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FBC Holdings Limited Strength • Diversity • Service FBC Holdings Limited Strength • Diversity • Service ANNUAL REPORT FBC Holdings Limited strength • diversity • service FBC Holdings Limited strength • diversity • service Contents Group Structure 1 Destiny, Cause & Calling 2 General Information 3 Financial Review Summary 5 Chairman's Statement 6 Group Chief Executive's Report 9 Directors' Report 11 Board of Directors 14 Corporate Governance 16 Auditors' Report 28 Financial Statements 29 Shareholders’ Information 74 Notice of AGM 76 Proxy Form 77 ANNUAL REPORT 2006 FBC Holdings Limited strength • diversity • service Group Structure FBC Holdings Limited strength • diversity • service FBC Bank Limited - (100%) (Registered Commercial Bank) The FBC Group is a financial FBC Reinsurance Limited - (100%) powerhouse whose most valuable product is service. We provide you with strong counsel, diversity and innovative thinking. We listen to you, understand your challenges and share in your success. FBC Building Society - (60%) (Registered Building Society) FBC Securities (Private) Limited - (100%) 1 ANNUAL REPORT 2006 FBC Holdings Limited strength • diversity • service Destiny, Cause & Calling Destiny To be Africa’s trendsetters in financial and risk management. Cause To secure individual and corporate wealth. Calling To create value through a passionate commitment to partnerships. ANNUAL REPORT 2006 2 FBC Holdings Limited strength • diversity • service General Information REGISTERED OFFICE AUDITORS Old Reserve Bank Building KPMG Chartered Accountants, Zimbabwe 76 Samora Machel Avenue Old Mutual Gardens P O Box 1227, Harare Emerald Hill Zimbabwe P O Box 6, Harare Telephone :263 -04 - 700312/797770 Zimbabwe :263 -04 - 708071/2 Telephone :263 -04 - 302600 Telex :24512 FIRSTB ZW Swift :FBCPZWHA Fax :263 - 04 - 700761 ATTORNEYS E-mail :[email protected] Dube Manikai & Hwacha Legal Practitioners Web site :http://www.fbc.co.zw Eastgate Building 6th Floor, Goldbridge, Southwing Cnr S. Nujoma/Robert Mugabe Road P O Box CR 36, Cranborne, Harare TRANSFER SECRETARIES Telephone :263 - 04 - 780351/2 First Transfer Secretaries (Private) Limited 4th Floor, Gold Bridge Costa & Madzonga Legal Practioners Eastgate 4th Floor P O Box 11 Three Anchor House Harare Jason Moyo Telephone :263-04-773744/47 773750/1 Harare Fax :263-04-749048 Telephone : 263-04- 77145/5 Fax : 263-04-737575 FBC Bank Branches Batanai Gardens Branch Belgravia Private Banking Cnr Jason Moyo/1st Street, Mezannine Floor, No. 2 Lanark road, Belgravia, Harare Harare, P O Box BE 818, Belvedere, Harare P O Box A852, Avondale, Harare Telephone :263-04-752929 Telephone :263-04-251975 :263-04-775390 :263-04-251976 Fax :263-04-775395 Fax :263-04-253556 Chinhoyi Branch Gweru Branch Stand 5309 71 - Sixth Street Magamba Way, P O Box 1220 P O Box 1833, Gweru Chinhoyi Telephone :263-054-26491 Telephone :263-067-24086 :263-054-26493/7 Fax :263-067-26162 Fax :263-054-26498 3 ANNUAL REPORT 2006 FBC Holdings Limited strength • diversity • service General Information (cont’d) Jason Moyo Avenue Branch Kwekwe Branch Asbestos House 44a/b Robert Mugabe Way Jason Moyo Avenue Kwekwe P O Box 2910, Bulawayo P O Box 1963, Kwekwe Telephone :263-09-76079 Telephone :263-055-24116 :263-09-76371 :263-055-24160 Fax :263-09-67536 Fax :263-055-24208 Masvingo Branch Mutare Branch 58/59 Hellet Street 50 B Herbert Chitepo Masvingo P O Box 2797 Telephone :263-039-64415/6 Mutare Fax :263-039-64415/6 Telephone :263-020-62586 :263-020-62114 Nelson Mandela Avenue Branch Fax :263-020-60543 Nelson Mandela Avenue P O Box BE 818, Belvedere Samora Machel Avenue Branch Telephone :263-04-750946 Old Reserve Bank Building :263-04-753608 76 Samora Machel Avenue Fax :263-04-775395 P O Box GD 450, Greendale, Harare Telephone :263-04-700372 Southerton Branch :263-04-700044 Highfield Junction Shop Fax :263-04-793799 P.O. Box St495 Southerton Victoria Falls Branch Harare Shop 4 Galleria De Falls Telephone :263-04-759712 P.O Box 225 :263-04-759392 Victoria Falls Fax :263-04-759567 Telephone :263-013-45996/5 Fax :263-013-5995/6 Zvishavane Branch Robert Mugabe Way FBC Reinsurance P O Box 91, Zvishavane Head Office Telephone :263-051-2176 P O Box 4282, Harare :263-051-2177 6th Floor Fidelity Life Tower Fax :263-051-3327 Raleigh Street, Harare Telephone :263-04-772703/7 FBC Building Society Head Office Fax :263-04772701 P O Box 4041, Harare 113 Leopold Takawira Way, Harare FBC Reinsurance Telephone :263-04-756811/6 Bulawayo Office Fax :263-04-772743 5th Floor West Wing, Pioneer House 14 branches: Harare: Highglen Shopping Centre; Corner Fife/8th Avenue Fidelity House; Leopold Takawira; Bulawayo; P O Box 2199 ZBS House; 109 Robert Mugabe Way; Bulawayo Beitbridge; Chipinge; Gweru; Kadoma; Kwekwe; Marondera; Masvingo; Mutare; Rusape; Zvishavane Telephone :263-09-888344 Fax :263-09-888560 FBC Securities (Private) Limited 2nd Floor, 99 Jason Moyo Ave. P.O.Box 1227 Harare Telephone : 263 -04 -797782 – 3 Fax : 263 -04 -704 758 ANNUAL REPORT 2006 4 FBC Holdings Limited strength • diversity • service Financial Review Summary 31 