FBC Holdings Limited strength • diversity • service
AUDITED FINANCIAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2015
FBC Bank Limited (Registered Commercial Bank) FBC Building Society FBC Reinsurance Limited (Registered Building Society) strength • diversity • service
FBC Securities (Private) Limited (Registered Stockbroker) - Member of the Zimbabwe Stock Exchange
(A registered microfinance institution) AUDITED FINANCIAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2015
Group Chairman’s Statement
Non-performing loans on the other hand have been on a downward trend as banks tightened lending conditions, Financial Highlights whilst the Reserve Bank’s initiative of ZAMCO affords banks the opportunity to clean up their balance sheets. Group profit before income tax US$21.3 million. This may create additional capacity for underwriting new credit facilities which are critical in the economic Group profit after tax US$18.1 million. revival process. Cost to income ratio 74%. Basic earnings per share 2.72 US cents. Regulatory authorities across the various sub-sectors of the financial services industry have been actively Net asset value per share 15.84 US cents. engaging the industry and have reviewed various risk management and compliance frameworks with a view to Final dividend proposed US$1.0 million, bringing total dividend to $2 million, including interim dividend of stabilising the industry and creating the necessary confidence required by all stakeholders. The regulators have US$1 million. also intervened in the determination of lending rates with the objective of making funding more affordable to key sectors of the economy and reducing non-performing loans in the process. Furthermore, banks have had Financial Performance Review the opportunity to lay out plans for financial inclusion as part of their initiatives to harness informal economic I am very pleased to report to our stakeholders that 2015 was another outstanding year for FBC Holdings. activities. This is expected to promote a more stable financial services industry, while providing the requisite Net profits increased by 30% to US$18.1 million, cost to income ratio improved to 74% from 78% and return platform for economic revival. on capital improved to 17.2% from 5.5%. The Group’s improved performance benefitted from the strategic decision to divest from Turnall Holdings Limited, a non-core building supplies manufacturing company. The Share Price Performance. company had been part of the FBC Holdings Group from September 2009 and was disposed of in 2014. Trading on the Zimbabwe Stock Exchange was subdued for the greater part of 2015. The depressed performance reflected the weak investment culture spurred by lack of savings as disposable incomes continued to shrink. The Group’s improved performance was significantly driven by net income growth of 5.9% (US$4.6 million). The FBCH Share price retreated by 12.5% from 8c to 7c compared to the overall industrial index’s negative This was however, partly offset by an increase in insurance commission and insurance claims related expenses outturn of 29.45%. Despite the negative share price outturn, the company has remained fundamentally strong of 15% (US$1.7 million) and an upward movement in overhead expenses of 9% (US$3.6 million). and continues to unlock value as evidenced by growth in profitability and net asset value.
The Group’s diversified business model in the financial services sector continues to form the foundation of our Corporate Social Investment strong performance, and positions the FBCH Group well in dealing with a volatile macroeconomic landscape. FBC Holdings Limited remains committed in giving back to the community as part of its corporate social investment strategy. It is in this light that the Group disbursed over US$120 000.00 towards various corporate The Group’s total net income increased by 5.9% to US$81.9 million underpinned by growth in net interest social responsibility initiatives in the fields of education, health, community share trusts, sports and the arts income of 12% (US$3.8 million) to US$36.6 million, fee and commission income of US$20.8 million, growth during the year 2015. in net earned insurance premium of 15% (US$2.9 million) to US$22.1 million. Gross profit on property sales decreased to US$0.9 million compared to US$2.9 million in 2014 due to a slowdown in sales. The Building Marketing and Public Relations Society had 22 units of unsold houses at year end as most of these were only completed towards the end of The FBC Holdings brand remains strongly visible within the financial services market place. During the course the year. In order to retain and strengthen our competitiveness in the sector we continue to focus on delivering of the year, the Group’s flagship brand, FBC Bank was recognised at the Corporate Governance Awards held housing units at the most efficient cost. by the Institute of Chartered Secretaries and Administrators in Zimbabwe where the following awards were presented: Second prize for the “Best Banking Risk Management” category, and Third prize in the “Best The growth in net interest income was driven by a 5% growth in financial assets held to maturity and the loan Banking Corporate Governance Practices” and “Best Banking Internal Audit Disclosures “ categories. book to US$353 million from US$337 million, improved cost of funding and the continued re-focusing of the In addition, FBC Holdings was ranked as one of the top four performing companies on the Zimbabwe Stock loan portfolio to better yielding sectors and improved quality loan income. Exchange by the Zimbabwe Independent Banks and Banking Survey 2015.
The net earned insurance premium growth was buttressed by the continued strengthening of the FBCH brand e-Commerce in the market, which inter-alia has culminated in the insurance subsidiaries consolidating their market share by The volumes of transactions going through electronic platforms show remarkable growth as more customers acquiring more quality customers. become banked and embrace convenient, cashless and reliable modes of transacting. The Group has been able to significantly value-add services across all electronic platforms such as ATMs, POS, mobile gadgets and the The level of impairment allowance on financial assets improved significantly, following the redefinition of our internet. The year culminated in the launch of the FBC Mobile Banking Application on the mainstream Android risk appetite. We are now more prudent in our approach to lending and have in the process, taken measures and IOS platforms. The Group’s e-commerce infrastructure is fundamental in enabling financial inclusion in to de-risk those counterparties falling outside our risk appetite. These initiatives, aided by the Reserve Bank’s the Zimbabwean market place. Having submitted its five-year financial inclusion plan to the Reserve Bank of scheme for banks to transfer secured non- performing loans to the Zimbabwe Asset Management Company Zimbabwe, the Group expects to implement the same in 2016 and beyond. It is imperative that the economy (ZAMCO), culminated in our non-performing loans (NPL) ratio improving to 6.9% from 15% last year. The migrates to cash-lite methods of transacting, thus reducing the burden of using cash which is expensive to Central Bank has set a non-performing loans ratio target of 10% by 30 June 2016 and 5% by 31 December procure and manage. The Group continues to engage like-minded partners towards the development of an 2016. The Group transferred total loans valued at $8 million to ZAMCO. inter-operable payments eco-system for the benefit of individuals, businesses as well as government entities.
Our administration expenses increased as we continued to invest for growth and the strengthening of our Directorate compliance and IT capabilities. The Group will continue to take action to manage its costs better by expanding Messrs Johnson Rex Mawere, Kenzias Chibota and James Mwaiyapo Matiza resigned from the Board of its digital capabilities, automation, re-engineering processes and strict cost control. FBC Holdings Limited with effect from 25 June 2015, 12 October 2015 and 16 October 2015 respectively. I would like to thank the three directors for their valued contributions to the Group and would like to take this The Group’s banking subsidiaries continued to maintain adequate liquidity for all its depositing customers opportunity to wish them well in their new endeavors. Mr Robin Vela was appointed to the Board with effect throughout the year by following prudent liquidity management policies and procedures. from 7 October 2015. I welcome Robin to the Group and look forward to his wise counsel.
The Group’s statement of financial position grew by 2.8% to US$490.5 million from US$477.3 million last year, Dividend mainly driven by retained earnings. On behalf of the Board of Directors, I am pleased to advise shareholders that a final dividend of 0.149 US cents per share was proposed. This makes a total dividend of 0.298 US cents per share, together with the interim The Group’s total equity attributable to shareholders of the parent company increased by 18.9% to US$104.6 dividend of 0.149 US cents per share which was paid in September 2015. million from US$88 million last year as a result of retained revenue reserves for the year.
Outlook Operating Environment In the face of a very challenging and intensely competitive environment, FBC Holdings will maintain its culture Economic fundamentals remained weak during the course of 2015 as most key economic indicators continued of outstanding performance and industry leadership. We will continue to monitor global and local economic on a downward trend. Economic growth forecasts were below the 2% mark, reflecting a challenging operating developments, and realign our strategies as appropriate, with a view to continue driving shareholder value. environment. The economy was characterised by weak aggregate demand, persistent liquidity constraints and low foreign direct investments. Capacity utilisation reportedly decreased further as cheap imports, obsolete Appreciation plants and erratic power supplies constrained production across most sectors of the economy. Informal I wish to extend my sincere appreciation to our valued clients who have continued to support us over the business activities on the other hand remained significant, as economic participants drifted further from the years. The confidence and loyalty shown to the FBC brand are immeasurable. As always, I am immensely formal structures of doing business. grateful for the guidance and counsel shown by the non-executive directors during this period, and for the professionalism, commitment and dedication shown by the Group Chief Executive, Mr John Mushayavanhu On a positive note, however, the country eagerly awaits the finalisation of the debt repayment arrangements and the entire FBC team. initiated by the government in 2015 which may provide the springboard for economic revival. The country requires significant fresh cash inflows coupled with investor-friendly macroeconomic policies to turnthe fortunes of the economy around.
Financial Services Sector The financial services sector has not been spared from the current economic distress as the sector’s prospects Herbert Nkala follow the fortunes of the general economy. Some players have exited the industry either voluntarily or Group Chairman involuntarily due to unviable business models. 15 March 2016
2 Directors: Herbert Nkala (Chairman), John Mushayavanhu (Group Chief Executive)*, Kleto Chiketsani*, Gertrude S Chikwava, Philip M Chiradza, Felix Gwandekwande*, Franklin H Kennedy, Trynos Kufazvinei (Group Finance Director)*, Canada Malunga, Chipo Mtasa, Godfrey G Nhemachena, Webster Rusere*, Robin Vela. (*Executive) AUDITED FINANCIAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2015
Group Chief Executive’s Report
It is my pleasure to once again present to you the FBC Holdings audited financial results for the 12 month period ending 31 Inspite of the challenging operating environment, the company maintained an underwriting result of US$1.9 million supported December 2015. Despite the constraints presented by the economic environment, the Group has continued to leverage off by strong underwriting discipline and robust risk management systems. The company has been steadily increasing its its diverse business model as a means to delivering positive performance and preserving stakeholder interests. market share from 12% in 2010 to 20% in 2015, on the back of increased confidence from the company’s clients.
Group Performance FBC Reinsurance’s maintained its A- rating in claims paying ability from the Global Credit Rating Agency of South Africa. The Group sustained a positive performance for the year 2015, achieving a profit before tax of US$21.3 million for the year compared to US$17.1 million last year. It is pleasing to note that the Group’s total net income registered a growth of 6% to The company commenced writing Life and Health business in 2015 and is already participating in some of the major life companies’ $81.9 million from US$77.4 million achieved last year. The revenue was sustained by increased customer acquisition and treaties. This new line of business is expected to contribute meaningfully in 2016, based on the business written thus far. retention initiatives, whilst leveraging on the FBC brand. FBC Reinsurance’s retrocession programme has been enhanced by the addition of an A rated global reinsurer on the panel. The Group’s net interest income grew by 12% to US$36.6 million from US$32.8 million recorded last year and its contribution This ensures that the business accepted by FBC Re is reinsured with some of the strongest Global reinsurers. The company to total income increased to 45% from 42% last year. This was driven by the growth in loans and advances, mortgages and also has arrangements with top rated specialist markets covering businesses against risks associated with Political Riots financial assets held to maturity. and Terrorism, as well as Cyber Risks.
Fee and commission income decreased slightly by 1% to US$20.9 million from US$21.2 million achieved in the prior year. Eagle Insurance Company Limited This was due to downward review conducted on bank charges during the course of the year. The contribution to total net Eagle Insurance continues to grow since its acquisition by the Group in 2011. Gross Written Premium increased by 6% to income registered a marginal decrease to 25% from 27% on the back of a more pronounced net interest income and net US$18.9 million from US$16.9 million in 2014. The insurance company has continued to post profits consistently since 2012. earned insurance premium contribution. I am pleased to report that the outlook remains largely positive, with the business unit poised to benefit from on-going The contribution of gross profit on property sales decreased to 1% from 4% mainly as a result of reduced turnover on product development in the largely untapped micro insurance space. Eagle Insurance continues to exercise robust risk property sales due to the fact that a significant number of housing units were completed towards the end of the year. Of note management, engage in prudent underwriting and also continues to maintain a very liquid balance sheet. In 2015, Eagle is the decline in margins on property sales to 14% from 36% last year as a result of increased competition in the housing Insurance’s claims paying ability was upgraded to A- by the Global Credit Rating Agency. sales space, continued liquidity challenges within the economy and a capital gains charge. Service Delivery Net earned insurance premium registered a commendable growth of 15% and its contribution to total net income increased Our commitment as FBC Holdings is to deliver outstanding service that leaves a lasting impression on all our clients to 27% from 25% last year driven by increased customer acquisitions and the successful performance of our micro insurance and stakeholders. In this regard, the Group has embarked on a mission to refurbish its branches, giving them a more products. contemporary feel. The Group also opened new branches across the country for units such as Microplan and FBC Bank in a bid to increase our footprint and nurture financial inclusion. The Group continues to place emphasis on cost containment as a strategic objective for survival under the current challenging operating environment. The Group cost to income ratio improved to 74% from 78% last year, mainly due to a decreased Risk Management impairment allowance arising from an improved loan book. Administration overheads at US$43 million were 9% above those The Group’s risk management processes are built on the Enterprise-Wide Risk Management model. This has enabled the incurred last year, as a result of expansion related expenses. The Bank and Microplan Financial Services opened two and development of a strong risk management culture across FBC Holdings which is critical in the effective management of risks four new branches respectively during 2015. across the business. Key focus areas include people, processes and systems, as these are key pillars in the implementation of the enterprise-wide risk management programme. The Group has a well-defined risk appetite which provides the connection The Group’s statement of financial position at US$490.5 million increased by 3% compared to the prior year. This growth is between the overall business strategy and the risk governance of the organisation. A mandatory review of policy and underpinned by continued customer support which is a further testimony to the continued consolidation of the FBC brand. procedure manuals is conducted at least once every year to ensure realignment with changes in the operating environment.
Total equity attributable to shareholders of FBC Holdings limited increased by 19% to US$105 million. Internal Capital Adequacy Assessment Processes (ICAAP) and Stress Tests are part of management’s regular tools to ensure businesses have sufficient capital at all times, consistent with risk profiles. Proactive measures are put in place to FBC Bank Limited address any vulnerability noted in stress testing exercises. The Group’s internal control environment continues to improve FBC Bank recorded a profit before income tax of US$9.3 million compared to US$2.2 million which was achieved for the as the Group implements ISO Information Security and Basel II standards. The Group has fully embraced these standards prior year after a fair value loss adjustment of US$6 million on the disposal of Turnall investment. The Bank’s cost to income in its quest to foster strong risk management standards. Management and the Board, which are an integral part of the risk ratio for the period improved to 76% from the prior year’s figure of 93%. Where possible, the Group has continued to pursue governance structure across the Group, continue to provide oversight on overall risks. a cost containment strategy supported by deployment of digital solutions to the bank’s operations. Know Your Customer (KYC) and Anti Money Laundering (AML) The Bank’s statement of financial position marginally grew by 1% from US$382.7 million to US$387.4 million, reflective of the The prevention of money laundering and terrorist financing is a key focus of the FBC Group. The Group has put in place the underlying punitive operating environment. Lines of credit from Afreximbank ($15 million) and PTA Bank ($10 million) were necessary Know Your Customer (KYC) and Customer Due Diligence (CDD) controls designed to inhibit the movement of successfully repaid during the year when they were due for repayment, demonstrating FBC Bank’s strong liquidity management. funds derived from any criminal activity, curb the availability of money to fund terrorist activities and prevent illicit financial FBC Bank also accessed US$3.5 million from PTA Bank, particularly for the Agricultural Inputs Facility whilst an additional flows. The Group and its subsidiaries is guided by the standards of regulatory and supervisory bodies such as the Financial US$20 million was jointly raised from the local market through the issuance of Tobacco bills for the 2015/16 season. Action Task Force (FATF), the Wolfsberg Group, the East and Southern African Anti Money Laundering Group (ESAAMLG) and the Reserve Bank of Zimbabwe Financial Intelligence Unit. In addition, the FBC Group has adopted international best The Bank increased its lending portfolio by 4.5% from US$252.8 million to US$268.5 million. Stringent credit policies were put in practice in order to refine its process flows relating to anti-money laundering (AML) and the countering of the financing of place to ensure that new credit was advanced only to qualifying customers. Asset quality has significantly improved, with Non- terrorism (CFT) as guided by regular interactions with its correspondent bankers. Performing Loans down to 8% as at 31 December 2015, in compliance with the RBZ guideline of 10% set for 30 June 2016. Key controls that have been put in place to minimize the Money Laundering/Terrorist Financing risk include the following; The Bank’s core capital as at 31 December 2015 which stood at US$43,1 million, is well in excess of the US$25 million Board approved AML/CFT Policies and Procedures which are reviewed annually; Risk Based Approach to KYC/CDD; Risk minimum capital requirement set by the RBZ, and is in line with our re-capitalisation plan, in pursuit of US$100 million by 2020. Based Training of all Staff; Independent and Anonymous Reporting Arrangements and Automated Screening Solutions.
During the course of the year, the Bank opened an SME-oriented branch in Graniteside, extended its agency banking Human Resources portfolio and deployed more Point of Sale terminals in pursuit of its financial inclusion initiatives. An additional branch was The Group enjoys harmonious employee relations across all its business units. For the fifth consecutive year, the Group also opened in Borrowdale to serve our growing customer base in the northern suburbs. was able to retain its key and critical skills that are pivotal in delivering the service it provides to its valued customers and stakeholders. Employee commitment to the Group continues to be high as reflected by the level of employee engagement The Bank continued with its e-commerce based strategy and introduced a mobile application to further increase customer which in 2015 surpassed the average level recorded for the last 4 years. convenience when transacting. The financial performance of the company bears testimony to the level of productivity that committed and highly engaged The Bank maintained an A-rating from the Global Credit Rating Agency in 2015. employees are capable of delivering. Internal and independent research has confirmed the existence of a positive correlation between high employee engagement and better company performance. The Group will continue to review its policies with FBC Building Society a view to ensuring that areas which increase the level of employee commitment and consequently productivity, are given FBC Building Society continues to be a significant player on the Zimbabwean properties market as it continues to avail high attention. These include but are not limited to employee relations, talent management, performance management, incentives quality and affordable housing units on the market. A total of 90 new housing units were released into the market during the and rewards, learning and development, employee participation, work life balance, employee wellness and other related year under review. policies which influence high levels of engagement and belonging.
