FBC Holdings Limited
2012 annual report A thrilling experience FBC of the Falls now redefined
As the masters of service we have redefined what banking is all about by making it possible to use your FBC MasterCard locally and globally.
Now you can access your funds locally and internationally from any of the 33,3 million ATM and Merchants POS available worldwide.
Pay bills, shop, transfer funds and withdraw cash using your FBC MasterCard at any FBC ATM or POS machine.
General lines: +263 4 783204/ 783206 7/ 707057/ 772706/ 797759, Direct: +263 4 761198, Hotline: +263 772 419 693
[email protected] www.fbc.co.zw FBC Bank Limited (Registered Commercial Bank) strength diversity service FBC Holdings Limited 2012 Annual Report
Contents
Group Structure ...... 2 Destiny, Cause and Calling ...... 3 General Information ...... 4 Financial Highlights ...... 6 Chairman’s Statement ...... 7 Group Chief Executive’s Report ...... 10 Directors’ Report ...... 14 Board of Directors ...... 17 Corporate Governance ...... 19 Independent Auditor’s report ...... 24 Consolidated and Company Statements of Financial Position ...... 25 Consolidated Statement of Comprehensive Income ...... 27 Consolidated Statement of Changes in Equity ...... 28 Consolidated Statement of Cash Flows ...... 29 Notes to the Consolidated Financial Statement...... 30 97 Shareholders’ Information ...... 98 Notice of AGM ...... 99 Proxy Form ...... 101
1 FBC Holdings Limited 2012 Annual Report
Group Structure
Shareholding 31 December 31 December 2012 2011
FBC Bank Limited 100% 100% (Registered Commercial Bank)
FBC Reinsurance Limited 100% 100%
FBC Building Society 60% 60%
FBC Securities (Private) Limited 100% 100%
100% 100%
95% 95%
58% 58%
2 FBC Holdings Limited 2012 Annual Report
Destiny ;VIL(MYPJH»Z[YLUKZL[[LYZPUÄUHUJPHSHUKYPZRTHUHNLTLU[
Cause To secure individual and corporate wealth.
Calling To create value through a passionate commitment to partnerships.
3 FBC Holdings Limited 2012 Annual Report
General Information
9LNPZ[LYLK6MÄJL Independent Auditor 6th Floor, FBC Centre PricewaterhouseCoopers Chartered Accountants (Zimbabwe) 45 Nelson Mandela Avenue )\PSKPUN5V(Y\UKLS6MÄJL7HYR P.O. Box 1227, Harare Norfolk Road Zimbabwe Mount Pleasant Telephone : 263 – 04 – 700312 P.O. Box 453, Harare : 263 – 04 – 797770 Telephone :263 04 338 362 8 : 263 – 04 – 708071/2 Fax :263 04 338 395 Telex : 24512 FIRSTB ZW Swift : FBCPZWHA Attorneys Fax : 263 – 04 – 700761 Dube Manikai & Hwacha Legal Practitioners E mail : [email protected] Eastgate Building Web site : http://www.fbc.co.zw 6th Floor, Goldbridge, Southwing Corner Sam Nujoma Street and Robert Mugabe Road Transfer Secretaries P.O. Box CR 36, Cranborne, Harare First Transfer Secretaries (Private) Limited Telephone : 263 – 04 – 780351/2 1 Armagh Avenue, Eastlea P.O. Box 11 Harare Costa & Madzonga Legal Practioners Telephone : 263 04 782869 4th Floor, Three Anchor House, Mobile : 263 772146157/8 54 Jason Moyo Avenue P.O. Box CY 1221, Causeway, Harare Telephone : 263 4 790618 : 263 4 790668 Fax : 263 4 737575
FBC Bank Limited Masvingo Branch Belgravia Private Banking Branch FBC House 2 Lanark Road, Belgravia, Harare 179 Robertson Street, Masvingo P.O. Box A852, Avondale, Harare Telephone : 263 039 62671 Telephone :263 04 251975 : 263 039 62821 :263 04 251976 : 263 039 62912 Fax :263 04 253556 Fax : 263 039 65876
Chinhoyi Branch Nelson Mandela Avenue Branch Stand 5309 Magamba Way Nelson Mandela Avenue P.O. Box 1220 P.O. Box BE 818, Belvedere, Harare Chinhoyi Telephone : 263 04 750946 Telephone :263 067 24086 : 263 04 753608 Fax :263 067 26162 Fax : 263 04 775395
Jason Moyo Avenue Branch Southerton Branch Asbestos House /PNOÄLSK1\UJ[PVU:OVW 108 Jason Moyo Avenue P.O. Box St495, Southerton, Harare P.O. Box 2910, Bulawayo Telephone : 263 04 759712 Telephone : 263 09 76079 : 263 04 759392 : 263 09 76371 Fax : 263 04 759567 Fax : 263 09 67536 Zvishavane Branch Gweru Branch 98 Robert Mugabe Way 71 Sixth Street P.O. Box 91, Zvishavane P.O. Box 1833, Gweru Telephone : 263 051 2176 Telephone : 263 054 26491 : 263 051 2177 : 263 054 26493/7 Fax : 263 051 3327 Fax : 263 054 26498 Mutare Branch FBC Centre Branch 50 B Herbert Chitepo Avenue 45 Nelson Mandela Avenue P.O. Box 2797, Mutare P.O. Box 1227, Harare Telephone : 263 020 62586 Telephone : 263 04 700312 : 263 020 62114 : 263 04 797770 Fax : 263 020 60543 Fax : 263 – 04 – 7008071/2 Samora Machel Avenue Branch Kwekwe Branch Old Reserve Bank Building 44a/b Robert Mugabe Way 76 Samora Machel Avenue P.O. Box 1963, Kwekwe P.O. Box GD 450, Greendale, Harare Telephone : 263 055 24116 Telephone : 263 04 700372 4 : 263 055 24160 : 263 04 700044 Fax : 263 055 24208 Fax : 263 04 793799 FBC Holdings Limited 2012 Annual Report
General Information (continued)
Victoria Falls Branch Msasa Branch Shop 4 Galleria De Falls 104 Mutare Road P.O. Box 225, Victoria Falls P.O. Box AY1 Amby, Msasa, Harare Telephone :263 013 45996/5 Telephone :263 04 446806 Fax :263 013 5995/6 Fax :263 051 3327
FBC Reinsurance Limited
/LHK6MÄJL )\SH^H`V6MÄJL 4th Floor, FBC Centre 1st Floor, Asbestos House 45 Nelson Mandela Avenue Jason Moyo Avenue P.O. Box 4282, Harare P.O. Box 2199, Bulawayo Telephone : 263 04 772703/7 Telephone : 263 09 888344 Fax : 263 04772701 Fax : 263 09 888560
FBC Building Society FBC Centre Branch Leopold Takawira Branch 45 Nelson Mandela Avenue FBC House,Fidelity House P.O. Box 4041, Harare 113 Leopold Takawira Telephone : 263 04 707057 P.O. Box 4041, Harare Fax : 263 04 783440 Telephone : 263 04 756811 6 Fax : 263 04 772747 Mutare Branch FBC House Gweru Branch P.O. Box 1224, Mutare Impala Seeds Building Telephone : 263 020 65894 69B 6th Street : 263 020 65897/8 P.O. Box 1345, Gweru Fax : 263 020 66723 Telephone : 263 054 226189 : 263 054 223586 Masvingo Branch Fax : 263 054 226189 FBC House 179 Robertson Street, Masvingo Bulawayo Branch Telephone : 263 039 62671/821/912 FBC House FBC House Fax : 263 039 65876 Corner Robert Mugabe Way and 11th Avenue, Bulawayo Telephone : 263 09 79504 : 263 09 68679 : 263 09 64547 : 263 09 69925/48 Fax : 263 09 74069
Eagle Insurance Company (Private) Limited
Harare Branch Bulawayo Branch Eagle House 4th Floor, LAPF House 105 Jason Moyo Avenue, Harare Corner 8th Avenue and Jason Moyo Street, Bulawayo Telephone : 263 04 708212 Telephone : 263 09 71791/4 Fax : 263 04 797135 Fax : 263 09 76224
Mutare Branch Manica Chambers 2nd Avenue Road, Mutatre Turnall Holdings Limited Telephone : 263 020 65723 Fax : 263 020 63079 5 Glasglow Road, Workington, Harare : 263 020 65722 Telephone : 263 04 754625/8 Fax : 263 04 754629
FBC Securities (Private) Limited Microplan Financial Services (Private )Limited
2nd Floor, Old Reserve Bank Building 4th Floor, FBC House 76 Samora Machel Avenue, Harare 113 Leopold Takawira Street, Harare Telephone : 263 04 700928 Telephone : 263 04 772745 : 263 04 700373 : 263 04 772729 5 FBC Holdings Limited 2012 Annual Report
Financial Highlights For the year ended 31 December 2012
31 Dec 12 31 Dec 11 US$ US$
Consolidated statement of comprehensive income 7YVÄ[ILMVYLPUJVTL[H_ 7YVÄ[MVY[OL`LHY
*VUZVSPKH[LKZ[H[LTLU[VMÄUHUJPHSWVZP[PVU Total equity 88 152 633 74 218 832 Total assets 392 054 851 279 592 710
Share statistics Shares in issue actual (m) 592 592 Shares in issue weighted (m) 536 546 Basic earnings per share (US cents) 2.42 1.78 Diluted earnings per share (US cents) 2.42 1.78 Headline earnings per share (US cents) 2.39 1.84 Dividend per share ordinary (US cents) 0.422 Closing share market price (US cents) 7.5 6.5
Ratios Return on shareholders equity 18% 17% Cost to income ratio 77% 75%
6 FBC Holdings Limited 2012 Annual Report
Chairman’s Statement
Financial Highlights
.YV\WWYVÄ[ILMVYLPUJVTL[H_\W [V<: TPSSPVUMYVT<: TPSSPVU
.YV\WWYVÄ[MVY[OL`LHYPUJYLHZLKI` [V<: TPSSPVUMYVT<: TPSSPVU
*VZ[[VPUJVTLYH[PV
)HZPJLHYUPUNZWLYZOHYLPUJYLHZLK[V<:JLU[ZWLYZOHYLMYVT <:JLU[ZWLYZOHYL
;V[HSHZZL[ZOH]LNYV^UI` [V<: TPSSPVUMYVT<: TPSSPVU
:OHYLOVSKLYZ»LX\P[`PUJYLHZLKI` [V<: TPSSPVUMYVT<: TPSSPVU
5L[HZZL[]HS\LWLYZOHYL<:JLU[Z<:JLU[Z
Herbert Nkala (Chairman)
Financial performance review ;OL.YV\WJOHYNLK<: TPSSPVUMVYPTWHPYTLU[HSSV^HUJL ;OL .YV\W HJOPL]LK WYVÄ[ ILMVYL PUJVTL [H_ VM <: VU ÄUHUJPHS HZZL[Z PU SPUL ^P[O [OL JOHSSLUNPUN VWLYH[PUN million registering a growth of 8% over last year’s performance environment, characterized by an illiquid market, short term VM<: TPSSPVU(S[OV\NO[OL.YV\WPZILULÄ[PUNMYVTP[Z credit facilities and prolonged cash conversion cycles. The KP]LYZPÄLK I\ZPULZZ TVKLS [OL Z\IK\LK WLYMVYTHUJL VM Group places emphasis on adequate impairment charging the manufacturing business and stock broking unit diluted and proper, prudent risk management to create value. the sterling performance of other subsidiaries. All the Group businesses recorded positive performance except the stock ;OL .YV\W»Z Z[H[LTLU[ VM ÄUHUJPHS WVZP[PVU NYL^ I` broking subsidiary which registered a loss. The results [V<: TPSSPVUHYLÅLJ[PVUVM[OLPUJYLHZLKZ\JJLZZPU were achieved against a backdrop of an illiquid market, deposits mobilization and other customer acquisitions. characterized by high interest rates and weakening credit quality. Operating environment Zimbabwe’s Gross Domestic Product grew by 4.4% ;OL.YV\WYLJVYKLKH[V[HSPUJVTLVM<: TPSSPVU in 2012, a moderate growth, as the macro economic above last year, largely driven by net interest income, fee and fundamentals were dented by erratic rainfall patterns, lack of commission income and earned insurance premium. The Z\MÄJPLU[L_[LYUHSÄUHUJPHSHUK[LJOUPJHSZ\WWVY[JVU[PU\LK increase in revenues is in line with the increase in customer weaknesses in the global economy and domestic structural acquisitions and increased activity on their accounts. constraints. The continued shifting of policy and the regulatory framework is keeping potential investors on the The Group’s cost to income ratio moved from 75% in 2011 fence, despite positive advancements on the political front. to 77% due to expenses incurred to increase capacity and Foreign direct investment has remained elusive, with credit customer acquisitions. The linkage of revenues to expenses lines on offer being solicited at high premiums. was however less pronounced as revenues grew by 19% whilst overheads increased by 23%. The Group will continue +LZWP[L H WVZP[P]L V\[[\YU VU HUU\HS PUÅH[PVU H[ I` [VJOHUULSZPNUPÄJHU[YLZV\YJLZ[VTHYRL[PUNIYHUKPUNHUK 31 December 2012 against projections of 4%, the medium information technology to achieve sustainable long term to long term trends remain linked to developments in competitiveness. international oil prices, United States of America dollar to South African rand exchange rates, import tariffs and the level of aggregate demand in the economy. 7 FBC Holdings Limited 2012 Annual Report
Chairman’s Statement (continued)
Financial sector overview FBC Bank Limited!<: TPSSPVUHNHPUZ[HYLX\PYLTLU[VM Under the multicurrency system, the stability of the <: TPSSPVU;OPZ^HZKPZJV\U[LKMYVTHNYVZZJHWP[HSVM country’s banking sector has remained vulnerable to liquidity <: TPSSPVUHM[LYHSSV^PUNMVYSLUKPUN[VYLSH[LKWHY[PLZ conditions. Loans and advances in the market have remained FBC Building Society! <: TPSSPVU HNHPUZ[ H predominantly short term in nature and expensive, catering YLX\PYLTLU[VM<: TPSSPVU;OPZ^HZKPZJV\U[LKMYVTH MVY [OL ÄUHUJPUN VM ^VYRPUN JHWP[HS HNHPUZ[ T\JO ULLKLK NYVZZJHWP[HSVM<: TPSSPVUHM[LYHSSV^PUNMVYSLUKPUN[V capital investments. related parties. Microplan Financial Services (Private) Limited! <: ;V[HSTHYRL[KLWVZP[ZH[<: IPSSPVUPUJYLHZLKI` TPSSPVUHNHPUZ[HYLX\PYLTLU[VM<: MYVT <: IPSSPVU PU ^OPSL SVHUZ HUK HK]HUJLZ FBC Reinsurance Limited! <: TPSSPVU HNHPUZ[ H PUJYLHZLK I` [V <: IPSSPVU MYVT <: IPSSPVU YLX\PYLTLU[VM<: Adverse macro economic developments presented potential Eagle Insurance Company (Private) Limited! <: liquidity challenges to the sector. However, under the vigilant TPSSPVUHNHPUZ[HYLX\PYLTLU[VM<: Z\WLY]PZPVUVM[OL9LZLY]L)HUR^LHYLJVUÄKLU[[OH[[OL FBC Securities (Private) Limited!<: HNHPUZ[H sector will remain safe and sound. YLX\PYLTLU[VM<:
Regulatory environment and capitalisation FBC Building Society traded itself into compliance with the In mid 2012, the regulatory authorities announced major +LJLTILYJHWP[HSYLX\PYLTLU[VM<: TPSSPVUVU reviews in capital requirements for banking institutions and 28 February 2012, and as part of the FBC Holdings Limited insurance companies. re capitalisation plan, the Society will merge with FBC Bank 3PTP[LKPU[OLÄYZ[OHSMVM The capital requirements for banking institutions were reviewed as follows: The Group’s recapitalization plan to meet the 30 June 2013 and 30 June 2014 minimum capital requirements was *VTTLYJPHSIHURZ!<: TPSSPVUMYVT<: TPSSPVU submitted to, and accepted by the Central Bank. )\PSKPUNZVJPL[PLZ!<: TPSSPVUMYVT<: TPSSPVU 4VUL`SLUKPUNPUZ[P[\[PVUZ!<: MYVT<: The Group’s banking subsidiaries implemented Basel II on 1 January 2013, in line with the Reserve Bank of Zimbabwe Banking institutions were required to comply with 25% of the YLX\PYLTLU[Z ;OL PTWSLTLU[H[PVU PZ ILPUN ÄUL[\ULK HUK new capital requirement by 31 December 2012, 50% by improved to match higher standards. 30 June 2013, 75% by 31 December 2013 and 100% by 30 June 2014. Share price performance Positive trading in equities, especially in the last quarter of The capital requirements for insurance companies were the year, saw the FBCH share price gain 15.4% to 7.5 US reviewed as follows: cents, against a 4.5% gain by the overall industrial index. Subsequently, FBCH’s market capitalization ended the year :OVY[[LYTYLPUZ\YHUJL!<: TPSSPVUMYVT<: Z[YVUNLY H[ <: TPSSPVU H [YLUK ^OPJO ^L HU[PJPWH[L :OVY[[LYTPUZ\YHUJL!<: TPSSPVUMYVT<: will be carried through in 2013. The market capitalization of -)*/VSKPUNZ3PTP[LKJVU[PU\LZ[VILZPNUPÄJHU[S`ILSV^[OL Insurance companies are required to comply with 50% of .YV\W»ZZOHYLOVSKLYZLX\P[`VM<: TPSSPVU;OPZWVZP[PVU the new capital required by 30 June 2013 and 100% by 30 is expected to reverse with liquidity improvement in the June 2014. economy.
