NMBZ Holdings Ld: Annual Report and Accounts | Company Announcements

Monday 04 August, 2008

NMBZ Holdings Ld

Annual Report and Accounts

RNS Number : 5178A

NMBZ Holdings Ld

04 August 2008

NMBZ HOLDINGS LIMITED

Holding company of

NMB BANK LIMITED (Registered Commercial Bank)

AUDITED INFLATION ADJUSTED AND HISTORICAL COST RESULTS FOR THE YEAR ENDED 31 DECEMBER 2007

HIGHLIGHTS

Inflation Adjusted	2007	2006	% Change


Attributable (loss)/profit (Z$million)	(255 521)	379 456	-167
Basic earnings per share (cents)	(16 011)	34 482	-146
Total deposits (Z$million)	28 761 921	32 468 131	-11
Shareholders' funds (Z$million)	12 286 581	9 155 997	+34


Historical

Attributable profit (Z$ million)	2 751 518	6 989	+39 269
Basic earnings per share (cents)	172 409	635	+27 051
Total deposits (Z$ million)	28 761 921	48 962	+58 643
Shareholders' funds (Z$ million)	9 230 125	8 102	+113 824

Enquiries:

NMBZ Holdings Limited Tel: +263-4-759 651/9



Benefit P Washaya Chief Executive Officer	benefitw@nmbz.co.zw

Benson Ndachena, Chief Financial Officer	bensonn@nmbz.co.zw

Website:	www.nmbz.co.zw

Email:	enquiries@nmbz.co.zw

NMBZ HOLDING LIMITED

CHAIRMAN'S STATEMENT

The year under review was characterised by:

Rising inflation
Increased money supply growth
High domestic and external debt
Fluctuating and negative interest rates
Foreign currency, fuel and power shortages

GROUP INFLATION ADJUSTED RESULTS

Introduction

In accordance with International Financial Reporting Standards (IFRS's) promulgated by the International Accounting Standards Board (IASB), the Group continues to prepare its results using hyperinflationary accounting with historical results being provided as a supplement. Unless otherwise stated, figures in this statement are inflation adjusted.

Compliance with International Financial Reporting Standards

The existence of hyperinflation as defined by International Accounting Standard (IAS) 29 'Reporting in Hyperinflationary Economics' was formally identified in Zimbabwe by the Zimbabwe Accounting Practices Board, which decided that IAS 29 would be applied for financial periods beginning on or after 1 January 2000. Consequently, these results have been prepared in compliance with IAS 29, which requires the adjustment of the financial statements on the basis of the inflation indices over the reporting period, and a restatement of prior year comparative figures.

Commentary on results

The inflation adjusted profit before taxation reduced from Z$1 091 119 million to a loss Z$1 316 794 million during the period under review. The Group recorded an inflation adjusted attributable loss of Z$255 521 million compared to a profit of Z$379 456 million for the same period last year. A historical cost attributable profit of Z$2 751 518 million was recorded compared to Z$6 989 million for 2006. Net interest income increased by 189% to Z$32 140 099 million from Z$11 115 946 million. The increase was primarily as a result of significant positive margins during the second half of the year. Non-interest income increased by 98% to Z$8 682 062 million (2006 - Z$4 378 735 million) and contributed 22% (2006 - 27%) of the net operating income.

Operating expenses, on an inflation adjusted basis, increased by 198% to Z$18 906 465 million from Z$6 337 670 million over the same period last year.

The loss on net monetary position occurs as a result of the restatement of amounts to current value. The loss of Z$20 930 962 million is based on the inflation index as provided by the Central Statistical Office of Zimbabwe. The loss has been charged to income in accordance with the IAS 29.

While a conservative approach continues to be taken with respect to provisions for bad and doubtful debts, on an inflation adjusted basis, an increase in the provisions from Z$83 150 million in the previous year to Z$96 749 million was recorded. This is reflective of the increase in advances and other accounts which on an inflation adjusted basis, increased from

Z$9 188 033 million to Z$13 382 646 million, as well as a prudent lending policy in an uncertain environment.

Dividend

In light of the need to conserve cash in the business, the Board has proposed not to declare a dividend.

NMBZ HOLDINGS LIMITED

BALANCE SHEET

The Group's total asset base, on an inflation adjusted basis increased marginally by 0.2% from Z$45 746 627 million at 31 December 2006 to Z$45 824 190 million. The increase was mainly caused by an increase in advances and other accounts.

Capital

The banking subsidiary's capital adequacy ratio at 31 December 2007 calculated on the historical cost basis in accordance with the guidelines of the Reserve Bank of Zimbabwe (RBZ) was 20.21% (31 December 2006 - 30. 02%). The minimum required by the RBZ is 10%.

The Bank complied with the RBZ's requirement of a minimum capital base of Z$3 225 000 million as at 31 December 2007. The Group will continue to monitor and manage its capital base in view of market and economic developments.

OUTLOOK AND STRATEGY

Initiatives to close the gap created by the foreign currency fraud remain a strategic imperative and should come to fruition soon.

We remain cognisant of the need to explore further enhancements of our delivery channels and services offering and these will be continually pursed.

DIRECTORATE

Dr D T Hatendi resigned from the Board on 30 September 2007 and Mr J P de la Fargue and Mrs D J Sibanda also resigned from the Board on 7 December 2007 and 13 December 2007 respectively. Their wise counsel and valuable contributions to NMBZ Holding limited are greatly appreciated.

Subsequent to the financial year end, Mr Benefit Peter Washaya was appointed the Chief Executive Officer of NMBZ Holdings limited on 4 January 2008. Messrs C Chipato, B W Madzivire, M Mudukuti and Ms L Majonga were appointed to the Board on 31 January 2008. Mr T N Mundawarara was appointed to the Board on 11 February 2008 and Mr F S Mangozho was also appointed to the Board on 29 February 2008. I would like to wish all the new directors a very fruitful tenure.

APPRECIATION

I would like to thank our clients for their support and patience and the Monetary Authorities for their guidance during the year under review. I would also like to express my appreciation to my fellow Board members, management and staff for their commitment and dedication under very difficult conditions.

GIBSON MANYOWA MANDISHONA

CHAIRMAN

14 July 2008

NMBZ HOLDINGS LIMITED

CONSOLIDATED INCOME STATEMENTS

year ended 31 December 2007

		INFLATION ADJUSTED		HISTORICAL

	Note	2007	2006	2007	2006
		Z$ million	Z$ million	Z$ million	Z$ million

Interest income	4	42 119 567	28 487 105	4 410 968	18 338
Interest expense	5	(9 979 468)	(17 371 159)	(1 889 446)	(9 829)
Net interest income		32 140 099	11 115 946	2 521 522	8 509
Net foreign exchange (losses) gains		(2 204 778)	570 780	(849 219)	164
Non-interest income	6	8 682 062	4 378 735	4 717 315	4 703
Net operating income		38 617 383	16 065 462	6 389 618	13 376
Operating expenditure	7	(18 906 465)	(6 337 670)	(3 302 134)	(3 632)
Impairment losses on loans and advances		(96 749)	(83 150)	(96 749)	(125)
Loss on net monetary position		(20 930 962)	(8 553 523)	-	-

(Loss)/profit before taxation		(1 316 793)	1 091 119	2 990 735	9 619
Taxation	8	1 073 534	(482 613)	(226 955)	(2 285)
Financial institutions levy	8	(12 262)	(229 051)	(12 262)	(345)

(Loss)/profit for the year		(255 521)	379 456	2 7514 518	6 989



(Loss)/earnings per share (cents)

- Basic	10	(16 011)	34 482	172 409	635
- Headline	10	(93 462)	(177 054)	(57 362)	316
- Diluted basic	10	(15 474)	28 514	166 624	531
- Diluted headline	10	(90 326)	(147 876)	(55 437)	265

NMBZ HOLDINGS LIMITED

CONSOLIDATED BALANCE SHEETS

As at 31 December 2007

		INFLATION ADJUSTED		HISTORICAL

	Note	2007	2006	2007	2006
Shareholders' funds		Z$ million	Z$ million	Z$ million	Z$ million

Share capital	11	2 730 879	2 730 879	-	-
Capital reserves	11	12 087 343	9 453 071	6 581 976	897
Revenue reserves		(3 465 732)	(3 027 953)	2 648 149	7 205
Total shareholders' funds		11 352 490	9 155 997	9 230 125	8 102



Liabilities

Deposits and other accounts	12	30 404 378	25 625 554	29 193 863	38 644
Financial liabilities	13	2 524 705	8 258 740	2 524 705	12 454
Provision for current taxation		(6 698)	273 872	(6 698)	413
Acceptances		-	72	-	-
Deferred taxation		1 549 315	2 432 392	1 123 825	1 131
		45 824 190	45 746 627	42 065 820	60 744
Assets

Cash and cash equivalents	14	8 876 529	9 480 818	8 876 529	14 297
Financial assets at fair value through profit and loss	13	5 718 813	13 240 382	5 718 813	19 967
Available-for-sale securities	13	47 975	784 177	47 975	1 183
Financial assets held-to-maturity	13	1 274 973	4 661 390	1 274 973	7 029
Advances and other accounts	15	13 659 069	9 188 033	13 382 646	13 856
Customers' indebtedness for acceptances		-	72	-	-
Trade investment	16	1 343	4 211	1 343	6
Quoted and other investments		207 526	34 570	207 526	52
Investment properties	18	4 250 000	2 785 117	4 250 000	4 200
Property and equipment	19	11 787 962	5 576 857	8 306 015	154
		45 824 190	45 746 627	42 065 820	60 744

NMBZ HOLDINGS LIMITED

CONSOLIDATED INFLATION ADJUSTED STATEMENT OF CHANGES IN EQUITY

for the year ended 31 December 2007

		Capital Reserves					Revenue Reserves
	Share Capital Z$ million	Share Premium Z$ million	Statutory Reserve Z$ million	Capital Redemption Reserve Z$ million	Revaluation Reserve Z$ million	Other (note 11) Z$ million	Accumulated Profit/(loss) Z$ million	Total Z$ million

Balances at 1 January 2007	2 730 879	8 652 962	346 347	524 103	34 793	(105 134)	(3 027 953)	9 155 997
Loss for the year	-	-	-	-	-	-	(255 521)	(255 521)
Shares issued - scrip dividend	-	8 890	-	-	-	-	-	8 890
Shares issued - share options	-	58 117	-	-	-	(8 295)	-	49 822
Share-based payments - share issue	-	8 891	-	-	-	(8 891)	-	-
Share-based payments - share options	-	-	-	-	-	20 842	-	20 842
Additional impairment losses on loans and advances as per RBZ grading	-	-	-	-	-	-	(158 526)	(158 526)
Deferred tax on impairment losses on loans and advances	-	-	-	-	-	-	48 984	48 984
Fair value loss on available- for-sale securities	-	-	-	-	-	(583)	-	(583)
Deferred tax on available-for-sale securities	-	-	-	-	-	180	-	180
Revaluation of properties	-	-	-	-	3 006 025	-	-	3 006 025
Deferred tax on revaluation of properties	-	-	-	-	(450 904)	-	-	(450 904)
Dividends paid	-	-	-	-	-	-	(72 716)	(72 716)
	-------------	--------------	--------------	-------------	------------	----------	---------------	--------------
Balances at 31 December 2007	2 730 879	8 728 860	346 347	524 103	2 589 914	(101 881)	(3 465 732)	11 352 490
	========	========	=========	========	========	=======	=========	========

