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Zanaco. Big.Strong. Reliable.           2012 Annual Report
Vision. Mission. Values. History.VisionTo be Zambia’s leading, preferred, admired, and      Netherlands. Subsequently, RFI...
ANNUAL REPORT AND FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 DECEMBER 2012Contents02          Financial Highlights      ...
ANNUAL REPORT AND FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 DECEMBER 2012Financial Highlights2                      We ...
ANNUAL REPORT AND FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 DECEMBER 2012  Board Of Directors                          ...
ANNUAL REPORT AND FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 DECEMBER 2012Promoting sustainable Board Of Directorsdevelo...
ANNUAL REPORT AND FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 DECEMBER 2012Executive Management TeamFrom left to rightTop...
ANNUAL REPORT AND FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 DECEMBER 2012Chairman’s Report                    It is wit...
ANNUAL REPORT AND FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 DECEMBER 2012does this sport play an important role for rec...
ANNUAL REPORT AND FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 DECEMBER 2012Managing Director’s Report                    ...
ANNUAL REPORT AND FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 DECEMBER 2012In 2012, we invested heavily in reviewing and ...
ANNUAL REPORT AND FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 DECEMBER 2012Directors’ ReportThe Directors submit their re...
ANNUAL REPORT AND FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 DECEMBER 2012RESEARCH AND DEVELOPMENTThe Bank did not incur...
ANNUAL REPORT AND FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 DECEMBER 2012Statement of Corporate GovernanceIntroduction ...
ANNUAL REPORT AND FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 DECEMBER 2012• Appointment of Directors is subjected to the...
ANNUAL REPORT AND FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 DECEMBER 2012Statement of Corporate GovernanceThe Board met...
ANNUAL REPORT AND FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 DECEMBER 2012Board CommitteesIn order to enable it to disch...
ANNUAL REPORT AND FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 DECEMBER 2012Statement of Corporate GovernanceThe attendanc...
ANNUAL REPORT AND FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 DECEMBER 2012Code of ConductThe purpose of the Code of Cond...
ANNUAL REPORT AND FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 DECEMBER 2012Statement of Corporate GovernanceInternal audi...
ANNUAL REPORT AND FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 DECEMBER 2012Stakeholder CommunicationThe Bank continued to...
ANNUAL REPORT AND FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 DECEMBER 2012Statement of Corporate GovernanceFinancial Fit...
ANNUAL REPORT AND FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 DECEMBER 2012Directors’ ResponsibilitySTATEMENT OF RESPONSI...
Deloitte.                                                                                                                 ...
Zanaco 2012 annual report
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Zanaco 2012 annual report
Zanaco 2012 annual report
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Zanaco 2012 annual report

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Zambia National Commercial Bank PLC annual report for the year ended 31 December 2012

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  1. 1. Zanaco. Big.Strong. Reliable. 2012 Annual Report
  2. 2. Vision. Mission. Values. History.VisionTo be Zambia’s leading, preferred, admired, and Netherlands. Subsequently, RFID sold a 3.41% stake to Lizarainnovative bank that should provide to each of our Investments Limited (a nominee of the Zambia Nationalchosen customer segments a fair deal as we also Farmers Union, ZNFU followed by the Bank’s Initial Public Of-strive to Bank the Unbanked. fering in 2008 and Employee Share Ownership Programme (ESOP).Mission  To be the number one bank in each of our chosen The Bank remains majority-owned by Zambians and thus issegments with a special focus on Government, considered “citizen owned”.Food and Agriculture and Retail Banking through  appropriate technology and distribution channels The relationship with Rabobank enables Zanaco to benefitand with empowered and motivated staff. from technical assistance and best practices in various areasValues of banking.• Excellence  • Teamwork Our Customers• Integrity Our customers are fully representative of Zambia as a whole;• Respect from Government to the private sector, from multinationals• Pride to SMEs, from industrial and agriculture, and from civil servants to the private sector. Reaching out to the Un-Strategy 2011 - 15 banked, Zanaco can truly be considered the People’s Bank.1. Banking the Unbanked, by doubling the number As a citizen owned bank, we take pride in serving Zambiansof Retail and Corporate Customers by 2015; of all walks of life, with fair pricing for our services.  2. Growing the agricultural client base of Zanaco Our Peopleeven further, and targeting to become the premier Most of our 1,019 staff members are also shareholders inagriculture financier in Zambia; Zanaco and, together with their families, have a direct interest and stake in the long-term success of the Bank.3. Developing the Small and Medium-sized They are empowered, motivated and committed to makeEnterprise market , ensuring that entrepreneurs a difference.have the correct training and access to financial  services; and Ownership Structure Post-Initial Public Offering4. Naturing and further developing the The current ownership structure of Zanaco is as follows:relationship with the Government of the Republicof Zambia (GRZ). GRZ remains a significant DETAILS % shareholder, but also a very important client toZanaco, and we will continue to provide Rabo Financial Institutions Development B.V (RFID) 45.59value - added services to all GRZ stakeholders. Public                                                                                          26.00HistoryZambia National Commercial Bank Plc (“Zanaco”)was established in 1969 to service the financial Government of the Republic of Zambia (GRZ)              25.00needs of the Zambian economy and it has sinceevolved into a leading bank nationwide. Lizara Investments Limited (a nominee of ZNFU)  3.41 In 2007, GRZ sold a 49% stake in the Bank to Total 100.00Rabo Financial Institutions Development  B.V(RFID), a subsidiary of the Cooperatieve CentraleRaiffeisen-Boerenleenbank (Rabobank) of the
  3. 3. ANNUAL REPORT AND FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 DECEMBER 2012Contents02 Financial Highlights 10 Directors’ Report The Directors submit their report, together with the audited financial statements for the year ended 31 December 2012, which disclose the results for the year and the state of affairs for the Bank as at that date. 12 Statement of Corporate Governance03 Board of Directors As Zambia National Commercial Bank Plc, we remain committed to the highest standards of corporate governance.  This is central to the continued strong performance of the business in a manner which is sustainable in the long term, and to maintaining the confidence of investors. For us, good governance is about managing the business effectively and responsibly in a way which is transparent and shows accountability.06 Chairman’s Report 21 Directors’ Responsibility Section 164(6) of the Companies Act, 1994 (as It is with great pleasure that I present this over- amended) requires the Directors to prepare financial statements for each financial year which give a true view on the performance of Zambia’s leading and fair view of the state of affairs of the Bank and of bank – the Zambia National Commercial Bank the profit or loss for that period. Plc., or ZANACO. The Annual Report for the year 2012 demonstrates that we continued to solidify our status as a leading player in the Zambian 22 Auditor’s Report Deloitte. To the members of Zambia National Commercial Bank economy as evidenced by the stable financial Plc. We have audited the accompanying financial results of the Bank and our continued growth. statements of Zambia National Commercial Bank Plc, which comprise the statement of financial position as at 31 December 2012, the statement of profit or08 Managing Director’s Report I am delighted to report on the Bank’s year of suc- loss and other comprehensive income, the statement of changes in equity, the statement of cash flows for the year then ended, and a summary of significant cess. The year 2012 was our 43rd year in existence and can be described as a very encouraging year accounting policies and other explanatory information. for the Bank, staff, customers, investors and Zambia 23 as a whole. Financial Statements 2012 Annual Report We have a responsible role to play in sustaining the environment: this paper is environmentally friendly. 1