The FBC Holdings Limited subsidiaries held the following capital as at 31 December 2012:
8 FBC Holdings Limited 2012 Annual Report
Chairman’s Statement (continued)
Directorate Dividend Mr Stanley Kudenga, Managing Director of FBC Reinsurance In view of the need to preserve income in order to achieve the resigned from the Group effective 1 March 2012 after new minimum regulatory capital requirements announced by having served the Group for more than ten years. Mr Kleto the Reserve Bank of Zimbabwe on 31 July 2012, the Board Chiketsani, a seasoned insurance practitioner with over of Directors proposed the non payment of a dividend. 20 years experience was appointed Managing Director of FBC Reinsurance taking over from Mr Kudenga. Mr Kleto Outlook Chiketsani was appointed to the Board of FBC Holdings We remain optimistic that the country will have peaceful Limited on 3 July 2012. elections in 2013, which will result in macro economic stability and increased foreign direct investment, leading to improved Mrs Chipo Mtasa was appointed to the Board of FBC liquidity. The Group is well poised to exploit the new Holdings Limited on 3 July 2012. Mrs Mtasa is a Chartered environment to grow shareholders value. Accountant (Zimbabwe) with extensive experience in strategic management. I welcome Mrs Mtasa to the Group Appreciation and look forward to her wise guidance. I would like to convey my profound gratitude to our valued clients and other stakeholders for their continued support and e Commerce JVUÄKLUJLPU[OL-)*IYHUK4`OLHY[MLS[NYH[P[\KLPZHSZV The operating landscape continues to demand innovative extended to all non executive directors for their unwavering solutions in the face of a well informed and technologically support and guidance through the years. The Group savvy customer. The Group’s e Commerce thrust is starting Chief Executive, management team and staff members’ [V WH`VMM ^P[O UL^ YL]LU\L JOHUULSZ Z[HY[PUN [V ÅV^ PU[V professionalism and dedication to their work underpins the [OLMLLPUJVTLIHZLKYP]LUI`PUJYLHZLK[YHUZHJ[PVU[YHMÄJ YLZPSPLUJLVM[OL.YV\WHUK0HTJVUÄKLU[PU[OLPYJHWHIPSP[` FBC will exploit its industry knowledge as well as create to deliver sustained stakeholder value. partnerships to maintain leadership in technology driven ÄUHUJPHSZLY]PJLZ
Corporate social investment Through a vibrant corporate social responsibility programme, Herbert Nkala the FBC Holdings Group has continued to participate in Group Chairman alleviating social challenges that face the communities we 21 March 2013 serve. This is in line with the Group’s mandate to give back to the societies it operates in, as a responsible corporate JP[PaLU -)* /VSKPUNZ .YV\W PU]LZ[LK H [V[HS VM <: 000 to charity organizations and various noble causes across the nation. The Group remains committed to support LK\JH[PVUÄUHUJPHSPUJS\ZPVULU[LYWYPZLKL]LSVWTLU[ZWVY[ the arts and health sectors as part of its corporate social responsibility.
9 FBC Holdings Limited 2012 Annual Report
Group Chief Executive’s Report
;OL .YV\W»Z Z[H[LTLU[ VM ÄUHUJPHS WVZP[PVUPUJYLHZLKI` [V<: TPSSPVUMYVT<: TPSSPVUVU[OLIHJR of improved brand acceptance by the market resulting in increased customer acquisitions.
John Mushayavanhu (Group Chief Executive)
I am pleased to present to you FBC The Group net interest income contribution to total Group income improved to 27% from 22% achieved last year as a /VSKPUNZ»H\KP[LKÄUHUJPHSZ[H[LTLU[ZMVY result of increased lending and an improvement in the cost the year ended 31 December 2012. The of funding. Loans and advances to customers recorded Group continues to exploit the inherent H ZPNUPÄJHU[ NYV^[O VM ^OPSZ[ [OL JVZ[ VM M\UKPUN ^HZ synergies and potential embedded in its better than last year by 1.3%. As a result, the Group’s net diverse business model. PU[LYLZ[PUJVTLPUJYLHZLKI` [V<: TPSSPVUMYVT[OL <: TPSSPVUH[[HPULK[OLWYL]PV\Z`LHY Group performance The Group fees and commission income was almost static at It is pleasing to note that the Group continues to deliver positive performance despite the challenges associated with a <: TPSSPVUYLJVYKPUNSLZZ[OHUH NYV^[O;OPZ^HZ primarily due to a reduction in the pricing of some services in recovering economy. The Group’s various businesses continue an effort to ameliorate our customers’ service charge burden to expand their activities in response to improving market and to stimulate transactions on our electronic service delivery opportunities. The contributions from the various subsidiaries channels. The contribution to total Group income by this have consistently been on a positive trend with the exception revenue line, decreased to 28% from 33% last year. of FBC Securities (Private) Limited.
Revenues from the insurance businesses registered a marked ;OL.YV\W[V[HSPUJVTLH[<: TPSSPVUYLNPZ[LYLKHNYV^[O of 19% over last year buoyed by strong performance in the PUJYLHZLVM [V<: TPSSPVUHZHYLZ\S[VMHNYV^[O in market share. The contribution of net earned insurance IHURPUN HUK PUZ\YHUJL Z\IZPKPHYPLZ .YV\W WYVÄ[ ILMVYL premium to total Group income increased to 20% from [H_ PUJYLHZLK I` [V <: TPSSPVU ^LPNOLK KV^U I` 14%. The insurance subsidiaries continue to consolidate higher overheads, incurred mainly to enhance the Group’s underwriting of quality business, minimising claims, growing competitiveness through implementing technology driven the customer base and improving risk management. business solutions, integration of Information Technology (“IT”) platforms and brand positioning. All the subsidiaries, except the stock broking business which recorded a loss, contributed ;OL .YV\W PTWHPYTLU[ HSSV^HUJL H[ <: TPSSPVU PZ satisfactory in view of the liquidity challenges and the absence [V[OL.YV\W»ZWYVÄ[HIPSP[`^P[O[OLTHU\MHJ[\YPUNI\ZPULZZ» of appropriately structured funding in the economy. The JVU[YPI\[PVUILPUNZPNUPÄJHU[S`J\Y[HPSLKHZHYLZ\S[VMHJOHUNL liquidity constraints and high interest rates subsisting in the in strategic focus. economy are denting the improvement of customers’ credit
10 FBC Holdings Limited 2012 Annual Report
Group Chief Executive’s Report (continued)
X\HSP[` ;OL .YV\W»Z [V[HS PTWHPYTLU[ HSSV^HUJL H[ <: FBC Building Society million is considered adequate, with most of the loan book ;OL)\PSKPUN:VJPL[`HJOPL]LKHUL[Z\YWS\ZVM<: TPSSPVU secured by tangible security. representing a 90% increase from the 2011 net surplus VM <: TPSSPVU ;OL \UH]HPSHIPSP[` VM SVUN [LYT ÄUHUJPUN The Group’s cost to income ratio moved from 75% to 77% in the local market continues to hinder further prospects of as the Group spent more to enhance competitiveness and advancing the Building Society’s business objectives. The branding in the long term. The Group will continue to invest in )\PSKPUN:VJPL[`OV^L]LYTHUHNLK[VHJJLZZH<: TPSSPVU technology with a view to reduce the cost to income ratio to credit facility from Shelter Afrique for direct mortgage lending. Z\Z[HPUHISLSL]LSZ;OL.YV\W»ZZ[H[LTLU[VMÄUHUJPHSWVZP[PVU The Society loan book registered a 93% growth driven mostly PUJYLHZLK I` [V <: TPSSPVU MYVT <: TPSSPVU by mortgages from the Society’s housing projects. The Society on the back of improved brand acceptance by the market completed and sold 202 high density houses, 88 medium resulting in increased customer acquisitions. density houses and 26 cluster units in the year under review. In 2013, the Society intends to undertake a high density housing All the Group’s subsidiaries with prescribed capital project in Kwekwe’s Mbizo suburb where 160 units are to be requirements are adequately capitalised in line with regulatory I\PS[ ;OL :VJPL[`»Z JHWP[HS IHZL Z[HUKZ H[ <: TPSSPVU guidelines, save for the Society which complied with the HNHPUZ[ H YLN\SH[VY` TPUPT\T JHWP[HS VM <: TPSSPVU ;OL minimum regulatory capital as at the end of February 2013. :VJPL[`JVTWSPLK^P[O[OL<: TPSSPVUTPUPT\TYLN\SH[VY` capital as at the end of February 2013, from normal trading FBC Bank Limited surpluses. ;OL )HUR YLJVYKLK H WYVÄ[ ILMVYL PUJVTL [H_ VM <: TPSSPVUTHPU[HPUPUNP[ZJVU[YPI\[PVU[V[OL.YV\W»ZWYVÄ[ILMVYL Microplan Financial Services (Private) Limited [H_ H[ ;V[HS )HUR PUJVTL ^HZ <: TPSSPVU ^P[O ;OL.YV\W»ZTPJYVÄUHUJLI\ZPULZZJVU[YPI\[LK<: TPSSPVU the contribution of net interest income increasing to 49% [V [OL V]LYHSS .YV\W WYVÄ[ ILMVYL [H_ YLWYLZLU[PUN H from 42% recorded last year. This was driven by an increase NYV^[OPUP[ZÄYZ[M\SS`LHYVMVWLYH[PVU4PJYVWSHU»ZI\ZPULZZ PU[OL)HUR»ZSLUKPUNWVY[MVSPVI` [V<: TPSSPVU success is attributed to deliberate efforts towards new product 5VUM\UKLKPUJVTLYLTHPULKHSTVZ[Z[H[PJH[<: TPSSPVU development, coupled with a robust risk management as the Bank eased pricing on some services in an effort to framework. The business unit continues to aggressively promote e channel usage in the long term. The Bank has pursue synergistic opportunities across the Group, including YLJVYKLKZPNUPÄJHU[Z\JJLZZ^P[O[OPZPUP[PH[P]LHZHZPNUPÄJHU[ access to various service distribution channels, access to new number of our customers have now switched to e channel business development, robust risk management guidance, transacting platforms. The Bank also successfully completed and new business development. The Group will continue to MasterCard acquiring, a programme that enables visitors and Z\WWVY[[OL\UP[PUP[ZLMMVY[Z[VILJVTLHZPNUPÄJHU[WSH`LY local MasterCard holders to transact on FBC Bank ATM’s and PU [OL HK]HUJLTLU[ VM ÄUHUJPHS PUJS\ZPVU HUK HSSL]PH[PVU VM POS machines countrywide. poverty in previously marginalised communities.
;OL )HUR»Z JHWP[HS H[ <: TPSSPVU HUK <: TPSSPVU FBC Securities (Private) Limited after deducting exposures to insiders, was well above the ( Z\IK\LK WLYMVYTHUJL VU [OL LX\P[PLZ THYRL[ PU [OL ÄYZ[ TPUPT\TYLN\SH[VY`JHWP[HSYLX\PYLTLU[VM<: TPSSPVUHZ three quarters of the year under review impacted negatively at 31 December 2012. The Bank has a clear and regulatory on the unit’s performance. Renewed foreign interest in the last authority approved capitalization plan to comply with the quarter, however, saw traded volumes increasing, giving hope <: TPSSPVUJHWP[HSI` for the future. The stock broking industry witnessed a number of closures and suspensions owing to non compliance issues. ;OL)HURLUNHNLKWYVMLZZPVUHSJVUZ\S[HUJ`ÄYT274.PU[OL I am glad to report that FBC Securities met all regulatory implementation of Basel II and managed to meet the Reserve requirements to the satisfaction of the authorities and its going Bank of Zimbabwe’s Basel II compliance deadline of 1 January concern status is safe and sound. During the year 2012 the ;OL)HURPZJ\YYLU[S`ÄUL[\UPUN[OLWYVJLZZPUHULMMVY[ \UP[ YLJVYKLK H SVZZ VM <: :[YH[LNPJHSS` [OL \UP[ to gravitate towards the non standardised format. remains an important element to the Group through which Z`ULYNPZ[PJILULÄ[ZJVU[PU\L[VILYLHSPZLK.VPUNMVY^HYK0 The Bank maintained its A rating from Global Credit Rating am certain that new strategies under employment will begin Agency in 2012. 11 FBC Holdings Limited 2012 Annual Report
Group Chief Executive’s Report (continued)
to bear fruits and should see the unit contributing meaningfully underwriting discipline and superior claim settlement service to to the Group. These include a leaner, more focused team, an clients. The Group believes the future of Eagle Insurance also aggressive pursuit of the foreign market and assisting local lies in new product development, evidenced by the company’s companies in capital raising and restructuring. PU[YVK\J[PVUVM[OL/VZWP[HS*HZO7SHUWYVK\J[HÄYZ[PU[OL Zimbabwean market. The company also leads the insurance FBC Reinsurance Limited (“FBC Re”) PUK\Z[Y`I`ILPUN[OLÄYZ[PUZ\YHUJLJVTWHU`[VKL]LSVWM\SS` FBC Re remains the most liquid reinsurer in Zimbabwe implemented web based IT systems to drive e commerce accounting for 60% of reinsurers’ liquid assets as at the fourth service delivery. quarter 2012 as per the Insurance and Pension Commission (“IPEC”) Report. By the same measure, it is now the most Turnall Holding Limited (“Turnall”) WYVÄ[HISL YLPUZ\YLY PU APTIHI^L ^P[O HU ( YH[PUN I` [OL Turnall’s performance was lower than the previous year, but Global Credit Rating Agency (“GCR”). This is the highest credit YLTHPUZWVZP[P]L;OLJVTWHU`»Z[\YUV]LYVM<: TPSSPVU rating a Zimbabwean insurance company can obtain from ^HZ SV^LY [OHU [OL WYL]PV\Z `LHY ^P[O WYVÄ[ ILMVYL GCR, taking into consideration country risk. PUJVTL[H_KLJYLHZPUNMYVT<: TPSSPVU[V<: TPSSPVU due to a combination of the unavailability of liquidity and high ;OLJVTWHU`YLJVYKLKHWYVÄ[ILMVYLPUJVTL[H_VM<: interest rates in the market. The business changed its model million representing a 49% growth from the previous year’s [VLTWOHZPaLJHZOÅV^THUHNLTLU[HUKJVZ[JVU[YVSYH[OLY performance. Market share of net premium income grew from than growing volumes. 14% in 2011 to 17% in 2012. The company’s capital position Z[HUKZH[<: TPSSPVU^OPJOPZ HIV]L[OLWYLZJYPILK The focus on improving working capital management resulted minimum capital requirement. in a reduction in sales and production levels, negatively PTWHJ[PUNVUTHYNPUZHUKWYVÄ[HIPSP[` ;OL JVTWHU`»Z WYVÄ[HIPSP[` PZ \UKLYWPUULK I` H Z[YVUN underwriting discipline coupled with sound risk management The company has continued to believe in strategically principles as well as the fastest claims settlement turnaround positioning the business through a capital expenditure program time in the market. to enhance both the technology and product offering for the future. To this end the company will commission a state of the FBC Re’s superior claim settlement service was demonstrated art concrete tile plant and a pavers production line in June PUMVSSV^PUN[OLÄYLSVZZH[62APTIHI^L;OLJVTWHU` 2013. ^HZ[OLÄYZ[[VZL[[SLP[ZZOHYLVM[OLSVZZJVTTP[TLU[KLZWP[L the fact that FBC Re had the largest exposure on that loss, with >L HYL JVUÄKLU[ [OH[ [OL JVUJYL[L [PSL WSHU[ ^PSS LUHISL \Z a total commitment of over 30% of the total loss. The company to compete in the high end segment of the housing market continues to manage its exposures through retrocession and offer price competitive products on the back of improved arrangements with strong international re insurers. technology and machinery.
