NMBZ Holdings Ld Annual Financial Report

Fecha : 26/04/2019 @ 01:00
Fuente : UK Regulatory (RNS & others)

NMBZ Holdings Ld Annual Financial Report

Nmbz Holdings Ld (LSE:NMBA)
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TIDMNMB

RNS Number : 1462X

NMBZ Holdings Ld

26 April 2019

NMBZ HOLDINGS LIMITED

Holding company of

NMB BANK LIMITED (Registered Commercial Bank)

CONDENSED AUDITED CONSOLIDATED RESULTS

FOR THE YEARED 31 DECEMBER 2018

FINANCIAL SUMMARY

 
                                                31 December   31 December 
                                                       2018          2017 
 Total income (US$)                              74 740 671    53 606 281 
                                               ------------  ------------ 
 Operating profit before impairment 
  charge (US$)                                   31 155 227    16 870 839 
                                               ------------  ------------ 
 Total comprehensive income (US$)                21 267 632    10 029 136 
                                               ------------  ------------ 
 Basic earnings per share (US cents)                   5.43          2.58 
                                               ------------  ------------ 
 Dividend per share (US cents)                         0.96          0.36 
                                               ------------  ------------ 
 Total deposits (US$)                           434 957 949   348 956 385 
                                               ------------  ------------ 
 Total gross loans and advances (US$)           262 335 026   211 005 418 
                                               ------------  ------------ 
 Total shareholders' funds and shareholders' 
  liabilities (US$)                              79 962 313    65 651 843 
                                               ------------  ------------ 
 

Enquiries:

NMBZ HOLDINGS LIMITED

Benefit P Washaya, Chief Executive Officer, NMBZ Holdings Limited benefitw@nmbz.co.zw

Benson Ndachena, Chief Finance Officer, NMBZ Holdings Limited bensonn@nmbz.co.zw

Website:

http://www.nmbz.co.zw

Email:

enquiries@nmbz.co.zw

Telephone:

+263-242-759 651/9

CHAIRMAN'S STATEMENT

INTRODUCTION

The Group has continued in the pursuit of its short and medium term goals and the accompanying results are testimony to the considerable progress towards our stated strategy. The financial results continue to be largely driven by the Bank's continued diversification into the broader market segments, enhanced use of the bank's digital offerings, stricter credit underwriting standards and containment of non-performing loans. The bank witnessed a slowdown in business activity during the last quarter of 2018 as businesses adjusted to the new policy measures outlined in the Transitional Stabilisation Policy presented in August 2018 soon after the national elections. Notwithstanding the slowdown, the group's financial performance was well above budget.

The key financial highlights of the Group as at 31 December 2018 are depicted below:

- Shareholders' funds and shareholders liabilities stood at US$80.0 million (2017 -- US$65.7 million).

- Total assets stood at US$527.1 million (2017 -- US$422.6 million).

- Total comprehensive income of US$21.3 million (2017 -- US$10.0 million).

- Basic earnings per share (US cents) of 5.43 (2017 -- 2.58).

GROUP RESULTS

The profit before taxation was US$27 143 275 (2017 - US$13 017 690) during the period under review and this gave rise to total comprehensive income of US$21 267 632 (2017 - US$10 029 136). The Group achieved a basic earnings per share of 5.43 cents (2017 - 2.58 cents).

Operating expenses amounted to US$34 720 428 and these were up 26% from a prior year amount of US$27 578 347. The increase in operating expenses was due to increased transaction processing and operational costs arising from the Bank's digital drive, continued expansion into the broader market segments and general inflationary pressures largely driven by foreign currency shortages.

Impairment losses on financial assets measured at amortised cost amounted to US$4 011 952 for the current period from a prior year amount of US$3 853 149 and the increase was mainly due to the adoption of IFRS 9 with effect from 1 January 2018. The bank has continued with its drive to reduce non-performing loans (NPLs) and the ratio stood at 7.43% as at 31 December 2018. This was lower than the 31 December 2017 ratio of 7.98%. The decrease in the NPL ratio was largely due to aggressive collections and stricter credit underwriting standards.

Financial position

The Group's total assets increased by 25% from US$422 564 352 as at 31 December 2017 to US$527 067 596 as at 31 December 2018 mainly due to a 27% increase in investment securities, a 21% increase in loans, advances and other assets, a 10% increase in investment properties, an increase of 26% in cash and cash equivalents and a 143% increase in property and equipment.

The bank continued with its intermediation role and support for the productive sectors as reflected by a 24% increase in gross loans and advances from US$211 005 418 as at 31 December 2017 to US$262 335 026 as at 31 December 2018.

Investment securities (Treasury Bills and Bonds) increased by 27% from US$92 245 425 as at 31 December 2017 to US$117 249 434 as at 31 December 2018 mainly due to some purchases from both the primary and secondary bond markets. The bank has set maximum limits for investment securities to ensure most of our funds are channeled towards loans and advances.

Total deposits increased by 25% from US$348 956 385 as at 31 December 2017 to US$434 957 949 as at 31 December 2018 as a result of strong deposit mobilisation strategies coupled with a significant improvement in market liquidity.

The Bank's liquidity ratio closed the period at 41.62% (2017 - 47.53%) and this was above the statutory requirement of 30%.

Capital

The banking subsidiary's capital adequacy ratio stood at 23.25% as at 31 December 2018 (31 December 2017 - 24.26%). The ratio was well above the statutory minimum of 12%. Our capitalisation level is adequate to cover all risks and supports the underwriting of new business.

The Group's shareholders' funds and shareholders' liabilities have increased by 22% from US$65 651 843 as at 31 December 2017 to US$79 962 313 as at 31 December 2018 as a result of the current year's total comprehensive income.

The Bank's regulatory capital as at 31 December 2018 was US$74 927 487 and is above the minimum required regulatory capital of US$25 million. Furthermore, the bank is on course to meet the required US$100 million capitalisation by 2020.

FUNCTIONAL CURRENCY AND AUDIT OPINION

Between 2014 and 2016, the Zimbabwean economy experienced a massive liquidity crisis which eventually prompted the Monetary Authorities to introduce the bond notes in November 2016 whilst encouraging the public to continue using the other currencies in the multi-currency basket. The bond notes were introduced at an official fixed exchange rate of 1:1 with the USD and the Monetary Authorities specifically directed financial institutions not to open separate vault and cash accounts for the USD and the bond notes.

In October 2018, the Monetary Authorities instructed financial institutions to separate bond notes and USD accounts and indicated that corporates and individuals could proceed to open Nostro Foreign Currency Accounts (FCA), for foreign currency holdings, which were now being exclusively distinguished from the existing RTGS based accounts. However, it should be noted that at the time of this policy pronouncement, the Monetary Authorities did not state that they had introduced a new currency for Zimbabwe, which actually meant that the USD remained as the currency of reference. By 31 December 2018, there had been no pronouncement by the Monetary Authorities to the effect that there had been a new currency introduced, which could be considered as the country's functional currency. On 22 February 2019, the Reserve Bank of Zimbabwe (RBZ) issued an Exchange Control Directive, RU 28 of 2019 which established an interbank foreign exchange market to formalise the buying and selling of foreign currency through the Banks and Bureaux de change. In order to establish an exchange rate between the current monetary balances and foreign currency, the Monetary Authorities denominated the existing RTGS balances in circulation as RTGS Dollars. Initial trades on 22 February 2019 were at USD1: RTGS$2.5. On the same date, Statutory Instrument 33 (SI 33) of 2019 was also issued and it specified that for accounting and other purposes, all assets and liabilities that were in USD immediately before the 22nd of February 2019 were deemed to have been valued in RTGS Dollars at a rate of

US$1: RTGS$1.

The fixed exchange rate of US$1: RTGS$1 for the period prior to the effective date of 22 February 2019 is not in compliance with IAS 21. In terms of IAS 21, foreign currency monetary items shall be translated using the closing rate, non-monetary items that are measured in terms of historical cost in a foreign currency shall be translated using the exchange rate at the date of the transaction; and non-monetary items that are measured at fair value in a foreign currency shall be translated using the exchange rates at the date when the fair value was measured. Foreign currency transactions shall be recorded, on initial recognition in the functional currency, by applying to the foreign currency amount the spot exchange rate between the functional currency and the foreign currency at the date of the transaction. The Group used a fixed exchange rate of US$1: RTGS$1 for the year ended 31 December 2018 and thus did not comply with the requirements of International Accounting Standard 21 (IAS 21) "The Effects of Changes in Foreign Exchange Rates", as doing so would have been in contravention of SI 33 of 2019. However, the Directors performed a sensitivity analysis on note 23.1 to illustrate the impact on the Group's statement of financial position as at 31 December 2018 had the financial statements been restated using the first available interbank mid-rate on 22 February 2019 of

USD1:RTGS$2.5. A further analysis of the impact on the statement of financial position has also been performed using the rates of USD1:RTGS$3 and USD1:RTGS$4.

In light of the failure to fully comply with the requirements of IAS 21, the Group's independent auditors, Ernst & Young, have issued an adverse opinion on the financial statements for the year ended 31 December 2018.

DIVID

In view of the significantly improved financial performance recorded by the Group in the year under review and the sound capital ratio, the Board proposes to declare a final scrip dividend alternative to the cash dividend of 0.96 RTGS cents per share. The scrip dividend option was arrived at after taking into account shareholders' expectations, value preservation and the need to ensure sustainable organic growth in view of the banking subsidiary's regulatory capitalisation requirements.

DIRECTORATE

There were no changes to the directorate during the period under review. The directors of both NMBZ Holdings Limited and NMB Bank Limited boards remain as follows: Mr Benedict A. Chikwanha (Board Chairman), Mr Benefit P. Washaya (Chief Executive Officer), Mr Benson Ndachena (Chief Finance Officer), Mr Charles Chikaura (Independent Non-Executive Director), Mr Erik Sandersen (Non-Executive Director) Mr James de la Fargue (Non-Executive Director), Ms Jean Maguranyanga (Independent Non-Executive Director), Mr Julius Ticheelar (Non-Executive Director) and Ms Sabinah Chitehwe (Independent Non-Executive Director).

Subsequent to year end, Mr Erik Sandersen resigned from the Board of NMBZ Holdings Limited on 24 January 2019. I would like to thank Erik for his contributions to NMBZ Holdings Limited and the Board over the years and wish him success in his new endeavours.

CORPORATE SOCIAL INVESTMENTS

During the period under review, the Group channeled its social investments efforts into the country's educational system, enhancement of youth entrepreneurial skills through partnerships, support for the disadvantaged and vulnerable groups as well as environmental protection and conservation causes.

The Group donated to the Glen View community following an outbreak of the cholera epidemic in September 2018. In addition to donations to social causes, donations were made to the Albino Trust of Zimbabwe, commemorations of World Kidney Day and to Friends of Dzikwa, a charity organisation which operates in the Dzivarasekwa community.

In line with promotion of sports, the group partnered several schools in their sporting activities and the highlight of these were the ZiMwana Trust Street Athletics and Friends of Dzikwa Trust 16(th) Annual Sports Day for Orphans whose thrust was the promotion of an inclusive society through sports. Partnerships with groups and organisations that promote the conservation of the environment and wildlife were maintained during the period under review, with BirdLife Zimbabwe and Friends of Hwange being some of the partner organisations.

CORPORATE DEVELOPMENTS

In line with our strategy to reach the broader market segments, the Bank opened two service centres in Bindura and Chitungwiza in May 2018 and December 2018 respectively. We continue to establish representation in areas where the Bank is currently not represented and plans to open a service centre in Victoria Falls are at an advanced stage.

The Group undertook the construction of its new Head Office along Borrowdale Road in April 2018 and the new building should be ready for occupation in the last quarter of 2019. The new Head Office reinforces the Group's commitment to the country and its foreseeable future.

OUTLOOK AND STRATEGY

In line with the Bank's financial inclusion drive, we have intensified efforts to open low cost accounts. Further investment is continuously being directed towards the digital channels to enhance service delivery as well as accommodate the increased transactional volumes created by the broadened customer base as the Bank continues to increase its footprint. The Bank has intensified its efforts in rolling out the low-cost Point of Sale devices (mPOS) in order to support our growing SMEs and sole traders' clientele base.

The year 2019 is likely to be a period in which inflation, currency fluctuations and a shortage of foreign currency play a pivotal role in determining the impact on revenue generation and operating costs. The combination will require a steady guiding hand from the relevant authorities as well as management and Board focus. Early indications point to a tough operating environment for the banking sector.

APPRECIATION

I would like to express my profound appreciation to our valued clients, shareholders, regulatory authorities and other valued stakeholders for their continued support in this difficult operating environment. To my fellow Board members, management and staff, I extend my sincere gratitude for their hard work, diligence, commitment and resilience which has underpinned the achievement of the commendable results.

MR. B. A. CHIKWANHA

CHAIRMAN

17 April 2019

DIRECTORS' REPORT

for the year ended 31 December 2018

   1.         RESPONSIBILITY 

The Directors of the Group are mandated by the Companies Act (Chapter 24:03) of Zimbabwe to maintain adequate accounting records and to prepare consolidated and separate financial statements that present a true and fair view of the state of affairs of the Group and Company at the end of each financial year. The information contained in these consolidated and separate financial statements has been prepared on a going concern basis and is in accordance with the provisions of the Companies Act (Chapter 24:03) of Zimbabwe, the Banking Act (Chapter 24:20) of Zimbabwe and International Financial Reporting Standards (IFRSs).

   2.         INTERNAL FINANCIAL CONTROLS 

The board is responsible for ensuring that effective internal control systems are implemented within the Group. The Group maintains internal controls and systems designed to provide reasonable assurance of the integrity and reliability of its records, safeguard the assets of the Group and prevent and detect fraud and errors. The Audit Committee in conjunction with the external and internal auditors of the Group reviews and assesses the internal control systems of the Group in key risk areas.

   3.         GOING CONCERN 

The Directors have assessed the ability of the Group and its subsidiaries to continue operating as a going concern and believe that the preparation of these financial statements on a going concern is still appropriate.

   4.          STATEMENT OF COMPLIANCE 

The condensed consolidated financial statements are prepared with the aim of complying fully with International Financial Reporting Standards (IFRSs) and have been prepared in the manner required by the Companies Act (Chapter 24:03) of Zimbabwe and the Banking Act (Chapter 24:20) of Zimbabwe. The financial statements show the impact of the first time adoption of IFRS 9 which was adopted by the Group effective 1 January 2018. The detailed impact of this adoption is disclosed in the section on significant accounting policies (Changes in accounting policy Note 3.12).

The Directors have been able to achieve full compliance with IFRSs in previous reporting periods. However, the 31 December 2018 financial reporting could only achieve partial compliance to the IFRS reporting framework due to developments detailed below.

The IFRS Conceptual Framework states that to achieve fair presentation to the financial statements, companies should consider the underlying economic substance of the transaction over and above the legal form. International Accounting Standard (IAS 21) "The Effects of Changes in Foreign Exchange Rates" requires the Directors to determine the functional currency of the reporting entity in preparing the entity's financial statements. In arriving at this conclusion, the entity is required to apply certain parameters which the Directors duly applied in their judgement. Furthermore, IAS 21 also requires the reporting entity to make certain judgements in determining the appropriate exchange rates to apply for certain transactions conducted in currencies other than the functional currency of the reporting entity.

As explained in Note 2.4.7, "Determination of the functional currency", it is our opinion that following the Monetary Policy pronouncements of 1 October 2018 and 20 February 2019, as well as the issuance of Exchange Control Directive RU 28 of 2019 on 22 February 2019, the country's functional currency appeared to have changed from the United States Dollar in terms of the IAS 21 considerations. However, the Government of Zimbabwe issued Statutory Instrument (SI 33) of 2019 on 22 February 2019, which prescribes the rate of USD1:RTGS$1 in accounting for all transactions and events before the effective date of the statutory instrument.

Furthermore, it is our interpretation that the SI 33 of 2019 issued in terms of the Presidential Powers Temporary Measures Act [Chapter 10:20], ranks supreme to any contrary legislation including quasi-legislations, which therefore implies that in preparing the financial statements, we sought to comply with the provisions of SI 33 of 2019 ahead of the IAS 21 requirements.

This, in our opinion resulted in non-compliance with IAS 21 and that non-compliance had a significant impact on the true and fair presentation of the Group's financial position and would therefore urge users of the financial statements to exercise due caution. To provide users with additional information, note 23 of the Consolidated Financial Statements provides a detailed analysis of the impact on the Group's Statement of Financial Position had the aforementioned events after the reporting period been treated as adjusting events at reporting date.

The consolidated and separate financial statements were approved by the Board of Directors on 17 April 2019.

.................................................. ...................................

               MR B. A. CHIKWANHA                                                      MR B. P. WASHAYA 

CHAIRMAN CHIEF EXECUTIVE OFFICER

               17 APRIL 2019                                                                      17 APRIL 2019 

AUDITOR'S STATEMENT

These financial results should be read in conjunction with the complete set of financial statements for the year ended 31 December 2018, which have been audited by Ernst & Young Chartered Accountants (Zimbabwe) and an adverse opinion issued thereon due to non-compliance with International Accounting Standard 21 (The Effects of Foreign Exchange Rates) as explained in the Directors' Report. The auditor's report is available for inspection at the Holding Company's registered office. There were no key audit matters communicated in the auditor's report.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the year ended 31 December 2018

 
                                               31 December 2018   31 December 2017 
                                                            US$                US$ 
                                       -----  -----------------  ----------------- 
                                        Note 
                                       -----  -----------------  ----------------- 
 
 Interest income                           4         39 333 178         32 061 931 
                                       -----  -----------------  ----------------- 
 Interest expense                                   (8 865 016)        (9 157 095) 
                                       -----  -----------------  ----------------- 
                                                ---------------     -------------- 
                                       -----  -----------------  ----------------- 
 Net interest income                                 30 468 162         22 904 836 
                                       -----  -----------------  ----------------- 
 
 Fee and commission income               5.1         28 539 376         18 832 185 
                                       -----  -----------------  ----------------- 
 Net foreign exchange gains                           1 899 670          1 583 164 
                                       -----  -----------------  ----------------- 
                                               ----------------      ------------- 
                                       -----  -----------------  ----------------- 
 Revenue                                             60 907 208         43 320 185 
                                       -----  -----------------  ----------------- 
 
 Other income                            5.2          4 968 447          1 129 001 
                                       -----  -----------------  ----------------- 
                                               ----------------   ---------------- 
                                       -----  -----------------  ----------------- 
 Operating income                                    65 875 655         44 449 186 
                                       -----  -----------------  ----------------- 
 Operating expenditure                     6       (34 720 428)       (27 578 347) 
                                       -----  -----------------  ----------------- 
                                               ----------------   ---------------- 
                                       -----  -----------------  ----------------- 
 Operating income before impairment 
  charge                                             31 155 227         16 870 839 
                                       -----  -----------------  ----------------- 
 Impairment losses on financial 
  assets measured 
                                       -----  -----------------  ----------------- 
   at amortised cost                    16.3        (4 011 952)                  - 
                                       -----  -----------------  ----------------- 
 Impairment losses on loans and 
  advances                              16.3                  -        (3 853 149) 
                                       -----  -----------------  ----------------- 
                                                ---------------    --------------- 
                                       -----  -----------------  ----------------- 
 Profit before taxation                              27 143 275         13 017 690 
                                       -----  -----------------  ----------------- 
 Taxation charge                           7        (5 922 074)        (3 078 864) 
                                       -----  -----------------  ----------------- 
                                                ---------------    --------------- 
                                       -----  -----------------  ----------------- 
 Profit for the period                               21 221 201          9 938 826 
                                       -----  -----------------  ----------------- 
 
 Other comprehensive income 
                                       -----  -----------------  ----------------- 
 Items that will not be reclassified 
  to profit or loss 
                                       -----  -----------------  ----------------- 
 Revaluations, net of tax                                46 431             90 310 
                                       -----  -----------------  ----------------- 
                                                 --------------     -------------- 
                                       -----  -----------------  ----------------- 
 Total comprehensive income for 
  the year                                           21 267 632         10 029 136 
                                       -----  -----------------  ----------------- 
                                                      =========          ========= 
                                       -----  -----------------  ----------------- 
 Earnings per share (US cents) 
                                       -----  -----------------  ----------------- 
 - Basic                                 9.3               5.43               2.58 
                                       -----  -----------------  ----------------- 
 - Diluted                               9.3               5.09               2.43 
                                       -----  -----------------  ----------------- 
 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

as at 31 December 2018

 
                                                       31 December 2018         31 December 2017 
                                      Note                          US$                      US$ 
                                    -------  --------------------------  ----------------------- 
 SHAREHOLDERS' FUNDS 
                                    -------  --------------------------  ----------------------- 
 Share capital                       10.2.1                      80 975                   78 751 
                                    -------  --------------------------  ----------------------- 
 Capital reserves                                            16 526 297               18 119 337 
                                    -------  --------------------------  ----------------------- 
 Revaluation reserves                                           136 741                   90 310 
                                    -------  --------------------------  ----------------------- 
 Retained earnings                                           47 377 400               31 612 288 
                                    -------  --------------------------  ----------------------- 
                                                         --------------            ------------- 
                                    -------  --------------------------  ----------------------- 
 Total equity                                                64 121 413               49 900 686 
                                    -------  --------------------------  ----------------------- 
 
 Redeemable ordinary shares              11                  14 335 253               14 335 253 
                                    -------  --------------------------  ----------------------- 
 Subordinated term loan                  12                   1 505 647                1 415 904 
                                    -------  --------------------------  ----------------------- 
                                                         --------------           -------------- 
                                    -------  --------------------------  ----------------------- 
 Total shareholders' funds and 
  shareholders' 
  liabilities                                                79 962 313               65 651 843 
                                    -------  --------------------------  ----------------------- 
                                                         --------------           -------------- 
                                    -------  --------------------------  ----------------------- 
 
 LIABILITIES 
                                    -------  --------------------------  ----------------------- 
 
 Deposits and other liabilities        13.1                 447 105 283              356 912 509 
                                    -------  --------------------------  ----------------------- 
                                                      -----------------        ----------------- 
                                    -------  --------------------------  ----------------------- 
 Total shareholders' funds and 
  liabilities                                               527 067 596              422 564 352 
                                    -------  --------------------------  ----------------------- 
                                                             ==========               ========== 
                                    -------  --------------------------  ----------------------- 
 ASSETS 
                                    -------  --------------------------  ----------------------- 
 
 Cash and cash equivalents               15                 112 440 912               89 553 202 
                                    -------  --------------------------  ----------------------- 
 Current tax assets                                             285 822                  231 007 
                                    -------  --------------------------  ----------------------- 
 Loans, advances and other assets     16.11                 254 202 945              210 483 221 
                                    -------  --------------------------  ----------------------- 
 Investment securities                 14.1                 117 249 434               92 245 425 
                                    -------  --------------------------  ----------------------- 
 Non-current assets held for 
  sale                                   17                      36 000                   36 000 
                                    -------  --------------------------  ----------------------- 
 Trade and other investments         14.5.1                     112 501                  117 880 
                                    -------  --------------------------  ----------------------- 
 Investment properties                                       20 950 606               18 977 000 
                                    -------  --------------------------  ----------------------- 
 Intangible assets                       18                   2 036 775                2 380 180 
                                    -------  --------------------------  ----------------------- 
 Property and equipment                  19                  17 844 069                7 335 988 
                                    -------  --------------------------  ----------------------- 
 Deferred tax assets                                          1 908 532                1 204 449 
                                    -------  --------------------------  ----------------------- 
                                                      -----------------      ------------------- 
                                    -------  --------------------------  ----------------------- 
 Total assets                                               527 067 596              422 564 352 
                                    -------  --------------------------  ----------------------- 
                                                             ==========              =========== 
                                    -------  --------------------------  ----------------------- 
 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 31 December 2018

 
 
                          Share    Share Premium   Share Option       Regulatory      Revaluation        Retained           Total 
                        Capital                         Reserve          Reserve          Reserve        Earnings 
                 --------------  ---------------  -------------  ---------------  ---------------  --------------  -------------- 
                            US$              US$            US$              US$              US$             US$             US$ 
                 --------------  ---------------  -------------  ---------------  ---------------  --------------  -------------- 
 
 Balances at 1                                                                                             22 185          39 849 
  January 2017           78 598       15 737 548         62 563        1 785 136                -             818             663 
                 --------------  ---------------  -------------  ---------------  ---------------  --------------  -------------- 
 Profit for the                                                                                             9 938           9 938 
  year                        -                -              -                -                -             826             826 
                 --------------  ---------------  -------------  ---------------  ---------------  --------------  -------------- 
 Other 
  comprehensive 
  income                      -                -              -                -           90 310               -          90 310 
                 --------------  ---------------  -------------  ---------------  ---------------  --------------  -------------- 
 Share based 
  payments - 
  share options 
  exercised                 153           21 734              -                -                -               -          21 887 
                 --------------  ---------------  -------------  ---------------  ---------------  --------------  -------------- 
 Transfer to 
  regulatory                                                                                                 (512 
  reserve                     -                -              -          512 356                -            356)               - 
                 --------------  ---------------  -------------  ---------------  ---------------  --------------  -------------- 
                  -------------   --------------   ------------     ------------      -----------   -------------   ------------- 
                 --------------  ---------------  -------------  ---------------  ---------------  --------------  -------------- 
 Balances at 31                                                                                            31 612          49 900 
  December 2017          78 751       15 759 282         62 563        2 297 492           90 310             288             686 
                 --------------  ---------------  -------------  ---------------  ---------------  --------------  -------------- 
 IFRS 9 
 adjustments - 
 1 January 2018 
                 --------------  ---------------  -------------  ---------------  ---------------  --------------  -------------- 
 Transfer from 
  regulatory                                                                                                2 297 
  reserve                     -                -              -      (2 297 492)                -             492               - 
                 --------------  ---------------  -------------  ---------------  ---------------  --------------  -------------- 
 Expected 
  credit loss 
  (ECL) 
  adjustment 
  1 January                                                                                                (8 575          (8 575 
  2018                        -                -              -                -                -            988)            988) 
                 --------------  ---------------  -------------  ---------------  ---------------  --------------  -------------- 
 Deferred tax 
  on ECL 
  adjustment 1 
  January                                                                                                   2 208           2 208 
  2018                        -                -              -                -                -             317             317 
                 --------------  ---------------  -------------  ---------------  ---------------  --------------  -------------- 
                  -------------    -------------   ------------    -------------   --------------    ------------   ------------- 
                 --------------  ---------------  -------------  ---------------  ---------------  --------------  -------------- 
 Restated 
  balances at 1                                                                                            27 542          43 533 
  January 2018           78 751       15 759 282         62 563                -           90 310             109             015 
                 --------------  ---------------  -------------  ---------------  ---------------  --------------  -------------- 
 Share issue - 
  scrip 
  dividend                2 224          704 452              -                -                -               -         706 676 
                 --------------  ---------------  -------------  ---------------  ---------------  --------------  -------------- 
 Profit for the                                                                                            21 221          21 221 
  year                        -                -              -                -                -             201             201 
                 --------------  ---------------  -------------  ---------------  ---------------  --------------  -------------- 
 Other 
  comprehensive 
  income                      -                -              -                -           46 431               -          46 431 
                 --------------  ---------------  -------------  ---------------  ---------------  --------------  -------------- 
                                                                                                           (1 385          (1 385 
 Dividend paid                -                -              -                -                -            910)            910) 
                 --------------  ---------------  -------------  ---------------  ---------------  --------------  -------------- 
                  -------------   --------------   ------------   --------------   --------------   -------------   ------------- 
                 --------------  ---------------  -------------  ---------------  ---------------  --------------  -------------- 
 Balances at 31                                                                                            47 377          64 121 
  December 2018          80 975       16 463 734         62 563                -          136 741             400             413 
                 --------------  ---------------  -------------  ---------------  ---------------  --------------  -------------- 
                       ========         ========        =======         ========         ========        ========        ======== 
                 --------------  ---------------  -------------  ---------------  ---------------  --------------  -------------- 
 
