cavmont capital holdings zambia plc · page 3 of 84 corporate information company secretary and...

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LNALewis Nathan AdvocatesLNALewis Nathan Advocates

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION.

The definitions commencing on page 8 of this Circular apply mutatis mutandis to this document including the cover page.

This Document is neither a prospectus nor an invitation to the public to subscribe for shares in Cavmont Capital Holdings Zambia Plc (“CCHZ” or “the Company”), but is an offer on a claw back basis to existing CCHZ shareholders, to acquire shares in the Company on the terms and conditions set out in this Circular.

Action Required:

This entire Circular is important and should be read with particular attention to page 5 entitled “Action required by CCHZ shareholders” which sets out the action required of them with regard to the Claw‐back Rights Offer;

If you are in any doubt as to the meaning of the contents of this Circular or as to the action you should take, please consult your accountant, bank manager, stockbroker or other professional advisor immediately;

If you no longer hold any shares in CCHZ, then you should send this Circular, as soon as possible, to the stockbroker through whom the sale of your shareholding in CCHZ was effected for onward transmission to the purchaser or transferee of those CCHZ shares;

Letters of Allocation (“LAs”) may only be traded in dematerialised form and accordingly CCHZ has issued all Letters of Allocation in dematerialised form.

CAVMONT CAPITAL HOLDINGS ZAMBIA PLC

(Incorporated in the Republic of Zambia, Company Registration Number: 41902) Share Code: CCHZ

ISIN: ZM0000000227 (“Cavmont” or “the Company”)

CIRCULAR TO SHAREHOLDERS

Regarding a

RENOUNCEABLE CLAW‐BACK RIGHTS OFFER Of 64,285,714,286 ordinary shares of ZMK 1.00 (one Zambian Kwacha) par value each in the share capital of CCHZ (“Claw ‐back Rights Offer

Shares”), at a subscription price of ZMK 1.40 per Claw‐back Rights Offer Share (“Claw‐back Offer Price”), on the basis of 90 (ninety) new

Claw‐back Rights Offer Shares for every 7 (seven) ordinary shares already held as at the Record Date, payable in full on acceptance;

and incorporating:

the information required for a Pre‐Listing Statement for the purposes of providing information to the public on CCHZ which complies with the

Listing Requirements of the LuSE.

JOINT LEAD ADVISERS

STOCKBROKERS ZAMBIA LIMITED

IMARA BOTSWANA LIMITED

Legal Adviser Independent Reporting Accountant

LEWIS NATHAN ADVOCATES DELOITTE & TOUCHE CHARTERED ACCOUNTANTS

Sponsoring Broker Transfer Secretary

STOCKBROKERS ZAMBIA LIMITED

CORPSERVE ZAMBIA

Date of Issue: 16 November 2012

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The Directors of CCHZ, whose names are given in section E of this Circular, collectively and individually accept full responsibility

for the accuracy of the information contained in this Circular and confirm that to the best of their knowledge and belief, there

are no other facts the omission of which would make any statement false or misleading, that they have made all reasonable

enquiries to ascertain such facts and that the Circular contains all information required by law.

Each of the Joint Lead Advisers to the Offer and the listing, Sponsoring Broker, Legal Adviser and Independent Reporting

Accountant have consented in writing to act in the capacities stated and to their names being stated and, where applicable, their

reports being included in this Circular.

Copies of this Circular are available in English only and may be obtained during normal business hours between 16 November and

07 December 2012 from the registered office of the Company and the offices of the Sponsoring Brokers, the addresses of which

are set out in the “Corporate Information” section on page 3 of this Circular.

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CORPORATE INFORMATION

Company Secretary and Registered Office Issuer

Louis Kabula Cavmont Capital Holdings Zambia Plc

Cavmont Capital Holdings Zambia Plc PwC Place, Plot 2374

PwC Place , Plot 2374 Thabo Mbeki Road

Thabo Mbeki Road P.O. Box 38474

P.O. Box 38474 Lusaka

Lusaka Zambia

Zambia

Joint Lead Adviser Joint Lead Adviser and Sponsoring Broker

Imara Botswana Limited Stockbrokers Zambia Limited (a member of the LuSE)

Plot 117, Millennium Office Park 2nd Floor, Stock Exchange Building

Ground Floor, Block A Unit 2 Central Park

Kgale Hill, P Bag 00186 P.O. Box 38956

Gaborone Lusaka

Botswana Zambia

Legal Advisers Transfer Secretary

Lewis Nathan Advocates Corpserve Share Transfer Agents

The Nathan Park, 758 Independence Avenue Plot 3671

Woodlands House Number 6, Mwaleshi Road

P.O. Box 37268 P.O Box 37522

Lusaka Lusaka

Zambia Zambia

Banker Independent Reporting Accountant

Cavmont Bank Limited Deloitte & Touche Chartered Accountants

PwC Place, Plot 2374 Abacus Square, Plot no. 2374/B

Thabo Mbeki Road Thabo Mbeki road

P.O. Box 38474 P.O. Box 30030

Lusaka Lusaka

Zambia Zambia

Auditors

PricewaterhouseCoopers

PwC Place

Stand No. 2374, Thabo Mbeki Road

P.O. Box 30942

Lusaka

Zambia

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CONTENTS

Page

CORPORATE INFORMATION 3

CONTENTS 4

ACTION REQUIRED BY CAVMONT SHAREHOLDERS 5

IMPORTANT INFORMATION 6

SALIENT DATES AND TIMES 7

DEFINITIONS 8

SALIENT FEATURES OF THE CLAW‐BACK RIGHTS OFFER 11

1. THE CLAW‐BACK RIGHTS OFFER 11

2. FINANCIAL EFFECTS OF THE CLAW‐BACK OFFER 11

3. DIRECTORS’ OPINION, RECOMMENDATION AND UNDERTAKING 11

4. PRE‐LISTING STATEMENT 11

CIRCULAR TO SHAREHOLDERS 12

A. PURPOSE OF THIS CIRCULAR 12

B. THE CLAW‐BACK OFFER 13

C. INFORMATION RELATING TO CAVMONT CAPITAL HOLDINGS ZAMBIA PLC 17

D. FINANCIAL INFORMATION 23

E. INFORMATION RELATING TO THE DIRECTORS 25

F. GENERAL INFORMATION 27

ANNEXURE I EXTRACTS FROM THE ARTICLES OF ASSOCIATION 28

ANNEXURE II TABLE OF ENTITLEMENTS 29

ANNEXURE III INFORMATION RELATING TO THE UNDERWRITERS 30

ANNEXURE IV REPORT ON THE FORECAST STATEMENT OF COMPREHENSIVE INCOME AND STATEMENT OF FINANCIAL POSITION 31

ANNEXURE V REPORT OF THE INDEPENDENT REPORTING ACCOUNTANT 35

LETTER OF ALLOCATION AND ACCEPTANCE FORM 81

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ACTION REQUIRED BY CAVMONT SHAREHOLDERS

COURSES OF ACTION

Action to be taken by CCHZ Shareholders

In order to participate in the Claw‐back Rights Offer, you need a copy of this Circular and your Letter of Allocation, which indicates your

name, the number CCHZ shares that you held as at the Record Date, which was Friday, 02 November 2012, and the number of Claw‐back

Rights Offer Shares that you are entitled to purchase on the basis of 90 Claw‐back Rights Offer Shares for every 7 ordinary shares held on

Record Date –and then follow the courses of action provided at on page 39 of this Circular and summarized below.

If you are a Shareholder and wish to buy more Claw‐back Rights Offer Shares, over and above your entitlement on the Record Date, you

should contact your stockbroker to purchase tradable rights or Letters of Allocation (LAs) listed on the LuSE during the period from 16

November 2012 to 05 December 2012, at the then prevailing market price, and thereafter proceed to purchase the Claw‐back Rights Offer

Shares associated with the purchased LAs, at the Claw‐back Rights Offer Price of ZMK 1.40 (one Kwacha and four ngwee) per Claw‐back

Rights Offer Share.

Pursuant to this Claw‐back Rights Offer by Cavmont Capital Holdings Zambia Plc, shareholders may elect one of four courses of action to

follow. The four options are summarised below. Should you have any questions about the appropriate action to take, please consult your

financial advisor or your stockbroker, or the Sponsoring Broker to the transaction, Stockbrokers Zambia Limited.

1. SUBSCRIBE for Claw‐back Rights Offer Shares offered (acceptance)

Complete Section A of the Renounceable Letter of Allocation/ Acceptance Form (at the end of this Circular) and see your broker to effect

payment for the Claw Back shares being subscribed for. Alternatively you can deposit or transfer your payment to the following bank account:

BANK : CAVMONT BANK LIMITED

ACCOUNT NAME : CCHZ CLAW‐BACK RIGHTS OFFER

ACCOUNT NUMBER : 0800000104572

BRANCH SORT CODE : 13‐00‐17

And send the completed Acceptance Form, together with your certified Deposit Slip as proof of payment, or a Cheque or Bank Draft, in favour

of “CCHZ CLAW‐BACK RIGHTS OFFER”, crossed “not negotiable” and “not transferable” by no later than 16h00 on Friday, 07 December 2012 to

the Sponsoring Broker whose details are given on page 3.

2. SELL your rights through the LuSE (renunciation)

Complete Section B of the Renounceable Letter of Allocation (at the end of this Circular) and send it to your stockbroker, or to the Sponsoring

Broker with the instructions to “sell the rights”. Participants will be permitted to sell their rights over the LuSE during the Offer Period.

3. SUBSCRIBE in part for Claw‐back Rights Offer Shares AND SELL the remaining rights through the LuSE

Complete Section B of the Renounceable Letter of Allocation (at the end of this Circular) and deposit or transfer your payment to the following

bank account:





Send the completed form to your stockbroker, or to the Sponsoring Broker with the instructions to “subscribe for a number of Rights Offer

Shares and sell the balance”, together with your certified Deposit Slip as proof of payment, or a Cheque or Bank Draft, in favour of “CCHZ

CLAW‐BACK RIGHTS OFFER”, crossed “not negotiable” and “not transferable” by no later than 13h00 on Wednesday, 05 December 2012 to the

Sponsoring Broker whose details are given in page 3.

Participants will be permitted to sell their rights over the LuSE between Friday, 16 November 2012 and Wednesday, 05 December 2012.

4. Non Action

Shareholders not selecting any of the foregoing options by Friday, 07 December 2012, the closing of the Offer Period, will be deemed to have

selected the option to sell all of their rights at the then prevailing price and, provided there are buyers for the rights, they will be sold by their

stockbroker or in the event that shareholders do not have a broker, by the Sponsoring Broker. This period for the sale of rights where the

shareholder “does nothing” will also close on Friday, 07 December 2012.

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IMPORTANT INFORMATION

The definitions as set out in the “Definitions” section of this Circular apply to this section regarding important information.

No person has been authorised by CCHZ to give any information or to make any representation not contained in or not consistent with this

Circular or any other information supplied in connection with the Claw‐back Rights Offer. If given or made, such information or representation

must not be relied upon as having been authorised by CCHZ, the Joint Lead Advisers or the Legal Advisers. Neither the delivery of this Circular

nor any subscription made in connection herewith shall, under any circumstances, create any implication that there has been no change in the

affairs of CCHZ since the date of the publication of this Circular, or that any other financial statement or other information supplied in

connection with the Circular is correct at any time subsequent to the date indicated in the document containing the same.

This Circular does not constitute an offer to sell or the solicitation of an offer to buy or subscribe for any Claw‐back Rights Offer Shares, in any

jurisdiction, to any person to whom it is unlawful to make the offer or solicitation in such jurisdiction. Neither CCHZ nor the Joint Lead Advisers

or Legal Adviser represent that this Circular may be lawfully distributed, or that any Claw‐back Rights Offer Shares may be lawfully offered, in

compliance with any applicable registration or other requirements in any such jurisdiction, or pursuant to an exemption available there under,

or assumes any responsibility for facilitating any such distribution or offering. In particular, no action has been taken by CCHZ, the Joint Lead

Advisers or the Legal Adviser that would permit a public offering of any Claw‐back Rights Offer Shares or distribution of this Circular in any

jurisdiction where action for that purpose is required. Accordingly, no Claw‐back Rights Offer Shares may be offered or subscribed for, directly

or indirectly, and neither this Circular nor any advertisement or other offering material may be distributed or published in any jurisdiction,

except in compliance with any applicable laws and regulations, and the Joint Lead Advisers have represented that all offers and sales or

subscriptions will be made in compliance with this prohibition. To the extent that this Circular may be sent to any jurisdiction in which the

dissemination of this Circular is illegal or fails to conform to the laws of such jurisdiction, it is provided for information purposes only.

The distribution of this Circular and the offer or sale of or subscriptions for Claw‐back Rights Offer Shares may be restricted by law in certain

jurisdictions. Persons into whose possession this Circular or any Claw‐back Rights Offer Shares come, must inform themselves about, and

observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such

jurisdiction.

The Claw‐back Rights Offer Shares have not been and will not be registered under the US Securities Act or with any securities regulator of any

state or jurisdiction of the United States. Claw‐back Rights Offer Shares may not be offered, sold, subscribed for or delivered within the United

States or to US persons except in accordance with Regulations under the US Securities Act.

Market and industry data

Market and other statistical information used throughout this Circular are based on independent industry publications, government

publications or other published independent sources. Although CCHZ believes these sources are reliable, the Company has not verified the

information independently and cannot guarantee its accuracy and completeness.

Forward looking statements

This Circular includes “forward‐looking statements” which include all statements other than statements of historical facts, including, without

limitation, those regarding CCHZ’s financial position, profit and revenue forecasts, business strategy, plans and objectives of management for

future operations (including development plans and objectives relating to CCHZ’s subsidiary’s products and services) and any statement

preceded by, followed by or that includes the word “projects”, “prospects”, “estimates”, “targets”, “believes”, “expects”, “aims”, “intends”,

“will”, “may”, “anticipates”, “would”, “could” or “seeks” or any similar expression or the negative thereof.

Such forward‐looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other

important factors beyond the Company’s control that could cause the actual results, performance and/or achievements of CCHZ to be

materially different from future results, performance and/or achievements expressed or implied by such forward‐looking statements. Such

forward‐looking statements are based on numerous assumptions regarding the Group’s present and future business performance and/or

strategies and the environment in which CCHZ will operate in the future.

These forward‐looking statements speak only as of the date of this document. CCHZ and its directors expressly disclaim any obligation or

undertaking to disseminate revisions to any forward‐looking statements contained in this Circular to reflect any change in CCHZ’s expectations

with regard to such statements or any change in events, conditions or circumstances on which any such statements are based, unless required

to do so by applicable law.

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SALIENT DATES AND TIMES

Last day to trade in CCHZ shares in order to settle by the Record Date and to qualify to participate

in the Claw‐back Rights Offer (cum entitlement)

Tuesday, 30 October 2012

Record Date for participation in the Claw‐back Rights Offer Friday, 02 November 2012

Listing of Letters of Allocation (Las) on the LuSE Friday, 16 November 2012

Claw‐back Offer Circular posted to CCHZ shareholders by Friday, 16 November 2012

Claw‐back Offer opens Friday, 16 November 2012

Last day to trade in Letters of Allocation on the LuSE Wednesday, 05 December 2012

Claw‐back Rights Offer closes Friday, 07 December 2012

Dematerialised CCHZ shareholders’ accounts updated with Claw‐back Rights Offer Shares to the

extent accepted

Friday , 14 December 2012

Results of Claw‐back Offer announcement published on or about Friday ,14 December 2012

Claw Back Shares commence trading ex‐claw‐back rights on the LuSE Monday , 17 December 2012

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DEFINITIONS

Throughout this Private Placing Offer Document and the appendices hereto, unless otherwise indicated, the words in the first column have the

meanings stated opposite them in the second column, words in the singular include the plural and vice versa, words importing one gender

include the other gender and references to a person include references to a body corporate and vice versa:

“Acceptance Form(s)” the forms of acceptance attached to the back of this Circular, to be used by

Applicants in connection with the Offer;

“Act” means the Securities Act Chapter 354 of the Laws of Zambia;

“Allocation” means the allocation of Claw‐back Rights Offer Shares to Applicants under the

Claw‐back Rights Offer;

“Applicable Laws” the Laws of the Republic of Zambia in force from time to time, to which this

Circular is subject;

“Applicant(s)” a person, including juristic persons, applying for Claw‐back Rights Offer Shares in

terms of the Claw‐back Rights Offer set out in this Circular;

“Articles” the Articles of Association of CCHZ as amended from time to time;

“ATS” Automated Trading System of the LuSE;

“Bank of Zambia” or “BOZ” the Central Bank of the Republic of Zambia;

“Bank of Zambia Policy Rate” or “BOZ Policy Rate” the policy rate as set by BoZ from time to time;

“Banking and Financial Services Act” the Banking and Financial Services Act, Chapter 387 of the laws of Zambia;

“Board” or “Board of Directors” the Board of Directors of CCHZ;

“Business Day” any day other than a Saturday, Sunday or official public holiday in the Republic of

Zambia;

“Cavmont Bank” or “CBL” Cavmont Bank Limited (registration number 26788), a wholly owned subsidiary of

CCHZ, a private company duly registered and incorporated in terms of the laws of

the Republic of Zambia and whose licensed activity is the provision of banking and

financial services in Zambia;

“CEE Act” the Citizenship Economic Empowerment Act, No 9 of 2006;

“Central Share Depository” or “CSD” the LuSE Central Shares Depository Limited, a company incorporated in Zambia

with registration number 36617, whose functions are to serve as custodian of the

LuSE tradable securities and to hold such securities in electronic form in its central

depository on behalf of the beneficial owners; and to provide clearing and

settlement services to the LuSE;

“Central Statistics Office” or “CSO” the Central Statistics Office of the Government of the Republic of Zambia;

“CIH” Capricorn Investment Holdings Limited, a company registered in Namibia under

registration number 82/031 and whose registered office is 6th Floor, CIH House,

Kasino Street, P. O. Box 15, Windhoek, Namibia

“Circular” this circular to CCHZ shareholders dated DD, 16 November 2012, including any

annexure and document incorporated by reference and the Acceptance Form;

“Claw‐back Rights Offer” the renounceable claw‐back offer by CCHZ of 64,285,714,286ordinary shares at a

subscription price of ZMK 1.40 per share in the ratio of 90 new ordinary shares for

every 7 ordinary shares held at the close of business on Friday, 02 November 2012;

“Claw‐back Rights Offer Price” ZMK1.40 per Claw‐back Rights Offer Share;

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“Claw‐back Rights Offer Shares” the 64,285,714,286 new ordinary shares which are the subject of the Claw‐back

Rights Offer;

“Closing Date” being the last date and time for submission of Acceptance Forms which falls on

Friday, 07 December 2012;

“Company” or “CCHZ” Cavmont Capital Holdings Zambia Plc (registration number 41902), a public limited

liability company duly registered and incorporated in terms of the laws of the

Republic of Zambia and whose registered office is located at PwC Place, Plot 2374,

Thabo Mbeki Road, Lusaka, Zambia;

“Companies Act” the Companies Act, Chapter 388 of the laws of Zambia;

“Directors” the executive and non‐executive directors of the Company whose details are set

out in Section E of this Circular;

“DPS” dividend per share;

“Employees” individuals that are pensionable employees, contractual employees, executives or

Directors of the Company;

“EPS” earnings per share;

“FSDP” the Financial Sector Development Plan. A comprehensive strategy that has been

formulated by the Government of the Republic of Zambia (GRZ) to address the

current weaknesses in the Zambian financial system as well as guide efforts aimed

at realising the vision of a financial system that is stable, sound and market‐based

and that would support efficient resource mobilisation necessary for economic

diversification and sustainable growth;

“Global Share Certificate” the single certificate, registered in the name of the LuSE CSD or its nominee, and

representing dematerialised shares;

“GDP” Gross Domestic Product;

“Imara” Imara Botswana Limited (Registration number 2002/2770), a company registered

in Botswana;

“Joint Lead Advisers” Stockbrokers Zambia Limited (Registration number 52224), a company registered

in Zambia and Imara Botswana Limited (Registration number 2002/2770), a

company registered in Botswana;

“Kwacha” or “K” or “ZMK” or “ZK” the legal tender of Zambia in which all monetary amounts in this Private Placing

Offer Document are expressed unless otherwise indicated;

“Legal Adviser” Lewis Nathan Advocates;

“Letter of Allocation” or “LA” the renounceable Letter of Allocation, for each shareholder of CCHZ as at Record

Date, in respect to the Claw‐back Rights Offer, which is attached hereto as

Appendix 7, that will be posted to each shareholder of CCHZ after the Record Date,

and which sets out the entitlement of the person/ shareholder to whom this

Circular is addressed with respect to the Claw‐back Rights Offer;

“Lewis Nathan Advocates” a law firm incorporated in Zambia and regulated by the Law Association of Zambia.

