Zanaco annual report_2011_final1

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Zanaco annual report 2011

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Zanaco annual report_2011_final1

  1. 1. ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 BEST BANK IN ZAMBIA 2011 IN THE INTERBANK SPORTS TOURNAMENT THE KUOMBOKA CEREMONY HANDOVER EUROMONEY AWARDS FOR EXCELLENCE LuSE CORPORATE GOVERNANCE AWARD LONG SERVING STAFF AWARDS ZANACO ZAMPOST PARTNERSHIP 2011 annual report
  2. 2. ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 20112011 annual report
  3. 3. ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 Vision, Mission, Values                  3   History                4 Financial Highlights               5   Board of Directors 6 Executive Management Team 7 Chairman’s Statement 9 Managing Director’s Statement 13 table of Directors’ Report 14 contents Statement on Corporate Governance                  17   Statement of Directors’ Responsibilities                  25   Report of the Independent Auditor                  26     Financial statements:   Profit and loss account         27          Statement of Financial Position 29   Statement of changes in equity         30   Cash flow statement         31   Notes to the financial statements 32 2 2011 annual report
  4. 4. ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 our vision, mission and values Vision To be Zambia’s leading, preferred, admired, and innovative bank that should provide to each of our chosen customer segments a fair deal as we also strive to “bank” the unbanked. Mission To be the number one bank in each of our chosen segments with a special focus on Government, Food and Agriculture and Retail Banking through appropriate technology and distribution channels and with empowered and motivated staff. Values • Maintaining long-term, ethical relationships with our customers, • Increasing productivity by improving teamwork, • Setting and achieving high standards, and • Being guided by integrity, respect for each other and the highest level of professionalism.2011 annual report 3
  5. 5. ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 history Zambia National Commercial Bank Plc (“Zanaco”) was established in 1969 to service the financial needs of the Zambian economy and it has since evolved into a leading Bank nationwide.   In 2007, the Government of the Republic of Zambia (GRZ) sold a 49% stake in the Bank to Rabo Financial Institutions Development  B.V (RFID), a subsidiary of the Cooperative Central Raiffeisen-Boerenleenbank (Rabobank) of the Netherlands. Subsequently RFID sold a 3.41% stake to Lizara Investments Limited (a nominee of the Zambia National Farmers Union (ZNFU), followed by the Bank’s Initial Public Offering in 2008 and Employee Share Ownership Programme (ESOP).   The Bank remains majority-owned by Zambians and thus is considered “citizen owned”.   The relationship with Rabobank enables Zanaco to benefit from technical assistance and best practices in various areas of banking.   Our Customers Our customers are fully representative of Zambia as a whole; from Government to the private sector, from multinationals to SMEs, from industrial and mining to agriculture and from civil servants to salaried workers. Reaching out to the unbanked, Zanaco can truly be considered the People’s Bank. As a citizen owned Bank, we take pride in serving Zambians of all walks of life, with fair pricing for our services.   Our People Most of our 1,184 staff members are also shareholders in Zanaco and, together with their families, have a direct interest and stake in the long-term success of the Bank. They are empow- ered, motivated and committed to the difference.   Ownership Structure Post-Initial Public Offering The current ownership structure of Zanaco is as follows: DETAILS % Rabo Financial Institutions Development B.V (RFID) 45.59 Government of the Republic of Zambia (GRZ)                             25.00 Public                                                                                                            24.68 Employee Share Ownership Programme (ESOP)        1.32 Lizara Investments Limited (a nominee of ZNFU)  3.41 Total 100.00 4
  6. 6. ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011financial highlights 5
  7. 7. ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 board of directors Bruce Dick - Chairman Mr. Dick has been the Managing Director of Rabo Financial Development BV (RFID) since the 1st of July, 2010. He is also Director of the Rabo Rural Fund B.V. Chintu Y. Mulendema - Vice Chairman Mr. Mulendema, is Managing Partner of CYMA Management and Public Accountants and immediate Past President of the Zambia Institute of Chartered Accountants (ZICA). Mr Mulendema is also the Chairman of the Zambia Centre for Dispute Resolution (ZCDR) and former member of the National Con- stitution Conference (NCC). Guy H. Robinson - Non-Excecutive Director Mr. Robinson is a businessman and farmer. He represents the Zambia National Farmers Union (ZNFU) where he serves as a Trustee. He is a member of the Board of Livestock Services Co-operatives Trust and the Livestock Development Agency and he is a Trustee of the Cotton Association of Zambia and the Golden Valley Research Trust (GART). He is also a Board member of SEEDCO, Parmalat and the Zambia Development Agency (ZDA). Gertrude M. Akapelwa-Ehueni (Mrs) - Chairperson Human Resources & Compensation Committiee Mrs. Akapelwa-Ehueni is the Acting Vice Chancellor and Board Chairperson of Victoria Falls University of Technology (VFU), as well as the Board Chairper- son of the Zambia Information & Communications Technology Authority (ZICTA). She is also a member of the Millennium Challenge Account Zambia Steering Committee and member of the Technical Committee for the Government of the Republic of Zambia Lands Information Management System. Prior to that, she served the African Development Bank in different capacities for 23 years in both Ivory Coast and Tunisia. Frederikus Weenig- Chairman Loans Review Committee Mr. Weenig is Director of Corporate Clients Netherlands and is a member of the Management Team of Wholesale Rabobank International. He joined Rabobank Nederlands in 2004 where he was Deputy Head of Special Assets Management Rabobank Group until July, 2010. Martyn H. Schouten - Managing Director Mr. Schouten was appointed Managing Director of Zanaco in December 2010. He has 28 years senior management experience in Retail and Corporate Banking, having held positions in strategy, business development, product development and corporate support. 6 2011 annual report
  8. 8. ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 executive management teamFront Row: Suzyo Ngandu Bank Secretary Martyn H Schouten Managing Director Chimango Chikwanda Director Human resourcesBack Row: Tom Borhgols Director Risk Management Ngenda Nyambe Director Treasury & Investments Hamish Chipungu Director Internal AuditIgnatius Mwanza Director Corporate Banking Arjan Poels Director Retail Banking Sonny Katowa Director Corporate Support Edward Mutale Director Finance 2011 annual report 7