  4. 4. ANNUAL REPORT AND FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 DECEMBER 2012Financial Highlights2 We have a responsible role to play in sustaining the environment: this paper is environmentally friendly. 2012 Annual Report
  5. 5. ANNUAL REPORT AND FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 DECEMBER 2012 Board Of Directors From left to right Top • Bruce Dick - Chairman • Chintu Y. Mulendema - Vice Chairman Middle • Gertrude M. Akapelwa-Ehueni (Mrs) - Chairperson Human Resources & Compensation Committee • Guy H. Robinson - Non-Executive Director • Frederikus Weenig- Chairman Loans Review Committee Bottom • Martyn H. Schouten - Managing Director2012 Annual Report We have a responsible role to play in sustaining the environment: this paper is environmentally friendly. 3
  6. 6. ANNUAL REPORT AND FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 DECEMBER 2012Promoting sustainable Board Of DirectorsdevelopmentZanaco’s CSRseeks to promotesustainabledevelopment ofthe communities inwhich the Bankoperates, not justfor the present,but for futuregenerations.24 We have a responsible role to play in sustaining the environment: this paper is environmentally friendly. This paper is environmentally friendly. 2012 Annual Report 2012 nnual
  7. 7. ANNUAL REPORT AND FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 DECEMBER 2012Executive Management TeamFrom left to rightTop• Hamish Chipungu - Director Internal Audit• Martyn H. Schouten - Managing Director• Edward Mutale - Director FinanceMiddle• Ngenda Nyambe - Director Treasury & Investments• Chimango Chikwanda - Director Human Resources• Ignatius Mwanza - Director Corporate Banking• Sonny Katowa - Director Corporate SupportBottom• Arjan Poels - Director Retail Banking• Suzyo Ngandu - Bank Secretary• Tom Borghols - Director Risk Management 2012 Annual Report We have a responsible role to play in sustaining the environment: this paper is environmentally friendly. 5
  8. 8. ANNUAL REPORT AND FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 DECEMBER 2012Chairman’s Report It is with great pleasure that I present this overview on the Product at 7.3% compared with 6.8% in 2011. This was largely performance of Zambia’s leading bank – the Zambia National driven by agriculture, construction, manufacturing, transport, Commercial Bank Plc., or ZANACO. The Annual Report for the year mining, storage and communications. Zambia’s economic pros- 2012 demonstrates that we continued to solidify our status as pects are underpinned by an expected robust domestic perfor- a leading player in the Zambian economy, as evidenced by the mance driven by the agriculture, mining, construction and tourism stable financial results of the Bank and our continued growth. With sectors. 63 branches, 121 Zanaco Xpress outlets and 9 agencies nation- wide, ZANACO progressively delivers on its vision to be Zambia’s Corporate Social Responsibility bank of choice. As part of our continued strategy to “Bank the Unbanked”, ZANACO once again reached more than 10,500 people directly through Performance financial education activities aimed at children, SMEs, farmers, The 2012 financial year saw the Bank increasing its Profit After Tax youth and members of staff. During 2012, the Bank also extended from ZMK 120,513 million to ZMK 156,088 million. The customer its programme to include health issues, with a focus on the growth rate rose to 32 % during this time, a significant provision of clean drinking water, environmental support and improvement on the 22 % achieved the year before. ZANACO occasional donations to meet various community needs. Five now has more than 617,000 customers countrywide, ranging from communities were serviced, with over 2,190 community members private individuals to small-scale farmers, to SMEs, local and benefiting from the projects. These included Da Gama School for international Corporate customers, multilateral organizations and the disabled, Twamutambula orphanage and Mweembe Health to the Government of the Republic of Zambia. Through out all this, Post, amongst others. ZANACO is proud to have remained “the People’s Bank” since its founding in 1969. Another CSR initiative adopted during the year was the Young Women’s Christian Association (YWCA) where the Bank made a The advances portfolio has once again seen positive growth and donation towards an improved service provision. The Manage- has increased to ZMK 2.6 billion - a 40% improvement on the ment and staff at ZANACO strongly believe that all women deserve previous year. This reaffirms ZANACO as being one of the country’s to live in a gender-based violence-free society. However, when leading lenders. The review and reduction of operational costs such unfortunate incidents do occur, women have the right to were effected as per our plans established last year. Costs continue appropriate safety, counselling and material support. We were to be under control and in line with business growth, while they honoured to support the YWCA as they provide these critical are scheduled to reduce gradually in the coming years. services, and we continue to look forward to a society free of gender-based violence. Economic Prospects The Zambian economy continued on a sustained growth path in Our CSR strategy also acknowledges that, as the reigning 2012. Preliminary figures place the real growth in Gross Domestic champions of Africa, Zambia is a proud football nation. Not only6 We have a responsible role to play in sustaining the environment: this paper is environmentally friendly. 2012 Annual Report
  9. 9. ANNUAL REPORT AND FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 DECEMBER 2012does this sport play an important role for recreation, it also successes firmly under our belt, our commitment to targeting the In closing, I would like to once again commend theencourages good mental and physical health while promot- two-thirds of Zambia’s population that remains ‘Unbanked’ has truly Management and Staff of the Bank for their dedication to buildinging team work and more inclusive social behaviour. At been reignited, while our widespread and growing national network on the successes of the previous years while continuing to workZANACO, we are playing our part to offer the children of ensures that we remain the bank that is best positioned to do so. towards strengthening the areas that need attention. ZANACOZambia, particularly in underprivileged communities, the op- remains committed to its long-term vision of transforming into aportunity to benefit from the sport and have since donated Board of Directors more customer and service-centric organisation and we look for-400 soccer balls though Play Soccer Zambia to kick-start In an unprecedented move, the Board engaged an external consul- ward to working towards that goal as we embark on yet anotheran active young society. We firmly believe that all children tant to undertake a Board Self-evaluation Effectiveness Review. This new year.should be given equal opportunities in order to succeed in clearly demonstrated the Board’s willingness to be introspective inlife and that through CSR and other support, they can grow its approach to assessing its own performance. The Board engagedinto thriving and productive citizens. in both formal and informal interactions during the course of the Bruce Dick year which helped to foster good relationships and create unity of ChairmanAchievements purpose.We are extremely proud to once again be the recipients ofthe Best Bank in Zambia Award, an accolade bestowed on us Future Prospectsby Euromoney for the 2nd year time in a row for consistently We are more positive than ever about the future prospects of thereported increases in profitability and lending since Bank. Our resolve to be a positive force in the growth of the ZambianZANACO’s privatisation in 2007. This was a great honour for economy remains unchanged and our positive reputation amongstus and a validation of our mission to be Zambia’s number our partners and customers bodes well for the coming months asone bank. In this same light, receiving the Best Corporate we continue to work towards increasing our distribution networkGovernance Award from the Lusaka Stock Exchange, also for and customer base.the 2nd time in a row, was an additional feather in our capand a welcome token of recognition for the hard work and As we aim to reach our 1,000,000 customer target by 2015, wededication that goes into ensuring that we remain the stead- will continue to expand our distribution channels and offer cost-fast and reliable banking partner that we are. We are very effective financial services to the ‘Unbanked’. We will also continueproud and committed to ensuring that there is full disclosure investing in innovative technological solutions to further harnessand that market-leading governance procedures are always opportunities in the field of mobile telephone banking, while at thein place. same time building on the successes of our existing strategic partnerships. Our unique position in being able to offer financialAnother positive result is that ZANACO’s growth has also led services to all existing districts remains a critical factor in our futureto a soaring market capitalisation: the Bank’s market capital growth and prosperity and we will look to strengthening this featuregrew by more than 65% in 2011, truly cementing our leading of our operations as we continue to move forward.standing in the Zambian banking industry. With all of these 2012 Annual Report We have a responsible role to play in sustaining the environment: this paper is environmentally friendly. 7