The Society recorded a surplus of US$6.3 million for the year ended 31 December 2015, which is relatively comparable to Information Technology and E-Commerce the US$6.8 million recorded in the prior year. Total net income for the year amounted to US$12.9 million in comparison to The FBC brand has made tremendous inroads in leveraging technology to enhance efficiency, lower costs and deliver the US$14.1 million recorded in 2014. superior customer experience and convenience. Emerging channels such as mobile and internet banking continue to benefit from the high penetration rate, resulting in a surge in electronic transactional volumes and associated revenues. The Group The Building Society’s statement of financial position increased by 14%, to US$124.8 million, from US$109.4 million in 2014. is focused on broadening service access for the banked, whilst enhancing reach for the un-banked and under-banked Deposits increased by 16% from US$74.1 million to US$ 85.3 million. The loan portfolio also registered a 16% growth to segments which previously could not be served optimally via brick and mortar structures. US$57.9 million from US$50.1 million in 2014. The loan book growth continues to be driven by mortgages lending, arising from our housing development projects. In an effort to increase our global footprint in the payments market, the Bank will shortly implement the VISA international card scheme which will see us accept and process VISA cards by April 2016. FBC Bank has also embarked on a drive to The net capital for the Building Society stood at US$35.0 million as at 31 December 2015, which is compliant with the current adopt and implement globally recognised frameworks in ICT governance and management to increase the efficiency and minimum capital requirements for building societies. effectiveness of our computing platform as it becomes more complex and sophisticated.
Microplan Financial Services (Private) Limited The Group is at an advanced stage of implementing an Information Security Management System based on the ISO27001 Microplan’s growth in market share and profitability since inception has remained impressive, supported by aggressive standard. This is to ensure preservation of confidentiality, integrity and availability of the Information Systems andthe business development techniques and strong risk management methods. Microplan recorded a full year profit before tax of valuable information they process, thereby protecting stakeholder value against ever-escalating cyber threats. Technology US$3 million in 2015, posting a 47% increase on the prior year. The capital level of the company stands at US$5.5 million remains fundamental to the FBC financial value chain, which will also utilise the agency network to enable reach and financial which is well above the regulatory minimum requirement of US$25 000. 00 and in compliance with the required minimum inclusion across multiple ecosystems. The Group is well poised to deliver integrated payment systems to its clients and the capital for deposit taking Micro Finance Institutions of $5 million. economy at large.
In the same period under review, new branches were opened in Chipinge, Chinhoyi, Lupane and Kwekwe, and these have We are fully aware of the shorter life-cycle of ICT infrastructure, attributed to the ever-changing needs of our valued been very active in the deployment of new Microplan products, namely micro-leasing, house expansion loans and rural customers. To this end, we have invested US$3 million to revamp our ICT infrastructure, which will result in enhanced agriculture business finance. Partnerships with targeted development agencies have yielded exciting results which have systems performance, business continuity, agility and real-time monitoring of the computing environment, thus assuring our advanced Microplan’s penetration of its target markets. The Zimbabwe Microfinance Fund (ZMF) in August 2015 extended customers of a guaranteed superior experience on any FBC electronic service delivery channel they transact on. a new line of credit to Microplan, adding to the existing lines of credit. Product Development FBC Securities (Private) Limited Our greatest asset as a Group is the ability to understand the desires of our clients and the market at large, thereby giving The meltdown in the world financial markets and reduced aggregate demand culminated in a negative performance of 29.45% us the scope to come up with products that are cost effective and tailor made for our clients. In line with our e-Commerce for the industrial index on the Zimbabwe Stock Exchange, as investors became more risk averse. This impacted negatively on thrust, we are also coming up with competitive and user friendly e- based products. the unit’s first half performance of 2015. With the coming on board of the Central Securities Depository and Automated Trading System in the listed securities market, FBC Securities rationalised its operations in the second half of 2015. Appreciation As always, my sincere gratitude is extended to our valued and loyal customers who have demonstrated their well-placed An increased presence in foreign markets and additional income from fixed income securities trading helped the unit finish confidence in us over the years. I wish to convey my sincere gratitude to the FBC Holdings Limited Board of Directors, strongly in 2015. Looking ahead, the unit will continue with the income diversification strategy hinged on equities, fixed Management and staff members for their unwavering guidance, contribution and support. income trading and advisory services.
FBC Reinsurance Limited FBC Reinsurance’s gross premium income for 2015 amounted to US$17.8 million compared to US$15.6 million written in 2014, representing an increase of 13%. Profit before income tax amounted to $2.5 million, which is a 6% decrease from the US$2.7 million achieved last year. Performance was adversely impacted by the adverse performance of the ZSE, as well as the reduction John Mushayavanhu in money market rates which resulted in investment income decreasing from $648 000.00 in 2014 to $583 000.00 in 2015. Group Chief Executive 15 March 2016
3 Directors: Herbert Nkala (Chairman), John Mushayavanhu (Group Chief Executive)*, Kleto Chiketsani*, Gertrude S Chikwava, Philip M Chiradza, Felix Gwandekwande*, Franklin H Kennedy, Trynos Kufazvinei (Group Finance Director)*, Canada Malunga, Chipo Mtasa, Godfrey G Nhemachena, Webster Rusere*, Robin Vela. (*Executive) AUDITED FINANCIAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2015
Consolidated Statement of Comprehensive Income Consolidated Statement of Financial Position For the year ended 31 December 2015 As at 31 December 2015 31 Dec 2015 31 Dec 2014 2015 2014 Note US$ US$ Note US$ US$ ASSETS Continuing operations Balances with other banks and cash 4 93 762 063 110 965 506 Interest income 19 61 476 965 61 380 917 Financial assets held to maturity 49 624 033 10 749 309 Interest expense 19.1 (24 848 487) (28 545 366) Loans and advances to customers 5.1 282 971 693 303 672 544 Trade and other receivables including insurance receivables 5.2 8 099 529 6 382 407 Net interest income 36 628 478 32 835 551 Bonds and debentures 6 8 702 320 2 768 518 Financial assets at fair value through profit or loss 7 1 050 037 1 349 039 Fee and commission income 20 20 977 274 21 233 171 Available for sale financial assets 8 377 568 407 764 Fee and commission expense 20.1 (81 617) (67 270) Inventory 9 6 112 654 4 464 350 Prepayments and other assets 10 5 666 568 6 095 286 Net fee and commission income 20 895 657 21 165 901 Current tax asset - 197 042 Deferred income tax assets 6 181 913 4 274 800 Revenue 21 6 709 923 8 282 137 Investment property 11 2 472 140 1 693 000 Cost of sales 21.1 (5 758 871) (5 282 538) Intangible asset 12 897 946 1 212 593 Property, plant and equipment 13 24 646 858 23 115 845 Gross profit 951 052 2 999 599 Total assets 490 565 322 477 348 003 Insurance premium revenue 22 35 425 142 31 067 431 Premium ceded to reinsurers and retrocessionaires (13 227 253) (11 777 515) EQUITY AND LIABILITIES Liabilities Net earned insurance premium 22 197 889 19 289 916 Deposits and borrowings from other banks and customers 14 360 719 968 364 867 863 Insurance liabilities 15 9 404 428 7 278 048 Net trading income 792 957 999 900 Trade and other payables 16 13 933 849 15 343 915 Net loss from financial assets at fair value through profit or loss 23 (361 233) (335 862) Current income tax liability 907 522 1 095 584 Other operating income 24 850 102 405 016 Deferred income tax liability 710 525 545 697 1 281 826 1 069 054 Total liabilities 385 676 292 389 131 107 Total net income 81 954 902 77 360 021 Equity Impairment allowance on financial assets 5.4 (3 325 576) (8 343 080) Capital and reserves attributable to equity holders of the parent entity Net insurance commission expense 25 (4 798 058) (4 004 082) Share capital and share premium 17.3 14 089 892 14 089 892 Other reserves 38 439 904 39 486 008 Insurance claims and loss adjustment expenses 26 (8 551 720) (7 580 228) Retained profits 52 100 051 34 432 803 104 629 847 88 008 703 Administrative expenses 27 (43 931 527) (40 337 235) Non controlling interest in equity 259 183 208 193 Profit before income tax 21 348 021 17 095 396 Total equity 104 889 030 88 216 896 Income tax expense 28 (3 249 778) (3 162 233) Total equity and liabilities 490 565 322 477 348 003 Profit for the year from continuing operations 18 098 243 13 933 163
Discontinued operations Consolidated Statement of Cash Flows Loss for the year from discontinued operations 29 - (9 038 872) Year ended 31 December 2015 2015 2014 Profit for the year 18 098 243 4 894 291 Note US$ US$ Cash flow from operating activities Other comprehensive income Profit before income tax 21 348 021 17 095 396 Gains on property revaluation - 1 222 154 Adjustments for non cash items: Tax relating to other comprehensive income - (238 040) Depreciation 13 1 747 315 1 633 171 Amortisation charge 12 493 636 451 168 Transfer from regulatory reserves 627 590 - Impairment loss on loans and advances 5.4 3 325 576 8 343 080 Tax - - Fair value adjustment on investment propety 11 (162 576) - Impairment loss on property and equipment 13 - 346 845 Loss on available for sale financial assets (30 196) (31 125) Fair value adjustment on financial assets at fair value through profit or loss 23 361 233 335 862 Tax 302 311 Profit on disposal of property and equipment 24 (32 503) (15 268)
Other comprehensive income, net income tax 597 696 953 300 Net cash generated before changes in operating assets and liabilities 27 080 702 28 190 254
Total comprehensive income for the year 18 695 939 5 847 591 Increase in financial instrument held to maturity (38 874 724) (10 749 309) Decrease/(increase) in loans and advances 17 375 275 (46 254 766) Profit attributable to: (Increase)/decrease in trade and other receivables (1 717 122) 4 542 557 Equity holders of the parent 18 040 863 4 838 405 Increase in bonds and debentures (5 933 802) (104 239) Non - controlling interest 57 380 55 886 Increase in financial assets at fair value through profit or loss (62 231) (213 701) Decrease/(increase) in available for sale financial assets 30 196 (407 764) Profit for the year 18 098 243 4 894 291 Increase in inventory (1 648 304) (306 276) Decrease in prepayments and other assets 428 718 390 361 Profit attributable to equity shareholders arises from: Increase in investment property (616 564) (648 000) Continuing operations: 18 040 863 13 877 277 (Decrease)/increase in deposits from customers (7 687 854) 64 113 180 Discontinued operations: - (9 038 872) Increase/(decrease) in deposits from other banks 12 652 873 (10 598 244) 18 040 863 4 838 405 Increase/(decrease) in insurance liabilities 2 126 380 (4 357 919) (Decrease)/increase in trade and other payables (1 410 066) 3 649 800 Total comprehensive income attributable to: 1 743 477 27 245 934 Equity holders of the parent 18 638 559 5 779 344 Non - controlling interest 57 380 68 247 Income tax paid (4 987 872) (2 907 837)
Total comprehensive income for the year 18 695 939 5 847 591 Net cash (used in)/generated from operating activities (3 244 395) 24 338 097
Total comprehensive income attributable to equity Cash flows from investing activities shareholders arises from: Purchase of intangible assets 12 (178 989) (302 816) Continuing operations: 18 638 559 14 818 216 Purchase of property, plant and equipment 13 (3 321 442) (1 312 671) Discontinued operations: - (9 038 872) Proceeds from sale of property, plant and equipment 50 512 15 989 18 638 559 5 779 344 Net cash used in investing activities (3 449 919) (1 599 498) Earnings per share (US cents) Basic earnings/(loss) per share 30.1 Cash flows from financing activities From continuing operations 2.72 2.09 Proceeds from borrowings 3 735 163 39 987 316 From discontinued operations - (1.36) Repayment of borrowings (12 848 077) (18 836 406) Dividend paid to the Company’s shareholders (1 001 205) (1 001 205) From profit for the year 2.72 0.73 Dividend paid to non-controlling interests (6 390) (16 510) Purchase of treasury shares (388 620) (834 551) Diluted earnings/(loss) per share 30.2 From continuing operations 2.72 2.09 From discontinued operations - (1.36) Net cash (used)/generated from financing activities (10 509 129) 19 298 644 Net (decrease)/increase in cash and cash equivalents (17 203 443) 42 037 243 From profit for the year 2.72 0.73 Cash and cash equivalents at beginning of the year 110 965 506 68 928 263 Cash and cash equivalents at the end of year 4.2 93 762 063 110 965 506 Consolidated Statement of Changes in Equity For the year ended 31 December 2015 Share Non Available Non Share Share Retained option Treasury distributable Revaluation for sale Regulatory Changes in controlling Total capital premium profits reserve shares reserve reserve reserve reserve ownership Total interest equity US$ US$ US$ US$ US$ US$ US$ US$ US$ US$ US$ US$ US$
Balance as at 1 January 2014 6 719 14 083 173 32 413 981 110 716 (339 150) 36 222 261 3 191 743 - 627 590 1 679 029 87 996 062 9 686 407 97 682 469
Profit for the year - - 4 838 405 ------4 838 405 55 886 4 894 291 Other comprehensive income; Gain on revaluation of property, plant and equipment, net of tax ------971 753 - - - 971 753 12 361 984 114 Loss on available for sale financial assets ------(30 814) - - (30 814) - (30 814) Total other comprehensive income ------971 753 (30 814) - - 940 939 12 361 953 300 Total comprehensive income - - 4 838 405 - - - 971 753 (30 814) - - 5 779 344 68 247 5 847 591
Transaction with owners: Dividend declared and paid - - (1 001 205) ------(1 001 205) (16 510) (1 017 715) Dividend in specie - - (3 930 947) ------(3 930 947) - (3 930 947) Disposal of interest in subsidiary - - 2 001 853 - - - (1 993 495) - - (8 358) - (9 529 951) (9 529 951) Realisation of reserve - - 110 716 (110 716) ------Treasury share purchase - - - - (834 551) - - - - - (834 551) - (834 551)
Balance as at 31 December 2014 6 719 14 083 173 34 432 803 - (1 173 701) 36 222 261 2 170 001 (30 814) 627 590 1 670 671 88 008 703 208 193 88 216 896
Balance as at 1 January 2015 6 719 14 083 173 34 432 803 - (1 173 701) 36 222 261 2 170 001 (30 814) 627 590 1 670 671 88 008 703 208 193 88 216 896 Profit for the year - - 18 040 863 ------18 040 863 57 380 18 098 243 Other comprehensive income
Transfer from regulatory reserve - - 627 590 - - - - - (627 590) - - - - Loss on available for sale financial assets ------(29 894) - - (29 894) - (29 894) Total other comprehensive income - - 627 590 - - - - (29 894) (627 590) - (29 894) - (29 894) Total comprehensive income and regulatory reserve transfer - - 18 668 453 - - - - (29 894) (627 590) - 18 010 969 57 380 18 068 349
Transaction with owners: Dividend declared and paid - - (1 001 205) ------(1 001 205) (6 390) (1 007 595) Treasury share purchase - - - - (388 620) - - - - - (388 620) - (388 620)
Balance as at 31 December 2015 6 719 14 083 173 52 100 051 - (1 562 321) 36 222 261 2 170 001 (60 708) - 1 670 671 104 629 847 259 183 104 889 030
4 Directors: Herbert Nkala (Chairman), John Mushayavanhu (Group Chief Executive)*, Kleto Chiketsani*, Gertrude S Chikwava, Philip M Chiradza, Felix Gwandekwande*, Franklin H Kennedy, Trynos Kufazvinei (Group Finance Director)*, Canada Malunga, Chipo Mtasa, Godfrey G Nhemachena, Webster Rusere*, Robin Vela. (*Executive) AUDITED FINANCIAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2015
Notes to the Consolidated Financial Results 31-Dec-15 31-Dec-14 4 BALANCES WITH BANKS AND CASH US$ US$
For the year ended 31 December 2015
4.1 Balances with Reserve Bank of Zimbabwe (“RBZ”) 1 GENERAL INFORMATION Current account balances 57 131 391 63 395 624
FBC Holdings Limited (“the Company”) and its subsidiaries (together “the Group”) provide a wide range of commercial Balances with banks and cash banking, mortgage financing, micro lending, reinsurance, short-term insurance, and stockbrocking services. Notes and coins 13 326 759 26 585 721
Other bank balances 23 303 913 20 984 161 The Company is a limited liability company, which is listed on the Zimbabwe Stock Exchange. The Company and its 36 630 672 47 569 882 subsidiaries are incorporated and domiciled in Zimbabwe.
Balances with banks and cash (excluding bank overdrafts) 93 762 063 110 965 506 These consolidated financial statements were approved for issue by the Board of Directors on 15 March 2016.
