ZB Holding Unaudited Results For HY Ended 30 Jun 13 PDF

UNAUDITED GROUP FINANCIAL RESULTS FOR THE HALF YEAR ENDED 30 JUNE 2013
Directorate
All amounts are in United States of America dollars (US$)

FINANCIAL HIGHLIGHTS
STATEMENT OF FINANCIAL POSITION Unaudited Statement of Financial Position as at 30 June 2013 30 June 2013 Total Assets Total Capital And Reserves Annualised Return on Equity Total Capital to Total Assets Ratio (Group) Loan Loss Provision Ratio (Group) Liquidity Ratio (Group) INCOME STATEMENT Unaudited Income Statement for the half year ended 30 June 2013 Total Income Transfer (to) / from Life Fund Profit After Taxation Basic Earnings Per Share Cost Efficiency Ratio 36 204 895 (1 905 127) 2 568 940 0.01 82.92% 2012 30 117 063 1 120 568 959 498 0.01 90.88% % CHANGE 20% (270%) 168% 0% 14% 19.22% 2.55% 32.77% 20.06% 4.06% 32.17% (4%) 37% 2% 348 783 771 67 024 625 7.16% 31 December 2012 326 729 967 65 526 155 11.09% % CHANGE 7% 2% (36%)
Mr. Elisha. N. Mushayakarara retired from the Board with effect from the 31st of May, 2013, having retired from his position as the Chief Executive Officer of the Group. On behalf of the Board, management and staff, I would like to thank him for his invaluable contribution to the Group over the last twenty years. I wish him a restful period ahead and success in all his endeavours. Mr. Ronald Mutandagayi was appointed the Chief Executive Officer of the Group with effect from 1 June, 2013. He became a member of the board with effect from the same date. The board welcomes him and looks forward to his contribution. B. P . Nyajeka Chairman 23 August, 2013 Harare
ZB FINANCIAL HOLDINGS LIMITED UNAUDITED FINANCIAL STATEMENTS 30 JUNE 2013
UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 30 June 2013 Unaudited Audited 30 June 31 December 2013 2012 US$ US$ ASSETS Cash and short term funds Money market investments Mortgages and other advances Investment securities Investments in associates Other assets Deferred tax asset Intangible assets Investment properties Property and equipment Total assets 76 048 138 11 939 445 145 262 598 34 048 406 2 208 591 8 495 234 1 031 326 9 185 006 16 752 570 43 812 457 348 783 771 69 726 565 13 192 365 136 195 690 29 406 810 2 676 884 5 058 447 929 155 9 718 994 16 780 703 43 044 354 326 729 967
GROUP CHIEF EXECUTIVES REPORT
Group results A generally illiquid market characterized by amplified credit risk militated against credit expansion whilst the spread of investment opportunities remained narrow. However, the marked resurgence of the Zimbabwe Stock Exchange had a positive impact on the Group's results whilst interest margins and transactional fees remained relatively flat.
LIABILITIES Deposits and other accounts Amounts due to other banks Short term borrowings Trade and other payables Current tax liabilities Deferred tax liabilities Life assurance funds Total liabilities EQUITY 232 036 139 283 092 7 095 976 14 959 051 281 354 4 791 753 22 311 781 281 759 146 216 727 944 109 353 6 716 657 12 485 768 757 460 3 999 976 20 406 654 261 203 812
CHAIRMANS STATEMENT
Despite mounting pressure on operating costs, the Group managed to post an operating profit for the half year of $2.6m, being 168% above the profit posted in the corresponding period in the prior year. Total income, at $36.2m increased by 20% compared to the outturn in the same period in the prior year despite a reduction in net interest income of 6%. The increase is anchored on a 28% increase in premiums revenues and a 164% improved outturn on capital gains on trade investments which posted a loss in the comparative period in the prior year. Operating costs increased from $27.4m in 2012 to $30m in 2013 (10% increase) achieving a cost efficiency ratio of 83%, an improvement from the 91% achieved in the corresponding period. An increase in insurance expenses of 26% is consistent with the increase in the business volumes. However, an aggregated insurance technical result of $4.3m was posted (2012: $3.2m). Additionally, an interim transfer to the life fund amounting to $1.9m was made (2012: (1.1m)). The net charge to the income statement for loan loss provisions amounted to $0.6m (2012: $2.3m). Total assets increased by 7% from 31 December, 2012 to close at $348.8m as at 30 June, 2013. This was on the back of a 7% growth in total deposits which increased from $216.7m to $232m, over the same period. Sadly, the deposits remained transient and unable to support the creation of significant long term assets. In sympathy with the tight liquidity conditions, the Loans to Deposits (L/D) ratio was maintained at a conservative ratio of 63%, the same level as at 31 December 2012, whilst prudential liquidity ratios for banking operations were maintained above 30%, with the aggregate ratio as at 30 June, 2013 being 33%. Operations review The channel expansion program continued with the establishment of three (3) branches at informal trading zones in Harare and one (1) campus branch at Bulawayo Polytechnic College. A total of $1m has been spent on branch redecorations with general ambience at the Graniteside and Victoria Falls branches having been matched to international standards. System integration with a number of customers, notably utility suppliers, was completed to facilitate enhanced bill payments with automated update of the paying customers' bills. This service is available through either the mobile banking platform, the internet banking channel or over the counter service. Deployment of Point of Sale gadgets is on-going as the Group expands its points of presence. The implementation of automated risk management systems is underway as the Group continues to revamp its technological platforms. Risk underwriting capacity for the Group's reinsurance operations was improved through capital support in the sum of $2m. Outlook Earnings volatility is likely to continue to affect the Group's performance whilst a cautious approach towards asset creation will be adopted with greater emphasis being put on quality. Cost optimization will remain an operating imperative with the Group having considered numerous options for cost containment. R. Mutandagayi Group Chief Executive Officer 23 August, 2013 Harare
Share capital Share premium Other components of equity Accumulated profit Non-controlling interests Total equity Total equity and liabilities
OPERATING ENVIRONMENT Headline GDP growth for 2013 is expected to be slightly lower at 3.4% compared to an estimated 4.4%, achieved in 2012 as some sectors of the economy exhibit signs of a slowdown. Inflation remained below regional averages on the back of low domestic demand and a weak South African rand which suppressed imported inflationary pressures. As a result, headline inflation averaged 2.4% in the first half of 2013, compared to 4.2% over the same period in 2012. Activity on the money market was relatively subdued with liquidity conditions remaining tight. As a result, interest rates remained flat in the absence of significant deal flows. The equity market firmed up towards the end of the first half of the year, underpinned by renewed interest and buying from foreign investors.This saw the industrial index increasing by 39.6% during the period under review to close at 211.19 points on 28 June 2013. The mining index increased at a slower pace, adding on 10.6% to close at 73.29 points over the same period. On the external front, the country's trade deficit widened to about US$1.5 billion as imports outpaced exports in the first half of 2013. In the outlook period, the country's external position will remain under pressure owing to a high import bill, with the rebound of exports not matching the steep rise in imports, leaving an anticipated current account deficit of about 18% by the end of 2013. Group results and interim dividend The Group's profit for the period grew by 168% compared to the comparative period in the prior year. A substantial portion of the earnings comprise of fair value credits which tend to be highly volatile. Given the nature of the earnings and the recapitalization efforts currently underway, the Directors have deemed it prudent to defer dividend payout at this interim stage. Capitalisation and future business outlook The reorganization of the Group's capital resources through the amalgamation of the Group's banking operations is underway. This will enhance the underwriting capacity within the Group's banking operations whilst eliminating unnecessary duplication which imposes onerous requirements on shareholders for the mobilization of regulatory capital for each of the disparate banking units. Additionally, in pursuance of the authority granted by shareholders in 2008 for the recapitalization of the Group through a private placement, active engagement with prospective investors is currently underway. Shareholders will be consulted once a suitable opportunity has been identified. Update on pending litigation and OFAC listing The matter in which Transnational Holdings Limited is challenging the acquisition of Intermarket Holdings Limited by ZB Financial Holdings Limited remains outstanding. The matter had been set down for hearing in the Supreme Court on the 10th of June 2013, but was postponed sine-die upon request by the applicants. Revocation of the Group's listing as a Specially Designated National (SDN) by the Office of Foreign Assets Control (OFAC) of the United States of America's Treasury Department still remains outstanding.
1 751 906 27 145 381 15 844 685 8 373 232 53 115 204 13 909 421 67 024 625 348 783 771
1 751 906 27 204 178 16 567 880 6 573 057 52 097 021 13 429 134 65 526 155 326 729 967
UNAUDITED CONSOLIDATED INCOME STATEMENT