  10. 10. ANNUAL REPORT AND FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 DECEMBER 2012Managing Director’s Report I am delighted to report on the Bank’s year of success. The year 2012 winning the FAZ/MTN Super Division Premier League Cup, thereby was our 43rd year in existence and can be described as a very qualifying for the Confederation For African Football (CAF) encouraging year for the Bank, staff, customers, investors and tournament 2013. Zambia as a whole. Economic Overview Our results of ZMK 238 billion Profit Before Tax shows an attractive ZANACO became the best capitalised Bank in Zambia by being the ZMK 53 billion increase over 2011, continuing the sustained and first bank to meet the new minimum capitalisation requirements of meaningful improvement in financial results over the past 5 years. the Bank of Zambia. Not only did ZANACO meet the new capital requirements for local banks (up from USD 2.5 Million to US$20 Our continued strong financial performance ensured that we Million), it also surpassed the significantly higher new minimum delivered consistently against our goals, reconfirming our capital requirements for foreign banks (US$100 Million), even though commitment to truly being “The People’s Bank” in Zambia. it is majority owned by Zambians. We remained firmly committed to our primary goal to Bank the Unbanked and we delivered this year again on our long-term Other significant economic highlights introduced by the promise. This is our pledge. This is what we mean to Zambia. Government included the: In late 2011, the Government of the Republic of Zambia announced • Introduction of the Bank of Zambia Policy Rate - The Policy Rate was an official Inquiry into the sale of 49% of ZANACO shares plus initially set at 9% but closed the year at 9.25%. Bank lending rates management rights to Rabobank of the Netherlands in 2007. must be benchmarked against the Policy Rate, rather than against individual Bank Base Rates. Overall, bank lending rates have Management and staff cooperated fully during this investigation. continued to drop consistently across the board for all customer The outcome of this inquiry was not available at the time of print. types during the year. • Introduction of Statutory Instrument No. 33 in May 2012, Recognition prohibiting the use of foreign currency in domestic transactions Our commitments to quality were demonstrated by back-to-back in order to reinforce the Kwacha as the country’s legal tender. awards by Euromoney for being the `Best Bank in Zambia 2012’ and The Kwacha appreciated significantly against the US Dollar in by the Lusaka Stock Exchange for `Best Corporate Governance’. the period immediately after this event to reach a year high of ZANACO received both awards in 2012 for its outstanding ZMK 4,840; it closed the year at ZMK 5,235 to the US Dollar. performance in 2011, while it received the same awards in 2011 for an equally excellent performance in 2010. The Bankers Association Performance of Zambia also recognised ZANACO for its `Excellence in Banking During the year, we concentrated on being active in all segments of the Unbanked’ and its ‘Financial Literacy Programme’. We are proud the Zambian economy. We focused on SMEs both in terms of train- of this local and international recognition, and we will continue to ing as well as offering a broad array of fundamental banking services. strive to exceed these high quality standards. We continued to focus on Government as our largest stakeholder. As a citizen-owned Bank we have an obligation to our shareholders The spirit of the country was dominated by football both at the start to sustain our financial results. We remain true to this promise and and the close of the year. We kick-started the year with the are delighted to see an increasing volume of Government business Chipolopolo Boys bringing home the Africa Cup of Nations (AFCON) being committed on a regular basis. 2012 trophy. We closed the year with the ZANACO Football Club8 We have a responsible role to play in sustaining the environment: this paper is environmentally friendly. 2012 Annual Report
  11. 11. ANNUAL REPORT AND FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 DECEMBER 2012In 2012, we invested heavily in reviewing and refining our our operational challenges continue to reduce and although I Corporate Social Responsibilityproducts in line with our customers’ needs. We ran a very believe we have taken the first important steps towards As part of our continued strategy to ‘Bank the Unbanked’ throughpopular campaign to “Invest in Zambia” by reducing our customer service improvement, we recognise that we have many financial fitness education in 2012, the Bank reached more thancompetitive interest rates even further for a limited period of more milestones to meet. 10,500 children, SMEs, farmers, youth and members of staff. Duringtime. This interest rate reduction attracted a large number this time, the Bank also extended its CSR programme to includeof scheme loan applications and contributed to the growth On the back of this, we have invested heavily in our Business health matters, with a focus on the provision of clean drinking water,of advances by 40% compared with 10% in 2011. Alongside Efficiency Programme (BEP) to improve our processes and therefore environmental support and occasional donations to meet variousthis, we continue to make impressive improvements to our our customer service. The specialised BEP team started to critically community needs.Non Performing Loans which are 3% better than the market analyse the key processes in the Bank, including card issuance,average. loan processing and payments processing. These key areas were In addition to this, the Bank started the journey to sensitizing staff identified as imperative to making business easier for our customers on environmental health, with the aim of providing a sustainableDistribution and to closing the gaps on our internal processes, thereby enhanc- green working environment in the near future. As the leading bankZANACO is proud to have more than 617,000 customers and ing security, reducing costs and further improving the customer in Zambia, we understand our responsibility to demonstrate thehas firmly positioned itself as the largest bank network in experience. We expect the main changes to start bearing fruit in the way forward within our communities.Zambia with 63 existing branches. We opened 4 new outlets fourth quarter of 2013.at Acacia Park, Levy Junction and Crossroads in Lusaka and Outlook for 2013Jacaranda Mall in Ndola. Our mobile truck continued operat- We certainly understand that, today, quality service and ease of We are positive about the coming year. Our Business Efficiencying in the Kabwata, Chelstone and Chilenje areas of Lusaka, doing business is what makes all the difference for customers. Progamme will take centre stage in embedding our focus for 2013whilst our Zanaco Xpress operations, supported by our 9 As such, ZANACO acknowledged the constructive feedback and on Service Improvement, Operating Efficiency, Governance, Controlagencies, served customers in a further 130 locations nation- rewarded 10 customers for their contribution towards our service and Customer Growth.wide. This is by far the largest branch footprint in the country. improvement efforts.We will continue to expand our outreach by investing in 2012 was a very fruitful year for ZANACO and, as always, suchmobile telephone functionality, ensuring that customers have Our People achievements cannot be executed without the direction of thea wide range of affordable and practical banking services Our enhanced communication efforts to and from our staff and Board of Directors and the support of Management and Staff. I offerthrough their mobile phones. customers provided more platforms for clear and transparent them all my gratitude and continued support for the coming years communication. This took place through the Intranet, the website and I look forward to working with both the ZANACO team and ourCustomer Service and face-to-face gatherings so as to communicate the short, valued customers in ensuring that 2013 will continue to see theOur growing customer base means that we have to improve medium and long term strategies of the Bank. Bank go from strength to strength.the ways in which we serve our diverse array of customers. Westarted to strategically address queues by deploying Customer ZANACO is increasingly well positioned as an attractive and fairService Representatives in all the branches, whilst at the same employer of choice, which is evident from the results of the Stafftime monitoring all the branches for customer service level Engagement Survey results. The Bank also embarked on its first ever Martyn H. Schoutenimprovements. The Bank also undertook its second Customer Customer Service Awards where efforts made by staff to improve Managing DirectorSatisfaction Survey, a first full mystery shopping exercise as service both internally and externally were recognised. This waswell as to hold focus group sessions to gather feedback from coupled with other team building activities and interactions suchcustomers, to measure and then act on this feedback. The as Long Service Awards, an inter-departmental football league andBank also increased operating hours in selected branch and several events to celebrate our distinguished awards.the Call Centre in response to customer requests. Meanwhile, 2012 Annual Report We have a responsible role to play in sustaining the environment: this paper is environmentally friendly. 9