Current 93 762 063 110 965 506 2 SIGNIFICANT ACCOUNTING POLICIES Non-current - -
A full set of the Group’s accounting policies is available in the Group’s annual report, which is ready for inspection at the Total 93 762 063 110 965 506 Company’s registered office. The following paragraphs describe the main accounting policies applied by the Group. These
policies have been consistently applied to all the years presented, unless otherwise stated. 4.2 Cash and cash equivalents
Cash and bank balances comprise balances with less than three months maturity from 2.1 Basis of preparation date of acquisition, including cash on hand, deposits held at call with banks, other The Group’s consolidated financial results have been prepared with policies consistent with International Financial Reporting short-term liquid investments with original maturities of three months or less. 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”) SI 62/96 Cash and cash equivalents include the following for the purposes of the statement of and SI 33/99. The consolidated financial results have been prepared from statutory records that are maintained under the cash flows; historical cost convention as modified by the revaluation of financial assets at fair value through profit or loss, investment
property and property, plant and equipment. Current account balance at Reserve Bank of Zimbabwe (“RBZ”) (note 4.1) 57 131 391 63 395 624
Balances with banks and cash (note 4.1) 36 630 672 47 569 882 2.1.1 Going concern 93 762 063 110 965 506 The Group’s forecasts and projections, taking account of reasonably possible changes in trading performance, show that
the Group should be able to operate within the level of its current financing. After making enquiries, the directors have a 5 LOANS AND RECEIVABLES 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 financial statements. 5.1 Loans and advances to customers
Loans and advance maturities 2.2 Basis of consolidation Maturing within 1 year 166 959 721 105 242 184
Maturing after 1 year 136 396 594 221 128 015 (a) Subsidiaries
The consolidated financial results combine the financial statements of FBC Holdings Limited (“the Company”) and all its Gross carrying amount 303 356 315 326 370 199 subsidiaries. Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls Impairment allowance (20 384 622) (22 697 655) an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the 282 971 693 303 672 544 ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which
control is transferred to the Group. They are deconsolidated from the date that control ceases. 5.2 Trade and other receivables including insurance receivables
Insurance receivables; The Company recognises investments in subsidiaries at cost. Subsidiaries are fully consolidated from the date on which - Due by insurance clients and insurance brokers 6 012 301 5 909 664 control is transferred to the Group. They are deconsolidated from the date that control ceases. - Due by reinsurers 566 701 758 769
- Due by retrocessionaires 2 034 269 110 716 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 to the former owners of the Gross carrying amount 8 613 271 6 779 149 acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or Impairment allowance (513 742) (396 742) liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent 8 099 529 6 382 407 liabilities assumed in a business 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 Current 8 099 529 6 382 407 non-controlling interest’s proportionate share of the recognised amounts of acquiree’s identifiable net assets. Acquisition- Non-current - - related costs are expensed as incurred.
Total 8 099 529 6 382 407 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 losses arising from such 5.3 Irrevocable commitments remeasurement are recognised through profit or loss. There are no irrevocable commitments to extend credit, which can expose the Group to penalties or disproportionate expense.
Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent Trade and changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance Loans and other with IAS 39 either in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified 5.4 Allowance for impairment advances receivables Total as equity is not re-measured, and its subsequent settlement is accounted for within equity. Balance as at 1 January 2014 14 221 173 4 148 168 18 369 341
Impairment allowance through statement of comprehensive income 8 094 530 248 550 8 343 080 The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition- Reversal of impairment allowance for discontinued operations - (3 999 976) (3 999 976) date fair value of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired Amounts written off during the year as uncollectible (3 098 229) - (3 098 229) is recorded as goodwill. If the total of consideration transferred, non-controlling interest recognised and previously held Interest in suspense 3 480 181 - 3 480 181 interest measured is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase,
the difference is recognised directly in the statement of comprehensive income. Balance as at 31 December 2014 22 697 655 396 742 23 094 397 Inter-company transactions, balances, income and expenses on transactions between group companies are eliminated.
Unrealised profits or losses are also eliminated. Accounting policies of subsidiaries have been changed where necessary to Balance as at 1 January 2015 22 697 655 396 742 23 094 397 ensure consistency with the policies adopted by the Group. Impairment allowance through statement of comprehensive income 3 208 576 117 000 3 325 576
Amounts written off during the year as uncollectible (7 657 711) - (7 657 711) (b) Changes in ownership interests in subsidiaries without change of control Interest in suspense 2 136 102 - 2 136 102 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 Balance as at 31 December 2015 20 384 622 513 742 20 898 364 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 31-Dec-15 31-Dec-14 ownership reserve”. 6 BONDS AND DEBENTURES US$ US$
(c) Disposal of subsidiaries Maturing after 1 year but within 7 years 8 702 320 2 768 518 When the Group ceases to have control any retained interest in the entity is re-measured to its fair value at the date when
control is lost, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount Bonds of US$8 440 642 and US$261 678 have a fixed interest rate of 10% and 5% for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In and they mature on 30 June 2022 and 30 September 2020 respectively. 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 previously recognised in 7 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS other comprehensive income are reclassified to profit or loss.
Listed securities at market value 1 050 037 1 349 039 2.3 Segment reporting
An operating segment is a distinguishable component of the Group that is engaged in business activities from which it Current 1 050 037 1 349 039 earns revenues and incurs expenses (including revenues and expenses relating to transactions with other components of Non-current - - 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; and for which discrete financial Total 1 050 037 1 349 039 information is available.
Financial assets at fair value through profit or loss are presented within ‘operating activities’ as part of changes in working Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision- capital in the statement of cash flows. maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the
operating segments, has been identified as the Group Executive Committee that makes strategic decisions. Changes in fair values of financial assets at fair value through profit or loss are recorded in ‘other operating income’ in the
statement of comprehensive income. The fair value of all equity securities is based on their bid prices on an active market, The Group’s operating segments have been aggregated based on the nature of the products and services on offer and the the Zimbabwe Stock Exchange at year end. nature of the regulatory environment. The CODM is responsible for allocating resources and assessing performance of the
operating segments.
8 AVAILABLE FOR SALE FINANCIAL ASSETS In accordance with IFRS 8, Operating Segments, the Group has the following business segments: commercial banking,
microlending, mortgage financing, reinsurance, short-term insurance and stockbroking. Listed securities at market value 377 568 407 764
3 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS Current 377 568 407 764
Non-current - - The Group’s financial statements and its financial results are influenced by accounting policies, assumptions, estimates and 377 568 407 764 management judgements, which necessarily have to be made in the course of the preparation of the financial statements.
9 INVENTORY The Group makes estimates and assumptions that affect the reported amounts of assets and liabilities within the next
financial year. All estimates and assumptions required in conformity with IFRS are best estimates undertaken in accordance Raw materials 274 442 90 285 with the applicable standard. Estimates and judgements are evaluated on a continuous basis, and are based on past Work in progress 4 039 788 2 569 611 experience and other factors, including expectations with regard to future events. Accounting policies and management’s Finished goods 1 798 424 1 804 454 judgements for certain items are especially critical for the Group’s results and financial situation due to their materiality. 6 112 654 4 464 350
The areas involving critical accounting estimates and judgements include impairment allowances, income taxes, claims and Current 6 112 654 4 464 350 inventory valuation. Non-current - -
Total 6 112 654 4 464 350
5 Directors: Herbert Nkala (Chairman), John Mushayavanhu (Group Chief Executive)*, Kleto Chiketsani*, Gertrude S Chikwava, Philip M Chiradza, Felix Gwandekwande*, Franklin H Kennedy, Trynos Kufazvinei (Group Finance Director)*, Canada Malunga, Chipo Mtasa, Godfrey G Nhemachena, Webster Rusere*, Robin Vela. (*Executive) AUDITED FINANCIAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2015
31-Dec-15 31-Dec-14 14 DEPOSITS AND BORROWINGS FROM OTHER BANKS AND CUSTOMERS 31-Dec-15 31-Dec-14 US$ US$ US$ US$ 10 PREPAYMENTS AND OTHER ASSETS 14.1 Deposits from customers Demand deposits 75 313 161 110 892 109 Prepayments 1 774 253 1 973 657 Promissory notes 37 765 456 58 897 901 Deferred acquisition costs 902 108 964 674 Other time deposits 96 351 481 47 327 942 Commission receivable 1 711 043 1 711 043 209 430 098 217 117 952 Refundable deposits for Mastercard and Visa transactions 706 781 631 793 Stationery stock and other consumables 45 359 45 359 Current 204 365 822 212 699 581 Time - share asset 56 250 67 500 Non-current 5 064 276 4 418 371 Other 470 774 701 260 5 666 568 6 095 286 Total 209 430 098 217 117 952
Current 3 899 277 4 316 743 14.2 Deposits from other banks Non-current 1 767 291 1 778 543 Money market deposits 77 986 130 65 333 257
Total 5 666 568 6 095 286 Current 77 986 130 65 333 257 Total 77 986 130 65 333 257 11 INVESTMENT PROPERTY 14.3 Borrowings Balance as at 1 January 1 693 000 25 000 Bank borrowings 3 735 164 - Additions 1 096 564 648 000 Foreign lines of credit 65 902 989 81 518 286 Fair value adjustment 162 576 - Other borrowings 3 665 587 898 368 Disposals (480 000) - 73 303 740 82 416 654 Transfer from property, plant and equipment - 1 020 000 Current 10 318 845 12 038 989 Balance as at 31 December 2 472 140 1 693 000 Non-current 62 984 895 70 377 665
Non-current 2 472 140 1 693 000 Total 73 303 740 82 416 654
Total 2 472 140 1 693 000 Total deposits and borrowings 360 719 968 364 867 863
12 INTANGIBLE ASSETS Software 2015 % 2014 % US$ 14.4 Deposit concentration US$ US$ Year ended 31 December 2015 Opening net book amount 1 212 593 Agriculture 8 994 139 2% 9 142 298 3% Additions 178 989 Construction 3 419 684 1% 3 643 352 1% Amortisation charge (493 636) Wholesale and retail trade 71 377 383 20% 72 563 290 20% Public sector 24 801 577 7% 21 095 274 6% Closing net book amount 897 946 Manufacturing 23 555 554 7% 26 508 214 7% Telecommunication 8 159 431 2% 8 292 349 2% As at 31 December 2015 Transport 3 547 590 1% 3 606 035 1% Cost 4 412 562 Individuals 40 373 383 11% 41 761 899 11% Accumulated amortisation (3 514 616) Financial services 142 089 010 39% 147 749 911 41% Mining 21 402 035 6% 21 760 305 6% Net book amount 897 946 Other 13 000 182 4% 8 744 936 2%
Year ended 31 December 2014 360 719 968 100% 364 867 863 100% Opening net book amount 1 276 109 Additions 302 816 31-Dec-15 31-Dec-14 Transfer from property, plant and equipment 84 836 15 INSURANCE LIABILITIES US$ US$ Amortisation charge (451 168) Gross outstanding claims 5 799 070 3 054 196 Closing net book amount 1 212 593 Liability for unearned premium 3 605 358 4 223 852 9 404 428 7 278 048 As at 31 December 2014 Cost 4 233 573 Current 9 404 428 7 278 048 Accumulated amortisation (3 020 980) 16 TRADE AND OTHER PAYABLES Net book amount 1 212 593 Trade and other payables 6 995 899 9 497 907 Deferred income 4 413 902 3 373 928 Other liabilities 2 524 048 2 472 080 13 PROPERTY, PLANT AND EQUIPMENT 13 933 849 15 343 915 Furniture
Land and Plant and Computer and office Motor Current 13 933 849 14 490 450 buildings machinery equipment equipment vehicles Total Non-current - 853 465 US$ US$ US$ US$ US$ US$
Year ended 31 Total 13 933 849 15 343 915 December 2014
Opening net book amount 28 328 732 24 959 160 954 817 4 415 523 1 140 479 59 798 711 17 SHARE CAPITAL AND SHARE PREMIUM Additions 21 000 3 199 160 551 655 972 471 949 1 312 671
Revaluation of property 1 124 419 - - - - 1 124 419 17.1 Authorised Transfer to intangible Number of ordinary shares, with a nominal value of US$0,00001 800 000 000 800 000 000 property - - (84 836) - - (84 836)
Impairment loss (338 963) - - (7 882) - (346 845) 17.2 Issued and fully paid Adjustment to cost (500) - 65 108 (1 622) (146 984) (83 998) Number of ordinary shares, with a nominal value of US$0,00001 671 949 927 671 949 927 Transfer to investment property (1 020 000) - - - - (1 020 000)
Disposals - - - (721) - (721) 17.3 Share capital movement Number of Share Share Disposal of a subsidiary (10 386 462) (24 932 017) (149 019) (135 700) (347 187) (35 950 385) Shares Capital Premium Total Depreciation (349 614) (17 770) (447 437) (605 492) (212 858) (1 633 171) US$ US$ US$
As at 1 January 2014 671 949 927 6 719 14 083 173 14 089 892 Closing net book amount 17 378 612 12 572 499 184 4 320 078 905 399 23 115 845 Share issue - - - -
As at 31 December 2014 671 949 927 6 719 14 083 173 14 089 892 As at 31 December 2014
Cost or valuation 17 378 612 196 995 2 634 302 6 612 226 2 629 691 29 451 826 As at 31 December 2015 671 949 927 6 719 14 083 173 14 089 892 Accumulated depreciation - (184 423) (2 135 118) (2 284 266) (1 472 741) (6 076 548)
Accumulated impairment - - - (7 882) (251 551) (259 433) 18 DISPOSAL OF PORTION OF INTEREST IN SUBSIDIARY
Net book amount 17 378 612 12 572 499 184 4 320 078 905 399 23 115 845 During the year 2014 a portion of the interest in a subsidiary, Turnall Holdings Limited, was disposed of as a distribution to
the shareholders of FBC Holdings Limited through a dividend in specie resulting in it becoming a 5% held financial asset Furniture available for sale. The consolidated carrying amount of assets and liabilities disposed of were as follows: Land and Plant and Computer and office Motor
buildings machinery equipment equipment vehicles Total 31-Dec-15 31-Dec-14 US$ US$ US$ US$ US$ US$ US$ US$ Year ended
31 December 2015 Property, plant and equipment - 33 504 876 Opening net book amount 17 378 612 12 572 499 184 4 320 078 905 399 23 115 845 Inventory - 10 104 786 Additions 3 570 - 1 737 207 1 244 062 336 603 3 321 442 Trade and other receivables - 4 379 502 Adjustment to cost 48 851 (12 572) 12 572 - - 48 851 Borrowings - (7 149 415) Adjustment to accumulated Trade and other payables - (20 910 279) depreciation - - (62 824) - (11 132) (73 956) Current income tax liability - (1 488 266) Disposals - - (1 387) (714) (15 908) (18 009) Deferred income tax liability - (2 981 536) Depreciation (407 149) - (444 797) (666 161) (229 208) (1 747 315)
Net assets disposed of - 15 459 668 Closing net book amount 17 023 884 - 1 739 955 4 897 265 985 754 24 646 858 Non-controlling interests - (6 436 307)
Fair value of retained investment - (382 097) As at 31 December 2015 Deemed consideration : dividend in specie - (3 930 947) Cost or valuation 17 431 033 184 423 4 338 521 7 845 495 2 700 449 32 499 921
Accumulated depreciation (407 149) (184 423) (2 598 566) (2 940 348) (1 463 144) (7 593 630) Total loss on disposal - 4 710 317 Accumulated impairment - - - (7 882) (251 551) (259 433) Net cash inflow - -
Net book amount 17 023 884 - 1 739 955 4 897 265 985 754 24 646 858 The net loss consolidated in the Group’s financial instruments for the period in which Turnall was a subsidiary is disclosed
under discontinued operations (note 29). Adjustments were recognised to correct identified mismatches in Property Plant and Equipment.
