Integrated Report 2016 NedNamibia Holdings Limited · 2017-11-24 · full range of domestic and global services to individual, ... 2014 2 345,5 NET ASSET VALUE PER SHARE (CENTS) 2015

Integrated Report 2016NedNamibia Holdings Limited

See moneydifferently with a Solid performance in all SectorS

Integrated ReportNedNamibia Holdings Limited

12016 NEDNAMIBIA HOLDINGS LIMITED |

See moneydifferently with a Solid performance in all SectorS

Contents

Group profile

Highlights

Retail branch network

Group structure

Board of directors

Executive committee

Chairman’s report

Managing director’s review

Chief financial officer’s report

Chief risk officer’s report

Sustainability report

Group annual financial statements

Corporate governance and compliance report

Directors’ responsibility

Statutory actuary’s report

Independent auditor’s report

Report of the directors

Company annual financial statements

Contact details

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NedNamibia Holdings Limited is the holding company for subsidiaries engaged in financial services including commercial and personal banking, corporate and specialised finance, personal lending, wealth management, life assurance, property and asset finance, foreign exchange and securities trading. The group has total assets of N$16.04 billion (2015: N$13.83 billion).

The principal subsidiary, Nedbank Namibia Limited, is a registered Namibian bank with assets of N$15.65 billion (2015: N$13.42 billion). It provides a full range of domestic and global services to individual, corporate and international clients through a widespread branch network and a business centre and head office in Windhoek. An innovative approach to providing financial services, coupled with in depth knowledge of the Namibian market, a commitment to Namibian development, strong support from its shareholder, and adherence to international best practice in risk management has enabled the bank to grow.

2 2016 INTEGRATED REPORT|


Group Profile

NedNamibia Life Assurance Company Limited provides cover for clients, notably for their credit and overdraft commitments. NedPlan Insurance Brokers Namibia (Proprietary) Limited provides insurance brokerage services and engages in any other business, which may seem directly or indirectly conducive to any of the objectives of the company.

NedCapital Namibia, the specialist non-banking financial services unit within NedNamibia Holdings, offers specialised finance, syndication and advisory services to corporates, state-owned enterprises and empowerment entities.


Building our BuSineSS BaSed on a reSponSiBle approach to the future

2016 and we see change

NET ASSET VALUE PER SHARE (CENTS) 2011 1 388,6





Continued investment in infrastructure, technology and human capital.


Good progress made towards group strategic goals despite economic downturn.

Encouraging client response to mobile banking and value added services through optimisation of core banking system introduced at Nedbank Namibia.

Record-breaking property finance development deals through the bank’s Corporate Investment Banking unit.

Wealth and bancassurance unit showed further growth.



2016 and we see change

Highlights

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3

9

13

1

1 Katima Mulilo

2 Rundu

3 Grootfontein

4 Eenhana

5 Oshikango

6 Oshakati

7 Ondangwa

8 Outapi

9 Windhoek

Business Centre

The Grove

Hidas

Independence Ave

Katutura

Maerua Mall

Main Branch

Prosperita

Wernhil

Westlane

Windhoek South

10 Keetmanshoop

11 Swakopmund

12 Walvis Bay

Walvis Bay Branch

Kuisebmond

13 Lüderitz

14 Otjiwarongo

15 Okahandja

16 Ongwediva

17 Rehoboth

18 Tsumeb



Retail Branch Network



Nedbank Group Limited

100%NedNamibiaHoldingsLimited

100%Nedbank NamibiaLimitedFull Spectrum Banking

100%NedProperties(Proprietary) LimitedProperty HoldingCompany

100%NedPlan Insurance Brokers Namibia(Proprietary) LimitedInsurance Broker

100%NedNamibia Life Assurance CompanyLimitedLong-term Insurance

100%NedCapital Namibia (Proprietary) LimitedSpecialised Financial Service

100%CBN Nominees(Proprietary) LimitedSafe Custodian Services

25%Namclear(Proprietary) LimitedClearing Service Provider

100%NedLoans(Proprietary) LimitedMicro-lending Administration

50%Ten Kaiser Wilhelm Strasse (Proprietary) LimitedProperty Holding

50%Walvis Bay Land Syndicate (Proprietary) LimitedProperty Holding

100%NIB Mining Finance(Proprietary) LimitedDormant Company




Group Structure




we are StriVingtowardS Superior SerViceWe have a reputation for innovation and are driven by our commitment.

Theo J Frank (SC)

ChairmanIndependent non-executive directorBA Law, LLB, Dip Bus Man, Certificate in Tax Law

Senior counsel and former judge of the High Court of Namibia. He is the chairperson of both NedNamibia Holdings and Nedbank Namibia and also the chairperson of Free Press of Namibia.


Richard W R Buchholz

Non-executive directorBCom, CA (SA)

Has 23 years’ experience in banking, credit and risk management, both with Nedbank Limited and as a former partner in the Financial Services division at KPMG.

Jan Adriaan Du Plessis

Non-executive directorBCom, BCompt (Hons), CA (SA), Certificate in the Theory of Accountancy, HDip in Company Law, AMP (Duke University, USA)

A seasoned banker with extensive experience in financial management (including specialised and structured finance products), mergers and acquisitions and corporate banking.

Trophimus T Hiwilepo

Independent non-executive director BSc (University of the Western Cape, SA)

Information Technology professional with extensive experience in leading, managing, planning as well as operational and technical expertise in information technology and services, infrastructure and business systems.

Board of Directors




Afra R Schimming-Chase

Independent non-executive directorLLB, LLM, PGrad Dip International Law (France), Certified Financial Planner CFP® (Member of FPI (SA))

Consultant and owner of Chase & Associates CC, Financial Planning & Coaching Practice, Partner and co-Licensee FranklinCovey Namibia. Customer service expert, seasoned public speaker and dynamic facilitator.

Liina M Muatunga

Independent non-executive directorNatDip HR Management (Peninsula Technicon CT), Masters Dip HR Management (Rand Afrikaans University, SA), BTech (University of South Africa), MBA (Maastricht, Netherlands), EDP (UCT Graduate Business School, SA); SMP (GIBS, University of Pretoria, SA)

General Manager at Mpact Corrugated with extensive experience in human resources management, training and development, industrial relations, performance management, operational management and labour law.

Lionel J Matthews

Managing DirectorBCompt (Hons), CA (Nam), CA (SA), Executive MBA (University of Cape Town, SA)

He has more than 20 years experience in finance, banking, investments and strategic planning, and has held various executive roles. These include CEO of Old Mutual Investment Group (Namibia), director of banking supervision at the Bank of Namibia and financial director at Namibian Breweries Ltd. He has been the Managing Director of both NedNamibia Holdings and Nedbank Namibia since 1 November 2013.



Richard P Niddrie

Independent non-executive directorBCom, BAcc, CA (SA), CA (Nam)

Former audit partner of Namibian practice of Ernst & Young with 35 years’ experience as a Chartered Accountant.

Board of Directors

Karl-Stefan Altmann

Chief Financial OfficerBAcc (Hons), CA (SA), CA (Nam)

His career covered appointments as Audit Manager with Deloitte & Touche, Financial and Senior Financial Manager at Nedbank Namibia, Head of Finance at ABSA Namibia as well as short-term assignments in Tanzania and Zambia. On 1 May 2014 he was appointed as Chief Financial Officer of NedNamibia Holdings and Nedbank Namibia.

Peter C W Hibbit

Independent non-executive directorBCom, CA (SA), HDip Tax (University of the Witwatersrand), AMP (Harvard University (USA))

Held numerous senior positions during his 31 years career as Chartered Accountant, amongst others Audit Partner at Pim Goldby (now Deloitte & Touche), General Manager Finance and Accounting at The SA Permanent Building Society, Divisional Director Management Services at Nedbank, Financial Director at Imperial Bank, Group Financial Director of Regent Insurance and Group Financial Director at Associated Motor Holdings (“AMH”), the latter two being part of the Imperial Group. He retired from the accounting profession at the end of 2014.



We want our customers to feel sure that they’ve made the right choice by going with us. We want investors to know that we are performing to our potential for them.

towardS a common purpoSe

Lionel Matthews

Managing DirectorLionel who was appointed managing director of NedNamibia Holdings and Nedbank Namibia from November 1, 2013, is a chartered accountant by profession, with a B Compt (Hons), CA (Nam), CA (SA) and an executive MBA from the Graduate School of Business at the University of Cape Town. He has more than 20 years experience in finance, banking, investments and strategic planning, and has held various executive roles. These include CEO of Old Mutual Investment Group (Namibia), director for banking supervision at the Bank of Namibia and financial director at Namibian Breweries Ltd.


Karl-Stefan Altmann

Chief Financial OfficerA graduate of Stellenbosch University and honours graduate in accounting from the University of South Africa, Karl-Stefan is a member of both the SA Institute of Chartered Accountants and the Institute of Chartered Accountants of Namibia. His career in banking began after a five-year spell as an audit manager with Deloitte & Touche, whose clients included Nedbank Namibia. It has covered appointments as financial manager and senior financial manager at Nedbank Namibia and head of finance at ABSA Namibia as well as short-term assignments in Tanzania and Zambia.

Executive Committee

Gernot de Klerk

Head: Marketing and CommunicationsGernot joined Nedbank Namibia in 2007 as Manager: Communications and Sponsorships and was appointed to his current post in December 2015. Before entering corporate communications, he was manager of the Afrikaans radio service at the Namibian Broadcasting Corporation. He joined the NBC in 1995 as an assistant producer. He studied at the Universities of Stellenbosch and Warwick, England and has attended development programmes in Namibia and South Africa. He is a member of the bank’s social investment committee and of the Go Green Committee and vice-chairman of the Rehoboth Development Forum, a community-based organisation aiming to improve the standard of living in the southern town.

Bertus Matthee

Executive: RetailWith 39 years’ experience in the banking industry, Bertus drives the overall sales campaign in the Retail division. He has vast experience in every facet of the retail banking business, having started in a junior clerical position at Nedbank Namibia some 30 years ago. His positions in the bank have included branch controller, branch manager, regional manager and operations manager. His responsibilities span the entire branch network, Retail, Business and Private Banking, External Sales, Conformance, NedPlan, Card issuing, Personal Loans and SME divisions in Nedbank Namibia.




Annette Stafford-Evans

Executive: Credit and Market RiskFollowing her appointment in September 2007 as Head: Credit of Nedbank Namibia, Annette was confirmed as a member of the executive committee when she became Chief Risk Officer on 1 November 2013. She was appointed as Executive: Credit and Market risk with effect from 2016. Annette is a chartered accountant CA (SA) and CA (Nam). She also holds post-graduate qualifications as a certified risk analyst (CRA), registered with the International Academy of Business and Financial Management (IABFM).

Richard Meeks

Chief Operating OfficerRichard who joined Nedbank Namibia as chief operating officer in May 2015, began his banking career at the Bank of Credit and Commerce International in London in 1988. He immigrated to South Africa in 1990 and joined Standard Bank where he served in various management roles in retail and commercial banking operations before being assigned to Standard Bank Namibia in 2004 as head of operations. In 2009 he was appointed as project director for the localisation of Standard Bank Namibia’s core banking system and delivery of a full service banking solution. He was reappointed as head of operations in 2013, serving as a member of Standard Bank Namibia’s exco. As chief operating officer of Nedbank Namibia, he is responsible for an effective support structure across information technology, operations and product and wealth management.

Elaine Schlechter

Executive: Wealth Management / BancassuranceElaine who was appointed to her current position in December 2015, joined the group in 2006 as Senior manager: Bancassurance and as Chief Operating Officer of NedNamibia Life Assurance Company Limited and has led the growth of the life company and the group’s broking business. In her 28-year career in the banking and insurance sector, 18 of which have been at senior management level, she has gained extensive experience in short term insurance and life assurance broking, assurance underwriting and in the banking sector. She studied at the University of Stellenbosch, the University of South Africa and the International Academy of Retail Banking in London. She is an executive member of the Life Assurance Association of Namibia.



Stephen van Rhyn

Chief Information OfficerA graduate of management programmes at the University of Stellenbosch Business School, the University of South Africa and the Management College of South Africa, Stephen has 21 years’ experience developing and executing strategies in alignment with corporate objectives. He has overall responsibility for the shared services environment of Nedbank Namibia. This includes electronic business, information technology, centralised banking operations, internal support, contact centre and customer support, local core banking, and infrastructure – technical support. Key responsibilities include implementation of the core banking system for Nedbank Namibia. He was previously an executive at First National Bank of Namibia Holdings Ltd where he was successively manager of information technology business development, Head of Information Technology and Chief Information Officer.

Silke van der Merwe

Executive: Strategy and Human CapitalA graduate of Stellenbosch University (BA, MBA) and of the University of South Africa (BA Hons), Silke began her working career in Germany. After returning to Namibia, she spent more than a decade in journalism and marketing and communication services before working as a project manager for an initiative of the Namibia Employers’ Federation and GIZ, the German international development company. She then focused on strategy and business consulting before joining Bank Windhoek Holdings where she became head of corporate strategy and sustainability in 2014. She was appointed as Head of Strategy and Transformation at Nedbank Namibia at the start of 2016 and as Executive – Strategy and Human capital in March.

Dr Edward Turner

Executive: Corporate Investment Banking Edward is a chartered accountant – CA (SA) and CA (Nam) – and has 18 years experience in commercial banking, life insurance, and auditing, tax and accounting. Before joining Nedbank Namibia in 2016, Edward held the position of Managing Partner at PKF (Namibia), registered accountants and auditors, and other positions as audit partner and audit manager in South Africa. Edward worked at BoE Bank from 1999 until 2002 where he gained extensive experience in commercial / corporate banking. He is a graduate of Stellenbosch University – he holds a doctorate in theology – and the University of South Africa where he gained a B.Compt Hons. Before his move into business, and while studying theology, he was a lecturer, researcher, and pastor.

Executive Committee

Advocate Sumari Von Künow

Chief Risk Officer Sumari has extensive experience as a legal practitioner, having practised at renowned legal firms in Stellenbosch, South Africa, and Namibia since 2003. An LLB and BA(law) graduate of the University of Stellenbosch, she passed the qualifying examinations for legal practitioners in Namibia in 2005. In addition she has completed a range of courses in compliance management, anti-money laundering and board governance. Her first position at Nedbank Namibia was as compliance officer in 2005. She joined the Society of Advocates in Namibia in 2010 and in 2012 was appointed as Head: Compliance at Standard Bank Namibia. She rejoined Nedbank Namibia in April 2013 as Head: Legal and was appointed as Executive: Legal, Governance and compliance in March 2014 before becoming Chief Risk Officer with effect from 2016.




Chairman’s Report

After five years of sustained high-level growth, Namibia hit a not unexpected bump in the road in 2016. According to the Bank of Namibia, economic growth more than halved to 2,5% from 5,3% in 2015. This setback was attributed mainly to a decline in construction and diamond mining, coupled with fiscal consolidation in the public sector, and could not be offset by improvements in uranium mining and a lesser contraction in an agricultural sector seeking to recover from drought.

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Given the context of the slowdown, the board views the group’s performance in the circumstances as satisfactory. Aside from the business growth in a difficult environment, the board was particularly pleased to note optimisation of the new core banking system at Nedbank Namibia and the improvement in the staff climate and culture and in union relationships. The business progress which is detailed on the following pages in reviews from the managing director and chief financial officer was built on increased contributions from the main subsidiaries, Nedbank Namibia and NedNamibia Life Assurance Company (Nedlife).

These were achieved in a year which saw a prolonging of the drought and water crisis, continuing high unemployment, declining public revenue due to contraction in Customs Union receipts and declining international reserves. The weakness of the Namibian dollar, in line with the South African rand, exerted inflationary pressure. Despite tight monetary policy to contain rising credit, an increase in the repo rate to 7%, and, in contrast, benefits of lower global oil prices, inflation breached the upper end of the 3-6% range before stabilising around 6,7% by year-end.

The country’s fragile ecosystem continued to bend in the face of the drought. It was reported more than 700 000 people, most of them in rural areas, were in need of direct food assistance. Apart from affecting agriculture, the water shortages also posed challenges to construction, the beverages sector and meat processing. Urbanisation continued to accelerate at a higher rate than population growth of 3,5% and to lead to a mushrooming of informal settlements in urban areas. Surveys put the number of unemployed at 280 000 – about 28% of the labour force.

While development plans have helped ensure a stable macro-economic environment, economic growth and development have not resulted in sufficient job creation and there have been calls for greater vigour to be applied to these development plans.

In contrast, and as dealt with more fully in the accompanying report from the chief risk officer, the financial services sector

continued to face the force of a regulatory tsunami. Aside from the requirements of the Basel III framework on banks’ capital adequacy, stress testing and market liquidity risk, pressure for ever more complex regulatory compliance increased and the weight of a zero tolerance stance along with penalties continued to demand more management scrutiny and to impact on industry margins. The professional and transparent relationship enjoyed with the regulators was maintained through the group’s governance and compliance function as custodians of this relationship and was evident from industry discussions and liaison with the Bank of Namibia regarding Nedbank Namibia and the Namibian Financial Institutions Supervisory Authority regarding Nedlife and the NedPlan brokerage.

An important issue under consideration with our parent group centres on increased Namibian ownership within our group. While an initial 11% interest was acquired by BEE holders in line with provisions of the Financial Services Charter, an increase in holding is contemplated as part of the regulatory focus on localisation. This focus also extends to the core banking system at Nedbank Namibia where full compliance is targeted for mid-2017. Some key steps have put the bank ahead of this target.

Along with the successful upgrade of the core banking system and infrastructure, ensuring business continuity – dealing with disaster recovery, premises and operations, and liquidity – was a key focus. Successful technical readiness tests were carried out. To counter the increase in financial crime – specifically cybercrime and fraud and around the management and protection of data – the bank established a dedicated financial crime risk business unit and frameworks in which the unit operates. The bank also enhanced its risk identification process, a key measure being the appointment of divisional risk managers. To better prepare the group and to track proposed and approved changes, a detailed regulatory change programme was established. The corporate governance programme was also reviewed – a review encompassing personnel and divisional structures, terms of reference for committees and their structure, and a gap analysis in respect of the provisions of the King IV code.




An audit review programme was established to ensure risk management is closely engaged with the planning, execution and resolving of audit issues. This has led to greater board audit committee and group Exco oversight of audit issues and a significant improvement of audit results.

Beyond the business, the group extended its involvement in community building and environmental initiatives across Namibia. Details of this involvement – ranging from sporting activity and participation in the Namibian Law Society’s advice open days to impacting the lives of school children in remote areas through the Nedbank Mobile Education Van, a partnership with Rössing Foundation – are given in the accompanying report. This also covers initiatives of the Go Green partnership with the Namibia Nature Foundation and the investment in the Namibian Tourism Expo.

Looking aheadAlthough the regional outlook is unsettled, domestic prospects for 2017 appear a little brighter. Growth is anticipated on the back of a recovery in diamond mining and agriculture. Improved growth is also projected for uranium mining, manufacturing and the transport and communication sectors. Tourism which has the potential to create substantial employment, has shown momentum, with more international flights into Namibia.

Well thought out strategies to take greater market share in banking and to grow wealth and bancassurance activities through a holistic offering are being implemented by management and are already bearing fruit. These strategies recognise that the Group’s growth is also dependent on a committed and motivated team of employees; they thus embrace new initiatives in training and development, talent management, recognition and employee engagement.

Appreciation The continued support and loyalty of our clients, and their warm reception of banking innovation and value added services are greatly valued. We sincerely appreciate the opportunity they give us to partner with them in business and in their financial and social well being.

Our personnel have shown deep commitment and dedication in dealing with the challenges of a demanding year and deserve special commendation for their efforts, particularly in the technology area. We also gratefully acknowledge the contributions of our suppliers and business partners and of many community-minded Namibians in guiding initiatives for sustainable development. We are also pleased to enjoy constructive engagement with the regulatory authorities. I thank my fellow directors for their support and for sharing their wisdom and insight.

Theo FrankChairman

Chairman’s Report




Managing Director’s Review

Our focus within the group in 2016 paid substantial dividends. We developed our client offering by optimising our technology, expanded our retail business, grew our share of the corporate market, notably in property finance through our Corporate Investment Banking unit, opened new markets and channels in our bancassurance and wealth area, and improved our working environment, culture, accessibility and transparency.

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Despite the economic slowdown, we made real progress towards our goals for 2018 of N$500 million in earnings, 20% transactional banking growth, 20% return on equity, 20% market share and an efficiency ratio of 55%. The Genesis programme of change which has as its core the further development of a service culture to deliver optimum performance and productivity added value to our strategy.

The past year brought a milestone in stabilising and optimising our new core banking system as part of our drive to deliver a competitive technology and innovation platform. We were rigorous in making sure the system met business requirements and processes enabled quicker turnarounds. We introduced a very competitive mobile banking solution, including value added services such as electricity purchases across Namibia and topping up of mobile services. We also built a mobile ATM for client convenience at events and revitalised PocketPOS, our chip and pin solution for receiving card payments for mobile businesses.

