Annual Report and Accounts 2018 Annual Report and Accounts • 2018

Publication of the National Bank of Angola (BNA)

Reproduction of the material is allowed provided the source is mentioned: Annual Report and Accounts of the BNA of 2018. Any discrepancies between data and totals or percentage changes come from rounding. The sources of tables and graphics of exclusive authorship of the National Bank of Angola are not mentioned.

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Table of Contents

Table of Contents 2 Message from the Governor 8 Executive Summary 10 PART I – MACROECONOMIC CONTEXT 12 1 International Economy 13 1.1. Estimates for 2018 and 2019 13 1.2. Outlook for 2018 14 1.3. Commodities Market 15 1.3.1. Energy Commodities 15 1.3.2. Food Commodities 16 2. Angolan Economy 17 2.1. The Real Sector 17 2.1.1. Economic Activity 17 2.1.2. Headline Inflation 18 2.1.1. Core Inflation 22 2.2. Fiscal Sector 23 2.2.1. Budget Policy and Situation 23 2.2.2. Public Revenue 23 2.2.3. Public Spending 24 2.2.4. Fiscal Balance and Financing 25 2.2.5. Public Debt 25 2.2.6. Primary Government Securities Market 26 PART II – ANGOLAN BANKING SYSTEM 29 3. Performance of the Angolan Banking System 30 3.1. Banking System Activity 30 3.2. Main Banking System Indicators 33 4. Performance of the Angolan Non-Bank Financial System 34 4.1. Composition of the Non-Bank Financial System 34 4.2. Non-Bank Financial System Activity 34 4.2.1. Turnover 34 4.3. Performance of the NBFI 36 4.3.1. Payment Service Provision Companies (Remittances) 37 4.3.2. Microcredit Companies 38

5. Payment System 39 5.1. Operation of the RTPS (Real-Time Payment Subsystem) 40 5.2. Superintendent of the APS (Angolan Payment System) 41 5.3. Angolan Payment System Technical Council 41 5.4. APS Outlook 42 PART III – CENTRAL BANK POLICIES 43 6. Monetary Policy and Liquidity Management 44 6.1. The Monetary Policy Operational Framework – Policy Instruments 44 6.1. Monetary Policy Objectives and Measurements 44 6.1.1. Monetary Policy Measurements 44 6.2. Money Market 45 6.2.1. Open Market Transactions (OMT) 45 6.2.2. Permanent Liquidity Facilities 46 6.3. Interbank Money Market 47 6.4. Foreign Exchange Policy Instruments 47 6.5. Primary Foreign Exchange Market 48 6.6. Secondary Foreign Exchange Market 48 7. Management of International Reserves 49 8. Impacts of Market Transactions on the Monetary Base and Monetary Aggregates 50 9. Monetary Aggregates and the Balance of Payments 51 9.1. Evolution of Monetary Aggregates 51 9.2. Balance of Payments Performance 54 9.2.1. Current Account 54 9.2.2. Capital and Financial Account 56 9.3. Evolution of International Reserves 57 10. Policy for Preventing Money Laundering and Combating Terrorist Financing 57 11. Corporate Governance and Internal Control System 58 PART IV – Relevant activities of the BNA 59 12. Activities of the National Bank of Angola 60 12.1. Monetary Policy Committee 60 12.2. Financial Stability Committee 61 12.3. Investment Committee 62 13. Equity Situation and Financial and Budgetary Performance 63 13.1. Budgetary Performance 63 13.2. Main variations in balance sheet composition 64

13.3. Evaluation of results 65 14. Organization 66 15. Regulation and Organization of the Financial System 68 16. Risk Management and Compliance 70 17. Complaints Management 71 17.1. By Reclaimed Matter 72 17.2. By Result 72 18. Inspections 73 18.1.1. Off-Site Inspections 73 18.1.2. On-Site Inspections 73 18.2. Punitive Activities 73 18.2.1. Global Analysis 74 18.2.2. Number of Product and Service Processes 74 18.2.3. Number of Advertising Campaigns 75 19. International Relations 75 20. Financial Education 76 20.1. Museum of Money 77 20.2. Financial Training 78 20.3. Access to the Financial System 80 21. Human Capital 81 PART V – Financial Statements 84 Balance Sheet as at 31 December 2018 85 Statement of profit and loss for the year ended on 31 December 2018 87 Statement of profit and loss and other comprehensive income for the year ended on 31 December 2018 87 Statement of changes in equity for the year ended on 31 December 2018 88 Statement of cash flows from foreign currency transactions for the year ended on 31 December 2018 89 PART VI – Note Appended to the Financial Statements 90 1. Basis of presentation and summary of main accounting policies 92 1.1 Basis of presentation 92 1.2 Derogations from rules and interpretations 92 1.3 Voluntary Changes in Accounting Policies 94

New Rules and Interpretations Applicable to the Year and Rules, Interpretations, Amendments and 1.4 94 Revisions that will Apply to Future Years 1.5 Summary of Main Accounting Policies 94 1.5.1 Specialization of Years 94 1.5.2 Transactions in Foreign Currency 94 1.5.3. Financial Instruments 95 1.5.4. Gold 100 1.5.5. Financial Stakes 100 1.5.6. Tangible Assets 100 1.5.7. Intangible Assets 101 1.5.8. Benefits for the Employees 102 1.5.9. Provisions and Contingent Liabilities 102 1.5.10. Other regulatory risks, guarantees provided and irrevocable commitments 103 1.5.11. Taxes 103 1.5.12. Share capital 103 1.5.13. Reserves and Retained Revenue 103 1.5.14. Statements of Cash Flows from Foreign Currency Transactions 104 1.5.15. MAIN estimates and uncertainties associated with the application of accounting policies 104 2. Gold 106 3. Cash and availabities at credit institutions 106 4. Investments at credit institutions 107 5. Other financial assets 108 6. International Monetary Fund 111 7. Other internal and external assets receivable 111 8. Transactions at credit institutions related to monetary policy operations 112 9. Financial assets granted to the state 114 10. Investments is associates and other entities 114 11. Tangible and intangible assets 115 12. Other assets 116 13. Banknotes and coins in circulation 117 14. Liabilities to domestic credit institutions related to monetary policy operations 118

15 . Domestic liabilities to other entities 120 16. Financial institution funds 120 17. Liabilities with pensions and other benefits 121 18. Provisions 123 19. Other liabilities 124 20. Capital 125 21. Revaluation differences 126 22. Other reserves and retained revenue 126 23. Off-Balance-Sheet Accounts 126 24. Interest and similar income 128 25. Interest and similar charges 128 26. Income from services and fees 129 27. Charges with services and fees 129 28 . Results of financial assets measured at fair value through results (profit or loss) 129 29. Available-for-sale financial assets results 130 30. Results on investments held to maturity 130 31. Results of investments in associates and other entities 130 32. Foreign exchange results 131 33. Costs of issuing banknotes and coins 131 34. Results from the sale of other assets 131 35. Other operating results 132 36. Staff costs 132 37. Third-party supplies and services 133 38. Impairment losses net of reversals 134 39. Transactions with related entities 134 39.1. Ministry of Finance 134 39.2. Angola Interbank Services Company (EMIS) 135 39.3 . Board of Directors of the Bank 135 39.4. Pension Fund 135 40. Impacts of the change to accounting policy 135 41. Dislosures regarding financial instruments 139 42. Contingent liabilities 152

43. Events subsequent to the reference date 152 44. Allocation of 2018 Profit 153 45. New standards and interpretations applicable to the year or that will take effect in future years 153 PART VII – ANNEXES 158 I. Audit Committee Report and Opinion 159 II Independent Auditor Opinion 165 III. Regulations 173 IV Abbreviations 181 8 • Relatório Anual e Contas • 2018

Message from the Governor

The global economy in 2018 maintained its positive trend, although with signs of weakening observed in the second half of the year. According to the International Monetary Fund (IMF), the global economy will grow by around 3.70% in 2018, with projected growth of 3.50% in 2019. This behaviour is influenced by the decline in growth expectations in developed economies, which will record a real growth rate of about 2.30% in 2018, with a projection of 2.00% for 2019. Despite positive outlook for global growth, the IMF warns that trade tensions, especially between the United States of America and China, the increasingly restrictive financial conditions worldwide and also “Brexit”, taken together, may bring about increased risks to global growth. The Sub-Saharan region of Africa recorded real economic growth below that of the global economy (2.90%), mainly caused by the decline in economic activity in Nigeria and Angola. However, it is expected to bounce back significantly in 2019, with forecast growth of 3.50% and with a third of countries in the region enjoying growth rates of over 5.00%.

In the domestic context, we highlight the implementation of the Macroeconomic Stabilization Programme (MSP) by the Angolan Government, which has caused an improvement in some macroeconomic indicators. The reduction in the inflation rate and the recording of an overall fiscal surplus demonstrate a macroeconomic environment that is gradually starting to show signs of stability. Gross Domestic Product will continue to fall, the result of a decline in oil production and a less dynamic non-oil sector; although this contraction is estimated at 1.1%, this is lower than the falls in the last two years. We should also mention the agreement reached between the Angolan Government and the International Monetary Fund, under the Extended Funds Facility (EFF), aimed to support economic reform in the country and to boost the already significant progress seen in the Angolan economic, with the implementation of the MSP.

Aiming to contribute to the macroeconomic stabilization process, the BNA took measures to reform the foreign exchange market and to consolidate the banking financial system. Structural reforms were made to the foreign exchange market, with particular emphasis on the abandonment of the domestic peg to stronger currencies; a flexible system was introduced for the exchange rate, calculated at regular auctions to sell currency on the primary market.

Besides the favourable impact on the country’s International Reserves and elimination of the artificial currency appreciation that had a negative impact on domestic production of goods and services, the differential that had accumulated between the primary and informal exchange market, which at the end of 2017 stood at around 147%, was reduced to 28%.

With respect to the banking financial system, the BNA increased the minimum regulated share capital and equity levels that commercial banks must always maintain. The main objective of this measure was to afford the banking system sufficient capital to withstand any shocks related to market risk. In 2019, we shall continue this process through an Asset Quality Assessment of the 12 banks which hold 90% of the assets on the market.

We should also highlight important initiatives that provide access to financial services, contribute to financial inclusion for the whole population and strengthen the financial system’s safety net. Setting up the Deposit Guarantee Fund, to protect consumer deposits held at Angolan financial institutions, as well as the establishment of basic bank accounts, have afforded greater credibility to the Angolan banking financial system.

Compliance with the international standards laid down by the FATF (“Financial Action Task Force”) requires each country to implement a framework for Domestic Risk Assessment, to prevent money laundering and combat terrorist financing (ML/TF). As a result of this framework, action plans and resources will be applied to where they will have most impact. In this respect and specifically in relation to the Angolan financial system, we participated in the Domestic Risk Assessment, coordinating groups from the banking financial, non-bank and financial inclusion sectors. This work will produce action plans that will be sent to the World Bank, our partner in carrying out this task. Finally, within the scope of aligning the regulatory framework with the recommendations from the Financial Action Task Force (FATF), we began the process of revising Law no. 34/11 of 12 December – Combating Money Laundering and Terrorist Financing Act, in partnership with the International Monetary Fund.

Regarding internal matters at the National Bank of Angola, we have strengthened our commitment to the best corporate governance, transparency and control practices. To this end, the BNA drew up and implemented a Risk Management Message from the Governor of the National Bank of Angola • 9

and Risk Criteria Policy that aims to set out guidelines for systematic, comprehensive and coordinated management of risks at the BNA, providing the Board of Directors with a holistic view of the risks to which the bank is exposed. In tandem, the bank prepared and is currently implementing a Compliance Policy and an ML/TF Prevention Policy which aim to ensure the institution’s compliance with control procedures and automated systems, in order to prevent, detect and combat Compliance, Money Laundering and Terrorist Financing risks.

At the end of 2018, the BNA had 2,058 employees. Building institutional capacity was the top priority for the Board of Directors. Thus, as part of this capacity building and training, we defined a new model that seeks continuous development of our employees’ skills. This model contains clear objectives aligned with the BNA’s strategic plan, a focus on continuous investment and career progression.

2019 begins with the implementation of a macroeconomic adjustment programme, agreed between the Angolan authorities and the International Monetary Fund. With this programme, which will last until 2021, we expect to balance the fiscal and external accounts and, consequently, to guarantee the macroeconomic stability required for economic growth. In the context of this programme and its powers, the National Bank of Angola will focus on pursuing price stability and ensuring a robust financial system.

José de Lima Massano

Governor 10 • Annual Report and Accounts • 2018

Executive Summary

The beginning of 2018 pointed towards a promising year in economic terms; however, throughout the year, the financial markets recorded considerable instability, contrary to the projections made at the end of 2017. This upheaval was caused by specific events which led to uncertainty regarding world trade and, consequently, economic growth. Among these, we highlight trade wars, uncertainty about the Italian economy, “Brexit” and oil price volatility.

According to the most recent estimates from the International Monetary Fund, advanced economies grew at a steady rate of 2.30%, while emerging and developing economies continued on the path of relatively strong growth, expanding by 4.60% in 2018. Many commodity-exporting countries, especially oil exporters, continued their slow recovery, although they remain exposed to oil price fluctuations. Thus, it estimated a global economic growth rate of 3.70% in 2018, slightly below the 3.80% recorded in 2017.

In the context of this slowdown, the IMF lowered its global economic growth forecast for 2019 in its January 2019 update to the World Economic Outlook; in particular, it considered Eurozone’s short-term prospects less favourable than in October. Due to considerably lower oil prices, it slightly reduced its growth forecasts for crude-oil-exporting countries. In general, then, the FMI forecasts a somewhat slower economic expansion than 2018 for 2019 and 2020, of 3.50% and 3.60% respectively.

In the energy commodities market, the price of oil in 2018 reached levels last seen in 2014, peaking at 86.26 USD/ barrel in October 2018. However, given the recorded volatility, the average price of Brent Crude was 71.69 USD/Barrel, an increase of 30.96% on the previous year.

Gross International Reserves shrank 11.29% in 2018, reaching USD 16,170.24 million; however, these also recorded mild volatility with the settlement of exchange-rate transactions carried out by the BNA and the issue of Eurobonds by the Angolan Government, which raised USD 3,500 million, and the disbursement of the part of the loan negotiated with the IMF. The import coverage ratio stood at 6.62 months for imports of goods and services, less than the previous year; however, it remained above SADC convergence target, set at 6 months of imports.

Within the scope of macroeconomic policy, with respect to foreign exchange policy, the beginning of 2018 was marked by the adoption of a flexible exchange-rate mechanism with bands put in place at the start of the year. The main objective of this change was focused on the need to eliminate the imbalance between supply of and demand for currency, which culminated in a significant increase in exchange-rate pressure on diverse markets. Thanks to this new mechanism, in 2018 the kwanza depreciated by around 46.23% and 47.48% against the US dollar and the euro respectively on the primary market. Likewise, the adopted exchange-rate mechanism contributed to a significant reduction in the differential between the primary and informal markets, which was one of the main goals of the new exchange-rate mechanism. The spread in relation to the US dollar and the euro had fallen from 150.62% to 28.26% and from 146.31% to 27.17% respectively at the end of December.

Regarding monetary policy, the BNA intervened in the money market in order to maintain the downward trend in inflation, which fell from 23.67% in 2017 to 18.60%; it focused primarily on the Monetary Base in domestic currency, which contracted by 10.71%. In addition, the BNA cut the base interest rate, at the end of June, from 18.00% to 16.50%. The Required Reserves constitution policy underwent two important changes in 2018. The first reduced the required reserve coefficient for private-sector deposits from 21.00% to 19.00% in May; then, in July, the required reserve coefficient for private-sector, Central Government and Local Government deposits in domestic currency was reduced to 17.00%.

In light of its duties to ensure the stability of the banking system, the BNA undertook several supervision measures to mitigate credit risk in line with Basel II, and also monitored the increase in share capital by banks to a minimum of Kz 7.50 thousand million, as per Notice no. 02/2018 of 2 March. With this increase, regulated equity grew by 53.43% and, as a result, the regulatory solvency ratio increased from 18.79% in December 2017 to 24.16% in December 2018, remaining well above the regulatory minimum limit of 10%. This guarantees that the banking system is more resilient to cope with the risks inherent to its activity. Executive summary • 11

The financial system’s performance continues to be affected by the adverse macroeconomic conditions, and credit risk remains at high levels. However, due to the kwanza’s depreciation associated with the new exchange-rate mechanism adopted at the start of 2018 and the settlement of exchange-rate transactions, plus the investment in government bonds, Angolan banks recorded an increase in their revenue.

With the aim of creating a guarantee for small depositors (individuals and companies) and to thus complete the safety net for the Angolan financial system, the Deposit Guarantee Fund (DGF) was set up. Its objective is to guarantee reimbursement of deposits made at banking financial institutions domiciled in Angola up to a limit of Kz 12.50 million.

Based on the need to adapt to international standards on the regulatory framework and supervision process for Money Laundering and Terrorist Financing (ML/TF), the robustness and adaptation of ML/TF prevention systems to the latest FATF (Financial Action Task Force) recommendations, in 2018 we began the process of revising Law no. 34/11 of 12 December – Combating Money Laundering and Terrorist Financing Act.

In order to enhance the development of payment systems in Angola, we shall implement a Direct Debit subsystem which will streamline charging for recurrent services, such as, for example, energy, water and insurance, with benefits for service users and providers (more security, lower costs). With regard to instant payments, we plan to establish a legal framework which will allow the implementation of a mobile payment system which will provide payment services to the uBNAnked population anywhere in Angola. This will constitute the first step in the process of ensuring access to banking and financial inclusion.

In order to better adapt the National Bank of Angola (BNA) to the best corporate governance, transparency and control practices, the institution drew up and implemented a Risk Management and Risk Criteria Policy. In tandem, it prepared and is currently implementing a Compliance Policy and an ML/TF Prevention Policy.

At the end of 2018, the BNA had 2,058 employees. Building institutional capacity was the top priority for the Board of Directors. Thus, as part of this capacity building and training, we defined a new model that seeks continuous development of our employees’ skills. This model contains clear objectives aligned with the BNA’s strategic plan, a focus on continuous investment and career progression.

On 31 December 2018, the Bank’s Assets totalled around Kz 7.06 billion, an increase of about Kz 2.37 billion (50%) compared to 31 December 2017. Liabilities also increased by Kz 1.84 billion (42%) to Kz 6.19 billion.

In the 2018 financial year, profit was recorded of Kz 18.59 thousand million, corresponding to a variation of 131% compared to the previous financial year.

With respect to Equity that totals Kz 885.38 thousand million, an increase of Kz 527.57 thousand million (+147%) was recorded compared to the previous financial year.

The 2018 financial year budget showed a surplus of Kz 104.48 million, which reflected a level of execution 465% above estimates (Kz 22.90 thousand million). PART I Macroeconomic Context Part I – Macroeconomic Context • 13

1 International Economy 1.1 Estimates for 2018 and 2019

The International Monetary Fund (IMF), in its January 2019 World Economic Outlook, maintained its global growth estimate at 3.70% for 2018 despite a slowdown in some economies, especially in the Eurozone and Asia. However, it revised downward its growth predictions for 2019, compared to the October forecasts, from 3.70% to 3.50%. On the other hand, with growth still above potential in most advanced economies, it expects a continued shrinkage of the labour market combined with a gradual increase in inflation and, in many cases, interest rate rises.

Regarding growth in the Eurozone, the IMF lowered its growth rates compared to its October forecasts; it predicts growth of 1.80% in 2018 and 1.60% in 2019, which represents a reduction of 0.20 p.p. and 0.30 p.p. respectively on its previous forecasts. This downward revision reflects signs of fragility in Europe, in particular in Germany, the block’s biggest exporter, harmed by new CO2 emissions standards for vehicles, and in Italy, under pressure due to the recent impasse with the European Commission over the budget proposed by its government. We also highlight the negative impact on the French economy of the Gilets Jaunes protests against certain reforms proposed by the government.

With respect to Asia, in particular China, the IMF lowered its economic growth rate for 2018 to 6.50% and maintained its forecast for 2019 of 6.20%. We highlight that the Chinese economy recorded a marked slowdown in 2018, its worst result since 1990. This was due to slower credit growth and the uncertainties surrounding the trade war with the USA.

Likewise, the IMF revised downward economic growth in Sub-Saharan Africa to 2.90% for 2018 and 3.50% for 2019 compared to the October forecasts which pointed to growth rates of 3.10% and 3.80% respectively. This revision was essentially due to new assessments of growth in Angola and Nigeria which were negatively affected by the fall in oil prices from October onwards and also a decrease in oil production in Angola.

Despite the trade wars between the USA and its commercial partners that characterized 2018, US GDP, according to the IMF’s January estimates, rose in 2018, growing by 2.90% compared to 2.20% in 2017. The main contribution from Donald Trump’s administration was the reduction in the tax burden, which stimulated economic growth despite increasing the budget deficit. The estimates forecast that growth will fall to 2.50% in 2019, due to the declining impact of the fiscal stimulus and the possibility that the Federal Reverse will continue to raise base interest rates.

Quadro 1: Produto Interno Bruto Mundial

2018 2019 2020 GDP growth (%) Estimates Forecasts Global economy 3,70 3,50 3,60 Developed economies 2,30 2,00 1,70 USA 2,90 2,50 1,80 EU Area 1,80 1,60 1,70 Japan 0,90 1,10 0,50 UK 1,40 1,50 1,60 Emerging and developing economies 4,60 4,50 4,60 Russia 1,70 1,60 1,70 China 6,60 6,20 6,20 India 7,30 7,50 7,70 Brazil 1,30 2,50 2,20 Sub-Saharan Africa 2,90 3,50 3,60 SADC 0,30 0,80 1,60 Nigeria 1,90 1,40 2,20 South Africa 0,80 2,00 1,70

Source: IMF, World Economic Outlook (Update), January 2019 14 • Annual Report and Accounts • 2018

1.2 Outlook for 2018

The adoption of trade tariffs by the USA against its trading partners caused the latter to impose retaliatory measures, which led to a fall in global industrial production and trade. American president Donald Trump and his administration challenged other world leaders, especially the leaders of China, with threats to put up trade barriers between the countries, increasing tariffs on imports of main products. The threats were put into practice in some cases, with China standing out due to the dimensions of its trade. In addition, the announcement by United States president Donald Trump of a doubling of tariffs on Turkish steel and aluminium led to a currency crisis. The increasingly protectionist rhetoric surrounding trade meant greater uncertainty throughout the world regarding trade policy, which created instability in investment decisions. In the regard, the United States Government, to boost growth and reduce worldwide investment uncertainty, implemented considerable fiscal stimuli. These focused on cutting taxes on corporations, the highest earners and also on public investment programmes.

In addition, the US dollar trended upwards, especially in the second half of the year. Regarding the USA’s monetary policy, the Federal Reserve raised the key interest rate on four occasions by 0.25 p.p., ending the year with a key interest rate range of between 2.25% and 2.50%. In the middle of the year, however, the way that the IOER is implemented was changed. The interest on excess reserves (IOER) rate, which since 2008 has been the upper band of the key interest rate, was raised by just 0.20 p.p. while the maximum was raised by 0.25 p.p. This change reflected in the part the rise in effective market interest rates caused by the increase in public debt issues by the Government, together with the continuing contraction of the Federal Reserve’s balance sheet, begun in 2018, reflected in the fall in free reserves at banking institutions. The Federal Reserve’s actions were influenced by macroeconomic conditions, in particular improvements in the labour market. As such, we expect further rate rises in 2019.

In Europe, 2018 was marked by a tussle between the Italian Government and the European Commission, mainly in the latter part of the year, regarding the fiscal deficit the Italian Government presented in its state budget for 2019. Italy managed to avoid sanctions from the European Union after reaching a compromise with the European Commission; it agreed a reduction in the deficit target from 2.40% to 2.04% of GDP. This impasse had a negative impact on European markets. The spread between interest rates on Italian and German bonds reached levels last seen during the sovereign debt crisis in Europe, leading to speculation that Italy would plunge into a new crisis. With respect to Eurozone monetary policy, 2018 saw the end of the Quantitative Easing programmes begun in September 2014, although some will continue in 2019, especially the holding of key interest rates in the negative and the rollover of assets held by the European Central Bank.

Regarding the process of the United Kingdom leaving the European Union, “Brexit”, 2018 was characterized by uncertainty over its progress. Negotiations in 2018 failed to produce an agreement, with the UK expected to leave in 2019. The uncertainty surrounding Brexit reduced growth in the United Kingdom to 1.30% in 2018, according to the Office for National Statistics. However, it is forecast that its resolution will allow growth to improve to 2.00% in 2019. We note that the pound has lost 13% of its value against the US dollar9 compared to its level before the referendum. This fall boosted exports, but increased the price of imports, which led to an increase in inflation to above the 2.00% target.

Finally, some vulnerable emerging economies came under pressure when the US dollar rose and the level of risk that international financial investors were prepared to accept decreased. Several emerging market currencies – including the Turkish lira, the Argentine peso, the Brazilian real, the South African rand, the Indian rupee and Indonesian rupee – recorded significant fluctuations throughout the year.

1 This variation was calculated between 22 June 2016 and 31 December 2018. Part I – Macroeconomic Context • 15

1.3 Commodities Market 1.3.1 Energy Commodities

Crude oil prices behaved erratically from August 2018, reflecting variations in supply, including the USA’s policy toward Iranian oil exports and, more recently, the economic and political situation in Venezuela. In terms of averages, the Brent Crude average was 71.69 USD/barrel, an increase of 30.96% over the previous year (54.75 USD/barrel). In December 2018, the price of Brent Crude ended the year at 53.80/barrel. With respect to Angolan production, which uses Brent Crude as a reference, its average price over the year was 69.20 USD/Barrel. The average price for WTI stood at 64.90 USD/barrel for the year.

Various factors contributed to the movements recorded in the oil market. Production of oil from bituminous shale in the USA contributed more than expected to the imbalance between supply and demand in this sector. In January, OPEC and allies decided to cut production in order to raise prices. According to the organization, quarterly worldwide demand for oil was 98.78 million barrels/day against 97.29 million barrels/day recorded in 2017, an increase of 1.49 million barrels in absolute terms. Demand from OECD countries in 2018 was revised upward due to stronger economic performance from North American countries, especially in the third quarter, when they showed increased demand for distillates for the petrochemical industry. In 2019, OPEC forecasts that global demand will increase by 1.29 million barrels/day, reaching an annual average of 100.08 million barrels/day per quarter.

For 2019, the International Energy Agency predicts an average Brent Crude of USD 60.52/Barrel; however, analysts from Bloomberg and Reuters are more optimistic, forecasting average prices of 62.56 USD/barrel and 69.13 USD/barrel respectively.

Chart 1: Energy Commodity Prices

USD/barrel l 54

6 7

Feb/1 Feb/1 8 Jun/17 Jun/18 Apr/18 Apr/17 Apr/17 Oct/17 Oct/17 Oct/18 Dec/16 Dec/17 Dec/17 Dec/18 Aug/17 Aug/18

Source: Bloomberg

1.3.2 Food Commodities

In 2018, the food price index of the UN Food and Agriculture Organization (FAO) closed at 161.7 points. The average of all months in 2018 was 3.52% lower than the average in same period in 2017. The price of sugar recorded the sharpest decline in 2018, while the prices of vegetable oil, meat and dairy products also fell. However, international prices for all main cereals recorded an increase. 16 • Annual Report and Accounts • 2018

Chart 2: Food Commodity Prices

350

300

250

Points Points 200

150

100

17 18 16 17 18 18 17 17 18 17 Source: FAO 18 ------Feb- Feb-17 Jun Jun Apr Apr Oct Oct Dec Dec Dec Aug Aug

FAO food price index Beef price index Dairy products price index

Cereal price index Oil price index Sugar price index

Source: FAO

Thus, we highlight a contraction of 21.90% in the sugar index, mainly caused by increased supply from India and Brazil. It should be noted that sugar cane is an input for both sugar and ethanol production and, since ethanol is used as fuel, the fall in oil prices discouraged its production, leading to an increase in sugar production. On the other hand, we highlight the cereals index, whose twelve-month average was 9.01% higher than the twelve months of 2017. The decrease in global wheat and corn production contributed to the rise in prices in 2018, although the global supply of cereals has remained more than sufficient, with stocks still at high levels.

2 Angolan Economy 2.1 Real Sector 2.1.1 Economic Activity

Preliminary data from the Ministry of Economic Planning (MEP) point to a growth rate in real economic activity in 2018, measured by Gross Domestic Product (GDP), of -1.70%, compared to -0.15% recorded in 2017. This reflects a larger contraction in the oil industry of around -9.20% and a less dynamic non-oil sector (0.28%). From this perspective, the Angolan economy is in recession for the third consecutive year due to a fall in oil production, despite higher oil prices quoted on the international market.

The decline in the rate of growth of oil activity of around 3.87 p.p. was mainly explained by the fall in oil and gas production levels of 12.48%, reflecting the drop in some oil wells combined with the low levels of investment seen, especially in the prospecting, research and exploration segments, and the inefficiency of secondary recovery systems.

The slowdown in non-oil activity by 0.94 p.p. was due to the lower dynamism observed in the manufacturing sector (from 1.18% to 0.10%), market services (from 1.48% to 0.65%) and construction (from 2.51% to 1.85%). Part I – Macroeconomic Context • 17

Graph 1: Real GDP and Real GDP by Sector of Activity Growth Rates

Real GDP growth rates per industry (%) Others 2 Real GDP growth rates (%) Energy

0 Processing industry Diamonds and others

-2 Agriculture -35.00 -15.00 5.00 25.00 45.00

-4 2016 2017 2018 GDP total Oil sector Non Oil sector

2016 2017 (Estimate) 2018 (Estimate)

Source: NSI and MINEP9 activity. However, we also observe that the tertiary sector, composed mainly of imports, remains the most important sector for overall GDP. This situation shows the urgent need to diversify the economy to boost the development of export sectors, especially the primary and secondary sectors.

Table 2: GDP Percentage Structure (2002 Prices)

2017 Esti- 2018 Esti- Percentage structure 2014 2015 2016 mates mates

Primary sector 40,99 39,53 31,57 31,84 39,27 Agriculture 4,65 5,15 6,18 6,40 5,81 Fishing and fish derivatives 2,63 3,09 3,71 3,72 3,28 Diamonds and others 0,57 0,64 0,68 0,56 0,79 Petroleum 33,14 30,64 21,00 21,15 29,38 Secondary sector 16,38 17,91 21,19 20,90 18,76 Transformation industry 4,15 5,29 6,79 6,65 5,86 Construction 11,78 12,16 13,84 13,80 12,37 Energy 0,44 0,47 0,56 0,46 0,52 Third sector 42,63 42,56 47,24 47,26 41,97 Business services 23,29 23,92 36,57 38,14 33,80 Others 19,34 18,64 10,67 9,12 8,17

Source: NSI and MEP

2.1.2 Headline inflation 2018 was characterized by the slowdown in the Angolan Consumer Prices Index (ACPI). It showed a year-on-year change of 18.60%, compared with 23.67% in the previous year, mainly caused by the reduction in the contribution of class 1 “Food and Non-Alcoholic Beverages” by 2.14 p.p., standing at 7.19 p.p., representing 38.65% of the variation in the general price index, followed by classes 3 “Clothing and Footware” and 5 “Furniture, Domestic Appliances and Maintenance” by 0.83 p.p., standing at 1.80 p.p. and 0.78 p.p., standing at 1.45 p.p., representing a total variation of 9.68% and 7.82% respectively.

This slowdown observed during the year in question can be explained through the effects of the monetary and foreign exchange policy measures adopted by the BNA, with a greater emphasis on the efficient allocation of currencies and the settlement of delayed exchanges, adoption of a more fluid exchange rate mechanism, contraction of monetary aggregates in domestic currency and improvement of communications from the Central Bank to economic agents.

2 National Statistics Office 18 • Annual Report and Accounts • 2018

Graph 2: Domestic Inflation Rate and Classes

Analogous variation rate per class (%) Inflation rate (%) 600 45 5 5 500 40 4 35 400 4 30 3 300 25 3 200 20 2 15 2 100 10 1 1 0 5

0 7

0 17 18 Feb/17 Feb/17 Dec-16 Dec-16 Dec/18 Apr/ Dec/1 Apr/ Jun/17 Aug/17 Oct/17 Jun/18 Aug/18 Oct/18 Feb/18 Food, non-alcoholic beverages Alcoholic beverages and tobacco Apr/18 Aug/18 Dec/16 Dec/18 Jun/18 Jun/18 Oct/18 Feb/17 Apr/17 Jun/17 Aug/17 Oct/17 Dec/17 Feb/18 Clothes and shoes Housing, water, electricity, gas, fuel Furniture, domestic appliances/maintenance Health Analogous (12 months) Transport Communication Monthly (right axis) Recreation, leisure and culture Education Hotels, cafés and restaurants Several goods and services

Source: NSI

In the year under analysis, class 4, “Housing, Water, Electricity, Gas and Fuel” recorded the largest variation (28.29%), reflecting an administrative measure that led to a price increase for drinking water supply on the official market, followed by the “Other Goods and Services” (26.40%) class, more precisely the increase in cost of baptism and marria- ge services, and also the “Clothing and Footware” (25.36%) class, with sandals, trainers and super wax cloth recording the highest rises. However, in terms of contribution to the overall inflation rate, the “Food and Non-Alcoholic Bevera- ges” class had the greatest impact with 7.19 p.p., followed by “Housing, Water, Electricity, Gas and Fuel” with 2.39 p.p. and “Other Goods and Services” with 1.85 p.p.

Graph 3: Contribution and Representativeness of Classes of Spending on Domestic Inflation

Contribution of classes in analogous Representativeness of classes who have inflation (p.p.) 100 contributed the most to inflation in 12 months (%)

18 0 17 t/17 t/18 18 17 Oc Dec/18 Oc Apr/ Dec/16 Apr/ Jun/ 17 Jun/ 18 Aug/18 Feb/17 Dec/17 Feb/18 t/17 Aug/17 t/18 Apr/ Jun/ 18 Jun/ 17 Oc Dec/16 Dec/18 Feb/17 Apr/ Dec/17 Feb/18 Aug/18 Oc Goods and services Hotels, cafés and restaurants Aug/17 Education Recreation, leisure and culture Food, Non-alcoholic beverages Communication Transport Clothes and shoes Health Furniture, domestic appliances/ Housing, water, electricity, gas and fuel Water, electricity, gas and fuel Clothes and shoes Furniture, domestic appliances/maintenance Alcoholic beverages and tobacco Alcoholic beverages and tobacco Food, non-alcoholic beverages Health Several goods and services

Source: INE Source: INE Part I – Macroeconomic Context • 19

In the province of Luanda, the Consumer Price Index (CPI) recorded a year-on-year change of 18.21% in 2018, a dece- leration of around 8.05 p.p. in relating to the previous year (26.26%), resulting from a reduced contribution from class 1 “Food and Non-Alcoholic Beverages” with 6.74 p.p., representing 37.02% of the variation in general price index, followed by classes 12 “Other Goods and Services” and 3 “Clothing and Footware” with 2.38 p.p. and 1.86 p.p. respectively, representing 13.06% and 10.20% of the total variation.

Chart 3: Inflation Rate in Luanda (%) 50 5

40 4

30 3

20 2

10 1

0 0 Feb/17 Feb/18 Jun/17 Jun/17 Jun/18 Apr/17 Apr/17 Apr/18 Oct/17 Oct/17 Oct/18 Dec/16 Dec/16 Dec/17 Dec/18 Aug/17 Aug/17 Aug/18 Analogous (12 months) Monthly (right axis)

Source: NSI

In terms of variation by class, the behaviour was similar to that nationwide, with the Housing, Water, Electricity, Gas and Fuel class with 30.48%, which saw the greatest variation, followed by Other Goods and Services (24.48%) and the Clothing and Footware (22.93%) classes). However, the class that contributed most the accumulated inflation in 2018 was also “Food and Non-Alcoholic Beverages” with 6.74 p.p., followed by the “Housing, Water, Electricity, Gas and Fuel” and “Other Goods and Services” classes with 2.53 p.p. and 2.38 p.p. respectively. Thus, the increase in representativeness of the Food and Non-Alcoholic Beverages class, which rose from 35.57% in 2017 to 37.02% in 2018 stands out; in other words, despite the decline its year-on-year variation, it still weighs heaviest on the recorded rate of inflation.

Graph 4: Contribution and Representativeness of Classes of Spending on Inflation in Luanda

Contribution of classes in analogous Representativeness of classes who have contributed 50 inflation (p.p.) 10 the most to inflation in 12 months (%)

0 0 Dec-18 Feb/18 Apr/17 Dec-18 Aug/17 Oct/17 Dec/17 Aug/18 Jun/17 Jun/18 Feb/17 Dec/16 Oct/18 Apr/18 Oct/18 Apr/17 Dec/16 Feb/17 Jun/17 Dec/17 Feb/18 Aug/18 Aug/17 Apr/18 Jun/18 Oct/17 Food, non-alcoholic beverages Several goods and services Hotels, cafés and restaurants Clothes and shoes Education Leisure, recreation and culture Housing, water, electricity, gas and fuel Communication Transport Furniture, domestic appliances/maintenance Health Furniture, domestic appliances and maintenance Alcoholic beverages and tobacco Housing, water, electricity, gas, fuel Clothes and shoes Health Alcoholic beverages, tobacco Food non-alcoholic beverages Several goods and services

Source: INE 20 • Annual Report and Accounts • 2018

It can be observed that the declining inflationary trend in 2018 arose from the reduced variation of prices in two categories: Goods at 9.76 p.p. and Services at 3.17 p.p., standing at 17.24% and 21.00% respectively. The behaviour of the Goods category resulted from reduced variation both in the Food Products subcategory (around 5.22 p.p.), standing at 15.28%, and the Industrial products subcategory (around 16.91 p.p.), standing at 19.84%. In terms of contributions, the Goods category accounted for 12.83 p.p., compared with 19.96 p.p. observed in the previous year, and the Services category accounted for 5.38 p.p., compared with 6.30 p.p. in the preceding year. From the subcategories, we highlight the contribution of Food Goods at 8.70 p.p., less than the 12.30 p.p. observed in 2017, and Industrial Goods at 8.54 p.p., in relation to 14.69 p.p. recorded in the previous year.

Chart 4: Variation of Cpi Components (%)

60 60

40 40

20 20

0 0 Feb/17 Feb/16 Jun/18 Jun/18 Jun/17 Jun/17 Apr/18 Apr/18 Apr/17 Apr/17 Oct/18 Oct/18 Oct/17 Oct/17 Dec/18 Dec/18 Dec/17 Dec/17 Dec/16 Dec/16 Aug/18 Aug/18 Aug/17 Aug/17 Analogous (12 months) CPI unprocessed foods CPI processed food items CPI industrial goods CPI services CPI goods

Source: BNA

In line with the trend set out above, we noted a lesser variation in Staple Product prices compared to the previous year,

reflected in the accumulated variation of the average price of Staple Products of around 0.89 p.p., standing at 10.26%. This10 behaviour0 is explained by the slowdown in prices for the following products: dried beef, pumpkin, powdered milk (Nido), spaghetti pasta, blue soap and common salt. 87.59 80

60 Chart 5: Annual Accumulated Variation – Staple Products

40 26.28

23.27

19.35

%o 14.60 13.23 13.12 12.65 11.47 10.88 10.76 10.14 9.72 8.23 7.72 7.60

20 6.48 5.38 4.65

(20) - 3.76 19.58

- - 8.82 10.05 11.18

- 10.00 - -

(40) - 13.72

alt

our our our our s fl fl Beans Beans Soy oil Soyoil salt Palm oil Palm Blue Common Corn Dried beef Dried Bulk sugar Bulksugar Wheat Wheat Current rice Current Bombó fl Bombó Powdered milk milk Powdered 2017 2018 dough Spaghe tti

Source: BNA Part I – Macroeconomic Context • 21

During 2018, the Wholesale Price Index (WPI) showed a stable trend, standing at 16.86%, a slight increase of 1.39 p.p. This results from the increase in price variations for both domestic and imported products of 2.34 p.p. and 1.14 p.p., going from 15.51% and 15.46% in 2017 to 17.85% and 16.59% in 2018 respectively. It should be noted that the Agriculture, Stock Raising, Hunting and Forestry sector showed the greatest variation, both for domestic products and imported products, at 19.72% and 26.26% respectively.

Graph 5: Wholesale Price Index Monthly and analogous IPG variation (%) IPG variation - national products Vs. 40 imported goods (%) 5 40 4 30 3 2 20 20 1 10 0 0 0 17 17 18 18 variation Analogous variation Analogous Feb/17 Apr/ Feb/17 Apr/ Jun/ 17 Aug/17 Dec/16 Jun/ 17 Aug/17 Oct/17 Dec/16 Apr/ Oct/18 Oct/17 Dec/18 Feb/18 Apr/ Jun/ 18 Aug/18 Oct/18 Dec/17 Aug/18 Jun/ 18 Feb/18 Dec/18 Dec/17

Monthly IPG IPG (national goods) Analogous IPG (right axis) IPG (imported goods)

Source: NSI

2.1.1 Core Inflation The core component of inflation consists of measuring the evolution of the consumer price index, excluding regulated products and the most volatile products (due to seasonal and irregular effects), such as the price of vegetables, tubers, fish and shellfish. In this sense, this indicator seeks to distinguish the changes in the price index resulting from excessi- ve monetary changes (inflation on the aggregate demand side) and changes resulting from variations in relative prices (inflation on the aggregate supply side).

Thus, core inflation serves as an indicator to measure the efficiency of decisions taken by the BNA concerning monetary policy. In 2018, core inflation recorded a variation of 18.16%, down by around 10.83 p.p. compared with 2017 (28.98%), reflecting the contractionary monetary measures taken by the BNA as mentioned above and described in more detail below. Vegetables and tubers recorded a variation of 15.33%, 11.19 p.p. lower than the 26.52% observed in 2017, while fish and shellfish recorded a variation of 18.62%, 4.41 p.p. lower than 2017 (23.03%). On the other hand, regulated products showed an increase of 20.60%, above the 12.34% recorded last year.

In the period under analysis, core inflation recorded a contribution of 13.36 p.p., accounting for 73.37% of headline inflation, followed by regulated products at 2.35 p.p., vegetables and tubers at 1.38 p.p., fish and shellfish at 1.11 p.p., which accounted for 12.93%, 7.59% and 6.11% respectively. 22 • Annual Report and Accounts • 2018

Graph 6: Components Of Headline Inflation

15 Monthly variation of full inflation components (%) 60 Analogous variation of full inflation components (%) 10 40 5 20 0 0 Feb/17 7 Feb/18 8 Jun/17 7 Jun/18 8 Oct/17 Apr/17 Apr/18 Dec/17 7 Dec/16 6 Aug/17 Oct/18 Aug/18 Dec/18 Feb/18 8 Feb/17 7 Jun/18 Jun/18 Jun/17 Jun/17 Oct/18 Oct/18 Oct/17 Oct/17 Apr/18 Apr/18 Apr/17 Apr/17 8 Dec/18 8 Dec/17 7 Dec/16 6 Aug/18 Aug/18 Aug/17 Aug/17

Inflation nucleus Legumes and tubers Inflation nucleus Legumes and tubers Fish and seafood Managed goods

60 Analogous contribution of full inflation components (p.p.) 5 Monthly contribution of full inflation components (p.p.) 4 40 3 20 2 1 0 0 Feb/18 8 Feb/17 7 Jun/18 Jun/18 Jun/17 Jun/17 Oct/18 Oct/18 Oct/17 Oct/17 Apr/18 Apr/17 Apr/17 Dec/18 8 Dec/17 7 Dec/16 6 Aug/18 Aug/18 Aug/17 Aug/17 Feb/18 8 Feb/17 7 Jun/17 Jun/17 Jun/18 Jun/18 Oct/18 Oct/18 Apr/17 Apr/17 Oct/17 Apr/18 Apr/18 Dec/19 8 Dec/16 6 Dec/17 7 Aug/17 Aug/17 Aug/18 Aug/18 Managed goods Fish and seafood Managed goods Fish and seafood Legumes and tubers Inflation nucleus Legumes and tubers Inflation nucleus

Full inflation vs. inflation nucleus (analogous, %) 46 36 26 16 6 Feb/18 8 Feb/17 7 Jun/17 Jun/17 Jun/18 Jun/18 Oct/18 Oct/18 Apr/18 Apr/18 Oct/17 Oct/17 Apr/17 Apr/17 Dec/18 8 Dec/17 7 Dec/16 6 Aug/18 Aug/18 Aug/17 Aug/17

Full inflation Inflation nucleus

Source: NSI and BNA

2.2 Fiscal Sector 2.2.1 Budget Policy and Situation Due to the increase in oil prices on the international market, the State Budget for 2018 was drawn up from a more optimistic perspective than in 2017, taking into account the recovery in economic activity, better revenue collection and execution of spending, which would result in an overall deficit of Kz 804.7 thousand million (3.4% of GDP), lower than the previous year (5.77% of GDP).