6 Directors: Herbert Nkala (Chairman), John Mushayavanhu (Group Chief Executive)*, Kleto Chiketsani*, Gertrude S Chikwava, Philip M Chiradza, Felix Gwandekwande*, Franklin H Kennedy, Trynos Kufazvinei (Group Finance Director)*, Canada Malunga, Chipo Mtasa, Godfrey G Nhemachena, Webster Rusere*, Robin Vela. (*Executive) AUDITED FINANCIAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2015
31-Dec-15 31-Dec-14 30 EARNINGS PER SHARE 31-Dec-15 31-Dec-14 19 INTEREST INCOME US$ US$ US$ US$ 30.1 Basic earnings per share Cash and cash equivalents 3 217 220 1 602 707 Profit from continuing operations attributable to equity holders of the parent 18 040 863 13 877 277 Loans and advances to other banks 2 530 340 2 177 173 Loss from discontinued operations attributable to equity holders of the parent - ( 9 038 872) Loans and advances to customers 50 994 933 54 337 806 Banker’s acceptances and tradable bills 4 681 300 1 519 224 Total 18 040 863 4 838 405 Other interest income 53 172 1 744 007 61 476 965 61 380 917 Shares Treasury Shares Weighted issued shares outstanding Credit related fees that are an intergral part of the effective interest on loans and advances have Year ended 31 December 2015 been classified under interest income. In 2014 these were shown under fee and commission income. Weighted average number of ordinary shares 671 949 927 6 516 226 665 433 701 665 433 701 19.1 INTEREST EXPENSE Treasury shares purchased - 4 787 977 (4 787 977) (1 994 990) Weighted average number of ordinary Deposit from other banks 7 305 957 12 559 651 shares as at 31 December 671 949 927 11 304 203 660 645 724 663 438 711 Demand deposits 472 907 609 577 Afreximbank and PTA Bank 9 233 670 7 430 371 Basic earnings per share for continuing operations (US cents) 2.72 Time deposits 7 835 953 7 945 767 Basic earnings per share from discontinued operations (US cents) - 24 848 487 28 545 366 2.72 Year ended 31 December 2014 20 FEE AND COMMISSION INCOME Weighted average number of ordinary shares Retail service fees 16 019 619 16 211 913 Issued ordinary shares as at 1 January 2014 671 949 927 5 681 675 666 268 252 666 268 252 Credit related fees 4 789 325 4 760 671 Treasury shares purchased - 834 551 (834 551) (486 821) Investment banking fees 26 964 16 064 Brokerage commission 140 549 238 279 Weighted average number of ordinary Financial guarantee contract commission 817 6 244 shares as at 31 December 671 949 927 6 516 226 665 433 701 665 781 431 20 977 274 21 233 171 Basic earnings per share for continuing operations (US cents) 2.09 20.1 Fee and commission expense Basic loss per share from discontinued operations (US cents) (1.36) Brokerage 81 617 67 270 0.73 30.2 Diluted earnings per share 21 REVENUE Diluted earnings per share is calculated after adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Company does not have dilutive ordinary shares. Property sales 6 709 923 8 282 137 6 709 923 8 282 137 31-Dec-15 31-Dec-14 US$ US$ 21.1 Cost of sales Earnings Raw materials 5 758 871 5 282 538 Profit from continuing operations attributable to equity holders of the parent 18 040 863 13 877 277 5 758 871 5 282 538 Loss from discontinued operations attributable to equity holders of the parent - (9 038 872)
22 INSURANCE PREMIUM REVENUE Total 18 040 863 4 838 405
Gross premium written 34 806 647 30 847 414 Weighted average number of ordinary shares at 31 December 663 438 711 665 781 431 Change in unearned premium reserve (“UPR”) 618 495 220 017 35 425 142 31 067 431 Diluted earnings per share for continuing operations (US cents) 2.72 2.09 Diluted loss per share from discontinued operations (US cents) - (1.36) 23 NET LOSS FROM FINANCIAL INSTRUMENTS CARRIED AT FAIR VALUE 2.72 0.73
Financial assets at fair value through profit or loss (note 7), fair value gains (361 233) (335 862) 30.3 Headline earnings per share Profit attributable to equity holders 18 040 863 4 838 405 24 OTHER OPERATING INCOME Adjusted for excluded remeasurements Rental income 404 843 318 655 Profit on the disposal of property, plant and equipment (note 24) (32 503) (15 268) Profit disposal of property, plant and equipment 32 503 15 268 Loss on the loss of control of Turnall Holdings Limited - 4 710 272 Sundry income 412 756 71 093 Impairment of property, plant and equipment - 346 845
Rental income is earned from owner occupied properties. Included in rental income Headline earnings 18 008 360 9 880 254 is US$ 184 833 (2014- US$ 117 690) earned from investment property. 850 102 405 016 Weighted average number of ordinary shares at 31 December 663 438 711 665 781 431 25 NET INSURANCE COMMISSION EXPENSE Headline earnings per share (US cents) 2.71 1.48 Commissions paid 6 247 579 5 312 373 Commission received (1 500 177) (1 404 122) Change in technical provisions 50 656 95 831 4 798 058 4 004 082 31 SEGMENT REPORTING
26 INSURANCE CLAIMS AND LOSS ADJUSTMENT EXPENSES Segment information is presented in respect of business segments. Gross Reinsurance Net Year ended 31 December 2015 US$ US$ US$ Segment revenue, expenses, results and assets are items that are directly attributable to the business segment or which can be allocated on a reasonable basis to a business segment. Claims and loss adjustment expenses 7 964 157 - 7 964 157 Change in technical provisions 587 563 - 587 563 The Group comprises six business segments i.e. commercial banking, microlending, mortgage financing, short term reinsurance, short term insurance and stockbroking. The manufacturing subsidiary was disposed of during the year 2014. Total claims 8 551 720 - 8 551 720 Performance is measured based on segment profit before income tax, as included in the internal management reports that Year ended 31 December 2014 are reviewed by the Group Executive Committee. Claims and loss adjustment expenses 7 591 850 - 7 591 850 Commercial Mortgage Short term Short term Change in technical provisions (11 622) - (11 622) banking Microlending financing reinsurance insurance Stockbroking Consolidated 31 December 2015 US$ US$ US$ US$ US$ US$ US$ Total claims 7 580 228 - 7 580 228 Total segment net income 31-Dec-15 31-Dec-14 Interest income 40 688 990 7 459 327 11 861 778 904 208 404 754 136 543 61 455 600 27 ADMINISTRATIVE EXPENSES US$ US$ Interest expense (23 325 950) (1 722 591) (4 978 685) - - - (30 027 226)
Net interest income / loss 17 363 040 5 736 736 6 883 093 904 208 404 754 136 543 31 428 374 Administrative expenses 16 393 701 15 264 426 Staff costs 20 427 899 17 882 262 Sales - - 6 709 923 - - - 6 709 923 Directors’ remuneration 3 503 840 3 481 265 Cost of sales - - (5 758 871) - - - (5 758 871) Audit fees: - Current year fees 173 256 269 530 Gross profit - - 951 052 - - - 951 052 Net earned insurance premium - - - 13 752 838 9 568 880 - 23 321 718 - Prior year fees 187 491 146 221 Net fee and commission income 19 913 382 482 183 4 868 831 - - 122 764 25 387 160 - Other services - - Net trading income and Depreciation 1 747 315 1 633 171 other income 1 272 343 52 197 175 108 (298 995) 30 865 (6 886) 1 224 632 Impairment of property and equipment - 346 845 Amortisation 493 636 451 168 Total net income for Operating lease payment 1 004 389 862 347 reported segments 38 548 765 6 271 116 12 878 084 14 358 051 10 004 499 252 421 82 312 936 43 931 527 40 337 235 Intersegment revenue (1 516 767) - (2 168 152) (1 199 948) (1 534 095) (82 952) (6 501 914) Intersegment interest expense and commission 3 002 797 1 636 767 1 738 372 38 913 1 255 383 3 272 7 675 504 28 INCOME TAX EXPENSE: Net income from Charge for the year external customers 40 034 795 7 907 883 12 448 304 13 197 016 9 725 787 172 741 83 486 526 Current income tax on income for the reporting year 4 594 914 3 634 706 Adjustments in respect of prior years 327 364 1 154 389 Segment profit before income tax 9 289 390 3 027 775 6 307 115 2 521 059 1 663 178 (151 207) 22 657 310 Deferred income tax (1 672 500) (1 626 862) Impairment allowances Income tax expense 3 249 778 3 162 233 on financial assets 2 054 623 517 393 636 560 - 117 000 - 3 325 576 Depreciation 1 372 473 27 037 167 101 22 518 142 887 15 299 1 747 315 29 DISCONTINUED OPERATIONS Amortisation 310 648 - 72 295 27 023 83 670 - 493 636
Turnall Holdings Limited was disposed of on the 20th of October 2014. Analysis of the result of discontinued operations, and Segment assets 387 388 351 18 876 686 124 754 260 19 477 235 12 963 393 1 550 225 565 010 150
the result recognised on the remeasurement of assets is as follows; Total assets includes : Additions to non-current assets 2 925 619 118 817 156 713 81 665 38 450 178 3 321 442 Revenue - 26 478 307 Investment in associates - - - 491 139 - - - Expenses - (34 774 937) Segment liabilities 344 320 639 13 384 908 89 724 276 7 646 373 7 190 834 1 285 359 463 552 389 Loss before tax of discontinued operations - (8 296 630) Type of revenue generating activity Commercial Microlending Mortgage Underwriting Underwriting Equity market Tax - 874 432 and retail financing general classes general classes dealing banking of short term of short term re-insurance insurance Loss after tax of discontinued operations - (7 422 198)
Loss attributable to equity holders of the parent - (4 328 555) Pre-tax loss recognised on the re-measurement of assets of the discontinued operation - (4 710 317)
Loss for the year from discontinued operations - (9 038 872)
7 Directors: Herbert Nkala (Chairman), John Mushayavanhu (Group Chief Executive)*, Kleto Chiketsani*, Gertrude S Chikwava, Philip M Chiradza, Felix Gwandekwande*, Franklin H Kennedy, Trynos Kufazvinei (Group Finance Director)*, Canada Malunga, Chipo Mtasa, Godfrey G Nhemachena, Webster Rusere*, Robin Vela. (*Executive) AUDITED FINANCIAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2015
31 SEGMENT REPORTING (CONTINUED) The Group Credit Management Division evaluates the credit exposures and assures ongoing credit quality by reviewing individual credit and concentration and monitoring of corrective action. Commercial Mortgage Short term Short term banking Microlending financing reinsurance insurance Stockbroking Consolidated The Group Credit Division periodically prepares detailed reports on the quality of the customers for review by the Board 31 December 2014 US$ US$ US$ US$ US$ US$ US$ Loans Review Committees of the subsidiary companies and assesses the adequacy of the impairment allowance. Any loan Total segment net income or portion thereof which is classified as a ‘loss’ is written off. To maintain an adequate allowance for credit losses, the Group Interest income 39 783 729 7 454 419 11 847 226 1 107 819 305 925 133 262 60 632 380 generally provides for a loan or a portion thereof, when a loss is probable. Interest expense (25 415 667) (2 477 737) (6 049 608) - - - ( 33 943 012) Credit policies, procedures and limits Net interest income 14 368 062 4 976 682 5 797 618 1 107 819 305 925 133 262 26 689 368 The Group has sound and well-defined policies, procedures and limits which are reviewed at least once every year and Sales - - 8 282 137 - - - 8 282 137 approved by the Board of Directors of the subsidiary companies and strictly implemented by management. Credit risk limits Cost of sales - - (5 282 538) - - - (5 282 538) include delegated approval and write-off limits to Credit Managers, Management, Board Credit Committees and the Board. In addition there are counterparty limits, individual account limits, group limits and concentration limits. Gross profit - - 2 999 599 - - - 2 999 599 Net earned insurance premium - - - 11 693 984 8 695 882 - 20 389 866 Credit risk mitigation and hedging Net fee and commission income 19 788 925 400 312 5 100 395 - - 240 440 25 530 072 As part of the Group’s credit risk mitigation and hedging strategy, various types of collateral is taken by the banking Net trading income and subsidiaries. These include mortgage bonds over residential, commercial and industrial properties, cession of book other income (3 453 846) 74 719 177 759 (459 771) 21 517 8 249 ( 3 631 373) debts and the underlying moveable assets financed. In addition, a guarantee is often required particularly in support of Total net income for a credit facility granted to counterparty. Generally, guarantor counterparties include parent companies and shareholders. reported segments 30 703 141 5 451 713 14 075 371 12 342 032 9 023 324 381 951 71 977 532 Creditworthiness for the guarantor is established in line with the credit policy. Intersegment revenue (269 641) - (3 623 843) (1 929 797) (997 085) (125 849) (6 946 215) Intersegment interest expense Credit risk stress testing and commission 4 109 127 1 257 463 528 409 70 062 1 053 111 - 7 018 172 The Group recognises the possible events or future changes that could have a negative impact on the credit portfolios which
Net income from could affect the Group’s ability to generate more business. To mitigate this risk, the Group has put in place stress testing external customers 34 542 627 6 709 176 10 979 937 10 482 297 9 079 350 256 102 72 049 489 framework that guides the Group’s banking subsidiaries in conducting credit stress tests.
Segment profit before Impairments income tax 2 196 040 2 060 767 6 767 000 2 668 021 1 763 452 (40 364) 15 414 916 An allowance for loan impairment is established if there is objective evidence that the Group will not be able to collect all amounts due according to the original contractual terms of loans. The amount of the allowance is the difference between Impairment allowances the carrying amount and the recoverable amount, being the present value of expected cash flows, including amounts on financial assets 6 350 988 895 482 848 059 - 248 551 - 8 343 080 Depreciation 1 248 126 13 308 188 741 25 503 135 097 22 396 1 633 171 recoverable from guarantees and collateral, discounted at the original effective interest rate of loans. Amortisation 282 628 - 58 236 26 634 83 670 - 451 168 Credit terms: Segment assets 382 650 392 12 212 595 109 402 856 16 561 022 11 475 913 2 072 074 534 374 852 Default Total assets includes: This is failure by a borrower to comply with the terms and conditions of a loan facility as set out in the facility offer letter or Additions to non-current assets 994 498 23 675 148 906 11 671 130 722 3 199 1 312 671 Investment in associates - - - 491 139 - - - loan contract. Default occurs when a debtor is either unwilling or unable to repay a loan.
Segment liabilities 349 385 470 8 859 586 79 650 047 6 288 624 6 811 822 1 834 765 452 830 314 Past due loans These are loans in which the debtor is in default by exceeding the loan tenure or expiry date as expressly set out in the loan Type of revenue generating activity Commercial Microlending Mortgage Underwriting Underwriting Equity market contract i.e. the debtor fails to repay the loan by a specific given date. and retail financing general classes general classes Dealing banking of short term of short term re-insurance insurance Impaired loans The Group’s policy regarding impaired/doubtful loans is that all loans where the degree of default becomes extensive such 2015 2014 that the Group no longer has reasonable assurance of collection of the full outstanding amount of principal and interest; all Operating segments reconciliations US$ US$ such loans are classified in the categories 8, 9 and 10 under the Basel II ten tier grading system.
Net income Total net income income for reportable segments 83 486 526 72 049 489 Provisioning policy and write offs Total net income for non reportable segments 2 956 020 - Determination of general and specific provisions Elimination of intersegment revenue received from the holding company (95 802) 250 334 Add fair value loss/(gain) on treasury shares 57 195 (257 376) The Group complies with the following Reserve Bank of Zimbabwe provisioning requirements: Intersegment eliminations (4 449 037) 5 317 574 Rating Descriptive Risk level Level of Old five grade/ 2012 Grading Type of Group total net income 81 954 902 77 360 021 classification allowance tier system and level of allowance allowance Group profit before tax 1 Prime grade Insignificant 1% Pass A (1%) General Total profit before income tax for reportable segments 22 657 310 15 414 916 Intersegment eliminations (1 309 289) 1 680 480 2 Strong Modest 1%
Profit before income tax 21 348 021 17 095 396 3 Satisfactory Average 2%
4 Moderate Acceptable 3% Special Mention B (3%) Group assets Total assets for reportable segments 565 010 150 534 374 852 5 Fair Acceptable with care 4% Other group assets 56 250 67 500 Deferred tax asset allocated to the holding company 1 527 861 1 164 980 6 Speculative Management attention 5% Intersegment eliminations (76 028 939) (58 259 329) 7 Highly Speculative Special mention 10%
Group total assets 490 565 322 477 348 003 8 Substandard Vulnerable 20% Substandard C (20%) Specific
Group liabilities 9 Doubtful High default 50% Doubtful D (50%) Total liabilities for reportable segments 463 552 389 452 830 314 Elimination of intersegment payables (77 876 097) (63 699 207) 10 Loss Bankrupt 100% Loss E (100%)
Group total liabilities 385 676 292 389 131 107 General allowance for impairment In the normal course of business, group companies trade with one another and the material intergroup transactions include: 1) Underwriting of insurance risk by the insurance subsidiary; Prime to highly speculative grades “1 to 7” 2) Reinsurance of the insurance subsidiary’s insurance risk by the reinsurance subsidiary; General allowance for impairment for facilities in this category are maintained at the percentage (detailed in table above) of 3) Borrowings from the banking subsidiary by group companies and placement of funds and operating of current accounts; and total customer account outstanding balances and off balance sheet (i.e. contingent) risks. 4) Placement of funds with the Building Society by group companies. Specific allowance for impairment These transactions result in income and expenses and assets and liabilities that are eliminated on consolidation. Sub-standard to loss grades “8 to 10” - Timely repayment and/or settlement may be at risk specific allowance for impairment for facilities in this category are currently maintained at the percentages (detailed above) of total customer outstanding 32 FINANCIAL RISK MANAGEMENT balances and off balance sheet (i.e. contingent) risks less the value of tangible security held.
The Group has a defined risk appetite that is set by the Board and it outlines the amount of risk that business is prepared The basis for writing off assets to take in pursuit of its objectives and it plays a pivotal role in the development of risk management plans and policies. The When an advance which has been identified as impaired and subjected to a specific allowance for impairment, continues to Group regularly reviews its policies and systems to reflect changes in markets, products, regulations and best market deteriorate, a point will come when it may be concluded that there is no realistic prospect of recovery. Board approval will be practice. sought by Group Credit Management Division for the exposure to be immediately written off from the Group’s books while long term recovery strategies are then pursued. The policies specifically cover foreign exchange risk, liquidity risk, interest rate risk , credit risk and the general useof financial instruments. Group Risk and Compliance, Group Internal Audit review from time to time the integrity of the risk Credit risk and Basel II control systems in place and ensure that risk policies and strategies are effectively implemented within the Group. The Group applied Credit Risk Basel II standards in line with the regulatory authorities’ approach. Internal processes have been revamped to comply with the requirements. Policies and procedure manuals have been realigned to comply with the The Group’s risk management strategies and plans are aimed at achieving an appropriate balance between risk and return minimum requirements of Basel II. and minimise potential adverse effects on the Group’s financial performance. 31-Dec-15 31-Dec-14 The Group’s activities and operations results in exposure to the following risks: 32.1.1 Exposure to credit risk US$ US$ (a) Credit risk Loans and advances (b) Market risk Past due and impaired (b.i) Interest rate risk, Grade 8: Impaired 9 564 595 29 608 779 (b.ii) Currency risk, and Grade 9: Impaired 2 010 262 5 062 713 (b.iii) Price risk Grade 10: Impaired 12 764 706 17 615 392 (c) Liquidity risk (d) Settlement risk Gross amount, past due and impaired 24 339 563 52 286 884 (e) Operational risk Allowance for impairment (14 476 110) (18 169 753) (f) Capital risk Carrying amount, past due and impaired 9 863 453 34 117 131 Other risks: g) Reputational risk Past due but not impaired h) Legal and Compliance risk Grade 4 - 7: 84 016 094 70 254 017 i) Strategic risk Neither past due nor impaired Grade 1 - 3: 195 000 658 203 829 298 The Group controls these risks by diversifying its exposures and activities among products, clients, and by limiting its positions in various instruments and investments. Gross amount, not impaired 279 016 752 274 083 315 Allowance for impairment (5 908 512) (4 527 902) 32.1 Credit risk Credit risk is the risk of loss due to the inability or unwillingness of a counterparty to meet their obligations as and when they Carrying amount, not impaired 273 108 240 269 555 413 fall due. Credit risk arises from lending, trading, insurance products and investment activities and products. Credit risk and exposure to loss are inherent parts of the Group’s business. Total carrying amount 282 971 693 303 672 544
The Group manages, limits and controls concentrations of credit risk in respect of individual counterparties and groups. Loans and advances neither past due nor impaired The Group structures the levels of credit risk it undertakes by placing limits on the amount of risk accepted in relation to Loans and advances neither past due nor impaired and which are not part of renegotiated loans are considered to be within one counterparty or group or counterparties and to geographical and industry segments. Such risks are monitored on a the grade 1 to 3 category. Past due loans and advances are those whose repayments (capital and interests) are outstanding revolving basis and are subject to an annual or more frequent review, when considered necessary. Limits on the level of credit for more than 30 days. risk by product and industry sector are approved by the Board of Directors of the subsidiary companies. Loans and advances past due but not impaired The Board Credit Committees of the Bank, Microplan and the Building Society periodically review and approve the Group’s Late processing and other administrative delays on the side of the borrower can lead to a financial asset being past due policies and procedures to define, measure and monitor the credit and settlement risks arising from the Group’s lending and but not impaired. Loans and advances less than 90 days past due are not considered impaired, unless other information is investment activities. Limits are established to control these risks. Any facility exceeding established limits of the subsidiary’s available to indicate the contrary. Management Credit Committee must then be approved by the subsidiary Board Credit Committee.