Eagle Insurance Company (Private) Limited Service delivery Following its acquisition by the Group last year, the company’s To continually provide quality service, convenience and WYVÄ[HIPSP[` OHZ PTWYV]LK YLJVYKPUN H WYVÄ[ ILMVYL PUJVTL savings to our clients, the Group has invested in technology [H_VM<: TPSSPVU \WMYVT[OLWYL]PV\Z`LHY;OL and continues to explore emerging technologies. It is also company’s market share in terms of net premium income is committed to investing in the upgrading of equipment in order up to 5.8% from 3.7% in 2011 as at the fourth quarter 2012. to enhance the FBC customer service experience. ;OLJVTWHU`»ZJHWP[HSWVZP[PVUZ[HUKZH[<: TPSSPVU^OPJO PZ ZPNUPÄJHU[S` OPNOLY [OHU [OL WYLZJYPILK TPUPT\T JHWP[HS Risk management YLX\PYLTLU[ VM <: TPSSPVU I` `LHY ;OL .YV\W The Group maintains a strong risk management culture continues to support and nurture Eagle Insurance which supported by a risk philosophy which states that ‘everyone is was acquired as a loss making business in early 2011. The a risk manager’. Policies and procedure manuals are regularly Group will continue to support Eagle Insurance in its efforts to reviewed to ensure that they remain relevant to conditions develop sound risk management principles as well as a strong prevailing in the operating environment and are in conformity with best practices. The Group, through its Enterprise Wide
12 FBC Holdings Limited 2012 Annual Report
Group Chief Executive’s Report (continued)
Risk Management frame work, conducts stress tests to Product development assess the vulnerability of the Group against severe market FBC Holdings believes that novelty and awareness are conditions. Proactive measures are undertaken to address necessary ingredients to success in a competitive and fast any undesirable outcomes from the stress tests. In addition, changing economic landscape. Technologies like the mobile the full implementation of Basel II standards is expected to phone continue to avail major opportunities in the distribution promote stronger risk management practices which ensure VM ÄUHUJPHS HUK PUMVYTH[PVU ZLY]PJLZ (Z H .YV\W ^L OH]L that the Group balances its risks and rewards. Management embraced these technological advancements through our and Board Committees which form part of the risk governance e –Commerce drive and have in the past launched Mobile structure across the Group, provide continuous oversight on Moola, SMS Alerts and the Hospital Cash Plan among other overall risks. technologically driven products. We continue to strive to employ technology to unlock the latent potential amongst the Human resources unbanked. The Bank has continued to roll out MasterCard Employee relations continue to be positive and healthy and products since we secured membership. This association this has been sustained through employee participation, with MasterCard and our e Commerce drive continues to recognition and commitment to the Group and its value SL]LYHNL[OL-)*IYHUKPU[V[OLTVYLHMÅ\LU[ZLNTLU[Z^OPSZ[ system. The Group retained its key staff members over the extending convenience and quality banking services to our year through concerted employee retention programmes clients. as well as initiatives to improve employee engagement and talent management. The employee engagement levels in 2012 Marketing and public relations improved over prior year levels. Talent management, employee The FBC brand has risen in stature during the course of the engagement, retention and performance management remain year and continues to be regarded highly in the market place. the Group’s human capital management focus as it endeavours Various customer awareness initiatives have been undertaken to have more engaged and highly productive employees. It to keep the public informed of new products and pertinent is expected that the conducive human capital management developments within the Group. fundamentals and initiatives will be sustained going forward. Appreciation Information technology and e Commerce As always, my sincere gratitude is extended to our valued The operating landscape continues to demand innovative and loyal customers who have demonstrated their well placed solutions in the face of a well informed and technologically JVUÄKLUJLPU\ZV]LY[OL`LHYZ;OLPYZ\WWVY[JVU[PU\LZ[V savvy customer. The Group’s e Commerce thrust is starting propel us to achieve even more. I wish to thank the FBC team [VWH`VMM^P[OUL^YL]LU\LJOHUULSZZ[HY[PUN[VÅV^PU[V[OL comprising the Board of Directors, Management and Staff for MLLPUJVTLIHZLKYP]LUI`PUJYLHZLK[YHUZHJ[PVU[YHMÄJ;OL their continued support. Group has enhanced its capacity to serve more customers more conveniently with the current infrastructure, hence increased productivity. The high mobile phone penetration rate should see the Group leverage the channel to enter new segments with technology driven products and services at John Mushayavanhu a competitive cost. Strategic partnerships are a key factor Group Chief Executive PU LZ[HISPZOPUN ÄUHUJPHS YLHJO ^OPJO LUZ\YLZ ]PHISL ÄUHUJPHS 21 March 2013 inclusivity, in an increasingly competitive industry which mobile network operators have also entered with vigour and enthusiasm. FBC will exploit its industry knowledge as well as create partnerships to maintain leadership in technology KYP]LUÄUHUJPHSZLY]PJLZ
13 FBC Holdings Limited 2012 Annual Report Directors’ Report
@V\YKPYLJ[VYZOH]LWSLHZ\YLPUZ\ITP[[PUN[OLPYUPU[OHUU\HSYLWVY[HUKH\KP[LKÄUHUJPHSZ[H[LTLU[ZMVY[OLÄUHUJPHS`LHYLUKLK 31 December 2012, for FBC Holdings Limited.
1 ACTIVITIES AND INCORPORATION
FBC Holdings Limited (‘’the Company’’) and its subsidiaries (together “the Group”) are incorporated and domiciled in Zimbabwe. The Group comprises four wholly owned subsidiaries and three subsidiaries controlled 60%, 58% and 95%.The Group, [OYV\NOP[ZZ\IZPKPHYPLZWYV]PKLZH^PKLYHUNLVMJVTTLYJPHSIHURPUNTVY[NHNLÄUHUJPUNYLPUZ\YHUJLZOVY[[LYTPUZ\YHUJL Z[VJRIYVRPUNHUKV[OLYYLSH[LKÄUHUJPHSZLY]PJLZHUKHSZVTHU\MHJ[\YLZWPWLZHUKYVVÄUNZOLL[Z
2 AUTHORISED AND ISSUED SHARE CAPITAL
;OLH\[OVYPZLKZOHYLJHWP[HSVM[OL*VTWHU`^HZ VYKPUHY`ZOHYLZVMHUVTPUHS]HS\LVM<: LHJOHZH[ +LJLTILY;OLPZZ\LKHUKM\SS`WHPKVYKPUHY`ZOHYLZYLTHPULKH[ VYKPUHY`ZOHYLZVM<: HZH[ 31 December 2012 with no movement for the year. The details of the authorized and issued share capital are set out in note VM[OLJVUZVSPKH[LKÄUHUJPHSZ[H[LTLU[Z
3 RESERVES
;OL.YV\W»Z[V[HSZOHYLOVSKLYZ»LX\P[`H[[YPI\[HISL[VLX\P[`OVSKLYZVM[OLWHYLU[HZH[+LJLTILY^HZ<: !<:
4 FINANCIAL STATEMENTS 2012 2011 US$ US$
;OLYLZ\S[ZYLÅLJ[LKHWYVÄ[ILMVYLPUJVTL[H_MVY[OL`LHYVM Income tax expense ( 1 255 798) (3 168 488)
7YVÄ[MVY[OL`LHY 15 636 852 12 506 510
Equity holders of the parent 12 987 368 9 705 377 Non controlling interest 2 649 484 2 801 133
15 636 852 12 506 510
5 DIRECTORS’ INTERESTS
As at 31 December 2012, the Directors’ interest in the issued shares of the Company directly or indirectly is shown below:
Directors’ shareholding Indirect Direct holding holding Total Number of shares
H. Nkala (Chairman) 410 339 410 339 J. Mushayavanhu (Group Chief Executive) 142 241 32 717 329 32 859 570 T. Kufazvinei (Executive Director) 274 812 14 733 505 15 008 317 W. Rusere (Executive Director) 5 000 12 717 200 12 722 200 G. G. Nhemachena (Non Executive Director) 5 960 9 082 15 042 F. Gwandekwande (Executive Director) 79 763 13 900 93 663
507 776 60 601 355 61 109 131
The other directors have no shareholding in the Company.
6 DIRECTORATE
+L[HPSZVM+PYLJ[VYZHYLYLÅLJ[LKVUWHNLZHUK
Mr Stanley Kudenga, Managing Director of FBC Reinsurance resigned from the Board of FBC Holdings Limited with effect from 28 February 2012 after having served the Group for more than ten years. Mr Kleto Chiketsani, a seasoned insurance practitioner with over 20 years experience was appointed Managing Director of FBC Reinsurance taking over from Mr. Kudenga. Mr Kleto Chiketsani was appointed to the Board of FBC Holdings Limited on 3 July 2012. Mrs Chipo Mtasa was appointed to the Board of FBC Holdings Limited on 3 July 2012. 14 FBC Holdings Limited 2012 Annual Report
Directors’ Report (continued)
7 CAPITAL ADEQUACY
The following subsidiaries have their capital regulated by the regulatory authorities: FBC Bank Limited, FBC Building Society and Microplan Financial Services (Private) Limited are all regulated by the Reserve Bank of Zimbabwe (“RBZ”). The Securities Commission of Zimbabwe (“SECZ”) sets and monitors capital requirements for the stockbroking subsidiary and the Insurance and Pensions Commission (“IPEC”) sets and monitors capital requirements for the insurance subsidiaries.
The capital position for these subsidiaries is detailed in the table below;
Minimum Net Regulatory capital regulatory Company authority required capital Total equity As at 31 December 2012 US$ US$ US$
FBC Bank Limited RBZ 25 000 000 29 989 249 34 433 093 FBC Building Society RBZ 20 000 000 18 979 135 19 360 110 FBC Reinsurance Limited IPEC 1 500 000 7 027 072 7 027 072 FBC Securities (Private) Limited SECZ 150 000 252 819 252 819 Eagle Insurance Company (Private) Limited IPEC 1 000 000 2 036 088 2 036 088 Microplan Financial Services (Private) Limited RBZ 10 000 1 213 468 1 213 468
As at 31 December 2011
FBC Bank Limited RBZ 12 500 000 18 928 844 28 198 757 FBC Building Society RBZ 10 000 000 14 062 550 14 416 055 FBC Reinsurance Limited IPEC 400 000 5 671 890 5 671 890 FBC Securities (Private) Limited SECZ 150 000 229 656 229 656 Eagle Insurance Company (Private) Limited IPEC 200 000 1 683 720 1 683 720 Microplan Financial Services (Private) Limited RBZ 5 000 418 472 418 472
At 31 December 2012, the banking subsidiary’s capital adequacy ratio computed under the Reserve Bank of Zimbabwe regulations was 15.37% and that of the building society was 50%, against the statutory minimum ratio of 12%. The respective capital adequacy ratios are determined as illustrated below. 2012 2011 US$ US$ FBC Bank Limited capital adequacy ratio
Ordinary share capital 18 500 000 18 500 000 9L[HPULKWYVÄ[ Regulatory reserve 660 244 660 244 Capital allocated for market and operational risk (3 243 976) ( 2 807 954) Advances to insiders (4 443 844) ( 9 269 913)
Tier 1 capital 25 765 203 15 140 820 Revaluation reserve 980 070 980 070
Tier 1 and 2 capital 26 745 273 16 120 890 Tier 3 capital allocated for market and operational risk 3 243 976 2 807 954
29 989 249 18 928 844
Risk weighted assets 195 115 408 143 642 673
Tier 1 ratio (%) 13.21% 10.08% Tier 2 ratio (%) 0.50% 0.89% Tier 3 ratio (%) 1.66% 2.03%
Capital adequacy ratio (%) 15.37% 13.00%
Minimum statutory capital adequacy ratio 12.00% 10.00%
15 FBC Holdings Limited 2012 Annual Report
Directors’ Report (continued)
2012 2011 US$ US$ FBC Building Society capital adequacy ratio
Share capital and share premium 10 141 559 10 141 559 Accumulated surplus 8 069 388 3 062 273 Capital allocated for market and operational risk (1 083 182) ( 641 239) Advances to insiders ( 380 975) ( 353 505)
Tier 1 capital 16 746 790 12 209 088
Non distributable reserve 839 778 839 778 Revaluation reserve 309 385 309 385 Regulatory reserve 63 060
Tier 1 and 2 capital 17 895 953 13 421 311 Tier 3 capital allocated for market and operational risk 1 083 182 641 239
18 979 135 14 062 550
Risk weighted assets 37 948 332 28 682 079
Tier 1 ratio (%) 44.13% 42.57% Tier 2 ratio (%) 3.03% 4.23% Tier 3 ratio (%) 2.85% 2.24%
Capital adequacy ratio (%) 50.01% 49.04%
Minimum statutory capital adequacy ratio 12.00% 10.00%
8 DIVIDEND ANNOUNCEMENT
In view of the need to preserve income in order to achieve the new minimum regulatory capital requirements announced by the Reserve Bank of Zimbabwe on 31 July 2012, the Board of Directors proposed the non payment of a dividend.
9 DIRECTORS’ RESPONSIBILITY STATEMENT
;OL+PYLJ[VYZHYLYLZWVUZPISLMVY[OLWYLWHYH[PVUHUK[OLPU[LNYP[`VM[OLÄUHUJPHSZ[H[LTLU[Z[OH[MHPYS`WYLZLU[[OLZ[H[LVM [OLHMMHPYZVM[OL.YV\WHZH[[OLLUKVM[OLÄUHUJPHS`LHY[OLZ[H[LTLU[VMJVTWYLOLUZP]LPUJVTLJOHUNLZPULX\P[`HUK JHZOÅV^ZMVY[OL`LHYHUKV[OLYPUMVYTH[PVUJVU[HPULKPU[OPZYLWVY[;OL.YV\W»ZÄUHUJPHSZ[H[LTLU[ZOH]LILLUWYLWHYLK in accordance with International Financial Reporting Standards (“IFRS”) and International Financial Reporting Interpretations Committee (“IFRIC”) interpretations and in the manner required by the Zimbabwe Companies Act (Chapter 24:03), and the YLSL]HU[:[H[\[VY`0UZ[Y\TLU[Z¸:0¹:0 HUK:0 ;OLÄUHUJPHSZ[H[LTLU[ZHYLIHZLKVUZ[H[\[VY`YLJVYKZ[OH[HYL THPU[HPULK\UKLY[OLOPZ[VYPJHSJVZ[JVU]LU[PVUHZTVKPÄLKI`[OLYL]HS\H[PVUVMWYVWLY[`WSHU[HUKLX\PWTLU[PU]LZ[TLU[ WYVWLY[`HUKÄUHUJPHSHZZL[ZH[MHPY]HS\L[OYV\NOWYVÄ[VYSVZZ
10 INDEPENDENT AUDITOR
Messrs. PricewaterhouseCoopers Chartered Accountants (Zimbabwe) have expressed their willingness to continue in VMÄJLHUKZOHYLOVSKLYZ^PSSILHZRLK[VJVUÄYT[OLPYYLHWWVPU[TLU[H[[OLMVY[OJVTPUN(UU\HS.LULYHS4LL[PUNHUK[VÄ_ their remuneration for the past year.