For the half year ended 30 June 2013
Unaudited 30 June 2013 US$
Interest income Interest expense Net interest income Gross reinsurance and life assurance premium income Reinsurance and life assurance expenses Net insurance and assurance income Other operating income Fair value adjustments Total other income Total income Operating expenses Operating income before risk provisions and taxation Specific and portfolio provisions Transfer from / (to) life assurance funds Share of associate companies' profit before taxation Profit before taxation Income tax expense Profit for the period Profit attributable to: Owners of parent Non-controlling interests Profit for the period Earnings per share Basic and fully diluted earnings per share (dollars)
17 739 065 (7 115 388) 10 623 677
17 969 984 (6 672 163) 11 297 819
16 849 856 (12 575 904) 4 273 952 19 117 556 2 189 710 21 307 266 36 204 895 (30 019 840)
13 122 152 (9 944 960) 3 177 192 19 088 014 (3 445 963) 15 642 051 30 117 062 (27 370 771)
6 185 055 (581 315) (1 905 127) 104 057 3 802 670 (1 233 730) 2 568 940
2 746 291 (2 312 113) 1 120 568 (35 171) 1 519 575 (560 077) 959 498
1 856 385 712 555 2 568 940
861 890 97 608 959 498
0.01
0.01
UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Unaudited 30 June 2013 US$ Profit for the period Other comprehensive income: Gains on property revaluation Share of associate companies' revaluation reserve Income tax relating to components of other comprehensive income Other comprehensive income for the period net of tax Total comprehensive income for the period Total comprehensive income attributable to: Owners of the parent Non-controlling interests 2 568 940
Unaudited 30 June 2012 US$ 959 498
(579 194) 28 960 (550 234) 2 018 706
3 366 186 (168 309) 3 197 877 4 157 375
1 306 151 712 555 2 018 706
4 059 767 97 608 4 157 375
01
ZBFH 939
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the half year ended 30 June 2013
Properties revaluation reserve US$ Attributable to equity holders of parent US$ Noncontrolling interests US$
Subject to finalisation of technical considerations, it is likely that the Mash investment will be equity accounted for in the consolidated financial statements of the Group going forward. The likely impact of this accounting treatment on the financial statements of the Group as at 30 June 2013 is indicated as follows:Revised audited 31 December 2012 US$ (6 983 123) 9 797 219 2 814 096 2 814 096 Revised unaudited 30 June 2012 US$ 1 589 539 165 485 1 755 024
Life fund liabilities are supported by the following net assets: Unaudited Audited 30 June 31 December 2013 2012 US$ US$ Listed equities Unlisted equities Gold fund Government and public utilities stock Investment properties Funds on deposit Trade and other receivables Gross assets Less: Deferred tax liabilities Trade and other payables Income tax payable Net assets 8 787 198 3 328 267 423 633 402 740 2 780 736 7 083 809 6 421 22 812 804 (291 248) (212 523) 2 748 22 311 781 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