8 Directors: Herbert Nkala (Chairman), John Mushayavanhu (Group Chief Executive)*, Kleto Chiketsani*, Gertrude S Chikwava, Philip M Chiradza, Felix Gwandekwande*, Franklin H Kennedy, Trynos Kufazvinei (Group Finance Director)*, Canada Malunga, Chipo Mtasa, Godfrey G Nhemachena, Webster Rusere*, Robin Vela. (*Executive) AUDITED FINANCIAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2015
32.1.2 Sectorial analysis of utilizations of loans and advances to customers Up to 3 months Over Contractual maturity analysis 3 months to 1 year 1 year Total 2015 2015 2014 2014 On balance sheet items as at 31 December 2014 US$ US$ US$ US$ US$ % US$ % Liabilities Mining 13 511 235 4% 15 964 985 5% Deposits from customers 196 263 136 16 436 445 4 418 371 217 117 952 Deposits from other banks 65 333 257 - - 65 333 257 Manufacturing 53 833 631 18% 65 919 412 20% Borrowings 1 551 515 13 140 189 67 724 950 82 416 654 Mortgage 40 603 547 13% 34 535 672 11% Insurance liabilities - 2 447 245 4 830 803 7 278 048 Wholesale 15 680 752 5% 28 247 266 9% Current income tax liabilities - 1 095 584 - 1 095 584 Distribution 29 904 593 10% 22 771 060 7% Trade and other liabilities 7 075 618 7 534 555 733 742 15 343 915 Individuals 88 306 979 29% 94 469 561 29% Agriculture 17 750 980 6% 18 049 431 6% Total liabilities - (contractual maturity) 270 223 526 40 654 018 77 707 866 388 585 410 Communication 6 720 323 2% 7 735 468 2% Construction 2 240 106 1% 2 578 490 1% Assets held for managing liquidity risk Local authorities 20 160 967 7% 23 206 410 7% (contractual maturity dates) Other services 14 643 202 5% 12 892 444 4% Balances with banks and cash 110 965 506 - - 110 965 506 Financial assets held to maturity - - 10 749 309 10 749 309 303 356 315 100% 326 370 199 100% Loans and advances to customers 39 973 493 95 324 452 168 374 599 303 672 544 Bonds and debentures - - 2 768 518 2 768 518 Trade and other receivables including Reconciliation of allowance for impairment for loans and advances insurance receivables - 6 382 407 - 6 382 407 Financial assets at fair value through profit or loss 1 349 039 - - 1 349 039 Available for sale financial assets 407 764 - - 407 764 Allowances for impairment 31 December 2015 31 December 2014 Other assets 827 810 2 143 204 1 150 615 4 121 629 Specific Collective Specific Collective 153 523 612 103 850 063 183 043 041 440 416 716 allowance allowance Total allowance allowance Total
US$ US$ US$ US$ US$ US$ Liquidity gap (116 699 914) 63 196 045 105 335 175 51 831 306
Balance at 1 January 18 169 753 4 527 902 22 697 655 10 551 613 3 669 560 14 221 173 Cumulative liquidity gap - on balance sheet (116 699 914) (53 503 869) 51 831 306 - Increase in impairment allowance 1 827 967 1 380 609 3 208 576 7 236 188 858 342 8 094 530 Off balance sheet items Write off (7 657 711) - (7 657 711) (3 098 229) - (3 098 229) Interest in suspense 2 136 102 - 2 136 102 3 480 181 - 3 480 181 Liabilities Guarantees and letters of credit - 6 898 941 - 6 898 941 14 476 111 5 908 511 20 384 622 18 169 753 4 527 902 22 697 655 Commitments to lend 9 773 788 - - 9 773 788
Total liabilities 9 773 788 6 898 941 - 16 672 729
31-Dec-15 31-Dec-14 Liquidity gap (9 773 788) (6 898 941) - 35 158 577 32.1.3 Trade and other receivables including insurance receivables US$ US$ Cumulative liquidity gap - on and off balance sheet (126 473 702) (70 176 598) 35 158 577 - Past due and impaired 513 742 396 742 Allowance for impairment (513 742) (396 742) The Group determines ideal weights for maturity buckets which are used to benchmark the actual maturity profile. Maturity mismatches across the time buckets are managed through the tenor of new advances and the profile of time deposits. Carrying amount - - 32.3 Market risk Past due but not impaired - - Market risk is the risk of financial loss from on and off balance sheet positions arising from adverse movements in market Neither past due nor impaired 8 099 529 6 382 407 prices such as interest rates, foreign exchange rates and equity prices.
Gross amount, not impaired 8 099 529 6 382 407 The market risk for the trading portfolio is managed and monitored based on a collection of risk management methodologies Allowance for impairment - - to assess market risk including Value–at– Risk (“VaR”) methodology that reflects the interdependency between risk variables,
Carrying amount, not impaired 8 099 529 6 382 407 stress testing, loss triggers and traditional risk management measures. Non–trading positions are managed and monitored using other sensitivity analysis. Total carrying amount 8 099 529 6 382 407 32.3.1 Interest rate risk 32.2 Liquidity risk Interest rate risk arises from the possibility that changes in interest rates will affect future cash flows or the fair values of Liquidity risk is the risk of not being able to generate sufficient cash to meet financial commitments, to extend credit, meet financial instruments. The interest rate risk profile is assessed regularly based on the fundamental trends in interest rates, deposit maturities, settle claims and other unexpected demands for cash. Liquidity risk arises when assets and liabilities economic developments and technical analysis. The Group’s policy is to monitor positions on a daily basis to ensure have differing maturities. positions are maintained within the established limits.
Management of liquidity risk Interest rate risk exposure stems from assets and liabilities maturing or being repriced at different times. For example: The Group does not manage liquidity risk in isolation as it is often triggered by consequences of other financial risks such i) Liabilities may mature before assets, necessitating the rollover of such liabilities until sufficient quantity of assets mature as credit risk and market risk. The Group’s liquidity risk management framework is therefore designed to ensure that its to repay the liabilities. The risk lies in that interest rates may rise and that expensive funds may have to be used to fund subsidiaries have adequate liquidity to withstand any stressed conditions. To achieve this objective, the Board of Directors of the Company, through the Board Asset Liability Committees of the Bank, Microplan and the Building Society and Board assets that are yielding lower returns. Risk and Compliance Committees, is ultimately responsible for liquidity risk management. The responsibility for managing the daily funding requirements is delegated to the Heads of Treasury Divisions for the banking entities and the Finance ii) Assets may mature before liabilities do, in which case they have to be reinvested until they are needed to repay the Managers for non-banking entities with independent day to day monitoring being provided by Group Risk Management. liabilities. If interest rates fall the re-investment may be made at rates below those being paid on the liabilities waiting to be retired. Liquidity and funding management The Group’s management of liquidity and funding is decentralised and each entity is required to fully adopt the liquidity This risk is managed by ALCO through the analysis of interest rate sensitive assets and liabilities, using tools such as Value policy approved by the Board with independent monitoring being provided by the Group Risk Management Division. The at Risk (“VAR”), Scenario Analysis and Gap Analysis. Group uses concentration risk limits to ensure that funding diversification is maintained across products, counterparties, and sectors. Major sources of funding are in the form of deposits across a spectrum of retail and wholesale clients for Scenario analysis of net interest income banking subsidiaries. The Group’s trading book is affected by interest rate movements. The desired interest rate risk profile is achieved through
effective management of the statement of financial position composition. When analyzing the impact of a shift in the yield Cash flow and maturity profile analysis The Group uses the cash flow and maturity mismatch analysis on both contractual and behavioural basis to assess the curve on the Group’s interest income, the Group recognizes that the sensitivity of changes in the interest rate environment banking units’ abilities to meet immediate liquidity requirements and plan for their medium to long term liquidity profile. varies by asset and liability class. Scenarios are defined by the magnitude of the yield curve shift assumed. Analysis of the various scenarios is then conducted to give an appreciation of the distribution of future net interest income and economic Liquidity contingency plans value of equity as well as their respective expected values. In line with the Group’s liquidity management policy, liquidity contingency plans are in place for the subsidiaries in order to ensure a positive outcome in the event of a liquidity crisis. The plans clearly outline early warning indicators which are 32.3.2 Currency risk supported by clear and decisive crisis response strategies. The crisis response strategies are created around the relevant The Group is a diversified local Company and its major trading and reporting currency is the US$. Due to the existing multi- crisis management structures and address both specific and market crises. currency regime, the Group is exposed to various currency exposures primarily with respect to to the South African rand, Botswana pula, British pound and the Euro, mainly due to the cash holding and switch transactions in the banking subsidiary. Liquidity stress testing It is the Group’s policy that each entity conducts stress tests on a regular basis to ensure that they have adequate liquidity Foreign exchange risks arise from future commercial transactions and recognised assets and liabilities. This is the risk from to withstand stressed conditions. In this regard, anticipated on- and off-balance sheet cash flows are subjected to a variety movement in the relative rates of exchange between currencies. The risk is controlled through control of open position as of specific and systemic stress scenarios during the period in an effort to evaluate the impact of unlikely events on liquidity positions. per ALCO directives, Reserve Bank of Zimbabwe requirements and analysis of the market. The Group manages this risk through monitoring long and short positions and assessing the likely impact of forecasted movements in exchange rates on The table below analyses the Group’s financial assets and liabilities into relevant maturity groupings based on the remaining the Group’s profitability. period at the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. 32.3.3 Equity Price risk The Group is exposed to equity price risk because of investments held by the Group and classified on the consolidated Up to 3 months Over statement of financial position at fair value through profit or loss. The Group is not exposed to commodity price risk. To Contractual maturity analysis 3 months to 1 year 1 year Total manage its price risk arising from investments in equity securities, the Group diversifies its portfolio. On balance sheet items as at 31 December 2015 US$ US$ US$ US$ 32.4 Settlement risk Liabilities The Group’s activities may give rise to risk at the time of settlement of transactions and trades. Settlement risk is the risk of loss Deposits from customers 193 945 072 10 420 750 5 064 276 209 430 098 due to the failure of a counterparty to honour their obligation to deliver cash, securities or other assets as contractually agreed. Deposits from other banks 74 876 026 3 110 104 - 77 986 130 Borrowings 3 518 454 6 800 391 62 984 895 73 303 740 Insurance liabilities 2 523 461 - 6 880 967 9 404 428 For certain types of transactions, the Group mitigates this risk by conducting settlements through a settlement/clearing Current income tax liabilities 907 522 - - 907 522 agent to ensure that trades are settled only when both parties have fulfilled their contractual settlement obligations. Trade and other liabilities 2 118 504 10 966 918 848 427 13 933 849 Settlement limits form part of the credit approval / limit monitoring process. Total liabilities - (contractual maturity) 277 889 039 31 298 163 75 778 565 384 965 767 32.5 Operating risk Assets held for managing liquidity risk Operational risk is the risk of loss arising from the potential inadequate information systems, technological failures, breaches (contractual maturity dates) in internal controls, fraud, unforeseen catastrophes, or other operational problems that may result in unexpected losses. Balances with banks and cash 93 762 063 - - 93 762 063 Financial assets held to maturity - 27 988 587 21 635 446 49 624 033 Operational risk exists in all products and business activities. Loans and advances to customers 30 542 463 109 781 455 142 647 775 282 971 693
Bonds and debentures - - 8 702 320 8 702 320 Trade and other receivables including insurance Group’s approach to managing operational risk receivables 1 835 744 6 263 785 - 8 099 529 The Group’s approach is that business activities are undertaken in accordance with fundamental control principles Financial assets at fair value through profit or loss 136 472 913 565 - 1 050 037 of operational risk identification, clear documentation of control procedures, segregation of duties, authorisation, close Available for sale financial assets 377 568 - - 377 568 monitoring of risk limits, monitoring of assets use, reconciliation of transactions and compliance. Other assets 964 343 333 814 2 676 339 3 974 496 127 618 653 145 281 206 175 661 880 448 561 739 Operational risk framework and governance The Board has ultimate responsibility for ensuring effective management of operational risk. This function is implemented Liquidity gap (150 270 386) 113 983 043 99 883 315 63 595 972 through the Board Risk and Compliance Committee at Group level which meets on a quarterly basis to review all major risks including operational risks. This Committee serves as the oversight body in the application of the Group’s operational risk Cumulative liquidity gap - on balance sheet (150 270 386) (36 287 343) 63 595 972 - management framework, including business continuity management. Subsidiaries have board committees responsible for
ensuring robust operational risk management frameworks. Other Group management committees which report to Group Off balance sheet items Executive Committee include the Group New Product Committee, Group IT Steering Committee and Group Business Liabilities Continuity Committee. Guarantees and letters of credit - 4 328 256 - 4 328 256 Commitments to lend 7 044 988 - - 7 044 988 The management and measurement of operational risk The Group identifies and assesses operational risk inherent in all material products, activities, processes and systems. It Total liabilities 7 044 988 4 328 256 - 11 373 244 ensures that before new products, activities, processes and systems are introduced or undertaken, the operational risk inherent in them is subjected to adequate assessment by the appropriate risk committees which include the Group Risk and Liquidity gap (7 044 988) ( 4 328 256) - 52 222 728 Compliance Committee and Group New Product Committee.
Cumulative liquidity gap - on and off balance sheet (157 315 374) ( 47 660 587) 52 222 728 -
9 Directors: Herbert Nkala (Chairman), John Mushayavanhu (Group Chief Executive)*, Kleto Chiketsani*, Gertrude S Chikwava, Philip M Chiradza, Felix Gwandekwande*, Franklin H Kennedy, Trynos Kufazvinei (Group Finance Director)*, Canada Malunga, Chipo Mtasa, Godfrey G Nhemachena, Webster Rusere*, Robin Vela. (*Executive) AUDITED FINANCIAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2015
The Group conducts Operational Risk Assessments in line with the Group’s risk strategy. These assessments cover causes 33 STATEMENT OF COMPLIANCE and events that have, or might result in losses, as well as monitor overall effectiveness of controls and whether prescribed controls are being followed or need correction. Key Risk Indicators (“KRIs”) which are statistical data relating to a business The Group complies with the following statutes inter alia:- or operations unit are monitored on an ongoing basis. The Group also maintains a record of loss events that occur in the The Banking Act (Chapter 24:20) and Banking Regulations, Statutory Instrument 205 of 2000; Bank Use Promotion & Group in line with Basel II requirements. These are used to measure the Group’s exposure to the respective losses. Risk Suppression of Money Laundering (Chapter 24:24); Exchange Control Act (Chapter 22:05); the National Payments Systems limits are used to measure and monitor the Group’s operational risk exposures. These include branch cash holding limits, Act (Chapter 24:23); Insurance Act (Chapter 24:07) and the Companies Act (Chapter - 24:03). In addition, the Group also teller transaction limits, transfer limits and write off limits which are approved by management and the Board. In addition, complies with the Reserve Bank of Zimbabwe and Insurance and Pensions Commission’s directives on liquidity management, the Group also uses risk mitigation mechanisms such as insurance programmes to transfer risks. The Group maintains capital adequacy as well as prudential lending guidelines. adequate insurance to cover key operational and other risks. 34 INTERNATIONAL CREDIT RATINGS Business continuity management To ensure that the essential functions of the Group are able to continue in the event of adverse circumstances, the Group The banking and reinsurance subsidiaries have their credit ratings reviewed annually by an international credit rating agency, Business Continuity Plan is reviewed annually and approved by the Board. The Group Business Continuity Committee is Global Credit Rating. All subsidiaries have maintained their investor grade ratings as illustrated below; responsible for ensuring that all subsidiary companies conduct tests each year in line with the Group policy. The Group successfully conducted its business continuity tests and all processes were well documented. All structures, processes and Subsidiary 2015 2014 2013 2012 2011 systems of the banking subsidiaries have been aligned to Basel II requirements. The Group also adopted in full all the Risk Management Guidelines which were issued by the Reserve Bank of Zimbabwe as part of the Basel II implementation for the FBC Bank Limited A- A- A- A- A- banking subsidiaries. FBC Reinsurance Limited A- A- A- A- A- 32.6 Capital risk FBC Building Society BBB- BBB- BBB- BBB- BBB-
32.6.1 Regulatory Capital and Financial Risk Management Eagle Insurance Company Limited A- BBB BBB- BB+ BB Capital risk refers to the risk of the Group’s own capital resources being adversely affected by unfavourable external developments. 35 SUBSEQUENT EVENTS
The Group’s objective when managing capital, which is a broader concept than the ‘equity’ on the face of the statement of Dividend Declared financial position, are: A final dividend of 0.149 US cents per share was declared by the Board on 15 March 2016 payable on 671 949 927 ordinary • To comply with the capital requirements set by the regulators of the Group’s subsidiaries; shares in issue in respect of the year ended 31 December 2015. The dividend is payable to Shareholders registered in • To safeguard the Group’s ability to continue as a going concern so that it can continue to provide returns for shareholders the books of the Company at the close of business on Friday, 8th April 2016. The shares of the Company will be traded and benefits for other stakeholders; and cum-dividend on the Zimbabwe Stock Exchange up to the market day of 1 April 2016 and ex-dividend as from 4 April 2016. • To maintain a strong capital base to support the development of its businesses. Dividend payment will be made to Shareholders on or about 20 April 2016.