  12. 12. ANNUAL REPORT AND FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 DECEMBER 2012Directors’ ReportThe Directors submit their report, together with the audited financial statements for the year ended 31 December 2012, which discloses the results for the year and the state of affairs for the Bank as at that date.PRINCIPAL ACTIVITIESThe Bank is engaged in the business of commercial banking and the provision of related services. The Bank has continued with its network expansion programme during the year.SHARE CAPITALThere were changes in the authorised and issued share capital during the year with the former increasing from K15,000 million to K100,000 million and the latter increasing from K11,550 million to K86,625 million by the issue of bonusshares of 13 to 2.RESULTS AND DIVIDENDThe net profit for the year of K156,088 million has been transferred to retained earnings.  The Bank paid dividends during the year amounting to K32,340 million in respect of 2011 profit.The Board has recommended a final dividend of K42,013 million for the year ended 31 December 2012.DIRECTORSThe Directors who held office during the year and to the date of this report were: Mr B Dick - ChairmanMr C Y Mulendema - Vice ChairmanMr M H Schouten - Managing Director Mrs G M Akapelwa Ehueni - Non-Executive DirectorMr G Robinson - Non-Executive DirectorMr F Weenig - Non-Executive Director  NUMBER OF EMPLOYEES AND REMUNERATIONThe total remuneration of employees during the year amounted to K235,725 million  (2011: K 207,550 million) and the average number of employees for each month of the year was as follows: Month Number Month Number January 919 July 992February 945 August 985March 961 September 980April 961 October 980May 989 November 1,007June 986 December 1,019The Bank has policies and procedures to safeguard the occupational health, safety and welfare of its employees.GIFTS AND DONATIONSDuring the year, the Bank made donations of K2,709 million (2011: K1,934 million) to charitable organisations and events.PROPERTY, PLANT AND EQUIPMENTThe Bank purchased property and equipment amounting to K61,527 million (2011: K64,762 million) during the year. In the opinion of the Directors, the recoverable amount of property, plant and equipment isnot less than the carrying value. 10 We have a responsible role to play in sustaining the environment: this paper is environmentally friendly. 2012 Annual Report
  13. 13. ANNUAL REPORT AND FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 DECEMBER 2012RESEARCH AND DEVELOPMENTThe Bank did not incur any research and development costs for the year 2012 (2011: Nil).RELATED PARTY TRANSACTIONSRelated party transactions are disclosed in Note 32 to the financial statements.DIRECTORS’ EMOLUMENTS AND INTERESTSDirectors’ emoluments and interests are disclosed in Note 32 to the financial statements.PROHIBITED BORROWINGS OR LENDINGThere were no prohibited borrowings or lendings as defined under Sections 72 and 73 of the Banking and Financial Services Act, 1994 (as amended).RISK MANAGEMENT AND CONTROLThe Bank, through its normal operations, is exposed to a number of risks, the most significant of which are credit, market, operational and liquidity risks. The Bank’s risk management objectives, policies and strat-egies are disclosed in Note 4 of the financial statements.COMPLIANCE FUNCTIONThe Bank has a compliance function which has the responsibility to monitor compliance with regulatory requirements and the various internal control processes and procedures.SIGNIFICANT EVENTAs reported in the last Directors’ Report contained in the 31 December, 2011, Financial Statements, the Commission of Inquiry appointed by the Republic of Zambia (GRZ) completed its hearings and receiving ofsubmissions on 9th February 2012. In line with the Bank’s highest Standard of Corporate Governance Practice, Management fully cooperated with the Government Commission of inquiry.As at the reporting date, the announcement of the findings and recommendations of the Commission of Inquiry had not been made public.KNOW YOUR CUSTOMER (KYC) AND ANTI-MONEY LAUNDERING (AML) POLICIESThe Bank has adopted Know Your Customer (KYC) and Anti-Money Laundering (AML) policies and complies with current legislation in these areas.AUDITORSThe Bank’s auditors, Messrs Deloitte, indicated their willingness to continue in office. A resolution proposing their reappointment and authorising the Directors to fix their remuneration will be put forward at theAnnual General Meeting.By order of the Board.MRS. S. NG’ANDUSECRETARYDate: 23 February 2013 2012 Annual Report We have a responsible role to play in sustaining the environment: this paper is environmentally friendly. 11
  14. 14. ANNUAL REPORT AND FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 DECEMBER 2012Statement of Corporate GovernanceIntroduction fields of business to ensure that the debate on matters of strategy, experience. Please refer to the Directors’ Report for a list of the policy and performance is robust, informed and constructive.  Directors who held office in the year under review. As Zambia National Commercial Bank Plc, we remain Furthermore, the roles of the Chairman and Managing Director do  committed to the highest standards of corporate gover- not vest in one person. To ensure transparency, the activities of the Board are documentednance.  This is central to the continued strong performance   and planned. Although the Board has ultimate responsibility forof the business in a manner which is sustainable in the long The Board structure is such that no one individual or group domi- the success of the Bank, this is managed on a delegated basis.term, and to maintaining the confidence of investors. For us, nates the decision making process. There is a schedule of matters The Board appoints the Chief Executive Officer and monitors hisgood governance is about managing the business effectively reserved for the entire Board’s approval and a clear delegation of or her performance in leading the Bank and providing operationaland responsibly in a way which is transparent and shows authority to the Managing Director and other senior executives and performance management in delivering the strategy.accountability. within the Bank for specific matters.  A procedure exists for the  determination of matters arising between scheduled meetings. The Chairman, with assistance from the Chief Executive Officer andOn the following pages, we set out our approach to corpo-   Company Secretary, is responsible for ensuring that Directors arerate governance, which includes the policies and structures There are established procedures in existence for planning and supplied with information in a timely manner to enable them tothat we have put in place. This is an effort to ensure that our capital expenditure, making of investments, information, reporting  discharge their duties.reporting on governance matters is clear, concise and well systems and for monitoring the Bank’s business and performance.   structured.   The Chief Executive Officer provides a regular report to the Board Newly appointed Directors are not only scrutinised and subjected that includes information on operational matters, the operatingOur corporate governance procedures are aligned to to a fit and proper test by the Bank of Zambia, but are also sub- environment, strategic development, corporate social respon-international practices and structures to ensure proper jected to a final approval by shareholders at the Annual General sibility, human resources and stakeholder relations. Our Boardchecks and balances. The Bank is fully in compliance with the Meeting. The Company’s Articles of Association provide that, on a composition remained intact, with the experience and expertise ofrequirements of the Banking Act, Companies Act and rotation basis, one third of the Directors resign every year and, if the Board members having been brought to bear.Securities Act and it has adopted the LuSE eligible, they can then offer themselves up for re-election.Corporate Governance Guidelines and the BOZ Guidelines In an unprecedented move, the Board engaged an externalon Corporate Governance. In line with accepted best practice, all Directors are subjected to consultant to undertake a Board evaluation. This clearly demon-  re-election at regular intervals. Board Members are also exposed to strated the Board’s willingness to be introspective in its approachBoard Performance continuous learning through various initiatives. to assessing its own performance. The Board enganged in both   formal and informal interactions during the course of the year,The Board is responsible for the long-term success of the The Chairman and Managing Director, in consultation with the which helped to foster good relationships and create unity ofcompany.  