The response from clients to our mobile banking offering was most encouraging but in recognition of the wider need for service excellence we invested in a powerful management information system to track the business and performance. In matching the bank’s credit appetite to strategic intent, we took advantage of increased mandates and reviewed credit approval structures for better turnaround times and service delivery.

In upgrading infrastructure for the core banking system, we enhanced our client care centre capabilities, up-skilling staff to assist clients on a 24/7 basis. We successfully completed tests for technical readiness for disaster recovery and introduced training to ensure compliance with international frameworks for governance of technology. We showed robust resilience to the increasing scourge of cyber crime and intrusion of ransomware and successfully completed a simulation for liquidity stress testing. We rolled out cards with improved security features to current and savings account clients to use at ATMs around the world. The process to phase out old magnetic strip cards and replace them with higher security chip-and-pin technology was initiated to comply with a Bank of

Namibia requirement for banks’ implementation of this technology by March 2017. This capability is built on the iVeri internet payment gateway which provides the best of breed e-commerce solutions for merchants and is used by acquiring banks in ten countries in Africa. For better record keeping and efficiency in business operations, we implemented a project to scan and store electronically all client documentation.

The challenging and competitive environment in retail and business banking led to pressure on asset growth. The severe slide in vehicle sales affected our asset based finance business but we grew our share of the markets for home and personal loans and noted a pick-up in transactional account growth in the last quarter along with the excellent response to our offering of mobile banking and value added services. There was also a welcome response to new offerings for the youth, seniors and entry-level markets. Our support for the SME market included a training initiative providing education for business owners over a period of six months.

In corporate banking, we increased our capacity under new leadership and focused on cross-selling and utilising our increased credit mandate from our parent group – a mandate which sharpened our competitive edge. The thrust into the property sector yielded record-breaking development finance deals of N$252 million for a residential development, the AmWeinberg Estate in Klein Windhoek, and of N$500 million for The Dunes Mall in Walvis Bay.

Our bancassurance and wealth division, built around NedNamibia Life Assurance Company and the NedPlan brokerage, again showed good growth. Investment income in the life company was sound and premium income was on a par with 2015. Claims increased in line with a bigger book and expenses were slightly up. We invested in our sales capacity, opening new channels and markets beyond Nedbank Namibia, and began training on new products for launch in 2017. We offered added value for employers with a group scheme with a funeral benefit. We improved systems and in line with treating clients fairly and in a friendly manner, reviewed policy wording and adopted more easily understood language.



In the workplace, we recorded a marked improvement in staff rankings of a healthy functioning business, improved union relationships and enhanced our wellness offering to staff. Underscoring these survey results, Nedbank Namibia placed fourth in the Deloitte Best Company to Work For survey. A highlight of our training and development initiatives was the completion by our first class of 22 of a management development programme through the University of Stellenbosch Business School.

As part of our executive road shows, we introduced “Conversations with Lionel”, in which I interview all 750 employees of the group, primarily on how they see their workplace, their community and their aspirations. This has uncovered some special talent and skills – and opportunities for extending our reach in outlying areas.

Looking aheadThe year ahead presents enormous socio-economic challenges for a Namibia beset by drought and a water crisis, high youth unemployment, a potential hangover from this year’s slump, and a knock-on effect from South Africa’s economic woes. The increased uncertainties in the South African economy and possible change in credit ratings of the economy are likely to increase exchange rate volatility with a resultant effect on inflation.

Nonetheless, there is optimism that we can gain more business from further advances on our technology and innovation platform and renewed focus on cross-selling by business units. Our plans for Nedbank Namibia are to build a virtual branch, to use robotics for high volume processing and for further efficiencies, and to analyse data more deeply so we can better understand clients and their needs.

We will leverage these developments and our capabilities in Retail and Business Banking, Corporate Investment Banking, Credit, Treasury and Risk management for growth. Following a review, an enhanced Treasury model will be implemented in 2017, along with up-skilling of staff. The appointment of credit managers in the regions will help Nedbank Namibia benefit from the larger country credit mandate. We will aggressively market our SME client value proposition. A carefully targeted thrust into Northern Namibia is planned under a regional

manager. We aim to forge smart partnerships to grow transactional banking income and to increase retail deposits to improve the funding mix. Our Corporate Investment Banking focus will be on key potential growth sectors, building on our success in property in 2016, increasing market share in the public sector, forging public-private sector partnerships, and growing the number of primary banked clients.

Our goal in wealth and bancassurance is to create a holistic offering to include specialised lending, financial management, risk and portfolio management, fiduciary services, philanthropy, portfolio management/stockbroking and international specialist advisory services. The Group is also looking to enter the short-term insurance market; an application for a licence for a short-term insurance company is awaiting approval.

With our aim of greater client satisfaction, our training and development focus will be on delivering service excellence, extending our graduate and middle management leadership programmes, and creating learning and development efficiencies through training hubs and e-learning. Our progress in the technology arena is such that we are now well positioned to lend further impetus to our marketing efforts and brand positioning.

The year ahead promises to be challenging and exciting.

Thanks My colleagues across the group and I are deeply appreciative of the support and encouragement we have enjoyed from our clients, old and new, this past year. We believe we have upped our game - and that we can do even better. For their collective commitment to service excellence, collaboration, development and innovation, our Group employees are due a very special salute and thank you. I also thank the board for their guidance and support.

Lionel MatthewsManaging director

Managing Director’s Review




Chief Financial Officer’s Report

In the challenging economic environment of 2016, Namibia fared better than its immediate neighbours, Angola and South Africa, where growth was worryingly marginal or flat. The subdued growth in Namibia was evident across multiple key indicators – such as private sector credit extension, vehicle sales, beverage production and government spending.

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The year saw the repo rate increase to 7% and private sector credit extension was more than 5% lower than the 2015 figure. An unexpected drain on the local money market, experienced from August, resulted in a margin squeeze, due to more expensive funding and fierce rivalry among the banks to offer competitive rates.

Against this backdrop, the group nonetheless gained market share in key sectors and improved profitability while maintaining a sound financial position. With the increased contributions from the main subsidiaries, Nedbank Namibia and NedNamibia Life Assurance Company, profit after taxation grew by 10.23% to N$301.1 million. This translated to weighted earnings per ordinary share of 426.42 cents, which represents a 9.77% increase.

Statement of comprehensive income

Interest incomeNet interest income grew by 15.9% to N$682.4 million (2015: N$588.8 million). This was mostly attributable to the increase in loans in advances to clients which grew by 14.5% to N$11.2 billion (2015: N$9.8 billion)

Although advances yields have picked up as prime increased, the pace of this pick-up was not enough to mitigate increases in funding cost, mainly due to wholesale funding reliance, which resulted in a net margin of 4.02%, compared to prior year of 3.98%.

A trend unique to the Namibian market and seen during the second half of 2016 was that Namibian wholesale term funding costs increased significantly above those of the South African market. This effectively wiped out the benefit of higher loans and advances yields during the same cycle. This is specific to the current dynamics in the Namibian market, with liquidity levels reducing as the government cuts spending and draws liquidity and funding from the market in order to boost reserves and reduce state debt levels.

Funding cost increases kept pressure on margins and efforts were stepped up to increase average lending rates through reducing subprime lending on new advances. This proved challenging given increased competition in the market and the slow advances growth.

Impairments

The total impairment charge improved from the prior year to N$41.1 million (2015: N$53.1 million). The credit loss ratio decreased to 0.39% (2015: 0.58%), which is well within the groups risk appetite taking into account our rapid growth strategy and the increasing interest rate cycle.

Non-interest revenueNon-interest revenue was down by 5.9% on the 2015 figure. This was below budgeted levels. After slow growth in transactional accounts gained in the first half of the year, the second half saw a pleasing uptick in these accounts as Namibians responded to the benefits of Nedbank’s core banking system and new services offered through more cost-effective electronic channels.

Margin Analysis

12.00%

10.00%

8.00%

6.00%

4.00%

2.00%

0.00%

Average Margin

4.00% 3.92% 4.04% 3.98% 4.02%

2012 2013 2014 2015 2016

Yielding Assets

Funding Costs4.37% 4.21%4.479%

5.09%

5.82%

8.37%

8.13%8.5%

9.07%9.84%


0.21% 0.19%

0.06%

0.58%

0.39%

Credit Loss Ratio

0.70%

0.60%

0.50%

0.40%

0.30%

0.20%

0.10%

0.00%2012 2013 2014 2015 2016

EPS

500.00

400.00

300.00

200.00

100.00EP

S (

in c

ents

)

226.01283.70

347.70388.46

426.42

2012 2013 2014 2015 2016



The group’s focus on a highly competitive offering to bank clients through electronic channels and on wealth management and insurance products has positioned operations for further growth in non-interest revenue for 2017.

Operating expensesTaking into account the investment in the newly implemented core banking system at Nedbank Namibia, along with the investment across the group in employees and their development, the group managed to contain expenses growth to 11.0%. Without the cost of the system and new information technology capability, expenses growth would have been pegged at 3.1%. Expenses represented 58.0% of total income compared with 56.2% in 2015.

Statement of financial positionLoans and advances to clients grew by 14.5% to N$11.2 billion, thanks to increases in home loans, personal loans and major deals in Corporate Investment Banking. Growth through the year has been ahead of our competitors, which resulted in an increase in our market share in loans and advances to 13.4% (2015: 12.8%)

Deposits increased by 16.5% to N$13.4 billion, this was well above the advances growth of 14.5%. As a result of this a significant total liquid asset buffer was in place throughout the year and at 31 December 2016 this total buffer amounted to N$2.2 billion.

This buffer was maintained in the light of the slower than expected loans and advances growth in 2016 and market liquidity shortages foreseen in the second half of the financial year. The buffer puts the group in good stead to absorb potential shocks to the market’s liquidity levels.

Funding Distribution (N$’000)

Based on the above ratios the group is in a good liquidity position, with long-term funding secured. However, long-term funding comes at a higher cost, which resulted in our margin being stable although we are in a rising interest environment.

The capital adequacy ratio was 14.96% compared to 15.76% at the end of 2015 and well above our internal target range of 12%. The excess ensures we have sufficient capital in place for our rapid growth strategy towards 2020. This however had a negative impact on our current return on average equity after taxation of 14.6% (2015: 15.4%).

The year aheadThe group delivered strong financial results in the muted economic environment of 2016 and is well positioned, with a solidly capitalised balance sheet to step up implementation of the strategy for growth in banking and bancassurance and wealth management and to meet the challenges of 2017 and beyond. The outlook for the year ahead is relatively promising and further gains in market share in key sectors and non-interest revenue, on the back of the enhanced technology and innovation platform, will be aggressively sought.

AppreciationI would like to thank our stakeholders for their support during 2016 and, most of all, our finance teams across the group for their hard work and ongoing commitment in producing outstanding financial reporting.

Karl-Stefan AltmannChief financial officer

Chief Financial Officer’s Report

Non-Interest Revenue to Total Income50.00

40.00

30.00

20.00

10.00

2012 2013 2014 2015 2016

39.80% 41.80% 40.30%37.00%

32.30%

Cost to Total Income

64.20

62.20

58.0058.80

57.50

66.00

64.00

62.00

60.00

58.00

56.00

54.002012 2013 2014 2015 2016

Short-term(0 to 31 days)

Medium-term(2 to 6 months)

Long-term(> 6 months)

December

Funding split %

5 750 782

44.8%

3 782 785

29.5%

3 301 923

25.7%




Chief Risk Officer’s Report

04Managing risk across NedNamibia Holdings Limited‘Risk management is an integral part of our business. We do not seek to avoid risk, but to understand it properly, manage it effectively and evaluate it in the context of the reward that is being earned. Our emphasis is on producing high quality earnings which are sustainable and will ultimately attract a premium rating for the group and protect the interests of shareholders, depositors and all other stakeholders.’




In line with its risk philosophy, NedNamibia Holdings (the group) maintained a stable operational risk environment in 2016 despite an increased inherent operational risk profile. Strong emphasis was placed on the basics of operational risk management, with a focus on both qualitative and quantitative measures.

The restrained economic environment, as illustrated by slow economic growth, combined with pressure on cost reduction, exchange rate fluctuations, low commodity prices, ongoing droughts and pressure to meet targets, will likely increase the exposure to operational risk in 2017.

The top and emerging operational risk themes for 2016 / 2017 relate to the intensifying regulatory environment, information technology / cybersecurity, financial crime, outsourcing / third-party risk and business continuity planning. For the latter two risks, specific ongoing projects are envisaged for finalisation in mid-2017, which will allow for adherence to Nedbank Group minimum requirements and regulatory requirements and for improved risk mitigation.

The focus on the combating of financial crime, amidst ever increasing regulatory pressure, led to the establishment of a financial crime unit, which consists of forensic investigations, business information security and anti-money

laundering (AML), combating financing of terrorism and sanctions teams with superior investigative and monitoring capability. To improve cyber resilience, enhanced risk frameworks are being implemented and more staff appointed.

Ongoing enhancement of the core banking system and improved data quality assist with the management of the AML programme. Transaction threshold reporting to the Financial Intelligence Centre received major attention in 2016. Continued remediation of the Namibian Financial Intelligence Act requirements were balanced with the requirements of Nedbank Group and the South African Financial Intelligence Centre Act which to date remains rules-based whilst Namibia’s Financial Intelligence Act is risk-based. Accounts where identification of clients is outstanding or incomplete continue to be restricted. Significant focus has commenced on upfront sanctions screening and client risk profiling as well as integration of client risk profiling and transactions monitoring. These measures reflect the group’s strong risk culture which is built on best-practice enterprise-wide risk management, a strong ‘tone from the top’ from the managing director, top management and the board and ongoing risk leadership by the chief risk officer. Our approach aligns strategy, policies, people, processes,

technology and business intelligence to measure, evaluate, manage and optimise the opportunities, threats and uncertainties that we face every day as a major financial institution. In this way the group is able to maximise sustainable shareholder value within its defined risk appetite. Embracing risk management as a core competency allows the business to optimise risk-taking and is objective and transparent. This ensures that the business prices for risk appropriately, linking risk to return.

ENTERPRISE-WIDE RISK MANAGEMENT

Operational risk managementOperational risk represents the next frontier in improving shareholder value by optimising the amount of risk to company earnings. Until recently, increasing shareholder value and therefore the value of the company has been approached primarily through performance management and not through the management of operational risk as an enabler.

The group has incorporated sophisticated measurement techniques such as managing for value to increase shareholder value. Operational risk management (ORM) contributes to managing for value by introducing tools and systems designed to improve value by generating improved operational risk management capability.

Regulators, rating agencies, shareholders and other stakeholders are increasingly interested in the group’s risk management as a major contributor to earnings volatility that can affect the value of the bank. Risk management can help influence stakeholder views and contribute to the improvement of controls to avoid stakeholder surprises.

Stakeholder satisfactionAvoiding unexpected losses and improving operational efficiency

Understanding the importance of key operational risks enables management to focus on ways to reduce routine losses and improve efficiency. This also reduces the likelihood of incurring large losses and improves the quality of operational processes.

Efficient use of capital

The business allocates capital based on expected earnings similar to how an investor values a company. The efficient use of capital implies optimising the risk/return trade-off for capital.

One of the Nedbank Group operational risk management framework (ORMF) objectives is to integrate the ORM programme with the benefits of managing risks in the operational risk processes being:



The group operational loss management process is of a centralised nature, allowing for firm validation control as well as a combined overview. In line with the requirements of the ORMF, all single material-loss and near miss events of N$500 000 and above are escalated and reported to Nedbank Group Operational Risk and Data Management (GORDM) within 24 hours, where emphasis is placed on identifying root causes and enhancing mitigating actions.

The group consolidated net operational losses remained within all prescribed

limits and thresholds per the seven Basel II event categories. Events related to the Basel category “execution, delivery and process management (EDPM)”, remained the primary reason for internal losses in terms of frequency and severity.

Enterprise wide risk management framework:Risk management in the group and its subsidiaries is underpinned by our enterprise risk management framework (ERMF).

The ERMF has served the group well and has been resilient through different economic cycles. The organisation has placed a strong reliance on this risk governance framework and the three lines of defence model, which are fundamental to our aspiration to be world class at managing risk.

Collectively there are 17 key risks that make up the risk universe in the ERMF. These risks and their materiality are reassessed, reviewed and challenged regularly by the board and management.


Enable proactive identification of key potential operational risks and assessment of effectiveness of the controls in place to manage these riskswithin defined and acceptable risk tolerance and appetite levels.

KRIs project to initiate and embed the process of continuous monitoring, measurable variables that are correlated with performance, losses or loss variability and track business, risk and control factors where applicable.

Risk and Control Self-Assessment (RCSA) Key Risk Indicators (KRIs)

OPERATIONAL RISK

Internal and External Loss Data (ILD)Actual losses that have taken place within the group.

The management and measurement of operational risk require key elements to be defined and used within the group. The ORMF defines and requires the use of:

Information technology (IT) risk

The risk resulting from system inadequate or system-inappropriate information technology investment, development, implementation, support or capacity with a concomitant negative impact on the achievement of strategic group objectives.

Operational risk The risk of loss resulting from inadequate or failed internal processes, people or systems or from external events. This includes legal risk, but excludes strategic risk and reputational risk.The event types of operational risk are:business disruption and system failures; clients, products and business

practices; damage to physical assets; employment practices and workplace safety; execution, delivery and process management; *external fraud;*internal fraud; legal risk (legal risk is a sub category of the clients, products and business practices); and model risk (for economic capital purposes, model risk is a sub category of clients, products and business practices).

* Measures are in place for the proactive prevention and detection of criminal activities.

Operational risk(continued)



Regulatory risk The risk that the group does not comply with applicable laws and regulations, inter alia, competition law (the risk that competition law is not followed and the risk that relationships with competition authorities are not appropriately managed in the territories where the Group carries on business)

Financial crime risk

Financial crime in relation to the group, means:• Any kind of unlawful conduct, arising

from either common law, any current statutory law or regulation and any conduct which Nedbank deems to be dishonest;

• regardless of whether the group is the victim or perpetrator of such conduct or was used as an instrumentality, or the form it takes; whether committed by act or omission;

• that relates to money or financial services, including any form of market abuse, misconduct in, or misuse of, information relating to a financial market;

• in respect of, or in relation to any goods, products or services (whether corporeal or incorporeal) and includes any systems, technology, data and information required to provide such goods, products or render such services; and

• results in or is likely to result in any harm or loss or potential harm or loss to the Group or its employees, clients and any other stakeholder.

In terms of governance risk, the risk associated with the systems and controls to ensure adequate oversight over the management of a company for the balancing of the interests of all its stakeholders and to ensure responsible and ethical behaviour with a view to achieving the maximum level of efficiency and profitability for a company, on a sustainable basis.

Compliance risk refers to the risk of legal or regulatory sanctions, material financial loss, or loss to reputation the group may suffer as a result of its failure to comply with laws, regulations, rules, related self-regulatory organisation standards, and codes of conduct applicable to its banking and other activities.

Governance and Compliance risk

Reputational risk

The risk of impairment of the group’s image in the community or the long-term trust placed in the group by its shareholders as a result of a variety of factors, such as the group’s performance, strategy execution, brand positioning and competitiveness, ability to create shareholder value, or an activity, action or stance taken by the group. This may result in loss of business and/or legal action.

Credit risk The risk arising from the probability of borrowers and/or counterparties failing to meet their repayment commitments (including accumulated interest) and in particular risks arising from impaired or problem assets and the group’s related impairments, provisions or reserves. It also includes risk arising from exposure to related persons.

Note: Consideration of financial crime risk should take into account all relevant sub-risk categories below.Financial Crime sub-risk categories:• Criminalactivity• Commercial crime • Corruption• Cybercrime• Fraud violent crime• Crime against people• Crime against property• Regulatory contraventions - Money laundering, terrorist financing and sanctions - Market abuse - Privacy and data breaches - Exchange and capital control contraventions - Tax fraud and evasion, Foreign Account

Tax Compliance Act (FATCA)

In terms of accounting risk, the risk of inappropriate accounting information causing suboptimal decisions to be made.

In terms of financial risk, the risk of financial targets and key performance indicators not being met.

In terms of taxation risk, the risk that effective tax planning, co-ordination and strategy, compliance with tax laws and regulations, proactive identification and management of tax risks are not enforced or a poor relationship with revenue authorities exists, resulting in loss and/or missed opportunities.

Accounting, financial and taxation risks

Financial crime risk(continued)



Insurance risk In terms of underwriting risk, the risk of a client being placed in the incorrect risk pool.

In terms of pricing risk, the risk of the level of risk associated with a pool being mispriced.

In terms of non-independence risk, the risk of a single event resulting in claims from multiple clients.

Capital risk The risk that the group will become unable to absorb losses, maintain public confidence and support the competitive growth of the business.