Total US$
Ordinary shares US$ Balance at 1 January 2013 Changes in equity for 2013: Treasury shares Total comprehensive income for the year Regulatory reserve in respect of doubtful debts Transfer from retained income Dividends paid Balance at 30 June 2013 -
Share premium US$
General reserve US$
Retained income US$
1 751 906 27 204 178
2 824 790
13 743 090
6 573 057
52 097 021
13 429 134 65 526 155
Reduction in investment securities Increase in investments in associate companies Increase in total assets Increase in total equity
(7 514 099) 9 968 597 2 454 588 2 454 588
(58 797) -
327 039 (500 000) -
(550234) -
1 856 385 (94 771) 500 000 (461 439)
(58 797) 1 306 151 232 268 (461 439)
(58 797)
712 555 2 018 706 (232 268) (461 439)
Unaudited 30 June 2013 US$ (Reduction) / increase in fair value gains Increase in share of associates' profit (Reduction) / Increase in period profits 2 SEGMENT INFORMATION Segment results (530 885) 171 377 (359 508)
The assets and liabilities indicated above are included under appropriate sections in the consolidated statement of financial position. 4. CONTINGENT LIABILITIES Unaudited Audited 30 June 31 December 2013 2012 US$ US$ Contingent liabilities
1 751 906 27 145 381
2 651 829
13 192 856
8 373 232
53 115 204
13 909 421 67 024 625
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS For the half year ended 30 June 2013 Unaudited 30 June 2013 US$ Cash flows from operating activities Income taxes paid Dividend paid Net cash generated from operating activities Cash flows used in investing activities Purchase of investment properties Purchase of property and equipment Proceeds on disposal of property and equipment Purchase of investment securities Proceeds on disposal of investment securities Increase in investment in subsidiary Net cash used in investing activities Cash flows used in financing activities Purchase of treasury shares Net cash used in financing activities Net increase in cash and short term funds Cash and short term funds at beginning of period Cash and short term funds at end of period Cash and short term funds comprise: Cash Local bank accounts Foreign bank accounts 12 667 951 (998 113) (461 440) 11 208 398 Unaudited 30 June 2012 US$ 19 599 351 (2 083 093) 17 516 258
2.1
Fund Banking management US$ US$ 30 June 2013 Total income
Reinsurance and life assurance US$
Other operations including consolidation journals Consolidated US$ US$
In respect of guarantees
27 004 112
25 366 068
5.
RISK MANAGEMENT Capital risk management
26 690 593
331 947
4 273 952
4 908 403
36 204 895
(19 866) (2 682 672) 64 382 (1 048 494) 858 622 (2 000 000) (4 828 028)
(200 579) (1 756 835) 55 008 (581 618) 1 503 556 (980 468)
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. 5.2 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. 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. 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. 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. 5.2.2 Market risk
Net profit / (loss) contribution 3 331 119 Income tax (expense) / credit (986 136) Profit / (loss) for the period Attributed to: Non-controlling interests Owners of the parent 268 963 2 076 020 2 344 983 2 344 983
(71 807) 9 439 (62 368)
978 202 (186 274) 791 928
(434 844) (70 759) (505 603)
3 802 670 (1 233 730) 2 568 940
(58 797) (58 797) 6 321 573 69 726 565 76 048 138
(17 493) (17 493) 16 518 297 51 954 400 68 472 697
(62 368) (62 368)
229 306 562 622 791 928
214 286 (719 889) (505 603)
712 555 1 856 385 2 568 940
30 June 2012 Total income Net income / (loss) contribution Income tax credit / (expense)
28 514 232
273 063
3 177 192
(1 847 425)
30 117 062
5 177 464
(147 158)
699 477
(4 210 208)
1 519 575
(862 651) 4 314 813
17 013 (130 145)
(145 769) 553 708
431 330 (3 778 878)
(560 077) 959 498
55 248 452 11 793 483 9 006 203 76 048 138
45 611 194 13 664 643 9 196 860 68 472 697
Profit / (loss) for the period Attributed to: Owners of the parent Non-controlling interests
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS For the half year ended 30 June 2013 1 1.1 BASIS OF PREPARATION Reporting currency The financial statements of the Group are presented in United States dollars (US$) being the reporting currency adopted by the Group following the introduction of a multi-currency trading environment in Zimbabwe in February 2009. 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 measured at fair value. The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs). 1.3 Basis of consolidation The Group financial results incorporate the financial results of the Company, its subsidiaries and associate companies. Subsidiary undertakings are those companies in which the Group, directly or indirectly, has an interest of more than one half of the voting rights and is able to exercise control of the operations. 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 results of subsidiaries acquired or disposed of during the year are incorporated from the dates control was acquired and up to the date control ceased. 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 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 adjustments of money market investments - 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 and - Loan loss provisioning. 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). ZB obtains significant influence 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'. Preliminary evaluation has indicated that application of 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 30% with an effective 10% being due to the equity holders of the parent company.
3 475 547 839 266 4 314 813
(130 145) (130 145)
1 241 552 (687 844) 553 708
(3 725 064) (53 814) (3 778 878)
861 890 97 608 959 498
2.2
Segment assets and liabilities Other operations including consolidation journals Consolidated US$ US$
Fund Banking management US$ US$ 30 June 2013 Operating assets Property and equipment Investment properties Total assets Segment liabilities Shareholders' funds Current tax liabilities Deferred tax liabilities Total equity and liabilities 2.3
273 105 153 41 768 031 12 113 565 326 986 749 260 325 325 62 952 768 192 413 3 516 243 326 986 749
581 232 25 702 340 000 946 934 301 107 645 827 946 934
36 754 082 1 035 522 3 899 005 41 688 609 27 962 744 12 446 867 43 621 1 235 377 41 688 609
(22 221 723) 288 218 744 983 202 43 812 457 400 000 16 752 570 (20 838 521) 348 783 771 (11 903 137) 276 686 039 (9 020 837) 45 320 40 133 67 024 625 281 354 4 791 753
(20 838 521) 348 783 771
Segment assets and liabilities Other operations including consolidation journals Consolidated US$ US$
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 interest-earning assets and interest bearing liabilities mature or reprice at different times or in differing amounts. Risk management activities are aimed at optimizing net interest income, given market 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$19 951(2012:23 399) and the total assets in the statement of financial position being increased or decreased by US$3.2 million using an average margin of 0.85% per annum. A 2% change in the rate sensitive liabilities would result in the reported profits being increased or decreased by US$32 237 (2012:US$36 990) and the total liabilities in the statement of financial position being increased or decreased by US$5.1 million using an average margin of 0.85% per annum.
Fund Banking management US$ US$ 31 December 2012 Operating assets Property and equipment Investment properties Total assets Segment liabilities Shareholders' funds Current tax liabilities Deferred tax liabilities Total equity and liabilities
254 344 834 40 963 463 12 093 700 307 401 997 241 734 050 62 270 388 570 681 2 826 878 307 401 997
603 074 28 322 340 000 971 396 263 201 708 195 971 396
31 683 337 1 028 581 3 947 003 36 658 921 25 877 048 9 541 938 166 640 1 073 295 36 658 921
(19 726 335) 266 904 910 1 023 988 43 044 354 400 000 16 780 703 (18 302 347) 326 729 967 (11 427 900) 256 446 399 (6 994 389) 20 139 99 803 65 526 132 757 460 3 999 976
(18 302 347) 326 729 967
3.
LIFE ASSURANCE FUNDS 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.
02
ZBFH 939
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 30 June 2013 were as follows: Unaudited Audited 30 June 31 December 2013 2012 US$ US$ Total assets Total liabilities Net foreign currency position 5 605 918 (3 374 038) 2 231 880 8 212 628 (4 580 859) 3 631 769 5.3 Other business risks 5.3.1 Operational 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. 5.3.3 Technological risk Summary of Risk Assessment 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 low 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. 5.3.4 Solvency 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. 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. 5.3.5 Underwriting 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. 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. RAS Component ZB Bank Moderate ZB Building Society Moderate Latest Rating ZB Asset Management Moderate Acceptable Moderate Stable Total insurance risk before retrocession Retroceded risk Insurance risk after reinsurance Risk rating Regulatory 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 ZB Bank n/a n/a n/a n/a n/a 2 2 2 3 3 2 2 ZB Building Society n/a n/a n/a n/a n/a 2 2 3 4 3 2 3 Latest Rating 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 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 (2011: US$75 000) and concentration of insurance risk is in fire and motor classes, as management consider these classes to be profitable. There is no concentration of risk in terms of exposure to single customers. Measurement methods In life assurance business, all applications for life and disability cover are assessed using sound underwriting techniques and methods, including HIV testing, where necessary. Mortality and disability investigations are periodically carried out and actuarial assumptions are adjusted accordingly. Strategies for management/mitigation In reinsurance business, this is normally mitigated by the purchase of reinsurance from the London insurance market annually. All mortality and disability risks above periodically determined retention levels are reassured with professional reassurance firms. Details of underwriting risk in reinsurance business are as follows: Unaudited Audited 30 June 31 December 2013 2012 US$ US$ 6 000 000 (5 000 000) 1 000 000 6 000 000 (4 000 000) 2 000 000
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$165 717 [2012: US$269 659] and the statement of financial position being reduced or increased by US$223 188 [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 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 30 June 2013 would result in an increase / decrease of US$2.53 million to the reported Group's profit and an increase / decrease of US$2.56 million in the statement of financial position. 5.2.3 Credit risk Definition Credit risk is the risk that a counter party will not honour its obligations to the Group as and when they become due. Identification techniques Prior to granting facilities, the Group conducts an assessment proposal through a credit scoring system which classifies as good or bad depending on points scored. Thereafter facilities extended to clients are reviewed on a regular basis and classified accordingly. Measurement methods The risk is measured through assessing the risk of default using a credit risk-rating matrix. Impact evaluation Credit risk is rated moderate due to increased market wide company failures as well as apparently increased debt burden on individuals due to a proliferation of credit facilities. Strategies for management/mitigation The Group has a credit risk management process which operates through a hierarchy of exposure discretions and managed at the Bank level. All exposures above a certain level require the approval of the Banks Board Credit Committee's which comprises executive and non-executive directors. Exposures below the Banks Board Credit Committee's discretion are approved according to a system of tiered exposure discretions through credit committees comprising senior management staff. A substantial portion of the Group's individual and corporate borrowings is insured for non-performance whilst security of various other forms is obtained for large exposures. Monitoring and controlling mechanisms Regular credit audits and reviews are conducted and problem accounts are highlighted and management action is taken as appropriate. Adequacy and effectiveness of risk management systems The credit risk management and control techniques alluded to above are adequate and effective and all staff members are required to adhere to them. The table below shows the credit exposure by client quality classification: Unaudited Audited 30 June 31 December 2013 2012 US$ US$ Classification Good Sub-standard Doubtful Loss Total Sensitivity analysis A 10% change in the assets classified as good and marginal categories to a loss classification would result in the reported profit being reduced by US$9.6 million [2012: US$9.2 million] and the total assets in the statement of financial position being reduced by US$14.0 million [2012: US$13.4 million] assuming that the available security does not perform.
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
Key: 1 = Strong; 2 = Satisfactory; 3 = Fair; 4 = Weak; 5 = Critical
Aggregate inherent risk Quality of aggregate risk management systems Overall composite risk Direction of overall composite risk
ZB Financial Holdings Group Moderate Acceptable Moderate Stable
Acceptable Acceptable Moderate Moderate Stable Stable
Overall Risk Matrix ZB Financial Holdings Limited Type or Risk Level of Aggregate Inherent Risk Minor Moderate Moderate Moderate Moderate High Moderate Moderate Moderate Adequacy of Aggregate Risk Management Systems Acceptable Acceptable Acceptable Acceptable Acceptable Acceptable Acceptable Acceptable Acceptable
Credit Risk Liquidity Risk Interest Rate Risk Foreign Exchange Risk Strategic Risk Operational Risk Legal & Compliance Risk Reputational Risk Overall Risk
Overall Composite Risk Low Moderate Moderate Moderate Moderate Moderate Moderate Moderate Moderate
Direction of Overall Composite Risk Stable Stable Stable Stable Stable Increasing 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.
142 426 938 3 569 329 1 110 047 25 160 398 172 266 712
135 315 901 1 609 899 3 721 065 20 914 895 161 561 760
03
ZBFH 939
5.4.2 External 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 ZB Life Assurance Company 2013 BBB+ BBBBBB+ Not rated 2012 BBB+ BBBBBB+ Not rated 2011 BBB+ BBBBBB+ Not rated 2010 BBB+ BBBBBB+ Not rated Intermarket Banking Corporation Limited Board Total meetings Name R Mutandagayi D T Machingaidze M Mkushi P M Matupire K Bangure 2 Meetings attended 2 2 2 2 1
Balance at 1 January 2013 Changes in equity for 2013: Total comprehensive income for the period Regulatory reserve in respect of doubtful debts Dividend paid Balance as at 30 June 2013 1 610 402 19 651 941 1 185 058 1 964 741 12 767 901 37 180 043 Share capital US$ UNAUDITED STATEMENT OF CHANGES IN EQUITY For the half year ended 30 June 2013 Property and equipment Share revaluation premium reserve US$ US$ General Accumulated reserve profit US$ US$ Total US$
1 610 402
19 651 941
94 766 -
1 371 115 1 137 115 (94 766) (1 160 275) (1 160 275) 12 883 975 37 390 883
ZB Life Assurance Board Total meetings Name E N Mushayakarara R Mutandagayi C Makoni A G Chinembiri E T Z Chidzonga M Gumbo L Mawire K P Matsikidze C Mandizvidza M Mkushi 2 Meetings attended 2 2 2 2 2 2 2 2 2 2
1 185 058 2 059 507
All ratings above fall within the Investment Grade. The current ratings expire on the 30th of November 2013. 6. COMPLIANCE WITH REGULATIONS 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 2011, 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 2013 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$20 million respectively as at 31 December 2012. Increased capital requirements and compliance duty are under review by the regulator. Intermarket Banking Corporation Limited (IBCL) and ZB Building Society (ZBBS) did not meet these requirements during the period under review. The Group has adopted a strategic position to merge ZBBS and ZB Bank Limited whilst winding down the operations of IBCL. This will address the capital requirements in the short term whilst capital requirements in the future will be addressed through trading profits as well as possible fresh capital injection. This will require the approval of the Reserve Bank of Zimbabwe. The directors are not aware of any other material cases of non-compliance with regulations governing the operations of all companies within the Group.
UNAUDITED STATEMENT OF CASH FLOWS For the half year ended 30 June 2013 Unaudited 30 June 2013 US$ Cash generated from operating activities Dividend paid Taxation paid Net cash generated from operating activities Investing activities Proceeds on disposal of property and equipment Purchase of property and equipment Purchase of intangible assets Net cash used in investing activities 13 639 720 (1 160 275) (1 073 466) 11 405 979 Unaudited 30 June 2012 US$ 21 035 864 (2 098 864) (1 657 212) 17 279 788
37 689 (1 695 731) (500 279) (2 158 321) 9 247 658 68 334 530 77 582 188
12 356 (1 282 390) (255 330) (1 525 364) 15 754 424 51 687 122 67 441 546
ZB Reinsurance Company Board Total meetings Name E N Mushayakarara R Mutandagayi C J Murandu D T Machingaidze B Shumba F B Chirimuuta 2 Meetings attended 2 1 2 2 2 2 2
Net increase in cash and short-term funds Cash and short-term funds at the beginning of the period Cash and short-term funds at the end of the period Cash and short-term funds comprise: Cash on hand Local bank accounts Foreign bank accounts
DIRECTORS RECORD OF ATTENDANCE AT BOARD MEETINGS FOR MAJOR BUSINESS UNITS DURING THE YEAR ENDED 31 DECEMBER 2012 ZB Financial Holdings Limited (ZBFH) Board Total meetings Name E N Mushayakarara E Hamandishe Dr C U Hokonya T Mafunda B P Nyajeka F Kapanje T P B Mpofu E Munemo 3 Meetings attended 3 3 3 3 3 3 3 3
22 575 696 46 319 821 8 686 671 77 582 188
12 290 010 46 198 841 8 952 695 67 441 546
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS For the half year ended 30 June 2013 Unaudited Audited 30 June 31 December 2013 2012 US$ US$ 1. CASH AND SHORT TERM FUNDS Balances with the Reserve Bank of Zimbabwe Balances with other banks and cash 31 819 821 45 762 367 77 582 188 20 802 863 47 531 667 68 334 530
C Nyachowe
ZB BANK LIMITED
(Registered Commercial Bank)
UNAUDITED FINANCIAL STATEMENTS 30 JUNE 2013