“the LuSE” the Lusaka Stock Exchange Limited a company incorporated in Zambia with

registration number 30495, whose functions are to operate a market for the

trading (i.e. buying and/ or selling) of securities. The LuSE is licensed and regulated

by the Securities and Exchange Commission of Zambia (“SEC”) under the Securities

Act Chapter 354 of the Laws of Zambia;

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“Mukumbi” Mukumbi Investments Limited (registration number 105785), a wholly owned

subsidiary of CIH, a private company duly registered and incorporated in terms of

the laws of the Republic of Zambia and created to facilitate the participation of

Zambians or Zambian entities in the ownership of Cavmont Bank;

“Net Asset Value” or “NAV” the result of subtracting a company’s long term and current liabilities from the

sum of its fixed and current assets;

“Ordinary Shares” Ordinary Shares with a par value of K 1.00 each in the share capital of CCHZ;

“PACRA” the Patents and Company Registration Agency of Zambia;

“PAT” profit after tax;

“PBT” profit before tax;

“PBV ratio” price to book value ratio;

“PE ratio” price to earnings ratio;

“the Receiving Agents” the receiving agents to the Offer;

“the Registrar of Companies” the Zambian Registrar of Companies, established pursuant to section 366 of the

Company’s Act;

“Return on Assets” or “ROA” the result of dividing a company’s PAT by the average total assets;

“Return on Equity” or “ROE” the result of dividing a company’s PAT by the average shareholder’s equity;

“RTGS” Real Time Gross Settlement;

“SADC” Southern African Development Community;

“the Securities Act” the Securities Act, Chapter 354 of the laws of Zambia;

“the SEC” the Securities and Exchange Commission Zambia, a statutory body established

under the Securities Act Cap 354 of the laws of Zambia;

“Sponsoring Broker” Stockbrokers Zambia Limited;

“Stockbrokers Zambia Limited” Stockbrokers Zambia Limited (Registration number 52224), a company registered

in Zambia and a member of the LuSE and licensed by the SEC as a dealer;

“Underwriter(s)” CIH and Mukumbi;

“Underwriting Agreement” The underwriting agreement entered into between CCHZ as issuer and the

Underwriters whereby on 28 September 2012 CIH , subscribed for 17,009,814,181

shares and Mukumbi for 13,619,471,534 shares, in CCHZ, on a claw back basis at

the Claw Back Rights Offer Price;

“USD” or “US$” United States Dollars;

“US Securities Act” US Securities Act of 1933, as amended;

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SALIENT FEATURES OF THE CLAW‐BACK RIGHTS OFFER

This summary section highlights certain information contained in this Circular, which should be read in its entirety for a full appreciation of the subject matter contained herein. If you are in any doubt as to its meaning, or what action to take, please consult, a licensed broker, investment adviser, accountant, lawyer or other professional adviser.

This section does not purport to be complete and is taken from, and is qualified by, the remainder of this Circular. Terms not otherwise defined in this section have the same meaning as used in the “Definitions” section of the Circular.

1. THE CLAW‐BACK RIGHTS OFFER

1.1 Introduction and terms of the Claw‐back Rights Offer

At the 13th Annual General Meeting of the Company held on 05 July 2012, shareholders authorised the Board of Directors to proceed with the

recapitalisation of Cavmont Bank Limited, the wholly owned subsidiary of Cavmont Capital Holdings Zambia PLC, to comply with the new BoZ

capital adequacy framework announced on 30 January 2012, by raising up to a maximum of Zambian Kwacha 90,000,000,000 (ZMK 90 billion).

On 28 September 2012, CCHZ issued 17,009,814,181 ordinary shares to CIH and 13,619,471,534 ordinary shares to Mukumbi at a price of ZMK

1.40 per share as the first step towards recapitalisation of Cavmont Bank Limited on the basis of Claw‐back Rights Offer by CCHZ.

Shareholders were subsequently notified by way of the First and Second Announcements published in the press on 19 October 2012 and 29

October 2012 respectively, that in order to provide equal opportunity to all shareholders to participate in the recapitalisation of Cavmont Bank

Limited, CCHZ was undertaking a Renounceable Claw‐back Rights Offer.

The second step and final stage of the Claw‐back Rights Offer is now to offer the Claw Back Rights Shares to all shareholders of CCHZ other

than CIH and Mukumbi.

Accordingly, CCHZ shareholders are now offered the right to claw back their shareholding in CCHZ by participating in this Claw‐back Rights

Offer to acquire the Claw Back Rights Shares as ordinary shares in CCHZ on the basis of 90 Claw‐back Rights Offer Shares for every 7 CCHZ

ordinary shares held on the Record Date at a price of ZMK 1.40 per Claw‐back Rights Offer Share.

All shareholders who are owed dividends which were declared but not paid by the Company, may use those unpaid dividends to take up Claw

Back Rights Shares at a price of ZMK 1.40 per Claw‐back Rights Offer Share as part of this Claw‐back Rights Offer process.

1.2 Purpose of the Claw‐back Rights Offer

The proceeds of the Claw‐back Rights Offer will be used to recapitalise Cavmont Bank Limited, the 100 % wholly owned subsidiary of Cavmont

Capital Holdings Zambia Plc, in an effort to comply with the new Bank of Zambia capital adequacy framework announced on 30 January 2012.

1.3 Underwriting Agreement

In terms of the Underwriting Agreement (incorporated herein by reference), CIH and Mukumbi agreed to subscribe for a combined total of

30,629,285,715 Claw‐back Rights Offer Shares at an issue price of ZMK 1.40 per Claw‐back Rights Offer Share as partial underwriting of the

ZMK 90 billion capital raise by CCHZ. In addition it is envisaged that some Zambian institutional investors may commit to participate as co‐

underwriters. An underwriting flat fee of 1.5% of the value of the underwriting commitment is payable to each of the Underwriters and any co‐

underwriters who subsequently sign up for this role.

2. FINANCIAL EFFECTS OF THE CLAW‐BACK OFFER

At ANNEXURE IV is provided the Reporting Accountants Report on the forecast statement of comprehensive income and statement of financial

position to 31 December 2012.

3. DIRECTORS’ OPINION, RECOMMENDATION AND UNDERTAKING

The directors, whose names are given in the “Information relating to the directors” in section F of this circular, have considered the terms of

the Claw‐back Rights Offer and are of the opinion that the terms thereof are fair and reasonable to CCHZ shareholders and, accordingly,

recommend that the shareholders follow their Claw‐back Rights in terms of the Claw‐back Rights Offer as set out in this Circular.

4. PRE‐LISTING STATEMENT

In compliance with paragraph 6.18(g) of the LuSE Listing Requirements, this Circular contains information required in a Pre‐Listing Statement.

COPIES OF THIS CIRCULAR

Copies of this Circular, in English, may be obtained during normal business hours between Friday, 16 November 2012 and Friday, 07 December

2012 from the registered office of the Company and the offices of the Sponsoring Broker, at the addresses set out in the “Corporate

information” section of this Circular.

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________________________________ Directors

Guy D. Z Phiri (Independent Chairman), Joseph Ngosa (Non‐Executive Director), Johan Swanepoel (Non‐Executive Director)

Johan Minnaar (Managing Director).

Address: PwC Place, Plot 2374, Thabo Mbeki Road, Stand no. 2374 P O Box 38474, Lusaka, Zambia.

CIRCULAR TO SHAREHOLDERS

A. PURPOSE OF THIS CIRCULAR

Background

In 2011 the Board of Cavmont Bank Limited approached CIH to obtain long term funds to recapitalise the bank. Subsequently CIH provided K20

billion as Tier II capital which the Bank of Zambia approved in December 2011 and was ratified by the shareholders of CCHZ at the 13th

AGM held on 05 July 2012.

At the AGM held on 05 July 2012, shareholders of CCHZ also authorised the Board of Directors to proceed with a recapitalisation plan to

ensure Cavmont Bank Limited, the wholly owned subsidiary of Cavmont Capital Holdings Zambia PLC, complies with the new Bank of Zambia

capital adequacy framework announced on 30 January 2012 for locally owned banks, by raising up to a maximum of Zambian Kwacha

90,000,000,000 (K90 billion).

At the AGM held on 05 July 2012, the shareholders approved the following resolution:

“ To AUTHORISE the Board of Directors to proceed with the capital raise to ensure Cavmont Bank Limited, the wholly owned subsidiary of

Cavmont Capital Holdings Zambia PLC, complies with the new Bank of Zambia capital adequacy framework announced on 30 January 2012, by

raising up to a maximum of Zambian Kwacha 90,000,000,000 (K90 billion) at a share issue price not less than the minimum allowed in terms of

the prevailing Lusaka Stock Exchange Listings Rules and Requirements as they pertain to a capital raise, provided that such capital raise shall be

in compliance with and in a form acceptable to both the Lusaka Stock Exchange and the Bank of Zambia requirements for such capital raise.

The capital raise will be in the form of an underwritten rights offer (the “Rights Offer”) or an underwritten public offer (the “Public Offer”)

where the existing shareholders shall have a pre‐emptive right to acquire shares.”

On 28 September 2012, CCHZ issued 17,009,814,181 ordinary shares to CIH and 13,619,471,534 ordinary shares to Mukumbi at a price of ZMK

1.40 per share to raise a total of ZMK 42,881,000,000 as the first step of the Claw‐back Rights Offer to raise the required sum of ZMK 90 billion

for recapitalisation of Cavmont Bank Limited. Part of the proceeds from this claw back capital raise will be used to acquire and convert into

ordinary shares the Tier II capital that was provided by CIH to Cavmont Bank in 2011.

Shareholders were subsequently notified by way of the First and Second Announcements dated 19 October 2012 and 29 October 2012 that in

order to provide equal opportunity to all shareholders to participate in the recapitalisation of Cavmont Bank Limited, CCHZ was undertaking a

Renounceable Claw‐back Rights Offer.

The second step and final stage of the Claw‐back Rights Offer is to now offer the Claw Back Rights shares to all shareholders of CCHZ, other

than CIH and Mukumbi, as per this Circular document.

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Accordingly, CCHZ shareholders are now offered the right to claw back their shareholding in CCHZ by participating in this Claw‐back Rights

Offer by acquiring shares in CCHZ on the basis of 90 Claw‐back Rights Offer Shares for every 7 CCHZ ordinary shares held on the Record Date at

a price of ZMK 1.40 per Claw‐back Rights Offer Share.

The purpose of this Circular is to provide CCHZ shareholders with all the relevant information relating to the Claw‐back Rights Offer and the

implications thereof in accordance with the LuSE Listing Requirements and the Securities Act.

This Circular contains information required for a Pre‐Listing Statement, which information is required in terms of paragraph 6.18(g) of the LuSE

Listing Requirements as a result of the Company issuing shares in terms of the Claw‐back Rights Offer in excess of 30% of its current shares in

issue.

B. THE CLAW‐BACK OFFER

1. INTRODUCTION

1.1 At the 13th Annual General Meeting of the Company held on 05 July 2012, shareholders authorised the Board of Directors to proceed

with the recapitalisation of Cavmont Bank Limited, the wholly owned subsidiary of Cavmont Capital Holdings Zambia Plc, to comply with

the new Bank of Zambia capital adequacy framework for local banks announced on 30 January 2012, by raising up to a maximum of

Zambian Kwacha 90,000,000,000 (ZMK 90 billion). Holders of CCHZ ordinary shares registered as such at the close of business on Friday

02 November 2012 (the Record Date) will be entitled to receive rights or Letters of Allocation, reflecting the number of Claw‐back Rights

Offer Shares they are entitled to in terms of the Claw‐back Offer.

1.2 The LuSE has approved the listing of the Letters of Allocation (LAs) in respect of the Claw‐back Rights Offer Shares and from the

commencement of trade on Friday, 16 November 2012 until the close of trade on Wednesday, 05 December 2012.

1.3 In terms of the Claw‐back Offer, CCHZ shareholders recorded in the register at the close of business on Friday, 02 November 2012, being

the Record Date, will receive rights to subscribe for Claw‐back Rights Offer Shares in term of the Claw‐back Rights Offer on the basis of

90 Claw‐back Rights Offer Shares for every 7 CCHZ ordinary shares held on the Record Date, at a Claw‐back Rights Offer Price of ZMK

1.40 per Claw‐back Offer Share

1.4 The Claw‐back Rights Offer Shares, upon their issue, will rank pari passu in all respects, with the ordinary shares currently in issue.

2. PURPOSE OF THE CLAW‐BACK RIGHTS OFFER

On 30 January 2012, the Bank of Zambia issued a circular, (referenced as CB Circular No.: 02/2012), revising the capital requirements of

commercial banks in Zambia. Prior to 30 January 2012 the minimum capital requirement for commercial banks operating in Zambia was ZMK

12 billion. In the revised BOZ regulations, the new capitalisation requirements for commercial banks are linked to the shareholding structure of

the banks as follows:‐

i) For foreign owned banks, the minimum capital requirement is now ZMK 520 billion; and

ii) For locally owned banks a lower capital requirement threshold of ZMK 104 billion has been set.

A locally owned bank refers to a bank licenced by the BOZ where at least 51% of its equity is owned by Zambian citizens and or entities

incorporated in Zambia that have at least 51 % equity owned by Zambian citizens .

A foreign owned bank refers to a bank licensed by the BOZ where more than 49% of its equity is owned by foreign entities.

Cavmont Bank Limited is a wholly owned subsidiary of CCHZ. CCHZ is listed on the Lusaka Stock Exchange.

Following the announcement by BOZ on 30 January 2012 regarding the revised capital requirements of commercial banks in Zambia, CCHZ

initiated a shareholding restructuring and recapitalisation plan for the Company. The proposed plan essentially involves the following two key

and critical actions on a simultaneous basis:

i) The restructuring of the shareholding in CCHZ such that Cavmont Bank qualifies as a locally owned bank in terms of the revised BOZ

regulations; and

ii) The recapitalisation of Cavmont Bank via a capital raise by CCHZ.

The primary reason for the Claw‐back Rights Offer is therefore to restructure the shareholding of CCHZ and simultaneously recapitalise CBL,

the wholly owned subsidiary of CCHZ.

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3. TERMS OF THE CLAW‐BACK RIGHTS OFFER

3.1 Particulars of the Claw‐back Rights Offer

CCHZ shareholders and/ or their renounces are hereby offered for subscription, by way of a Renounceable Claw‐back Rights Offer, a total of

64,285,714,286 CCHZ ordinary shares at a Claw‐back Rights Offer Price of ZMK 1.40 per Claw‐back Rights Offer Share on the basis of 90 Claw‐

back Rights Offer Shares for every 7 CCHZ ordinary shares held as at the Record date, being Friday, 02 November 2012.

The Claw‐back Offer Price is payable in Zambian Kwacha in full upon acceptance of the Claw‐back Offer.

The Claw‐back Offer Price represents a discount of 69% to the 90 day volume weighted average price (VWAP) of ZMK 4.50 of CCHZ shares on

28 September 2012, the date of the Underwriting Agreement.

CCHZ shareholders recorded in the register on the Record Date, being Friday, 02 November 2012, or renounces in terms of the Claw‐back Offer

will be entitled to participate in the Claw‐back Offer.

The Letters of Allocation may be traded on the LuSE during the period from Friday, 16 November 2012 to Wednesday, 05 December 2012.

3.2 Opening and closing dates of the Claw‐back Offer

The Claw‐back Offer will open at the commencement of trade on Friday, 16 November 2012 and will close at 14h00 on Friday, 07 December

2012.

3.3 Entitlement

CCHZ shareholders are entitled to subscribe for 90 Claw‐back Rights Offer Shares for every 7 CCHZ ordinary share held as at Record Date and

are referred to the Table of Entitlements set out in Annexure 2 to this Circular. The allocation of Claw‐back Shares will be such that only whole

numbers of Claw‐back Rights Offer Shares will be issued and shareholders will be entitled to rounded numbers of Claw‐back Rights Offer

Shares. Fractional entitlements of 0.5 or greater will be rounded up and those less than 0.5 will be rounded down.

3.4 Excess applications

Holders of Letters of Allocation may apply for a greater number of Claw‐back Rights Offer Shares than those allocated in terms of the Claw‐

back Offer and set out in such Letter of Allocation.

Applications for excess Claw‐back Rights Offer Shares must be made by completing the Acceptance Form in accordance with instructions

contained therein.

All applications for excess Claw‐back Rights Offer Shares must be accompanied by sufficient funds to cover such applications in accordance

with 5.3 below.

Cheques and/ or the refunding of monies in respect of unsuccessful applicants for additional Claw‐back Rights Offer Shares will be posted to

the relevant applicant, at their risk, on or about 17 December 2012. No interest will be paid on any monies received in respect of unsuccessful

applications.

3.5 Listing of Letters of Allocation and Claw Back Rights Offer Shares on the LuSE

The LuSE has granted the listings for the Claw‐back Rights Offer Shares and Letters of Allocation as follows:

i) Letters of Allocation in respect of 64,285,714,286 Claw‐back Rights Offer Shares will be listed from the commencement of trade on Friday,

16 November 2012 until the close of trade on Wednesday, 05 December 2012, both days inclusive;

ii) 64,285,714,286 Claw‐back Rights Offer Shares will be listed with effect from the commencement of trade on Monday, 17 December 2012.

3.6 Takeover and Mergers Rules

At the 13th Annual General Meeting of the Company held on 05 July 2012, shareholders resolved that a mandatory offer in terms of Clause 56

of the Securities (Takeover and Mergers) Rules, Statutory Instrument No 170 of 1993 of the Securities Act, would be waived in the event that a

person or entity or related parties acquired 35% or more voting rights in CCHZ arising from the participation in the Claw‐back Rights Offer

described in this Circular.

3.7 Limits on voting rights under Zambian banking regulations

Under the BFSA, no person or entity can hold directly or indirectly more than 25% voting rights in a bank in Zambia unless that person or entity

is listed on a recognised stock exchange. Accordingly, it will be necessary to seek and obtain BOZ approval for any shareholding exceeding 25%

voting power in CCHZ as a result of the Claw Back Rights Offer described in this document.

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4. APPLICATION OF NEW CAPITAL

The new capital shall be applied as follows:‐

Figures (ZMK’ Millions) 2012 2013 2014 Total

Support Lending Capacity 37,500 37,500 75,000

Branch Refurbishments 1,000 2,400 3,000 6,400

Branch Relocations 1,000 800 1,800

Fixed Assets 1,000 1,500 1,000 3,500

Technology 1,300 2,000 3,300

Total 90,000

Loans and advances – The capital shall be used to support the lending capacity;

Branch improvements & renovation of Archives Building;

Branch Relocations;

Fixed Assets for improvements to security (CCTV), office equipment and teller cubicles; and

Technology includes Mobile banking and ATMs.

5. PROCEDURE FOR ACCEPTANCE, RENUNCIATION AND SALE OF CLAW‐BACK RIGHTS

The enclosed Letter of Allocation reflects the number of Claw‐back Rights Offer Shares for which a shareholder is entitled to subscribe. Any

instruction to accept, sell or renounce all or part of the Claw‐back Rights Offer Shares allocated to them may be made by means of the

Acceptance Form.

5.1 Acceptance

Full details of the procedure for acceptance of the Claw‐back Rights Offer are contained in the Acceptance Form enclosed with this Circular. It

should be noted that:

5.1.1 acceptances are irrevocable and may not be withdrawn;

5.1.2 acceptances may be made only by means of the Acceptance Form;

5.1.3 any instruction to sell or renounce all or part of the Claw‐back Rights Shares may only be made by means of the Acceptance Form;

5.1.4 the properly completed Acceptance Form and together with your certified Deposit Slip as proof of payment, or a Cheque or Bank

Draft, in favour of “CCHZ CLAW‐BACK RIGHTS OFFER”, crossed “not negotiable” and “not transferable”, for the relevant Claw‐back

Rights Offer Shares must be received by the Sponsoring Broker at the addresses set out in the “Corporate information” section of this

Circular by no later than 14h00 on Friday, 07 December 2012;

5.1.5 the Acceptance Form to take up the Claw‐back Offer Rights will be regarded as complete only when monies have been cleared for

payment;

5.1.6 such payment will constitute an irrevocable acceptance of the Claw‐back Offer upon the terms and conditions set out in this circular

and in the Acceptance Form once monies have been cleared for payment;

5.1.7 if any Acceptance Form is not received as set out above, the Claw‐back Rights Offer will be deemed to have been declined and the

Claw‐back Rights to purchase the Claw‐back Rights Offer Shares in terms of the Letter of Allocation will lapse regardless of who holds

it;

5.1.8 no acknowledgement of receipt will be given for monies received in respect of the Claw‐back Rights Offer.

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5.2 Renunciation or sale of Claw‐back Rights

5.2.1 CCHZ has issued the Letters of Allocation in dematerialised form.

5.2.2 The Letters of Allocation to which the Acceptance Form relates are negotiable and can be traded on the LuSE.

5.2.3 Shareholders who do not wish to purchase all, or some of the Claw‐back Rights Offer Shares allocated to them as reflected in the

Letter of Allocation, may sell or renounce or lapse their Claw‐back Rights.

5.2.4 In addition, shareholders who wish to sell the Claw‐back Rights allocated to them as reflected in the Letter of Allocation must

complete the relevant section of the Acceptance Form and return it to the Sponsoring Brokers in accordance with the instructions

contained therein, to be received no later than 14h00 on Friday, 07 December 2012.

5.2.5 The Sponsoring Broker will endeavour to procure the sale of the Claw‐back Rights on the LuSE on behalf of such shareholders and will

remit the proceeds in accordance with the payment instruction reflected in the Acceptance Form, net of brokerage charges and

associated expenses. Neither the Sponsoring Broker nor the Company nor any broker appointed by either of them will have any

obligation or responsibility for any loss or damage whatsoever in relation to or arising out of the timing of such sales, the price

obtained or any failure to sell such Claw‐back Rights. References in this paragraph to shareholders include references to the person

or persons executing the Acceptance Form and any person or persons on whose behalf such person or persons executing the

Acceptance Form is/ are acting and in the event of more than one person executing the Acceptance Form, the provisions of this

paragraph shall apply to them, jointly and severally.

5.2.6 Shareholders who do not wish to sell the Claw‐back Rights allocated to them as reflected in the Letter of Allocation, and who do not

wish to purchase the Claw‐back Rights Offer Shares offered in terms of the Acceptance Form but who wish to renounce their Claw‐

back Rights, should complete the relevant section of the Acceptance Form and return it to the Sponsoring Broker in accordance with

the instructions contained therein, to be received by no later than 14h00 on Friday, 07 December 2012.