Bank Secretary, agree on the agenda for Board meetings, but all purpose. Board Members are entitled to raise other matters.  The ChairmanThe Board of Directors retains full and effective control of the ensures that all Board Members are properly briefed on all issues Equitable Treatment of Minority ShareholdersBank and monitors the Executive Management team. The arising from the Board meetings. It is the responsibility of theBoard is also responsible for the Bank’s direction, policies and Executive Management to ensure that the Board is supplied with The corporate governance framework of the Bank ensures thatstrategies and all investment and divestment decisions. It information in a timely manner and of quality appropriate enough equitable treatment of shareholders, including minority sharehold-also ensures that the Bank meets its responsibilities towards to enable it to carry out its duties. ers, is achieved by:all its stakeholders and that it is prudently managed against  the major risks inherent in general business dynamics.  The Board, which comprises five Non-Executive Directors and the • Ensuring that the Board adopts a shareholders’ perspective  Managing Director, are confident that they have the knowledge, when making decisions and ensuring minority interests areIn this respect, the Board makes key decisions to ensure talent and experience to lead a listed Bank. The Non-Executive protectedthat it retains proper direction and control of the Bank. The Directors are independent of Management and exercise their • Improving communications and interactions betweenDirectors bring in experience and expertise from their own independent judgement with their in-depth knowledge and minority shareholders, Board Members and Management 12 We have a responsible role to play in sustaining the environment: this paper is environmentally friendly. 2012 Annual Report
  15. 15. ANNUAL REPORT AND FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 DECEMBER 2012• Appointment of Directors is subjected to the final processes to identify, evaluate and manage risk so that Directors able measures of  assurance in respect of the above mentioned approval of all shareholders, including minority have visibility of the major risks. objectives. shareholders, at the Annual General Meeting Internal auditors monitor the operations of the internal controls• Ensuring the minority shareholders are duly accorded The Bank has developed a system of internal controls that encom- and report to Management and the Audit Committee on their with their three basic rights:- passes the policies, processes, tasks and behaviours that seek to findings and recommendations. All critical Information Technology o The right to seek information facilitate the effective and efficient operation of the Bank. (IT) is backed up and the Bank has put in place well documented o The right to voice an opinion business continuity and disaster tolerant procedures for all mission o The right to seek redress The Internal Audit team independently reviews the risk critical operations and systems. identification procedures and control processes implementedManagement Team by Management.  It provides objective assurance of the opera- The procedures are tested periodically and the Board is of the tion and validity of the systems of internal control through a opinion that they meet the acceptable criteria.  Our Executive Management Team remained dynamic. The programme of cyclical reviews, making recommendations for busi-  team provided leadership and direction for the organisation.  ness and control improvements as required. Financial ReportingRespective members of the Executive Team participatedin various industry initiatives such as those initiated by the The Bank also developed policies and procedures to drive con- The Directors accept final responsibility for the preparation of theBankers Association of Zambia (BAZ) and its Committees. sistency and clarity on how risks are managed and subsequently annual financial statements which fairly present: reported.  During the year under review, the Frauds Policy and theSuccession planning also forms part of the responsibility Market Risk Policy were approved by the Board. •  the financial position of the Bank as at the end of the year underof Senior Management to ensure that there is continuity in   review, andthe organization.  The Team conducted a Staff Engagement The Board accepts final responsibility for the risk management •  the financial results of operations as well as the cash flows forSurvey, while the Senior Team visited Branches within the and internal control systems of the Bank. It is the responsibility that period.network. of Management to ensure that adequate internal financial and    operational control systems are  developed and maintained on an The responsibility for compiling the annual financial statementsRisk Management and Control on-going basis in order to provide reasonable assurance was delegated to Management. The external auditors report on regarding: whether the annual financial statements are fairly presented.The Board continued to manage both risks and controls in   The Directors are satisfied that during the year under review:the organization.  The Board regularly reviewed the effective- •  effectiveness and efficiency of operationsness of the Bank’s system of risk management and internal •  safeguarding of the Bank’s assets (including information) •  adequate accounting records were maintainedcontrol processes, including financial, operational and com- •  compliance with applicable laws, regulations and supervisory •  an effective system of internal control and risk managementpliance controls and risk management systems. requirements monitored by Management was maintained •  reliability of accounting records •  appropriate accounting policies supported by reasonable andTo this end, the Credit Policy, which was last reviewed in •  business sustainability under normal as well as adverse prudent judgments and estimates were used consistently, and2008, was amended to include, among other things, set conditions, and •  the financial statements were compiled in accordance withguidelines on credit risk acceptability.  The policy was also •  responsible behaviour towards all stakeholders. International Financial Reporting Standards approved by ZICA, thecondensed to make it more concise and user friendly to our Banking and Financial Services and the Zambian Companies Act,staff. The Risk Appetite Statement was also adopted by the  The efficiency of internal control systems is dependent on their the Securities Act, and the Stock Exchange Listing Rules.Board in November 2012. compliance with prescribed measures. There is always a risk of staff   non-compliance with such measures.  Consequently, even a strict The Directors are also satisfied that no material event has occurredFor the Board, a key requirement is that the Bank has robust and efficient internal control system can provide no more reason- between the financial year-end and the date of this report. 2012 Annual Report We have a responsible role to play in sustaining the environment: this paper is environmentally friendly. 13
  16. 16. ANNUAL REPORT AND FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 DECEMBER 2012Statement of Corporate GovernanceThe Board met on a quarterly basis throughout the year. The attendance by the Directors during the year was as follows:  Director’s Name                            2012                                                            February            May                        September            November Mr B Dick                      -  NED         a                  a                  a                  a Mr C Y Mulendema                    - NED                  a a a   a Mrs G M Akapelwa-Ehueni -  NED   a a a  a Mr G Robinson                           -  NED                   a a a   a Mr F Weenig           -  NED                  a a a a Mr M H Schouten                      -  ED a a a a*NED - Non-Executive Director*ED - Executive DirectorDirectors’ CompensationThe disclosure of Directors’ fees and remunerations is made in Note 32 of the financial statements. The Directors do not have any shares in the Bank and are not entitled to share options. Directors’ fees and anyamendments are approved by shareholders at the Annual General Meeting. Board Evaluation The Board engaged an external third party to review the effectiveness of the Board in line with accepted best practice. The review sought to identify specific areas in need of improvement or strengthening,while the recommendations for any actions to be taken where discussed by the entire Board. The review and evaluation include, among other things, the assessments of the Board’s: • performance against its objectives at the beginning of the year • effectiveness with respect to the Bank’s strategic direction • responsiveness to shareholders and stakeholders’ concerns • maintenance and implementation of the Board’s governance principles • access to and review of information from Management and the quality of such information • review of the composition and diversity of the skills and exposure of the Board, and  • continuous professional development for Board members.  14 We have a responsible role to play in sustaining the environment: this paper is environmentally friendly. 2012 Annual Report