Capital adequacy and the use of regulatory capital are monitored daily by the Group’s management, employing techniques 36 CORPORATE GOVERNANCE based on the guidelines developed by the Basel Committee as implemented by the Reserve Bank of Zimbabwe (the “RBZ”), for supervisory purposes for the banking subsidiaries. The required information is filed with the RBZ on a quarterly basis. The Board is committed to the principles of openness, integrity and accountability. It recognises the developing nature of corporate governance and assesses its compliance with local and international generally accepted corporate governance It is the intention of the Group to maintain a ratio of total regulatory capital to its risk-weighted assets (the “Capital Adequacy practices on an ongoing basis through its various sub-committees. Ratio”) above the minimum level set by the Reserve Bank of Zimbabwe which takes into account the risk profile of the Group. The Board is responsible to the shareholders for setting the direction of the Group through the establishment of strategies The regulatory capital requirements are strictly observed when managing economic capital. The banking subsidiaries’ objectives and key policies. The Board monitors the implementation of these policies through a structured approach regulatory capital is analysed into three tiers; reporting and accountability.
• Tier 1 capital, which includes ordinary share capital and premium, retained profits, non distributable reserves and other The Board meets regularly, with a minimum of four scheduled meetings annually. To assist the Board in the discharge of its regulatory adjustments relating to items that are included in equity but are treated differently for capital adequacy responsibilities a number of committees have been established, of which the following are the most significant: (i) Board purposes. Audit Committee, (ii) Board Human Resources and Remuneration Committee, (iii) Board Finance and Strategy Committee • Tier 2 capital, which includes qualifying subordinated liabilities, revaluation reserve, collective impairment allowances and (iv) Board Risk and Compliance Committee (v) Board Marketing and Public Relations Committee. the element of the fair value reserve relating to unrealised gains on equity instruments classified as available-for-sale. Board Attendance • Tier 3 capital or market and operational risk capital includes market risk capital and operational risk capital. Operational Board member Main board Board Audit Board HR Board Finance & Board Risk & Board Marketing risk includes legal risk. Market risk capital is allocated to the risk of losses in the on and off balance sheet position arising Strategy Compliance & PR from movements in market prices. Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Various limits are applied to elements of the capital base. The amount of capital qualifying for tier 2 capital cannot exceed Herbert Nkala a a a a N/A N/A N/A N/A a a a a N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A tier 1 capital and the qualifying term subordinated loan capital may not exceed 50 percent of tier 1 capital. There are John a a a a N/A N/A N/A N/A a a a a a a a a a a a a a a a a also restrictions on the amount of collective impairment allowances that may be included as part of tier 2 capital. Other Mushayavanhu deductions from capital include the carrying amounts of investments in subsidiaries that are not included in the regulatory a a a N/A N/A N/A N/A N/A N/A N/A N/A N/A a a a N/A a a a N/A N/A N/A N/A N/A consolidation, investment in the capital of other banks and certain other regulatory items. Kenzias Chibota Kleto Chiketsani a a a a N/A N/A N/A N/A N/A N/A N/A N/A a a a N/A r a a N/A a r a a The Group’s operations are categorised as either banking or trading book, and risk weighted assets are determined according a a a a N/A N/A N/A N/A N/A N/A N/A N/A a a a a N/A N/A N/A a a a a a to specified requirements that seek to reflect the varying levels or risk attached to assets and off balance sheet exposures. Gertrude S Chikwava
The Group’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to Philip M a a a a a a a N/A a a a a N/A N/A N/A a a a a N/A N/A N/A N/A N/A sustain future development of the business. Overall, the Group recognises the need to maintain a balance between the Chiradza higher returns that might be possible with greater gearing and the advantages and security afforded by a sound capital Felix a a a a N/A N/A N/A N/A N/A N/A N/A N/A a a a N/A a r a N/A a a a a position. The Group and its individually regulated operations have always complied with all externally imposed capital Gwandekwande requirements throughout the period. a a a a N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Franklin H Kennedy 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. Trynos a a a a N/A N/A N/A N/A N/A N/A N/A N/A a a a N/A N/A N/A N/A N/A N/A N/A N/A N/A Kufazvinei The following subsidiaries have their capital regulated by the regulatory authorities: Canada Malunga a a a a r a a a N/A N/A N/A N/A N/A N/A N/A a N/A N/A N/A N/A a a a a
Minimum Net James M Matiza a a a N/A N/A N/A N/A N/A N/A N/A N/A N/A r a a N/A N/A N/A N/A N/A a a a N/A Company Regulatory capital Regulatory Johnson R a a N/A N/A a a N/A N/A a a N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A As at 31 December 2015 Authority required Capital Total Equity Mawere US$ US$ US$ a r a a a a a a N/A N/A N/A N/A N/A N/A N/A a a a a N/A N/A N/A N/A N/A Chipo Mtasa FBC Bank Limited RBZ 25 000 000 41 387 308 43 067 712 Godfrey G a a a a r a a a N/A N/A N/A a N/A N/A N/A N/A a a a a N/A N/A N/A N/A FBC Building Society RBZ 20 000 000 35 029 984 35 029 984 Nhemachena FBC Reinsurance Limited IPEC 3 000 000 11 830 862 11 830 862 Webster Rusere a a a a N/A N/A N/A N/A N/A N/A N/A N/A a a a N/A a a a N/A a a a a FBC Securities (Private) Limited SECZ 150 000 264 865 264 865 Eagle Insurance Company (Private) Limited IPEC 1 500 000 5 772 560 5 772 560 Robin Vela N/A N/A N/A a N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A a N/A N/A N/A a N/A N/A N/A N/A Microplan Financial Services (Private) Limited RBZ 10 000 5 491 778 5 491 778
As at 31 December 2014 Legend Not a member N/A FBC Bank Limited RBZ 25 000 000 30 668 972 33 264 921 Attended a FBC Building Society RBZ 20 000 000 29 702 581 29 752 809 Apologies r FBC Reinsurance Limited IPEC 3 000 000 10 272 398 10 272 398 Quarter Q FBC Securities (Private) Limited SECZ 150 000 237 308 237 308 Meeting postponed P Eagle Insurance Company (Private) Limited IPEC 1 500 000 4 664 093 4 664 093 Microplan Financial Services (Private) Limited RBZ 10 000 3 353 009 3 353 009 By order of the Board 32.7 Reputational risk Reputational risk refers to the risk of damage to the Group’s image, which may affect its ability to retain and generate business. The Group manages reputational risk by ensuring that business is conducted in accordance with the legal and regulatory requirements. In addition, the Group’s corporate governance structure conforms to international standards. The Group also has systems in place to monitor customer service satisfaction levels as well as processes to resolve customer queries and complaints. Tichaona K. Mabeza GROUP COMPANY SECRETARY 32.8 Legal and compliance risk 15 March 2016 Legal and compliance risk is the risk that arises due to the Group’s failure to adhere to legal and regulatory obligations. The Group manages this risk through dedicated Legal and Compliance units, and deliberations by its Board Risk and Compliance Committee. Audit opinion The Auditors of the Group, Deloitte & Touche have audited the financial results of the Group for the year ended 31 December 32.9 Strategic risk 2015. The audit report is unqualified. Strategic risk refers to the potential for opportunity loss arising from failure to optimise the earnings potential of the Group. The Board approves the Group’s strategy as formulated by top management, while the Chief Executive Officer has the overall responsibility of strategy implementation. The Board conducts a quarterly review of the strategy’s performance and its continued applicability.
10 Directors: Herbert Nkala (Chairman), John Mushayavanhu (Group Chief Executive)*, Kleto Chiketsani*, Gertrude S Chikwava, Philip M Chiradza, Felix Gwandekwande*, Franklin H Kennedy, Trynos Kufazvinei (Group Finance Director)*, Canada Malunga, Chipo Mtasa, Godfrey G Nhemachena, Webster Rusere*, Robin Vela. (*Executive) AUDITED FINANCIAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2015
Statement of Financial Position Statement of Cash Flows As at 31 December 2015 For the year ended 31 December 2015
31 Dec 2015 31 Dec 2014 31 Dec 2015 31 Dec 2014 Note US$ US$ Note US$ US$
Cash flows from operating activities ASSETS Profit before income tax 9 289 390 2 196 042 Balances with banks and cash 1 86 662 932 100 525 672
Financial assets held to maturity 2 49 624 033 10 749 309 Adjustments for non cash items: Loans and advances to customers 3 208 864 160 242 039 014 Impairment allowance on loans and advances 3.2 2 054 623 6 350 987 Bonds and debentures 8 702 320 2 768 518 Non cash recoveries (1 535 941) (648 000) Prepayments and other assets 4 3 545 503 3 812 339 Cumulative fair value adjustments on financial assets Amounts due from group companies 6 570 769 2 595 950 available for sale recycled to profit or loss - 5 903 912 Deferred income tax asset 3 455 335 2 287 472 Fair value gains on investment property (162 576) - Investment property 2 447 140 1 668 000 Amortisation 310 648 282 628 Intangible assets 513 700 729 710 Depreciation 5 1 372 463 1 248 126 Property and equipment 5 17 002 459 15 474 408 Profit on disposal of property and equipment (18 059) (14 968)
Total assets 387 388 351 382 650 392 Net cash generated before changes in operating assets and liabilities 11 310 548 15 318 727 EQUITY AND LIABILITIES Increase in financial assets held to maturity (38 874 724) (10 749 309)
Decrease /(increase) in loans and advances to customers 33 174 854 (35 885 964) Liabilities Decrease/(increase)in prepayments and other assets 266 836 (7 494) Deposits from customers 6 175 355 558 186 283 360 (Increase)/decrease in amounts due from group companies (3 974 819) 1 294 072 Deposits from other financial institutions 6.1 97 365 231 80 725 798 Increase in bonds and debentures (5 933 802) (104 239) Lines of credit 6.2 65 902 989 77 192 603 (Decrease)/increase in deposits from customers (10 927 802) 48 926 612 Current income tax liability 776 510 803 339 Increase /(decrease) in deposits from other financial institutions 16 639 433 (2 425 314) Trade and other payables 7 4 920 351 4 380 370 Increase in other liabilities 539 981 271 299
Total liabilities 344 320 639 349 385 470 2 220 505 16 638 390 Equity Income tax paid (2 881 298) (1 356 750) Share capital 18 500 925 18 500 000 Share premium 2 199 075 - Net cash (used in)/generated from operating activities (660 793) 15 281 640 Retained profits 20 742 037 12 479 003 Other reserves 1 625 675 2 285 919 Cash flows from investing activities Proceeds from sale of property and equipment 18 059 15 689 Total equity 43 067 712 33 264 922 Purchase of intangible assets (94 638) (302 816) Purchase of property and equipment (2 925 619) (1 043 669) Total equity and liabilities 387 388 351 382 650 392
Net cash used in investing activities (3 002 198) (1 330 796)
Cash flows from financing activities Statement of Comprehensive Income Proceeds from issue of equity instruments 2 200 000 - For the year ended 31 December 2015 Proceeds received from lines of credit 20 418 406 34 434 223 Repayments of lines of credit (32 818 155) (16 553 947) 31 Dec 2015 31 Dec 2014 Note US$ US$ Net cash (used)/generated from financing activities (10 199 749) 17 880 276
Interest and similar income 9 43 470 396 42 620 569 Net (decrease)/increase in cash and cash equivalents (13 862 740) 31 831 120 Interest and similar expense 10 (23 325 950) (25 415 667) Cash and cash equivalents at beginning of year 100 525 672 68 694 552 Net interest income 20 144 446 17 204 902 Cash and cash equivalents at the end of year 1 86 662 932 100 525 672 Dealing and trading income 792 957 999 900
Fee and commission income 11 17 131 976 16 952 085 Notes to the Financial Results For the year ended 31 December 2015 Cumulative fair value losses on financial assets held for sale - (5 903 912)
recycled from other comprehensive income
Other operating income 479 385 1 450 166 31 Dec 2015 31 Dec 2014
US$ US$ Total net income 38 548 764 30 703 141
1 BALANCES WITH BANKS AND CASH Impairment allowance on loans and advances 3.2 (2 054 623) (6 350 987)
Balances with Reserve Bank of Zimbabwe Administrative expenses 12 (27 204 751) (22 156 112) Current account balances 56 928 288 63 192 401
Profit before income tax 9 289 390 2 196 042 Balances with other banks and cash
Nostro accounts 5 860 036 5 587 484 Income tax expense (1 686 600) (2 468 090) Notes and coins 11 252 322 24 069 654
Other bank balances 12 622 286 7 676 133 Profit for the period 7 602 790 (272 048) 29 734 644 37 333 271
Other comprehensive income Cash and cash equivalents 86 662 932 100 525 672 Items that may subsequently be reclassified to profit or loss: Fair value loss on financial assets available for sale - (4 723 130) 2 FINANCIAL ASSETS HELD TO MATURITY Reclassfication of fair value gains on financial assets available for sale - 5 903 912
Tax relating to other comprehensive income - (236 156) Open market treasury bills 49 624 033 10 749 309 - 944 626 49 624 033 10 749 309
Transfer from regulatory reserves, net of tax 660 244 - 3 LOANS AND ADVANCES TO CUSTOMERS
Items that will not be reclassified to profit or loss: Maturing within 1 year 138 886 661 84 270 634 Gains on property revaluation - 869 502 Maturing after 1 year but within 5 years 85 124 083 176 820 814 Tax relating to other comprehensive income - (223 897) Gross carrying amount 224 010 744 261 091 448 645 605
Impairment allowance (note 3.2) (15 146 584) (19 052 434) Other comprehensive income (net of income tax) 660 244 1 590 231 Net loans and advances 208 864 160 242 039 014
Total comprehensive income for the period 8 263 034 1 318 183 3.1 Loans concentration by sector 2015 2014 Statement of Changes In Equity Sector of the economy gross total percentage gross total percentage Agriculture 15 680 752 7% 18 049 429 7% For the year ended 31 December 2015 Communication 6 720 322 3% 7 735 470 3% Financial Construction 2 240 107 1% 2 578 490 1% assets Distribution 29 121 397 13% 33 520 369 13% Share Share Retained Revaluation Regulatory available for Total capital premium profits reserve reserve sale equity Individuals 56 002 686 25% 64 462 247 25% US$ US$ US$ US$ US$ US$ US$ Local authorities 20 160 967 9% 23 206 409 9% Manufacturing 53 762 579 24% 51 669 851 20% Balance as at 1 January 2014 18 500 000 - 19 835 745 980 070 660 244 (944 626) 39 031 433 Mining 13 440 645 6% 15 470 939 5% Other services 11 200 537 5% 16 150 978 6% Loss for the year - - (272 048) - - - (272 048) Wholesale 15 680 752 7% 28 247 266 11%
Other comprehensive income: Gross value of loans and advances 224 010 744 100% 261 091 448 100% Reclassfication of fair value loss on financial assets Allowance for impairment (15 146 584) (19 052 434) available for sale - - - - - 944 626 944 626 Net loans and advances 208 864 160 242 039 014
Gain on revaluation of property - - - 645 605 - - 645 605 31 Dec 2015 31 Dec 2014 and equipment US$ US$ 3.2 Movement in impairment provision Total comprehensive income - - (272 048) 645 605 - 944 626 1 318 183