5.2.7 Shareholders who wish to purchase only a portion of the Claw‐back Rights Offer Shares allocated to them must indicate on the

Acceptance Form, the number of Claw‐back Rights Offer Shares which they wish to purchase.

5.3 Payment

5.3.1 Currency

The amount due on acceptance of the Claw‐back Offer is payable in Zambian Kwacha.

5.3.2 Payment terms

The amount due on acceptance is payable in Zambia Kwacha by deposit or transfer to the following bank account:





Payment may also be in the form of manager’s cheques or bankers’ drafts (crossed “not negotiable”) in respect of subscriptions and should be

made payable to “CCHZ CLAW‐BACK OFFER”. Cheques and bankers’ drafts and completed Letters of Allocation should be lodged, with

payment, with the Sponsoring Brokers Broker at the addresses set out in the “Corporate information” section of this Circular by no later than

14h00 on Friday, 07 December 2012.

All cheques or drafts received by the Sponsoring Broker will be deposited immediately. In the event that any cheque or bank’s draft is

dishonoured, CCHZ, in its sole discretion, may treat the relevant acceptance as void or may tender delivery of the relevant Claw‐back Rights

Offer Shares to which it relates against payment in cash of the Claw‐back Offer Price for such Claw‐back Rights Offer Shares. Payments

received in respect of an Application which is rejected or otherwise treated as void by CCHZ, or which is otherwise not validly received in

accordance with the terms stipulated in this paragraph, will be posted by registered mail (without interest) by way of a cheque drawn in

Zambian Kwacha to the Applicant concerned, at the Applicant’s risk on or about 17 December 2012. If the Applicant concerned is not a CCHZ

shareholder and gives no address in the Acceptance Form, then the relevant refund will be held by CCHZ with no interest payable to the

Applicant until collected by the Applicant.

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5.3.3 Share certificates

Where applicable, share certificates in respect of Claw‐back Rights Offer Shares will be posted, by registered mail, by the Transfer Secretaries,

at the risk of the certificated shareholders concerned, on or about Monday, 17 December 2012.

Certificated shareholders receiving Claw‐back Rights Offer Shares in certificated form must note that such shares cannot trade on the LuSE

until they have been dematerialised.

Dematerialised shareholder’s LuSE CSD accounts will be credited with the Claw‐back Rights Offer Shares subscribed for in terms of the Claw‐

back Offer on Monday, 17 December 2012.

6. UNDERWRITING AGREEMENT

CCHZ has entered into the Underwriting Agreement with CIH and Mukumbi in terms of which CIH and Mukumbi subscribed for and were

issued 17,009,814,181 and 13,619,471,534 Claw‐back Rights Offer Shares each respectively at an issue price of ZMK 1.40 per Claw‐back Offer

Share, which raised a total of ZMK 42.9 billion or 47.66% of the Claw Back Rights Offer, and subject to claw‐back in terms of the Renounceable

Claw‐back Offer to CCHZ shareholders.

An underwriting fee of 1.50 % of the value of the subscription commitment is payable to each Underwriter.

Information relating to the Underwriters is set out in ANNEXURE III to this Circular.

Minimum subscription

The minimum subscription is ZMK 45 billion or 50 % of the total Claw back Rights Offer Shares on offer. Of this ZMK 45 billion, a total of ZMK

42.9 billion or 47.66 % has already been raised from the Underwriters

7. TAX CONSEQUENCES

CCHZ shareholders are advised to consult their professional advisers regarding the tax consequences of the Claw‐back Offer.

8. JURISDICTION

The distribution of this Circular and the offer of Claw‐back Rights Offer Shares may be restricted by law in certain jurisdictions. Persons who

are in possession of this Circular are cautioned to familiarise themselves, and to observe any such restrictions. The Claw‐back Rights Offer

Shares have not been and will not be registered in any jurisdiction outside of Zambia. Any investor(s) from any jurisdiction outside of Zambia,

is (are) required to comply with the laws of that jurisdiction in participating in this Rights Offer.

C. INFORMATION RELATING TO CAVMONT CAPITAL HOLDINGS ZAMBIA PLC

1. INCORPORATION AND HISTORY

The Company was originally incorporated in Zambia on 6 January 1999 as Cavmont Capital Leasing Company Limited. Its name was

subsequently changed to Cavmont Capital Holdings Zambia Limited and to Cavmont Capital Holdings Zambia PLC following its conversion to a

public company on 25 September 2003. Its ordinary shares were first quoted on the LuSE in October 2005 and it became fully listed on the

LuSE in September 2006.

Cavmont Bank Limited is 100 % owned by CCHZ and was originally incorporated as Cavmont Merchant Bank Limited on 29 October 1992 and is

registered as a bank under the Banking and Financial Services Act. It changed its name to Cavmont Capital Bank Limited following its merger

with its affiliate New Capital Bank Limited, a Zambian retail bank incorporated in March 1992.

In 2007, CIH, a banking and financial services group from Namibia acquired a 25% stake in CCHZ. CIH subsequently provided partial

underwriting to the renounceable rights offer undertaken by CCHZ in November 2007 and consequently increased its equity stake in CCHZ

beyond 25% by holding non‐voting shares. CIH has supported CBL with technical support services in the past when required. In 2010 CCHZ

conducted a rebranding exercise and changed the name of the bank to Cavmont Bank Limited.

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Current Holding Structure

2. NATURE OF BUSINESS AND PROSPECTS

2.1 Nature of business

Cavmont Bank Limited distributes its products via a branch network of 15 branches and 1 agency. Six are community branches through which

the Bank distributes banking services to local communities. Started as a project in 2003 with seed funding from the United Kingdom’s

Department for International Development (DFID) under its Financial Deepening Challenge Fund (FDCF), the Bank has now invested more than

ZMK 4.1 billion in its Community Banking Division, which enables the Bank to provide banking services to community enterprises and small

businesses that otherwise would not be able to access banking services.

i) The Bank presently provides corporate, retail, treasury and community banking facilities to over 52,000 customers. The number of

customers is on a strong growth path as its points of representation increase for the retail, community and rural branches.

ii) Historically, CBL traditionally deployed its deposits in the GRZ treasury‐bill and bond market. With the repositioning and rebranding of the

bank in 2010, CBL now operates as a full scope commercial bank with a full suite of lending, deposit and other banking service and

product offerings.

iii) The vision of CBL is “to be a world class bank rated amongst the best in Zambia with a focus on partnering with all (its) stakeholders”. To

this end, the bank seeks to provide tailored, convenient banking products and services coupled with a focus on customer service.

iv) As at 30th June 2012, compared to other Zambian banks, CBL ranked 7

th in terms of number of branches, 10

th in terms of loans and

advances to customers, 14th in terms of total assets, and 11

th in terms of customer deposits.

Regulatory Framework

The Bank operates under the following legal framework;

Banking and Financial Services Act, 1994, as amended – this prescribes the operating and reporting framework for financial institutions.

The monitoring and compliance aspect is handled by the Bank of Zambia (BOZ) who is the regulator of the industry. From time to time

BOZ issues circulars prescribing changes in certain legislation

Companies’ Act, 1994, as amended – the Act prescribes the operating and reporting framework for all types of companies and gives

guidance on various matters including share capital, dividends, directors, meetings of directors and winding up of companies.

Securities Act – this prescribe the continuing obligations of companies listed and quoted on the Lusaka Stock Exchange (LuSE).

Income Tax Act – this prescribes the income tax framework for Banks.

Lusaka Stock Exchange (LuSE) – its listing rules and guidelines.

Anti‐money laundering guidelines – the act provides guidance on how to deal and report money laundering activities in the conduct of

banking activities.

Non-Voting 19.2% Voting 25.0% Total 44.2%

CCHZ

CAVMONT BANK

LIMITED

100%

Capricorn Investment Other Shareholders

Non-Voting 0%

Voting 75% Total 55.8%

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The principal activity of CCHZ is that of a holding company. Its major activity comprises commercial banking through Cavmont Bank Limited, a

100% wholly owned subsidiary.

2.2 Prospects

The Zambian banking industry has experienced dramatic growth over the last 10 years, with more growth expected as the economy expands.

Over the last two years CBL’s balance sheet has grown substantially, a new system has been implemented, the bank has been rebranded and

additional services have been rolled out (Visa Cards, Electronic Internet banking etc.). CBL is well positioned in the local market and the

recapitalisation presents an opportunity for the bank to leverage off its current infrastructure and expand the business. With support from

shareholders, local institutions and the strategic investor, and with the increased capital at its disposal, the management team of CBL is

confident that the bank will return to profitability. The recapitalisation of the banking sector in Zambia will have a significant effect on the

industry. CBL is recognised as a leading local bank and believes that this presents an opportunity to strengthen its position in the market.

3. CAPITAL STRUCTURE

3.1 Summary of alterations to the share capital and issued shares in the past three years

At the 13th Annual General Meeting of shareholders of CCHZ, resolutions were passed to approve the increase in authorised share capital from

7,255,000,000 ordinary shares of ZMK 1.00 par value each to 57,255,000,000 ordinary shares of ZMK 1.00 par value each. The share capital of

the Company has not been changed in any other way over the past three years.

Date Number of shares Nominal Value per share

(ZMK)

Total Nominal Value

(ZMK)

Authorised share capital (ZMK)

31 December 2011 5,500,000,000 ordinary shares 1.00 5,500,000,000

31 December 2011 1,750,000,000 non‐convertible 1.00 1,750,000,000

31 December 2011 5,000 preference shares 1,000 5,000,000

Increase in Authorised share capital 28 September 2012 50,000,000,000 ordinary shares 1.00 50,000,000,000

31 October 2012 42,745,000,000 ordinary shares 1.00 42,745,000,000

Total Authorised share capital 31 October 2012 100,000,000,000 1.00 100,000,000,000

Issued share capital (ZMK) 31 December 2011 5,000,000,000 1.00 5,000,000,000

Increase in Issued share capital 28 September 2012 30,629,285,715 1.00 30,629,285,715

31 October 2012 28,656,428,570 1.00 28,656,428,570

Total Issued shares after Rights Offer 69,285,714,286 1.00 69,285,714,286

Note* on 28th September 2012, 30,629,285,715 shares were issued at a price of ZMK1.40 per share and a total amount of capital of ZMK42,881,000,000.00 was

underwritten by CIH and Mukumbi to facilitate the underwritten claw back rights offer.

3.2 Unissued shares

The Company’s unissued ordinary shares are under the control of the Directors as directed and authorised by the shareholders subject to the

provisions of the Companies Act.

3.3 Information relating to the share capital and shares

3.3.1 Ordinary share capital

The entire issued ordinary share capital of CCHZ is listed on the LuSE and the LuSE has confirmed its continued listing subsequent to the Claw‐

back Offer.

3.4 Variation of rights attaching to shares

In accordance with the Company’s Articles of Association any variation of rights attaching to shares will require the consent of shareholders in

general meeting.

3.5 Voting rights

In accordance with the Articles of Association of CCHZ, at any general meeting, every shareholder present in person or by authorised

representative shall have one vote on a show of hands and on a poll every shareholder present in person, by authorised representative or by

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proxy shall have that proportion of the total votes in the Company which the aggregate amount of the par value of the shares held by that

shareholder bears to the aggregate of the par value of all the shares issued by the Company to which voting rights attach.

3.6 Authorisations relating to shares

At the 13th Annual General Meeting of CCHZ held on 05 July 2012 at Taj Pamodzi Hotel in Lusaka, shareholders authorised an increase in the

authorized share capital of CCHZ from 7,255,000,000 to 57,255,000,000 ordinary shares of ZMK 1.00 for the purposes of raising ZMK 90 billion

via an underwritten rights offer or an underwritten public offer.

Subsequently, a filing was made into PACRA increasing the authorised share capital from 57,225,000,000 ordinary shares to 100,000,000,000

ordinary shares in order to facilitate the issuance of 64,285,714,286 ordinary shares at ZMK 1.40 per share required to raise the required ZMK

90 billion. This addendum is to be ratified at the next extra ordinary general meeting of shareholders tentatively scheduled to be held on or

about 07 December 2012.

3.7 Authorised and issued share capital

The authorised and issued share capital of CCHZ, before and after, the Claw‐back Offer, is as follows:‐

Before the Claw‐back Offer After the Claw‐back Offer

Authorised share capital (Kwacha) 7,255,000,000 100,000,000,000

Issued share capital (Kwacha) 5,000,000,000 69,285,714,286

Note: Ordinary Shares in CCHZ are of K 1.00 par value each

The authorised and unissued shares will be under the control of the Directors as directed and authorised by the shareholders subject to the

provisions of the Companies Act.

All of the authorised and issued shares, rank pari passu in every respect (except as provided by the terms of issue of each class of the shares.

Any variation of rights attaching to ordinary shares will require the consent of shareholders in general meeting in accordance with the Articles

of Association of CCHZ.

None of the Ordinary Shares of CCHZ are listed on any other stock exchange, other than the on the LuSE.

4. CONTROLLING AND MAJOR SHAREHOLDERS

At the date of this Circular, shareholders who are beneficially interested, directly and indirectly, in 5% or more of the Company’s shares and

their holdings after the Claw‐back Offer (assuming all rights are taken up), are set out below:

Before the Claw‐back Offer After the Claw‐back Offer

Shareholder Number CCHZ shares held % Holding Number CCHZ shares held % Holding

Capricorn Investment Holdings 2,210,469,544 44.21 30,630,792,253 44.21

Bank Windhoek Nominees (Pty) Ltd 652,916,433 13.06 9,047,556,286 13.06

Cavmont & Co. SA 550,000,000 11.00 7,621,428,571 11.00

NAPSA 546,915,739 10.94 7,578,689,526 10.94

Subtotal 3,960,301,716 79.21 54,878,466,636 79.21

Others 1,039,698,284 20.79 14,407,247,650 20.79

Total number of shares in issue 5,000,000,000 100% 69,285,714,286 100%

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5. MATERIAL CONTRACTS, PROMOTERS, SERVICE AND OTHER AGREEMENTS

CIH and CBL have entered into an agreement for professional and technical services relating to various support to CBL.

6. LITIGATION

Subject to review by the Legal Adviser , the Directors of CCHZ believe the current ongoing litigation cases do not affect the operations of CCHZ

or CBL, and therefore not material.

7. SUBSIDIARY COMPANIES

Cavmont Bank Limited is a wholly owned subsidiary of CCHZ, a private company duly registered and incorporated in terms of the laws of the

Republic of Zambia and whose licensed activity is the provision of banking and financial services in Zambia.

8. SHARE PRICE HISTORY AND RIGHTS OFFER VALUATION

The graph below depicts the trend in the share price of CCHZ on the LuSE over the past eight years since 2005.

0

2

4

6

8

1 0

1 2

1 4

1 6

1 8

Jan-05

Jul-05

Jan-06

Jul-06

Jan-07

Jul-07

Jan-08

Jul-08

Jan-09

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Jan-11

Jul-11

Jan-12

Jul-12

Share Price -Zmk

Y E A R

C C H Z Sh a re Pr ice tre nd :J a nua ry 2005 - Septem ber 2012

CCH Z

Rights Offer Pricing

CCHZ last traded on the LuSE at a share price of ZMK 4.50 on 15 October 2012. To take into account the low liquidity in the share price on the

LuSE a valuation exercise was undertaken to determine the appropriate offer price for the Claw Back Rights Offer Accordingly the Claw Back

Rights Offer price has been set at ZMK 1.40 which represents a discount of 69 % to the last traded price. The Offer price of ZMK 1.40 can be

contrasted to the Net Asset Value of ZMK 1.33 per share (as shown in the table below) and this gives a Price to Book Value (PBV) ratio of 1.05.

It is envisaged that that the high discount of 69 % and the low PBV ratio will encourage Zambian shareholders to follow their rights in the Claw

Back Rights Offer.

Date/reference Share Price Net Asset Value per share (NAV) Price to Book Value (PBV)

31 Dec 2011 ZMK 5.00 ZMK 2.37 2.10

29 June 2012 ZMK 4.00 ZMK1.33 3.00

November 2012 ‐ Rights Offer ZMK 1.40 ZMK 1.33 1.05

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9. CONSOLIDATION OF SHARE CAPITAL

On 09 November 2012 the company issued a notice to shareholders of an extraordinary shareholders meeting to consider and approve a

consolidation of the shares of the company to accommodate the Kwacha rebasing scheduled for 1 January 2013. The number of issued shares,

should all rights be taken up, will therefore reduce from 69,285,714,286 of ZMK 1 each to 69,285 714 of ZMK 1000 each.

It is proposed that, subject to the passing of the requisite special and ordinary resolutions at the EGM on 07 December 2012 and the filing of

the Resolutions at PACRA, CCHZ will implement a Consolidation of the authorised and issued share capital of the Company on the basis of 1

new CCHZ Consolidated Share for every 1,000 CCHZ ordinary shares of ZMK 1.00 par value each held as at the Record Date of 14 December

2012 by the consolidation of every 1,000 ordinary shares of par value of ZMK 1.00 each into 1 new CCHZ ordinary share with a par value of

ZMK 1,000.00 each.

The Consolidation is being proposed primarily to prepare CCHZ for the proposed currency rebasing exercise in Zambia.

The Bank of Zambia will rebase the Zambian currency by a factor of 1,000 commencing 01 January 2013. Therefore, share prices reported on

the LuSE will be divided by a factor of 1,000 across the board. Accordingly, the Consolidation is also intended to adjust the share price of CCHZ

ahead of the currency rebasing (but with no change in market value), and give a realistic resultant working figure when currency rebasing is

effected, commencing 01 January 2013.

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D. FINANCIAL INFORMATION

1. HISTORICAL FINANCIAL INFORMATION

The following tables set out selected historical financial information for the three years ended 31 December 2009, 2010 and 2011 and the six

months period ended 30 June 2012 from the Report of the Independent Reporting Accountant in ANNEXURE Vof this Circular. The Report of

the Independent Reporting Accountant on CCHZ has been prepared with reference to the financial statements audited by PWC. The financial

statements have been prepared in accordance with IFRS.

Report of the Independent Reporting Accountant

The Report of the Independent Reporting Accountant on CCHZ is contained in ANNEXURE V of this Circular.

Consolidated statement of comprehensive income for the preceding three years

The following table should be read in conjunction with the Report of the independent Reporting Accountant.

Kwacha millions

2011 2010 2009

Interest income 26,310 20,049 17,996

Interest expense (9,937) (4,213) (2,195)

NET INTEREST INCOME 16,373 15,836 15,801

Impairment losses on loans & advances (754) (1,194) (1,608)

Net interest income after loan impairment 15,619 14,642 14,193

Fees and commission income 15,471 11,321 9,480

Fees and commission expense (603) ‐ ‐

NET FEE AND COMMISSION INCOME 14,868 11,321 9,480

Foreign exchange income 4,339 3,658 4,778

Other income 111 79 680

Depreciation expense (1,809) (1,888) (1,469)

Operating expenses (50,151) (35,562) (29,747)

Loss before income tax (17,023) (7,749) (2,085)

Income tax credit (expense) 4,186 3,724 639

Loss for the year (12,837) (4,025) (1,446)

Earnings per share (2.57) (0.81) (0.28)

Dividend per share ‐ ‐ (0.40)

Years ended 31 December

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Consolidated statement of financial position as at 31 December for the last 3 years

Kwacha millions 2011 2010 2009

Assets

Cash and Balances with Bank of Zambia 35,645 31,966 32,660

Placements with other banks 28,008 31,877 14,115

Loans and advances 134,257 64,553 33,176

Investment securities 66,688 50,245 58,039

Current income tax 3,208 2,236 768

Property and equipment 19,907 17,964 8,409

Intangible assets 12,913 14,137 12,971

Deferred income tax 8,415 3,983 2,611

Receivables and prepayments 10,540 5,553 5,699

TOTAL ASSETS 319,581 222,514 168,448

Liabilities

Convertible redeemable preference shares 10,000 ‐ ‐

Customer Deposits 290,329 187,399 122,530

Other liabilities 7,371 10,643 15,317

Obligation under finance lease ‐ ‐ 79

Retirement benefit obligations ‐ ‐ 4,599

Total liabilities 307,700 198,042 142,525

Shareholders' equity

Share capital 5,000 5,000 5,000

Share premium 16,992 16,992 16,992

Revaluation reserve 3,200 2,954 380

Non distributable reserve 3,327 3,327 3,327

(Accumulated losses) Retained earnings (16,638) (3,801) 224

Total shareholders' equity 11,881 24,472 25,923

TOTAL EQUITY AND LIABILITIES 319,581 222,514 168,448

Net assets per share 2.37 4.89 5.18

Net (liabilities) assets per share (0.21) 2.07 2.59

2. PROFIT FORECAST

The Report of the Independent Reporting Accountant on the forecast Statement of comprehensive Income and Statement of financial position

for the year ended 31st December 2012 are contained in ANNEXURE IV of this Circular.

3. DIVIDENDS

The company has not paid a dividend in the last 3 years.

The company had unpaid dividends to a class of shareholders as at 31 December 2009 amounting to ZMK 1.3 billion and it is the intention of

the directors to issue shares or pay cash to eliminate the liability.

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E. INFORMATION RELATING TO THE DIRECTORS

1. DETAILS

The full names, qualifications, nationalities, addresses and occupations of the directors of CCHZ are set out below:

The Business Address of all Directors is PwC Place, Plot 2374, Thabo Mbeki Road, P O Box 32322, Lusaka, Zambia.

Brief profiles of the members of the CCHZ Board of Directors and the Company Secretary are set out in the table below.