  9. 9. 2011 annual report
  10. 10. ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 chairman’s statement Strategy 2011-2015 the Zanaco share price performing well above the LuSE All Share Index; the Zanaco share price started the year The Board tasked Executive Management of the Bank to at ZMK 821 and ended at ZMK 1,350, representing an update its Strategic Plan for the medium term, and ap- increase of 64%. proved the subsequent submission. The key pillars of this strategy are: Banking Sector Overview 1. Banking the Unbanked, by doubling the number of Retail and Corporate customers by 2015; The Bank of Zambia (BOZ) took two important steps dur- ing the course of the year regarding banks supervision and 2. Growing the agricultural client base of Zanaco even regulation: 1. Reducing minimum statutory reserves held further, and targeting to become the premier agriculture at BOZ in several areas, with the intent to increase bank financier in Zambia; liquidity, lending and thereby reducing bank interest rates; and 2. Increasing minimum capitalization requirements for 3. Developing the Small and Medium-sized Enterprise local commercial banks from ZMK 12 billion ($2.3 million) market , ensuring that entrepreneurs have the correct to ZMK 104 billion ($20 million), while increasing these It is with pleasure that we present to you the Annual training and access to financial services; and minima from international banks to ZMK 520 billion ($100 Report for the year 2011. During the year under review, the million). Zanaco is proud to be majority Zambian-owned Zambia National Commercial Bank Plc. (Zanaco) continued 4. To nurture and further develop the relationship with local bank, but even more proud that its current share- the Government of the Republic of Zambia (GRZ). GRZ holder equity is only just short of the minimum capital to consolidate its position as a leading Bank and a key remains a significant shareholder, but also a very important requirements for international banks. This very strong player in the Zambian economy. This was evidenced by client to Zanaco and we will continue to provide added- capital base will provide a base for Zanaco to withstand another year of strong financial results built on continued potential future local and international liquidity and credit value services to all GRZ stakeholders. growth in the number of customers, branches and prod- risk challenges. ucts. Economic Overview Corporate Social Responsibility Performance The Zambian economy continued to grow steadily, book- ing a real GDP growth of 6.5% during the year under Our Financial Fitness programme continued to grow, and During the year under review, the Bank increased its Profit review. Zambia remained relatively well insulated from the is now seen as being synonymous with the Zanaco Brand. After Tax from ZMK 113 billion to ZMK 121 billion, which economic crises that affected other parts of the world. The programme was extended to schools, tertiary institu- was mainly attributed to a rapid growth in customer num- However, the economy continues to rely heavily on tions, SME’s and the farming community through the Lima exports of copper (80% of total exports), which makes Scheme. bers, robust growth in the Bank’s loan portfolio and con- Zambia vulnerable to potential price volatility of this tinued cost awareness. The customer base continued to important commodity. Inflation rates continued to decline We are currently working on a partnership with the expand from 450,000 to over 550,000, or an annual growth Ministry of Education to incorporate Financial Fitness into single digits in 2011, ending the year at 7.2%. The rate of over 22%. The Bank successfully increased its mar- ZMK/USD exchange rate depreciated some 7% on average programme into the core secondary school curriculum. ket share in Deposits, allowing it to further grow its lending over the year, albeit supported from further erosion by Through such initiatives, we continue to share our book as a result. The loan portfolio increased to ZMK 1,979 robust world copper prices. knowledge and help raise the level of financial literacy billion, making Zanaco a significant lender in Zambia, in the communities where we operate. while Non-Performing Loans continued to decline to As an emerging market economy, Zambia continued to 9.8%. Costs remain in line with business growth, although attract good levels of Foreign Direct Investment, which Achievements concerted efforts have been made to review and reduce helped to foster greater economic activity. The capital operational costs. This will remain a priority for 2012. markets also remained buoyant throughout the year, with 2011 was a rewarding year in which the Bank received two2011 annual report 9
  11. 11. ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 chairman’s statement continued prestigious awards. In June 2011, we were awarded the Eu- Board of Directors will continue to improve our customer service, realizing romoney Magazine’s ‘Best Bank in Zambia’ award. Euromoney that customers have ever more choice among Zambian commented that “Every year since 2007, when Zanaco went At the end of 2011, the Board conducted a Self-Evaluation financial institutions. We shall continue to utilize our public, the Bank has seen both profits and lending increase. to ensure that we continue to function as an effective and strategic partnership with the Zambia Postal Corporation The Bank has also successfully developed its franchise in cohesive team. (ZAMPOST), providing easier access to financial services rural areas, increasing branches and ATMs and introducing through their 121 post offices in the county. Together new services such as mobile branches on trucks and mobile At the last AGM, Mrs Gertrude Akapelwa-Ehueni retired by with selected SME agents of Zanaco, the Bank can now phone banking”. This is the first time that any Zambian bank rotation and was duly re-elected. offer financial services in all 74 Districts in the country, has been awarded this coveted prize, and a true feather in which is a unique feature. the cap of all of our Zanaco staff. Future Prospects Finally, I would like to commend Management and Staff This was followed by the Lusaka Stock Exchange Corporate The Bank continues to face a bright future. Zanaco is a for their determination to transform Zanaco into a more Governance Award (2010) which we received in December, respected organization which provides visibly improved customer and service-centric organization. This remains 2011. This award was in recognition of efforts made by the services at a fair price to its customers. The Bank is com- an important focus area for the Bank in the coming years, Board and Management to embed governance processes mitted to play a pivotal role in the growth of the Zambian but the efforts in 2011 have been very encouraging. and procedures which ensure that there is full disclosure and economy. We will continue to expand our distribution transparency and that there are proper governance struc- channels, while relying on cost-effective solutions to bring tures in place, in line with best practice. These awards gave financial services closer to the Unbanked. We will con- Bruce Dick the Bank pride of place and validated the efforts being made tinue to be innovative, building further on technological to improve both our operations and governance processes. solutions in the field of mobile telephone banking. We 10 2011 annual report