 
 

CONSOLIDATED STATEMENT OF CASH FLOWS

for the year ended 31 December 2018

 
                                                             31 December               31 December 
                                                                    2018                      2017 
 CASH FLOWS FROM OPERATING ACTIVITIES                                US$                       US$ 
                                                      ------------------  ------------------------ 
 Profit before taxation                                       27 143 275                13 017 690 
                                                      ------------------  ------------------------ 
 Non-cash items: 
                                                      ------------------  ------------------------ 
 -Depreciation                                                 1 370 312                 1 136 810 
                                                      ------------------  ------------------------ 
 -Amortisation of intangible assets                              879 376                   832 567 
                                                      ------------------  ------------------------ 
 -Impairment losses on financial assets measured 
  at amortised costs                                           4 011 952                 3 853 149 
                                                      ------------------  ------------------------ 
 -Investment properties fair value adjustment                (2 551 436)                 (302 255) 
                                                      ------------------  ------------------------ 
 -Trade and other investments fair value adjustment             (10 154)                  (35 176) 
                                                      ------------------  ------------------------ 
 -(Profit)/loss on disposal of property and 
  equipment                                                     (22 396)                    56 637 
                                                      ------------------  ------------------------ 
 -Loss on disposal of non-current asset held 
  for sale                                                             -                    75 300 
                                                      ------------------  ------------------------ 
 -Profit on disposal of investment properties                  (567 032)                  (12 951) 
                                                      ------------------  ------------------------ 
 -Loss on disposal of quoted investments                          15 074                         - 
                                                      ------------------  ------------------------ 
 -Interest capitalised on subordinated loan                      171 483                   165 345 
                                                      ------------------  ------------------------ 
 -Impairment reversal on land and buildings                     (76 661)                  (89 660) 
                                                      ------------------  ------------------------ 
 -Unrealised foreign exchange loss/(gain)                         20 689                  (16 555) 
                                                      ------------------  ------------------------ 
                                                          --------------            -------------- 
                                                      ------------------  ------------------------ 
 Operating cash flows before changes in operating 
  assets and liabilities                                      30 384 482                18 680 901 
                                                      ------------------  ------------------------ 
 Changes in operating assets and liabilities 
                                                      ------------------  ------------------------ 
 Increase in deposits and other liabilities                   90 105 608                91 525 302 
                                                      ------------------  ------------------------ 
 Increase in loans, advances and other assets               (56 133 883)              (14 719 275) 
                                                      ------------------  ------------------------ 
                                                         ---------------           --------------- 
                                                      ------------------  ------------------------ 
 Net cash generated from operations                           64 356 207                95 486 928 
                                                      ------------------  ------------------------ 
 Taxation                                                  -------------             ------------- 
                                                      ------------------  ------------------------ 
 Corporate tax paid                                          (4 488 757)               (1 757 028) 
                                                      ------------------  ------------------------ 
 Capital gains tax paid                                                -                 (155 265) 
                                                      ------------------  ------------------------ 
 Tax on dividends paid                                          (97 294)                         - 
                                                      ------------------  ------------------------ 
                                                          --------------          ---------------- 
                                                      ------------------  ------------------------ 
 Net cash from operating activities                           59 770 156                93 574 635 
                                                      ------------------  ------------------------ 
 CASH FLOWS FROM INVESTING ACTIVITIES                     --------------          ---------------- 
                                                      ------------------  ------------------------ 
 Acquisition of intangible assets                              (535 971)               (1 565 713) 
                                                      ------------------  ------------------------ 
 Acquisition of investment securities                       (25 004 005)              (67 500 670) 
                                                      ------------------  ------------------------ 
 Proceeds on display of property and equipment                    22 396                     1 076 
                                                      ------------------  ------------------------ 
 Acquisition of property and equipment                       (9 490 840)               (2 038 933) 
                                                      ------------------  ------------------------ 
 Proceeds on disposal of investment properties                 4 801 846                   332 951 
                                                      ------------------  ------------------------ 
 Acquisition of investment properties                        (6 082 924)               (4 792 476) 
                                                      ------------------  ------------------------ 
 Proceeds on disposal of non-current asset 
  held for sale                                                        -                 2 150 000 
                                                      ------------------  ------------------------ 
 Proceeds on disposal of quoted investments                          458                    94 877 
                                                      ------------------  ------------------------ 
                                                       -----------------         ----------------- 
                                                      ------------------  ------------------------ 
 Net cash used in investing activities                      (36 289 040)              (73 318 888) 
                                                      ------------------  ------------------------ 
 CASH FLOWS FROM INVESTING ACTIVITIES                  -----------------         ----------------- 
                                                      ------------------  ------------------------ 
 Payment of interest on subordinated term 
  loan                                                          (81 740)                 (164 931) 
                                                      ------------------  ------------------------ 
 Proceeds from share based payments - share 
  option exercised                                                     -                    21 887 
                                                      ------------------  ------------------------ 
 Cash dividend paid                                            (573 719)                         - 
                                                      ------------------  ------------------------ 
 Share issue costs - scrip dividend                              (8 221)                         - 
                                                      ------------------  ------------------------ 
                                                         ---------------           --------------- 
                                                      ------------------  ------------------------ 
 Net cash used in financing activities                         (663 680)                 (143 044) 
                                                      ------------------  ------------------------ 
                                                          --------------          ---------------- 
                                                      ------------------  ------------------------ 
 Net increase in cash and cash equivalents                    22 817 436                20 112 703 
                                                      ------------------  ------------------------ 
 Net foreign exchange differences on cash 
  and cash equivalents                                            70 274                    19 242 
                                                      ------------------  ------------------------ 
 Cash and cash equivalents at beginning of 
  the year                                                    89 553 202                69 421 257 
                                                      ------------------  ------------------------ 
                                                           -------------            -------------- 
                                                      ------------------  ------------------------ 
 Cash and cash equivalents at the end of the 
  year (Note 15)                                             112 440 912                89 553 202 
                                                      ------------------  ------------------------ 
                                                               =========                  ======== 
                                                      ------------------  ------------------------ 
 

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2018

   1.     REPORTING ENTITY 

The Holding Company is incorporated and domiciled in Zimbabwe and is an investment holding company. Its registered office address is 64 Kwame Nkrumah Avenue, Harare. Its principal operating subsidiary is engaged in commercial and retail banking. NMB Bank Limited is a registered commercial bank and was incorporated in Zimbabwe on 16 October 1992 and commenced trading on 1 June 1993. The Bank operated as an Accepting House until 6 December 1999 when the licence was converted to that of a Commercial Bank. The Bank is exposed to the following risks in its operations: liquidity risk, credit risk, market risk, operational risk, foreign currency exchange rate risk and interest rate risk.

   2.     ACCOUNTING CONVENTION 

Statement of compliance

The condensed consolidated financial statements are prepared and presented on the basis that they reflect the information necessary to be a fair summary of the annual financial statements from which they are derived. This includes financial results that agree with or can be recalculated from the related information in the audited consolidated financial statements and that contain the information necessary so as not to be misleading in the circumstances. The information contained in these consolidated financial results does not contain all the disclosures required by International Financial Reporting Standards, the Companies Act (Chapter 24:03) of Zimbabwe and the Banking Act (Chapter 24:20) of Zimbabwe, which are disclosed in the full consolidated annual financial statements from which this set of condensed financial statements were derived. For a better understanding of the Group`s financial position, its financial performance and cash flows for the year, these condensed financial statements should be read in conjunction with the audited consolidated annual financial statements.

   2.1   Basis of preparation 

The condensed consolidated financial statements have been prepared under the historical cost convention except for quoted and other investments, investment properties and non-current assets held for sale which are carried at fair value and land and buildings which are stated at revalued carrying amount. These condensed consolidated financial statements are reported in United States of America dollars and rounded to the nearest dollar.

   2.2   Basis of consolidation 

The Group financial results incorporate the financial results of the Company and its subsidiaries. Subsidiaries are investees controlled by the Group. The Group controls an investee if it is exposed to, or has rights to, variable returns from its involvement with the investee. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until date when control ceases. 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. When the Group loses control over a subsidiary, it derecognises the assets and liabilities of the subsidiary, and any related non-controlling interest and other components of equity. Any resulting gain or loss is recognised in profit or loss. Any interest retained in the former subsidiary is measured at fair value when control is lost.

   2.3    Comparative financial information 

The comparative information covers a period of twelve months.

   2.4    Use of estimates and judgements 

In preparation of the Group financial statements, Directors have made judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised prospectively.

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment in the year ended 31 December 2018 is included in the following notes:

2.4.1 Deferred tax

Deferred taxation is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Temporary differences arising out of the initial recognition of assets or liabilities and temporary differences on initial recognition of business combinations that affect neither accounting nor taxable profit are not recognised. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the reporting date. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.

   2.4.2    Land and buildings 

The properties were valued by an independent professional valuer. The determined fair value of land and buildings is most sensitive to significant unobservable inputs. The property market is currently not stable due to liquidity constraints.

   2.4.3    Investment properties 

Investment property were valued by an independent professional valuer. The property market is currently not stable due to liquidity constraints.

   2.4.4    Investment securities 

The Group has treasury bills and government bonds for which there is currently no market information to facilitate the application of fair value principles in determining fair value disclosures. Directors have made a significant judgment in determining that the carrying amount approximates fair value. (refer to note 14.1).

   2.4.5    Impairment losses on loans and advances 

The Bank adopted IFRS 9 with effect from 1 January 2018. As permitted by the IFRS 9 transitional provisions, the Bank elected not to restate comparative figures.

The Bank recognises loss allowances for Expected Credit Losses (ECLs) on the following financial

instruments that are not measured at Fair Value through Profit or Loss (FVTPL):

-- loans and advances to banks;

-- loans and advances to customers;

-- debt investment securities;

-- lease receivables;

-- loan commitments issued; and

-- financial guarantee contracts issued.

No impairment loss is recognised on equity investments.

With the exception of purchased or originated credit-impaired (POCI) financial assets (which are considered separately below), ECLs are measured through a loss allowance at an amount equal to:

-- 12-month ECL, i.e. lifetime ECL that result from those default events on the financial instrument that are possible within 12 months after the reporting date, (referred to as Stage 1); or

-- Full lifetime ECL, i.e. lifetime ECL that result from all possible default events over the life of the

financial instrument, (referred to as Stage 2 and Stage 3).

A loss allowance for full lifetime ECL is required for a financial instrument if the credit risk on that financial instrument has increased significantly since initial recognition. For all other financial instruments, ECLs are measured at an amount equal to the 12-month ECL.

The impairment loss on loans and advances is disclosed in more detail under note 8 and note 16.3.

              2.4.6    Non-current assets held for sale 

Non-current assets were valued by an independent professional valuer. All non-current assets held for sale are measured at their fair values. The determined fair value of non-current assets held for sale is most sensitive to significant unobservable inputs. In addition, the property market is currently not stable due to liquidity constraints and hence comparable values are also not stable.

   2.4.7    Determination of the functional currency 

The Government of Zimbabwe adopted a multi-currency regime in 2009. The British Pound, Euro, United States Dollar (USD), South African Rand (ZAR) and Botswana Pula were adopted as the multi-currency basket in February 2009. In January 2014, the Reserve Bank of Zimbabwe (RBZ) issued a Monetary Policy Statement which added the Chinese Yuan, Australian Dollar, Indian Rupee, Japanese Yen into the basket of multi-currencies. At the onset, the USD and the ZAR were the commonly used currencies, with the USD eventually gaining prominence resulting in it being designated as the functional and presentation currency by the transacting public and the Monetary Authorities, including the Group.

Between 2014 and 2016, the Zimbabwean economy experienced a massive liquidity crisis which eventually prompted the Monetary Authorities to introduce the bond notes in November 2016 whilst encouraging the public to continue using the other currencies in the multi-currency basket. The bond notes were introduced at an official fixed exchange rate of 1:1 with the USD and the Monetary Authorities specifically directed financial institutions not to open separate vault and cash accounts for the USD and the bond notes. The introduction of the bond notes gave rise to a three (3) tier pricing system wherein sellers and service providers would quote three (3) separate prices (USD, bond notes and RTGS/electronic transfers) for their merchandise and services respectively. Significant discounts were being offered for USD payments whilst a premium would be added for prices quoted in bond notes or electronic settlement via the Real Time Gross Settlement System (RTGS). These developments triggered a debate around the functional currency of Zimbabwe. It should be noted that the group never participated in the three tier pricing and none of its products had multiple prices during the same period.

In October 2018, the Monetary Authorities instructed financial institutions to separate bond notes and USD accounts and indicated that corporates and individuals could proceed to open Nostro Foreign Currency Accounts (FCA), for foreign currency holdings, which were now being exclusively distinguished from the existing RTGS based accounts. However, it should be noted that at the time of this policy pronouncement, the Monetary Authorities did not state that they had introduced a new currency for Zimbabwe, which actually meant that the USD remained as the currency of reference. By 31 December 2018, there had been no pronouncement by the Monetary Authorities to the effect that there had been a new currency introduced, which could be considered as the country's functional currency.

On 22 February 2019, the Reserve Bank of Zimbabwe (RBZ) issued an Exchange Control Directive, RU 28 of 2019 which established an interbank foreign exchange market to formalise the buying and selling of foreign currency through the Banks and Bureaux de change. In order to establish an exchange rate between the current monetary balances and foreign currency, the Monetary Authorities denominated the existing RTGS balances in circulation as RTGS Dollars. Initial trades on 22 February 2019 were at USD1: RTGS$2.5.

On the same date, Statutory Instrument 33 of 2019 was also issued and it specified that for accounting and other purposes, all assets and liabilities that were in USD immediately before the 22(nd) of February 2019 were deemed to have been valued in RTGS Dollars at a rate of 1:1.

In light of the developments summarised above, the directors are of the opinion that the USD was the Group's functional and presentation currency due to the following factors:

-- There was no alternative currency at reporting date as the Monetary Authorities only introduced the RTGS Dollars on 22 February 2019; and

-- SI 33 of 2019 specified that for accounting and other purposes, all assets and liabilities that were in USD immediately before the 22(nd) of February 2019 were deemed to have been valued in RTGS Dollars at a rate of 1:1.

-- Furthermore, the official rate between the USD and bond notes as well as RTGS/electronic balances was pegged at 1:1 on 31 December 2018 and no reliance could be placed on the unofficial rates which were being quoted i.e. the parallel market rate and the Old Mutual Implied Rate, both of which have significant legal limitations.

-- Neither the Group nor its subsidiary ever had a three tier pricing system on any of its products and services during the period under review.

-- Furthermore, neither the Group nor its subsidiary ever sourced foreign currency using either of the two unofficial rates from the time the rates emerged until the introduction of the official interbank foreign exchange market by the Monetary Authorities on 22 February 2019.

   2.4.8    Going concern 

The Directors have assessed the ability of the Group to continue operating as a going concern and believe that the preparation of these condensed consolidated financial statements on a going concern basis is still appropriate.

   3.         ACCOUNTING POLICIES 

The selected principal accounting policies applied in the preparation of these condensed consolidated financial statements are set out below. These policies have been consistently applied unless otherwise stated.

   3.1         Fair value measurement principles 

The fair value of financial instruments is based on their quoted market price at the reporting date without any deduction for transaction costs. If a quoted market price is not available, the fair value of the instrument is estimated using pricing models or discounted cash flow techniques.

Where discounted cash flow techniques are used, estimated future cash flows are based on management's best estimates and the discount rate is a market related rate at the reporting date for an instrument with similar terms and conditions. Where pricing models are used, inputs are based on market related measures at the reporting date.

   3.2         Investment properties 

Investment properties are measured at fair value. Gains and losses arising from a change in fair value of investment properties are recognised in the statement of comprehensive income. The fair value is determined at the end of each reporting period, by a registered professional valuer.

   3.3         Share based payments 

The Group issues share options to certain employees in terms of the Employee Share Option Scheme. Share options are measured at fair value at the date of grant. The fair value determined at the date of grant of the options is expensed on a straight-line basis over the vesting period, based on the Group's estimate of shares that will eventually vest. Fair value is measured using the Black-Scholes option pricing model. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and other behavioural considerations.

   3.4       Property and equipment 

The residual value and the useful life of property and equipment are reviewed at least each financial year-end. If the residual value of an asset increases by an amount equal to or greater than the asset's carrying amount, then the depreciation of the asset ceases. Depreciation will resume only when the residual value decreases to an amount below the asset's carrying amount.

   3.5       Intangible assets 

Intangible assets are initially recognised at cost. Subsequently, the assets are measured at cost less accumulated armotisation and any accumulated impairment losses.

   3.6       Taxation 

Income tax

Income tax expenses comprise current and deferred tax. It is recognised in profit or loss except to the extent that it relates to items recognised directly in equity or in other comprehensive income.

Current tax

Current tax comprises expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. It is measured using rates enacted or substantively enacted at the reporting date in the country where the Bank operates and generates taxable income and any adjustment to tax payable in respect of previous years.

Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to the taxation authorities.

Deferred taxation

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for:

-- temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss;

-- temporary differences related to investments in subsidiaries to the extent that it is probable that they will not reverse in the foreseeable future; and

   --               taxable temporary differences arising on the initial recognition of goodwill. 

Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date.

The measurement of deferred tax reflects the tax consequences that would follow the manner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. For this purpose, the carrying amount of investment property measured at fair value is presumed to be recovered through sale, and the Group has not rebutted this presumption.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

Additional taxes that arise from the distribution of dividends by the Group are recognised at the same time as the liability to pay the related dividend is recognised. These amounts are generally recognised in profit or loss because they generally relate to income arising from transactions that were originally recognised in profit or loss.

   3.7       Cash and cash equivalents 

Cash and cash equivalents comprise cash and bank balances, and short term highly liquid investments with maturities of three months or less when purchased. Cash and cash equivalents are measured at amortised cost in the statement of financial position.

   3.8       Revenue recognition 

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty. The specific recognition criteria described below must also be met before revenue is recognised.

   3.9       Interest income 

For all financial instruments measured amortised cost and financial instruments designated at fair value through profit or loss, interest income or expense is recorded using the effective interest rate (EIR), which is the rate that exactly discounts the estimated future cash payments or receipts through the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or liability. Interest income includes income arising out of the banking activities of lending and investing.

   3.10     Interest expense 

Interest expense arises from deposit taking. The expense is recognised in profit or loss as it accrues, taking into account the effective interest cost of the liability.

   3.11     Shareholders' funds and shareholders' liabilities 

Shareholders' funds and shareholders' liabilities refer to the investment made by the shareholders in the Group and it consists of share capital, share premium, share options reserve, retained earnings, revaluation reserve, redeemable ordinary shares and subordinated term loans.

   3.12      Changes in accounting policy 

The Bank has adopted IFRS 9 as issued by the International Accounting Standards Board (IASB) in July 2014 with a date of transition of 1 January 2018, which resulted in changes in accounting policies and adjustments to the amounts previously recognised in the financial statements.

As permitted by the transitional provisions of IFRS 9, the Bank elected not to restate comparative figures.

Any adjustments to the carrying amounts of financial assets and liabilities at the date of transition were recognised in the opening retained earnings and other reserves of the current period. Consequently, for notes disclosures, the consequential amendments to IFRS 7 disclosures have also only been applied to the current period. The comparative period notes disclosures repeat those disclosures made in the prior year.

The adoption of IFRS 9 has resulted in changes in the Bank's accounting policies for recognition, classification and measurement of financial assets and financial liabilities and impairment of financial assets. IFRS 9 also significantly amends other standards dealing with financial instruments such as IFRS 7 Financial Instruments: Disclosures.

Set out below are disclosures relating to the impact of the adoption of IFRS 9 on the Bank.

(a) Classification and measurement of financial instruments

The measurement category and the carrying amount of financial assets and liabilities in accordance with IAS 39 and IFRS 9 at 1 January 2018 are compared as follows:

                                                                             IAS 39                                                                IFRS 9 
 
                           Measurement Category          Carrying   Measurement Category        Carrying 
                                                           Amount                                 Amount 
                                                              US$                                    US$ 
                          -------------------------  ------------  ---------------------  -------------- 
 Financial Assets 
 Cash and cash             Amortised cost (Loans 
  equivalents               and advances)              89,553,202   Amortised cost            89,526,431 
                          -------------------------  ------------  ---------------------  -------------- 
                           Amortised cost (Loans 
 Loans and advances         and advances)             210,483,221   Amortised cost           202,308,086 
                          -------------------------  ------------  ---------------------  -------------- 
 Investment                Amortised cost (Loans 
  securities                and advances)              92,245,425   Amortised cost            91,871,343 
                          -------------------------  ------------  ---------------------  -------------- 
 Unquoted and 
  other investments        FVPL (Held for trading)        117,880   FVPL                         117,880 
                          -------------------------  ------------  ---------------------  -------------- 
                                                                                            383,823, 
 Total                                                392,399,728                            740 
                                                     ------------  ---------------------  -------------- 
 Financial Liabilities 
 Total deposits 
  and other liabilities    Amortised cost             356,912,509   Amortised cost           356,912,509 
                          -------------------------  ------------  ---------------------  -------------- 
 

(b) Reconciliation of statement of financial position balances from IAS 39 to IFRS 9

The Bank performed a detailed analysis of its business models for managing financial assets and an analysis of their cash flow characteristics to determine how the instruments shall be measured.

The following table reconciles the carrying amounts of financial assets, from their previous measurement categories in accordance with IAS 39 to their new measurement categories upon transition to IFRS 9 on 1 January 2018:

 
                                                      Carrying amount 
                                                       1 January 2018 
                                                                  US$ 
 Amortised cost 
                                                     ---------------- 
 
 Cash and cash equivalents 
                                                     ---------------- 
 
 Opening balance - IAS 39                                  89 553 202 
                                                     ---------------- 
 Additional IFRS 9 impairment allowance - Expected 
  Credit Loss (ECL)                                          (26 771) 
                                                     ---------------- 
                                                       -------------- 
                                                     ---------------- 
 Closing balance - IFRS 9                                  89 526 431 
                                                     ---------------- 
                                                             ======== 
                                                     ---------------- 
 Loans and advances 
                                                     ---------------- 
 Opening balance - IAS 39                                 210 483 221 
                                                     ---------------- 
 Additional IFRS 9 impairment allowance - (ECL)           (8 175 135) 
                                                     ---------------- 
 Less reclassifications                                             - 
                                                     ---------------- 
                                                      --------------- 
                                                     ---------------- 
 Closing balance - IFRS 9                                 202 308 086 
                                                     ---------------- 
                                                            ========= 
                                                     ---------------- 
 Investment securities 
                                                     ---------------- 
 Opening balance - IAS 39                                  92 245 425 
                                                     ---------------- 
 Additional IFRS 9 impairment allowance                     (374 082) 
                                                     ---------------- 
 Less reclassifications                                             - 
                                                     ---------------- 
                                                       -------------- 
                                                     ---------------- 
 Closing balance - IFRS 9                                  91 871 343 
                                                     ---------------- 
                                                             ======== 
                                                     ---------------- 
 Total financial assets measured at amortised cost        383 705 860 
                                                     ---------------- 
 Fair value through profit or loss 
                                                     ---------------- 
 Unquoted investments                                         117 880 
                                                     ---------------- 
                                                      --------------- 
                                                     ---------------- 
 Total financial assets                                   383 823 740 
                                                     ---------------- 
                                                            ========= 
                                                     ---------------- 
 
 

The Directors concluded that there were no measurement difference between IAS 39 and IFRS 9 for the Bank's liabilities on 1 January 2019.

   (c)        Reconciliation of impairment allowance balance from IAS 39 to IFRS 9 

The following table reconciles the prior period closing impairment allowance measured in accordance with the IAS 39 incurred loss model to the new expected credit loss allowance measured in accordance with the IFRS 9 expected loss model at 1 January 2018:

 
                           IAS 39 Impairment                     IFRS 9 Impairment 
                              loss allowance                        loss allowance 
   Measurement Category              balance     Remeasurement         balance US$ 
                                         US$               US$ 
 Interbank placements                      -            26 771              26 771 
                          ------------------  ----------------  ------------------ 
 Investment securities                     -           374 082             374 082 
                          ------------------  ----------------  ------------------ 
                                   5 445 968         8 175 135          13 621 103 
                          ------------------  ----------------  ------------------ 
 Loans and advances                5 445 968         6 162 469          11 608 437 
                          ------------------  ----------------  ------------------ 
 Loan commitments                          -         1 551 975           1 551 975 
                          ------------------  ----------------  ------------------ 
 Financial guarantees                      -           460 691             460 691 
                          ------------------  ----------------  ------------------ 
                                ------------     -------------      -------------- 
                          ------------------  ----------------  ------------------ 
 Total                             5 445 968         8 575 988          14 021 956 
                          ------------------  ----------------  ------------------ 
                                     =======          ========            ======== 
                          ------------------  ----------------  ------------------ 
 
   3.12.1   Financial Instruments 

Measurement methods

Armotised cost and effective interest rates

The amortised cost is the amount at which the financial asset or financial liability is measured at initial recognition minus the principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between that initial amount and the maturity amount and, for financial assets, an adjustment for any loss allowance.

The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial asset or financial liability to the gross carrying amount of a financial asset (i.e. its amortised cost before any impairment allowance) or to the amortised cost of a financial liability. The calculation does not consider expected credit losses and includes transaction costs, premiums or discounts and fees and points paid or received that are integral to the effective interest rate, such as origination fees. For purchased or originated credit-impaired ('POCI') financial assets - assets that are credit-impaired at initial recognition - the Bank calculates the credit-adjusted effective interest rate, which is calculated based on the amortised cost of the financial asset instead of its gross carrying amount and incorporates the impact of expected credit losses in estimated future cash flows.

When the Bank revises the estimates of future cash flows, the carrying amount of the respective financial assets or financial liability is adjusted to reflect the new estimate discounted using the original effective interest rate. Any changes are recognised in profit or loss.

Interest Income

Interest income is calculated by applying the effective interest rate to the gross carrying amount of financial assets, except for:

a) Purchased or originated credit-impaired (POCI) financial assets, for which the original credit-adjusted effective interest rate is applied to the amortised cost of the financial asset.

b) Financial assets that are not 'POCI' but have subsequently become credit-impaired (or 'stage 3'), for which interest revenue is calculated by applying the effective interest rate to their amortised cost (i.e net of the expected credit loss provision).

Initial recognition and measurement

Financial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions of the instrument. Regular way purchases and sales of financial assets are recognised on trade-date, the date on which the Bank commits to purchase or sell the asset.

At initial recognition, the Bank measures a financial asset or financial liability at its fair value plus or

minus, in the case of a financial asset or financial liability not at fair value through profit or loss; transaction costs that are incremental and directly attributable to the acquisition or issuance of the financial asset or financial liability respectively, such as fees and commissions. Transaction costs of financial assets and financial liabilities carried at fair value through profit or loss are expensed in profit or loss. Immediately after initial recognition, an expected credit loss allowance (ECL) is recognised for financial assets measured at amortised cost and investments in debt instruments measured at FVOCI, which results in an accounting loss being recognised in profit or loss when an asset is newly originated.