By order of the Board Tichaona K. Mabeza SECRETARY 21 March 2013
16 FBC Holdings Limited 2012 Annual Report
Board of Directors
HERBERT NKALA, B.Sc. Hons, MBA [OLHYLHZVMÄUHUJLHUKJVYWVYH[LHUKZ[Y\J[\YLKÄUHUJL (CHAIRMAN) Stanley joined FBC Bank Limited in June 2002 as Executive Appointed to the First Banking Corporation Limited Board Director Investment Banking, a position he held until he was in February 1997. He is a Chairman and director of several appointed Managing Director for FBC Reinsurance Limited in other companies, which are listed on the Zimbabwe Stock October 2006. He sits on several external company boards, Exchange. including one listed on the Zimbabwe Stock Exchange. He resigned from the Board on 28 February 2012. JOHN MUSHAYAVANHU – AIBZ, DIP MANAGEMENT, MBA TRYNOS KUFAZVINEI – B.Acc (Hons), CA(Z), MBA (GROUP CHIEF EXECUTIVE) (GROUP FINANCE DIRECTOR) John is an Associate of the Institute of Bankers in Zimbabwe Trynos is a Chartered Accountant (Zimbabwe) who (“AIBZ”), and holds a Diploma in Management from Henley completed his articles with Pricewaterhouse and holds a Management College, United Kingdom, as well as a Masters Masters degree in Business Administration from University degree in Business Administration from Brunel University, of Manchester, United Kingdom. Trynos is responsible for United Kingdom. A career banker, John has over 25 years [OL ÄUHUJL HUK HKTPUPZ[YH[PVU TH[[LYZ VM -)* /VSKPUNZ PU [OL ÄUHUJPHS ZLY]PJLZ ZLJ[VY /L OHZ WYL]PV\ZS` OLSK 3PTP[LK° /L OHZ V]LY `LHYZ L_WLYPLUJL PU ÄUHUJL HUK senior positions in corporate and retail banking with a local HKTPUPZ[YH[PVU°;Y`UVZQVPULK-)*)HUR3PTP[LKPU1HU\HY` multinational bank. John is the former President of Bankers 1998 as Head of Finance and Administration and was Association of Zimbabwe (“BAZ”). John joined FBC Bank as appointed to the board in October 2003. He became Group an Executive Director in the Corporate Banking division in Finance Director in 2004 following the consolidation of the October 1997. He became Managing Director in 2004 and FBC Group and was appointed the Deputy Chief Executive was appointed the Chief Executive of the FBC Group on 6MÄJLYVM[OL-)*.YV\WVU[OLZ[VM1\UL the 1st of June 2011. JAMES MWAIYAPO MATIZA MSc Social Protection KENZIAS CHIBOTA B.Acc (Hons), CA(Z) and Financing, MBA (UZ), FCIS and Dip Business (NON EXECUTIVE DIRECTOR) Studies (UZ) Appointed to the Board of FBC Holdings Limited in August (NON EXECUTIVE DIRECTOR) /LPZ[OL*OPLM,_LJ\[P]L6MÄJLYVM+LZ[PU`,SLJ[YVUPJZ Appointed to the Board of FBC Holdings Limited in (Private) Limited and director of several other companies. September 2009. He is the General Manager of National Social Security Authority and holds directorships in a number GERTRUDE SIYAYI CHIKWAVA MSc Strategic of other companies. Management, AIBZ (NON EXECUTIVE DIRECTOR) JOHNSON REX MAWERE B.A Public Administration Appointed to the Board of FBC Holdings Limited in December and Economics, MSc Administrative Sciences 2009. She is a director of several other companies. (Business Management) (NON EXECUTIVE DIRECTOR) PHILIP MHARIDZO CHIRADZA (MSC Strategic Appointed to the Board of FBC Holdings Limited in August Management), Dip (Gen Management) 2004. He is the former Mayor of the City of Kwekwe and is (NON EXECUTIVE DIRECTOR) a director of several other companies. Appointed to the Board of FBC Holdings Limited in June 2005. He is the former Managing Director of Beverley Building GODFREY GAVIRO NHEMACHENA BSc. Soc Society and is also a director of several other companies. (NON EXECUTIVE DIRECTOR) Appointed to the Board of Directors of First Banking STANLEY KUDENGA B.Acc (Hons), CA (Z), MBL Corporation Limited in June 2002 and to the Board of FBC (EXECUTIVE DIRECTOR) (Resigned) Holdings in August 2004. He holds directorships in a number Stanley is a Chartered Accountant (Zimbabwe) who completed of other companies. He is the former Town Clerk for the City his articles with Pricewaterhouse and also holds a Masters of Gweru and is the past Chairman of the Local Authorities of Business Leadership degree from the University of South Pension Fund. (MYPJH/LOHZ^VYRLKMVY]HYPV\ZSVJHSÄUHUJPHSPUZ[P[\[PVUZPU 17 FBC Holdings Limited 2012 Annual Report
Board of Directors (continued)
FELIX GWANDEKWANDE– AIBZ, MBA in Accounting, KLETO CHIKETSANI – Bachelor of Business Studies Banking and Economics (UK) (Honours) (UZ), AIISA (EXECUTIVE DIRECTOR) (EXECUTIVE DIRECTOR) Felix was appointed Managing Director of FBC Building Kleto has 20 years experience in reinsurance gathered with Society on the 1st of June 2011. A career banker, chartered two leading reinsurers in Zimbabwe. He is a founder member marketer, and a holder of a Masters in Business Administration of FBC Reinsurance Limited, having joined the company (then from Nottingham Trent University, Felix has over 27 years Southern Africa Reinsurance Company Limited) on 1 January L_WLYPLUJLPU[OLÄUHUJPHSZLY]PJLZPUK\Z[Y`LUJVTWHZZPUN 1995 as Senior Underwriter and rose through the ranks to most aspects of banking. He joined FBC Bank in 1998, rising become Executive Director, Operations of FBC Reinsurance through branch management and heading the Bank’s Retail Limited in 2006. He holds a Bachelor of Business Studies Operations. (Honours) Degree from the University of Zimbabwe and is also an Associate of the Insurance Institute of South Africa. WEBSTER RUSERE – AIBZ, MBA He was appointed Managing Director for FBC Reinsurance (EXECUTIVE DIRECTOR) Limited on 1 March 2012. Webster commenced his banking career in 1982 and rose through the corporate and retail banking ranks to become CHIPO MTASA B.Acc (Hons), CA(Z) Head of Global Trade Finance and Cash Management (NON EXECUTIVE DIRECTOR) Services in 1995 of a local multinational bank. He also served Chipo, is a Chartered Accountant (Zimbabwe) who in other senior positions covering Local and Foreign Treasury completed her articles with Coopers & Lybrand. She has Management, International Trade Finance, Correspondent wide experience in various sectors of commerce and industry Banking and Fund Management. He joined FBC Bank in Zimbabwe. She is the former Group Chief Executive for Limited in March 2000 as Project Manager and rose to the Rainbow Tourism Group and is currently the Managing become Managing Director of FBC Bank Limited Congo Sarl Director of Telone and director of several other companies. in November 2000. After the expiry of the DRC management She was appointed to the Board of FBC Holdings Limited on contract in 2004, he was appointed Head of Retail Banking the 3rd of July 2012. Division. He has held the position of Managing Director of FBC Building Society for four years and was appointed Managing +PYLJ[VYVM-)*)HUR3PTP[LKVU[OLZ[VM1\UL°
CANADA MALUNGA B Acc (Hons), CA(Z) (NON EXECUTIVE DIRECTOR) Canada, a Chartered Accountant (Zimbabwe) by training who completed his articles with Pricewaterhouse, has wide experience in various sectors of commerce and industry in Zimbabwe. He is a former President of the Institute of Chartered Accounts Zimbabwe. He is the Managing Director of Murray & Roberts Zimbabwe Limited that was recently renamed Masimba Holdings Limited. He was appointed to the Board of FBC Holdings Limited on the 8th of June 2011.
18 FBC Holdings Limited 2012 Annual Report
Corporate Governance
The Board is committed to the principles of openness, The composition of the Board of FBC Holdings Limited integrity and accountability. It recognises the developing shows a good mix of skill, experience as well as succession nature of corporate governance and assesses its compliance WSHUUPUN ;OL .YV\W KLYP]LZ [YLTLUKV\Z ILULÄ[ MYVT [OL with local and international generally accepted corporate diverse level of skills and experience of its Board of Directors. governance practices on an ongoing basis through its various subcommittees. The Board is responsible to the shareholders for setting the direction of the Group through the establishment of Guidelines issued by the Reserve Bank of Zimbabwe from strategies, objectives and key policies. The Board monitors time to time are strictly adhered to and compliance check lists the implementation of these policies through a structured are continuously reviewed. The Board of Directors comprises approach to reporting and accountability. VMÄ]LL_LJ\[P]LKPYLJ[VYZHUKUPULUVUL_LJ\[P]LKPYLJ[VYZ
Board attendance
Board Human Resources and Remuneration Board member
Legend
The Board meets regularly, with a minimum of four scheduled Board Human Resources and Remuneration meetings annually. To assist the Board in the discharge Committee of its responsibilities a number of committees have been Members LZ[HISPZOLKVM^OPJO[OLMVSSV^PUNHYL[OLTVZ[ZPNUPÄJHU[! H. Nkala (Chairman) J. Mushayavanhu Board Finance and Strategy Committee P.M. Chiradza Members J.R. Mawere K. Chibota (Chairman) C. Mtasa (appointed 3 July 2012) S. Kudenga (resigned 28 February 2012) T. Kufazvinei The Committee is chaired by a non executive director and J. Mushayavanhu comprises mainly non executive directors. This Committee is W. Rusere constituted at Group level and oversees the subsidiary J. M. Matiza companies. Meetings of the committee are attended by F. Gwandekwande invitation by the Divisional Director of Human Resources. G. Chikwava K. Chiketsani (appointed 3 July 2012) The Committee’s primary objective is to ensure that the right calibre of management is attracted and retained. To achieve The Board Finance and Strategy Committee has written terms this it ensures that the directors, senior managers and staff are of reference. This committee is constituted at Group level and appropriately rewarded for their contributions to the Group’s oversees the subsidiary companies. It is chaired by a non performance. executive director. Meetings of the Committee are attended by invitation, by other senior executives. The Committee is also responsible for the Group’s Human Resources Policy issues, terms and conditions of service. The committee meets at least four times a year to review the following amongst other activities: Non executive directors are remunerated by fees and do not ;OL.YV\W»ZÄUHUJPHSZ[H[LTLU[ZHUKHJJV\U[PUNWVSPJPLZ participate in any performance related incentive schemes. ;OL.YV\W»ZZ[YH[LN`HUKI\KNL[ ;OL.YV\W»ZWLYMVYTHUJLHNHPUZ[HNYLLKILUJOTHYRZHUK ;OL HKLX\HJ` VM [OL .YV\W»Z THUHNLTLU[ PUMVYTH[PVU 19 systems. FBC Holdings Limited 2012 Annual Report
Corporate Governance (continued)
Board Audit Committee Board Loans Review Committee Members Members P.M. Chiradza (Chairman) P.F. Chimedza (Chairman) J.R. Mawere T. Mutunhu G.G. Nhemachena S. Mutangadura C. Malunga M. Ndoro
The Committee is chaired by a non executive director and The committee falls directly under the Bank, has terms of comprises non executive directors only. The Divisional Director reference and comprises non executive directors only. of Internal Audit, the Group Chief Executive, the Group Meetings of the committee are attended by invitation, by the Finance Director and other executives attend the committee Managing Director of the Bank, the Head of Credit and Risk by invitation. The Committee is constituted at Group level and and the Group Chief Executive. oversees subsidiary companies. The committee is responsible for ensuring that the Bank’s The Committee meets regularly to: loan portfolio and lending activities abide by the Bank’s 9L]PL^JVTWSPHUJL^P[OZ[H[\[VY`YLN\SH[PVUZ credit policy as approved by the Board of Directors and is 9L]PL^[OLLMMLJ[P]LULZZVMPU[LYUHSJVU[YVSZ in compliance with RBZ requirements. It also ensures that 9L]PL^HUKHWWYV]L[OLÄUHUJPHSZ[H[LTLU[ZHUK WYVISLTSVHUZHYLWYVWLYS`PKLU[PÄLKJSHZZPÄLKHUKWSHJLKVU 9L]PL^YLWVY[ZVMIV[OPU[LYUHSHUKL_[LYUHSH\KP[VYZ» non accrual in accordance with the Reserve Bank guidelines. ÄUKPUNZPUZ[P[\[PUNZWLJPHSPU]LZ[PNH[PVUZ^OLYL The committee also ensures that adequate impairment necessary. allowances are made for potential losses and write offs of SVZZLZPKLU[PÄLKHYLTHKLPU[OLJVYYLJ[WLYPVK Board Risk and Compliance Committee Members Board Assets and Liabilities Committee G.G. Nhemachena (Chairman) Members K. Chibota D.W. Birch (Chairman) S. Kudenga (Resigned 28 February 2012) G. Bera J. Mushayavanhu T. Mazoyo W. Rusere J. Mushayavanhu P.M. Chiradza S. Mutangadura F. Gwandekwande T. Mutunhu K. Chiketsani (Appointed 3 July 2012) W. Rusere C. Mtasa (Appointed 3 July 2012) The committee falls directly under the Bank, draws its The Committee is constituted at Group level and is members from the Bank’s Board and is chaired by a non responsible for the group risk management function. It is executive director. It is responsible for the continuous chaired by a non executive director. The Committee’s monitoring of the Bank’s assets and liabilities. primary objective is to maintain oversight of the Group’s risk and regulatory compliance processes and procedures and Internal Controls monitor their effectiveness. The Committee keeps under The Directors are responsible for the Group’s internal control review, developments and prospective changes in the system, which incorporates procedures that have been YLN\SH[VY` LU]PYVUTLU[ HUK TVUP[VYZ ZPNUPÄJHU[ YPZR HUK designed to provide reasonable assurance that assets are regulatory issues affecting the Group, noting any material safeguarded, proper accounting records are maintained and compliance/ regulatory breaches and monitoring resolution ÄUHUJPHSPUMVYTH[PVUPZYLSPHIS`YLWVY[LK of any such breaches. The key procedures which the Board considers essential to Board Credit Committee provide effective control include: Members G.R. Bera (Chairman) i) Decentralized organisational structure with strong D.W. Birch THUHNLTLU[^VYRPUN^P[OPUKLÄULKSPTP[ZVM T. Mazoyo responsibility and authority. W. Rusere ii) An annual budgeting process with quarterly re forecasts [VYLÅLJ[JOHUNPUNJPYJ\TZ[HUJLZHUK[OLPKLU[PÄJH[PVU This committee falls directly under the Bank. It sets the of key risks and opportunities. Bank’s credit policy and also approves credit applications iii) Detailed monthly management accounts with above management’s discretionary limits. The committee is comparisons against budget through a comprehensive responsible for the overall quality of the Bank’s credit portfolio. variance analysis. The committee is chaired by a non executive director. The Heads of Credit and Risk Management attend the committee Nothing has come to the attention of the Directors to indicate meetings by invitation. that any material breakdown in the functioning of these internal control procedures and systems has occurred during 20 the year under review.