Name of Director Summary profile

Guy Phiri

(Zambian)

(Independent)

Mr. Phiri was appointed as a Independent Director of CCHZ and CBL in November 2011. He was

subsequently elected chairman of the Board of CCHZ. Mr. Phiri is currently serving as the Managing Director

of Engen Petroleum Zambia Limited, overseeing all operations of Engen in Zambia. Mr Phiri is also chairman

of Engen Malawi, a director of the Zambian Federation of Employers, a member of the Institute of Directors,

a former director of Engen Botswana PLC and he holds a post graduate degree in Chemical Engineering.

Joseph Ngosa

(Zambian)

(Non‐Executive)

Mr. Joseph Ngosa was appointed as a Non-Executive Director for Cavmont Bank in August 2008. Mr. Ngosa

serves as a Director for the National Pension Scheme Authority (NAPSA) in charge of Investments. Prior to

his engagement with NAPSA, Mr. Ngosa served as Financial Services Manager, Financial Analyst and

Internal Auditor for Cavmont Bank Limited.

Johan Swanepoel

(Namibian)

(Non‐Executive)

Mr. Swanepoel was appointed as Managing Director of Bank Windhoek Limited on 1 July 1999. In 2005 he

took up the position of Group Managing Director of the Capricorn Investment Holdings Group. After joining

Coopers & Lybrand (now PricewaterhouseCoopers) in 1980, he qualified as a Chartered Accountant in 1982.

He was appointed Managing Partner of Coopers & Lybrand in Namibia in 1989

Johan Minnaar

(Namibian)

(Managing Director)

Mr. Johan Minnaar was appointed Managing Director for Cavmont Bank Limited in January 2010. He joined

Cavmont Capital Holdings Zambia PLC (CCHZ) in February 2008 as Executive Director on secondment from

Capricorn Investment Holdings Limited (CIH). He served as director for the repositioning project named

Project Makumbi. Mr. Minnaar started his banking career in 1973, and brings a considerable amount of

banking experience gained over three decades at Bank Windhoek in Namibia and Absa in South Africa,

amongst others.

Louis Kabula

(Zambian)

(Company Secretary)

Mr Kabula was appointed Chief Financial Officer for Cavmont Bank Limited in October 2009. In his role he is

responsible for Strategic Financial Guidance and Governance. Prior to joining Cavmont Bank Limited he held

a number of senior management positions in the Finance Portfolio at Flora Clothing, Standard Chartered

Bank Zambia Limited and Stanbic Bank Zambia Limited.

2. INTEREST IN THE COMPANY’S SHARES

Interests of Directors

The beneficial, direct and indirect interests of the directors and their associates in the Company’s shares before and after the Claw‐back Offer

(assuming all Claw‐back Rights Offer Shares are subscribed for) are set out below:

Name of Director Before Claw‐back Offer After Claw‐back Offer

Direct Indirect % Direct Indirect %

Guy D. Z. Phiri 1,182,216 ‐ 0.02 16,382,136 ‐ 0.02

Johan Swanepoel ‐ ‐ ‐ ‐ 2.00

There was no change in the directors’ interest, before the Claw‐back Offer, between the date of the Company’s most recent year‐end (31

December 2011) and the date of this Circular.

CIH and Mukumbi have entered into an underwriting agreement with CCHZ and it is noted that Johan Swanepoel is a director of both CIH and

CCHZ.

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Interests of Experts

The number of shares in which each expert holds relevant interest on the date of this Circular and on completion of this Claw back Rights Offer

are and will be approximately as follows :

Expert No of Share held prior to Rights Offer

Entitlement to new shares

on 90 for 7 basis

Total shares held after the Rights Offer

(assuming rights fully taken)

Charles Mate 668,469 8,594,601 9,263,070

3. INTERESTS IN TRANSACTIONS

Save as disclosed above neither the Directors of CCHZ nor any person acting in concert with the Directors, controls or is interested, beneficially

or otherwise, in any CCHZ Shares or in any securities convertible to rights to subscribe for CCHZ Shares.

4. AUTHORITY AND REMUNERATION OF DIRECTORS

The relevant provisions of the Articles of Association which authorise a rights offer are set out in ANNEXURE I to this Circular.

4.1 The remuneration paid to directors of CCHZ in the financial year ended 31 December 2011 was ZMK 370 million (2010: ZMK 367 million).

5. MATERIAL CHANGES

The Directors report that to their knowledge there have been no material changes in the financial or trading position of the Company since 31

December 2011, the date of the last audited financial statements of the same and set out in the Independent Reporting Accountants’ Report

on the Historical Financial Information of the Company as set out in Annexure V.

6. DIRECTORS’ RESPONSIBILITY STATEMENT

The directors, whose names are given in this section of the Circular, collectively and individually accept full responsibility for the accuracy of

the information given and certify that to the best of their knowledge and belief there are no other facts the omission of which would make any

statement false or misleading, that they have made all reasonable enquiries to ascertain such facts and that the Circular contains all

information required by law

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F. GENERAL INFORMATION

1. ADEQUACY OF CAPITAL

The Directors are of the opinion that after the issue of the 64,285,714,286 new Claw Back Rights shares:

The Company’s authorized share capital is adequate for the purposes of the business of the Company for the foreseeable future; and

The Company’s working capital resources will be adequate to cover for its current and foreseeable requirements.

2. PRELIMINARY EXPENSES

The total costs of the Rights offer (excluding underwriting fees), including advisory fees, regulatory costs, marketing and printings costs is

estimated at ZMK 2 billion or 2.22% of the Offer.

3. EXPERTS’ CONSENTS

SBZ, Imara, Lewis Nathan Advocates, Deloitte & Touche Chartered Accountants and PricewaterhouseCoopers have given, and not withdrawn,

their consent to the issue of this Circular with the inclusion of their names and report(s) in the forms and contexts in which they appear.

4. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the Company Secretary’s office at PwC Place, Plot 2374, Thabo Mbeki

Road, Lusaka, Zambia, at any time during business hours on weekdays (official public holidays in Zambia excluded) prior to the close of the

Claw‐back Offer at 17h00 on 07 December 2012.

i) the articles of association of the Company, the certificate of incorporation and the certificate of share capital;

ii) the audited annual reports of Cavmont Capital Holdings Zambia Plc and Cavmont Bank Limited for the last 3 years;

iii) the signed copy of the Report of the Independent Reporting Accountant;

iv) the written consents of the Joint Lead advisers, the Independent Reporting Accountant, the Sponsoring Broker and the Legal Adviser

to the Claw‐back Offer named in this Circular to act in those capacities, none of which consents having been withdrawn prior to

registration; and

SIGNED AT LUSAKA ON 16 November 2012 ON HIS OWN BEHALF AND ON BEHALF OF ALL THE OTHER DIRECTORS OF THE COMPANY, HE

BEING DULY AUTHORISED THERETO IN TERMS OF POWERS OF ATTORNEY GRANTED TO HIM BY SUCH OTHER DIRECTORS.

NAME DESIGNATION

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ANNEXURE I EXTRACTS FROM THE ARTICLES OF ASSOCIATION

The relevant provisions of the articles which authorise a rights offer are hereby reproduced:

Article 38(1) ‐ Subject to any resolution to the contrary, all un‐issued shares shall, before issue, be offered to such persons as are at the date of

the offer entitled to receive notices from the company of general meetings in proportion, as nearly as the circumstances allow, to the sum of

the nominal values of the shares already held by them.

Article 38 (2) ‐ The offer shall be made by notice, specifying the number of shares offered and delimiting a period within which the offer, if not

accepted, will be deemed to be declined"

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ANNEXURE II TABLE OF ENTITLEMENTS

The rounded number of Claw‐back Rights Offer Shares to which a Claw‐back participant will become entitled will be as follows:

Number of ordinary shares held Rights Offer entitlement on a 90 for 7 basis Value of entitlement at ZMK [1.40] per

Rights Offer Share

1 13 18.20

10 129 180.60

100 1,286 1,800.40

500 6,429 9,000.60

1,000 12,857 17,999.80

2,000 25,714 35,999.60

5,000 64,286 90,000.40

10,000 128,571 179,999.40

15,000 192,857 269,999.80

20,000 257,143 360,000.20

25,000 321,429 450,000.60

30,000 387,714 542,799.60

40,000 514,286 720,000.40

50,000 642,857 899,999.80

100,000 1.285,714 1,799,999.60

500,000 6,428,571 8,999,999.40

1,000,000 12,857,143 18,000,000.20

2,000,000 25,714,286 36,000,000.40

3,000,000 38,571,429 54,000,000.60

5,000,000 64,285,714 89,999,999.60

10,000,000 128,571,429 180,000,000.60

20,000,000 257,142,857 359,999,999.80

60,000,000 771,428,571 1,079,999,999.40

80,000,000 1,028,571,429 1,440,000,000

1,000,000,000 12,857,142,857 17,999,800,000

2,000,000,000 25,714,285,714 35,999,600,000

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ANNEXURE III INFORMATION RELATING TO THE UNDERWRITERS

The following information relating to the Underwriter is disclosed in accordance with the LuSE Listing Requirements:

1. Capricorn Investment Holdings Limited (incorporated in Namibia, Registration number 82/031)

Holding company to the CIH Group of companies including Bank Windhoek and Bank Gaborone in Namibia and Botswana respectively (Group consists of 13 Subsidiaries and 6 associate investments including investment in CCHZ Plc).

Directors JC Brandt( Chairman),

JJ Mannheimer,

MK Shikongo,

JJ Swanepoel (Group Managing Director),

G Nakazibwe‐Sekandi

A Basson

MJ Prinsloo

Bankers Bank Windhoek Limited Namibia

Authorised and issued share capital of the company

Authorised, Namibia Dollar 5 million; Issued Namibia Dollar 4.5 million

Address: CIH House, Kasino Street; P.O. Box 15,Windhoek, Namibia

2. Mukumbi Investments Limited (incorporated in Zambia on 29 August 2012, Registration number 105785)

Mukumbi Investments was established as a vehicle to facilitate participation by Zambians in the rights offer supported by CIH. CIH has provided capital in exchange for non‐voting shares, with these shares ultimately being sold to existing local shareholders or new Zambian investors.

Directors MJ Prinsloo

GJ Joubert

Bankers Cavmont Bank Limited

Authorised and issued share capital of the company:

Authorised, ZMK 5 million; Issued, ZMK 5 million

Address: Plot 450a Off Lake Road, Kabulonga, Box 36937, Lusaka, Zambia

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ANNEXURE IV REPORT ON THE FORECAST STATEMENT OF COMPREHENSIVE INCOME AND STATEMENT

OF FINANCIAL POSITION

31 October 2012

The Directors

Cavmont Capital Holdings Zambia Plc

Head Office

PwC Place, Stand No 2374

Thabo Mbeki Road

Lusaka

Dear Sirs,

Forecast Statement of comprehensive income and Statement of financial position for the year ending 31 December 2012

We have reviewed the accounting bases and calculations for the forecasts of interest income and profit after tax for the year ending 31

December 2012 of Cavmont Capital Holdings Zambia Plc (“CCHZ” or the “Company”) in respect of the renounceable claw‐back rights offer.

The Directors of Cavmont Capital Holdings Zambia Plc are solely responsible for these forecasts. This responsibility includes ensuring that the

forecasts are prepared with due care and objectivity. Our responsibility as Independent Reporting Accountants is to satisfy ourselves that the

forecasts have been so prepared.

In our opinion, the forecasts, so far as the accounting bases and calculations are concerned, have been properly compiled on the basis of the

assumptions made by the Directors set out below and are presented on a basis consistent with the accounting policies adopted by Cavmont

Capital Holdings Zambia Plc.

Yours faithfully,

DELOITTE &TOUCHE

CHARTERED ACCOUNTANTS

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FORECAST STATEMENT OF COMPREHENSIVE INCOME

Kwacha millions Audited

Year to 31 December 20111

Forecast

Year to 31 December 20122

Interest income 26,310 37,118

Interest expense (9,937) (15,589)

Net interest income 16,373 21,529

Impairment losses on loans & advances (754) (1,523)

Net interest income after loan impairment 15,619 20,006

14,868 17,647 Net fee and commission income

Foreign exchange income 4,339 6,701

Other income 111 100

Depreciation expense (1,809) (4,100)

Operating expenses (50,151) (52,992)

Loss before income tax (17,023) (12,838)

Income tax credit 4,186 4,493

Loss for the year (12,837) (8,345)

Source 1 ‐Audited financial statements

2 ‐Directors’ forecast

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FORECAST STATEMENT OF FINANCIAL POSITION

Kwacha millions Audited

31 December 2011 1

Forecast

31 December 20122

Assets

Cash and Balances with Bank of Zambia 35,645 34,852

Placements with other banks 28,008 16,335

Loans and advances 134,257 237,062

Investment securities 66,688 88,583

Property, equipment& Intangible assets 32,820 34,457

Other assets and prepayments 22,163 23,081

TOTAL ASSETS 319,581 434,370

Liabilities

Convertible redeemable preference shares 10,000 ‐

Customer deposits 290,329 364,000

Other liabilities 7,371 25,370

Total liabilities 307,700 389,370

Total shareholders' equity 11,881 45,000

TOTAL EQUITY AND LIABILITIES 319,581 434,370


2 ‐Directors’ forecast

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Assumptions

The Directors of Cavmont Capital Holdings Zambia Plc are solely responsible for the forecasts. They have been prepared in accordance with the

accounting policies and bases currently in place.

The following are the significant assumptions that the Directors used in preparing the forecast financial position as at 31 December 2012 and

the forecast financial performance for the year then ended.

Bank of Zambia Policy rate is estimated to remain at 9% in 2012;

Non‐interest income is expected to total 53% of total income;

Provision for doubtful loans are estimated to amount to 2.7% of gross loans and advances;

Staff costs will increase by 3.9%;

While the rights offer is anticipated to close in December 2012, it is expected that the actual cash proceeds of the rights offer will be

received in 2013. Accordingly, the forecast shareholders’ equity does not reflect receipt of the rights offer proceeds by 31 December

2012; and

While it is the intention of CCHZ and its shareholders that the current rights offer is successfully concluded and fully subscribed by

December 2012, the Company has considered the implications of not successfully concluding the proposed recapitalisation. In the event

that the proposed recapitalisation is not fully subscribed by December 2012, it is the intention of CCHZ that a second capital raise will be

pursued in 2013.

SIGNIFICANT RATIOS

The table below shows how ratios projected for the financial year ending 31 December 2012 compare with actual ratios for the year ended 31

December 2011.

Actual

As at 31 December 2011

Forecast

As at 31 December 2012

Income statement

Interest income growth(compared to prior year) 31.2% 41.1%

Net interest income/Total income 35.5% 35.0%

Operating cost /Total Income 114.3% 95.4%

Net interest margin 62.2% 58.0%

Statement of financial position

Credit / Deposit ratio 46.2% 65.1%

Impairment to total advances ratio 0.56% 0.64%

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ANNEXURE V REPORT OF THE INDEPENDENT REPORTING ACCOUNTANT

31 October 2012

The Directors

Cavmont Capital Holdings Zambia Plc

Head Office

PwC Place, Stand No 2374

Thabo Mbeki Road

Lusaka

Dear Sirs,

INDEPENDENT ACCOUNTANT’S REPORT

Cavmont Capital Holdings Zambia Plc (“CCHZ” or the “Company”) is a limited company incorporated and domiciled in the Republic of Zambia.

CCHZ was incorporated on 6 January 1999. Cavmont Capital Holdings Zambia Plc owns 100% of the ordinary shares of Cavmont Bank Limited

(“CBL”) together referred to as the “Group”.

We have examined the audited consolidated financial statements of Cavmont Capital Holdings Zambia Plc, and its subsidiary company,

Cavmont Bank Limited for the three years ended 31 December 2011, 31 December 2010 and 31 December 2009and the unaudited interim

financial information for the six month period ended 30 June 2012.

Messrs PricewaterhouseCoopers were the auditors for the years ended 31 December 2011, 31 December 2010 and 31 December 2009and

performed a review of interim financial information for the 6 months ended 30 June 2012 (together “the financial statements”).

Basis of preparation

The financial information set out in section 1 to 5 is based on the financial statements after making such adjustments as we believe necessary.

The financial statements have been prepared on the basis of the accounting policies set out in pages 37 to 47 below, which conform to

operative International Financial Reporting Standards.

Responsibility

The financial statements on which the following information is based are the responsibility of the Directors of the Company who approved

them for issue. The Directors of Cavmont Capital Holdings Zambia Plc are responsible for the contents of the renounceable claw back rights

offer pre‐listing document in which this report is included. We report on the information in accordance with the requirements of the Securities

Act 1993, and the Third Schedule to the Securities (Registration of Securities) Rules, 1993. We are a firm of Accountants with partners who

hold practising certificates issued by the Zambia Institute of Chartered Accountants under the Accountants Act, 2008.

Basis of opinion

Our work included an assessment of evidence relevant to the amounts and disclosures in the financial information. The evidence included that

previously obtained by the auditors who audited the financial statements underlying the financial information and reviewed the interim

financial information. It also included an assessment of significant estimates and judgements made by those responsible for the preparation of

the financial statements underlying the financial information and whether the accounting policies are appropriate to the Group’s

circumstances, consistently applied and adequately disclosed.

We planned and performed our work so as to obtain all the information and explanations which we considered necessary in order to provide

us with sufficient evidence to give reasonable assurance that the financial information is free from material misstatement whether caused by

fraud or other irregularity or error.

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Opinion

In our opinion, the information set out in pages 37 to 80 below gives, for the purposes of the renounceable claw back rights offer pre‐listing

statement, a true and fair view of the profit of the Group for the three years ended 31 December 2011, 2010 and 2009 and of the assets and

liabilities of the Group as at 31 December 2011, 2010 and 2009.

Furthermore, based on the review, nothing has come to our attention that causes us to believe that the accompanying interim financial

information does not present fairly, in all material respects the financial position of the Group as at 30 June 2012, and of its financial

performance for the six month period then ended for the purposes of the renounceable claw back rights offer pre‐listing statement.

Yours faithfully,

DELOITTE &TOUCHE

CHARTERED ACCOUNTANTS

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1 ACCOUNTING POLICIES

1.1 GENERAL INFORMATION

Cavmont Capital Holdings Zambia Plc a limited company incorporated and domiciled in the Republic of Zambia. CCHZ was incorporated on 6

January 1999. The address of its registered office and principal place of business is PwC Place, Stand № 2374, Thabo Mbeki Road, Lusaka, Zambia.

Presented below are the audited financial statements for the years ended 31 December 2011, 2010 and 2009, as well as the unaudited financial

statements for the 6 months ended 30 June 2012, which disclose the state of affairs of Cavmont Capital Holdings Zambia Plc ("the Company") and

its subsidiary, Cavmont Bank Limited (the “Bank”).

These financial statements are presented in units of millions of Zambian Kwacha.

1.2 SIGNIFICANT ACCOUNTING POLICIES

1.2.1 Statement of compliance

The financial statements have been prepared in accordance with International Financial Reporting Standards, the Banking and Financial

Services Act, 1994 (as amended), the Companies’ Act, 1994 (as amended), the requirements of the Securities Act 1993, and the Third Schedule

to the Securities (Registration of Securities) Rules, 1993.

1.2.2 Basis of preparation

The financial statements have been prepared on the historical cost basis except for certain properties and financial instruments that are

measured at revalued amounts or fair values, as explained in the accounting policies below. Historical cost is generally based on the fair value

of the consideration given in exchange for assets.

The preparation of financial statements in conformity with IFRS requires the use of estimates and assumptions. It also requires Management

to exercise its judgment in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or

complexity, or where assumptions and estimates are significant to the financial statements, are disclosed in Note 1.3.

Going concern

The Company does not trade but relies on the results of the wholly owned subsidiary. The financial statements of the Company standing alone

and with the subsidiary (together the “Group”) have been prepared on a going concern basis, which assumes that the Group will continue to

be able to meet its liabilities as they fall due for the foreseeable future. During 2011, the Group made a loss before tax of ZK17, 023 million

(2010: ZK7,749 million) and as at 31 December 2011 had accumulated losses of ZK16,638 million (2010: ZK3,801 million).

The Directors of the subsidiary have taken up the following actions to address the current performance of the Bank and to reverse the current

trend of losses:

The Bank is focussed on increasing the value of its customer deposits from to ZK400 million over 2012, which will in turn support the

planned growth of loans and advances to customers;

On 15 December 2011, the Bank issued cumulative, redeemable, convertible preference shares of ZK20,000 million which qualifies as

secondary capital. This increased the Bank’s ability to increase loans and advances by ZK20,000 million.

The Group implemented a number of incentives to increase non‐interest income;

Management has introduced cost control and reduction activities that are expected to reduce overheads of the Group by 10% over the

next 2 years.

The Directors are of the opinion that the above actions will reverse the current losses and the Bank should return to profitability in the future.

The consolidated financial statements comprise the financial statements of Cavmont Capital Holdings Zambia Plc and its subsidiary, Cavmont

Bank Zambia Limited, as at 31 December of each year. The financial statements of the subsidiary are prepared for the same reporting year as

the parent company, using consistent accounting policies.

All inter‐group balances, transactions, income and expenses, as well as profits and losses resulting from intra‐group transactions that are

recognised in assets and liabilities, are eliminated in full. The subsidiary is fully consolidated from the date of acquisition, being the date on

which the Group’s obtains control, and shall continue to be consolidated until the date that such control ceases.

These financial statements are presented in millions of Zambian Kwacha (ZK).

The principal accounting policies are set out below.

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1.2 SIGNIFICANT ACCOUNTING POLICIES (continued)

1.2.3 Application of new and revised International Financial Reporting Standards (IFRSs)

The following new and revised IFRSs have been applied in the current year and have affected the amounts reported in these financial

statements.