Conduct risk The group’s approach to market conduct is based upon a broad and all-encompassing definition of what constitutes market conduct. That definition is given below:– the bank’s pattern of behaviour in executing

its pricing and promotion strategy– the relationship between the group and

the public in so far as any product or service is concerned

– its response to the realities of, and changes in, the market it serves

– the nature and extent to which the group complies with and meets:

* the laws that govern the group, especially those related to the creation and marketing of products and services

* established best practices, codes of conduct and directives and client expectations and requirements.

– the group’s relationship with regulators– the ethical standards the group adheres

to in conducting its business.

Note: ‘Market Conduct’ includes a reference to ‘Treating Customers Fairly’ and is applicable to all stakeholder engagement.

Liquidity and funding risk

In terms of market - and credit risk, the risk of an excessive concentration of exposure to a single client or group of related clients.

In terms of liquidity risk, the risk of overreliance on funding or liquidity from a single depositor or small group of depositors.

Market risk In terms of market risk in the trading book, the risk of loss as a result of unfavourable changes in market prices, such as foreign exchange rates, interest rates, equity prices, credit spreads and commodity prices.

In terms of market risk in the banking book, the risk of loss in the banking book as a result of unfavourable changes in foreign exchange rates and interest rates.

Transformation risk, social and environmental risks

Concentration risk

Business and strategic (execution) risk

Transformation risk is the risk of failure by the group to adequately, proactively and positively respond to and address transformation issues.

Social risk is the risk of reputational damage, political intervention, heightened regulatory pressure, protests, boycotts and operational stoppages – and ultimately loss of business and profitability – due to the real or perceived negative impact of group business practices on a broad range of matters related to human, societal and community welfare such as health and economic opportunity.

Environmental risk is the risk that an activity or process in the group will degrade, devalue or destabilise the environment and lead to further damage, cause harm to bank employees, cause harm to people in the community/ society or damage the long-term prospects of the group.

In terms of market - and credit risk, the risk of an excessive concentration of exposure to a single client or group of related clients.

In terms of liquidity risk, the risk of overreliance on funding or liquidity from a single depositor or group of depositors.

Business risk is defined as the risk assumed, due to potential changes in general business conditions, such as our competitive market environment, client behaviour and disruptive technological innovation.

Strategic risk is the risk of an adverse impact on capital and earnings, due to business policy decisions (made or not made), changes in the economic environment, deficient or insufficient implementation of decisions, or a failure to adapt to changes in the environment. Strategic risk is either the failure to do the right thing, doing the right thing poorly, or doing the wrong thing.

Execution risk is the risk that a company’s business plans will not be successful when they are put into action or full implementation is not achieved.



Information technology risk

Operational risk

Regulatory risk• Impact of new system implementation on strategic objectives.

• Impact of regulatory change on technology changes.

• Impact on IT risk, due to costs pressures, outsourcing and the need for additional capacities.

• Outsourcing and third party risks.• Process failure caused through design,

non-existence, lack of integration, lack of ownership or validation.

• Skill shortages – increased competition created shortage of skill in some areas.

• Shortage of learning and development programmes.

• In terms of the Basel categories, execution, delivery and process management (EDPM), remained

the primary reason for losses from failed transaction processing or process management, from relations with trade counter parties and vendors in 2016.

Financial crime risk

Business and strategic (execution) risk

Governance and compliance risk

• Governance and compliance risk.• Increased regulatory requirements and

compliance with these.

• Increased changes and restriction in the regulatory environment and associated costs of complying.

• Regulatory zero tolerance stance.• Challenging deadlines.• Possibility of fines, penalties and

reputational risk.

• The increase in cybercrime and financial crime including money laundering.

• Developments in the economy (financial markets, inflation, interest rates, productivity) etc. impact the key business drivers of the organisation.

• Potential impact, due to the threatening credit downgrading in South Africa and Namibia.

• Regulations on restrictions relating to loan-to-value ratios effective March 2017 will have an impact on the business and the market.

The top six risks in the group in 2016/17:

People risk The risk associated with people has a strategic and operational component. People risk encompasses the strategic component, while the operational component is included in operational risk.

People risk is the risk associated with inadequacies in human capital and the management of human resources, policies and processes, resulting in the inability to attract, manage, motivate, develop and retain competent resources and at the same time having a negative impact on the achievement of strategic group objectives.

It includes:• the risk that effective risk-adjusted

performance measurement and indicators are not implemented in the group, resulting in incorrect reward

allocation, failure to optimise the use/allocation of the group’s capital and wrong corporate behaviour resulting in sub-optimal returns;

• the risk that the group fails to motivate staff through the use of inappropriate incentive schemes, or the poor administration of incentive schemes.

• the risk that the group does not ensure that skills and experience are developed, consistently and methodically retained (or capitalised) and enhanced to create value for the group (for example, in the form of innovative product designs, developed systems, methods and procedures); and

• risks arising from or related to inappropriate compensation practices for directors and executive officers.

People risk(continued)



The three lines of defence model is the backbone of the group’s ERMF and places strong emphasis on accountability and responsibility of business management, all supported by appropriate internal control, risk management and governance structures.

The first line of defence comprises focused and informed involvement by the board and Exco, and accountability and responsibility of business supported by appropriate internal control, risk management and governance structures, policies and processes. The managing director, management and staff within the group take ownership for the identification, assessment, management, monitoring and reporting of risks arising within their areas of responsibility. Included in the first line of defence are business risk functions established primarily to monitor the identification, assessment, management, monitoring and reporting of risk arising within their areas of responsibility.

At group level the second line of defence comprises of independent risk monitoring and oversight by Enterprise-wide Risk Management and the Governance and Compliance Division which provide specialist advice, policies and standard setting to the first line of defence.

Third line of defence provides independent objective assurance on the effectiveness of the management of risk across the group. This is provided through the Internal audit, group internal audit and external audit.

Root cause frameworkA root cause framework has been implemented; root cause analysis are conducted on top risks and issues (these include inter alia internal and external audit findings, losses, forensic investigations, compliance monitoring, branch conformance etc.) as per the

framework for NedNamibia Holdings Limited and its subsidiaries. The aim of this approach is to ensure a well-structured group-wide approach to address the cause of the problems rather than merely focusing on the symptoms.

This will ultimately lead to sustainable resolutions to prevent reoccurrences of the same issues in the future. Understanding the true underlying cause of control breakdowns and implementing management actions in direct response will ensure effective resolution of issues, and in so doing, improve the risk and control culture.

Enterprise-wide risk committee (ERCO)The ERCO forms part of the group’s enterprise-wide-risk governance structure. The primary role of ERCO is to monitor the risks and implementation of the risk management frameworks in the group. The committee has a dual reporting line, one into the group risk and capital management committee and the other into the Nedbank Group Rest of Africa ERCO. The managing director is the chairperson of ERCO.

The ERCO focuses on risk monitoring and oversight and the implementation of risk management frameworks and reports to the board and board committees in terms of it. It performs identification, assessment, management, reporting and monitoring of risks.

Enterprise-wide risk management has an independent risk monitoring entity that is independent from business activities taking on risk. The group risk and capital management committee acts as the board’s expert monitor for the universe of risks listed and defined in the group’s ERMF.

POLICY GOVERNANCE

Policy development:A policy is generally developed when a gap

in standards or management has been identified as a result of, for example, new legislation, a change in strategic direction or environment, policy shortcomings or problems identified by an audit or review. This policy guides the development, approval, implementation, management and review of policy in respect of the group’s risk universe, which lists 17 key risks and is contained in the group’s enterprise-wide risk management framework.

Policy approval:Policy approval occurs when the policy is approved and signed-off by the board.

ERM guides the policy through the prescribed policy approval process, i.e. submission to the group ERCO, group risk and capital management committee, group audit committee, group REMCO, and board.

Policy implementation:A new policy must be supported by a demonstrable implementation process.

Policy management:Policies are managed through the central policy repository by the policy custodians (ERM) and are incorporated in a policy matrix to ensure that all policy documents can be related to the various areas of responsibility and to target audiences. This can also facilitate the elimination of duplication or gaps in policy coverage.

Policy review:Annual reviews serve as a guideline, but reviews must be done on a regular basis.The status of policies and their implementation is monitored by the group enterprise risk committee (ERCO) throughout the group.

Corporate and business governance:Reviews were conducted of all the board, subsidiary board and business committee charters.



The following principles were taken into consideration and incorporated:• AlignmentwithTheNamCode/KingIII

principles.• Alignmentwiththeboardapproved

mandate of powers to the managing director and executive team cascading down to powers and authorities level.

• AlignmentwithNedbankGroupcharters.

King IV will be considered in the 2017 review of corporate and business governance charters.

Risk philosophyIn support of its vision to be “world-class at managing risk”, the group will advance its risk philosophy by creating an appropriate environment for risks to be managed and objectives to be achieved. The group approaches risk on three core fundamentals; risk as opportunity, risk as a threat and risk as uncertainty.

Risk cultureThe group promotes a risk-awareness culture that creates an awareness, recognition and understanding of the value of risk identification, measurement, management, monitoring and reporting as part of daily business activities. Such risk culture is founded on the group’s risk philosophy and risk appetite and reflects the shared mind-set, values, beliefs and practices that support how the group manages risk on a day-to-day basis. A culture of risk awareness is embedded where all employees are responsible for managing risk as part of their day-to-day business activities.

Risk appetiteThe board sets the group’s risk appetite for individual ERMF risks. Risk appetite is expressed both quantitatively and qualitatively.

To ensure that its target levels of capital are comprehensive and relevant to its current operating environment and provide for unexpected events, the group has a process that analyses its current and future capital requirements in relation to its strategic objectives and states capital adequacy objectives and limits with respect to all ERMF risks. The process considers the quantitative and qualitative aspects of the group’s risk appetite.

GOVERNANCE AND COMPLIANCE

EthicsThe board-approved code of conduct and ethics is based on company values and requires directors along with all staff to file an annual declaration of outside interests. This year, the ethics office received 100% submission of annual declarations which require disclosure of any changes to outside interests, as well as conflicts of interests, as they arise. Directors along with all staff also sign personal account trading policy (PATP) acknowledgements and declarations; the ethics office also received 100% submission for the PATP acknowledgements and declarations.

The mission of the ethics office is to provide guidance and clarity on the code of ethics and the organisational policies and procedures, and to provide advice and action in the case of a potential ethical dilemma or breach.

The ethics office reports on ethics training statistics, declarations of outside interests as well as gift declarations to the board and the executive committee throughout the year. Ethics awareness sessions were held in Windhoek, Walvis Bay and Northern Namibia. A total of 87 percent of staff attended the ethics awareness sessions this year.

During 2016, ethics officers attained the ethics officer accreditation from the Ethics Institute of South Africa. This certified them to conduct awareness training sessions and investigations. They will also have the necessary knowledge and skill to work with the Nedbank Group ethics officer in designing an appropriate ethics programme for the group, once the ethics risk assessment for Namibia has been conducted.

Human rightsA human rights specialist within group enterprise governance and compliance conducted human rights awareness sessions for group management. The presentation focused on responsible business practices, which Nedbank endeavours to uphold in the group; on what Nedbank has done in terms of human rights in business; on United Nations global compact guiding principles on human rights in business; and our strategy. Discussions were also held regarding the Nedbank Group human rights in business policy, Nedbank Group human rights statement and Nedbank Group conflict mineral statement. Corporate responsibility to eliminate the sale of children and due diligence Nedbank can assume in terms of staff and procurement/tenders were also covered.

Nedbank is committed to supporting human rights as we view ourselves as a role model and a responsible corporate citizen working together for a better future for all, in our endeavour to be Africa’s most admired bank.

Nedbank Namibia is currently customising the framework to implement in-country. The human rights in business project will be implemented in 2017. As part of the implementation Nedbank Namibia was


required to complete a human rights compliance assessment. The aim of the exercise is to use the completed surveys to form a first group view to work from for future initiatives in human rights.

Regulatory changesBanks are still scrambling to comprehend the wave of new regulations triggered by the US Dodd-Frank Wall Street Reform and Consumer Protection Act and the residual effects of the economic downturn. As regulators sought to address the fundamental shortcomings that ultimately led to the global financial crisis, legislative change emanated at a global, regional and national level, covering structural reform, capital and liquidity, culture, market structures and accountability.

Furthermore, due to the rise of terrorism, geo-political tensions, cyber-crime, mobile phone banking and increasing non-traditional entrants into the banking sphere, the trend in compliance is leaning towards increased regulation, increased investment into information technology security, enhancement of localised capacity for customer support, heightened capital reserve requirements and skepticism towards ultra-sophisticated financial instruments.

The Bank of Namibia has been focusing on IT security inter alia through the Banking Institutions Act Determination 30 (information security for banking institutions) and Banking Institutions Act Determination 19 (localisation of core banking systems). The advanced Basel III approaches for credit, operational and market risk is also receiving attention in Namibia as driven by the central bank.

Namibia has a small population compared to other economies, which

presents an opportunity for efficient regulation of the sector. The global regulatory trends are nonetheless being imposed on an international scale with laws relating to privacy, money laundering, capital reserves, bribery and corruption, sanctions and terrorism all having a bearing on the regulatory environment. Nedbank Namibia implemented the reporting requirements for the Foreign Account Tax Compliance Act (FATCA) (US legislation) during 2016 and continues to comply with the FATCA requirements.

Moreover from a governance point of view, it has become a non-negotiable for boards and executives to have not only an eye towards profits, but also sustainability of the environment, society and the enterprise as a whole as has come to the fore in the latest King IV Report published on 1 November 2016.

Banks play an important role in building stakeholder trust across society, and as a result regulators globally have increasingly identified areas to increase compliance and governance standards as a significant risk-mitigating standardised practice to avoid banking failures. Consequently, increased laws and regulations are surrounding banks and Namibia is no different. The promulgation of regulations on unfair terms in contracts with customers is awaited while regulations imposing loan-to-value restrictions on customers buying non- primary residences have been promulgated. The Credit Agreements Amendment Act took effect in June 2016, requiring 10% deposit from customers buying a vehicle in terms of an instalment or lease agreement.

The Namibian legislature has recently focused on regulatory restrictions

dealing with acquisition of land by inter alia non-nationals, through the Local Authorities Amendment Bill, Regional Council Bill and the Land Bill of 2016. The Namibian Investment Promotion Act aims to promote sustainable economic development and growth through the mobilisation and attraction of domestic and foreign investments, but the Act also imposes restrictions by reservation of certain economic sections and business activities to certain categories of investors.The National Equitable Economic Empowerment Framework (NEEEF) provides for the establishment of an Economic Empowerment Advisory Council and Commission aimed at implementing a framework to address government’s approach to redressing the social, economic and educational imbalances in Namibian society arising from discriminatory laws and/or practices. Views of Namibians on NEEEF have been combined in a report and submitted to the Prime Minister to consider and decide on the way forward.

Adv. Sumari von KunowChief risk officer




This is how we’re giving back to Namibia.

we are helping Build a SucceSSful namiBia




Sustainability Report


Contents

Sports

Education

Entrepreneurship

Community development

Environment

42

44

45

47

48


We are supporting sports.Sports development and the promotion of a healthy, active lifestyle is a cornerstone of Nedbank’s community development programmes. It is well documented that sports development plays a crucial role in health and societal development, and as such brings about social cohesion. In addition, it provides a platform for the identification of potential talent for further development by national sporting institutions.



SPORTS

Cycling Nedbank continues to uplift and bring about a new standard of sportsmanship to the cycling discipline. By supporting cycling development, Nedbank has helped grow cycling in Namibia. The achievements of the discipline is reflected by the participation of three Namibian nationals who qualified for the 2016 Rio Olympics.

Nedbank celebrated the 30th Annual Nedbank Cycle Challenge in 2016, bringing together more than 2 000 cyclists who had the opportunity to conquer the city or bush in the road cycle challenge and mountain bike challenge.

Nedbank makes the Namibian cycling seasonal calendar possible, by supporting the ever popular Road Cycle Club, Windhoek Pedal Power and the Mountain Bike Club, Rock and Rut. The cycling clubs offer seasonal cycling events for our growing, enthusiastic cycling community throughout the year.

Nedbank also supported the Namibian Cycling Federation’s 2016 MTB XCO Nationals, which proved to be an exciting experience for both riders and spectators.

The Nedbank Desert DashWe started the year with the biggest cycling event in the country, the Nedbank Cycle Challenge and ended with an internationally acclaimed, iconic 24-hour cycling event that leads cyclists from Windhoek, across a stretch of 369 km through the world’s oldest desert to the Atlantic coast.

The Nedbank Desert Dash continues to grow in popularity, with just over a 1 000 entries for 2016. The Desert Dash saw over 21 nationals participating, mainly from our neighbouring South Africa with 280 entrants, as well as 33 German nationals, 13 British nationals and 750 Namibian nationals.

The Nedbank commitment to cycling is an excellent example of what is possible with targeted funding and working with the right partners to develop the sport to achieving an ever higher professional form.

Football In 2016 Nedbank Namibia partnered with the Namibian Daily Newspaper and The Ministry of Youth and Sports to bring Namibians the 16th edition of the Namibia Newspaper Cup.

The Newspaper Cup is made up of group stages. The final knockout stage of the tournament in 2016 took place in the Okavango Region.

Nedbank Namibia’s support of the celebrated Namibian Newspaper cup goes a long way towards creating a platform for talent scouting opportunities for youth that have the potential to feed into our National Football clubs in the future. Nedbank Namibia has awarded N$500 000 to the football tournament.

The appeal of the Newspaper Cup is that it is hosted annually in different regions, exposing participants to different cultures and new learning experiences.





We are embracing education.Education remains a prime ingredient in providing access to employment, economic prosperity, improved quality of life, personal fulfilment and growth of all Namibia’s people. As a Namibian bank with the interest of Namibians at heart, Nedbank Namibia embraces our obligation in this regard.


Mobile Van Laboratory Outreach ProgrammeIn 2015 Nedbank partnered with the Rössing Foundation to bring the Educational Mobile Van to Namibian rural communities. Through the Mobile Van Laboratory Outreach Programme, Nedbank is transforming the lives of Namibian learners and teachers in the remote parts of the country by ‘Making Education Happen’ in partnership with the Rössing Foundation and the Ministry of Education.

The mobile laboratory concept was initiated to provide

teaching and learning opportunities to schools with inadequate or no teaching and learning resources. The overarching purpose is to coach and mentor, and where applicable, strengthen the capacity of teachers in classroom practices, subject content knowledge and material development skills.

Some of the schools that have benefitted from this initiative in 2016 include Gustav Kandjii Senior Secondary in the Omaheke region, Vooruitsig Combined in the Hardap region,

Elia Weyulu Combined in the Ohangwena region, Oneshikuvu Primary in the Oshikoto region and Ombuumbuu Combined in the Omusati region In total the programme has reached 33 schools and engaged with over 5 000 learners.

Old Mutual NedNamibia Bursaries By providing opportunities for educational development, the Old Mutual NedNamibia Education Trust contributes to the social upliftment of previously disadvantaged Namibians. It is our intention

that through this initiative Namibians will be able to experience the advancement that education can bring.

The Old Mutual NedNamibia Bursaries for 2016 were awarded to 10 students, who will be pursuing their studies in fields such as science, veterinary science, accounting, engineering, agriculture, actuarial science, biomedical science and information technology. Students studying abroad receive N$50 000 per year and the students studying locally receive N$35 000 annually.



EDUCATION

ENTREPRENEURSHIP

Back row: From left to right: Ireneus Bongi, Brenton David, Rubi Haradoes, Lizani Haufiku, Mutwa Maiba, Ndahekelekwa Paulus, Panduleni Angula and Panduleni Ndengu. Absent: David Haimbodi and Sofia HashipalaFront row: From left to right: Mr Tarah Shaanika, Chairperson of the Old Mutual NedNamibia Education Trust; Ms Priscilla Husslemann, Head: Operational Effectiveness, Nedbank Namibia; Dr Itah Kandjii-Murangi, Honorable Minister of Higher Education, Training and Innovation; and Mr Ndangi Katoma, Executive: Marketing, Transformation and Customer Strategy, Old Mutual.

The social and economic initiatives supported by Nedbank are integrated to meet the development needs of the communities we work in. The aim is to create an enabling environment that supports the growth of a sustainable entrepreneurial culture that uplifts Namibian communities.

Nedbank SME Mentorship Programme In Namibia and many other African countries, entrepreneurs and small business owners face a number of challenges in running successful businesses, with research revealing a lack of business and/or financial acumen as the biggest cause

of business failure. With regard to this, Nedbank encourages the establishment of a holistic approach in terms of the service offering by financial institutions to small businesses, which not only focuses on fulfilling the banking and funding needs of small businesses, but also on ensuring that they are sustainable by empowering the entrepreneurs with crucial skills and competencies through strategic initiatives and partnerships.