2. 2.1 Unaudited Audited 30 June 31 December 2013 2012 US$ US$
UNAUDITED STATEMENT OF FINANCIAL POSITION As at 30 June 2013
ADVANCES AND OTHER ACCOUNTS Reported through Statement of Financial Position Loans, overdrafts and other accounts Finance leases Bills discounted Gross Advances Less: Specific and portfolio provisions Less: Interest reserved Net Advances
117 383 644 4 222 379 34 342 512 155 948 535 (3 368 647) (8 486 715) 144 093 173
99 794 487 2 206 757 40 285 546 142 286 790 (4 890 275) (6 692 953) 130 703 562
ZB Bank Board Total meetings Name R Mutandagayi Dr C U Hokonya Z R Churu S A Sibanda P M Matupire C Mandizvidza C Nyachowe G N Mahlangu V B Sibanba G Chikomo 2 Meetings attended 2 2 2 2 2 2 2 2 2 2 ASSETS Cash and short-term funds Treasury bills Advances and other accounts Trade and other receivables Investment securities Investment in subsidiary company Property and equipment Intangible assets Deferred tax asset Total assets LIABILITIES Trade and other payables Short term borrowing Offshore borrowings Deposits from banks Deposits from customers Current tax payable Deferred tax liabilities Total liabilities EQUITY R Mutandagayi S K Chiganze Z R Churu P M Nyamadzawoh C J Murandu C T Masvosva S Mutamuko S Nhongo 2 2 2 2 1 2 2 2 Total equity and liabilities Share capital Share premium Revaluation reserves General reserves Retained income Total equity
Notes
1 2 3 4 5
77 582 188 144 093 173 8 667 720 6 458 074 21 017 534 7 454 639 8 963 336 274 236 664
68 334 530 1 000 000 130 703 562 11 469 185 6 460 322 21 373 848 6 603 920 9 428 528 473 570 255 847 465
2.2
Contingent assets In respect of guarantees Gross Loan book
27 004 112 182 952 647
25 366 068 167 652 858
2.3
ZB Asset Management Company Limited Board Total meetings Name 2 Meetings attended
5 666 099 3 345 976 3 750 000 6 644 208 217 292 346 147 152 236 845 781
7 224 480 4 966 657 1 750 000 1 910 141 202 354 202 461 942 218 667 422
Maturity analysis - On demand - Within 1 month - Between 1 and 6 months - Between 6 and 12 months - After 12 months
37 230 562 40 892 578 28 104 819 20 109 842 29 610 734 155 948 535
32 021 491 14 499 253 51 499 831 22 055 133 22 211 082 142 286 790
2.4
Non-performing debt Non-performing loans and advances Less: Interest reserved Less: Specific and portfolio provisions Value to be received from security held
29 839 774 (8 486 715) (3 368 647) 17 984 412
26 182 186 (6 692 953) (4 890 275) 14 598 958
1 610 402 19 651 941 1 185 058 2 059 507 12 883 975 37 390 883 274 236 664
1 610 402 19 651 941 1 185 058 1 964 741 12 767 901 37 180 043 255 847 465
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 Bank 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 the security held in respect of the non-performing book amounted to $22 182 603 as at 30 June 2013 (Dec 2012: $22 541 048).
Unaudited Audited 30 June 31 December 2013 2012 US$ US$ 2.5 Sectoral analysis of advances Private Agriculture Mining Manufacturing Distribution Construction Transport Communications Services Financial
UNAUDITED STATEMENT OF COMPREHENSIVE INCOME

ZB Building Society Board Total meetings Name E N Mushayakarara S K Chiganze R Mutandagayi T P B Mpofu S Mahlangu C Makoni M T Sachak C Sandura E Munemo S A Sibanda E Mungoni 2 Meetings attended 2 2 2 2 2 2 2 1 2 2 2 Specific and portfolio provisions Profit before taxation Income tax expense Profit for the period Operating income before risk provisions and taxation Interest income Interest expense Net interest income Other income Fair value adjustments Total income Operating expenses
Notes 9 9
Unaudited 30 June 2013 US$ 16 153 373 (6 976 835) 9 176 538
Unaudited 30 June 2012 US$ 16 301 311 (6 430 417) 9 870 894 15 390 655 1 582 205 26 843 754 (18 768 801)
36 028 530 22 445 196 25 289 749 29 882 011 8 827 021 2 177 336 4 128 049 2 128 406 12 318 558 12 723 679 155 948 535
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
10 11
13 966 820 (358 371) 22 784 987
Less: Specific and portfolio provision Less: Interest reserved
(3 368 647) (4 890 275) (8 486 715) (6 692 953) 144 093 173 130 703 562
12
(20 305 555)
2 479 432 2.7 (389 300) 2 090 132 13 (719 017) 1 371 115
8 074 952 (1 599 087) 6 475 865 (855 693) ZBFH 939 5 620 172
03 04
ZB BANK LIMITED
(Registered Commercial Bank)
UNAUDITED FINANCIAL STATEMENTS 30 JUNE 2013