  17. 17. ANNUAL REPORT AND FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 DECEMBER 2012Board CommitteesIn order to enable it to discharge its executive functions, the Board has established four principal standing Committees, each governed by written terms of reference defining the frequency ofmeetings, power and duties, and reporting obligations. These Committees continuously evaluate the progress made towards meeting the Bank’s overall objectives, in addition to ensuring the efficient andeffective management of the entire Bank’s core functions. A Non-Executive Director chairs each of the four Committees. The said committees are Audit, Loans Review, Credit and Human Resources andCompensation.Audit and Risk CommitteeThe Audit and Risk Committee is chaired by a Non-Executive Director and consists of two other Non-Executive Directors. The Committee meets at least four times per year to evaluate, amongst other things,accounting practices, the internal control systems and the auditing and financial reporting. Its tasks include evaluating critical risk areas identified with the help of Management, as well as reporting on these tothe Board. The Committee operates under a formal charter approved by the Board and the Committee Members have unlimited access to all information. Certain members of Management including the ManagingDirector are invited to attend and give feedback at Committee meetings. The Audit Committee also recommends to the Board the remuneration of the external auditors. The Committee also holds separatemeetings with the Director of Internal Audit and the external auditors when required, in order to ensure that matters are considered without undue influence. The attendance by the Directors during the year was as follows:  Director’s Name                                                                        2012                                                                        Feb                        May                        September            November Mr C Y Mulendema -  NED                       a            a       a              a Mr B Dick                                    -  NED                        a            a       a              a Mrs G M Akapelwa-Ehueni -  NED a            a       a              a*NED - Non-Executive DirectorLoans Review CommitteeThe Loans Review Committee is chaired by a Non-Executive Director and consists of two Non-Executive Directors and one Executive Director, who is also the Chief Executive Officer of the Bank. On a quarterlybasis, the Committee reviews the collectability of the Bank’s lending portfolio by not only ensuring adherence to statutory and regulatory requirements, but also ensuring that lending practices and proceduresare in line with the credit policy of the Bank, including on matters relating to provisions and allowances for impairment. 2012 Annual Report We have a responsible role to play in sustaining the environment: this paper is environmentally friendly. 15
  18. 18. ANNUAL REPORT AND FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 DECEMBER 2012Statement of Corporate GovernanceThe attendance by the Directors during the year was as follows:   Director’s Name                                                                        2012                                                                                   February            May                        September            November Mr F Weenig -  NED    a            a       a                           a Mr C Y Mulendema -  NED     a            a       a              a Mr M H Schouten   -  ED    a            a       a              a Mr B Dick                                 -  NED                       a            a       a              a*NED - Non-Executive Director*ED - Executive DirectorCredit CommitteeThe Credit Committee is chaired by a Non-Executive Director and consists of two other Non-Executive Directors and one Executive Director, who is also the Chief Executive Officer of the Bank. Certain membersof the Executive Management Committee attend by invitation. The Credit Committee supervises the effective implementation of credit and risk management policies and ensures the enhancement of theBank’s credit risk management systems and processes, in line with best practices in loan rating/credits, risk modelling, loan pricing and strategic loan management, including the identification and control ofthe concentration of risk. The Credit Committee also approves credits with values beyond the mandate of Management.The attendance by the Directors during the year was as follows:  Director’s Name                                                                        2012                                                                                   February            May                        September            November Mr B Dick                                                     -  NED                      a              a       a              a Mrs G M Akapelwa-Ehueni                  -  NED                      a              a       a              a Mr G  Robinson              -  NED                      a              a       a              a Mr M H Schouten                                    -  ED                         a              a       a              a*NED - Non-Executive Director*ED - Executive DirectorHuman Resources and Compensation CommitteeThe Committee provides oversight over the remuneration and compensation for Senior Management and key personnel in the Bank, so as to retain and motivate staff to perform at the level of quality required.Currently, the Bank participates annually in local market surveys and those focusing on the rest of Africa in order to ensure market related salaries are paid and that market related trends are also followed whenchanges are made to employee benefits. The remuneration of all managerial staff in the Bank is also linked to their individual performance. The attendance by the Directors during the year was as follows:  Director’s Name                                                                        2012                                                                                   February            May                        September            November Mrs G M Akapelwa-Ehueni                  -  NED                       a              a       a              a Mr G Robinson                                           -  NED                       a              a       a                               a Mr C Y Mulendema                                  -  NED                       a              a       a                               a Mr M H  Schouten                              -  ED                          a              a       a              a*NED - Non-Executive Director*ED - Executive Director     16 We have a responsible role to play in sustaining the environment: this paper is environmentally friendly. 2012 Annual Report
  19. 19. ANNUAL REPORT AND FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 DECEMBER 2012Code of ConductThe purpose of the Code of Conduct is to regulate the required standards of corporate behaviour by which the Bank is judged in all and its operations. Therefore, the Code of Conduct stipulates the standardsby which individuals within the Bank are judged. The objectives of the code are:• integrity                                                                                          • staff interest and gifts                                                                • conduct of business / communication with customers                         • duty to supervise• skill, care and diligence• customer due diligence / know your customer• conflict of interestMembers of staff as well as agents are being subjected to continued training on the contents of the Code of Conduct to enable them to understand and appreciate these important guidelines, which controltheir conduct in their daily activities as Bank employees.In 2012, we introduced a formal procedure requesting Board Members and Management to fill out a Declaration of Interest Form on an annual basis. Directors have a continuing duty to update any changesin these interests at each Board meeting. Bank SecretaryThe Board appoints the Bank Secretary and all Board Members have access to the services of the Bank Secretary. Where necessary, the Board may seek independent professional advice on some matters.The Bank Secretary ensures the following: •  annual calendar for Board meetings is circulated to all Board Members after approval•  adequate information is provided to all the Members prior to commencement of the Board and sub-committee meetings•  culture of Good Corporate Governance is promoted•  liaison with Securities and Exchange Commission (SEC), the Lusaka Stock Exchange (LuSE) and Patents and Companies Registration Agency (PACRA)•  statutory registers are maintained•  key liaison for investors and contact point forshareholders, and•  Board is updated on relevant statutory amendments and developments. External AuditThe external auditors are responsible for reporting on whether the financial statements are fairly presented in accordance with International Financial Reporting Standards and in the manner required by theZambian Companies Act and the Banking and Financial Services Act. Consultation occurs between external and internal auditors to effect an efficient audit process. The external auditors consider all the reports issued by the Internal Audit Department and which are dulysupplied to them by the Bank. Internal  AuditInternal audit is an independent, objective assurance and consulting activity designed to add value to the Bank as well as to improve its operations. It helps the Bank accomplish its objectives by bringing asystematic and disciplined approach to evaluating and improving risk management, control and governance processes.  