NMBZ HOLDINGS LIMITED

CONSOLIDATED INFLATION ADJUSTED STATEMENT OF CHANGES IN EQUITY

for the year ended 31 December

		Capital Reserves					Revenue Reserves
	Share Capital Z$ million	Share Premium Z$ million	Statutory Reserve Z$ million	Capital Redemption Reserve Z$ million	Revaluation Reserve Z$ million	Other (note 11) Z$ million	Accumulated Profit/(loss) Z$ million	Total Z$ million

Balances at 1 January 2006	2 730 609	7 173 342	346 347	524 103	34 793	20 112	(3 344 091)	7 785 215
Profit for the year	-	-	-	-	-	-	379 456	379 456
Shares issued - right issue	258	1 547 223	-	-	-	-	-	1 547 481
Shares issue expenses	-	(87 142)	-	-	-	-	-	(87 142)
Share issued - share options	12	19 539	-	-	-	(6 904)	-	12 647
Additional impairment losses on loans and advances as per RBZ grading	-	-	-	-	-	-	(91 632)	(91 632)
Deferred tax on impairment losses on loans and advances	-	-	-	-	-	-	28 314	28 314
Share-based payments - share issue	-	-	-	-	-	8 891	-	8 891
Share-based payments - share options	-	-	-	-	-	17 734	-	17 734
Fair value loss on available- for-sale securities	-	-	-	-	-	(209 794)	-	(209 794)
Deferred tax on available-for-sale securities	-	-	-	-	-	64 827	-	64 827
Dividends paid	-	-	-	-	-	-	-	-
	-------------	--------------	--------------	-------------	------------	----------	---------------	--------------
Balances at 31 December 2007	2 730 789	8 652 962	346 347	524 103	34 793	(105 134)	(3 027 953)	9 155 997
	========	========	=========	========	========	=======	=========	========

NMBZ HOLDINGS LIMITED

CONSOLIDATED HISTORICAL COST STATEMENT OF CHANGES IN EQUITY

for the year ended 31 December 2007

		Capital Reserves					Revenue Reserves
	Share Capital Z$ million	Share Premium Z$ million	Statutory Reserve Z$ million	Capital Redemption Reserve Z$ million	Revaluation Reserve Z$ million	Other (note 11) Z$ million	Accumulated Profit/(loss) Z$ million	Total Z$ million

Balances at 1 January 2007	-	1 076	-	-	34 793	(179)	7 205	8 102
Net profit for the year	-	-	-	-	-	-	2 751 518	2 751 518
Shares issued - share options	-	14 884	-	-	-	(6 932)	-	7 952
Shares issued - share based payments	-	13	-	-	-	(13)	-	-
Share issued - scrip dividend	-	974	-	-	-	-	(158 526)	974
Additional impairment losses on loans and advances as per RBZ grading	-	-	-	-	-	-	48 984	(158 526)
Deferred tax on impairment losses on loans and advances	-	-	-	-	-	-	-	48 984
Share-based payments - share options	-	-	-	-	-	20 842	-	20 842
Revaluation of properties					7 707 900	-		7 707 900
Deferred tax on revaluation of properties	-	-	-		(1 156 186)	-	-	(1 156 186)
Fair value loss on available- for-sale securities	-	-	-	-	-	(583)	-	(583)
Deferred tax on available-for-sale securities	-	-	-	-	-	180	-	180
Dividends paid	-	-	-	-	-	-	(1 032)	(1 032)
	-------------	--------------	--------------	-------------	------------	----------	---------------	--------------
Balances at 31 December 2007	-	16 947	-	-	6 551 714	(13 315)	2 648 149	9 230 125
	========	========	=========	========	========	=======	=========	========

NMBZ HOLDINGS LIMITED

CONSOLIDATED HISTORICAL COST STATEMENT OF CHANGES IN EQUITY

for the year ended 31 December 2006

		Capital Reserves					Revenue Reserves
	Share Capital Z$ million	Share Premium Z$ million	Statutory Reserve Z$ million	Capital Redemption Reserve Z$ million	Revaluation Reserve Z$ million	Other (note 11) Z$ million	Accumulated Profit/(loss) Z$ million	Total Z$ million

Balances as at 1 January 2006	-	85	-	-	-	2	311	398
Net profit for the year	-	-	-	-	-	-	6 989	6 989
Shares issued - rights issue	-	1 033	-	-	-	-	-	1 033
Shares issue expenses	-	(58)	-	-	-	-	-	(58)
Shares issued share options	-	16	-	-	-	(3)	-	13
Shares based payments - share issue	-	-	-	-	-	13	-	13
Shares based payments - share options	-	-	-	-	-	27	-	27
Fair value loss on available-for-sale securities	-	-	-	-	-	(316)	-	(316)
Deferred tax on available-for-sale securities	-	-	-	-	-	98	-	98
Additional impairment losses on loans and advances adjustments as per RBZ grading	-	-	-	-	-	-	(138)	(138)
Deferred tax on impairment losses on loans and advances	-	-	-	-	-	-	43	43
Dividends paid	-	-	-	-	-	-	-	-
	-------------	--------------	--------------	-------------	------------	----------	---------------	--------------
Balances at 31 December 2006	-	1076	-	-	-	(179)	7 025	8 102
	========	========	=========	========	========	=======	=========	========

NMBZ HOLDINGS LIMITED

CONSOLIDATED CASH FLOW STATEMENTS

for the year ended 31 December 2007

	INFLATION ADJUSTED		HISTORICAL

	2007	2006	2007	2006
CASH FLOWS FROM OPERATING ACTIVITIES	Z$ million	Z$ million	Z$ million	Z$ million

Profit before taxation and monetary position	19 614 169	9 644 642	2 990 735	9 619
Non-cash items
Loss/(profit) on disposal of property and equipment	13 145	(3 867)	(83 992)	(8)
Depreciation	915 425	502 369	14 340	11
Impairment losses on loans and advances	96 749	83 150	96 749	125
Impairment on non-financial assets	-	26 039	-	39
Share-based payments - share options	20 842	17 734	20 842	27
Investment properties	(1 464 883)	(2 051 522)	(4 245 800)	(4 120)
Trade Investments	2 868	14 720	(1 337)	(4)
Quoted and other investments	(172 956)	(13 697)	(207 474)	(50)
Loss on net monetary position	(20 930 962)	(8 553 523)	-	-

Operating cash flows before changes in operating
assets and liabilities	(1 905 603)	1 716 544	(1 415 937)	9 813
Changes in operating assets and liabilities
Financial liabilities	(5 734 034)	3 303 103	2 512 251	11 913
Deposits and other accounts	4 778 824	6 652 843	29 155 219	36 576
Advances and other accounts	(4 726 312)	258 870	(13 624 065)	(13 105)
Financial assets at fair value through profit and loss	7 521 569	(4 003 064 )	(5 698 846)	(18 958)
Financial assets held-to-maturity	3 386 417	(4 661 390 )	(1 267 944)	(7 029)
Available-for-sale securities	735 619	(674 735)	(47 375)	(1 464)

	4 056 480	541 671	9 613 303	13 572
Taxation
Corporate tax paid	(504 081)	(897 855)	(230 653)	(1 076)

Net cash inflow/ (outflow) from operating activities	3 552 399	(356 184)	9 382 650	12 496

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds on disposal of property and equipment	84 106	12 361	83 993	8
Purchase of property and equipment	(4 226 790)	(210 022)	(612 305)	(143)
Net cash outflow from investing activities	(4 142 684)	(197 661)	(528 312)	(135)
Net cash (outflow)/inflow before financing activities	(590 285)	(553 545)	8 854 338	12 361

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of shares - rights issue	-	1 460 339	-	974
Proceeds from issue of shares - scrip dividend	8 890	-	974	-
Proceeds from issue of shares - share options	49 822	12 647	7 952	14
Share-based payments - share issue	-	8 891	-	13
Dividends paid	(72 716)	-	(1 032)	-
Net cash (outflow)/inflow from financing activities	(14 004)	1 481 877	7 894	1 001
Net (decrease)/ increase in cash and cash equivalents	(604 289)	928 032	8 862 232	13 362
Cash and cash equivalents at beginning of year	9 480 818	8 552 786	14 297	935
Cash and cash equivalents at the end of the year (note 14)	8 876 529	9 480 818	8 876 529	14 297

NMBZ HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2007

__________________________________________________________________________________________________

NOTES TO THE FINANCIAL STATEMENTS

1. REPORTING ENTITY

The Company is incorporated and domiciled in Zimbabwe and is an investment holding company and its registered office is 64 Kwame Nkrumah Avenue, Harare. Its principal operating subsidiary is engaged in banking and other companies hold property. The details of the Bank's non-operating subsidiary are shown under note 'f' to the Bank's accounts. The consolidated financial statements of the bank as at and for the year ended 31 December 2007 comprise the bank and its subsidiaries.

BASIS OF PREPARATION

Statement of compliance

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs), and interpretations adopted by the International Accounting Standards Board, and the requirements of the Companies Act (Chapter 24:03) and the Banking Act (Chapter 24:20). The accounting policies have been consistently applied by the Group and use consistent with those used in the previous year.

The financial statements were approved by the Board of Directors on 14 July 2008.

Historical cost convention

The financial statements are prepared under the historical cost convention and adjusted to reflect the changes in general price levels in accordance with IAS 29, Financial Reporting in Hyperinflationary Economies except for quoted and other investments, investment property and financial instruments carried at fair value.

Functional and presentational currency

These consolidated financial statements are presented in Zimbabwe dollars, which is the Group's functional currency. Except as indicated, financial information presented in Zimbabwe dollars has been rounded to the nearest million.

Use of estimates and judgments

The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.