When the fair value of financial assets and liabilities differs from the transaction price on initial recognition, the entity recognises the difference as follows:

(a) When the fair value is evidenced by a quoted price in an active market for an identical asset or liability (i.e. a Level 1 input) or based on a valuation technique that uses only data from observable markets, the difference is recognised as a gain or loss.

(b) In all other cases, the difference is deferred and the timing of recognition of deferred day one profit or loss is determined individually. It is either amortised over the life of the instrument, deferred until the instrument's fair value can be determined using market observable inputs, or realised through settlement.

3.12.1.1 Financial Assets

(i) Classification and subsequent measurement

From 1 January 2018, the Group has applied IFRS 9 and classifies its financial assets in the

following measurement categories:

   --    Fair value through profit or loss (FVPL); 
   --     Fair value through other comprehensive income (FVOCI); or 
   --     Amortised cost. 

The classification requirements for debt and equity instruments are described below:

Debt instruments

Debt instruments are those instruments that meet the definition of a financial liability from the issuer's perspective, such as loans, government and corporate bonds and trade receivables purchased from clients in factoring arrangements without recourse.

Classification and subsequent measurement of debt instruments depend on:

   --     the Bank's business model for managing the asset; and 
   --     the cash flow characteristics of the asset. 

Based on these factors, the Bank classifies its debt instruments into one of the following three measurement categories:

-- Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest ('SPPI'), and that are not designated at FVPL, are measured at amortised cost. The carrying amount of these assets is adjusted by any expected credit loss allowance. Interest income from these financial assets is included in interest and similar income using the effective interest rate method.

-- Fair value through other comprehensive income (FVOCI): Financial assets that are held for collection of contractual cash flows and for selling the assets, where the assets' cash flows represent solely payments of principle and interest and that are not designated at FVPL, are measured at fair value through other comprehensive income (FVOCI). Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses on the instrument's amortised cost which are recognised in profit or loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognised in "Net Investment Income'. Interest income from these financial assets is included in 'Interest Income' using the effective interest rate method.

-- Fair value through profit or loss: Assets that do not meet the criteria for amortised cost or FVOCI are measured at fair value through profit or loss. A gain or loss on a debt investment that is subsequently measured at fair value through profit or loss and is not part of a hedging relationship is recognised in profit or loss and presented in the profit or loss statement within 'Net Trading Income" in the period in which it arises, unless it arises from debt instruments that were designated at fair value or which are not held for trading, in which case they are presented separately in 'Net Investment Income'. Interest income from these financial assets is included in "Interest income" using the effective interest rate method.

Business model: the business model reflects how the Bank manages the assets in order to generate cash flows. That is, whether the Bank's objective is solely to collect the contractual cash flows from the assets or is to collect both the contractual cash flows and cash flows arising from the sale of assets. If neither of these is applicable (e.g. financial assets are held for trading purposes), then the financial assets are classified as part of 'other' business model and measured at FVPL. Factors considered by the Bank in determining the business model for a group of assets include past experience on how the cash flows for these assets were collected, how the asset's performance is evaluated and reported to key management personnel, how risks are assessed and managed and how managers are compensated. Securities held for trading are held principally for the purpose of selling in the near term or are part of a portfolio of financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking. These securities are classified in the 'other' business model and measured at FVPL.

Where the business model is to hold assets to collect contractual cash flows or to collect contractual cash flows and sell, the Bank assesses whether financial instruments' cash flows represent solely payments of principal and interest (the "SPPI" test). In making this assessment, the Bank considers whether the contractual cash flows are consistent with a basic lending arrangement i.e. interest includes only consideration for the time value of money, credit risk, other basic lending risks and a profit margin that is consistent with a basic lending arrangement. Where the contractual terms introduce exposure to risk or volatility that are inconsistent with a basic lending arrangement, the related financial asset is classified and measured at fair value through profit or loss.

The Bank reclassifies debt investments when and only when its business model for managing those assets changes. The reclassification takes place from the start of the first reporting period following the change. Such changes are expected to be very infrequent and none occurred during the period.

Equity instruments

Equity instruments are instruments that meet the definition of equity from the issuer's perspective; that is, instruments that do not contain a contractual obligation to pay and that evidence a residual interest in the issuer's net assets. Examples of equity instruments include basic ordinary shares.

The Bank subsequently measures all equity investments at fair value through profit or loss, except where the Bank's management has elected, at initial recognition, to irrevocably designate an equity investment at fair value through other comprehensive income. The Bank policy is to designate equity investments as FVOCI when those investments are held for purposes other than to generate investment returns. When this election is used, fair value gains and losses are recognised in OCI and are not subsequently reclassified to profit or loss, including on disposal. Impairment losses (and reversal of impairment losses) are not reported separately from other changes in fair value. Dividends, when representing a return on such investments, continue to be recognised in profit or loss as other income when the Bank's right to receive payments is established.

Gains and losses on equity investments at FVPL are included in the 'Other Income' line in the statement of profit or loss.

(ii) Impairment

The Bank recognises loss allowances for Expected Credit Losses (ECLs) on the following financial instruments that are not measured at Fair Value through Profit or Loss (FVTPL):

-- loans and advances to banks;

-- loans and advances to customers;

-- debt investment securities;

-- lease receivables;

-- loan commitments issued; and

-- financial guarantee contracts issued.

No impairment loss is recognised on equity investments.

With the exception of POCI financial assets (which are considered separately below), ECLs are measured through a loss allowance at an amount equal to:

-- 12-month ECL, i.e. lifetime ECL that result from those default events on the financial instrument that are possible within 12 months after the reporting date, (referred to as Stage 1); or

-- Full lifetime ECL, i.e. lifetime ECL that result from all possible default events over the life of the financial instrument, (referred to as Stage 2 and Stage 3).

A loss allowance for full lifetime ECL is required for a financial instrument if the credit risk on that financial instrument has increased significantly since initial recognition. For all other financial instruments, ECLs are measured at an amount equal to the 12-month ECL.

Expected Credit Losses

ECLs are a probability-weighted estimate of the present value of credit losses. These are measured as the present value of the difference between the cash flows due to the Bank under the contract and the cash flows that the Bank expects to receive arising from the weighting of multiple future economic scenarios, discounted at the asset's EIR.

For undrawn loan commitments, the ECL is the difference between the present value of the difference between the contractual cash flows that are due to the Bank if the holder of the commitment draws down the loan and the cash flows that the Bank expects to receive if the loan is drawn down; and

For financial guarantee contracts, the ECL is the difference between the expected payments to reimburse the holder of the guaranteed debt instrument less any amounts that the Bank expects to receive from the holder, the debtor or any other party.

The Bank measures ECL on an individual basis, or on a collective basis for portfolios of loans that share similar economic risk characteristics. The measurement of the loss allowance is based on the present value of the asset's expected cash flows using the asset's original EIR, regardless of whether it is measured on an individual basis or a collective basis.

Credit-impaired financial assets

A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of that financial asset have occurred. Evidence that a financial asset is credit-

impaired include observable data about the following events:

(a) significant financial difficulty of the issuer or the borrower;

(b) a breach of contract, such as a default or past due event;

(c) the lender(s) of the borrower, for economic or contractual reasons relating to the borrower's financial difficulty, having granted to the borrower a concession(s) that the lender(s) would not otherwise consider;

(d) it becoming probable that the borrower will enter bankruptcy or other financial reorganisation;

(e) the disappearance of an active market for that financial asset because of financial difficulties; or

(f) the purchase or origination of a financial asset at a deep discount that reflects the incurred credit losses.

It may not be possible to identify a single discrete event-instead, the combined effect of several events may have caused financial assets to become credit-impaired.

Purchased or originated credit-impaired (POCI) financial assets

For POCI the Bank only recognises the cumulative changes in lifetime expected credit losses since initial recognition. At each reporting date, the Bank recognises in profit or loss the amount of the change in lifetime expected credit losses as an impairment gain or loss. The Bank recognises favourable changes in lifetime expected credit losses as an impairment gain, even if the lifetime expected credit losses are less than the amount of expected credit losses that were included in the estimated cash flows on initial recognition.

The Bank assesses on a forward-looking basis the expected credit losses ('ECL') associated with its debt instrument assets carried at amortised cost and FVOCI and with the exposure arising from loan commitments and financial guarantee contracts. The Bank recognises a loss allowance for such losses at each reporting date. The measurement of ECL reflects:

-- An unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes;

   --     The time value of money; and 

-- Reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions.

For loan commitments and financial guarantee contracts, the loss allowance is recognised as a provision. The Bank keeps track of the changes in the loss allowance for financial assets separately from those for loan commitments and financial guarantee contracts. However, if a financial instrument includes both a loan (i.e.

financial asset) and an undrawn commitment (i.e. loan commitment) component and the Bank does not separately identify the expected credit losses on the loan commitment component from those on the financial asset component, the expected credit losses on the loan commitment is recognised together with

the loss allowance for the financial asset. To the extent that the combined expected credit losses exceed the gross carrying amount of the financial asset, the expected credit losses is recognised as a provision.

Definition of default

Critical to the determination of ECL is the definition of default. The definition of default is used in measuring the amount of ECL and in the determination of whether the loss allowance is based on 12-month or lifetime ECL, as default is a component of the probability of default (PD) which affects both the measurement of ECLs and the identification of a significant increase in credit risk.

The Bank considers the following as constituting an event of default:

   --     The borrower is past due more than 90 days on any material credit obligation to the Bank or; 
   --     The borrower is unlikely to pay its credit obligations to the Bank in full. 

The definition of default is appropriately tailored to reflect different characteristics of different types of assets. Overdrafts are considered as being past due once the customer has breached an advised limit or has been advised of a limit smaller than the current amount outstanding.

When assessing if the borrower is unlikely to pay its credit obligation, the Bank takes into account both qualitative and quantitative indicators. The information assessed depends on the type of the asset, for example in corporate lending a qualitative indicator used is the breach of covenants, which is not relevant for retail lending. Quantitative indicators, such as overdue status and non-payment on another obligation of the same counterparty are key inputs in this analysis. The Bank uses a variety of sources of information to assess default which are either developed internally or obtained from external sources.

Significant increase in credit risk

The Bank monitors all financial assets, undrawn loan commitments and financial guarantee contracts that are subject to the impairment requirements to assess whether there has been a significant increase in credit risk since initial recognition. If there has been a significant increase in credit risk the Bank will measure the loss allowance based on lifetime rather than 12-month ECL. The Bank's accounting policy is not to use the practical expedient that financial assets with 'low' credit risk at the reporting date are deemed not to have had a significant increase in credit risk. As a result the Bank monitors all financial assets, undrawn loan commitments and financial guarantee contracts that are subject to impairment for significant increase in credit risk.

In assessing whether the credit risk on a financial instrument has increased significantly since initial recognition, the Bank compares the risk of a default occurring on the financial instrument at the reporting date based on the remaining maturity of the instrument with the risk of a default occurring that was anticipated for the remaining maturity at the current reporting date when the financial instrument was first recognised. In making this assessment, the Bank considers both quantitative and qualitative information that is reasonable and supportable, including historical experience and forward-looking information that is available without undue cost or effort, based on the Bank's historical experience and expert credit assessment including forward-looking information.

Multiple economic scenarios form the basis of determining the probability of default at initial recognition and at subsequent reporting dates. Different economic scenarios will lead to a different probability of default. It is the weighting of these different scenarios that forms the basis of a weighted average probability of default that is used to determine whether credit risk has significantly increased.

For corporate lending, forward-looking information includes the future prospects of the industries in which the Bank's lenders operate, obtained from economic expert reports, financial analysts, governmental bodies and other similar organisations, as well as consideration of various internal and external sources of actual and forecast economic information. For the retail portfolio, forward looking information includes the same economic forecasts as the corporate portfolio with additional forecasts of local economic indicators, particularly for regions with a concentration to certain industries, as well as internally generated information of customer payment behaviour. The Bank allocates its counterparties to a relevant internal credit risk grade depending on their credit quality. The quantitative information is a primary indicator of significant increase in credit risk and is based on the change in lifetime PD by comparing:

   --     The remaining lifetime PD at the reporting date; with 

-- the remaining lifetime PD for this point in time that was estimated based on facts and circumstances at the time of initial recognition of the exposure.

The PDs used are forward looking and the Bank uses the same methodologies and data used to measure the loss allowance for ECL.

The qualitative factors that indicate significant increase in credit risk are reflected in PD models on a timely basis. However, the Bank still considers separately additional qualitative factors to assess if credit risk has increased significantly. For corporate lending there is particular focus on assets that are included on the Bank's 'watch list' and for the retail portfolio the Bank considers the expectation of forbearance and payment holidays, credit scores and any other changes in the borrower's circumstances which are likely to adversely affect one's ability to meet contractual obligations.

Given that a significant increase in credit risk since initial recognition is a relative measure, a given change, in absolute terms, in the PD will be more significant for a financial instrument with a lower initial PD than compared to a financial instrument with a higher PD.

The Bank assumes that when an asset becomes 30 days past due, the Bank considers that a significant increase in credit risk has occurred and the asset is in stage 2 of the impairment model, i.e. the loss allowance is measured as the lifetime ECL.

(iii) Modification of loans

The Bank sometimes renegotiates or otherwise modifies the contractual cash flows of loans to customers. When this happens, the Bank assesses whether or not the new terms are substantially different to the

original terms. The Bank does this by considering, among others, the following factors:

-- If the borrower is in financial difficulty, whether the modification merely reduces the contractual cash flows to amounts the borrower is expected to be able to pay.

-- Whether any substantial new terms are introduced, such as a profit share/equity-based return that substantially affects the risk profile of the loan.

-- Significant extension of the loan term when the borrower is not in financial difficulty. Significant change in the interest rate.

   --     Change in the currency the loan is denominated in. 

-- Insertion of collateral, other security or credit enhancements that significantly affect the credit risk associated with the loan.

If the terms are substantially different, the Bank derecognises the original financial asset and recognises a 'new' asset at fair value and recalculates the new effective interest rate for the asset. The date of renegotiation is consequently considered to be the date of initial recognition for impairment calculation purposes, including for the purpose of determining whether a significant increase in credit risk has occurred. However, the Bank also assesses whether the new financial asset recognised is deemed to be credit-impaired at initial recognition, especially in circumstances where the renegotiation was driven by the

debtor being unable to make the originally agreed payments. Differences in the carrying amount are also

recognised in profit or loss as a gain or loss on derecognition.

If the terms are not substantially different, the renegotiation or modification does not result in derecognition, and the Bank recalculates the gross carrying amount based on the revised cash flows of the financial asset and recognises a modification gain or loss in profit or loss. The new gross carrying amount is recalculated by discounting the modified cash flows at the original effective interest rate (or credit-adjusted effective interest rate for purchased or originated credit-impaired financial assets).

(iv) Derecognition other than on a modification

Financial assets, or a portion thereof, are derecognised when the contractual rights to receive the cash flows from the assets have expired, or when they have been transferred and either

   --     the Bank transfers substantially all the risks and rewards of ownership, or 

-- the Bank neither transfers nor retains substantially all the risks and rewards of ownership and the Bank has not retained control.

The Bank enters into transactions where it retains the contractual rights to receive cash flows to other entities and transfers substantially all of the risks and rewards. These transactions are accounted for as 'pass through' transfers that result in derecognition if the Bank:

   (i)    Has no obligation to make payments unless it collects equivalent amounts from the assets; 

(ii) Is prohibited from selling or pledging the assets; and

(iii) Has an obligation to remit any cash it collects from the assets without material delay.

Collateral (shares and bonds) furnished by the Bank under standard repurchase agreements and securities lending and borrowing transactions are not derecognised because the Bank retains substantially all the risks

3.12.1.2 Financial liabilities

i) Classification and subsequent measurement

In both the current and prior period, financial liabilities are classified as subsequently measured at amortised cost, except for:

-- Financial liabilities at fair value through profit or loss: this classification is applied to financial liabilities held for trading (e.g. short positions in the trading booking) and other financial liabilities designated as such at initial recognition. Gains or losses on financial liabilities designated at fair value through profit or loss are presented partially in other comprehensive income (the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability, which is determined as the amount that is not attributable to changes in market conditions that give rise to market risk) and partially profit or loss (the remaining amount of change in the fair value of the liability). This is unless such a presentation would create, or enlarge, an accounting mismatch, in which case the gains and losses attributable to changes in the credit risk of the liability are also presented in profit or loss;

-- Financial liabilities arising from the transfer of financial assets which did not qualify for

derecognition, whereby a financial liability is recognised for the consideration received for the transfer. In subsequent periods, the Bank recognises any expense incurred on the financial liability.

(ii) Derecognition

Financial liabilities are derecognised when they are extinguished (i.e. when the obligation specified in the contract is discharged, cancelled or expires).

The exchange between the Bank and its original lenders of debt instruments with substantially different terms, as well as substantial modifications of the terms of existing financial liabilities, are accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. The terms are substantially different if the discounted present value of the cash flows under the new terms, including any fees paid net of any fees received and discounted using the original effective interest rate, is at least 10% different from the discounted present value of the remaining cash flows of the original financial liability. In addition, other qualitative factors, such as the currency that the instrument is denominated in, changes in the type of interest rate, new conversion features attached to the instrument and change in covenants are also taken into consideration. If an exchange of debt instruments or modification of terms is accounted for as an extinguishment, any costs or fees incurred are recognised as part of the gain or loss on the extinguishment. If the exchange or modification is not accounted for as an extinguishment, any costs or fees incurred adjust the carrying amount of the liability and are amortised over the remaining term of the modified liability.

3.12.1.3 Financial guarantee contracts and loan commitments

Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due, in accordance with the terms of a debt instrument. Such financial guarantees are given to banks, financial institutions and others on behalf of customers to secure loans, overdrafts and other banking facilities.

Financial guarantee contracts are initially measured at fair value and subsequently measured at the higher of:

   --    The amount of the loss allowance; and 

-- The premium received on initial recognition less income recognised in accordance with the principles of IFRS 15.

Loan commitments provided by the Bank are measured as the amount of the loss allowance. The Bank has not provided any commitment to provide loans at below-market interest rate, or that can be settled net in cash or by delivering or issuing another financial instrument.

For loan commitments and financial guarantee contracts, the loss allowance is recognised as a provision. However, for contracts that include both a loan and an undrawn commitment and the Bank cannot separately identify the expected credit losses on the undrawn commitment component from those on the loan component, the expected credit losses on the undrawn commitment are recognised together with the loss allowance for the loan. To the extent that the combined expected credit losses exceed the gross carrying amount of the loan, the expected credit losses are recognised as a provision.

   3.12.1.4   Critical accounting estimates and judgements 

The preparation of financial statements requires the use of accounting estimates which, by definition, will seldom equal the actual results. Management also needs to exercise judgement in applying the Bank's accounting policies.

Note 2.4 (Use of estimates and judgements) provides an overview of the areas that involve a higher degree of judgement or complexity, and major sources of estimation uncertainty that have a significant risk of resulting in a material adjustment within the next financial year. Detailed information about each of these estimates and judgements is included in the related notes together with information about the basis of calculation for each affected line item in the financial statements.

   3.12.1.5   Measurement of the expected credit loss allowance 

The measurement of the expected credit loss allowance for financial assets measured at amortised cost and FVOCI is an area that requires the use of complex models and significant assumptions about future economic conditions and credit behaviour (e.g. the likelihood of customers defaulting and the resulting losses). A number of significant judgements are also required in applying the accounting requirements for measuring ECL, such as:

   --     Determining criteria for significant increase in credit risk; 
   --     Choosing appropriate models and assumptions for the measurement of ECL; 

-- Establishing the number and relative weightings of forward-looking scenarios for each type of product/market and the associated ECL; and

   --     Establishing groups of similar financial assets for the purposes of measuring ECL. 

The Bank evaluates ECLs for 7 portfolios of audited corporates with overdraft limits, audited corporates without overdraft limits, unaudited corporates with overdraft limits, unaudited corporates without overdraft limits, SMEs with limits, SMEs without limits and Retail loans.

The guiding principle of the Expected Credit Loss evaluation is to reflect the general pattern of deterioration or improvement in the credit quality of financial instruments and allocate commensurate

loss provisions. Under the general approach, there are two measurement bases:

-- 12-month ECLs (Stage 1 ECLs) that is evaluated for all financial instruments with no significant deterioration in credit quality since initial recognition.

-- Lifetime ECLs (Stages 2 and 3 ECLs) that is evaluated for financial instruments for which significant increase in credit risk or default has occurred on an individual or collective basis.

Probability of Default (PD)

The Bank defines Probability of Default as the likelihood that a borrower will fail to meet their contractual obligations in the future. The Bank's PD models have been built using historical credit default experience, present credit information as well as forward looking factors which affect the capacity of borrowers to meet their contractual obligations. The Bank used the logistic regression approach to construct PD models for Corporate, SME, Retail and Treasury Bills portfolios while the Merton model was adopted for Interbank Placements. The PD models are used at entity level to evaluate 12-month PDs for Day 1 losses and for financial instruments with no significant deterioration in credit risk since initial recognition, whilst lifetime PD is used for financial instruments for which significant increase in credit risk or default has occurred. 12-month PDs are derived using borrower present risk characteristics while lifetime PDs are derived using a combination of 12-month PDs, present borrower behaviour and forward looking macroeconomic factors.

Exposure at Default (EAD)

The Bank defines Exposure at Default as an estimation of the extent to which the Bank will be exposed to a counterparty in the event of a default. The Bank's EAD models have been built using historical experience of debt instruments that defaulted. The Bank used the linear regression approach to construct EAD models for Corporate, SME and Retail portfolios. For TBs and Interbank Placements, the Bank took a conservative approach of considering the full outstanding balance as the EAD at any given point in the lifetime of an instrument. The Bank's EAD models that use Credit Conversion Factors (CCFs) are applied on fully drawn down instruments while models that use Loan Equivalents (LEQs) are applied on partly drawn instruments. The EAD models are used at entity level to evaluate the proportion of the exposure that will be outstanding at the point of default.

Loss Given Default (LGD)

The Bank defines Loss Given Default as an estimate of the ultimate credit loss in the event of a default. The Bank's LGD models were built using historical experience of defaulted debt instruments and observed recoveries. The Bank used the linear regression approach to construct LGD models for Corporate, SME and Retail portfolios. For Treasury Bills and Interbank Placements, the Bank took a conservative approach of taking a fixed 100% as the LGD at any given point in the lifetime of an instrument. The LGD models are used at portfolio level to evaluate 12-month LGDs for financial instruments with no significant increase in credit risk since initial recognition and lifetime is applied LGDs for financial instruments for which significant increase in credit risk has occurred. 12-month LGDs were derived as historical loss rates while lifetime LGDs were derived using a combination of 12-month LGDs and forward looking macroeconomic factors such as GDP and Inflation.

The Bank's ECL model combines the output of the PD, EAD and LGD and computes an Expected Credit

Loss that takes into account time value of money using the Effective Interest Rates (EIR) and time to maturity of the debt instruments.

The final ECL is a probability-weighted amount that is determined by evaluating three (3) possible outcomes of Best Case ECL, Baseline Case ECL, and Worst Case ECL. The Bank has modelled these three cases in such a way that the Best Case represents scenario of lower than market average default rates, the Base Case represents scenarios of comparable market average default rates and the Worst Case represent scenarios of higher than market average default rates.

3.12.2 Regulatory guidelines and International Financial Reporting Standards requirements in respect of the Bank's activities

Renegotiated loans and advances

Where possible, the Bank seeks to restructure loans rather than to take possession of collateral. This may involve extending the payment arrangements and the agreement of new loan conditions. Once the terms have been re-negotiated, any impairment is measured using the original effective interest rate (EIR) as calculated before the modification of terms and the loan is no longer considered past due. Management continuously renews re-negotiated loans to ensure that all criteria are met and that future payments are likely to occur. The loans continue to be subject to an individual or collective impairment assessment, calculated using the loans original EIR.

Collateral valuation

The Bank seeks to use collateral, where possible, to mitigate its risks on financial assets. The collateral comes in various forms such as cash, securities, letters of credit/guarantees, real estate, receivables, inventories, other non-financial assets and credit enhancements such as netting agreements. The fair value of collateral is generally assessed, at a minimum, at inception and based on the Bank's quarterly reporting schedule, however, some collateral, for example, cash or securities relating to margining requirements, is valued daily. To the extent possible, the Bank uses active market data for valuing financial assets, held as collateral. Other financial assets which do not have a readily determinable market value are valued using models. Non-financial collateral, such as real estate, is valued based on data provided by third parties such as mortgage brokers, housing price indices, audited financial statements, and other independent sources.

Collateral repossessed

The Bank's policy is to determine whether a repossessed asset is best used for its internal operations or should be sold. Assets determined to be useful for the internal operations are transferred to their relevant asset category at the lower of their repossessed value or the carrying value of the original secured asset. Assets that are determined better to be sold are immediately transferred to assets held for sale at their fair value at the repossession date in line with the Bank's policy.

   4.      INTEREST INCOME 
 
                                    31 December 2018   31 December 2017 
                                                 US$                US$ 
                                   -----------------  ----------------- 
 Loans and advances to banks                 793 220          1 139 233 
                                   -----------------  ----------------- 
 Loans and advances to customers          28 570 221         25 986 567 
                                   -----------------  ----------------- 
 Investment securities                     9 969 737          4 936 131 
                                   -----------------  ----------------- 
                                     ---------------     -------------- 
                                   -----------------  ----------------- 
                                          39 333 178         32 061 931 
                                   -----------------  ----------------- 
                                           =========          ========= 
                                   -----------------  ----------------- 
 
   5.      NON INTEREST INCOME 
   5.1     FEE AND COMMISSION income 
 
                                                      31 December              31 December 
                                                             2018                     2017 
                                                              US$                      US$ 
                                         ------------------------  ----------------------- 
 Retail banking customer fees                          11 107 290                5 718 711 
                                         ------------------------  ----------------------- 
 Corporate banking credit related fees                  2 621 449                1 463 126 
                                         ------------------------  ----------------------- 
 Financial guarantee fees                                 148 518                  222 187 
                                         ------------------------  ----------------------- 
 International banking commissions                        491 279                  546 651 
                                         ------------------------  ----------------------- 
 Digital banking fees                                  14 170 840               10 881 510 
                                         ------------------------  ----------------------- 
                                                    -------------           -------------- 
                                         ------------------------  ----------------------- 
                                                       28 539 376               18 832 185 
                                         ------------------------  ----------------------- 
                                                         ========                ========= 
                                         ------------------------  ----------------------- 
 
   5.2     OTHER income 
 
                                                        31 December                 31 December 
                                                               2018                        2017 
                                                                US$                         US$ 
                                                  -----------------  -------------------------- 
 Trade and other investments fair value 
  adjustments                                                10 154                      35 176 
                                                  -----------------  -------------------------- 
 Loss of disposal of quoted investments                    (15 074)                           - 
                                                  -----------------  -------------------------- 
 Fair value adjustment on investment properties           2 551 436                     302 255 
                                                  -----------------  -------------------------- 
 Profit on disposal of investment properties                567 032                      12 951 
                                                  -----------------  -------------------------- 
 Profit on disposal of property and equipment                22 396                           - 
                                                  -----------------  -------------------------- 
 Rental income                                              365 269                     135 900 
                                                  -----------------  -------------------------- 
 Bad debts recovered                                      1 295 428                     580 295 
                                                  -----------------  -------------------------- 
 Loss on disposal of non-current asset 
  held for sale                                                   -                    (75 300) 
                                                  -----------------  -------------------------- 
 Other net operating income                                 171 806                     137 724 
                                                  -----------------  -------------------------- 
                                                     --------------               ------------- 
                                                  -----------------  -------------------------- 
                                                          4 968 447                   1 129 001 
                                                  -----------------  -------------------------- 
                                                           ========                    ======== 
                                                  -----------------  -------------------------- 
 
   6.      Operating EXPITURE 
 
                                                  31 December      31 December 
                                                         2018             2017 
                                                          US$              US$ 
                                              ---------------  --------------- 
 The operating profit is after recognising 
  the following: 
                                              ---------------  --------------- 
 Administration costs                              15 963 308       11 866 111 
                                              ---------------  --------------- 
 Audit fees: 
                                              ---------------  --------------- 
  -Current year                                        98 991           35 938 
                                              ---------------  --------------- 
  -Prior year                                         111 406           95 456 
                                              ---------------  --------------- 
 Impairment reversal on land and buildings*          (76 661)         (89 660) 
                                              ---------------  --------------- 
 Depreciation                                       1 370 312        1 136 810 
                                              ---------------  --------------- 
 Amortisation of intangible assets                    879 376          832 567 
                                              ---------------  --------------- 
 Directors' remuneration                              971 121          719 318 
                                              ---------------  --------------- 
   -Fees                                              219 246          233 102 
                                              ---------------  --------------- 
  -Expenses                                            17 364            9 393 
                                              ---------------  --------------- 
   -Services rendered                                 734 511          476 823 
                                              ---------------  --------------- 
 
 Staff costs - salaries, allowances and 
  related costs                                    15 402 575       12 981 807 
                                              ---------------  --------------- 
                                               --------------   -------------- 
                                              ---------------  --------------- 
                                                   34 720 428       27 578 347 
                                              ---------------  --------------- 
                                                    =========         ======== 
                                              ---------------  --------------- 
 

*The impairment reversal on land and building arose due to fair value changes on the Group's land and buildings

measured using the revaluation model.