9. Unaudited Audited 30 June 31 December 2013 2012 US$ US$ NET INTEREST INCOME Interest income Advances Overdrafts Dealing income Other interest receivable categories Total interest income Interest expense Retail deposits Dealing expenses Other interest expense categories Total interest expense Net interest income Gross investment in finance leases Less:Unearned finance charges Net investment in finance leases Less than 1 year Between 1 and 5 years 5 218 308 (995 929) 4 222 379 858 551 3 363 828 4 222 379 2 785 529 (578 772) 2 206 757 401 096 1 805 661 2 206 757 10. OTHER INCOME Commission and fees Dividend received Exchange loss Recovery of shared costs Recovery of charges Rent received Loss on sale of equipment Sundry
Unaudited 30 June 2012 US$ 14. RISK MANAGEMENT - cont.
Unaudited Audited 30 June 31 December 2013 2012 US$ US$
14.1 Liquidity ratios 13 057 802 2 345 620 473 446 276 505 16 153 373 11 186 839 4 521 056 328 340 265 077 16 301 311 Total liquid assets Total liabilities to the public Liquidity ratio Minimum statutory liquidity ratio 77 582 188 217 292 346 36% 30% 69 334 530 202 354 202 37% 30%
2.6
Finance lease receivable 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
982 591 4 235 717
464 173 2 321 356
6 239 861 372 722 364 252 6 976 835 9 176 538
5 531 275 713 814 185 329 6 430 418 9 870 893
14.2 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 Bank was concluded on the 21st of October, 2009, using data as at 30 September 2009. The condition of the Bank was assessed using the Risk Assessment System (RAS) and the CAMELS** rating model. The Bank was awarded a composite CAMELS rating of 2, which is a satisfactory rating whilst the individual components were rated as follows:
2.7
Specific and portfolio risk provisions Balance at beginning of year Write offs charged to provisions Charged to statement of comprehensive income Balance at 30 June 2013 Comprising: - Specific - Portfolio 4 890 275 (1 910 928) 389 300 3 368 647 3 700 830 1 189 445 4 890 275
12 803 343 709 890 (44 697) 298 468 62 574 88 259 (13 785) 62 768 13 966 820
12 172 794 2 040 486 505 128 337 726 204 712 17 271 (640) 113 178 15 390 655
CAMELS Component Capital Adequacy Asset Quality Management Earnings Liquidity & Funds Under Management Sensitivity to Market Risk
Latest Rating 2 2 2 3 3 2
11.
UNREALISED FAIR VALUE ADJUSTMENTS Arising from FVTPL instruments Investment securities Investment in subsidiary company
** CAMELS stands for Capital Adequacy, Asset Quality, Management, Earnings, Liquidity management and Sensitivity to market risk. Key: 1 = Strong; 2 = Satisfactory; 3 = Fair; 4 = Weak; 5 = Critical (2 057) (356 314) (358 371) 82 003 1 500 202 1 582 205 Summary of Risk Assessment RAS Component Aggregate inherent risk Quality of aggregate risk management systems Overall composite risk Direction of overall composite risk Overall Risk Matrix Type or Risk Level of Aggregate Inherent Risk Minor Moderate Moderate Moderate Moderate High Moderate Moderate Moderate Adequacy of Aggregate Risk Management Systems Acceptable Acceptable Acceptable Acceptable Acceptable Acceptable Acceptable Acceptable Acceptable Latest Rating Moderate Acceptable Moderate Stable
2 979 775 388 872 3 368 647
4 535 116 355 159 4 890 275 12.
3.
TRADE AND OTHER RECEIVABLES Accrued interest Remittances in transit Inventories Advance payments and sundry assets Amounts clearing from other banks INVESTMENT SECURITIES Opening balance Add: Purchases Fair value (loss)/profit to statement of comprehensive income Exchange gain on investments Impairment loss on investments
OPERATING EXPENSES Staff expenses Communication expenses Computer and information technology Occupation expenses Transport expenses Travelling expenses Administration expenses 8 867 023 478 804 1 607 996 2 220 421 241 646 254 302 6 635 363 20 305 555 7 843 194 521 757 994 227 2 158 967 246 137 289 439 6 715 080 18 768 801
6 973 3 631 915 488 950 4 488 678 51 204 8 667 720 6 460 322 (2 057) (191) 6 458 074
22 596 7 565 456 405 734 3 454 851 20 548 11 469 185 6 258 361 2 790 198 979 343 (151) 6 460 322
4.
Comprising: At fair value through profit and loss (FVTPL) equity investments Unlisted securities Credit Insurance Company Limited Zimswitch Technologies (Private) Limited Held at amortised cost Bank balances Swift shares
Included in administration expenses are the following: Audit fees Depreciation changes on property and equipment Amortisation of intangible assets Impairment loss on investments 13. TAXATION Current income tax Deferred taxation
32 575 926 327 965 471 191
34 500 944 347 273 606 487
731 340 191 025 922 365 5 533 095 2 614 6 458 074
740 878 183 544 924 421 5 533 262 2 639 6 460 322
98 295 620 722 719 017
544 147 311 546 855 693 15.
Credit Risk Liquidity Risk Interest Rate Risk Foreign Exchange Risk Strategic Risk Operational Risk Legal & Compliance Risk Reputational Risk Overall Risk
Overall Composite Risk Low Moderate Moderate Moderate Moderate High Moderate Moderate Moderate
Direction of Overall Composite Risk Stable Stable Stable Stable Stable Increasing Stable Stable Stable
5.
INVESTMENTS IN SUBSIDIARY COMPANY Investment in Barcelona Investments Limited Opening net asset value Fair value loss to income statement Closing net asset value TRADE AND OTHER PAYABLES Interest accrued on deposits Items in transit Accruals and sundries Amounts clearing to other banks
Unaudited Audited 30 June 31 December 2013 2012 US$ US$ 14. CONTINGENT LIABILITIES In respect of guarantees 27 004 112 25 366 058
COMPLIANCE WITH BANKING REGULATIONS 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.
21 373 848 (356 314) 21 373 848
21 048 036 325 812 21 373 848
ZB ASSET MANAGEMENT COMPANY LIMITED UNAUDITED FINANCIAL STATEMENTS 30 JUNE 2013