2012 Annual Report We have a responsible role to play in sustaining the environment: this paper is environmentally friendly. 17
  20. 20. ANNUAL REPORT AND FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 DECEMBER 2012Statement of Corporate GovernanceInternal audit plans are prepared using a risk assessment model that ensures audit resources are directed towards high risk areas of the Bank. The plan is developed in consultation with Management and approved by theAudit Committee to ensure independence of the audit function, the Director Internal Audit functionally reports to the Audit Committee and administratively to the Managing Director.The internal audit function is governed by the Internal Audit Charter which defines the purpose, authority and responsibility of the internal audit function. The Internal Audit Charter is reviewed and updated to meet bestinternational practices at least once a year.Compliance FunctionThe Bank has set up an independent Compliance Function, guided by the Compliance Charter, which defines the fundamental principles, roles and responsibilities of the Compliance Functions within the Bank, as well as itsrelationship with Executive Management, the Board of Directors and the business and operational functions. The Charter further stipulates the mission of the Compliance Function, which is to promote, monitor and safeguardthe integrity of the Bank.The Charter will be updated from time to time to reflect the legal and regulatory evolution which shall be communicated to all staff. The Board of Directors is responsible for formally approving the compliance policy set by theExecutive Management. The efficiency and implementation of the policy will be evaluated on a quarterly basis by means of a status report provided by the Executive Management to the Board. The Compliance Function alsoindependently reports to the Board Audit and Risk Committee material compliance issues in the Bank through the Compliance Quarterly Report to enable the Board to appreciate the level of compliance risk and to solicit fortheir timely guidance. The objectives of the Independent Compliance Function are to:•  identify and evaluate the compliance risks within the Bank•  organise, co-ordinate and structure compliance related controls•  control and monitor all measures taken to mitigate compliance risks•  report to the Executive Management and the Board of Directors as appropriate, and•  act as the compliance advisor  within the Bank. The Compliance Function and Compliance Monitoring programme are subject to an independent review by both an internal and external audit for the appropriateness of the policies and implementation. Anti-Money Laundering PolicyThe Bank has enhanced its Anti-Money Laundering procedures by gaining access to an internationally reported database for people and entities who are reported to be involved in money laundering and terrorist financingactivities. This is an important control measure that ensures that the Bank only deals with customers and counter-parties with high integrity.Following the introduction of Anti-Money Laundering directives in 2009 by the Securities and Exchange Commission, the Bank has further endeavoured to ensure that all the requirements of the directives are met. The trainingof staff on Anti-Money Laundering matters is an on going critical activity of the Bank which is designed to transfer sufficient knowledge to all members of staff.Whistle BlowingThe Whistle Blowing Policy is intended  to make it easier for members of staff, consultants and other service providers to report irregularities in good faith without needing to fear that those actions may have adverse conse-quences for them. The Whistle Blowing Policy is a key element in demonstrating the Bank’s commitment to the highest possible standard of transparency, integrity, probity and accountability in its operations with all stakeholders. Protecting the integrity and reputation of the Bank requires the active support of all members of staff who, in most cases, are the first to notice and who are required to report incidents of suspected fraud,corruption, collusion and coercion and other serious infringements of the rules and policies in force at the Bank.By creating an environment of trust and maximum protection for members of staff through this policy, the Bank wants to encourage them to co-operate in full. The policy has put in place arrangements that ensure thatmembers of staff who report irregularities in good faith are afforded the utmost confidentiality and the greatest degree of protection against any retaliations or reprisals, whether actual or threatened, as a result of their whistleblowing. In this regard, the Whistle Blowing Policy was revised and approved by the Board in the year under review to reflect the enhanced procedures for reporting malpractice through the Trusted Person. 18 We have a responsible role to play in sustaining the environment: this paper is environmentally friendly. 2012 Annual Report
  21. 21. ANNUAL REPORT AND FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 DECEMBER 2012Stakeholder CommunicationThe Bank continued to engage with its key stakeholders using various channels.  This included the following:         •  Annual General Meeting which affords the Minority Shareholders the opportunity to interact with Board and Management         •  Investor Relations presentations for both Domestic and International Institutional Investors as well as one on one meetings with representatives of various Fund Managers, and         •  Online Investor Relations Portal through which both existing and potential investors can access information and have access to Management.To underscore the governance principles of disseminating timely and relevant information, all presentations made are uploaded on our website.In addition, we have put in place an Insider Trading Policy which ensures that the release of Price Sensitive Information is properly managed, and particularly prohibits the Board, employees  and their related parties from tradingduring restricted periods i.e. “closed windows”. Environmental and Social Management PolicyCompliance with Legislation on Environmental and Social aspects of business are increasingly becoming focal measurement point for Good Governance. Our approach as a Bank has been to develop and implement innovativemonitoring and screening processes that adhere to both our internal guidelines and the Zambian Environmental Laws.Alongside the environmental laws, the Bank has developed a detailed environmental assessment screening process which is an integral part of loan origination and appraisal processes. Broadly, the process is categorized inthree parts: • Category A – Projects with potential significant adverse social or environmental impacts • Category B – Projects with potential limited adverse social or environmental impacts • Category C – Projects with minimal or no significant social or environmental impactsAs a good corporate citizen, ZANACO intends to actively work towards the realization of sustainable development. Through our business activities and services, the Bank will support environmental conservation efforts withinits operational scope as well as those in the service supply chain in order to contribute to the realization of sustainable development in Zambia.The Bank is committed to raising staff awareness on environmental issues and sustainable development and encourages staff observance of the following at the workplace: • Prevent pollution by reducing, reusing and recycling materials and goods purchased • Encourage energy saving, reduce water consumption, and promote good housekeeping practices • Improve and maintain the quality of the working environment within the Bank and all our branches/affiliates (internal air quality, water quality, waste management, paper use, energy use, etc).Basel IIThe implementation of the International convergence of Capital Measurement and Capital Standards also known as Basel II has started in earnest following the issuing by Bank of Zambia of draft regulations for Credit risk, Op-eration risk and Market risk under Pillar 1. Basel II will apply to all Banks operating in Zambia and the implementation process is expected to be completed by December 2013.Zambia National Commercial Bank has structures and resources in place which will ensure full implementation and compliance of the Basel II requirements in line with guidelines issued by Central Bank.Corporate Social Responsibility (CSR)Financial Fitness:ZANACO’s major CSR strategy focuses on equipping citizens with personal final management skills through the Financial Fitness Programme to help them make informed judgements and take effective actions regarding thecurrent and future use of money. The target audience for the Financial Fitness Programme comprises children through the school system, youths through colleges, adults through the media and business groups (farmers andSMEs) through trainings and partnership with membership organisations such as the Zambia National Farmers Union. 