December 2006 Historical 2006 2005 2004 $'M $'M $'M Income Profit before taxation 28 028 868 152 Profit after taxation 20 522 562 95 Balance Sheet Shareholders' funds 31 550 778 118 Total assets 92 066 3 218 529 Share Statistics Shares in issue - actual (m) 348 341 340 Shares in issue - weighted (m) 342 337 324 Basic earnings per share - (Z$) 52,16 1,54 0,29 Headline earnings per share - (Z$) 52,46 1,54 0,29 Diluted earnings per share - (Z$) 49,41 1,45 0,27 Dividend per share - Ordinary (Z$) 15,60 0,055 0,015 Share market price - Z$ (31/12/06) 95 2,2 0,026 Ratios Return on shareholders' funds 65% 72% 80% Cost income ratio 28% 38% 51% Capital adequacy ratio (Bank) 39% 39% 35% 5 ANNUAL REPORT 2006 FBC Holdings Limited strength • diversity • service Chairman's Statement As widely predicted in the previous year, the economic environment remained extremely challenging, with the Group businesses having to focus on opportunities arising from limited business sources. It is against this background that I am pleased to report that the FBC Group has once again, made significant strides in the year 2006 to consolidate its place in the market. The Group has been particularly adept at making the most out of a fluid trading environment, resulting in all the subsidiaries recording profits and growth well above the rate of inflation. The sustained growth in the performance of the Group over the last few years has put it in a strong position to take advantage of future opportunities as and when a conducive trading environment returns. The real growth is highlighted below bearing in mind the average inflation for the year of 1 033%. Financial Highlights - Historical • Profit before tax up 3 129% to $28 billion from $868 million in 2005. • Profit after tax rose 3 552% to $21 billion from $562million in 2005. • Basic earnings per share attributed to equity holders of the company up 3 287% at $52,16 from $1,54 last year. • Capital adequacy ratios - 39% and 93% at the Bank and Building Society respectively against a prescribed minimum of 10%. • Group cost income ratio improved to 28% from 38% in 2005. • Assets increased by 2 761% to $92 billion from $3 billion last year. • Shareholders’ funds excluding minority interest increased by 3 744% to $27,4 billion. • Proposed dividend of $15,60 per share up from $0,055. We are fully aware and cognisant that the performance and contribution from traditional financial services, loans and overdrafts, mortgages, foreign exchange business, and insurance underwriting continued to be constrained by a very difficult macro-economic environment. The Group will naturally continue to take advantage of available opportunities to ensure sustained growth of income whilst at the same time developing and sustaining the infrastructure for traditional financial services in preparation for the return of a stable economic environment. Rebranding The successful consolidation, repositioning and rebranding of the Group was confirmed by numerous independent surveys and accolades from the media, including the awarding of the 'Best Turnaround Trophy' for Zimbabwe Stock Exchange listed companies (co-sponsored by the Premier Group and the Financial Gazette). The Group is well positioned to continue consolidating and enhancing its brand. The flagship subsidiary - FBC Bank celebrates its tenth anniversary in 2007, to join FBC Reinsurance and FBC Building Society which have been in existence for more than a decade. The Group will continue focusing on client service to augment the brand consolidation. ANNUAL REPORT 2006 6 FBC Holdings Limited strength • diversity • service Chairman's Statement (cont’d) Hyperinflation The removal of three digits on the currency and the introduction of higher denominated bearer cheques in August 2006 improved transacting convenience in the economy. However, the rate of inflation which had initially slowed down in the month of September in response to the monetary authorities initiatives, picked up again in October peaking at 1 281,1% in December 2006. We are encouraged by the monetary authorities' resolve to address the fundamental causes of the current economic malaise. The high rate of inflation has hampered business capacity to plan in advance, to borrow at commercial rates to finance growth and increase productivity. Credit Rating The Bank, Building Society and Reinsurance companies have maintained the investor grade status accorded by an international rating agency. This has boosted our relations with customers, stakeholders and correspondent financial institutions. It is our view, that our credit rating should continue to improve in the future. Regulatory Environment The highly volatile economic environment has translated into a policy regime that is not as predictable as it should be, thereby resulting in severe planning difficulties. The Group companies will continue to ensure compliance with regulatory requirements. In this connection the Bank and the Building Society have always comfortably exceeded the minimal capital requirements set by the authorities over the years.
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