   7.      taxation 
 
                         31 December     31 December 
                                2018            2017 
 Income tax expense              US$             US$ 
                      --------------  -------------- 
 Current tax               4 433 942       1 930 812 
                      --------------  -------------- 
 Deferred tax              1 488 132       1 029 133 
                      --------------  -------------- 
 Capital gains tax                 -         118 919 
                      --------------  -------------- 
                       -------------   ------------- 
                      --------------  -------------- 
                           5 922 074       3 078 864 
                      --------------  -------------- 
                            ========        ======== 
                      --------------  -------------- 
 
   8.      IMPAIRMENT LOSSES ON LOANS AND ADVANCES 

Impairment losses are calculated by estimating the expected credit losses for all financial assets (including loan commitments and guarantees) measured at amortised cost or fair value through OCI (FVOCI). ECLs arising from financial assets measured at armotised cost and at FVOCI are recognized in profit or loss. However, the loss allowance in respect of assets measured at FVOCI shall not reduce the carrying amount of the financial asset in the Statement of Financial Position but will be accumulated in a reserve through OCI. The aggregate impairment losses which are made during the year are dealt with as per paragraph 8.3.

         8.1   Lifetime expected credit losses 

Lifetime ECLs are recognized where the Bank's counterparty to a financial asset has been classified as default as defined in the Bank's accounting and credit policies. Financial assets are written off against lifetime ECL provisions once the probability of recovering any significant amounts becomes remote.

         8.2   Twelve month expected credit losses 

The 12-Month ECL relates to the day 1 impairment provisions on financial assets as well as financial assets which are considered not to have had a significant increase in credit risk as defined in the Bank's accounting and credit policies.

   8.3   Regulatory guidelines and International Financial Reporting Standards requirements 

The Banking Regulations 2000 gives guidance on provisioning for doubtful debts and stipulates certain minimum percentages to be applied to the respective categories of the loan book.

IFRS 9, Financial Instruments IFRS 9, prescribes the provisioning for impairment losses based on the expected credit losses from the expected cash flows from financial assets held by the bank, including guarantees and loan commitments.

The two prescriptions are likely to give different results. The Group has taken the view that where the IFRS 9 charge is less than the amount provided for in the Banking Regulations, the difference is recognised directly in equity as a transfer from retained earnings to a regulatory reserve and where it is more, the full amount will be charged to the profit or loss.

   8.4    Suspended interest 

Interest on loans and advances is accrued to income until such time as reasonable doubt exists about its collectability, thereafter and until all or part of the loan is written off, interest continues to accrue on customers' accounts, but is not included in income. Such suspended interest is deducted from loans and advances in the statement of financial position. This policy meets the requirements of the Banking Regulations 2000 issued by the RBZ. Impairment losses are applied to write off loans and advances in part or in whole when they are considered partly or wholly irrecoverable. The aggregate impairment losses which are made during the year are dealt with as per paragraph 8.3.

   9.      EARNINGS PER SHARE 

Basic earnings per share is calculated by dividing the profit for the year attributable to ordinary equity holders of NMBZ Holdings Limited by the weighted average number of ordinary shares outstanding during the year.

Diluted earnings per share is calculated by dividing the profit attributable to ordinary equity holders of NMBZ Holdings Limited adjusted for the after tax effect of: (a) any dividends or other items related to dilutive potential ordinary shares deducted in arriving at profit or loss attributable to ordinary equity holders of the parent entity; (b) any interest recognised in the period related to dilutive potential ordinary shares; (c) any other changes in income or expense that would result from the conversion of the dilutive potential ordinary shares; by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.

   9.1    Earnings 
 
                        31 December 2018                  31 December 2017 
                                     US$                               US$ 
                       -----------------  -------------------------------- 
 Profit for the year          21 221 201                         9 938 826 
                       -----------------  -------------------------------- 
                                ========                           ======= 
                       -----------------  -------------------------------- 
 
   9.2    Number of shares 

9.2.1 Basic earnings per share

 
                                        31 December 2018   31 December 2017 
 Weighted average number of ordinary 
  shares for 
  basic earnings per share                   390 959 988        384 746 646 
                                       -----------------  ----------------- 
 

9.2.2 Diluted earnings per share

 
                                   31 December 2018   31 December 2017 
 Number of shares at beginning 
  of period                             384 974 542        384 427 351 
                                  -----------------  ----------------- 
 Effect of dilution: 
                                  -----------------  ----------------- 
 Share options exercised                          -            547 191 
                                  -----------------  ----------------- 
 Shares issued - scrip dividend           7 980 654                  - 
                                  -----------------  ----------------- 
                                     --------------    --------------- 
                                  -----------------  ----------------- 
                                        392 955 196        384 974 542 
                                  -----------------  ----------------- 
 Share options approved but not 
  granted                                23 942 639         23 942 639 
                                  -----------------  ----------------- 
                                    ---------------    --------------- 
                                  -----------------  ----------------- 
                                        416 897 835        408 917 181 
                                  -----------------  ----------------- 
                                          =========          ========= 
                                  -----------------  ----------------- 
 
   9.3    Earnings per share (US cents) 
 
            31 December 2018   31 December 2017 
 Basic                  5.43               2.58 
           -----------------  ----------------- 
 Diluted                5.09               2.43 
           -----------------  ----------------- 
 
   10.    SHARE CAPITAL 

10.1 Authorised

 
                            31 December        31 December   31 December    31 December 
                                   2018               2017          2018           2017 
                       Shares (million)   Shares (million)           US$            US$ 
                      -----------------  -----------------  ------------  ------------- 
 Ordinary shares of 
  US$0.00028 
  each                              600                600       168 000        168 000 
                      -----------------  -----------------  ------------  ------------- 
                                   ====               ====        ======         ====== 
                      -----------------  -----------------  ------------  ------------- 
 
   10.2     Issued and fully paid 

10.2.1 Ordinary shares

 
                         31 December        31 December          31 December          31 December 
                                2018               2017                 2018                 2017 
                    Shares (million)   Shares (million)                  US$                  US$ 
                   -----------------  -----------------  -------------------  ------------------- 
 
 Ordinary shares                 290                282               80 975               78 751 
                   -----------------  -----------------  -------------------  ------------------- 
                                ====               ====                =====                ===== 
                   -----------------  -----------------  -------------------  ------------------- 
 

10.2.2 Redeemable ordinary shares

 
                              31 December        31 December          31 December         31 December 
                                     2018               2017                 2018                2017 
                         Shares (million)   Shares (million)                  US$                 US$ 
                       ------------------  -----------------  -------------------  ------------------ 
 
 Redeemable ordinary 
  shares                              104                104               29 040              29 040 
                       ------------------  -----------------  -------------------  ------------------ 
                                      ===                ===                =====               ===== 
                       ------------------  -----------------  -------------------  ------------------ 
 

A total of 7 943 318 ordinary shares were issued to existing shareholders in March 2018 as scrip dividend.

Of the unissued ordinary shares of 206 million shares (2017 - 214 million), options which may be granted in terms of the 2012 ESOS amount to 23 942 639 (2017 - 23 942 639). No share options were exercised from the Scheme as at 31 December 2018. The share option scheme expires in 2022.

Subject to the provisions of section 183 of the Companies Act (Chapter 24:03) of Zimbabwe, the

unissued       shares are under the control of the directors. 
   11.       REDEEMABLE ORDINARY SHARES 
 
                                31 December 2018      31 December 
                                                             2017 
                                             US$              US$ 
                               -----------------  --------------- 
 
 Nominal value (note 10.2.2)              29 040           29 040 
                               -----------------  --------------- 
 Share premium                        14 306 213       14 306 213 
                               -----------------  --------------- 
                                  --------------   -------------- 
                               -----------------  --------------- 
                                      14 335 253       14 335 253 
                               -----------------  --------------- 
                                        ========         ======== 
                               -----------------  --------------- 
 

On 30 June 2013, the Group received US$14 831 145 capital from Nederlandse Financierings-Maatschappij Voor Ontiwikkelingslanden N.V. (FMO), Norwegian Investment Fund for Developing Countries (Norfund) and AfricInvest Financial Sector Holdings (AfricInvest) who were allocated 34 571 429 shares each (total 103 714 287) for individually investing US$4 943 715. This amount, net of share issue expenses, was used to recapitalise the Bank in order to contribute towards the minimum capital requirements set by the Reserve Bank of Zimbabwe of US$100 million by 31 December 2020. FMO and Norfund came together with Rabobank to form ARISE which is a development finance institution primarily focusing on investing in African financial institutions to support and enhance financial service delivery in Africa.

NMBZ Holdings Limited (NMBZ) entered into a share buy-back agreement with Norfund, FMO and AfricInvest, where these three strategic investors have a right at their own discretion at any time after the 5(th) anniversary (30 June 2018) but before the 9(th) anniversary (30 June 2022) of its first subscription date, to request NMBZ to buy back all or part of its NMBZ shares at a price to be determined using the agreed terms as entailed in the share buy-back agreement. It is a condition precedent that at any point when the share buy-back is being considered, the proceeds used to finance the buy-back should come from the distributable reserves which are over and above the minimum regulatory capital requirements. Further, no buy-back option can be exercised by any investor after the 9(th) anniversary (30 June 2022) of the effective date.

The share buy-back agreement creates a potential obligation for NMBZ Holdings Limited to purchase its own instruments. The shares issued gave rise to a potential financial liability and are classified as redeemable ordinary shares.

   12.       SUBORDINATED TERM LOAN 
 
                                      31 December 2018               31 December 
                                                                            2017 
                                                   US$                       US$ 
                        ------------------------------  ------------------------ 
 
 At 1 January                                1 415 904                 1 415 490 
                        ------------------------------  ------------------------ 
 Interest capitalised                          171 483                   165 345 
                        ------------------------------  ------------------------ 
 Interest paid                                (81 740)                 (164 931) 
                        ------------------------------  ------------------------ 
                                         -------------            -------------- 
                        ------------------------------  ------------------------ 
                                             1 505 647                 1 415 904 
                        ------------------------------  ------------------------ 
                                              ========                  ======== 
                        ------------------------------  ------------------------ 
 

In 2013, the Group received a subordinated term loan amounting to US$1.4 million from a Development Financial Institution which attracts an interest rate of LIBOR plus 10% and has a seven year maturity date (13 June 2020) from the first disbursement date.

The above liability would, in the event of the winding up of the issuer, be subordinated to the claims of depositors and all other creditors of the issuer. The Group defaulted on a principal repayments with respect to this subordinated loan during the year ended 31 December 2018 as a result of the prevailing nostro funding challenges affecting the economy. However, there were no defaults on interest payments. There was a breach to the financial covenant regarding to the aggregate large exposure ratio which stood at 25.12% instead of a maximum of 25%. The Group will apply for a waiver of the non-compliant ratio by 31 March 2019.

   13.          DepositS and other LIABILITIES 
   13.1        Deposits and other liabilities 
 
                                                  31 December        31 December 
                                                         2018               2017 
                                                          US$                US$ 
                                           ------------------  ----------------- 
 Deposits from banks and other financial 
  institutions**                                   74 110 527         17 213 617 
                                           ------------------  ----------------- 
 Current and deposit accounts from 
  customers*                                      360 847 422        331 742 768 
                                           ------------------  ----------------- 
                                            -----------------   ---------------- 
                                           ------------------  ----------------- 
 Total deposits                                   434 957 949        348 956 385 
                                           ------------------  ----------------- 
 Trade and other payables*                         12 147 334          7 956 124 
                                           ------------------  ----------------- 
                                            -----------------   ---------------- 
                                           ------------------  ----------------- 
                                                  447 105 283        356 912 509 
                                           ------------------  ----------------- 
                                                   ==========          ========= 
                                           ------------------  ----------------- 
 

*The carrying amounts of current and deposit accounts and trade and other payables approximate the

related fair values due to their short term nature.

** Included in deposits from banks and other financial institutions are loan balances of US$8 244 147,

US$4 129 484 and US$1 043 957 due to Nederlandse Financierings-Maatschappij Voor Ontiwikkelingslanden (FMO), Swedfund and Societie de Promotion de Paticipation Pour la Cooperation Economique SA (Proparco) respectively. The carrying amounts of deposits from other banks and other financial institutions approximate the related fair values. The Group has not had any defaults on the principal and interest with respect to these loans during the period ended 31 December 2018. However, there were breaches to the financial covenants with respect to the following ratios :-

-- Non-performing loans ratio - 7.43% (instead of a maximum of 7%); and

-- Aggregate large exposure ratio - 25.12% instead of a maximum of 25%.

     13.2     Maturity analysis 
 
                       31 December 2018   31 December 2017 
                                    US$                US$ 
                      -----------------  ----------------- 
 Less than 1 month          374 121 777        279 698 410 
                      -----------------  ----------------- 
 1 to 3 months               25 835 037         37 746 638 
                      -----------------  ----------------- 
 3 to 6 months                7 515 300          2 472 911 
                      -----------------  ----------------- 
 6 months to 1 year          11 781 062         11 751 881 
                      -----------------  ----------------- 
 1 to 5 years                15 512 943         17 094 715 
                      -----------------  ----------------- 
 Over 5 years                   191 830            191 830 
                      -----------------  ----------------- 
                        ---------------   ---------------- 
                      -----------------  ----------------- 
                            434 957 949        348 956 385 
                      -----------------  ----------------- 
                              =========         ========== 
                      -----------------  ----------------- 
 
   13.3   Sectoral analysis of deposits 
 
                                          31 December                    31 December 
                                                 2018                           2017 
                                                  US$          %                 US$        % 
                                    -----------------  ---------  ------------------  ------- 
 
 Agriculture                               11 005 126          2          10 034 242        3 
                                    -----------------  ---------  ------------------  ------- 
 Banks and other financial 
  institutions                             74 110 527         17          17 213 617        5 
                                    -----------------  ---------  ------------------  ------- 
 Distribution                              42 030 992         10          38 540 570       11 
                                    -----------------  ---------  ------------------  ------- 
 Individuals                               27 742 789          6          29 133 379        8 
                                    -----------------  ---------  ------------------  ------- 
 Manufacturing                             69 798 745         16          62 426 525       18 
                                    -----------------  ---------  ------------------  ------- 
 Mining companies                           9 077 534          2           8 086 319        2 
                                    -----------------  ---------  ------------------  ------- 
 Municipalities and parastatals            28 945 864          7          25 633 695        7 
                                    -----------------  ---------  ------------------  ------- 
 Other deposits                            59 781 285         14          57 598 053       17 
                                    -----------------  ---------  ------------------  ------- 
 Services                                  98 028 025         23          87 501 920       25 
                                    -----------------  ---------  ------------------  ------- 
 Transport and telecommunications          14 437 062          3          12 788 065        4 
                                    -----------------  ---------  ------------------  ------- 
                                     ----------------   --------   -----------------   ------ 
                                    -----------------  ---------  ------------------  ------- 
                                          434 957 949        100         348 956 385      100 
                                    -----------------  ---------  ------------------  ------- 
                                            =========      =====          ==========      === 
                                    -----------------  ---------  ------------------  ------- 
 
   14.     FINANCIAL INSTRUMENTS 
   14.1   Investment securities 
 
                                Note   31 December 2018   31 December 2017 
                                                    US$                US$ 
                               -----  -----------------  ----------------- 
 Held to maturity                                     -         13 744 715 
                               -----  -----------------  ----------------- 
 Loans and receivables                                -         78 500 710 
                               -----  -----------------  ----------------- 
 Armotised cost - Gross                     117 693 824                  - 
                               -----  -----------------  ----------------- 
 Impairment allowance           16.3          (444 390)                  - 
                               -----  -----------------  ----------------- 
 -ECL at 1 January 2018                       (374 082)                  - 
                               -----  -----------------  ----------------- 
 -ECL charged thought profit                   (70 308)                  - 
  and loss 
                               -----  -----------------  ----------------- 
                                        ---------------    --------------- 
                               -----  -----------------  ----------------- 
                                            117 249 434         92 245 425 
                               -----  -----------------  ----------------- 
                                              =========          ========= 
                               -----  -----------------  ----------------- 
 

The Group holds treasury bills and government bonds amounting to US$117 693 825 with interest rates ranging from 2% to 10%. The Treasury Bills are measured at amortised cost in line with the Bank's business model to collect contractual cashflows and the contractual terms are such that the financial assets give rise to cashflows that are solely payments of principal and interest. Of the total Treasury Bills balance of US$117 693 825, a total of US$85 415 837 had been pledged as security against interbank borrowings.

   14.2    Maturity analysis of investment securities held to maturity 
 
                                   31 December 2018   31 December 2017 
                                                US$                US$ 
                                  -----------------  ----------------- 
 Less than 1 month                                -                  - 
                                  -----------------  ----------------- 
 1 to 3 months                              142 245                  - 
                                  -----------------  ----------------- 
 3 to 6 months                            6 133 977                  - 
                                  -----------------  ----------------- 
 6 months to 1 year                      43 004 020                  - 
                                  -----------------  ----------------- 
 1 year to 5 years                       57 031 351                  - 
                                  -----------------  ----------------- 
 Over 5 years                            11 382 231                  - 
                                  -----------------  ----------------- 
                                     --------------     -------------- 
                                  -----------------  ----------------- 
                                        117 693 824                  - 
                                  -----------------  ----------------- 
 Expected Credit loss allowance           (444 390) 
                                  -----------------  ----------------- 
                                     --------------     -------------- 
                                  -----------------  ----------------- 
                                        117 249 434                  - 
                                  -----------------  ----------------- 
                                           ========           ======== 
                                  -----------------  ----------------- 
 
    14.3   Maturity analysis of investment securities - loans and receivables 
 
                         31 December 2018   31 December 2017 
                                      US$                US$ 
                      -------------------  ----------------- 
 Less than 1 month                      -                  - 
                      -------------------  ----------------- 
 1 to 3 months                          -                  - 
                      -------------------  ----------------- 
 3 to 6 months                          -                  - 
                      -------------------  ----------------- 
 6 months to 1 year                     -          2 424 461 
                      -------------------  ----------------- 
 1 year to 5 years                      -                  - 
                      -------------------  ----------------- 
 Over 5 years                           -         11 320 254 
                      -------------------  ----------------- 
                        -----------------     -------------- 
                      -------------------  ----------------- 
                                        -         13 744 715 
 ----------------------------------------  ----------------- 
                               ==========          ========= 
 ----------------------------------------  ----------------- 
 

14.4 Maturity analysis of investment securities - loans and receivables

 
                         31 December 2018   31 December 2017 
                                      US$                US$ 
                      -------------------  ----------------- 
 Less than 1 month                      -          6 150 000 
                      -------------------  ----------------- 
 1 to 3 months                          -            142 246 
                      -------------------  ----------------- 
 3 to 6 months                          -            722 972 
                      -------------------  ----------------- 
 6 months to 1 year                     -          6 138 889 
                      -------------------  ----------------- 
 1 year to 5 years                      -         65 346 603 
                      -------------------  ----------------- 
                        -----------------     -------------- 
                      -------------------  ----------------- 
                                        -         78 500 710 
 ----------------------------------------  ----------------- 
                               ==========           ======== 
 ----------------------------------------  ----------------- 
 
 

14.5 Fair values of financial instruments

The fair values of financial assets and financial liabilities that are traded in active markets are based on quoted market prices or dealer price quotations. For all other financial instruments, the Group determines fair values using other valuation techniques.

For financial instruments that trade infrequently and have little price transparency, fair value is less objective, and requires varying degrees of judgement depending on liquidity, concentration, uncertainty of market factors, pricing assumptions and other risks affecting the specific instrument.

Valuation models

The Group measures fair values using the following fair value hierarchy, which reflects the significance of the inputs used in making the measurements.

-- Level 1: inputs that are quoted market prices (unadjusted) in active markets for identical instruments.

-- Level 2: inputs other than quoted prices included within Level 1 that are observable either directly (i.e. as prices) or indirectly (i.e. derived from prices). This category includes instruments valued using: quoted market prices in active markets for similar instruments; quoted prices for identical or similar instruments in markets that are considered less than active; or other valuation techniques in which all significant inputs are directly or indirectly observable from market data.

-- Level 3: inputs that are unobservable. This category includes all instruments for which the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument's valuation. This category includes instruments that are valued based on quoted prices for similar instruments for which significant unobservable adjustments or assumptions are required to reflect differences between the instruments.

The objective of valuation techniques is to arrive at a fair value measurement that reflects the price that would be received to sell the asset or paid to transfer the liability in an orderly transaction between market participants at the measurement date.

14.5.1 Financial instruments measured at fair value - fair value hierarchy

 
                          31 Dec 2018         Level 1       Level 2            Level 3 
                                  US$             US$           US$                US$ 
                      ---------------  --------------  ------------  ----------------- 
 Trade investments            112 501               -             -            112 501 
                      ---------------  --------------  ------------  ----------------- 
 Quoted investments                 -               -             -                  - 
                      ---------------  --------------  ------------  ----------------- 
                       --------------   -------------   -----------   ---------------- 
                      ---------------  --------------  ------------  ----------------- 
                              112 501               -             -            112 501 
                      ---------------  --------------  ------------  ----------------- 
                             ========        ========       =======        =========== 
                      ---------------  --------------  ------------  ----------------- 
 
 
                          31 Dec 2017         Level 1       Level 2            Level 3 
                                  US$             US$           US$                US$ 
                      ---------------  --------------  ------------  ----------------- 
 Trade investments            102 347               -             -            102 347 
                      ---------------  --------------  ------------  ----------------- 
 Quoted investments            15 533          15 533             -                  - 
                      ---------------  --------------  ------------  ----------------- 
                       --------------   -------------   -----------   ---------------- 
                      ---------------  --------------  ------------  ----------------- 
                              117 880          15 533             -            102 347 
                      ---------------  --------------  ------------  ----------------- 
                             ========        ========       =======          ========= 
                      ---------------  --------------  ------------  ----------------- 
 

During the reporting periods ended 31 December 2018 and 31 December 2017, there were no transfers between Level 1 and Level 2 fair value measurements, and no transfers into and out of Level 3 fair value measurements.

Level 3 fair value measurements

Reconciliation

31 December 2018

 
                                      Trade investments 
                                                    US$ 
                                     ------------------ 
 Balance at 1 January                           102 347 
                                     ------------------ 
 Gain recognised in profit or loss               10 154 
                                     ------------------ 
                                            ----------- 
                                     ------------------ 
 Balance at 31 December                         112 501 
                                     ------------------ 
                                                ======= 
                                     ------------------ 
 

31 December 2017

 
                                      Trade investments 
                                                    US$ 
                                     ------------------ 
 Balance at 1 January                            88 930 
                                     ------------------ 
 Gain recognised in profit or loss               13 417 
                                     ------------------ 
                                            ----------- 
                                     ------------------ 
 Balance at 31 December                         102 347 
                                     ------------------ 
                                                ======= 
                                     ------------------ 
 

14.5.2 Financial instruments not measured at fair value

Below is a list of the Group's financial investments not measured at fair value, but whose carrying amounts approximate fair value.

31 December 2018

 
                                          Total carrying 
                                                  amount 
 Assets                                              US$ 
                                      ------------------ 
 Cash and cash equivalents                   112 440 912 
                                      ------------------ 
 Loans, advances and other accounts          254 202 945 
                                      ------------------ 
 Investment securities                       117 249 434 
                                      ------------------ 
                                       ----------------- 
                                      ------------------ 
                                             483 893 291 
                                      ------------------ 
                                              ========== 
                                      ------------------ 
 
 Liabilities 
                                      ------------------ 
 Deposits and other liabilities              447 105 283 
                                      ------------------ 
                                       ----------------- 
                                      ------------------ 
                                             447 105 283 
                                      ------------------ 
                                              ========== 
                                      ------------------ 
 

31 December 2017

 
                                       Total carrying 
                                        amount 
 Assets                                              US$ 
                                      ------------------ 
 Cash and cash equivalents                    89 553 202 
                                      ------------------ 
 Loans, advances and other accounts          210 483 221 
                                      ------------------ 
 Investment securities                        92 245 425 
                                      ------------------ 
                                       ----------------- 
                                      ------------------ 
                                             392 281 848 
                                      ------------------ 
                                              ========== 
                                      ------------------ 
 Liabilities 
                                      ------------------ 
 Deposits and other liabilities              356 912 509 
                                      ------------------ 
                                       ----------------- 
                                      ------------------ 
                                             356 912 509 
                                      ------------------ 
                                              ========== 
                                      ------------------ 
 

The carrying amount of financial assets and liabilities not measured at fair approximate fair value.

   15.           CASH AND CASH EQUIVALENTS 
 
                                          31 December 2018      31 December 
                                                                       2017 
                                   Note                US$              US$ 
                                  -----  -----------------  --------------- 
 Balances with the Central 
  Bank                                          89 081 480       79 876 937 
                                  -----  -----------------  --------------- 
 Current, nostro accounts* 
  and cash                                      13 426 360        6 676 265 
                                  -----  -----------------  --------------- 
 Interbank placements (see 
  below)                                        10 000 000        3 000 000 
                                  -----  -----------------  --------------- 
 Expected credit loss allowance                   (66 928)                - 
  (see below) 
                                  -----  -----------------  --------------- 
                                            --------------   -------------- 
                                  -----  -----------------  --------------- 
                                               112 440 912       89 553 202 
                                  -----  -----------------  --------------- 
                                                 =========        ========= 
                                  -----  -----------------  --------------- 
 
 Interbank placements                     31 December 2018      31 December 
                                                                       2017 
                                  -----  -----------------  --------------- 
                                                       US$              US$ 
                                  -----  -----------------  --------------- 
 Interbank placements                           10 000 000        3 000 000 
                                  -----  -----------------  --------------- 
 Expected Credit Loss allowance 
  - Stage 1                        16.3           (66 928)                - 
                                  -----  -----------------  --------------- 
 -ECL charged at 1 January                        (26 770)                - 
  2018 
                                  -----  -----------------  --------------- 
 -ECL charged through profit                      (40 158)                - 
  and loss 
                                  -----  -----------------  --------------- 
                                             -------------     ------------ 
                                  -----  -----------------  --------------- 
                                                 9 933 072        3 000 000 
                                  -----  -----------------  --------------- 
                                                  ========          ======= 
                                  -----  -----------------  --------------- 
 

*Nostro accounts are foreign domiciled bank accounts operated by the Bank for the facilitation of offshore transactions on behalf of clients.