Balance at the beginning of the period 19 052 434 12 254 798 Transaction with owners: Dividend in specie declared and paid - - (7 084 694) - - - (7 084 694) Increase in impairment allowances 2 054 623 6 350 987 Increase in interest in suspense 1 534 987 3 243 874 Balance as at 31 December 2014 18 500 000 - 12 479 003 1 625 675 660 244 - 33 264 922 Amounts written off (7 495 460) (2 797 225) Balance at end period 15 146 584 19 052 434 Profit for the year - - 7 602 790 - - - 7 602 790 4 PREPAYMENTS AND OTHER ASSETS Other comprehensive income: Prepayments 766 247 1 055 335 Transfer from regulatory reserve - - 660 244 - (660 244) - - Commission receivable 1 711 042 1 711 042 Mastercard collateral 706 781 631 793 Total comprehensive income and Recoveries 206 293 206 858 regulatory reserve transfer - - 8 263 034 - (660 244) - 7 602 790 Other receivables 155 140 207 311 3 545 503 3 812 339 Transaction with owners: 4.1 Maturity analysis of other assets Share issue 925 2 199 075 - - - - 2 200 000
Balance as at 31 December 2015 18 500 925 2 199 075 20 742 037 1 625 675 - - 43 067 712 Maturing within 1 year 1 834 461 2 101 297 Maturing after 1 year but within 5 years 1 711 042 1 711 042 3 545 503 3 812 339
11 Directors: Takabvakure E. Mutunhu (Chairman), Webster Rusere (Managing Director), Garikai Bera, David .W. Birch, Trynos Kufazvinei (Executive), Martin Makonese (Executive), Theresa Mazoyo, Agrippa G.R Mugwagwa (Executive), John Mushayavanhu, Mercy Ndoro, Morgan Nzwere, Patrick Takawira (Executive) AUDITED FINANCIAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2015
31 Dec 2015 31 Dec 2014 31 Dec 2015 31 Dec 2014 US$ US$ US$ US$ 5 PROPERTY AND EQUIPMENT 13 STAFF COSTS
Opening balance 15 474 408 16 060 985 Salaries and allowances 9 156 258 7 466 095 Additions 2 925 619 1 064 669 Social security 209 894 236 553 Disposals (149 166) (59 884) Pension contribution 936 784 939 131 Revaluations - 56 995 10 302 936 8 641 779 Reversal of depreciation on disposal/revaluation 149 166 773 939 Adjustments (25 105) (154 170) Transfer to investment property - (1 020 000) 13.1 Directors’ remuneration Depreciation charge for the period (1 372 463) (1 248 126) Carrying amount for the period 17 002 459 15 474 408 Board fees 115 800 308 197 For services as management 1 216 650 1 950 856 6 DEPOSITS FROM CUSTOMERS Other emoluments 169 954 128 431 1 502 404 2 387 484 Amounts due to customers by type: Demand deposits 85 272 753 104 815 142 14 CAPITAL COMMITMENTS Promissory notes 37 765 456 58 897 901 Time deposits 52 317 349 22 570 317 Capital expenditure authorized but not yet contracted for 7 670 435 7 410 817 175 355 558 186 283 360
6.1 Deposits from other financial institutions 15 CONTINGENT LIABILITIES
Money market deposits 97 365 231 80 725 798 Guarantees and letters of credit 4 328 256 6 898 941
6.2 LINES OF CREDIT The amount of these letters of credit and guarantees represents the Bank’s maximum exposure and no material losses are anticipated from these transactions. Eastern and Southern African Trade and Development Bank (“PTA Bank”) 3 590 135 10 000 000 African Export-Import Bank 59 970 000 65 946 415 16 EXPOSURE TO CREDIT RISK The Zimbabwe Agriculture Development Trust (“ZADT”) 1 842 854 1 246 188 The Reserve Bank of Zimbabwe- Chrome facility 500 000 - Gross carrying amount of loans and advances to customers 65 902 989 77 192 603 Past due and impaired Grade 8: impaired 9 010 496 27 409 150 Total Deposits 338 623 778 344 201 761 Grade 9: impaired 1 372 200 2 761 468 Grade 10: impaired 7 458 435 14 828 818 6.3 Deposits concentration (excluding lines of credit) Gross amount, past due and impaired 17 841 131 44 999 436 Agriculture 8 994 141 3% 9 070 956 3% Allowance for impairment (10 704 572) (15 672 409) Construction 3 344 344 1% 3 372 907 1% Wholesale and retail trade 48 339 118 18% 58 107 058 22% Carrying amount, past due and impaired 7 136 559 29 327 027 Public sector 14 571 260 5% 14 695 707 6% Past due but not impaired Manufacturing 23 104 454 9% 23 301 780 9% Grade 4-7: 72 776 083 62 796 696 Telecommunication 8 157 939 3% 8 227 613 3% Neither past due nor impaired Transport 3 547 346 1% 3 577 642 1% Grade 1-3: 133 393 530 153 295 316 Individuals 35 835 609 13% 36 216 732 14% Financial services 97 365 231 36% 80 725 798 30% Gross amount, not impaired 206 169 613 216 092 012 Mining 21 400 873 8% 21 583 649 8% Allowance for impairment (4 442 012) (3 380 025) Other 8 060 474 3% 8 129 316 3% Carrying amount, not impaired 201 727 601 212 711 987 272 720 789 100% 267 009 158 100% Total carrying amount (loans and advances) 208 864 160 242 039 014 31 Dec 2015 31 Dec 2014 US$ US$ 17 LIQUIDITY PROFILING 6.4 Maturity analysis (excluding lines of credit)
Liquidity profiling as at 31 December 2015 Maturing within 1 year 272 720 789 267 009 158
Maturing after 1 year but within 5 years - - 1 month to 3 months Over 272 720 789 267 009 158 On balance sheet items 3 months to 1 year 1 year Total US$ US$ US$ US$ 7 Trade and other payables
Liabilities Provisions 1,544,779 765,383 Deposits from customers 164 934 808 10 420 750 - 175 355 558 Accrued expenses 276 839 1 164 048 Deposits from other financial institutions 94 255 128 3 110 103 - 97 365 231 Deferred income 3 098 733 2 450 939 Lines of credit - 5 932 989 59 970 000 65 902 989 4 920 351 4 380 370 Current income tax liabilities 776 510 - - 776 510
Other liabilities 1 873 606 3 046 745 - 4 920 351 8 CAPITAL ADEQUACY
Total liabilities - (contractual maturity) 261 840 052 22 510 587 59 970 000 344 320 639 Ordinary share capital 18 500 925 18 500 000 Share premuim 2 199 075 - Assets held for managing liquidity risk Retained profit 20 742 037 12 479 003 Balances with other banks and cash 86 662 932 - - 86 662 932 Regulatory reserve - 660 244 Financial assets held to maturity - 27 988 587 21 635 446 49 624 033 Capital allocated for market and operational risk (6 890 321) (4 035 797) Loans and advances to customers 56 708 320 58 881 353 93 274 487 208 864 160 Advances to insiders (1 680 404) (2 595 950) Bonds and debentures - - 8 702 320 8 702 320 Other assets (excluding prepayments) - - 1 711 042 1 711 042 Tier 1 capital 32 871 312 25 007 500 Total assets - (contractual maturity) 143 371 252 86 869 940 125 323 295 355 564 487 Revaluation reserve 1 625 675 1 625 675 Liquidity gap (118 468 800) 64 359 353 65 353 295 11 243 848 Tier 2 capital 1 625 675 1 625 675 Cumulative liquidity gap - on balance sheet (118 468 800) (54 109 447) 11 243 848 - Tier 1 & 2 capital 34 496 987 26 633 175 Tier 3 capital allocated for market and operational risk 6 890 321 4 035 797 Off balance sheet items 41 387 308 30 668 972 Liabilities Risk weighted assets 282 449 567 194 870 201 Guarantees and letters of credit - 4 328 256 - 4 328 256 Commitments to lend 6 661 238 - - 6 661 238 Tier 1 Ratio (%) 11.64% 12.83% Tier 2 Ratio (%) 0.58% 0.84% Total liabilities 6 661 238 4 328 256 - 10 989 494 Tier 3 Ratio (%) 2.44% 2.07% Capital adequacy (%) 14.66% 15.74% Liquidity gap (125 130 038) 60 031 097 65 353 295 254 354
Cumulative liquidity gap - on and off balance sheet (125 130 038) (65 098 941) 254 354 - 31 Dec 2015 31 Dec 2014 9 INTEREST INCOME Liquidity profiling as at 31 December 2014
Loans and advances to banks and other financial institutions 2 577 875 2 177 173 Liabilities Loans and advances to customers 35 940 159 38 834 132 Deposits from customers 169 851 978 16 431 382 - 186 283 360 Banker’s acceptances and tradable bills 4 681 300 1 519 224 Deposits from other financial institutions 80 725 798 - - 80 725 798 Bonds and debentures 271 062 90 040 Lines of credit 1 400 000 12 399 930 63 392 673 77 192 603 43 470 396 42 620 569 Current income tax liabilities 803 339 - - 803 339 Other liabilities 3 017 854 1 362 516 - 4 380 370 Credit related fees that are an integral part of the effective interest on loans and advances have been classified under interest income. In 2014 these were Total liabilities - (contractual maturity) 255 798 969 30 193 828 63 392 673 349 385 470 shown under fee and commission income. Assets held for managing liquidity risk 10 INTEREST EXPENSE Balances with other banks and cash 100 525 672 - - 100 525 672 Financial assets held to maturity - - 10 749 309 10 749 309 Deposit from other financial institutions 6 045 773 10 075 059 Loans and advances to customers 57 133 975 82 088 864 102 816 175 242 039 014 Demand deposits 345 918 328 706 Bonds and debentures - - 2 768 518 2 768 518 Lines of credit 8 759 955 6 801 251 Other assets (excluding prepayments) 827 810 6 860 316 2 364 954 10 053 080 Time deposits 8 174 304 8 210 651 23 325 950 25 415 667 Total assets - (contractual maturity) 158 487 457 88 949 180 118 698 956 366 135 593
11 FEES AND COMMISSION INCOME Liquidity gap (97 311 512) 58 755 352 55 306 283 16 750 123
Retail services fees 16 824 982 16 280 168 Cumulative liquidity gap - on balance sheet (97 311 512) (38 556 160) 16 750 123 - Corporate banking service fees 150 162 407 788 Financial guarantee contracts issued 129 868 244 644 Off balance sheet items Investment banking fees 26 964 19 485 17 131 976 16 952 085 Liabilities Guarantees and letters of credit - 6 898 941 - 6 898 941 12 ADMINISTRATION EXPENSES Commitments to lend 9 773 788 - - 9 773 788
Operating expenses 12 528 962 8 579 755 Total liabilities 9 773 788 6 898 941 - 16 672 729 Staff costs (note 13) 10 302 936 8 641 779 Directors’ remuneration (note 13.1) 1 502 404 2 387 484 Liquidity gap (107 085 300) 51 856 411 55 306 283 77 394 Depreciation 1 372 463 1 248 126 Amortisation 310 648 282 628 Cumulative liquidity gap - on and off balance sheet (107 085 300) (55 228 889) 77 394 - Operating lease payment 960 190 818 708 Audit fees 227 148 197 632 27 204 751 22 156 112
12 Directors: Takabvakure E. Mutunhu (Chairman), Webster Rusere (Managing Director), Garikai Bera, David .W. Birch, Trynos Kufazvinei (Executive), Martin Makonese (Executive), Theresa Mazoyo, Agrippa G.R Mugwagwa (Executive), John Mushayavanhu, Mercy Ndoro, Morgan Nzwere, Patrick Takawira (Executive) AUDITED FINANCIAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2015
18 INTEREST RATE REPRICING AND GAP ANALYSIS 20 VALUE AT RISK
Total position as at 31 December 2015 Value at risk (“VaR”)is a statistical estimate of the maximum loss expected from the Bank’s trading book with a given Over 365 Non-interest degree of confidence over a given holding period. The Bank’s system uses the Exponentially Weighted Moving Average 0 - 30 days 31 - 90 days 91-180 days 181-365 days days bearing Total (‘’EWMA’’) method to compile VaR. This method attaches more weight to the most recent data on market risk factors the US$ US$ US$ US$ US$ US$ US$ weights decaying exponentially as we go further into the past. The VaR parameters used are at 95% confidence level, one day holding period and ten day holding period. Cash and cash equivalents 14 330 774 18 154 889 - - - 54 177 269 86 662 932 Financial assets held to maturity 27 988 587 21 635 446 - 49 624 033 Loans and advances to customers 64 022 148 16 709 707 46 467 855 22 119 601 41 703 718 17 841 131 208 864 160 31 December 2015 Value at risk(95% confidence level Bonds and debentures - - - - 8 702 320 - 8 702 320 Prepayments and other assets - - - - 1 711 042 1 834 461 3 545 503 Asset class Type of risk Present value Portfolio 1-day holding 5-day holding Amounts due from group companies - - - - - 6 570 769 6 570 769 Investment property - - - - - 2 447 140 2 447 140 weight period period Deferred income tax asset - - - - - 3 455 335 3 455 335 Currency Exchange rate 539 457.94 100% 4 161 9 305 Intangible assets - - - - - 513 700 513 700 Property and equipment - - - - - 17 002 459 17 002 459 Total portfolio VaR 539 458 100% 4 161 9 305 - - - Total assets 78 352 922 34 864 596 46 467 855 50 108 188 73 752 526 103 842 264 387 388 351 31 December 2014
Asset class Deposits from customers 42 477 223 21 535 051 7 406 859 2 100 749 8 320 000 93 515 676 175 355 558 Deposits from other Currency Exchange rate 454 768 100% 2 471 5 525 financial institutions 71 546 184 18 585 148 4 123 795 3 110 104 - - 97 365 231 Lines of credit - - 2 402 989 3 500 000 60 000 000 - 65 902 989 Total portfolio VaR 454 768 100% 2 471 5 525 Other liabilities - - - - - 4 920 351 4 920 351 Current income tax liabilities - - - - - 776 510 776 510 Capital and reserves - - - - - 43 067 712 43 067 712 21 RESERVE BANK OF ZIMBABWE (“RBZ”) ONSITE EXAMINATION
Total liabilities 114 023 407 40 120 199 13 933 643 8 710 853 68 320 000 142 280 249 387 388 351 The Bank has its corporate governance and risk management processes independently audited by the Reserve Bank of Zimbabwe. Interest rate repricing gap (35 670 485) (5 255 603) 32 534 212 41 397 335 5 432 526 (38 437 985) - The most recent inspection was carried out for the 12 months to 30 June 2014 and the results indicate that the Bank’s risk Cumulative interest rate repricing gap (35 670 485) (40 926 088) (8 391 876) 33 005 459 38 437 985 - - management and corporate governance practices are sound as illustrated below:
Total position as at 31 December 2014 Summary risk assessment system (“RAS”) ratings Over 365 Non-interest 0 - 30 days 31 - 90 days 91-180 days 181-365 days days bearing Total RAS component Latest RAS rating 30-06-2014 US$ US$ US$ US$ US$ US$ US$ Overall inherent risk Moderate
Overall risk management systems Acceptable Cash and cash equivalents 5 587 483 - - - - 94 938 189 100 525 672 Financial assets held to maturity - - - 10 749 309 - 10 749 309 Overall composite risk Moderate Loans and advances to customers 79 366 005 10 480 174 8 132 139 59 336 652 84 724 044 - 242 039 014 Bonds and debentures - - - - 2 768 518 - 2 768 518 Prepayments and other assets 1 001 013 362 769 356 654 149 552 231 309 1 711 042 3 812 339 Amounts due from group companies - - - - - 2 595 950 2 595 950 FBC Bank Limited’s CAMELS* ratings by The Reserve Bank Of Zimbabwe Deferred income tax asset - - - - - 2 287 472 2 287 472 Investment property - - - - - 1 668 000 1 668 000 Camels component Latest RBS ratings Previous RBS ratings 30 Intangible assets - - - - - 729 710 729 710 30 June 2014 September 2008 Property and equipment - - - - - 15 474 408 15 474 408 - - - Total assets 85 954 501 10 842 943 8 488 793 59 486 204 98 473 180 119 404 771 382 650 392 Capital adequacy 2 2
Asset quality 3 3 Deposits from customers 46 004 504 19 900 040 5 499 094 9 555 531 - 105 324 191 186 283 360 Deposits from other financial Management 2 2 institutions 60 443 609 20 282 189 - - - - 80 725 798 Lines of credit 500 000 900 000 - 12 399 930 63 392 673 - 77 192 603 Earnings 2 2 Other liabilities 1 005 951 2 011 903 359 906 1 002 610 - - 4 380 370 Current income tax liabilities - - - - - 803 339 803 339 Liquidity 1 2 Capital and reserves - - - - - 33 264 922 33 264 922 Sensitivity to market risk 2 2 Total liabilities 107 954 064 43 094 132 5 859 000 22 958 071 63 392 673 139 392 452 382 650 392 Composite rating 2 2 Interest rate repricing gap (21 999 563) (32 251 189) 2 629 793 36 528 133 35 080 507 (19 987 681) - *CAMELS- is an acronym for capital adequacy, asset quality, management, earnings, liquidity, and sensitivity to market risk. Cumulative interest rate CAMELS rating system uses a rating scale of 1-5, where ‘1’ is strong, ‘2’ is satisfactory , ‘3’ is fair, ‘4’ is weak, and ‘5’ is critical. repricing gap (21 999 563) (54 250 752) (51 620 959) (15 092 826) 19 987 681 - - *RBS- stands for risk-based supervision.