The State Budget relied on the following macroeconomic assumptions: average oil price of USD 50.00/barrel, annual oil exports of 620.00 million barrels, an average USD/Kz exchange rate of 218.70 and a real growth rate of 4.90%, supported by growth of 3.11% in the oil sector and 4.35% in the non-oil sector.

2.2.2 Public Revenue Preliminary data from the Ministry of Finance for 2018 point to a significant increase (46.98%) in total revenue. This is the highest level in the last four years, standing at Kz 5.21 billion (18.06% of GDP). The growth in revenue continues to be strongly supported by the increase in oil revenue (75.92%), equivalent to 67.88% of total revenues and 12.26% of GDP. For its part, the increase in oil revenues is explained by the rise in average oil prices, which reached 69.20 USD/ barrel, i.e. 19.20 USD/barrel higher than forecast. Part I – Macroeconomic Context • 23

Table 3: Structure of Public Revenue

2018 2018 Variação 2018 2017 Federal "2018 2017 Federal (%) Preliminar Budget Budget Preliminary" Billion Kz % of GDP % of GDP Total revenues 3 542,99 4 404,24 5 207,40 46,98 17,02 18,45 18,06 Current revenues 3 542,30 4 404,24 5 206,39 46,98 17,02 18,45 18,06 Taxes 3 202,68 4 139,29 4 906,14 53,19 15,39 17,34 17,02 Petroleum 2 009,18 2 399,13 3 534,61 75,92 9,65 10,05 12,26 Non-petroleum 1 193,50 1 740,16 1 371,53 14,92 5,73 7,29 4,76 Income taxes, profits 632,53 833,91 698,68 10,46 3,04 3,49 2,42 Property taxes 37,64 54,24 39,85 5,89 0,18 0,23 0,14 Goods and services 245,96 437,36 297,15 20,81 1,18 1,83 1,03 taxes Foreign trade taxes 120,49 200,19 155,94 29,42 0,58 0,84 0,54 Other taxes 156,89 214,46 179,91 14,67 0,75 0,90 0,62 Social security contributions 165,82 172,86 132,06 -20,36 0,80 0,72 0,46 Donations 4,59 - 0,76 -83,54 0,02 - 0,00 Other revenues 169,22 92,09 167,43 -1,05 0,81 0,39 0,58 Capital revenues 0,69 - 1,02 47,84 0,00 - 0,00

Source: MINFIN

The total revenue was 118.24% above that forecast in the State Budget, where Oil Taxes and Non-Oil Taxes had execution levels of 147.33% and 78.82% respectively compared to the forecast. Despite its limited importance in terms of total revenue, the Other Revenue stood out with an execution level at 181.82% above the forecast. We also highlight that the tax revenue as a percentage of GDP stood at 17.02%, in line with the projection (17.34%) and above last year’s level (15.39%), denoting an increase in tax paid in relation to wealth produced in the country.

Non-Oil Revenue grew by 14.92%, resulting from increases in all its categories. We highlight the collection of tax on international trade (29.42%) and on goods and services (20.81%). However, the increase was lower than expected, which may be linked to the slow recovery of the non-oil sector (0.28%).

Chart 6: Non-Oil Taxes (% of GDP)

6 5 4 3

0 2016 2017 2018 GENERAL STATE BUDGET 2018 (PRELIMINARY )

Other taxes Foreign trade taxes

Goods and services taxes Property taxes

Income, proﬁt and capital gains tax Non petroleum

Source: MINFIN 24 • Annual Report and Accounts • 2018

2.2.3 Public Spending The forecasts for 2018 show a 4.87% increase in total spending, driven by the 14.31% rise in current spending, a reflection of the increase in every category except for spending on goods and services.

From the current spending, we highlight expenditure on interest and transfers, which rose by 41.67% and 27.50% respectively. This evolution in interest spending represents, in nominal terms, an increase of Kz 282.22 thousand million, which may be partially explained by the currency depreciation.

Despite the increase in average oil prices seen throughout the year, and consequently greater revenue collection than in 2017, the execution level for total spending in 2018 was lower, at 97.08%. Spending on goods and services, 23.22% below expectations, contributed to this performance.

Table 4: Structure of Public Spending

General 2018 2018 2018 Pre- Variation State 2017 FEDERAL 2017 Prelimi- liminary (%) Budget BUDGET nary 2018 % of GDP Total expenditure 4 822,07 5 208,98 5 056,82 4,87 23,17 21,82 17,54 Current expenditure 3 499,24 4 230,17 4 000,15 14,31 16,81 17,72 13,87 Employee salaries 1 507,07 1 689,71 1 689,72 12,12 7,24 7,08 5,86 Earnings 1 421,06 1 586,82 1 586,82 11,66 6,83 6,65 5,50 Social security contribu- 86,01 102,89 102,90 19,63 0,41 0,43 0,36 tions Goods and services 840,66 971,98 746,31 -11,22 4,04 4,07 2,59 Interest 677,29 968,40 959,51 41,67 3,25 4,06 3,33 External 294,65 517,07 365,10 23,91 1,42 2,17 1,27 Internal 382,63 451,33 594,41 55,35 1,84 1,89 2,06 Current transfers 474,22 600,08 604,61 27,50 2,28 2,51 2,10 Subsidies 93,67 224,95 224,95 140,16 0,45 0,94 0,78 Donations 6,26 - 4,18 -33,24 0,03 0,86 0,01 Social benefits 281,88 205,64 205,65 -27,04 1,35 0,71 0,71 Other expenses 92,41 169,48 169,83 83,78 0,44 4,10 0,59 Capital expenses 1 322,83 978,81 1 056,67 -20,12 6,36 4,10 3,66 Integrated product policy (PIP) 1 312,52 978,81 1 056,67 -19,49 6,31 4,10 3,66 Others 10,31 - - -100,00 0,05 - -

Source: MINFIN

Spending as a percentage of GDP stood at 17.54%, representing a reduction of 5.63 p.p. in relation to 2017. The reduction in this ratio was reflected in a drop in current spending of 2,94 p.p., which accounted for 13.87% of GDP. The reduction in the weight of current spending was a consequence of more resources being allocated to cover debt servicing in this period, which stood at around 100% of total revenue. Part I – Macroeconomic Context • 25

CHART 7: CURRENT SPENDING (% of GDP)

- 2016 2017 2018 GENERAL STATE BUDGET 2018 Preliminary

Personnel expenses Goods and services Interest Current transfers Current expenses

Source: MINFIN

2.2.4 Fiscal Balance and Financing The data presented, although preliminary, points to an overall surplus (commitment) of Kz 150.6 thousand million in 2018 (corresponding to 0.52% of GDP), compared to a projected deficit of Kz 804.7 thousand million (3.4% of GDP). This represents better performance than the previous year. In addition, the non-oil sector balance improved its position, although still in deficit, going from 14.70% of GDP in 2017 to 12.70% of GDP in 2018., Despite the surplus balance, the need for financing grew by 47.85%, standing at 4.75 billion, with 56.58% from internal financing and 43.02% from external financing.

Chart 8: Fiscal Balances (% of GDP)

4.18 0.21 0.52

- 0.23

- 5.90 - 6.14 - 15.84 - 12.70 - 14.70

2016 General State Budget (reviewed) 2017 Estimates 2018 Preliminary Overall balance (commitment) Current balance Non petroleum primary balance

Source: MINFIN 26 • Annual Report and Accounts • 2018

2.2.1 Public Debt 9 Despite the relative improvement in fiscal accounts, fruit of the increase in revenue, which enhanced the Government’s capacity to honour its short-term commitments, the Government’s stock of debt remains high. The public debt stock stands at USD 85,207.32 million (increase of 14.45%), representing 79.66% of GDP. This is above the SADC reference target and the reference limit defined in the Macroeconomic Stability Programme (60% of GDP).

In this period, a reduction was recorded in the internal debt 10, stock, valued in US dollars, comprising mainly government bonds, which went from USD 35,913.49 million (29.41% of GDP) in 2017 to USD 33,781.42 million (31.58% of GDP) 11. For its part, the external debt stock increased by 33.44%, standing at USD 51,425.90 million, against USD 38,538.39 million, coming to represent 48.08% of GDP. As shown on the chart below, the weight of the public debt against GDP has risen considerably; it has tripled in the last five years, going from 28% in 2014 to 79.66% in 2018.

Chart 9: Government Debt (% of GDP) 79.66

60.96 57.63

48.08

30.64 31.56 31.58 26.99 29.41

2016 2017 2018 Preliminary External debt Internal debt Government bonds

Source: MINFIN

The increase in the external debt ratio is reflected in the issue of Eurobonds in May 2018 to the sum of USD 3,000 million and financing as part of the Extended Fund Facility (EFF) from the IMF, which immediately provided USD 990.7 million (from a total of USD 3.7 thousand million) in December. We highlight that demand for Angolan Eurobonds exceeded the amount offered, a reflection of the high coupon interest rate: 8.25% for the issue of USD 1.75 thousand million with a 10-year term and 9.375% for USD 1.25 thousand million with a 30-year term. During the year, however, a decline in the interest rates on these bonds was recorded on the secondary market, reflecting increased confidence on international markets. This improvement was essentially due to the increase in oil prices compared with 2017, to the agreement signed with the IMF and the higher credit rating given by the main rating agencies, which raised Angola’s outlook from negative in 2017 to stable in 2018. However, the end of year saw an increase in rates on diverse terms, due to the downward trend in oil prices and the uncertainties involved in growing trade disputes.

Interest rates on internal debt recorded a decrease, as can be seen in more detail in the following section.

3 Not including the debt of public companies. 10 Including loan contracts. 5 This reduction is due to devaluing of the kwanza against the US dollar. Thus, the internal debt stock stood at Kz 8.58 thousand million (30.40% of GDP), above the Kz 5.96 billion (29.41% of GDP) in 2017. Part I – Macroeconomic Context • 27

2.2.6 Primary Government Securities Market

The issue of Treasury Securities in domestic currency in 2018 stood at Kz 1.34 billion (54.08% of the volume planned by the Treasury), of which Kz 645.58 thousand million were in Treasury Bills and Kz 691.82 thousand million were in Treasury Bonds. The volume of issues of government securities in domestic in 2018 was significantly lower than in 2017, at around 83.69%. It should be noted that these issues were intended to service just 48.36% of domestic debt securities.

Graph 7: Issue and Redemption of Securities

250 000 Issuance Redemptions 250 000 ions 200 000 200 000 150 000 150 000 100 000 100 000 Millions Kz Millions 50 000 Kz Millions 50 000

0 0

18 18 18 18 18 18 18 18 18 18 Jan- May- Jan- Jul- May- Oct- Apr-18 Jun-18 Jun-18 Feb-18 Feb-18 Sep-18 Sep-18 Mar-18 Mar-18 Dec-18 Au g-18 Nov- Jul- Oct- Apr-18 Jun-18 Jun-18 Feb-18 Feb-18 Sep-18 Sep-18 Mar-18 Mar-18 Dec-18 Nov- Au g-18 BT OT BT OT

Source: BNA

In parallel, payments from the Angolan Treasury arising from redemptions of public securities carried out in 2018 totalled Kz 2.48 billion, of which 1.30 billion were from redemptions of Treasury Bills and Kz 1.18 billion were from redemptions of Treasury Bonds. The volume of internal public debt service was slightly higher, at 3.29%, compared to 2017. This was fundamentally due to the reduction in the volume of short-term issues in 2017.

The stock of public securities in domestic currency on 31 December 2018 stood at Kz 7.49 billion, of which around Kz 581.55 thousand million (8.42%) were in Treasury Bills and Kz 6.91 billion (91.58%) were in Treasury Bonds. In 2018, we observed a stock increase of around 31.22% compared to 2017.

The net effect of issues of Treasury Securities (Bills and Bonds) on liquidity was an expansion of around Kz 1.43 billion, since the volume of redemption and interest payments made during the year was higher than the volume of issues.

Chart 10: Stock of Securities

8 000 7 000

6 000 5 000

MillionKz 4 000 3 000 2 000 1 000 0

18 18 18 18 18 18 ------Jul-18 Sep-18 Jan-18 Feb-18 Jun Apr Oct Dec Aug Nov May-18 Mar-18

BT OT

Source: BNA 28 • Annual Report and Accounts • 2018

Interest rates on the primary market were constant in general terms, with a slight fluctuation for 91, 182 and 364-day maturities that showed a downward trend over the first half of the year under analysis, and then an upward trend. At the end of 2018, the average nominal interest rates on Treasury Bills with maturities of 91, 182 and 364 stood at 13.60%, 17.05% and 19.05% respectively. Compared with last year, the nominal rates on short-term securities declined by 2.55 p.p., 3.19 p.p. and 4.85 p.p. respectively.

Graph 8: Interest Rates on the Primary Market

28 10

24 8

% 6 16 % 12 4 8 2 4 0 - 17 18 t/17 t/18 Dec/16 Feb/17 Apr/17 Jun/17 Aug/17 Oct/17 Dec/17 Feb/18 Apr/18 Jun/18 Aug/18 Oct/18 Dec/18 Dec/16 Feb/17 Apr/ Jun/ 17 Aug/17 Oc Feb/18 Apr/ Jun/ 18 Aug/18 Oc Dec/17 Dec/18

OT-TXC 6 years OT-TXC 7 years BT 91 days BT 182 days OT-TXC 5 years BT 364 days OT-TXC 2 years

14 13

% 11 10 9 8 7 6 5

n/17 n/18 Dec/16 Feb/17 Apr/17 Ju Aug/17 Oct/17 Dec/17 Feb/18 Apr/18 Ju Aug/18 Oct/18 Dec/18

OT-NR OT 2 years OT-NR OT 3 years

OT-NR OT 4 years OT-NR OT 5 years

Source: BNA

For medium and long-term Angolan Treasury Securities, in particular Treasury Bonds in domestic currency indexed to the exchange rate, all maturities were reduced by 2,50 p.p., with maturities of 5, 6 and 7 years having rates of 5.00%, 5.25% and 5.50% respectively, while the rates for non-adjustable Treasury Bonds in domestic currency were increased by 5.00 p.p. for all maturities, with maturities of 2, 3, 4 and 5 years having rates of 12.00%, 12.25%, 12.50% and 12.75% respectively. It should be noted that non-adjustable Treasury Bonds with a maturity of 1.5 years were issued at 11.75%. PART II Angolan Banking System 30 • Annual Report and Accounts • 2018

3. Performance of the Angolan Banking System

The Angolan banking system faces several challenges. Among these, we highlight strengthening the credibility of the financial system, improving correspondent banking relations, implementing effective supervision of risk and fully adopting international accounting and financial reporting standards.

In this context, in 2018, several supervision actions were carried that aimed to mitigate credit risk, such as monitoring of the implementation of the Basel II prudential rules, an increase in punitive and corrective measures, together with monitoring the increase in share capital, as per Notice no. 2/2018 of 2 March.

We highlight, in the period under analysis, the creation of the Deposit Guarantee Fund (DGF) through Presidential Decree no. 195/18 of 22 August, which came into force on that date. Its objective is to guarantee reimbursement of deposits made at banking financial institutions domiciled in Angola up to a limit of Kz 12.50 million. The DGF acts as a guarantee for small depositors (individuals and companies) and thus completes the safety net for the Angolan financial system.

3.1. Banking System Activity In December 2018, the banking system’s assets reached a total of Kz 13.10 billion, an increase of Kz 2.88 billion (28.14%) compared to last year, mainly caused by an increase in bonds and securities, and also the investments in central banks and other credit institutions of 27.84% and 79.92% respectively.

With the depreciation of the kwanza against the US dollar in the currency market, which took place at the beginning of 2018 due to the implementation of the new foreign exchange mechanism, the assets denominated in foreign currency rose in value, increasing 62.43% year-on-year, accounting for 48.00% of total assets. Assets in domestic currency rose by 7.24%, and comprised 52.00% of the total weight.

A lower appetite for risk prevails among banking financial institutions. The growing trend for financing the state is maintained via bonds and securities, presenting, in the period under analysis, a total representation in the assets of 33.93% in detriment to loans, which represented 31.74%. Part II – Angolan Banking System • 31

Chart 11: Structure of Total Assets

Other fixed assets 14 Commercial and industrial inventories and 12 advance payments to vendors Other assets

Credit to clients 10 Exchange rate operations 8 Credits in the payments system

Billion Kz Billion 6 Coverage derivatives with positive fair price 4 Bonds and securities

2 Investments in central banks and other credit institutions - 2016 2017 2018 Cash and receivables

Source: BNA

In the period under analysis, the gross loan portfolio totalled Kz 4.16 billion, an increase of 14.97% year-on-year. In terms of currency, loans in domestic currency grew by Kz 128.59 thousand million (4.49%) year-on-year, corresponding to a weight of 71.89% in the total portfolio, while loans in foreign currency grew by around Kz 412.76 thousand million (54.58%), accounting for 28.11% of the total portfolio.

Loans by sector of economic activity in the banking system were mostly concentrated in the “Wholesale and Retail Trade; Repair of Cars and Motorcycles and Goods for Personal and Domestic Use” sector, accounting for 22.29% of the portfolio, followed the sectors of “Property Activities, Rentals and Services Provided to Companies” and “Individuals” with 16.21% and 14.26% respectively.

Loans in arrears increased significantly by 12.61%, going from Kz 1.04 billion in December 2017 to Kz 1.18 billion in December 2018. The default rate stood at 28.26%.

Chart 12: Loans in Arrears Over Total Loans

5 35

30 4 25

3 20 % lion Kz lion

Bil 2 15 10 1 5

- 0 2016 2017 2018

Gross credit Bad debt Default ratio (right axis)

Source: BNA 32 • Annual Report and Accounts • 2018

In the period under analysis, the total liabilities of the banking sector amounted to around Kz 11.0 billion against Kz 8.93 billion last year, an increase of Kz 2.16 billion (24.14%), influenced mainly by an increase in customer deposits and other loans of about Kz 2.08 billion (28.42%). Customer deposits and other loans remained the main source of funding for banking financial institutions, comprising 85.00% of the total liabilities, corresponding to Kz 9.42 billion, of which 49.18% were demand deposits, 49.07% term deposits, 1.61% other deposits and 0.14% other loans.

Regarding sectors of economic activity, we highlight with the largest volume of deposits the “Individuals”, “Property Activities, Rentals and Services Provided to Companies”, “Wholesale and Retail Trade; Repair of Cars and Motorcycles and Goods for Personal and Domestic Use” and “Other Activities concerning Collective, Social and Personal Services”, with 27.15%, 16.70%, 11.73% and 11.43% of the total deposits in the banking sector respectively.

As with the assets, the liabilities were predominantly in domestic currency, accounting for approximately 53.88% of the total volume of funding in the banking sector.

Chart 13: Structure of Total Liabilities

12 Technical reserves Reserves

10 Commercial and industrial vendors Other liabilities

8 Client advance payments

Subordinate liabilities

6 Exchange rate operations (P)

Liabilities in the payments

4 system Coverage derivatives with negative fair price Kz Billion Financial liabilities at fair price through results Liabilities represented by securities 2 Funds in central banks and other credit institutions Other clients’ funds and - other loans 2016 2017 2018

Source: BNA

Despite the weakening of the Angolan economic, the banking system recorded a significant increase in net revenues of Kz 371.99 thousand million (177.89%), going from Kz 209.11 thousand million in December 2017 to Kz 581.11 thousand million in December 2018. This essentially explained by the increase in revenues from foreign exchange transactions of Kz 556.66 thousand million (551.22%) and proceeds from bonds and securities of Kz 146.59 thousand million (44.05%).

Chart 14: Revenues

1 600 80

1 400 70 Source: BNA 1 200 60

1 000 50

800 40 %

Billion Kz Billion 600 30

400 20

200 10

0 - 2016 2017 2018

Fiscal year’s net result Financial margin Bank product Financial margin/bank product (right axis) Part II – Angolan Banking System • 33

3.2. Main Banking System Indicators Despite the increase in loans in arrears, the default ratio decreased slightly from 28.85% to 28.26% due to the restructuring of the loans in arrears portfolio. The conversion ratio, in light of high credit risk, showed a declining trend, diminishing from 49.32% in 2017 to 44.15% in 2018.

Likewise, the quick liquidity indicators in domestic currency for the banking system showed a declining trend, reaching a ratio 9 of 16.86%, which represents a fall of 3.30 p.p. For its part, quick liquidity in foreign currency rose by 4.27 p.p. in relation to the previous year, standing at 24.90% in the period under analysis, which reflects a greater coverage capacity for short-term liabilities in foreign currency.

In light of the considerable increase in banking revenues, the profitability indicators, return on equity (ROE), return on assets (ROA), increased by 12.40 p.p. and 2.36 p.p. respectively, standing at 26.57% and 4.43% respectively.

Graph 9: Quick Liquidity Ratios and Conversion Ratio

Transformation ratio (Billion Kz) 40 Immediate liquidity ratios (%) 10 60 9 8 7 6 20 5 50 % 4 3 2 1 0 0 40 2016 2017 2018 2016 2017 2018 Immediate liquidity ratio ME (Level 1) Total gross credit Immediate liquidity MN (Level 1) Total deposits Immediate liquidity MN and ME (Level 1) Gross credit total/total deposits (right axis)

Source: BNA

With the increase in share capital held by banks to a minimum of Kz 7.50 thousand million, within the scope of Notice no. 02/2018 of 2 March, the regulated equity increased by 53.43% and, as a result, the regulatory solvency ratio increased from 18.79% in December 2017 to 24.16% in December 2018, remaining well above the regulatory minimum limit of 10%. This guarantees that the banking system is more resilient to cope with the risks inherent to its activity. However, the existing risk in the credit portfolio may lead to an increase in impairment, with a negative impact on the regulated solvency of banking financial institutions.

Chart 15: Regulatory Solvency Ratio 3 30

2 20 % lion Kz lion

Bil 15

1 10

- - 2016 2017 2018

Own regulatory funds Regulatory solvability ratio (right axis)

Source: BNA

9 Quick Liquidity in domestic currenct level 1 = Availability/Short-Term Liabilities 34 • Annual Report and Accounts • 2018

4. Performance of the Angolan Non-Bank Financial System

The strengthening of non-bank financial institutions (NBFI) represents a challenge for the Angolan financial system. Among other aspects, we highlight the promotion of micro enterprises, the fight against poverty, the strengthening of microfinance, the stability of exchange rate policy, adequate adoption of international accounting standards, the implementation of risk-based supervision, gathering quantitative and qualitative information about the risks to which these institutions are exposed, thus contributing to greater credibility and robustness of the Angolan financial system.

The National Bank of Angola has carried out important – external and internal – initiatives which aim to promote stability in the banking sector. In this regard, on 27 June 2018, the Board of Directors created a new organic unit called the Non-Bank Supervision Department (NBSD), focused on prudential supervision of non-bank financial institutions, in recognition of specifics of supervising these kinds of institutions, at both the regulatory and supervisory levels.

The performance of the non-bank financial system has been affected by the current macroeconomic outlook. This has had an impact on the number of foreign exchange transactions, remittances, microcredit granted, together with the capacity of micro entrepreneurs, individuals and companies to repay their loans. These factors have contributed to the slow growth in loans granted and to the increase of microcredit in arrears.

4.1 Composition of the Non-Banking Financial System

The main areas of activity of the institutions under supervision of the DSN are the exchange activity (purchase and sale of foreign currency), remittances (sending and receiving values to/from abroad) and the microcredit business.

In recent years, non-banking financial sector has been experiencing significant growth, and until December 2018 there were 102 NBFI’s in activity, from witch 68 are exchange houses with 121 agencies, 20 are micro companies with 70 branches, there are 14 payment provider societies 27 branches and two credit unions services with two agencies. In terms of geographical distribution, most of the NBFI’s are headquartered in Luanda with a representation of 85%, followed by the province of Cabinda with 9%, Benguela and Uige with 6% each.

4.2 Non-Banking Financial System Activity 4.2.1 Turnover

During the reporting period, the volume of foreign currency purchases, made by exchange offices, amounted to EUR 16.47 million and USD 6.91 million, while foreign sales amounted to USD 29.60 million. Regarding the volume of international remittances made by companies that provide payment services, it reached kz 5.21 billion, equivalent to USD 20.88 million, highlighting items sent to Portugal, representing 89.98%, Brazil 3.1%, South Africa with 2.89% and 4.06% other countries.

Similarly, Portugal is the country that stood out, with a higher volume of incoming remittances from abroad, with the representation of 23.65%, followed by the United States with 12.12%, the UK with 10.63%, France with 10.19%, Brazil with 8.18% and the other countries with 35.19. Part II – Angolan Banking System • 35

Table 5: Foreign Exchange Transactions

Oper- Equiv- ações de Equiv- Foreign Contraval- Montante Montante "Amount in alente remessas alente exchange trans- Currency or em Kz em Kz em Kz ME em USD (recebi- em USD actions (milhões) (milhões) (milhões) (milhões) mentos do (milhões) exterior) EUR 16.47 6,281.37 4,430.54 17,76 Portugal 93,82 0,37

Purchases USD 6.91 2,280.52 161,78 0,58 United 48,09 0,18 States of America USD 29,6 - 151,16 0,66 UK 42,18 0,15 Sales 469,71 1,86 83 Nations 212,45 0,79

Source: BNA

Despite the downturn in the economy the non-banking system, in this period, registered an increase of the volume of microcredits granted, amounting to 2.07 Kz billion, comparing to the corresponding period, having benefit 30 467 micro entrepreneurs.

The average prevailing interest rates had a slight decrease of 5.19 percentage points over the corresponding period.

Panel 10: Microcredit Volume and Microcredit Interest Rates

Annual microcredit volume (million Kz) Annual medium interest rate (%)

63.43

5 799.17 58.24 56.61 3 920.17 3 733.55

2016 2017 2018 2016 2017 2018

Source: BNA

Regarding geographical distribution of microcredit, the province of Luanda was highlighted with a greater loans volume, with a representation of 60.87%, followed by Benguela with 9.82% and Cabinda with 7.44%.

Chart 16: Micro-Credit Volume by Provinces in 2018

3 530.49

Million Kz Million 741.24 432.01 569.84 318.643 206.95

Luanda Cabinda Benguela Huíla Namibe Remaining 12 Provinces

Source: BNA

As for the portfolio of gross loans of the corporate credit unions, it had a volume of around Kz 57.45 million at an average interest rate of 25.00%, which benefited 78 microentrepreneurs and is granted only in the province of Luanda. 36 • Annual Report and Accounts • 2018

4.3. Performance of NBFI’s

In December 2018, the active exchange offices registered a decrease of Kz 2.19 billion, corresponding to 28% over the corresponding period, thus reaching the amount of Kz 5.71 billion. This reduction was mainly caused by the decrease of 44% of the availability.

During the reporting period, the exchange offices had negative results due to lower availability of foreign currency resources for the exercise of the exchange activity.

Panel 11: Asset Structure Total of Exchange Offices

Assets structure Dec-17 Assets3% structure Dec-18

1% 3%

2% 1% 16% 9%

78% 18% 61%

Receivables Receivables Other amounts Other amounts Fixed Short-term investments Fixed assets Currency transactions Bonds and securities Credits in the payments system

Source: BNA

Painel 12: Estrutura do Passivo Total das Casas de câmbio

Liabilities structure Dec-17 4% Liabilities structure Dec-18 7% 2% 8% 8%

90%

81% Other liabilities Other liabilities Provisions for probable liabilities Liabilities in the payments system Provisions for probable liabilities Liabilities in the payments system Other funding Part II – Angolan Banking System • 37

Source: BNA

4.3.1 Corporate Payment Services Providers (Remittances)

In this period, the assets of the companies that provide payment services (remittances), had a decrease of Kz 898.18 million, corresponding to 50% over the corresponding period, reaching thereby the amount of Kz 890.18 million. This decrease was mainly caused by the decrease of the investments in securities and fixed assets, 99% and 77%, respectively.

Panel 13: Total Asset Structure of Payment Corporations

2% Assets structure Dec-17 Assets structure Dec-18 1% 4% 10% 19% 52% 52%

37% 21% Receivables Bonds and securities Fixed assets Other amounts Receivables Other amounts Credits in payment systems Fixed assets Short-term investments Short-term investments

Source: BNA

Panel 14: Total Liabilities Structure of Payment Companies

Liabilities structure Dec - 17 Liabilities structure Dec - 18

1% 11%

49% 50% 32% 56%

Other liabilities Provisions for probable liabilities Provisions for probable liabilities Other liabilities Liabilities in the payments system

Source: BNA 38 • Annual Report and Accounts • 2018

4.3.2. Corporate Microcredit

In December 2018, the credit and other companies assets registered an increase of Kz 3.48 billion, corresponding to 81.39% over the same period, reaching thus a cipher of Kz 7.75 billion. This increase was mainly caused by the increase of availabilities and credit granted, of 43.17% and 40.02%, respectively.

In 2018, microcredit societies changed the composition of their assets, increasing diversification of the assets. Indeed, in 2018, 78% of the asset are composed of three headings (Loans, Securities and Liquidity Applications), with 30%, 28% and 20% of total assets, respectively. Moreover, in the corresponding period, 68% of the asset compounds by two items (Credits and Liquidity Applications) with 39% and 29% of the total assets, respectively.

Panel 15: Total Asset Structure of Credit NBFI’S And Others

Assets structure Dec-18 Assets structure Dec-17 5% 6% 8% 11% 39% 9% 30%

14 %

20%

Credits 28% 29% Credit Fixed assets Short-term investments Bonds and securities amounts Receivables Other amounts Short-term investments Fixed assets Source: BNA Other amounts

Regarding the total liabilities of Credit NBFI´s and Others, it got to a total of Kz 6.16 billion, having had an increase of Kz 2,44 billion, equivalent to 66% over corresponding period. This growth is due, above all, to the increase of the heading Other Abstractions of about Kz 2.07 billion, representing 78% of the total liabilities.

Panel 16: Total Liabilities Structure Of Credit NBFI’S And Others

Liabilities structure Dec-17 Liabilities structure Dec-18 1% 2% 2% 1% 10%

23%

73% 78%

Other funding Other funding Other liabilities Other liabilities Provisions for probable liabilities Provisions for probable liabilities Part II – Angolan Banking System • 39

Source: BNA 5. Payments System The Angola Payments System (SPA) is regulated by the Banco Nacional de Angola (National Bank of Angola), in accordance with the in accordance with the provisions of Law No. 05/05 of July 29th, the SPA Law, with a view to achieving the objectives of public interest defined in this law - Security, Operational Reliability, Efficiency and Transparency. In this context, the National Bank of Angola and the Technical Council of the Angola Payment System, among others, are involved in the SPA.

Regarding the SPA’s architecture, the composition remained unchanged in 2018 over the previous year, continuing to exist three subsystems in retail - check Compensation Subsystem (SCC), Multibox Subsystem (MCX) Credit Transfers Subsystem (STC) - and a wholesale subsystem - Real Time Payment System (SPTR).

Regarding the operations processing of the SPA, in this period, about 473 million operations were processed amounting to approximately Kz 17 billion. However, the number of operations and composition are highlighted, because they reflect the evolution of the use of payment instruments. The operations of the MCX, which accounted for about 98% of total operations processed in the SPA, they experienced an annual increase of 19.41% as a result of the increased use of cards as compared to other SPA payment instruments.

TABLE 6:Number and Amount of Processed Operations in the SPA Subsystems

Annual variance 2016 2017 2018 (%) Number 312 245 359 397 348 571 472 989 714 19,04 SPTR 198 845 176 393 193 225 9,54 SCC 427 603 307 081 220 398 -28,23 STC 6 681 641 9 979 572 10 612 200 6,34 MCX 304 937 270 386 885 525 461 963 891 19,41 Amount (million Kz) 14 916 762 14 482 928 16 921 760 16,84 SPTR 8 956 397 5 979 155 6 732 968 12,61 SCC 1 131 784 876 899 760 498 -13,27 STC 1 671 636 3 246 298 3 996 765 23,12 MCX 3 156 945 4 380 576 5 431 529 23,99

Source: BNA

In this period, cards and transfers were the most used tools. However, because this reffers to instruments linked to retail subsystems, it’s expected that they present a higher number of transactions for large amounts systems.

However, the checks maintain a downward trend, having had a decrease of about 38% in 2018 comparing to 2017, assuming a positive factor given the risks inherent in its use and dematerialization, which is one of the objectives set for the payment instruments.

Chart 17: Evolution of The Use of Payment Instruments 500 2.500

400 2.000

300 1.500

Número 200 1.000 Número

100 500

0 0 2016 2017 2018

MT 102 103 Cheques Transf a Cred.(Eixo à dir.)

Cartão MCX (Eixo à dir.) 40 • Annual Report and Accounts • 2018

Source: BNA

4.3.2. Corporate Microcredit SPTR is a system operated by The National Bank of Angola, directed to the processing of high-assets operations (greater than or equal to Kz 10.00 million), where all operationsare settled in local currency, including the operations of retail subsystems and the securities market.

In 2018 34 institutions participated in the system, from which 32 were financial banking institutions, one State Insti- tution (Ministry of Finance) and an infrastructure of financial market (IMF)9 , namely the Central Securities Depository (CEVAMA).

Regarding the SPTR funtioning, this presented an availability of 99.90% which represents an unavailability of 0.10%, acceptable levels, having has a reference the international best practice and the availability of the systems from countries as Brazil, Portugal and South Africa.

Panel 17: Evolution of the Transactions Settled in SPTR

Number Amount (Billion Kz) 250 000 50

200 000 40 Others 150 000 FX 30 Clients 100 000 Lev/Dep 20 SIGMA 50 000 Interb. 10

0 0 2016 2017 2018 2016 2017 2018

Source: BNA

In terms of processed operations, in 2018, SPTR settled a total of 234 thousand operations in the amount of Kz 48.63 billion, representing an increase of 7.44% in terms of number of transactions in the previous year, influenced mainly by the increase in customer payment operations. In turn, the traded amounts had a slight increase of 0.14% over the previous year, mainly due to the growth of Interbank Money Market transactions (MMI).

9 In accordance with the Financial Market Infrastructure Principles (PIMF) issued by the Committee Payments and Market Infrastructure (CPMI) and the International Organization of Securities Commissions (IOSCO) published by the Bank for International Settlements (BIS) in April 2012, a financial market infrastructure (IMF) is by definition a multilateral system among participating institutions, including the system operator, used for compensation, settlement or registration of payments, securities, derivatives or other financial transactions. Part II – Angolan Banking System • 41

5.2. Superintendence of the SPA

In this context, the Superintendence is a function of the BNA and as such was carried out in accordance with the financial market infrastructure CPMI-IOSCO Principles and the Document of Policy and Superintendence Internal Procedures Manual.

Thus, it was made an ongoing analysis of the functioning of the subsystems and instruments of the SPA based on clearing sessions and settled transactions by historical data and information about incidents affecting the normal functioning of financial market infrastructures in particular CEVAMA, SIGMA, SPTR, SCC, MCX and STC.

That way, change-inducing actions were carried out, in terms of moral persuasion, having been recommended to stakeholders the compliance of standards and internationally recommended standards. Regarding the regulation, No- tice No. 18/04 of 22 March on Changing the wording of article 12 of the Notice No. 17/09 of 12 September was published, relating to penalties being applied for infringements for failure to comply transfer lead times and availability of funds to the final beneficiary.

In addition, the participants in the Automated Clearing House of Angola (CCAA) were penalized in relation to breach of the minimum guarantee for settlement of clearing balances and the non-confirmation of the return file transfers offset the STC.

5.3. Technical Council of Angola’s Payment System The Technical Council of Angola Payment System (CTSPA) is the advisory body of BNA concerning Payment System. In 2018, as a result of the restructuring of CTSPA, there was just an ordinary meeting, which addressed issues related to the MCX subsystems, STC and SDD (Subsystem Direct Debits), namely: (i) the need to improve the team down- for lack of notes in MCX; (Ii) the migration of domestic debit cards from magnetic stripe to EMV technology (Europay Master- 42 • Annual Report and Accounts • 2018

Card and Visa); (Iii) the rate of real-time availability Multicaixa subsystem; (Iv) the necessity of reducing the percentage of discards in the STC. Regarding the implementation of the subsystem Direct Debits have been proposed guarantees scenarios for the settlement of multilateral balances. 5.4. Outlook of the SPA

Despite recent economic constraints experienced by the Angolan economy, the payment system, has registered an increasing trend in the use of payment instruments and channels, with particular emphasis on electronic instruments.

Thus, the SPA has further developments in perspective in short and medium term as part of the development strategy of Angola payment systems. Therefore, subsystem of Direct Debits will be implemented, which will streamline the collecting of recurring services, such as energy consumption, water or insurance with benefits for creditors and debtors (greater safety, lower costs).

And still about retail payments, it is stressed that it is planned to implement the plan of mass electronic payments in order to dematerialize cash payments, in other words, contribute to the gradual reduction in physical currency in circulation and move towards electronic payments with the diverse availability of automatic payment channels (ATMs, automatic payment terminals and home banking solutions) and electronic payment instruments like the card.

Regarding instant payments, it is envisaged the implementation of a system of mobile payments that will provide payment services available to the uBNAnked population anywhere in the country which is the first step in the whole process of banking and financial inclusion.

In terms of regulations, the publication of the SPA Law proposal and consequently the review of regulations related to the provision of electronic payment services is in view, thus giving room for the entry of new stakeholders and financial technologies (Fintech) service providers and distributed data (DLT). The implementation of the SPA laboratory is also expected, which aims to encourage technological innovation for the payment system can become increasingly efficient. PART III Policies of the Central Bank 44 • Annual Report and Accounts • 2018

6. Monetary Policy and Liquidity Management 6.1 The Operational Framework of Monetary Policy - Po- licy Instruments

The BNA, at the end of 2017, defined the monetary basis as an operational variable of the monetary policy as a result of the weakness of the monetary policy transmission mechanism, whose operation was based on the key interest rate, BNA rate, established as an operating variable when setting the Monetary Policy Committee (MPC) in 2011. Despite the change of the operational variable, the monetary policy instruments kept up.

Permanent Lending Facilities and Liquidity Absorption:

The Permanent Facilities of Liquidity Management are initiated by the bank financial institutions and aim to provide and absorb liquidity and control the interbank market interest rates, since they define a corridor (maximum and minimum) for determination of rate interest on overnight maturity of MMI. Thus, in 2018, these transactions were traded with overnight deadlines and 7 days.

The Permanent Facilities of Liquidity Lending (FCL) are reversible operations supported by Government Bonds in national currency (BT, OT and TBC) of any maturity, designed to provide liquidity to financial institutions by Bank overnight or 7 days. The interest rate on the facility is preset by the BNA, in the meeting of the Monetary Policy Committee (MPC). In 2018, these transactions were traded with overnight deadlines and 7 days.

Contrary to the effect of FCL, the Permanent Facilities of Liquidity Absorption (FAL) correspond to deposits made by banking financial institutions with the BNA intended to absorb liquidity without limits for the amounts deposited. The BNA has available operations with overnight maturity (FAO) and seven days (FAL7), both registering a zero rate at the end of the year. It highlights that in 2018 were not made Permanent Ease Liquidity Absorption operations.

Open Market Operations (OMA):

Despite the operational framework provide for the use of open market operations with various specifications and different modes of operation, the BNA has used only fine-tuning operations, whether providing or liquidity-absorbing. These operations are implemented on the initiative of the BNA, via auctions, bilateral procedures may also be used.

Mandatory reserves:

The Mandatory Reserves system aims to stabilize money market interest rates, allowing for greater regulation of liquidity levels in the banking system and greater efficiency of monetary policy transmission instruments.

6.1 Objectivos e Medidas de Política Monetária The ultimate objective of monetary policy is price stability. To do this, the BNA used its monetary policy instruments, in particular the Open Market Operations (WCO) and the Permanent Lending Liquidity Facilities.

6.1.1 Monetary Policy Measures

In 2018, the BNA kept the benchmark interest rate at 18.00% until the end of June when it registered a decrease of 1.50 percentage points to 16.50%. Additionally, the interest rate of the Lending Liquidity Facilities Overnight decreased 2.00 pp, leaving from the 20.00% to 18.00%, while the liquid absorption rate of Easy Overnight with maturities and kept 7 days If 0.00%. Part III – Policies of the Central Bank • 45

Policies for establishment of Mandatory Reserves suffered two significant changes during the year 2018. The first time proceeded to the reduction in the coefficient of compulsory reserves for deposits of the private sector from 21.00% to 19.00% in May, and later in July the coefficient of reserve requirements was reduced for deposits and for the private sector as the Central Government and Local Government, in local currency, to 17.00%.

6.2. Money market 6.2.1. Open Market Operations (OMA)

In the context of regularization of liquidity through monetary operations, the volume of open market operations (OMA), for liquidity absorption in 2018 was Kz 1.62 billion and its impact on liquidity was contractionary in Kz 21.32 billion, while the Open Market Operations for marginal lending totaled about Kz 78,08 billion and contributed to a contraction of liquidity in Kz 98,06 billion. Compared to 2017, the market operations volume open for transfer and absorption in 2018 was lower by about 11.52% and 50.60%, respectively.

The average rates of absorption OMA in the maturities of 7 and 28 days were reporting the greatest decrease passing 7.50% to 14.00% in January, to 1.25% and 2.00% in September respectively. In December maturity at rates of 1, 7, 14, 28 and 63 days prevailing in this market segment stood at 1.25%, 4.00%, 8.80% and 13.00%, respectively. On the other hand, the average interest rate for the provision of liquidity was 20.00% for maturities of 7 and 28 days, 1 percentage point less compared to the rate applied in 2017.

Gráfico 18: Evolução das Operações e Taxas de Juro das OMA 450 000 20 400 000 18 350 000 16 300 000 14

250 000 12

200 000 10 % 8

lion Kz lion 150 000 6 il

M 100 000 4 50 000 2 - 0 Feb/18 7 Feb/1 7 Jun/18 Jun/17 Oct/17 Apr/18 Oct/18 Apr/17 Dec/17 Dec/18 Dec/16 Feb/17 Aug/17 Aug/18

OMA (Assimilation) (left axis) OMA 7d OMA 14d OMA 28d

Fonte: BNA 46 • Annual Report and Accounts • 2018

6.2.2. Liquidity permanent facilities In 2018, the use of Liquidity Lending Facilities operations (FCO / FCL) allowed the banking institutions to acquire access to overnight financing and 7 days of the BNA in regulatory terms. The volume of these operations in the year amounted to an average monthly value of Kz 36,92 billion, with the highest incidence in the first and second quarter of the period, and the net impact been contractionary in Kz 231,15 billion. The operations were transacted in reference with maturities of 1 to 7 days.

Chart 19: Evolution of Operations and Fco’s Interest Rates

700 000 25 600 000 16.50 20 500 000 15 400 000 % 10 lion Kzlion 300 000 il M 200 000 5 100 000 - -

7 8 ct/18 8 8 Aug/18 Jun/18 Dec/18 O Feb/17 7 Feb/18 8 7 Jun/17 Apr/1 Oct/17 Apr/1 Dec/16 6 Dec/17 7 Aug/17

FCO FCO rate (right axis)

Source: BNA

The National Bank of Angola also provided liquidity in a special way in the amount of Kz 354,23 billion at an annual interest rate of 7.50%.

24 Chart 20: Monetary Policy Interest Rates

20 16.50 16

% 12

- -

Feb/17 7 Feb/17 8 Jun/17 Jun/18 Apr/18 Apr/17 Oct/17 Oct/18 Dec/18 Dec/16 Dec/17 Aug/17 Aug/18

Tx BNA FAO FCO

Source: BNA Part III – Policies of the Central Bank • 47

6.3. Interbank Money Market Regarding interbank money market, liquidity-providing transactions between banking institutions increased from an average monthly volume of Kz 196,22 billion in 2017 to Kz 755,68 billion in 2018, having observed a significant increase about 285.12%.