UNAUDITED STATEMENT OF FINANCIAL POSITION As at 30 June 2013
6.
1 447 963 558 055 3 376 989 283 092 5 666 099
1 071 861 894 334 5 148 932 109 353 7 224 480
14.
RISK MANAGEMENT
Up To 1 month US$ 2 To 6 months US$ 7 To 12 months US$ Above 12 months US$ Other US$ Total US$
7.
DEPOSITS FROM CUSTOMERS Deposits by type Current accounts Savings and call accounts Term deposits Other
Interest rate gap analysis As at 30 June 2013
Notes ASSETS
Unaudited Audited 30 June 31 December 2013 2012 US$ US$
22 676 539 78 399 798 115 074 118 1 141 891 217 292 346
21 025 867 78 420 058 102 868 481 39 796 202 354 202
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 Communication
101 076 337 89 683 913 26 501 196 30 900 217 292 346 40 331 683 6 348 220 1 647 391 11 995 189 7 395 005 1 580 343 1 861 985 33 321 288 86 681 421 26 129 821 217 292 346
99 485 336 75 543 362 27 320 208 5 296 202 354 202 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
ASSETS Cash and short term funds Advances and other accounts Trade and other receivables Investment securities Investments in subsidiaries Property and equipment Intangible assets
8 686 671 78 123 140 5 753 002 92 562 813
28 104 819 2 914 718 31 019 537
20 109 842 20 109 842
- 68 895 517 17 755 372 6 458 074 - 21 017 534 7 454 639 8 963 336 17 755 372 112 789 100
77 582 188 144 093 173 8 667 720 6 458 074 21 017 534 7 454 639 8 963 336 274 236 664
LIABILITIES Trade and other payables Short term borrowings Deposits from other banks Deposits from customers Offshore borrowings Deferred tax liabilities Shareholders' funds
1 432 554 6 644 208 190 760 250 198 837 012
4 078 418 26 501 196 30 579 614
155 127 603 373 30 900 3 750 000 4 539 400
2 742 603 2 742 603
147 152 37 390 883 37 538 035
5 666 099 3 345 976 6 644 208 217 292 346 3 750 000 147 152 37 390 883 274 236 664 -
Cash and short term funds Money market investments Trade and other receivables Investment securities Intangible assets Investment property Property and equipment Deferred tax asset Total assets LIABILITIES Trade and other payables Total liabilities EQUITY Issued capital Share premium Accumulated loss Revaluation reserve Total equity Total equity and liabilities
1 2 3 4
132 041 102 000 133 335 22 237 4 600 340 000 25 701 182 753 942 667
28 999 145 904 221 671 17 590 9 200 340 000 28 322 179 710 971 396
278 397 278 397
263 201 263 201
Period gap Cumulative gap Liquidity gap analysis As at 30 June 2013 ASSETS Cash and short term funds Advances and other accounts Trade and other receivables Investment securities Investment in subsidiaries Property and equipment Intangible assets
(106 274 199) 439 923 15 570 442 15 012 769 75 251 065 (106 274 199) (105 834 276) (90 263 834) (75 251 065) -
818 807 323 327 (499 598) 21 734 664 270 942 667
818 807 323 327 (455 673) 21 734 708 195 971 396
8 8.1
CAPITAL Share capital Authorised; 300 000 000 (2012: 300 000 000) ordinary shares of US$0.01 each Issued and fully paid; 161 040 160 ordinary shares of US$0.01 each (2012: 161 040 160) Capital adequacy Ordinary share capital Share premium Reserves Loans to group entities and directors Tier 1 capital General provisions Revaluation reserves Tier 2 capital Total capital base Credit risk weighted assets Operational risk equivalent assets Market risk equivalent assets Total risk weighted assets Tier 1 capital ratio Tier 2 capital ratio Capital adequacy ratio
3 000 000
3 000 000
77 331 118 78 123 140 5 753 002 161 207 260
251 070 28 104 819 2 914 718 31 270 607
20 109 842 20 109 842
17 755 372 17 755 372
6 458 074 21 017 534 7 454 639 8 963 336 44 249 897
77 582 188 144 093 173 8 667 720 6 458 074 21 017 534 7 454 639 8 963 336 274 236 664
UNAUDITED STATEMENT OF COMPREHENSIVE INCOME For the half year ended 30 June 2013 Unaudited 30 June 2013 US$ Unaudited 30 June 2012 US$
1 610 402
1 610 402
8.2
1 610 402 19 651 941 14 848 717 (2 862 892) 33 248 168 94 766 1 185 058 1 279 824 34 527 992 194 946 987 66 076 393 2 224 022 263 247 402 12.63% 0.49% 13.12%
1 610 402 19 651 941 12 767 901 (2 388 435) 31 641 809 1 964 741 1 185 058 3 149 799 34 791 608 169 396 685 7 358 515 6 871 064 183 626 264 12.77% 1.27% 14.05%
LIABILITIES Trade and other payables Short term borrowings Deposits from other banks Deposits from customers Offshore borrowings Deferred tax liabilities Shareholders' funds
1 432 554 603 373 6 644 208 190 760 250 199 440 385 (38 233 125) (38 233 125)
4 078 418 2 742 603 26 501 196 33 322 217
155 127 30 900 3 750 000 3 936 027
147 152 37 390 883 37 538 035 6 355 548 -
5 666 099 3 345 976 6 644 208 217 292 346 3 750 000 147 152 37 390 883 274 236 664 -
Notes Management fees Management fees on equity funds Management fees on money market funds Management fees on unit trust funds Total management fees Interest on money market investments Other income Fair value gain/ (loss) on investments securities Total income Staff costs Other operating expenditure Net loss before taxation Income tax (expense)/credit Loss for the period
112 451 165 679 23 467 301 597 8 179 20 315 4 647 334 738 (159 234) (222 472) (46 968) (3 043) (43 925)
78 037 154 646 20 317 253 000 11 684 27 718 (55 037) 237 365 (181 187) (203 336) (147 158) 17 013 (130 145)
Period gap Cumulative gap
(2 051 610) 16 173 815 17 755 372 (40 284 735) (24 110 920) (6 355 548)
03 05
ZBFH 939
ZB ASSET MANAGEMENT COMPANY LIMITED UNAUDITED FINANCIAL STATEMENTS 30 JUNE 2013
Assets held on behalf of clients were as follows Unaudited Audited 30 June 31 December 2013 2012 US$ US$ Funds under management: ZB Investment Nominees (Private) Limited Investors' funds in ZB Unit Trust Funds
share capital US$ Share Revaluation Accumulated premium reserve loss US$ US$ US$ Total US$
ZB BUILDING SOCIETY UNAUDITED FINANCIAL STATEMENTS 30 JUNE 2013
UNAUDITED STATEMENT OF CHANGES IN EQUITY For the half year ended 30 June 2013
54 326 696 2 175 335 56 502 031
45 994 609 2 156 689 48 151 298
UNAUDITED STATEMENT OF FINANCIAL POSITION As at 30 June 2013 Unaudited Audited 30 June 31 December 2013 2012 US$ US$
Balance at 1 January 2013 Changes in equity for 2013: Total comprehensive loss for the period Balance as at 30 June 2013
818 807
323 327
21 734
(455 673)
708 195
Represented by: Investments in money market instruments Investments in listed instruments Investments in unlisted investments Property investments
818 807
323 327
21 734
(43 925) (499 598)
(43 925) 664 270
26 414 286 21 435 931 5 218 809 3 433 005 56 502 031
19 817 214 19 071 379 5 231 701 4 031 004 48 151 298
Notes ASSETS Cash and short term funds Amounts clearing from other banks Loans and advances Money market instruments Trade and other receivables Mortgage advances Investment securities Investment in subsidiaries Investment properties Property and equipment Total assets LIABILITIES Deposits from customers Trade and other payables Deferred tax liabilities Total liabilities EQUITY AND RESERVES Share capital Share premium Retained income Total equity Total equity and liabilities UNAUDITED STATEMENT OF COMPREHENSIVE INCOME
For the half year ended 30 JUNE 2013
1 2 3 4 5
8.
RISK MANAGEMENT
Up to 1 month US$ 2 to 6 months US$ 7 to 12 months US$ Above 12 months US$ Other US$ Total US$
UNAUDITED STATEMENT OF CASH FLOWS For the half year ended 30 June 2013 Unaudited 30 June 2013 US$ Net cash generated from / (used in) operating activities Cash generated from investing activities Acquisition/disposal of money market instruments Purchase of property and equipment Proceeds from disposal of investment securities Dividends received Net cash generated from / (used in) investing activities Cash generated from financing activities Proceeds on issue of share capital Net increase in cash and short term funds Cash and short term funds at the beginning of the period Cash and short term funds at the end of the period Cash and short term funds comprise: Bank balances 132 041 97 743 61 434 Unaudited 30 June 2012 US$ (14 418)
Liquidity gap analysis As at 30 June 2013 Assets Cash and short term funds Money market investments Trade and other receivables Investment securities Intangible assets Investment property Property and Equipment Deferred tax asset
3 656 709 1 139 584 4 873 294 9 200 000 1 598 914 7 056 973 11 428 4 434 425 3 450 000 4 161 028 39 582 355
7 715 277 4 253 018 6 900 000 1 670 361 5 880 248 11 428 4 336 140 3 450 000 4 159 039 38 375 511
43 904 (2 849) 553 41 608
(170 817) (6 915) 76 895 2 996 (97 841)
132 041 102 000 234 041
133 335 133 335
22 237 22 237
4 600 340 000 25 701 182 753 553 054
132 041 102 000 133 335 22 237 4 600 340 000 25 701 182 753 942 667
7 8 9
21 959 307 1 494 591 568 717 24 022 615
20 746 964 1 993 467 564 30 23 304 738
10
Liabilities Trade and other payables Total equity
234 041 234 041
278 397 278 397 (145 062) 88 979
88 979
22 237 111 216
664 270 664 270 (111 216) -
278 397 664 270 942 667 -
954 814 8 896 953 5 707 973 15 559 740 39 582 355
954 814 8 896 953 5 219 006 15 070 773 38 375 511
103 042
296 266 184 009
Period gap Cumulative gap Interest rate gap As at 30 June 2013 Assets Cash and short term funds Money market investments Trade and other receivables Investment securities Intangible assets Investment property Equipment Deferred tax asset
28 999 132 041
(86 266) 97 743
132 041 102 000 234 041
133 335 22 237 4 600 340 000 25 701 182 753 708 626
132 041 102 000 133 335 22 237 4 600 340 000 25 701 182 753 942 667
Notes Interest income Interest expense Net interest income Other income Fair value gain Total income Operating expenses Profit before impairment Specific provisions Profit before tax Income tax expense Profit for the period Earnings per share Basic and fully diluted earnings per share (cents) UNAUDITED STATEMENT OF CHANGES IN EQUITY For the half year ended 30 June 2013 15 14 11.1 11.2 11 12 13
Unaudited 30 June 2013 US$ 1 287 904 (346 559) 941 345 2 544 975 98 285 3 584 605 (2 834 102) 750 503 245 202 995 705 (4 410) 991 295
Unaudited 30 June 2012 US$ 1 382 812 (243 093) 1 139 719 3 245 549 (246 247) 4 139 021 (2 711 144) 1 427 877 (172 657) 1 255 220 (2 180) 1 253 040
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS For the half year ended 30 June 2013 Unaudited Audited 30 June 31 December 2013 2012 US$ US$ 1. TRADE AND OTHER RECEIVABLES Management fees Provision for bad debts Other 84 787 48 548 133 335 163 120 (3 638) 62 189 221 671
Liabilities Trade and other payables Total equity
234 041 234 041
234 041
234 041
234 041
278 397 664 270 942 667 (234 041) -
278 397 664 270 942 667 -
Period gap Cumulative gap
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 Company was concluded on the 21st of October, 2009, using data as at 30 September 2009. The condition of the Company was assessed using the Risk Assessment System (RAS) and the CEFM** rating model. The Company was awarded a composite CAMELS rating of 2, which is a satisfactory rating whilst the individual components were rated as follows: CEFM Component Capital Adequacy Earnings Funds Under Management Management Latest Rating 2 3 2 3
2.
INVESTMENT SECURITIES Balance at the beginning of period Disposal of investments securities Fair value (loss)/gains Balance at the end of period Made up of: Cost Fair value gains 17 590 4 647 22 237 213 833 (66 725) (129 518 17 590
1.04
1.31
3 912 18 325
3 912 13 678
** CEFM stands for Capital Adequacy, Earnings, Funds Under Management and Management. Key: 1 = Strong; 2 = Satisfactory; 3 = Fair; 4 = Weak; 5 = Critical
3.
INTANGIBLE ASSETS Carrying amount at the beginning of period Amortisation for the period Carrying amount at the end of period 9 200 (4 600) 4 600 18 400 (9 200 9 200
Share capital US$ Balance at 1 January 2013 Changes in equity for 2013: 954 814
Share premium US$ 8 896 953
Retained income US$ 5 219 006
Total equity US$ 15 070 773
11.1 Risk rating (continued) Summary of Risk Assessment RAS Component Aggregate inherent risk Quality of aggregate risk management systems Overall composite risk Direction of overall composite risk Overall Risk Matrix Type or Risk Level of Aggregate Inherent Risk Moderate High Moderate Moderate Moderate Moderate Adequacy of Aggregate Risk Management Systems Acceptable Acceptable Acceptable Acceptable Acceptable Acceptable Latest Rating Moderate Acceptable Moderate Stable
4.
INVESTMENT PROPERTIES Opening balance Fair value adjustment Balance at the end of period 340 000 340 000 395 000 55 000 340 000
Total comprehensive income for the period Dividend paid Balance at 30 June 2013
954 814
8 896 953
991 295 (502 328 ) 5 707 973
991 295 (502 328) 15 559 740
UNAUDITED STATEMENT OF CASH FLOWS For the half year ended 30 June 2013 Unaudited 30 June 2013 US$ Net cash (used in) / generated from operating activities 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 Net decrease in cash and short term funds (1 617 231) Unaudited 30 June 2012 US$ 405 446
5.
TRADE AND OTHER PAYABLES Trade payables Due to Group companies Other
10 636 245 957 21 804 278 397
18 238 219 457 25 506 263 201
6.
OTHER INCOME Dividend income Rentals income Other income 553 16 950 2 812 20 315 2 996 16 500 8 222 27 718
Strategic Risk Operational Risk Legal & Compliance Risk Reputational Risk Financial Risk Overall Risk
Overall Composite Risk Moderate High Moderate Moderate Moderate Moderate
Direction of Overall Composite Risk Stable Increasing Stable Stable Stable Stable
(163 766) (37 100 000) 34 800 000 22 429 (4 058 568) 7 715 277 3 656 709
(51 907) (18 000 000) 16 800 000 8 511 (837 950) 3 071 369 2 233 419
Cash and short term funds at beginning of period Cash and short term funds at the end of period Cash and short term funds comprise of:
7.
OPERATING EXPENDITURE Occupational expenses Computers and information Depreciation Administration expenses Directors' fees Legal fees Amortisation Travelling expenses 27 980 26 290 5 470 98 128 47 794 725 4 600 11 485 222 472 42 338 29 527 3 646 87 010 30 248 4 600 5 967 203 336
Cash on hand Local bank accounts
775 254 2 881 455 3 656 709
595 239 1 638 180 2 233 419
8.
TRUST ACTIVITIES The Company provides trust services to individuals, trusts, retirement benefit plans and other institutions whereby it holds and manages assets or invests funds received in various financial instruments at the direction of the client. Such assets and investments are held and or registered in the name of a nominee Company called ZB Investments Nominee Limited. The Company receives management fees for providing these services. The transactions conducted through ZB Investments Nominee are not consolidated in the financial statements of the Company as prescribed by the Asset Management Act Chapter 24:26.
03 06
ZBFH 939
ZB BUILDING SOCIETY UNAUDITED FINANCIAL STATEMENTS 30 JUNE 2013
10.2 Capital adequacy ratio NOTES TO THE UNAUDITED FINANCIAL STATEMENTS For the half year ended 30 June 2013 Unaudited Audited 30 June 31 December 2013 2012 US$ US$ 1. CASH AND SHORT TERM FUNDS Cash on hand Local bank accounts Tier 1 Share capital Share premium Retained earnings Total capital Risk Weighted Assets 775 254 2 881 455 3 656 709 823 694 6 891 583 7 715 277 Tier 1 Tier 2 Capital Adequacy Ratio Unaudited Audited 30 June 31 December 2013 2012 US$ US$ 16.3 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 Society was concluded on 21 October 2009, using data as at 30 September 2009. The condition of the Building Society was assessed using the Risk Assessment System (RAS) and the CAMELS** rating model. 954 814 8 896 953 5 707 973 15 559 740 32 973 449 47% 0% 47% 954 814 8 896 953 5 219 006 15 070 773 29 098 427 52% 0% 52% The Building Society was awarded a composite CAMELS rating of 3, which is a fair rating whilst the individual components were rated as follows: CAMELS Component Capital Adequacy Asset Quality Management Earnings Liquidity & Funds Under Management Sensitivity to Market Risk Latest Rating 2 2 3 4 3 2
2.
LOANS AND ADVANCES At amortised cost Gross loans and advances Less portifolio and specific provisions Maturity analysis Within 1 month Between 1 and 6 months Between 6 and 12 months After 12 Months
4 946 768 (73 474) 4 873 294 230 043 1 491 581 2 925 073 300 071 4 946 768
4 535 327 (282 309) 4 253 018 853 276 2 875 332 806 719 4 535 327
** CAMELS stands for Capital Adequacy, Asset Quality, Management, Earnings, Liquidity management and Sensitivity to market risk. Key: 1 = Strong; 2 = Satisfactory; 3 = Fair; 4 = Weak; 5 = Critical Summary of Risk Assessment RAS Component Aggregate inherent risk Quality of aggregate risk management systems Overall composite risk Direction of overall composite risk Overall Risk Matrix Type of Risk Level of Aggregate Inherent Risk Adequacy of Aggregate Risk Management Systems Acceptable Acceptable Acceptable Acceptable Acceptable Acceptable Acceptable Acceptable Acceptable Overall Composite Risk Direction of Overall Composite Risk Stable Stable Stable Stable Stable Increasing Stable Stable Stable Latest Rating Moderate Acceptable Moderate Stable
11.
NET INTEREST INCOME
Sectoral analysis Private Specific and portfolio risk provisions Balance at beginning of year Charge to statement of comprehensive income Balance at end of period Comprising: Portfolio provisions Specific
4 946 768
4 535 327
11.1 Interest income Mortgage advances Fixed deposits Other interest income
243 656 399 500 644 748 1 287 904
146 060 220 323 1 016 429 1 382 812
282 309 (208 835) 73 474
44 917 237 392 282 309
11.2 Interest expense Fixed deposits Other interest expense
71 980 274 579 346 559 941 345
51 153 191 940 243 093 1 139 719 Credit Risk Liquidity Risk Interest Rate Risk Foreign Exchange Risk Strategic Risk Operational Risk Legal & Compliance Risk Reputational Risk Overall Risk
Net interest income 46 023 27 451 73 474 282 309 282 309 12. OTHER INCOME Commissions and fees Operating lease rental income Other
3.
MONEY MARKET INSTRUMENTS At amortised cost Fixed deposits
2 118 319 180 686 245 970 2 544 975
3 003 763 174 721 67 065 3 245 549
9 200 000 9 200 000
6 900 000 6 900 000
13.
4.
TRADE AND OTHER RECEIVABLES Interest receivable Other receivables Inventories
NET GAIN ON FAIR VALUE ADJUSTMENTS Financial assets designated at FVTPL Fair value adjustment on subsidiaries Unlisted equity
Low Moderate Minor Minor Moderate Moderate Moderate Moderate Moderate
Low Moderate Low Low Moderate High Moderate Moderate Moderate
153 312 1 175 602 270 000 1 598 914
69 973 1 097 228 503 160 1 670 361
98 285 98 285
(247 632) 1 385 (246 247)
GROUP CORPORATE INFORMATION
14.
5.
MORTGAGE ADVANCES At amortised cost Gross mortgage advances Less portfolio provisions
7 132 480 (75 507) 7 056 973
5 992 122 (111 874) 5 880 248
OPERATING EXPENSES Operating expenses comprise the following expenses: Staff costs Communication expenses Computer and information technology Occupation expenses Commission and fees Administration expenses
754 783 31 042 201 610 191 760 752 647 902 260 2 834 102
930 629 24 696 191 157 158 486 599 038 807 138 2 711 144
Maturity analysis Between 1 year and 5 years Between 5years and 10 years Over 10 years
2 471 865 1 135 673 3 524 942 7 132 480
797 585 1 451 852 3 742 685 5 992 122
Included in administration expenses are the following: Audit fees Depreciation on property and equipment 15. INCOME TAXES Deferred tax Total tax expense RISK MANAGEMENT
As at 30 June 2013 3 to 6 6 months to months 1 year US$ US$ 1-5 years US$
10 900 119 429
10 900 103 608
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
Sectoral analysis of advances Private Individuals Distribution Construction Services
4 410 4 410
2 180 2 180
6 842 366 9 490 161 568 119 056 7 132 480
5 842 283 69 481 3 851 76 507 5 992 122
16.
16.1 Liquidity gap analysis