NMBZ HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2007

__________________________________________________________________________________________________

3. ACCOUNTING POLICIES

3.1 Inflation Accounting

The economy of Zimbabwe is considered to be a hyperinflationary economy. In order to comply with IAS 29, Financial Reporting in Hyperinflationary Economies, financial statements need to be expressed in terms of the measuring unit current at the balance sheet date. Accordingly, the accompanying financial statements, including comparatives, have been to account for changes in the general purchasing power of the Zimbabwe dollar. The restatement is based on the Consumer Price Index at the balance sheet date. The indices and conversion factors are derived from the inflation rates which are issued by the Central Statistical Office of Zimbabwe. The indices and conversion factors used were as follows:

Dates	Indices	Conversion factors
31 December 2007	441 490 130.80	1.00
31 December 2006	665 774.10	663.23
31 December 2005	48 205.62	9 158.45

3.2 Financial instruments

3.2.1 Classification

Financial assets and liabilities at fair value through profit and loss include financial assets and liabilities held for trading i.e. those that the Group principally holds for the purpose of short-term profit taking as well as those that were, upon initial recognition, are designated by the entity as financial assets or liabilities at fair value through profit and loss. There is no reclassification into or out of this category as per IAS 39.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market other than those classified as held-for-trading and the Group upon initial recognition designates as at fair value through profit or loss and those the Group upon initial recognition designates as available for sale.

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity that the Group has the positive intention and ability to hold to maturity.

Financial assets available-for-sale are non-derivative financial assts that are designated as available for sale or are not classified as loans and receivables, held-to-maturity investments or financial assets at fair value through profit or loss.

3.2.2 Recognition

The Group recognises financial assets at fair value through profit and loss and available for sale assets on the date it commits to purchase the assets. From this date any gains and losses arising from changes in fair value of the assets are recognised in the income statement and equity respectively.

Held-to-maturity investments and loans and receivables are recognised at cost which is the fair value of the consideration given on the day that they are transferred to the Group.

NMBZ HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2007

__________________________________________________________________________________________________

3.2.3 Measurement

Financial assets and liabilities are measured initially at fair value. Subsequent to initial recognition, financial assets and liabilities at fair value through profit and loss and available for sale financial assets are measured at fair value, except that any instrument that does not have a quoted market price in an active market and whose fair value cannot be reliably measured is stated at cost, less impairment losses.

Held-to-maturity investments and loans and receivables are measured at amortised cost less impairment losses. Amortised cost is calculated using the effective interest rate method. Premiums and discounts, including initial transaction costs, are included in the carrying amount of the related instrument and amortised based on the effective interest rate of the instrument.

3.2.4 Fair value measurement principles

The fair value of financial instruments is based on their quoted market price at the balance sheet date without any deduction for transaction costs. If a quoted market price is not available, the fair value of the instrument is estimated using pricing models or discounted cash flow techniques.

Where discounted cash flow techniques are used, estimated future cash flows are based on management's best estimates and the discount rate is a market related rate at the balance sheet date for an instrument with similar terms and conditions. Where pricing models are used, inputs are based on market related measures at the balance sheet date.

The fair value of derivatives that are not exchange-traded is estimated at the amount that the Group would receive or pay to terminate the contract at the balance sheet date taking into account current market conditions and the current credit worthiness of the counterparties.

3.3 Investment properties

Investment properties are stated at fair value. Gains and losses arising from a change in fair value of investment properties are recognized in the income statement.

Share - based payments

The Group issues share options to certain employees in terms of the Employee Share Option Scheme. Share options are measured at fair value at the date of grant. The fair value determined at the date of grant of the options is expensed on a straight-line basis over the vesting period, based on the Group's estimate of shares that will eventually vest. Fair value is measured using the Black-Scholes option pricing model. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and other behavioural considerations.

Property and equipment

International Accounting Standard 16 (IAS 16) stipulates that the residual value and the useful life of an asset must be reviewed at least each financial year-end. If the residual value of an asset increases by an amount equal to or greater than the asset's carrying amount, then the depreciation of the asset ceases. Depreciation will resume only when the residual value decreases to an amount below the asset's carrying amount.

NMBZ HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2007

__________________________________________________________________________________________________

INTEREST INCOME	INFLATION ADJUSTED			HISTORICAL

		2007	2006	2007	2006
		Z$ million	Z$ million	Z$ million	Z$ million
Cash and cash equivalents		1 150	20 666	342	6
Loans and advances to banks		797 887	233 742	80 599	236
Loans and advances to customers		17 280 880	8 680 550	2 372 548	3 764
Investment securities		24 036 108	19 550 278	1 957 248	14 331
Other		3 542	1 869	231	1
		42 119 567	28 487 105	4 410 968	18 338

5 INTEREST EXPENSE	INFLATION ADJUSTED			HISTORICAL

		2007	2006	2007	2006
		Z$ million	Z$ million	Z$ million	Z$ million
Statutory reserves		-	(1 105 687)		(121)
Trading activities		9 979 468	18 476 846	1 889 446	9 950
		9 979 468	17 371 159	1 889 446	9 829


	INFLATION ADJUSTED			HISTORICAL
		2007	2006	2007	2006
6. NON-INTEREST INCOME		Z$ million	Z$ million	Z$ million	Z$ million

Net gains from quoted and other
investments		172 956	33 058	208 811	50
Net commission and fee income		6 763 242	1 471 745	71 458	443
Fair value adjustment on investment properties		1 464 883	2 732 001	4 245 800	4 120
Fair value adjustment on trade investments		1 337	2 839	1 337	4
(Loss)/profit on disposal of property and equipment		(13 145)	3 867	83 991	-
Rent received		-	188	-	-
Other net operating income		292 789	135 037	105 918	78
		8 682 062	4 378 735	4 717 315	4 703

NMBZ HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2007

__________________________________________________________________________________________________

OPERATING EXPENDITURE

	INFLATION ADJUSTED		HISTORICAL

	2007	2006	2007	2006
	Z$ million	Z$ million	Z$ million	Z$ million
The operating profit is after charging the following:-
Administration costs	5 831 697	2 358 313	978 496	1 475
Depreciation	915 425	502 369	14 340	11
Staff costs	12 159 343	3 476 988	2 309 298	2 146
	18 906 465	6 337 670	3 302 134	3 632

TAXATION

	INFLATION ADJUSTED		HISTORICAL

	2007	2006	2007	2006
Tax Charge	Z$ million	Z$ million	Z$ million	Z$ million

Current taxation	205 128	722 071	205 128	1 089
Aids levy	6 154	21 656	6 154	33
Deferred tax (credit)/charge	(1 284 818)	(261 114)	15 673	1 163
	(1 073 534)	482 613	226 955	2 285
Financial institutions levy	12 262	229 051	12 262	345
Total taxation	(1 061 272)	711 664	239 217	2 630

NMBZ HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2007

__________________________________________________________________________________________________

9. IMPAIRMENT LOSSES ON LOANS AND ADVANCES

Impairment losses are applied to write off advances in part or in whole when they are considered wholly or partly irrecoverable. The aggregate impairment losses which are made during the year are dealt with as per paragraph 9.3.

9.1 Specific provisions

Specific provisions are made where the repayment of identified advances is in doubt and reflect estimates of the loss. Advances are written off against specific provisions once the probability of recovering any significant amounts becomes remote.

9.2 Portfolio provisions

The portfolio provision relates to the inherent risk of losses which, although not separately identified, is known to be present in any loan portfolio.

Regulatory Guidelines and International Accounting Standards requirements

The Banking Regulations 2000 gives guidance on provisioning for doubtful debts and stipulates certain minimum percentages to be applied to the respective categories of the loan book.

International Accounting Standard 39, Financial Instruments Recognition and Measurement (IAS 39), prescribes the provisioning for impairment losses based on the actual loan losses incurred in the past applied to the sectoral analysis of book debts and the discounting of expected cash flows on specific problem accounts.

The two prescriptions are likely to give different results. The Group has taken the view that where the IAS 39 charge is less than the amount provided for in the Banking Regulations, the difference is charged against equity and where it is more, the full amount will be charged to the income statement.

9.4 Non-performing loans

Interest on loans and advances is accrued to income until such time as reasonable doubt exists about its collectability, thereafter and until all or part of the loan is written off, interest continues to accrue on customers' accounts but is not included in income. Such suspended interest is deducted from loans and advances in the balance sheet. This policy meets the requirements of the Banking Regulations 2000 issued by the RBZ.

NMBZ HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2007

__________________________________________________________________________________________________

10. EARNINGS PER SHARE

The calculation of earnings per share is based on the following figures:

10.1 (Losses)/earnings

	INFLATION ADJUSTED		HISTORICAL

	2007	2006	2007	2006
	Z$ million	Z$ million	Z$ million	Z$ million

Basic	(255 521)	379 456	2 751 518	6 989
Headline earnings (note 10.4)	(1 491 588)	(1 945 417)	(915 450)	3 482

	INFLATION ADJUSTED		HISTORICAL
10.2 Number of shares	2007	2006	2007	2006

Weighted average shares in issue	1 595 928 299	1 100 130 612	1 595 928 299	1 100 130 612
Diluted number of shares	1 651 334 229	1 315 815 222	1 651 334 229	1 315 815 222

10. 3 (Loss)/earnings per share (cents)

	INFLATION ADJUSTED		HISTORICAL

	2007	2006	2007	2006

Basic	(16 011)	34 482	172 409	635
Headline	(93 462)	(177 054)	(57 362)	316
Diluted basic	(15 474)	28 514	166 624	531
Diluted headline	(90 326)	(147 876)	(55 437)	265

Headline (losses)/earnings

	INFLATION ADJUSTED		HISTORICAL

	2007	2006	2007	2006
	Z$ million	Z$ million	Z$ million	Z$ million

(Loss)/profit attributable to shareholders	(255 521)	379 456	2 751 518	6 989
Add/(deduct) non-recurring items:
- Loss/(profit) on disposal of property and equipment	13 145	(3 867)	(83 991)	(8)
- Fair value adjustment on investment properties	(1 464 883)	(2 732 001)	(4 245 800)	(4 120)
- Tax effect thereon	215 671	410 995	662 823	621
	(1 491 588)	(1 945 417)	(915 450)	3 482

NMBZ HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2007

__________________________________________________________________________________________________

11. SHARE CAPITAL

	HISTORICAL AND INFLATION ADJUSTED
	GROUP AND COMPANY
	2007	2006	2007	2006
11.1 Authorised	Shares	Shares	Z$ million	Z$ million
	Million	Million

Ordinary shares of Z$0.00025 each	2 250	2 250		-

11.2 Issued and fully paid	2007	2006	2007	2006
	Shares	Shares	Z$ million	Z$ million
	Million	Million

At 1 January	1 569	854	-	-
Shares issued - share options	39	27	-	-
Shares issued during the year - rights issue	-	688	-	-
At 31 December - Historical	1 608	1 569	-	-
Effect of IAS 29	-	-	2 730 879	2 730 879
At 31 December Inflation adjusted	1 608	1 569	2 730 879	2 730 879

Of the unissued ordinary shares of 641 840 941, options which may be granted in terms of the NMBZ 2005 Employee Share Option Scheme (ESOS) amount to 85 360 962 and out of these 10 670 869 had not been issued. As at 31 December 2006, 43 175 170 share options out of the issued had not been exercised.

Subject to the provisions of section 183 of the Companies Act (Chapter 24:03), the unissued shares are under the control of the directors.