  12. 12. 2011 annual report
  13. 13. ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 managing director’s statement 6.6% in 2010. The rate of inflation closed the year at 7.2%, Our Xapit product remained very popular and helped to increase down from 8.5% in the previous year. The agricultural sector our total customer base to over 550,000 customers during continued to grow, with the country recording back-to-back the year under review. In addition, our Scheme Loans (payroll bumper maize harvests in the 2010/2011 farming season. deductible loans) grew substantially in popularity, generating In spite of slow global economic growth and weak demand a significant increase in our Retail Loan Portfolio. Our Corporate from major economies, Zambia recorded a trade surplus ow- Loan Portfolio also grew proportionately, allowing Zanaco to ing to increased metal and non-metal exports. capture a meaningful market share in this competitive sector. Our Agricultural Loan Portfolio also increased dramatically, re- The second half of the year saw the Central Bank reduce flecting our ambition to become the premier Agriculture finance some reserve requirements for commercial banks, freeing up bank in Zambia and to mirror Rabobank’s international status as additional resources to support private sector lending. The the leading global Food and Agriculture bank to the Agricultural revision of reserve requirements increased market liquidity sector. and assisted banks to reduce their base lending rates. Zanaco lowered its Prime Rate of Lending from 19% to 16%, effective We remained committed to improving the customer experience December 1, 2011; the December average lending rate in the at Zanaco. Customer service and waiting times have improved It is my pleasure to report on the Bank’s performance in 2011 market was 17%. The overall economic outlook is expected during 2011, but further improvements are needed. Additional and to provide you with an outlook for 2012. to continue to support broad-based growth across key sec- front office staff have been recruited and trained, seeking to tors such as agriculture, mining and construction. improve processing times and making banking “easier”. These ef- Following a successful financial and operational year in 2010, forts have been recognized by our existing and new customers, we are very pleased to be able to report a 7% increase in our The announced recapitalisation of the banking sector will re- but they must be further incorporated into our core activities. Profit After Tax in 2011, amounting to ZMK 121 billion. We confirm the positions of the strongest banks in the economy, delivered another stable performance in 2011, with all key while challenging banks with smaller capital reserves. Zanaco Distribution performance ratios improving as planned. Our share price is very well positioned to meet these new regulatory require- movement reflected these improvements, starting the year at ments, having the highest Shareholder Equity position in the In 2011, the Bank continued its drive to Bank the Unbanked ZMK 821 per share and ending the year at ZMK 1,350; this rep- country. This should allow the Bank to meet possible future by expanding its presence throughout the country. Follow- resents an increase of 64%. The Zambia National Commercial regulatory and liquidity challenges in the International and ing an agreement with the Zambia Postal Service Corporation Bank Plc. (Zanaco) shares were consistently recommended in Zambian financial markets. (Zampost), the Bank rolled out Zanaco Xpress services to 121 the market as “Stable” and “Sustainable”. additional locations across the country. This, together with the Performance existing 59 Zanaco Branches and Agencies and together with At the end of 2011, the Government of the Republic of Zam- 9 SME Zanaco Xpress Agencies, formed the largest network of bia (GRZ) announced an official Commission of Inquiry into We remain the “People’s Bank” in Zambia. Together with the banking services in the country. Zanaco currently provides finan- the sale of 49% of shares plus management rights of Zanaco formal recognition of being “Citizen Owned” due to the fact cial services in all 74 Districts in the nation, a footprint unrivalled to Rabobank of the Netherlands in 2007. The Management of that the majority of shares are owned by Zambians, these in Zambia. This allows account holders to perform both simple Zanaco and the buyer, Rabobank, have cooperated fully with descriptions underscore the importance which Zanaco places and complex financial transactions in almost all areas of the the Commission of Inquiry at all times. The written conclu- on being active in all segments of the Zambian economy. We country. This pulls customers into the formal financial sector and sions of the Commission of Inquiry was not available at the focus on Banking the Unbanked. We focus on Agriculture. improves efficiencies. Customers are no longer required to walk time of print. We focus on Small and Medium Sized Enterprises (SMEs). We for several days to neighbouring Districts to collect salaries, but focus on one of our largest shareholders, the Government can withdraw and spend their monthly stipends in the commu- Economic Overview of the Republic of Zambia, and we ensure that we provide nities where they live. This has helped stimulate growth in rural essential services to GRZ stakeholders and civil servants. We areas, while saving time for individual and corporate customers The economy continued on a steady growth path with real focus on generating sustainable financial results, ensuring alike. Gross Domestic Product growing at 6.5%, compared to that all shareholders remain committed to the mission, vision and values of Zanaco. 12 2011 annual report