FBC Holdings Limited 2012 Annual Report
Corporate Governance (continued)
Executive Committee 0U HKKP[PVU [V [OL HIV]L [OLYL HYL HSZV ZWLJPÄJ I\ZPULZZ The operational management of the Group is delegated to risks that arise from the Group’s reinsurance and insurance the executive committee, which is chaired by the Group subsidiaries’ core activities and the Group’s manufacturing Chief Executive. The executive committee is the chief subsidiary. operating decision maker for the Group. Risk management framework The executive committee comprises: In line with the Group’s risk strategy, size and complexity The Group Chief Executive of its activities, the Board established a risk governance Managing Director (FBC Bank Limited) structure and responsibilities that are adequate to meet the Managing Director (FBC Reinsurance Limited) requirements of a sound risk management framework. Managing Director (FBC Building Society) Managing Director (FBC Securities (Private) Limited) The Group’s Board of Directors has the ultimate responsibility Managing Director (Eagle Insurance Company for ensuring that an adequate and effective system of (Private) Limited) internal controls is established and maintained. The Board Group Finance Director delegates its responsibilities to the following Committees Company Secretary through its respective Board Committees: Divisional Director Human Resources .YV\W9PZRHUK*VTWSPHUJL*VTTP[[LL It meets fortnightly or more frequently if necessary and acts .YV\W(\KP[*VTTP[[LL on behalf of the Board. .YV\W/\THU9LZV\YJLZHUK9LT\ULYH[PVU° Committee, Group Internal Audit .YV\W-PUHUJLHUK:[YH[LN`*VTTP[[LL The Group internal audit department examines and evaluates *YLKP[*VTTP[[LLZMVY[OL)HURHUK)\PSKPUN:VJPL[` the Group’s activities with the aim of assisting management 3VHUZ9L]PL^*VTTP[[LLMVY[OL)HURHUK)\PSKPUN with the effective discharge of their responsibilities. It Society and YL]PL^Z[OLYLSPHIPSP[`HUKPU[LNYP[`VMÄUHUJPHSHUKVWLYH[PUN (ZZL[ZHUK3PHIPSP[PLZ*VTTP[[LLZ¸(3*6¹MVY[OL)HUR PUMVYTH[PVU [OL Z`Z[LTZ VM PU[LYUHS JVU[YVS [OL LMÄJPLU[ and Building Society management of the Group’s resources, the conduct of operations and the means of safeguarding assets. The ;OLZWLJPÄJK\[PLZKLSLNH[LK[VLHJOJVTTP[[LLVM[OL)VHYK Divisional Director of Internal Audit reports to the Chairman and its respective Management Committee are outlined in of the Audit Committee. [OL[LYTZVMYLMLYLUJLMVY[OLZWLJPÄJJVTTP[[LLZ
Risk Management and Control In addition to the above Committees, the following three risk related functions are directly involved in Group wide risk Introduction and overview management: Managing risk effectively in a diverse and complex institution requires a comprehensive risk management governance .YV\W9PZR4HUHNLTLU[ structure that promotes the following elements of a sound .YV\W0U[LYUHS(\KP[HUK risk management framework: .YV\W*VTWSPHUJL
:V\UKIVHYKHUKZLUPVYTHUHNLTLU[V]LYZPNO[ Group Risk Management Division assumes a central role in (KLX\H[LWVSPJPLZWYVJLK\YLZHUKSPTP[Z the oversight and management of all risks that the Group (KLX\H[LYPZRTVUP[VYPUNHUKTHUHNLTLU[PUMVYTH[PVU is exposed to in its various activities. The Head of Group systems (“MIS”), and Risk Management is responsible for recommending to the (KLX\H[LPU[LYUHSJVU[YVSZ Group Risk and Compliance Committee and the Board Risk and Compliance Committee a framework that ensures FBC Holdings Limited manages risk through a comprehensive the effective management and alignment of risk within the framework of risk principles, organisational structure and risk Group. The Head of Group Risk Management is responsible processes that are closely aligned with the activities of the for the process of identifying, quantifying, communicating, entities in the Group. mitigating and monitoring risk.
The most important risks that the Group is exposed to are Group compliance is an independent compliance listed below: management activity that is headed by the Group Compliance Manager who reports administratively to the 9LW\[H[PVUHSYPZR Group Chief Executive and directly to the Group Risk and :[YH[LNPJYPZR Compliance Committee. The Group Compliance Manager *YLKP[YPZR has unrestricted access to the Chairman of the Group Risk 3PX\PKP[`YPZR Compliance Committee. 4HYRL[YPZR 6WLYH[PVUHSYPZRHUK Group Internal Audit independently audits the adequacy *VTWSPHUJLYPZR and effectiveness of the Group’s risk management, control and governance processes. The Divisional Director of Group 21 FBC Holdings Limited 2012 Annual Report
Corporate Governance (continued)
Internal Audit who reports administratively to the Group International credit ratings Chief Executive and functionally to the Chairman of the The banking and reinsurance subsidiaries have their credit Audit Committee, provides independent assurance to the ratings reviewed annually by an international credit rating Group Audit Committee and has unrestricted access to the agency, Global Credit Rating. All subsidiaries have maintained Chairman of the Group Audit Committee. their investor grade ratings as illustrated below.
The principal risks to which the Group is exposed to and Subsidiary 2012 2011 2010 which it continues to manage are detailed in note 41 under Financial Risk Management. FBC Bank Limited A A A
FBC Reinsurance Limited A A A To ensure that essential functions of the Group are able to continue in the event of adverse circumstances, the Group FBC Building Society BBB BBB BBB Business Continuity Plan is reviewed annually and approved by the Board. The Group Management Business Continuity Committee is responsible for ensuring that all units and branches conduct tests half yearly in line with the Group policy.
The Group continues to conduct its business continuity tests in the second and fourth quarters of each year and all the Herbert Nkala processes are well documented. (Chairman)
Compliance risk Compliance risk is the current and prospective risk to earnings or capital arising from violations of, or non conformance with laws, rules, regulations, prescribed practices, internal policies and procedures or ethical standards. John Mushayavanhu The Compliance function assesses the conformity of codes (Group Chief Executive) of conduct, instructions, procedures and organizations in YLSH[PVU[V[OLY\SLZVMPU[LNYP[`PUÄUHUJPHSZLY]PJLZHJ[P]P[PLZ These rules are those which arise from the Group’s own integrity policy as well as those which are directly provided by its legal status and other legal and regulatory provisions HWWSPJHISL[V[OLÄUHUJPHSZLY]PJLZZLJ[VY Tichaona K. Mabeza (Company Secretary) Management is also accountable to the Board for designing, implementing and monitoring the process of compliance risk management and integrating it with the day to day activities of the Group.
Statement of Compliance The Group complied with the following statutes inter alia:
The Banking Act (Chapter 24:20) and Banking Regulations, Statutory Instrument 205 of 2000; Bank Use Promotion and Suppression of Money Laundering (Chapter 24:24); Exchange Control Act (Chapter 22:05); the National Payments Systems Act (Chapter 24:23) and The Companies Act (Chapter 24:03), the relevant Statutory Instruments (“SI”) SI 33/99 and SI 62/96, The Income Tax Act (Chapter 23:06), The Capital Gains Act (Chapter 23:01) and the Value Added Tax Act (Chapter 23:12).
In addition, the Group also complied with the Reserve Bank of Zimbabwe’s directives on liquidity management, capital adequacy as well as prudential lending guidelines.
22
FBC Holdings Limited 2012 Annual Report Helping you achieve your dream home!
23 FBC Holdings Limited 2012 Annual Report
Independent auditor’s report
to the shareholders of
FBC HOLDINGS LIMITED
>LOH]LH\KP[LK[OLJVUZVSPKH[LKÄUHUJPHSZ[H[LTLU[ZVM-)*/VSKPUNZ3PTP[LKHUKP[ZZ\IZPKPHYPLZ¸[OL.YV\W¹HUK[OL Z[H[LTLU[VMÄUHUJPHSWVZP[PVUVM-)*/VSKPUNZ3PTP[LK[OL¸*VTWHU`¹Z[HUKPUNHSVUL[VNL[OLY[OL¸JVUZVSPKH[LKÄUHUJPHS Z[H[LTLU[Z¹^OPJOJVTWYPZL[OLJVUZVSPKH[LKHUKZLWHYH[LZ[H[LTLU[ZVMÄUHUJPHSWVZP[PVUHZH[+LJLTILYHUK[OL JVUZVSPKH[LKZ[H[LTLU[ZVMJVTWYLOLUZP]LPUJVTLJOHUNLZPULX\P[`HUKJHZOÅV^ZMVY[OL`LHY[OLULUKLKHUKHZ\TTHY` VMZPNUPÄJHU[HJJV\U[PUNWVSPJPLZHUKV[OLYL_WSHUH[VY`PUMVYTH[PVUZL[V\[VUWHNLZ[V
+PYLJ[VYZ»9LZWVUZPIPSP[`MVY[OLJVUZVSPKH[LKÄUHUJPHSZ[H[LTLU[Z ;OL*VTWHU`»ZKPYLJ[VYZHYLYLZWVUZPISLMVY[OLWYLWHYH[PVUHUKMHPYWYLZLU[H[PVUVM[OLZLÄUHUJPHSZ[H[LTLU[ZPUHJJVYKHUJL with International Financial Reporting Standards and in the manner required by the Zimbabwe Companies Act (Chapter 24:03), and the relevant Statutory Instruments (“SI”) SI 33/99 and SI 62/96 and for such internal control as the directors determine is ULJLZZHY`[VLUHISL[OLWYLWHYH[PVUVMÄUHUJPHSZ[H[LTLU[Z[OH[HYLMYLLMYVTTH[LYPHSTPZZ[H[LTLU[Z^OL[OLYK\L[VMYH\KVY error.
Auditor’s responsibility 6\YYLZWVUZPIPSP[`PZ[VL_WYLZZHUVWPUPVUVU[OLZLÄUHUJPHSZ[H[LTLU[ZIHZLKVUV\YH\KP[>LJVUK\J[LKV\YH\KP[PU accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and WSHUHUKWLYMVYT[OLH\KP[[VVI[HPUYLHZVUHISLHZZ\YHUJLHIV\[^OL[OLY[OLÄUHUJPHSZ[H[LTLU[ZHYLMYLLMYVTTH[LYPHS misstatement.
(UH\KP[PU]VS]LZWLYMVYTPUNWYVJLK\YLZ[VVI[HPUH\KP[L]PKLUJLHIV\[[OLHTV\U[ZHUKKPZJSVZ\YLZPU[OLÄUHUJPHSZ[H[LTLU[Z The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement VM[OLÄUHUJPHSZ[H[LTLU[Z^OL[OLYK\L[VMYH\KVYLYYVY0UTHRPUN[OVZLYPZRHZZLZZTLU[Z[OLH\KP[VYJVUZPKLYZPU[LYUHS JVU[YVSYLSL]HU[[V[OLLU[P[`»ZWYLWHYH[PVUHUKMHPYWYLZLU[H[PVUVM[OLÄUHUJPHSZ[H[LTLU[ZPUVYKLY[VKLZPNUH\KP[WYVJLK\YLZ that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of HJJV\U[PUNLZ[PTH[LZTHKLI`THUHNLTLU[HZ^LSSHZL]HS\H[PUN[OLV]LYHSSWYLZLU[H[PVUVM[OLÄUHUJPHSZ[H[LTLU[Z
>LILSPL]L[OH[[OLH\KP[L]PKLUJL^LOH]LVI[HPULKPZZ\MÄJPLU[HUKHWWYVWYPH[L[VWYV]PKLHIHZPZMVYV\YH\KP[VWPUPVU
Opinion 0UV\YVWPUPVU[OLÄUHUJPHSZ[H[LTLU[ZWYLZLU[MHPYS`PUHSSTH[LYPHSYLZWLJ[Z[OLJVUZVSPKH[LKHUKZLWHYH[LÄUHUJPHSWVZP[PVUZ VM [OL .YV\W HUK [OL *VTWHU` HZ H[ +LJLTILY HUK [OL .YV\W»Z JVUZVSPKH[LK ÄUHUJPHS WLYMVYTHUJL HUK P[Z JVUZVSPKH[LKJHZOÅV^ZMVY[OL`LHY[OLULUKLKPUHJJVYKHUJL^P[O0U[LYUH[PVUHS-PUHUJPHS9LWVY[PUN:[HUKHYKZHUKPU[OL manner required by the Zimbabwe Companies Act (Chapter 24:03) and the relevant Statutory Instruments (“SI”) SI 33/99 and SI 62/96.