Amendments to IAS 1 Presentation of financial statements

The amendments to IAS 1 clarify that an entity may choose to disclose an analysis of other comprehensive income by item in the statement of

analysis of other comprehensive income by item in the statement of changes in equity or in the notes to the financial statements.

IAS 24 Related party disclosures as amended in 2009

IAS 24 (as revised in 2009) has been revised on the following two aspects: (a) IAS 24 (as revised in 2009) has changed the definition of a related

party and (b) IAS 24 (as revised in 2009) introduces a partial exemption from the disclosure requirements for government‐related entities.

1.2.4 New and revised IFRSs in issue but not yet effective

The Group has not applied the following new and revised IFRSs that have been issued but are not yet effective

Amendments to IFRS 7 Financial instruments: Disclosures, effective for annual periods beginning on or after 1 July 2011.

The amendments to IFRS 7 increase the disclosure requirements for transactions involving transfers of financial assets. These amendments

are intended to provide greater transparency around risk exposures when a financial asset is transferred but the transferor retains some level

of continuing exposure in the asset. The amendments also require disclosures where transfers of financial assets are not evenly distributed

throughout the period. If the Group enters into other types of transfers of financial assets in the future, disclosures regarding those transfers

may be affected.

IFRS 9 Financial Instruments, effective for annual periods beginning on or after 1 January 2013.

IFRS 9 issued in November 2009 introduces new requirements for the classification and measurement of financial assets. IFRS 9 amended in

October 2010 includes the requirements for the classification and measurement of financial liabilities and for derecognition.

IFRS 9 requires all recognised financial assets that are within the scope of IAS 39 Financial Instruments: Recognition and Measurement to be

subsequently measured at amortised cost or fair value. Specifically, debt investments that are held within a business model whose objective is

to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal

outstanding are generally measured at amortised cost at the end of subsequent accounting periods. All other debt investments and equity

investments are measured at their fair values at the end of subsequent accounting periods.

The most significant effect of IFRS 9 regarding the classification and measurement of financial liabilities relates to the accounting for changes in

the fair value of a financial liability (designated as at fair value through profit or loss) attributable to changes in the credit risk of that liability.

Specifically, under IFRS 9, for financial liabilities that are designated as at fair value through profit or loss, the amount of change in the fair

value of the financial liability that is attributable to changes in the credit risk of that liability is presented in other comprehensive income,

unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an

accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability’s credit risk are not subsequently reclassified to

profit or loss. Previously, under IAS 39, the entire amount of the change in the fair value of the financial liability designated as at fair value

through profit or loss was presented in profit or loss.

IFRS 9 is effective for annual periods beginning on or after 1 January 2013, with earlier application permitted. The Group is considering the

implications of the Standard, the impact on the Group and the timing of its adoption by the Group.

IFRS10 Consolidated Financial Statements, effective for annual periods beginning on or after 1 January 2013

IFRS 10 replaces the parts of IAS 27 Consolidated and Separate Financial Statements that deal with consolidated financial statements and SIC‐

12 Consolidation – Special Purpose Entities. Under IFRS 10, there is only one basis for consolidation, which is control. In addition, IFRS 10

includes a new definition of control that contains three elements: (a) power over an investee, (b) exposure, or rights, to variable returns from

its involvement with the investee, and (c) the ability to use its power over the investee to affect the amount of the investor’s returns. Extensive

guidance has been added in IFRS 10 to deal with complex scenarios.

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1.2.4 New and revised IFRSs in issue but not yet effective (continued)

IFRS11 Joint Arrangements, effective for annual periods beginning on or after 1 January 2013

IFRS 11 replaces IAS 31 Interests in Joint Ventures and SIC‐13 Jointly Controlled Entities – Non‐monetary Contributions by Venturers. IFRS 11

deals with how a joint arrangement of which two or more parties have joint control should be classified. Under IFRS 11, joint arrangements

are classified as joint operations or joint ventures, depending on the rights and obligations of the parties to the arrangements. In contrast,

under IAS 31, there are three types of joint arrangements: jointly controlled entities, jointly controlled assets and jointly controlled operations.

In addition, joint ventures under IFRS 11 are required to be accounted for using the equity method of accounting, whereas jointly controlled

entities under IAS 31 can be accounted for using the equity method of accounting or proportionate accounting.

IFRS12 Disclosure of Interests in Other Entities, effective for annual periods beginning on or after 1 January 2013

IFRS 12 is a disclosure standard and is applicable to entities that have interests in subsidiaries, joint arrangements, associates and/or

unconsolidated structured entities. In general, the disclosure requirements in IFRS 12 are more extensive than those in the current standards.

IFRS13 Fair value measurement, effective for annual periods beginning on or after 1 January 2013

IFRS 13 establishes a single source of guidance for fair value measurements and disclosures about fair value measurements. The Standard

defines fair value, establishes a framework for measuring fair value, and requires disclosures about fair value measurements. The scope of IFRS

13 is broad; it applies to both financial instrument items and non‐financial instrument items for which other IFRSs require or permit fair value

measurements and disclosures about fair value measurements, except in specified circumstances. In general, the disclosure requirements in

IFRS 13 are more extensive than those required in the current standards. For example, quantitative and qualitative disclosures based on the

three‐level fair value hierarchy currently required for financial instruments only under IFRS 7 Financial Instruments: Disclosures will be

extended by IFRS 13 to cover all assets and liabilities within its scope.

Amendments to IAS 1 Presentation of Financial Statements, effective for annual periods beginning on or after 1 July 2012

The amendments to IAS 1 retain the option to present profit or loss and other comprehensive income in either a single statement or in two

separate but consecutive statements. However, the amendments to IAS 1 require additional disclosures to be made in the other

comprehensive income section such that items of other comprehensive income are grouped into two categories: (a) items that will not be

reclassified subsequently to profit or loss; and (b) items that will be reclassified subsequently to profit or loss when specific conditions are met.

Income tax on items of other comprehensive income is required to be allocated on the same basis. The amendments to IAS 1 are effective for

annual periods beginning on or after 1 July 2012. The presentation of items of other comprehensive income will be modified accordingly when

the amendments are applied in the future accounting periods.

Amendments to IAS 12 Taxes, effective for annual periods beginning on or after 1 July 2012

The amendments to IAS 12 provide an exception to the general principles in IAS 12 that the measurement of deferred tax IAS 8.30(b) assets

and deferred tax liabilities should reflect the tax consequences that would follow from the manner in which the entity expects to recover the

carrying amount of an asset. Specifically, under the amendments, investment properties that are measured using the fair value model in

accordance with IAS 40 Investment Property are presumed to be recovered through sale for the purposes of measuring deferred taxes, unless

the presumption is rebutted in certain circumstances.

IAS 19 Employee benefits, as revised in 2011, effective for annual periods beginning on or after 1 January 2013

The amendments to IAS 19 change the accounting for defined benefit plans and termination benefits. The most significant change relates to

the accounting for changes in defined benefit obligations and plan assets. The amendments require the recognition of changes in defined

benefit obligations and in fair value of plan assets when they occur, and hence eliminate the 'corridor approach’ permitted under the previous

version of IAS 19 and accelerate the recognition of past service costs. The amendments require all actuarial gains and losses to be recognised

immediately through other comprehensive income in order for the net pension asset or liability recognised in the consolidated statement of

financial position to reflect the full value of the plan deficit or surplus.

1.2.5 Interest income and expense

Interest income and expense for all interest bearing instruments are recognised within 'interest income' and 'interest expense' in profit and

loss using the effective interest method.

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1.2.5 Interest income and expense (continued)

The effective interest method is a method of calculating the amortised cost of a financial asset or a financial liability and of allocating interest

income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash

payments or receipts through the expected life of the financial asset, or, where appropriate, a shorter period to the net carrying amount of the

financial asset or liability.

When a financial asset or a group of financial assets has been written down as a result of an impairment loss, interest income is recognised

using the rate of interest that was used to discount the future cash flows for the purpose of measuring the recoverable amount.

1.2.6 Fees and commission income

Fees and commission income are generally recognised on an accruals basis when the service has been provided. Loan commitment fees for

loans that are likely to be drawn down are deferred (together with related direct costs) and recognised as an adjustment to the effective

interest rate on the loan.

Fees and commission income and expenses that are integral to the effective interest rate on a financial asset or liability are included in the

measurement of the effective interest rate.

1.2.7 Translation of foreign currencies

The financial statements of the Group are presented in the currency of the primary economic environment in which the entity operates (its

functional currency). For the purpose of the financial statements, the results and financial position of the Group are expressed in Zambian

Kwacha (‘ZK’), which is the functional currency of the Group and the presentation currency for the financial statements.

In preparing the financial statements of the Group, transactions in currencies other than the Group's functional currency (foreign currencies)

are translated into functional currency using the rates of exchange prevailing at the dates of the transactions.

At each reporting date, monetary items denominated in foreign currencies are retranslated at the rates prevailing at the reporting date. Non‐

monetary items measured at historical cost denominated in a foreign currency are translated with the exchange rate as at the date of initial

recognition.

Foreign exchange differences resulting from settlement of foreign currency transactions and from the translation at year‐end exchange rates

of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of comprehensive income.

1.2.8 Financial instruments

Financial assets and financial liabilities are recognised when a group entity becomes a party to the contractual provisions of the instrument.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or

issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added

to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition.

1.2.9 Financial assets

The Group classifies its financial assets into the following IAS 39 categories: financial assets at fair value through profit or loss; loans, advances

and receivables; held‐to‐maturity investments; and available‐for‐sale financial assets. Management determines the classification of its

investments at initial recognition.

1.2.9.1 Financial assets at fair value through profit or loss

This category has two sub‐categories: financial assets held for trading, and those designated at fair value through profit or loss at inception.

Financial assets are designated at fair value through profit or loss when the application of fair value option reduces or eliminates an accounting

mismatch that would otherwise arise, or the financial assets are part of a portfolio of financial instruments which is risk managed and reported

to senior management on a fair value basis, or it forms part of a contract containing one or more embedded derivatives.

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1.2.9 Financial assets (continued)

1.2.9.2 Loans, advances and receivables

Loans and receivables are non‐derivative financial assets with fixed or determinable payments that are not quoted in an active market

Loans and receivables are initially recognised at fair value – which is the cash consideration to originate or purchase the loan including any

transaction costs – and measured subsequently at amortised cost using the effective interest rate method. Interest on loans is included in the

income statement and is reported as ‘Interest and similar income’. In the case of impairment, the impairment loss is reported as a deduction

from the carrying value of the loan.

The Group classifies its financial assets into the following IAS 39 categories: financial assets at fair value through profit or loss; loans, advances

and receivables; held‐to‐maturity investments; and available‐for‐sale financial assets. Management determines the classification of its

investments at initial recognition.

1.2.9.3 Financial assets at fair value through profit or loss

This category has two sub‐categories: financial assets held for trading, and those designated at fair value through profit or loss at inception.

Financial assets are designated at fair value through profit or loss when the application of fair value option reduces or eliminates an accounting

mismatch that would otherwise arise, or the financial assets are part of a portfolio of financial instruments which is risk managed and reported

to senior management on a fair value basis, or it forms part of a contract containing one or more embedded derivatives. .

1.2.9.4 Loans, advances and receivables

Loans and receivables are non‐derivative financial assets with fixed or determinable payments that are not quoted in an active market

Loans and receivables are initially recognised at fair value – which is the cash consideration to originate or purchase the loan including any

transaction costs – and measured subsequently at amortised cost using the effective interest rate method. Interest on loans is included in the

income statement and is reported as ‘Interest and similar income’. In the case of impairment, the impairment loss is reported as a deduction

from the carrying value of the loan.

1.2.9.5 Held to maturity financial assets

Held‐to‐maturity investments are non‐derivative financial assets with fixed or determinable payments and fixed maturities that the Group’s

management has the positive intention and ability to hold to maturity. Were the Group to sell more than an insignificant amount of held to

maturity assets, the entire category would have to be reclassified as available for sale.

Regular way purchases and sales of financial assets held to maturity and available for sale are recognised on trade date – the date on which

the Group commits to purchase or sell the asset.

Loans, advances and receivables and held to maturity financial assets are carried at amortised cost using the effective interest method.

Interest calculated using the effective interest method is recognised in profit and loss.

1.2.9.6 Derecognition of financial assets

Financial assets are derecognised when the contractual rights to receive the cash flows from these assets have ceased to exist or the assets

have been transferred and substantially all the risks and rewards of ownership of the assets are also transferred (that is, if substantially all the

risks and rewards have not been transferred, the Group tests control to ensure that continuing involvement on the basis of any retained

powers of control does not prevent derecognition). Financial liabilities are derecognised when they have been redeemed or otherwise

extinguished. Collateral furnished by the Group under standard repurchase agreements and securities lending and borrowing transactions is

not derecognised because the Group retains substantially all the risks and rewards on the basis of the predetermined repurchase price, and

the criteria for derecognition are therefore not met.

On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration

received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is

recognised in profit or loss.

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1.2.10 Impairment of financial assets

1.2.10.1 Assets carried at amortised cost

The Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, and

individually or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of

impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with

similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for

which an impairment loss is or continues to be recognised are not included in a collective assessment of impairment.

The Group assesses at each reporting date whether there is objective evidence that a financial asset or group of financial assets is impaired. A

financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as

a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an

impact on the estimated future cash flows of the financial assets or group of financial assets that can be reliably estimated.

The criteria that the Group uses to determine that there is objective evidence of an impairment loss include:

Delinquency in contractual payments of principal or interest;

Cash flow difficulties experienced by the borrower (for example, equity ratio, net income percentage of sales);

Breach of loan covenants or conditions;

Initiation of bankruptcy proceedings;

Deterioration of the borrower’s competitive position;

Deterioration in the value of collateral; and

Downgrading below investment grade level.

If there is objective evidence that an impairment loss on loans and receivables has been incurred, the amount of the loss is measured as the

difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future credit losses that have

not been incurred) discounted at the financial asset's original effective interest rate (i.e. the effective interest rate computed at initial

recognition). The carrying amount of the asset is reduced through use of an allowance account and the amount of the loss shall be recognised

in profit or loss. If a loan has a variable interest rate the discount for measuring any impairment loss is the current effective interest rate

determined under the contract. As a practical expedient, the Group may measure impairment on the basis of an instrument’s fair value using

an observable market price.

The calculation of the present value of the estimated future cash flows of a collateralised financial asset reflects the cash flows that may result

from foreclosure less costs for obtaining and selling the collateral, whether or not foreclosure is probable.

For the purposes of a collective evaluation of impairment, financial assets are group on the basis of similar credit risk characteristics (i.e. on the

basis of the Group’s grading process that asset type, industry, geographical location, collateral type, past due status and other relevant

factors). Those characteristics are relevant to the estimation of future cash flows for groups of such assets by being indicative of the debtors’

ability to pay all amounts due according to the contractual terms of the asset being evaluated.

Future cash flows in a group of financial assets that are collectively evaluated for impairment are estimated on the basis of the contractual

cash flows of the assets in the group and historical loss experience for assets with credit risk characteristics similar to those in the group.

Historical loss experience is adjusted on the basis of current observable data to reflect the effects of current conditions that did not affect the

period on which the historical loss experience is based and to remove the effects of conditions in the historical period that do not exist

currently.

When a loan is uncollectible, it is written off against the related provision for loan impairment. Such loans are written off after all the

necessary procedures have been completed and the amount of the loss has been determined. Subsequently recoveries of amounts previously

written off decrease the amount of the provision for loan impairment in the income statement.

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1.2.10 Impairment of financial assets (continued)

1.2.10.2 Renegotiated loans

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring

after the impairment was recognised (such as an improvement in the debtor’s credit rating), the previously recognised impairment loss is

reversed by adjusting the allowance account. The amount of the reversal is recognised in the statement of comprehensive income.

Statutory and other regulatory loan loss reserve requirements that exceed these amounts are dealt with in the general banking reserve as an

appropriation of retained earnings.

1.2.11 Financial liabilities and equity instruments

Debt and equity instruments issued by the Group are classified as either financial liabilities or as equity in accordance with the substance of

the contractual arrangements and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that

evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are

recognised at the proceeds received, net of direct issue costs.

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity

instruments issued by the Group are recognised at the proceeds received, net of direct issue costs.

Financial liabilities are measured at amortised cost. Financial liabilities measured at amortised cost are deposits from banks or customers, debt

securities in issue for which the fair value option is not applied, convertible bonds and subordinated debts.

Compound instruments

The component parts of compound instruments issued by the Group are classified separately as financial liabilities and equity in accordance

with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

Transaction costs that relate to the issue of the compound instrument are allocated to the liability and equity components in proportion to the

allocation of the gross proceeds. Transaction costs relating to the equity component are recognised directly in equity. Transaction costs

relating to the liability component are included in the carrying amount of the liability component and are amortised over the lives of the

liability component using the effective interest method.

Derecognition of financial liabilities

The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or they expire. The

difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or

loss.

Share capital

Ordinary shares are classified as ‘share capital’ in equity. Any premium received over and above the par value of the shares is classified as

‘share premium’ in equity.

1.2.12 Offsetting

Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there is a legally enforceable

right to offset the recognized amounts and there is an intention to settle on a net basis, or realize the assets and settle the liability

simultaneously.

1.2.13 Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a

substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are

substantially ready for their intended use or sale.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted

from the borrowing costs eligible for capitalisation.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

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1.2.14 Property and equipment

All property and equipment are initially recorded at cost. Buildings are subsequently shown at market value, based on periodic, but at least

triennial valuations by external independent valuers, less subsequent depreciation for buildings. All other property and equipment is stated at

historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Subsequent expenditure is included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable

that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other

repairs and maintenance are charged to the profit and loss account during the financial period in which they are incurred.

Increases in the carrying amount arising on revaluation are credited to a revaluation reserve. Decreases that offset previous increases of the same

asset are charged against the revaluation reserve; all other decreases are charged to the profit and loss account.

Depreciation on other assets is calculated on the straight line basis to allocate their cost their residual values over their estimated useful lives,

as follows:

Buildings 50 years

Fixtures, fittings and equipment 4 to 7 years

Motor vehicles 4 years

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

The Group assesses at each reporting date whether there is any indication that any item of property and equipment is impaired. If any such

indication exists, the Group estimates the recoverable amount of the relevant assets. An impairment loss is recognised for the amount by which

the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and

value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash

flows (cash‐generating units).

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the

continued use of the asset. Gains and losses on disposal of property and equipment are determined by reference to their carrying amount and are

taken into account in determining operating profit.

1.2.15 Intangible assets

Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These

costs are amortised on the basis of the expected useful lives. Software has a maximum expected useful life of 11 years. Software upgrade

costs are assessed and amortised separately from the original licence.

All software cost are stated at historical cost less amortisation. Historical cost includes expenditure that is directly attributable to the

acquisition of these assets.

Subsequent expenditure is included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable

that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other

support and maintenance costs are charged to profit and loss during the financial period in which they are incurred.

An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising

from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the

asset, are recognised in profit or loss when the asset is derecognised.

1.2.16 Leases

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the

lessee. All other leases are classified as operating leases.

Operating lease payments are recognised as an expense on a straight‐line basis over the lease term, except where another systematic basis is

more representative of the time pattern in which economic benefits from the leased asset are consumed.

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1.2.17 Taxation

Current tax

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the income statement because

it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or

deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance

sheet date.

Deferred tax

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the

corresponding tax base used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax

liabilities are generally recognised for all taxable temporary differences, and deferred tax assets are generally recognised for all deductible

temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary

differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial

recognition of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that

sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the

asset is realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date. The

measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group

expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities

and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities

on a net basis.

Withholding taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay the related dividend is

recognised.

Current and deferred tax for the period

Current and deferred tax are recognised as an expense or income in profit or loss, except when they relate to items credited or debited

directly to equity, in which case the tax is also recognised directly in equity.

1.2.18 Cash and cash equivalents

Cash and cash equivalents include cash in hand, deposits held at call with banks, other short term highly liquid investments with original

maturities of three months or less, including cash and non‐restricted to balances with the Bank of Zambia, Treasury and other eligible bills, and

amounts due from other banks. Cash and cash equivalents excludes the cash reserve requirement held with the Bank of Zambia.

1.2.19 Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the

Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the balance sheet

date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated

to settle the present obligation, its carrying amount is the present value of those cash flows.

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is

recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

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1.2.20 Employee benefits

Retirement benefit obligations

Since 31 December 2006 the Bank operates a defined contribution pension plan for all its employees. Benefits from this plan only relates to

service subsequent to 31 December 2006. The Group and all its employees also contribute to the National Pension Scheme, which is a defined

contribution scheme. A defined contribution plan is a retirement benefit plan under which the Group pays fixed contributions into a separate

entity. The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all

employees the benefits relating to employee service in the current and prior periods. The assets of the defined contribution plans are held in

separate trustee administered funds, which are funded by contributions from both the Group and employees.

The Group’s contributions to the defined contribution schemes are charged to profit and loss in the year in which they fall due.

Other benefits

Short‐term benefits, such as salaries, paid absences, and other benefits, are accounted for on an accruals basis over the period which

employees have provided services in the year.

1.2.21 Acceptances and letters of credit

Acceptances and letters of credit are accounted for as off balance sheet transactions and disclosed as contingent liabilities.

1.2.22 Fiduciary activities

The Group commonly acts as trustee and in other fiduciary capacities that result in the holding or placing of assets on behalf of individuals,

trusts, retirement benefit plans and other institutions. These assets and income arising thereon are excluded from these financial statements,

as they are not assets of the Group.

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1.3 CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Group’s accounting policies, which are described in note 1.4, Management is required to make judgements, estimates

and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and

associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from

these estimates.