  14. 14. ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 managing director’s statement continued The partnership with ZESCO, the electricity provider, was fur- curriculum of Secondary Schools in Zambia. This initiative will where possible. Staff feedback has been direct, emotional ther strengthened in 2011. Customers can now pay electricity train the youth of Zambia to plan for their financial future. and engaging. We intend to continue with such interactions, bills by mobile phone, reducing long waiting queues for cash We remain proud sponsors of the five-time Premier League encouraging staff to propose new ways to serve customer payment. This service is now also offered for mobile phone football champions of Zambia, the Zanaco Football Club. In the needs in future, while improving staff working conditions payments of taxes, entertainment bills and education fees. year under review, the “Bankers” reached a disappointing 8th where necessary and appropriate. Convenience has improved significantly, and can be mea- place in the Football Association League, reflecting a year of sured favourably against any banking services in any country rebuilding after the loss of many senior players to competitors. Outlook for 2012 in the world today. We expect to see many more Zanaco players being promoted to the National Team to help the Chipolopolo retain their We are optimistic about 2012. Investments in people and Our Truck Bank was operational in areas throughout Lusaka African Cup of Nations prize and qualify for the Football World infrastructure are starting to take hold, and we have become and increased their reach by having a presence in Chilenje, Cup in future years. the employer of choice for many Zambian banking profes- Chelstone, Kabwata, Munjili and Mutendere markets. The sionals. Our market share in key areas is improving (Scheme truck serviced trading and pedestrian customers in the im- Our People Loans, Deposits, Corporate Loans, Payments and Cash Man- mediate and surrounding areas. Customers continue to be agement) and we are seeing a steady increase in customer able to deposit, withdraw and open accounts within minutes Our people remain our most important asset, and we actively numbers. Our IT systems are robust, and our people are of using our Truck Bank. strive to improve their capabilities. The Bank aligned financial increasingly committed to meeting our customers’ needs. fitness with the wellness of staff by launching the ‘Zanaco Zanaco is well positioned for further growth, and we look Corporate Social Responsibility (CSR) Wellness Week’ in November 2011. The Wellness Week encour- forward to working with you in the coming year to realise aged staff members to develop a balanced lifestyle. Numerous your plans and your full potential. Zanaco was proud to bring Financial Literacy programmes to speakers and workshops underscored the benefits of healthy 165 schools, 10,000 students and over 2,000 SMEs in 2011. We lifestyles and healthy choices. have expanded our CSR programme to include Health Care, Martyn H. Schouten as we believe that people need to be healthy in order to be Management has also embarked on a regular dialogue with financially fit as well. We were very pleased to support GRZ’s staff across the country. These Open Forums are designed to initiative to introduce Financial Literacy training into the core engage staff, ask for feedback and implement new solutions2011 annual report 13
  15. 15. ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010 directors’ report The directors submit their report, together with the audited financial statements for the year ended 31 December 2011, which discloses the state of affairs for the Bank. PRINCIPAL ACTIVITIES The Bank is engaged in the business of banking and the provision of related services. The Bank has continued with its network expansion programme during the year. SHARE CAPITAL There were no changes in the issued share capital during the year. RESULTS AND DIVIDENDS The net profit for the year of K120,513 million has been transferred to retained earnings. The Bank paid dividends during the year amounting to K32,340 million in respect of the profit for the year 2010. The Board has recommended a final dividend of K 32,340 million and a bonus issue of 13 ordinary shares for 2 held for the year ended 31 December 2011. DIRECTORS The Directors who held office during the year and to the date of this report were: Mr B Dick - Chairman Mr C Y Mulendema - Vice Chairman Mr M H Schouten - Managing Director Mrs G M Akapelwa-Ehueni - Non Executive Director Mr G Robinson - Non Executive Director Mr F Weenig - Non Executive Director NUMBER OF EMPLOYEES AND REMUNERATION The total remuneration of employees during the year amounted to K207,550 million (2010: K169,814 million) and the average number of employees was as follows: Month Number Month Number January 1,085 July 1,093 February 1,101 August 1,119 March 1,092 September 1,126 April 1,089 October 1,170 May 1,080 November 1,177 June 1,098 December 1,184 The Bank has policies and procedures to safeguard the occupational health safety and welfare of its employees. GIFTS AND DONATIONS During the year, the Bank made donations of K1,934 million (2010: K1,988 million) to charitable organisations and events. 14 2011 annual report
  16. 16. ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 directors’ report continued PROPERTY, PLANT AND EQUIPMENT The Bank purchased property and equipment amounting to K64,762 million (2010: K46,834 million) during the year. In the opinion of the Directors, the carrying value of the property, plant and equipment is not less than their recoverable value. RESEARCH AND DEVELOPMENT During the year, the Bank did not incur any research and development costs (2010: Nil). RELATED PARTY TRANSACTIONS Related party transactions are disclosed in Note 33 to the financial statements. DIRECTORS’ EMOLUMENTS AND INTERESTS Directors’ emoluments and interests are disclosed in Note 33 to the financial statements. PROHIBITED BORROWING OR LENDING There was no prohibited borrowings or lendings as defined under Sections 72 and 73 of the Zambia Banking and Financial Services Act, 1994 (as amended). RISK MANAGEMENT AND CONTROL The 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 strategies are disclosed in Note 4 of the financial statements. SIGNIFICANT POST STATEMENT OF FINANCIAL POSITION DATE EVENTS i) Commission of inquiry into privatisation. Subsequent to the Reporting Date, a Commission of Inquiry appointed by the Head of State commenced sittings looking into the privatisation of the Bank. By the date of the financial statements the Commission had yet to submit a report of its findings. ii) On 30 January 2012, the Bank of Zambia issued a circular advising commercial banks of the new Capital Adequacy Framework to be applied by the end of 2012 and onwards. Commercial banks will be required to comply with the circular as follows: • the minimum primary capital requirements for commercial banks will be adjusted upward to K104 billion for locally owned banks and K520 billion for foreign owned banks which must be made up of at least 80% in nominal paid-up common shares (nominal paid-up-capital) and the balance may only be held in any one or more of the following (i) Shares premium , (ii) Retained income , (iii) General reserves and (iv) statutory reserves. Commercial banks which do not meet the revised minimum requirements on the date of publication of the Government Gazette have been given up to 31 December 2012 to progressively build up their primary capital to the required amount, on the condition that they submit a recapitalisation plan.2011 annual report 15