11.3 Capital Reserves

	INFLATION ADJUSTED		HISTORICAL

	2007	2006	2007	2006
	Z$ million	Z$ million	Z$ million	Z$ million

Statutory reserve fund	346 347	346 347	-	-
Share premium	8 728 860	8 652 962	16 947	1 076
Capital redemption reserve	524 103	524 103	-	-
Revaluation reserve	2 589 914	34 793	6 551 714	-
Other	(101 881)	(105 134)	13 315	(179)
	12 087 343	9 453 071	6 581 976	897

NMBZ HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2007

11.4 Other Reserves
At 31 December 2007

	INFLATION ADJUSTED			HISTORICAL

	Available-for	Share option		Available-for	Share option
	-sale reserve	Reserve fund	Total	-sale reserve	Reserve fund	Total
	Z$ million	Z$ million	Z$ million	Z$ million	Z$ million	Z$ million

Balances at 1 January	(170 485)	65 351	(105 134)	(220)	41	(179)
Share issued -share options	-	(8 296)	(8 296)	-	(6 932)	(6 932)
Shares issued share -based payments	-	(8 891)	(8 891)	-	(13)	(13)
Fair value loss on available -for-sale securities	(583)	-	(583)	(583)	-	(583)
Deferred tax on available -for-sale securities adjustment	180	-	180	180	-	180
Share-based payments share options	-	20 843	20 843	-	20 843	20 843
Balance at 31 December	(170 888)	69 007	(101 881)	(623)	13 938	13 315

11.5 Other Reserves
At 31 December 2006

	INFLATION ADJUSTED			HISTORICAL

	Available-for	Share option		Available-for	Share option
	-sale reserve	Reserve fund	Total	-sale reserve	Reserve fund	Total
	Z$ million	Z$ million	Z$ million	Z$ million	Z$ million	Z$ million

Balances at 1 January	(25 518)	45 630	20 112	(2)	4	2
Share issued -share options	-	(6 904)	(6 904)	-	(3)	(3)
Shares-based payments -share issue	-	(8 891)	(8 891)	-	(13)	(13)
Fair value loss on available -for-sale securities	(209 794)	-	(209 794)	(316)	-	(316)
Deferred tax on available -for-sale securities adjustments	64 827	-	64 827	98	-	98
Balance at 31 December	(170 485)	65 351	(105 134)	(220)	41	(179)

NMBZ HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2007

12. DEPOSITS AND OTHER ACCOUNTS

12.1 Deposits and other accounts by type

	INFLATION ADJUSTED		HISTORICAL

	2007	2006	2007	2006
	Z$ million	Z$ million	Z$ million	Z$ million

RBZ Productive Sector Facility	6 560 420	5 394 732	6 560 420	8 135
Deposits from other banks	3 429 450	5 248 264	3 429 450	7 914
Other money market deposits	2 524 705	8 258 812	2 524 705	12 454
Current and deposit accounts	16 247 346	13 566 323	16 247 346	20 459
Total deposits	28 761 921	32 468 131	28 761 921	48 962
Trade and other creditors	4 167 162	1 416 163	2 956 647	2 136
	32 929 083	33 884	31 718 568	51 098
Less: Financial liabilities (note 13.1)	(2 524 705)	(8 258 740)	(2 524 705)	(12 454)
	30 404 378	25 625 554	29 193 863	38 644

Maturity analysis

	INFLATION ADJUSTED		HISTORICAL

	2007	2006	2007	2006
	Z$ million	Z$ million	Z$ million	Z$ million

Less than one month	28 754 367	32 289 677	28 754 367	48 693
1 to 3 months	7 506	177 808	7 506	268
3 to 6 months	48	622	48	1
6 months to 1 year	-	24	-	0
1 to 5 years	-	-	-	-
Over 5 years	-	-	-	-
	28 761 921	32 468 131	28 761 921	48 962

NMBZ HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2007

_____________________________________________________________________________________________

Sectoral analysis of deposits

	INFLATION ADJUSTED

	2007		2006
	Z$ million	%	Z$ million	%

Banks and other financial institutions	3 429 450	12	5 248 264	16
Reserve Bank of Zimbabwe	6 560 420	23	5 394 731	17
Transport and telecommunications companies	428 908	1	2 064 030	6
Mining companies	262 660	1	319 479	1
Industrial companies	10 127 715	35	12 475 299	38
Municipalities and parastatals	43 694	-	3 906	-
Individuals	4 478 243	16	2 761 080	9
Agriculture	3 365 316	12	2 651 308	8
Other deposits	65 515	-	1 550 034	5
	28 761 921	100	32 468 131	100

Sectoral analysis of deposits

HISTORICAL

	2007		2006
	Z$ million	%	Z$ million	%

Banks and other financial institutions	3 429 450	12	7 914	16
Reserve Bank of Zimbabwe	6 560 420	23	8 135	17
Transport and telecommunications companies	428 908	1	3 113	6
Mining companies	262 660	1	482	1
Industrial companies	10 127 215	35	18 813	38
Municipalities and parastatals	43 694	-	6	-
Individuals	4 478 243	16	4 164	9
Agriculture	3 365 316	12	3 998	8
Other deposits	65 515	-	2 337	5
	28 761 921	100	48 962	100

NMBZ HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2007

__________________________________________________________________________________________________

13. FINANCIAL INSTRUMENTS

Financial liabilities

		Fair	Inflation
	Cost	Value	Adjusted	Historical
	2007	2007	2006	2006
	Z$ million	Z$ million	Z$ million	Z$ million

Fixed term deposits	360 785	360 735	955 681	1 441
Negotiable Certificates of Deposits	1 082 113	1 082 113	4 920 935	7 421
Liabilities re-discounted	1 081 857	1 081 857	2 382 124	3 592
Total financial liabilities	2 524 705	2 524 705	8 258 740	12 454

Financial assets at fair value through profit and loss

Government and public sector securities	5 086 637	5 083 358	11 444 833	17 259
Treasury bills	5 079 987	5 077 251	11 361 362	17 133
Government stock	1 050	1 107	34 982	53
Mortgage bonds	5 000	5 000	48 488	73
Bills - own acceptances	624 000	635 455	1 795 549	2 708

Total financial assets at fair value through profit and loss	5 710 037	5 718 813	13 240 382	19 967

	INFLATION ADJUSTED		HISTORICAL

	2007	2006	2007	2006
	Z$ million	Z$ million	Z$ million	Z$ million

Fair value adjustment to profit and loss	8 919	1 212 787	8 919	1 829

Available-for-sale securities

	INFLATION ADJUSTED		HISTORICAL
	2007	2006	2007	2006
	Z$ million	Z$ million	Z$ million	Z$ million
Treasury bills (two-year bills)	147	402 387	147	607
Non-negotiable certificates of deposits	47 828	381 790	47 828	576
	47 975	784 177	47 975	1 183

NMBZ HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2007

__________________________________________________________________________________________________

13.4 Financial assets held-to-maturity

Financial sector stabilisation bonds

5 115

4 661 390

5 115

7 029

Insurance Bonds

1 269 858

1 274 973

4 661 390

1 274 973

7 029

13.5 Financial liabilities

	INFLATION ADJUSTED		HISTORICAL

	2007	2006	2007	2006
	Z$ million	Z$ million	Z$ million	Z$ million

Less than 1 month	2 517 151	8 080 286	2 517 151	12 185
1 to 3 months	7 506	177 808	7 506	268
3 to 6 months	48	623	48	1
6 months to 1 year	-	23	-	-
1 to 5 years	-	-	-	-
Over 5 years	-	-	-	-
	2 524 705	8 258 740	2 524 705	12 454

Financial assets at fair value through profit and loss

	INFLATION ADJUSTED		HISTORICAL

	2007	2006	2007	2006
	Z$ million	Z$ million	Z$ million	Z$ million

Less than 1 month	691 488	3 939 083	691 488	5 940
1 to 3 months	19 999	4 861 127	19 999	7 331
3 to 6 months	132 129	4 037 786	132 129	6 089
6 months to 1 year	4 875 197	402 386	4 875 197	607
1 to 5 years	-	-	-	-
Over 5 years	-	-	-	-
	5 718 813	13 240 382	5 718 813	19 967

NMBZ HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2007

__________________________________________________________________________________________________

Available-for-sale securities

	INFLATION ADJUSTED		HISTORICAL

	2007	2006	2007	2006
	Z$ million	Z$ million	Z$ million	Z$ million

Less than 1 month	3 735	-	3 735	-
1 to 3 months	-	-	-	-
3 to 6 months	9 207	2 379	9 207	4
6 months to 1 year	35 028	524 659	35 028	791
1 to 5 years	-	257 139	-	388
Over 5 years	-	-	-	-
	47 975	784 177	47 975	1 183

Financial assets held-to-maturity

	INFLATION ADJUSTED		HISTORICAL

	2007	2006	2007	2006
	Z$ million	Z$ million	Z$ million	Z$ million

Less than 1 month	-	-	-	-
1 to 3 months	-	-	-	-
3 to 6 months	-	-	-	-
6 months to 1 year	-	-	-	-
1 to 5 years	1 274 973	1 269 360	1 274 973	1 914
Over 5 years	-	3 392 010	-	5 115
	1 274 973	4 661 390	1 274 973	7 029

CASH AND CASH EQUIVALENTS

	INFLATION ADJUSTED		HISTORICAL

	2007	2006	2007	2006
	Z$ million	Z$ million	Z$ million	Z$ million

Statutory reserve	8 002 524	6 912 594	8 002 524	10 424
Current, nostro accounts and cash	874 005	2 568 224	874 005	3 873
Total cash and cash equivalents	8 876 529	9 480 818	8 876 529	14 297

The statutory reserve balance with the Reserve Bank of Zimbabwe is non-interest bearing. The balance is determined on the basis of deposits held and is not available to the Bank for daily use.

NMBZ HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2007

_____________________________________________________________________________________________

15. ADVANCES AND OTHER ACCOUNTS

	INFLATION ADJUSTED		HISTORICAL

	2007	2006	2007	2006
	Z$ million	Z$ million	Z$ million	Z$ million

15.1.1 Advances
Fixed term loans	6 267 978	5 577 569	6 267 978	8 411
Local loans and overdrafts	3 921 524	2 900 471	3 921 524	4 374
Other accounts	3 469 567	709 931	3 193 144	1 071
	13 659 069	9 188 033	13 382 646	13 856

15.1.2 Maturity analysis
Less than 1 month	4 478 070	3 238 708	4 478 070	4 885
1 to 3 months	8 081	241 694	8 081	364
3 to 6 months	980 236	343 544	980 236	518
6 months to 1 year	4 978 687	3 976 249	4 978 687	5 996
1 to 5 years	-	879 942	-	1 327
Over 5 years	-	-	-	-
Total advances	10 445 074	8 680 137	10 445 074	13 090
Provision for impairment losses on loans and advances	(255 572)	(198 665)	(255 572)	(300)
Suspended interest	-	(3 432)	-	(5)
	10 189 502	8 478 040	10 189 502	12 785
Other accounts	3 469 567	709 993	3 193 144	1 071
Total	13 659 069	9 188 033	13 382 646	13 856

Included in other accounts is the equivalent of an amount of US$1.8 million that was outstanding at 31 December 2003 and recorded as a foreign currency amount owing at the then market rate, which was the auction rate in January 2004 as reported in the financial statements at 31 December 2003. This amount was recovered and remitted to the RBZ in December 2004. The receipt was translated at Z$6 200 to the US$ as per an understanding with the RBZ at the time the money was received. Subsequent to the remittance, the RBZ offered settlement at Z$0.824 to the US$, being the historical rate prior to the introduction of the controlled foreign exchange auction system resulting in a loss to the Bank of $9.7 million . The Bank was informed in early 2006 that settlement was to be at a rate of Z$0.824 to the US$ and the current year results reflect this position. The Bank appealed against this ruling and discussions are being held with the Authorities.

