.co.zw Website: www.zb.co.zw
8 185 101 5 333 601 7 228 262 20 746 964 15.
Included in administration expenses are the following: Audit fees Depreciation on property and equipment INCOME TAX EXPENSE Current tax Deffered tax Total tax expense
112 563 201 416
97 577 225 259
219 468 384 969 586 303 742 497 60 230 1 993 467
ZB Life Towers Sam Nujoma Street /Jason Moyo Avenue P O Box 969 Harare Telephone: 708801/09 E-mail: info@zblife.co.zw Website: www.zb.co.zw
ZB Centre 1st Floor Corner First Street / Kwame Nkrumah Avenue P O Box 3198 Harare Telephone: 796841/6
7 350 7 350
26 117 26 117
16.
RISK MANAGEMENT
4 to 6 months $US
7 to 12 months $US
Above 12 months $US
Carrying Amount $US$
175 000 172 500 216 807 564 307
1 250 1 750 6 616 9 616
176 250 174 250 223 423 573 923
As at 31 December 2013 Assets Cash and cash equivalents Money market placements Loans and advances
ZB Centre 1st Floor Corner First Street / Kwame Nkrumah Avenue P O Box 3198 Harare Telephone: 796841/49 E-mail: info@zb.co.zw Website: www.zb.co.zw
1 281 278 8 500 000 479 304 10 260 582
140 646 140 646 978 978 978 978 (838 332) 1 348 254
2 665 914 2 665 914 1 713 253 1 713 253 952 661 2 300 915
9 365 354 9 365 354 7 629 464 7 629 464 1 735 890 4 036 805
1 281 278 8 500 000 12 651 218 22 432 496 18 395 691 18 395 691 4 036 805 -
Balance 1 January US$ 2012 Property and equipment Investment property Fair value adjustments to financial assets
Current year movement US$
Balance at 31 December US$
Liabilities Deposits from customers
8 073 996 8 073 996
263 000 158 175 153 688 574 863
(88 000) 14 325 63 119 (10 556)
175 000 172 500 216 807 564 307
2 186 586 2 186 586
Audited 31 December 2013 US$ 10. EQUITY AND RESERVES
3 months US$ 16.2 Liquidity gap analysis as at
4 to 6 months US$
7 to 12 months US$
Above 12 months US$
Gross Norminal Inflow/ (outflow) US$
Carrying amount US$
As at 31 December 2013 Assets Cash and cash equivalents Money market placements Loans and advances
10.1 Share capital Authorised; 100 000 000 ordinary shares of US$0.01 each Issued and fully paid; 95 481 425 ordinary shares of US$0.01 each 10.2 Capital adequacy ratio Share capital Share premium Retained earnings 954 814 8 896 953 6 667 577 16 519 344 Related party exposure Operational risk allocations Tier 1 Capital Revaluation reserve Tier 2 Capital Operational Risk Tier 3 Capital Total capital base Credit risk weighted assets Operational risk equivalent assets Total risk weighted assets Tier 1 capital ratio Tier 2 capital ratio Tier 3 capital ratio Capital Adequacy Ratio 11. NET INTEREST INCOME (672 114) (515 415) 15 331 815 43 062 43 062 515 415 515 415 15 890 292 30 319 351 6 442 686 36 762 037 42% 0% 1% 43% 954 814 8 896 953 5 219 006 15 070 773 (944 233) (178 906) 13 947 634 178 906 178 906 14 126 540 29 317 326 2 236 329 31 553 655 44% 0% 1% 45%
2 029 362 8 577 222 502 317 11 108 901
220 262 220 262
2 822 039 2 822 039
2 029 362 2 029 362 8 577 222 8 500 000 9 665 508 13 210 126 12 651 218 9 665 508 23 816 710 23 180 580
1 000 000
1 000 000
Liabilities Deposits from customers
954 814
954 814
8 159 560 8 159 560 2 949 341 2 949 341
993 528 993 528 (733 266) 2 176 075
1 713 320 1 713 320 1 108 719 3 284 794
9 574 048 20 440 456 18 395 691 9 574 048 20 440 456 18 395 691 91 460 3 376 254 3 376 254 -
The table above sets out the remaining contractual maturities of the Building Societys assets and financial liabilities
16.2.1 Liquidity ratios
2013 US$ Total liquid assets Total liabilities Liquidity ratio Minimum statutory level 17. EXTERNAL CREDIT RATING 10 529 362 18 395 691 57% 30%
2012 US$ 14 615 277 20 746 964 70% 30%
The Society subscribes to an internationally recognised rating agency Global Credit Rating Group (GCR), and the ratings for the last three years were as follows:2013 2012 2011 Long term debt rating BBBBBBBBBThe current rating expires on 30 May 2014 and falls within an investment grade. 18. COMPLIANCE WITH BANKING REGULATIONS The Building Society was not compliant with minimum capital levels as at 31December 2013 as prescribed by the Reserve Bank of Zimbabwe. 19. Directors T. P . Mpofu (Chairman), S.A. Sibanda, E.N. Mungoni (Mrs), S.K. Chiganze, C Makoni, E. Munemo, R . Mutandagayi, M.T. Sachak, C.E. Sandura (Mrs)
11.1 Interest income Mortgage advances Overdrafts Consumer loans Short term funds and securities
642 421 109 815 1 132 788 857 362 2 742 386
357 192 105 744 1 425 394 542 430 2 430 760 107 965 33 386 332 788 43 847 517 986 1 912 774
GROUP CORPORATE INFORMATION
11.2 Interest expense Fixed deposits Savings accounts Short term funds Other liabilities
183 194 39 921 412 670 48 500 684 285
Net interest income 12. TRADING AND OTHER INCOME Commissions and fees Operating lease rental income Dividend income Valuation fees Profit share write backs Other
2 058 101
10th Floor ZB House 46 Speke Avenue P O Box 3198 Harare Telephone: 751168/75 Telex: 24163 Facsimile: 251029 E-mail: zb@zb.co.zw Website: www.zb.co.zw Company Registration Number 1278/89 Date of Incorporation 29 May 1989
4 190 330 368 112 134 803 61 408 125 592 232 358 5 112 603
4 869 277 356 236 47 669 47 794 190 552 265 403 5 776 931 10th Floor ZB House 46 Speke Avenue P O Box 3198 Harare Telephone: 751168/75 Telex: 24163 Facsimile: 251029 E-mail: zb@zb.co.zw Website: www.zb.co.zw
13.
FAIR VALUE ADJUSTMENTS Financial assets designated at FVTPL Fair value adjustment on investment properties Unlisted equity investments Fair value adjustments on subsidiaries 1st Floor ZB Center 46 Speke Avenue P O Box 3198 Harare Telephone: 796841 Telex: 24163 Facsimile: 251029 E-mail: zb@zb.co.zw Website: www.zb.co.zw
ZBFH 272
35 000 5 914 132 325 173 239
(763 500) 4 168 1 262 386 503 054
07

