Table of Contents Section ................................................................................................................................................Page No Group Salient Features ..................................................................................................................................2 Chairman’s Statement ...................................................................................................................................4 W Group Chief Executive Officer’s Statement ...................................................................................................7 IE V Business Overview .......................................................................................................................................12 ER V Group Structure ...........................................................................................................................................12 O Stakeholder Overview ..................................................................................................................................13 Our Geographical Footprint .........................................................................................................................15 GROUP Our Success .................................................................................................................................................16 Share Buy Back ............................................................................................................................................18 Analysis of Shareholders .............................................................................................................................19 Shareholders’ Calendar ...............................................................................................................................20 Managing Director’s report-CBZ Bank Limited ..........................................................................................22 Managing Director’s report-CBZ Asset Management (Private) Limited ....................................................25 Managing Director’s report-CBZ Insurance Operations .............................................................................27 SUBSIDIARIES CBZ Life Actuary’s Report ...........................................................................................................................29 Corporate Social Responsibility Report ......................................................................................................34 CSR Our Approach to Corporate Governance .....................................................................................................44 Board of Directors .......................................................................................................................................45 ERNANCE Report of the Directors ................................................................................................................................50 V Our Directorate: Profiles............................................... ..............................................................................52 CORPORATE GO Statement of Directors’ Responsibilities ....................................................................................................58 Report of the Independent Auditors ............................................................................................................59 Consolidated Statement of Comprehensive Income ...................................................................................60 Consolidated Statement of Financial Position ............................................................................................61 Consolidated Statement of Changes in Equity ............................................................................................62 Consolidated Statement of Cash Flows ......................................................................................................63 Group Accounting Policies ...........................................................................................................................64 FINANCIAL Notes to the Consolidated Financial Statements ........................................................................................74 STATEMENTS Company Financial Statements .................................................................................................................107 Notice to Members ....................................................................................................................................115 Group Details .............................................................................................................................................116 OTHER Form of Proxy .............................................................................................................................................117 CBZ Holdings Limited Annual Report 2013 1 GROUP SALIENT FEATURES Group Salient Financial Features 2013 2012 US$ US$ Total assets 1 558.7m 1 223.1m Gross advances 1 064.0m 890.1m Impairment charge on advances 35.9m 35.5m Total deposits 1 332.6m 1 032.4m Profit after taxation 36.7m 45.0m Capital adequacy (%) – CBZ Bank 13.9 12.9 Funds under management –CBZ Asset Management 140.2m 111.1m Total insurance assets – CBZ Insurance 4.0m 4.7m Basic earnings per share (cents) 6.3 7.4 Return on assets (%) 3.0 4.5 Return on equity (%) 20.0 28.1 Non-interest income as a % of total income 36.7 33.9 Advances/Deposits ratio (including offshore) (%) 77.2 82.8 Cost to income ratio (%) 59.0 57.8 Permanent staff compliment 1 380 1 370 Net interest income levels maintained despite MOU effects Significant Non funded growth in net income growth written premium enhanced (13% in 2013 in life business compared to 2% in 2012) Key Good volumes (91.0%) of transactions perfomance recorded drivers Efficiency in claims Operation management. Loss expenditure growth ratio improved to 34.0% restricted to single from 45.2% in short digit growth (6.6% term insurance in 2013 2 CBZ Holdings Limited Annual Report 2013 Group Communication Statements CBZ Holdings Limited Annual Report 2013 33 Group Communications Statement Chairman’s Statement Richard Victor Wilde t is with great pleasure that I present to you the audited financial results for CBZ Holdings Limited for the year ended 31 December I2013, marking a continuous five years post dollarisation of profitable operations by the Group. A well-functioning financial The past two years have been characterised by subdued economic services system has performance which called for expanded prudential banking practices. The level of non-performing loans increased in the sector always played a key role with the market ratio deteriorating from 13.47% as at 31 December in driving and supporting 2012 to 15.92% as at 31 December 2013. The resultant write offs and provisions have taken a toll on the Banking industry’s profitability. growth by providing capital, facilitating trade and Despite the challenges, the Group has made notable inroads in the banking, insurance and asset management frontiers and again the financing infrastructure and Group has delivered significant value to all stakeholders along the innovation. value chain. Operating Environment The economy’s performance continued to be a major concern to investors and market watchers alike, with the GDP growth rate for the year estimated at only 3.4%. Fiscal revenue collections for the year were down 6% due to a declining working populace, while other exogenous aspects of the economy were not helping either as most mineral prices were depressed by as much as 13% of 2012 levels. The bulk of the country’s trade deficit was funded by international remittances of $1.8 billion and tobacco revenues. Tobacco sales contributed $577.3 million after 156.2 million kilograms of the golden leaf went under the hammer during the selling season. The South African Rand was on the back foot for the greater part of 2013, and provided arbitrage opportunities on the US dollar for importers due to the seemingly stable commodity prices prevailing in that economy. 4 CBZ Holdings Limited Annual Report 2013 Group Communications Statement Chairman’s Statement (continued) The year on year inflation figure opened the year at 2.91% and Overview of the Group’s performance averaged 1.64% during the year before closing at 0.33%. The low Below are the key highlights of the Group’s performance for the inflation levels depicted by the subdued economy are testimony stated period: of a soft aggregate demand regime resulting from declining consumer income levels. Audited Audited Year Ended Year Ended 31-Dec-13 31-Dec-12 US$m US$m Profit before taxation 42.2 55.6 Profit after taxation 36.7 45.0 Total comprehensive income 39.9 50.1 Total assets 1 558.7 1 223.1 Total equity and reserves 205.8 160.7 Total deposits 1 332.6 1 032.4 Total advances 1 028.1 854.7 Other statistics Financial Market Basic earnings per share(cents) 6.3 7.4 Non-interest income to total income % 36.7 33.9 A well-functioning financial services system has always played Cost to income ratio % 59.0 57.8 a key role in driving and supporting growth by providing capital, Annualised return on assets % 3.0 4.9 facilitating trade and financing infrastructure and innovation. Annualised return on equity % 20.0 32.2 Financial institutions must therefore play a pivotal role in providing innovative solutions to the general social, economic