NMBZ HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2007

__________________________________________________________________________________________________

15.2 Sectoral analysis of utilisations

INFLATION ADJUSTED


	2007		2006
	Z$ million	%	Z$ million	%

Industrials	2 086 031	20	288 700	3
Agriculture and horticulture	6 423 035	61	5 623 867	65
Conglomerates	424 191	4	773 288	9
Services	662 926	6	997 403	11
Mining	158 716	2	157 102	2
Food & Beverages	522 410	5	790 734	9
Other	167 765	2	49 043	1
	10 445 074	100	8 680 137	100

Sectoral analysis of utilisation

HISTORICAL

	2007		2006
	Z$ million	%	Z$ million	%

Industrials	2 086 031	20	435	3
Agriculture and horticulture	6 423 035	61	8 481	65
Conglomerates	424 191	4	1 166	9
Services	662 926	6	1 504	11
Mining	158 716	2	237	2
Food & Beverages	522 410	5	1 193	9
Other	167 765	2	74	1
	10 445 074	100	13 090	100

The material concentration of loans and advances are in the agricultural sector 61% (2006 - 65%)

15.4 Provisions for losses on loans and advances (including acceptances)

	INFLATION ADJUSTED
	2007			2006

	Specific	Portfolio	Total	Specific	Portfolio	Total
	Z$ million	Z$ million	Z$ million	Z$ million	Z$ million	Z$ million

At 1 January	23 086	175 579	198 665	395 280	35 014	430 294
Charge against profits	78 153	18 596	96 749	1 738	81 412	83 150
Charge against retained earning	-	158 526	158 526	-	91 632	91 632
Bad debts written off	(3)	-	(3)	(7 272 )	-	(7 272)
Monetary adjustment	(23 051)	(175 314)	(198 365)	(366 660)	(32 479)	(399 139)
At 31 December	78 185	177 387	255 572	23 086	175 579	198 665

NMBZ HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2007

_____________________________________________________________________________________________

15.5 Provisions for losses on loans and advances (including acceptances)

	HISTORICAL
	2007			2006
	Specific	Portfolio	Total	Specific	Portfolio	Total
	Z$ million	Z$ million	Z$ million	Z$ million	Z$ million	Z$ million

At 1 January	35	265	300	43	4	47
Charge against profits	78 153	18 596	96 749	3	123	126
Charge against retained earnings	-	158 526	158 526	-	138	138
Bad debts written off	(3)	-	(3)	(11)	-	(11)
At 31 December	78 185	177 387	255 572	35	265	300

15.6 Non-performing loans and advances

	INFLATION ADJUSTED		HISTORICAL

	2007	2006	2007	2006
	Z$ million	Z$ million	Z$ million	Z$ million

Total non performing loans and advances	78 185	26 518	78 185	40
Provision for impairment loss on loans and advances	(78 185)	(23 086)	(78 185)	(35)
Interest in suspense	-	(3 432)	-	(5)
	-	-	-	-

The residue on these accounts, where applicable, represents recoverable portions covered by realisable security.

TRADE INVESTMENT

	INFLATION ADJUSTED		HISTORICAL
	2007	2006	2007	2006
	Z$ million	Z$ million	Z$ million	Z$ million

Takura Ventures (Pvt) Ltd	1 164	2 698	1 164	4
Other	179	1 513	179	2
	1 343	4 211	1 343	6

NMBZ HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2007

__________________________________________________________________________________________________

NON-CURRENT ASSETS HELD-FOR-SALE

	INFLATION ADJUSTED		HISTORICAL
	2007	2006	2007	2006
	Z$ million	Z$ million	Z$ million	Z$ million

As at 1 January	-	367 255	-	40
Transfer from investment properties	-	-	-	-
Transfer to investment properties	-	(367 255)	-	(40)
At 31 December	-	-	-	-

As a result of pending legal proceedings, the previous decision to dispose the remainder of Lot H of Borrowdale Estate, owned by the Bank's wholly owned subsidiary, Carey Farm (Private) Limited, was put in abeyance and the property was reclassified back to investment property.

INVESTMENT PROPERTY

	INFLATION ADJUSTED		HISTORICAL
	2007	2006	2007	2006
	Z$ million	Z$ million	Z$ million	Z$ million

At 1 January	2 785 117	366 339	4 200	40
Reclassification from non-current assets held-for sale	-	367 255	-	40
Fair value adjustments	1 464 883	2 051 523	4 245 800	4 120
At 31 December	4 250 000	2 785 117	4 250 000	4 200

There was no rental income or operating expenses arising from investment properties in the current year.

The investment property comprise 2 properties namely Borrowdale Road Property and Borrowdale Estate. Borrowdale Road property which is also known as Stand Number 19207 Harare Township of stand 1 9206 measures 4 506 hectares in extent. The property was valued for year end purpose an independent and professional valuer and the open market value was Z$1 700 000 million.

The Borrowdale Estate which is also known as the remainder of lot H of Borrowdale Estate, owned by Carey Farm (Pvt) Ltd, a wholly owned subsidiary of the Bank was reclassified from non-current assets held-for-sale in 2006 per Note 23. The property measures 89.2623 hectares (223.16 acres) in extent. The beneficial interest in Carey Farm (Private) Limited arose from shareholding acquired in settlement of a debt owed to the Bank amounting to Z$10 008 000. The acquisition is in compliance with section 34 of the Banking Act (Chapter 24.20). The land was valued by a independent and professional valuer for the year end purposes and the open market value was Z$ 2 550.000 million.

NMBZ HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2007

__________________________________________________________________________________________________

PROPERTY AND EQUIPMENT

	INFLATION ADJUSTED		HISTORICAL

	2007	2006	2007	2006
	Z$ million	Z$ million	Z$ million	Z$ million

Cost	23 038 858	16 304 869	8 320 378	175
Accumulated depreciation	(11 250 896)	(10 728 012)	(14 363)	(21)
Net book value	11 787 962	5 567 857	8 306 015	154

CAPITAL COMMITMENTS

	INFLATION ADJUSTED		HISTORICAL

	2007	2006	2007	2006
	Z$ million	Z$ million	Z$ million	Z$ million

Capital expenditure authorised but not yet contracted for	20 643 579	2 276 593	20 643 579	3 433

CONTINGENT LIABILITIES

	INFLATION ADJUSTED		HISTORICAL

	2007	2006	2007	2006
	Z$ million	Z$ million	Z$ million	Z$ million

Guarantees	93 366	522 884	93 636	789
Commitments to lend	366 319	46 418	316 319	8 411
	459 955	522 884	459 955	9 200

22. EXCHANGE RATES

The following exchange rates have been used to translate the foreign balances to Zimbabwe dollars at period end:-

		31 Dec 2007	31 Dec 2006
		Z$	Z$
United States Dollar	USD1.00	322 500	250
British Sterling	GBP1.00	644 291	490

NMB BANK LIMITED

CONSOLIDATED INCOME STATEMENTS

for the year ended 31 December 2007

	INFLATION ADJUSTED		HISTORICAL
Note	2007	2006	2007	2006
	Z$ million	Z$ million	Z$ million	Z$ million

Interest income	42 119 567	28 487 105	4 410 965	18 338

Interest expense	(9 979 469)	(17 371 158)	(1 889 445)	(9 829)

Net interest income	32 140 098	11 115 947	2 521 523	8 509

Net foreign exchange (losses) gains	(2 204 777)	570 779	(849 219)	164
Non-interest income a	8 399 200	4 344 387	4 519 036	4 651

Net operating income	38 334 521	16 031 113	6 191 340	13 324
Operating expenditure b	(18 895 509)	(6 251 331)	(3 302 097)	(3 631)

Impairment losses on loans and advances	(96 749)	(83 150)	(96 749)	(125)

Loss on net monetary position	(20 664 567)	(8 550 010)	-	-

(Loss)/profit before taxation	(1 322 304)	1 146 622	2 792 494	9 568

Taxation	1 060 634	(505 878)	(217 127)	(2 283)

Financial institutions levy	(12 262)	(229 051)	(12 262)	(345)

(Loss)/profit for the year	(273 932)	411 693	2 563 105	6 940

(Loss)/earnings per share (cents):
- Basic c	(1 660 193)	2 541 315	15 533 969	42 840
- Headline c	(9 151 513)	(11 809 747)	(6 690 078)	21 191

NMB BANK LIMITED

CONSOLIDATED BALANCE SHEETS

As at 31 December 2007


		INFLATION ADJUSTED		HISTORICAL

		2007	2006	2007	2006
SHAREHOLDER'S FUNDS	Note	Z$ million	Z$ million	Z$ million	Z$ million

Share capital		1 283 141	1 283 141	-	-
Capital reserves		11 558 014	10 343 653	5 056 176	864
Revenue reserves		(3 180 612)	(2 724 422)	2 459 685	7 154
Total shareholder's funds		9 660 543	8 902 372	7 515 861	8 018

LIABILITIES

Deposits and other accounts		30 434 189	25 645 827	29 223 675	38 674
Financial liabilities		2 524 705	8 258 740	2 524 705	12 454
Amount owing to holding company		-	27	-	-
Provision for current taxation		(6 698)	273 836	(6 698)	413
Acceptances		-	72	-	-
Deferred taxation		1 245 835	2 352 544	849 995	1 130

		43 858 574	45 433 418	40 107 538	60 689
ASSETS

Cash and cash equivalents	e	8 876 529	9 480 818	8 876 529	14 297
Financial assets at fair value through profit and loss		5 718 813	13 240 382	5 718 813	19 967
Available-for-sale securities		47 975	748 177	47 975	1 183
Financial assets held-to-maturity		1 274 973	4 661 390	1 274 973	7 029
Advances and other accounts		13 659 068	9 188 198	13 382 645	13 856
Customers' indebtedness for acceptances		-	72	-	-
Quoted and other investments		10 585	1 606	10 585	2
Investment properties	g	4 250 000	2 785 117	4 250 000	4 200
Property and equipment	h	10 020 631	5 291 658	6 546 018	155
		43 858 574	45 433 418	40 107 538	60 689