ZBFH Audited Results For FY Ended 31 Dec 13

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ZBFH Audited Results For FY Ended 31 Dec 13

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AUDITED GROUP FINANCIAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2013

ZB FINANCIAL HOLDINGS LIMITED AUDITED FINANCIAL STATEMENTS 31 DECEMBER 2013

Non-controlling interests Total equity Total equity and liabilities

AUDITED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

93 901 78 138 (4 695)

4 933 933 936 (924 352)

167 344 1 035 449

4 010 517 14 869 518

320 863 547 242 868 105

8 988 464 1 870 537 10 859 001

509 867 525 582 1 035 449

11 668 664 3 200 854 14 869 518

Share capital US$ Restated balance at 1 January 2012

Share premium US$

General reserve US$

Retained income US$

ZB FINANCIAL HOLDINGS LIMITED AUDITED FINANCIAL STATEMENTS 31 DECEMBER 2013

1 751 906 27 337 466 1 664 867

4 060 464 45 810 739 6 930 545 52 741 284

8 988 464 1 870 537 10 859 001

2 680 200 1 330 317

(580 105) (1 129 369) (66 854)

(580 105) (133 288) 30 554 -

(580 105) (133 288) -

11 272 600 56 796 564 10 100 845 66 897 409

(461 439) 182 759 500 000

(461 439) (122 482) 50 020 182 250

(57 187) (50 020) (182 250)

(518 626) (122 482) -

11 814 783 56 954 780 10 336 970 67 291 750

AUDITED CONSOLIDATED STATEMENT OF CASH FLOWS

29 003 851 326 729 967 261 203 812

20 106 623 328 101 221 261 203 812

52 097 021 13 429 134

56 796 564 10 100 845

43 500 928 10 955 318

45 810 739 6 930 545

9 148 672 7 772 786

12 326 341 10 859 001

8 968 877 7 029 666

8 968 877 7 029 666

SEGMENT INFORMATION Segment results

Audited 31 December 2013 US$ In respect of guarantees 23 832 413

(201 368) 69 160 246

(1 068 664) 69 726 565

19 747 201 29 585 141 -

20 433 670 352 -

190 818 8 030 968 -

(62 114) (3 872 084) 186 557

43 262 442 17 555 385 8 342 419 69 160 246

41 295 499 21 235 916 7 195 150 69 726 565

70 363 3 408 851 52 811 556

37 773 41 202 769 760

4 097 714 1 235 686 13 555 186

(1 634 479) 1 464 154 (3 917 966)

2 571 371 6 149 893 63 218 536

2 216 074 1 942 907

275 363 134 804

237 321 12 651

2 740 747 2 099 562

307 317 246 244 645 029

910 994 235 678

44 896 864 31 772 499