  17. 17. ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011directors’ report continuedCOMPLIANCE FUNCTIONThe Bank has a compliance function whose responsibility is to monitor the Bank’s compliance with the regulatory environment and the various internal control processes and procedures.KNOW YOUR CUSTOMER (KYC) AND ANTI- MONEY LAUNDERING POLICIES (AML)The Bank has adopted Know Your Customer (KYC) and Anti-Money Laundering (AML) policies and adheres to current legislation in these areas.AUDITORSThe Bank’s Auditors, Messers Deloitte and Touche, have indicated their willingness to continue in office. A resolution proposing their reappointment and authorising the Directors to fix their renumera-tion will be put to the Annual General Meeting.By order of the BoardMRS S. NGANDUSECRETARYDATE: 23/02/2012 16 2011 annual report
  18. 18. ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 statement of corporate governance General  policy and performance is robust, informed and constructive. knowledge and experience. Please refer to the Directors’ Furthermore, the roles of the Chairman and Managing Director Report for a list of the Directors who held office in the year The Bank attaches great importance to sound Corporate Gov- do not vest in one person. under review. ernance Practices because this ensures integrity and   transparency in managing the relationship that exists The Board structure is such that no one individual or group Risk Management and Internal Control between the Bank and all its stakeholders. It is in this vein dominates the decision making process. There is a schedule that the Bank ensures that it is in compliance with the of matters reserved for the entire Board’s approval and a clear The Board accepts final responsibility for the risk requirements of various legislations which govern its delegation of authority to the Managing Director and other management and internal control systems of the Bank. It is operations including the Banking and Financial Services Act, senior executives within the Bank for specific matters. the responsibility of Management to ensure that adequate the Bank of Zambia Corporate Governance Guidelines, the A procedure exists for the determination of matters arising internal financial and operational control systems are Zambian Companies Act, the Securities Act and the Anti- between scheduled meetings. developed and maintained on an on-going basis in order Money Laundering Act.  to provide reasonable assurance regarding: There are established procedures in existence for planning   Management Team and capital expenditure, making of investments, information, •  effectiveness and efficiency of operations reporting systemsn and for monitoring the Bank’s business •  safeguarding of the Bank’s assets (including infor ation) m Members of the executive team also participate in various and performance. •  compliance with applicable laws, regulations and industry initiatives, such as, the Bankers Association of Zambia   supervisory requirements (BAZ) technical committee as well as the committee set up to Newly appointed Directors are not only scrutinised and sub- •  reliability of accounting records formulate the Financial Charter of the Citizens Economic jected to a fit and proper test by the Bank of Zambia but are •  business sustainability under normal as well as Empowerment Act. also subjected to a final approval by shareholders at the Annual adverse conditions, and   General Meeting. The Company’s Articles of Association •  responsible behaviour towards all stakeholders. As a listed Bank on the Lusaka Stock Exchange (LuSE), Zanaco provide that, on a rotation basis, one third of the Directors   has further compliance requirements which include the resign every year and, if eligible, they can then offer themselves The efficiency of internal control systems is dependent on continuing obligations to comply with the LuSE listing Rules up for re-election. their compliance with prescribed measures. There is always and Corporate Governance Code. a risk of staff non-compliance with such measures.   The Chairman and Managing Director, in consultation with Consequently, even a strict and efficient internal control The Board the Bank Secretary agree on the agenda for Board meetings, system can provide no more reasonable measures of but all Board Members are entitled to raise other matters. assurance in respect of the above mentioned objectives. The Board of Directors retains full and effective control of the The Chairman ensures that all Board Members are properly Internal auditors monitor the operations of the internal con- Bank and monitors the executive management team. The briefed on all issues arising from the Board meetings. It is the trols and report to Management and the Audit Committee on Board is also responsible for the Bank’s direction, policies and responsibility of the Executive Management to ensure that the their findings and recommendations. All critical Information strategies and all investment and divestment decisions. It also Board is supplied with information in a timely manner and of a Technology (IT) is backed up and the Bank has put in place ensures that the Bank meets its responsibilities towards all its quality appropriate enough to enable it to carry out its duties. well documented business continuity and disaster tolerant stakeholders and that the Bank is prudently managed against   procedures for all mission critical operations and systems. the major risks inherent in general business dynamics.  The Board, which comprises five Non-Executive Directors The procedures are tested periodically and the Board is of   and the Managing Director, are confident that they have the the opinion that they meet the acceptable criteria.   In this respect, the Board makes key decisions to ensure that knowledge, talent and experience to lead a listed Bank. The it retains proper direction and control of the Bank. The Direc- Non-Executive Directors are independent of Management tors bring in experience and expertise from their own fields and exercise their independent judgement with their in-depth of business to ensure that the debate on matters of strategy,2011 annual report 17