Balances with the Central Bank, other banks and cash are used to facilitate customer transactions which include

payments and cash withdrawals. During the year the Central Bank through Exchange Control Operational

Guide 8 (ECOGAD8) introduced prioritisation criteria which have to be followed when making foreign

payments on behalf of customers. After prioritisation, foreign payments are then made subject to availability of bank balances with foreign correspondent banks, resulting in possible delay of payment of telegraphic transfers. However, no delay is expected in the settlement of local transactions through the Real Time Gross Settlement (RTGS) system. Of the cash and cash equivalents balance an amount of US$526 316 was pledged to Proparco as collateral for offshore lines of credit.

Expected credit loss (ECL) is not significant on balances with the Central Bank and Nostro accounts.

    16.1    Total loans, advances and other assets 

16.1.1 Loans, advances and other assets

 
                                     31 December       31 December 
                                            2018              2017 
                                             US$               US$ 
                                ----------------  ---------------- 
 Fixed term loans - Corporate         58 036 580        54 435 318 
                                ----------------  ---------------- 
 Fixed term loans - Retail            77 580 291        65 227 917 
                                ----------------  ---------------- 
 Mortgages                            61 390 107        37 295 987 
                                ----------------  ---------------- 
 Overdrafts                           50 946 710        47 374 705 
                                ----------------  ---------------- 
                                 ---------------   --------------- 
                                ----------------  ---------------- 
                                     247 953 688       204 333 927 
                                ----------------  ---------------- 
 Other assets                          6 249 257         6 149 294 
                                ----------------  ---------------- 
                                  --------------    -------------- 
                                ----------------  ---------------- 
                                     254 202 945       210 483 221 
                                ----------------  ---------------- 
                                       =========         ========= 
                                ----------------  ---------------- 
 
    16.1.2   Maturity analysis 
 
                                                     31 December        31 December 
                                                            2018               2017 
                                                             US$                US$ 
                                                ----------------  ----------------- 
 Less than one month                                  67 413 196         71 137 746 
                                                ----------------  ----------------- 
 1 to 3 months                                        19 263 549         10 680 845 
                                                ----------------  ----------------- 
 3 to 6 months                                         6 828 594          2 954 340 
                                                ----------------  ----------------- 
 6 months to 1 year                                   24 887 015         11 024 220 
                                                ----------------  ----------------- 
 1 to 5 years                                         94 242 902         80 804 577 
                                                ----------------  ----------------- 
 Over 5 years                                         49 699 770         34 403 690 
                                                ----------------  ----------------- 
                                                 ---------------   ---------------- 
                                                ----------------  ----------------- 
 Total advances                                      262 335 026        211 005 418 
                                                ----------------  ----------------- 
 Allowances for impairment losses on loans 
  and advances                                      (13 300 688)        (5 445 968) 
                                                ----------------  ----------------- 
    -IAS 39 impairment loss allowance at 
     1 January                                       (5 445 968)        (8 305 117) 
                                                ----------------  ----------------- 
    -ECL recognized through retained earnings        (8 175 135)                  - 
                                                ----------------  ----------------- 
    -ECL charged through profit and loss             (3 901 487)                  - 
                                                ----------------  ----------------- 
    -IAS 39 charge through profit and loss                     -        (3 853 149) 
                                                ----------------  ----------------- 
 Bad debts written off                                 4 221 902          6 712 298 
                                                ----------------  ----------------- 
 Suspended interest on credit impaired 
  financial assets                                   (1 080 650)        (1 225 523) 
                                                ----------------  ----------------- 
                                                  --------------      ------------- 
                                                ----------------  ----------------- 
                                                     247 953 688        204 333 927 
                                                ----------------  ----------------- 
 Other assets                                          6 249 257          6 149 294 
                                                ----------------  ----------------- 
                                                 ---------------    --------------- 
                                                ----------------  ----------------- 
                                                     254 202 945        210 483 221 
                                                ----------------  ----------------- 
                                                       =========          ========= 
                                                ----------------  ----------------- 
 
   16.2    Sectoral analysis of utilizations 
 
                                       31 December          %   31 December 2017          % 
                                              2018 
 
 Agriculture and horticulture           37 386 857         14         28 631 460         14 
                                ------------------  ---------  -----------------  --------- 
 Conglomerates                          10 692 402          4          9 210 926          4 
                                ------------------  ---------  -----------------  --------- 
 Distribution                           28 902 108         11         28 737 726         14 
                                ------------------  ---------  -----------------  --------- 
 Food & beverages                        6 304 863          3         10 417 745          5 
                                ------------------  ---------  -----------------  --------- 
 Individuals                           100 512 291         38         82 589 355         39 
                                ------------------  ---------  -----------------  --------- 
 Manufacturing                           8 731 095          3          8 565 178          4 
                                ------------------  ---------  -----------------  --------- 
 Mining                                    703 294          -            736 466          - 
                                ------------------  ---------  -----------------  --------- 
 Services                               69 102 116         27         42 216 562         20 
                                ------------------  ---------  -----------------  --------- 
                                 -----------------   --------    ---------------   -------- 
                                ------------------  ---------  -----------------  --------- 
                                       262 335 026        100        211 005 418        100 
                                ------------------  ---------  -----------------  --------- 
                                        ==========      =====          =========      ===== 
                                ------------------  ---------  -----------------  --------- 
 

The material concentration of loans and advances is with individuals at 38% (2017 - 39%) and services sector at 27% (2017 - 20%).

16.3 Impairment analysis of financial assets measured at amortised

 
                                               Stage 1                Stage 2              Stage 3               Total 
 Gross carrying amount at 1                                                                                    343 389 
  January 2018                             307 212 628             19 328 471           16 848 747                 846 
                                 ---------------------  ---------------------  -------------------  ------------------ 
 
 Transfers                                 (9 071 715)            (2 794 360)           11 866 075                   - 
                                 ---------------------  ---------------------  -------------------  ------------------ 
 -to 12 month ECL                            1 422 126            (1 096 550)            (325 576)                   - 
                                 ---------------------  ---------------------  -------------------  ------------------ 
 -to lifetime ECL not credit 
  impaired                                 (9 561 225)             10 357 548            (796 323)                   - 
                                 ---------------------  ---------------------  -------------------  ------------------ 
 -to lifetime ECL credit 
  impaired                                   (932 616)           (12 055 358)           12 987 974                   - 
                                 ---------------------  ---------------------  -------------------  ------------------ 
 
 Net movement in financial 
  assets                                    74 121 127              8 583 823          (9 235 272)          73 469 678 
                                 ---------------------  ---------------------  -------------------  ------------------ 
                                  --------------------    -------------------    -----------------    ---------------- 
                                 ---------------------  ---------------------  -------------------  ------------------ 
 Balance as at 31 December                                                                                     416 859 
  2018                                     372 262 040             25 117 934           19 479 550                 524 
                                 ---------------------  ---------------------  -------------------  ------------------ 
                                          ============            ===========           ==========          ========== 
                                 ---------------------  ---------------------  -------------------  ------------------ 
 Loss allowance analysis 
                                 ---------------------  ---------------------  -------------------  ------------------ 
 At 1 January 2018 (IAS 39 
  Provisions)                                        -                      -                    -           5 445 968 
                                 ---------------------  ---------------------  -------------------  ------------------ 
 Adjustment on initial 
  application 
  of IFRS 9*                                         -                      -                    -           8 575 988 
                                 ---------------------  ---------------------  -------------------  ------------------ 
 ECL on 1 January 2018                       9 075 323              1 335 253            3 611 380          14 021 956 
                                 ---------------------  ---------------------  -------------------  ------------------ 
 -ECL - loans and advances                   8 674 470              1 335 253            3 611 380                   - 
                                 ---------------------  ---------------------  -------------------  ------------------ 
 -ECL - Investment securities                  374 082                      -                    -                   - 
                                 ---------------------  ---------------------  -------------------  ------------------ 
 -ECL - Interbank placements                    26 771                      -                    -                   - 
                                 ---------------------  ---------------------  -------------------  ------------------ 
 
 Transfers                                   (445 983)            (3 253 424)            3 699 407                   - 
                                 ---------------------  ---------------------  -------------------  ------------------ 
 -to 12 month ECL                               30 024               (18 951)             (11 073)                   - 
                                 ---------------------  ---------------------  -------------------  ------------------ 
 -to lifetime ECL not credit 
  impaired                                   (219 448)                356 161            (136 713)                   - 
                                 ---------------------  ---------------------  -------------------  ------------------ 
 -to lifetime ECL credit 
  impaired                                   (256 559)            (3 590 634)            3 847 193                   - 
                                 ---------------------  ---------------------  -------------------  ------------------ 
 
 Net increase/(decrease) in 
  ECL                                        (879 896)              2 771 543            2 120 305           4 011 952 
                                 ---------------------  ---------------------  -------------------  ------------------ 
 Bad debts written off                               -                      -          (4 221 902)         (4 221 902) 
                                 ---------------------  ---------------------  -------------------  ------------------ 
                                  --------------------    -------------------    -----------------    ---------------- 
                                 ---------------------  ---------------------  -------------------  ------------------ 
 Balance as at 31 December 
  2018                                       7 749 444                853 372            5 209 190          13 812 006 
                                 ---------------------  ---------------------  -------------------  ------------------ 
                                           ===========           ============           ==========          ========== 
                                 ---------------------  ---------------------  -------------------  ------------------ 
 Loans and advances                          7 238 126                853 372            5 209 190          13 300 688 
                                 ---------------------  ---------------------  -------------------  ------------------ 
 Investment securities                         444 390                      -                    -             444 390 
                                 ---------------------  ---------------------  -------------------  ------------------ 
 Interbank placements                           66 928                      -                    -              66 928 
                                 ---------------------  ---------------------  -------------------  ------------------ 
                                   -------------------   --------------------   ------------------   ----------------- 
                                 ---------------------  ---------------------  -------------------  ------------------ 
                                             7 749 444                853 372            5 209 190          13 812 006 
                                 ---------------------  ---------------------  -------------------  ------------------ 
                                           ===========           ============           ==========          ========== 
                                 ---------------------  ---------------------  -------------------  ------------------ 
 

* The Group adopted IFRS 9 effective 1 January 2018 and the resultant increase in impairment allowance on the effective date was recognized through retained earnings as the Group did not elect retrospective application of the Standard.

The Bank is continuing recovery efforts in respect of loans written off amounting to US$1 316 711.

16.4 Allowance for impairment on loans and advances and financial assets measured at amortised cost

 
                                                        31 December 2017 
                                 Specific        Portfolio             Total 
                          ---------------  ---------------  ---------------- 
                                      US$              US$               US$ 
                          ---------------  ---------------  ---------------- 
 At 1 January                   6 207 672        2 097 445         8 305 117 
                          ---------------  ---------------  ---------------- 
 Charge against profits         3 334 133          519 016         3 853 149 
                          ---------------  ---------------  ---------------- 
 Bad debts written off        (6 712 298)                -       (6 712 298) 
                          ---------------  ---------------  ---------------- 
                            -------------    -------------    -------------- 
                          ---------------  ---------------  ---------------- 
                                2 829 507        2 616 461         5 445 968 
                          ---------------  ---------------  ---------------- 
                                  =======         ========          ======== 
                          ---------------  ---------------  ---------------- 
 
   16.5     Credit-impaired financial assets 
 
                                                 31 December         31 December 
                                                        2018                2017 
                                                         US$                 US$ 
                                             ---------------  ------------------ 
 Total credit impaired financial assets           19 479 550          16 848 747 
                                             ---------------  ------------------ 
 Expected credit losses on credit impaired       (5 209 190)                   - 
  financial assets 
                                             ---------------  ------------------ 
 Allowance for impairment loss on loans 
  and advances                                             -         (2 829 507) 
                                             ---------------  ------------------ 
 Retail loans insurance                            (499 057)         (1 457 059) 
                                             ---------------  ------------------ 
 Suspended interest on credit-impaired 
  financial assets                               (1 080 650)         (1 225 523) 
                                             ---------------  ------------------ 
                                              --------------   ----------------- 
                                             ---------------  ------------------ 
 Net credit impaired financial assets             12 690 653          11 336 658 
                                             ---------------  ------------------ 
                                                    ========          ========== 
                                             ---------------  ------------------ 
 

The net credit impaired financial assets represents recoverable portions covered by realisable security, which includes guarantees, cessation of debtors, mortgages over properties, equities and promissory notes all fair valued at US$9 212 125 (2017 - US$15 483 487).

   16.6    Loans to related parties (included under loans, advances and other assets) 
 
                                 31 December 2018   31 December 2017 
                                              US$                US$ 
                                -----------------  ----------------- 
 Executive directors                       90 036            201 084 
                                -----------------  ----------------- 
 Officers                              12 115 488          7 566 669 
                                -----------------  ----------------- 
 Officers' companies                            -                  - 
                                -----------------  ----------------- 
                                   --------------     -------------- 
                                -----------------  ----------------- 
                                       12 205 524          7 767 753 
                                -----------------  ----------------- 
 Fair value adjustments                         -          (276 695) 
                                -----------------  ----------------- 
 ECL on staff loans - Stage 1           (160 529)                  - 
                                -----------------  ----------------- 
                                    -------------     -------------- 
                                -----------------  ----------------- 
                                       12 044 995          7 491 058 
                                -----------------  ----------------- 
                                         ========          ========= 
                                -----------------  ----------------- 
 
   17.        NON-CURRENT ASSETS HELD FOR SALE 
 
                            31 December 2018   31 December 2017 
                                         US$                US$ 
                         -------------------  ----------------- 
 At 1 January                         36 000          2 261 300 
                         -------------------  ----------------- 
 Fair value adjustment                     -                  - 
                         -------------------  ----------------- 
 Disposals                                 -        (2 225 300) 
                         -------------------  ----------------- 
                          ------------------     -------------- 
                         -------------------  ----------------- 
                                      36 000             36 000 
                         -------------------  ----------------- 
                                 ===========          ========= 
                         -------------------  ----------------- 
 
   18.     INTANGIBLE ASSETS 
 
                                     Work in       Computer 
                                    Progress       Software            Total 
                               -------------  -------------  --------------- 
                                         US$            US$              US$ 
                               -------------  -------------  --------------- 
 Cost 
                               -------------  -------------  --------------- 
 Balance at 1 January 2017           228 595      3 045 126        3 273 721 
                               -------------  -------------  --------------- 
 Acquisitions                              -      1 565 713        1 565 713 
                               -------------  -------------  --------------- 
                                ------------   ------------   -------------- 
                               -------------  -------------  --------------- 
 Balance at 1 January 2018           228 595      4 610 839        4 839 434 
                               -------------  -------------  --------------- 
 Acquisitions                              -        535 971          535 971 
                               -------------  -------------  --------------- 
 Capitalisations                   (228 595)        228 595                - 
                               -------------  -------------  --------------- 
                                ------------   ------------    ------------- 
                               -------------  -------------  --------------- 
 Balance at 31 December 2018               -      5 375 405        5 375 405 
                               -------------  -------------  --------------- 
                                     =======        =======          ======= 
                               -------------  -------------  --------------- 
 
 Accumulated amortisation 
                               -------------  -------------  --------------- 
 Balance at 1 January 2017                 -      1 626 687        1 626 687 
                               -------------  -------------  --------------- 
 Amortisation for the year                 -        832 567          832 567 
                               -------------  -------------  --------------- 
                                 -----------   ------------     ------------ 
                               -------------  -------------  --------------- 
 Balance at 1 January 2018                 -      2 459 254        2 459 254 
                               -------------  -------------  --------------- 
 Amortisation for the year                 -        879 376          879 376 
                               -------------  -------------  --------------- 
                                ------------    -----------      ----------- 
                               -------------  -------------  --------------- 
 Balance at 31 December 2018               -      3 338 630        3 338 630 
                               -------------  -------------  --------------- 
                                     =======    -----------      ----------- 
                               -------------  -------------  --------------- 
 Carrying amount 
                               -------------  -------------  --------------- 
 
 At 31 December 2018                       -      2 036 775        2 036 775 
                               -------------  -------------  --------------- 
                                    ========        =======        ========= 
                               -------------  -------------  --------------- 
 At 1 January 2018                   228 595      2 151 585        2 380 180 
                               -------------  -------------  --------------- 
                                    ========       ========        ========= 
                               -------------  -------------  --------------- 
 At 1 January 2017                   228 595      1 418 439        1 647 034 
                               -------------  -------------  --------------- 
                                    ========      =========        ========= 
                               -------------  -------------  --------------- 
 
   19.    PROPERTY AND EQUIPMENT 
 
                                Capital        Computers    Motor Vehicles        Furniture         Freehold             Total 
                                work in                                       and equipment         land and 
                               progress                                                           buildings* 
 Cost/Revaluation                   US$              US$               US$              US$              US$               US$ 
 amount 
                    -------------------  ---------------  ----------------  ---------------  ---------------  ---------------- 
                                                                                                                        12 562 
 At 1 January 2017              188 947        3 677 901         1 283 448        3 913 914        3 498 454               664 
                    -------------------  ---------------  ----------------  ---------------  ---------------  ---------------- 
 Additions                      268 310        1 598 813            52 454          115 296            4 060         2 038 933 
                    -------------------  ---------------  ----------------  ---------------  ---------------  ---------------- 
 Capitalisations              (163 541)          163 541                 -                -                -                 - 
                    -------------------  ---------------  ----------------  ---------------  ---------------  ---------------- 
 Revaluation gain                     -                -                 -                -          211 290           211 290 
                    -------------------  ---------------  ----------------  ---------------  ---------------  ---------------- 
 Disposals                            -          (4 930)          (80 000)                -                -          (84 930) 
                    -------------------  ---------------  ----------------  ---------------  ---------------  ---------------- 
                        ---------------   --------------    --------------   --------------   --------------    -------------- 
                    -------------------  ---------------  ----------------  ---------------  ---------------  ---------------- 
 At 31 December                                                                                                         14 727 
  2017                          293 716        5 435 325         1 255 902        4 029 210        3 713 804               957 
                    -------------------  ---------------  ----------------  ---------------  ---------------  ---------------- 
 Additions                    7 179 544        1 978 026           123 267          210 003                -         9 490 840 
                    -------------------  ---------------  ----------------  ---------------  ---------------  ---------------- 
 Capitalisations              (309 266)                -                 -          257 626                -          (51 640) 
                    -------------------  ---------------  ----------------  ---------------  ---------------  ---------------- 
 Revaluation gain                     -                -                 -                -          139 194           139 194 
                    -------------------  ---------------  ----------------  ---------------  ---------------  ---------------- 
 Disposals                            -                -         (109 399)         (18 616)                -         (128 015) 
                    -------------------  ---------------  ----------------  ---------------  ---------------  ---------------- 
 Reclassification 
  from investment 
  property                    2 300 000                -                 -                -                -         2 300 000 
                    -------------------  ---------------  ----------------  ---------------  ---------------  ---------------- 
                          -------------    -------------   ---------------   --------------   --------------   --------------- 
                    -------------------  ---------------  ----------------  ---------------  ---------------  ---------------- 
 At 31 December                                                                                                         26 478 
  2018                        9 463 994        7 413 351         1 269 770        4 478 223        3 852 998               336 
                    -------------------  ---------------  ----------------  ---------------  ---------------  ---------------- 
                               ========          =======         =========         ========         ========          ======== 
                    -------------------  ---------------  ----------------  ---------------  ---------------  ---------------- 
 Accumulated 
 depreciation 
                    -------------------  ---------------  ----------------  ---------------  ---------------  ---------------- 
 At 1 January 2017                    -        2 203 125           772 200        3 044 870          262 183         6 282 379 
                    -------------------  ---------------  ----------------  ---------------  ---------------  ---------------- 
 Charge for the 
  year                                -          563 658           191 573          316 222           65 357         1 136 810 
                    -------------------  ---------------  ----------------  ---------------  ---------------  ---------------- 
 Disposals                            -          (2 219)          (25 000)                -                -          (27 219) 
                    -------------------  ---------------  ----------------  ---------------  ---------------  ---------------- 
                         --------------   --------------    --------------   --------------   --------------     ------------- 
                    -------------------  ---------------  ----------------  ---------------  ---------------  ---------------- 
 At 1 January 2018                    -        2 764 564           938 774        3 361 092          327 540         7 391 970 
                    -------------------  ---------------  ----------------  ---------------  ---------------  ---------------- 
 Charge for the 
  year                                -          843 339           178 887          283 982           64 104         1 370 312 
                    -------------------  ---------------  ----------------  ---------------  ---------------  ---------------- 
 Disposals                            -                -         (109 399)         (18 616)                -         (128 015) 
                    -------------------  ---------------  ----------------  ---------------  ---------------  ---------------- 
                          -------------   --------------     -------------    -------------     ------------    -------------- 
                    -------------------  ---------------  ----------------  ---------------  ---------------  ---------------- 
 At 31 December 
  2018                                -        3 607 903         1 008 262        3 626 458          391 644         8 634 267 
                    -------------------  ---------------  ----------------  ---------------  ---------------  ---------------- 
 Carrying amount               ========         ========           =======          =======          =======          ======== 
                    -------------------  ---------------  ----------------  ---------------  ---------------  ---------------- 
 At 31 December                                                                                                         17 844 
  2018                        9 463 994        3 805 448           261 509          851 764        3 461 354               069 
                    -------------------  ---------------  ----------------  ---------------  ---------------  ---------------- 
                          -------------   --------------     -------------   --------------   --------------      ------------ 
                    -------------------  ---------------  ----------------  ---------------  ---------------  ---------------- 
 At 1 January 2018              293 716        2 670 762           317 129          668 118        3 386 264         7 335 988 
                    -------------------  ---------------  ----------------  ---------------  ---------------  ---------------- 
                          -------------   --------------     -------------   --------------   --------------       ----------- 
                    -------------------  ---------------  ----------------  ---------------  ---------------  ---------------- 
 At 1 January 2017              188 947        1 474 776           511 248          896 044        3 236 271         6 280 286 
                    -------------------  ---------------  ----------------  ---------------  ---------------  ---------------- 
                          -------------   --------------     -------------   --------------   --------------      ------------ 
                    -------------------  ---------------  ----------------  ---------------  ---------------  ---------------- 
 

*Assets measured using the revaluation model

Measurement of fair value

Fair value hierarchy

Immovable properties were revalued as at 31 December 2018 on the basis of valuations carried out by independent professional valuers, PMA Real Estate (Private) Limited. The valuation which conforms to International Valuation Standards, was in terms of the policy as set out in the accounting policies section. All movable assets are measured at their carrying amounts which are arrived at by the application of a depreciation charge on their cost values over the useful lives of the assets.

The valuation of land and buildings was arrived by applying yield rates of 10% on rental levels of between US$3 - US$7 per square metre.

Level 3

The fair value of immovable properties of US$3 461 354 (2017 - US$3 386 264) has been categorised under level 3 in the fair value hierarchy based on the inputs used for the valuation technique described below.

The following shows reconciliation between the opening and closing balances for level 3 fair values:

 
                                    31 December 2018   31 December 2017 
                                                 US$                US$ 
                                   -----------------  ----------------- 
 At 1 January                              3 386 264          3 236 271 
                                   -----------------  ----------------- 
 Additions                                         -              4 060 
                                   -----------------  ----------------- 
 Transfers from work in progress                   -                  - 
                                   -----------------  ----------------- 
 Revaluation gain                             62 533            121 630 
                                   -----------------  ----------------- 
 Impairment reversal                          76 661             89 660 
                                   -----------------  ----------------- 
 Depreciation                               (64 104)           (65 357) 
                                   -----------------  ----------------- 
                                       -------------      ------------- 
                                   -----------------  ----------------- 
 Balance at 31 December                    3 461 354          3 386 264 
                                   -----------------  ----------------- 
                                             =======           ======== 
                                   -----------------  ----------------- 
 

Valuation technique and significant unobservable inputs

The following table shows the valuation technique used in measuring the fair value of investment properties, as well as the significant unobservable inputs used.

 
 Valuation     Significant Unobservable                                     Inter-relationship between 
 Technique      Inputs                                                       key unobservable inputs and 
                                                                             fair value measurement 
 The Direct                                                                 The estimated fair value 
 Comparison     *    Weighted average expected market rental growth (5%);    would increase /(decrease) 
 Method was          and                                                     if: 
 applied                                                                      *    expected market rental growth were higher/ (lower); 
 on all                                                                            and 
 residential    *    Average market yield of 10%. 
 properties 
                                                                              *    the risk adjusted discount rates were lower/ 
                                                                                   (higher). 
 
 
 
                                                                             Below is an indication of 
                                                                             the sensitivity analysis 
                                                                             at different discount rates:- 
                                                                              Change in     Change in 
                                                                                   rate    fair value 
                                                                                    +5%       139 000 
                                                                                         ------------ 
                                                                                    +3%        83 400 
                                                                                         ------------ 
                                                                                    +1%        27 800 
                                                                                         ------------ 
                                                                                    -1%       -27 800 
                                                                                         ------------ 
                                                                                    -3%       -83 400 
                                                                                         ------------ 
                                                                                    -5%      -139 000 
                                                                                         ------------ 
              -----------------------------------------------------------  ----------------------------------------------------------- 
 
   20.    CAPITAL COMMITMENTS 
 
                                             31 December     31 December 
                                                    2018            2017 
                                                     US$             US$ 
                                          --------------  -------------- 
 Capital expenditure contracted for            2 931 385         607 736 
                                          --------------  -------------- 
 Capital expenditure authorised but not 
  yet contracted for                           9 092 999      10 502 287 
                                          --------------  -------------- 
                                           -------------   ------------- 
                                          --------------  -------------- 
                                              12 024 384      11 110 023 
                                          --------------  -------------- 
                                                ========        ======== 
                                          --------------  -------------- 
 

The capital expenditure will be funded from the Group's own resources.