Panel 18: Evolution of The Rates of Mmi Vs. Traded Volume

35 2017 2018 2017 30 2018 1 400 000 25 25 20 1 200 000 20 15 1 000 000 15 % 800 000 % 10 600 000 10 5 400 000 5 200 000 0 Million Kz Kz Million 17

18 0 t/17 ec/18 17 18 Apr/ t/18 t/18 Dec/16 Aug/18 Feb/18 Jun/ 17 Aug/17 Oc Apr/ Jun/ 18 Oct/18 Feb/17 Dec/17 D Oc Jun/ 18 Aug/17 Dec/18 Feb/17 Apr/ Jun/ 17 Oct/17 Feb/18 Apr/ Dec/17 Aug/18 LUIBOR overnight 1 month Dec/16 3 months 6 months VOL - MMI 9 months 12 months LUIBOR overnight (right axis) Source: BNA

The rate of overnight LUIBOR, calculated based on the marginal lending operations between banks noted an increasing trend from January to June 2018 reaching 21.94%, followed of a sharp drop in July (about 5.56 pp from the previous month). In December 2018, the rate of overnight LUIBOR stood at 16.75%, registering a decrease of 1.02 percentage points compared to the year 2017, when the rate stood at 17.77%.

The LUIBOR rates in other maturities 1, 3, 6, 9 and 12 months showed the same trend over the period in question, having located on December 16.81%, 17.09%, 17.35% 17, 82% and 17.99%, respectively, for each maturity, a reduction of 1.46 pp, 1.83 pp, 2.81 pp, 4.08 percentage points and 5.09 percentage points over the corresponding period.

6.4. Exchange Rate Policy Instruments In 2018, besides the change in exchange rate regime, BNA has implemented some measures of exchange rate policy such as the end of direct sales of foreign exchange, greater communication and exchange sales programming and on the other hand, which helped to establish a greater predictability in this market so as to anchor the expectations of the various economic agents.

The first major step in ensuring greater transparency and predictability to the foreign exchange market was the publication in institutional BNA site, from August 2018, the indicative amounts BNA intended to sell and the monthly schedule of foreign exchange intervention. This communication allowed the agents have a clear idea of how to sue the intervention of the BNA in the market.

A second important decision was the end of direct sales by the BNA for sale exclusively at auction in October 2018, thus becoming the fall the currency allocation to all economic agents on the responsibility of commercial banks. Thus, the intervention of the BNA now passes for only two types of auctions: number of auctions (sales for letters of credit) and price auction (sale of foreign currency). Also at the end of the year, from November, the frequency of the auctions has become daily.

In December, new instructional were published (No. 19 and No. 20, December 3, 2018) in order to further relax the exchange system having been removed administered bands. However, the entry into force of these instructional ha- ppened only in January 2019. 48 • Annual Report and Accounts • 2018

6.5. Primary Exchange Market As a result of the need for foreign exchange for the importation of goods and services as well as making various external commitments, exchange resources equivalent to USD 13 472,44 billion against USD 12 219,66 were placed in the foreign exchange market during the year 2018, representing an increase of 10.25%.

Chart 21: Currency Sales

2 000 24.76 1 800

1 600

1 400 351.20 174.13 1 200

1 000 252.73 1 107.70 300.25 1 779.36 USD millions millions USD (millions) 800 253.3 1 1 350.91 600 245.4 1 267.48 1 250.20 554.23 325.83 9 904.55 400 834.19 697.97 200 653.5 377.36 279.0 0 488.2 0 4 6 Jul/18 Jul/18 Sep/18 8 Jan/18 Jan/18 Feb/18 8 Jun/18 Jun/18 Apr/18 Apr/18 Oct/18 Oct/18 Aug/18 Aug/18 Dec/18 May/18 8 Nov/18 Nov/18 Mar/18

Direct sales Auctions

Source: BNA

In 2018, in the primary market, the reference exchange rate of the kwanza against the US dollar closed with a quotation of USD/Kz 308.607 against the USD/Kz 165.924 of December 2017, representing a reduction of approximately 46, 23% of the kwanza facing the US Dollar.

6.6. Secondary Exchange Market The Kwanza, in the secondary market of foreign currency, depreciated in the end of 2018 over the corresponding period, about 45.15%, passing from USD/Kz 170.541 in December 2017 to USD/Kz 310.942 in December 2018.

As a result of the foreign exchange market situation, in all market segments was observed depreciation of the national currency with the exception of the informal market, where there was a slight appreciation result of less pressure felt in this market as a result of BNA effort meet the needs of agents via the primary market.

Table 7: Exchange Rates in the Various Markets

2016-12-31 2017-12-01 2018-12-01 Primary market (USD/Kz) 165,90 165,92 308,61 Medium variation (%) -18,44 -0,01 -46,23 Secondary market - foreign currencies (USD/Kz) 169,01 202,61 310,55 Medium variation (%) -18,51 -16,59 -34,76 Informal market (USD/Kz) 474,17 415,83 395,83 Medium variation (%) -44,20 14,03 5,05 Currency exchange offices (USD/Kz) 378,40 248,00 330,98 Medium variation (%) -41,58 52,58 -25,07

Source: BNA Part III – Policies of the Central Bank • 49

7. International Reserves Management The management of international reserves has as basic principles the preservation of capital security and liquidity of the financial assets that make up the structure of the investment portfolio, taking into account the conservative risk profile of the National Bank of Angola, the Central Bank of quality, light of the current investment policy approved by the Board of Directors, through the Order No. 238/2011 of 30 November 2011, in line with the Masters lines approved by means of Order No. 35/2011 of February 15 2011.

Thus, the objectives of the investment policy for the management of international reserves are focused on: i). Diversify the investment portfolio taking into account the new opportunities; ii). Set limits by type of financial instruments and risk exposure of the portfolio; iii). Set the profitability benchmark for the portfolio of assets under management and the limits of fluctuation due to the defined reference portfolio (stop-loss); iv). Restructure and reduce exposure to External Managers and the number of management companies; v). Adjust the number of corresponding deposit as defined in the Masters lines and the Counterparties Assess- ment Model; vi). Define the powers for approval.

For the tranches of International reserves, there was a certain stability in terms of weight over the period 2018, where the liquidity tranche corresponds to USD 1 712,09 million, intermediate tranche equivalent to USD 6 848,37 million and investment tranche presented an amount of USD 8 560,46 million, compared to USD 1 853,64 million, USD 7 414,59 million and USD 9 268,24 million of the year 2017, respectively.

As for asset classes, there is the Fixed Income instruments (sovereign, supranational, corporate and government agencies with high quality) and the instruments of money market, with amounts of USD 8 358,28 million and USD 6 922,43 million, 3.91% and 14.05% lower, respectively, compared to 2017, respectively (USD 8 698,47 million and USD 8 053,95 million).

These investments are made taking an active strategy, with conservative profile, in accordance with the good practice in the management of reserves emanating from multilateral organizations, notably the International Monetary Fund and the World Bank respectively.

Table 8: Allocation by Active Class

Asset classes (%) 2017 2018 Monetary market instruments (bank deposits and equivalent) 36 40 debt securities (sovereign, supranational and government agencies) 48 49 Gold 4 4 Other investments 12 6

Source: BNA

The exposure level of international reserves by currency remained mainly in US dollars with a weight of 87%, the Euro with a 4% weight, Pound 3% and 6% in other currencies.

The credit rating of the portfolio under management of the National Bank of Angola amounts to 63% in entities considered rating of as a good investment grade (greater than BB). The average duration of the managed investment portfolio stood at 1.66 years, compared to 1.96 years in 2017, and the level of liquidity of the assets stood at 92%. The Value at Risk total portfolio stood at 1.59% compared to 2.79% at the end of 2017, representing the maximum expected loss of the investments made in the period in question, justified to some extent by selling assets with high risk in the portfolio that were under external management.

The annual average return on investment in International reserves stood at around 5.49% (5.92% in 2017), and the yield of the Deposits of 13.05% was due to the four increments rate interest by the Federal Reserve United State of America currently lying in the range 2.25% to 2.50%. It is noteworthy that even the fall of the yield is due, to some extent, the divestiture in the period concerned from the portfolio of assets under external management. 50 • Annual Report and Accounts • 2018

8. Impacts of market operations on the monetary base and monetary aggregates Analyzing the balance of the BNA, from an analytical point of view, it appears that in 2018, the monetary base expanded by 5.45% over the previous year, standing at Kz 1.71 billion. This expansion is due to the exchange effect leading to an increase in the External Liquid Assets 61.70%, which in turn is influenced essentially by the expansion of the BNA reserve assets 45.94% (one drop 21 53% removing foreign exchange effect). In turn, the monetary base in the national currency (operating variable of monetary policy) contracted by 10.71%.

Table 9: Monetary Basis

2017 2018 2017 2018 Kz billion Monetary base 1 620,22 1 708,60 6,95 5,45 Bills and coins in circulation 527,72 498,39 4,29 -5,56 Bank reserve 1 092,50 1 210,21 8,28 10,77 Compulsory deposits 891,50 841,04 53,96 -5,66 Compulsory deposits - MN 769,94 584,14 57,02 -24,13 Compulsory deposits - ME 121,57 256,89 37,03 111,32 Free deposits 201,00 369,17 -53,25 83,67 Free deposits - MN 155,71 215,13 -54,95 38,16 Free deposits - ME 45,30 154,04 -46,27 240,08 Other obligations with other financial 66,38 87,91 -4,07 32,43 institutions

Memorandum: Monetary base in national currency 1 453,36 1 297,67 8,30 -10,71

Source: BNA

The expansion of the monetary base in 2018 was reflected in the increase of the Reserve Bank of 10.77%, while the banknotes and coins in circulation contracted 5.56%. The positive evolution of bank is associated with significant expansion of Free deposits 83.67%, and the deposits contracted 5.66%. In turn, the increase in Free Deposits was influenced fundamentally by political measures taken by BNA through the year 2018, especially the two reductions in the coefficient of mandatory reserves in local currency.

In terms of currency, deposits Free registered increases in both local currency and foreign currency 38.16% to 240.08% (82.84% increase one removing foreign exchange effect), respectively. Consequently, this increase led to a reduction of the Mandatory Deposit.

Panel 19: Bank Reserve - Mandatory and Free Deposits

800 350 300 600 250

200 400 150

MILLION KZ MILLION 100

KZ MILLION 200 50 0 0 2017 2018 2017 2018 Free deposits - MN

Compulsory deposits - MN Free deposits - ME Compulsory deposits - ME Other obligations with other financial institutions

Source: BNA Part III – Policies of the Central Bank • 51

During the period under review, the National Bank of Angola issued least 46.85% notes (in number) than in the preceding period by issuing 165.50 million bills against the injection of 311.40 million bills in 2017. In monetary terms, there was a decrease of 33,33% in the amount issued, Kz 102.00 million less than in the year 2017.

At the end of 2018, currency in circulation was divided into 367.59 million bills and 408,36 coins, equivalent, in financial value, to Kz 498,42 million (98.42% bills and 1.58% coins). Compared to 2017, in quantitative terms there was a reduction of around 10.98% of the bills in circulation, but an increase of 8.39% on coins, meaning that over 31.60 million coins where in circulation in the previous period. In financial terms, there was a contraction of the currency in circulation of 5.55%, less Kz 29.30 billion in circulation.

Chart 22: Issue VS. Monetary Circulation 600 000

500 000

400 000

300 000

MILLION KZ MILLION 200 000

100 000

0 Issue date Monetary circulation Dec-17 Dec-18 Source: BNA

9. Monetary aggregates and Balance of Payments 9.1. Evolution of Monetary Aggregates The money supply in the broadest sense, represented by M3 expanded 24.37% over the previous year, reflected in the expansion of the monetary aggregate M2 in 24.30%. This increase reflects mainly the exchange depreciation, and removing the effect of the total exchange foreign currency deposits reported in AKZ contracted 2.94% and said aggregates showed a shrinkage of 1.22% and 1.27% respectively.

Table 10: Summary Monetary

2017 2018 2017 2018 Kz billion T.V.H. (%) Net foreign assets 2 686,64 4 344,26 -30,25 61,70 BNA 2 416,43 3 526,56 -31,48 45,94 Net foreign reserves 2 254,47 3 285,45 -34,69 45,73 Commercial banks 270,21 817,70 -16,94 202,62

Net domestic assets 3 835,09 3 766,66 43,26 -1,78 Net domestic credit 5 988,71 6 578,89 33,45 9,85 Net credit to the central government 2 587,96 2 735,96 134,72 5,72 Credit to the central government 4 567,82 5 485,62 21,65 20,09 Central government deposits 1 979,87 2 749,65 -25,35 38,88 Credit to the economy 3 400,75 3 842,93 0,46 13,00 Other net assets -2 153,62 -2 812,23 18,94 30,58

Source: BNA 52 • Annual Report and Accounts • 2018

By contrast monetary acceleration, enhances the increase of net domestic credit at 9.85%, which in turn was influenced by the expansion of the Net Credit to the Central Government in 5.72% and Credit to the Economy at 13.00 % over the previous year. Autumn by hand, Foreign Net Assets registered an increase of 61.70% over the previous year. Excluding the exchange effect, these contracted 13.06% influenced mainly by contraction of the net international reserves 21.65%.

Table 11: Monetary Aggregates

2017 2018 2017 2018 Kz billion T.V.H. (%) M3 6 521,73 8 110,92 -0,11 24,37 M3 MN 4 521,07 4 497,11 -0,46 -0,53 M2 6 517,70 8 101,54 -0,11 24,30 M2 MN 4 521,07 4 497,11 -0,46 -0,53 M1 3 732,16 4 098,12 -3,16 9,81 M1 MN 2 825,13 2 792,67 -4,91 -1,15 Bills and coins in public hands 418,74 371,10 5,81 -11,38 Demand deposits 3 313,43 3 727,02 -4,19 12,48 Demand deposits - MN 2 406,40 2 421,57 -6,56 0,63 Demand deposits - ME 907,03 1 305,44 2,72 43,93 Quasi-currency 2 785,54 4 003,43 4,29 43,72 Time deposits - MN 1 695,93 1 704,44 7,95 0,50 Time deposits - ME 1 089,60 2 298,98 -0,94 110,99 Other instruments similar to deposits* 4,03 9,38 5,92 132,89 Note: * Includes bonds and repos in domestic and foreign currency Source: BNA

The monetary aggregate M2 amounted Kz 8.10 billion (against Kz 6.52 billion in 2017), representing an increase of 24.30%, is reflected in the increase in sight deposits and time deposits at 12.48% and 43.72%, respectively, while notes and coins held by the public decreased by 11.38%. The expansion of sight deposits was due to the increase in sight deposits in foreign currency at 43.93% (a decrease of 22.62% by removing the exchange rate effect) and sight deposits in national currency at 0.63%. As for the increase in time deposits, it is justified primarily by the increase in time deposits in foreign currency at 110.99% (one 13.44% increase removing the exchange rate effect). The M2 in national currency, in turn, decreased by 0.53% over the year 2017, stood at Kz 4.50 billion.

In aggregate terms, in 2018, the deposits in the banking system stood at Kz 7.73 billion, registering an increase of 26.75% over the previous year. The positive trend in deposits was influenced by the growth of deposits in foreign currency 80,53% and deposits in national currency at 0.58%. Excluding the exchange end, foreign currency deposits contracted 2.94%, which was reflected in the contraction of total deposits at 0.57%.

The stock of credit to the economy increased by 13.00%, influenced by the increase in the stock of credit in foreign currency and credit in the national currency at 65.42% and 2.12%, respectively. Removing the exchange rate effect the stock of credit in foreign currency decreased by 11.06%, which was reflected in the decrease in the stock of credit to the economy at 0.15%.

In terms of share of total credit stock, it is stressed that, in 2018, there was the following scenario, not unlike the previous year, the Wholesale and Retail accounted for 22.29% of the total (23, 83% in 2017), followed by Real Estate Business Sector, Leasing and Services Companies with 16.21% (14.84% in 2017), private with 14.26% (13.55% in 2017), construction with 12.11% (11.97% in 2017) and Other Activities Service Collective, Social and Personal with 11.50% (10.77% in 2017).

However, in 2018, there was an increase in the credit stock of the weight of the real estate activities sector, Leasing and Services and Services to Companies (1.37 pp), Other Activities of Collective, Social and Personal Services (0.73 pp), the Process Industries (0.71 pp), Individuals (0.71 pp) and transport, storage and communications (0.65 pp). It appears Part III – Policies of the Central Bank • 53

that the sectors seen as key to the process of economic diversification still have some significant weight on the total credit, including the manufacturing industry (7.81%), Agriculture, Livestock, Hunting and Forestry (4, 97%), the industry (1.82%) and Fisheries (0.39%).

With regard to financing conditions in the banking sector, it is stressed that, in 2018, the interest rates charged on lending to the corporate sector in national currency recorded increases in all maturities. Thus, interest rates with maturities up to 180 days, 181 days to 1 year and more than 1 year, pp showed increases of 1.20, 0.24 and 6.23 pp pp 2017, respectively, and oscillated, in annual average terms, between 20.20% and 21.60%.

As regards the interest rates charged on lending to individuals in national currency, they showed increases of 3.06 percentage points and 7.69 percentage points in the maturity of up to 180 days and 1 year, respectively, while the maturity of 181 days to 1 year registered a decreased of 0.86 pp in annual average terms, 2018, the rates in this loan segment fluctuated between 17.90% and 25.71%.

Panel 20: Credit and Deposits in the Banking System9 Interest Rates 25 28

22 25 22

19 % % % 19 16 16 13 13 10 10 Dec/16 Dec/16 Aug/18 Aug/18 Oct/18 Dec/18 Aug/17 Aug/17 Oct/17 Dec/17 Feb/18 Apr/18 Jun/18 Feb/17 Feb/17 Apr/17 Jun/17 Dec/16 Dec/16 Aug/18 Aug/18 Oct/18 Dec/18 Aug/17 Aug/17 Oct/17 Dec/17 Feb/18 Apr/18 Jun/18 Feb/17 Feb/17 Apr/17 Jun/17

By 180 days MN By 180 days MN 181 days to 1 year MN 181 days to 1 year MN

12 6

10 4 8 % % 6 2 4

2 0 /16 ec /17 ec /18 ec /16 ec /18ec /17 ec D Feb/17 Feb/17 Apr/17 Jun/17 Aug/17 Oct/17 D Feb/18 Apr/18 Jun/18 Aug/18 Oct/18 D D Apr/18 Apr/18 Jun/18 Aug/18 Oct/18 D Apr/17 Apr/17 Jun/17 Aug/17 Oct/17 D Feb/18 Feb/17 Feb/17 DP by 90 days ME DP by 90 days MN DP 91 to 180 days DP 91 to 180 days ME MN

Source: BNA

The interest rates charged on liabilities in national currency had a mixed performance. In maturity 90 days and more than 1 year were reported decreases of 0.46 percentage points and 5.24 percentage points, respectively, while the maturity 91 to 180 days and 181 days to 1 year there were increases of 3.31 percentage points and 3.95 percentage points, respectively. These rates ranged in annual average, between 6.25% and 9.29%.

In turn, the interest rates charged on liabilities in foreign currency showed decreases of 0.11 pp, 0.25 pp and 3.98 pp in the maturity of 91 to 180 days 181 days 1 year and more than 1 year, respectively, while at 90 days maturity there was an increase of 0.09 pp rates under consideration in annual average, ranged between 1.73 % and 2.28%.

9 Interest rates at the end of the period. 54 • Annual Report and Accounts • 2018

9.2. Balance of Payments Performance The information balance of payments reflects the accumulated up to the third quarter of 2018, the set of real and financial transactions carried out by the country with the rest of the world. Note that the data analyzed in this document are preliminary.

The recovery of oil prices in international markets in 2018 positively influenced revenues from exports of Angola leading to improved performance of the external accounts of the Angolan economy and consolidating the position of the current account surplus.

Preliminary data by the third quarter of 2018 indicated a surplus balance balance of payments in USD 236.580 million vs the deficit of USD 3 127.63 million in cumulative terms in the corresponding period, representing an improvement of about 107.56%.

9.2.1. Checking account The Balance of Payments current account registered a significant improvement in its balance of USD 10 488,72 million, passing from a deficit of USD 2 316,82 million by the third quarter of 2017 to a surplus of USD 8 171.90 million in this period. Thus, the current account surplus by the third quarter of 2018 corresponded to 9.06% of GDP against negative 2.60% observed the same period.

The significant improvement in the current account results from the positive performance of the goods account whose balance surplus amounted to USD 19 765.01 million vs USD 13 633,97 in the corresponding period, an increase of about 44.97%. The performance of this account was boosted by the increase in export earnings from crude oil, driven primarily by the rising price of Angolan branches since, in volume terms there was a decrease of 41.18 million barrels (9.55 %). As for services and secondary income accounts (including donations, remittances and other transfers) recorded an improvement in its deficit balances on the order of 40.72% and 73.16%, respectively, while the primary income account worsened their balance deficit of 0.75%.

Graph 23: Current Account and its Components

25 000 20 000 15 000 10 000

ON S) 5 000 0 USD -5(MILLI 000 -10 000 -15 000 2016 2017* 2018*

Goods Services Primary branches Secondary branches Current account

Source: BNA * To III quarter data Part III – Policies of the Central Bank • 55

In turn, the amount of imports of goods increased by 4.97% in cumulative terms until the third quarter of 2018, about USD 541.03 million, passing from USD 10 885.05 million in 2017 to USD 11 426.07 million in 2018, with emphasis on the increase in vehicle imports (USD 456.12 million) and fuel (USD 412.56 million). It is noteworthy that in the period compared to 2017, there was a reduction of imports of textiles and clothing (USD 83.72 million) and miscellaneous manufactured articles (USD 38.80 million).

Quadro 12: Principais Produtos Importados USD (millions) Goods category 2017* 2018* Relative variation Foods 2 448,82 2 457,16 0,34 Machines, mechanical and electrical devices 2 454,72 2 416,26 -1,57 Fuel 1 313,96 1 726,52 31,40 Vehicles 646,33 1 102,45 70,57 Chemical products 804,44 896,67 11,46 Construction material 721,84 801,51 11,04 Plastic, rubber, skin and leather 414,41 461,32 11,32 Various works 450,07 411,27 -8,62 Textiles and clothing 377,29 293,57 -22,19 Paper or cardboard and its works 140,07 176,51 26,02 Other goods 1 113,09 682,84 -38,65 Total 10 885,05 11 426,07 4,97 Note: (*) to III quarter data Source: BNA

China was the leading country of origin of imported goods in 2018, with an estimated cost of USD 1 903.56 million (16.66% of total) against USD 1 372,48 million registered in 2017. Of the categories of goods imported from China the mechanical and electrical machinery and appliances, building materials and chemicals led to a weight of 37.86%, 20.09% and 8.47%, respectively.

Figure 24: Main Countries of Imports Origin

4.500 4.000 3.500 3.000 2.500 1.903,56 1.720,69 2.000 1.626,22 1.372,48

USD MILHÕES 1.500 821,56 806,75 801,60 733,16 619,63 610,73

1.000 462,04 463,44 470,70 441,21 378,25 339,71 337,05 336,42 285,40 500 177,13 0

EUA EAU Togo Índia China Brasil coreia Bélgica Portugal África do sul República da 2017* 2018*

Source: BNA Note: (*) To III quarter data 56 • Annual Report and Accounts • 2018

Portugal followed China with USD 1 626.22 million (14.23% of the total), there is the import of machinery, mechanical appliances and electrical, the food and chemical products with a weight of 23.63%, 22 , 88% and 11.76%, respectively.

Imports from Brazil, the country that comes Portugal, with USD 821.56 million, representing 7.19% of total expenditure on imports. Among the many goods imported from this country, there is the importation of foodstuffs, vehicles and machinery, mechanical appliances and electrical with a weight of 51.08%, 42.01% and 1.96% respectively.

9.2.2. Capital and Financial Account The data accumulated by the third quarter of 2018 pointed to an increase in the capital and financial account deficit at USD 7 711.67 million against a deficit of USD 2 777,83 million registered in the corresponding period, an increase of about USD 4 933.85 million, explained by the increase in medium and long-term equity at 671.41%, as well as the relief of the net balance of foreign direct investment (FDI) which stood at about USD 3 841.89 million compared to a negative amount of USD 5,412,830,000 determined until the third quarter of 2017, representing a reduction of 2902%. It stresses that the IDE maintains a strong relationship with the performance of the oil sector, to the extent that the input stream of this depends crucially on the implementation of projects mainly related to this sector.

Chart 25: Financial Account and its Components

10 000

8 000

6 000

4 000

2 000

USD MILLIONS MILLIONS USD -2(millions) 000

-4 000

-6 000

-8 000

-10 000 2016 2017* 2018*

Direct investment Medium and long-term capital Other capital Financial account

(*) Data up to 3rd quarter

Source: BNA Note: (*) To III quarter data

The output of capital was set at USD 9 259.65 million until the third quarter of 2018 against USD 10 185.96 million on the corresponding period, a reduction of 9.09%. Regarding the external debt, there was an increase in disbursements of USD 251.78 million, passing from USD 6 329.34 million on the third quarter of 2017 to USD 6 581.12 million by the third quarter of 2018, while repaying foreign debt increased from USD 6 567,27 million in 2017 to USD 5 221.58 million on the period under review. Thus, the net flow related to the debt showed an increase in the order of USD 1 359.55 million in 2018, against a negative balance of USD 237.93 million in 2017.

The capital account has shown residual values over the years, and the balance of the capital and financial account almost determined by the financial account.

9.3. Evolution of International Reserves Part III – Policies of the Central Bank • 57

The position of Gross International Reserves (RIB), 31 December 2018, showed a decrease of 11.29% (US $ 2 257.51 million), when passing from USD 18 227.75 million in 2017 to USD 16 170.24 million (corresponding to a 7.74 months and 8.16 months import cover, respectively).

In the same period, the Net International Reserves stood at USD 10 646.08 million compared to USD 13 587.42 of 2017, equivalent to a 21.65% drop.

Chart 26: Gross International Reserves and Imports Coverage Ratio

26 000 12

24 000 11

22 000 352.54 10 2 4 20 000

9 18 000

USD MILLIONS USD MILLIONS (millions) 8 Months s 16 000 989.66

1 7 7 14 000 6.81

12 000 6 604.94 1 6 10 000 5 Dec/16 Dec/17 Dec- 2018 preliminary

Gross reserves Import coverage ratio (right axis)

Source: BNA

The general point of view, the Gross International Reserves at the end of 2018 remained at comfortable levels, with an above-target cover six months of imports of goods and services (SADC convergence target).

10. Capital Laundering Prevention Policy and Terrorist Financing In 2018, with the aim of measuring the level of vulnerability of the risk of ML / FT to which the country is exposed and recommend their resolution measures the weaknesses identified, the BNA participated in the exercise of National Risk Assessment (CRA) coordinating groups of banking, non-banking and financial inclusion. In this context, meetings were held between the groups within the comments made by the World Bank, which resulted in the elaboration of an action plan to address identified vulnerabilities. It is noteworthy that the action plans will then be examined by the World Bank.

Under the alignment of the regulatory framework to the recommendations of the Financial Action Task Force (FATF), was started the process of the revision of Law No. 34/11 of 12 December - for Combating Money Laundering Law and Finance Terrorism. BNA participated in meetings with the IMF for Law proposal analysis. Therefore, the BNA and other entities related to the prevention of ML/FT have been working together in drafting the bill format taking into account the comments provided by the IMF.

In order to evaluate the ratio of domestic banks with correspondent banks was carried out a new survey of commercial banks to analyze the extent, development, causes and impacts of de-risking in Correspondence Banking Relations (RCB) in Angola and results They showed improvement on previous years. Nevertheless, three banks of the banking sector reported having been RCB restriction target. 58 • Annual Report and Accounts • 2018

With regard to supervisory actions on and off-site, BNA held in the prevention of ML / FT a total of 127 inspections, 60 inspections for IF Bank, 54 inspections and 13 inspections to IF noBNAnk respectively. It should be mentioned that the shares in the Bank IF focused primarily on: i). Cash transactions communication highier than or equal to, in national currency, the equivalent of USD 15 000 million to the Financial Intelligence Unit (FIU); ii). Border wire transfers over USD 100 thousand (PBs); 9 iii). Self-Assessment Questionnaire; iv). Evaluation of KYC and CDD.

As for the Bank IF non-banking, the actions focused on the following topics: i). Follow-up inspections; ii). Spot inspections aim to verify the functionality of computer applications under the Prevention of ML / FT; iii). Early surveys and outreach activities.

11. Corporate governance and Internal Control System In terms of corporate governance reiterated the challenges for its effective implementation in the banking sector, since still some weaknesses in the governance structures of banks, related to weaknesses in the implementation of relevant requirements such as formalization of training policies, conflicts of interest and related parties.

However, in 2018, it was observed that the banks showed improvements in compliance with the requirements of Notice No. 01/13 of April 19 - Corporate Governance, over the same period, particularly regarding the definition and formalization policies and processes inherent in matter, namely, code of conduct, duties of governing bodies, setting strategy and transparency in the disclosure of information.

However, we identified even a reduced level of implementation of the requirements concerning the distribution of responsibilities, appointment of independent director, formalization of conflicts of interest policy as well as the formalization and operation of risk management committees and internal control.

Regarding the internal control system referred to in Notice No. 02/13 of 19 April, in the year 2018, there was a greater increase in the level of compliance of the requirements over the same period, ie, greater interoperability and adequacy of the key functions of the internal control system, including risk management, compliance and internal audit, continue to satisfactory greetings.

9 wire transfers, according to Art. 27 th of Law No. 34/11, of December 2011. PART IV Relevant Activities of the BNA 60 • Annual Report and Accounts • 2018

12. Activities of the National Bank of Angola The National Bank of Angola, according to Law No. 16/10 of July 15, has the following functions to ensure the preservation of the value of the national currency and involved in shaping the monetary, financial and exchange rate policies.

In this context, it is the National Bank of Angola to implementation, monitoring and control of monetary, exchange and credit, the payment system management and administration of the currency within the economic policy of the country.

In order to establish guidelines for the implementation of its basic tasks, the National Bank of Angola has provided three collegiate committees, including the Committee of Monetary Policy, Financial Stability Committee and the Invest- ment Committee.

12.1. Monetary Policy Committee The Monetary Policy Committee of the National Bank of Angola (BNA), hereinafter referred to as CPM, is a coordinating entity for Monetary Policy, which is responsible for establishing monetary policy guidelines, analyze and decide on matters related to it, decide on key interest rates, which includes the BNA rate and required reserve ratios, aiming to allow the Board of Directors of Banco fulfillment of its duties.

The CPM aims, contribute to ensure the preservation of the value of the national currency and the range of a low inflation and stable, as enshrined in the Act of the National Bank of Angola. The same is chaired by the governor and the BNA comprises the following members:

i). Member Full Law:

- Governor;

- Vice governor;

- Administrators who have under their responsibility the responsibilities relating to the areas of monetary and exchange rate policy.

ii). Members Permanent Guests:

- Economics and Research Department (DEE), which holds the secretariat function;

- Department of Asset Markets (DMA);

- Bureau of Statistics (DES);

- Department of Payment Systems (DSP);

- Department Reserves Management (DGR);

- Exchange Control Department (DCC).

Regarding the frequency of meetings, from July 2018, ordinary meetings are now held every two months, and extraordinary meetings can be held on the initiative of its President.

Thus, throughout the year 2018, the CPM has followed the evolution of the economic situation both nationally and internationally, on the basis of which took the following decisions:

i). In its seventy-ninth ordinary session, on 24 May, the BNA taking into account the downward trend of annual inflation decided to reduce their interest rates. The rate of marginal lending facility liquidity from 20% to 18%. Also decided to unify the facility interest rate on marginal lending facility and the basic interest rate, going to designate only Fee for BNA. Thus, the BNA rate shall reflect the actual cost of providing liquidity to commercial banks by BNA. The coefficient of mandatory reserves in national currency decreased from 21% to 19% and remained unchanged the interest rate on the liquidity facility absorption; Part IV – Relevant Activities of the BNA • 61

ii). In its eighty-ordinary session on 17 July, the BNA has taken a number of measures in order to provide liquidity in the system in order to stimulate lending by banks, as well as accommodate the economic growth taking into account the downward trend the annual inflation. This time, the institution decided to reduce the BNA rate of 18% to 16.5% in order to direct a decrease in the interbank money market interest rate (LUIBOR) and thus allow for a transfer to credit interest rates to economy, thereby leveraging the possibility of increased investment in the productive sector. On the other hand, in order to ensure commercial banks the liquidity necessary to allow the fall in interest rates, the BNA also reduced the coefficient of mandatory reserves in local currency to 17%. Like this.

12.2. Financial Stability Committee The Financial Stability Committee (COMEF) is an organ of the Board of consultation in the field of financial stability, supporting the development of guidelines and strategies for the mitigation of systemic risk, as well as the adoption of macroprudential policies in conjunction with the other entities supervision of the National Financial System.

It is incumbent upon COMEF on the one hand, define the mechanisms of prevention and contingency plans for resolving financial crises and, second, to evaluate the macroeconomic performance and behavior of the main variables that may affect financial stability, including the situation of global financial system from the perspective of systemic risk and probability of contagion nationwide. To this end, it is analyzed and evaluated the behavior of the main indicators of growth, profitability, liquidity and solvency of the Angolan financial system, proposing policies to promote their robustness and efficiency.

This Committee is chaired by the Governor of BNA and integrates the other members of the Board of Directors, members of the governing body BNA whose materials are related to financial stability, and may involve other regulatory authorities of the financial system and invited personalities. The COMEF ordinarily meets once a quarter and, extraordinarily, whenever convened by its Chairman.

In 2018, there were four quarterly meetings, at which it was found that system stability improved over the same period, mainly due to the increase in profitability of the banking system and capitalization levels. However, there are still some vulnerabilities associated mainly to the international economy, balance of payments and the increase in non-perfor- ming loans in arrears levels and the low level of financial inclusion with a concentration in Luanda.

Throughout the year, the following issues were highlighted::

iii). Review of the regulatory requirements of corporate governance and internal control systems;

iv). Review of the Basic Law of Financial Institutions and ML/FT;

v). Monitoring of the project full adaptation of International Accounting Standards / International Financial Re- porting Standards (IAS/IFRS) by the Financial Institutions Banking;

vi). Role of Audit Committees with the Financial Institutions Banking;

vii). Revision of the standard on the exchange position;

viii). Exercise Test;

ix). Strengthening the financial system safety net;

x). Adjustment of capital;

xi). Presentation of the terms of reference of the evaluation program of asset quality - AQA, 2019. 62 • Annual Report and Accounts • 2018

12.3. Investment Committee The Investment Committee (IC) is a body of the National Bank of Angola, established under Order No. 181/2010 of the Governor of the National Bank of Angola, aims to support the Board of Directors in the definition, analysis, approval and monitoring the application of the National Bank of Angola in the International Financial Market.To do this, the behavior of the overall investment portfolio (portfolio under internal management and external portfolio under management) is analyzed and evaluated, taking into account the safety, liquidity and profitability of the assets that comprise it.

Thus, given the lines set out above, it is the Investment Committee: i). o the Board of Directors the guidelines for the management of the reserves under the responsibility of the National Bank of Angola; ii). Define, coordinate and monitor the application of the reserves under the responsibility of the National Bank of Angola; iii). Define market risk indicators for the applications of reserves; iv). Set and control the tactical benchmark, taking into account the strategic plan set by the Board of Directors of the National Bank of Angola; v). Supervise compliance with the Investment Policies and lines Masters in management of reserves under the responsibility of the National Bank of Angola; vi). Formulate opinions to improve the management of reserves and submit them to the Board of Directors of the National Bank of Angola; vii). Propose the model selection, recruitment, monitoring and replacement of the external managers from the proposals made DGR based on predefined performance indicators; viii). Periodically evaluate the internal and external managers and replace those who have poor performance from the proposal submitted by the DGR; ix). Track and monitor the results of the Internal Management and propose on the basis of “guidelines for the Reserves Management” and the allocation of resources between the Internal Management and External; x). Monitor developments in relation to new markets products, investment methods and management practices through material provided by DGR and participation in courses, lectures, seminars and other events related to the matters on the management of reserves; xi). Monitor macroeconomic variables and markets likely to influence internationalfinancial markets and the application of the National Bank of Angola; xii). Anticipate the risks that may affect the application of the National Bank of Angola in the international financial market and the general reserve management and remit to the Board any suggestions regarding precau- tionary measures, preserving the State Foreign Exchange Policy.

This committee is chaired by the Governor of BNA, integrates a Deputy Governor and members of the Governing Body BNA whose materials are related to the management of the reserves, and may join other personalities invited by the President of CI. The Committee currently meets once a month whenever called by the President, and extraordinarily upon request of one of its members, with at least three (3) business days in advance.

In 2018, two meetings were held of the Investment Committee, where various issues concerning the international reserve management were discussed, of which we emphasize the following resolutions: i). Approval of Investment Strategy 2018; ii). Approval of the disinvestment process of the portfolios of Foreign Managers; iii). Strengthening the commercial relationship of necessity between the National Bank of Angola and the NY Federal Reserve, Bank for the purpose of correspondence, in order to mitigate the current risk concentration. Part IV – Relevant Activities of the BNA • 63

13. Financial Situation and Finantial and Budgetary Performance 13.1. budget performance The 2018 budget provided the financial year a surplus of Kz 22.90 billion. However, the budget gathered until December 31st 2018 showed a surplus of Kz 104.48 million, which reflected a degree of implementation of 456% above the estimated. Thus, the accumulated budgetary result until the end of the year is explained mainly by foreign exchange gains and interest and similar income, which represent approximately 65.39% and 23.44% of the revenues of the National Bank of Angola, respectively.

Table 13: Budget 2018 Forecast up Realized up Realized up Implementa- (Amounts in millions of Kwanzas) Approved to December to December Deviation to December Variance (%) tion level 2018 2018 2017 Revenues 219 681 219 681 858 066 391% -291% 524 295 63,66 Exchange rate gains 57 765 57 765 561 082 971% -871% 270 116 107,72 Interest and similar earnings 125 053 125 053 201 145 161% -61% 122 224 64,57 Financial transaction gains 24 284 24 284 79 035 325% -225% 119 096 -33,64 Earnings from services and 11 556 11 556 13 000 112% -12% 10 935 18,88 commissions Other operating revenues 1 024 1 024 3 804 372% -272% 1 923 97,85 Expenditure (196 784) (196 784) (753 589) 383% -283% (410 705) 83,49 Operating and financial expenses (84 231) (84 231) (546 410) 649% -549% (291 815) 87,25 Management expenses (98 161) (98 161) (198 567) 202% -102% (82 949) 139,39 Investment expenses (14 393) (14 393) (8 612) 60% 40% (35 942) -76,04 Surplus/(Deficit) 22 897 22 897 104 476 456% -356% 113 590 -8,02 Source: BNA

Regarding the estimate for the year 2018, we found the following:

- Total revenues that have a deviation of 290.60% resulting from recognition of gains on foreign exchange transactions and the associated gains to exchange rate differences due to exchange rate changes, the interest and similar income from financial assets available for sale, by interest on investments and deposits at credit institutions abroad;

- The total expenditure which have a deviation of 282.95%, mainly explained by the operating and financial expenses arising from the initial recognition of the fair value of National Treasury Bonds of the own portfolio of the National Bank of Angola. 64 • Annual Report and Accounts • 2018

13.2. Major Changes in the Balance Sheet Composition

Table 14: Composition Balance (Amounts in millions of Kwanzas) 2018 "2017 2017 Variação (restated)" 2017 Variation Montante % Amount % ASSETS 7 061 495 4 695 053 4 961 674 2 366 442 50,40

Gold 234 495 128 165 128 165 106 330 82,96 Foreign assets 5 268 297 3 266 842 3 266 842 2 001 455 61,27 Internal assets 1 468 080 1 219 943 1 484 020 248 137 20,34 Tangible and intangible assets 50 642 51 067 51 067 (425) -0,83 Other assets (amounts) 39 981 29 036 31 580 10 945 37,69 LIABILITIES 6 176 112 4 337 241 4 337 241 1 838 871 42,40 Bills and coins in circulation 498 390 527 717 527 717 (29 327) -5,56 Bank reserves 1 749 197 1 332 969 1 332 969 416 228 31,23 Interbanking monetary market 87 881 66 297 66 297 21 584 32,56 Single treasury account 1 513 820 1 026 409 1 026 409 487 411 47,49 Other domestic liabilities 530 196 313 334 313 334 216 862 69,21 Other foreign liabilities 1 727 300 1 000 885 1 000 885 726 415 72,58 Other liabilities (amounts) 69 328 69 631 69 631 (303) -0,43 OWN CAPITAL 885 383 357 812 624 433 527 571 147,44 Note: (Reepresso) resulting from this adoption of IAS 39 and IFRS 13 and to comply with the provisions of IAS 8, BNA restated its financial statements on 31 December 2017, being the impacts disclosed in footnote 40. Source: BNA

The assets of the National Bank of Angola, on December 31st 2018, showed a balance of Kz 7.06 billion, reflecting an increase of Kz 2.37 billion compared to the 31st December 2017. The following factors explained this increase of 50.40%:

- Increased position of the “Gold” by about 82.96%, explained essentially by two opposing effects, namely (i) Kwanza devaluation facing the US Dollar and (ii) reduction of the “Gold’s” position in the foreign currency at about 1.6%, explained by the fall on the gold market price of USD 1 302.80 on December 31st, 2017 to USD 1 281.58 at December 31st, 2018;

- Increase in “Claims on the outside” in about 61.27%, justified mainly by two contrary effects, inter alia, (i) the devaluation of the kwanza against the US dollar and (ii) a decrease in currency positioning foreign of external assets by about 13% in particular under other external assets receivable 100% in financial assets at fair value through profit or loss at about 61% and applications in credit institutions by about 17 %, offset by the increase in foreign currency in cash and cash equivalents balance at credit institutions by about 65% and financial assets available for sale at about 28%;

- Increase of Kz 248, 14 billion (20.34%) of the “Internal Assets” justified primarily by the issuing of National Treasury Bonds by the MOF for payment of the current account.

On the other hand, the liabilities of the National Bank of Angola totaled Kz 6.18 billion, representing an increase Kz 1.84 billion (42.40%) compared to December 31st, 2017, with the main changes in liabilities It is explained by the following facts:

- Decrease of Kz 29,33 billion (5.56%) of the “Notes and coins in circulation,” explained by deposits of banknotes and coins made by Angolan commercial banks;

- Increase of Kz 416,230 billion (31.23%) of the “bank reserves”, justified by the increased obligations of the Part IV – Relevant Activities of the BNA • 65

National Treasury in foreign currency delivered for compulsory reserve of compliance and the effect of the devaluation of the kwanza against the US Dollar American;

- Increased Kz 21,580 million (32.56%) of the operations of “interbank money market”, explained by greater adherence of commercial banks to open market operations;

- Increase of Kz 487,410 million (47.49%) of the balance of the “Single Treasury Account” (CUT), explained substantially by funding provided by the BNA in the amount of Kz 354,230 million and the depreciation of the Kwanza against the US dollar;

- Increase of Kz 216,860 billion (69.21%) of the “Other internal responsibilities”, explained mainly by the increase in provisions and pension liabilities and other benefits;

- Increase of Kz 726,420 billion (72.58%) of “Other External Liabilities” mainly explained by (i) the devaluation of the kwanza against the US dollar and (ii) the sales operations of interest increased with agreement repurchase (rEPO);

- Decrease of Kz 302.55 million (0.43%) of the “Other liabilities values”, explained mainly by the amounts paid under the “Currency Conversion Agreement” with the Bank of Namibia.

In turn, the Equity, registered an increase in the amount of Kz 527.57 billion (147.44%) justified by:

- Positive result of the exercise of Kz 18,59 billion;

- Increase “revaluation differences” in Kz 508.98 billion (132%), justified by two opposing effects, namely (i) an increase in “currency revaluation differences” in Kz 626.22 billion as a result of the depreciation of kwanza against the US dollar, (ii) the reduction of the “fair value revaluation differences” arising from changes in fair value of “financial assets available for sale” and “Gold” at Kz 117.24 billion;

- Worsening of “Negative Carried Over Result” in 41%, justified by the results of December 31st, 2017 amounting to Kz 59.75 billion.