NMB BANK LIMITED

CONSOLIDATED INFLATION ADJUSTED STATEMENT OF CHANGES IN EQUITY

for the year ended 31 December 2007

		Capital Reserves
	Share Capital Z$ million	Share Premium Z$ million	Statutory Reserve Z$ million	Revaluation Reserve Z$ million	Available for sale Reserve Z$ million	Retained Profit/(loss) Z$ million	Total Z$ million

Balances at 1 January 2007	1 283 141	10 140 593	346 347	27 201	(170 488)	(2 724 422)	8 902 372
Net loss for the period	-	-	-	-	-	(273 932)	(273 932)
Fair value loss on available for-sale-securities	-	-	-	-	(583)	-	(583)
Deferred tax on available-for- sale-securities	-	-	-	-	180	-	180
Additional impairment losses on loans and advances as per RBZ grading	-	-	-	-	-	(158 526)	(158 526)
Deferred for tax on impairment losses on loans and advances as per RBZ grading	-	-	-	-	-	48 984	48 984
Revaluation of properties	-	-	-	1 429 134	-	-	1 429 134
Deferred tax on revaluation of properties	-	-	-	(214 370)	-	-	(214 370)
Dividend paid	-	-	-	-	-	(72 716)	(72 716)
Balances at 31 December 2007	1 283 141	10 140 593	346 347	1 241 965	(170 891)	(3 180 612)	9 660 543

for the year ended 31 December 2006

Capital Reserves

Capital

Z$ million

Premium

Z$ million

Statutory

Reserve

Z$ million

Revaluation Reserve

Z$ million

Available for sale Reserve

Z$ million

Retained

Profit/(loss)

Z$ million

Total

Z$ million

Balances at 1 January 2006 as

1 283 140

8 641 904

346 347

27 201

(25 518)

(3 027 797)

7 200 277

Net profit for the period

411 693

Fair value loss on available-for-sale securities

(209 797)

Deferred tax on available- for-sale securities

64 827

Additional impairment

losses on loans and

advances as per

RBZ grading

(91 632)

Deferred tax for tax on

impairment losses on

loans and advances

28 314

Shares issued

1 498 689

1 498 690

Balances at 31 December 2006

1 283 141

10 140 593

346 347

27 201

(170 488)

(2 724 422)

8 902 372

NMB BANK LIMITED

CONSOLIDATED HISTORICAL STATEMENT OF CHANGES IN EQUITY

for the year ended 31 December 2007

		Capital Reserves
	Share Capital Z$ million	Share Premium Z$ million	Statutory Reserve Z$ million	Revaluation Reserve Z$ million	Available for sale Reserve Z$ million	Retained Profit/(loss) Z$ million	Total Z$ million

Balances at 1 January 2007	-	1 085	-	-	(221)	7 154	8 018
Net profit for the period	-	-	-	-	-	2 563 105	2 563 105
Fair value loss on available-for-sale securities	-	-	-		(583)	-	(583)
Deferred tax on available-for- sale securities	-	-	-	-	180	-	180
Additional impairment losses on loans and advances as per RBZ grading	-	-	-	-	-	(158 526)	(158 526)
Deferred tax on impairment losses on loans and advances	-	-	-	-	-	48 984	48 984
Shares issued	-	-	-	-	-	(1 032)	(1 032)
Revaluation of properties				5 947 900	-	-	5 947 900
Dividends paid	-	-	-	(892 185)	-	-	(892 185)
Balances at 31 December 2007	-	1 085	-	5 055 715	(624)	2 459 685	7 515 858

for the year ended 31 December 2006

		Capital Reserves
	Share Capital Z$ million	Share Premium Z$ million	Statutory Reserve Z$ million	Revaluation Reserve Z$ million	Available for sale Reserve Z$ million	Retained Profit/(loss) Z$ million	Total Z$ million

Balances at 1 January 2006	-	85	-	-	-	309	394
Net profit for the period	-	-	-	-	-	6 940	6 940
Fair value loss on available- For-sale securities	-	-	-	-	(319)	-	(319)
Deferred tax on available-for-sale securities Additional impairment losses on loans and advances as per RBZ gradings	- -	- -	- -	- -	98 -	- (138)	98 (138)
Deffered tax on impairment losses on loans and advances Shares issued	- -	- 1 000	- -	- -	- -	43 -	43 1 000
Dividend paid	-	-	-	-	-	-	-

Balances at 31 December 2006	-	1 085	-	-	(221)	7 154	8 018

NMB BANK LIMITED

CONSOLIDATED CASH FLOWS STATEMENTS

for the year ended 31 December 2007

	INFLATION ADJUSTED		HISTORICAL

	2007	2006	2007	2006
CASH FLOWS FROM OPERATING ACTIVITIES	Z$ million	Z$ million	Z$ million	Z$ million

Profit before taxation and monetary position	19 342 263	9 696 632	2 792 494	9 568
Non-cash items
Loss/(profit) on disposal of property and equipment	13 145	(3 867)	(83 992)	(8)
Depreciation	829 699	416 845	14 340	11
Impairment losses on loans and advances	96 749	83 150	96 749	125
Impairment on non-financial assets	-	26 039	-	39
Investment properties	(1 464 883)	(2 051 522)	(4 245 800)	(4 120)
Quoted and other investments	(8 979)	(828)	(10 583)	(2)
Amount owing to Holding Company	(27)	(340)		-
Loss on net monetary position	(20 664 567)	(8 550 010 )	-	-
Operating cash flows before changes in operating
assets and liabilities	(1 856 600)	1 668 789	(1 436 792)	9 735
Changes in operating assets and liabilities
Financial liabilities	(5 734 035)	3 803 103	2 512 251	11 913
Deposits and other accounts	4 788 362	6 689 197	29 185 001	36 604
Financial assets at fair value through profit and loss	7 521 569	(4 003 064)	(5 698 846)	(18 958)
Financial assets held-to-maturity	3 386 417	(4 661 390)	(1 267 944)	(7 029)
Available-for-sale securities	735 619	(674 735)	(47 375)	(1 464)
Advances and other accounts	(4 726 145)	255 647	(13 624 064)	(13 106)

	4 115 187	524 857	9 622 231	13 575
Taxation
Corporate tax paid	(504 076)	(897 854)	(230 655)	(1 077)

Net cash (outflow)/inflow from operating activities	3 611 111	(372 997)	9 391 576	12 498

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds on disposal of property and equipment	84 106	12 361	83 993	8
Purchase of property and equipment	(4 226 790)	(210 022)	(612 305)	(143)
	--------------	-------------	-------------	-------------
Net cash outflow from investing activities	(4 142 684)	(197 661)	(528 312)	(135)
	----------------	-------------	--------------	-------------
Net cash (outflow)/inflow before financing activities	(531 573)	(570 658)	8 863 264	12 363
	----------------	-------------	-------------	--------------

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of shares	-	1 498 690	-	1 000
Dividends paid	(72 716)	-	(1 032)	-

Net cash (outflow)/inflow from financing activities	(72 716)	1 498 690	(1 032)	1 000
Net (decrease)/increase in cash and cash equivalents	(604 289)	928 032	8 862 232	13 363
Cash and cash equivalents at beginning of the year	9 480 818	8 552 786	14 297	934
Cash and cash equivalents at the end of the year (note e)	8 876 529	9 480 818	8 876 529	14 297

NMB BANK LIMITED

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2007

NOTES TO THE FINANCIAL STATEMENTS (NMB BANK LIMITED)

There are no material differences between the Bank and the Holding company as the Bank is the principal operating subsidiary of the Group. The notes to the financial statements under NMBZ Holdings Limited are therefore the same in every material respect.

a. NON-INTEREST INCOME

		INLATION ADJUSTED		HISTORICAL

	2007		2006	2007	2006
	Z$ million		Z$ million	Z$ million	Z$ million

Net gains from quoted and other investments	10 583		1 550	10 583	2
Investment property fair value adjustment	1 464 883		2 732 001	4 245 800	4 120
Net commission and fee income	6 644 090		1 471 745	72 744	443
(Loss)/Profit on disposal of property and equipment	(13 145)		3 867	83 991	8
Other net operating income	292 789		135 225	105 918	78
	8 399 200		4 344 387	4 519 036	4 651

b. OPERATING EXPENDITURE

		INFLATION ADJUSTED		HISTORICAL

The operating profit is after	2007		2006	2007	2006
charging the following:	Z$ million		Z$ million	Z$ million	Z$ million
Administration costs	5 906 467		2 357 498	978 459	1 474
Depreciation	829 699		416 845	14 340	11
Staff costs	12 159 343		3 476 988	2 309 298	2 146

Total	18 895 509		6 251 331	3 302 097	3 631

EARNINGS PER SHARE

The calculation of earnings per share is based on the following figures:

c.1 (Losses)/earnings

		INFLATION ADJUSTED		HISTORICAL

	2007		2006	2007	2006
	Z$ million		Z$ million	Z$ million	Z$ million

Basic	(273 932)		411 693	2 563 105	6 940
Headline earnings (note c.4)	(1 509 999)		(1 913 180)	(1 103 864)	3 433

NMB BANK LIMITED

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2007

c.2 Number of shares (million)

	INFLATION ADJUSTED		HISTORICAL

2007		2006	2007	2006

Weighted average shares in issue

16.5

16.2

16.5

16.2

c.3 (Loss)/earnings per share (cents)


Basic	(1 660 193)	2 541 315	15 533 969	42 840
Headline	(9 151 513)	(11 809 747)	(6 690 078)	21 191

c.4 Headline (losses)/earnings

		INFLATION ADJUSTED		HISTORICAL
The adjustments are as follows
	2007		2006	2007	2006
	Z$ million		Z$ million	Z$ million	Z$ million

(Loss)/profit attributable to shareholders	(273 932)		411 693	2 563 105	6 940
Add/(deduct) non-recurring items:
- (Loss)/profit on disposal of property and equipment	13 145		(3 867)	(83 992)	(8)
- Fair value adjustment on investment properties	(1 464 883)		(2 732 001)	(4 245 800)	(4 120)
- Tax effect thereon	215 671		410 995	662 823	620
	(1 509 999)		(1 913 180)	(1 103 864)	3 432

d. SHARE CAPITAL

d.1 Authorised

The authorised ordinary share capital at 31 December 2007 is at the historical cost figure of Z$ 50 000 (2006 - Z$50 000) comprising 25 million ordinary shares of Z$0.002 each.

d.2 Issued fully paid

The issued share capital at 31 December 2007 is at the historical cost figure of Z$33 000

(2006 - Z$33 000) comprising 16.5 million (2006 - 16. 5 million) ordinary shares of Z$0.002 each.