  19. 19. ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011statement of corporate governanceFinancial ReportingThe Directors accept final responsibility for the preparation of the annual financial statements which fairly present: •  the financial position of the Bank as of the end of the year under review •  the financial results of operations as well as the cash flows for that period The responsibility for compiling the annual financial statements was delegated to Management. The external auditors report on whether the annual financial statements are fairly presented. The Directors are satisfied that during the year under review: •  adequate accounting records were maintained • an effective system of internal control and risk management monitored by Management was maintained •  appropriate accounting policies supported by reasonable and prudent judgments and estimates were used consistently , and •  the financial statements were compiled in accordance with International Financial Reporting Standards approved by ZICA, the   Banking and Financial Services and the Zambian Companies Act, the Lusaka Stock Exchange (LuSE) Act and the Securities Act.The Directors are also satisfied that no material event has occurred between the financial year-end and the date of this report.The Board met on a quarterly basis throughout the year. The attendance by the Directors during the year was as follows: Director’s Name 2011 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 are disclosed in Note 33 of the financial statements (see page 15). The Directors do not have any shares in the Bank and are not entitled to share options.Directors’ fees and any amendments are approved by shareholders at the Annual General Meeting. 18 2011 annual report
  20. 20. ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 statement of corporate governance Board Evaluation  The Board recognises that self evaluation is a best practice benchmark for assessing the levels of performance of the Board. At the end of each financial year, the Board carries out a self-evaluation of its performance and that of its sub-committees. The review seeks to identify specific areas in need of improvement or strengthening while the recommendations for any actions to be taken are discussed by the entire Board.    The review and evaluation include among other things, the assessments of the Board’s:   • Performances 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  • Continuous professional development for Board members. Board Committees In 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 of meetings, power and duties and reporting obligations. These Committees continuously evaluate the progress towards mademeeting the Bank’s overall objectives in addition to ensuring the efficient and effective 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 Resourc- es and Compensation.   Audit and Risk Committee The Audit and Risk Committee is chaired by a Non-Executive Director and consists of two other Non-Executive Directors and the Chief Executive Officer in attendance. 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 to the 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 are invited to attend and give feedback at Committee meetings. The Audit and Risk Committee also recommends to the Board the remuneration of the external auditors. The Committee also holds separate meetings with the Director of the Internal Audit department 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 2011 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 Loans Review Committee The Loans Review Committee is chaired by a Non-Executive Director and consists of two Non-Executive Directors and one Executive Director who is the Chief Executive Officer of the Bank. On a quar- terly basis, the Committee reviews the collectability of the Bank’s lending portfolio by ensuring adherence to not only statutory and regulatory requirements but also ensuring that lending practice and procedures are in line with the credit policy of the Bank, including on matters relating to provisions and allowances for impairment.2011 annual report 19
  21. 21. ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011statement of corporate governanceThe attendance by the Directors during the year was as follows: Director’s Name 2011 February May September November  Mr F Weenig - NED a a a -  Mr C Y Mulendema - NED a a a a Mr M H Schouten - ED a a a aCredit CommitteeThe Credit 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. 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 ofthe the Bank’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 andcontrol of the 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 2011 February May September November  Mr B Dick - NED - 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 aHuman 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 qualityrequired. Matters related to remuneration and compensation were previously addressed by the main Board of Directors. 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 followedwhen changes are made to 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: 20 2011 annual report
  22. 22. ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 statement of corporate governance Director’s Name 2011 February May September November Mrs G M Akapelwa-Ehueni - NED a a a a Mr G Robinson - NED a a a - Mr C Y Mulendema - NED a a a - Mr M H Schouten - ED a a a a Code of Conduct The purpose of the Code of Conduct is to regulate required standards of corporate behaviour by which the Bank is judged in both its retail and corporate operations. Therefore, the Code of Conduct stipulates the standards by 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 • Conduct of business/ conflict of interest Company Secretary The 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 Company 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 for Shareholders, and •  Board is updated on relevant statutory amendments and developments. External Audit The 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 the Zambian 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 are supplied with, and they consider all the reports issued by the Internal Audit Department.2011 annual report 21
  23. 23. ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 statement of corporate governance Internal Audit Internal 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 a systematic and disciplined approach to evaluate and improve risk management, control and governance processes.    Internal audit plans cover matters identified in risk management assessments, as well as issues highlighted by the Board, the Audit and Risk Committee, and the Executive Directors and Senior Management.  The Director of the Internal Audit Department administratively reports to the Managing Director on day-to-day matters, but reports directly to the Chairman of the Audit Committee on a regular basis. The purpose, authority and responsibility of the independent internal audit activity are formally defined in an internal audit charter which is updated regularly and approved by the Audit Committee. Significant audit findings are reported to the Audit Committee. Steps are then taken to address any shortcomings in control while other opportunities for  improving the system whenever they are identified. All significant business operations are subject to an internal audit.    Compliance Function The 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 its relationship with Executive Management, the Board of Directors and the business and operational functions.   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 the Executive 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 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 o 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 Policy The 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 activities.   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 training of 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 Blowing The 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 consequences 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.    22 2011 annual report