PricewaterhouseCoopers Chartered Accountants (Zimbabwe)
Harare 20 May 2013
24 FBC Holdings Limited 2012 Annual Report
Consolidated Statement of Financial Position As at 31 December 2012
2012 2011 Note US$ US$ ASSETS Balances with other banks and cash 4 82 415 090 50 359 054 Loans and advances to customers 5.1 190 592 547 121 333 026 Trade and other receivables including insurance receivables 5.2 26 582 806 23 173 709 -PUHUJPHSHZZL[ZH[MHPY]HS\L[OYV\NOWYVÄ[VYSVZZ Inventory 7 22 152 528 17 290 873 Prepayments and other assets 8 6 921 582 5 708 773 Deferred income tax assets 16 1 664 338 1 292 080 Investment property 9 25 000 25 000 Intangible asset 10 1 457 875 1 418 791 Property, plant and equipment 11 57 310 267 56 868 165
Total assets 392 054 851 279 592 710
EQUITY AND LIABILITIES Liabilities Deposits from customers 12.1 128 101 881 70 790 291 Deposits from other banks 12.2 84 389 793 54 114 334 Borrowings 13 41 566 592 36 504 626 Insurance liabilities 14 10 976 731 8 380 408 Trade and other payables 15 29 885 061 21 866 385 Current income tax liability 1 712 581 4 843 420 Deferred income tax liability 16 7 269 579 8 874 414
Total liabilities 303 902 218 205 373 878
Equity Capital and reserves attributable to equity holders of the parent entity Share capital and share premium 17.3 7 681 908 7 681 908 Other reserves 18 34 616 972 34 750 923 9L[HPULKWYVÄ[Z
67 037 129 55 538 942
Non controlling interest 21 115 504 18 679 890
Total equity 88 152 633 74 218 832
Total equity and liabilities 392 054 851 279 592 710
Herbert Nkala John Mushayavanhu Tichaona K. Mabeza (Chairman) (Group Chief Executive) (Group Company Secretary)
25 FBC Holdings Limited 2012 Annual Report
Company Statement of Financial Position As at 31 December 2012
2012 2011 Note US$ US$ ASSETS Amounts due from related parties 19 7 451 340 1 096 846 (]HPSHISLMVYZHSLÄUHUJPHSHZZL[ Investments in subsidiaries 21 40 240 602 53 113 958 Deferred income tax asset 10 075 401 040 Jointly controlled asset 22 90 000 101 250
Total assets 50 617 908 54 713 094
EQUITY AND LIABILITIES Liabilities Amounts due to related parties 23 1 271 459 7 778 613 Other liabilities 377 141 233 472
1 648 600 8 012 085
Equity Share capital and premium 7 681 908 7 681 908 Other reserves 24 41 287 400 39 019 101
48 969 308 46 701 009
Total equity and liabilities 50 617 908 54 713 094
Herbert Nkala John Mushayavanhu Tichaona K. Mabeza (Chairman) (Group Chief Executive) (Company Secretary)
26 FBC Holdings Limited 2012 Annual Report
Consolidated Statement of Comprehensive Income For the year ended 31 December 2012
2012 2011 Note US$ US$
Interest income 25 37 806 670 26 621 440 Interest expense 25.1 (17 511 395) (12 773 813) Net interest income 20 295 275 13 847 627
Fee and commission income 26 20 605 148 20 430 481 Fee and commission expense 26.1 ( 27 318) ( 20 067) Net fee and commission income 20 577 830 20 410 414
Revenue 27 53 613 611 56 292 235 Cost of sales 27.1 (37 504 472) (39 054 161) .YVZZWYVÄ[
Insurance premium revenue 28 22 951 209 15 075 827 Premium ceded to reinsurers and retrocessionaires ( 8 373 776) ( 6 334 763) Net earned insurance premium 14 577 433 8 741 064
Net trading income 1 163 206 1 016 385 5L[NHPUZMYVTÄUHUJPHSHZZL[ZH[MHPY]HS\L[OYV\NOWYVÄ[VYSVZZ Other operating income 30 1 103 913 760 314
2 655 348 1 922 205
Total income 74 215 025 62 159 384
0TWHPYTLU[HSSV^HUJLVUÄUHUJPHSHZZL[Z
Net insurance commission expense 31 (3 012 597) (2 138 109)
Insurance claims and loss adjustment expenses 32 (5 811 900) (3 108 215)
Administrative expenses 33 (44 894 036) (37 487 980)
Share of loss of associate ( 32 938)
7YVÄ[ILMVYLPUJVTL[H_
Income tax expense 34 (1 255 798) (3 168 488)
7YVÄ[MVY[OL`LHY
Other comprehensive income Gains on property revaluation 3 844 017 Tax relating to other comprehensive income (714 285)
Other comprehensive income, net income tax 3 129 732
Total comprehensive income for the year 15 636 852 15 636 242
7YVÄ[H[[YPI\[HISL[V! Equity holders of the parent 12 987 368 9 705 377 Non controlling interest 2 649 484 2 801 133
7YVÄ[MVY[OL`LHY
;V[HSJVTWYLOLUZP]LPUJVTLH[[YPI\[HISL[V! Equity holders of the parent 12 987 368 11 798 046 Non controlling interest 2 649 484 3 838 196
Total comprehensive income for the year 15 636 852 15 636 242
Earnings per share (US cents) Basic 40.1 2.42 1.78 Diluted 40.2 2.42 1.78
27 FBC Holdings Limited 2012 Annual Report
Consolidated Statement of Changes in Equity For the year ended 31 December 2012
184 6 986) 6 06 510 510 06 636 852 852 636 1 566 150) 566 1 61 727 458 458 727 61 319) 495 (1 832 218 74 832 218 74 4 4 633 152 88 st st equity 484 484 852 636 15 7 063 063 7 732 129 3 1 037 063 063 037 1 732 129 3 196 838 3 242 636 15 controlling Total US$ US$ US$ 221 362 221 362 585) 562 (1 585) 562 (1 743 743 650 690 766) (214 942 538 55 890 679 18 9 074 074 9 223 709 358 8 031 499 46 427 228 15 1 743 743 1 650 690 766) (214 942 538 55 890 679 18 1 743 743 1 590 627 766) (214 129 037 67 50 115 21 ve ve reserve reserve ownership Total intere ibutable ibutable Regulatory Revaluation in Changes 377 705 9 133 801 2 5 12 368 987 12 484 649 2 15 124) (223 124) (223 862) (253 (47 801 27 801 27 85) 85) 085) (201 085) (201 194 130 184 64 64 280) 352 (1 870) (213 ( 060) (63 368 987 12 649 2 669 092 2 669 092 2 03 1 669 092 2 573) (18 046 798 11 227) 000 (1 092) (495 573) (18 669 092 2 573) (18 669 092 2 060) (63 Share Non Non 060) (63 106 111 111 106 716 110 644) 686 (2 224 659 33 191 3 4 382 388 388 382 4 926 82 059) 124 (1 224 659 33 09 1 13 106 111 111 106 13 716 110 644) 686 (2 224 659 33 19 3 24 738 249 249 738 24 716 110 535) 757 (2 224 659 33 19 3
US$ US$ US$ US$ US$ US$ US$ US$ US$ US$
Acquisition of additional interest in in interest additional of Acquisition capital premium profits reserve shares reser Share Share Retained option Treasury distr 2011 January 1 at as Balance income; comprehensive Other 907 5 990 675 7 subsidiary subsidiary Increase in ownership interest interest ownership in Increase Share buyback buyback Share 585) 562 (1 Other comprehensive income: income: comprehensive Other Gain on revaluation of property, plant plant property, of revaluation on Gain Total comprehensive income income comprehensive Total owners: with Transaction excercised options Share remeasurement option Share 11 950 723 9 801 27 (11) owners: with Transaction exercised options Share interest ownership in Increase Profit for the year year the for Profit 377 705 9 Gain on revaluation of property, plant plant property, of revaluation on Gain and equipment, net of income tax tax income of net equipment, and 2011 December 31 at as Balance 918 5 990 675 7 2012 January 1 at as Balance 918 5 990 675 7 13 Profit for the year year the for Profit 368 987 12 Total other comprehensive income income comprehensive other Total paid and declared Dividend 573 18 227) 000 (1 Total comprehensive income income comprehensive Total 2012 December 31 at as Balance 428 050 13 918 5 990 675 7 and equipment, net of income tax tax income of net equipment, and Dividend declared and paid paid and declared Dividend purchase shares Treasury release reserve share Treasury 280) 352 (1 010) (66 0 (201 Regulatory impairment allowance allowance impairment Regulatory 573 18 Regulatory impairment allowance allowance impairment Regulatory 060 63 Total other comprehensive income income comprehensive other Total 060 63 28 FBC Holdings Limited 2012 Annual Report
Consolidated Statement of Cash Flows For the year ended 31 December 2012
2012 2011 Note US$ US$ *HZOÅV^MYVTVWLYH[PUNHJ[P]P[PLZ 7YVÄ[ILMVYLPUJVTL[H_ (KQ\Z[TLU[ZMVYUVUJHZOP[LTZ! Depreciation 11 3 830 018 3 169 303 Amortisation charge 10 582 752 468 042 0TWHPYTLU[HSSV^HUJLVUÄUHUJPHSHZZL[Z Share option remeasurement 27 790 Impairment allowance on property, plant and equipment 11 54 548 Share of loss of associate 32 938 -HPY]HS\LHKQ\Z[TLU[VUÄUHUJPHSHZZL[ZH[MHPY]HS\L[OYV\NO WYVÄ[VYSVZZ Fair value adjustment on investment property 9 (55 000) Loss on remeasurement of previously held associate 367 995 Write off of goodwill 4 290 7YVÄ[VUKPZWVZHSVMWYVWLY[`WSHU[HUKLX\PWTLU[ Net cash generated before changes in operating assets and liabilities 24 345 925 23 298 193
Increase in loans and advances (63 331 490) (41 706 497) Increase in trade and other receivables (3 822 387) (4 842 319) Decrease in statutory reserves 85 250 0UJYLHZLKLJYLHZLPUÄUHUJPHSHZZL[ZH[MHPY]HS\L[OYV\NO WYVÄ[VYSVZZ Increase in inventory (4 861 655) (7 047 126) Increase in prepayments and other assets (1 212 809) (2 582 841) Increase/(decrease) in deposits from customers 57 311 590 (39 257 314) Increase in deposits from other banks 30 275 459 44 623 835 Increase in insurance liabilities 2 596 323 1 561 562 Increase in trade and other payables 8 018 676 6 225 934
48 510 053 (19 451 327) Income tax paid (6 257 609) (2 781 424)
Net cash generated from /(used in) operating activities 42 252 444 (22 232 751)
*HZOÅV^ZMYVTPU]LZ[PUNHJ[P]P[PLZ Acquisition of a subsidiary, net of cash acquired (569 859) Purchases of intangible assets 10 (621 836) (708 914) Purchase of property, plant and equipment 11 (4 336 496) (5 420 081) Proceeds from sale of property, plant and equipment 239 484 104 218
Net cash used in investing activities (4 718 848) (6 594 636)
*HZOÅV^ZMYVTÄUHUJPUNHJ[P]P[PLZ Purchase of additional interest in existing subsidiary (476 987) Proceeds from borrowings 36 725 399 46 636 020 Repayment of borrowings (31 663 432) (33 419 813) Dividend paid to company’s shareholders (1 352 280) (1 000 227) Dividends paid to non controlling interests (213 870) (495 092) Purchase of treasury shares (201 085) (1 562 585)
5L[JHZONLULYH[LKMYVTÄUHUJPUNHJ[P]P[PLZ
Net increase/(decrease) in cash and cash equivalents 40 828 328 (19 146 071)
Cash and cash equivalents at beginning of the year 41 091 857 60 237 928
Cash and cash equivalents at the end of year 4.1 81 920 185 41 091 857
29 FBC Holdings Limited 2012 Annual Report
Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2012
1 GENERAL INFORMATION
FBC Holdings Limited (“the Company”) and its subsidiaries (together “the Group”) provide a wide range of commercial IHURPUNTVY[NHNLÄUHUJPUNTPJYVSLUKPUNYLPUZ\YHUJLZOVY[[LYTPUZ\YHUJLZ[VJRIYVJRPUNHUKHSZVTHU\MHJ[\YLZ WPWLZHUKYVVÄUNZOLL[Z
The Company is a limited liability company, which is listed on the Zimbabwe Stock Exchange. The Company and its subsidiaries are incorporated and domiciled in Zimbabwe.
;OLZLJVUZVSPKH[LKÄUHUJPHSZ[H[LTLU[Z^LYLHWWYV]LKMVYPZZ\LI`[OL)VHYKVM+PYLJ[VYZVU 4HYJO
2 SIGNIFICANT ACCOUNTING POLICIES
;OLWYPUJPWHSHJJV\U[PUNWVSPJPLZHWWSPLKPU[OLWYLWHYH[PVUVM[OLZLJVUZVSPKH[LKÄUHUJPHSZ[H[LTLU[ZHYLZL[V\[ below. These policies have been consistently applied to all the years presented, unless otherwise stated.
2.1 Basis of preparation ;OL.YV\W»ZJVUZVSPKH[LKÄUHUJPHSZ[H[LTLU[ZOH]LILLUWYLWHYLKPUHJJVYKHUJL^P[O0U[LYUH[PVUHS-PUHUJPHS9LWVY[PUN Standards (“IFRS”), and the International Financial Reporting Interpretations Committee, (“IFRIC”) interpretations and in the manner required by the Zimbabwe Companies Act, Chapter (24:03) and the relevant Statutory Instruments (“SI”) :0 HUK :0 ;OL JVUZVSPKH[LK ÄUHUJPHS Z[H[LTLU[Z OH]L ILLU WYLWHYLK MYVT Z[H[\[VY` YLJVYKZ [OH[ HYL THPU[HPULK\UKLY[OLOPZ[VYPJHSJVZ[JVU]LU[PVUHZTVKPÄLKI`[OLYL]HS\H[PVUVMÄUHUJPHSHZZL[ZH[MHPY]HS\L[OYV\NO WYVÄ[VYSVZZPU]LZ[TLU[WYVWLY[`HUKWYVWLY[`WSHU[HUKLX\PWTLU[
;OLWYLWHYH[PVUVMÄUHUJPHSZ[H[LTLU[ZPUJVUMVYTP[`^P[O0-9:YLX\PYLZ[OL\ZLVMJLY[HPUJYP[PJHSHJJV\U[PUNLZ[PTH[LZ It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The HYLHZPU]VS]PUNHOPNOLYKLNYLLVMQ\KNLTLU[VYJVTWSL_P[`VYHYLHZ^OLYLHZZ\TW[PVUZHUKLZ[PTH[LZHYLZPNUPÄJHU[ [V[OLJVUZVSPKH[LKÄUHUJPHSZ[H[LTLU[ZHYLKPZJSVZLKPUUV[L
2.1.2 Changes in accounting policy and disclosures
(a) New standards, amendments and interpretations, effective on or after 1 January 2012 The following new standards, amendments and interpretations are effective for accounting periods beginning on or after 1 January 2012 and are relevant to the Group;
Standard/Interpretation Content (WWSPJHISLMVYÄUHUJPHS`LHYZ beginning on /after IFRS 1 (amendment) -PYZ[[PTLHKVW[PVUVUÄ_LKKH[LZHUKO`WLYPUÅH[PVU 1 July 2011
IFRS 7 (amendment) Financial instruments: Disclosures on derecognition 1 July 2011
IAS 12 (amendment) Deferred tax 1 January 2012
These new standards, amendments and interpretations do not have a material impact on the Group’s consolidated ÄUHUJPHSZ[H[LTLU[Z
0-9:HTLUKTLU[º-PYZ[[PTLHKVW[PVU»VUÄ_LKKH[LZHUKO`WLYPUÅH[PVU;OLZLHTLUKTLU[ZPUJS\KLZ[^VJOHUNLZ [V0-9:;OLÄYZ[YLWSHJLZYLMLYLUJLZ[VHÄ_LKKH[LVM1HU\HY`^P[Oº[OLKH[LVM[YHUZP[PVU[V0-9:Z»;OL ZLJVUKHTLUKTLU[WYV]PKLZN\PKHUJLVUOV^HULU[P[`ZOV\SKYLZ\TLWYLZLU[PUNÄUHUJPHSZ[H[LTLU[ZPUHJJVYKHUJL with IFRSs after a period when the entity was unable to comply with IFRSs because its functional currency was subjected [VZL]LYLO`WLYPUÅH[PVU;OPZHTLUKTLU[^HZLHYS`HKVW[LKHUKHSSV^LK[OL.YV\W[VHJOPL]LJVTWSPHUJL^P[O0-9: for the year ended 31 December 2010.
30 FBC Holdings Limited 2012 Annual Report
Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2012
IFRS 7 (amendment) ‘Financial instruments: disclosures’ on derecognition. This amendment will promote transparency in the reporting of transfer transactions and improve users’ understanding of the risk exposures relating to transfer of ÄUHUJPHSHZZL[ZHUK[OLLMMLJ[VM[OVZLYPZRZVUHULU[P[`»ZÄUHUJPHSWVZP[PVUWHY[PJ\SHYS`[OVZLPU]VS]PUNZLJ\YP[PZH[PVUVM ÄUHUJPHSHZZL[Z
IAS 12 (amendments) ‘Income taxes” on deferred tax. Currently IAS12, Income taxes, requires an entity to measure the deferred tax relating to an asset depending on whether the entity expects to recover the carrying amount of the asset [OYV\NOZHSLVY\ZL0[JHUILKPMÄJ\S[HUKZ\IQLJ[P]L[VHZZLZZ^OL[OLY[OLYLJV]LY`^PSSIL[OYV\NO\ZLVY[OYV\NOZHSL when the asset is measured using the fair value model in IAS40, Investment property. Hence the amendment introduces an exception to the existing principles for the measurement of deferred tax assets or liabilities arising on investment property measured at fair value. The amendments also incorporate into IAS12 the remaining guidance previously contained in SIC12, which is accordingly withdrawn.