2012 Annual Report We have a responsible role to play in sustaining the environment: this paper is environmentally friendly. 19
  22. 22. ANNUAL REPORT AND FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 DECEMBER 2012Statement of Corporate GovernanceFinancial Fitness 2012 achievementsTarget group Number of people reached in 2012 Number of people reached from 2009Children 6,500 18,900Youths and students 2,000 2,000SMEs 1,072 4,072Farmers 1,024 1,931Members of staff 46 1,074General adult population Radio station coverage TV, Radio, print media coverageWater supportZANACO recognises the importance of health to society in general and is focusing on water and sanitation support to communities. Water is life and clean water is important for healthy living, including theprevention of water borne diseases. This component of CSR was introduced in 2012 with 5 communities currently being serviced and over 2,190 community members benefiting. One organisation was sup-ported with sanitation improvement.Benefiting communities include:Name of community District1. Da Gamma School for the disabled children Luanshya2. Twamutambula Orphanage Chisamba3. Mweemba Health Post Mazabuka4. Tafelasoni Basic School Chipata5. Sacha Village Lundazi6. University of Zambia LusakaPartnerships and DonationsZANACO rolls out some of the CSR initiatives through strategic partnerships and donations to meet various community needs. Below are some initiatives supported:• In recognition of the growing concern around gender-based violence, ZANACO made a donation to YWCA to equip them for service provision. We believe that women need to live in a gender-based violence free society. Where such unfortunate incidences occur, women have the right to appropriate safety, counselling and material support as provided by YWCA. We look forward to a gender based violence free society.• As the reigning champions of Africa, Zambia is a proud football nation. Sport plays an important role in the lives of children and encourages good health and fitness. At ZANACO, we are playing out part and have donated 400 soccer balls to kick-start an active young society, especially in underprivileged areas. We believe that all children should be given an equal opportunity to succeed.At ZANACO we remain committed to giving back to our society. Zanaco Football Club Zanaco remains the proud sponsor of the Sensational Zanaco Football Club. The club continues to perform very well in the Zambian Super League and recorded its sixth top title of the league by winning the 2012 MTN/FAZ Premier League. The club will represent Zambia in the Orange Confederation for African Football (CAF) League in 2013. Prior to this, the Bank won 20 We have a responsible role to and 2009. The Club’s brilliant performance during friendly. 2012 nnual Report the Super League in 2003, 2005, 2006, 2008, play in sustaining the environment: This paper is environmentallythe year resulted in the selection of six players who represented Zambia in the 2012 Zone Six games hosted by Zambia.
  23. 23. ANNUAL REPORT AND FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 DECEMBER 2012Directors’ ResponsibilitySTATEMENT OF RESPONSIBILITY FOR ANNUAL FINANCIAL STATEMENTSSection 164(6) of the Companies Act, 1994 (as amended) requires the Directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Bank and of the profitor loss for that period.The Directors are responsible for the maintenance of adequate accounting records and the preparation and integrity of the annual financial statements and related information. The Independent external auditors,Messers Deloitte, have audited the annual financial statements and their report is shown on page 23.The Directors are also responsible for the systems of internal control. These are designed to provide reasonable, but not absolute, assurance as to the reliability of the financial statements and to adequately safe-guard, verify and maintain accountability for assets and to prevent and detect material misstatements. The systems are implemented and monitored by suitably trained personnel with an appropriate segregationof authority and duties. Nothing has come to the attention of the Directors to indicate that any material breakdown in the functioning of these controls, procedures and systems has occurred during the year underreview.In the opinion of the Directors:• the profit and loss account is drawn up so as to give a true and fair view of the profit of the Bank for the financial year ended 31 December 2012;• the statement of financial position is drawn up so as to give a true and fair view of the state of affairs of the Bank as at 31 December 2012;• there are reasonable grounds to believe that the Bank will be able to pay its debts as and when they fall due; and• the financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and in the manner required by the Companies Act, 1994 (as amended) and the Banking and Financial Services Act,1994 (as amended). Director Director Director Secretary 2012 Annual Report We have a responsible role to play in sustaining the environment: this paper is environmentally friendly. 21
  24. 24. Deloitte. ANNUAL REPORT AND FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 DECEMBER 2012Independent Auditor’s ReportTo the members of Zambia National Commercial Bank PlcWe have audited the accompanying financial statements of Zambia National Commercial Bank Plc, which comprise the statement of financial position as at 31 December 2012, the statement of profit or lossand other comprehensive income, the statement of changes in equity, the statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatoryinformation.Directors’ responsibility for the financial statementsThe Directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards, and in the manner required by the Bankingand Financial Services Act, 1994 (as amended), and the Companies Act, 1994 (as amended), and for such internal control as Management determines is necessary to enable the preparation of financial state-ments that are free from material misstatement, whether due to fraud or error.Auditor’s responsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that wecomply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including theassessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s prep-aration and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectivenessof the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by Management, as well as evaluatingthe overall presentation of the financial statements.We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.OpinionIn our opinion, the financial statements give a true and fair view of the financial position of Zambia National Commercial Bank Plc as at 31 December 2012, and of its financial performance and cash flows forthe year then ended in accordance with International Financial Reporting Standards, and in the manner required by the Banking and Financial Services Act, 1994 (as amended) and the Companies Act, 1994(as amended).Report on other legal requirementsThe Companies Act, 1994 (as amended) under section 173 (3) requires that in carrying out our audit, we consider and report to you on the following matter. We confirm that, in our opinion, the accountingand other records and registers have been properly kept in accordance with the Act.In accordance with section 64 (2) of the Banking and Financial Services Act, 1994 (as amended), we report that in our opinion:• The Bank made available all the necessary information to enable us to comply with the requirements of this Act, and• The Bank complied with the provisions of this Act and the regulations, guidelines and prescriptions of this Act.DELOITTE & TOUCHEC. CHUNGUPARTNERDate: 23 February 2013 22 We have a responsible role to play in sustaining the environment: this paper is environmentally friendly. 2012 Annual Report

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