2016 saw the launch of our new business banking offering for Small and Medium Enterprises (SME). In conjunction with this new banking product, an SME

Mentorship Programme was developed in partnership with Namibian businesswoman and Nedbank SME Ambassador, Twapewa Kadhikwa.

Twapewa Kadhikwa heads the mentorship classes that are hosted over the course of six months, using the accredited ‘Introduction to Entrepreneurship SME Business Tool Kit’ that was developed in association with the SADC Chambers of Commerce and Industry. The unique programme offers participants theoretical knowledge and real-life experiences from Namibian SME business owners. Twapewa Kadhikwa,

Nedbank SME Ambassador.



We are working together for change.To bring about the change we want to see for Namibians, we partner and collaborate with organisations and individuals working to alleviate poverty and improve the lives of all Namibians.


ENTREPRENEURSHIP continued

Nedbank Kapana Cookoff The entries and popularity of the Kapana Cookoff has grown since it was first introduced to the Namibian community in 2014. Grilling meat over coal is part of the fabric of Namibian life and as Kapana has assumed national stature of late so has the Nedbank Kapana Cookoff.

Nedbank especially admires the entrepreneurial spirit of the Kapana vendors, which in some cases requires extreme innovation and a drive to make things happen regardless of circumstance. The Kapana Cookoff is continuing to inspire and celebrate the Namibian spirit of togetherness, as the cookoff brings people from all walks of life together.

Nedbank understands the contribution of micro-businesses

that the Kapana vendors bring to the economy and more directly to Namibian livelihoods. The competition has a strong socio-economic element to it, and every year it inspires vendors to show off and develop their creative culinary skills. This is exactly what Triphania Hamunyela did to win the 2016 Kapana Cookoff. In an interview, Hamunyela shared these sentiments with Nedbank: ‘Winning the 2016 Nedbank Kapana Cookoff competition has changed my life and the N$15 000 prize money will enable me to achieve other goals that I have set for myself, including expanding my clothing business and buying new stock.’

Tourism Expo and Motor Show ExpoThe Namibian Tourism and Motor Show Expo (NTE) is a business platform that brings together, local, regional and international exhibitors and vendors. Over the last two years the NTE has drawn

over 20 000 visitors and continues to grow, with the Expo having become an anticipated event showcasing the latest services and products from the tourism, hospitalityand motor industry.

Through the NTE, we create an important business networking platform for Namibians. The value and success of this event reflects in the ever-increasing crowds and excitement that it continues to bring the Namibian and regional business calendar.

The development of the agricultural sector forms part of Namibia’s vision 2030, as food security in the face of climate change has become increasingly important, especially in terms of how we sustainably adapt our farming methods.

COMMUNITYDEVELOPMENT Food processing mechanised Sub-Saharan Africa lags behind in terms of farm mechanisation, leading to low productivity of crop land. There is also a high rate of urbanisation where the younger generations leave villages in search of work in the nearest town or cities. This leaves the elders to work the crop land. It has been reported that 60% of power on substance farms is still provided by muscle; statistically, this is done mostly by elders, women and children who are left in the villages.

The donation of the hammer mill machine to the village of Mbambazi in Katima Mulilo is one small link that will make a substantial difference to the village. The hammer mill machine will allow for faster Mahangu processing, reducing food waste and making the workload lighter for the elders and women in the village. This

one link in their food supply chain will make a significant difference to their lives. In addition to the hammer mill machine, in 2017 the village will also be receiving conservation agriculture training. Through this training farmers will learn how to farm sustainably and adapt to the current changing climatic conditions, such as the variable precipitation patterns and longer occurring drought and or dry spell periods that Namibia has been experiencing. The alleviation of poverty in Namibia can be achieved by working together to bring about an impactful change. To bring about the change we want to see for Namibians, Nedbank recognises that the drive lies not with one entity or institution, but should be done with collaborative partnerships.

Dibasen Homeless Committee of KatuturaIn 2016 Nedbank partnered with Maria Dax and the Kavango

Build Together Programme to assist the Dibasen Homeless Committee. Nedbank provided seed funding to the committee to enable them to start their housing construction project. The project is still ongoing, with 60% of the construction of 27 houses almost complete. The committee is made up of 27 female-headed homes who started the project in 2007, gaining first municipal land rights and working steadily on getting their plots serviced.

The Dibasen Homeless Committee showcases what is possible when a small group of people who join hands and work towards a goal to uplift themselves. Supporting the driven Dibasen Homeless Committee and working together to improve and bring dignity to their living conditions forms part of our corporate social responsibility.





We are acting for a sustainable future.At Nedbank Namibia we act to help conserve and develop Namibia’s natural resources as well as support individuals and organisations in Namibia working towards a more sustainable future.




ENVIRONMENT

Nedbank established the Go Green Fund in 2001, because we understand that by supporting conservation programmes such as the ones sponsored through our vehicle and home loan products, we are indirectly ensuring that natural assets can deliver their full economic, social and environmental potential. The partnership between Nedbank and our Go Green Fund managing partner, Namibia Nature Foundation, serves as a good example of how civil society and the private sector can work together to make a meaningful contribution to conservation efforts in Namibia. Through our Go Green Fund, Namibia Nature Foundation and Nedbank are increasing public awareness and the case for conserving our precious resources for future generations. With the help of our valued clients, in 2016, Nedbank supported the following conservation efforts:

Khomas Environmental Education Programme (KEEP)Awarded N$80 000KEEP is a targeted environmental education programme for primary school students in the Khomas Region.

The programme is in line with international trends in environmental education, specifically in Education for Sustainable Development (ESD), and contributes directly to the UNESCO Global Action Programme (GAP). Linked to the national curriculum, KEEP addresses the relevant Namibian policies and provides practical knowhow. KEEP seeks to

develop and maintain an ongoing relationship with schools in the Khomas Region by identifying those who view environmental education as a valuable component of their annual school calendar. The hope is to promote environmental learning and critical environmental thinking in primary school students in the region and to equip educators and students with the skills to take action to live more sustainably leading, ultimately, to improved living conditions. Additionally, KEEP seeks to empower young Namibians by offering internships, volunteerism and employment opportunities as facilitators in the field of environmental education and gaining important practical experience in the workplace.

Namibia Protected Landscape Conservation Areas (NAM-PLACE) Awarded N$167 160 The GGF awarded the NAM-PLACE project, N$167 160 to conduct a study of the population densities, movement patterns and land uses of Oryx, Springbok and mountain Zebra in and around the Greater Sossusvlei-Namib Landscape.

Namib Desert Environmental Education Trust Awarded N$150 000 The Go Green Fund is a co-sponsor of the Namib Desert Environmental Education Trust (NaDEET) education programme. A total of N$150 000 has been dedicated to the three-year programme, which is in its second year and has enabled the schools to make visits to

NaDEET Centre a part of their annual calendar. This year the Nedbank Go Green Fund has aided 86 less fortunate school pupils from two schools to attend the NaDEET environmental education programme. NaDEET Centre offers comprehensive environmental education programmes that are closely tied to the Namibian school curriculum programme. It is this invaluable experience that contributes to a well-rounded education of Namibia’s children. Participating schools have experienced the value the programme adds to pupils, making schools revisit the centre. For example, Origo Primary School attended the NaDEET programme for the second time and Ruimte Primary School visited the centre for the fifth time, proving the worth that schools are placing on the practical environmental education programme.

The programme’s aim is in line with the Nedbank Go Green Fund, managed in partnership with Namibia Nature Foundation, in that it aims to support conservation through environmental education for schools. This will aid in protecting the natural environment through improved access to environmental education, and increased knowledge, understanding and awareness of environmental problems and solutions.

During the week-long visit pupils explore Namibian and global environmental problems focusing on energy, water, waste and biodiversity.

The students get to do more than discuss the issues. Through practical solutions taught at the centre they get to learn different ways in which one can play a role to counteract these problems. All of these activities and new information which learners are exposed to have a profound impact on them. By the end of the week learners become aware of their impact on the environment, and realising that it is up to them to improve the environment.

Viktoria Keding, the founder and director of NaDEET remarked, ‘To reach the Sustainable Development Goals, we need to make Education for Sustainable Development a part of every classroom nationwide. Field trips to a place like NaDEET Centre, as a working model of sustainability, spurs responsible environmental behaviour’.




ENVIRONMENT

Dolphin Project at Walvis Bay. Awarded N$96 400The Namibian Dolphin Project (NDP) began in 2008 with a pilot study of the conservation status of coastal dolphins of Walvis Bay. This initial study period generated novel information on the diversity of whale and dolphin species occurring in the area and highlighted the small size of the population of bottlenose dolphins using Walvis Bay (less than 100 individuals) as well as the high level of marine tourism which focuses on these animals. Building on these initial findings the scope of the Namibian Dolphin Project (NDP)’s research and activities has grown considerably since 2008, with substantial support from the Nedbank Go Green Fund for three different projects over the years.

The Go Green Fund allowed the NDP to continue it’s work in Walvis Bay in 2009-2011 to generate longer-term information on the populations of dolphins and whales in the area as well as get a better understanding of the human impacts on the ecosystem. This research showed that the number of bottlenose dolphins using Walvis Bay fluctuates over the year, with only a subset of about a quarter of the population using the bay in summer months, when oceanic

upwelling slows and food becomes more scarce along the coast. The entire bottlenose dolphin population uses the bay at least some of the time over the winter months. Analysis of how dolphins were using the bay also allowed the NDP to identify key resting habitat along the Long Beach coastline and to work with the Marine Tourism Industry of Namibia (MTAN) to minimise their impact in this area to allow it to act as a sanctuary for the animals.

Between 2012 and 2014 the NDP expanded their research activities to the Luderitz area to work with the Ministry of Fisheries and Marine Resources to investigate the capacity of the newly declared Namibian Islands Marine Protected Area (NIMPA) to protect whale and dolphin populations as well as the sea birds which are its primary focus. Together the NDP and MFMR pioneered the use of a combination of visual and acoustic survey techniques in southern Africa, by using a towed-hydrophone array to survey night and day and through both good and poor weather in NIMPA to search for dolphins and whales. This work has allowed NDP to describe the key habitat used by both large filter-feeding baleen whales and the smaller fish-eating dolphins within and outside the NIMPA and how it relates to the strong oceanic upwelling of nutrients which occurs here.

The Cheetah Conservation Fund. Awarded N$147 055 The fund worked to determine the density and human-carnivore conflict areas for cheetah (Acinonyx jubatus) and other key large carnivores across the Greater Waterberg Landscape.

The current distribution and densities of key carnivore species, including the African wild dog and cheetah, across the Greater Waterberg Landscape in Namibia is unknown. However, previous studies have shown that high level of retaliation killing of carnivores due to livestock loss is occurring across the GWL. Therefore, this project aims to use remote camera traps to determine large carnivore presence and densities across the GWL. The fund also worked to establish if the land use type and/or other environmental variables are influencing carnivore densities in the region. In addition to verifying carnivore presence the project aims to go further by quantify the level and spatial distribution of human-carnivore conflict that is taking place across the GWL. By mapping these conflict zones, resources can be targeted to these key areas through education of mitigation methods, which in turn reduces the level of human-carnivore conflict in this area, to secure the future of large carnivores across the

GWL. The fund also worked to create a comprehensive species list which will be shared with the relevant government departments, conservation non-governmental organisations, conservancy management and their respective communities, the Large Carnivore Management Association of Namibia, and relevant international organisations, for example the International Union for Conservation of Nature, where applicable.

Namibian Environment and Wildlife Society (NEWS). Awarded N$50 000Roan News is the bi-annual magazine of the Namibian Environment and Wildlife Society (NEWS). The magazine carries content on interesting environmental aspects which include articles on research projects, environmental impact assessments and environmental problems as well as general wildlife news in Namibia.



52 2016 GROUP ANNUAL FINANCIAL STATEMENTS|



Contents

Group annual financial statements

Value added statement

Corporate governance and compliance report

Corporate governance structure

Directors’ responsibility

Statutory actuary’s report

Independent auditor’s report

Report of the directors

Consolidated statement of financial position

Consolidated statement of comprehensive income

Consolidated statement of changes in equity

Consolidated statement of cash flows

Notes to the consolidated annual financial statements

52

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Group AnnualFinancial Statements



For the year ended 31 December 2016

Value AddedStatement

2016 2015 N$’000 % N$’000 %

VALUE ADDEDValue added is the wealth created by NedNamibia Holdings Limited through the provision of services to clients Interest income and non-interest revenue 1 709 215 1 475 164 Interest paid and other expenditure 974 602 808 203

734 613 666 961

VALUE ALLOCATED Employees Salaries, wages and other benefits 254 661 35% 233 881 35% Government Direct and Indirect Tax 146 357 20% 130 459 20% Shareholders Dividends – 0% – 0% Retentions for expansion and growth 333 595 45% 302 621 45%

Retained income 301 090 273 140 Depreciation 32 505 29 481

734 613 100% 666 961 100%

VALUE ADDED 2016 VALUE ADDED 2015

Employees 35%Government 20%Shareholders 0%Retentions for expansion & growth 45%

Employees 35%Government 20%Shareholders 0%Retentions for expansion & growth 45%


CORPORATE GOVERNANCE STRATEGY

The NedNamibia Holdings group (“the group”) understands the important role good governance plays in the running of a strong, successful and legally compliant organisation and that good governance not only supports the day-to-day running of the organisation, but it also provides a means of building public trust and confidence.

The group, as part of Nedbank Group Limited, is committed to good governance and compliance with recognised best-practice codes and legislation. We believe that our conduct should be underscored by sound governance principles characterised by discipline, integrity, transparency, responsibility (including social responsibility), accountability and a values-driven approach to everything we do, to promote the interest of all stakeholders. Corporate governance means abiding by principles and structures that enable us to facilitate and foster good relationships between the board, shareholders, stakeholders and employees and facilitating collaboration between our clients and their business partners.

The group applies the corporate governance code for Namibia, called “The NamCode”, which is based on the principles contained in King III and other international best practices, but adapted to suit the Namibian legislative landscape and is based on an “apply or explain” basis. This is in line with the aspirations of our parent company, Nedbank Group Limited, which in 2016 has applied the principles of King III. Since corporate governance is an evolving subject, the King IV Report on Corporate Governance for South Africa 2016, has been released in November 2016 and is effective in South Africa for financial years commencing from 1 April 2017. The group – as part of the Nedbank Group Limited – will benchmark the principles and recommended practices contained in King IV against The NamCode.

The board annually assesses and documents whether the process of corporate governance implemented by the group successfully achieves the objectives, measured as part of the Regulation 39(18) and 40 reports on the state of corporate governance in the group, as prepared and submitted to the South African Reserve Bank, in accordance with the South African Banks Act requirement.

The Group Directors’ Affairs Committee (“GDAC”) monitors corporate governance quarterly to ensure that it complies with best practice, the regulatory- and legal- requirements as well as the corporate governance principles stipulated in The NamCode.

BOARD OF DIRECTORS

The boards of NedNamibia Holdings Limited (“NNH” ) and Nedbank Namibia Limited (“NBN”) comprise the same members, i.e. two executive-, two non-executive- and six independent non-executive directors. The boards’ diversity and demographic mix comprise six white and four black directors. To the date of this report, the board comprised the following members, classified in terms of The NamCode definition around independence:

INDEPENDENT NON-EXECUTIVE DIRECTORS (6)– Frank Theo J (Chairperson)– Hibbit Peter CW– Hiwilepo Trophimus T– Muatunga Liina M (Mrs)– Niddrie Richard P– Schimming-Chase Afra R (Ms)

NON-EXECUTIVE DIRECTORS (2)– Buchholz Richard WR– Du Plessis Adriaan J

EXECUTIVE DIRECTORS (2)– Matthews Lionel J (Managing Director)– Altmann Karl-Stefan (Chief Financial Officer)

The profiles of the members of the board can be found on page 10 of this annual report.

Both boards are chaired by the same independent non-executive director. There is a clear distinction between the roles of the chairperson of the board, Mr Theo Frank, and the Managing Director, Mr. Lionel Matthews, who is in charge of the day-to-day operations and executive management. At the same time the board and executive management work closely together in determining the strategic objectives of the group. The board is of the view that the non-executive directors all have a high degree of integrity and credibility and the strong independent composition of the board provides for independent and objective input into the decision making process, thereby ensuring that no one director holds unfettered decision making powers.

The directors come from diverse backgrounds and bring to the board a wide range of experience in commerce, industry and banking.

The changes that occurred to the NNH board during the period under review are reported in the Directors’ Report on page 83 of this report. The Chief Financial Officer, Mr. Karl-Stefan Altmann has been appointed to both the NNH and NBN boards. Resultantly, the composition of both boards became compliant with the principles of The NamCode, in terms of which a minimum of two executive directors should be appointed to the board, being the Chief Executive Officer and the director responsible for the Finance function.

A board continuity programme is in place that addresses the skills, experience and other qualities required for the effective functioning of the board, processes around the selection and appointment of directors, induction and ongoing training of directors, evaluation of directors’ performance and directors’ succession planning.

BOARD APPOINTMENTS

In appointing directors, emphasis is placed on retaining the balance of skills, knowledge, expertise and industrial knowledge to meet our strategic objectives as well as ensuring that the

Corporate Governanceand Compliance Report


board comprises the requisite independence and appropriate demographic representation. Board appointments are conducted in a formal and transparent manner by the board as a whole, assisted by the GDAC. New board members will only hold office until the next annual general meeting, at which they will retire and become available for election.

In general, directors are given no fixed term of appointment. With the exception of the executive directors, i.e. the Managing Director and the Chief Financial Officer, who are subject to short-term notice periods as defined in the terms and conditions of their service contracts, all directors are subject to retirement by rotation in terms of the company’s articles of association and, where available for re-election, are evaluated and assessed against predetermined criteria that serve as a benchmark for assessment, prior to submission of their names for election at the annual general meeting. The retirement age of a non-executive director is 70. The service contracts of executive directors are effective until they reach the normal retirement age. The key responsibilities of the chairman of the board and the Managing Director are encapsulated in the board charter.

ROTATION OF DIRECTORS

Appointment of directors who retired by rotation and who were eligible for re-electionAt the annual general meeting held in terms of Section 187(9) of the Companies Act, Act 28 of 2004 on 30 June 2016, the following directors who, at this meeting, retired by rotation in terms of the articles of association were appointed as directors of the company:

Mr Adriaan du Plessis Mr Richard Buchholz Mr Richard Niddrie

Appointment of newly appointed director, who retired by rotation, but was eligible for re-electionThe following newly appointed director, who retired in terms of the articles of association of the company, was appointed as director of the company:

Mr Peter Hibbit

BOARD CHARTER AND RESPONSIBILITY

The board is governed by the board charter, which is subordinate to the articles of association and any governing legislation. It is designed to serve as a guide to the performance by the directors of their duties, in accordance with the principles of sound corporate governance, the appropriate legislative requirements and codes of conduct.

The board provides entrepreneurial leadership and vision to the group to enhance shareholder value within a framework of prudent and effective controls, which enables risk to be assessed and managed to ensure long-term sustainable development and growth.

The board has ultimate accountability and responsibility for the performance and affairs of the group and to this end is responsible for defining the group’s strategic intent, its objectives and values which constitute the organizational behaviour. Key responsibilities of the board include inter alia: ensuring that the group’s values adhere to high standards of

ethical and corporate behaviour; ensuring that integrity permeates all aspects of the group and

that the code of conduct, addressing conflicts of interests, particularly in relation to directors, is in place, thereby establishing the tone and culture of the group;

ensuring good corporate governance and business performance within the group;

annually reviewing the group strategy and continually monitoring management’s performance and implementation of such strategy;

ensuring that the necessary financial and capital resources are in place for the group to meet its strategic objectives;

overseeing the adequacy of the group’s systems of internal control, governance and risk management;

ensuring that procedures and practices are in place that protect the group’s assets and reputation;

ensuring that the financial statements fairly represent the affairs of the group and contain proper disclosures in conformity with the law and to approve the annual and half-yearly financial statements, reports to shareholders and public announcements;

reviewing and approving the annual integrated report; ensuring the group has appropriate systems, including

frameworks and policies for the identification, measurement, control and reporting of all key risk areas and key performance indicators of the business of the group;

reviewing and approving group policies, processes and procedures;

safeguarding the interests of all group stakeholders, including shareholders, employees, suppliers, customers and the environment and ensuring that the group has a communication policy and communicates with its shareholders and all relevant stakeholders openly and promptly;

protecting the group’s financial position by reviewing the performance of the business of the group on the basis of inter alia quarterly financial reports and analyses, as well as any other reports it may require to meet its responsibilities;

establishing sub-committees of the board, their constitution and terms of reference, having regard to all codes of conduct and other governance, statutory and regulatory requirements and to evaluate the performance of such sub-committees and the board itself on an annual basis;

delegating the oversight over the professional management of the group subsidiaries to the Managing Director and the group Executive Committee (“EXCO”);

monitoring the quality of reporting and satisfying themselves about the integrity of information that is provided to them in this regard;

reviewing remuneration policies and practices in general, including superannuation and incentive schemes for management and determining the appropriate levels of executive remuneration for the Managing Director and EXCO members;

(continued)



ensuring that an effective internal audit department, staffed with qualified resources, is established to perform the internal audit function in the group.