The 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 if the revision affects only that period or in the period of the revision and future periods if the revision affects

both current and future periods.

1.3.1 Impairment losses on loans and advances

The Group reviews its loan portfolios to assess impairment at least on a monthly basis. In determining whether an impairment loss should be

recorded in the income statement, the Group makes judgements as to whether there is any observable data indicating that there is a

measurable decrease in the estimated future cash flows from a portfolio of loans before a decrease can be identified with an individual loan in

that portfolio. This evidence may include observable data indicating that there has been an adverse change in the payment status of borrowers

in a group, or local economic conditions that correlate with defaults on assets in that group.

Management uses estimates based on historical loss experience for assets with credit risk characteristics and objective evidence of impairment

similar to those in the portfolio when scheduling future cash flows. The methodology and assumptions used for estimating both the amount

and the timing of future cash flows are reviewed regularly to reduce any differences between loss estimates and actual loss experience. Were

the net present values of estimated impairment losses on loans and advances to differ by + or – 1%, the impairment loss is estimated to be ZK

48 million higher or lower as at 31 December 2011.

1.3.2 Held to maturity financial assets

The Group follows the guidance on IAS 39 on classifying non‐derivative financial assets with fixed or determinable payments and fixed maturity

as held‐to‐maturity. This classification requires significant judgement. In making this judgement, the Group evaluates its intention and ability

to hold such investments to maturity. If the Group fails to keep these investments to maturity other than for specific circumstances ‐ for

example, selling an insignificant amount close to maturity ‐ it will be required to reclassify the entire class as available for sale. The Directors

have reviewed the Group's held to maturity financial assets in light of its capital maintenance and liquidity requirements and have confirmed

the Group's positive intention and ability to hold those assets to maturity.

1.3.3 Income taxes

The Group is subject to income taxes in the Republic of Zambia. There are many transactions and calculations for which the ultimate tax

determination is uncertain during the ordinary course of business. The Group recognises liabilities for anticipated tax based on estimates of

whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded,

such differences will impact on the income tax and deferred tax provisions in the period in which such determination is made.

1.3.4 Recoverability of deferred tax asset

Critical estimates are made by the Directors in determining the recoverability of the deferred tax asset recognised. This involves estimating

the amount of future taxable profits against which the deferred tax asset can be realised. Should insufficient taxable profits be generated, the

deferred tax asset of ZK12, 873 million (31 December 2010: ZK6, 822 million) would be recognised as an expense in profit and loss.

1.3.5 Useful lives of property and equipment

As described Note 1.2.14 above, the Group reviews the estimated useful lives of property and equipment at the end of each reporting period.

During the current year, there were no adjustments made to the useful lives of property and equipment.

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1.4 FINANCIAL RISK MANAGEMENT

The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest

rate risk and price risk), credit risk and liquidity risk. Those activities involve the analysis, evaluation, acceptance and management of some

degree of risk or combination of risks. Taking risk is core to the Group’s business and the financial risks are an inevitable consequence of being

in business. The Group’s aim is therefore to achieve an appropriate balance between risk and return and minimise potential adverse effects

on its financial performance.

Risk management is carried out by the Treasury department under policies approved by the Board of Directors. Treasury identifies, evaluates

and hedges financial risks in close cooperation with the operating units. The Board of Directors provides written principles for overall risk

management, as well as written policies covering specific areas such as foreign exchange risk, interest rate risk, credit risk, use of derivative

and non‐derivative financial instruments.

1.4.1 Financial assets and liabilities

The Group classifies financial instruments into classes that reflect the nature of information and take into account the characteristics of those

financial instruments as follows:

Kwacha Millions Held to maturity

Loans and

receivables

Available for

sale

Other

amortised cost

Total carrying

amount

31 December 2011

Balances with Bank of Zambia ‐ 35,646 ‐ ‐ 35,646

Placements with other banks ‐ 28,008 ‐ ‐ 28,008

Loans and advances ‐ 134,257 ‐ ‐ 134,257

Investment securities 66,688 ‐ ‐ ‐ 66,688

Total financial assets 66,688 197,910 ‐ ‐ 264,598

Customer deposits ‐ ‐ ‐ 290,329 290,329

Convertible redeemable preference shares ‐ ‐ ‐ 10,000 10,000

Total financial liabilities ‐ ‐ ‐ 300,329 300,329

31 December 2010




Investment securities 50,245 ‐ ‐ ‐ 50,245



Convertible redeemable preference shares ‐ ‐ ‐ ‐ ‐


31 December 2009




Investment securities 58.039 ‐ ‐ ‐ 58.039




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1.4 FINANCIAL RISK MANAGEMENT (continued)

1.4.2 Credit risk

The Group takes on exposure to credit risk, which is the risk that a counterparty will cause a financial loss to the Group by failing to pay

amounts in full when due. Credit risk is the most important risk for the Group’s business: management therefore carefully manages the

exposure to credit risk. Credit exposures arise principally in lending and investment activities. There is also credit risk in off‐balance sheet

financial instruments, such as loan commitments. Credit risk management and control is centralised in the credit risk management team in the

Advances/Credit department, which reports regularly to the Board of Directors.

Risk limit control and mitigation policies

The Group structures the levels of credit risk it undertakes by placing limits on the amount of risk accepted in relation to one borrower, or

groups of borrowers, and to industry segments. Such risks are monitored on a regular basis and are subject to annual or more frequent review.

The exposure to any one borrower including banks is further restricted by sub‐limits covering on‐ and off‐balance sheet exposures and daily

delivery risk limits in relation to trading items such as forward foreign exchange contracts. Actual exposures against limits are monitored daily.

Exposure to credit risk is managed through regular analysis of the ability of borrowers and potential borrowers to meet interest and capital

repayment obligations and by changing lending limits where appropriate.

The Group employs a range of policies and practices to mitigate credit risk. The most traditional of these is the taking of security for funds

advanced, which is common practice. The Group implements guidelines on the acceptability of specific classes of collateral or credit risk

mitigation. The principal collateral types for loans and advances are:

Mortgages over residential properties

Charges over business assets such as premises, inventory and accounts receivable

Charges over financial instruments such as debt securities and equities

Collateral

Longer term finance and lending to corporate entities are generally secured; revolving individual credit facilities are general unsecured. In

addition, in order to minimise credit loss the Group will seek additional collateral from the counterparty as soon as impairment indicators are

identified for the relevant loans and advances.

Collateral held as security for financial assets other than loans and advances depends on the nature of the instrument. Debt securities,

treasury and other eligible bills are generally unsecured, with the exception of asset back securities and similar instruments, which are secured

by portfolios of financial instruments.

Credit related commitments:

The primary purpose of these instruments is to ensure that funds are available to a customer as required. Guarantees and standby letters of

credit, which represent irrevocable assurances that the Group will make payments in the event that a customer cannot meet its obligations to

third parties, carry the same credit risk as loans. Documentary and commercial letters of credit, which are written undertakings by the Group

on behalf of a customer authorising a third party to draw drafts on the Group up to a stipulated amount under specific terms and conditions,

are collateralised by the underlying shipments of goods to which they relate and therefore carry less risk than a direct borrowing.

Commitments to extend credit represent unused portions of authorisations to extend credit in the form of loans, guarantees or letters of

credit. With respect to credit risk on commitments to extend credit, the Group is potentially exposed to loss in an amount equal to the total

unused commitments. However, the likely amount of loss is less than the total unused commitments, as most commitments to extend credit

are contingent upon customers maintaining specific credit standards. The Group monitors the term to maturity of credit commitments

because longer‐term commitments generally have a greater degree of credit risk than shorter‐term commitments.

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1.4.2 Credit risk (continued)

Maximum exposure to credit risk before collateral held

With exception of the following, the maximum exposure to credit risk of financial assets is equal to their carrying amount.


Credit risk exposures relating to off‐balance sheet items:

Undrawn commitments 4,119 ‐ ‐

Guarantee and performance bonds 2,369 2,167 636

The above table represents a worst case scenario of credit risk exposure to the Group at 31 December 2011, 31 December 2010 and 31

December 2009, without taking account of any collateral held or other credit enhancements attached. For on‐balance sheet assets, the

exposures are based on carrying amounts as reported in the balance sheet.

Loans and advances to customers, are secured by collateral in the form of charges over land and buildings and/or plant and machinery or

corporate guarantees.

Management is confident in its ability to continue to control and sustain minimal exposure of credit risk to the Group resulting from both its

loan and advances portfolio and debt securities based on the following:

the Group exercises stringent controls over the granting of new loans

81% of the loans and advances portfolio are neither past due nor impaired

99% of the loans and advances portfolio are backed by collateral

100% of the investments in debt securities are government securities.

Financial assets are summarised as follows:


Neither past due nor impaired 112,122 47,383 28,342

Past due but not impaired 18,463 14,173 5,175

Individually impaired 7,604 6,778 3,076

Gross 138,189 68,334 36,593

Less: allowance for impairment (3,932) (3,781) (3,417)

Net 134,257 64,553 33,176

Financial assets that are past due but not impaired

Loans and advances less than 180 days past due are not considered fully impaired, unless other information is available to indicate the

contrary. The gross amounts of loans and advances that were past due but not impaired were as follows:


Past due up to 30days 16,853 7,103 923

Past due 31 to 60days 230 6,929 4,252

Past due 61 to 90days 83 91 ‐

Past due 91 to 180 days 1,297 50 ‐

Total 18,463 14,173 5,175

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1.4.2 Credit risk (continued)

Loans and advances neither past due nor impaired

The credit quality of the portfolio of loans and advances that were neither past due nor impaired can be assessed by reference to the internal

rating system adopted by the Group:

Economic sector risk concentrations within the customer loan and deposit portfolios were as follows:


Manufacturing 4,510 2,050 1,098

Wholesale and retail trade 24,980 10,933 1,464

Transport and communications 12,063 6,833 6,578

Financial services 18,081 6,150 366

Agricultural 6,703 9,567 1,468

Restaurant and hotels 8,803 2,051 732

Community, Social and personal 6,436 8,200 1,102

Personal 23,731 4,100 4,391

Construction 21,325 13,667 14,637

Other 11,557 4,783 4,757

Total 138,189 68,334 36,593

The Group had no repossessed collateral as at 31 December 2011 (31 December 2010: Nil, 31 December 2009: Nil).

1.4.3 Liquidity risk

Liquidity risk is the risk that the Group is unable to meet its payment obligations associated with its financial liabilities as they fall due and to

replace funds when they are withdrawn.

The Group is exposed to daily calls on its available cash resources from overnight deposits, current accounts, maturing deposits and calls on

cash settled contingencies. The Group does not maintain cash resources to meet all of these needs as experience shows that a minimum level

of reinvestment of maturing funds can be predicted with a high level of certainty. The Bank of Zambia requires that the Group maintain a cash

reserve ratio. In addition, the Board sets limits on the minimum proportion of maturing funds available to meet such calls and on the

minimum level of inter‐bank and other borrowing facilities in place to cover withdrawals at unexpected levels of demand. The treasury

department monitors liquidity ratios on a daily basis.

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1.4.3 Liquidity risk (continued)

The table below presents the cash flows payable by the Group under financial liabilities by remaining contractual maturities at the balance

sheet date.

Kwacha millions Up to 1 month 1 – 3 3 ‐ 12 1 ‐5 Total

31 December 2011

Cash &Balances with BOZ 35,645 ‐ ‐ ‐ 35,645

Placements with other banks 28,008 ‐ ‐ ‐ 28,008

Loans & advances to customers 48,473 319 6,345 98,981 154,118

Investment securities 11,000 12,014 36,392 13,117 72,523

Total financial assets 123,126 12,333 42,737 112,098 290,294

Customer deposits 120,024 48,387 127,029 ‐ 295,440

Convertible loan 88 263 788 16,474 17,613

Total financial liabilities 120,112 48,650 127,817 16,474 313,053

31 December 2010


Placements with other banks 31,878 ‐ ‐ ‐ 31,878

Loans & advances to customers 43,134 98 2,866 31,196 77,294

Investment securities ‐ 19,689 19,841 16,119 55,649



Total financial liabilities 90,363 31,058 69,682 ‐ 191,103

31 December 2009


Placements with other banks 8,443 ‐ ‐ 5,671 14,114

Loans & advances to customers 15,773 1,138 6,522 14,724 38,157

Investment securities ‐ 2,431 21,771 46,477 70,679



Total financial liabilities 75,163 26,717 27,213 ‐ 129,093

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1.4.4 Market risk

Market risk is the risk that changes in market prices, which include currency exchange rates and interest rates, will affect the fair value or

future cash flows of a financial instrument. Market risk arises from open positions in interest rates and foreign currencies, both of which are

exposed to general and specific market movements and changes in the level of volatility. The objective of market risk management is to

manage and control market risk exposures within acceptable limits, while optimising the return on risk. Overall responsibility for managing

market risk rests with the Assets and Liabilities Committee (ALCO). The Treasury department is responsible for the development of detailed

risk management policies (subject to review and approval by ALCO) and for the day to day implementation of those policies.

1.4.5 Currency risk

The Group takes on exposure to the effects of fluctuations in the prevailing foreign currency exchange rates on its financial position and cash

flows. The Board sets limits on the level of exposure by currency and in total for both overnight and intra‐day positions, which are monitored

daily. The table below summarises the Group’s financial instrument exposure to foreign currency exchange rate risk categorised by currency:

Kwacha Millions USD GBP Euro ZAR Total

31 December 2011

Cash & balances with BOZ 1,391 79 384 158 2,012

Placements with other banks 18,780 619 13 2,557 21,969

Loans &advances to customers 12,376 ‐ ‐ ‐ 12,376

Other financial assets 8,934 152 ‐ ‐ 9,086

Total assets 41,481 850 397 2,715 45,443

Customers deposits 37,856 679 79 2,458 41,072

Other liabilities 3,415 151 ‐ 30 3,596

Total liabilities 41,271 830 79 2,488 44,668

210 20 318 227 775

31 December 2010

Cash & balances with BOZ 6,980 75 341 39 7,435

Placements with other banks 26,687 711 112 557 28,067

Loans & advances to customers 7,224 1 ‐ ‐ 7,225

Other financial assets 2,095 ‐ ‐ ‐ 2,095

Total assets 42,986 787 453 596 44,822

Customers deposits 40,152 752 76 379 41,359

Other liabilities 4 169 277 179 629

Total liabilities 40,156 921 353 558 41,988

2,830 (134) 100 38 2,834

31 December 2009

Total assets 26,104 1,088 538 777 28,507

Total liabilities 23,881 1,035 342 720 25,978

2,223 53 196 57 2,529

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1.4.6 Interest rate risk

The Group takes on exposure to the effects of fluctuations in the prevailing levels of market interest rates on both its fair value and cash flow

risks. Interest margins may increase as a result of such changes but may reduce or create losses in the event that unexpected movements

arise. The Board of Directors sets limits on the level of mismatch of interest rate re‐pricing that may be undertaken, which is monitored daily.

The table below summarises the Group’s exposure to interest rate risks.

Kwacha ‘millions

Up to 1

month

1 – 3

months

3 ‐ 12

months

Over 1

years

Non

Interest

bearing Total

31 December 2011

Cash &Balances with BOZ ‐ ‐ ‐ ‐ 35,645 35,645

Placements with other banks 28,008 ‐ ‐ ‐ ‐ 28,008

Loans & advances to customers 47,551 307 5,442 80,957 ‐ 134,257

Investment securities 11,000 11,250 33,073 11,365 ‐ 66,688

Total financial assets 86,559 11,557 38,515 92,322 35,645 264,598

Customer deposits 119,595 47,872 123,060 ‐ ‐ 290,527

Convertible loan ‐ ‐ ‐ 10,000 ‐ 10,000

Total financial liabilities 119,595 47,872 122,862 10,000 ‐ 290,329

Interest re‐pricing gap (33,036) (36,315) (84,347) (82,322) 35,645 (35,731)

31 December 2010

Cash &Balances with BOZ ‐ ‐ ‐ ‐ 31,966 31,966

Placements with other banks 23,442 ‐ ‐ ‐ 8,435 31,877

Loans & advances to customers 42,323 93 2,330 19,807 ‐ 64,553

Investment securities ‐ 19,280 18,114 12,851 ‐ 50,245


Customer deposits 90,025 30,712 66,681 ‐ 2,000 189,418

Total financial liabilities 90,025 30,712 66,681 ‐ 2,000 189,418

Interest re‐pricing gap (24,260) (11,339) (46,237) 32,658 38,401 (10,777)

31 December 2009


Total financial liabilities ‐ 62,542 ‐ 8,379 64,575 135,496

Interest re‐pricing gap 24,216 (59,108) 24,653 44,647 (31,915) 2,493

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1.4.6 Interest rate risk (continued)

Included in the table above are the Group’s assets and liabilities at carrying amounts, categorised by the earlier of contractual re‐pricing or

maturity dates. The Group does not bear an interest rate risk on off balance sheet items.

The matching and controlled mismatching of the maturities and interest rates of assets and liabilities is fundamental to the management of

the Group. It is unusual for banks to be completely matched since business transacted is often of uncertain terms and of different types. An

unmatched position potentially enhances profitability, but can also increase the risk of losses.

The maturities of assets and liabilities and the ability to replace, at an acceptable cost, interest‐bearing liabilities as they mature, are important

factors in assessing the liquidity of the Group and its exposure to changes in interest rates and exchange rates.

1.4.7 Fair values of financial assets and liabilities

The fair value of held to maturity investment securities at 31 December 2011 is estimated at ZK66,880 million (31 December 2010:ZK52,101

million, 31 December 2009: ZK58,039 million). The fair values of the Group’s other financial assets and liabilities approximate the respective

carrying amounts, due to the generally short periods to contractual re‐pricing or maturity dates as set out above. Fair values are based on

discounted cash flows using a discount rate based upon the borrowing rate that the Directors expect would be available to the Group at the

balance sheet date.

1.4.8 Operational risk

Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the Group’s processes, personnel,

technology and infrastructure, and from external factors other than credit, market and liquidity risks such as those arising from legal and

regulatory requirements and generally accepted standards of corporate behaviour. Operation risk arises from all of the Group's operations and

are faced by all business entities.

The Group’s objective is to manage operational risk so as to balance the avoidance of financial losses and damage to the Group’s reputation

with overall cost effectiveness and to avoid control procedures that restrict initiative and creativity.

The primary responsibility for the development and implementation of controls to address operational risk is assigned to senior management

within each business unit. This responsibility is supported by the development of overall Bank standards for the management of operational

risk in the following areas:

requirements for appropriate segregation of duties, including the independent authorisation of transactions

requirements for the reconciliation and monitoring of transactions

compliance with regulatory and other legal requirements

documentation of controls and procedures

requirements for the periodic assessment of operational risks faced, and the adequacy of controls and procedures to address the risks

identified

requirements for the reporting of operational losses and proposed remedial action

development of contingency plans

training and professional development

ethical and business standards

risk mitigation, including insurance where this is effective.

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1.4.9 Capital risk management

The Group’s objectives, when managing capital, which is a broader concept than the ‘equity’ on the balance sheets are:

To comply with the capital requirements set by the Banking and Financial services Act;

To safeguard the Bank’s ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits

for other stakeholders;

To maintain a strong capital base to support the development of its business.

Capital adequacy and use of regulatory capital are monitored regularly by management, employing techniques based on the guidelines

developed by the Basel Committee, as implemented by the Bank of Zambia for supervisory purposes. The required information is filed with

the Bank of Zambia on a monthly basis.

The Bank of Zambia requires each Bank to:

Hold the minimum level of regulatory capital of ZK520,000 million for foreign owned banks and ZK104,000 million for locally owned

banks

Maintain a ratio of total regulatory capital to the risk weighted assets plus risk weighted off balance sheet assets (the ‘Basel ratio’) at or

above the required minimum of 10%

Maintain primary or tier 1 capital of not less than 5% of total risk weighted assets and

Maintain total capital of not less than 10% of risk weighted assets plus risk weighted off balance sheet items.

The Group’s total regulatory capital is divided into two tiers:

Tier 1 capital (primary capital): common shareholders’ equity, qualifying preferred shares and minority shares in the equity of shareholders

that are less than wholly owned.

Tier 2 capital (secondary capital): qualifying preferred shares, 40% of revaluation reserves, subordinated term debt or loan stock with a

minimum original term of maturity of over five years (subject to a straight line amortisation during the last five years leaving no more than

20% of the original amount outstanding in the final year before redemption) and other capital instruments which the Bank of Zambia may

allow. The maximum amount of secondary capital is limited to 100% of secondary capital.

The risk weighted assets are measured by means of a hierarchy of four risk weights classified according to the nature of and reflecting an

estimate of the credit risk associated with – each asset and counterparty. A similar treatment is adopted for off balance sheet exposure, with

some adjustments to reflect the more contingent nature of the potential losses.

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1.4.9 Capital risk management (continued)

In 2011 the Bank’s capital position fell the statutory limit of 25% single name lending limit for large loan exposures in the months outlined

below. The Bank of Zambia granted dispensation on condition that the exposure will be regularised within 270 days. The position was

corrected by the injection of ZK10,000 million Tier 2 capital.

Month Regulatory

Lending limit

Year ended 31 December

2011

January 25% 22%

February 25% 19%

March 25% 23%

April 25% 24%

May 25% 24%

June 25% 30%

July 25% 32%

August 25% 33%

September 25% 41%

October 25% 41%

November 25% 42%

December 25% 25%

During the month of November 2011, the actual regulatory capital of ZK13,485 million was lower than the minimum required amount of

ZK16,927 million by ZK3,442 million. The condition was regularised following receipt of ZK10,000 million Tier 2 capital.