13.3. Evolution of Results Table 15: Main Income Statement Indicators

2017 (Amounts in millions of Kwanzas) 2018 2017 Variation (restated) Amount % Financial margin 131 778 95 458 84 458 36 320 38,05 Net commissions 10 084 6 810 6 810 3 274 48,08 Financial operation results (70 112) 11 539 11 539 (81 651) -707,61 Operating results 487 593 218 979 218 979 268 614 122,67 Exploration results (540 751) (392 536) (392 536) (148 215) 37,76 FISCAL YEAR INCOME 18 592 (59 750) (70 750) 78 342 -131,12

Source: BNA

In the year 2018 it was found a positive result in the value of Kz 18.59 billion, and the change from the previous year is explained mainly by:

- Increased Kz 36.32 billion (38.05%) of the “Financial margin” resulting mainly from the increase in income from “financial assets available for sale” and investment in securities of foreign sovereign debt;

- Increase of Kz 3.27 billion (48.08%) in the “Net Commissions” due to the increase of fees received for transactions with the Ministry of Finance and reduce commissions paid for banking services provided by third parties; 66 • Annual Report and Accounts • 2018

- Decrease of Kz 81.65 billion (707.61%) in the “Results from Financial Operations” mainly due to the losses associated with the demobilization and fair value adjustment of part of the investments managed by external entities;

- Increase of Kz 268.61 billion (122.67%) in “Operating Results” mainly due to exchange rate results;

- Decrease of Kz 148.22 billion (37.76%) in “Operating income” mainly due to:

i). Decrease of KZ 75.71 billion (23%) in net impairment losses of reversals affects the following situations:

Table 16: Impairments

Description of operation Notes 2018 "2017 Variação (restated)" Variation (257 293) (322 696) 65 403

Non recurring operations with credit institutions (257 293) (322 696) 65 403 National treasury liabilities issued for payment from the 5 and 38 (259 200) - (259 200) current account Reversal of impairment by settlement of treasury liabilities in 5 and 38 1 907 24 222 (22 315) kind Treasury liabilities paid in kind 5 and 38 - (89 955) 89 955 Payment in kind from a national financial institution - (256 963) 256 963 8 and 38 Discount and lending operations (17 548) 31 228 (48 775) Discount operations – (reinforcement) / impairment 8 and 38 (54 875) 43 593 (98 468) reversal Lending – impairment reversal 37 328 (12 365) 49 693 Other 17 160 (41 919) 59 078 Reversal of impairment by acquisition of assets and services with 12 and 38 17 603 (35 460) 53 063 indication of irregularities

Other (443) (6 458) 6 015 Total (257 681) (333 387) 75 706

Source: BNA

ii). Decrease of Kz 110.15 billion (445%) under “Net provisions of reversals and cancellations” as a result of the reversal recorded in provisions for market risk by 100% and reinforcement of provisions for systemic risk in the banking sector, housing fund and social fund;

iii). Increase of Kz 113.77 billion (136%) in administrative expenses, due to (i) the increase in personnel costs, amounting to Kz 114.45 billion, mainly due to the reinforcement of pension and other benefits as a result of the actuarial assumptions being updated and (ii) the increase in third-party supplies and services and amortizations amounting to Kz 500 million and Kz 174 million respectively.

14. Organization In the period under analysis, the activities carried out by the Bank’s Organizational Units universe were based on the Strategic Plan approved by the Board of Directors for the five-year period 2018-2022, called NZIMBU, which indicates the institution’s return to it’s origins in order to project the future creating in the present.

The NZIMBU 2018 - 2022 reformulated the organizational strategic reference, without harming the principles defined by the BNA Law. Four major challenges were defined as Strategic Pillars and eight qualitative / quantitative results called Strategic Objectives. Part IV – Relevant Activities of the BNA • 67

Figure 1: Synthesis NZIMBU 2018 – 2022

Source: BNA

In the first year of the Strategic Planning and Management cycle, BNA developed a set of strategic actions, of which should be highlighted the completion of 62 deliveries, which are framed by objectives:

Graph 27: Conclusion of Deliveries by Strategic Objectives 2018

2 10

18 6

1 4 2

SO 1 SO 2 SO 3 SO 4 SO 5 SO 6 SO 7 SO 8 Source: BNA

The NZIMBU 2018 performance review shows the degree of execution of the actions included in the different perspectives of the strategic map. In this sense, it is worth mentioning the perspective of the Company with a degree of execution of 56%, followed by the Financial System and Internal Processes, with a degree of execution of 36% and 64% respectively, and finally the perspective of Learning and Growth with 9% . In general, the NZIMBU 2018 was 52% executed.

With regard to initiatives with impact on processes, information systems, human resources and physical and technological infrastructures, for the period under review, the BNA project portfolio comprises 44 projects, of which such as the creation of the Integrated Management Support System, the Integrated Supervision and Risk Management Solution, the Risk and Compliance Management, the Licensing and Registration of Financial Insti- tutions, the Standards Management, the Foreign Exchange Operations Management Solution and the Framework for financial risk management. 68 • Annual Report and Accounts • 2018

Panel 21: Defined Strategic Investments and Status of Projects In 2018 Projects Portfolio VS. Projects portfolio status Strategic Objectives

Completed In progress 9% 11% SO 6; 3 SO 8; 13 Late/ 2019 80% SO 7; 30

Late/2019 In progress Completed Source: BNA

Within the scope of the organization, the development of some initiatives in the field of organizational development in line with the defined objectives stands out:

i). Revision and Adjustment of the Normative System, as well as updating and implementation of internal management standards and instruments, including the Board of Directors ‘and Board of Auditors’ regulations, review of the procurement regulation, creation of the acquisition committee goods, services and works, as well as the implementation of policies of risk management, compliance and money laundering;

ii). Adequacy of the Organic and Functional Structure of BNA, focusing on the centralization of the sanctioning action process, the centralization of the Procurement Process and the separation of supervision by Banking and Non-Banking Financial Institutions.

A total of 178 internal and external communication documents were issued and standardized within the normative and standardization activity, with 12 notices, 21 instructions and 145 dispatches, distributed as per the table below.

Table 17: Normative Documents Issued

Orders Notices Instructional Mone- Mone- End of Year Organiza- Nomina- Monetary tary and Payment tary and Payment commis- Projects tion tions circulation exchange systems exchange systems sion rate policy rate policy 2018 96 22 20 2 5 10 2 19 2 Total 145 12 21

Source: BNA

15. Regulation and Organization of the Financial System As part of the continuous alignment of the regulatory framework and supervisory processes with Basel II and III requirements, in 2018, the BNA approved and published a range of 41 regulations, namely 12 Notices, 21 Instruction and 8 Directives, as can be observed in the annexes (published regulations).

Considering that the process of adjusting the Angolan Financial System to prudential standards and good international practices is continuous, especially the recommendations of the Basel Committee on Banking Supervision, there are still some matters to be regulated. For this purpose, BNA has elaborated a macroplan that is in execution (Figure 2).

With regard to the process of monitoring the full adoption of international accounting and reporting standards (IAS / IFRS) by the national banking sector, a number of activities were undertaken:

i). Adjusted Contif. Update, arising from the entry into force of International Financial Reporting Standard IFRS 9 - Financial Instruments; Part IV – Relevant Activities of the BNA • 69

ii). Presentation of a proposal on the standardization of financial sector declaratory models, in the context of the publication of Executive Decree No. 456/17 of 2nd October, referring to tax declaratory models;

iii). Follow-up of the IFRS 9 - Financial Instruments implementation plan, at the level of the Banking Financial Institutions

iv). Updating of regulations resulting from the entry into force of IFRS 9;

v). Analysis of the action plans reported by financial institutions, within the framework of the implementation of IFRS 9;

vi). Completion of the 3rd phase of the project for the full adoption of IAS/IFRS.

As regards its licensing of the financial system, BNA carried out special registration of 42 processes for the authorization of members of corporate bodies of banking and non-banking financial institutions, two special procedures for the registration of directors by co-option, eight authorization procedures special register of directors with relevant management functions and 20 authorization processes for special registration of statutory changes.

The National Bank of Angola granted 18 processes for authorization of capital increase, four processes for authorizing the external auditor, six processes for authorizing statutory changes, five processes for authorizing the transmission of shares, a process for canceling banking institution, two procedures for representative office establishments, a procedure for the establishment of a branch of a banking financial institution, a refusal of the execution of a bank guarantee issued by a financial institution, foreclosure of 16 non-bank financial institutions, a representative office closure process, a process of extension of the start-up of an office of representation of a banking financial institution and a bank guarantee issued by a financial institution.

A Manual of Procedures for Sanctioning Action was prepared and approved at a meeting of the Board of Directors.

As a result of the punitive action, 691 cases were filed, of which 247 were concluded, resulting in the imposition of fines totaling Kz 634.78 million.

Finally, two applications were developed on Licensing and Registration processes, as well as BNA Compliance Surveys.

Figure 2 – Macro Plan Implementation

Source: BNA

16. Risk Management and Compliance The National Bank of Angola is exposed to financial and non-financial risks arising from internal and external factors that may jeopardize the achievement of its strategic objectives. In order to mitigate risks, BNA is committed to a robust risk culture and the implementation of a framework that promotes integrated risk management. To this end, the BNA uses the Three Lines of Defense Model to segregate functions related to risk management. 70 • Annual Report and Accounts • 2018

The Board of Directors of BNA in order to strengthen the corporate governance model and internal control system, approved and implemented the following:

• Risk Management Policy and Risk Management Criteria. It aims to provide the guidelines for a systematic, comprehensive and coordinated risk management of the BNA, giving the Board of Directors a holistic view of the risks to which the bank is exposed, increasing the probability of reaching the objectives and promoting the risk culture throughout the Institution;

• Compliance Policy and ML / FT Prevention Policy. These policies aim to adapt the bank’s compliance with automated control procedures and systems, with the aim of preventing, detecting and combating the risks of Compliance and ML / FT, taking into account the principles and rules established by national and international legislation. In this context, a set of initiatives was implemented, namely:  Due Diligence to Suppliers and Counterparties, with the purpose of evaluating the risks in the business relations that the BNA intends to establish or established;  Swift Sanction Screening tool for filtering transactions made and received by BNA;  Swift Name Screening tool that seeks to consult entities (individual or collective) that allows to check if they are included in the lists of sanctions and / or fall into the category of Politically Exposed Persons (PEP);  The Reporting Channel that allows identified or anonymous reports about any wrongdoing or irregularity with a negative impact on the reputation and image of the BNA.

• Regulations of the Risk Management Committee and the Business Continuity Subcommittee. These define the objectives, composition, duties, competencies, duties and responsibilities of its members. These bodies aim to advise the Board of Directors on related issues, with Risk Management, Compliance and Business Continuity Management;

• Incident Record Tool, its Regulations and Manual of Procedures. It aims to standardize and create a database of bank incidents and provide information to the various levels of management with a high level of detail on the incidents that occurred at the BNA;

• Business Continuity Management System: Business recovery and IT Disaster Recovery exercises were carried out to assess the adequacy of the technology recovery solutions and risk prevention and business recovery procedures defined by the BNA.

Within the framework of the training of BNA workers, including the Regional Delegations, the Risk and Compliance Management Department carried out the following dissemination and training activities:

 Risk Management and Compliance Methodologies and Procedures, aimed at risk partners with the objective of guaranteeing the effective implementation and maintenance of the same in their units;

 Use of the Reporting Channel Tool;

 BC / FT Compliance and Prevention Policy;

 International Business Continuity Awareness Week, under the theme “Working together to improve organizational resilience”. A series of workshops was organized on Organizational Resilience, Cyber Risks and Internal Emergency Plan, and other awareness-raising initiatives (award-winning competition, placement of banners and wallpapers on the intranet and BNA website).

17. Complaint Management The analysis of the complaints sent to the BNA also includes those presented directly to the banking financial institutions and reported to the BNA. As a result, during the year 2018, a total of 27,509 complaints were received, due to a report to the National Bank of Angola, representing an increase of 18.73% (4,340 complaints) compared to 2017 (23,169 complaints). This increase may be associated with greater awareness by consumers of financial products and services of their rights and duties, as well as the constraints on operations in the foreign exchange market. Part IV – Relevant Activities of the BNA • 71

On the other hand, of the total reported claims, 18 768 are related to the national private banks, 5 432 for private foreign-owned banks and 3 309 belonging to national public banks.

Chart 28: Claims by Bank Type

25 000

20 000 18 768

15 000 13 643

10 000 8 270

No. of claims of claims No. 5 432 5 000 3 309 1 256 0 National private banks Foreign private banks Public banks

2017 2018

Source: BNA and Financial Institutions Banking

17.1. By Reclaimed Matter Regarding the share of the six most disputed items, which represent a weight of 90.52% of the total, the most notable are those related to payment cards (35.41%), automatic teller machines and automatic payment terminals (14.93%), (12.42%), transfers (10.12%), internet and mobile banking (9.00%) and operations abroad (8.64%).

Chart 18: Claims by Matter

Weight (%) Subjects with the most claims 2017 2018 Variation (%) 2017 2018 Payment cards 8 417 9 741 15,73 36 35 Deposit account 2 611 3 416 30,83 11 12 Transfers 3 411 2 785 -18,35 15 10 Internet and mobile banking 2 449 2 475 1,06 11 9 Operations with overseas 1 800 2 377 32,06 8 9 Credit 655 955 45,80 3 3 Services 753 672 -10,76 3 2 Foreign exchange operations 225 354 57,33 1 1 Cash availability 118 113 -4,24 1 0 Checks 125 110 -12,00 1 0 Collection 92 42 -54,35 0 0 Fraudulent operations 5 32 540,00 0 0 Credit assignment, consolidation and 8 30 275,00 0 0 restructuring Commissions and fees 12 29 141,67 0 0 Refund 7 19 171,43 0 0 Supplementary information 1 12 1 100,00 0 0 Buy-in collected 15 8 -46,67 0 0 Other matters* 80 231 188,75 0 1 Total 23 169 27 509 18,73 100 100

Note: (*) Cancellation; Interest payments; Change of counter; Not resolvable by BNA; Order / Replacement and Warranties. Source: BNA and Banking Financial Institutions 72 • Annual Report and Accounts • 2018

17.2. By Result In the period under review, 21 414 complaints were concluded, corresponding to 77.84% of the total, and the remainder is still under analysis.

Chart 19: Status of Complaints (Absolute Values)

Number of claims received by the banking/financial institutions State of the claims Variance Weight (%) 2017 2018 (%) 2017 2018 Concluded 17 485 21 414 22 75 78 Under analysis 5 684 6 095 7 25 22 Total 23 169 27 509 19 100 100

Source: BNA and Banking Financial Institutions

18. Inspections 18.1.1. Off Site Inspections Off-site inspections are carried out at a distance, without the inspection of Banco Nacional de Angola inspectors to financial institutions, verifying the information available on their websites, as well as the information reported to the BNA, and the focus of the inspection carried out on (i) the commission and expense tables and interest rates, ii) payment card tariffs, iii) the number of customers of banking financial institutions.

In 2018, 232 inspection actions were carried out on the 29 banking financial institutions, representing a decrease of 80.17% over the same period last year. These actions had as objective to evaluate the compliance with the rules of conduct, general duties of information availability and the legal and regulatory regulations in force, and some noncon- formities were identified.

18.1.2. On Site Inspections On-site inspections are characterized by the presence of BNA inspectors at the head offices and agencies of financial institutions and may assume two typologies, accredited on-site inspections and “mystery shopper”.

In the period under review, 58 inspections were carried out, resulting in a decrease of 96.17% over the same period of the previous year. The objective was to (i) assess the degree of compliance with the marketing margins of foreign currency, (ii) commissions charged on the loading of prepaid international flag cards, (iii) complaints from consumers, (iv) commissions charged on foreign exchange transactions, (v) national currency and (vi) compliance with exemptions for the collection of regulated minimum banking services.

In addition, 328 “mystery client” inspections were carried out, where the inspector passes as a common consumer, in order to evaluate the conduct of the professionals of the financial institutions, in compliance with the regulations in force, resulting in a reduction of 84, 47% over the same period of the previous year.

During the period under review, the evolution of interest rates offered on time deposits, commissions on returning checks to the beneficiary, commissions on account maintenance, issuance of Multicaixa and credit card cards, commissions transfers of securities in national currency and in foreign currency, and in the loading of prepaid international flag cards. However, there was an increase in existing commissions and the implementation of other commissions in banks ‘financial institutions’ fees compared to 2017. Part IV – Relevant Activities of the BNA • 73

18.2. Sanctioning Activities In relation to the sanctions actions, 109 letters of recommendation were issued for the remedy of irregularities and 58 proposals to establish the competent transgression procedures. This subchapter presents the main indicators related to the activity of licensing financial products and services.

18.2.1. Global Analysis The volume of licensing processes received by the BNA, which encompass processes of products and services and processes of advertising campaigns, registered a decrease of 26.10% (77 processes) compared to 2017.

Graphic 29: Numers of Product Licensing Processes

206 Products/services 153

89 Publicity campaigns 65

2017 2018

Source: BNA

18.2.2. Product and Service Process Numbers In 2018, there were 153 processes related to financial products and services submitted for authorization, representing a decrease of 53 processes (74.27%) compared to 2017. In terms of processes by categories, FTIs represent a large part of the volume of processes submitted for authorization with a weight of 53.59%, totaling 82 processes.

Graphic 30: Product and Service Process Numbers

Contracts 69 55

122 FTIs 82

3 Account

form manuals 12 13

Others 3 2017 2018

Source: BNA

Regarding the submitted cases, 118 were analyzed considering 36 as “non conforming” (representing 30.51% of the processes analyzed), the remainder awaits treatment. 74 • Annual Report and Accounts • 2018

18.2.3. Advertising Campaign Numbers In the period under analysis, the BNA received 65 processes submitted for authorization of advertising campaigns, representing a decrease of 24 processes (26.97%) compared to 2017. In the analysis by advertising medium, the Poster / Brochure support presented the largest volume of processes submitted for authorization, totaling 24 submitted cases.

Graphic 31: Volume of Advertising Campaign Processes

TV 18 7

Radio 16 9

press 7 14

Posters/leaﬂets 24 Internet/Mailings 4 9 SMS 1 2

2017 2018

Sourec: BNA

Analyzing the volume of processes by type of FI and by treatment status, it was concluded that of the 65 processes related to the licensing of advertising campaigns, 36 were analyzed, of which 9 were considered “non-compliant”, the rest are awaiting treatment.

19. International Relations In the field of international relations, in 2018, several actions were taken to follow up and improve institutional exchange with international partners, as well as cooperation actions, through the organization and participation in events in Angola and abroad. This exercise aimed at strengthening institutional relations, disseminating and clarifying the measures taken by the BNA in its fields of activity, showing greater openness to similar institutions and other international partners as well as the fulfillment of the responsibilities of the central bank in international organizations in which it’s inserted.

In this context, during the period under review, in the area of bilateral cooperation, the following BNA actions stand out:

• Work visit of the Governor of the BNA to the Central Bank of Japan, in the context of strengthening institutional cooperation relations;

• Work visit of a BNA delegation headed by the Governor to the Bank of Portugal in order to stimulate the instruments of cooperation in force between the two institutions. Part IV – Relevant Activities of the BNA • 75

As for representation, BNA participated in a number of events, both at the level of the regional institutions of which it is a member, and at the level of international institutions, in particular those carried out within the Bretton Woods institutions, the Community of Language Countries (CPLP), the Alliance for Financial Inclusion (AFI) and the Bank for International Settlements (BIS). It is important to relate the following events: a) At regional level i). 46th and 47th Meetings of the Southern African Development Community (SADC) Committee of Central Bank Governors (CCBG); ii). Meetings of the SADC Macroeconomic Subcommittee and Peer Review Panel; iii). Meetings of Technical Subcommittees of the CCBG (Macroeconomic, Banking Supervision, Information and Communication Technologies, Legal and Payment Systems); iv). Meetings of the Financial Stability Board (FSB) Advisory Group for Sub-Saharan Africa. b) At international level i). Spring and Annual Meetings of the International Monetary Fund (IMF) and World Bank (WB); ii). Annual Meeting of the Bank for International Settlements (BIS); iii). Annual Meeting of the Alliance for Financial Inclusion (AFI); iv). Technical Meetings in the framework of the Central Banks of the Community of Portuguese Speaking Coun- tries (BCPLP);

With regard to the IMF, in addition to participating in the Spring and Annual meetings organized in partnership with the World Bank, BNA benefited from technical assistance actions as well as from the IMF Technical Missions to Angola under Article IV. Of the IMF Statutes.

20. Financial education The consolidation of activities under the Financial Education Program for 2018 has led to the development of new perspectives for its enlargement, as well as to ensuring its comprehensiveness and effectiveness in promoting financial literacy, expanding financial services and raise the rate of banking. In this path, the celebration of Angola’s Global Mo- ney Week, for the first time in Angola, is an initiative of Child & Youth Finance International aimed at inspiring children and young people to learn about issues of money, livelihoods and entrepreneurship. In addition, the 1st edition of the Financial Education Workshop was held to commemorate World Savings Day, awareness campaigns to open bank accounts as well as various educational activities in the context of the Currency Museum.

20.1. Currency Museum The Currency Museum ensures the dissemination of the national numismatic collection, promoting educational actions aimed at the general public, especially schools, children’s centers, churches, public and private institutions. In 2018, the Currency Museum registered 91,762 visitors, representing a monthly average of 7,649.8 visitors, of which 98.35% were national citizens. In terms of representativeness, male adults were the ones that visited the Museum the most, accounting for 40%. In relation to the previous year, the Museum registered an increase of 28 838 visitors due to the closer relations with public and private schools, the electronic facility for requests for visits and the financial education activities carried out. 76 • Annual Report and Accounts • 2018

Panel 23: Visits to the Currency Museum by Age, Gender and Nationality

Adults 37% 40% Teenagers Children 23%

45% 55%

98%

National Foreign Male Female

Source: BNA

20.2. Financial Training The BNA’s actions in this area were aimed at conveying to the population financial concepts with the objective of contributing to the improvement of its capacities and confidence in the administration of its income, in its financial choices regarding savings and investment, as well as in the prevention of situations of fraud or shortage, with impact on the creation of conditions of general access to the benefits associated with the financial system. The creation of these conditions aims at the well-being of the population, the development of the financial system thus contributing to the maintenance of its stability.

In this context, 181 lectures were held in 2018, with 39,099 participants in the provinces of Luanda, Cabinda, Zaire, Moxico, Huambo, Benguela, Cuanza Sul, Cunene, Huíla and Namibe, as shown in the chart below.

Chart 32: Total of Lectures in 2018

100 000 35 741

10 000 3 358

1 000 154

100 27

1 Luanda Provinces Nr. of lectures Nr. of participants

Source: BNA Part IV – Relevant Activities of the BNA • 77

Still in the scope of financial training, the BNA developed specific financial training initiatives aimed at the young public, such as the 1st edition of the “Financial Education Workshop” under the motto “Building Values”, hoping to have a positive impact in the development of their capacities and abilities related to the management of their finances including the development of entrepreneurial ideas. During this activity, visitors were directed to the BNA building to be informed about their role and functions, attended a variety of lectures on financial literacy, pre-defined places and play activities in kiosks where children and adolescents they acted as small entrepreneurs in the sense of equipping them with knowledge about savings, consumption and responsible investments. The graph below shows the participation of the target audience during the event week.

Graphic 33: Total of Teaching Institutions

45 42 40 35 30 30 30 24 25 20 20 21 21 20 17 14 12 15 10 10 10 7 5 2

3/12/2018) 3/14/2018) 3/13/2018) 3/15/2018) 3/16/2018) ( Monday Friday ( ( dn esday ( Tuesday ( Thursday We

Primary, junior and senior high Universities/higher education/associations Total

Source: BNA

A total of 140 educational institutions participated in the Global Money Week, with an audience of 15,022 thousand, whose frequency was highlighted at the weekend.

Chart 34: Number of Participants for Activities

2 500

2 000

1 500

1 000

500

Saturday 10.27.2018 Saturday Sunday 11.4.2018 Sunday Saturday 11.3.2018 Saturday Friday 11.2.2018 Friday Sunday 10.28.2018 Sunday esday 10.31.2018 dn esday Tuesday 10.30.2018 Tuesday Thursday 11.01.2018 Thursday We 10. 29.2018 10. Monday

Lectures. Kiosk activities Total

Source: BNA 78 • Annual Report and Accounts • 2018

During Financial Education Workshop the audience was 16.928 million people.

Gráfico 35: Número de participantes por Actividades 4 500 3913 3 913 3 580 4 000 3580 3 500

3 000 2 578 2 500 2193 2 010 2 000 1 577 1657 1 500 1099 1 000 585 511 779 497 268 478 353 385 500 88 0 0 0 Kiosk activities Guest speakers Total

Source: BNA

The activities in the different kiosks representative of commercial activities were the attraction of the audience.

Also part of the financial training process is the National School Financial Education Contest, within the scope of the Project for insertion of contents of Financial Literacy in schools of the 1st and 2nd cycle throughout the country, under the Protocol signed between the BNA and the Ministry of Education. Thus, on October 31st, 2018, the award ceremony of the first three categories of the competition was held.

20.3. Access to the Financial System The National Bank of Angola promotes financial inclusion with the objective of providing adequate and low-cost access to a set of financial products and services by the population, especially those who fall into the low income class, aiming at the stability of the financial system, increased investment, economic growth and improved social welfare.

This process is supported by awareness-raising campaigns carried out by the country aimed at promoting the opening of bank accounts, including the promotion of “Bankita Accounts”, a financial product with reduced costs and minimum requirements in terms of documentation required. In this way, in 2008, 189 campaigns or awareness-raising activities were carried out in the provinces of Luanda, Bengo, Moxico, Malanje, Huambo, Huíla, Benguela, Cabinda, Zaire, Bié, Cuando Cubango and Cuanza Sul, in collaboration with the commercial banks that joined the Bankita product. These actions reached a total of 33 055 participants, as can be seen in the chart below.

Graphic 36: Total Sensitization Campaigns in 2018

100 000 30 014

10 000 3 041

1 000 170

100 19

1 Luanda Provinces

Nr. of campaigns Nr. of participants

Source: BNA Part IV – Relevant Activities of the BNA • 79

With regard to Bankita accounts, in accumulated terms, 643 737 accounts were opened and active until December 2018, representing an increase of 15.98% over the same period of the previous year. It is worth noting that 109,293 Bankita accounts were migrated to conventional accounts and 7,284 Bankita accounts to Crescer 9 were constituted, representing a reduction of 3.14% in relation to the previous period.

21. Human capital At the end of 2018, the BNA had a total of 2 058 employees, representing a variation of 3.17% in relation to the number of employees in 2017, of which about 84% is allocated to the Central Services, the rest being distributed by the five Delegations In Cabinda, Malange, Benguela, Huila and Huambo.

In the period under review, 71 workers were retired and 16 terminated their contracts with BNA for several reasons.

The distribution of the herd by Gender, Academic Formation and Functional Band is described in the tables below.

Chart 20: Presentation by Functional Band/Gender

Genre Group Function Amount Weight (%) Male Female Governor 1 0 1 0 Administration Vice-Governor 2 0 2 0 Manager 3 1 4 0 Subtotal 6 1 7 0 Director 23 11 34 2 Management Deputy-Director 12 15 27 1 Subtotal 35 26 61 3 Head of division 54 42 96 5 Coordination Head of depart- 80 76 156 8 ment Subtotal 134 118 252 12 Specialist 18 13 31 2 Female technician Male technician 453 471 924 45 Subtotal 471 484 955 46 Support 155 125 280 14 Support Assistant 408 95 503 24 Subtotal 563 220 783 38 Total 1 209 849 2 058 100

Source: BNA

Chart 21: Presentation by Academic Training

Education Level Amount Weight (%) Up to high school (final year) 1 019 50 Attended higher education 260 13 Graduate degree 641 31 Postgraduate degree (*) 138 6 Total 2 058 Note: (*) Specializations, Masters and PhDs Source: BNA

9 Term deposit account with a bank that has adhered to the provision of that product. 80 • Annual Report and Accounts • 2018

In the scope of Training and Capacity Building, in 2018, a new model was defined, aimed at the continuous development of workers’ skills. This model defines as main objectives the alignment to the BNA strategy, process improvement, focus on continuous investment and career growth.

The training was structured in six thematic blocks, focusing on Institutional Training, General Technical Training, Specific Technical Training, Technical Training of Central Banking, Management and Leadership Program and for the Certification and Postgraduate Program.

Figure 3 – Training Actions Carried Out in 2018

Source: BNA

In addition, 6 scholarships were awarded abroad for workers, for Masters and PhD in matters of interest to the Bank.

In a gesture of appreciation of the internal staff and sharing of knowledge, an Internal Cycle of Technical Workshops was implemented, with the aim of leveling the knowledge of the workers, on matters inherent to the business activities and control of the BNA. There were also workshops on more cross-cutting issues, such as IT Security Policy, Risk and Compliance, Performance Evaluation, among others. This year there were a total of 14 Workshops, carried out at Headquarters and all Regional Delegations, with 3 490 participations, as shown below. It should be noted that these workshops were all carried out with internal resources, that is, workers with deep technical knowledge in the matters addressed. Part IV – Relevant Activities of the BNA • 81

Figure 4 – Workshops in 2018

Source: BNA

In 2018, a total of Kz 769.61 million were invested in training and preparation of workers.

Within the ambit of Social Policy, the BNA offers a range of benefits, of which we highlight the access to housing, Health Insurance for the worker and household, collective transport, Pension Fund, among others.

The BNA has established the Defined Contribution Pension Fund, which is voluntary, in order to guarantee financial stability in the condition of retirement. The worker participates with at least 4% of the base salary and the Institution with 8%. 82 • Annual Report and Accounts • 2018 PART V Financial Statements 84 • Annual Report and Accounts • 2018

PART V - Financial Statements

The National Bank of Angola (hereinafter referred to as “BNA” or “Bank”), Central Bank of Angola, is mandated by law to promote the country’s economic and financial well-being. The BNA is committed to keeping Angolans informed about its policies, operations and activities.

In accordance with the provisions of article 86 of Law no. 16/10 of July 15th, the Financial Statements of the National Bank of Angola, for the year ended December 31st, 2018, are presented, comprising the Balance Sheet, Income State- ment, Statement of Income and Other Comprehensive Income, the Statement of Changes in Equity, the Statement of Cash Flows of Foreign Currency Transactions and the related Notes to the Accounts, approved by the Board of Directors on March 29th, 2019.

The preparation and presentation of the Financial Statements, in accordance with the International Accounting and Financial Reporting procedures and standards, was defined as an objective of the BNA, reflecting the direction taken by its Board of Directors, with a view to modernizing the Model Governance and Management. This objective consubstan- ciated in the partial adoption of International Accounting Standards and Financial Reporting (IAS / IFRS) as an accounting reference for the preparation and presentation of the Financial Statements for the year ended December 31st 2018.

The Financial Statements are presented in millions of Kwanzas.

At December 31st, 2018, the depreciation of the Kwanza against the US dollar was around 86% compared to December 31st, 2017 Part V – Financial Statements • 85 - - 84 853 84 853 (2 544) 66 297 66 297 43 809 43 809 98 562 69 631 98 562 69 631 527 717 527 717 270 000 270 000 386 441 386 441 230 551 770 334 230 551 213 835 770 334 213 835 (59 750)357 812 (70 750) 624 433 (135 900) (144 245) (5 068) 1 332 969 1 332 969 1 026 409 1 026 409 4 337 241 4 337 241 4 695 053 4 961 674 Maria J. C. V. de Fontes Pereira Maria J. C. V. - 26 18 592 Director of the Financial Conduct Dept. (“DCF”) 885 383 6 176 112 7 061 495 ______6 329 386 13 498 390 202020 270 000 21 (2 544) (135 900) 895 420 1414 1 749 197 15 87 881 15 1 513 820 1617 1 397 914 346 166 10 22 43 809 1819 184 004 69 328 22 (203 994) Notes 2018 “2017 (restated)” 2017 LIABILITIES AND OWN CAPITAL LIABILITIES AND OWN CAPITAL External liabilities with other entities Responsibilities with credit institutions Capital Unrealized subscribed capital Discounts from capital issuing Interbanking monetary market Funds from financial institutions Bills and coins in circulation Investments in affiliates and other entities liabilities Total Review discrepancies Liabilities with pensions and other benefits Provisions Other liabilities (amounts) Total liabilities and own capital Total Other reserves Retained earning Own capital total Fiscal year result - - 1 425 1 351 174 440 - - - 1 425 1 351 14 516 14 516 International Monetary Fund 82 962 82 962 Other liabilities 49 716 49 716 29 036 31 580 190 811 938 079 867 701 190 811 966 933 938 079 national related to monetary policy operations 220 357 867 701 Bank reserves 966 933 220 357 Internal liabilities with other entities Single treasury account 128 165 128 165 377 396 567 396 619 247 207 359 619 247 106 996 1 219 943 1 484 020 3 266 842 3 266 842 4 695 053 4 961 674 - - - 731 725 9 734 12 106 49 917 39 981 586 671 622 394 313 548 234 495 154 993 752 961 537 555 1 468 080 1 448 197 2 297 487 5 268 297 7 061 495 7 3 4 5 5 6 3 9 2 7 5 5 5 8 10 11 11 12 Notes 2018 “2017 (restated)” “2017 ASSETS Governor José de Lima Massano Financial department administrator Beatriz Ferreira de Andrade dos Santos Operations to affiliated credit institutions ______Financial assets granted to the Government Investments in affiliates and other entities Foreign assets Cash on hand and receivables from credit institutions Investments in credit institutions Financial assets at fair price through results Financial assets tradeable Internal assets Cash on hand and receivables from credit institutions Financial assets received in capital increase International Monetary Fund Financial assets tradeable with monetary policy operations Investments held until maturity Gold Other internal assets receivable Other external assets receivable assets Total Other assets (amounts) Tangible assets Tangible Intangible assets Balance sheet as at December 31st, 2018 As notas anexas fazem parte integrante desta demonstração financeira. 86 • Annual Report and Accounts • 2018

Statement of profit and loss for the year ended Decem- ber 31st, 2018

Notes 2018 “2017 (restated)” 2017

Interest and similar earnings 24 170 009 125 800 114 800

Interest and similar fees 25 (38 231) (30 343) (30 343)

Financial margin 131 778 95 458 84 458

Earnings from services and commissions 26 13 000 10 935 10 935

Service fees and commissions 27 (2 916) (4 125) (4 125)

Net commissions 10 084 6 810 6 810

Results from financial assets at appreciated at fair price through results 28 (70 306) 12 316 12 316

Results from financial assets tradeable 29 (782) (777) (777)

Results from investments held until maturity 30 964 - -

Results from investments in affiliates and other entities 31 12 - -

Financial operation results (70 112) 11 539 11 539

Exchange rate results 32 498 647 221 390 221 390

Costs related to the issuing of bills and coins 33 (2 898) (3 165) (3 165)

Results from the sale of other assets 34 (1 101) 6 6

Other operating results 35 (7 055) 749 749

Operating results 487 593 218 979 218 979

Personnel costs 36 (179 381) (64 933) (64 933)

Outsourced services and supplies 37 (15 105) (15 605) (15 605)

Fiscal year amortizations 11 (3 189) (3 363) (3 363)

Net provisions from replenishments and annulments 18 e 19 (85 395) 24 753 24 753

losses due to impairment net of reversals 5/8/12/38 (257 681) (333 387) (333 387)

Exploration results (540 751) (392 536) (392 536)

Fiscal year result 18 592 (59 750) (70 750) The accompanying notes form an integral part of this financial demonstration

Statement of income and other comprehensive income for the year ended December 31st, 2018 2018 “2017 (restated)” 2017

Fiscal year net result 18 592 (59 750) (70 750)

Items that can be reclassified later to results

Variations of the difference of fair price evaluation:

Financial assets tradeable (80 104) (9 850) (9 850)

Gold (37 138) 15 271 15 271

Variations of the exchange rate evaluation 626 221 (163 995) (163 995)

Yield / (expense) directly recognized under own capital 508 979 (158 574) (158 574)

Complete earnings for the fiscal year 527 571 (218 324) (229 324)

The accompanying notes form an integral part of this financial demonstration Part V – Financial Statements • 87 - - - Total Total - 4 521 856 470 18 592 885 383 18 592 527 571 (2 713) (2 713) 59 750 (1 809) 11 000 (266 621) (70 750) (229 324) (70 750) 624 433 (59 750) 357 812 result “ “ Fiscal year - - - - (5 068) (5 068) (59 750) (139 177) (203 994) (144 245) earnings Retained ------904 21 849 21 849 21 849 20 945 ------904 Other reserves 21 960 21 960 21 960 21 056 - - - - - 430 047 626 221 430 047 594 042 (163 995) 1 056 268 Exchange rate Statutory reserve Free reserve - - - - - 5 421 (43 606) (43 606) (49 027) (117 242) (160 848) Review discrepancies Fair price ------(135 900) (135 900) (135 900) discount Capital issuance ------(2 544) (2 544) (2 544) cribed capital Unrealized subs------270 000 270 000 270 000 270 000 Capital Complete earnings for the fiscal year Complete earnings for the fiscal year Distribution of 2017 results Distribution of 2016 results Transfer of 2017 results Transfer Transfer of 2016 results Transfer Movements resulting from the change in accounting policy Balance on 12-31-2018 Balance on 12-31-2017 Balances on 12-31-2017 (restated) Balance on 12-31-2016 Statement of changes in shareholders’ equity for the year ended December 31st 2018 Statement of changes in shareholders’ equity for The accompanying notes form an integral part of this financial demonstration 88 • Annual Report and Accounts • 2018

Statement of Cash Flows from Foreign Currency Tran- sactions for the Year Ended December 31st, 2018 In the years ended December 31st, 2018 and 2017, the aggregate “Cash and cash equivalents in foreign currency” is made up as follows: 2018 "2017

(restated)"

Operational activities

Gains from bonds and securities 72 632 86 699

Gains from short-term investments 31 368 13 008

Banking institutions 3 286 (73 921)

Acquisition of employees’ debts - (6 451)

Monetary conversion agreement with Bank of Namibia (23 562) (34 280)

Payment of administrative costs (4 864) (10 616)

Bills and coins production expenses (3 615) (1 830)

Other payments and credits 95 335 209 080

Cash flow from operations 170 580 181 689

Investments

Investments in:

Applications generated by external entities 745 731 490 816

Foreign exchange operations (3 255 793) (1 723 952)

Exchange rate operations (370 995) (181 709)

Acquisitions and sales of fixed assets (318) (793)

Cash flow from investments (2 881 375) (1 415 638)

Financing

Reduction (increase) of deposits from residents:

National treasury 958 920 55 276

Financial institutions – Banking reserves 1 707 966 514 194

Transactions with repurchase agreement - 7 910

Loan interest (26 285) -

International Monetary Fund - (4 808)

Increase (reduction) of foreign bills and coins (14 833) (1 733)

Cash flow from loans 2 625 768 570 839

Exchange rate variation effect in cash and cash equivalent 985 303 19 573

Variation of cash and cash equivalent 900 276 (643 537)

Cash and cash equivalent in foreign currency at the start of fiscal year 1 140 165 1 783 703

Cash and cash equivalent in foreign currency at the end of fiscal year 2 040 441 1 140 165

The accompanying notes form an integral part of this financial demonstration

In the years ended December 31st 2018 and 2017, the aggregate “Cash and cash equivalents in foreign currency” is made up as follows:

Cash and cash equivalent in foreign currency 2018 “2017 (restated)” Variation

Cash and receivables from credit institutions (Note 3)

Foreign currency bills and coins at hand 7 579 12 622 (5 043)

Demand deposits in foreign currency: -

Overseas 586 671 190 811 395 860

Domestic 1 909 1 754 155

Investment applications in credit institutions (Note 4) -

Time deposits -

Overseas 1 444 282 934 978 509 304

Domestic - - -

2 040 441 1 140 165 900 276 PART VI Notes Appended to the Financial Statements 90 • Annual Report and Accounts • 2018

PART VI - Notes Appended to the Financial Statements The origin of the National Bank of Angola goes back to August 14th, 1926, when the Bank of Angola was created, based in Lisbon. Until 1957, the Banco de Angola detained, exclusively, the banking trade, when the Commercial Bank of Angola, strictly of Angolan law, appeared in the market, representing a new milestone in the history of the country.

In the context of the political-economic transformations that took place until the 1980s, and in view of the importance of the country’s monetary and financial system, the so-called Banking process was developed in August 1975, which led to the confiscation of assets and liabilities of the Bank of Angola and the creation of the National Bank of Angola, one year after national independence, through Law no. 69/76, published in the Diário da República No. 266 - 1st Series, dated November 10th, 1976.

Since 1978 and through Law 4/78 of February 25th, banking activity has been exclusively exercised by state banks, as private commercial banks have been formally closed, thus facilitating network of branches of the BNA throughout the national territory.

In 1991 and based on Law no. 5/91, of April 20th - Law on Financial Institutions, a new step was begun in the implementation of a two-tier banking system, whereby BNA began to exercise the function of Central Bank established as monetary authority and agent of the exchange authority, thus withdrawing from the trade functions it had exercised until then. Headquarters is located in Luanda, at Avenida 4 de Fevereiro, 151.

At the moment, the BNA is present in the country, through its regional offices located in the provinces of (i) Cabinda; (ii) Huíla; (iii) Benguela; (iv) Malange; (v) Huambo; (vi) Moxico; and (vii) Kuando Kubango.

According to Law no. 16/10, of July 15th - Law of the National Bank of Angola, which establishes its Organic Law, its functions have two main vectors: i) ensure the preservation of the value of the currency and (ii) as the Central Bank:

a) To act as sole banker of the State;

b) To advise the State in monetary, financial and foreign exchange matters;

c) Collaborate in the definition and execution of the foreign exchange policy and its market;

d) To manage the external availability of the country or those that are committed to it;

e) Acting as an intermediary in the international monetary relations of the State;

f) To ensure the stability of the national financial system, ensuring, to this end, the role of financier of last resort;

g) Ensure and assure a system of information, compilation and treatment of monetary, financial and exchange statistics and other documentation in the fields of its activity in order to serve as an efficient instrument for coordination, management and control;

h) To prepare and keep updated the complete record of the country’s external debt, as well as to manage it; and

i) Elaborate the balance of external payments of the country.

The Board of Directors, as the body responsible for defining the BNA’s management and administration policies, is responsible for preparing and presenting the financial statements and other information contained in this report, ensuring its integrity and objectivity, in order to ensure that operations and transactions resulting from its mission are carried out and processed in accordance with the rules and procedures in force.

The financial statements as of December 31st, 2018 were approved by the Board of Directors on March 29th, 2019 and prepared for appreciation by the holder of the Executive Branch. However, the Board of Directors admits that they will be approved without significant changes. Part VI – Notes Appended to the Financial Statements • 91

1. Basis of presentation and summary of the main accounting policies 1.1 BASIS OF PRESENTATION The financial statements of BNA for the year ended December 31st 2018 were prepared on the assumption of continuity of operations, based on the chart of accounts approved by the Board of Directors in the year 2013. This new chart of accounts considers, in its entirety, (IAS / IFRS) issued by the International Accounting Standards Board (IASB), with the exceptions described in item 1.2 below.

The Bank adopted IAS / IFRS for the first time in the year ended December 31st 2013, considering for this purpose the terms of IFRS 1 - First-time adoption of International Financial Reporting Standards, which were applied retrospectively for all periods.

The Organic Law of the Bank does not determine the presentation structure of the financial statements that the Bank should adopt. Accordingly, it is the responsibility of the Board of Directors of the BNA to decide on the applicability of the International Financial Reporting Standards (IAS / IFRS) in the financial statements, taking into account its Organic Law and its functions as financial, exchange and monetary policy.