I 5L^Z[HUKHYKZHTLUKTLU[ZHUKPU[LYWYL[H[PVUZ[OH[OH]LILLUPZZ\LKI\[UV[LMMLJ[P]LMVY[OLÄUHUJPHS year beginning 1 January 2012 and not early adopted
A number of new standards and amendments to standards and interpretations are effective for annual periods ILNPUUPUNHM[LY1HU\HY`HUKOH]LUV[ILLUHWWSPLKPUWYLWHYPUN[OLZLJVUZVSPKH[LKÄUHUJPHSZ[H[LTLU[Z ;OLMVSSV^PUNZL[V\[ILSV^HYLL_WLJ[LK[VOH]LHULMMLJ[VU[OLJVUZVSPKH[LKÄUHUJPHSZ[H[LTLU[ZVM[OL.YV\W"
Standard/Interpretation Content (WWSPJHISLMVYÄUHUJPHS years beginning on/ after IAS 1 (amendment) Other comprehensive income 1 July 2012 IAS 27 (amendment) :LWHYH[LÄUHUJPHSZ[H[LTLU[Z 1 January 2013 IAS 32 (amendment) Asset and liability offsetting 1 January 2014 IAS 34 (amendment) 0U[LYPTÄUHUJPHSYLWVY[PUN 1 January 2013 IFRS 7 (amendment) Asset and liability offsetting 1 January 2013 IFRS 9 (new) Financial Instruments 1 January 2015 IFRS 10 (new) *VUZVSPKH[LKÄUHUJPHSZ[H[LTLU[Z 1 January 2015 IFRS 12 (new) Disclosures of interests in other entities 1 January 2013 IFRS 13 (new) Fair value measurement 1 January 2013 Annual improvements Improvements to various International Financial Reporting 1 January 2013 2011 Standards
The Group is considering the implications of these new standards, amendments and interpretations, and their impact on the Group and the timing of their adoption.
IAS 1 (amendments) ‘Financial statements presentation’ regarding other comprehensive income. The amendment requires entities to group items presented in ‘other comprehensive income’ on the basis of whether they are WV[LU[PHSS`YLJSHZZPÄHISL[VWYVÄ[VYSVZZZ\IZLX\LU[S`;OLHTLUKTLU[ZKVUV[HKKYLZZ^OPJOP[LTZHYLWYLZLU[LK in other comprehensive income.
0(:HTLUKTLU[º:LWHYH[LÄUHUJPHSZ[H[LTLU[Z»;OPZYL]PZLKZ[HUKHYKPUJS\KLZ[OLWYV]PZPVUZVUZLWHYH[L ÄUHUJPHSZ[H[LTLU[Z[OH[HYLSLM[HM[LY[OLJVU[YVSWYV]PZPVUZVM0(:OH]LILLUPUJS\KLKPU[OLUL^0-9:
0(:HTLUKTLU[º0U[LYPTÄUHUJPHSYLWVY[PUN»;OLHTLUKTLU[IYPUNZ0(:PU[VSPUL^P[O[OLYLX\PYLTLU[ZVM0-9: 6WLYH[PUN:LNTLU[Z(TLHZ\YLVM[V[HSHZZL[ZHUKSPHIPSP[PLZPZYLX\PYLKMVYHUVWLYH[PUNZLNTLU[PUPU[LYPTÄUHUJPHS statements.
IFRS 7 (amendment) ‘Financial instruments: disclosures’ on derecognition. This amendment includes new disclosures [VMHJPSP[H[LJVTWHYPZVUIL[^LLU[OVZLLU[P[PLZ[OH[WYLWHYL0-9:ÄUHUJPHSZ[H[LTLU[Z[V[OVZL[OH[WYLWHYLÄUHUJPHS statements in accordance with US GAAP.
31 FBC Holdings Limited 2012 Annual Report
Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2012
0-9: UL^º-PUHUJPHSPUZ[Y\TLU[Z»;OPZZ[HUKHYKPZ[OLÄYZ[Z[LWPU[OLWYVJLZZ[VYLWSHJL0(: -PUHUJPHSPUZ[Y\TLU[Z! YLJVNUP[PVU HUK TLHZ\YLTLU[» 0-9: YL[HPUZ I\[ ZPTWSPÄLZ [OL TP_LK TLHZ\YLTLU[ TVKLS HUK LZ[HISPZOLZ [^V WYPTHY`TLHZ\YLTLU[JH[LNVYPLZMVYÄUHUJPHSHZZL[Z!HTVY[PZLKH[JVZ[HUKMHPY]HS\L
0-9: UL^ º*VUZVSPKH[PVU VM ÄUHUJPHS Z[H[LTLU[Z» ;OL VIQLJ[P]L VM [OPZ 0-9: PZ [V LZ[HISPZO WYPUJPWSLZ MVY [OL WYLZLU[H[PVUHUKWYLWHYH[PVUVMJVUZVSPKH[LKÄUHUJPHSZ[H[LTLU[Z^OLUHULU[P[`JVU[YVSZVULVYTVYLV[OLYLU[P[PLZ[V WYLZLU[JVUZVSPKH[LKÄUHUJPHSZ[H[LTLU[Z
IFRS 12 (new) ‘Disclosures of interests in other entities’. IFRS 12 includes the disclosure requirements for all forms of interest in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles.
IFRS 13 (new) ‘Fair value measurement’. IFRS 13 aims to improve consistency and reduce complexity by providing a WYLJPZLKLÄUP[PVUVMMHPY]HS\LHUKHZPUNSLZV\YJLVMMHPY]HS\LTLHZ\YLTLU[HUKKPZJSVZ\YLYLX\PYLTLU[ZMVY\ZLHJYVZZ IFRSs.
Annual improvements Improvements to IFRS were issued by the International Accounting Standard Board (“IASB”) to be applied for ÄUHUJPHSWLYPVKZILNPUUPUNVUVYHM[LY1HU\HY`;OL`JVU[HPUU\TLYV\ZHTLUKTLU[Z[V0-9:[OH[[OL0(:) considered non urgent but necessary. Improvements to IFRS comprise amendments that result in accounting changes for presentation, recognition or measurement purposes, as well as terminology amendments related to a variety of individual IFRS standards.
(c) New standards, amendments and interpretations effective for accounting periods beginning after 1 January 2012 and not relevant to the Group
The following new standards, amendments and interpretations have been issued but are not effective and are not relevant to the Group:
Standard/ Content (WWSPJHISLMVYÄUHUJPHS Interpretation years beginning on/ after
IAS 19 (amendment) ,TWSV`LLILULÄ[Z 1 January 2013 IAS 28 (amendment) Associates and joint ventures 1 January 2012
IFRS 1 (amendment) Government loans 1 January 2013
IFRS 11 (new) Joint arrangements 1 January 2013
IFRIC 20 (new) Stripping costs in the production phase of a surface mine 1 January 2013
0(: HTLUKTLU[º,TWSV`LLILULÄ[Z»;OLZLHTLUKTLU[ZLSPTPUH[L[OLJVYYPKVYHWWYVHJOHUKJHSJ\SH[LÄUHUJL costs on a net funding basis.
IAS 28, (amendment) ‘Associates and joint ventures’. The revised standard includes the requirements for joint ventures, as well as associates, to be equity accounted following the issue of IFRS 11.
0-9:HTLUKTLU[º-PYZ[[PTLHKVW[PVU»VUNV]LYUTLU[SVHUZ;OPZHTLUKTLU[HKKYLZZLZOV^HÄYZ[[PTLHKVW[LY would account for a government loan with a below market rate of interest when transitioning to IFRS.
0-9:UL^º1VPU[HYYHUNLTLU[Z»;OPZWYLZLU[ZHTVYLYLHSPZ[PJYLÅLJ[PVUVMQVPU[HYYHUNLTLU[ZI`MVJ\ZPUNVU[OL rights and obligations of the arrangement rather than its legal form.
IFRIC 20 (new) ‘Stripping costs in the production phase of a surface mine’. This interpretation sets out the accounting for overburden waste removal (stripping) costs in the production phase of a surface mine.
32 FBC Holdings Limited 2012 Annual Report
Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2012
2.1.3 Going concern The Group’s forecasts and projections, taking account of reasonably possible changes in trading performance, show [OH[[OL.YV\WZOV\SKILHISL[VVWLYH[L^P[OPU[OLSL]LSVMP[ZJ\YYLU[ÄUHUJPUN(M[LYTHRPUNLUX\PYPLZ[OLKPYLJ[VYZ have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. The Group therefore continues to adopt the going concern basis in preparing its consolidated ÄUHUJPHSZ[H[LTLU[Z
2.2 Basis of consolidation
(a) Subsidiaries Subsidiaries are all entities (including special purpose entities) over which the Group has the power to govern the ÄUHUJPHS HUK VWLYH[PUN WVSPJPLZ NLULYHSS` HJJVTWHU`PUN H ZOHYLOVSKPUN VM TVYL [OHU VUL OHSM VM [OL ]V[PUN YPNO[Z The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. The Group also assesses existence of control where it does not OH]LTVYL[OHU VM[OL]V[PUNWV^LYI\[PZHISL[VNV]LYU[OLÄUHUJPHSHUKVWLYH[PUNWVSPJPLZI`]PY[\LVMKLMHJ[V control. De facto control may arise in circumstances where the size of the Group’s voting rights relative to the size and KPZWLYZPVUVMOVSKPUNZVMV[OLYZOHYLOVSKLYZNP]L[OL.YV\W[OLWV^LY[VNV]LYU[OLÄUHUJPHSHUKVWLYH[PUNWVSPJPLZ etc.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.
The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent JVUZPKLYH[PVUHYYHUNLTLU[0KLU[PÄHISLHZZL[ZHJX\PYLKHUKSPHIPSP[PLZHUKJVU[PUNLU[SPHIPSP[PLZHZZ\TLKPUHI\ZPULZZ combination are measured initially at their fair values at the acquisition date. The Group recognises any non controlling interest in the acquiree on an acquisition by acquisition basis, either at fair value or at the non controlling interest’s WYVWVY[PVUH[LZOHYLVM[OLYLJVNUPZLKHTV\U[ZVMHJX\PYLL»ZPKLU[PÄHISLUL[HZZL[Z Acquisition related costs are expensed as incurred.
If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date; any gains or loses arising from such remeasurement are recognised through the statement of comprehensive income.
Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair value of non JVU[YVSSPUNPU[LYLZ[V]LY[OLUL[PKLU[PÄHISLHZZL[ZHJX\PYLKHUKSPHIPSP[PLZHZZ\TLK0M[OPZJVUZPKLYH[PVUPZSV^LY[OHU [OLMHPY]HS\LVM[OLUL[HZZL[ZVM[OLZ\IZPKPHY`HJX\PYLK[OLKPMMLYLUJLPZYLJVNUPZLKPUWYVÄ[VYSVZZ
Inter company transactions, balances, income and expenses on transactions between group companies are eliminated. 7YVÄ[ZHUKSVZZLZYLZ\S[PUNMYVTPU[LYJVTWHU`[YHUZHJ[PVUZ[OH[HYLYLJVNUPZLKPUHZZL[ZHYLHSZVLSPTPUH[LK(JJV\U[PUN policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
(b) Changes in ownership interests in subsidiaries without change of control Transactions with non controlling interests that do not result in loss of control are accounted for as equity transactions – that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity within “changes in ownership reserve”. Gains or losses on disposals to non controlling interests are also recorded in equity within “changes in ownership reserve”.
(c) Disposal of subsidiaries When the Group ceases to have control any retained interest in the entity is re measured to its fair value at the date ^OLUJVU[YVSPZSVZ[^P[O[OLJOHUNLPUJHYY`PUNHTV\U[YLJVNUPZLKPUWYVÄ[VYSVZZ;OLMHPY]HS\LPZ[OLPUP[PHSJHYY`PUN HTV\U[MVY[OLW\YWVZLZVMZ\IZLX\LU[S`HJJV\U[PUNMVY[OLYL[HPULKPU[LYLZ[HZHUHZZVJPH[LQVPU[]LU[\YLVYÄUHUJPHS asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts WYL]PV\ZS`YLJVNUPZLKPUV[OLYJVTWYLOLUZP]LPUJVTLHYLYLJSHZZPÄLK[VWYVÄ[VYSVZZ 33 FBC Holdings Limited 2012 Annual Report
Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2012
(d) Associates (ZZVJPH[LZHYLHSSLU[P[PLZV]LY^OPJO[OL.YV\WOHZZPNUPÄJHU[PUÅ\LUJLI\[UV[JVU[YVSNLULYHSS`HJJVTWHU`PUNH shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting. Under the equity method, the investment is initially recognised at cost, and the carrying HTV\U[PZPUJYLHZLKVYKLJYLHZLK[VYLJVNUPZL[OLPU]LZ[VY»ZZOHYLVM[OLWYVÄ[VYSVZZHUKYLZLY]LZVM[OLPU]LZ[LL HM[LY[OLKH[LVMHJX\PZP[PVU;OL.YV\W»ZPU]LZ[TLU[PUHZZVJPH[LZPUJS\KLZNVVK^PSSPKLU[PÄLKVUHJX\PZP[PVUUL[VM any accumulated impairment loss.
0M[OLV^ULYZOPWPU[LYLZ[PUHUHZZVJPH[LPZYLK\JLKI\[ZPNUPÄJHU[PUÅ\LUJLPZYL[HPULKVUS`HWYVWVY[PVUH[LZOHYLVM [OLHTV\U[ZWYL]PV\ZS`YLJVNUPZLKPUV[OLYJVTWYLOLUZP]LPUJVTLPZYLJSHZZPÄLK[VWYVÄ[VYSVZZ;OL.YV\W»ZZOHYLVM WVZ[HJX\PZP[PVUWYVÄ[VYSVZZPZYLJVNUPZLKPU[OLZ[H[LTLU[VMJVTWYLOLUZP]LPUJVTLHUKP[ZZOHYLVMWVZ[HJX\PZP[PVU movements in other comprehensive income is recognised in other comprehensive income with a corresponding adjustment to the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate.
The Group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the YLJV]LYHISLHTV\U[VM[OLHZZVJPH[LHUKP[ZJHYY`PUN]HS\LHUKYLJVNUPZLZ[OLHTV\U[HKQHJLU[[VºZOHYLVMWYVÄ[ (loss)of an associate’ in the statement of comprehensive income.
7YVÄ[Z VY SVZZLZ YLZ\S[PUN MYVT \WZ[YLHT HUK KV^UZ[YLHT [YHUZHJ[PVUZ IL[^LLU [OL .YV\W HUK P[Z HZZVJPH[L HYL YLJVNUPZLKPU[OL.YV\W»ZÄUHUJPHSZ[H[LTLU[ZVUS`[V[OLL_[LU[VM\UYLSH[LKPU]LZ[VY»ZPU[LYLZ[ZPU[OLHZZVJPH[LZ Unrealised losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group.
Dilution gains or losses arising in investments in associates are recognised in the statement of comprehensive income.
2.3 Segment reporting An operating segment is a distinguishable component of the Group that is engaged in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the entity); whose operating results are reviewed regularly by the entity’s chief operating decision maker (“CODM”) to make decisions about resources to be allocated to the segment and to assess its performance; HUKMVY^OPJOKPZJYL[LÄUHUJPHSPUMVYTH[PVUPZH]HPSHISL6WLYH[PUNZLNTLU[ZHYLYLWVY[LKPUHTHUULYJVUZPZ[LU[^P[O the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is YLZWVUZPISLMVYHSSVJH[PUNYLZV\YJLZHUKHZZLZZPUNWLYMVYTHUJLVM[OLVWLYH[PUNZLNTLU[ZOHZILLUPKLU[PÄLKHZ[OL Group Executive Committee that makes strategic decisions.
The Group’s operating segments have been aggregated based on the nature of the products and services on offer and the nature of the regulatory environment. The CODM is responsible for allocating resources and assessing performance of the operating segments.
In accordance with IFRS 8 Operating Segments, the Group has the following business segments: commercial banking, TPJYVSLUKPUNTVY[NHNLÄUHUJPUNYLPUZ\YHUJLZOVY[[LYTPUZ\YHUJLZ[VJRIYVRPUNHUKTHU\MHJ[\YPUN
2.3.1 Commercial banking The principal activities of this segment consist of dealing in the money and foreign exchange markets, retail, corporate HUKPU[LYUH[PVUHSIHURPUNHUKJVYWVYH[LÄUHUJL
2.3.2 Microlending The principal activities of this segment consist of short term lending to the informal market.
4VY[NHNLÄUHUJPUN The principal activities of this segment consist of mortgage lending, savings deposit accounts and other money market investment products.