NMB BANK LIMITED

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2007

CASH AND CASH EQUIVALENTS

		INFLATION ADJUSTED		HISTORICAL

	2007		2006	2007	2006
	Z$ million		Z$ million	Z$ million	Z$ million

Statutory reserve	8 002 524		6 912 594	8 002 524	10 424
Current, Nostro accounts and cash	874 005		2 568 224	874 005	3 873
Total cash and cash equivalents	8 876 529		9 480 818	8 876 529	14 297

INVESTMENT PROPERTY

		INFLATION ADJUSTED		HISTORICAL

	2007		2006	2007	2006
	Z$ million		Z$ million	Z$ million	Z$ million

Borrowdale Estate property	1 700 000		1 790 432	1 700 000	2 700
Borrowdale Road Property	2 550 000		994 685	2 550 000	1 500
	4 250 000		2 785 117	4 250 000	4 200

There was no rental income or operating expenses arising from investment properties in the current year.

The Borrowdale Road property Stand Number 19 207 Harare Township of Stand 19 206 measuring 4.4506 hectares in extent. The property was valued for year end purposes on 3 April 2008 by an independent and professional valuer and the open market value was Z$2 550 000 million.

The remainder of Lot H Borrowdale Estate, owned by Carey Farm (Pvt) Ltd, a wholly owned subsidiary of the Bank measures 89.2623 hectares (223.16 acres) in extent. The beneficial interest in Carey Farm (Private) Limited arose from shareholding acquired in settlement of a debt owed to the Bank amounting to Z$10 008 000. The acquisition is in compliance with Section 34 of the Banking Act (Chapter 24:20). The land was valued by an independent and professional valuer on 3 April 2008 for year end purposes and the open market was Z$1 700 000 million.

PROPERTY AND EQUIPMENT

		INFLATION ADJUSTED		HISTORICAL

	2007		2006	2007	2006
	Z$ million		Z$ million	Z$ million	Z$ million

Cost	20 816 977		15 658 928	6 560 378	175
Accumulated depreciation	(10 796 346)		(10 367 270)	(14 360)	(20)
Net book value	10 020 631		5 291 6568	6 546 018	155

NMB BANK LIMITED

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2007

CORPORATE GOVERNANCE AND RISK MANAGEMENT

1. RESPONSIBILITY

These financial statements are the responsibility of the directors. This responsibility includes the setting up of internal control and risk management processes, which are monitored independently.

2. CORPORATE GOVERNANCE

The Group adheres to principles of corporate governance derived from the King II Report, the United Kingdom Combined Code and RBZ corporate governance guidelines. The Group is cognisant of its duty to conduct business with due care and in good faith in order to safeguard all stakeholders' interests.

3. BOARD OF DIRECTORS

Board appointments are made to ensure a variety of skills and expertise on the Board. Non-executive directors are of such calibre as to provide independence to the Board. The Chairman of the Board is an independent non-executive director. The Board is supported by mandatory committees in executing its responsibilities. The Board meets at least quarterly to assess risk, review performance and provide guidance to management on both operational and policy issues.

4. RISK MANAGEMENT

In the ordinary course of business the Bank manages risks of all forms risks. The risks are identified and monitored through various channels and mechanisms.

The Board of Directors has overall responsibility for the establishment and oversight of the Bank's risk management framework. The Board has established the Asset and Liability Management Committe (ALCO) and Operational Risk Committee, which are responsible for developing and monitoring Bank risk management policies in their specified areas. The Bank has a Risk Management department, which reports to the Chief Executive Officer and is responsible for the management of the overall risk profile.

The Bank's risk management policies are established to identify and analyse the risks faced by the Bank, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions, products and services offered.

The Bank Audit Committee which is responsible for monitoring compliance with the Banks risk management policies and procedures, and for reviewing the adequacy of the risk management framework in relation to the risks faced by the Bank, is assisted in these functions by Internal Audit. Internal Audit undertakes both regular and ad-hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.

The Bank's main objective is to contain the risk inherent within the financial services sector and to ensure that the Bank's various risk profiles are understood and appropriately managed to the benefit of customers, shareholders and other stakeholders.

NMB BANK LIMITED

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2007

4.1 Credit risk

Credit risk is the risk that a financial contract will not be honoured according to the original set of terms. The risk arises when borrowers or counterparties to a financial instrument fail to meet their contractual obligations. The Board has put in place sanctioning committees which operate according to the amount requested by an applicant. The Risk Management department reviews all applications. This initial review allows only those applications that do not unduly expose the Bank to credit risk to be considered by the sanctioning committees.

Management of credit risk

The Board has delegated responsibility for the management of credit risk to its Loans Review Committee. The Risk Management department which also reports to the Loan Review Committee is responsible for oversight of the Bank's credit risk, including:

Formulating credit policies in consultation with business units, covering collateral requirements, credit assessment, risk grading and reporting, documentary and legal procedures, and compliance with regulatory and statutory requirements
Establishing the authorization structure for the approval and renewal of credit facilities. Facilities require authorization by Head of Risk, Executive directors, Loans Review Committee or the Board of Directors depending on amount as per set limits.
The Credit Risk department assesses all Credit exposures in excess of designated limits, prior to facilities being committed to clients by the business unit corncerned. Renewals and reviews of facilities are subject to the same review process.
Limiting concentrations of exposure to counter parties and industry for loans and advances.
Maintaining and monitoring the risk gradings as per the RBZ requirement in order to categorise exposures according to the degree of risk of financial loss faced and to focus management on the attendant risks. The current risk grading framework consists of five grades reflecting varying degrees of risk of default and the availability of collateral or other credit risk mitigation.
Reviewing compliance of business units with agreed exposure limits, including those for selected industries.
Providing advice, guidance and specialist skills to business units to promote best practice throughout the Bank in the management of credit risk.

4.2 Market risk

This arises from adverse movements in the market place, which occur in the money market (interest rate risk), foreign exchange and equity markets in which the Bank operates. The Bank is currently developing VaR (Value at Risk) model which will be used to manage and monitor the market risk for the trading portfolio.

The Bank has in place an Asset and Liability Management Committee (ALCO), which comprises the departmental heads of Risk, Treasury, Corporate and Retail banking and Finance, in addition to executive directors. The committee monitors these risks and recommends the appropriate levels to which the Bank should be exposed at any time. The approval of all dealing limits ultimately rests with this committee.

The market risk for the non - trading portfolio is managed by monitoring the sensitivity of Bank's financial assets and liabilities to various interest rate scenarios.

NMB BANK LIMITED

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2007

4.3 Liquidity risk

Liquidity risk is the risk that operations cannot be funded and financial commitments cannot be met timeously. The risk arises when there is a maturity mismatch between assets and liabilities. The Bank dentifies this risk through maturity profiling of assets and liabilities and assessment of excepted cashflows and the availability of collateral which could be used additional funding if required.

The Bank maintains a portfolio of marketable assets that can be easily liquidated in the event of an unforeseen interruption of cash flow. The Bank maintains a statutory deposit with the Central Bank at stipulated rates. As at 31 December 2007 these rates were 45% for time liabilities and 50% for demand liabilities. The daily liquidity position is monitored and regular liquidity stress testing is conducted under a variety of scenarios covering both normal and more severe market conditions. All liquidity policies and procedures are subject to review and approval by ALCO.

The key measure used by the Bank for managing liquidity risk is the ratio of net liquid assets to deposits to customers. The Bank monitors its liquidity ratio in compliance with Banking Regulations to ensure that it is not less than 10% of the liabilities to the public. Liquid assets consist of cash and cash equivalents, short term bank deposits and liquid investment securities available for immediate sale.

4.4 Operational risk

This risk is inherent in all business activities and is the potential for loss arising from ineffective internal controls, poor operational procedures to support these controls, errors and deliberate acts of fraud. The mitigation of the risk and the cost incurred to reduce the risk is critical. The Board has an Audit Committee whose function is to ensure that this risk is minimised. The Audit Committee through the internal audit function assesses the adequacy of the internal controls and makes the necessary recommendations to the Board.

4.5 Legal and Compliance risk

Legal risk is risk from uncertainty due to legal actions or uncertainty in the applicability or interpretation of contracts, laws or regulations. Legal risk may entail such issues as contract formation, capacity and contract frustration. Compliance risk is the risk arising from non - compliance with laws and regulations.

To manage this risk the Bank employs a legal practitioner who is responsible for the drafting, monitoring and executing all contracts. Permanent relationships are also maintained with firms of legal practitioners and access to legal advice is readily available to all departments. The compliance function is also responsible for identifying and monitoring legal and compliance risks and ensuring that the Bank remains in compliance with all regulatory requirements.

4.6 Reputational risk

Reputational risk is the risk of loss of business as a result of negative publicity or negative perceptions by the market with regards to the way the Bank conducts its business.

To manage this risk, the Bank strictly monitors customers' complaints, continuously train staff at all levels, conducts market surveys and periodic reviews of business practices through its internal audit department.

The directors are satisfied with the risk management processes in the Bank as these have contributed to the minimisation of losses arising from risky exposures.

NMB BANK LIMITED

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2007

Risk Ratings

Camels* Ratings

CAMELS Component	Latest RBS** Ratings 30/06/2007	Previous RBS Ratings 30/06/2006	Previous RBS Ratings 30/06/2003
Capital Adequacy	4	3	1
Asset Quality	3	4	2
Management	4	4	2
Earnings	3	4	1
Liquidity	3	4	1
Sensitivity to Market Risk	3	4	-
Composite Rating	4	4	1

*CAMELS is an acronym for Capital Adequacy, Asset quality, Management, Earnings, Liquidity and Sensitivity to Market Risk. CAMELS rating system uses a rating scale of 1-5, where '1' is Strong, '2' is Satisfactory, '3' is Fair, '4' is Weak and '5' is Critical.

**RBS stands for Risk-Based Supervision

4.7.2 Summary RAS ratings

RAS Component	Latest RAS*** Ratings 30/06/2007	Previous RBS Ratings 30/06/2006	Previous RBS Ratings 30/06/2003
Overall Inherent Risk	High	High	NR
Overall Risk Management Systems	Weak	Weak	NR
Overall Composite Risk	High	High	NR
Direction of Overall Composite Risk	Increasing	Increasing	NR

*** RAS stands for Risk Assessment System.

NR - risk ratings only commenced from 30/06/2006 on-site inspections.

4.7.3 Summary risk matrix -30 June 2007 on - site examination

Type of Risk	Level of Inherent Risk	Adequacy of Risk Management Systems	Overall Composite Risk	Direction of Overall Composite Risk
Credit	Moderate	Acceptable	Moderate	Stable
Liquidity	Moderate	Acceptable	Moderate	Increasing
Interest Rate	Moderate	Acceptable	Moderate	Stable
Foreign Exchange	High	Acceptable	High	Increasing
Strategic Risk	Moderate	Acceptable	Moderate	Increasing
Operational Risk	High	Weak	High	Increasing
Legal & Compliance	High	Acceptable	High	Increasing
Reputation	Moderate	Acceptable	Moderate	Increasing
Overall	High	Weak	High	Increasing

NMB BANK LIMITED

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2007

KEY

Level of Inherent Risk

Low - reflects a lower than average probability of an adverse impact on a banking institution's capital and earnings. Losses in a functional area with low inherent risk would have little negative impact on the banking institution's overall financial condition.