The financial statements of the BNA at December 31st 2018 and 2017 are expressed in millions of Kwanzas and the assets and liabilities denominated in other currencies have been converted into the national currency on the basis of the average exchange rates of the last business day following year:

Currencies 2018 2017 Variation 1 US dollar (USD) 308,607 165,924 86% 1 Euro (EUR) 353,015 185,400 90% 1 Canadian dollar (CAD) 226,683 131,737 72% 1 South African rand (RND) 21,344 13,451 59% 1 British pound (GBP) 390,079 223,084 75% 1 Chinese Yuan Renmimbi (CNY) 44,931 25,395 77% 1 Special Drawing Right (SDR) 324,6753247 227,790 43%

During the financial year of 2018, the Kwanza exchange rate against the other currencies was fixed on a flexible exchange rate basis and monitored with significant changes from January to December 2018, as shown in the table above.

At December 31st, 2018, the depreciation of the Kwanza against the US dollar was around 86% compared to December 31st, 2017.

BNA, in agreement with the Angolan Association of Banks (“ABANC”), is of the opinion that the requirements of IAS 29 - Financial Reporting in Hyperinflationary Economies (“IAS 29”) are not met in order for the Angolan economy to be considered hyperinflationary in the year ended December 31st, 2018.

1.2 Derogations of Rules and Interpretations At the transition date, and considering the specifics of its activity as a regulator of the financial system and responsible for the implementation of monetary and exchange rate policies of the country, as well as the management of international reserves, the Bank decided not to adopt the following standards issued by the International Accounting Standards Board (IASB) and the interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) and its predecessor bodies:

- IFRS 9 – Financial instruments: The Bank maintained unchanged the accounting treatment related to the classification and measurement of financial assets and liabilities, the methodology for calculating impairment and the application of hedge accounting rules, in accordance with IAS 39. The Board of Directors considered the adoption of the norm in the 2019 financial year. 92 • Annual Report and Accounts • 2018

- IAS 21 - The effects of changes in exchange rates: The Bank has maintained unchanged the accounting treatment for foreign exchange variations arising from the updating of assets and liabilities denominated in foreign currencies at the prevailing exchange rates, being the equity account denominated “Foreign exchange revaluation reserves” and only recorded as income when accomplish. In view of the high volatility of these assets and their potential condition, the Board of Directors considered that the adoption of the standard could result in a possible change in the Bank’s capitalization principles and an interference in the management of monetary policy, considering that the distribution of dividends or the resulting loss coverage would directly affect the magnitude of the monetary base with possible inflationary effects, in addition to generating financial flows between the Treasury and the Central Bank based on non-effective results.

- IFRS 10, IAS 28, IAS 27, IFRS 12 – Consolidated financial statements: The Bank has decided not to present consolidated financial statements, maintaining its holdings valued at acquisition cost, recognizing any impairment losses, regardless of the control and/or significant influence it may have on the investees. These derogations from standards and interpretations continued to be applied in the Bank’s financial statements for the year ended December 31st 2018. In addition, the Bank decided to partially adopt the following standards and interpretations issued by the IASB and IFRIC:

- IAS 39 – Financial instruments - Recognition and measurement and IFRS 13 - Fair Value Measure- ment: “Obligations assigned to fulfill mandatory reserve requirements” correspond to Treasury Obligations delivered by commercial banks for compliance with mandatory reserves in domestic currency and foreign currency, in accordance with foreseen in Instruction nº 4/2016, and also accounted for under the heading “Bank reserves”, were recorded at the initial recognition, at their nominal value. In addition, the Bank classifies financial assets at fair value through profit and loss to investments managed by external entities, which include a variety of financial instruments, including derivatives, whose position of these instruments is offset in the same balance sheet item (including fair value of certain financial instruments). The position with each of the managers is updated based on the valuation reported in the statement sent periodically by the respective external entities as well as other available information. The Bank does not have internal models for valuing unlisted financial instruments using as a reference the valuation reported by the external Managers and in the cases of the funds obtains the audited financial statements.

- IAS 19 – Employee benefits:The Bank is applying IAS 19 for all employee benefits, except for the recognition of retirement benefits and other post-employment benefits. In order to establish these responsibilities, the Bank annually requests an actuarial study from an independent expert, which is based on actuarial and financial assumptions that best suit the population and the Bank’s reality. All retirement pension liabilities are recorded in the income statement. With the constitution of the pension plan to cover defined contribution liabilities, which has an autonomous Pension Fund, which entered into force on January 1st, 2016, according to Order No. 335/15 of October 27th, 2015, I Series - No. 147 of Diário da República, is voluntary for active Bank employees, who will be entitled to receive the benefits provided in the disclosed contract. Accordingly, according to Article 88 of the Bank’s Organic Law, defined contributions to the pension fund are recorded as a result of the year. In view of the foregoing, the National Bank of Angola does not present all the disclosures provided for in this standard.

- IAS 37 – Provisions, Contingent Liabilities and Contingent Assets: it should be noted that the Board of Directors annually defines appropriations for the constitution or reinforcement of provisions to cover doubtful receivables and for risks of depreciation of other assets, or to the occurrence of other contingencies that it is deemed necessary to provide, as provided for in no. 2, article 5, and article 88 of Law 16/10 of July 15th - Law of the National Bank of Angola. The accompanying notes describe the accounting principles and criteria used by the BNA in the preparation of the financial statements. These derogations from standards and interpretations continued to be applied in the Bank’s financial statements for the year ended December 31st 2018. Part VI – Notes Appended to the Financial Statements • 93

1.3 Voluntary Changes in Accounting Policies - IAS 39 – Financial Instruments - Recognition and measurement and IFRS 13 - Measurement at Fair Valuer

During 2018, BNA adopted IAS 39 and IFRS 13, except for the exceptions disclosed in note 1.2.

As a result of this adoption and in order to comply with IAS 8, BNA restated its financial statements as of December 31st, 2017, and the respective impacts are disclosed in Note 40.

The financial statements related to the restatement of December 31st 2017 were prepared with the voluntary changes to the accounting policies set out below:

• Treasury obligations received in the scope of the capital increase approved by the BNA Law, as well as the financial assets received from the State were recorded at the initial recognition, at their nominal value, once again taking into account the impact of the adoption of this Bank’s capitalization and its consequent interference in the management of the country’s monetary policy.

1.4 New Rules and Interpretations Applicable to the Year and Rules, Interpretations, Amendments and Revisions That Will Be in Force in Future Exercises The description of the new standards and interpretations is presented in note 45.

1.5 Summary of Main Accounting Policies In addition to the accounting principles applicable to certain items of the financial statements, specifically described throughout this Annex, BNA generally uses the following accounting principles and valuation criteria in the preparation of its financial statements:

1.5.1 Specialization of Exercises The National Bank of Angola adopts the accrual principle of accruals in relation to the headings of the financial statements. In this way, income and costs are recognized based on the period of validity of the operations, and are recorded as they are generated, regardless of when they are received or paid.

1.5.2 Transactions in Foreign Currency The Bank’s accounts are prepared in the currency of the economic environment in which it operates (“functional currency”) and are expressed in Kwanzas.

Transactions in foreign currency are recorded in accordance with the principles of the “multi currency” system that is, registered in the respective currency of denomination, and are translated into Kwanzas based on the exchange rates in force on the date they occur. Assets and liabilities denominated in foreign currency are translated into Kwanzas using the average exchange rate published by the Bank at the reporting date.

The costs and income relating to potential exchange rate differences are recorded under a specific equity caption called “Exchange rate revaluation differences”, and the exchange differences are actually realized, whether negative or positive, recorded in the income statement for the year in which they occur, in respective items of “Losses and gains associated with foreign exchange differences” (Notes 21 and 32). 94 • Annual Report and Accounts • 2018

1.5.3. Financial Instruments a) Initial Recognition

Financial assets and liabilities are recorded at the contractual date at their respective fair value, except for securities received for compliance with mandatory reserves, and costs directly attributed to the transaction are accrued at acquisition cost, except for financial instruments at fair value through results, whose transaction costs are immediately recognized in results.

The fair value of a financial instrument corresponds to the price that would be received for the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. b) Classification and measurement of financial instruments

B.1) Financial assets

Financial assets are recognized on the trade date, that is, on the date the Bank commits itself to acquire the asset and are classified according to the underlying intent, according to the categories described below:

- Financial assets at fair value through profit or loss;

- Available-for-sale financial assets;

- Investments held until maturity.

The classification and measurement of these financial assets reflects the Bank’s intention for each investment.

B.1.1) Financial assets at fair value through results

Financial assets at fair value through profit or loss include:

- Fixed and variable income securities that the Bank has opted at its initial recognition to record and measure at fair value through results;

- Financial instruments with positive fair value (including embedded in assets);

- Others.

Financial assets classified in this category are recorded at fair value, with the capital gains arising from the subsequent valuation being recorded in the income statement under the caption “Results of assets and liabilities measured at fair value through results”.

The Bank classifies applications managed by external entities in this category. The sources of appreciation of these investments are based on the following information:

- Reports made by external managers;

- Audited Financial Information on investment funds;

- Market value, for quoted titles;

- Other information available, particularly for illiquid investments.

The Bank does not have internal valuation models for unquoted financial instruments using the above mentioned information, when available, as a reference.

The amount of the remaining capital commitments taken out with the external managers is recorded in an off-balance sheet item, being updated simultaneously whenever a call for capital is paid and the investment position with the entity in question increased. Part VI – Notes Appended to the Financial Statements • 95

B.1.2). Available-for-sale financial assets

Available-for-sale financial assets include fixed income securities that are not classified as financial assets at fair value through profit or loss or as held-to-maturity investments.

Available-for-sale financial assets are measured at fair value, and changes are recognized directly in equity under the heading “Fair value revaluation reserves” until maturity or sale of the security, at which point the gain or loss previously recognized in capital recognized in results.

The securities sold under repurchase agreements remain recorded in the Bank’s securities portfolio and are recorded under the caption “Repurchase transactions”, and are recorded in off-balance-sheet accounts.

The interest accrued on fixed income securities and the differences between the acquisition cost and the nominal value (premium or discount) are recorded in the income statement, using the effective interest rate method.

With reference to the financial reporting date, the Bank evaluates the existence of situations of objective evidence in which available-for-sale financial assets are impaired, taking into account the market situation and information available to issuers.

According to IAS 39, the objective evidence that an available-for-sale financial asset is impaired includes observable data on the following loss events:

- Significant financial difficulties of the issuer;

- Contractual breach of the issuer in terms of repayment of capital or payment of interest;

- Probability of bankruptcy of the issuer;

- Disappearance of an active market for the financial asset due to financial difficulties of the issuer.

In addition to these events, the Bank considers as objective evidence of impairment a significant and prolonged decrease in the fair value of financial assets.

When there is objective evidence that an available-for-sale financial asset is impaired, any loss is recorded in profit or loss after the derecognition of potential capital losses recognized in fair value revaluation reserves.

Impairment losses on fixed income securities are reversed through profit and loss, whenever there is a positive change in the fair value of the security resulting from an event occurring after the impairment determination. Impairment losses relating to variable income securities can not be reversed. In the case of fixed or floating-rate securities for which impairment has been recognized, subsequent negative changes in fair value are always recognized in the income statement.

B.1.3) Held-to-maturity investments

Holdings held to maturity include financial assets with fixed or determinable payments and fixed maturity for which it has the intention and ability to hold until maturity.

These assets are initially recognized at fair value. In general, the fair value at the initial time corresponds to the transaction value and includes income and costs directly attributable to the transaction. Subsequently, investments held to maturity are valued at amortized cost, based on the effective interest rate method and subject to impairment tests.

Treasury obligations issued in local currency indexed to the United States dollar exchange rate are subject to updating of the nominal value of the security according to the variation of the respective indexes. Accordingly, the result of said updating of the nominal value of the security is reflected in the income statement for the year in which it occurs. 96 • Annual Report and Accounts • 2018

When there is objective evidence that an investment held to maturity is impaired, any impairment loss is the difference between the carrying amount of the financial asset and the estimated future cash flows (excluding the effect of future events), discounted at the original effective interest rate calculated at the initial recognition, and the same shall be recorded against profit or loss.

If in a subsequent period the amount of the loss decreases and this decrease can be objectively related to an event that occurred after the recognition of the impairment, it is reversed against the results.

B.1.4) Financial assets granted to the State

In the context of strengthening the State treasury, the financial assets granted to the Ministry of Finance provided for in the Bank’s Law are recognized in the balance sheet at their initial fair value and subsequently at amortized cost.

B.1.5) Applications in credit institutions

These short-term and highly liquid Financial Investments are classified in International Financial Institutions. These assets are recorded at amortized cost, with interest being accrued.

B.1.6) Financial assets received in capital increase

The obligations of the National Treasury received in connection with the realization of the capital increase of the Bank are recognized on the balance sheet at fair value.

B.1.7) Financing operations of credit institutions relating to operations and monetary policy

As provided in the National Bank of Angola’s Law, the Bank may grant loans to financial institutions, loans for a term of not less than three months. They may be granted with a guarantee waiver, provided that, in the opinion of the Board of Directors, the liquidity requirements of the debtor credit institution and the public interest are involved.

These loans are initially recorded at fair value at the initial time and thereafter at amortized cost.

At each balance sheet date, the Board of Directors analyzes the objective evidence of impairment. The amount of impaired impairment loss is recognized directly in income for the year in the caption “Impairment losses net of reversal”.

B.2) Financial liabilities

Financial liabilities include banknotes and coins in circulation, deposits from other institutions, securities issued by the Central Bank, other monetary policy instruments and financing from the International Monetary Fund.

Financial liabilities are recorded at the date of purchase at their fair value, less costs directly attributable to the transaction, and are subsequently valued at amortized cost.

Any difference between the amount received net of transaction costs and the amount payable at maturity is recognized in the income statement over the life of the liability using the effective rate method.

B.2.1) Banknotes and coins in circulation

Banknotes and coins in circulation are recorded at their issue value (face value) under “Notes and coins issues”. Pro- duction charges are recognized on a straight-line basis as expenses over the useful life of the banknotes and coins, under the caption “Other charges and expenses - issue of banknotes and coins”, currently estimated at 5 years.

B.2.2) Open market operations

Funds raised from financial institutions arising from liquidity-absorbing operations are recorded under the liability item “Liabilities to credit institutions - Interbank money market”, and the respective interest payable is recognized at the effective rate during the term of the operations. Part VI – Notes Appended to the Financial Statements • 97

B.2.3) International Monetary Fund

The recognition of transactions and balances with the IMF follows the indications given by this institution, which con- sider the specific characteristics of the financial relations of the member countries with the Fund.

Positions with the IMF are denominated in Special Drawing Rights (SDRs) and converted to Kwanzas at the exchange rate at the reference date, with assets and liabilities being recorded separately. In addition, all potential exchange rate variations of positions with the IMF are recognized in equity under “Revaluation reserve,” instead of the interest and commissions paid, resulting from the relationship maintained with this entity, which are recognized in the income statement.

B.2.4) Bank Reserves

Part of the Bank’s bank reserves are made up of deposits from National Financial Institutions. Instruction 10/2018 and Directive 04/DSP/DRO/2018 provide that commercial banks may form part of the mandatory reserves with foreign currency securities. These are recorded at the nominal value, on the balance sheet line of the bank reserves reflecting on the balance sheet line other assets.

B.2.5) Single Treasury Account

These financial liabilities are initially recognized at fair value and subsequently at amortized cost. This account has no associated remuneration. c) Valuation methods

Actives Valuation methods/Information font

Cash and cash equivalents in credit institutions Amortized Cost Loans and advances to credit institutions Amortized Cost Financial assets at fair value through profit or loss Fair value Available-for-sale financial assets Fair value International Monetary Fund Amortized Cost Other external assets receivable Amortized Cost Held-to-maturity investments Amortized Cost Financial assets received on capital increase Fair value Investments in associates and other entities Purchase cost Financing operations for credit institutions related to monetary policy operations Amortized Cost Financial assets granted to the State Amortized Cost Other domestic receivables Amortized Cost

Passive Valuation methods/Information font

Banknotes and coins in circulation Face value Liabilities to national credit institutions related to monetary policy operations Amortized Cost International Monetary Fund Amortized Cost Resources from financial institutions Amortized Cost Sales operations with repurchase agreement Amortized Cost Internal responsibilities to other entities Amortized Cost 98 • Annual Report and Accounts • 2018

c.1) Fair value

Financial instruments recorded in the categories of financial assets or liabilities at fair value through profit or loss and available-for-sale financial assets are valued at fair value.

Financial instruments held at amortized cost are initially recorded at fair value plus or less costs or income directly attributable to the transaction. The interest is recognized by the effective rate method.

Whenever the estimate of payments or collections associated with financial instruments valued at amortized cost is reviewed, the respective balance sheet value is adjusted to reflect their revised cash flows. The new amortized cost is calculated by calculating the present value of the revised future cash flows at the adjusted effective interest rate of the financial instrument. This adjustment in amortized cost is recognized directly in the income statement. d) Reclassification of financial assets

In accordance with IAS 39, it is possible to reclassify financial assets classified as financial assets at fair value through profit or loss or available for sale to other categories of financial assets if certain requirements are met, and reclassifications are not permitted for the asset category fair value through results.

Reclassification to categories of held-to-maturity investments is only possible if the Bank has the intention and ability to hold assets to maturity or for the foreseeable future.

Reclassifications of Held-to-Maturity Financial Assets Available for Sale are permitted provided that the Bank subsequently does not recognize, for 2 years, any financial assets in that class.

1.5.4. Gold Gold is valued in United States Dollars at the daily closing price available on the New York Stock Exchange. Potential gains arising from fair value valuation and foreign exchange revaluation are recorded in accounts other than “Revalua- tion reserves”. Actual reserves are recorded in the income statement at the time of disposal of the gold positions held. Effective gains and losses arising from fair value are recorded under “Gains on non-financial assets” or “Losses on non-financial assets”, respectively, depending on whether they are capital gains or losses. The effective gains resulting from the exchange rate revaluation are recorded under “Gains linked to exchange rate differences” or “Losses associated with exchange rate differences”, respectively, depending on whether they are capital gains or losses.

With reference to the financial reporting date, the Bank evaluates the existence of situations of objective evidence of impairment, considering for this purpose a prolonged and significant decline in its value over time.

When there is objective evidence that gold is impaired, the potential loss accumulated in the fair value revaluation reserve is derecognised from equity and recorded in the results of the period, and subsequent negative potential changes in fair value are always recognized in the income statement.

Impairment losses recorded in gold are reversed through profit or loss if there is a positive change in the fair value of the security resulting from an event occurring after the impairment determination. Part VI – Notes Appended to the Financial Statements • 99

1.5.5. Financial Participations Financial investments are recorded at acquisition cost, and the receipts arising from profit distributions are recognized in the income statement.

In addition, impairment tests are performed on each financial reporting date in order to assess the recoverability of the investment in accordance with IAS 36 - Impairment of assets, and impairment is recorded when there are permanent losses.

1.5.6. Tangible Assets Tangible assets are stated at acquisition cost, revalued under Decree-Law no. 6/96, of January 26th, in order to reflect the effect of the devaluation of the national currency, and is deducted from the respective depreciation and losses due to accumulated impairment. The costs of repair, maintenance and other expenses after initial recognition associated with its use are recognized as cost for the year. Costs incurred with improvements that allow an increase in the estimated future economic benefits, as well as an increase in the useful life of the asset, should be capitalized in the value of the asset.

Depreciation is calculated on the basis of the straight-line method and the estimated useful life corresponding to the period in which the asset is expected to be available for use:

Years of useful life Real Estate 50 Equipment: Furniture and equipment 10 Machines and tools 10 Computer equipment 3 a 10 Interior Facilities 10 Transport material 3 Safety equipment 3 a 10 Other equipment 10 Works in leased real estate 3 a 5

The land and the artistic heritage held by the Bank are not subject to depreciation.

Expenditure on works on leased properties is depreciated for a period compatible with that of its expected utility or lease.

If there are market indicators that could lead to the identification of evidence of impairment in tangible assets, the BNA will perform impairment tests. Whenever the net book value of the tangible assets exceeds their recoverable value (greater than the value in use and the fair value), an impairment loss is recognized as a result of the results for the year under “Impairment of other assets”.

Property, plant and equipment in progress is recorded at the total amount of expenses billed to the Bank, and is transferred to fixed assets when it is actually used and amortization is commenced

1.5.7. Intangible Assets This item essentially comprises costs for the acquisition of data processing systems used in the development of the Bank’s activity.

Intangible assets are recorded according to their acquisition cost, deduced from depreciations and losses following impairment. Depreciations are recorded using the constant shares method over the estimated useful life of the assets, 100 • Annual Report and Accounts • 2018

which corresponds to a three years period. An analysis is carried out annually to determine any potential impairment losses.

In case of market indicators that could lead to the identification of impairment evidence regarding intangible assets, the BNA will perform Impairment tests. Whenever the net book value of intangible assets exceeds their recoverable value (being the greater between the use value and the fair value), an impairment loss is recognized, being rendered in the results for the accounting period under the item “Impairment from other assets”.

1.5.8. Benefits for the Employees a. Short-term benefits

Short-term benefits such as salaries, Christmas bonus, holidays and August 14 are reflected in the “Personnel expenses” item, under their corresponding period, according to the accounting period specialization principle. b. Post-employment benefits

In 2010, the Bank established a defined benefits plan, assuring its employees, or their families in the event of death, the payment of supplementary pensions, survivors’ pensions and death grants. To date, this plan only includes retired people and pensioners, so it will not have new adhesions.

Following the entry into force of the new General Labor Law regarding Article 262 - Compensation for retirement, the Board of Directors decided, on 27 December 2016, to continue this benefit for all workers admitted before 13 Sep- tember 2015. During the 2015 accounting period, through the publication of Order N.°335/15 of 27 October, the BNA’s workers pension fund was set up to cover the defined contribution plan established in the 2015 accounting period.

The total amount of pension liabilities, death grant and reform compensation, for past services related to the defined benefit plan is determined by independent actuaries, using the projected unit credit method and recorded in full under the liabilities item “Liabilities with pensions and other benefits”.

The total value of liabilities with medical and medicamental assistance and with Christmas bonus is estimated by the Board of Directors and is recognized under the liability item “Liabilities with pensions and other benefits”.

The Bank insures retired people and their spouses the payment of medical and medicamental expenses by means of a health insurance. In addition, the Bank annually provides its pensioners with a Christmas bonus.

The Board of Directors decided to make an initial financial contribution in the form of an extraordinary contribution to each employee who joined the pension fund, in proportion to the length of service that each has dedicated to the BNA, since their admission to the Bank, pursuing to stimulate adherence to the pension fund, as well as to repay the contribution given by each worker to the development and consolidation of the institution. The amount of the initial financial contribution was calculated on the basis of an actuarial study. For liabilities up to 13 September 2015.

1.5.9. Provisions and Contingent Liabilities A provision is constituted when there is a present obligation (legal or constructive) resulting from past events for which the future expenditure of resources is probable and can be determined reliably. The amount of the provision corresponds to the best estimate of the amount to be disbursed to settle the liability at the balance sheet date. Pursuant to item 2 under Article 5 of the Bank’s Organic Law, the Board of Directors may create other reserves and provisions to cover depreciation or impairment risks to which certain types of assets or operations are particularly subject.

The item “Provision for miscellaneous risks” includes provisions to cover potential liabilities of a specific nature, such as the execution of guarantees or other commitments, the opening of foreign exchange contingencies and other liabilities or legal and tax contingencies. Part VI – Notes Appended to the Financial Statements • 101

In case the future expenditure of resources proves unlikely, it is a contingent liability. Contingent liabilities are only disclosed, unless the possibility of their realization is remote.

As part of its supervisory role, the National Bank of Angola must always assess the systemic risk to which the national financial system is subject. In addition, taking into account the current macroeconomic context, the supervision of the National Bank has become increasingly necessary in the financial system.

Thus, in order to reflect this concern in the financial statements of the BNA, there should be a provision for the systemic risk of the financial sector. In this sense, its assessment is based on a scoring model that essentially seeks to evaluate the exposure of banking financial institutions to risk and considers in its calculation basis the total of financial liabilities, deduced from the net availabilities deriving from the bank financial institutions. It should be noted that scoring is carried out taking into account the following risks:

- Liquidity risk;

- Regulatory solvency ratio;

- Concentration of the loan portfolio;

- Processing ratio; and

- Exchange risk.

1.5.10. Other Regulatory Risks Provided Guarantees and Irrevocable Commitments Liabilities for provided guarantees and irrevocable commitments are recorded in off-balance-sheet items at their risk- -value, with the interest flows, commissions or other income being recognized in the results throughout the life of operations.

1.5.11. Taxes Considering the regulatory changes in Consumer Tax that occurred during the 2014 accounting period, through the approval of Presidential Decree-Law n.°3-A/14 of October 21, 2014, as well as the changes that had already been introduced by Presidential Decree n.°7/11, of December 30, the National Bank of Angola is analyzing the framework of the exemption provided for in article 92.° of Law n.° 16/2010, of July 15, regarding the mentioned Presidential Legislative Decree. To date, the framework work has not yet been completed, yet only possible unmeasured contingencies have been identified. The payment of customs and inherent duties on the importation of goods and other taxes that did not fall within the scope of the exemption provided for in its Organic Law was verified during the 2018 accounting period, just as in the past.

1.5.12. Capital social Capital increases are recognized in the capital item under the corresponding “Capital” heading, the moment they are subscribed at the nominal value. The unrealized amount is recorded under the item “Unrealized subscribed capital” and the difference between the fair value of the Treasury Bonds received at the date of their realization and the Nominal Value is considered under the item “Capital Emission Discount” (Note 20). 102 • Annual Report and Accounts • 2018

1.5.12. Share Capital The Bank’s reserves are constituted and handled in accordance with Article 89.° of the Bank’s Organic Law and are divided between (i) the legal reserve and (ii) other reserves that the Board of Directors may decide.

Retained results represent results of prior periods that are awaiting application by the Board of Directors.

According to article 89, paragraph n.° 1, item c) of the BNA Law, the result of the accounting period, if positive, should be distributed to the Ministry of Finance by means of dividends of at least 60%.

1.5.14. Statements of Cash Flows from Foreign Currency Transactions For the purpose of preparing cash flow statements for foreign currency operations, the Bank considers as cash and its equivalents in foreign currency all sight deposits and term deposits, which are part of the items “Cash and availabilities in credit institutions” (Note 3) and “Investment in credit institutions” (Note 4).

1.5.15. Main Estimations and Uncertainties Associated with the Application of Accounting Policies In the preparation of the Bank’s financial statements, estimates and expected future values are used. These estimates are subjective in nature and may affect the value of assets and liabilities, income and costs, as well as disclosed contingent liabilities. The estimates with the greatest impact on the Bank’s financial statements include the following. a. Retirement and survivors’ pensions and retirement compensation

Liabilities for retirement and survivors’ pensions and retirement compensation are estimated based on actuarial valuations performed by external experts. These estimates incorporate a set of financial and actuarial assumptions, namely the discount rate, mortality tables, disability, pension and wages growth, among others. Notwithstanding the General Labor Law of 7/15, of June 15, which repeals Law N.°2/2000, of February 11, extinguishes the liabilities with workers retirement compensation, in relation to article 262 - Compensation for retirement. The Board of Directors resolved on 27 December 2016, the continuity of this benefit for all workers admitted before September 13, 2015 according to information n.º20 Pref.ª DRH/DIR/2016.

The assumptions adopted correspond to the best estimate of the Board of Directors regarding the future behavior of the mentioned variables. b. Liabilities regarding Christmas subsidy and medical and medicamental assistance of the assets and pensioners

Liabilities for Christmas bonus and medical and medicamental assistance for assets and retirees are estimated by the Bank based on actuarial and financial assumptions, namely discount rate, inflation rate, wage growth rate and mortality tables.

The Bank considers that the liabilities recorded in the financial statements adequately reflect the best estimate at the balance sheet date of the amounts to be disbursed. c. Impairment losses estimation on available-for-sale financial assets

In accordance with the valuation requirements of these assets, the capital losses resulting from the devaluation of the respective market value are recognized against fair value revaluation reserves. Whenever there is objective evidence of impairment, accumulated losses that have been recognized in the fair value revaluation reserve must be transferred to costs for the accounting period. Part VI – Notes Appended to the Financial Statements • 103

In the case of debt instruments classified under this category, capital losses are transferred from the revaluation reserve to results whenever there is evidence that there may be a non-compliance with contractual cash flows, namely due to financial difficulties on the part of the issuer, existence of default of other financial liabilities, or a significant deterioration of the issuer’s rating. d. Determination of impairment losses on financing operations to credit institutions related to monetary policy operations

Impairment losses on operations with credit institutions related to monetary policy operations take prudence criteria into account in order to hedge future risks and contingencies. The assumptions adopted for the determination of impairment losses correspond to the best estimate of the Board of Directors. e. Determination of impairment losses on other domestic receivables

Impairment losses on the balances of other domestic receivables take into account prudence criteria, pursuing to cover risks and future contingencies. The assumptions adopted for the determination of impairment losses correspond to the best estimate of the Board of Directors on the date of approval of the financial statements. f. Provisions for miscellaneous risks

The Law of the National Bank of Angola provides for the existence of a provision for miscellaneous risks, whose reinforcements and replenishments are made directly against the income statement. The provision for miscellaneous risks is intended to cover other risks and future contingencies, and the amounts are determined based on prudence criteria for the other patrimonial and off-balance-sheet items. g. Provisions for systemic risk in the banking sector

As part of its supervisory role, the National Bank of Angola must assess the systemic risk to which the national financial system is subject. The provision for systemic risk is based on a scoring model that essentially seeks to assess the exposure of banking financial institutions to risk by considering the total of their financial liabilities deduced from the net availabilities of banking financial institutions. h. Liabilities for the housing fund and social fund

According to Law n.°16/10, of July 15, article 81 and 82 - Organic Law of the National Bank of Angola, the BNA may acquire or construct real estate, intended for the housing of its own employees, under the terms and conditions to be established by the Board of Directors. The amount of the provision corresponds to the best estimate of the amount to be disbursed to finance real estate investments of a social nature at the balance sheet date, whose terms and conditions being duly communicated to the comprehended BNA employees.

In addition, pursuant to the Social Fund Regulation approved by Order N.° 008/2014 of January 31, an amount of financial resources to be allocated to the Social Fund is defined annually by the Board of Directors at the time of approval of the accounts of the Bank’s accounting period. This is calculated according to assumptions made annually, taking into account the social context at the balance sheet date, so the amount of the provision corresponds to the best estimate of the amount to be disbursed to settle this liability at the balance sheet date. i. Provision for the debt resulting from workers loans

As part of its social action, the National Bank of Angola provides loans to its workers for the purpose of housing acquisition. At the end of each accounting period, the BNA assesses the existence of impairment associated to these credits, with a particular focus on loans to retired employees and deceased employees. 104 • Annual Report and Accounts • 2018

2. Gold On 31 December 2018 and 2017, this item has the following composition:

2018 2017 (restated) Oz (*) Amount Oz (*) Amount 592 901 234 495 592 901 128 165

(*) 1 ounce of fine (pure) gold = 31.103481 grams of fine gold.

On December 31, 2018 and 2017, the Bank holds 592.90 ounces of gold (Oz) at an average price of USD 1.68 thousand, its market value at these dates being USD 1.28 thousand and USD 1,30 thousand, respectively.

On 31 December 2018 and 2017, the item “Fair value revaluation differences” in equity capital relating to the gold position shows a potential loss of KZ 75.81 billions and Kz 38.67 billions , respectively (Note 21).

The Bank did not recognize losses due to impairment of gold in the 2018 accounting period, since in the face of the impairment analysis carried out during the 2018 accounting period the potential loss of 24% is below the limit defined by the accounting policy of a potential loss of 30%, that is, the market value is above the limit defined by the accounting policy.

3. Cash and Availabilities in Credit Institutions

On 31 December 2018 and 2017, this item has the following composition:

“2017 2018 (restated)” Overseas Demand deposits 586 671 190 811 Domestic Demand deposits In foreign currency 1 909 1 754 In national currency 232 123 Bills and coins at hand In foreign currency 7 579 12 622 In national currency 14 17 9 734 14 516 596 405 205 326

During the 2018 accounting period, the item “Sight deposits abroad” increased by KZ 395.86 billions compared to 31 December 2017. This increase is mainly explained by the demobilization of investments managed by external entities, maturity of investments in term deposits, receipts on behalf of the Treasury, thus generating an increase in the availability regarding foreign financial institutions.

On December 31, 2018 and 2017, the balances presented under the item “In the country - Paper money and coins in cash - In foreign currency” are mainly denominated in US dollars.

On December 31, 2018 and 2017, the item “In the country - Paper money and coins in cash - In local currency”, is constituted by the physical means found in the treasury of Luanda structure units and each regional delegation, which are regularly checked by means of physical inventories. Part VI – Notes Appended to the Financial Statements • 105

4. Investments in Credit Institutions On 31 December 2018 and 2017, this item has the following composition:

2018 “2017 (restated)” Overseas Time deposits Invested amount 1 444 282 934 978 Interest receivable 3 915 3 101 1 448 197 938 079

On December 31, 2018 and 2017, the composition for the item “Term deposits - Applied value” in terms of residual terms to maturity is as follows:

2018 Up to 1 month b/w 1 and 3 months b/w 3 and 6 months Over 6 months Total time deposits (amount invested) Overseas 735 769 439 428 114 407 154 678 1 444 282 735 769 439 428 114 407 154 678 1 444 282 2017 (restated) Up to 1 month b/w 1 and 3 months b/w 3 and 6 months Over 6 months Total time deposits (amount invested) Overseas 254 905 127 671 124 308 428 094 934 978 254 905 127 671 124 308 428 094 934 978

On 31 December 2018 and 2017, the item “Overseas - Term Deposits” represents the investments of BNA in international banks, with a maximum maturity of up to one year and remunerated at an average annual rate of 2.6% and 1.29%, respectively. 106 • Annual Report and Accounts • 2018

5. Other Financial Assets On 31 December 2018 and 2017, the financial instruments item has the following composition: 2018 “2017 (restated)”

Foreign assets Financial assets at fair price through results Debt instruments: Public and corporate debt 212 114 501 119 Structured debt with secured capital 37 873 61 013 Capital instruments: Venture capital funds 166 885 115 081 Estate development association 177 366 89 927 Hedge funds 1 669 21 069 Other capital instruments 62 23 063 Deposits and other monetary assets 26 425 56 429 622 394 867 701 Financial assets tradeable Exchange rate operations Foreign public issuers Nominal price 798 043 162 069 Fair price variations (Note 21) 8 520 3 317 Premium or discount (1 808) 231 Earnings receivable 3 774 1 385 Sales transactions with repurchase agreement Nominal price 1 461 382 798 924 Fair price variations (Note 21) (18 756) (8 319) Premium or discount (6 619) (3 991) Earnings receivable 4 409 2 034 International financial bodies Nominal price 48 683 11 077 Fair price variations (Note 21) 178 68 Premium or discount (571) 87 Earnings receivable 252 51 2 297 487 966 933 2 919 881 1 834 634 Internal assets Investments held until maturity Treasury liabilities Liabilities in national currency - 381 313 Indexed to the US dollar exchange rate - 11 591 Losses due to impairment - (1 907) Liabilities in foreign currency - 830 Earnings receivable - 2 833 Premium or discount (243 179) Treasury liabilities received in capital increase Nominal price - 174 440 Premium or discount - (118 562) Earnings receivable - - - 207 359 Financial assets tradeable Treasury liabilities Liabilities in national currency 1 027 443 - Liabilities in foreign currency 1 543 - Indexed to the US dollar exchange rate 2 - Fair price variations (Note 21) (23 490) - Premium or discount (489 557) - Earnings receivable 12 802 - 528 743 - Treasury liabilities received in capital increase Nominal price 174 440 - Fair price variations (Note 21) (51 439) - Premium or discount (114 189) - Earnings receivable - - 8 812 - 537 555 - 537 555 207 359 3 457 436 2 041 993 Part VI – Notes Appended to the Financial Statements • 107

On 31 December 2018, the balance sheet item “financial assets at fair value through results” in the amount of Kwan- zas 622.39 billions (31 December 2017: 867.70 billions Kwanzas) comprises two portfolios of financial assets, one managed by external managers and the other managed internally, the latter being managed by the Bank in November 2018, after the termination of the management contract with external managers.

The future liabilities assumed by the BNA for capital calls arising from investments in alternative investment funds with external managers, recorded in off-balance sheet accounts - commitments to non-resident third parties, amount to approximately Kz 24,26 billions and Kz 17.97 billions on 31 December 2018 and 2017, respectively (Note 23).

The realized and potential gains or losses on these investments are reflected in the outcomes statement item “Outco- mes from financial assets measured at fair value through results” (Note 28).

Due to the deliberation of the Board of Directors of BNA and taking into account the Investment policy, the Bank, during the 2018 accounting period, reduced the portfolio managed by external entities, by selling such portfolios.

By 31 December 2018, the Bank had an amount of Kz 20.87 billions which were managed by an external Managing Entity. These funds have been frozen by authorized external entities.

On 31 December 2018 and 2017, the item “Available-for-sale financial assets - Foreign sovereign debt securities - Nominal value”, in terms of residual terms to maturity, is as follows:

2018 Up to 1 year b/w 1 and 3 years b/w 3 and 5 years Over 5 years Total Exchange rate operations Foreign public issuers 232 250 267 967 263 391 34 435 798 043 Sales transactions with repurchase agreement 400 418 617 986 412 118 30 861 1 461 382 International financial bodies - 48 683 - - 48 683 632 667 934 636 675 509 65 296 2 308 108

2017 (restated) Up to 1 year b/w 1 and 3 years b/w 3 and 5 years Over 5 years Total Exchange rate operations Foreign public issuers 46 607 57 123 14 420 43 918 162 069 Sales transactions with repurchase agreement 63 051 348 440 238 101 149 332 798 924 International financial bodies 8 296 - 2 781 - 11 077 117 954 405 564 255 302 193 250 972 070

The potential results of the valuation of the financial assets portfolio held for sale - foreign sovereign debt securities at their fair value are recognized in Equity capital under the item «Fair value revaluation differences» (Note 21). The results of this portfolio are recorded in the outcomes statement for the accounting period.

On 31 December 2018 and 2017, foreign sovereign debt securities are remunerated at an annual average rate of 2.4% and 2.2%, respectively.

The reduction verified under the item «Internal Assets - Investments held to maturity» by 31 December 2018 results from the reclassification of securities to the «Available-for-sale financial assets» category. 108 • Annual Report and Accounts • 2018

Investments held until Transfer to financial assets tradeable on March 13, 2018 maturity on 01-01-2018 Treasury liabilities Amortized cost Amortized cost Fair price Fair price variation Liabilities in national currency Non-indexed 194 744 196 794 120 152 (76 641) Indexed to the US dollar exchange rate 11 790 1 1 - Liabilities in foreign currency 824 1 067 1 077 10 207 359 197 862 121 230 (76 631)

During the 2018 accounting period, the BNA received short-term payments granted to the Ministry of Finance, Treasury Bonds with a maturity of 10 years, and remuneration rate below the issues of securities with the same characteristics in the market. In this context, as established in IAS 39 - Financial Instruments, at the time of the reclassification, BNA recorded losses recognized under the item “Impairment net losses of reversal” associated with these instruments in the amount of Kz 259.2 billions, corresponding to the difference between issuing values and the fair value at the date of transfer.

The financial losses on the treasury bonds received were cleared, at the time of transfer, based on future contractual cash flows, and the discount rate used corresponds to the average nominal interest rate of the last issues of Treasury bills, with residual terms equivalent to those of the mentioned bonds. 2018 Up to 1 year b/w 1 and 3 years b/w 3 and 5 years Over 5 years Total Financial assets tradeable Treasury liabilities Liabilities in national currency - - 73 509 953 934 1 027 443 Liabilities in foreign currency - - 1 543 - 1 543 Indexed to the US dollar exchange rate - - 2 - 2 Treasury liabilities received in capital increase - - - 174 440 174 440

2017 (restated) Up to 1 year b/w 1 and 3 years b/w 3 and 5 years Over 5 years Total Investments held until maturity Treasury liabilities 3 845 4 025 61 307 324 557 393 734 Treasury liabilities received in capital increase - - - 174 440 174 440

The Deferral of the premium/discount of National Treasury Bonds are recognized under the outcomes statement item “Interest and similar income” (Note 24).

“Treasury Bonds received in increase of capital” refers to Treasury Bonds issued by the Ministry of Finance for the realization of part of the social capital subscribed during the 2011 accounting period, as defined in Law n.°16/10 of June 15, Law of the BNA. Such bonds, with a maturity of 20 years, are characterized by not presenting associated remuneration (zero rate), a situation that is contrary to the provisions of the Organic Law of the BNA. In 2018, the Board of Directors of BNA changed the accounting policy associated with accounting for these securities (see note 40) to adopt IAS 39. The Bank determined the fair value of these Treasury Bonds, registering the difference between the fair value and the nominal value at the issue date, under the equity capital item called “Capital issue discount” (Note 20).

31/12/18 Fair price Discounts Premium Fair Date of Nominal Fair Amorti- on the date from capital or dis- price issue price price zed cost of issue issuing count variation Treasury liabilities received in joint stock increase AOTNR2021U12 21/06/12 95 000 21 327 (73 673) 5 417 34 727 (60 273) (29 310) AOTNR2013U13 13/06/13 48 150 10 810 (37 340) 2 231 16 362 (31 788) (14 131) AOTNR2025U14 25/06/14 31 290 6 403 (24 887) 1 164 9 162 (22 128) (7 998) 174 440 38 540 (135 900) 8 812 60 251 (114 189) (51 439) Part VI – Notes Appended to the Financial Statements • 109

6. International Monetary Fund On December 31, 2018 and 2017, the active and passive positions with the International Monetary Fund (IMF) have the following composition: 2018 “2017 (restated)” Foreign assets IMF Quota 240 483 168 351 Special Drawing Right (SDR) 73 065 52 006 313 548 220 357

External liabilities Accounts #1 / #2 166 162 105 093 Allocation of special drawing rights (SDR) 88 869 62 176 Securities account 37 439 37 439 IMF tranche reserve 36 916 25 844 329 386 230 551

On 31 December 2018 and 2017, the item “Assets overseas - IMF Quota” of the Republic of Angola is equivalent to SDR 740.1 millions (KZ 240.48 billions and Kz 168.35 billions) respectively.

On 31 December 2018 and 2017, the balance of “External liabilities - Accounts n.°1 / n.°2 and securities account” items is equivalent to SDR 627.1 millions (Kz 203.60 billions) and SDR 625.7 millions (Kz 142.53 billions) respectively.

On 31 December 2018 and 2017, the exchange rate from 1 SDR to Kz corresponds to approximately 324.93 and 227.47, respectively. 110 • Annual Report and Accounts • 2018

7. Other Internal and External Assets Receivable On 31 December 2018 and 2017, this item has the following composition: 2018 "2017 (restated)” Overseas Receivable - Mais Financial - 82 962 - 82 962 In the interior Receivable from financial institutions 256 963 256 963 Impairment - receivable (256 963) (256 963) Receivables from non financial entities 25 009 35 460 Impairment – Several debtors (12 903) (35 460) 12 106 -

In March 2018, the “Mais Financial” entity returned the amount of USD 500 millions, which represented, on 31 Decem- ber 2017, BNA’s rights to that international institution, amounting to Kz 82.96 billions.

On December 31, 2018, the balance presented under the item “Amounts receivable from financial institutions / ENSA Group” corresponds to the amount related to the transfer of the contractual position, by means of a “Payment Agree- ment” struck up between the ENSA Group - Investimentos e Participações, S.A. and a Financial Institution in the total amount of Kz 256.96 billions, for settlement of amounts owed for rediscount operations. Considering that to date no payments have been made on the part of the ENSA Group and since there is no direct relationship between the BNA and the ENSA Group on the recoverability of these assets to date, the BNA management has prudently understood keeping the impairment loss recorded in 2017 on the total amount.

In addition, on 31 December 2018, the balances recorded under the item “Amounts receivable from non-financial entities” include amounts paid under contracts that were celebrated for the acquisition of tangible fixed assets, as well as for the provision of a set of services that showed signs of irregularities, in particular because the acquisition of goods or service counterpart was not proven. The amounts recorded are as follows: 2018 "2017 (restated)” Receivable from non financial entities Suppliers of tangible fixed assets 19 716 21 702 Service providers 5 293 13 759 Impairment – Several debtors (12 903) (35 460) 12 106 -

In June 2018, the “Mais Financial” entity returned the amount of EUR 25 millions (Kz 4.61 billions), which represented, on 31 December 2017, BNA’s rights to that international institution registered under the item “service suppliers” whereby impairment was reversed by the same amount.