   21.    CONTINGENT LIABILITIES 
 
                                                         31 December                  31 December 
                                                                2018                         2017 
                                                                 US$                          US$ 
                                                 -------------------  --------------------------- 
 
 Guarantees                                                6 159 566                    8 195 056 
                                                 -------------------  --------------------------- 
 Facilities approved but not drawn down                   20 671 107                   28 943 947 
                                                 -------------------  --------------------------- 
 Expected credit losses on facilities approved           (1 520 945)                            - 
  but not drawn down 
                                                 -------------------  --------------------------- 
 Expected credit losses on guarantees                      (553 538)                            - 
                                                 -------------------  --------------------------- 
                                                       -------------               -------------- 
                                                 -------------------  --------------------------- 
                                                          24 756 190                   37 139 003 
                                                 -------------------  --------------------------- 
                                                            ========                     ======== 
                                                 -------------------  --------------------------- 
 
   22.           EXCHANGE RATES 

The following exchange rates have been used to translate the foreign currency balances to United States dollars at year end:-

 
                                     Mid-rate           Mid-rate 
                                  31 December   31 December 2017 
                                         2018 
                          -----  ------------  ----------------- 
                                          US$                US$ 
                          -----  ------------  ----------------- 
 British Pound Sterling     GBP        1.2785             1.3525 
                          -----  ------------  ----------------- 
 South African Rand         ZAR       14.2254            12.3250 
                          -----  ------------  ----------------- 
 European Euro              EUR        1.1490             1.1994 
                          -----  ------------  ----------------- 
 Botswana Pula              BWP       10.7296             9.8232 
                          -----  ------------  ----------------- 
 

23. EVENTS AFTER THE REPORTING PERIOD

On 20 February 2019, the Reserve Bank of Zimbabwe (RBZ) announced in its Monetary Policy Statement (MPS) that the Monetary Authorities had established an interbank foreign exchange market to formalise the buying and selling of foreign currency through the Banks and Bureaux de change. The Monetary Policy statement was followed by the issuance of Statutory Instrument 33 of 2019 (SI 33) on 22 February 2019.

The Statutory Instrument introduced RTGS dollars as a legal tender in Zimbabwe and advised that the RTGS dollars at a rate of 1:1 to the USD would be used by all entities and individuals in Zimbabwe for the purposes of pricing goods and services, record debts, accounting and settlement of domestic transactions with effect from 20 February 2019. All foreign liabilities or legacy debts due to suppliers and service providers, declared dividends e.t.c shall be treated separately after registering such debts with the RBZ Exchange Control Department for the purposes of providing the Reserve Bank of Zimbabwe with sufficient information to determine an orderly expunging of these legacy debts.

The Directors, based on their analysis of IFRSs, had considered the MPS of 20 February 2019 and the subsequent emergence of the USD interbank exchange rate to be an adjusting post balance sheet event in terms of International Accounting Standard 10 (IAS 10) "Events After the Reporting Period" as the developments were reflective of underlying conditions that existed at reporting date. The introduction of the RTGS$ as a currency and initial trades on 22 February 2019 at USD1: RTGS$2.5, was in the opinion of the Directors, a confirmation of a market wide practice which had recognised and accepted RTGS$ as a form of currency which was different from the United States Dollars. However, due to the limitations provided by SI 33 of 2019, these events after the reporting period have not been adjusted for as doing so would result in non-compliance with local laws and regulations.

The Directors performed a sensitivity analysis on note 23.1 to illustrate the impact on the Group's statement of financial position as at 31 December 2018 had the financial statements been restated using the first available interbank mid-rate on 22 February 2019 of USD1:RTGS$2.5. A further analysis of the impact on the statement of financial position has also been performed using the rates of USD1:RTGS$3 and USD1:RTGS$4.

Assumptions

In coming up with the sensitivity analysis of the Group's Statement of Financial Position as at 31 December 2018, the Directors based the analysis on the assumptions of parity and interchangeability between the USD and RTGS balances. Furthermore, the figures on the sensitivity analysis are not reflective of the opening balances for future periods.

Foreign liabilities or legacy debts, which are being registered with the RBZ for them to determine an orderly expunging of the debts, have been restated at the assumed interbank mid-rates above pending a determination by the Reserve Bank of Zimbabwe.

23.1 Sensitivity Analysis for events after the reporting period

 
                                                  Components of reported amounts                                         Sensitivity Analysis 
                  Monetary            Monetary            Non Monetary         Non Monetary         Total             Total             Total RTGS$         Total RTGS$ 
                                                                                                     USD               RTGS$ 
                 ------------------  ------------------  -------------------  -------------------  ----------------  ----------------  ------------------  ------------------- 
                  Assets              Assets/             Assets/              Assets/              @ 1:1             @1:2.5            @1:3                @1:4 
                   /Liabilities        Liabilities         Liabilities          Liabilities 
                 ------------------  ------------------  -------------------  -------------------  ----------------  ----------------  ------------------  ------------------- 
                  Nostro              RTGS                USD                  RTGS$ 
                   FCA 
                 ------------------  ------------------  -------------------  -------------------  ----------------  ----------------  ------------------  ------------------- 
 Shareholders' 
 funds 
                 ------------------  ------------------  -------------------  -------------------  ----------------  ----------------  ------------------  ------------------- 
 Share Capital                    -              80 975                    -                    -            80 975            80 975              80 975               80 975 
                 ------------------  ------------------  -------------------  -------------------  ----------------  ----------------  ------------------  ------------------- 
 Capital                                         16 526                                                      16 526            16 526              16 526               16 526 
  Reserves                        -                 297                    -                    -               297               297                 297                  297 
                 ------------------  ------------------  -------------------  -------------------  ----------------  ----------------  ------------------  ------------------- 
 Revaluation 
  Reserve                         -                   -              136 741                    -           136 741           341 853             410 223              546 964 
                 ------------------  ------------------  -------------------  -------------------  ----------------  ----------------  ------------------  ------------------- 
 Foreign 
  currency 
  translation                                                                                                                   9 019              12 026               18 039 
  reserve                         -                   -                    -                    -                 -               801                 401                  601 
                 ------------------  ------------------  -------------------  -------------------  ----------------  ----------------  ------------------  ------------------- 
 Retained                                        47 377                                                      47 377            47 377              47 377               47 377 
  earnings                        -                 400                    -                    -               400               400                 400                  400 
                 ------------------  ------------------  -------------------  -------------------  ----------------  ----------------  ------------------  ------------------- 
                  -----------------   -----------------   ------------------   ------------------   ---------------   ---------------   -----------------   ------------------ 
                 ------------------  ------------------  -------------------  -------------------  ----------------  ----------------  ------------------  ------------------- 
                                                 63 984                                                      64 121            73 346              76 421               82 571 
 Total equity                     -                 672              136 741                    -               413               327                 297                  239 
                 ------------------  ------------------  -------------------  -------------------  ----------------  ----------------  ------------------  ------------------- 
 Redeemable 
  ordinary                                       14 335                                                      14 335            14 335              14 335               14 335 
  shares                          -                 253                    -                    -               253               253                 253                  253 
                 ------------------  ------------------  -------------------  -------------------  ----------------  ----------------  ------------------  ------------------- 
 Subordinated                                                                                                 1 505             3 764 
  term loan               1 505 647                   -                    -                    -               647               118           4 516 941            6 022 588 
                 ------------------  ------------------  -------------------  -------------------  ----------------  ----------------  ------------------  ------------------- 
                   ----------------   -----------------   ------------------   ------------------   ---------------   ---------------   -----------------   ------------------ 
                 ------------------  ------------------  -------------------  -------------------  ----------------  ----------------  ------------------  ------------------- 
 Total 
  shareholders' 
  funds and 
  shareholders'                                  78 319                                                      79 962            91 445              95 273              102 929 
  liabilities             1 505 647                 925              136 741                    -               313               698                 491                  080 
                 ------------------  ------------------  -------------------  -------------------  ----------------  ----------------  ------------------  ------------------- 
 Liabilities 
                 ------------------  ------------------  -------------------  -------------------  ----------------  ----------------  ------------------  ------------------- 
 Deposits and 
  Other                      28 953             418 151                                                     447 105           490 536             505 013              533 967 
  Accounts                      975                 308                    -                    -               283               246                 233                  208 
                 ------------------  ------------------  -------------------  -------------------  ----------------  ----------------  ------------------  ------------------- 
 Deferred                                                                                                                       1 219 
  taxation                        -                   -                    -                    -                 -               546           2 262 240            4 347 626 
                 ------------------  ------------------  -------------------  -------------------  ----------------  ----------------  ------------------  ------------------- 
                  -----------------   -----------------   ------------------                        ---------------   ---------------   -----------------   ------------------ 
                 ------------------  ------------------  -------------------  -------------------  ----------------  ----------------  ------------------  ------------------- 
 Total                       28 953             418 151                                                     447 105           491 755             507 275              538 314 
  liabilities                   975                 308                    -                    -               283               792                 473                  834 
                 ------------------  ------------------  -------------------  -------------------  ----------------  ----------------  ------------------  ------------------- 
                  -----------------   -----------------   ------------------    -----------------   ---------------   ---------------   -----------------   ------------------ 
                 ------------------  ------------------  -------------------  -------------------  ----------------  ----------------  ------------------  ------------------- 
 Total 
  shareholders' 
  funds and                  30 459             496 471                                                     527 067           583 201             602 548              641 243 
  liabilities                   622                 233              136 741                    -               596               490                 694                  914 
                 ------------------  ------------------  -------------------  -------------------  ----------------  ----------------  ------------------  ------------------- 
                         ==========          ==========          ===========           ==========         =========         =========          ==========          =========== 
                 ------------------  ------------------  -------------------  -------------------  ----------------  ----------------  ------------------  ------------------- 
 Assets 
                 ------------------  ------------------  -------------------  -------------------  ----------------  ----------------  ------------------  ------------------- 
 Cash and cash               12 692              99 748                                                     112 440           131 479             137 825              150 518 
  equivalents                   524                 388                    -                    -               912               698                 960                  484 
                 ------------------  ------------------  -------------------  -------------------  ----------------  ----------------  ------------------  ------------------- 
 Current tax 
  assets                          -             285 822                    -                    -           285 822           285 822             285 822              285 822 
                 ------------------  ------------------  -------------------  -------------------  ----------------  ----------------  ------------------  ------------------- 
 Investment                                     117 249                                                     117 249           117 249             117 249              117 249 
  securities                      -                 434                    -                    -               434               434                 434                  434 
                 ------------------  ------------------  -------------------  -------------------  ----------------  ----------------  ------------------  ------------------- 
 Loans, 
  advances and 
  other                                         254 198                                                     254 202           254 209             254 211              254 215 
  accounts                    4 081                 864                    -                    -               945               067                 107                  188 
                 ------------------  ------------------  -------------------  -------------------  ----------------  ----------------  ------------------  ------------------- 
 Non-current 
  assets held 
  for 
  sale                            -                   -               36 000                    -            36 000            90 000             108 000              144 000 
                 ------------------  ------------------  -------------------  -------------------  ----------------  ----------------  ------------------  ------------------- 
 Trade and 
  other 
  investments               112 501                   -                    -                    -           112 501           281 253             337 503              450 004 
                 ------------------  ------------------  -------------------  -------------------  ----------------  ----------------  ------------------  ------------------- 
 Investment                                                           13 838                                 20 950            41 708              48 627               62 466 
  properties                      -                   -                  490            7 112 116               606               341                 586                  076 
                 ------------------  ------------------  -------------------  -------------------  ----------------  ----------------  ------------------  ------------------- 
 Intangible                                                                                                   2 036             2 036 
  assets                          -                   -                    -            2 036 775               775               775           2 036 775            2 036 775 
                 ------------------  ------------------  -------------------  -------------------  ----------------  ----------------  ------------------  ------------------- 
 Property and                                                         12 011                                 17 844            35 861              41 866               53 878 
  equipment                       -                   -                  354            5 832 715               069               100                 777                  131 
                 ------------------  ------------------  -------------------  -------------------  ----------------  ----------------  ------------------  ------------------- 
 Deferred                                                                                                     1 908 
  taxation                        -           1 908 532                    -                    -               532                 -                   -                    - 
                 ------------------  ------------------  -------------------  -------------------  ----------------  ----------------  ------------------  ------------------- 
                  -----------------   -----------------   ------------------   ------------------   ---------------   ---------------   -----------------    ----------------- 
                 ------------------  ------------------  -------------------  -------------------  ----------------  ----------------  ------------------  ------------------- 
                             12 809             473 391               25 885               14 981           527 067           583 201             602 548              641 243 
 Total assets                   106                 040                  844                  606               596               490                 964                  914 
                 ------------------  ------------------  -------------------  -------------------  ----------------  ----------------  ------------------  ------------------- 
                         ==========          ==========          ===========          ===========         =========         =========          ==========           ========== 
                 ------------------  ------------------  -------------------  -------------------  ----------------  ----------------  ------------------  ------------------- 
 

DIVID DECLARATION NOTICE

Notice is hereby given that the board declared a scrip dividend alternative to the cash dividend of 0.96 RTGS cents per share for the year ended 31 December 2018 payable in respect of all the ordinary shares of the Company. The ratio of allotment for the scrip dividend shall be one (1) for every twenty five (25) shares held. The conversion price of the scrip dividend is 24 RTGS cents which was the market price as at 17(th) April 2019, being the date the directors approved the dividend. This dividend will be payable in full to all Shareholders of the Company registered at the close of business on 10 May 2019.

The payment of the dividend will take place on or about 11 June 2019. The applicable shareholders' tax will be deducted from the Gross Dividends.

The shares of the Company will be traded cum-dividend on the Zimbabwe Stock Exchange up to the market day of 7 May 2019 and ex-dividend as from 8 May 2019.

The forms of election with the full details and terms of the scrip/cash dividend offer will be mailed to shareholders on 17 May 2019 and the last date of receiving the forms of election is 7 June 2019.

Shareholders are requested to submit/update their mailing and banking details to the Transfer Secretaries and also immediately contact the Transfer Secretary should they not have received their dividend election forms by 24 May 2019 on the following contacts.

First Transfer Secretaries (Pvt) Ltd

1 Armagh Avenue

Eastlea

Harare

Telephone: +263 (242) 782869/72 or 776628/49/59/69/74

Email: info@fts-net.com

By order of the Board

S. PASHAPA

Company Secretary

17 April 2019

NMB BANK LIMITED

STATEMENT OF COMPREHENSIVE INCOME

for the year ended 31 December 2018

 
                                                                     31 December   31 December 2017 
                                                                            2018 
                                            Note                             US$                US$ 
                                           ------  -----------------------------  ----------------- 
 Interest income                                                      39 333 178         32 061 931 
                                                   -----------------------------  ----------------- 
 Interest expense                                                    (8 865 016)        (9 157 095) 
                                                   -----------------------------  ----------------- 
                                                                ----------------     -------------- 
                                           ------  -----------------------------  ----------------- 
 Net interest income                                                  30 468 162         22 904 836 
                                                   -----------------------------  ----------------- 
 Fee and commissions income                                           28 539 376         18 832 185 
                                                   -----------------------------  ----------------- 
 Net foreign exchange gains                                            1 899 670          1 583 164 
                                                   -----------------------------  ----------------- 
                                                                ----------------     -------------- 
                                           ------  -----------------------------  ----------------- 
 
 Revenue                                                              60 907 208         43 320 185 
                                                   -----------------------------  ----------------- 
 Other income                               a                          4 983 521          1 107 241 
                                           ------  -----------------------------  ----------------- 
                                                                ----------------    --------------- 
                                           ------  -----------------------------  ----------------- 
 Operating income                                                     65 890 729         44 427 426 
                                                   -----------------------------  ----------------- 
 Operating expenditure                      b                       (34 712 711)       (27 578 347) 
                                           ------  -----------------------------  ----------------- 
                                                                  --------------     -------------- 
                                           ------  -----------------------------  ----------------- 
 Operating income before impairment 
  charge                                                              31 178 018         16 849 079 
                                                   -----------------------------  ----------------- 
 Impairment losses on financial assets 
  measured at amortised cost                                         (4 011 952)                  - 
                                           ------  -----------------------------  ----------------- 
 Impairment losses on loans and advances                                       -        (3 853 149) 
                                                   -----------------------------  ----------------- 
                                                                  --------------     -------------- 
                                           ------  -----------------------------  ----------------- 
 Profit before taxation                                               27 166 066         12 995 930 
                                                   -----------------------------  ----------------- 
 Taxation                                                            (5 923 385)        (3 078 579) 
                                                   -----------------------------  ----------------- 
                                                                  --------------      ------------- 
                                           ------  -----------------------------  ----------------- 
 Profit for the period                                                21 242 681          9 917 351 
                                                   -----------------------------  ----------------- 
 
 Other comprehensive income 
                                           ------  -----------------------------  ----------------- 
 Revaluations, net of tax                   c                             46 431             90 310 
                                           ------  -----------------------------  ----------------- 
                                                                   -------------       ------------ 
                                           ------  -----------------------------  ----------------- 
 Total comprehensive income for the 
  period                                                              21 289 112         10 007 661 
                                                   -----------------------------  ----------------- 
                                                                         =======           ======== 
                                           ------  -----------------------------  ----------------- 
 Earnings per share (US cents) 
                                           ------  -----------------------------  ----------------- 
 -Basic                                     d                             128.70              60.08 
                                           ------  -----------------------------  ----------------- 
 

NMB BANK LIMITED

STATEMENT OF FINANCIAL POSITION

as at 31 December 2018

 
                                             31 December 2018     31 December 2017 
                                   Note                   US$                  US$ 
                                  ------  -------------------  ------------------- 
 SHAREHOLDER'S FUNDS 
                                  ------  -------------------  ------------------- 
 Share capital                       e                 16 506               16 506 
                                  ------  -------------------  ------------------- 
 Share premium                                     31 474 502           31 474 502 
                                          -------------------  ------------------- 
 Regulatory Reserve                                         -            2 297 492 
                                          -------------------  ------------------- 
 Revaluation reserve                                  136 741               90 310 
                                          -------------------  ------------------- 
 Retained earnings                                 47 267 030           30 842 252 
                                          -------------------  ------------------- 
                                              ---------------      --------------- 
                                  ------  -------------------  ------------------- 
 Total shareholder's funds                         78 894 779           64 721 062 
                                          -------------------  ------------------- 
                                              ---------------      --------------- 
                                  ------  -------------------  ------------------- 
 
 LIABILITIES 
                                  ------  -------------------  ------------------- 
 Deposits and other liabilities                   447 138 216          356 977 472 
                                          -------------------  ------------------- 
 Subordinated term loan                             1 505 647            1 415 904 
                                          -------------------  ------------------- 
                                            -----------------     ---------------- 
                                  ------  -------------------  ------------------- 
 Total liabilities                                448 643 863          358 393 376 
                                          -------------------  ------------------- 
                                             ----------------      --------------- 
                                  ------  -------------------  ------------------- 
 Total shareholder's funds 
  and liabilities                                 527 538 642          423 114 438 
                                          -------------------  ------------------- 
                                                   ==========            ========= 
                                  ------  -------------------  ------------------- 
 ASSETS 
                                  ------  -------------------  ------------------- 
 Cash and cash equivalents           f            112 440 912           89 553 202 
                                  ------  -------------------  ------------------- 
 Current tax assets                                   210 302              155 488 
                                          -------------------  ------------------- 
 Loans, advances and other 
  assets                                          254 195 558          210 475 836 
                                          -------------------  ------------------- 
 Investment securities                            117 249 434           92 245 425 
                                          -------------------  ------------------- 
 Amount owing from Holding 
  Company                                             558 303              651 564 
                                          -------------------  ------------------- 
 Non-current assets held for 
  sale                                                 36 000               36 000 
                                          -------------------  ------------------- 
 Unquoted investments                                 112 501              102 347 
                                          -------------------  ------------------- 
 Investment properties               g             20 950 606           18 977 000 
                                  ------  -------------------  ------------------- 
 Intangible assets                                  2 036 775            2 380 180 
                                          -------------------  ------------------- 
 Property and equipment                            17 844 069            7 335 988 
                                          -------------------  ------------------- 
 Deferred tax assets                                1 904 182            1 201 408 
                                          -------------------  ------------------- 
                                           ------------------   ------------------ 
                                  ------  -------------------  ------------------- 
 Total assets                                     527 538 642          423 114 438 
                                          -------------------  ------------------- 
                                                  ===========          =========== 
 ---------------------------------------  -------------------  ------------------- 
 

NMB BANK LIMITED

STATEMENT OF CHANGES IN EQUITY

for the year ended 31 December 2018

 
                         Share            Share       Revaluation       Regulatory           Retained 
                       Capital          Premium           Reserve          Reserve           Earnings            Total 
                           US$              US$               US$              US$                US$              US$ 
                 -------------  ---------------  ----------------  ---------------  -----------------  --------------- 
 Balances at 1 
  January 2017          16 506       31 474 502                 -        1 785 136         21 437 257       54 713 401 
                 -------------  ---------------  ----------------  ---------------  -----------------  --------------- 
 Profit for the 
  year                       -                -                 -                -          9 917 351        9 917 351 
                 -------------  ---------------  ----------------  ---------------  -----------------  --------------- 
 Other 
  comprehensive 
  income                     -                -            90 310                -                  -           90 310 
                 -------------  ---------------  ----------------  ---------------  -----------------  --------------- 
 Transfer from 
  retained 
  earnings                   -                -                 -          512 356          (512 356)                - 
                 -------------  ---------------  ----------------  ---------------  -----------------  --------------- 
                      --------    -------------   ---------------   --------------   ----------------   -------------- 
                 -------------  ---------------  ----------------  ---------------  -----------------  --------------- 
 Balances at 31 
  December 2017         16 506       31 474 502            90 310        2 297 492         30 842 252       64 721 062 
                 -------------  ---------------  ----------------  ---------------  -----------------  --------------- 
 
 IFRS 9 
 adjustments - 
 1 January 2018 
                 -------------  ---------------  ----------------  ---------------  -----------------  --------------- 
 Transfer from 
  regulatory 
  reserve                    -                -                 -      (2 297 492)          2 297 492                - 
                 -------------  ---------------  ----------------  ---------------  -----------------  --------------- 
 Expected 
  credit loss 
  (ECL) 
  adjustment 
  1 January 
  2018                       -                -                 -                -        (8 575 988)      (8 575 988) 
                 -------------  ---------------  ----------------  ---------------  -----------------  --------------- 
 Deferred tax 
  on ECL 
  adjustment - 
  1 
  January 2018               -                -                 -                -          2 208 317        2 208 317 
                 -------------  ---------------  ----------------  ---------------  -----------------  --------------- 
                  ------------    -------------    --------------    -------------      -------------    ------------- 
                 -------------  ---------------  ----------------  ---------------  -----------------  --------------- 
 Restated 
  balances at 1 
  January 2018          16 506       31 474 502            90 310                -         26 772 073       58 353 391 
                 -------------  ---------------  ----------------  ---------------  -----------------  --------------- 
 
 Profit for the 
  year                       -                -                 -                -         21 242 681       21 242 681 
                 -------------  ---------------  ----------------  ---------------  -----------------  --------------- 
 Other 
  comprehensive 
  income                     -                -            46 431                -                  -           46 431 
                 -------------  ---------------  ----------------  ---------------  -----------------  --------------- 
 Dividend paid               -                -                 -                -          (747 724)        (747 724) 
                 -------------  ---------------  ----------------  ---------------  -----------------  --------------- 
                      --------   --------------   ---------------   --------------      -------------   -------------- 
                 -------------  ---------------  ----------------  ---------------  -----------------  --------------- 
 Balances at 31 
  December 2018         16 506       31 474 502           136 741                -         47 267 030       78 894 779 
                 -------------  ---------------  ----------------  ---------------  -----------------  --------------- 
                         =====         ========         =========         ========           ========         ======== 
                 -------------  ---------------  ----------------  ---------------  -----------------  --------------- 
 

NMB BANK LIMITED

STATEMENT OF CASH FLOWS

for the year ended 31 December 2018

 
                                                                31 December            31 December 
                                                                 2018                         2017 
 CASH FLOWS FROM OPERATING ACTIVITIES                                        US$               US$ 
                                                               -----------------  ---------------- 
 Profit before taxation                                               27 166 066        12 995 930 
                                                               -----------------  ---------------- 
 Non-cash items 
                                                               -----------------  ---------------- 
 -Impairment losses on financial assets measured 
  at amortised cost                                                    4 011 952         3 853 149 
                                                               -----------------  ---------------- 
 -Investment properties fair value adjustment                        (2 551 436)         (302 255) 
                                                               -----------------  ---------------- 
 -Profit on disposal of property and equipment                          (22 396)                 - 
                                                               -----------------  ---------------- 
 
   *    Loss on disposal of property and equipment (included 
        in staff costs)                                                        -            56 637 
                                                               -----------------  ---------------- 
 -Loss on disposal of non current asset held 
  for sale                                                                     -            75 300 
                                                               -----------------  ---------------- 
 -Profit on disposal of investment properties                          (567 032)          (12 951) 
                                                               -----------------  ---------------- 
 -Trade and other investments fair value adjustment                     (10 154)          (13 417) 
                                                               -----------------  ---------------- 
 -Impairment reversal on land and buildings                             (76 661)          (89 660) 
                                                               -----------------  ---------------- 
 -Depreciation                                                         1 370 312         1 136 810 
                                                               -----------------  ---------------- 
 -Interest capitalised on subordinated term 
  loan                                                                   171 483           165 345 
                                                               -----------------  ---------------- 
 -Amortisation of intangible assets                                      879 376           832 567 
                                                               -----------------  ---------------- 
 -Unrealised foreign exchange loss/(gain)                                 20 689          (16 555) 
                                                               -----------------  ---------------- 
                                                                ----------------    -------------- 
                                                               -----------------  ---------------- 
 Operating cash flows before changes in operating 
  assets and liabilities                                              30 392 199        18 680 900 
                                                               -----------------  ---------------- 
 
 Changes in operating assets and liabilities 
                                                               -----------------  ---------------- 
 Increase in deposits and other liabilities                           90 073 581        91 620 178 
                                                               -----------------  ---------------- 
 Increase in loans, advances and other assets                       (56 133 878)      (14 656 426) 
                                                               -----------------  ---------------- 
                                                                 ---------------   --------------- 
                                                               -----------------  ---------------- 
 Net cash generated from operations                                   64 331 902        95 644 652 
                                                               -----------------  ---------------- 
                                                                 ---------------   --------------- 
                                                               -----------------  ---------------- 
 Taxation 
                                                               -----------------  ---------------- 
 Capital gains tax paid                                                        -         (155 265) 
                                                               -----------------  ---------------- 
 Corporate tax paid                                                  (4 488 757)       (1 757 028) 
                                                               -----------------  ---------------- 
                                                                  --------------   --------------- 
                                                               -----------------  ---------------- 
 Net cash inflow from operating activities                            59 843 145        93 732 359 
                                                               -----------------  ---------------- 
                                                                  --------------   --------------- 
                                                               -----------------  ---------------- 
 CASH FLOWS FROM INVESTING ACTIVITIES 
                                                               -----------------  ---------------- 
 Proceeds on disposal of property and equipment                           22 396             1 076 
                                                               -----------------  ---------------- 
 Acquisition of intangible assets                                      (535 971)       (1 565 713) 
                                                               -----------------  ---------------- 
 Acquisition of property and equipment                               (9 490 840)       (2 038 933) 
                                                               -----------------  ---------------- 
 Acquisition of investment properties                                (6 082 924)       (4 792 475) 
                                                               -----------------  ---------------- 
 Proceeds or disposal of non-current asset 
  held for sale                                                                -         2 150 000 
                                                               -----------------  ---------------- 
 Acquisition of investment securities                               (25 004 013)      (67 500 670) 
                                                               -----------------  ---------------- 
 Decrease/(increase) in amount owing from 
  Holding Company                                                         93 261          (40 961) 
                                                               -----------------  ---------------- 
 Proceeds on disposal of investment properties                         4 801 846           332 951 
                                                               -----------------  ---------------- 
                                                                ----------------   --------------- 
                                                               -----------------  ---------------- 
 Net cash outflow from investing activities                         (36 196 245)      (73 454 725) 
                                                               -----------------  ---------------- 
                                                                ----------------   --------------- 
                                                               -----------------  ---------------- 
 
 
 