Moderate - could reasonably be expected to result in a loss which could be absorbed by a banking institution in the normal course of business.

High - reflects a higher than average probability of potential loss. High inherent risk could reasonably be expected to result in a significant and harmful loss to the banking institution.

Adequacy of Risk Management Systems

Weak - risk management systems are inadequate or inappropriate given the size, complexity and risk profile of the banking institution. Institution's risk management systems are lacking in important ways and therefore a cause of more than normal supervisory attention. The internal control systems will be lacking in important aspects particularly as indicated by continued control exceptions or by the failure to adhere to written policies and procedures.

Acceptable - management of risk is largely effective but lacking to some modest degree. While the institution might be having some minor risk management weaknesses, these have been recognized and are being addressed. Management information systems are generally adequate.

Strong - management effectively identifies and controls all types of risk posed by the relevant functional areas or per inherent risk. The board and senior management are active participants in managing risk and ensure appropriate policies and limits are put in place. The policies comprehensively define the bank's risk tolerance, responsibilities and accountabilities are effectively communicated.

Overall Composite Risk

Low - would be assigned to low inherent risk areas. Moderate risk areas may be assigned a low composite risk where internal controls and risk management systems are strong and effectively mitigate much of the risk.

Moderate - risk management systems appropriately mitigates inherent risk. For a given low risk area, significant weakneses in the risk management systems may result in a moderate composite risk assessment. On the other hand, a strong risk management system may reduce the risk so that any potential financial loss from the activity would have only a moderate negative impact on the financial condition of the organization.

High - risk management systems do not significantly mitigate the high inherent risk. Thus, the activity could potentially result in a financial loss that would have a significant impact on the bank's overall condition.

Direction of Overall Composite Risk

Increasing - based on the current information, risk is expected to increase in the next 12 months.

Decreasing - based on current information, risk is expected to decrease in the next 12 months.

Stable - based on the current information, risk is expected to be stable in the next 12 months.

NMB BANK LIMITED

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2007

4.7.4 External Credit Ratings

The external credit ratings were given by Global Credit Rating (GCR), a credit rating agency accredited with the Reserve Bank of Zimbabwe.

Security class 2005 2006 2007

Short-term N/A A3 NR

Long term N/A BBB- BBB-*

* the rating was withdrawn after the discovery of the US$6.4 million forex fraud.

N/A - ratings only became mandatory in 2006.

NR - not rated.

REGULATORY COMPLIANCE

The Bank's foreign currency dealership licence was revoked by the Central Bank with effect from 15 May 2007 after the Bank was defrauded of US$6.4 million through a disposal of foreign currency without authority. The Group delayed to publish the 2007 financial statements which were supposed to be published within 3 months after year end and hence it has fined Z$ 10 million per day after this deadline. The Group remains committed to complying with and adhering to all regulatory requirements.

CAPITAL MANAGEMENT

The primary objective of the Bank's capital management is to ensure that the Bank complies with the RBZ requirements. In implementing the current capital requirements, the RBZ requires the Bank to maintain a prescribed ratio of total capital to total risk weighted assets.

Regulatory capital consists of Tier 1 capital, which comprises share capital, share premium, retained earnings (including current year profit), statutory reserve and other equity reserves.

The other component of regulatory capital is Tier 2 capital, which includes subordinated term debt, revaluation reserves and portfolio provisions.

Tier 3 capital relates to an allocation of capital to market and operational risk.

Various limits are applied to elements of the capital base. The core capital (Tier 1) shall compromise not less than 50% of the capital base and portfolio provisions are limited to 1.25% of total risk weighted assets.

NMB BANK LIMITED

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2007

CAPITAL ADEQUACY

HISTORICAL

	2007	2006
	Z$ million	Z$ million

Share capital	-	-
Share premium	1 085	1 085
Retained earnings	2 459 685	7 153
Statutory reserve	-	-

	2 460 770	8 238
Less: Capital allocated for market and operational risk	(186 465)	(775)
Credit to insiders	-	(111)

Tier 1 capital	2 274 305	7 352
Tier 2 capital (subject to limit as per Banking Regulations)	2 274 305	78
Revaluation reserves	2 022 118	-
Available for sale	(624)	(221)
Subordinated debt	-	-
Portifolio provisions (limited to 1.25% of risk weighted assets)	252 811	299

Total tier 1 & 2 capital	4 548 610	7 430
Tier 3 capital (sum of market and operational risk capital)	186 465	775
Total capital base	4 735 075	8 205

Total risk weighted assets	23 433 478	27 332

Tier 1 ratio	9.71%	26.90%
Tier 2 ratio	9.71%	0.29%
Tier 3	0.80%	2.84%
Total capital adequacy ratio	20.21%	30.02%

NMB BANK LIMITED

NOTES TO THE FINANCIAL STATEMENTS

year ended 31 December 2007

NON - ADJUSTING POST BALANCE SHEET EVENTS

i. Subsequent to the balance sheet date for the year ended 31 December 2006, a fraud involving about US$6.4 million was uncovered wherein foreign currency was disposed of by a bank official for Zimbabwe dollars at the then ruling official exchange rate of ZW$250 to the US$, without authority. This subsequently resulted in the revocation of the bank's foreign currency dealership licence by the Reserve Bank of Zimbabwe with effect from 15 May 2007. The revocation did not affect the local currency banking operations. The foreign currency dealership licence was restored with effect from 1 June 2008.

An amount of US$2.6 million of the total funds defrauded belonged to the bank's clients and the balance was the bank's own funds. The fraud has no accounting effect on the financial statements for the year ended 31 December 2006 as value was received at the official exchange rate of ZW$250 to the US$, the amount at which the asset was carried in the financial statements. The bank had a net foreign currency deficit position as at 31 December 2006 of ZW$64 million as shown on note 24.1. It is intended that the US$2.6 million (ZW$1 418 million) net liability will be met by any recoveries of the misappropriated foreign currency and shareholder injections anticipated from a plan the Board has put in place, the details of which will be made available in separate circular to shareholders.

As at 31 December 2007, for financial reporting purposes, the US$ exchange rate of 322 500 was applied in the bank's financial statements and the cumulative foreign exchange losses for 2007 (ZW$849.2 billion) and for the six months ended 30 June 2008 (ZW$30.65 quadrillion) amounted to ZW$30.7 quadrillion and these were accounted for in the respective financial years. The foreign exchange market was liberalised on 2 May 2008. Subsequently, as at 30 June 2008, the US$ exchange rate was $11.3 billion on the interbank market and the foreign exchange losses have increased in line with the changes in the interbank rates. These increases after the year end represent non adjusting events and have not been accounted for in the financial statements for the years ended 31 December 2006 and 31 December 2007.

The directors are of the view that with the restoration of the bank's foreign currency dealership licence, the Bank will continue in operational existence for the foreseeable future. The unaudited management accounts at 30 June 2008 indicate that the bank's total assets exceed its total liabilties.

ii. Subsequent to the year end there has been a significant increase in the fair value of investment property. This arises from changes in the macro economic fundamentals.

iii. There has also been a devaluation of the Zimbabwean dollar following the introduction of the interbank

market. The interbank exchange rate to the US dollar on 30 June 2008 was Z$11.3 billion compared

to the multiplier exchange rate used at year end of Z$322 500 to the US dollar.

NMBZ HOLDINGS LIMITED

NOTICE TO MEMBERS

Notice is hereby given that the 12th Annual General Meeting of Members of NMBZ Holdings Limited will be held at the Registered Office of the Company at 4th Floor Unity Court, Cnr 1st Street/Kwame Nkrumah Avenue, Harare on Thursday, 25 September 2008 at 14:30 hours for the following purposes:

ORDINARY BUSINESS

1. To receive and adopt the Financial Statements for the year ended 31 December 2006, together with the reports of the Directors and Auditors thereon.

2. To ratify the position of Directors.

In accordance with the Articles of Association, Mr B Ndachena who was appointed after the financial year-end was supposed to retire at the Annual General Meeting in 2007 and Messrs G Mandishona and D T Hatendi retiring by rotation offered themselves for re-election. There being no Annual General Meeting held the Directors continued holding office and that situation requires ratification.

3. To ratify the appointed Auditors for the 2007 year and to approve KPMG's remuneration for 2006.

Note: A member of the company entitled to attend and vote at this meeting is entitled to appoint a proxy to attend, speak and on a poll, vote in his stead. A proxy need not be a member of the company. Proxy forms should be forwarded to reach the office of the transfer secretaries at least 48 hours before the commencement of the meeting.

By Order of the Board

M B Narotam

Company Secretary

14 July 2008

NMBZ HOLDINGS LIMITED

NOTICE TO MEMBERS

Notice is hereby given that the 13th Annual General Meeting of Members of NMBZ Holdings Limited will be held at the Registered Office of the Company at 4th Floor Unity Court, Cnr 1st Street/Kwame Nkrumah Avenue, Harare on Thursday, 25 September 2008 at 14:30 hours for the following purposes:

ORDINARY BUSINESS

To receive and adopt the Financial Statements for the year ended 31 December 2007, together with the reports of the Directors and Auditors thereon.

To appoint Directors.

In accordance with the Articles of Association, Ms L Majonga, Messrs C Chipato, B W Madzivire, M Mudukuti, T N Mundawarara and B P Washaya, who were appointed after the financial year-end will retire at the forthcoming Annual General Meeting and Mr A M T Mutsonziwa retires by rotation. All the retiring directors offer themselves for re-election.

To appoint Auditors for the current year and to approve Messrs Ernst & Young's remuneration for the previous year.

By Order of the Board

M B Narotam

Company Secretary

14 July 2008

Registered Offices

1st Floor

Unity Court

Cnr 1st Street/Kwame Nkrumah Avenue

Harare

Zimbabwe

NMB Centre

George Silundika Avenue/

Leopold Takawira Street

Bulawayo

Zimbabwe

Telephone

Facsimile

+263 4 759651

+263 4 759648

+263 9 70169

+263 9 68535

Website:

http://www.nmbz.co.zw

Email:

enquiries@nmbz.co.zw

Transfer Secretaries

In Zimbabwe

First Transfer Secretaries

4th Floor, Gold Bridge North

Eastgate Building

Cnr. Second Street

P O Box 11

Harare

Zimbabwe

In UK

Computershare Services PLC

36 St Andrew Square

Edinburgh

EH2 2YB

This information is provided by RNS

The company news service from the London Stock Exchange

END

FR FKDKBABKDNFK

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