Over 5 years US$
Specific and portfolio risk provisions Balance at beginning of year Charge to statement of comprehensive income Balance at end of period Comprising: Portfolio provisions
111 874 (36 367) 75 507
27 219 84 655 111 874
3 months US$ Assets Cash and short term funds Amounts clearing from other banks Loans and Advances Money market instruments Trade and other receivables Mortgage advances Investment securities Investment in subsidiaries Investment properties Property and equipment
Other US$
Total US$
3 656 709 1 139 584 230 043 9 200 000 14 226 336
1 491 581 1 491 581
3 151 670 3 151 670
- 3 6567 709 1 598 914 11 428 4 434 425 3 450 000 4 161 028 1 139 584 4 873 294 9 200 000 1 598 914 7 056 973 11 428 4 434 425 3 450 000 4 161 028
75 507 75 507
111 874 111 874
6.
INVESTMENT PROPERTIES Balance at beginning of year Fair value loss Transfer from owner occupied properties Balance at end of period 3 450 000 3 450 000 3 163 500 (763 500) 1 050 000 3 450 000
- 7 056 973 -
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
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
- 7 056 973 13 655 795 39 582 355
7.
DEPOSITS FROM CUSTOMERS Savings accounts Fixed deposits Other deposits 10 749 302 6 722 820 4 487 185 21 959 307 8 185 101 5 333 601 7 228 262 20 746 964
Equity and liabilities Deposits from customers Trade and other payables Deferred tax liabilities Shareholders' funds Total Period gap Cumulative gap
15 607 296 1 494 591 17 101 887
- 6 352 011 - 21 959 307 - 1 494 591 568 717 568 717 - 15 559 740 15 559 740 - 6 352 011 16 128 457 39 582 355 -
8.
TRADE AND OTHER PAYABLES Deferred Income Leave pay provision Trade payables Other payables
566 866 67 658 493 678 366 389 1 494 591
586 303 60 230 742 497 604 437 1 993 467
(2 875 551) 1 491 581 (2 875 551) (1 383 970)
3 151 670 704 962 (2 472 662) 1 767 700 1 767 700 2 472 662 -
16.1.1Liquidity Ratios Unaudited Audited 30 June 31 December 2013 2012 US$ US$ Total liquid asset Total liabilities Liquidity ratio Minimum statutory liquidity ratio
16.2 Interest rate gap analysis As at 30 June 2013 2 to 3 months US$ 4 to 6 months US$ 7 to 12 months US$ Over 1 year US$
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
9. 9.1
DEFERRED TAX LIABILITIES Fair valuation of property and equipment Fair value adjustments on financial assets Fair valuation of investment properties
174 496 221 721 172 500 568 717
175 000 216 807 172 500 564 307
14 226 336 21 959 307 65% 30%
14 713 772 20 746 964 70% 30% 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
9.2
Deferred tax movement Balance at the beginning of year Arising from revaluation adjustment on property Charge to statement of comprehensive income Balance at end of the period EQUITY AND RESERVES
564 307 4 410 568 717
574 862 (36 672) 26 117 564 307
10
1 month US$ Assets Cash and short term funds Amount clearing from other banks Loans and advances Money market instruments Trade and other receivables Mortgage advances Investment securities Investment in Subsidiaries Investment properties Property and equipment
Other US$
Total US$
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
2 881 455 230 043 9 200 000 12 311 498
1 491 581 1 491 581
3 151 670 3 151 670
775 254
3 656 709
1 000 000
1 000 000
954 814
954 814
- 1 139 584 1 139 584 - 4 873 294 - 9 200 000 - 1 598 914 1 598 914 - 7 056 973 - 7 056 973 11 428 11 428 - 4 434 425 4 434 425 - 3 450 000 3 450 000 - 4 161 028 4 161 028 - 7 056 973 15 570 633 39 582 355
Equity and liabilities Deposits from customers Trade and other payables Deferred tax liabilities Shareholders' funds Total Period gap Cumulative gap
15 607 296 15 607 296
- 6 352 011 - 21 959 307 - 1 494 591 1 494 591 568 717 568 717 - 15 559 740 15 559 740 - 6 352 011 17 623 048 39 582 355 -
07
ZBFH 939
(3 295 798) 1 491 581 (3 295 798) (1 804 217)
3 151 670 704 962 (2 052 415) 1 347 453 1 347 453 2 052 415 -
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