In addition, in the course of 2018, BNA recovered the amount of Kz 1.60 billions of the companies, “Figueres Trading Corp” and “Urbanova”, for which the impairment loss recorded on December 31, 2017 was reversed, for the same amount. In addition, BNA has been negotiating with suppliers in order to evaluate the possibility of recovering the amounts paid, reason why it was possible to reverse impairment losses in the amount of Kz 16.35 billions. Part VI – Notes Appended to the Financial Statements • 111

8. Transactions To Credit Institutions Related To Mone- tary Policy Operations On 31 December 2018 and 2017, this item has the following composition: 2018 "2017 (restated)” Interbanking monetary market Securities assigned for fulfilling RO-ME 538 989 240 467 Discount operations Assigned amount 257 178 201 602 Losses due to impairment (93 168) (40 457) Interest receivable 1 614 3 955 Occasional lending operations Invested amount - 98 070 Interest receivable - 973 Lending rate - Overnight Invested amount 42 554 74 213 Interest receivable 794 - Lending rate Assigned amount 11 575 84 327 Losses due to impairment (6 575) (43 902) 752 961 619 247

The item “Securities allocated to RO-ME compliance” corresponds to Treasury Bonds delivered by commercial banks with nominal value in the amount of USD 1.75 billion, in order to comply with mandatory foreign currency reserves, in accordance with Instruction N.°10/2018 and Directive n.°04/DSP/DRO/2018, which are also recorded under “Bank Reserves” item (Note 14), which are registered at the value determined by the Payment Systems Department (DSP). This item recorded a variation resulting from the inclusion of one more financial institution and the effect of the Kwanza devaluation against the US dollar by about 86%.

The rediscount operations aim to cede liquidity for a longer period to the banking financial institutions, and are granted in the sole discretion of the BNA, upon formal request from the financial institution, under the terms of regulations. Being made with the commitment to repurchase the collateral assets.

On 31 December 2018 and 2017, the item “Rediscount operations” is distributed by financial institution as follows: 2018 2017 (restated)

Assigned Earnings “ Impairment Net Assigned Earnings “Impairment Net Financial institution amount receivable accrued“ balance amount receivable accrued“ balance

Banco de Poupança e Crédito 230 600 1 614 (66 590) 165 624 163 602 921 (15 365) 149 158

Banco Angolano de Negócios e Comércio 26 578 - (26 578) - 23 000 2 122 (25 092) 30

Banco Millennium Atlântico - - - - 15 000 912 - 15 912

257 178 1 614 (93 168) 165 624 201 602 3 955 (40 457) 165 100

On December 31, 2018, the rediscount operations contracted by the “Angolan Bank for Business and Commerce”, present deadlines beyond the maturity of three months, a situation that does not comply with that defined in the BNA Law (Law n.°16/10 of 15 July).

The Board of Directors, based on information collected and also taking into account the estimated fair value of the collateral obtained, with nominal value of Kz 253.78 billions represents, by December 31, 2018, impairment losses of Kz 93,17 billions of Kwanzas, accounting for around 36% of the total exposure.

On 31 December 2018 and 2017, the item “Occasional liquidity-providing operations” is distributed as follows: 112 • Annual Report and Accounts • 2018

2018 2017 (restated) Assigned Earnings Assigned Earnings Net Financial institution Net balance amount receivable amount receivable balance Banco de Fomento Angolano - - - 52 509 525 53 034 Banco Sol - - - 28 003 294 28 297 Banco BIC - - - 11 396 96 11 492 Banco Keve - - - 6 162 58 6 221 - - - 98 070 973 99 043

On 31 December 2018 and 2017, the “Liquidity Lending Facility - Overnight Deposits” item shows the following distribution: 2018 2017 (restated) Assigned Earnings Assigned Earnings Net Financial institution Net balance amount receivable amount receivable balance Banco de Poupança e Crédito 42 554 794 43 348 67 000 - 67 000 Banco Sol - - - 7 213 - 7 213 42 554 794 43 348 74 213 - 74 213

The overnight deposits are made available by the National Bank of Angola, being executed by direct initiative of the banking financial institutions and are remunerated at a rate of 16.5%.

On 31 December 2018 and 2017, the item “Liquidity lending” corresponds to operations of liquidity lending in foreign currency to national financial institutionsto serve as collateral in the opening of letters of credit for food import operations. There were regular settlements in 2018, so that on 31 December 2018 the balance of this item corresponds to the amount owed by a financial institution, for which there is a depreciation plan, which is expected to be terminated for the first half of 2019. The reversal of impairment in the amount of Kz 37.33 billions was supported by settlements made during 2018 and in the first quarter of 2019.

At the end of the 2018 accounting period, the financing of a credit institution related to monetary policy operations is still not fully covered through collateral. For this reason, and given the fact that these operations have specific deadlines that were not fully complied with, the Bank opted for a more conservative approach, taking into account the coverage of risks and future contingencies.

9. Financial Assets Granted to the State Under Law N.° 16/10 of July 15, the BNA may grant the State a current account credit up to the equivalent limit of 10% of current revenues collected in the last year, and the current account amount must be settled until 31 December of the year to which it relates along with the respective interest.

On 31 December 2018, this item has the following composition:

2018 “2017 (restated)” Financial assets granted to the Government 154 993 377 396 154 993 377 396

Part VI – Notes Appended to the Financial Statements • 113

On 31 December 2018, the item “Financial assets granted to the State” includes the financing obtained from Gemcorp, for a total amount of USD 500 millions, transferred to the Ministry of Finance (MINFIN). The debt repurchase agreement provided for an annual interest rate of 2.6% and repayment in accordance with the original agreement between the BNA and GemCorp, i.e., the payment of interest at 3 years and the capital outstanding at the end . In 2017, BNA renegotiated the terms of payment with GemCorp, thereby changing the annual interest rate to 3% and the repayment term for May 2021. This change was passed on to the Ministry of Finance (see note 16).

In April and December 2018, the Ministry of Finance settled the current account with the issuance of two National Trea- sury Bonds in the amount of kz 291.90 billions and 354.23 billions with a coupon interest rate of 12.5% and 12.0%, respectively, and maturity of 10 years. These securities are recorded in the portfolio of available-for-sale financial assets.

10. Investments in Associates and Other Entities On 31 December 2018 and 2017, this item has the following composition:

2018 “2017 (restated)” Domestic EMIS, SARL 731 1 425 731 1 425 Unpaid capital - (853) - (853)

On December 31, 2018 and 2017, BNA holds an 18% and 35% participation, respectively, in the social capital of EMIS - Empresa Interbancária de Serviços S.A., recorded at acquisition cost, whose social purpose is the management of the Multicaixa network and the consolidation of Angola’s retail payment system. As established in the mandate authorizing this social participation, the BNA has reduced its participation, moving from a majority stake of 35% to the current 18% stake.

In addition, in order to reduce participation, in November 2018, the “Parasocial Agreement” was signed between the BNA, EMIS and the commercial banks holding shares in EMIS, which provides for the transfer of 35% of BNA shares in EMIS in two stages, designated as follows: (i) 17% on 31 December 2018 and (ii) the remaining 18% on 31 December 2020. On 31 December 2018, BNA transferred 17% of BNA’s social capital to EMIS, whose gains are recorded under the item “Results of investments in associates and other entities” (Note 31). 114 • Annual Report and Accounts • 2018 66 66 725 1 351 16 917 11 562 21 372 21 804 11 261 16 585 49 917 50 642 49 716 51 067 Net Net value value value ------(75) (75) (75) (2 205) (2 205) (2 205) Impairment Impairment Impairment - - - - (5 543) (8 212) (3 963) (6 030) (5 688) (3 039) (13 755) (17 718) (11 718) (14 757) Balance on 12-31-2018 Accrued Accrued Accrued amortizations amortizations amortizations Balances on 12-31-2017 (restated) 66 66 4 390 4 688 22 535 19 774 21 372 30 038 16 949 16 585 63 747 68 435 63 639 68 029 value value value Gross Gross ------107 (107) Transfers Transfers ------552 2 130 2 130 2 130 (2 205) (2 205) (1 653) impairment impairment impairment impairment Reversal or Reversal losses due to due losses Losses due to due Losses (reinforcement) of (reinforcement) ------89 228 416 552 228 228 504 1 056 (Amortizations) (Amortizations) - - - - - Write-offs Write-offs (8 028) (8 028) (5 318) (3 135) (3 289) (5 370) (8 028) (11 742) (17 112) value value value Gross Gross - - - - Movements incurred in the 2018 fiscal year 2018 fiscal incurred in the Movements year 2017 fiscal incurred in the Movements 259 (924) (760) (600) (2 524) (2 003) (2 265) (3 189) (3 363) (2 763) Fiscal year Fiscal year Fiscal amortizations amortizations amortizations - 14 525 298 2 825 4 787 6 572 4 940 8 137 8 435 11 974 12 016 35 516 30 576 Acquisitions Acquisitions Acquisitions 66 52 4 009 7 966 1 829 1 902 21 804 11 261 16 585 23 319 51 618 35 345 49 716 37 175 Net Net value value value ------552 (2 205) 35 345 35 345 (2 205) (1 653) Impairment Impairment Impairment - - - 0 (6 030) (5 688) (3 039) (5 358) (4 101) (2 991) (9 459) (11 718) (14 757) (12 451) Balance on 12-31-2016 Accrued Accrued Accrued amortizations amortizations amortizations Balances on 12-31-2017 (restated) 66 52 8 110 7 966 4 390 4 820 30 038 16 949 16 585 28 677 63 639 68 029 44 805 49 625 value value value Gross Gross

Real property Real Equipment Artistic assets course in Tangible Software property Real Equipment Artistic assets course in Tangible Software Tangible assets assets Intangible Tangible assets assets Intangible 11. Tangible and Intangible Assets 11. Tangible The changes occurred under the tangible, intangible and current assets items during 2018 2017 accounting periods were as follows: Part VI – Notes Appended to the Financial Statements • 115

During the 2018 accounting period, it was possible to reverse impairment losses in the amount of Kz 2.13 billions, so that on 31 December 2018 total impairment losses on tangible assets (real estate) correspond to the amount of Kz 75 millions, whereas the process of legalizing a set of real estate assets is still ongoing.

On 31 December 2018 and 2017, the item”Tangible assets in progress” refers to the following works in progress, by delegation:

2017 2018 (restated) Luanda 16 059 12 980 Moxico 2 646 1 532 Huambo 1 267 1 113 Kuando Kubango 645 580 Huila 397 224 Cabinda 276 156 Benguela 82 - 21 372 16 585

On December 31, 2018 and 2017, the balance under the “Luanda” item includes mainly the ongoing construction of the headquarters building.

On December 31, 2018, the increase reflected under the items “Moxico” and “Huambo” is mainly explained by the rehabilitation of the building of these regional offices.

12. Other Assets On 31 December 2018 and 2017, this item has the following composition:

2017 2018 (restated)

Debtors and other applications Personnel 23 628 22 949 Advance payments to vendors 5 401 520 Miscellaneous debtors 1 646 16 Expenses with deferred fee Issuing of bills and coins 11 280 9 327 Outsourced services and supplies 21 84 Other assets Deposits from exchange rate transgressions 7 757 4 498 Treasurer’s office 2 358 2 527 Regularization accounts 141 923 52 232 40 844 Impairment - Personnel (12 251) (11 808) 39 981 29 036

On 31 December 2018 and 2017, the balance of “Debtors and other investments - Personnel” item can be detailed as follows:

A. Personnel

2017 2018 (restated) Employee loans 7 221 6 157 Housing projects 11 175 11 343 Acquisition of employees’ debts 4 700 5 091 Social security fund 532 358 Impairment (12 251) (11 808)

11 377 11 141 116 • Annual Report and Accounts • 2018

Within the framework of the social policy in force at the BNA and in order to provide support in obtaining its own housing, the Board of Directors decided to acquire lots of housing for assignment to its employees in the form of resolvable income. In this context, the balance of “Employee loans” and “Housing projects” items represents the outstanding amount not subsidized by the BNA which is being reimbursed by the workers.

The item “Purchase of workers’ debt” corresponds to the purchase of workers’ debt from banking financial institutions, which is being periodically amortized by the Bank’s employees. In addition, taking into account certain assumptions related to the recoverability of certain balances, the Bank has recorded impairment losses, which on 31 December 2018 corresponds to the amount of Kz 3.94 billions.

“Social Fund” item refers to the amount to be received in respect of extraordinary grants granted by the Bank to its employees for the payment of one-off personal expenses. These amounts are subsequently charged to the respective beneficiaries in the course of salary processing.

The item “Debtors and other investments - Advances to suppliers” corresponds entirely to the amounts advanced to the company producing national banknotes and coins.

On 31 December 2018 and 2017, the item “Debtors and other investments - Sundry debtors” looks as follows: B. Several debtors

2017 2018 (restated) Other receives from the MinFin 1 444 - Via transfer of shares to EMIS 183 - Guarantees receivable 17 17 Banco Namibia repatriated amounts 2 - 1 646 17

On 31 December 2018 and 2017, the balance of the item “Deferred Charge Expenses - Banknote and Currency Issues” corresponds to the expenses associated with the production of banknotes and coins of Kwanza. Costs incurred with its production are initially recorded under this item and recognized on a straight-line basis as results over the useful life of the assets, currently estimated as 5 years.

On 31 December 2018 and 2017, expenditure on the production of banknotes and coins is as follows:

D. Issuing of bills and coins

2017 2018 (restated) Notes 10 453 8 396 Currencies 827 931 11 280 9 327

- - Nos exercícios de 2018 e 2017, foram reconhecidos custos relativos à emissão de notas e moedas nos montantes de Kz 2,89 mil milhões e Kz 3,17 mil milhões (ver nota 33).

13. Banknotes and Coins in Circulation On 31 December 2018 and 2017, this item had the following composition:

2017 2018 (restated) Monetary issuance Issued bills 699 348 719 288 Issued coins 9 491 6 794 Bills and coins in circulation Notes (208 915) (197 312) Currencies (1 534) (1 052) 498 390 527 717 Part VI – Notes Appended to the Financial Statements • 117

EThis item represents the issuance of banknotes and coins that the National Bank of Angola placed on the market as an instrument for facilitating the country’s commercial transactions, deduced from the face values that the BNA holds which are awaiting market entry.

The costs associated with the annual depreciation of the notes are reflected in the item “Other assets - Deferred charges” (Note 12), which are recognized on a straight-line basis as results from the accounting period, after entry into circulation, over the estimated useful life of the notes, currently established as 5 years.

14. Liabilities to Domestic Credit Institutions Related to Monetary Policy Operations On 31 December 2018 and 2017, this item has the following composition: 2017 2018 (restated) Bank reserves In national currency Net reserve 799 276 925 641 In foreign currency Securities 538 989 240 466 Net reserve 410 932 166 861 1 749 197 1 332 969 Interbanking monetary market Occasional liquidity absorption operations Assimilated amount 87 516 66 240 Fees payable 365 57 87 881 66 297 1 837 078 1 399 265

The “Net Bank Reserves” item represents the deposits in national currency and foreign currency made by the national banking financial institutions, in order to satisfy the legal requirements regarding the minimum reserve levels defined by the Central Bank, which are not remunerated.

On December 31, 2018, according to Instruction n.°10/2018 in conjunction with Directive n.°04/DSP/DRO/2018, which repeals Instruction n.°6/2017, they are also eligible to comply with compulsory reserves in ME, Treasury Bonds in ME belonging to the proprietary portfolio registered in SIGMA, issued as of 2015. These securities (TOs in foreign currency) are also accounted for at nominal value under the item “Operations to credit institutions related to monetary policy operations” (Note 8).

On 31 December 2018 and 2017, the coefficient for calculating bank reserves in national currency amounts to 17% and 21%, respectively, on the basis of incidence.

The item “Interbank money market” includes all occasional liquidity-absorbing operations carried out in national currency aimed to manage the liquidity of the national banking system.

On December 31, 2018 and 2017, the liabilities of BNA for conducting “Occasional liquidity absorption operations” in the open market are distributed by financial institution as follows: 118 • Annual Report and Accounts • 2018

2018 2017 (restated) Assimilated Fees Assimilated Fees Financial institution Total Total amount payable amount payable Banco de Fomento de Angola 45 500 223 45 723 33 000 2 33 002 Banco Angolano de Investimentos 21 000 114 21 114 25 000 20 25 020 Banco Internacional de Crédito 10 000 5 10 005 - - - Standard Chartered Bank de Angola 6 600 17 6 617 2 000 16 2 016 Banco Postal, S.A 1 793 3 1 796 1 450 4 1 454 Banco Regional do Keve 1 500 0 1 500 1 900 5 1 905 Banco Kwanza Invest 600 1 601 1 600 7 1 607 Banco de Negócios Internacional 523 3 526 - - - Banco Comercial Angolano - - - 1 090 1 1 091 Banco Pungo Andongo - - - 200 1 201 87 516 365 87 881 66 240 57 66 297

On 31 December 2018 and 2017, the composition of the item “Occasional liquidity-absorbing operations - Absorbed value” in terms of residual terms to maturity is as follows:

2018 Up to 1 Financial institution b/w 1 and 3 months Total month Banco Fomento de Angola 30 000 15 500 45 500 Banco Angolano de Investimentos 16 000 5 000 21 000 Banco Internacional de Crédito 10 000 - 10 000 Standard Chartered Bank de Angola 6 600 - 6 600 Banco Postal, S.A 1 611 182 1 793 Banco Regional Keve 1 500 - 1 500 Banco Kwanza Invest 600 - 600 Banco de Negócios Internacional 523 - 523 66 834 20 682 87 516

2017 (restated) Up to 1 Financial institution b/w 1 and 3 months Total month Banco Fomento de Angola 33 000 - 33 000 Banco Angolano de Investimentos 25 000 - 25 000 Standard Chartered Bank de Angola 1 000 1 000 2 000 Banco Regional Keve 1 900 - 1 900 Banco Kwanza Invest 1 600 - 1 600 Banco Postal, S.A 1 450 - 1 450 Banco Comercial Angolano 1 090 - 1 090 Banco Pungo Andongo 200 - 200 65 240 1 000 66 240 On 31 December 2018 and 2017, the average rate of remuneration for “Occasional liquidity-absorbing operations” is 8.6% and 10%, respectively. Part VI – Notes Appended to the Financial Statements • 119

15. Internal Liabilities Regarding Other Entities On 31 December 2018 and 2017, this item has the following composition:

2017 2018 (restated) Single treasury account In foreign currency 1 306 844 848 371 In national currency 202 803 173 865 Amounts returnable to CUT 4 173 4 173 1 513 820 1 026 409

Other liabilities 26 84

The “Treasury Single Account” item is included in the scope of the protocol signed in 2002 with the Ministry of Finance regarding the management of Fiscal and Monetary Policy, in which the Treasury deposits, among other revenues, those resulting from taxes on oil exploration and the obtained financing. The remuneration of this account, although provided for in the protocol, has never been implemented, and it is the Bank’s Board of Directors’ belief that such compensation for the 2018 and previous financial years is not required, since the protocol is still under review.

On 31 December 2018, the change in the balance of the “Treasury Single Account” item is explained by three effects, namely: i) the decrease in the availability of foreign currency due to the various payments made at Treasury request; ii) the devaluation of the Kwanza against the US dollar by about 86% and iii) the increase in the availability of local currency.

On December 31, 2018, the balance of “Other liabilities” item corresponds to the amount due in connection with the financial leasing contract entered into with a financial institution in August 2015 for the purchase of light vehicles, with 3 installments pending this way, and having an expected termination to 20 August 2019, in accordance with the financial plan.

16. Resources From Financial Institutions On 31 December 2018 and 2017, this item has the following composition:

2018 2017 (restated) Fees Fees Operations Obtained loans Total Obtained loans Total payable payable Sales transactions with repurchase agreement 1 388 732 9 182 1 397 914 746 658 6 340 752 998 Bank overdrafts - - - 17 336 - 17 336 1 388 732 9 182 1 397 914 763 994 6 340 770 334

On 31 December 2018 and 2017, the item “Sales transactions with repurchase agreements” has the following composition:

2018 2017 (restated) Fees Fees financial institution Obtained loans Total Obtained loans Total payable payable

GemCorp 771 518 7 095 778 613 414 810 2 699 417 509 ICBC Standard Bank 617 214 2 087 619 301 331 848 3 641 335 489 1 388 732 9 182 1 397 914 746 658 6 340 752 998 120 • Annual Report and Accounts • 2018

On 31 December 2018 and 2017, the item “Sales transactions with repurchase agreements” relates to financing obtained from two external entities, GemCorp and ICBC Standard Bank, for a total amount of USD 4.50 billions ( KZ 1.39 billion), with foreign currency sovereign debt securities recorded as available-for-sale financial assets amounting to USD 4.82 billions (Kz 1.44 billion) on 31 December 2018 (Note 5). From this financing, the total amount of USD 500 millions, recorded under the item “Financial Assets Granted to the State” was transferred to the Ministry of Finance (MINFIN) (see note 9).

2018

Interest Date started Maturity date Interest Accrued Accrued Amount Entity Funding Currency payment Funding MN (disbursement) (reimbursement) rate interest ME interest MN payable MN periodicity GEMCORP 500 USD 05/07/17 05/07/19 Annual 2,35% 154 304 6 1 803 156 106 GEMCORP 500 USD 05/09/17 02/06/20 Annual 2,54% 154 304 4 1 285 155 588 GEMCORP 500 USD 03/11/17 04/05/21 Annual 3,00% 154 304 2 720 155 024 GEMCORP 1 000 USD 01/12/17 01/12/22 Quarterly 3,25% 308 607 11 3 288 311 895 ICBC 1 000 USD 27/01/17 27/10/21 Quarterly 2,70% 308 607 5 1 504 310 111 ICBC 1 000 USD 09/12/17 09/12/21 Quarterly 3,09% 308 607 2 583 309 190 4 500 1 388 732 30 9 182 1 397 914

2017 (restated)

Interest Date started Maturity date Interest Accrued Accrued Amount Entity Funding Currency payment Funding MN (disbursement) (reimbursement) rate interest ME interest MN payable MN periodicity GEMCORP 500 USD 05/07/17 05/07/19 Annual 2,35% 82 962 7 1 179 84 141 GEMCORP 500 USD 05/09/17 02/06/20 Annual 2,54% 82 962 4 677 83 639 GEMCORP 500 USD 03/11/17 04/05/21 Annual 2,60% 82 962 2 393 83 355 GEMCORP 1 000 USD 01/12/17 01/12/22 Quarterly 3,25% 165 924 3 449 166 373 ICBC 1 000 USD 27/01/17 27/10/21 Quarterly 2,70% 165 924 20 3 328 169 252 ICBC 1 000 USD 09/12/17 09/12/21 Quarterly 3,09% 165 924 2 313 166 237 4 500 746 658 38 6 340 752 998

On 31 December 2018 and 2017, the average rate of return on “Sales transactions with repurchase agreements” is 2.89% and 2.76%, respectively.

17. Liabilities With Pensions and Other Benefits On 31 December 2018 and 2017, the estimated liability for services rendered in respect of eligible retired people and the active population of the Bank amounts to:

2017 Plan type 2018 (restated) Pensioners Retirement pension and living allowanceDefined benefit 197 770 124 314 Medical and drug assistance Defined benefit 66 548 16 299 Christmas bonus Defined benefit 6 946 6 088 Subsidy due to death Defined benefit 5 369 2 622 Active employees Retirement pension and living allowanceSet contribution 59 321 55 081 Reform compensation Defined benefit 5 378 6 395 Christmas bonus Defined benefit 4 834 3 037 346 166 213 835

The Bank has undertaken, on a voluntary basis, to provide its employees or their families with cash benefits to su- pplement old-age, invalidity, early retirement and survivor’s pensions. In this sense, liabilities with pensions and other benefits consist of provisions that the Board of Directors decided to set up as of 2010 accounting period, with the objective of covering the liabilities with past services related to old-age pensions, early retirement and survival of its employees, based on a defined benefits plan. Part VI – Notes Appended to the Financial Statements • 121

During the 2015 accounting period, the BNA’s workers’ pension fund was set up, through the publication of Order n.°335/15 of 27 October. Contributions to the pension fund began on January 1, 2016, and the Board of Directors approved an initial financial contribution in the form of an extraordinary contribution to each employee who joined the pension plan, in proportion to the length of service since their admission to the Bank, with the purpose of stimulating adhesion to the pension fund, as well as repaying the contribution made by each employee to the development and consolidation of the institution. The initial contribution amounts to Kz 59.32 billions.

On 31 December 2018 and 2017, the number of participants covered by the defined benefits plan (pension plan) is shown in the table below:

Number of participants 2018 2017 Retirees and pre-retirees 1 718 1 997 The liabilities arising from the pension plan were determined on the basis of actuarial studies with reference to 31 December 2018 and 2017, using the projected unit credit method.

The main actuarial and financial assumptions are as follows:

Actuarial and financial assumptions 2018 2017 Nominal interest rate (discount rate) 7,30% 2,50%

Nominal growth rate of salaries 8.5% per annum (equivalent to 77.7% of inflation) 2,00%

Pensions growth rate 8.5% per annum (equivalent to 77.7% of inflation) 0,00% Inflation rate 11.0% per annum Unavailable Plan’s back date 01.01.1987 01.01.1987 Reference date 12.31.2018 12.31.2017 Mortality/survival table PF-60/64 PF-60/64 Allocation moment 60 years old with a minimum 60 years old with a minimum of the retirement pension of 5 years of service of 5 years of service Calculation reference currency Kz (Kwanzas) Kz (Kwanzas)

The liabilities with compensation of retirement are the amount to be paid to the employees who reach the retirement, as provided in articles n.°218 and 262 of Law n.°2/2000 and articles n.°218 and 262 of the General Labor Law (Note 1.5.8). The General Labor Law was amended by Law n.°7/15 of 15 of June, repealing Law n.°2/2000 of February 11. The retirement compensation provided for in the previous art. n.°262 is no longer required by law, but the BNA Board of Directors decided on 27 December 2016 to continue this benefit for all workers admitted before 13 September 2015 according to information n.º20 with Ref.ª DRH/DIR/2016.

On 31 December 2018 and 2017, the Bank recognized liabilities relating to the constructive obligation associated with medical and medicamental assistance of retired people and expenses for the Christmas compensation of retired people and active workers. On December 31, 2018, the liabilities related to the constructive obligation associated with the medical and medicamental assistance of pensioners were calculated based on the insurance plan contracted with SAHAM Angola Seguros. In addition, on December 31, 2018, the Bank recognized liabilities related to the constructive obligation associated with the medical and medicamental assistance of the active employees. 122 • Annual Report and Accounts • 2018

18. Provisions On December 31, 2018 and 2017, the item “Provisions” amounts to:

2017 2018 (restated) For market risks - 59 144 For banking sector systemic risk 180 781 37 583 For several risks 3 223 1 834 184 004 98 562

In the accounting periods ended on December 31, 2018 and 2017, movements in provisions item were as follows:

Balance on Balance on Net Exercisable Net Exercisable 12-31-2017 12-31-2016 reinforcements securities reinforcements securities (restated) Provision for market risks 94 775 (35 631) - 59 144 (59 144) - Provision for banking sector systemic risk 28 191 9 393 - 37 583 143 198 - Provision for several risks 1 834 - - 1 834 1 693 (305) Provision for bad debtors 1 151 - (1 151) - - - 125 951 (26 238) (1 151) 98 562 85 747 (305)

On 31 December 2018 and 2017, the Bank, based on the prospects for market growth and the degree of liquidity of its assets, reversed the provision for market risks, since there were corrections to the fair value of the active positions of items of financial assets at fair value through results (profit or loss) (Note 5).

On 31 December 2018, the “provision for systemic risk in the banking sector” corresponds to the exposure of banking financial institutions to risk and considers in its calculation base the total of financial liabilities deduced from the net assets of banking financial institutions. Based on the scoring attributed to each financial institution, the Board of Directors defined risk-based percentages to cover possible losses related to financial difficulties of Credit Institutions. This provision falls within the functions determined by the Organic Law, namely to ensure the stability of the national financial system, ensuring, for this purpose, the role of financier of last resort.

On June 26, 2018, the Board of Directors of Banco Nacional de Angola decided to intervene in the Angolan Bank for Business and Commerce (BANC), after having verified a significant deterioration of the financial indicators and the BANC’s inability to face its responsibilities in the national payment system. In view of the inability to mobilize additional capital by the BANC shareholders, which is necessary and indispensable for the fulfillment of the minimum legal requirements in force, the BNA, under the combined provisions of article 21.° of the Law of the National Bank of Angola and article 30.°, paragraph n.°1, of Law for the Basis of Financial Institutions, at an extraordinary meeting of the Board of Directors held on January 29, 2019, decided to revoke the authorization for the exercise of banking activity, for which the mentioned bank was authorised, thus ceasing its activity on February 6, 2019.

In addition, at a meeting of the Board of Directors, held on January 2, 2019, the National Bank of Angola resolved to revoke the licenses of two banking financial institutions, namely BANCO MAIS, S.A. and BANCO POSTAL, S.A., for not meeting the legal requirement for the continuity of banking activity, in accordance with point b), in conjunction with point c) of item 15.°, and point f), both of article 29.° of Law n.°12/15, of June 17, Basic Law of the Financial Institu- tions, as well as in compliance with what was stipulated in Notice n.°02/2018, of March 2.

In this way, the provision for systemic risk in the banking sector was strengthened, based on the estimate of customer deposits and compensation to employees that the BNA may eventually bear.

The balance of the item “Provision for miscellaneous risks” corresponds to the amount estimated to cover potential liabilities of a specific nature, namely legal or fiscal liabilities or contingencies, and by December 31, 2018 amounts to Kz 3.22 billions. Part VI – Notes Appended to the Financial Statements • 123

19. Other Liabilities On 31 December 2018 and 2017, this item has the following composition:

2017 2018 (restated) Creditors and other funds Several creditors 28 567 16 598 Housing fund 25 137 22 682 Taxes payable 6 782 3 545 Social security fund 3 628 5 565 Advance payments from financial institutions 182 182 World Bank 153 353 Payables secured by monetary conversion agreement - 16 943 with the Bank of Namibia Fees payable 3 450 2 957 Regularization accounts 1 429 806 69 328 69 631

The item “Creditors and other resources - Sundry creditors” presents the following detail:

2017 2018 (restated) Vendors 18 478 10 806 Deposits from exchange rate transgressions (Note 12) 7 833 4 539 Guarantees from companies 2 256 1 253 28 567 16 598

On 31 December 2018, part of the balance recorded under the item “Suppliers” is the result of contracts whose assessment of their performance revealed in 2017 a series of indications of irregular procedures, so that the amounts payable are subject to the procedure negotiation that is under way by the BNA’s Legal Office, being possible to terminate and/ or renew the respective contracts.

Likewise, the amounts already paid under the mentioned contracts, having occurred without the respective consideration for service or acquisition of goods, also went through the negotiation process, and it was possible to recover part of the amounts advanced.

The item “Creditors and other resources - Housing Fund” corresponds to the estimate of the Board of Directors to finance real estate investments of a social nature, in accordance with the provisions of the Bank’s Organic Law. On Decem- ber 31, 2018, the Bank recorded a provision for housing funds in the amount of Kz 25.14 billions, since it corresponded to our best estimate for financing real estate investments of a social nature, and the assumptions and contributions were duly communicated to the employees with the benefit.

The balance of the item “Liabilities and Other Resources - Taxes payable” corresponds essentially to the amounts wi- thheld from taxes on capital investments in the interbank money market operations, on services rendered and property tax for the months of November and December 2018.

The item “Creditors and other resources - Social Fund” corresponds to the amount of financial resources that the Bank provisioned on 31 December 2018 as loans to workers.

On 31 December 2018 and 2017, a net reversal of Kz 352 millions and Kz 1.49 billion was made, respectively, referring to the provision for the Housing and Social Fund.

The item “Creditors and other resources - Advances from financial institutions” corresponds to the advanced deposits of banking and non-banking financial institutions for the realization of part of the Social Capital.

On 31 December 2018, the balance of the item “Creditors and other resources - World Bank” corresponds entirely to the amount received for the provisioning of the IBRD - International Bank for Reconstruction and Development. 124 • Annual Report and Accounts • 2018

On 31 December 2018 and 2017, the “Charges payable” item relates essentially to the specialization of holiday allowance, Christmas allowance and the performance bonus to be paid to staff and management bodies. Considering that the amount of holiday allowance allocated in a given year is a right acquired in the immediately preceding year, the Bank records at the end of each financial year the amount of this allowance and its social charges. The performance bonuses payable to the assigned staff and management bodies are recorded as costs in the accounting period to which they relate, although they are paid only in the following accounting period.

On December 31, 2018, the item “Regularization accounts” corresponds to the amount received from the “Mais Finan- cial” entity for delivery to the State, related to judicial expenses and to the amounts of surplus cash.

20. Capital The capital of the BNA may be increased by incorporation of reserves, as resolved by the Board of Directors and rati- fied by the Executive Branch (Law n.°16/10 of June 15). On 31 December 2018, the item “Capital” amounts to Kz 270 billions.

On 31 December 2018 and 2017, this item has the following composition: 2017 2018 (restated) Vendors 18 478 10 806 Deposits from exchange rate transgressions (Note 12) 7 833 4 539 Guarantees from companies 2 256 1 253 28 567 16 598

The Bank calculated the fair value of Treasury Bonds received in capital increase and recorded, under the item “Capital Emission Discount”, the amount of Kz 135.90 billions, which represent the difference between the fair value and the nominal value at the date of the capital achievement (Note 5).

In the accounting periods ending on December 31, 2018 and 2017, the change in the balance of the item “Subscribed capital not completed” is derived from the following movements:

Balance in 2016 (13 027) 2017 Fiscal year reductions Allocation of dividends to distribute in relation to the 2015 fiscal year 7 770 Allocation of dividends to distribute in relation to the 2016 fiscal year 2 713 Balance in 2017 (restated) (2 544)

21. Revaluation Differences On 31 December 2018 and 2017, this item has the following composition:

2017 2018 (restated) Fair price review differences Financial assets tradeable (85 037) (4 933) Gold (75 811) (38 673) (160 848) (43 606)

Exchange rate review discrepancies 1 056 268 430 047 895 420 386 441 Part VI – Notes Appended to the Financial Statements • 125

The variation in “Revaluation Differences” is justified by the potential value of the devaluation of the Gold quotation, the fair value of the foreign sovereign debt securities and the securities issued by the Ministry of Finance, as well as the transfer to results of the effective sale of foreign sovereign debt securities and potential foreign exchange reserves of assets and liabilities denominated in foreign currency.

According to what is mentioned in note “1.5.2. - Transactions in foreign currency”, the amounts referring to potential exchange rate differences are recorded under the item “Exchange rate revaluation differences”. These amounts are recorded in the statements on the date when the values become effective.

22, Other Reserves and Retained Results On 31 December 2017 and 2016, this item has the following composition:

2017 2018 (restated) Other reserves Statutory reserve 21 960 21 960 Free reserve 21 849 21 849 43 809 43 809

Retained earnings (203 994) (144 245)

The change in retained results in the amount of Kz 59.75 billions is explained by the negative result of December 31, 2017.

23, Off-Balance Sheet Accounts On 31 December 2018 and 2017, off-balance sheet items have the following composition:

2017 2018 (restated) Liabilities for services rendered 7 767 366 5 546 926 Rendered warranties and other extraordinary liabilities 1 298 504 945 910 Bills and coins in circulation 733 112 692 938 Liabilities before third parties Non-residents 24 257 17 969 Residents 13 956 27 994 Guarantees received 10 007 5 689 Services rendered to third parties 665 665 9 847 867 7 238 090 Under the item “Liabilities for services rendered”, BNA’s liabilities are registered as custodian of securities issued by the Ministry of Finance. This item shows the following composition: 2017 2018 (restated) Liabilities for services rendered Treasury liabilities in national currency 6 721 167 4 001 801 Treasury bonds 581 549 1 158 040 Treasury liabilities in foreign currency 466 348 383 764 Other deposits (1 699) 3 318 Amounts administrated by the institution 1 1 7 767 366 5 546 926 126 • Annual Report and Accounts • 2018

The item “Guarantees provided and other occasional liabilities” refer essentially to guarantees and sureties provided and to the commitments made by BNA to foreign entities.

On 31 December 2018 and 2017, this item shows the following composition:

2017 2018 (restated) Rendered warranties and other extraordinary liabilities Institutional warranties rendered Funding from China 1 227 305 804 687 1 227 305 804 687 Promissory notes Final promissory notes from the Brazil line 18 865 33 053 Promissory notes in favor of IMF 330 057 86 357 Promissory notes in favor of others 19 689 12 813 368 611 132 223 Guarantees rendered secured by credit agreements with commercial banks 9 000 9 000 9 000 9 000 Other Institutional guarantees rendered IMF - Extended Fund Facility (EFF) (306 412) - 1 298 504 945 910

These liabilities are supported by the Protocol on the Management of Fiscal and Monetary Policy concluded with the Ministry of Finance. This protocol identifies the Ministry as responsible for its payment, and BNA is the guarantor of the debt in case of default by the Ministry of Finance. The value of the guarantees is updated on the basis of information received from the Ministry of Finance. On December 31, 2018, the item “Other institutional guarantees provided - IMF - Expanded Financing Program (PFA)”, is equivalent to SDR 715 millions (Kz 233.33 billions) and refers to the first tranche sent by the International Monetary Fund to MinFin, under the Expanded Financing Program (PFA) Angola has.

The item “Banknotes and coins out of circulation” consists entirely of the banknotes of the new Kwanza family (Series 2012) which are ready for issue.

On December 31, 2018 and 2017, the item “Commitments to third parties - Non-Residents” corresponds to future commitments assumed by the Bank for calls for capital, arising from investments in alternative investment funds with external entities where BNA holds management portfolios discretionary, amounting to Kz 24.26 billions and Kz 17.97 billions, respectively.

24. Interest and Similar Income In 2018 and 2017 accounting periods, this item has the following composition:

2017 2018 (restated)

Financial assets tradeable 92 648 21 133 Investments in credit institutions Overseas - Time deposit 26 613 12 929 Operations with credit institutions related with monetary policy operations Discount operations 23 842 43 356 Overnight operations 13 678 15 232 Occasional lending operations 1 010 3 005 Loaning interest granted to the Government 4 772 2 534 Investments held until maturity 3 490 26 177 Receivables in other credit institutions 2 979 1 060 IMF - DSE interest 977 373 170 009 125 800 Part VI – Notes Appended to the Financial Statements • 127

The items “Available-for-sale financial assets” and “Held-to-maturity investments” represent the gains from coupon interest and the income resulting from the application of the effective rate method of differences between acquisition cost and nominal value (premium or discount) of the National Treasury bonds and the foreign sovereign debt securities held in the portfolio, respectively.

In 2018 and 2017 accounting periods, the item “Investments in credit institutions” refers essentially to the gains obtained from interest on foreign term deposits and interest from operations to credit institutions related to monetary policy operations, namely rediscount operations and liquidity-providing operations carried out by the BNA.

25. Interest and Similar Charges In 2018 and 2017 accounting periods, this item has the following composition:

2017 2018 (restated) Funds from credit institutions 37 312 29 603 Loan interest 818 335 Other interest and similar fees 101 406 38 231 30 343

The item “Resources from credit institutions” refers to the costs incurred with interest on the liquidity-absorbing operations carried out by BNA and the interest arising from “Sales operations with repurchase agreement” with GemCorp and ICBC. Interest on “Sales operations with repurchase agreement with GemCorp and ICBC” amounted to Kz 30.51 billions.

26. Income From Services and Commissions In 2018 and 2017 accounting periods, this item has the following composition:

2017 2018 (restated) Commissions received for operations performed on account of third parties Ministry of Finance 12 952 10 889 Commissions received for services rendered Real-time payment system 48 46 13 000 10 935

The item “Commissions received on transactions carried out on behalf of third parties” refers entirely to commissions collected as a result of bank transfers made on behalf of the National Treasury, in accordance with the protocol signed between BNA and the Ministry of Finance.

27. Charges With Services and Commissions In 2018 and 2017 accounting periods, this item has the following composition:

2017 2018 (restated) Commissions paid for banking services rendered by third parties Financial instruments 2 910 4 125 Demand deposits 6 - 2 916 4 125 128 • Annual Report and Accounts • 2018

In 2018 and 2017 accounting periods, this item amounted to KZ 2.92 billions and Kz 4.13 millions, respectively, related to the recognition of commissions charged by external entities where BNA holds discretionary management portfolios, securities custody commissions of foreign sovereign debt, commissions paid as a result of relations with the IMF and maintenance of current accounts.

28. Results of Financial Assets Measured at Fair Value Throu- gh Results (Profit or Loss) In 2018 and 2017 accounting periods, this item has the following composition:

2017 2018 (restated)

Gains in financial assets at fair price through results 77 236 119 096

Losses in financial assets at fair price through results (147 542) (106 780) (70 306) 12 316

In 2018 and 2017 accounting periods, this item totaled Kz 70.31 millions and gains of Kz 12.32 billion, respectively, representing the net result of potential fair value gains and losses associated with the positions of the portfolios managed by external entities.

During November 2018, BNA terminated the asset management contract with an external management entity. As a result of the fair value analysis of the underlying assets, a loss of KZ 29, 80 billions was reflected.

29. Available-for-Sale Financial Assets Results In 2018 and 2017 accounting periods, this item has the following composition: 2017 2018 (restated) Gains in financial assets tradeable Government bonds 434 - Exchange rate operations - 519 434 519

Results from financial assets tradeable Exchange rate operations (1 216) (1 296) (1 216) (1 296) (782) (777)

In 2018 and 2017, this item totaled net losses of Kz 782 millions and Kz 777 millions respectively, representing losses on the disposal of foreign sovereign debt securities classified as available-for-sale financial assets.

30. Results On Investments Held To Maturity In 2018 and 2017 accounting periods, this item has the following composition: 2017 2018 (restated) Gains in investments held until maturity Government bonds 1 799 - 1 799 -

Losses in investments held until maturity Government bonds (835) - (835) - 964 - Part VI – Notes Appended to the Financial Statements • 129

In the 2018 accounting period, this item totals net gains of Kz 964 millions, representing capital gains obtained from the sale of national public debt securities classified as held-to-maturity investments.

31. Results of Investments in Associates and Other Entities In the 2018 accounting period, this item totaled net gains of Kz 12 millions, representing capital gains from the sale of investments in associates, namely the transfer of 17% of BNA shares in EMIS to the remaining commercial banks.

32. Exchange Results In 2018 and 2017 accounting periods, this item has the following composition:

2017 2018 (restated) Exchange rate gains Gains linked to exchange rate discrepancies 514 677 195 006 Gains in exchange rate operations 46 406 75 110 561 083 270 116 Exchange rate losses Losses in exchange rate operations (62 436) (48 606) Losses linked to exchange rate discrepancies - (120) (62 436) (48 726) 498 647 221 390

Based on the constant deliberation contained in Minutes n.°08/A/2008 of July 26 of the Board of Directors, only the exchange variations are reflected in the “Gains linked to exchange differences” and “Losses associated with exchange differences” in the statement of income results of the accounting periods in which they occur. Potential exchange differences are recognized under “Exchange revaluation differences” in Equity Capital (Note 21). During the 2018 accounting period, foreign exchange sales were predominantly conducted in the form of auctions and direct sales.

33. Costs Related to the Issuance of Banknotes and Coins In the 2018 and 2017 accounting periods, this item amounted to Kz 2.90 billions and Kz 3.17 billions, respectively, and consists of the specialization of the costs related to the issuance of banknotes and coins.