22 BOARD ATTENDANCE 19 FBC BANK FOREIGN EXCHANGE GAP AS AT 31 DECEMBER 2015
Foreign exchange gap analysis as at 31 December 2015 Executive ("E") / NAME Non Executive 2015 MAIN BOARD Base currency ZAR EUR BWP GBP TOTAL Director ("NE") US$ equivalent US$ US$ US$ US$ US$ QUARTER 1 QUARTER 2 QUARTER 3 QUARTER 4
Assets Takabvakure Euwitt Mutunhu N/E √ √ √ √ Cash 455 432 76 378 33 131 46 851 611 792 Correspondent nostro balances 395 689 131 907 249 714 123 818 901 127 John Mushayavanhu E √ √ √ √ Loans and overdrafts 50 475 1 535 69 31 52 111 Garikai Bera N/E √ X √ √ Other assets 3 697 2 14 45 3 758 Trynos Kufazvinei E √ √ √ √ Total assets 905 293 209 822 282 928 170 745 1 568 788 Martin Makonese E √ √ √ √ Liabilities Morgan Nzwere N/E √ √ √ √ Deposits from customers 752 085 65 828 86 963 121 021 1 025 897 Other liabilities 3 277 19 36 100 3 432 Webster Rusere E √ √ √ √
Total liabilities 755 362 65 847 86 999 121 121 1 029 329 Mercy Rufaro Ndoro N/E √ √ √ √
Theresa Mazoyo N/E √ √ √ √ Net currency position 149 931 143 975 195 929 49 624 539 459 Patrick Takawira E √ X √ √ Foreign exchange gap analysis as at 31 December 2014 Agrippa Mugwagwa E √ √ √ √ Assets David William Birch N/E √ √ √ √ Cash 2 369 504 80 600 38 810 37 734 2 526 648 Correspondent nostro balances (259 471) 300 921 134 230 78 611 254 291 Nomsa Dube N/E X √ N/A N/A Loans and overdrafts 81 153 1 612 440 305 83 510 Other assets 5 150 20 16 47 5 233 √ - Present N/E - Non-executive director Total assets 2 196 336 383 153 173 496 116 697 2 869 682 X - Absent E - Executive director
Liabilities N/A - not applicable because board member had resigned prior to the meetings Deposits from customers 1 894 612 319 966 91 448 92 668 2 398 694 Other liabilities 4 389 11 694 43 104 16 230 By Order of the Board Total liabilities 1 899 001 331 660 91 491 92 772 2 414 924
Net currency position 297 335 51 493 82 005 23 925 454 758
Tichaona K. Mabeza GROUP COMPANY SECRETARY 15 March 2016
13 Directors: Takabvakure E. Mutunhu (Chairman), Webster Rusere (Managing Director), Garikai Bera, David .W. Birch, Trynos Kufazvinei (Executive), Martin Makonese (Executive), Theresa Mazoyo, Agrippa G.R Mugwagwa (Executive), John Mushayavanhu, Mercy Ndoro, Morgan Nzwere, Patrick Takawira (Executive) AUDITED FINANCIAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2015
Statement of Financial Position Statement of Cash Flows As at 31 December 2015 For the year ended 31 December 2015
Audited Audited Audited Audited 31 Dec 2015 31 Dec 2014 31 Dec 2015 31 Dec 2014 Notes US$ US$ Notes US$ US$
Assets CASH FLOW FROM OPERATING ACTIVITIES Cash and cash equivalents 1 55 523 967 50 219 722 Loans and advances to customers 2 57 996 110 50 156 220 Surplus for the year 6 307 115 6 767 000 Inventory 3 6 112 654 4 225 813 Adjustments for: - Other assets 4 499 063 173 189 Depreciation of property and equipment 5 167 101 188 741 Investment property 25 000 25 000 Amortisation of intangible assets 6 72 295 58 236 Property and equipment 5 4 439 627 4 457 131 Impairment on property and equipment 5 - 346 845 Intangible assets 6 157 839 145 781 Profit on disposal of property and equipment (1 613) (300) Total assets 124 754 260 109 402 856 Impairment on loans and advances 2.2 636 560 848 059 Net cash generated before changes in working capital 7 181 458 8 208 581 Liabilities - Deposits from banks 7.1 31 427 450 25 368 660 Increase in loans and advances to customers (8 476 450) (6 101 474) Deposits from customers 7.2 50 157 622 44 413 138 Increase in inventory (1 886 841) (67 738) Borrowings 7.3 3 735 164 4 325 682 (Increase)/ decrease in other assets (310 334) 28 422 Other liabilities 8 4 404 040 5 542 567 Increase in deposits from banks 6 058 790 8 467 630 Total liabilities 89 724 276 79 650 047 Increase in deposits from customers 5 744 484 17 980 069 (Decrease)/ increase in other liabilities (1 138 527) 264 470 Equity Net cash generated from operating activities 7 172 580 28 779 960 Share capital 156 175 156 175 Share premium 11 110 424 11 110 424 CASH FLOW FROM INVESTING ACTIVITIES Revaluation reserve 93 915 93 915 Retained earnings 23 669 470 18 392 295 Purchase of property and equipment 5 (156 713) (148 906) Total equity 35 029 984 29 752 809 Purchase of intangible assets 6 (84 353) - Proceeds from disposal of property and equipment 8 731 300 Total equity and liabilities 124 754 260 109 402 856 Net cash used in investing activities (232 335) (148 606)
CASH FLOW FROM FINANCING ACTIVITIES
Statement of Comprehensive Income Borrowings repayment (606 060) (2 282 459) For the year ended 31 December 2015 Dividend paid (1 029 940) (790 211) Net cash used in financing activities (1 636 000) (3 072 670) Audited Audited 31 Dec 2015 31 Dec 2014 Net increase in cash and cash equivalents 5 304 245 25 558 684 Notes US$ US$ Cash and cash equivalents at the beginning of the year 50 219 722 24 661 038 Interest income 9 11 861 778 11 847 226 Interest expense 10 (4 978 685) (6 049 608) Cash and cash equivalents at the end of the year 1 55 523 967 50 219 722 Net interest income 6 883 093 5 797 618
Revenue from property sales 6 709 923 8 282 137 Cost of sales (5 758 871) (5 282 538) Net income from property sales 951 052 2 999 599 Notes to the Financial Results For the year ended 31 December 2015 Fees and commission income 4 931 845 5 177 008 Fees and commission expense (63 014) ( 76 613) Audited Audited Net fees and commission income 4 868 831 5 100 395 31 Dec 2015 31 Dec 2014 US$ US$ Other income 11 175 108 177 759 1. CASH AND CASH EQUIVALENTS Total net income 12 878 084 14 075 371 Cash on hand 956 590 1 062 594 Impairment on loans and advances 2.2 (636 560) (848 059) Cash at bank 824 615 768 931 Operating expenses 12 (5 934 409) (6 460 312) Interbank short term investments 53 742 762 48 388 197 55 523 967 50 219 722 Total operating expenses (6 570 969) (7 308 371) 2. LOANS AND ADVANCES TO CUSTOMERS Surplus for the year 6 307 115 6 767 000 Short term loan advances 24 831 765 18 370 800 Other comprehensive income Mortgage loan advances 35 540 105 33 533 681 Gross loans and advances to customers 60 371 870 51 904 481 Gain on property revaluation 5 - 69 792 Allowance for impairment (2 375 760) (1 748 261) Net loans and advances to customers 57 996 110 50 156 220 Total comprehensive income for the year 6 307 115 6 836 792 2.1 Maturity analysis of loans and advances Up to 1 month 1 701 642 1 420 550 1 month to 3 months 3 403 283 2 783 604 3 months to 1 year 11 624 697 10 256 050 1 year to 5 years 23 580 836 25 140 253 Over 5 years 17 685 652 10 555 763 Statement of Changes in Equity 57 996 110 50 156 220 For the year ended 31 December 2015 2.2 Impairment on loans and advances Share Share Revaluation Retained Total Balance at beginning of the year 1 748 261 1 170 065 capital premium reserve earnings Impairment charge for the year 636 560 848 059 US$ US$ US$ US$ US$ Interest in suspense 153 191 31 141 Amounts written off during the year (162 252) (301 004) Opening balance at 1 January 2014 156 175 11 110 424 24 123 12 415 506 23 706 228 2 375 760 1 748 261
Surplus for the year - - - 6 767 000 6 767 000 2.3 Exposure to credit risk Carrying amount 57 996 110 50 156 220 Other comprehensive income Revaluation of property - - 69 792 - 69 792 Past due and impaired Grade 8: Impaired 501 087 2 158 121 Total comprehensive income - - 69 792 6 767 000 6 836 792 Grade 9: Impaired 482 975 1 876 923 Grade 10: Impaired 4 117 362 1 164 352 Transactions with owners recorded Gross carrying amount 5 101 424 5 199 396 directly in equity Allowance for impairment (1 215 796) (839 390) Dividend paid - - - (790 211) (790 211) Carrying amount 3 885 628 4 360 006 Shareholders equity as at 31 December 2014 156 175 11 110 424 93 915 18 392 295 29 752 809 Neither past due nor impaired Grade 4-7: watch list 9 548 830 7 673 306 Opening balance at 1 January 2015 156 175 11 110 424 93 915 18 392 295 29 752 809 Grade 1-3: low fair risk 45 721 616 39 031 779 Gross carrying amount 55 270 446 46 705 085 Surplus for the year - - - 6 307 115 6 307 115 Allowance for impairment (1 159 964) (908 871) Carrying amount 54 110 482 45 796 214 Other comprehensive income - - - - - Total carrying amount 57 996 110 50 156 220 Total comprehensive income - - - 6 307 115 6 307 115 3. INVENTORY Transactions with owners recorded directly in equity Raw materials 274 442 90 285 Work in progress 4 039 788 2 569 611 Dividend paid - - - (1 029 940) (1 029 940) Completed units 1 798 424 1 565 917 Shareholders equity as at 6 112 654 4 225 813 31 December 2015 156 175 11 110 424 93 915 23 669 470 35 029 984 4. OTHER ASSETS
Prepayments 96 232 79 854 Other 402 831 93 335 499 063 173 189
14 Directors: Benjamin Kumalo (Chairman), Felix Gwandekwande (Managing Director), Oliver Gwaze, Marah Hativagone, Agnes Kanhukamwe*, Hashmon Matemera, Kennard C. Muranda, John Mushayavanhu, Christopher Y Muyeye, Pius Rateiwa*, Webster Rusere (Executive*) AUDITED FINANCIAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2015
Audited Audited Audited Audited 31 Dec 2015 31 Dec 2014 31 Dec 2015 31 Dec 2014 US$ US$ US$ US$ 15. CAPITAL ADEQUACY RATIO
5. PROPERTY AND EQUIPMENT Core Capital Tier 1 Issued and fully paid up ordinary share capital 11 266 599 11 266 599 Cost Retained earnings 23 669 470 18 392 295 Carrying amount at beginning of the year 4 457 131 4 774 019 Capital allocated for market and operational risk (1 685 134) (1 650 312) Gross carrying amount 5 086 629 5 430 925 Advances to insiders - (50 228) Accumulated depreciation and impairment (629 498) (656 906) Total core capital 33 250 935 27 958 354
Additions 156 713 148 906 Supplementary Capital Tier 2 Gain on properties revaluation - 69 792 Revaluation reserves 93 915 93 915 Disposals (7 116) - Total supplementary capital 93 915 93 915 Depreciation for the year (167 101) (188 741) Impairment - (346 845) Tier 3 Carrying amount at end of the year 4 439 627 4 457 131 Capital allocated for market and operational risk 1 685 134 1 650 312
6. INTANGIBLE ASSETS Core capital plus supplementary capital 35 029 984 29 702 581
Opening net carrying amount 145 781 204 017 Total risk weighted assets 86 155 979 73 516 267 Additions 84 353 - Amortisation charge (72 295) (58 236) Tier 1 capital ratio 39% 38% Closing net carrying amount 157 839 145 781 Tier 2 capital ratio 0% 0% Tier 3 capital ratio 2% 2% 7. DEPOSITS AND BORROWINGS Capital adequacy ratio 41% 40% 7.1 Deposits from banks Money market deposits 31 427 450 25 368 660 16. CAPITAL COMMITMENTS 31 427 450 25 368 660 Capital expenditure authorised not yet undertaken 1 102 000 1 420 000 7.2 Deposits from customers Retail savings deposits 6 123 490 6 920 467 Money market deposits 44 034 132 37 492 671 50 157 622 44 413 138 17. RESERVE BANK OF ZIMBABWE ONSITE EXAMINATION
7.3 Borrowings The Building Society has its corporate governance and risk management processes independently audited by the Reserve Offshore borrowings 3 735 164 4 325 682 Bank of Zimbabwe. 3 735 164 4 325 682 FBC Building Society CAMELS* ratings Total deposits and borrowings 85 320 236 74 107 480 CAMELS* component Latest RBS** ratings 30 June 2014 Previous RBS** ratings 30 Sept 2007 7.4 Maturity analysis of deposits and borrowings Capital adequacy 2 2 Up to 1 month 60 787 219 48 098 509 1 month to 3 months 15 885 092 17 062 386 Asset quality 3 2 3 months to 1 year 454 545 808 592 Over 1 year 8 193 380 8 137 993 Management 2 2 85 320 236 74 107 480 Earnings 2 2 8. OTHER LIABILITIES Liquidity 1 2
Trade and other payables 1 722 181 1 586 455 Sensitivity to market risk 2 2 Deferred income 976 613 660 151 Provisions 1 705 246 3 295 961 Overall composite rating 2 2 4 404 040 5 542 567 *CAMELS is an acronym for capital adequacy, asset quality, management, earnings, liquidity, and sensitivity to market risk. 9. INTEREST INCOME CAMELS rating system uses a rating scale of 1-5, where ‘1’ is strong, ‘2’ is satisfactory, ‘3’ is fair, ‘4’ is weak and ‘5’ is critical.
Loans and advances to customers 8 692 191 8 040 220 **RBS stands for Risk-Based Supervision. Interbank money market investments 3 169 587 3 807 006 11 861 778 11 847 226 Summary Risk Assessment System (RAS) ratings RAS component Latest RAS rating 30 June 2014 10. INTEREST EXPENSE Overall inherent risk Moderate Deposits from banks 1 260 185 2 484 592 Deposits from customers – retail savings 126 988 280 871 Overall risk management systems Acceptable Offshore borrowings 473 715 629 120 Deposits from customers – time deposits 3 117 797 2 655 025 Overall composite risk Moderate 4 978 685 6 049 608 Direction of overall composite risk Stable
11. OTHER INCOME Summary risk matrix Rent received 161 945 162 372 Profit on disposal of property and equipment 1 613 300 Type of risk Level of inherent Adequacy of risk Overall composite Direction of Other 11 550 15 087 risk management systems risk overall composite 175 108 177 759 risk
12. OPERATING EXPENSES Credit Moderate Acceptable Moderate Increasing
Administration expenses 1 435 534 1 605 605 Liquidity Moderate Acceptable Moderate Stable Personnel expenses 3 040 819 3 184 423 Interest rate Moderate Acceptable Moderate Stable Audit fees 75 831 86 868 Directors fees and key management remuneration 1 142 829 989 594 Foreign exchange Low Strong Low Stable Depreciation and amortisation 239 396 593 822 5 934 409 6 460 312 Operational Moderate Acceptable Moderate Stable 13. LIQUIDITY RISK Legal and compliance Moderate Acceptable Moderate Stable
Contractual maturity profile of assets and liabilities Reputation Moderate Strong Moderate Stable 31 December 2015 Strategic Moderate Acceptable Moderate Stable
Up to 30 days 31-90 days 91-365 days Over 1 year Total Overall Moderate Acceptable Moderate Stable US$ US$ US$ US$ US$
Liabilities 18. BOARD ATTENDANCE Deposits from banks 30 424 343 1 003 107 - - 31 427 450 Deposits from customers 30 362 876 14 730 470 - 5 064 276 50 157 622 Borrowings - 151 515 454 545 3 129 104 3 735 164 Main Board Other liabilities 1 154 282 1 875 281 536 285 838 192 4 404 040 Total liabilities 61 941 501 17 760 373 990 830 9 031 572 89 724 276 Board member Q1 Q2 Q3 Q4
Assets Benjamin Kumalo √ √ √ √ Cash and cash equivalents 48 482 185 7 041 782 - - 55 523 967 Felix Gwandekwande √ √ √ √ Loans and advances to customers 1 701 642 3 403 283 11 624 697 41 266 488 57 996 110 Oliver Gwaze √ √ X √ Total assets 50 183 827 10 445 065 11 624 697 41 266 488 113 520 077 Marah Hativagone √ √ √ √ Liquidity gap (11 757 674) (7 315 308) 10 633 867 32 234 916 23 795 801 Agnes Kanhukamwe √ √ √ √ Cumulative liquidity gap (11 757 674) (19 072 982) (8 439 115) 23 795 801 Patrick L. Mapani √ √ X n/a
14. INTEREST RATE RISK Hashmon Matemera n/a n/a n/a √
Interest rate repricing gap Kennard C. Muranda √ √ √ √ 31 December 2015 Up to 30 days 31-90 days 91-180 days 181-365 days Over 365 days Non interest Total John Mushayavanhu √ √ √ √ bearing US$ US$ US$ US$ US$ US$ US$ Christopher Y Muyeye √ √ √ √ Assets Cash and cash equivalents 46 700 980 7 041 782 - - - 1 781 205 55 523 967 Pius Rateiwa √ √ √ √ Loans and advances to customers 35 830 168 2 829 695 3 537 118 6 366 813 9 432 316 - 57 996 110 Inventory - - - - - 6 112 654 6 112 654 Webster Rusere √ √ √ √ Other assets - - - - - 499 063 499 063 Investment property - - - - - 25 000 25 000 Property and equipment - - - - - 4 439 627 4 439 627 Key √ - Attended x - Apologies n/a - not applicable Intangible assets - - - - - 157 839 157 839 Total assets 82 531 148 9 871 477 3 537 118 6 366 813 9 432 316 13 015 388 124 754 260 By order of the Board
Equity and liabilities Deposits from banks 30 424 343 1 003 107 - - - - 31 427 450 Deposits from customers 35 427 152 14 730 470 - - - - 50 157 622 Borrowings 3 735 164 - - - - - 3 735 164 Other liabilities - - - - - 4 404 040 4 404 040 Equity - - - - - 35 029 984 35 029 984 Tichaona K. Mabeza Total equity and liabilities 69 586 659 15 733 577 - - - 39 434 024 124 754 260 GROUP COMPANY SECRETARY 15 March 2016 Interest rate repricing gap 12 944 489 (5 862 100) 3 537 118 6 366 813 9 432 316 (26 418 636) -
Cumulative interest rate repricing gap 12 944 489 7 082 389 10 619 507 16 986 320 26 418 636 -
15 Directors: Benjamin Kumalo (Chairman), Felix Gwandekwande (Managing Director), Oliver Gwaze, Marah Hativagone, Agnes Kanhukamwe*, Hashmon Matemera, Kennard C. Muranda, John Mushayavanhu, Christopher Y Muyeye, Pius Rateiwa*, Webster Rusere (Executive*)