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UNAUDITED GROUP FINANCIAL RESULTS FOR THE HALF YEAR ENDED 30 JUNE 2013

All amounts are in United States of America dollars (US$)

ZB FINANCIAL HOLDINGS LIMITED UNAUDITED FINANCIAL STATEMENTS 30 JUNE 2013

GROUP CHIEF EXECUTIVES REPORT

UNAUDITED CONSOLIDATED INCOME STATEMENT

Unaudited 30 June 2013 US$

Unaudited 30 June 2012 US$

17 739 065 (7 115 388) 10 623 677

17 969 984 (6 672 163) 11 297 819

1 856 385 712 555 2 568 940

861 890 97 608 959 498

UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Unaudited 30 June 2012 US$ 959 498

(579 194) 28 960 (550 234) 2 018 706

3 366 186 (168 309) 3 197 877 4 157 375

1 306 151 712 555 2 018 706

4 059 767 97 608 4 157 375

Unaudited 30 June 2013 US$

Share premium US$

General reserve US$

Retained income US$

1 751 906 27 204 178

13 429 134 65 526 155

(7 514 099) 9 968 597 2 454 588 2 454 588

327 039 (500 000) -

1 856 385 (94 771) 500 000 (461 439)

(58 797) 1 306 151 232 268 (461 439)

712 555 2 018 706 (232 268) (461 439)

1 751 906 27 145 381

13 909 421 67 024 625

Fund Banking management US$ US$ 30 June 2013 Total income

Reinsurance and life assurance US$

Other operations including consolidation journals Consolidated US$ US$

RISK MANAGEMENT Capital risk management

(71 807) 9 439 (62 368)

978 202 (186 274) 791 928

(434 844) (70 759) (505 603)

3 802 670 (1 233 730) 2 568 940

(62 368) (62 368)

229 306 562 622 791 928

214 286 (719 889) (505 603)

712 555 1 856 385 2 568 940

(862 651) 4 314 813

17 013 (130 145)

(145 769) 553 708

431 330 (3 778 878)

(560 077) 959 498

55 248 452 11 793 483 9 006 203 76 048 138

45 611 194 13 664 643 9 196 860 68 472 697

3 475 547 839 266 4 314 813

(130 145) (130 145)

1 241 552 (687 844) 553 708

(3 725 064) (53 814) (3 778 878)

861 890 97 608 959 498

Reinsurance and life assurance US$

(20 838 521) 348 783 771

Reinsurance and life assurance US$

(18 302 347) 326 729 967

Key: 1 = Strong; 2 = Satisfactory; 3 = Fair; 4 = Weak; 5 = Critical

ZB Financial Holdings Group Moderate Acceptable Moderate Stable

Acceptable Acceptable Moderate Moderate Stable Stable

1 185 058 2 059 507

22 575 696 46 319 821 8 686 671 77 582 188