A schedule of delegated authorities, setting out the mandates, powers and authority levels that apply to the various decision making bodies and officers who are responsible for governance and management of the group, is in place.

The board subscribes to the ‘four eyes’ principle of management, in terms of which no individual officer of the group (including the Managing Director) acting alone, is empowered to bind the group in relation to material matters.

The board has delegated certain powers and authorities to the Managing Director jointly with any member of the EXCO and reserved others for itself.

Matters reserved by the board, include inter alia the following: approval of material changes to the accounting policies or

practices of the group; the declaration or recommendation of dividends and the

forfeiture of unclaimed dividends; the raising of incremental borrowing facilities (other than in

the ordinary course of business), involving amounts in excess of limits determined by the board;

the increase, reduction or alteration to the share capital of NNH and the allotment, issue or disposal of its shares;

approval of major acquisitions, disposals and capital expenditure;

approval of the group’s strategy, business plans and annual budget and any material changes to the strategic direction or material deviations in business plans;

approval of annual financial statements and interim reports; any special resolution as provided for in the Namibian

Companies Act, 28/2004; appointments, removals and dismissals of incumbents of

executive positions, the company secretary and the chief internal auditor;

appointment of external auditors; appointment and removal of directors; approval of directors’ fees; approval of share incentive schemes; the establishment of board committees, their constitution

and terms of reference; approval of all policies and charters that apply to the group

and any amendment thereto; establishment / closing / disposal of any subsidiary of the

group; variation of the rights attached to shares, where such powers

are vested in the directors; approval of the code of conduct and ethics and other similar

codes and any amendment thereto; approval of any agreements entered into with controlling

shareholders; the approval and authority to issue prospectuses, listing

particulars, rights offer or takeover or merger documents; considering or approving any major transactions outside the

ordinary course of business;

approval of any material restructuring or structural changes within the group; and

approval of mergers, acquisitions and/or capital investments.

BOARD EFFECTIVENESS

An appraisal of the board and board committees was undertaken in 2016. The appraisal included an evaluation of the effectiveness of the board and board committees, the chairman and individual board members. The board evaluation was conducted online and sent to all the board members, using the internet and e-mail as a medium. The board committee-, chairman- and peer evaluations were conducted by way of an evaluation questionnaire. The question set used was designed to gain an insight into how well the board and board committees are meeting their objectives.

Overall, the results revealed that good governance is generally practiced and that the board and board committees are functioning effectively and achieving their objectives. The chairman’s performance and facilitation of board meetings was rated as “consistently good” and directors were individually informed by the chairman of their own evaluation results, which were treated as confidential.

Structures are presently being implemented to address shortcomings identified during the evaluation exercise.

The Managing Director’s performance is assessed bi-annually by the Managing Executive of Nedbank Rest of Africa by way of a performance scorecard.

DEVELOPMENT OF DIRECTORS

A formal, ongoing director development program focuses on keeping all members of the board and board committees up to date with local and international industry developments, technology issues, risk management and corporate governance best practice.

The annual one-day directors’ development program took place on 16 August 2016 and presentations were given on the following topics: Nedbank Group Audit Methodology; Nedbank Group Remuneration Philosophy; Internal Capital Adequacy Assessment Process (“ICAAP”).

We have a formal induction programme for new non-executive directors, which enables new appointees to familiarise themselves with the group’s operations, financial affairs and strategic positions. This program includes sessions with the heads of each of the group’s major business units, functional heads and the company’s internal auditors.

Board members are expected to keep themselves abreast of changes and trends in the business and in the company’s environment and markets, including changes and trends in the economic, political, social and legal climate generally.


NEDNAMIBIA HOLDINGS LIMITED

Group Group Risk & Capital Group Remuneration, Nomination, Group Directors’ Audit Management Employment Equity and Skills Affairs Names of Directors Boards Committee Committee Retention Committee (“REMCO”) Committee NBN NNH Board Board Meetings held: 6 5 5 4 4 4

Attendance:

Frank TJ 6# 5# 4 4 4#

Altmann K-S (1) 3 3 5* 4*

Buchholz RWR 6 5 5 3 (outgoing#)

Du Plessis JA 5 5 4* 4 4

Hibbit PCW (2) 4 5 4 3 (incoming#)

Hiwilepo TT 6 5 5

Matthews LJ 4 5 5* 4* 4* 4*

Muatunga LM (Mrs) 4 4 3# 3

Niddrie RP 6 5 5# 4

Schimming-Chase AR 5 5 4

# Chairperson

* Attended board committee meetings by invitation.

(1) Appointed as executive director to the NNH/NBN boards with effect from 22/06/2016.(2) Appointed as independent non-executive director to the NNH/NBN boards with effect from 12/05/2016 and member of the

GAC and GRCMC with effect from 19/05/2016.

With the exception of Mrs. Liina Muatunga and Mr Lionel Matthews who – for valid reasons that were accepted by the board – were only able to attend 67% of the bank’s board meetings, the board attendance of all other directors complied with the 75% attendance rule as stipulated in BID-1 of the Banking Institutions Act 2 of 1998.

ATTENDANCE OF BOARD AND BOARD COMMITTEE MEETINGS Directors’ attendance of board and board committee meetings is monitored by the Directors’ Affairs committee quarterly. Irregular attendances of meetings are dealt with by the chairperson of the board.

The following attendances of board and board committee meetings have been recorded for 2016:

(continued)


COMPANY SECRETARY

The board appoints the company secretary who provides support and guidance to the board and companies within the group on matters relating to governance, ethics and statutory practices across the group. The company secretary assists the board as a whole and directors individually with detailed guidance on how to discharge their responsibilities in the best interest of the group. All directors have access to the advice and services of the company secretary.

The company secretary plays a vital role in the assessment process of the board and board committees as well as board training. New directors are informed of their duties and responsibilities by way of an induction course that is run by the company secretary and each newly appointed director is provided with an induction pack containing essential documentation and background material aimed at deepening their understanding of

the business of the group and in particular the business of the bank as the main operational entity within the group.

The company secretary is responsible for corporate governance on board, board committee level, while business governance resorts under the enterprise-wide risk- and governance and compliance functions, reporting to the Chief Risk Officer of the group.

The company secretary has direct access to and ongoing communication with the chairman of the board and the chairman and the company secretary meet regularly throughout the year. The company secretary, Mrs. Mechthild Meiring, is not a director of the company and has an arm’s length relationship with the board.

The current group company secretary, Mrs. Meiring, retires with effect from 1 March 2017 and will be succeeded by Ms. Saretha Malan on even date.


NEDNAMIBIA HOLDINGS LIMITED

Fees paid for 2016 financial year to individual directors

Names of directors N$ paid per annum

Non-executive directors

Frank TJ (Chairperson) 180 000

Buchholz RWR NIL

Du Plessis JA NIL

Hibbit Peter CW 101 500

Hiwilepo TT 90 000

Muatunga LM 106 000

Niddrie RP 216 000

Schimming-Chase AR 90 000

Executive directors

Matthews LJ (Managing Director) NIL

Altmann K-S (Chief Financial Officer) NIL

DIRECTORS’ REMUNERATION On the grounds that Determination BID-1 of the Banking Institutions Act, 1998 (Act 2 of 1998) requires non-executive directors to attend at least 75% of the board meetings of a banking institution in any particular year, the board deviated from the governance principle to pay directors a basic- and a sitting fee. The directors in the group only receive a basic fee, which as from January 2017 will be paid monthly instead of quarterly, as was previously the case.

Monthly directors’ and board committee fees are rounded up to the nearest N$500.

The following directors’ fees were approved for the 2016 financial year:

NEDNAMIBIA HOLDINGS LIMITED Annual Directors’ and Board Committee remuneration

Chairperson (fees per annum) Members (fees per annum)

Directors’ fees N$54 000 N$27 000

Group Audit Committee N$125 000 N$62 500 Group Risk and Capital Management Committee N$125 000 N$62 500 Group Remuneration, Nomination, Employment Equity and Skills Retention Committee N$63 600 N$31 800 Group Directors’ Affairs Committee N$30 000 N$15 000


(continued)


NEDBANK NAMIBIA LIMITED

Fees paid for 2016 financial year to individual directors

Non-executive directors N$ paid per annum

Frank TJ (Chairperson) 203 700

Buchholz RWR NIL

Du Plessis JA NIL

Hibbit PCW 66 500

Hiwilepo TT 100 000

Muatunga LM 100 000

Niddrie RP 105 700

Schimming-Chase AR 100 000

Executive directors 8 879 603

NEDBANK NAMIBIA LIMITED The following directors’ fees were paid for the financial year 2016:Chairman N$197 000 per annumMembers N$98 500 per annum

Fees for time spent by directors on bank related matters that fall outside N$1 900 per hour the normal course of board/board committee business/preparation

DIRECTORS’ QUALIFICATIONS The directors have the following academic qualifications:

DIRECTORS’ QUALIFICATIONS Names Academic Qualifications

Altmann K-S B.Acc; CA (SA); CA (Namibia)

Buchholz RWR B Com; CA (SA) Du Plessis JA B Com; BCompt (Hons); CA (SA); Certificate in the Theory of Accountancy; Higher Dip. in Company

Law; AMP (Duke University, USA)

Frank TJ BA Law; LLB; Dip. Bus. Man.; Certificate in Tax Law

Hibbit PCW BCom (Wits); CA (SA); H.Dip Tax (Wits); AMP (Harvard)

Hiwilepo TT B.Sc (University of Western Cape, SA)

Matthews LJ BCompt (Hons); CA (SA); CA (Namibia); Executive MBA (University of Cape Town, SA) Muatunga LM Nat. Dip. HR Management (Peninsula Technicon CT); Masters Dip. in HR Management (RAU); B.Tech

(UNISA); MBA (Maastricht, Netherlands); EDP (University of Cape Town); SMP – GIBBS (University of Pretoria)

Niddrie RP B Com; B Acc; CA (SA); CA (Namibia) Schimming-Chase AR LLB; LLM; Post Graduate Diploma in International and European Law; (University of Mont Saint

Aignan, Rouen, France); Certified Financial Planner (CFP) (Member of Financial Planning Institute SA)


DECLARATION OF OUTSIDE INTERESTS

The procedures for dealing with directors’ conflicts of interest continued to operate effectively during 2016 and no director had a material interest in any significant contract with the company or any of its subsidiaries during the year under review.

Directors disclose their outside interest on a quarterly basis to the board. The chairperson of the board addresses directors’ conflicts of interest when these arise.

A register of directors’ outside interests is kept at the company’s registered address.

BOARD FOCUS AREAS IN 2016

Key focus areas of the board were inter alia- Strategic oversight of the group in a deteriorating

macroeconomic environment with an escalating regulatory agenda;

Overseeing the preparations for NNH’s localisation plan to comply with the 2019 Namibian localisation requirements;

Overseeing the Flexcube remediation programme, following the implementation of the new Flexcube System in 2015;

Monitoring board committee deliberations and considering matters recommended by board committees for board approval;

Continuously overseeing the development and implementation of a risk strategy and the Group Risk Plan (including credit risk) to ensure that the group and banking entities manage risks in an optimal manner;

Enhanced Anti-Money Laundering (“AML), Combatting the Financing of Terrorism (“CFT”) and Sanction compliance oversight;

Liquidity and disaster stress testing.

BOARD KEY FOCUS AREAS IN 2017 AND BEYOND

Key focus areas for 2017 and beyond include inter alia- Overseeing the execution of the 3-year Strategic Plan, with a

specific focus on the growth of transactional banking in Retail and the implementation of a Wealth offering;

Enhanced Anti-Money Laundering (“AML”), Combatting the Financing of Terrorism (“CFT”) and Sanctions compliance oversight;

Overseeing enterprise-wide risk and capital management; Overseeing good corporate governance, ethics and compliance; Continuous monitoring of Flexcube remediation programme;

Continuous focus on the preparations for and realisation of the group’s transformation agenda, including the NNH Localisation in 2019;

Continuously overseeing the development and implementation of a risk strategy and the Group Risk Plan (including credit risk) to ensure that the group and banking entities manage risks in an optimal manner.

BOARD COMMITTEES

The board committees assist the board in the discharge of its duties and responsibilities. Each board committee has formal written terms of reference that are reviewed every second year, or more frequently if necessary, and effectively delegated in respect of certain of the board’s responsibilities. The board monitors these responsibilities to ensure effective coverage of and control over the operations of the group.

During 2016, the following board committees operated within the NedNamibia Holdings group: Group Audit Committee (“GAC”); Group Risk and Capital Management Committee (“GRCMC”); Group Remuneration, Nomination, Employment Equity and

Skills Retention Committee (“REMCO”); and Group Directors’ Affairs Committee (“GDAC”)

The NNH board is responsible for the appointment of group board committee members, who should all be directors of NNH. In terms of the respective board committee charters, members retire after two years from appointment, but are eligible for re-appointment. Any board member who ceases to be a director for any reason whatsoever, ipso facto ceases to be a member of the board committees on which he/she serves.

The executive directors, Messrs Lionel Matthews and Karl-Stefan Altmann, are not members of board committees, but attend board committee meetings by invitation. Other standing invitees who attend the Audit- and Risk and Capital Management committee meetings are the members of the Executive committee, the Chief Internal Auditor and the External Auditors (who only attend Audit Committee meetings). Other members of management and representatives of Nedbank Group (SA) attend board committee meetings as invitees when necessary.

Board Committees may take decisions and adopt matters within their scope, responsibilities and authority and recommend these to the board for approval.

All board committees meet quarterly or more frequently if necessary.


GROUP REMUNERATION, NOMINATION, EMPLOYMENT EQUITY AND SKILLS RETENTION COMMITTEE (“REMCO”)

REPORT FROM THE REMCO CHAIR

The REMCO assists the board with the general oversight and monitoring responsibility over the group’s human resources function to fulfil the following objectives: To instill a human resources philosophy (including but not

limited to a remuneration philosophy) which attracts, retains, motivates and rewards staff to successfully implement the group strategy;

In executing remuneration policies, processes and procedures, to ensure that -

– remuneration structures are aligned with best market practice and sound governance principles;

– the group conforms to the latest thinking regarding good corporate governance on executive remuneration and correctly aligns the behaviour of executives with the strategic objectives of the group;

– due regard is given to all stakeholders and to the financial and commercial health of the group;

– the group complies with the relevant employment related legislation of Namibia, with special reference to the Labour Act, 2007 (Act No 11 of 2007) as amended from time to time; and

– due regard is given to the management of collective labour relations.

To ensure that a competitive human resources strategy is developed and implemented to comply with-

– the guidelines provided by the Employment Equity Commissioner as well as affirmative action initiatives, to support superior business performance; and

– the BBEE targets set in the Namibian Financial Sector Charter.

The terms of reference of the REMCO are set out in a board approved REMCO charter.

The REMCO has met quarterly during the period under review.

The REMCO members are:

The Managing Director is a standing invitee to the REMCO.

The key responsibilities of the REMCO are, inter alia to- review, adopt and recommend to the board for approval

the group’s human resources related policies, including the material terms and conditions of employment to ensure that they are fair and competitive;

oversee that the right calibre of executive and senior management is attracted, retained, motivated and rewarded for individual performance;

recommend for board approval candidates for executive positions; review the remuneration framework (including incentive

schemes) and ensuring that the group’s remuneration policy, processes and procedures are aligned with best practice and relevant legislative and regulatory requirements as well as sound governance principles;

ensure that an adequate performance measurement methodology is implemented;

review the bi-annual performance ratings of executive and senior management;

ensure that an environment is created, where individuals are able to develop rewarding careers at all levels and ensuring equitable access to opportunity;

maintain an environment where employment and progression is based on merit;

review progress made in attaining the group’s employment equity goals;

review succession and development plans for executive and senior managers in the group;

review promotions at executive and senior management levels; develop a culture within the group and an image of the group that

gives rise to the group being perceived as an employer of choice.

REMCO key focus areas in 2016Regular reports were submitted to the REMCO to oversee inter alia- quarterly trends in the-

– head count; – staff turnover; – employment equity; salary negotiations with the Namibia Financial Institutions

Union (“NAFINU”); culture surveys; performance management; talent management; recognition; affirmative action; and development- and succession planning for successors for EXCO

and senior management positions.

Pertinent matters addressed in 2016The REMCO adopted and recommended the following matters for board approval- annual salary increase and short-term incentive bonus pool; revised EXCO structures and the appointment of candidates

into the following EXCO positions: – Executive Corporate and Investment Banking; – Executive Strategy and Human Capital; Human Resources related policies, charters and manuals; 2016-2018 Affirmative Action Plan.

(continued)


NedNamibia Holdings Group Period served REMCO members on committee

*Muatunga LM (Chairperson) 2014 – 2016 Du Plessis JA 2014 – 2016 *Frank TJ 2014 – 2016 *independent non-executive members

For directors’ qualifications refer to page 60 of this report.


REMCO focus for 2017 and beyondKey focus areas for 2017 include inter alia- monitoring the execution of the Human Resources Strategy; continued focus on ensuring that the REMCO fulfils its

responsibilities to meet the group’s Human Resources objectives; and

reviewing succession and development plans for executive and senior managers in the group.

RemunerationThe group defines total reward as a combination of various types of rewards, including financial and non-financial, indirect and direct and intrinsic and extrinsic rewards. The group remuneration policy is board-approved and forms part of the group’s operating philosophy, policies and standards. It provides a framework for the management of total reward in the group and supports the group’s employee value proposition. The remuneration policy sets out how total remuneration is to be managed in the group and is supported by detailed operating policies, procedures and practices at business unit level.

Salary adjustments for non-managersFollowing our Managing Director’s commitment at a staff meeting in June 2015, as well as his one-one sessions with our employees during 2016, a proposal regarding salary adjustments for staff that have a salary below the company’s median, was submitted to REMCO and the board to be implemented during December 2016. This proposal applicable to employees in the bargaining unit (NB03 - NB08) was approved.

The adjustments are, however, subject to: Performance Score (needs to be higher than 3.5); Conduct (no warnings or disciplinary actions within the

past year); Length of Employment (staff needs to be employed for

more than one year).

This adjustment makes Nedbank Namibia highly competitive in terms of salaries for non-managers in the industry (relative to the size and performance of the bank) and fits in with the strategy to make Nedbank Namibia the best company to work for. For that purpose, our HR Department has engaged consultants to look at our overall remuneration & reward strategy, to identify any gaps where necessary.

Performance managementThe group’s performance management process ensures appropriate alignment of individual, team, business unit and cluster performance objectives with those of the group. This enables translation of the group’s strategic focus areas into individual action plans.

The core principles of the group’s performance management process are as follows: Performance management is consistently applied across the

group to ensure effective alignment of strategic objectives and individual outputs.

Performance objectives are based on a scorecard of metrics featuring both financial and non-financial indicators that align with the group’s strategic imperatives.

Performance management is an ongoing process rather than an event.

Performance outcomes are appropriately differentiated to reflect the different levels of the contribution made by employees to the success of the group. Where performance deficits are identified, these are dealt with actively, with the primary objective of returning the employee to full performance.

Employment Equity/Affirmative ActionThe group continuously strives to achieve employment equity in the workplace and to enhance competitiveness. It is a carefully planned, managed and monitored process, incorporating strategies aimed at transforming the employment environment within the group. These mechanisms provide for the recruitment, development and promotion of competent individuals, especially those from previously disadvantaged groups, to allow them to gain access to opportunities based on their suitability, while ensuring the maintenance of core standards within the organisation. NedNamibia Holdings’ 2015 Affirmative Action report was approved by the Employment Equity Commissioner and an Affirmative Action Compliance Certificate was issued to the group.

REMCO evaluationAn evaluation of the effectiveness of REMCO was conducted in 2016. Overall the Committee has been rated as well functioning and effective, but a few areas were identified that only ‘partially meet objectives’.

Strategies were implemented to address the identified shortcomings.

ConclusionThe REMCO is satisfied that it complied with its legal, regulatory and other responsibilities.

L Muatunga (Mrs)Chairperson of the Group REMCO


GROUP DIRECTORS’ AFFAIRS COMMITTEE (“GDAC”)

The GDAC assists the board with its corporate governance and related responsibilities and acts as the board’s expert monitor and sounding board in the following key areas: governance, including implementation and adherence to

corporate governance standards, compliance with the NamCode and corporate governance provisions of the Banking Institutions Act;

Directors’ nominations and appointments; Board Committee nominations and appointments; Directors’ remuneration and fees; Directors’ training and development; Evaluation of board/board committees/chairman/individual

directors; Termination, rotation, retirement and dismissal of directors; Directors’ outside interests.

The terms of reference of the GDAC are set out in a board approved GDAC charter.