  24. 24. ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011statement of corporate governanceProtecting 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 suspectedfraud, 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 placearrangements that ensure that members 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 whistle blowing.             Internal and External Communications Members of staff at all levels are kept fully informed of developments within the Bank using a range of communication mechanisms. These include newsletters, the intranet and circulars, as well asregular discussions at different management levels. The emphasis is on two-way communication in order to develop a workforce which understands and supports the business philosophy and ethicsof the Bank.  Our investor relations website provides relevant information and affords the investing public a chance to engage with management. Environmental and Social Management PolicyThe Management and Board of Directors of ZANACO recognise that environmental management is the responsibility of all public and private institutions. As a good corporate citizen, ZANACO intendsto fulfill this responsibility by actively working towards the realisation of sustainable development. Through our business activities and services, the Bank will support environmental conservation effortswithin its operational scope as well as those in the service supply chain in order to contribute to the realisation of sustainable development in Zambia. To this end the Bank’s Environmental and Social Management Policy includes specific objectives such as: a.  Environmental Management at the Workplace - i.e. Training staff in Environmental Management and improving the quality of the working environment within the Bank, andb.  Environmental Management in the Supply Chain-Taking into account the potential environmental impact of clients’ activities, the Bank will assist clients in environmental mainstreaming, which entailsstrategically addressing the environmental and social issues of their businesses as a cross cutting dimension of development.Basel IIThe Basel II Framework is defined by the Bank of International Settlements (BIS) and aims to incentivise banks, through more efficient capital allocations, to improve their risk management processes.Bank of Zambia is currently still consulting on the roll out of the Basel II Framework and ZANACO participates in these industry consultations.    Corporate Social Responsibility (CSR)Zambia National Commercial Bank Plc (Zanaco) has continued investing largely in developments aimed at supporting local communities through Corporate Social Responsibility (CSR) efforts. The Bank’sCSR is focused on providing sustainable financial benefits by enhancing the understanding, access and usage of financial services.Zanaco is committed to helping citizens become financially educated through Financial Literacy strategies under the theme “Financial Fitness”. The Financial Fitness programme targets young peoplethrough educative programmes aimed at introducing financial literacy basics early in life. The general adult population and business groups are reached through media sensitisation and interactiveprogrammes aimed at strengthening their financial knowledge and skills in order to help them make better informed decisions on the use of financial resources.Resulting from the implementation of the Financial Fitness programme: • Over 165 schools adopted through our branch network received Financial Fitness education materials to implement the programme • Over 10,000 pupils were taught financial literacy basics to help them make informed decisions on matters of budgeting, saving, investment, debt management and financial planning • Close to 2000 SMEs received financial literacy training to promote sustainable business management practices • Over 800 small scale farmers received financial literacy training to enhance their financial planning, saving, investment and credit management skills • All members of staff were trained in Financial Fitness to promote better financial management of resources availed to them such as salaries and loans • The general adult population was reached through 16 series weekly newspaper publications, and • A donation of K100,000,000 where made as an act of appreciation to the best performing schools and also as a way of contributing to the enhancement of service delivery in the education system. 2011 annual report 23
  25. 25. ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011statement of corporate governanceZanaco remains committed to helping citizens become financially fit and has further introduced an undergraduate scholarship targeted at the best student graduating at Sioma High School inShangombo District.Employee Wellness ProgrammeZanaco recognises its staff as being very critical to the business. Staff welfare is important in ensuring the improved wellbeing of everyone in the workplace. We endeavour to encourage staff to adopthabits and behaviours that promote better health and an improved overall quality of life. This in turn ensures that all staff are functioning at their optimal levels and are better able to deliver Zanaco’sbusiness objectives. To this effect, the Bank launched its wellness programme in 2011, where various aspects of health such as Voluntary Counselling and Testing (VCT) and other lifestyle diseases affectingday to day operations of the business, were discussed with the help of medical personnel. Follow-up activities will include the continuity of this awareness programme on a quarterly basis to underscorethe importance of wellness. This will be coupled with more engaging activities where upcountry branches will be fully involved. Employee Share Ownership Programme (ESOP)Following the successful Initial Public Offer (IPO) in 2008, the Employee Share Option plan enabled employees to become shareholders in the Bank through an agreed deferred payment plan. This inturnenabled the bank to maximise the value of employee share ownership through the generation of loyalty, pride, knowledge and empowerment. Zanaco Football ClubThe Bank has continued with its sponsorship of Zanaco football club as part of its Corporate Social Responsibility. Football in Zambia like the rest of the continent of Africa plays an undisputable andremarkable agency role in creating cultural, humanitarian and reassurance value in society. The number of people directly and indirectly benefiting from the Bank sponsorship of football is well over 200ranging from first team players, developmental team players, auxiliary staff and their dependants. 24 2011 annual report