34. Results From Sale of Other Assets In the 2018 and 2017 accounting periods, this item has the following composition:

2017 2018 (restated) Gains with the sale of other assets Gains in non-financial assets 66 10 66 10

Losses with the sale of other assets Losses in non-financial assets (1 167) (4) (1 167) (4) (1 101) 6 In the 2018 and 2017 accounting periods, the balance of items “Gains on non-financial assets” and “Losses on sale of other assets” correspond to gains and losses on write-offs of tangible assets, respectively. 130 • Annual Report and Accounts • 2018

35. Other Operating Results In the 2018 and 2017 accounting periods, this item has the following composition:

2017 2018 (restated) Other gains and revenues Supervision Fines and penalties 1 308 1 063 Others 2 959 850 4 267 1 913

Other fees and expenses Levies and donations (571) (607) Operational rental revenues (352) (387) Other fees and miscellaneous expenses (10 399) (167) Taxes Rates - - Customs duties - (3) (11 322) (1 164) (7 055) 749

In the 2018 and 2017 accounting periods, “Supervision - fines and penalties” corresponds to the fines applied by BNA to financial institutions for non-compliance with the legal provisions in force.

The item “Quotations and donations” corresponds entirely to donations granted by the BNA to the various local institutions.

36 – COST WITH STAFF In the 2018 and 2017 accounting periods, this item has the following composition:

2017 2018 (restated) Employees’ payments 24 107 22 008 Optional payroll levies and benefits 61 604 7 690 Mandatory payroll levies and benefits 92 398 32 730 Payment of management bodies 377 642 Others 895 1 865 179 381 64 933

In the 2018 and 2017 accounting periods, the item «Remuneration of employees» includes the recognition of liabilities with current employees.

In the 2018 and 2017 accounting periods, the item «Optional social charges» includes the recognition of liabilities for past services related to medical and medicamental assistance of retired people and liabilities with Christmas compensation (Note 17).

In the 2018 and 2017 accounting periods, the item «Compulsory social charges» consists essentially of the reinforcements made in the estimates of the liabilities for services rendered related to retirement and survivors› pensions and Funeral and mourning allowance, whose balance amounts to Kz 88.16 thousand millions and 32.73 billions (Note 17).

By 31 December 2018, the number of active workers is shown in the table below:

2018 Active employees Management bodies 7 Management 59 Intermediary headship 244 Technicians 1 748 2 058 Part VI – Notes Appended to the Financial Statements • 131

37. Third-Party Supplies and Services In the 2018 and 2017 accounting periods, this item has the following composition:

2017 2018 (restated) Supply Current consumption material 315 550 Water, energy and fuels 283 334 Support and repair material 96 90 Hygiene and cleaning material 58 97 Publications 40 43 Decoration and comfort material 6 211 Other third party supplies 345 1 336 Services Specialized services 8 182 7 702 Maintenance and repair 3 028 1 808 Travel, lodging and representation 871 768 Incomes and rents 654 761 Communications 514 510 Publicity and publication editing 312 1 019 Transportation 285 281 Insurance 116 97 Other non-specialized services - 0 15 105 15 605

In the 2018 and 2017 accounting periods, the item “Services - Specialized services” presents the following detail:

2017 2018 (restated) Consultancy and auditing 4 363 4 349 User license 1 179 736 Information technology 920 285 Cleaning 543 521 Other costs with independent work 494 980 Agreements and fees 355 156 Judicial 60 160 Security and surveillance 184 180 Gardening 37 63 Other specialized services 31 56 Disinfection of facilities 16 8 Independent evaluators - 85 Occasional labor - 26 Personnel recruitment - 95 8 182 7 702

In the 2018 and 2017 accounting periods, the “Consulting and auditing” item essentially records the costs related to services rendered in the context of consulting projects, as well as external audit services of the Bank’s financial statements. 132 • Annual Report and Accounts • 2018

38. Losses for Reversals Net Impairment In the 2018 and 2017 accounting periods, this item presents the following composition:

(Reforço) Saldo em (Reforço) Saldo em Saldo em líquido de Utilizações Transferências 31-12-2017 líquido de Utilizações 31-12-2016 31-12-2018 reversão (reexpresso) reversão Obrigações do Tesouro recebidas em Dação (Nota 5) - (89.955) 89.955 - - - - - Crédito a Instituições não Financeiras - ENSA (Nota 7) - (181.702) - (75.261) 256.963 - - 256.963 Imparidade - Operações de redesconto (Nota 8) 84.050 (31.668) - 75.261 40.457 (55.405) 2.694 93.168 Aquisições de activos e serviços irregulares (Nota 7) - (35.460) - - 35.460 17.473 5.084 12.903 Imparidade - cedencia de liquidez (Nota 8) 31.537 (12.365) - - 43.902 37.327 - 6.575 Perdas por imparidades dos empréstinos colaboradores (Nota 12) - (2.347) - (1.151) 3.498 (443) - 3.941 Imparidade de Imóveis (Nota 11) - (2.205) - - 2.205 660 1.470 75 Liquidação em espécie com Obrigações do Tesouro (Nota 5) 24.222 22.315 - - 1.907 1.907 - - Obrigações do Tesouro Nacional emitidas para pagamento da conta corrente (Nota 5) - - - - - (259.200) 259.200 - 139.809 (333.387) 89.955 (1.151) 384.392 (257.681) 268.448 373.625 During the 2018 accounting period, the BNA recorded the impairment losses shown in the table above, whose framework is presented in the notes in detail.

During the 2018 accounting period, the Ministry of Finance liquidated the financing granted in the amount of Kz 646.13 billions through National Treasury Bonds with a nominal value of the same amount with interest rates of 12.0% and 12, 5%, which were classified in Available-for-Sale Financial Assets. The initial loss resulting from the application of the initial fair value amounted to Kz 259.20 billions by the application of market interest rates.

Justo valor no Perda inicial da Entidade Valor em divida Valor nominal momento inicial aplicação do justo valor Obrigações do Tesouro recebidas do Ministério das Finanças AOTNR1019A18 291 900 291 900 176 057 (115 843) AOUGDOND18A1 354 230 354 230 210 873 (143 357) 646 130 646 130 386 930 (259 200)

39. Transactions With Related Entities The Bank’s related entities with which it maintained balances or transactions in the accounting periods ended on 31 December 2018 and 2017 are as follows: Part VI – Notes Appended to the Financial Statements • 133

39.1 FINANCE MINISTRY The Ministry of Finance (MINFIN) represents the State as the sole shareholder of BNA, constituting the main entity related to the Bank.

On 31 December 2018 and 2017, balances or transactions with this entity may be presented as follows:

2017 2018 (restated) Assets Financial assets tradeable (Note 5) 537 555 - Investments held until maturity (Note 5) - 207 359 Financial assets granted to the Government (Note 9) 154 993 377 396 Total assets 692 548 584 755

Liabilities Single treasury account (Note 15) In foreign currency 1 306 844 848 371 In national currency 202 803 173 865 Amounts returnable to CUT 4 173 4 173 Total liabilities 1 513 820 1 026 409

Own capital Capital (Note 20) 270 000 270 000 Unpaid capital (Note 20) (2 544) (2 544) Capital issuance discount (Note 20) (135 900) (135 900) Own capital total 131 556 131 556 Net balance (952 828) (573 209)

2017 2018 (restated) Results Interest from investments held until maturity (Note 24) 3 490 26 177 Interest from financial assets tradeable 58 565 - Commissions received (Note 26) 12 952 10 889 Taxes (Note 35) - 3 Total results 75 007 37 069

2017 2018 (restated) Pain and suffering (Note 23) Liabilities for services rendered Custody of securities issued by the treasury Treasury liabilities in national currency 6 721 167 4 001 801 Treasury liabilities in foreign currency 581 549 1 158 040 Treasury bonds 466 348 383 764 Rendered warranties and other extraordinary liabilities Institutional warranties rendered 1 227 305 804 687 Promissory notes 368 611 132 223 Total pain and suffering 9 364 980 6 480 516 134 • Annual Report and Accounts • 2018

On December 31, 2018, contrary to what is defined in art. 33° of the Law of the BNA, the National Assembly, when the General State Budget was approved, did not approve the limit of the credits for membership or participation in international organizations (art. 30° of the Law) and of the Securities issued and guaranteed by the State (art. 31° of the Law) to be granted by the BNA to the State. In view of this situation, the Board of Directors of the BNA has applied the provisions of Article 29° which sets a limit equivalent to 10% of the amounts of current revenues collected in the last year.

39.2 Angola Interbank Services Company (EMIS) It is the processor and reference operator of the national payment system.

The BNA is the largest shareholder, with the majoritarian shareholding of 35% held by BNA on 31 December 2017, which has been gradually reduced, with an 18% stake in the social capital of the entity by 31 December 2018 , following the process of transfer of shares, under the “Parasocial agreement” of EMIS. This participation, which was intended to ensure the promotion of the development of the Angolan payment system, will be terminated on 31 December 2020, with the transfer of the remaining 18%, as provided for in the “Parasocial agreement”.

On 31 December 2018 and 2017, BNA’s active balances with EMIS include the social capital of Kz 731 millions and 1.42 billions, respectively, representing 730 749 shares and 1 421 shares, respectively, with the nominal unit value of AOA 1 000. Part VI – Notes Appended to the Financial Statements • 135

39.3 Board of Directors of the Bank It represents the body with exclusive decision-making power in the Bank, and currently comprises seven members.

On 31 December 2018 and 2017, remuneration attributed to the Bank’s Board of Directors and other benefits granted under the respective regulations amounted to Kz 377 millions and Kz 642 millions, respectively (Note 36).

39.4 PENSION FUND In 2018, the BNA made a contribution to the Pension Fund of its workers in the amount of Kz 767 millions. 136 • Annual Report and Accounts • 2018 Total assets Other assets (amounts) Intangible assets Tangible assets Internal assets Foreign assets Gold Investments in affiliates and other entities Financial assets granted to the Government Financial assets received in capital increase Investments held until maturity Operations to affiliated credit institutions Cash on hand and receivables from credit institutions Other external assets receivable International Monetary Fund Financial assets tradeable Financial assets at fair price through results Investments in credit institutions Cash on hand and receivables from credit institutions with monetary policy operations ASSETS 4 961 674 1 484 020 3 266 842 2017 567 396 174 440 106 996 619 247 220 357 966 933 867 701 938 079 190 811 128 165 31 580 49 716 14 516 82 962 1 351 1 425 Adjustments Adjustments (266 621) (264 077) (190 000) (174 440) 100 363 (2 544) ------G A B C (restated) 2017 4 695 053 1 219 943 3 266 842 377 396 207 359 619 247 220 357 966 933 867 701 938 079 190 811 128 165 29 036 49 716 14 516 82 962 1 351 1 425 - Total liabilities and own capital Own capital total Fiscal year result Retained earning Other reserves Review discrepancies Discounts from capital issuing Unrealized subscribed capital Capital Total liabilities Other liabilities (amounts) Provisions Liabilities with pensions and other benefits External liabilities with other entities Internal liabilities with other entities national related to monetary policy operations Responsibilities with credit institutions Bills and coins in circulation Funds from financial institutions International Monetary Fund Investments in affiliates and other entities Other liabilities Single treasury account Interbanking monetary market Bank reserves LIABILITIES AND OWN CAPITAL 4 337 241 4 961 674 1 026 409 1 332 969 624 433 2017 386 441 270 000 213 835 770 334 230 551 527 717 (70 750) 43 809 69 631 (5 068) 98 562 66 297 853 84 - - Adjustments (266 621) (266 621) (139 177) (135 900) 11 000 (2 544) ------D G F E (restated) 4 695 053 4 337 241 2017 1 026 409 1 332 969 357 812 (144 245) (135 900) 386 441 270 000 213 835 770 334 230 551 527 717 (59 750) 43 809 (2 544) 69 631 98 562 66 297 853 84 40. Impacts of Change in Accounting Policy 40. Impacts of Change in Accounting On 1 January 2018, the BNA no longer adopted a set of exceptions to IAS 39 and IFRS 13, with only disclosed in note 1.2 remaining. Under 8, it was necessary determine financial statements as of December 31, 2017. The impacts changes in accounting policies the balance sheet and income impacts on the comparative of approved and published Note 1.3 discloses voluntary changes in accounting policies. statement are presented below. Balance sheet as of 31 December 2017 Part VI – Notes Appended to the Financial Statements • 137

Statement of profit and loss for the year ended in 31 De- cember 2017

2017 2017 Adjustments (restated) Interest and similar earnings 114 800 11 000 F 125 800 Interest and similar fees (30 343) - (30 343) Financial margin 84 458 11 000 95 458 Earnings from services and commissions 10 935 - 10 935 Service fees and commissions (4 125) - (4 125) Net commissions 6 810 - 6 810

Results from financial assets at appreciated at fair price through results 12 316 - 12 316 Results from financial assets tradeable (777) - (777) Financial operation results 11 539 - 11 539 Exchange rate results 221 390 - 221 390 Costs related to the issuing of bills and coins (3 165) - (3 165) Results from the sale of other assets 6 - 6 Other operating results 749 - 749 Operating results 218 979 - 218 979 Personnel costs (64 933) - (64 933) Outsourced services and supplies (15 605) - (15 605) Fiscal year amortizations (3 363) - (3 363) Net provisions from replenishments and annulments 24 753 - 24 753 losses due to impairment net of reversals (333 387) - (333 387) Exploration results (392 536) - (392 536) Fiscal year result (70 750) 11 000 (59 750)

The detail of the impacts of the change in shareholders’ equity and income for the year ended in December 31, 2017 are presented below.

Impacto em Capital próprio Impacto em resultado Justo valor Custo Custo Desconto de Valor Resultado na data de amortizado em amortizado em emissão de Margem financeira nominal transitado emissão 31-12-2016 31-12-2017 capital

Obrigações do Tesouro recebidas em aumento do capital social AOTNR2021U12 95.000 21.327 29.911 32.229 (73.673) 8.584 2.318 AOTNR2013U13 48.150 10.810 14.093 15.185 (37.340) 3.283 1.092 AOTNR2025U14 31.290 6.403 7.819 8.464 (24.887) 1.416 645 174.440 B 38.540 51.823 55.878 (135.900) 13.283 4.055

Obrigação do Tesouro emitida para pagamento da conta corrente AOTNR1019L16 190.000 34.767 37.540 44.485 - (152.460) 6.945 190.000 A 34.767 37.540 44.485 - (152.460) 6.945 364.440 73.307 89.363 100.363 C (135.900) D (139.177) E 11.000 F

A - Reclassification of the Treasury Bond in the amount of Kz 190 billion for the held-to-maturity portfolio;

B - Reclassification of Treasury Bonds received in capital increase in the amount of Kz 174.4 billion for the held-to-maturity portfolio;

C - Recognition of the obligations referred to in A and B at Fair value in the category of Held-to-maturity investments at the initial moment and their impact of amortized cost until 31 December 2017;

D - Recognition of the differential for the fair value at the time of issuance of the Treasury Bonds received in increase of capital;

E - The impact of the recognition of the initial fair value of the obligations referred to in A and the impact of the amortized cost of the obligations referred to in A and B until 31 December 2016;

F - Impact of the amortized cost of the obligations referred to in A and B for the year 2017;

G - Reclassification of the amount of subscribed capital not paid up. 138 • Annual Report and Accounts • 2018

41. Disclosures Regarding Financial Instruments Risk management at the Bank aims to ensure the sustainability and profitability of the institution itself, safeguarding its independence and ensuring its effective participation in the National Financial System. Accordingly, BNA follows a strict and prudent risk management policy, which is reflected in the profile and degree of risk tolerance defined by the Board of Directors.

Management of international reserves

The National Bank of Angola is exposed to financial risks in its activity. Management of financial risks related to international reserves is ensured by the Reserve Management Department, while the Risk Management Department - Independent Unit - is responsible for the monitoring and reporting of these risks.

The evaluation and control of credit risk, liquidity, market and operational risks are carried out in accordance with the investment guidelines and risk profile mirrored in the Investment Policy and the guidelines are approved by the Board of Directors (currently under review), which aim to the preservation of capital.

In pursuit of this objective, the management of reserves should take into account the liquidity required to meet the commitments of the Angolan State and the National Bank of Angola, as well as the maximization of profitability, based on the defined risk tolerance.

Considering the need to optimize the performance and achieve the strategic objectives of the BNA, the Investment Po- licy and the Master Lines have promoted the development of the current system, defining limits / restrictions regarding the exposure of international reserves, of which the following stand out: - Definition of limits by type of financial instrument; - Definition of limits by counterpart, taking into account their creditworthiness; - Definition of limits by currency; - Definition of average investment deadlines; - Definition of benchmark s of profitability and fluctuation limits in relation to the defined reference portfolio (stop-loss); - Definition of delegation of powers for investments under management.

Monetary and exchange rate policy management

For the implementation of the monetary policy during the year of December 31, 2018, the National Bank of Angola maintained regular interventions of absorption of liquidity in the money market, through the accomplishment of operations of open market (OMA), instrument provided in its operational framework monetary policy. BNA used the other regulatory instruments, with particular emphasis on the permanent liquidity facilities Overnight and Intraday (FCO and FCL) and the mandatory reserves.

The open market operations carried out by the National Bank of Angola were supported by its own securities portfolio, and the magnitude of its interventions was adequate to the seasonality of the factors conditioning its variation, in view of the pursuit of the objectives of liquidity regulation and variation of the monetary base.

The exercise of the function of monetary authority and stabilization of the financial system, by the National Bank of Angola, also aimed at the creation of remunerator references for the application of financial resources. Thus, during the year 2018, the following facts were verified:

i. Change in the Basic Rate of the National Bank of Angola (the BNA Rate), which by decision of the Monetary Policy Committee was reduced by 1.5 percentage points, from 18% to 16.5% per year;

ii. Maintain unchanged the interest rate of the permanent Liquidity Absorption Facility, at 0%;

iii. Change in the reserve requirement ratio in national currency from 21% to 17%, as defined in Instruction 10/2018 of 19 July, combined with Directive No. 04 DSP DRO 2018. Part VI – Notes Appended to the Financial Statements • 139

As a reflection of a rigorous liquidity management exercise, LUIBOR showed a growth trend from January to June 2018, followed by a sharp drop in July, the interest rate on interbank lending operations described a downward trend, term short-term financing opportunities in the interbank market.

From the point of view of exchange rate stability, the National Bank of Angola moved from a fixed to floating exchange rate regime starting in January and this was one of the main measures taken in 2018, with the fundamental objective of significantly reducing the spread that occurred between the exchange rates practiced in the formal and informal markets.

In the context described above, the disclosures related to the main risks required by IFRS 7 and IFRS 13 for the years ended December 31, 2018 and 2017 are as follows. 140 • Annual Report and Accounts • 2018 Liabilities Assets External liabilities with other entities Internal liabilities with other entities national related to monetary policy operations Responsibilities with credit institutions Bills and coins in circulation Internal assets Foreign assets Gold Funds in credit institutions International Monetary Fund Investments in affiliates and other entities Other liabilities Single treasury account Interbanking monetary market Bank reserves Other internal assets receivable Investments in affiliates and other entities Financial assets granted to the Government Financial assets tradeable Funding to credit institutions Cash on hand and receivables from credit institutions Other external assets receivable International Monetary Fund Financial assets tradeable Financial assets at fair price through results Investments in credit institutions Cash on hand and receivables from credit institutions Investments held until maturity related to monetary policy operations Total Total Estimated at fair 3 691 931 price 2 297 487 537 555 622 394 234 495 ------Amortized cost / acquisition 2018 5 576 614 3 278 941 1 397 914 1 513 820 1 749 197 1 448 197 329 386 498 390 154 993 752 961 313 548 586 671 87 881 12 106 9 734 731 26 ------6 970 872 5 576 614 Total 1 397 914 1 513 820 1 749 197 2 297 487 1 448 197 329 386 498 390 154 993 537 555 752 961 313 548 622 394 586 671 234 495 87 881 12 106 9 734 731 26 - - - Estimated at fair 1 962 799 price 966 933 867 701 128 165 ------Amortized cost / acquisition (restated) 3 955 213 2 652 152 2017 1 026 409 1 332 969 770 334 230 551 527 717 377 396 207 359 619 247 220 357 938 079 190 811 66 297 14 516 82 962 1 425 853 84 - - - - - Total 3 955 213 4 614 950 1 026 409 1 332 969 770 334 230 551 527 717 377 396 207 359 619 247 220 357 966 933 867 701 938 079 190 811 128 165 66 297 14 516 82 962 1 425 853 84 - - Fair value of financial instruments At December 31, 2018 and 2017, financial instruments gold are valued at the balance sheet value by valuation method: Part VI – Notes Appended to the Financial Statements • 141

Fair value for financial assets and liabilities not recognized in the balance sheet at fair value

2017 2018 (restated) Balance Fair price Difference Balance Fair price Difference Assets Foreign assets Cash on hand and receivables from credit institutions 586 671 586 671 - 190 811 190 811 - Investments in credit institutions 1 448 197 1 441 284 (6 913) 938 079 933 394 (4 685) International Monetary Fund 313 548 313 548 - 220 357 220 357 - Other external assets receivable - - - 82 962 82 962 - Internal assets Cash on hand and receivables from credit institutions 9 734 9 734 - 14 516 14 516 - Funding to credit institutions related to monetary policy operations 752 961 748 690 (4 271) 619 247 587 667 (31 580) Investments held until maturity - - - 207 359 88 095 (119 263) Financial assets granted to the Government 154 993 149 702 (5 291) 377 396 227 066 (150 331) Investments in affiliates and other entities 731 744 13 1 425 128 (1 297) Other internal assets receivable 12 106 12 106 - - - - Total 3 278 941 3 262 479 (16 462) 2 652 151 2 344 995 (307 156) Liabilities Bills and coins in circulation 498 390 498 390 - 527 717 527 717 - Responsibilities with credit institutions national related to monetary policy operations Bank reserves 1 749 197 1 749 197 - 1 332 969 1 332 969 - Interbanking monetary market 87 881 87 779 (102) 66 297 66 287 (9) Internal liabilities with other entities Single treasury account 1 513 820 1 513 820 - 1 026 409 1 026 409 - Other liabilities 26 26 - 84 91 7 Investments in affiliates and other entities - - - 853 853 - External liabilities with other entities International Monetary Fund 329 386 329 386 - 230 551 230 551 - Funds in credit institutions 1 397 914 1 377 357 (20 557) 770 334 698 173 (72 162) Total 5 576 614 5 555 955 (20 659) 3 955 213 3 883 049 (72 164)

In the calculation of the fair value presented in the previous table, the following assumptions were used:

- For the purposes of calculating the fair value of “Loans and advances to credit institutions”, future cash flows at market rates were discounted taking into consideration the currencies and residual terms of the investments, plus a risk spread represented by the CDS curves (Credit Default Swaps) of the respective counterparties;

- For instruments classified in the categories of “Lending operations related to monetary policy operations” and “Interbank money market, fair value was determined on the basis of contractual cash flows futures discounted at current rates for these operations;

- For instruments classified in the categories of “Financial Assets Granted to the State” and “Funds in Credit Institutions”, the fair value was determined based on the contractual cash flows futures discounted at a market rate;

- For the purposes of calculating the fair value of “Investments in associates and other entities”, the equity method was considered based on the net equity of EMIS at the date of the last available and audited financial statements in the percentage held by the Bank;

- For the active and passive positions with the “International Monetary Fund” the positions disclosed by this entity were considered as approximation to fair value; and

- For the remaining items, fair value is considered to be similar to its balance sheet value, since they represent short-term investments and financing (less than 1 year). 142 • Annual Report and Accounts • 2018

Fair value for financial assets recognized in the balance sheet at fair value

At 31 December 2018 and 2017, the fair value measurement of financial instruments and gold, recognized in the balance sheet at fair value, is as follows by hierarchy of valuation at fair value:

2018 Valuation techniques Level 2 Level 3 Level 1 Observable market Other valuation Market quotes inputs techniques Total Assets Gold 234 495 - - 234 495 Foreign assets Financial assets at fair price through results 373 088 249 306 622 394 Financial assets tradeable 2 297 487 - - 2 297 487 Internal assets Financial assets tradeable - 537 555 - 537 555 Total 2 531 982 910 643 249 306 3 691 931

2017 (restated) Valuation techniques Level 2 Level 3 Level 1 Observable market Other valuation Market quotes inputs techniques Total Assets Gold 128 165 - - 128 165 Foreign assets Financial assets at fair price through results - 616 556 251 145 867 701 Financial assets tradeable 966 933 - - 966 933 Total 1 095 098 616 556 251 145 1 962 799

For the purposes of this note, the financial instruments recorded in the balance sheet at fair value are classified according to the following hierarchy, based on the guidelines in IFRS 13 - - Fair value measurement:

- Level 1 - Financial instruments recorded at fair value based on quotations published in active markets to which the Bank has access. Included in this category are securities valued on the basis of executable prices (with immediate liquidity) published by external sources;

- Level 2 - Financial instruments recorded at fair value through the use of observable data directly or indirectly in active markets. Included in this category are securities valued based on valuations provided by external counterparties and internal valuation techniques that exclusively use observable market data;

- Level 3 - Financial instruments that are valued using internal models with some inputs that do not correspond to observable market data.

In the form of fair value measurement presented in the previous tables, the following assumptions were considered:

- In the case of a net asset traded on an active market, the fair value of gold corresponds to the product of the amount of gold held by BNA for the price of the Ounce on the international markets at each financial reporting date. In addition, in calculating the cost of acquisition, the exchange rate practiced in each transaction was considered, and therefore, the potential realized value includes a currency appreciation component;

- The fair value of instruments classified in the category “ Financial assets at fair value through profit or loss” corresponds to the valuation evidenced in the periodic reports sent by the counterparties, audited financial information on investment funds, market value for quoted securities and other available information, particularly for illiquid investments. The Bank considers all venture capital funds and other illiquid assets at level 3, and at level 2, it considers all other instruments managed by external managers, which include quoted financial instruments, real estate funds and other financial instruments. At level 2, the BNA did not distinguish between quoted and unlisted investments;

- The fair value of “Available-for-sale financial assets” was determined based on the market prices of foreign sovereign debt securities held in the portfolio. For this purpose, the bid price given by the BGN contributor, taken from Bloomberg’s financial terminal, as well as the exchange rates in force at the reporting date, was considered. In order to calculate the acquisition cost, the exchange rates prevailing on the respective Part VI – Notes Appended to the Financial Statements • 143

transaction dates were taken into account, so that the realized capital gains include a component of exchange rate appreciation; and

- The fair value of domestic assets section - financial assets available for sale was determined based on future contractual cash flows, and the discount rate used is the average of interest rates of the last issues of Treasury Bonds placed by the BNA on the market with residual terms equivalent to those of the missions included in the portfolio.

Credit risk

Credit risk management is ensured by the Bank’s business areas, namely by the Department of Reserves Management (DGR) and the Department of Asset Markets (DMA), which are responsible for the risk segmentation according to the characteristics of the products and of its issuers.

Counterparty risk consists of the credit risk inherent in transactions in the financial markets, corresponding to the possibility of default by the counterparties of the contracted terms, and subsequent occurrence of financial losses for the Bank. The types of transactions covered include cash and cash equivalents in credit institutions, the purchase and sale of securities and the contracting of repurchase agreements.

In the management and implementation of international reserves and domestic assets, the DGR and the DMA assume in their work a certain level of exposure to credit risk. These business departments carefully and prudently regulate exposure to credit risk, setting risk concentration limits, which are reviewed periodically.

Maximum exposure to credit risk

At 31 December 2018 and 2017, the maximum exposure to credit risk can be broken down as follows:

2017 2018 (restated) Maximum Collaterals Maximum Collaterals exposure received exposure received

Assets Foreign assets Cash on hand and receivables from credit institutions 586 671 - 190 811 - Investments in credit institutions 1 448 197 - 938 079 - Financial assets at fair price through results 276 412 - 614 801 - Financial assets tradeable 2 297 487 - 966 933 - Other external assets receivable - - 82 962 - Internal assets Cash on hand and receivables from credit institutions 2 141 - 1 877 - Funding to credit institutions related to monetary policy operations 752 961 253 780 619 247 105 283 Investments held until maturity - - 207 359 - Financial assets tradeable 537 555 - - Financial assets granted to the Government 154 993 - 377 396 - Other internal assets receivable 12 106 - - - Other assets (amounts) 30 675 - 23 484 - Subtotal 6 099 198 253 780 4 022 949 105 283

Rendered warranties and other extraordinary liabilities 1 298 504 - 945 910 - 144 • Annual Report and Accounts • 2018

Credit quality of financial assets

At 31 December 2018 and 2017, exposure to credit risk by counterparty rating may be broken down as follows:

2018 External rating Without AAA to AA- AA+ to AA A+ to A- BBB+ to BBB- BB+ to BB- B+ to B- Below B- Total rating Assets Foreign assets Cash on hand and receivables from credit institutions 338 415 - 21 089 - 13 257 - - 213 911 586 671 Investments in credit institutions 119 377 - 608 003 191 005 465 563 1 142 - 63 107 1 448 197 Financial assets at fair price through results 148 503 22 487 61 099 18 210 8 538 9 515 - 8 059 276 412 Financial assets tradeable 2 252 159 4 698 34 464 6 167 2 297 487 Internal assets Cash on hand and receivables from credit institutions ------2 141 2 141 Funding to credit institutions related to monetary policy operations ------752 961 752 961 Investments held until maturity - - - - - 537 555 - - 537 555 Financial assets granted to the Government - - - - - 154 993 - - 154 993 Other internal assets receivable ------12 106 12 106 Other assets (amounts) ------30 675 30 675 Subtotal 2 858 454 22 487 690 191 213 913 521 822 709 372 - 1 082 960 6 099 198

Rendered warranties and other extraordinary liabilities - - - - - 1 298 504 - - 1 298 504

Total 2 858 454 22 487 690 191 213 913 521 822 2 007 876 - 1 082 960 7 397 702

2017 (restated) External rating Without AAA to AA- AA+ to AA A+ to A- BBB+ to BBB- BB+ to BB- B+ to B- Below B- Total rating Assets Foreign assets Cash on hand and receivables from credit institutions 2 341 - 186 177 - 1 686 147 - 459 190 811 Investments in credit institutions 92 562 - 279 152 157 885 265 863 95 393 - 47 223 938 079 Financial assets at fair price through results 203 306 26 879 111 301 121 617 22 082 14 641 2 688 112 288 614 801 Financial assets tradeable 923 267 - 12 675 10 040 11 106 - - 9 846 966 933 Other external assets receivable 82 962 82 962 Internal assets Cash on hand and receivables from credit institutions ------1 877 1 877 Funding to credit institutions related to monetary policy operations ------619 247 619 247 Investments held until maturity - - - - - 207 359 - - 207 359 Financial assets granted to the Government - - - - - 377 396 - - 377 396 Other assets (amounts) ------23 484 23 484 Subtotal 1 221 475 26 879 589 305 289 542 300 737 694 937 2 688 897 386 4 022 949

In the construction of these tables the following assumptions were considered:

- The rating considered for the counterparties is drawn from the Bloomberg financial terminal through the ratings assigned to Standard & Poor’s, Moody’s or equivalent.

- For the Federal Reserve System (EDF) and Bank for International Settlements (BIS) were considered the AAA rating because they represent a central and international institution, respectively, which aim for monetary and financial stability.

- For the financial instruments issued by the State registered under “Available-for-sale financial assets” and “Financial assets received in the capital increase”, the Republic of Angola rating was considered.

- Taking into account the insufficient information disclosed by the external entities on the securities held in the various discretionary portfolios classified in the category “Financial assets at fair value through profit and loss”, it is not possible to disclose the creditworthiness of the same.

- For the remaining active and passive items no rating information is available. Part VI – Notes Appended to the Financial Statements • 145

Concentration of credit risk

At 31 December 2018 and 2017, the exposure to credit risk by geographic region is detailed as follows:

2018 Geographic area Europe America Africa Asia Oceania Supranational Total Assets Foreign assets Cash on hand and receivables from credit institutions 44 126 542 527 - 19 - - 586 671 Investments in credit institutions 1 026 403 169 772 70 845 181 401 - - 1 448 197 Financial assets at fair price through results 131 799 105 165 2 473 16 539 15 438 4 997 276 412 Financial assets tradeable 170 363 1 991 586 23 004 - 33 413 79 122 2 297 487 Internal assets Cash on hand and receivables from credit institutions - - 2 141 - - - 2 141 Funding to credit institutions related to monetary policy operations - - 752 961 - - - 752 961 Investments held until maturity - - 537 555 - - - 537 555 Financial assets granted to the Government - - 154 993 - - - 154 993 Other internal assets receivable 12 106 12 106 Other assets (amounts) 30 675 30 675 Subtotal 1 372 691 2 809 050 1 586 753 197 959 48 851 84 119 6 099 198

Rendered warranties and other extraordinary liabilities - - 1 298 504 - - - 1 298 504

Total 1 372 691 2 809 050 2 885 257 197 959 48 851 84 119 7 397 702

2017 (restated) Geographic area Europe America Africa Asia Oceania Supranational Total Assets Foreign assets Cash on hand and receivables from credit institutions 147 631 1 691 - 41 489 - - 190 811 Investments in credit institutions 884 943 - 36 064 17 072 - - 938 079 Financial assets at fair price through results 204 258 295 752 3 390 71 227 18 418 21 756 614 801 Financial assets tradeable 104 072 784 741 13 593 19 130 20 458 24 939 966 933 Other external assets receivable 82 962 - - - - - 82 962 Internal assets Cash on hand and receivables from credit institutions - - 1 877 - - - 1 877 Funding to credit institutions related to monetary policy operations - - 619 247 - - - 619 247 Investments held until maturity - - 207 359 - - - 207 359 Financial assets granted to the Government - - 377 396 - - - 377 396 Other assets (amounts) - - 23 484 - - - 23 484 Total 1 423 866 1 082 184 1 282 410 148 918 38 876 46 695 4 022 949

Liquidity risk

Liquidity risk is the risk that an institution does not have the necessary funds to meet its payment obligations at any time.

The Bank’s Board of Directors defines concentration limits by maturity dates, which are reviewed annually, and it is the responsibility of the Department of Asset Markets (DMA) and the Department of Reserves Management (DGR) to verify, on a daily basis, compliance of the limits.

Following are the maps referring to the liquidity risk, considering all the undiscounted contractual cash flows of the financial instruments, according to their contractual maturity.

At 31 December 2018 and 2017, the undiscounted contractual cash flows of financial assets and liabilities have the following structure: 146 • Annual Report and Accounts • 2018

2018 Residual terms b/w 1 and 3 b/w 3 and 6 b/w 3 and 5 Up to 1 month b/w 6 and 1 year b/w 1 and 3 years Over 5 years Indefinite Total months months years Assets Foreign assets Cash on hand and receivables from credit institutions 586 671 ------586 671 Investments in credit institutions 698 143 482 187 115 394 159 837 - - - - 1 455 561 Financial assets at fair price through results 3 063 10 150 10 294 30 701 121 882 61 037 27 222 358 045 622 394 Financial assets tradeable 40 422 78 085 67 225 393 026 913 557 705 425 73 317 - 2 271 057 International Monetary Fund ------313 548 313 548 Internal assets Cash on hand and receivables from credit institutions 9 734 ------9 734 Funding to credit institutions related to monetary policy operations 43 349 168 069 5 000 216 418 Financial assets tradeable 2 310 43 617 46 522 186 087 230 856 1 616 582 - 2 125 974 Financial assets granted to the Government - - - - 163 677 - - - 163 677 Investments in affiliates and other entities ------731 731 Other internal assets receivable ------12 106 - 12 106 Total 1 381 382 740 801 241 531 630 086 1 385 203 997 318 1 729 226 672 324 7 777 871

Liabilities Bills and coins in circulation ------498 390 498 390 Responsibilities with credit institutions national related to monetary policy operations Bank reserves 367 464 ------1 381 733 1 749 197 Interbanking monetary market 67 419 21 123 ------88 543 Internal liabilities with other entities Single treasury account 1 513 820 ------1 513 820 Other liabilities - 15 15 3 - - - - 33 External liabilities with other entities International Monetary Fund ------329 386 329 386 Funds from credit institutions 2 083 4 891 6 975 176 801 986 246 318 637 - - 1 495 633 Total 1 950 785 26 029 6 990 176 804 986 246 318 637 - 2 209 509 5 675 002

Adjusted marketability (569 404) 714 772 234 541 453 282 398 957 678 681 1 729 226 (1 537 185)

Accrued marketability (569 404) 145 368 379 910 833 192 1 232 149 1 910 830 3 640 056 2 102 871

2017 (restated) Residual terms b/w 1 and 3 b/w 3 and 6 b/w 3 and 5 Up to 1 month b/w 6 and 1 year b/w 1 and 3 years Over 5 years Indefinite Total months months years Assets Foreign assets Cash on hand and receivables from credit institutions 190 811 ------190 811 Investments in credit institutions 366 730 162 430 223 084 188 993 - - - - 941 238 Financial assets at fair price through results 22 295 15 864 26 693 37 895 274 356 127 537 357 059 6 002 867 701 Financial assets tradeable - 30 584 28 015 77 192 410 128 234 397 213 604 - 993 921 International Monetary Fund ------220 357 220 357 Other external assets receivable 82 962 82 962 Internal assets Cash on hand and receivables from credit institutions 14 516 ------14 516 Funding to credit institutions related to monetary policy operations 364 315 - 16 496 - - - - - 380 810 Investments held until maturity 7 5 485 6 381 7 883 34 583 105 569 633 052 - 792 960 Financial assets received in capital increase ------55 879 - 55 879 Financial assets granted to the Government - - - - 377 396 - - - 377 396 Investments in affiliates and other entities ------1 425 1 425 Total 958 673 214 362 300 669 311 964 1 096 463 467 504 1 259 595 310 746 4 919 976

Liabilities Bills and coins in circulation ------527 717 527 717 Responsibilities with credit institutions national related to monetary policy operations Bank reserves 201 002 ------1 131 967 1 332 969 Interbanking monetary market 65 288 1 009 ------66 297 Internal liabilities with other entities Single treasury account 1 026 409 ------1 026 409 Other liabilities 15 15 15 30 33 - - - 108 Investments in affiliates and other entities ------853 853 External liabilities with other entities International Monetary Fund ------230 551 230 551 Funds from credit institutions - 2 630 9 059 9 856 203 008 613 982 - - 838 535 Total 1 292 713 3 654 9 074 9 886 203 041 613 982 - 1 891 088 4 023 438

Adjusted marketability (334 040) 210 708 291 595 302 078 893 422 (146 478) 1 259 595 (1 580 342)

Accrued marketability (334 040) (123 332) 168 263 470 341 1 363 763 1 217 286 2 476 880 896 538

The main assumptions used in the construction of the tables presented above are the following:

- Interest on market indexes or other benchmarks, which can only be determined at a future date (for example, interest on National Treasury Bonds indexed to the exchange rate or the consumer price index) were calculated based on the indexes at each reporting date financial.

- The accounts (including interest) are considered active in sight, and consequently are included in the “Up to 1 month”.

- For the remaining financial assets, it was considered that their maturity was indeterminate and included in the “Undetermined” column, as well as the banknotes and coins in circulation, bank reserves and Treasury Single Account which, although they are financial liabilities payable in cash, is not expected that have such liquidation period. Part VI – Notes Appended to the Financial Statements • 147

- No defaults or early repayments were considered.

Market risk

Market risk corresponds to the probability of negative impacts on results or shareholders’ equity due to unfavourable movements in the market price of financial instruments held by the Bank, such as the risk of fluctuations in interest rates and exchange rates.

The Bank assumes exposure to market risks, i.e. risks arising from open positions in interest rates, foreign currency and other products exposed to market movements.

Cambial risk

It translates into the probability that the value of a financial instrument will change due to fluctuations in the exchange rate of the foreign currency associated with the instrument.

The foreign currency investment policy is defined by one of the Bank’s business areas, namely the Reserve Manage- ment Department (DGR). Cash and cash equivalents, investments and funds in credit institutions, securities held in portfolios managed internally and externally, as well as financing, expose the Bank to exchange rate risk, even though it is managed by setting exposure limits for each currency, composition of International Reserves. These limits are defined by the DGR and approved by the Bank’s Board of Directors.

As a result of the accounting policy described in note b) of Note 2.1.4, the Bank records all costs and income relating to potential exchange rate differences in a caption of equity and has no impact on the Bank’s income statement.

At 31 December 2018 and 2017, the financial instruments, by national and foreign currency, show the following detail: 148 • Annual Report and Accounts • 2018

2018 Pounds Yuan Kwanzas Others Total US Dollars Euros Sterling Renminbi Assets Gold - 234 495 - - - - 234 495 External assets Cash on hand and receivables from credit institutions - 577 591 6 586 45 17 2 432 586 671 Investments in credit institutions - 1 365 845 - 82 575 - - 1 448 197 Financial assets at fair price through results - 531 975 21 266 65 637 - 3 516 622 394 Financial assets tradeable - 2 097 849 135 280 19 438 - 44 920 2 297 487 International Monetary Fund - - - - - 313 548 313 548 Other external assets receivable ------Total in KZ - 4 807 755 163 132 167 695 17 364 416 5 502 792 Total in USD - 15 579 529 543 0 1 181 17 831

Internal assets Cash on hand and receivables from credit institutions 246 8 081 1 399 - - 8 9 734 Funding to credit institutions related to monetary policy operations 752 961 - - - - - 752 961 Financial assets tradeable 536 004 1 551 - - - - 537 555 Financial assets granted to the Government - 154 993 - - - - 154 993 Investments in affiliates and other entities 731 - - - - - 731 Other internal assets receivable 12 106 - - - - - 12 106 Total in KZ 1 302 048 164 625 1 399 - - 8 1 468 080 Total in USD 4 219 533 5 - - 0 4 757 Liabilities Bills and coins in circulation 498 390 - - - - - 498 390 Responsibilities with credit institutions national related to monetary policy operations Bank reserves 799 276 949 921 - - - - 1 749 197 Interbanking monetary market 87 881 - - - - - 87 881 Internal liabilities with other entities Single treasury account 206 976 1 191 994 114 850 - - - 1 513 820 Other liabilities 26 - - - - - 26 External liabilities with other entities International Monetary Fund - - - - - 329 386 329 386 Funds in credit institutions - 1 397 914 - - - - 1 397 914 Total in KZ 1 592 549 3 539 830 114 850 - - 329 386 5 576 615 Subtotal in USD 5 160 11 470 372 - - 1 067 18 070

Net position in KZ (290 501) 1 432 550 49 681 167 695 17 35 038 1 394 257 Net position of assets and liabilities in foreign currency (USD) (941) 4 642 161 543 0 114 4 517

2017 (restated) Pounds Yuan Kwanzas Others Total US Dollars Euros Sterling Renminbi Assets Gold - 128 165 - - - - 128 165 External assets Cash on hand and receivables from credit institutions - 189 085 469 1 211 1 045 190 811 Investments in credit institutions - 775 927 27 746 134 406 - - 938 079 Financial assets at fair price through results - 638 588 163 495 55 429 - 10 190 867 701 Financial assets tradeable - 820 717 100 193 (792) 19 130 27 685 966 933 International Monetary Fund - - - - - 220 357 220 357 Other external assets receivable - 82 962 - - - - 82 962 Total in KZ - 2 635 443 291 903 189 044 19 341 259 276 3 395 007 Total in USD - 15 883 1 759 1 139 117 1 563 20 461 Internal assets Cash on hand and receivables from credit institutions 17 13 722 770 - - 6 14 516 Funding to credit institutions related to monetary policy operations 294 459 323 345 1 442 - - - 619 247 Investments held until maturity 206 384 974 - - - - 207 359 Financial assets granted to the Government 291 900 85 496 - - - - 377 396 Investments in affiliates and other entities 1 425 - - - - - 1 425 Total in KZ 794 186 423 538 2 212 - - 6 1 219 943 Total in USD 4 786 2 553 13 - - 0 7 352

Liabilities Bills and coins in circulation 527 717 - - - - - 527 717 Responsibilities with credit institutions national related to monetary policy operations Bank reserves 925 641 407 328 - - - - 1 332 969 Interbanking monetary market 66 297 - - - - - 66 297 Internal liabilities with other entities Single treasury account 178 038 848 371 - - - - 1 026 409 Other liabilities 84 - - - - - 84 Investments in affiliates and other entities 853 - - - - - 853 External liabilities with other entities International Monetary Fund - - - - - 230 551 230 551 Funds in credit institutions - 770 334 - - - - 770 334 Total in KZ 1 698 629 2 026 034 - - - 230 551 3 955 213 Part VI – Notes Appended to the Financial Statements • 149

Interest rate risk

The interest rate risk refers to the impact that movements in interest rates have on the results and the net asset value of the Bank’s assets and liabilities. This risk arises mainly from the existence of different maturities or revaluation of the entity’s assets, liabilities and off-balance sheet positions in the face of changes in the slope of the interest rate curve. Thus, the interest rate risk corresponds to the risk of the present value of the future cash flows of a financial instrument to undergo fluctuations due to changes in market interest rates.