34 FBC Holdings Limited 2012 Annual Report
Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2012
2.3.4 Reinsurance The principal activities of this segment consist of underwriting the following classes of reinsurance business; Fire, Engineering, Motor, Miscellaneous accident classes and Marine.
2.3.5 Short term insurance The principal activities of this segment consist of underwriting the following classes of insurance business; Fire, Engineering, Motor, Miscellaneous accident classes and Marine.
2.3.6 Stockbroking The principal activities of this segment consist of dealing in the equities market and offering advisory services.
2.3.7 Manufacturing ;OLWYPUJPWHSHJ[P]P[PLZVM[OPZZLNTLU[JVUZPZ[VM[OLWYVK\J[PVUVMI\PSKPUNTH[LYPHSZPUJS\KPUNÄIYLJLTLU[YVVÄUN products, piping and accessories.
2.4 Foreign currency translation
(a) Functional and presentation currency 0[LTZPUJS\KLKPU[OLÄUHUJPHSZ[H[LTLU[ZVMLHJOVM[OL.YV\W»ZLU[P[PLZHYLTLHZ\YLK\ZPUN[OLJ\YYLUJ`VM[OLWYPTHY` LJVUVTPJLU]PYVUTLU[PU^OPJO[OLLU[P[`VWLYH[LZº[OLM\UJ[PVUHSJ\YYLUJ`»;OLJVUZVSPKH[LKÄUHUJPHSZ[H[LTLU[Z HYLWYLZLU[LKPU[OL (b) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuations where items are re measured. Foreign exchange gains or losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of comprehensive income except when KLMLYYLKPUV[OLYJVTWYLOLUZP]LPUJVTLHZX\HSPM`PUNJHZOÅV^OLKNLZ Foreign exchange gains or losses are presented in the statement of comprehensive income within ‘net trading income’. *OHUNLZPU[OLMHPY]HS\LVMTVUL[HY`ZLJ\YP[PLZKLUVTPUH[LKPUMVYLPNUJ\YYLUJ`JSHZZPÄLKHZH]HPSHISLMVYZHSLHYL analysed between translation differences resulting from changes in the amortised cost of the security and other changes in the carrying amount of the security. Translation differences related to changes in amortised cost are recognised in WYVÄ[VYSVZZHUKV[OLYJOHUNLZPUJHYY`PUNHTV\U[HYLYLJVNUPZLKPUV[OLYJVTWYLOLUZP]LPUJVTL ;YHUZSH[PVUKPMMLYLUJLZVUUVUTVUL[HY`ÄUHUJPHSHZZL[ZHUKSPHIPSP[PLZZ\JOHZLX\P[PLZOLSKH[MHPY]HS\L[OYV\NOWYVÄ[ VYSVZZHYLYLJVNUPZLKPUWYVÄ[VYSVZZHZWHY[VM[OLMHPY]HS\LNHPUVYSVZZ;YHUZSH[PVUKPMMLYLUJLZVUUVUTVUL[HY` ÄUHUJPHSHZZL[ZZ\JOHZLX\P[PLZJSHZZPÄLKHZH]HPSHISLMVYZHSLHYLPUJS\KLKPUV[OLYJVTWYLOLUZP]LPUJVTL 2.5 Financial assets and liabilities 2.5.1 Financial assets *SHZZPÄJH[PVU ;OL.YV\WJSHZZPÄLZP[ZÄUHUJPHSHZZL[ZPU[OLMVSSV^PUNJH[LNVYPLZ!H[MHPY]HS\L[OYV\NOWYVÄ[VYSVZZH]HPSHISLMVYZHSL HUKSVHUZHUKYLJLP]HISLZ;OLJSHZZPÄJH[PVUKLWLUKZVU[OLW\YWVZLMVY^OPJO[OLÄUHUJPHSHZZL[Z^LYLHJX\PYLK 4HUHNLTLU[KL[LYTPULZ[OLJSHZZPÄJH[PVUVMP[ZÄUHUJPHSHZZL[ZH[PUP[PHSYLJVNUP[PVU H -PUHUJPHSHZZL[ZH[MHPY]HS\L[OYV\NOWYVÄ[VYSVZZ -PUHUJPHSHZZL[ZH[MHPY]HS\L[OYV\NOWYVÄ[VYSVZZHYLÄUHUJPHSHZZL[ZOLSKMVY[YHKPUN(ÄUHUJPHSHZZL[PZJSHZZPÄLKPU this category if acquired principally for the purpose of selling in the short term. Derivatives are also categorised as held for trading unless they are designated as hedges. (b) Loans and receivables 3VHUZHUKYLJLP]HISLZHYLUVUKLYP]H[P]LÄUHUJPHSHZZL[Z^P[OÄ_LKVYKL[LYTPUHISLWH`TLU[Z[OH[HYLUV[X\V[LK 35 in an active market and the Group does not intend to sell immediately or in the near term. The Group’s loans and FBC Holdings Limited 2012 Annual Report Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2012 receivables comprise ‘loans and advances to customers’, ‘trade and other receivables’ and ‘balances with banks and JHZO»PU[OLZ[H[LTLU[VMÄUHUJPHSWVZP[PVU3VHUZHUKYLJLP]HISLZHYLPUP[PHSS`TLHZ\YLKH[MHPY]HS\LWS\ZPUJYLTLU[HS direct transaction costs, and subsequently measured at their amortised cost using the effective interest method. Loans and receivables are stated net of impairment allowances. J (]HPSHISLMVYZHSLÄUHUJPHSHZZL[Z (]HPSHISLMVYZHSLÄUHUJPHSHZZL[ZHYLUVUKLYP]H[P]LZ[OH[HYLLP[OLYKLZPNUH[LKPU[OPZJH[LNVY`VYUV[JSHZZPÄLKPUHU` of the other categories. Recognition and measurement 9LN\SHY W\YJOHZLZ HUK ZHSLZ VM ÄUHUJPHS HZZL[Z HYL YLJVNUPZLK VU [OL [YHKLKH[L [OL KH[L VU ^OPJO [OL .YV\W commits to purchase or sell the asset. Financial assets are initially recognised at fair value plus transaction costs for all ÄUHUJPHSHZZL[ZUV[JHYYPLKH[MHPY]HS\L[OYV\NOWYVÄ[VYSVZZ-PUHUJPHSHZZL[ZJHYYPLKH[MHPY]HS\LHYLPUP[PHSS`YLJVNUPZLK at fair value, and transaction costs are expensed within administrative expenses in the statement of comprehensive PUJVTL-PUHUJPHSHZZL[ZHYLKLYLJVNUPZLK^OLU[OLYPNO[Z[VYLJLP]LJHZOÅV^ZMYVT[OLPU]LZ[TLU[ZOH]LL_WPYLKVY have been transferred and the Group has transferred substantially all risks and rewards of ownership. Available for sale ÄUHUJPHSHZZL[ZHUKÄUHUJPHSHZZL[ZH[MHPY]HS\L[OYV\NOWYVÄ[VYSVZZHYLZ\IZLX\LU[S`JHYYPLKH[MHPY]HS\L3VHUZHUK receivables are subsequently carried at amortised cost using the effective interest method. .HPUZVYSVZZLZHYPZPUNMYVTJOHUNLZPU[OLMHPY]HS\LVM[OLºÄUHUJPHSHZZL[ZH[MHPY]HS\L[OYV\NOWYVÄ[VYSVZZ»JH[LNVY` are presented in the statement of comprehensive income in the period in which they arise. Dividend income from ÄUHUJPHSHZZL[ZH[MHPY]HS\L[OYV\NOWYVÄ[VYSVZZHUKH]HPSHISLMVYZHSLÄUHUJPHSHZZL[ZPZYLJVNUPZLKPU[OLZ[H[LTLU[ of comprehensive income when the Group’s right to receive payments is established. *OHUNLZPU[OLMHPY]HS\LVMTVUL[HY`HUKUVUTVUL[HY`ZLJ\YP[PLZJSHZZPÄLKHZH]HPSHISLMVYZHSLHYLYLJVNUPZLKPU V[OLYJVTWYLOLUZP]LPUJVTL>OLU[OLZLÄUHUJPHSHZZL[ZHYLZVSKVYPTWHPYLK[OLHJJ\T\SH[LKMHPY]HS\LHKQ\Z[TLU[Z recognised in equity are included in the statement of comprehensive income as ‘gains or losses from investment securities’. ;OLMHPY]HS\LZVMX\V[LKPU]LZ[TLU[ZHYLIHZLKVUJ\YYLU[IPKWYPJLZ0M[OLTHYRL[MVYHÄUHUJPHSHUKMVY\USPZ[LK securities) is not available, the Group establishes fair value by using valuation techniques. These include the use of YLJLU[HYT»ZSLUN[O[YHUZHJ[PVUZYLMLYLUJL[VV[OLYPUZ[Y\TLU[Z[OH[HYLZ\IZ[HU[PHSS`[OLZHTLKPZJV\U[LKJHZOÅV^ analysis, and option pricing models, making maximum use of market inputs and relying as little as possible on entity ZWLJPÄJPUW\[Z ;OL.YV\WJSHZZPÄLZ[OLÄUHUJPHSPUZ[Y\TLU[ZPU[VJSHZZLZ[OH[YLÅLJ[[OLUH[\YLVMPUMVYTH[PVUHUK[HRLPU[VHJJV\U[ JOHYHJ[LYPZ[PJZVM[OVZLÄUHUJPHSPUZ[Y\TLU[Z;OLJSHZZPÄJH[PVUTHKLJHUILZLLUPUZLJ[PVU 2.5.2 Financial liabilities ;OL.YV\W»ZÄUHUJPHSSPHIPSP[PLZHYLTLHZ\YLKH[HTVY[PZLKJVZ[-PUHUJPHSSPHIPSP[PLZTLHZ\YLKH[HTVY[PZLKJVZ[PUJS\KL deposits from other banks and customers, borrowings, certain insurance liabilities and trade and other liabilities. The .YV\WKLYLJVNUPZLZHÄUHUJPHSSPHIPSP[`^OLUP[ZJVU[YHJ[\HSVISPNH[PVUZHYLKPZJOHYNLKJHUJLSSLKVYOH]LL_WPYLK 2.5.3 Borrowings Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the statement of comprehensive income over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre payment for liquidity services and amortised over the period of the facility to which it relates. 2.5.4 Borrowing costs .LULYHSHUKZWLJPÄJIVYYV^PUNJVZ[ZKPYLJ[S`H[[YPI\[HISL[V[OLHJX\PZP[PVUJVUZ[Y\J[PVUVYWYVK\J[PVUVMX\HSPM`PUN assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, 36 FBC Holdings Limited 2012 Annual Report Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2012 are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. 0U]LZ[TLU[PUJVTLLHYULKVU[OL[LTWVYHY`PU]LZ[TLU[VMZWLJPÄJIVYYV^PUNZWLUKPUN[OLPYL_WLUKP[\YLVUX\HSPM`PUN assets is deducted from the borrowing costs eligible for capitalisation. All other borrowing costs are recognised in statement of comprehensive income in the period in which they are incurred. 2.5.5 Customer deposits Customer deposits are recognized initially at fair value, net of transaction costs incurred. Deposits are subsequently shown at amortised costs using the effective yield method. Any difference between proceeds (net of transaction costs and the redemption value is recognized in the statement of comprehensive income. *H[LNVYPLZVMÄUHUJPHSPUZ[Y\TLU[Z *H[LNVY`HZKLÄULKI`0(: -PUHUJPHS Class (as determined Subclasses 0UZ[Y\TLU[Z!9LJVNUP[PVUHUK4LHZ\YLTLU[ by the Group) Financial assets at fair value Financial assets Equity securities (listed on the [OYV\NOWYVÄ[VYSVZZ held for trading Zimbabwe Stock Exchange) Equity securities (listed on the Available for sale Zimbabwe Stock Exchange) Loans and advances to Placements other banks Large corporate customers Trade receivables Retail customers Financial assets Mortgage Loans to Loans and receivables Term loans individuals Loans and Overdraft advances to Large corporate Bankers customers Loans to customers acceptances, corporate Mortgages, SMEs entities Term loans, Other Overdrafts Deposits from other banks Lines of credit Large corporate Financial liabilities at Demand deposits Financial liabilities customers amortised cost Deposits from Promissory notes customers SMEs Savings and current accounts Individuals Borrowings Contingent liabilities Loan commitments and commitments Guarantees and letters of credit 37 FBC Holdings Limited 2012 Annual Report Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2012 6MMZL[[PUNÄUHUJPHSPUZ[Y\TLU[Z -PUHUJPHSHZZL[ZHUKSPHIPSP[PLZHYLZL[VMMHUK[OLUL[HTV\U[YLWVY[LKPU[OLZ[H[LTLU[VMÄUHUJPHSWVZP[PVU^OLU[OLYL is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously. Income and expenses are presented on a net basis only when permitted by the accounting standards, or for gains and losses arising from a group of similar transactions such as in the Group’s trading activity. 0TWHPYTLU[VMÄUHUJPHSHZZL[Z (a) Assets carried at amortised cost ;OL .YV\W HZZLZZLZ H[ LHJO YLWVY[PUN KH[L ^OL[OLY [OLYL PZ VIQLJ[P]L L]PKLUJL [OH[ H ÄUHUJPHS HZZL[ VY NYV\W VM ÄUHUJPHSHZZL[ZPZPTWHPYLK(ÄUHUJPHSHZZL[VYNYV\WVMÄUHUJPHSHZZL[ZPZPTWHPYLKHUKPTWHPYTLU[SVZZLZHYLPUJ\YYLK if, and only if there is objective evidence of impairment as a result of one or more events that occurred after the initial YLJVNUP[PVUVM[OLHZZL[HUK[OH[L]LU[OHZHUPTWHJ[VU[OLLZ[PTH[LKM\[\YLJHZOÅV^ZVM[OLÄUHUJPHSHZZL[VYNYV\W VMÄUHUJPHSHZZL[Z[OH[JHUILYLSPHIS`TLHZ\YLK 6IQLJ[P]LL]PKLUJL[OH[HÄUHUJPHSHZZL[VYNYV\WVMÄUHUJPHSHZZL[ZPZPTWHPYLKPUJS\KLZVIZLY]HISLKH[H[OH[JVTLZ to the attention of the Group about the following loss events: PZPNUPÄJHU[ÄUHUJPHSKPMÄJ\S[`VM[OLPZZ\LYVYVISPNVY" (ii) a breach of contract, such as default or delinquency in interest or principal payments; PPP[OL.YV\WNYHU[PUN[V[OLIVYYV^LYMVYLJVUVTPJVYSLNHSYLHZVUZYLSH[PUN[V[OLIVYYV^LY»ZÄUHUJPHSKPMÄJ\S[`H concession that the lender would not otherwise consider; P]P[ILJVTPUNWYVIHISL[OH[[OLIVYYV^LY^PSSLU[LYIHURY\W[J`VYV[OLYÄUHUJPHSYLVYNHUPZH[PVU" ][OLKPZHWWLHYHUJLVMHUHJ[P]LTHYRL[MVY[OH[ÄUHUJPHSHZZL[ILJH\ZLVMÄUHUJPHSKPMÄJ\S[PLZ"VY ]PVIZLY]HISLKH[HPUKPJH[PUN[OH[[OLYLPZHTLHZ\YHISLKLJYLHZLPU[OLLZ[PTH[LKM\[\YLJHZOÅV^ZMYVTHNYV\WVM ÄUHUJPHSHZZL[ZZPUJL[OLPUP[PHSYLJVNUP[PVUVM[OVZLHZZL[ZHS[OV\NO[OLKLJYLHZLJHUUV[`L[ILPKLU[PÄLK^P[O[OL PUKP]PK\HSÄUHUJPHSHZZL[ZPU[OLNYV\WPUJS\KPUN!