  26. 26. ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011directors’ responsibilitiesSection 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 Bankand of the profit or 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 IndependentExternal Auditors, Messers Deloitte & Touche, have audited the annual financial statements and their report appears on page 26.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 toadequately safeguard, verify and maintain accountability for assets and to prevent and detect material mis-statements. The systems are implemented and monitored by suitably trained personnelwith an appropriate segregation of authority and duties. Nothing has come to the attention of the Directors to indicate that any material breakdown in the functioning of these controls, proceduresand systems has occurred during the year under review.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 2011; • the statement of financial postion is drawn up so as to give a true and fair view of the state of affairs of the Bank as at 31 December 2011; • 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 (BFSA), (as amended).Director: ........................................................... Director: ....................................................... Director:........................................... Secretary: ........................................................23rd February 20122011 annual report 25
  27. 27. ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 report of the independent auditors To the members of Zambia National Commercial Bank Plc We have audited the accompanying financial statements of Zambia National Commercial Bank Plc, which comprise the statement of financial position as at 31 December 2011, and the statement of comprehensive income, the statement of changes in equity, and the statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. Directors’ Responsibility for the Financial Statements The 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 Banking and 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 statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our 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 we comply 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 the assessment 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 controls relevant to the entity’s preparation 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 effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made by man- agement, as well as evaluating the 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. Opinion In 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 2011, and of its financial performance and cash flows for the 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 the Legal Requirement The 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 account- ing and 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 • The Bank complied with the provisions of this Act and the regulations, guidelines and prescriptions of this Act. C. CHUNGU PARTNER - DELOITTE & TOUCHE DATE: 29th February 2012 26 2011 annual report
  28. 28. ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 financial statements Profit and loss account 2011 2010 K’million K’million Interest income 5 453,533 368,023 Interest expense 6 (60,139) (43,828) Net interest income 393,394 324,195 Impairment losses on loans and advances 16 (19,852) (34,364) 373,542 289,831 Net interest income after loans impairment charges Fee and commission income 7 200,998 186,548 Foreign exchange income 23,692 27,304 Other operating income 8 7,958 31,684 31,650 58,988 Total income 606,190 535,367 Operating expenses 9 (421,252) (363,072) Profit before income tax 184,938 172,295 Income tax expense 11 (64,425) (59,785) Profit for the year 120,513 112,510 Dividend proposed/paid 12 - (32,340) Proposed/paid dividend per share (Kwacha) - 28 Basic earnings per share (Kwacha) 34 104.34 97.412011 annual report 27
  29. 29. ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011financial statements NotesStatement of comprehensive income 2011 2010 K’million K’millionProfit for the year 120,513 112,510Other comprehensive incomeNet gains/ (losses) on available-for-sale financial assets 15 5,347 (1,276)Net reclassification adjustment for realised net (gain)/losses on available - for- salefinancial assess 1,276 (6,278)Deficit on defined benefit plan 24 (7,259) -Gain on revaluation of properties 27,293 -Deferred tax arising on gain on revaluation of properties (8,537) -Total other comprehensive income for the year, net of tax 18,120 (7,554)Total comprehensive income for the year 138,633 104,956 28 2011 annual report
  30. 30. ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 financial statements Notes 2011 2010 Statement of financial position K million K million ASSETS Cash and balances with Bank of Zambia 13 512,896 404,031 Balances with other banks 14 404,741 122,034 Withholding tax recoverable 11 29,505 49,946 Investment securities – available-for-sale 15 806,772 343,460 – held-to-maturity 15 752,007 612,792 Loans and advances to customers 16 1,890,736 1,725,504 Non-current assets held for sale 1,077 - Property and equipment 17 229,140 169,938 Other assets 19 90,747 92,315 Total assets 4,717,621 3,520,020 LIABILITIES Customer deposits 20 3,412,319 2,591,242 Deposits from other banks 21 1,246 24,278 Deferred tax liability 18 33,425 28,071 Current tax payable 11 28,930 61,319 Other liabilities 23 110,445 132,016 Provisions for liabilities and charges 24 37,509 44,822 Borrowed funds 25 511,076 161,894 Total liabilities 4,134,950 3,043,642 EQUITY Share capital 26 11,550 11,550 Share premium 26 77,697 77,697 Statutory reserve 29 11,550 11,550 General banking reserves 27 105,687 75,584 Revaluation reserves 28 63,577 39,452 Retained earnings 312,610 260,545 Total equity 582,671 476,378 Total equity and liabilities 4,717,621 3,520,020 The financial statements on pages 27 to 70 were approved for issue by the Board of Directors on 23rd February 2012 and Director: ........................................................... Director: ....................................................... signed on its behalf by: Director: ........................................................... Secretary: .....................................................2011 annual report 29

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