The GDAC members are:

The Managing Director is a standing invitee to the GDAC.

In 2016, the GDAC met quarterly, focusing on board governance and related responsibilities within the group.

The GDAC is satisfied that the governance framework in the group is well established and aligned with regulatory requirements and the principles of The NamCode and that governance processes across the group are functioning effectively. Governance matters that deviate from the principles of The NamCode are duly explained in this report.

Group Directors’ Affairs Committee EvaluationAn evaluation of the effectiveness of GDAC has been conducted in 2016. Overall the Committee has been rated as well functioning and effective.

GROUP AUDIT COMMITTEE (“GAC”)

The board is of the opinion that the audit committee is effective and independent.

The audit committee fulfils a vital role in corporate governance in ensuring the integrity of integrated reporting and internal financial controls and identifies and manages financial risks.

The GAC members are:

The non-independent member, Mr RWR Buchholz, remains a member of the GAC, representing the controlling shareholder, Nedbank Group Limited. The board is of the view that Mr Buchholz’s specialist skills, experience and knowledge of the Nedbank group add value to the effective functioning of the GAC. The board is satisfied that this area of non-compliance with The NamCode does not impair the independence of the GAC.

The board is satisfied that the collective skills of the committee are appropriate to oversee integrated reporting.

Audit Committee CharterThe terms of reference of the audit committee are set out in a board approved GAC charter. The GAC charter sets the audit committee meeting agenda. The committee is satisfied that it has complied with and executed its responsibilities for the year in terms of the charter.

GAC EvaluationAn evaluation of the effectiveness of GAC was conducted in 2016. Overall the GAC has been rated as well functioning and effective.

REPORT FROM THE GROUP AUDIT COMMITTEE CHAIR

The GAC has an essential role to play in ensuring the integrity and transparency of corporate reporting and provides key links between management, the board and external audit. The committee is able to focus on the key issues facing the organization and oversees management’s financial reporting controls and processes through the review of significant accounting and reporting issues.

The GAC assists the board in fulfilling its oversight responsibility in the group, in particular with regard to evaluation of the adequacy and efficiency of accounting policies, internal controls,

(continued)


NedNamibia Holdings Group Directors’ Affairs Committee Period served members on committee

*Frank TJ (Chairperson) 2014 – 2016 Du Plessis JA 2014 – 2016 *Muatunga LM 2014 – 2016 *independent non-executive members


NedNamibia Holdings Group Period served Audit Committee members on committee

*Niddrie RP (Chairperson) 2014 – 2016 Buchholz RWR 2014 – 2016 *Hibbit PCW 2016 *Hiwilepo TT 2014 – 2016 *independent non-executive members



accounting practices, information systems and auditing processes applied within the group. In addition the GAC assesses the effectiveness of the internal audit- and finance functions as well as the independence and effectiveness of the external auditors.

Pertinent matters addressed in 2016The GAC met five times during the year and the following pertinent matters were addressed by the committee in 2016:

Internal controlThe GAC is responsible for reviewing the effectiveness of systems for internal control, financial reporting and considering the major findings of any internal investigations into control weaknesses, fraud or misconduct and managements’ response thereto.

The GAC receives quarterly reports to assist in evaluating the group’s internal controls. Significant areas of focus within the reports include the following:(a) Creating and maintaining an effective internal control

environment throughout the group;(b) Demonstrating the necessary respect for the control

environment; and(c) Identifying weaknesses in systems and internal controls.

Information TechnologyThe GAC is responsible for overseeing the group’s information technology as it relates to financial reporting and the going concern of group entities. The GAC regularly reviewed reports from the group’s Chief Information Officer, pertaining to the effectiveness and efficiency of the group’s information systems. In addition quarterly post implementation updates are given on the Flexcube System, which went live in 2015.

Financial reporting processThe GAC received regular reports from the Chief Financial Officer pertaining to - the financial performance of the group and the tracking and

monitoring of key performance indicators, financial reporting controls and processes and the adequacy and reliability of management information used during the financial reporting process;

key suspense accounts reconciliations; tax compliance and risk; IFRS-9 implementation.

The GAC further assessed and confirmed the appropriateness of the going-concern assumption used in the annual financial statements, taking into account management budgets and the capital and the liquidity profiles.

The GAC has satisfied itself as to the expertise, resources and experience of the finance function, as well as the appropriateness of the expertise and experience of the Chief Financial Officer.

Integrated reportingThe GAC reviewed and discussed the audited annual financial statements with the Chief Financial Officer, the Managing

Director, the Chief Risk Officer, Internal Audit and the external auditors. The GAC assessed, and found to be effective and appropriate, the reporting process and controls that led to the compilation of the annual financial statements as well as the presentation and disclosure in the annual financial statements with regard to the approved accounting policies, International Financial Reporting Standards and the requirements for fair presentation of the Namibian Companies Act, 28 of 2004.

The GAC reviewed and discussed the integrated report’s reporting process, governance and financial information included in the integrated report and recommended to the board that the annual financial statements and the financial information included in the integrated report be approved. The board subsequently approved the 2016 annual financial statements and the integrated report, which will be tabled for adoption by the shareholders at the forthcoming annual general meeting.

The external auditor’s opinion on the 2016 consolidated and separate financial statements is reflected in the Independent Auditor’s Report on page 82 of this annual report.

Key focus areas in 2016Key focus areas of the GAC were inter alia- Creating and maintaining an effective internal control

environment in the group and ensuring that the group’s financial systems, accounting practices, information systems and auditing processes and controls are operating effectively and are responsive to changes in the environment and industry.

Monitoring the implementation of a new management information system named “Infostack” in the group, which went live in September 2016. The system is currently providing the following offerings:

– Credit Risk Management (Impairments); – Treasury and Capital Management (TCM); – Management Reporting; – Financial Reporting and other Finance functions; – Daily reconciliation and exception reporting; – Automation, Distribution and Accessibility; Reviewing the disclosure of sustainability issues within the

group’s integrated report, ensuring that the information is reliable and no conflicts or differences arise when compared with the financial statements;

IFRS-9 - continued focus on progress made with the implementation of IFRS-9;

Continued focus on the monitoring of key suspense accounts and the timely reconciliation thereof.

Focus for 2017 and beyondKey focus areas for 2017 and beyond include, inter alia- continued focus on creating and maintaining an effective

internal control environment in the group and ensuring that the group’s financial systems, processes and controls are operating effectively and are responsive to changes in the environment and industry.


continued monitoring of the further enhancement of the Infostack system in terms of additional offerings, i.e:

– Liquidity and Interest Rate Risk / Asset and Liability Management (ALM);

– Budgeting and Planning; – Regulatory reporting; – Treasury and Capital Management (TCM). IFRS-9 – continued focus on enhancement and gathering

of historical data.

EXTERNAL AUDITORS

The group’s external auditors are Deloitte & Touche.

The report of the independent auditors on page 82 sets out the responsibilities of the external auditors with regard to expressing an opinion on the annual financial statements and the group’s compliance with both statutory and accounting standard requirements.

The external audit is structured to provide sufficient evidence to give reasonable assurance that the annual financial statements are free from material misstatement. The audit opinion also considers the directors’ statement on the group as a going concern and the adequacy of the internal control environment.

The external auditors provide non-audit services to the group. Fees paid to the external auditors are disclosed in note 31 to the annual financial statements.

During the period under review, the GAC- recommended to the board the selection of the external

auditors and the approval of their audit- as well as non-audit fees;

adopted the external auditors annual audit plan and related scope of work, confirming suitable reliance on Group Internal Audit and the appropriateness of key audit risks identified;

Monitored the effectiveness of the external auditors in terms of their audit quality, expertise and independence as well as the content and execution of the audit plan.

In accordance with the requirements of The NamCode and the GAC charter, a separate meeting was held by the GAC with the external- and internal auditors. This meeting was held without the presence of management. The external audit partner confirmed that the external audit has been conducted without any scope restrictions and that there were no undue pressures and influences from management.

IndependenceThe external auditors have established various safeguards and procedures to ensure their independence and objectivity. The external auditors confirmed their independence and objectivity to the Audit Committee for the year ended 31 December 2016.

The external auditors have unrestricted access to the chairperson of the Audit committee.

GROUP INTERNAL AUDIT (“GIA”)

GIA performs an independent assurance function and forms part of the third line of defence as set out in the enterprise-risk management framework (“ERMF”) on page 69 of this annual report. The purpose, authority and responsibility of GIA is formally defined in a charter approved by the board. The objective of the internal audit function is to determine whether the group’s systems of internal control, risk management and governance, as designed and operated by management, are adequate and effective. To provide for the independence of the group’s internal audit function, the Chief Internal Auditor has a direct reporting line to the Audit committee chairperson, a functional reporting line to the Managing Director and the Head of Audit Wealth and Africa (Nedbank SA) and has unrestricted access to the chairperson of the board. The Chief Internal Auditor of Nedbank Group Limited has an oversight over the internal audit function. By virtue of its mandate any material or significant control weakness is brought to the attention of the Chief Risk Officer, the Managing Director and the GAC for consideration and the necessary remedial action.

Internal control For the board to discharge its responsibilities to ensure the accuracy and integrity of the annual financial statements, management has developed and continues to maintain adequate accounting records and an effective system of internal control. The board has ultimate responsibility for the systems of internal control and reviews their operation primarily through the GAC and various other risk-monitoring committees.

As part of the systems of internal control, the GIA function conducts operational, financial, and specific audits and coordinates audit coverage with the external auditors. Specialist skills such as that required for information technology and treasury audits are sourced from Nedbank Group Internal Audit.

The internal controls include risk-based systems of internal accounting and administrative controls, designed to provide reasonable, but not absolute, assurance that assets are safeguarded and that transactions are executed and recorded in accordance with generally accepted business practices and the group’s policies and procedures. These internal controls are based on established and written policies and procedures and are implemented by trained, skilled staff, with an appropriate segregation of duties, are monitored by management and include a comprehensive budgeting and reporting system, operating within strict deadlines and an appropriate control framework that has been developed in accordance with the group’s activities. Internal control issues are regularly discussed with the Managing Director and at GAC and board level.

The board and board committees continuously identify operational control areas and implement suitable processes and technology to further enhance this important component of the operations of the business.

(continued)



The GAC - with respect to its evaluation of the adequacy and effectiveness of internal controls – receives regular reports from the Chief Internal Auditor and assesses the effectiveness of the group internal audit function and to this end the GAC has during the period under review, inter alia- reviewed and recommended the Group Internal Audit charter

for board approval; assessed the effectiveness of the GIA function in terms of

its scope, execution of its plan, coverage, independence, skills, staffing, overall performance and position within the organisation;

monitored and challenged, where appropriate actions taken by management with regard to adverse internal audit findings; and

adopted the internal audit plan for 2017.

The chairperson of the GAC maintains a regular and direct channel of communication with the Chief Internal Auditor.

The Chief Internal Auditor confirmed to the GAC that he and his team were performing the internal audit to the best of their ability and that, where necessary, assistance was obtained from Nedbank Group Internal Audit (“NGIA”).

The Chief Internal Auditor has assessed the group’s effectiveness of internal controls and risk management and confirmed to the GAC that, based on the audit work that has been performed during the period 1 January 2016 to 31 December 2016, nothing has come to GIA’s attention that adversely affects the adequacy and effectiveness of the NedNamibia Holdings system of internal controls and risk management as covered by the annual audit plan and 3+9 planning process (in terms of the risk based Nedbank Group Internal Audit Methodology and Nedbank Change Methodology), other than the issues reported to the GAC and included in the relevant audit committee packs.

Internal Audit Quality Assurance ReviewIn August 2016, Nedbank Group Internal Audit (SA) conducted a file quality assurance review.

The GAC was satisfied that the Internal Audit function in the group was adequately performed by the Internal Audit team.

ConclusionThe GAC is satisfied that it has complied with its legal, regulatory and other responsibilities.

The GAC recommended the integrated report to the board for approval.

R NiddrieChairman of the Group Audit Committee

GROUP RISK AND CAPITAL MANAGEMENT COMMITTEE (“GRCMC”)

REPORT FROM THE GROUP RISK AND CAPITAL MANAGEMENT COMMITTEE CHAIR

The GRCMC has a monitoring and decision making responsibility and is considered the board’s expert monitors of the risk universe as listed and defined in the NedNamibia Holdings Group’s Enterprise-wide Risk Management Framework (“ERMF”). A board approved charter defines the minimum requirements for the committee to give effect to its risk oversight responsibilities.

The GRCMC members are:

In November 2016 the independent non-executive member, Mr PCW Hibbit, took over the chair of the GRCMC from the non-executive member Mr RWR Buchholz, who remains a member of the GRCMC, representing the controlling shareholder, Nedbank Group Limited. The board is of the view that Mr Bucholz’s specialist skills, experience and knowledge of the Nedbank group add value to the effective functioning of the GRCMC. The Board is satisfied that this area of non-compliance with The NamCode does not impair the independence of the GRCMC.

The GRCMC met quarterly during 2016.

GRCMC EvaluationAn evaluation of the effectiveness of GRCMC was conducted in 2016. Overall the GRCMC was rated as well functioning and effective.

A few matters were identified that only “partially meet objectives”. Training will be arranged for RCMC members to better understand certain risks within the risk universe and reporting to the RCMC will be enhanced to enable the committee to adequately fulfil its monitoring functions.

NedNamibia Holdings Group Period served RCM Committee on committee

*Hibbit PCW (Chairperson) 2016 Buchholz RWR 2014 – 2016 *Frank TJ 2010 – 2016 *Niddrie RP 2015 – 2016 *Schimming-Chase AR 2014 – 2016 *independent non-executive members



GRCMC Key focus areas in 2016The committee is involved in various key risk and capital management activities and, during the period under review, regular reports were submitted to the GRCMC, to continue focusing on, inter alia: overseeing the development and implementation of a risk

strategy and the Group Risk Plan to ensure that the group and banking entities manage risks in an optimal manner;

adopting and recommending for board approval the group’s risk appetite;

adopting, reviewing and evaluating the adequacy and efficiency of the risk policies procedures, practices and controls applied in the day-to-day management of business;

ensuring that the group establishes and maintains an Internal Capital Adequacy and Assessment Process (ICAAP);

monitoring the adequacy of the asset and liability management process in the group;

monitoring market, trading, derivatives and investment risks;

maintaining a best-practice ERMF; overseeing Anti Money Laundering (“AML”), Combatting the

Financing of Terrorism (“CFT”) and Sanctions compliance; monitoring Legal and Compliance risks; overseeing all aspects of credit management, including the

quality of the bank’s loan portfolio and ensuring adequate provisioning for potential loss exposures;

overseeing the broader risks of information technology (those not covered by the GAC).

Pertinent matters addressed in 2016The GRCMC has overseen inter alia the following pertinent matters that were addressed in 2016: Liquidity simulation exercise – Nedbank Namibia has conducted

its first liquidity simulation exercise, which specifically focused on the bank’s ability to deal with a liquidity crisis. The exercise was facilitated by Pricewaterhouse Coopers (PwC). The recommendations contained in the report will be incorporated in the Liquidity Risk Contingency Plan (“LRCP”).

Disaster recovery testing – a technical Disaster Recovery test was conducted in October 2016. The scope of the test included NedNamibia Life Assurance Company Limited. The test was completed successfully within the agreed timeframe. The next step will be the full failover test with all stakeholders.

Remediation of Flexcube post implementation issues – in 2016, a substantial number of Flexcube post implementation incidents/issues were addressed. Flexcube post implementation updates were given to the board on a quarterly basis.

Country Credit Mandate – the country credit mandate was increased from N$15 million to N$30 million for clients rated NGR01 – NGR15 and N$50 million for clients rated NGR16 – NGR25.

Establishment of Financial Crime Unit – effective 1 January 2016, the Forensic Services- and Anti Money Laundering- (“AML”), Combatting the Financing of Terrorism (“CFT”)- and Sanctions Compliance teams were consolidated to establish the Financial Crime Unit, to ensure this evolving risk receives dedicated and focused management attention.

NedNamibia Life Assurance Company Limited (“NNLA”) Risk Control and Self-Assessment (“RCSA”) – top issues addressed were system insufficiencies following the implementation of NNLA’s new insurance operating system and manual AML, CFT screening of the external client data base.

Overseeing BID-19 Localisation of Core Banking Systems – Nedbank Namibia has undertaken to comply with this Determination by mid-2017.

Key focus areas in 2017 and beyondKey focus areas for 2017 and beyond include, inter alia- cybersecurity and protecting our clients and stakeholders; overseeing BID-19 Localisation of Core Banking Systems; regulatory and conduct risk – since the global financial crisis,

regulation continues to fundamentally change the shape of banking and financial services. Regulatory risk and conduct risk will, for the foreseeable future, be key focus areas.

enhanced AML, CFT and Sanctions Compliance oversight; overseeing enterprise-wide risk and capital management; continuous monitoring of the Flexcube remediation programme; enhanced oversight over information technology risk; and overseeing the development and implementation of the risk

strategy and the group risk plan to ensure that the group and banking entities manage risks in an optimal manner.

More information regarding the risk governance within the group is encapsulated under the Risk Governance section of this report.

Emerging risksAlthough emerging risks are difficult to quantify and assess the group keeps abreast of the global risk landscape to enable identification and assessment of new risks. Emerging risks (internal or external environment) are also raised at divisional level by business units in consultation with divisional risk managers through the Risk and Control Self Assessments (RCSA) process. Material emerging risks are tabled and discussed at the quarterly Enterprise-wide Risk Committee (“ERCO”) meetings, where they are escalated to monitor potential changes to the risk exposure through the top and emerging risk log.

Current Emerging risks include: Cybercrime/Information security – risk of illegal activities

used against the group’s computer systems, networks and the internet to disrupt business and perform scams, theft and fraud;

the impact on NedNamibia Holdings Limited and its subsidiaries, due to the possible credit downgrading in Namibia and South Africa;

implications of Basel III; the impact on business, due to the water crisis in Namibia; the mandatory per policy cession to the Namibian National

Reinsurance Corporation (NAMIBRE) of 12,5% of premium received by the NedNamibia Life Assurance Company Limited.

ConclusionFundamentally, the business of banking is about managing risk. For the group to achieve our 2020 aspirations and targets on a sustainable basis, given the regulatory and highly competitive environment, along with technological advancement and

(continued)



innovation, risk management must become a competitive differentiator for the group.

The GRCMC is satisfied that- the committee has adequately discharged its duties in terms

of its charter and in particular overseeing the development and implementation of a risk strategy and the group risk plan to ensure that the group manage risks in an optimal manner;

the group’s risk management processes are appropriate and effective; and

the committee has complied with its legal, regulatory and other responsibilities.

PCW HibbitChairman of the Group Risk and Capital Management Committee

RISK GOVERNANCE

CHIEF RISK OFFICER

Since 1 January 2016, the risk management function is headed by the Chief Risk Officer, Mrs Sumari von Kunow, who is a member of the Executive committee (EXCO). The Chief Risk Officer has unrestricted access to the chairpersons of both the GAC and the GRCMC.

Enterprise-wide risk managementRisk management in the financial services industry is a fundamentally important process in ensuring profitability, growth and long-term sustainability. The board acknowledges its responsibility for the entire process of risk management and for evaluating the effectiveness thereof. Management is accountable to the board for designing, implementing and monitoring the process of risk management and integrating it with day-to-day business operations. The GRCMC assists the board in reviewing the risk management process and any significant risks facing the group. The board, supported by the GRCMC, sets the risk strategy, decides on the group’s tolerance for risk and makes use of generally recognised risk management and internal control models and frameworks.

The risk management function is embedded in the enterprise-wide risk management framework (“ERMF”) that sets out the major risk classifications. The ERMF forms the basis of risk governance and is underpinned by the 3 lines of defence that are now deeply entrenched in the organisation. Risk management is embedded in business processes and committees operate effectively. The enterprise-wide risk management function monitors compliance with the ERMF. The group risk function is independent of the operational business units. A key issues control log has been developed as a tool to assist in achieving good governance. It represents a holistic, yet focused, view of any risk issues that require attention, raising concerns around these and the actions taken to address them.

In the normal course of business operations, the group, and in particular the bank, are primarily exposed to the following risks: accounting, financial and taxation risk; capital risk; governance and compliance risk; credit risk; information technology risk; insurance risk (non-banking); market risk in the trading- and banking books; liquidity and funding risk; business and strategic (execution) risk; operational risk; people risk; reputational risk; transformation, social and environmental risk; regulatory risk; concentration risk; conduct risk; and financial crime risk.

These risks are managed through the comprehensive ERMF, encompassing infrastructure, policies and methods that support active and effective control. More information on risk management is disclosed in the Chief Risk Officer’s report on page 30.

ENTERPRISE-WIDE RISK COMMITTEE (“ERCO”)

The ERCO forms part of the group’s enterprise-wide risk governance structure. The primary role of ERCO is to monitor the risks and implementation of the risk management frameworks in the group. These risk management frameworks are adopted by the GRCMC and approved by the board.