The table below summarises the composition of regulator capital and the ratios of the Bank.

Kwacha Millions 2011 2010 2009

Tier 1 capital 10,904 17,177 14,878

Tier 1 + Tier 2 capital 21,808 20,859 23,029

Risk weighted assets

On balance sheet 170,892 125,260 168,470

Off balance sheet 2,369 2,167 636

Total risk weighted assets 173,261 127,427 169,106

Basel ratio

Tier 1 (Regulatory minimum 5%) 6% 13% 9%

Tier 1 + Tier 2 (Regulatory minimum 10%) 13% 16% 14%

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2 FINANCIAL STATEMENTS

2.1 INCOME STATEMENTS

Group

As at 31 December (Kwacha millions) Notes 20111 20101 20091

Interest income 3.1 26,310 20,049 17,996

Interest expense 3.2 (9,937) (4,213) (2,195)

Net interest income 16,373 15,836 15,801

Impairment losses on loans & advances 3.7 (754) (1,194) (1,608)

Net interest income after loan impairment 15,619 14,642 14,193

Fees and commission income 15,471 11,321 9,480

Fees and commission expense (603) ‐ ‐

14,868 11,321 9,480 Net fee and commission income 3.3

Foreign exchange income 4,339 3,658 4,778

Other income 3.4 111 79 680

Depreciation expense 3.12 (1,809) (1,888) (1,469)

Operating expenses 3.4 (50,151) (35,562) (29,747)

Loss before income tax (17,023) (7,749) (2,085)

Income tax credit (expense) 3.6 4,186 3,724 639

Loss for the year (12,837) (4,025) (1,446)

Earnings per share 3.27 (2.57) (0.81) (0.28)

Dividend per share 3.28 ‐ ‐ (0.40)


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2.2 STATEMENTS OF COMPREHENSIVE INCOME

Group

As at 31 December (Kwacha millions) 20111 2010

1 2009

1

Loss for the year (12,837) (4,025) 1,446

Other comprehensive income

Revaluation of buildings ‐ 4,290 ‐

Deferred tax on revaluation 246 (1,716) ‐

Total other comprehensive income 246 2,574 ‐

Total comprehensive income (12,591) (1,451) (1,446)


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2.3 STATEMENTS OF MOVEMENTS IN EQUITY

Group

Kwacha millions Notes

Share

capital

Share

premium

Revaluation

reserve

Non

distributable

reserve

Retained earnings

(Accumulated

losses)

Proposed

dividends Total

At 1 January 2009 5,000 16,992 380 3,327 3,670 500 29,869

Comprehensive income

Loss for the year ‐ ‐ ‐ ‐ (1,446) (1,446)

Total comprehensive income ‐ ‐ ‐ ‐ (1,446) (1,446)

Transactions with owners

Proposed final dividend for 2008 (500) (500)

Interim dividend for 2009 (2,000) (2,000)

At 31 December 20091 5,000 16,992 380 3,327 224 ‐ 25,923


Loss for the year ‐ ‐ ‐ ‐ (4,025) ‐ (4,025)

Other comprehensive income

Revaluations ‐ ‐ 4,290 ‐ ‐ ‐ 4,290

Deferred tax on revaluation ‐ ‐ (1,716) ‐ ‐ ‐ (1,716)

‐ ‐ 2,574 ‐ ‐ ‐ 2,574

Total comprehensive income ‐ ‐ 2,574 ‐ (4,025) ‐ (1,451)

At 31 December 20101 5,000 16,992 2,954 3,327 (3,801) ‐ 24,472


Loss for the year ‐ ‐ ‐ ‐ (12,837) ‐ (12,837)

Deferred tax on revaluation ‐ ‐ 246 ‐ ‐ ‐ 246

Total comprehensive income ‐ ‐ 246 ‐ (12,837) ‐ (12,591)

At 31 December 20111 5,000 16,992 3,200 3,327 (16,638) ‐ 11,881


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2.4 STATEMENTS OF FINANCIAL POSITION

Group

As at 31 December (Kwacha millions) Notes 2011 1 2010 1 2009 1

Assets

Cash and Balances with Bank of Zambia 3.8 35,645 31,966 32,660

Placements with other banks 3.9 28,008 31,877 14,115

Loans and advances 3.10 134,257 64,553 33,176

Investment securities 3.11 66,688 50,245 58,039

Current income tax 3.6 3,208 2,236 768

Property and equipment 3.12 19,907 17,964 8,409

Intangible assets 3.13 12,913 14,137 12,971

Deferred income tax 3.14 8,415 3,983 2,611

Receivables and prepayments 3.15 10,540 5,553 5,699

TOTAL ASSETS 319,581 222,514 168,448

Liabilities

Convertible redeemable preference shares 3.16 10,000 ‐ ‐

Customer Deposits 3.17 290,329 187,399 122,530

Other liabilities 3.18 7,371 10,643 15,317

Obligation under finance lease 3.30 ‐ ‐ 79

Retirement benefit obligations 3.31 ‐ ‐ 4,599

Total liabilities 307,700 198,042 142,525

Shareholders' equity

Share capital 3.19 5,000 5,000 5,000

Share premium 3.19 16,992 16,992 16,992

Revaluation reserve 3.20 3,200 2,954 380

Non distributable reserve 3.21 3,327 3,327 3,327

(Accumulated losses) Retained earnings (16,638) (3,801) 224

Total shareholders' equity 11,881 24,472 25,923

TOTAL EQUITY AND LIABILITIES 319,581 222,514 168,448

Net assets per share 3.29 2.37 4.89 5.18

Net (liabilities) assets per share 3.29 (0.21) 2.07 2.59


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2.5 STATEMENTS OF FINANCIAL POSITION

Company

As at 31 December (Kwacha millions) Notes 2011 1 2010

1 2009

1

Assets

Non‐current assets

Investment in subsidiary 3.11 23,507 23,507 19,561

Equipment 3.12 24 58 150

Deferred income tax 3.14 21 22 17

23,552 23,587 19,728

Current assets

Receivables and prepayments 3.15 84 40 191

Cash and cash equivalents 3.8 197 19 4,578

281 59 4,778

Current liabilities

Current income tax 3.6 94 94 105

Payables and accrued expenses 3.18 1,905 1,720 1,926

Obligation under finance lease 3.30 ‐ ‐ 79

1,999 1,814 2,110

NET ASSETS 21,834 21,832 22,396

Equity

Share capital 3.19 5,000 5,000 5,000

Share premium 3.19 16,992 16,992 16,992

(Accumulated losses) Retained earnings (158) (160) 404

TOTAL SHAREHOLDERS' EQUITY 21,834 21,832 22,396

Net assets per share including intangible assets 3.29 4.37 4.37 4.50

Net assets per share excluding intangible assets 3.29 4.37 4.37 4.50


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2.6 CASHFLOW STATEMENTS

Group

As at 31 December (Kwacha millions)

2011 1 2010

1 2009

1

OPERATING ACTIVITIES

Interest receipts 25,659 20,046 17,996

Interest payments (9,304) (4,071) (2,195)

Net fee and commission receipts 15,369 10,168 9,480

Foreign exchange receipts 4,450 4,407 5,458

Other income received ‐ ‐ ‐

Recoveries from loans previously written off 100 567 1,082

Payments to employees and suppliers (49,609) (36,900) (34,074)

Income tax recovered(paid) (972) (832) (1,106)

Cash flows generated from operating activities (14,307) (6,615) (3,359)

Changes in operating assets and liabilities

Other assets (5,494) 160 (2,310)

Other liabilities (3,272) (4,633) 4,698

Cash reserve requirement (905) (6,991) 5,081

Loans and advances (69,704) (31,377) (13,621)

Customer deposits 102,930 60,301 (5,863)

Net cash flows (used in) generated from operating activities 9,248 10,845 (15,374)

INVESTING ACTIVITIES

Investment in government securities (16,443) 7,794 4,161

Purchase of property, equipment and intangible assets (4,034) (8,672) (14,022)

Proceeds from sale of property and equipment 134 111 81

Net cash (used in) generated from investing activities (20,343) (767) (9,780)

FINANCING ACTIVITIES

Proceeds from issuance of convertible preference shares 10,000 ‐ ‐

Net cash flows used in financing activities 10,000 ‐ ‐

Net (decrease) increase in cash and cash equivalents (1,095) 10,078 (25,154)

Cash and cash equivalents at:

Beginning of the period/year 3.22 50,076 39,998 65,152

End of the period/year 3.22 48,981 50,076 39,998

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2.7 UNAUDITED INTERIM FINANCIAL INFORMATION

2.7.1 Unaudited interim income statement

Group

Kwacha millions Unaudited 6 Months Period to 30 June 2012

Interest income 17,515

Interest expense (8,065)

Net interest income 9,450

Impairment losses on loans & advances (367)

Net interest income after loan impairment 9,083

Net fee and commission income 10,191

Other income ‐

Operating expenses (27,368)

Loss before income tax (8,094)

Income tax credit 2,989

Loss for the period (5,106)

2.7.2 Unaudited statement of financial position

Group

Kwacha millions Unaudited as at 30 June 2012

Assets

Loans and advances 181,431

Government securities 58,115

Other assets 110,179

TOTAL ASSETS 349,725

Equity and liabilities

Customer Deposits 286,292

Other liabilities 36,763

Convertible redeemable preference shares 20,000

Shareholders’ equity 6,670

TOTAL EQUITY AND LIABILITIES 349,725

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3 NOTES TO THE FINANCIAL STATEMENTS

3.1 Interest income

Revenue is derived substantially from the business of banking and related activities and comprises net interest and non‐interest income.

An analysis of interest income is as follows:

Group

As at 31 December (Kwacha millions) 2011 2010 2009

Loans and advances 20,409 12,980 6,400

Government securities 5,466 6,989 10,262

Cash and short term funds 435 80 1,334

Total 26,310 20,049 17,996

3.2 Interest expense

An analysis of the total interest expenses is shown below:

Group


Customer deposits 9,799 4,033 1,682

Others 138 180 513

Total 9,937 4,213 2,195

3.3 Net fee and commission income

Fee and commission income primarily relates to credit related fees and commissions, as well as Account management fees.

3.4 Operating expenses

Operating expenses comprise the following:

Group


Employee benefits (note 3.5) 27,307 22,045 14,864

Amortisation (note 3.13) 1,372 900 ‐

Operating lease rentals 3,299 1,057 849

Auditors’ remuneration 584 499 461

Other operating expenses 17,589 11,061 13,573

Total 50,151 35,562 29,747

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3.5 Employee benefits

Employee benefits expense includes the following:

Group


Employee benefits expenses

Wages and salaries 25,220 20,640 14,210

Pension costs 1,359 851 590

Compulsory social security obligations 728 554 64

Total employee benefits expense 27,307 22,045 14,864

Details of Directors’ pay and benefits, and transactions with Directors and other senior officers are disclosed under Related Parties in note

3.24.

3.6 Income tax

The income tax expense comprises the following:

Group


2011 2010 2009

Current tax ‐ ‐ 364

Over provision in prior year current tax ‐ (636) (89)

Deferred tax (note 3.14) 4,186 (3,088) (914)

Income tax (expense) credit 4,186 (3,724) 639

(i) The total charge for the year can be reconciled to the accounting profit as follows:

Group


2011 2010 2009

Loss before tax (17,023) (7,749) (2,085)

Tax on accounting loss at 35% (5,958) (2,712) (730)

Income taxed separately at 40% ‐ (560) 131

Overprovision in prior year ‐ (636) (89)

Change in deferred tax rate 1,047 ‐ (23)

Non‐deductible expenses 725 184 72

Income tax credit(expense) (4,186) (3,724) (639)

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3.6 Income tax expense (Continued)

(ii) The movements on current income tax recoverable (payable) were as follows:

Group


At the start of the period/year 2,236 768 63

Tax expense for the year ‐ ‐ 364

Overprovision in prior year ‐ 636 (89)

Payments during the year 972 832 (1,106)

Recoverable (payable) at end of the year 3,208 2,236 (768)

Company


At the start of the period/year 94 105 74

Tax expense for the year ‐ ‐ 105

Payments during the year ‐ ‐ (74)

Overprovision in prior year ‐ (11) ‐

Recoverable at end of the year 94 94 105

3.7 Impairment losses on loans & advances

All impaired loans have been written down to their estimated recoverable amount. The aggregate carrying amount of impaired loans at 31

December 2011 was ZK 7,604 million (2010: ZK6,778 million, 2009: ZK 3,076 million).

Movements in provisions for impairment of loans and advances are as follows:

Group


Accumulated impairment loss at beginning of year 3,781 3,417 2,998

Net charge against profit 754 1,194 1,608

Amounts recovered during the year (100) (567) (1,082)

Amounts written off (503) (263) (107)

Accumulated impairment loss at end of year (note 3.10) 3,932 3,781 3,417

The gross loans in issue as well as their carrying amounts at the reporting dates are presented in note 3.10.

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3.8 Cash and Balances with Bank of Zambia

Group


Cash in hand 10,877 8,014 6,776

Other money market placements ‐ 8,500 ‐

Statutory deposits 24,768 15,452 25,884

35,645 31,966 32,660

Company


2010 2009

Cash in hand 197 19 4,587

197 19 4,587

From time to time the Central Bank prescribes the minimum required statutory deposit ratio as a means of protecting customers’ deposits.

The statutory deposits are restricted and not available for use in the Group’s day‐to‐day operations and are non‐interest bearing. Cash on hand

and current account balances are non‐interest bearing.

3.9 Placements with other banks

Mandatory reserve deposits are not available for use in the Group’s day to day operations. Cash in hand and balances with central banks

mandatory reserve deposits are non‐interest bearing. Other money market placements are floating rate assets.

3.10 Loans and advances to customers

Group


2010 2009

Overdrafts 45,587 43,638 23,794

Term loans 77,497 19,446 10,426

Staff loans 15,105 5,250 2,373

Gross loans and advances 138,189 68,334 36,593

Allowance for impairment (note 3.7)

‐ Individually assessed (3,121) (3,047) (3,076)

‐ Collectively assessed (811) (734) (341)

Net loans and advances 134,257 64,553 33,176

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3.11 Investment securities

Government bonds are classified as held‐to‐maturity securities issued by the Government of the Republic of Zambia.

Cavmont Capital Holdings Zambia Plc (“CCHZ”) owns 100% of the ordinary shares of Cavmont Bank Limited (“CBL”).

Company


Investment in subsidiary 23,507 21,368 8,868

Convertible loan maturing after more than one year ‐ 2,139 10,693

‐ Equity portion ‐ 463 2,314

‐ Financial liability ‐ 1,676 8,379

23,507 23,507 19,561

On 1 December 2007, the Company issued a convertible loan of ZK10 billion to its subsidiary, Cavmont Bank Limited. The loan attracted

interest at a rate of 10.8543% per annum until 31 December 2012 and thereafter at a rate that would be agreed every five years, equal to the

5 year Government bond rate. As at 30 November 2011, the Company converted the remaining balance of the loan into equity in the

subsidiary. The Company’s interest in the subsidiary which is unlisted and which has the same year end as the Company was as follows:

Company

Country of

incorporation Interest held

Share

Capital

(ZK millions)

Year ended 31 December 2011 Zambia 100% 23,507



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3.12 Property and equipment

Group Kwacha millions Buildings

Leasehold improvements

Motor Vehicles

Fixtures, fittings and equipment

Capital work in progress Total

At 1 January 2009

Comprising:

Cost or valuation 2,687 1,402 2,780 7,418 862 15,149

Accumulated depreciation (145) (1,026) (1,548) (5,422) ‐ (8,141)

Net book amount 2,542 376 1,232 1,995 862 7,008

Year ended 31 December 2009

Opening net book amount 2,542 376 1,232 1,995 862 7,008

Additions 76 11 ‐ 590 2,216 2,893

Disposals ‐ ‐ ‐ (23) ‐ (23)

Depreciation charge (54) (238) (438) (739) ‐ (1,469)

Closing net book amount 2,564 149 794 1,824 3,078 8,409

Comprising:

Cost or valuation 2,763 1,413 2,780 8,008 3,078 18,042


Net book amount 2,564 149 794 1,824 3,078 8,409


Opening net book amount 2,564 149 794 1,824 3,078 8,409

Additions ‐ ‐ ‐ 885 6,379 7,264

Transfers ‐ 785 ‐ 3,518 (4,303) ‐

Revaluations 4,290 ‐ ‐ ‐ ‐ 4,290

Disposals ‐ ‐ (111) ‐ ‐ (111)

Depreciation charge (74) (140) (366) (1,308) ‐ (1,888)

Closing net book amount 6,780 794 317 4,919 5,154 17,964

Comprising:

Cost or valuation 6,780 2,198 2,277 12,259 5,154 28,668

Accumulated depreciation ‐ (1,404) (1,960) (7,340) ‐ (10,704)

Net book amount 6,780 794 317 4,919 5,154 17,964


Opening net book amount 6,780 794 317 4,919 5,154 17,906

Additions ‐ ‐ 158 ‐ 3,728 3,886

Transfers ‐ 1,183 ‐ 4,152 (5,335) ‐

Disposals ‐ ‐ (134) ‐ ‐ (134)

Depreciation charge (25) (210) (124) (1,450) ‐ (1,809)

Closing net book amount 6,755 1,767 217 7,621 3,547 19,907

Comprising:

Cost 6,780 3,381 1,907 16,534 3,547 32,149


Net book amount 6,755 1,767 217 7,621 3,547 19,907

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3.12 Property and equipment (continued)

Buildings were last revalued on 30 November 2011 by RM Fumbeshi and Company valuer and Property Consultants, an independent valuation

expert. Valuations were made on the basis of open market value. The book values of the properties were adjusted to the revaluations and the

resultant surplus net of deferred income tax was credited to the revaluation surplus in the shareholders’ equity.

If buildings were stated at the historical cost basis the amounts would be as follows:


Cost 2,130 2,130 1,857

Accumulated depreciation (505) (231) (178)

1,625 1,899 1,679

Company

Kwacha millions Computer equipment

Motor Vehicles

Office furniture

and equipment Total


Opening net book amount 5 151 17 173

Additions ‐ ‐ 100 100

Depreciation charge (1) (91) (31) (123)

Closing net book amount 4 60 86 150

Comprising:

Cost or valuation 6 272 123 401

Accumulated depreciation (2) (212) (37) (251)

Net book amount 4 60 86 150


Opening net book amount 4 60 86 150

Depreciation charge (1) (60) (31) (92)

Closing net book amount 3 ‐ 55 58

Comprising:

Cost or valuation 6 272 123 401


Net book amount 3 ‐ 55 58


Opening net book amount 3 ‐ 55 58

Depreciation charge (3) ‐ (31) (34)

Closing net book amount ‐ ‐ 24 24

Comprising:

Cost 6 272 123 401


Net book amount ‐ ‐ 24 24

3.12 Property and equipment (continued)

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In accordance with section 183 of the Zambian Companies Act 1994 (as amended) the register of Lands and Buildings is available for inspection

by members and their duly authorized agents at the registered records office of the Company.

3.13 Intangible assets

During the year the Directors reassessed the useful life of software which resulted in the useful life being increased from 7 years to 10.5 years.

The change resulted in a reduction to the amortisation charge by approximately ZK754 million to the profit and loss account. The impact on

future financial years will be similar to this amount.

Group

Kwacha millions Software costs Software projects in

progress Total


Opening net book amount ‐ 1,844 1,844

Additions ‐ 11,127 11,127

Accumulated amortisation ‐ ‐ ‐

Closing net book amount ‐ 12,971 12,971


Opening net book amount ‐ 12,971 12,971

Additions ‐ 2,066 2,066

Transfer 15,037 (15,037) ‐

Accumulated amortisation (900) ‐ (900)

Closing net book amount 14,137 ‐ 14,137

Comprising:

Cost or valuation 15,037 ‐ 15,037

Amortisation (900) ‐ (900)

Net book amount 14,137 ‐ 14,137


Opening net book amount 14,137 ‐ 14,137

Additions 148 ‐ 3,886

Amortisation (1,372) ‐ (1,372)

Closing net book amount 12,913 ‐ 16,651

Comprising:

Cost 15,185 ‐ 15,185

Accumulated amortisation (2,272) ‐ (2,272)

Net book amount 12,913 ‐ 12,913

3.14 Deferred income tax

Deferred income tax is calculated using the enacted tax rate of 35% (2011:35%). The movement in deferred income tax is as follows:

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Group


Opening deferred tax asset 3,983 2,611 1,697

Movements

Credit to income statements 4,186 3,088 891

Overprovision in prior year ‐ ‐ 23

Credit (debit) to equity 246 (1,716) ‐

Deferred tax asset 8,415 3,983 2,611

Company


Opening deferred tax asset (liability) 22 17 (18)

Movements

Credit to income statements (1) 5 12

Overprovision in prior year ‐ ‐ 23

Credit (debit) to equity ‐ ‐ ‐

Deferred tax asset 21 22 17

The following are the major deferred tax liabilities recognised by the Group and their movements in the year:

Group

Kwacha Millions

Property, plant

and equipment

Other temporary

differences

Tax

losses Total

At 1 January 2010 345 (1,990) (966) (2,611)

Credit) debit to statement of comprehensive income 1,195 1,573 (5,856) (3,088)

(Credit) debit to equity 1,716 ‐ 1,716

At 31 December 2010 3,256 (417) (6,822) (3,983)

(Credit) debit to statement of comprehensive income 1,446 417 (6,051) (4,186)

(Credit) debit to equity (246) ‐ ‐ (246)

At 31 December 2011 4,458 ‐ (12,873) (8,415)

With effect from 1 April 2012, the statutory income tax rate for Banks was reduced from 40% to 35%. This rate has been enacted by the

Zambian Parliament. Consequently the closing deferred tax asset has been measured at 35% (the rate that will apply when the temporary

differences reverse).