At 31 December 2018 and 2017, the financial instruments, by type of interest rate, are2018 as follows: Exposure Subject to interest rate Not subject to Fixed rate Variable rate interest rate Total Assets Gold - - 234 495 234 495 External assets Cash on hand and receivables from credit institutions - 336 971 249 700 586 671 Investments in credit institutions 1 448 197 - - 1 448 197 Financial assets at fair price through results 223 501 26 253 372 640 622 394 Financial assets tradeable 2 297 487 - - 2 297 487 International Monetary Fund - 73 065 240 483 313 548 Internal assets Cash on hand and receivables from credit institutions - - 9 734 9 734 Funding to credit institutions related to monetary policy operations 752 961 - - 752 961 Financial assets tradeable 499 367 - 38 188 537 555 Financial assets granted to the Government 154 993 - - 154 993 Investments in affiliates and other entities - - 731 731 Other internal assets receivable - - 12 106 12 106 Total 5 376 505 436 289 1 158 078 6 970 872

Liabilities Bills and coins in circulation - - 498 390 498 390 Responsibilities with credit institutions national related to monetary policy operations Bank reserves - - 1 749 197 1 749 197 Interbanking monetary market 87 881 - - 87 881 Internal liabilities with other entities Single treasury account - - 1 513 820 1 513 820 Other liabilities - - 26 26 External liabilities with other entities International Monetary Fund - 329 386 - 329 386 Funds in credit institutions 1 397 914 - - 1 397 914 Total 1 485 795 329 386 3 761 433 5 576 614

2017 (restated) Exposure Subject to interest rate Not subject to Fixed rate Variable rate interest rate Total Assets Gold - - 128 165 128 165 External assets Cash on hand and receivables from credit institutions - - 190 811 190 811 Investments in credit institutions 938 079 - - 938 079 Financial assets at fair price through results 445 660 109 773 312 268 867 701 Financial assets tradeable 966 933 - - 966 933 International Monetary Fund - 52 006 168 351 220 357 Other external assets receivable 82 962 82 962 Internal assets Cash on hand and receivables from credit institutions - - 14 516 14 516 Funding to credit institutions related to monetary policy operations 619 247 - - 619 247 Investments held until maturity 207 359 - - 207 359 Financial assets granted to the Government 187 396 - 190 000 377 396 Investments in affiliates and other entities - - 1 425 1 425 Total 3 364 673 161 778 1 088 498 4 614 949

Liabilities Bills and coins in circulation - - 527 717 527 717 Responsibilities with credit institutions national related to monetary policy operations Bank reserves - - 1 332 969 1 332 969 Interbanking monetary market 66 297 - - 66 297 Internal liabilities with other entities Single treasury account - - 1 026 409 1 026 409 Other liabilities - - 84 84 Investments in affiliates and other entities - 853 853 External liabilities with other entities International Monetary Fund - 230 551 - 230 551 Funds in credit institutions 770 334 - - 770 334 Total 836 631 230 551 2 888 031 3 955 213 150 • Annual Report and Accounts • 2018

For the purposes of preparing the previous tables, the following assumptions were considered:

- Loans and deposits with credit institutions were distinguished from regular deposits with non-interest- bearing credit institutions, which are subject to a variable interest rate, in particular deposits with contracted overnight deposits.

- Taking into account the insufficient information disclosed by the external entities on securities held in the various discretionary portfolios classified in the category “Financial assets at fair value through profit and loss”, it is not possible to disclose the exposure by type of interest rate of these investments.

- Although the coupon paid by the National Treasury bonds, classified in the category “Held-to-maturity investments”, is variable due to the fluctuation of the nominal value according to the exchange rate of the settlement date, the coupon rate associated with each security is fixed.

It should be noted that there are investments made by external management (included in the item «Financial assets at fair value through profit and loss») that have exposure to interest rate risk, but the Bank globally relates this risk as a market risk.

As of December 31, 2018 and 2017, the financial instruments by maturity date or rate redoing period are as follows:

2018 Resetting dates b/w 1 and 3 b/w 3 and 6 b/w 6 and 1 b/w 1 and 3 b/w 3 and 5 Up to 1 month Over 5 years Indefinite Total months months year years years Assets Gold ------234 495 234 495 External assets Cash on hand and receivables from credit institutions 336 971 ------249 700 586 671 Investments in credit institutions 697 671 480 180 114 673 155 673 - - - - 1 448 197 Financial assets at fair price through results 3 063 10 150 10 294 30 701 121 882 61 037 27 222 358 045 622 394 Financial assets tradeable 40 335 77 894 128 039 383 701 926 518 672 952 68 047 - 2 297 487 International Monetary Fund ------313 548 313 548 Internal assets Cash on hand and receivables from credit institutions ------9 734 9 734 Funding to credit institutions related to monetary policy operations 43 349 165 623 5 000 - 538 989 - - - 752 961 Financial assets tradeable - - - - 2 59 463 478 090 - 537 555 Financial assets granted to the Government - - - - 154 993 - - - 154 993 Investments in affiliates and other entities ------731 731 Other internal assets receivable ------12 106 12 106 Total 1 121 389 733 848 258 006 570 075 1 742 384 793 452 573 358 1 178 359 6 970 872

Liabilities Bills and coins in circulation ------498 390 498 390 Responsibilities with credit institutions national related to monetary policy operations Bank reserves ------1 749 197 1 749 197 Interbanking monetary market 67 172 20 709 ------87 881 Internal liabilities with other entities Single treasury account ------1 513 820 1 513 820 Other liabilities - 11 11 4 - - - - 26 External liabilities with other entities International Monetary Fund ------329 386 329 386 Funds in credit institutions - - - 156 082 1 241 832 - - - 1 397 914 Total 67 172 20 720 11 156 086 1 241 832 - - 4 090 793 5 576 614

2017 (restated) Resetting dates b/w 1 and 3 b/w 3 and 6 b/w 6 and 1 b/w 1 and 3 b/w 3 and 5 Up to 1 month Over 5 years Indefinite Total months months year years years Assets Gold ------128 165 128 165 External assets Cash on hand and receivables from credit institutions 190 811 ------190 811 Investments in credit institutions 366 481 162 161 222 236 187 200 - - - - 938 079 Financial assets at fair price through results 22 295 15 864 26 693 37 895 274 356 127 537 357 059 6 002 867 701 Financial assets tradeable - 13 898 28 060 76 147 402 071 253 431 193 326 - 966 933 International Monetary Fund ------220 357 220 357 Other external assets receivable 82 962 82 962 Internal assets Cash on hand and receivables from credit institutions 14 516 ------14 516 Funding to credit institutions related to monetary policy operations 603 335 - 15 912 - - - - - 619 247 Investments held until maturity - 2 924 1 002 - 4 116 62 394 503 269 - 207 359 Financial assets granted to the Government ------377 396 377 396 Investments in affiliates and other entities ------1 425 1 425 Total 1 197 437 194 847 293 903 301 243 680 543 443 362 1 053 654 816 307 4 614 949

Liabilities Bills and coins in circulation 527 717 ------527 717 Responsibilities with credit institutions national related to monetary policy operations Bank reserves 1 332 969 ------1 332 969 Interbanking monetary market 65 288 1 009 - - - - - 66 297 Internal liabilities with other entities Single treasury account 1 026 409 ------1 026 409 Other liabilities 17 10 10 21 26 - - - 84 Investments in affiliates and other entities 853 853 External liabilities with other entities International Monetary Fund ------230 551 230 551 Funds in credit institutions - 763 4 507 1 071 165 924 598 070 - - 770 334 Total 2 952 399 1 782 4 517 1 092 165 950 598 070 - 231 404 3 955 213 Part VI – Notes Appended to the Financial Statements • 151

42. Contingent Liabilities Due to the regulatory changes in consumption tax that occurred during the 2014 fiscal year, through the approval of Presidential Decree-Law no. 3-A / 14, dated October 21, 2014, as well as the changes that had already been made introduced by Presidential Decree No. 7/11, of December 30, the National Bank of Angola is analysing the framework of the exemption provided for in article 92 of Law no. 16/2010 of July 15 Law of the National Bank of Angola, light of the said Presidential Decree-Legislative. To date, the framework work has not yet been completed, only possible unmeasured contingencies have been identified.

43. Events Subsequent to the Reference Date The relevant events subsequent to 31 December 2018 are presented below. The Board of Directors of the BNA, in accordance with IAS 10, is convinced that they do not give rise to adjustments in the Bank’s financial position with reference to 31 December 2018. a) Debt restructuring operation of a credit institution

An agreement between the BNA and a Financial Institution is being formalized with a view to establishing a debt restructuring plan. However, at the date of approval of these financial statements, no significant impacts on the same arising from said agreement are estimated (Note 7). b) Liquidity lending operation

As at 31 December 2018 and 2017, the caption “Liquidity lending” corresponds to a liquidity-providing operation in foreign currency to a national banking financial institution, with a view to opening letters of credit for food import operations. At 31 December 2018, BNA further recorded an impairment loss reversal in the amount of Kz 5000 million, based on actual receipts that occurred before March 15, 2019, resulting from a restructuring agreement due to financial difficulties. In view of the uncertainties regarding the institution’s ability to settle the remainder of the financing line, the impairment recorded at 31 December 2018 (Kz 6575 million) corresponds to the amount of the Liquid Assignment not settled until 15 March 2019 (Note 8). c) Change in the interest rate of the Treasury Bond issued on July 19, 2016

Presidential Decree approved on March 18, 2019 by the President repealed Article paragraph 2 of Presidential Decree No. 130/16 of 13 June and changed the coupon interest rate future of the National Treasury Bonds issued in July 2016, from 0% to 12%. d) Revocation of Banco Postal, Banco Mais and BANC licenses

At a meeting of the Board of Directors, held on January 2, 2019, the National Bank of Angola decided to revoke the licenses of two banking financial institutions, namely BANCO MAIS, SA and BANCO POSTAL, SA, for failing to legal requirement for continuity of banking activity , in accordance with point b), in conjunction with item c) of item 15, and item f), both of article 29 of Law no. 12/15 of 17 June, Law on the Basis of Financial Institutions, as well as in compliance with that stipulated in Notice no. 02/2018 of 02 March.

In view of the inability to mobilize additional capital by the BANC shareholders necessary and indispensable for the fulfilment of the minimum legal requirements in force, BNA, under the combined provisions of articles 21 of the Law of the National Bank of Angola and article 30, paragraph 1, of Law on the Basis of Financial Institutions, at an extraordinary meeting held on January 29, 2019, decided to revoke the authorization for the banking activity of said bank, thus ceasing its activity on February 6, 2019.

In this way, the provision for systemic risk in the banking sector was strengthened in order to support the value of customer deposits and compensation to employees that BNA may eventually bear (Note 8 and 18). 152 • Annual Report and Accounts • 2018

44. Allocation of the result of 2018 Taking into account that the result for the year was Kz 18.59 billion, the Board of Directors decided on March 29, 2019, in order to proceed to the next distribution of those results, in accordance with article 89 of the BNA Act:

- 20%, i.e. Kz 3,72 billion for Legal Reserve;

- 20%, i.e. Kz 3,72 billion for free reserve; and

- 60%, i.e. Kz 11,16 billion to the National Treasury, as dividends.

These Financial Statements were approved by the Board of Directors at its meeting held on March 29, 2019, so they are signed by its members.

45. New standards and interpretations applicable to the year or that will take effect in future years Adoption of standards (new or revised) issued by the International Accounting Standards Board (IASB) and interpretations issued by the International Financial Reporting Interpretation Committee (IFRIC)

The following standards, interpretations, amendments and revisions are mandatory for the first time in the year ended 31 December 2018:

Applicable for periods be- Standard / interpretation Issue Date ginning on or after IFRS 15 - Revenue from Contracts with Customers 05-28-2014 01-01-2018 IFRS 15 - Revenue from Contracts with Customers (Amendment) 09-11-2015 01-01-2018 IAS 40 - Transfers of investment property (Amendment) 12-11-2016 01-01-2018 IFRS 9 - Financial Instruments 07-27-2014 01-01-2018

No significant effects were recorded in the financial statements for the year ended 31 December 2018, as a result of the adoption of the standards, interpretations, deliveries and revisions referred to above, with the exception of IFRS 9, which was not adopted.

Standards, interpretations, amendments and revisions that will take effect in future yearss

The standards and interpretations recently issued by the IASB whose application is mandatory only in periods beginning after January 1, 2018 or later and which the Bank did not adopt in advance are as follows:

Applicable for periods Standard / interpretation Issue date beginning on or after IFRS 9 - Financial Instruments (Amendment) 05-28-2014 01-01-2019 IFRS 16 - Locations 01-13-2016 01-01-2019 IFRIC 23 - Uncertainties in the treatment of income tax 06-01-2017 01-01-2019 IAS 19 Employee Benefits (Amendment) 06-01-2018 01-01-2019 IAS 1 and IAS 8 - Presentation of the financial statements and (Amendment) 09-12-2017 01-01-2020 Part VI – Notes Appended to the Financial Statements • 153

IFRS 9 Financial instruments (Standard not adopted by BNA on 1 January 2018)::

This standard is part of the draft revision of IAS 39 and establishes the new requirements regarding the classification and measurement of financial assets and liabilities, the methodology for calculating impairment and the application of hedge accounting rules.

The draft implementation of IFRS 9 establishes new classification and measurement rules for financial assets and liabilities and was structured in three stages:

- Step 1: Classification and measurement of financial assets and liabilities;

- Step 2: Impairment of financial assets: reduction in recoverable value;

- Step 3: Hedge accounting

With regard to the classification of financial assets and liabilities, the following main aspects of IFRS 9 are identified:

Classification and measurement of financial assets

- All financial assets are measured at fair value on the date of initial recognition, adjusted for transaction costs if the instruments are not accounted for at fair value through profit or loss (Fair value through Profit loss). However, customer accounts without a significant financing component are initially measured at their transaction value, as defined in IFRS - 15 contract yields with customers.

- Debt instruments are subsequently measured based on their contractual cash flows and the business model in which such instruments are held. If a debt instrument has contractual cash flows that are only payments of principal and interest on the outstanding principal and is held within a business model for the purpose of holding the assets to collect contractual cash flows, then the instrument is recorded at amortized cost. If a debt instrument has contractual cash flows that are exclusively the payments of principal and interest on capital owed and is held in a business model whose purpose is to collect contractual cash flows and the sale of financial assets, then the instrument is measured at fair value through profit or loss (Fair value through other comprehensive income) with subsequent reclassification to results.

- All other debt instruments are subsequently accounted for by the FVTPL. In addition, there is an option that allows the financial assets in the initial recognition to be designated as FVTPL if this eliminates or significantly reduces significant accounting decompensation in the year’s results.

- The equity instruments are generally measured to the FVTPL. However, entities have an irrevocable option, on an instrument-by-instrument basis, to present changes in the fair value of the instruments in the statement of comprehensive income (without subsequent reclassification of the change to results for the year). 154 • Annual Report and Accounts • 2018

Classification and measurement of financial liabilities

- For financial liabilities designated as fair value through profit or loss, using the fair value option, the amount of the change in the fair value of these financial liabilities that is attributable to changes in credit risk must be presented in the statement of comprehensive income. The remainder of the change in fair value shall be presented in profit or loss unless the presentation of the change in fair value relative to credit risk of the liability in the statement of comprehensive income will create or increase an accounting decompensation in profit or loss.

- All other classification and measurement requirements for financial liabilities of IAS 39 were carried forward to IFRS 9, including embedded derivatives separation rules and the criteria for using the fair value option.

In summary, with respect to the classification and measurement of financial assets and liabilities, we find that the new standard has reduced the complexity of accounting for financial instruments by reducing the complexity of accounting for financial instruments by reducing the number of classes where may account for financial instruments that go from the four classes of IAS 39 to two classes (Fair value or Amortized cost) and the expected reduction in the number of instruments recorded at fair value.

However, with respect to debt instruments, the elimination of held-to-maturity investments makes it possible for more debt instruments to be carried at amortized cost without demonstrating the intention and ability to hold them to maturity. It should be noted that the only way to account for debt instruments quoted at amortized cost in IAS 39 was through the held-to-maturity investments class. Reclassifications of financial assets are possible when there are changes to the business models. These reclassifications should affect all financial instruments included in the reclassified class. Regarding the accounting of financial liabilities, there is little change in IFRS 9 compared to that provided for in IAS 39, that is, the possibility of separating the embedded derivatives included in financial liabilities and keeping the host instrument accounted for at amortized cost remains. In addition, the possibility of applying an option at fair value and accounting for financial liabilities at fair value is maintained and must be made a separation of the changes in fair value occurred. When these changes are due to changes in the credit risk of the issuer, these changes should be recognized in comprehensive income. When they are due to causes exogenous to the entity, they must be recognized in the income statement.

In the second stage of the implementation of this standard, a change was introduced in the way financial institutions calculate impairments on their financial instruments. IFRS 9 introduced an expected loss model to replace the incurred loss model used in IAS 39. Under this new model, entities should recognize expected losses before the occurrence of loss events. There is also the need to include information prospectively (“forward looking “) on estimates of expected loss, with the inclusion of future trends and scenarios, including macroeconomic. Part VI – Notes Appended to the Financial Statements • 155

The concept of expected loss of credit differs from the concept of expected loss provided for in the Basel III agreement, namely in the Capital Requirements Directive IV (CRD IV). According to this new model, the assets subject to the impairment calculation should be categorized into one of the following phases, depending on changes in credit risk since the initial recognition of the asset and not in relation to the credit risk at the reporting date:

- Phase 1 - From the initial recognition of the asset and whenever there is no significant deterioration of credit risk since that date, the assets are classified in this first phase. For these assets, an impairment loss corresponding to the expected loss for the one-year horizon, starting from the reference date of the report, must be recognized.

- Phase 2 - If there is a significant risk degradation since the initial recognition, the assets should be classified in the 2nd phase. At this stage, the impairment will correspond to the loss expected for the remaining life of that asset. The concept of significant credit risk degradation, as recommended by IFRS 9, introduces a higher level of subjectivity in the calculation of impairment, and also requires a greater link with the entity’s credit risk management policies. The lifetime and forward-looking perspectives introduce challenges in the modelling by financial institutions of credit risk parameters.

- Phase 3 - Impairment assets should be classified at this stage, with impairment corresponding to the loss expected for the remaining life of that asset. In relation to the previous phase, the distinction corresponds to the form of recognition of the effective interest, which should be based on the net book value (in the 2nd phase it was based on the gross balance sheet value).

Impairment: reduction in recoverable value

- Impairment requirements are based on an expected credit loss model, which replaces the loss model incurred in IAS 39.

- The expected credit loss model applies to: (i) debt instruments accounted for at amortized cost or at fair value through comprehensive income, (ii) the majority of loan commitments, (iii) financial guarantee contracts, (iv) contractual assets under IFRS 15 and (v) receivables from leases under IAS 17 - Leases.

- The measurement of the SGPs should reflect the weighted probability of the result, the effect of the time value of money, and be based on reasonable and bearable information that is available at no cost or overexertion.

Finally, the third stage of implementation of IFRS 9 relates to hedge accounting and the new requirements arising from the application of the new accounting standards. IFRS 9 simplified the current needs and the alignment between hedge accounting and the institutions’ risk management.

Accounting of coverage

- The coverage effectiveness tests should be prospective and may be qualitative, depending on the complexity of the coverage, without the 80.0% - 125.0% test.

- A risk component of a financial or non-financial instrument may be designated as the hedged item if the risk component is separately identifiable and reliably measurable.

- The time value of an option, the forward element of a forward contract and any foreign currency spread may be excluded from the designation as hedging instruments and accounted for as hedging costs.

- Larger sets of items can be designated as covered items, including layered designations and some liquid positions.

Luanda, 29 March 2019 156 • Annual Report and Accounts • 2018

______José de Lima Massano (Governor)

______Rui Miguêns de Oliveira (Deputy Governor)

______Manuel António Tiago Dias (Deputy Governor)

______Beatriz Ferreira de Andrade dos Santos (Administrator)

______Miguel Bartolomeu Miguel (Administrator)

______Pedro Rodrigo Gonçalves de Castro e Silva (Administrator)

______Tavares André Cristóvão (Administrator)

PART VII – ANNEXES I. Audit Committee Report and Opinion 158 • Annual Report and Accounts • 2018 Annexes – I. Report and Opinion of the Board of Auditors • 159 160 • Annual Report and Accounts • 2018 Annexes – I. Report and Opinion of the Board of Auditors • 161 162 • Annual Report and Accounts • 2018 Annexes – I. Report and Opinion of the Board of Auditors • 163 164 • Annual Report and Accounts • 2018 II. Independent Auditor Opinion 166 • Annual Report and Accounts • 2018 Annexes – II. Report of the External Auditor • 167 168 • Annual Report and Accounts • 2018 Annexes – II. Report of the External Auditor • 169 170 • Annual Report and Accounts • 2018 Annexes – II. Report of the External Auditor • 171 172 • Annual Report and Accounts • 2018 Message from the Governor of the National Bank of Angola • 173

III. Regulations 174 • Annual Report and Accounts • 2018

I. WARNINGS

• Notice No. 01/2018, of 17 January 18, DR-I Series, - Exchange Rate Limit - establishes the limit of the global exchange position of commercial banks and their calculation base.

• Notice nº 02/2018, of 02 March 18, DR-I Series, no. 30, - Establishes the minimum capital stock and regulatory own funds (FPR) of the banking financial institutions. Revokes - Notice no. 14/2013, of 02 December and 04/07 of 12 September.

• Notice no 03/2018, of 02 March 18, DR-I Series, no. 30, - E establishes the set of minimum banking services exempt from commission charges. Revokes - Notice no. 03/2017, of March 30th.

• Notice No. 04/2018, of March 7, 18, DR-Series I, No. 33 - Change the wording of Article 12 of Notice No. 17/09 of 12 September on offenses that may be committed by the Banking Financial Institutions in respect of their obligations under Notice no. 09/17, of 12 September, in particular the breach of the deadlines established herein.

• Notice No. 05/2018, of July 17, 18, DR-I Series, - Foreign Exchange Regulation - Establishes the rules and procedures to be observed in the execution of foreign exchange operations for the settlement of imports and exports of merchandise in the Republic of Angola. Revokes - Notice no. 19/12, April 25, Notice no. 3/14 of Au- gust 12, Notice no. 4/17, of June 28 and Instruction not published in the Diário da República 4/17 of 27 March.

• Notice no. 06/2018, of August 15, 18, DR-I Series, n.122, - Exchange position limit - Establishes the limit of the commercial banks’ overall foreign exchange position and their calculation base. Revokes Notice No. 01/2018, of 22 January.

• Notice no. 07/2018, of November 29, 18, DR-I Series, no. 180, - Financial System - Establishes the requirements and procedures for the authorization of the constitution of non-bank Financial Institutions linked to currency and credit, subject to the supervision of the National Bank of Angola, established in number 1 of article 7 of Law no. 12/15, of June 17, Basic Law of Financial Institutions. Revokes - Notice no. 15/2012, of April 3, Notice no. 18/2012, of April 3, Notice no. 08/2012, of March 30, Notice no. April 02, Notice no. 07/2013, of April 22 and Notice no. 05/2014, of October 1st.

• Notice no. 08/2018 , of 29 November 18, DR-I Series, n. º180, - Financial System- Establishes the minimum capital and regulatory capital applicable to non-bank financial institutions linked to currency and credit, subject to the supervision of the national bank of Angola, referred to in paragraph 1 of article 7 of Law no. 12/15, of 17 of June - Law of Bases of the Financial Institutions, s. Revokes - Warning No 15/2012 of 03 April Notice No. 18/2012 of 03 April Notice No. 08/2012, of March 30, Notice No. 09/2012 of April 02, Notice no. 07/2013, of April 22 and Notice no. 05/2014, of October 1st.

• Notice no. 09/2018, of 29 November, DR-I Series, no. 180, - Financial system- Defines the terms and conditions under which foreign exchange offices must carry out their business, observing the general requirements provided for in article 104 of Law no. 12/15, of June 17 - Basic Law of Financial Institutions. Revokes - Notice 21/12, of April 25, Instruction no. 2/2012 of April 20 and Instruction no. 21/2016, of 06 September.

• Notice No. 10/2018, of November 29, DR-I Series, No. 180, - Financial System- Establishes the type of sanctioning process applicable to situations of delay in sending periodic information to the National Bank of Angola. Revokes - Notice no. 16/2007, of 12 of September.

• Notice No. 11/2018, of November 29, DR-I Series, no. 180, - Payment Systems - Establishes the operational rules for the rendering of remittance services carried out by Financial Institutions, designated by service providers. payment services, under the supervision of the National Bank of Angola, under the Angolan Payments System. Revokes - Notice no. 06/2013, of April 22, on the remittance service and Instruction no. 22/2016, of September 6, on the operational rules of the remittance service.

• Notice No. 12/2018, of December 21, DR-I Series, No. 189, - Exchange Rate Position Limit - Establishes the limit of the global commercial foreign exchange position and its calculation base. Revokes - Notice no. 06/2018, of August 15. Annexes – III. Abbreviations • 175

II. INSTRUCTIONS

• Instruction no. 01/2018, January 19 - Foreign Exchange Policy - Establish procedures for participation in auctions to buy and sell foreign currency to better meet exchange rate policy objectives. Revokes - Instruc- tive # 10/2015, of June 4th.

• Instruction no. 02/2018, January 19 - Exchange Policy - Establishes procedures to be observed in the execution of foreign exchange operations by commercial banks, in a fair and transparent manner in negotiations with their Clients and other market participants.

• Instruction no. 03/2018, January 19 - Foreign Exchange Policy - Defines the methodology for calculating the process of formation of the reference exchange rate of the primary market, as well as the permitted margins on foreign exchange transactions in the secondary market.

• Instruction no. 04/2018, March 19 - Monetary Policy - Establishes the procedures that development banks, considering their scope and fundamental functions, must observe in the participation of the interbank money market for the provision of liquidity, upon delivery or not guarantees by the borrowing banking institutions. Revokes - Instructive # 13/2015, of July 1st.

• Instruction no. 05/2018, 05 May - Monetary Policy - Updates existing standards for the establishment and fulfilment of mandatory reserves by banking institutions established in the country in the light of the current macroeconomic stability framework, with a view to greater efficiency of the instruments monetary policy. Revokes - Instructive # 06/2017, of December 1st.

• Instruction no. 06/2018, June 19 - Foreign Exchange Policy - Establish the limits of foreign exchange operations for family aid - setting the monthly sale limit of EUR 1,000.00 (one thousand euros) per beneficiary, specifically for family assistance, thus monthly limit per computer should not exceed EUR 2,500.00 (two thousand and five hundred euros).

• Instruction no. 07/2018, June 19 - Foreign Exchange Policy - Directs banking financial institutions to maintain an independent exchange control function, reporting directly to an Administrator.

• Instruction no. 08/2018, June 19 - Foreign Exchange Policy - Establishes the period of suspension of the need for BNA to license goods import operations awaiting settlement, with customs clearance of shipments dated after January 1, 2015.

• Instruction no. 09/2018, July 2 and 19 - Foreign Exchange Policy - Establish limits of foreign exchange operations of merchandise, referring to prepayments, documentary remittances and documentary collections.

• Instruction no. 09/2018, July 19 - Monetary Policy - Updates the existing rules for the establishment and fulfilment of the mandatory reserves in the current macroeconomic stability framework. Revokes - Instructive # 05/2018, of May 25.

• Instruction no. 11/2018, September 11 - Monetary Policy - Establishes the procedures that development banks, considering their scope and fundamental functions, must observe to participate in the interbank money market to provide liquidity, whether by delivery or not of guarantees by the borrowing Banking Institutions. Revokes - Instructive # 04/18, of January 19.

• Instruction no. 12/2018, September 14 - Foreign Exchange Policy - Establishes the rules for the provision of temporary ceilings on international payment cards, for the coverage of hospital and school expenses (tuition fees and accommodation) and / or their immediate family members.

• Instruction no. 13/2018, September 19 - Foreign Exchange Policy - E stabelece the procedures that banking financial institutions should observe the identification of the profile of risk of customers in the tran- 176 • Annual Report and Accounts • 2018

sactions of import and export of goods and the measures of prevention of laundering of capital, financing of terrorism and offenses underlying, which must be applied to clients classified in high risk.

• Instruction no. 14/2018, September 19 - Exchange Policy - Establishes the remuneration of collateral deposits associated with letters of credit.

• Instruction No. 15/2018 September 19 - Exchange rate policy - Establishes foreign currency sales procedures to non - banking financial institutions, in particular, exchange offices and companies that provide payment services that carry out activity of remittances (societies of remittances). Revoked Instruction no. 17/2015 of 20 August and Directive no. 2/2011 of 31 March.

• Instruction no. 16/2018, November 21 - Foreign Exchange Policy - Establishes the limits applicable to remittance transactions and the limit applicable to foreign currency sale transactions in notes, traveler’s checks or prepaid card shipments. Repeals - Instructions 21/2016 and 22/2016, both dated September 6.

• Instruction no. 17/2018, November 28 - Financial System - Regulates and standardizes the procedure to be observed in the voluntary repatriation of financial resources provided for in Law No. 9/18 of June 26, Law on the Repatriation of Resources Financial.

• Instruction no. 18/2018, November 28 - Financial System - Establishes the rules that commercial banks must observe in the processes of conversion of credits granted in foreign currency into national currency.

• Instruction no. 19/2018, December 03 - Exchange Policy - Establishes the rules and procedures that banking financial institutions must observe in the sessions of auctions of sale and purchase of foreign currency by the National Bank of Angola. Revokes - Instructive nº 01/2018, of 19 January.

• Instruction no. 20/2018, December 03 - Foreign Exchange Policy - Establishes the methodology for calculating the primary market reference exchange rate and the exchange rates that should be practiced by the banking financial institutions. Revokes - Instructive 03/2018, of January 10th.

• Instruction no. 21/2018, December 03 - Exchange Policy - To extend the term of the temporary suspension of the obligation of licensing by the National Bank of Angola of the merchandise import operations that remain unpaid after 360 (three hundred and sixty) days of the date of the customs clearance procedure. Annexes – III. Abbreviations • 177

III. DIRECTIVES

• Directive No. 01 / DCC / 2018 - establishes the procedures for sending information on the mapping of needs by commercial banks.

• Directive No 01 / ISD / DRO / DMA / 2018 - Obliges commercial banks to submit, daily, the “DAILY EX- CHANGE POSITION” map, which should contain information related to the last previous business day.

• Directive No. 03 / DCC / 2018 - Establish procedures for the reporting of the map of needs all operations that are awaiting exchange coverage, including pending before 2018 with documentation still valid, without prejudice to the provisions of Directive n. 01/17 of 3 February, as of 01.11.2018. Revokes - Directive no. 01 / DCC / 2018, of April 3rd.

• Directive No. 03 / DRO / ISD / 18 - Establish the guidelines and the program for the implementation of quality control tests related to the criteria adopted by financial institutions.

• Directive No. 04 / DSP / DRO / 18 - Establish the requirements for the establishment and fulfilment of the mandatory reserves related to the period of establishment of the reserve base for the calculation of the mandatory reserves in national currency (MN) and in foreign currency (ME) monthly.

• Directive No. No. 05 / DMA / DRO / 18 - Establish the access requirements to the facility to transfer liquidity Overnight - FCO. Revokes - Directive no. 03 / DRO / DMA / 16.

• Directive No. 05 / DSB / DRO / 18 - Establish the procedures that banks must observe in sending, on a daily basis, the map of “DAILY EXCHANGE POSITION” and their closing balances, containing information related to the last previous business day. Revokes - Directive No. 01 / ISD / DRO / DMA / 2018, of 29 January.

• Directive No. 07 / DSB / DRO / 18 - Establish the procedures that banks must observe in sending, on a daily basis, the map of “DAILY EXCHANGE POSITION” and their closing balances, containing information related to the last previous business day. Revokes - Directive No. 05 / DSB / DRO / DMA / 2018 of 20 August. 178 • Annual Report and Accounts • 2018

IV. ORDERS

ORGANIZATION

• Order No. 1/2018 - Organization - X Meeting of Statistics of Bank Central of Countries of Portuguese Language - Reconstitution of the Committee Organizer.

• Order No. 06/2018 - Organization -IV- National Treasury Meeting - Constitution of the Committee of Organization.

• Order No. 08/2018- Monetary Policy - Regulation Politics Monetary policy.

• Order No. 09/2018 - Organization - Week Global Money - Constitution of the Committee Organization - Realization of the Week Global Money (Global Money Week), one year international of awareness about the money.

• Order No. 18/2018 - Organization - Policy and Strategy of Continuity of Business.

• Order No. 19/2018 - Organization - Policy of Compliance - Manuel of procedures of Swift Sanction Screening. It aims to ensure the strengthening of corporate governance and the internal control system of the National Bank of Angola.

• Order No. 20/2018 - Public Tender - Hiring Services External Audit DCF.

• Order No. 26/2018 - Organization - IV Meeting of Audit, Management and Risk and Compliance of Bank Central of Countries of Language Portugal (BCPLP) - Constitution of the Committee Organizer.

• Order No. 43/2018 - Organization - Annual Meeting of the SADC Bank IT Group.

• Order No. 45/2018 - Organization - Regulation of Acquisitions and payments of Goods Services and Con- tracts.

• Order No. º46 / 2018 - Organization - Committee for the Acquisition of Goods, Services and Contracts

• Order No. 47/2018 - Organization - Implementation of the Process of Acquisition of Goods, Services and Contracts Constitution of the Group Work.

• Order No. 48/2018 - Competition Ends by Invitation - Borrowing of Company Specialized for Provision of Consultancy for restructuring of the Department of Operations Banking (DOB) - Constitution of the Commis- sion ‘s evaluation of proposals.

• Order No. 51/2018 - Fixed assets Tangible - Constitution of the Committee for Slaughter and Disposal of Fixed Assets Tangible Banco Nacional de Angola.

• Order No. 53/2018 - Competition Ends by Invitation - Hiring of Company specialized for provision of services of consulting for the Consolidation of Methods for Monitoring the Process of Inclusion Financial - Constitution of the Committee of Evaluation of Proposals.

• Order No. 55/2018 - Policy Monetary - Regulation of the Committee of Political monetary (CPM). It aims to ensure the operationalization and dynamization of the monetary and exchange markets in harmony with the objectives of monetary policy.

• Order No. 71/2018 - Personal - Appointment of Directors of the Bank of Angola of Business.

• Order No. 74/2018 - Competition Limited by Invitation - Hiring of Company for Supply of Uniforms - Cons- titution of the Commission ‘s evaluation of proposals.

• Order No. 77/2018 - Organization - Election of Representative of Workers for the Board of Audit.

• Order No. 78/2018 - Organization - Management of Computer Resources. Annexes – III. Abbreviations • 179

• Order No. 81/2018 - Organization - Regulation of Authorized Signatures.

• Order No. 82/2018 - Organization - Regulation Election of the Workers ‘ Representative to the Audit Board.

• Order No. 84/2018 - Organization - Seminar about Compliance.

• Order No. 85/2018 - Competition Ends by Invitation – Hiring of company for supply, installation and configuration of solution of management of printing and printer - Constitution of the Committee of Evaluation of Proposals.

• Order No. 86/2018 - Competition Ends by Invitation - Hiring S. Audit.

• Order No. 96 - Organization - Regulation of Acquisitions and Payments of Goods, Services and Contracts.

• Order No. 98/2018 - Personnel - Absence of the Governor.

• Order No. 104/2018 - Organization - Installing Commission of the Deposit Guarantee Fund.

• Dispatch No. 106/2018- Organization - VIII Meeting of the Payment Systems of the Central Banks of the Portuguese Speaking Countries (BCPLP) - Constitution of the Organizing Committee.

• Order No. 110/2018 Organization - Politics of Prevention to Laundering of Capital and Financing to Terro- rism.

• Order No. 111/2018 - Organization - Policy of Management of Risk - Rules of the Committee of Mana- gement of Risk - Regulation of Subcommittee of Continuity of Business.

• Order No. 114/2018 - Organization - Constitution Organizing Committee of Allusive Activities to November 5th.

• Order No. 116/2018 - Contest Ends for Preliminary Qualification - Hiring of Company to update the products Oracle and Migration data - Constitution of the Committee of Evaluation of Proposals.

• Order No. 117/2018 - Contest Ends for Preliminary Qualification - Hiring of Company to update the products Oracle and Migration data - Constitution of the Committee of Evaluation of Proposals.

• Order No. 118/2018 - Contest Ends For Preliminary Qualification - Borrowing of Company for supply, installation and configuration of equipment for processing and storage Data - Constitution of the Committee of Evaluation of Proposals.

• Order No. 119/2018 - Competition Public - Hiring of Company for supply of meals to Body of Security and Picket the area of Electricity and Other areas - Constitution of the Committee of Evaluation of Proposals.

• Order No. 120/2018 - Competition Public - Contraction of Company Specialized for Provision of Services of maintenance and cleaning at the Center Children BNA - Constitution of the Committee of Evaluation of Proposals.

• Order No. 121/2018 - Competition Public - Hiring of Company Specialized in supply of furniture for delegation Regional South - Constitution of the Committee of Evaluation of Proposals.

• Order No. 122/2018 - Competition Public - Hiring Specialized Company for installation of CCTV.

• Order No. 124/2018 - Organization - Regulation of the Council of Administration.

• Order No. 125/2018 - Organization - Regulation of the Board of Auditors.

• Order No. 134/2018 - Organization - Access ace installations of Headquarters.

• Order No. 135/2018 - Organization - Annual Meeting of the Subcommittee on Financial Markets.

• Order No. 137/2018 - Organization - Regulation of Management of Incidents. 180 • Annual Report and Accounts • 2018

• Order No. 138/2018 - Organization - Forum of Technologies of Information and Communication for System Financial Angola.

• Order No. 139/2018 - Contest Ends For Preliminary Qualification, Hiring of Company Specialized for maintenance General of the Museum of the Currency.

• Order No. 140/2018 - Contest Ends For Invitation for supply of equipment networks.

• Order No. 141/2018 - Competition Public for supply of software and provision of services.

• Order No. 142/2018 - Competition Public for supply, installation and configuration of equipment and licensing of software.

• Order No. 143/2018 - Public tender for the supply, installation and configuration of ManageEngine Software.

• Order No. 144/2018 - Organization - Regulation of Management and Channel Report.

• Order No. 142/2018 - Organization - Reorganization of the Composition of the Provisional Administration of the Angolan Bank of Business.

MONETARY CIRCULATION

• Order No. 03/2018 - Circulation Currency - Constitution of the Committee for Destruction of notes with- drawn from circulation.

• Order No. 05/2018 - Circulation Currency - Constitution of the Committee for Destruction of notes with- drawn from circulation.

• Order No. 75/2018 - Circulation Currency - Constitution of the Committee for Destruction of notes with- drawn from circulation.

• Order No. 76/2018 - Circulation Currency - Constitution of the Committee for Destruction of Notes With- drawals of Circulation.

• Order No. 80/2018 - Circulation Currency - Constitution of the Committee for Destruction of Notes With- drawals of Circulation. Abbreviations 182 • Annual Report and Accounts • 2018

Abreviaturas

ATM: Automatic Teller Machine CCAA: Câmara de Compensação Automatizada de An- gola (Automated Compensation Chamber of Angola) BAD: Banco Africano de Desenvolvimento CCBG: Comité dos Governadores dos Bancos Centrais BAI: Banco Angolano de Investimentos, S.A. da SADC (Committee of Central Bank Governors of BANC: Banco Angolano de Negócios e Comércio, S.A. SADC)

BCA: Banco Comercial Angolano, S.A.R.L. CCTV: Closed Circuit Television

BCE: Banco Central Europeu CPD: Data Processing Center

BCGTA: Banco Caixa Geral Totta de Angola, S.A.R.L. CI: Investment Committee

BCH: Banco Comercial do Huambo, S.A. CMA: Common Monetary Zone

BCI: Banco de Comércio e Indústria, S.A.R.L. COMEF: Committee on Financial Stability

BDA: Banco de Desenvolvimenro de Angola CPM: Monetary Policy Committee

BESA: Banco Espírito Santo Angola, S.A.R.L. CTSPA: Technical Advice of the Angolan Payment Sys- tem BFA: Banco de Fomento Angola, S.A.R.L. CUA: African Union Commission BC/FT: Branqueamento de capitais e financiamento de terrorismo (Money laundering and terrorist financing) DEE: Department of Economic Studies

BI: Bilhete de Identidade (Identity Card) DES: Department of Statistics

BIC: Banco BIC, S.A. DJU: Legal Department

BIS: Banco Internacional de Pagamentos DMA: Department of Asset Markets

BKI: Banco Kwanza Investimento, S.A. DPS: Department of Heritage and Services

BM: Base Monetária (Monetary Base) DRI: Department of Risk Management

BMA: Banco Millennium Angola, S.A. DSC: Department of Behavioral Supervision

BMF: Banco BAI Micro Finanças, S.A. DSI: Prudential Supervision Department of Financial Ins- titutions BMMOEDA NACIONAL: Base Monetária em Moeda Nacional (Monetary Base in National Currency) DSP: Payment Systems Department

BNA: Banco Nacional de Angola EMIS: Interbank Services Company

BNI: Banco de Negócios Internacional, S.A. EUA: Estados Unidos da América (United States of Ame- rica) BPA: Banco Privado do Atlântico, S.A. FAO: Ease of Liquidity Absorption BPC: Banco de Poupança e Crédito, S.A.R.L. FAO: Food and Agriculture Organization of the United BRICS: Brazil, Russia, India, China and South Africa Nations

BRM: Delegação Regional de Malange (Malange Regio- FCO: Liquidity Lending Facility nal Delegation) FMI: Fundo Menetário Internacional (International Mo- BT: Bilhetes do Tesouro (Treasury Bills) netary Fund)

BVB: Banco Valor, S.A. FNB: Finibanco Angola Abbreviations • 183

GCI: Institutional Communication Office SBA: Standard Bank of Angola, S.A.

ICE: Economic Climate Indicator SCC: Check Compensation Subsystem

INE: National Institute of Statistics SCV: Securities Clearing Service

Inf: Inflation SFA: Angolan Financial System

INF_IR: Irregular Component Present in Inflation SIGMA: Market and Asset Management System

INF_SA: Adjusted Seasonal Component Inflation SIRESS: SADC Regional Electronic Settlement System

INF_SF: Seasonal Component Present in Inflation SNM: Notes and Currency System

INF_TC: Trend and Cyclic Component SOL: Banco Sol

IPC: Consumer Price Index SPA: Angolan Payment System

IPI: Industrial Production Index SPTR: Real Time Payment System

KEVE: Banco Keve, S.A.R.L. SSIF: System of Supervision of Financial Institutions

LUIBOR: Luanda Interbank Offered Rate STC: Credit Transfer Subsystem

Mb/d: one thousand barrels per day mb/d: thousand bar- TBC: Central Bank Securities rels per day TPA: Automatic Payment Terminal MCX: Multicaixa VTB: Banco VTB África, SA MEFMI: Institute of Macroeconomic and Financial Ma- ZEE: Zona Económica Especial (EEZ: Special Economic nagement of Southern and Eastern Africa Zone). MT102 and MT103: These are messages that transfer payments made by banks on behalf of clients and payments to bank clients made by BNA in their own name or from the National Treasury.

MT202: These are messages that transfer payments made by banks on their own behalf to another bank.

OGE: State Budget

OMA: Open Market Operations

OT: Treasury Bonds

PERT: Executive Project for Tax Reform

PIB: Produto Interno Bruto (GDP: Gross Domestic Pro- duct)

PRP: Study Review Panel

ROA: Asset Yield

ROE: Return on Capitals

SADC: Southern African Development Community

SADCBA: SADC Banking Association Av. 4 de Fevereiro nº 151 - Luanda - Angola Caixa Postal 1243 Tel: (+244) 222 679200 - Fax: (+244) 222 339 125 www.bna.ao