The committee has a dual reporting line, one into the GRCMC and the other one into the Nedbank Rest of Africa ERCO. The Managing Director is the chairperson of ERCO.

Financial risk management The most significant financial risks for the group are credit risk, liquidity risk and market risk. Market risk includes interest rate and foreign exchange risk.

The group’s policies are designed to identify the risks, to set appropriate risk limits and controls and to continuously monitor these risks and limits through effective information systems.

High level risk policies for managing financial risks are formulated and updated regularly at Nedbank Group Limited level. The financial risk policies of the group form part of Nedbank Group Limited’s overall financial risk policies and fall within the parameters of these policies. Those policies are then aligned with local operations and circumstances and implemented locally.

Credit riskCredit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the group.


RISK GOVERNANCE (continued)Credit risk (continued)

Credit risk management

Objectives in managing riskThe long-term credit strategy is to maintain the necessary balance between capital preservation and capital optimisation. The group’s pursuit is for quality facilities, soundly based, with good income returns for the group.

Exposure to risk and how it arisesThe group is exposed to credit risk through granting of credit to clients, which can take the form of one of many products offered by the group, including overdrafts, installment sale facilities, home loans, commercial loans, letters of guarantee and certain foreign exchange products such as letters of credit and foreign exchange contracts.

As a result, credit risk is managed within the overall risk management framework of the group, due to the importance thereof.

Concentration of creditThe group seeks to avoid significant exposures in areas (of whatever nature), which are inherently fraught with risk or very sensitive to for example changes in economy, politics, legislation, demographics, climate, etc. Internal limits are set to limit the bank’s exposure to concentration risk. As a benchmark the exposure to any one specific industry should not exceed 20% of the total lending book and in line with Bank of Namibia regulations exposure to a single client or a group of associated companies should not exceed 30% of a bank’s qualifying capital and the aggregate of all large exposures (i.e. an exposure which individually equals or exceeds 10% of a bank’s qualifying capital) shall not exceed 80% of a bank’s qualifying capital.

Methods used to measure riskCredit risk is measured during the credit granting process by risk rating the potential client in terms of the group’s risk rating criteria to enable the identification of a realistic risk level at all times. The group’s policy requires that all obligators are rated at inception, and re-rated at least once annually thereafter. The existing risk rating model is based on the Nedbank Group rating, utilising the middle market rating model and the corporate rating model.

Mandates and authority levelsA mandate structure is in place with delegated levels of lending authority. All facilities, irrespective of amount, fall under the control of the Bank Credit committee. Maximum levels of lending authority have been set for the credit department and the Bank Credit committee. Applications in excess of lending authorities are referred to the next higher level for approval, with excesses of the Bank Credit committee being referred to the Africa Credit Management committee of Nedbank Limited (“AFCRAM”) for approval.

MonitoringThe group has adequate systems of controls in place for the monitoring of facilities. Diary systems, which are monitored at a suitable senior level, are in place in order to manage the expiry of limits, revaluation of collateral, continual review of risk categories, periodic review of the terms and conditions of approval, identification of any irregularities in conduct of the account or utilisation of the facility, monitoring systems of daily usage and any other key events requiring monitoring. Regular internal audits are carried out to ensure the application of sound lending principles as well as the adequate administration of security documents and key credit information.

Liquidity risk Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities.

Liquidity risk managementThe liquidity of the group is subject to the mix and liquidity preferences of both borrowers and depositors as well as the structure of the market in which the group operates. In most instances a bank acts as a liquidity transformer between the liquidity needs of the borrowers and depositors.

The final responsibility for the management of liquidity risk rests with the board of directors who has delegated the day-to-day accountability to the Asset and Liability committee (“ALCO”). ALCO is responsible for ensuring that the necessary policies, frameworks and processes and procedures to manage liquidity risk within the group are developed and implemented. It is also responsible for monitoring the group’s compliance with the policy as well as the agreed risk limits. ALCO reports to the group EXCO and through the GRCMC to the board. The board’s responsibility with regard to adequate liquidity management includes the development and implementation of a liquidity management policy that clearly establishes the responsibilities for managing liquidity, includes a comprehensive set of liquidity limits that define acceptable levels of cash outflow, includes a liquidity contingency plan and complies with local legislation and liquidity requirements.

Liquidity risk is measured using liquidity risk gaps. A liquidity risk gap is generated using the contractual cash in- and outflows for each balance sheet item and placing these flows into designated time buckets. The contractual cash flows are then subjected to behavioural adjustments dependant on the liquidity risk scenario being modeled. The liquidity risk gap is calculated by deducting cash outflows from cash inflows in each bucket and then calculating the cumulative cash outflow. For liquidity risk management purposes the liquidity gaps are calculated using a sight to one week bucket and monthly buckets from 1 to 12 months.

The group’s liquidity risk management is based on the following principals: management of cash flows, especially in the sight to three

month horizon; diversification of the depositor base; and maintaining a stock of surplus liquefiable assets.

(continued)



Liquidity risk limits are approved by ALCO and submitted to the board for ratification. By monitoring the maturity profile of the current balance sheet as well as its expected future structure ALCO is proactively monitoring this risk and is able to manage any potential mismatches in accordance with best banking practice.

The group manages its liquidity by managing the liquidity of those components of the balance sheet over which it has direct control. The controllable components consist of:

In the shorter term: the size and composition of the liquid asset and prudential

asset portfolios; the size and maturity structure of the professional funding

portfolio; and maintaining an effective liquidity buffer consisting of high

quality liquefiable money market instruments.

In the medium term: by encouraging business units to broaden the depositor base

(especially retail type deposits) and to increase the group’s share of transactional banking balances (current- and savings accounts).

In the longer term: the management of its operations generally to ensure that

there are no unexpected large losses which could give rise to liquidity stress;

ongoing management of relationships with major sources of liquidity;

only accepting a prudent level of risk and neutralising all excess risks in all portfolios where possible;

diversification of the depositor base wherever possible; and developing the group’s franchise to improve both its reputation

and customer spread.

A comprehensive liquidity risk management reporting system is in place, which includes: daily reporting to executive and senior management of

the bank’s liquidity risk position as well as reasons for any significant changes in the liquidity risk position;

ongoing monthly reporting of the liquidity risk and funding structure of the bank including significant shifts in the liquidity risk and explanations thereof; and

analysis of the long-term changes in the liquidity risk and funding structure of the bank with explanations and plans to rectify any adverse change in the composition of deposits.

The group furthermore reports to Nedbank Group Limited ALCO on a monthly basis the liquidity risk limit utilisation and an assessment of the liquidity risk conditions.

The Bank of Namibia via a determination requires Nedbank Namibia to maintain a statutory liquidity based on liabilities to the public reduced by monies on lent to other Namibian banks. A portion of this buffer takes the form of an interest free deposit with the Bank of Namibia. To accommodate daily

liquidity flows and in order to participate at the Bank of Namibia repurchase window, a surplus buffer stock position of Namibian government gilts is held. This also supports the intra-day clearing requirements of the National Payment System.

Nedbank Namibia also holds an additional liquidity buffer at all times. This buffer may take the form of any combination of the following: surplus liquid assets in excess of those needed for normal intra-

day and statutory requirements; loans to other clearing banks in Namibia; any other immediately liquefiable instrument with the approval

of ALCO; and the liquidity buffer will be reviewed and confirmed at monthly

ALCO meetings.

A liquidity risk contingency plan is in place, which includes procedures to be followed and communication required when the plan is triggered.

Market risk in the trading bookMarket risk in the trading book is the risk of loss as a result of unfavourable changes in market prices such as foreign exchange rates, interest rates, equity prices, credit spreads and commodity prices. There is a trading market risk within the NedNamibia Holdings Group’s proprietary trading activities (trading on the NedNamibia Holdings Group’s own account). Concentration risk is a sub-risk of market risk.

Market risk in the banking bookMarket risk in the banking book is the risk of loss in the banking book as a result of unfavourable changes in foreign exchange rates and interest rates.The sub risks of market risk in the banking book are: Interest rate risk in the banking book; Foreign exchange translation risk; Foreign exchange transaction risk in the banking book; Equity (investment) risk; and Property risk.

Interest rate riskInterest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

Interest Rate Risk ManagementThe group has identified the following four sources of interest rate risk to which the group is exposed:

Change in the level of interest rates This is the risk associated with a general decline or increase in the level of interest rates. All interest rates will move by approximately the same amount – the so-called “parallel shift” in interest rates.

Change in the slope of the yield curve Under this risk there is a change in a certain class of interest rates. For example all short-term rates might change without any change to long-term rates.


RISK GOVERNANCE (continued)Interest rate risk (continued)Interest Rate Risk Management (continued)

Basis or margin risk This is the risk that interest rates with the same or similar tenors do not move by the same amount. An example would be a change in short-term interest rates, but no change in the prime rate.

Embedded customer options in products Under this risk the customer may have an early termination option on a fixed rate contract. The group may be unable to recover any penalty or the penalty is small compared to the loss suffered should the option be exercised.

Interest rate risk is measured using the following methodologies:

Interest rate re-pricing gapAll assets, liabilities and off-balance sheet items at the measurement date are analysed into predefined time buckets. The bucket selected is the earlier of the maturity or next re-pricing date for each item. A net re-pricing balance (“gap”) for each bucket is calculated as well as cumulative re-pricing balances (“cumulative gap”). Limits on the quantum of mismatch in a bucket are set to manage the interest rate risk of the balance sheet, in particular a cumulative limit for the 0 to 3 month bucket.

Sensitivity of forecast earnings to interest rate shocksEarnings for the next twelve months are projected using a ‘base case’ interest rate scenario. The earnings for the same period are recalculated, but with all interest rates shocked by a standard 100 basis point parallel decrease in the yield curve and all other rates. The difference between the earnings figures of the ‘base case’ and each shock scenario is the earnings sensitivity to the selected interest rate shock.

Interest rate risk management entails identifying and quantifying the sensitivity of the group’s income to each of these sources of risk. After the interest rate risks have been quantified, strategies to manage or immunise the group from these risks are implemented.

The final responsibility for the management of interest rate risk rests with the board of directors who has delegated the day-to-day accountability via the EXCO to the ALCO. ALCO is responsible for ensuring that the necessary policies, frameworks and processes and procedures to manage interest rate risk within the bank are developed and implemented. It is also responsible for monitoring the bank’s compliance with the policy as well as the agreed risk limits. ALCO reports to the group EXCO and via the GRCMC to the board regarding the bank’s interest rate risk management. The reporting includes current exposure to interest rate changes, high-level strategies adopted to hedge interest rate risk, major assumptions used to derive the interest rate risk and major process and or policy issues or shortcomings and plans for their elimination. ALCO is responsible

for implementing this framework throughout Nedbank Namibia and for ensuring compliance by all operating units with the limits and other provisions of this framework.

Interest rate risk is assessed through the use of traditional gap analysis techniques. Gap analysis measures the volumes of assets and liabilities subject to re-pricing within a given period. For this purpose assets and liabilities are classified according to their contractual re-pricing characteristics. Through the use of balance sheet stress testing and net interest income scenarios the impact of interest rate movements and risk concentrations can be identified and measured. Strategies are then developed for mitigating such risks.

Net Interest Margin (“NIM”) is split into the following components, each of which should be separately managed and reported: Lending spread comprising the difference between the

incremental cost of funds and the interest rate earned on interest paying balances;

Funding spread comprising the difference between the interest rates paid on liability balances and the incremental cost of funds;

Endowment spread comprising the net interest paid or received at the incremental cost of funds rate on the net assets or liabilities not earning or paying interest; and

Mismatch spread being the difference between the incremental cost of funds on lending transactions and the incremental cost of funds on deposits raised and adjusted for strategies that have been implemented.

The business units responsible for originating transactions manage the lending, funding and endowment spread. Staff having the required skills and access to the necessary resources analyse, report and manage mismatch spread. All new products launched by the group are subject to an approval process in order to ensure that the interest rate risk has been correctly identified and is being properly managed. No fixed rate lending is performed unless it is fully hedged.

Maximum exposures to interest rate risk are monitored by setting interest rate risk limits, within which the group must operate. Limits are set for the net interest income impact of parallel changes in interest rates and for mismatches and are periodically reviewed.

Currency RiskCurrency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in the foreign exchange rates.

Currency risk managementThe group undertakes a wide variety of transactions denominated in foreign currency resulting in exposure to exchange rate fluctuations. Transactions that result in currency risk include among other foreign exchange cash dealing, transactions with foreign banks, transactions on customer accounts denominated in foreign currency and forward exchange contracts. The revaluation of asset or liability balances denominated in foreign currencies at day end

(continued)



(referred to as the net open position) also results in exposure to changes in foreign exchange rate. The main currencies to which the group is exposed are US Dollar, Euro and British Pound.

Exposure to currency risk is measured as follows: Intraday position, being the foreign exchange risk exposure, in

either single currency or as a sum of all currencies, which the group incurs between the opening and closing of business on the same day; and

Net open position, being the net balance between assets and liabilities held in a foreign currency at close of business each day.

The final responsibility for the management of currency risk rests with the board of directors, which in turn has delegated the management of currency risk to ALCO and the day to day accountability to the Treasury department. ALCO is responsible for ensuring that the necessary policies, frameworks, processes and procedures to manage currency risk within the group are developed and implemented and that the group complies with local legislation and regulations. It is also responsible for monitoring the group’s compliance with the policy as well as the agreed risk limits.

Exposure to currency risk is managed through the setting of exposure limits and monitoring of compliance to the set exposure limits. These limits include: Aggregate net open position limits

The aggregate net open spot position is managed and monitored not to exceed the limits as determined by the Bank of Namibia regulations. These limits are set not to expose the group to single currency risk in major currencies (US Dollar, Euro and British Pound) exceeding 10% of capital and reserves, single currency risk on other currencies in excess of 5% of capital and reserves and for overall foreign exchange exposure, not to exceed 20% of the group’s capital and reserves.

Limits on aggregate dealings with counterparties A limit has been set per counterparty and dealers monitor

exposures daily to ensure that aggregate deals with a counterparty do not exceed the set limit.

Limits on single day delivery by counterparty A limit is set and monitored for the aggregate limit per

counterparty, which may be utilised for a single day delivery.

Trading limits for dealers The Executive: Treasury assigns a limit for trading to each dealer

authorised to deal in foreign exchange. Dealers are only allowed to trade with approved counterparty banks and in amounts not exceeding the limits set per counterparty and per currency.

Stop loss limits

Dealers leave a stop loss order for any open position exceeding a set limit, thereby limiting the potential losses from foreign exchange rate fluctuations. Stop loss limits are set for both the net open position at close of business each and for any intra-day open position. Dealers are only allowed to trade with approved counterparty banks and in amounts not exceeding the limits set per counterparty and per currency.

DEFINITIONS OF OTHER SIGNIFICANT RISKS

The definitions of other significant risks are disclosed on page 33 under the Chief Risk Officers’ report.

MANAGEMENT COMMITTEES

GROUP EXECUTIVE COMMITTEE (“EXCO”)The group EXCO is the highest ranking management committee in the group, assisting the Managing Director in managing the business of the group, subject to regulatory and statutory limits, the board’s limitations on delegation of authority and the board approved policies and authority levels of the group. The committee furthermore assists the Managing Director to guide and control the overall direction of the business of the group and in particular the bank and acts as a medium of communication and co-ordination between business units and the board. Responsibility for material management decision-making in the group is delegated by the board to the group EXCO, which in turn is accountable to the board through the Managing Director, who is the chairperson of group EXCO and a member of the board. EXCO members are upon the recommendation of the group REMCO appointed by the board.

The following structural changes were effected to the EXCO during the period under review: The previous Executive Human Resources, Mrs Diana Mokhatu,

resigned with effective date 1 April 2016. The strategy and human capital structures were combined and the Executive Human Resources position was converted into the Executive Strategy and Human Capital Position. Mrs Silke van der Merwe was appointed into this position with effective date 22 June 2016.

The Corporate and Business Banking structure was revised. Business Banking was incorporated into the Executive Retail’s portfolio and the corporate- and investment banking structures were combined. The Executive Corporate and Business banking position was converted into the Executive Corporate and Investment Banking position and filled by Dr Edward Turner with effective date 4 July 2016.

Until such time that the restructuring of the Treasury division has been finalised and the Executive: Treasury position filled, Treasury will report to the Chief Financial Officer, Mr Karl-Stefan Altmann.

Mrs Sumari von Kunow was appointed as Chief Risk Officer with effective date 1 January 2016.


(continued)


As reflected in the Corporate Governance Structure on page 76 of this report, the group EXCO is supported by the following management committees, which are governed by board approved charters, incorporating standard principles of good business governance and which are all accountable to the group EXCO:

Asset and Liability committee (“ALCO”); Operational Distribution committee; Pricing committee; Social Investment committee; Product committee; Information Technology committee; Health and Safety committee; Transformation /Affirmative Action committee; Formal Recognition committee; Vendor and Procurement committee.

THE BASEL CAPITAL ACCORD (“BASEL II”) The group places significant focus on risk management in compliance with Basel II. Nedbank Namibia presently applies the standardised approach for regulatory purposes in line with the rest of the industry. Banking Institutions have been advised by Bank of Namibia that all banking institutions that are considered Domestically Systemically Important Banks will have to implement Basel III. Bank of Namibia issued the draft determination in October 2016, inviting comments and requesting completion of questionnaires as part of a

Quantitative Impact Study (QIS) by end of February 2017. The draft determination indicates an effective date 1 July 2017. Nedbank Namibia is presently preparing for the implementation of Basel III, which will be done in phases. For credit risk management purposes of corporate and business banking clients, the bank makes use of rating models based on South African data. A summary of the ratings is submitted quarterly to the Cluster Credit Committee (“CCC”) of Nedbank Limited. The bank complies with regulatory requirements in submitting its Internal Capital Adequacy Assessment Process (“ICAAP”) reporting to Bank of Namibia. The assumptions underlying ICAAP are continuously evaluated and reported to the GRCMC.

ETHICS

The group is a value-driven organisation, which is committed to organisational integrity and high standards of ethical behaviour in its dealings with all the group’s stakeholders. Its values of integrity, respect, accountability, pushing beyond boundaries and being people-centered have been enshrined in the group’s “Deep Green Aspirations” and incorporated into a code of ethics as the foundation of the group’s culture. Ethical and trustworthy employees are key to our continued success and the required level of ethical behaviour is achieved through ongoing employees’ awareness and education efforts and a culture of zero tolerance for ethical misconduct.

MANAGEMENT COMMITTEES (continued)GROUP EXECUTIVE COMMITTEE (“EXCO”) (continued)

The composition of EXCO is as follows:

The group EXCO meets formally on a monthly basis and informally on a weekly basis. Additional meetings may be held when necessary.

Executive Committee Members

Name of Member Occupation Current Status

Matthews L Managing Director No change

Meeks R Chief Operating Officer No change

Stafford-Evans A Executive Credit and Market Risk No change

Von Kunow S Chief Risk Officer Appointed 1/1/2016

Matthee H Executive Retail & Business Banking No change

Mokhatu D Executive Human Resources Resigned 1/4/2016

Van der Merwe S Executive Strategy & Human Capital 22/6/2016

Turner E Executive Corporate & Investment Banking 4/7/2016

Altmann K-S Chief Financial Officer No change

Van Rhyn S Chief Information Officer No change

Schlechter E Executive: Bank Assurance and Wealth Management No change

Executive Treasury Vacant


The mission of the Ethics Office is to provide guidance and clarity on the Code of Ethics and the organisational policies and procedures and to provide advice and action in the case of a potential ethical dilemma or breach to any employee.

The Ethics Office reports on ethics training statistics, declarations of outside interests as well as gift declarations to Board and the Executive Committee. Ethics Awareness Sessions were held in Windhoek, Walvis Bay and Northern Namibia. A total of 87 percent of staff attended the Ethics awareness sessions this year.

During 2016, NNH’s Ethics Officers attained the Ethics Officer Accreditation from the Ethics Institute of South Africa, this renders them certified to conduct awareness training sessions and investigations going forward. They will also have the necessary knowledge and skill to work with the Nedbank Group Ethics Officer in designing an appropriate ethics programme for NNH, once the ethics risk assessment for Namibia has been conducted.

The board of directors is confident that high ethical standards are maintained in the group and that business is conducted in a manner, which under all reasonable circumstances, is beyond reproach.

GOVERNANCE STRUCTURES WITHIN OTHER OPERATING SUBSIDIARIES

NedLoans (Proprietary) Limited (“NedLoans”)The internal control-, risk management- and compliance environments of NedLoans are monitored by the GAC and GRCMC reporting into the board of directors.

NedCapital Namibia (Proprietary) Limited (“NedCapital”)During 2016, the service offering of NedCapital Namibia has been enrolled under Nedbank Namibia Limited and a business unit called “Corporate and Investment Banking” has been established. This move was to ensure that there was a consistent and seamless client experience under the overall Nedbank commitment to excellent service delivery and replicates the Nedbank Group structure.