3.14 Deferred income tax (continued)

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Subject to agreement with the Zambia Revenue Authority, the Group has estimated tax losses of ZK 36.8 billion as at 31

December 2011available to carry forward for a period of not more than 5 years from the period in which they were incurred for set

off against future taxable profits from the same source. The losses arose as follows:

Kwacha millions

2009 loss expiring in 2014 4,850



36,774

The following are the major deferred tax liabilities recognised by the Company and their movements in the year:

Company

Kwacha Millions Property,, plant and

equipment Other temporary

differences Total

At 1 January 2010 17 ‐ 17

(Credit) debit to statement of comprehensive income 1 4 5

At 31 December 2010 18 4 22

(Credit) debit to statement of comprehensive income (4) 3 (1)

At 31 December 2011 14 7 (21)

3.15 Receivables and prepayments

Group


Recoverable deposits 41 ‐ 527

Commission receivable 2,925 ‐ ‐

Prepayments and other receivables 7,574 5,513 5,172

Total 10,540 5,513 5,699

Company


Recoverable deposits ‐ ‐ ‐

Commission receivable ‐ ‐ ‐

Prepayments and other receivables 84 40 191

Total 84 40 191

3.16 Convertible redeemable preference shares

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During 2011 Cavmont Bank Limited issued cumulative, redeemable preference shares amounting to ZK 20,000 million. Dividends are payable

at a fixed rate of 10.5%, accrued half yearly and paid once per annum. As at 31 December 2011, 10,000 million of these shares were taken up

by Capricorn Investments Holdings of Namibia who holds 25% of the voting shares of the Cavmont Bank Limited’s parent company, Cavmont

Capital Holdings Zambia Plc.

The actual undiscounted cash flows payable at the reporting dates are as follows:


Due within 1 year 1,139 ‐ ‐

Due between 1 and 2 years 1,050 ‐ ‐

Due between 2 and 5 years 15,424 ‐ ‐

Total cash flows 17,613 ‐ ‐

3.17 Customer deposits

Group


Current and demand deposits 119,397 90,063 65,746

Savings accounts 47,872 30,712 26,521

Fixed deposit accounts 117,709 64,735 25,433

Call accounts 5,351 1,889 4,830

Total 290,329 187,399 122,530

Current 119,397 90,063 65,746

Non‐current 170,932 97,336 56,784

290,329 187,399 122,530

3.18 Other liabilities

Group


Payables and accrued expenses 7,371 10,643 15,317

Total 7,371 10,643 15,317

Company


Payables and accrued expenses 1,905 1,720 1,926

Total 1,905 1,720 1,926

3.19 Share capital

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The authorised number of ordinary shares for the Company as at 31 December 2011 was 7,255,000,000 (2010: 7,255,000,000 shares, 2009:

7,255,000,000 shares).

The subscribed number of ordinary shares is 5,000,000,000 at a par value of ZK1.00 per share and issued at a premium of ZK3.40 per share.

Included in the ordinary shares are 1,280,626,059 non‐voting shares of ZK1.00 per share. However, the shareholder is entitled to receive

dividends on these shares.

Company

2011 2010 2009

Number of authorized shares (millions) 7,255 7,255 7,255

Number of issued shares (millions) 5,000 5,000 5,000

Ordinary share capital (ZK million) 5,000 5,000 5,000

Share premium (ZK million) 16,992 16,992 16,992

The shareholder spread of Cavmont Capital Holdings Zambia Plc between public and non‐public shareholders, as defined by the Lusaka Stock

Exchange listing rules is as follows:

As at 31 December (Millions of shares) 2011 2010 2009

Public shareholders 20.8% 20.8% 20.8%

Non‐public shareholders 79.2% 79.2% 79.2%

Directors ‐ ‐ ‐

Pension funds established for the benefit of Directors or ‐ ‐ ‐

Shareholders with 10% or more of the ordinary shares 79.2% 79.2% 79.2%

Total 100% 100% 100%

The shareholders that hold 5% or more of the ordinary shares of Cavmont Capital Holdings Zambia Plc, together with the amount of each such

shareholder’s interest is shown below.

As at 31 December (Millions of shares) 2011 2010 2009

Capricorn Investment Holdings 44.2% 44.2% 44.2%

Bank Windhoek nominees (Pty) Ltd 13.1% 13.1% 13.1%

Cavmont& CO S.A. 11.0% 11.0% 11.0%

NAPSA 10.9% 10.9% 10.9%

79.2% 79.2% 79.2%

3.20 Revaluation reserve

Premises revaluation reserves arose from the revaluation of properties in prior years. The revaluation reserves are being written off to revenue

reserves as the related properties are being disposed of. The revaluation reserves are not available for distribution to the Group’s

shareholders.

3.21 Non distributable reserve

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This reserve represents an appropriation from accumulated losses to comply with the Bank of Zambia’s prudential regulations. The balance in

the reserve represents the excess of impairment provisions determined in accordance with the prudential regulations over the impairment

provisions recognised in accordance with the Group’s policy. The reserve is not distributable.

3.22 Cash and cash equivalents at end of year

Group


Cash & balances with Bank of Zambia 35,645 31,966 32,660

Less: cash reserve requirements (14,672) (13,767) (6,776)

Placements with other banks 28,008 31,877 14,114

48,981 50,076 39,998

For the purposes of the cash flow statement, cash and cash equivalents comprise balances with less than 90 days maturity from the date of

acquisition including: cash and balances with central banks, treasury bills and other eligible bills, and amounts due from other banks. Cash and

cash equivalents exclude the cash reserve requirement held with the Bank of Zambia.

Banks are required to maintain a prescribed minimum cash balance with the Bank of Zambia that is not available to finance the bank’s day‐to‐

day activities. The amount is determined as 10% of the average outstanding customer deposits over a cash reserve cycle period of one month.

3.23 Off balance sheet financial instruments, contingent liabilities and commitments

In common with other banks, the Group conducts business involving acceptances, performance bonds and indemnities. The majority of these

facilities are offset by corresponding obligations of third parties. In addition, there are other off‐balance sheet financial instruments including

forward contracts for the purchase and sale of foreign currencies, the nominal amounts for which are not reflected in the balance sheet.

Acceptances

An acceptance is an undertaking by a bank to pay a bill of exchange drawn on a customer. The Group expects most acceptances to be

presented, but reimbursement by the customer is normally immediate.

Guarantees

Guarantees are generally written by a bank to support refinance by a customer to third parties. The Group will only be required to meet these

obligations in the event of customer default.

Contingent liabilities:


Undrawn commitments 4,119 ‐ ‐

Guarantees and performance bonds 2,369 2,167 636

Total 6,488 2,167 636

Contingent assets

There were no litigation cases ruled in favour or against the Group as at 31 December 2011 (2010: ZK 148 million, 2009: Nil).

Commitments

Commitments to lend are agreements to lend to a customer in the future, subject to certain conditions. Such commitments are either made

for a fixed period, or have a specific maturity but are cancellable by the lender subject to notice requirements.

3.24 Related party transactions

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There are companies which are related to Cavmont Capital Holdings Zambia Plc through common shareholdings or common directorships. A

number of banking and other transactions are entered into with these other group companies in the normal course of business. These include

operation of current accounts, and placing of foreign currency at Cavmont Bank Limited.

The volumes of related party transactions, outstanding balances at the year end, and the related interest expense and income for year are as

follows:


Amounts due to related companies 2,395 1,658 1

Amounts due to related companies represent amounts payable to Capricorn Investment Holdings for dividends, services related to marketing,

human resources and recharged expenses incurred on behalf of Cavmont Bank Limited.

Loans to Directors

Advances to customers at 31 December 2011include loans to Directors, loans to companies controlled by Directors or their families, and loans

to employees as follows:


At the start of period/year 1,574 2,020 260

Raised (Repaid) during the period/year 1,578 (446) 1,760

At end of period/year 3,152 1,574 2,020

Interest income earned ‐ 78 ‐

All loans to Directors and to companies controlled by directors or their families were given on commercial terms and at market rates.

No provisions have been recognised in respect of loans to directors and to companies controlled by directors or their families.

Loans to employees

At 31 December 2011 advances to employees amounted to ZK13,851 million (2010: ZK5,250 million, 31 December 2009: ZK2,731 million).

Deposits by Directors


At the start of year 479 34 101

(Withdrawals) deposits during the year (22) 445 67

At end of year 457 479 34

Key management compensation

Kwacha millions 2010 2009

Salaries and other short‐term employment benefits 3,399 4,622 4,607

Directors’ remuneration

Kwacha millions 2010 2009

Fees for services as a director 547 489 182

3.25 Operating lease commitments

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The future minimum lease payments under non‐cancellable leases are as follows:


Not later than one year 2,756 2,808 630

Later than one year but not later than five years 9,674 6,805 590

Total 12,430 9,613 1,220

3.26 Post balance sheet events

There were no material post balance sheet events that would require disclosure or adjustment to the statement of financial position as at 31

December 2011, 2010 and 2009.

3.27 Earnings per share

Basic earnings per share are calculated by dividing the profit attributable to equity holders of the Company by the weighted average number

of ordinary shares outstanding. There were no potentially dilutive shares outstanding at 31 December 2011. Diluted earnings per share are

therefore the same as basic earnings per share.

Group

As at 31 December 2011 2010 2009

(Loss) profit attributable to equity holders of the (12,837) (4,025) (1,446)

Weighted average number of ordinary shares in issue 5,000 5,000 5,000

Basic earnings per share (Kwacha per share) (2.57) (0.81) (0.28)

3.28 Dividends per share

No dividend was paid in the year ended 31 December 2011 and the year ended 31 December 2010. During the year ended 31 December 2009

a dividend of ZK0.40 per share was paid.

3.29 Net assets per share

The ratio of net assets per share is calculated by dividing net assets by the number of shares in issue at each respective balance sheet date, as

required by section 8.10 of the Lusaka Stock Exchange listing rules.

3.30 Finance lease commitments

Group


Minimum lease payments ‐ ‐ 288

Future finance charges on finance leases ‐ ‐ (209)

Present value of minimum future lease payments ‐ ‐ 79

Analysed as follows

Not later than one year ‐ ‐ 79

Later than one year but not later than five years ‐ ‐ ‐

Total ‐ ‐ 79

Company

As at 31 December

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Minimum lease payments ‐ ‐ 79

Future finance charges on finance leases ‐ ‐ ‐

Present value of minimum future lease payments ‐ ‐ 79

Analysed as follows

Not later than one year ‐ ‐ 79

Later than one year but not later than five years ‐ ‐ ‐

Total ‐ ‐ 79

3.31 Retirement benefit obligations

These obligations related to retirement benefits in respect of all employees in employment of Cavmont Bank Limited until December 2006.

The present value of the unfunded defined benefit obligation as at 31 December 2011 and 2010 was Nil (2009: ZK4,599 million).

4 SUMMARISED INCOME STATEMENTS

Group

Kwacha Millions 2011 2010 2009 2008 2007

Net interest income 16,373 15,836 15,801 13,947 7,519

(Loss) profit before income tax (17,023) (7,749) (2,085) 3,982 934

Income tax expense 4,186 3,724 639 (1,479) (66)

Profit after income tax (12,837) (4,025) (1,446) 2,504 868

5 STATEMENT OF ADJUSTMENTS

All adjustments in the financial statements are in respect of rearrangement of notes and have no financial impact.

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LETTER OF ALLOCATION AND ACCEPTANCE FORM

1. RENOUNCEABLE LETTER OF ALLOCATION (“LA”)

An offer is hereby made to shareholders of Cavmont Capital Holdings Zambia Plc (“CCHZ”), who were registered as such at the close of

business on Friday, 02 November 2012 (“Record Date”), to subscribe for 64,285,714,285 new Ordinary Shares of par value ZMK 1.00 each

(“Rights Offer Shares”), at a subscription price of ZMK 1.40 per Rights Offer Share, offered on the basis of 90 Rights Offer Shares for every 7

Ordinary Shares held as at Record Date.

This offer should be read in conjunction with the Circular to CCHZ Shareholders, dated Monday, 16 November 2012, detailing the terms and

conditions of the Rights Offer (“Circular”).

2. CAVMONT BANK OFFER SUBSCRIPTION ARRANGEMENTS

2.1 Summary of Rights Offer Shares to be issued

64,285,714,285 renounceable Rights Offer Shares are hereby offered to CCHZ Shareholders, registered as such at the close of business on

Friday, 02 November 2011, being the Record Date, for subscription in cash at a price of ZMK 1.40 each, payable on acceptance, on the basis of

90 Rights Offer Shares for every 7 CCHZ Ordinary Share held as at Record Date.

The renounceable Letter of Allocation that will be posted to Shareholders from Friday, 16 November 2012 will set out the entitlement of the

person to whom this Circular is addressed.

2.2 Time table

The Rights Offer opens ‐ 08h00 Friday,16 November 2012

Dealing in LA’s commences Friday,16 November 2012

Last day for dealing in LA’s – 13h00 Wednesday, 05 December 2012

Last day for splitting LA’s – 17h00 Thursday, 06 December 2012

Rights Offer closes – 17h00 Friday, 07 December 2012

Last day for receiving postal acceptances – 16h00 Wednesday, 12 December 2012

3. COURSES OF ACTION

Set out below are the various options open to Shareholders with respect to the rights accruing to them in terms of the Rights Offer:

3.1 Acceptance ‐ SUBSCRIBE for all the Rights Offer Shares offered

A person to whom this Rights Offer is made (and/or his/her renouncee) who wishes to apply for Rights Offer Shares, must complete the

renounceable Letter of Allocation in accordance with the instructions contained therein and forward or post it, clearly marked, “Cavmont

Capital Holdings Zambia Plc – Rights Offer”, to any one of the addresses or offices as contained in paragraph 8 of this Appendix, together with

payment in accordance with paragraph 4.0 of this Appendix.

The completed Letter of Allocation and payment, if posted, must reach any of the addresses of the Sponsoring Broker by no later than 16h00

on Wednesday, 12 December 2012.

3.2 Renunciation – SELL all rights to the Rights Offer Shares being offered by trading them on the LuSE

The right to subscribe for Rights Offer Shares in CCHZ, as detailed in the Letter of Allocation, may be renounced (nil paid) by completing the

Letter of Allocation in accordance with the instructions contained therein. Such renounced rights may be sold by your broker on the LuSE, if

there are buyers during the period allotted for trading of rights. Any unsold rights will be forfeited at the end of the Offer period.

The completed Letter of Allocation must reach Sponsoring Broker whose details are given on page 3 by no later than 16h00 on Friday, 05

December 2012.

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3.3 Splitting – SUBSCRIBE in part for the Rights Offer Shares and SELL the remaining Rights by trading them on the LuSE

A Letter of Allocation may be split into letters of smaller denominations by completing the Letter of Allocation in accordance with the

instructions contained therein. Splitting allows a shareholder to subscribe for some of the new shares offered and to sell the rights on the

balance of shares not taken up.

The last day for splitting will be on Thursday, 06 December 2012, at 12h00.

3.4 No action ‐ The 4th option

Shareholders not selecting any of the foregoing options by Friday, 07 December 2012, the closing of the Offer Period, will be deemed to have

selected the option to sell all of their rights at the then prevailing price and, provided that there are buyers for the rights, they will be sold by

their stockbroker or in the event that shareholders do not have a broker, by the Sponsoring Broker. This period for the sale of rights where the

shareholder “does nothing” will also close on Friday, 07 December 2012.

4. PAYMENT

The amount due on acceptance is payable in Zambia Kwacha by deposit or transfer to the following bank account:





Payment may also be in the form of manager’s cheques or bankers’ drafts (crossed “not negotiable”) in respect of subscriptions should be

made payable to “CCHZ Rights Issue”.

Cheques and bankers’ drafts and completed Letters of Allocation should be lodged, with payment, with CCHZ or the Sponsoring Broker.

All cheques or drafts received by CCHZ will be deposited immediately.

Applications will be regarded as complete only when cheques or bankers’ drafts have been cleared.

5. LISTING AND REGISTRATION OF THE RIGHTS OFFER SHARES

The Listings Committee of the LuSE has granted a primary listing for, and permission to deal in, all renounceable Letters of Allocation (nil paid)

relating to the Rights Offer Shares, between Friday 16 November 2012 and Wednesday, 05 December 2012.

Application has been made for the Rights Offer Shares offered in terms of the Rights Offer to be listed on the LuSE on or about Monday 17

December 2012.

6. CONFIRMATION LETTERS

Shareholders will NOT be issued share certificates, but will instead be issued confirmations of allotment of Rights Offer Shares held at the LuSE

CSD.

Confirmation of allotments in respect of the Rights Offer Shares will be posted from Monday, 17 December 2012, at the risk of the

Shareholders to whom they are addressed.

7. EXPENSES OF THE TRANSACTION

The cash expenses of the Transaction, amounting to approximately ZMK 2 billion, relate to various advisory and regulatory fees and charges,

registration and listing fees, brokerage commissions, underwriting fees, marketing and other third party expenses, and will be paid by CCHZ

out of the proceeds of the Claw‐back Rights Offer.

8. ADDRESSES AND OFFICES

Shareholders may forward completed Letters of Allocation to the Sponsoring Broker, being Stockbrokers Zambia Limited at their registered

office shown at the beginning of this Circular.

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Directors: G. Phiri (Chairman), J Minnaar (Managing Director), J. Ngosa, J. Swanepoel

Address: PwC Place, Plot 2374, Thabo Mbeki Road, P O Box 32322, Lusaka, Zambia.

RENOUNCEABLE LETTER OF ALLOCATION: This document is valuable and may be traded on the Lusaka Stock Exchange or renounced freely.

Please read the instructions and notes in this Letter of Allocation in conjunction with the Rights Offer Circular dated Friday, 16 November 2012

to which it relates. If you are in any doubt as to the action to be taken, you should contact your stockbroker, bank manager, lawyer,

accountant or other professional advisor.

[NAME OF SHAREHOLDER] [ADDRESS OF SHAREHOLDER]

NAME : ……………………………………………………….ADDRESS : …………………………………………………………………………………………………………………………

A. ACCEPTANCE (as per paragraph 3.1 of the Letter of Allocation )

Signature(s) …………………………………………..

IF YOU WISH TO SUBSCRIBE FOR THESE RIGHTS OFFER SHARES WHICH HAVE BEEN OFFERED TO YOU, YOU MAY DEPOSIT OR TRANSFER YOUR

MONEY TO THE FOLLOWING BANK ACCOUNT.





IF YOU WISH TO SUBSCRIBE FOR THESE RIGHTS OFFER SHARES WHICH HAVE BEEN OFFERED TO YOU SIMPLY RETURN THIS FORM, TOGETHER

WITH YOUR CERTIFIED RTGS FORM OR DEPOSIT SLIP AS PROOF OF PAYMENT OR A CHEQUE OR BANK DRAFT IN FAVOUR OF “CCHZ CLAW‐BACK

OFFER” CROSSED “NOT NEGOTIABLE” AND “NOT TRANSFERABLE” BY NO LATER THAT 17h00 ON 07 DECEMBER 2012 TO THE COLLECTION

AGENTS WHOSE DETAILS ARE GIVEN IN APPENDIX 3. BY SIGNING THIS FORM, YOU UNDERSTAND AND ACCEPT THAT SHOULD SUCH CHEQUE

BE DISHONOURED, YOU WILL FORFEIT THE RIGHT TO TAKE UP THE RIGHTS OFFER SHARES AND WILL HAVE NO CLAIM WHATSOEVER AND WILL

INDEMNIFY CCHZ IN THIS REGARD.

Number of CCHZ shares registered in your name

at the close of business at 16h00, Friday, 02

November 2012

Number of CCHZ Rights Offer Shares which you

may subscribe for at ZMK 1.40 per Rights Offer

Share on 90 for 7 basis

AMOUNT PAYABLE in ZMK

By 16h00 on Friday, 07 December 2012

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B. FORM OF RENUNCIATION/SPLITTING (as per paragraph 3.3 of Letter of Allocation on page 81)

(To be completed by the Shareholder named above if the right to subscribe for the Rights Offer Shares is to be renounced or if this Letter

is to be split)

TO: The Directors

Cavmont Capital Holdings Limited

Signature(s) ……………………………….Date:……………………………………………………...

C. REGISTRATION APPLICATION FORM

(To be completed by the person(s) to whom the right has been renounced, or by his/her/their agent).

(PLEASE PRINT)

First Name(s) ………………………………………………………………Surname or name of corporate body…………………………………………………………………………

Address……………………………………………………………………………………………………………………………………………………………………………………………………………

TO: The Directors Cavmont Capital Holdings Plc

I/We the person(s) named above, confirm I/we have full legal capacity to contract and request you to allot the Rights Offer Shares covered by

this Letter in my/our name(s). I/We authorise you to place my/own name(s) on the register as members of the Company in respect of the

shares so allocated, subject to the conditions set out in Circular to Shareholders dated 10 June 2011 and to the Articles of Association of the

Company and enclose herewith my/our cheque/ or other proof of payment.

Signature(s) ……………………………….Date:……………………………………………………...

Details of split required

Split No.

1.

2.

3

4.

I/We, the shareholder(s) named, would like to take up ……………… (Number of Rights Offer Shares) of the

total Rights Offer Shares offered above. I/We hereby renounce the balance of my/our right to subscribe

for the Rights Offer Shares allocated to me/us in favour of the Person(s) signing the registration

application form (see Section C below) in relation to such Rights Offer Shares, or in default of a named

person, in favour of the underwriter.

cavmont capital holdings zambia plc · page 3 of 84 corporate information company secretary and...

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