 CASH FLOWS FROM FINANCING ACTIVITIES 
                                             ---------------  ---------------- 
 
 Dividend paid                                     (747 724)                 - 
                                             ---------------  ---------------- 
 Payment of interest on subordinated term 
  loan                                              (81 740)         (164 931) 
                                             ---------------  ---------------- 
                                              --------------   --------------- 
                                             ---------------  ---------------- 
 Net cash inflow from financing activities         (829 464)         (164 931) 
                                             ---------------  ---------------- 
                                              --------------   --------------- 
                                             ---------------  ---------------- 
 Net increase in cash and cash equivalents        22 817 436        20 112 703 
                                             ---------------  ---------------- 
 Net foreign exchange differences on cash 
  and cash equivalents                                70 274            19 242 
                                             ---------------  ---------------- 
 Cash and cash equivalents at beginning 
  of the year                                     89 553 202        69 421 257 
                                             ---------------  ---------------- 
                                              --------------   --------------- 
                                             ---------------  ---------------- 
 Cash and cash equivalents at the end of 
  the year (note f)                              112 440 912        89 553 202 
                                             ---------------  ---------------- 
                                                    ========          ======== 
                                             ---------------  ---------------- 
 

NMB BANK LIMITED

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

for the year ended 31 December 2018

There are no material differences between the Bank and the Holding company as the Bank is the principal operating subsidiary of the Group. The notes to the financial statements under NMBZ Holdings Limited are therefore the same as those of the Bank in every material respect where applicable.

   a.   OTHER income 
 
 
                                                31 December 2018   31 December 2017 
                                               -----------------  ----------------- 
                                                             US$                US$ 
                                               -----------------  ----------------- 
 Loss on disposal of non-current assets 
  held for sale                                                -           (75 300) 
                                               -----------------  ----------------- 
 Unquoted investments fair value adjustments              10 154             13 416 
                                               -----------------  ----------------- 
         Profit on disposal of investment 
          properties                                     567 032             12 951 
                                               -----------------  ----------------- 
         Profit on disposal of property and               22 396                  - 
          equipment 
                                               -----------------  ----------------- 
 Fair value adjustment on investment 
  properties                                           2 551 436            302 255 
                                               -----------------  ----------------- 
 Rental income                                           365 269            135 900 
                                               -----------------  ----------------- 
 Bad debts recovered                                   1 295 428            580 295 
                                               -----------------  ----------------- 
 Other operating income                                  171 806            137 724 
                                               -----------------  ----------------- 
                                                  --------------       ------------ 
                                               -----------------  ----------------- 
                                                       4 983 521          1 107 241 
                                               -----------------  ----------------- 
                                                        ========             ====== 
                                               -----------------  ----------------- 
 
   b.   Operating EXPITURE 
 
 
                                               31 December 2018   31 December 2017 
                                              -----------------  ----------------- 
                                                            US$                US$ 
                                              -----------------  ----------------- 
 The operating profit is after recognising 
  the following: 
                                              -----------------  ----------------- 
 Administration costs                                15 955 591         11 866 111 
                                              -----------------  ----------------- 
 Audit fees: 
                                              -----------------  ----------------- 
 - Current year                                          98 991             35 938 
                                              -----------------  ----------------- 
 - Prior year                                           111 406             95 456 
                                              -----------------  ----------------- 
 Impairment reversal on land and buildings*            (76 660)           (89 660) 
                                              -----------------  ----------------- 
 Depreciation                                         1 370 312          1 136 810 
                                              -----------------  ----------------- 
 Amortization of intangible assets                      879 376            832 567 
                                              -----------------  ----------------- 
 Directors' remuneration                                971 121            719 318 
                                              -----------------  ----------------- 
  -Fees for services as directors                       219 246            233 102 
                                              -----------------  ----------------- 
   -Expenses                                             17 364              9 393 
                                              -----------------  ----------------- 
   -services rendered                                   734 511            476 823 
                                              -----------------  ----------------- 
 Staff costs - salaries, allowances 
  and related costs                                  15 402 574         12 981 807 
                                              -----------------  ----------------- 
                                                 --------------    --------------- 
                                              -----------------  ----------------- 
                                                     34 712 711         27 578 347 
                                              -----------------  ----------------- 
                                                       ========          ========= 
                                              -----------------  ----------------- 
 

*The impairment reversal on land and buildings arose due to fair value changes on the Group's land and buildings measured using the revaluation model.

   c.         OTHER COMPREHENSIVE INCOME 
 
 
                                              31 December 2018       31 December 2017 
                                          --------------------  --------------------- 
                                                           US$                    US$ 
                                          --------------------  --------------------- 
 Revaluation gain on land and buildings                 62 533                121 630 
                                          --------------------  --------------------- 
         Tax effect                                   (16 102)               (31 320) 
                                          --------------------  --------------------- 
                                                   -----------           ------------ 
                                          --------------------  --------------------- 
                                                        46 431                 90 310 
                                          --------------------  --------------------- 
                                                        ======                 ====== 
                                          --------------------  --------------------- 
 
   d.         EARNINGS PER SHARE 

The calculation of earnings per share is based on the following figures:

   d.1       Earnings 
 
                        31 December 2018   31 December 2017 
                                     US$                US$ 
                       -----------------  ----------------- 
 Profit for the year          21 242 681          9 917 351 
                       -----------------  ----------------- 
 
   d.2       Number of shares 
 
 Weighted average shares in issue    16 506 050   16 506 050 
 
   d.3       Earnings per share (US cents) 
 
 Basic    128.70   60.08 
 
   e.      SHARE CAPITAL 
   e.1    Authorised 

The authorised ordinary share capital at 31 December 2018 is at the historical cost figure of US$25 000 (2017 - US$25 000) comprising 25 million ordinary shares of US$0.001 each.

   e.2    Issued and fully paid 

The issued share capital at 31 December 2018 is at the historical cost figure of US$16 506 (2017 - US$16 506) comprising 16 506 050 (2017 - 16 506 050) ordinary shares of US$0.001 each.

    f.     CASH AND CASH EQUIVALENTS 
 
                                        31 December 2018   31 December 2017 
                                                     US$                US$ 
                                       -----------------  ----------------- 
 Balances with the Central Bank               89 081 480         79 876 937 
                                       -----------------  ----------------- 
 Current, nostro accounts and cash            13 426 360          6 676 265 
                                       -----------------  ----------------- 
 Interbank placements (see below)             10 000 000          3 000 000 
                                       -----------------  ----------------- 
                                         ---------------    --------------- 
                                       -----------------  ----------------- 
                                             112 507 840         89 553 202 
                                       -----------------  ----------------- 
 Expected Credit loss allowance (see            (66 928)                  - 
  below) 
                                       -----------------  ----------------- 
                                         ---------------   ---------------- 
                                       -----------------  ----------------- 
                                             112 440 912         89 553 202 
                                       -----------------  ----------------- 
                                               =========          ========= 
                                       -----------------  ----------------- 
 Interbank placements 
                                       -----------------  ----------------- 
 Interbank placements                         10 000 000          3 000 000 
                                       -----------------  ----------------- 
 Expected Loss allowance - Stage 1              (66 928)                  - 
                                       -----------------  ----------------- 
 
  -ECL at 1 January 2018                        (26 770)                  - 
                                       -----------------  ----------------- 
  -ECL charge through profit or loss            (40 158)                  - 
                                       -----------------  ----------------- 
                                           -------------      ------------- 
                                       -----------------  ----------------- 
                                               9 933 072          3 000 000 
                                       -----------------  ----------------- 
                                                 =======            ======= 
                                       -----------------  ----------------- 
 
   g.       INVESTMENT PROPERTIES 
 
                                               31 December 2018   31 December 2017 
                                                            US$                US$ 
                                              -----------------  ----------------- 
 
 At 1 January                                        18 977 000         14 202 270 
                                              -----------------  ----------------- 
 Acquisitions                                         6 082 924          4 792 475 
                                              -----------------  ----------------- 
 Disposals                                          (4 360 754)          (320 000) 
                                              -----------------  ----------------- 
 Fair value adjustments                               2 551 436            302 255 
                                              -----------------  ----------------- 
 Reclassification to property and equipment         (2 300 000)                  - 
                                              -----------------  ----------------- 
                                                  -------------      ------------- 
                                              -----------------  ----------------- 
 At 31 December                                      20 950 606         18 977 000 
                                              -----------------  ----------------- 
                                                       ========           ======== 
                                              -----------------  ----------------- 
 

Investment properties comprise a commercial property and residential properties that are leased out to third parties and land held for future development. No properties were encumbered.

Rental income amounting to US$365 269 (2017 - US$135 900) was received and no operating expenses were incurred on the investment properties in the current year due to the net leasing arrangement on the properties.

Included in investment properties are properties which were acquired as part of the foreclosure process with marketability restrictions measured at US$8 355 662 as at 31 December 2018. The Bank has no restrictions on the realisability of all the remaining investment properties and no contractual obligations to purchase, construct or develop the investment properties or for repairs, maintenance and enhancements.

Measurement of fair value

Fair value hierarchy

The fair value of the Bank's investment properties as at 31 December 2018 has been arrived at on the basis of valuations carried out by independent professional valuers, PMA Real Estate (Private) Limited. The valuation which conforms to International Valuation Standards, was in terms of the policy as set out in the accounting policies section and was derived with reference to market information close to the date of the valuation.

Level 2

The fair value for investment properties of US$12 594 944 (2017 - US$8 722 000) has been categorised under level 2 in the fair value hierarchy based on the inputs used for the valuation technique described below.

The following shows reconciliation between the opening and closing balances for level 2 fair values:

 
                                                         31 December 2018             31 December 2017 
                                                                      US$                          US$ 
                                              ---------------------------  --------------------------- 
 
           At 1 January                                         8 722 000                    7 382 270 
                                              ---------------------------  --------------------------- 
           Acquisitions                                         3 247 175                    1 740 158 
                                              ---------------------------  --------------------------- 
           Disposals                                                    -                    (320 000) 
                                              ---------------------------  --------------------------- 
           Fair value adjustments                               1 281 769                     (80 428) 
                                              ---------------------------  --------------------------- 
           Transfers from Level 3                               1 644 000                            - 
                                              ---------------------------  --------------------------- 
           Reclassification to property and                   (2 300 000)                            - 
            equipment 
                                              ---------------------------  --------------------------- 
                                                          ---------------                ------------- 
                                              ---------------------------  --------------------------- 
           Balance at 31 December                              12 594 944                    8 722 000 
                                              ---------------------------  --------------------------- 
                                                                =========                     ======== 
                                              ---------------------------  --------------------------- 
 

Level 3

The fair value for investment properties of US$8 355 662 (2017 - US$10 255 000) has been categorised under level 3 in the fair value hierarchy based on the inputs used for the valuation technique described below.

The following shows reconciliation between the opening and closing balances for level 3 fair values:

 
                                               31 December 2018             31 December 2017 
                                                            US$                          US$ 
                                    ---------------------------  --------------------------- 
           At 1 January                              10 255 000                    6 820 000 
                                    ---------------------------  --------------------------- 
           Acquisitions                               2 835 749                    3 052 317 
                                    ---------------------------  --------------------------- 
           Disposals                                (4 360 754)                            - 
                                    ---------------------------  --------------------------- 
           Fair value adjustments                     1 269 667                      382 683 
                                    ---------------------------  --------------------------- 
           Transfers to Level 2                     (1 644 000)                            - 
                                    ---------------------------  --------------------------- 
                                                ---------------                ------------- 
                                    ---------------------------  --------------------------- 
           Balance at 31 December                     8 355 662                   10 255 000 
                                    ---------------------------  --------------------------- 
                                                      =========                     ======== 
                                    ---------------------------  --------------------------- 
 

The values were arrived at by applying yield rates of 5% on rental values of between US$4 - US$7 per square metre. The properties are leased out under operating lease to various tenants.

Valuation technique and significant unobservable inputs

The following table shows the valuation technique used in measuring the fair value of investment properties, as well as the significant unobservable inputs used.

 
 Valuation     Significant unobservable                                         inter-relationship between 
 technique      inputs                                                           key unobservable inputs 
                                                                                 and fair value measurement 
 The                                                                            The estimated fair value 
 investment         *    Weighted average expected market rental growth (5%);   would increase /(decrease) 
 method                                                                         if: 
 Discounted                                                                      *    expected market rental growth were higher/ (lower); 
 cash flows         *    Void period (average 3 months after the end of each 
 was used to             lease); 
 value all                                                                       *    void periods were shorter/(longer); 
 income 
 producing          *    Occupancy rate (55%); and 
 properties.                                                                     *    the occupancy rates were higher /(lower); and 
 
 The direct         *    Average market yield of 10%. 
 comparison                                                                      *    the risk adjusted discount rates were lower/ 
 method was                                                                           (higher). 
 applied on         *    Marketability restrictions for level 3 items due to 
 all                     underlying contractual agreements with third parties 
 residential       . 
 properties. 
              ---------------------------------------------------------------  ---------------------------------------------------------- 
 

Below is an indication of the sensitivity analysis at different discount rates:-

 
 Change in rate   Change in fair value 
            +5%              1 165 911 
                 --------------------- 
            +3%                699 546 
                 --------------------- 
            +1%                233 182 
                 --------------------- 
            -1%               -233 182 
                 --------------------- 
            -3%               -699 546 
                 --------------------- 
            -5%             -1 165 911 
                 --------------------- 
 
   h.      CORPORATE GOVERNANCE AND RISK MANAGEMENT 
   1.      RESPONSIBILITY 

These financial statements are the responsibility of the directors. This responsibility includes the setting up of internal controls and risk management processes, which are monitored independently. The information contained in these financial statements has been prepared on the going concern basis and is in accordance with the provisions of the Companies Act (Chapter 24:03) of Zimbabwe, the Banking Act (Chapter 24:20) of Zimbabwe and International Financial Reporting Standards.

   2.      CORPORATE GOVERNANCE 

The Bank adheres to principles of corporate governance derived from the National Code on Corporate Governance Zimbabwe, King IV Report, the United Kingdom Combined Code and Reserve Bank of Zimbabwe corporate governance guidelines. The Bank is cognisant of its duty to conduct business with due care and in good faith in order to safeguard all stakeholders' interests.

Board and Director evaluations are carried out an annual basis, wherein the effectiveness of the Board is reviewed, including its gender and skills mix. Furthermore, the independence of Independent Non-Executive Directors is reviewed on an annual basis.

The Bank has in place an Ethics Charter ("Code of Ethics") that all Board and staff members are required to adhere to. Also the Bank adheres to its Environmental and Social Risk Management Framework, wherein its main objectives are to:

-- Identify and assess environmental and social risks and opportunities associated with a Client's activities and its sphere of influence;

   --   Promote improved social and environmental performance of a Client's companies; and 

-- Avoid, or where avoidance is not possible, minimize, mitigate, or compensate for adverse impacts on workers, affected communities, and the environment.

   3.      BOARD OF DIRECTORS 

Board appointments are made to ensure a variety of skills and expertise on the Board. Non-executive directors are of such calibre as to provide independence to the Board. The Chairman of the Board is an independent non-executive director. The Board is supported by mandatory committees in executing its responsibilities. The Board meets at least quarterly to assess risk, review performance and provide guidance to management on both operational and policy issues.

The Board conducts an annual peer based evaluation on the effectiveness of its activities. The process involves the members evaluating each other collectively as a board and individually as members. The evaluation, as prescribed by the RBZ, takes into account the structure of the board, effectiveness of committees, strategic leadership, corporate social responsibility, attendance and participation of members and weaknesses noted. Remedial plans are invoked to address identified weaknesses with a view to continually improve the performance and effectiveness of the Board and its members.

3.1 Directors' attendance (NMB Bank Limited Board is the same as the NMBZ Holdings Limited Board)

 
                                                                                               Human 
                                                                Asset and                      Resources, 
                                                                Liability                      Remuneration 
                                                                Management       Loans         and 
                   Board of       Audit         Risk            Committee        Review        Nominations        Credit 
                   Directors      Committee     Management      (ALCO) &         Committee     Committee          Committee 
                                                                Finance 
                                                                Committee 
 Mr. B. A. 
  Chikwanha      4      3                      4    3                                          4     3          4      3 
                -----  ------  -----  ------  ---  ---------  ---  ----------  ----  -------  ----  ---------  -----  ------ 
 Mr. B. 
  Ndachena (E)   4      4                                      4    4 
                -----  ------  -----  ------  ---  ---------  ---  ----------  ----  -------  ----  ---------  -----  ------ 
 Mr. E. 
  Sandersen      4      4                      4    4          4    4           4     4 
                -----  ------  -----  ------  ---  ---------  ---  ----------  ----  -------  ----  ---------  -----  ------ 
 Mr. B. P. 
  Washaya (E)    4      4                                      4    4                          4     4          4      4 
                -----  ------  -----  ------  ---  ---------  ---  ----------  ----  -------  ----  ---------  -----  ------ 
 Ms. S. 
  Chitehwe       4      4       10     10                      4    4           4     4 
                -----  ------  -----  ------  ---  ---------  ---  ----------  ----  -------  ----  ---------  -----  ------ 
 Mr. J. 
  Tichelaar      4      4                                      4    4           4     4        4     4 
                -----  ------  -----  ------  ---  ---------  ---  ----------  ----  -------  ----  ---------  -----  ------ 
 Mr. J. de la 
  Fargue         4      4                      4    4          4    4                          4     4          4      4 
                -----  ------  -----  ------  ---  ---------  ---  ----------  ----  -------  ----  ---------  -----  ------ 
 Ms. J. 
  Maguranyanga   4      4       10      9                                       4     4        4     4 
                -----  ------  -----  ------  ---  ---------  ---  ----------  ----  -------  ----  ---------  -----  ------ 
 Mr. C. 
  Chikaura       4      4       10     10      4    4          4    4                          4     4          4      4 
                -----  ------  -----  ------  ---  ---------  ---  ----------  ----  -------  ----  ---------  -----  ------ 
 
 

KEY

 
   Meetings planned 
 
 
 
 

(E) Executive.

   4.      RISK MANAGEMENT 

The Board of Directors has overall responsibility for the establishment and oversight of the Group's risk management framework. The Board has established the Board Asset and Liability Management Committee (ALCO) and the Board Risk and Compliance Committee, which are responsible for defining the Group's risk universe, developing policies and monitoring implementation. The Board also has the Board Credit Committee (BCC) which is responsible for sanctioning credits and the Board Loans Review Committee (LRC), which is responsible for monitoring asset quality and adherence to the credit risk management policy.

Risk management is linked logically from the level of individual transactions to the Group level. Risk management activities broadly take place simultaneously at the following different hierarchy levels:

a) Strategic Level: This involves risk management functions performed by senior management and the board of directors. It includes the definition of risk, ascertaining the Group's risk appetite, formulating strategy and policy for managing risk and establishes adequate systems and controls to ensure overall risk remains within acceptable levels and is adequately compensated.

b) Macro Level: It encompasses risk management within a business area or across business lines. These risk management functions are performed by middle management.

c) Micro Level: This involves "On-the-line" risk management where risks are actually created. These are the risk management activities performed by individuals who assume risk on behalf of the organisation such as Treasury Front Office, Corporate Banking, Retail banking etc. The risk management in these areas is confined to operational procedures set by management.

Risk management is premised on four (4) mutually reinforcing pillars, namely:

   a)      adequate board and senior management oversight; 
   b)      adequate strategy, policies, procedures and limits; 
   c)      adequate risk identification, measurement, monitoring and information systems; and 
   d)      comprehensive internal controls and independent reviews. 
   4.1   Credit risk 

Credit risk is the risk that a financial contract will not be honoured according to the original set of terms. The risk arises when borrowers or counterparties to a financial instrument fail to meet their contractual obligations. The Group's general credit strategies centre on sound credit granting process, diligent credit monitoring and strong loan collection and recovery. There is a separation between loan collection and recovery. There is a separation between loan granting and credit monitoring to ensure independency and effective management of the loan portfolio. The Board has put in place sanctioning committees with specific credit approval limits. The Credit Management department does the initial review of all applications before recommending them to the Executive Credit Committee and finally the Board Credit Committee depending on the loan amount. The Group has in place a Board Loans Review Committee responsible for reviewing the quality of the loan book and adequacy of loan loss provisions.

The Group has an automated credit processes from loan origination, appraisal, monitoring and collections. The system has a robust loan monitoring and reporting module which is critical in managing credit risk. In view of the group's move into the mass market, retail credit has become a key area of focus. The group has put in place robust personal loan monitoring systems and structures to mitigate retail loan delinquencies. This includes a rigorous scheme assessment and a dedicated pre-delinquency team and a separate recoveries team.

Credit Management

   --           Responsible for evaluating & approving credit proposals from the business units. 

-- Together with business units, has primary responsibility on the quality of the loan book.

   --           Reviewing credit policy for approval by the Board Credit Committee. 

-- Reviewing business unit level credit portfolios to ascertain changes in the credit quality of individual customers or other counterparties as well as the overall portfolio and detect unusual developments.

-- Approve initial customer internal credit grades or recommend to the Credit Committees for approval.

   --           Setting the credit risk appetite parameters. 
   --           Ensure the Group adheres to limits, mandates and its credit policy. 

-- Ensure adherence to facility covenants and conditions of sanction e.g. annual audits, gearing levels, management accounts.

-- Manage trends in asset and portfolio composition, quality and growth and non-performing loans.

   --          Manage concentration risk both in terms of single borrowers or group as well as sector concentrations and the review of such limits. 

Credit Monitoring and Financial Modelling

   --           Independent credit risk management. 
   --           Independent on-going monitoring of individual credit and portfolios. 

-- Triggers remedial actions to protect the interests of the Group, if appropriate (e.g. in relation to deteriorated credits).

-- Monitors the on-going development and enhancement of credit risk management across the Group.

   --           Reviews the Internal Credit Rating System. 
   --           On-going championing of the Basel II methodologies across the Group. 

-- Ensures consistency in the rating processes and performs independent review of credit grades to ensure they conform to the rating standards.

-- Confirm the appropriateness of the credit risk strategy and policy or recommends necessary revisions in response to changes/trends identified.

Credit Administration

   --           Prepares and keeps custody of all facility letters. 
   --           Security registration. 
   --           Safe custody of security documents. 

-- Ensures all conditions of sanction are fulfilled before allowing drawdown or limit marking.

-- Review of credit files for documentation compliance e.g. call reports, management accounts.

Recoveries

The recoveries unit is responsible for all collections and ensures that the Group maximises recoveries from Non-Performing Loans (NPLs) and loans and advances written off.

   4.2       Market risk 

This is the exposure of the Group's on and off balance sheet positions to adverse movement in market

prices resulting in a loss in earnings and capital. The market prices will range from money market

(interest rate risk), foreign exchange and equity markets in which the bank operates. The Group has in place a Management Asset and Liability Committee (ALCO) which monitors market risk and

recommends the appropriate levels to which the Group should be exposed at any time. Net Interest

Margin is the primary measure of interest rate risk, supported by periodic stress tests to assess the

Group's ability to withstand stressed market conditions. On foreign exchange risk, the bank monitors

currency mismatches and make adjustments depending on exchange rate movement forecast. The

mismatches per currency are contained within 5% of the Group's capital position.

Management ALCO meets on a monthly basis and operates within the prudential guidelines and policies established by the Board ALCO. The Board ALCO is responsible for setting exposure thresholds and limits, and meets on a quarterly basis.

   4.3       Liquidity risk 

Liquidity risk is the risk of financial loss arising from the inability of the Group to fund asset increases or meet obligations as they fall due without incurring unacceptable costs or losses. The Group identifies this risk through maturity profiling of assets and liabilities and assessment of expected cash flows and the availability of collateral which could be used if additional funding is required.

The daily liquidity position is monitored and regular liquidity stress testing is conducted under a variety of scenarios covering both normal and more severe market conditions. All liquidity policies and procedures are subject to review and approval by the Board ALCO.

The key measure used by the bank for managing liquidity risk is the ratio of net liquid assets to deposits to customers. The Group also actively monitors its loans to deposit ratio against a set threshold in a bid to monitor and limit funding risk. The group monitors funding concentration risk by reviewing the ratio of top 20 depositors to the total funding. Funding mix is also monitored by monitoring the contribution of wholesale and demand deposits to the total funding for the bank. Liquidity risk is monitored through a daily liquidity reports produced by the Risk Management department. This is augmented by a monthly management ALCO and a quarterly board ALCO meetings.

   4.4       Operational risk 

This risk is inherent in all business activities and is the risk of loss arising from inadequate or failed

internal processes, people, systems or from external events. The Group utilises monthly Key Risk Indicators to monitor operational risk in all units. Further to this, the Group has an elaborate Operational Loss reporting system in which all incidents with a material impact on the well-being of the Group are reported to risk management. The risk department conducts periodic risk assessments on all the units within the Group aimed at identifying the top risks and ways to minimise their impact. There is a Board Risk and Compliance Committee whose function is to ensure that this risk is minimised. The Risk Committee with the assistance of the internal audit function and the Risk Management department assesses the adequacy of the internal controls and makes the necessary recommendations to the Board.

   4.5       Legal and compliance risk 

Legal risk is the risk from uncertainty due to legal actions or uncertainty in the applicability or interpretation of contracts, laws or regulations. Legal risk may entail such issues as contract formation, capacity and contract frustration. Compliance risk is the risk arising from non - compliance with laws and regulations. To manage this risk, permanent relationships are maintained with firms of legal practitioners and access to legal advice is readily available to all departments. The Group has an independent compliance function which is responsible for identifying and monitoring all compliance issues and ensures the Group complies with all regulatory and statutory requirements.

   4.6       Reputational risk 

Reputation risk is the risk of loss of business as a result of negative publicity or negative perceptions

by the market with regards to the way the Group conducts its business. To manage this risk, the Group

strictly monitors customers' complaints, continuously train staff at all levels, conducts market surveys

and periodic reviews of business practices through its Internal Audit department. The directors are

satisfied with the risk management processes in the Group as these have contributed to the minimisation

of losses arising from risky exposures.

   4.7       Strategic risk 

This refers to current and prospective impact on a Group's earnings and capital arising from adverse business decisions or implementing strategies that are not consistent with the internal and external environment. To manage this risk, the Group always has a strategic plan that is adopted by the Board of Directors. Further, attainment of strategic objectives by the various departments is monitored periodically at management level.

   4.8       Risk Ratings 
   4.8.1    Reserve Bank of Zimbabwe Ratings 

The Reserve Bank of Zimbabwe conducted an onsite inspection on the Group's banking subsidiary on 24 November 2016. Below are the final ratings from the onsite examination.

4.8.1.1 CAMELS* Ratings

 
                          Latest RBS**   Previous RBS   Previous RBS 
     CAMELS Component        Ratings        Ratings        Ratings 
                           24/11/2016     30/06/2013     31/01/2008 
 Capital Adequacy              2              2              4 
                         -------------  -------------  ------------- 
 Asset Quality                 3              4              2 
                         -------------  -------------  ------------- 
 Management                    3              3              3 
                         -------------  -------------  ------------- 
 Earnings                      2              2              3 
                         -------------  -------------  ------------- 
 Liquidity                     3              2              3 
                         -------------  -------------  ------------- 
 Sensitivity to Market 
  Risk                         2              2              3 
                         -------------  -------------  ------------- 
 Composite Rating              3              3              3 
                         -------------  -------------  ------------- 
 

*CAMELS is an acronym for Capital Adequacy, Asset quality, Management, Earnings, Liquidity and Sensitivity to Market Risk. CAMELS rating system uses a rating scale of 1-5, where '1' is Strong, '2' is Satisfactory, '3' is Fair, '4' is Weak and '5' is Critical.

**RBS stands for Risk-Based Supervision.

4.8.1.2 Summary RAS ratings

 
                                  Latest RAS***   Previous RAS     Previous 
          RAS Component              Ratings         Ratings      RAS Ratings 
                                    24/11/2016     30/06/2013     31/01/2008 
 Overall Inherent Risk                High          Moderate       Moderate 
                                 --------------  -------------  ------------- 
 Overall Risk Management           Acceptable      Acceptable     Acceptable 
  Systems 
                                 --------------  -------------  ------------- 
 Overall Composite Risk             Moderate        Moderate       Moderate 
                                 --------------  -------------  ------------- 
 Direction of Overall Composite      Stable          Stable         Stable 
  Risk 
                                 --------------  -------------  ------------- 
 

*** RAS stands for Risk Assessment System.

4.8.1.3 Summary risk matrix - 24 November 2016 on - site examination

 
                      Level of Inherent   Adequacy of        Overall      Direction 
     Type of Risk      Risk                Risk Management    Composite    of Overall 
                                           Systems            Risk         Composite 
                                                                           Risk 
 Credit               High                Acceptable         High         Stable 
                     ------------------  -----------------  -----------  ------------ 
 Liquidity            High                Acceptable         High         Stable 
                     ------------------  -----------------  -----------  ------------ 
 Interest Rate        Moderate            Acceptable         Moderate     Stable 
                     ------------------  -----------------  -----------  ------------ 
 Foreign Exchange     Low                 Acceptable         Low          Stable 
                     ------------------  -----------------  -----------  ------------ 
 Strategic Risk       Moderate            Acceptable         Moderate     Stable 
                     ------------------  -----------------  -----------  ------------ 
 Operational Risk     Moderate            Acceptable         Moderate     Stable 
                     ------------------  -----------------  -----------  ------------ 
 Legal & Compliance   Moderate            Acceptable         Moderate     Stable 
                     ------------------  -----------------  -----------  ------------ 
 Reputation           High                Acceptable         Moderate     Stable 
                     ------------------  -----------------  -----------  ------------ 
 Overall              Moderate            Acceptable         Moderate     Stable 
                     ------------------  -----------------  -----------  ------------ 
 

KEY

Level of Inherent Risk

Low - reflects a lower than average probability of an adverse impact on a banking institution's capital and earnings. Losses in a functional area with low inherent risk would have little negative impact on the banking institution's overall financial condition.

Moderate - could reasonably be expected to result in a loss which could be absorbed by a banking institution in the normal course of business.

High - reflects a higher than average probability of potential loss. High inherent risk could reasonably be expected to result in a significant and harmful loss to the banking institution.

Adequacy of Risk Management Systems

Weak - risk management systems are inadequate or inappropriate given the size, complexity and risk profile of the banking institution. Institution's risk management systems are lacking in important ways and therefore a cause of more than normal supervisory attention. The internal control systems will be lacking in important aspects particularly as indicated by continued control exceptions or by the failure to adhere to written policies and procedures.

Acceptable - management of risk is largely effective but lacking to some modest degree. While the institution might be having some minor risk management weaknesses, these have been recognised and are being addressed. Management information systems are generally adequate.

Strong - management effectively identifies and controls all types of risk posed by the relevant functional areas or per inherent risk. The board and senior management are active participants in managing risk and ensure appropriate policies and limits are put in place. The policies comprehensively define the bank's risk tolerance, responsibilities and accountabilities are effectively communicated.

Overall Composite Risk

Low - would be assigned to low inherent risk areas. Moderate risk areas may be assigned a low composite risk where internal controls and risk management systems are strong and effectively mitigate much of the risk.

Moderate - risk management systems appropriately mitigates inherent risk. For a given low risk area, significant weaknesses in the risk management systems may result in a moderate composite risk assessment.

On the other hand, a strong risk management system may reduce the risk so that any potential financial loss from the activity would have only a moderate negative impact on the financial condition of the organisation.

High - risk management systems do not significantly mitigate the high inherent risk. Thus, the activity could potentially result in a financial loss that would have a significant impact on the bank's overall condition.

Direction of Overall Composite Risk

Increasing - based on the current information, risk is expected to increase in the next 12 months.

Decreasing - based on current information, risk is expected to decrease in the next 12 months.

Stable - based on the current information, risk is expected to be stable in the next 12 months.

   4.8.2    External Credit Ratings 

The external credit ratings were given by Global Credit Rating (GCR), a credit rating agency accredited with the Reserve Bank of Zimbabwe.

Security class 2018 2017

Long term BBB- BB+

The current rating expires in August 2019.

   4.9       Regulatory Compliance 

There was no regulatory breach resulting in penalties during the period under review. The Bank is committed to comply with and adhere to all regulatory requirements.

              5.    CAPITAL MANAGEMENT 

The primary objective of the Bank's capital management is to ensure that the Bank complies with the RBZ requirements. In implementing the current capital requirements, the RBZ requires the Banking subsidiary to maintain a prescribed ratio of total capital to total risk weighted assets.

Regulatory capital consists of Tier 1 capital, which comprises share capital, share premium, retained earnings (including current year profit), statutory reserve and other equity reserves.

The other component of regulatory capital is Tier 2 capital, which includes subordinated term debt, revaluation reserves and portfolio provisions.

Tier 3 capital relates to an allocation of capital to market and operational risk.

Various limits are applied to elements of the capital base. The core capital (Tier 1) shall comprise not less than 50% of the capital base and the regulatory reserves and portfolio provisions are limited to 1.25% of total risk weighted assets.

The Bank's regulatory capital position at 31 December was as follows:

 
                                                        31 December      31 December 
                                                               2018             2017 
                                                                US$              US$ 
                                                 ------------------  --------------- 
 
 Share capital                                               16 506           16 506 
                                                 ------------------  --------------- 
 Share premium                                           31 474 502       31 474 502 
                                                 ------------------  --------------- 
 Retained earnings                                       47 267 030       30 842 252 
                                                 ------------------  --------------- 
 Fair value gain on investment properties               (3 257 631)      (1 197 871) 
                                                 ------------------  --------------- 
                                                    ---------------   -------------- 
                                                 ------------------  --------------- 
                                                         75 500 407       61 135 389 
                                                 ------------------  --------------- 
 
 Less: capital allocated for market and 
  operational risk                                      (3 886 799)      (2 918 935) 
                                                 ------------------  --------------- 
 Credit to insiders                                               -                - 
                                                 ------------------  --------------- 
                                                     --------------   -------------- 
                                                 ------------------  --------------- 
 Tier 1 capital                                          71 613 608       58 216 454 
                                                 ------------------  --------------- 
 Tier 2 capital (subject to limit as per 
  Banking Regulations)                                    8 197 298        5 183 773 
                                                 ------------------  --------------- 
 
 Revaluation reserve                                      3 257 631        1 197 871 
                                                 ------------------  --------------- 
 Revaluation of property and equipment                      136 741           90 310 
                                                 ------------------  --------------- 
 Subordinated debt                                          302 152          477 782 
                                                 ------------------  --------------- 
 Regulatory reserve (limited to 1.25% of 
  risk weighted assets)                                           -        2 297 492 
                                                 ------------------  --------------- 
 Stage 1 & 2 ECL provisions - (limited to                 4 500 774                - 
  1,25% of risk weighted assets) 
                                                 ------------------  --------------- 
 Portfolio provisions (limited to 1.25% 
  of risk weighted assets)                                        -        1 120 318 
                                                 ------------------  --------------- 
                                                    ---------------   -------------- 
                                                 ------------------  --------------- 
 Total Tier 1 & 2 capital                                79 810 906       63 400 227 
                                                 ------------------  --------------- 
 Tier 3 capital (sum of market and operational 
  risk capital)                                           3 886 799        2 918 935 
                                                 ------------------  --------------- 
                                                    ---------------   -------------- 
                                                 ------------------  --------------- 
 Total capital base                                      83 697 705       66 319 162 
                                                 ------------------  --------------- 
                                                          =========        ========= 
                                                 ------------------  --------------- 
 Total risk weighted assets                             360 061 931      273 424 840 
                                                 ------------------  --------------- 
                                                          =========        ========= 
                                                 ------------------  --------------- 
 Tier 1 ratio                                                19.89%           21.29% 
                                                 ------------------  --------------- 
 Tier 2 ratio                                                 2.28%            1.90% 
                                                 ------------------  --------------- 
 Tier 3 ratio                                                 1.08%            1.07% 
                                                 ------------------  --------------- 
 Total capital adequacy ratio                                23.25%           24.26% 
                                                 ------------------  --------------- 
 RBZ minimum required                                        12.00%           12.00% 
                                                 ------------------  --------------- 
 
   6.         SEGMENT INFORMATION 

For management purposes, the Bank is organised into five operating segments based on products and services as follows:

 
            Retail Banking          Individual customer's deposits and consumer 
                                     overdrafts, credit card facilities and 
                                     funds transfer facilities. 
 
            Corporate Banking       Loans and other credit facilities and 
                                     deposit and current accounts for corporate 
                                     and institutional customers. 
 
            Treasury                Money market investment, securities trading, 
                                     accepting and discounting of instruments 
                                     and foreign currency trading. 
 
            International Banking   Handles the Bank's foreign currency denominated 
                                     banking business and manages relationships 
                                     with correspondent. 
 
            Digital Banking         Handles the Bank's Digital Banking products 
                                     including Card and POS Services. 
 

Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss which in certain respects is measured differently from operating profit or loss in the financial statements. Income taxes are managed on a bank wide basis and are not allocated to operating segments.

Interest income is reported net as management primarily relies on net interest revenue as a performance measure, not the gross income and expense.

Transfer prices between operating segments are on arm's length basis in a manner similar to transactions with third parties.

No revenue from transactions with a single external customer or counterparty amounted to 10% or more of the Bank's total revenue in 2018 and 2017.

The following table presents income and profit and certain asset and liability information regarding the bank's operating segments and service units:

 
                  Retail Banking        Corporate          Treasury   International          Digital 
                                          Banking           Banking         Banking          Banking             Other             Total 
 For the year 
 ended 31                    US$              US$               US$             US$              US$               US$               US$ 
 December 
 2018 
                 ---------------  ---------------  ----------------  --------------  ---------------  ----------------  ---------------- 
 Third party                                                                                  14 206 
  income              24 477 869       17 934 170        12 662 627         491 279              279         4 983 521        74 755 745 
                 ---------------  ---------------  ----------------  --------------  ---------------  ----------------  ---------------- 
 Interest and 
  similar 
  expense            (1 555 990)      (3 049 358)       (4 259 668)               -                -                 -       (8 865 016) 
                 ---------------  ---------------  ----------------  --------------  ---------------  ----------------  ---------------- 
                   -------------   --------------      ------------   -------------    -------------    --------------     ------------- 
                 ---------------  ---------------  ----------------  --------------  ---------------  ----------------  ---------------- 
 Net operating                                                                                14 206 
  income              22 921 879       14 884 812         8 402 959         491 279              279         4 983 521        65 890 729 
                 ---------------  ---------------  ----------------  --------------  ---------------  ----------------  ---------------- 
                  --------------   --------------      ------------   -------------   --------------   ---------------    -------------- 
                 ---------------  ---------------  ----------------  --------------  ---------------  ----------------  ---------------- 
 Other material 
 non-cash 
 items: 
                 ---------------  ---------------  ----------------  --------------  ---------------  ----------------  ---------------- 
 Impairment 
  losses on 
  financial 
  assets 
  measured at 
  armotised 
  cost                 1 263 783        2 637 704           110 465               -                -                 -         4 011 952 
                 ---------------  ---------------  ----------------  --------------  ---------------  ----------------  ---------------- 
 Depreciation 
  of property 
  and equipment          404 593           38 933             2 842           4 471          413 438           506 035         1 370 312 
                 ---------------  ---------------  ----------------  --------------  ---------------  ----------------  ---------------- 
 Amortisation 
  of intangible 
  assets                       -                -                 -               -                -           879 376           879 376 
                 ---------------  ---------------  ----------------  --------------  ---------------  ----------------  ---------------- 
 Segment 
  profit/ 
  (loss)              10 610 669        6 478 395         7 135 831       (262 253)        9 658 564       (6 455 140)        27 166 066 
                 ---------------  ---------------  ----------------  --------------  ---------------  ----------------  ---------------- 
 Income tax 
  charge                       -                -                 -               -                -       (5 923 385)       (5 923 385) 
                 ---------------  ---------------  ----------------  --------------  ---------------  ----------------  ---------------- 
 Other 
  comprehensive 
  income                       -                -                 -               -                -            46 431            46 431 
                 ---------------  ---------------  ----------------  --------------  ---------------  ----------------  ---------------- 
                  --------------   --------------     -------------    ------------     ------------    --------------     ------------- 
                 ---------------  ---------------  ----------------  --------------  ---------------  ----------------  ---------------- 
 Profit/(loss)                                                                                                 (12 322 
  for the year        10 610 669        6 478 395         7 135 831       (262 253)        9 658 564              094)        21 289 112 
                 ---------------  ---------------  ----------------  --------------  ---------------  ----------------  ---------------- 
                   -------------   --------------   ---------------   -------------     ------------    --------------   --------------- 
                 ---------------  ---------------  ----------------  --------------  ---------------  ----------------  ---------------- 
 
 At 31 December 
 2018 
                 ---------------  ---------------  ----------------  --------------  ---------------  ----------------  ---------------- 
 Assets and 
 liabilities 
                 ---------------  ---------------  ----------------  --------------  ---------------  ----------------  ---------------- 
 Capital 
  expenditure            709 351          232 845             1 731           3 236        4 254 017         4 680 032         9 881 214 
                 ---------------  ---------------  ----------------  --------------  ---------------  ----------------  ---------------- 
                         100 998          157 788                                                                                527 538 
 Total assets                573              029       160 181 794       3 722 839        5 652 611        99 052 400               642 
                 ---------------  ---------------  ----------------  --------------  ---------------  ----------------  ---------------- 
 Total                   123 421          159 912                                                                                448 643 
  liabilities                353              290       135 168 359      15 654 293                -        14 487 568               863 
                 ---------------  ---------------  ----------------  --------------  ---------------  ----------------  ---------------- 
 

The following table presents income and profit and certain asset and liability information regarding the bank's operating segments and service units:

 
                  Retail Banking        Corporate        Treasury    International         Digital 
                                          Banking         Banking          Banking         Banking             Other            Total 
 For the year                US$              US$             US$              US$             US$               US$              US$ 
 ended 31 
 December 
 2017 
                 ---------------  ---------------  --------------  ---------------  --------------  ----------------  --------------- 
 
 Third party                                                                                10 914 
  income              18 806 390       14 340 614       7 658 528          546 651             710         1 317 628       53 584 521 
                 ---------------  ---------------  --------------  ---------------  --------------  ----------------  --------------- 
  Interest and 
   similar                (1 950 
   expense                  582)      (3 392 090)     (3 814 423)                -               -                 -      (9 157 095) 
                 ---------------  ---------------  --------------  ---------------  --------------  ----------------  --------------- 
                   -------------   --------------    ------------    -------------   -------------    --------------    ------------- 
                 ---------------  ---------------  --------------  ---------------  --------------  ----------------  --------------- 
 Net operating                                                                              10 914 
  income              16 855 808       10 948 524       3 844 105          546 651             710         1 317 628       44 427 426 
                 ---------------  ---------------  --------------  ---------------  --------------  ----------------  --------------- 
                  --------------   --------------    ------------    -------------   -------------   ---------------   -------------- 
                 ---------------  ---------------  --------------  ---------------  --------------  ----------------  --------------- 
 Other material 
 non-cash items 
                 ---------------  ---------------  --------------  ---------------  --------------  ----------------  --------------- 
 Impairment 
  losses on 
  loans 
  and advances         1 599 035        2 254 114               -                -               -                 -        3 853 149 
                 ---------------  ---------------  --------------  ---------------  --------------  ----------------  --------------- 
 Depreciation 
  of property 
  and equipment          476 499           15 069           9 566            6 127         486 916           142 633        1 136 810 
                 ---------------  ---------------  --------------  ---------------  --------------  ----------------  --------------- 
 Amortisation 
  of intangible 
  assets                       -                -               -                -               -           832 567          832 567 
                 ---------------  ---------------  --------------  ---------------  --------------  ----------------  --------------- 
 Segment 
  profit/ 
  (loss)               2 946 565        3 372 984       2 774 647         (91 733)       2 675 839         1 317 628       12 995 930 
                 ---------------  ---------------  --------------  ---------------  --------------  ----------------  --------------- 
 Income tax 
  charge                       -                -               -                -               -       (3 078 579)      (3 078 579) 
                 ---------------  ---------------  --------------  ---------------  --------------  ----------------  --------------- 
 Other 
  comprehensive 
  income                       -                -               -                -               -            90 310           90 310 
                 ---------------  ---------------  --------------  ---------------  --------------  ----------------  --------------- 
                   -------------   --------------   -------------   --------------    ------------    --------------    ------------- 
                 ---------------  ---------------  --------------  ---------------  --------------  ----------------  --------------- 
 Profit/(loss) 
  for the year         2 946 565        3 372 984       2 774 647         (91 733)       2 675 839       (1 670 640)       10 007 662 
                 ---------------  ---------------  --------------  ---------------  --------------  ----------------  --------------- 
                        ========         ========        ========         ========        ========          ========         ======== 
                 ---------------  ---------------  --------------  ---------------  --------------  ----------------  --------------- 
 As at 31 
 December 2017 
                 ---------------  ---------------  --------------  ---------------  --------------  ----------------  --------------- 
 Assets and 
 liabilities 
                 ---------------  ---------------  --------------  ---------------  --------------  ----------------  --------------- 
 Capital 
  expenditure            325 455            2 388           1 958            2 873       1 060 815         2 211 157        3 604 646 
                 ---------------  ---------------  --------------  ---------------  --------------  ----------------  --------------- 
                         103 344                          118 870                                                             423 114 
 Total assets                444      152 311 200             271        3 612 619       5 312 423        39 663 481              438 
                 ---------------  ---------------  --------------  ---------------  --------------  ----------------  --------------- 
 Total                   109 755                                                                                              358 393 
  liabilities                085      128 928 542      96 952 318       15 052 401               -         7 705 030              376 
                 ---------------  ---------------  --------------  ---------------  --------------  ----------------  --------------- 
 
   6.1    GEOGRAPHICAL INFORMATION 

The Bank operates in one geographical market, Zimbabwe.

   7.       EVENTS AFTER REPORTING PERIOD 

Sensitivity analysis for events after the reporting period

 
                                       Components of reported amounts                                                  Sensitivity Analysis 
                  Monetary           Monetary           Non Monetary        Non Monetary      Total             Total             Total              Total 
                 -----------------  -----------------  ------------------  ----------------  ----------------  ----------------  -----------------  ----------------- 
                  Assets/            Assets/            Assets/             Assets/           USD               RTGS$             RTGS$              RTGS$ 
                 -----------------  -----------------  ------------------  ----------------  ----------------  ----------------  -----------------  ----------------- 
                       Liabilities        Liabilities         Liabilities       Liabilities   @1:1              @1:2.5            @1:3               @1:4 
                 -----------------  -----------------  ------------------  ----------------  ----------------  ----------------  -----------------  ----------------- 
                        Nostro FCA              RTGS$                 USD             RTGS$ 
                               USD 
                 -----------------  -----------------  ------------------  ----------------  ----------------  ----------------  -----------------  ----------------- 
 Shareholder's 
 funds 
                 -----------------  -----------------  ------------------  ----------------  ----------------  ----------------  -----------------  ----------------- 
 Share capital                   -             16 506                   -                 -            16 506            16 506             16 506             16 506 
                 -----------------  -----------------  ------------------  ----------------  ----------------  ----------------  -----------------  ----------------- 
                                               31 474                                                  31 474            31 474             31 474 
 Share premium                   -                502                   -                 -               502               502                502         31 474 502 
                 -----------------  -----------------  ------------------  ----------------  ----------------  ----------------  -----------------  ----------------- 
 Revaluation 
  reserve                        -                  -             136 741                 -           136 741           341 853            410 223            546 964 
                 -----------------  -----------------  ------------------  ----------------  ----------------  ----------------  -----------------  ----------------- 
 Foreign 
  currency 
  translation                                                                                                                               12 026 
  reserve                        -                  -                   -                 -                 -         9 019 801                401         18 039 601 
                 -----------------  -----------------  ------------------  ----------------  ----------------  ----------------  -----------------  ----------------- 
 Retained                                      47 267                                                  47 267            47 267             47 267 
  earnings                       -                030                   -                 -               030               030                030         47 267 030 
                 -----------------  -----------------  ------------------  ----------------  ----------------  ----------------  -----------------  ----------------- 
                   ---------------    ---------------   -----------------   ---------------   ---------------   ---------------    ---------------   ---------------- 
                 -----------------  -----------------  ------------------  ----------------  ----------------  ----------------  -----------------  ----------------- 
 Total 
  shareholder's                                78 758                                                  78 894            88 119             91 194 
  funds                          -                038             136 741                 -               779               692                662         97 344 603 
                 -----------------  -----------------  ------------------  ----------------  ----------------  ----------------  -----------------  ----------------- 
 Liabilities 
                 -----------------  -----------------  ------------------  ----------------  ----------------  ----------------  -----------------  ----------------- 
 Deposits and 
  other                                       418 184                                                 447 138           490 569            505 046            534 000 
  accounts              28 953 975                241                   -                 -               216               179                166                141 
                 -----------------  -----------------  ------------------  ----------------  ----------------  ----------------  -----------------  ----------------- 
 Subordinated 
  term loan              1 505 647                  -                   -                 -         1 505 647         3 764 118          4 516 941          6 022 588 
                 -----------------  -----------------  ------------------  ----------------  ----------------  ----------------  -----------------  ----------------- 
 Deferred tax 
  liability                      -                  -                   -                 -                 -         1 223 898          2 266 591          4 351 978 
                 -----------------  -----------------  ------------------  ----------------  ----------------  ----------------  -----------------  ----------------- 
                   ---------------   ----------------   -----------------    --------------   ---------------   ---------------   ----------------   ---------------- 
                 -----------------  -----------------  ------------------  ----------------  ----------------  ----------------  -----------------  ----------------- 
 Total                                        418 184                                                 448 643           495 557            511 829            544 374 
  liabilities           30 459 622                241                   -                 -               863               195                698                707 
                 -----------------  -----------------  ------------------  ----------------  ----------------  ----------------  -----------------  ----------------- 
                   ---------------   ----------------   -----------------    --------------   ---------------   ---------------    ---------------   ---------------- 
                 -----------------  -----------------  ------------------  ----------------  ----------------  ----------------  -----------------  ----------------- 
 Total 
  shareholder's 
  funds 
  and                                         496 942                                                 527 538           583 676            603 024            641 719 
  liabilities           30 459 622                279             136 741                 -               642               887                360                310 
                 -----------------  -----------------  ------------------  ----------------  ----------------  ----------------  -----------------  ----------------- 
                         =========          =========          ==========         =========         =========         =========          =========          ========= 
                 -----------------  -----------------  ------------------  ----------------  ----------------  ----------------  -----------------  ----------------- 
 Assets 
                 -----------------  -----------------  ------------------  ----------------  ----------------  ----------------  -----------------  ----------------- 
 Cash and cash                                 99 748                                                 112 440           131 479            137 825            150 518 
  equivalents           12 692 524                388                   -                 -               912               698                960                484 
                 -----------------  -----------------  ------------------  ----------------  ----------------  ----------------  -----------------  ----------------- 
 Current tax 
  assets                         -            210 302                   -                 -           210 302           210 302            210 302            210 302 
                 -----------------  -----------------  ------------------  ----------------  ----------------  ----------------  -----------------  ----------------- 
 Investment                                   117 249                                                 117 249           117 249            117 249            117 249 
  securities                     -                434                   -                 -               434               434                434                434 
                 -----------------  -----------------  ------------------  ----------------  ----------------  ----------------  -----------------  ----------------- 
 Amount owing 
  from Holding 
  Company                        -            558 303                   -                 -           558 303           558 303            558 303            558 303 
                 -----------------  -----------------  ------------------  ----------------  ----------------  ----------------  -----------------  ----------------- 
 Loans, 
  advances and 
  other                                       254 191                                                 254 195           254 201            254 203            254 207 
  accounts                   4 081                477                   -                 -               558               681                720                801 
                 -----------------  -----------------  ------------------  ----------------  ----------------  ----------------  -----------------  ----------------- 
 Non current 
  assets held 
  for sale                       -                  -              36 000                 -            36 000            90 000            108 000            144 000 
                 -----------------  -----------------  ------------------  ----------------  ----------------  ----------------  -----------------  ----------------- 
 Unquoted 
  investments              112 501                  -                   -                 -           112 501           281 253            337 503            450 004 
                 -----------------  -----------------  ------------------  ----------------  ----------------  ----------------  -----------------  ----------------- 
 Investment                                                                                            20 950            41 708             48 627 
  properties                     -                  -          13 838 490         7 112 116               606               341                586         62 466 076 
                 -----------------  -----------------  ------------------  ----------------  ----------------  ----------------  -----------------  ----------------- 
 Intangible 
  assets                         -                  -                   -         2 036 775         2 036 775         2 036 775          2 036 775          2 036 775 
                 -----------------  -----------------  ------------------  ----------------  ----------------  ----------------  -----------------  ----------------- 
 Property and                                                                                          17 844            35 861             41 866 
  equipment                      -                  -          12 011 354         5 832 715               069               100                777         53 878 131 
                 -----------------  -----------------  ------------------  ----------------  ----------------  ----------------  -----------------  ----------------- 
 Deferred tax 
  asset                          -          1 904 182                   -                 -         1 904 182                 -                  -                  - 
                 -----------------  -----------------  ------------------  ----------------  ----------------  ----------------  -----------------  ----------------- 
                  ----------------   ----------------     ---------------   ---------------   ---------------   ---------------    ---------------   ---------------- 
                 -----------------  -----------------  ------------------  ----------------  ----------------  ----------------  -----------------  ----------------- 
                                              473 862                                14 981           527 538           583 676            603 024            641 719 
                        12 809 106                086          25 885 844               606               642               887                360                310 
                 -----------------  -----------------  ------------------  ----------------  ----------------  ----------------  -----------------  ----------------- 
                         =========          =========           =========          ========         =========         =========          =========          ========= 
                 -----------------  -----------------  ------------------  ----------------  ----------------  ----------------  -----------------  ----------------- 
 

Registered Offices

4(th) Floor NMB Centre

Unity Court George Silundika Avenue/

   Cnr 1(st) Street/Kwame Nkrumah Avenue                                   Leopold Takawira Street 
   Harare                                                                                    Bulawayo 
   Zimbabwe                                                                              Zimbabwe 
   Telephone         +263 4 759651-7                                              +263 9 70169 
   Facsimile          +263 4 759648                                                 +263 9 882068 
   Website:           http://www.nmbz.co.zw 
   Email:               enquiries@nmbz.co.zw 

Transfer Secretaries

   In Zimbabwe                                                                           In UK 

First Transfer Secretaries Computershare Investor Services PLC

   1 Armagh Avenue                                                                   The Pavilions 
   (Off Enterprise Road)                                                              Bridgewater Road 
   Eastlea                                                                                   Bristol 
   P.O. Box 11                                                                             BS99 9ZZ 

Harare United Kingdom

Zimbabwe

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April 26, 2019 02:00 ET (06:00 GMT)

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