The de-registration of the dormant company NIB Mining Finance (Proprietary) Limited, a 100% subsidiary of NedCapital Namibia, has been lodged with the Registrar of Companies. Publication of the de-registration in the Government Gazette is still pending.

NedNamibia Life Assurance Company Limited (“NNLA”)NedPlan Insurance Brokers Namibia (Proprietary) Limited (“NIBN”)

These operating companies are 100% subsidiaries of NedNamibia Holdings. The companies’ internal control environments are monitored by the GAC while the GRCMC

monitors the companies’ capital management as well as its risk management-, information technology and compliance environments. Both committees report into the NedNamibia Holdings board.

COMPOSITION OF NNLA BOARD

To make the NNLA board compliant with regulatory requirements and governance principles, the following additional independent non-executive directors were appointed with effective date 14 June 2016: Mr Richard Niddrie; and Mr Trophimus Hiwilepo

The NNLA board comprise the following members:

DIRECTORS’ DECLARATION

The directors of NedNamibia Holdings group confirm and acknowledge that: it is the directors’ responsibility to prepare the group annual

financial statements that fairly present the state of affairs of the group at the end of the financial year and the profit or loss and cash flows for that period;

the auditors are responsible for reporting on whether the annual financial statements are fairly presented;

adequate accounting records and an effective system of internal control and risk management have been maintained;

appropriate accounting policies, supported by reasonable and prudent judgements and estimates have been applied consistently, except as otherwise disclosed; and

applicable accounting standards have been adhered to or, if there has been any departure in the interest of fair presentation, this has been disclosed, explained and quantified.

Independent non-executive directors

Peters R (Chairman)

Etzold U

Hiwilepo T

Niddrie R

Tjipueja P

Non-executive directors

Blumeris L

Matthews L

Executive director

Vermeulen G

INSURANCE RISK COMMITTEE

NEDBANK NAMIBIA LIMITEDBOARD OF DIRECTORS

BANK CREDIT COMMITTEE

NEDNAMIBIA HOLDINGS LIMITEDBOARD OF DIRECTORS

*GROUP RISK ANDCAPITAL MANAGEMENT COMMITTEE

*GROUP DIRECTORS’AFFAIRS COMMITTEE

*GROUP REMUNERATION, NOMINATION, EMPLOYMENT EQUITY AND SKILLS RETENTION COMMITTEE

*GROUP AUDITCOMMITTEE

GROUP EXECUTIVE COMMITTEE (EXCO)

CREDIT RISK AND MONITORING COMMITTEE (MONITORING CRAM)

GROUP ENTERPRISE-WIDE RISK COMMITTEE (ERCO)

OPERATIONAL DISTRIBUTIONCOMMITTEE

ASSET AND LIABILITYCOMMITTEE (ALCO)

INFORMATION TECHNOLOGY COMMITTEE

FORMAL RECOGNITION COMMITTEE

HEALTH & SAFETYCOMMITTEE


* Group relates to NedNamibia Holdings Group


PRICINGCOMMITTEE

SOCIAL INVESTMENT COMMITTEE

PRODUCT COMMITTEE

NEDLOANS(PROPRIETARY) LIMITEDBOARD OF DIRECTORS

CBN NOMINEES(PROPRIETARY) LIMITEDBOARD OF DIRECTORS

WALVISBAY LAND SYNDICATE (PROPRIETARY) LIMITEDBOARD OF DIRECTORS

TEN KAISER WILHELM STRASSE (PROPRIETARY) LIMITED BOARD OF DIRECTORS

NAMCLEAR(PROPRIETARY) LIMITEDBOARD OF DIRECTORS

NEDBANK NAMIBIA LIMITEDBOARD OF DIRECTORS

NEDNAMIBIA LIFEASSURANCE COMPANY LIMITEDBOARD OF DIRECTORS

NEDPLAN INSURANCE BROKERSNAMIBIA (PROPRIETARY) LIMITEDBOARD OF DIRECTORS

NEDPROPERTIES(PROPRIETARY) LIMITEDBOARD OF DIRECTORS

NEDCAPITAL NAMIBIA(PROPRIETARY) LIMITEDBOARD OF DIRECTORS

VENDOR AND PROCUREMENT COMMITTEE

TRANSFORMATION/AFFIRMATIVE ACTION COMMITTEE

Group Governance Structure31 December 2016

NIB MINING FINANCE(PROPRIETARY) LIMITEDBOARD OF DIRECTORS



The directors are responsible for the integrity and fair presentation of the consolidated and separate annual financial statements of NedNamibia Holdings and related information included in this annual report. The consolidated and separate annual financial statements presented on pages 69 to 73 (section relating to financial risk management) and 83 to 170 have been prepared in accordance and compliance with International Financial Reporting Standards (“IFRS”) adopted by the International Accounting Standards Board (“IASB”), and interpretations issued by the International Financial Reporting Interpretations Committee of the IASB and the Namibian Companies Act and include amounts based on judgments and estimates made by management. The directors have also sanctioned the other information included in the annual report, since they are responsible for both its accuracy and consistency with the annual financial statements.

To enable the Board to discharge its responsibilities, management has developed and continues to maintain a system of internal financial control. The Board has ultimate responsibility for this system of internal control and reviews the effectiveness of its operation primarily through the Group Audit- and Group Risk and Capital Management Committees and other risk monitoring functions.

The internal financial controls include risk-based systems of accounting and administrative controls designed to provide reasonable, but not absolute, assurance that assets are

safeguarded and that transactions are executed and recorded in accordance with generally accepted business practices and the group’s written policies and procedures. The controls are monitored by management and include a comprehensive budgeting and reporting system operating within strict deadlines and an appropriate control framework. As part of the system of internal financial control, the Internal Audit division- which operates unimpeded and independently from operational management – conducts operational, financial and specific audits within the group and coordinates audit coverage with the external auditors.

The consolidated and separate annual financial statements have been audited by the independent auditors, Deloitte & Touche, who were given unrestricted access to all financial records and related data, including minutes of all meetings of shareholders, the Board of directors and committees of the Board. The directors believe that all representations made to the independent auditors during the audit are valid and appropriate.

The going-concern basis has been adopted in preparing the consolidated and separate annual financial statements. The directors have made an assessment of the group’s and company’s ability to continue as going concerns and there is no reason to believe that the company or any other company within the group will not be a going concern in the year ahead.

The audit report of the independent auditors is presented on page 82.

T J Frank (Sc)Chairman

L J MatthewsManaging Director

The consolidated and separate annual financial statements of NedNamibia Holdings Limited were approved by the NedNamibia Holdings Board of directors on 24 February 2017 and are signed on its behalf by:

Directors’ ResponsibilityFor the year ended 31 December 2016


STATEMENT OF ACTUARIAL VALUES OF ASSETS AND LIABILITIES I have conducted an actuarial valuation of NedNamibia Life Assurance Company Limited (the Company) in accordance with generally accepted actuarial principles. These principles require reasonable provision for future outgo under in-force policies, generally based on the assumption that current conditions will continue. Provision is therefore not made for all possible contingencies. I have accepted that the Financial Statements comply with the Companies Act and the Long-Term Insurance Act of Namibia.

Actuarial Balance Sheet – Published Reporting BasisThe excess of assets over liabilities on the Published Reporting Basis is shown in the table below:

StatutoryActuary’s Report

To the Member of NedNamibia LifeAssurance Company Limited

2016 2015 N$ N$

Value of assetsTotal value of assets per statement of financial position 247 072 271 310 690 684 Value of assets on the published basis 247 072 271 310 690 684 Less liabilities: Actuarial value of policy liabilities 99 534 898 100 297 801 Current and other liabilities 5 506 399 3 353 031

EXCESS OF ASSETS OVER LIABILITIES 142 030 974 207 039 852

Represented by:Share capital and premium 4 000 000 4 000 000 Accumulated surplus 138 030 974 203 039 852

ORDINARY SHAREHOLDER’S INTEREST 142 030 974 207 039 852

2016 2015 N$ N$

Value of assetsTotal value of assets per statement of financial position 247 072 271 310 690 684Less: Disallowed assets 7 091 783 8 546 280 Value of assets on the statutory basis 239 980 488 302 144 404 Less liabilities: Actuarial value of policy liabilities 99 534 898 100 297 801 Current and other liabilities 5 506 399 3 353 031

EXCESS OF ASSETS OVER LIABILITIES 134 939 191 198 493 572

CAPITAL ADEQUACY REQUIREMENT (CAR) 4 000 000 5 829 277

Excess of assets over liabilities as a multiple of CAR 34 times 34 times

Actuarial Balance Sheet – Statutory Reporting BasisThe excess of the value of assets over liabilities on theStatutory Reporting Basis is shown in the table below:


ANALYSIS OF CHANGE IN EXCESS ASSETS

The excess of the value of assets over liabilities on thePublished Reporting Basis has changed as follows overthe reporting period:

CHANGES IN VALUATION METHODS AND ASSUMPTIONSThe value of the liabilities decreased by N$7.4m (before tax) as a result of the following changes to the valuation assumptions and methodology:

– Economic Assumptions The economic basis was reviewed to reflect the current economic environment. This has resulted in a lower overall investment return to discount future liability outgo. At the same time, the expense inflation assumption was decreased.

– Non-Economic AssumptionsThe expense and retrenchment assumptions were reviewed in the light of recent and historic experience. In addition, the discretionary reserve of N$5 million held last year was reduced to N$2.5 million over the valuation period and other minor modelling refinements were made.

VALUATION OF ASSETS Assets are valued at statement of financial position values i.e. at market or director’s value as described in the Annual Financial Statements. NedNamibia Assurance Company Limited has disallowed assets as defined in Section 27 of the Namibian Long-Term Insurance Act.

StatutoryActuary’s Report (continued)

To the Member of NedNamibia LifeAssurance Company Limited

2016 2015 N$ N$

Excess Assets as at end of reporting period 142 030 974 207 039 852 Excess Assets as at beginning of reporting period 207 039 852 129 141 385

Change in Excess Assets over the reporting period (65 008 878) 77 898 467

This change is due to the following factors: Investment return 20 211 076 18 580 936Operating profit 58 787 627 57 470 811Changes in valuation methods or assumptions 7 441 318 3 463 862Taxation (1 448 899) (1 617 142)Total reported earnings per financial statements 84 991 122 77 898 467Dividends paid (150 000 000) –

Total change in Excess Assets (65 008 878) 77 898 467

Reconciliation to reported earnings:Total earnings as per the above table 84 991 122 77 898 467 Reported earnings in annual financial statements 84 991 122 77 898 467

Difference – –

2016 2015 N$ N$

Excess Assets on Published Reporting Basis 142 030 974 207 039 852 Less: Disallowed Assets 7 091 783 8 546 280

Excess Assets on Statutory Basis 134 939 191 198 493 572

Reconciliation of Excess Assets between Published Reporting Basis and Statutory BasisThe excess assets on the Published Reporting Basis reconcile to the excess assets on the Statutory Basis as follows:


VALUATION OF POLICY LIABILITIESThe valuation of the policy liabilities was conducted based on the assumptions below.

The assumptions are based on best estimates of the expected experience. The main assumptions, before allowing for prescribed margins, were as follows: Future persistency, mortality and other decrements are estimated taking into account historical and recent experience; Mortality was allowed for based on a percentage of SA85/90 Heavy plus an allowance for AIDS; Withdrawals were allowed for based on expected experience; An interest rate of 5.6% p.a. (gross of tax) per annum was used; and, Expense inflation was assumed to be 5.9% p.a.

No negative reserves were held.An Incurred But Not Reported (IBNR) reserve of 4/12ths of the annual expected claims was established.A reserve of N$7.3m was held in respect of policies that were sold but not included in the valuation data as at the valuation date.Compulsory margins have been allowed for as outlined in the Actuarial Society of South Africa’s guidance note - SAP 104 (version 8). The elimination of negative reserves was included as a discretionary margin and amounted to N$0.5m.

CAPITAL ADEQUACY REQUIREMENTSThe capital adequacy requirement (CAR) is calculated in accordance with SAP104 (version 8) (other than the Minimum Capital Requirement, which is based on Namibian regulation) issued by the Actuarial Society of South Africa, to determine whether the excess of assets over liabilities is sufficient to provide for the possibility of actual future experience departing negatively from the assumptions made in calculating policy liabilities and against fluctuations in the value of assets.

The CAR can allow for Management action; for the purpose of this valuation, no management action has been allowed for.

For the purpose of grossing up the intermediate ordinary capital adequacy requirements (IOCAR) to determine the ordinary capital adequacy requirements (OCAR), it has been assumed that assets backing the capital adequacy requirements are invested 100% in cash or cash equivalents. This is in line with a decision taken by the Board.

The OCAR of N$3.9m exceeded the termination capital adequacy requirement (“TCAR”) at the valuation date. However, regulation requires that a Life Company with multiple products hold at least N$4m in capital. Therefore, current CAR for NedNamibia Life Assurance is N$4m and sufficient as per regulations.

The excess assets are 34 times the capital adequacy requirement.

CERTIFICATION OF STATUTORY FINANCIAL POSITION I hereby certify that: The valuation on the Statutory basis of NedNamibia Life Assurance Company Limited as at 31 December 2016, the results of which are

summarised above, has been conducted in accordance with, and this Statutory Actuary’s report has been produced in accordance with the Namibian Long-Term Insurance Act and applicable Actuarial Society of South Africa Advisory Practice Notes and Standards of Actuarial Practice;

I have accepted that the annual financial statements comply with the requirements of the Namibian Companies Act and Long-Term Insurance Act in Namibia;

This Statutory Actuary’s Report, read together with the annual financial statements, fairly represents the financial position of the Company; and,

Therefore, the company is financially sound on the statutory basis as at the valuation date, and in my opinion is likely to remain financially sound for the foreseeable future.

S C Poriazis Statutory ActuaryFellow of the Actuarial Society of South Africa

23 March 2017


Opinion We have audited the group financial statements and company annual financial statements of NedNamibia Holdings Limited, which comprise the consolidated and separate statements of financial position as at 31 December 2016, the consolidated and separate statements of comprehensive income, the consolidated and separate statements of changes in equity and the consolidated and separate statements of cash flows for the year then ended and the notes to the financial statements, including a summary of significant accounting policies and other explanatory notes and the Report of the directors as set out on pages 69 to 73 (section relating to financial risk management) and 83 to 170. In our opinion, the consolidated and separate financial statements present fairly, in all material respects, the financial position of the NedNamibia Holdings Limited and the group as at 31 December 2016 and their financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs) and the requirements of the Companies Act of Namibia.

Basis for OpinionWe conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the consolidated and separate Financial Statements section of our report. We are independent of the Group and Company in accordance with the independence requirements applicable to performing audits of financial statements in Namibia which is consistent with the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants (Parts A and B). We have fulfilled our other ethical responsibilities in accordance with the ethical requirements applicable to performing audits in Namibia. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Responsibilities of the directors for the consolidated and separate Financial StatementsThe directors are responsible for the preparation and fair presentation of the consolidated and separate financial statements in accordance with International Financial Reporting Standards and the requirements of the Companies Act of Namibia and for such internal control as the directors determine is necessary to enable the preparation of consolidated and separate financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated and separate financial statements, the directors are responsible for assessing the Group and Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.

Auditor’s Responsibilities for the Audit of the consolidated and separate Financial StatementsOur objectives are to obtain reasonable assurance about whether the consolidated and separate financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated and separate financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the

consolidated and separate financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group and Company’s internal control.

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.

Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group and Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated and separate financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group and Company to cease to continue as going concerns.

Evaluate the overall presentation, structure and content of the consolidated and separate financial statements, including the disclosures, and whether the consolidated and separate financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group and Company to express an opinion on the consolidated and separate financial statements. We are responsible for the direction, supervision and performance of the audit. We remain solely responsible for our audit opinion.

We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

Deloitte & ToucheRegistered Accountants and AuditorsChartered Accountants (Namibia)ICAN practice number: 9407 | PO Box 47, Windhoek, Namibia

Erwin Tjipuka Partner | Windhoek | 28 April 2017

Partners: E Tjipuka (Managing Partner), RH McDonald, H de Bruin, J Cronjé, A Akayombokwa, AT Matenda, G Brand (Director)Associate of Deloitte Africa, a Member of Deloitte Touche Tohmatsu Ltd

Independent Auditor’s ReportTo the Shareholder of NedNamibia Holdings Limited


The directors have pleasure in submitting their report together with the annual financial statements of NedNamibia Holdings Limited (hereinafter referred to as “the company”) and its subsidiaries (hereinafter referred to as “the group”) for the year ended 31 December 2016. The details of the annual financial results are set out in these annual financial statements, which have been prepared under the supervision of the group’s Chief Financial Officer, Mr. Karl-Stefan Altmann, in compliance with International Financial Reporting Standards, adopted by the International Accounting Standards Board (“IASB”), and interpretations issued by the International Financial Reporting Interpretations Committee of the IASB and the Namibian Companies Act and include amounts based on judgments and estimates made by management.

INTEGRATED REPORTThe integrated report has been prepared in line with best practice pursuant to the recommendations of The NamCode, which is based on the principles contained in King III and other international best practices, but adapted to suit the Namibian legislative landscape.

Statement of the board of directors of NedNamibia Holdings LimitedThe board of directors acknowledges its responsibility to ensure the integrity of the integrated report, which in the board’s opinion addresses all material issues and presents fairly the integrated performance of the organisation and its impacts.

NATURE OF THE BUSINESSNedNamibia Holdings is a registered holding company which, through its subsidiaries, provides a wide range of banking and financial services, including corporate- and, business banking, small and medium enterprises (SME’s), retail banking, property and asset finance, private banking, assurance and insurance, foreign exchange, securities trading, wealth management and investment banking. The group’s head office is in Windhoek and its operations are confined to Namibia.

HOLDING COMPANY AND CONTROLLING SHAREHOLDERThe holding company of NedNamibia Holdings is Nedbank Group Limited, a South African registered company, which holds 100% of the issued share capital of NedNamibia Holdings. Its ultimate controlling shareholder is Old Mutual plc, incorporated in England and Wales.

The NedNamibia Holdings group structure is set out on page 8 of this report.

FINANCIAL RESULTS FOR THE YEAR Full details of the consolidated annual financial results are set out on pages 83 to 170 of this report.

SHARE CAPITALNedNamibia Holdings has an authorised share capital of 80 000 000 ordinary shares of 25 cents each. The company’s issued share capital comprises 70 381 644 ordinary shares.

At the annual general meeting held 30 June 2016 the shareholder has placed the unissued share capital of 9 618 356 ordinary shares under the control of the directors until the next annual general meeting.

DIVIDENDSDetails of the dividend appear in note 35 to the annual financial statements.

ACCOUNTING TREATMENT OF LOANS AND ADVANCESThe accounting treatment of loans and advances disclosed in the annual financial statements complies with IFRS. The impairment determined in compliance with the requirements of BID-2 (Determinations on the Classification of Loans and the Suspension of Interest on Non-Performing Loans and the Provisions for Bad and Doubtful Debts) issued pursuant to Section 71(3) of the Banking Institutions Act, 1998 is recorded in the returns to the Bank of Namibia. The excess impairment determined in compliance with BID-2 over the impairment determined based on IFRS is recorded as a general risk reserve in the annual financial statements.

BOARD OF DIRECTORSOn 12 May 2016, Mr. Peter Hibbit was appointed as independent non-executive director. The group’s Chief Financial Officer, Mr. Karl-Stefan Altmann was appointed as executive director to the NedNamibia Holdings board effective 22 June 2016, which is in line with Chapter 2, principle 18.12 of The NamCode.

In terms of the company’s articles of association, one-third of the directors are required to retire at each annual general meeting and may offer themselves for election or re-election. The rotating directors are those longest in office since their last election. At the annual general meeting held in terms of Section 187(9) of the Companies Act, Act 28 of 2004 on 30 June 2016, the following directors who retired by rotation in terms of the articles of association were appointed as directors of the company for a further term: Mr. Adriaan du Plessis Mr. Richard Buchholz Mr. Richard Niddrie

The articles of association further state that the board has the right to fill any vacancies occurring on the board, but any person so appointed shall retire at the next following annual general meeting and be eligible for re-election.

Report of theDirectors



BOARD OF DIRECTORS (continued) At the annual general meeting held on 30 June 2016 the following newly appointed director, who retired in terms of the articles of association, has been appointed as director of the company: Mr. Peter Hibbit

The NedNamibia Holdings board presently comprises the following members:

Nationality Date of appointment

Frank Theo J (SC) (Chairman) Independent non-executive director Namibian 11 February 2005

Altmann Karl-Stefan Executive director, Chief Financial Officer Namibian 22 June 2016

Buchholz Richard WR Non-executive director South African 19 August 2014

Du Plessis Adriaan J Non-executive director South African 19 August 2014

Hibbit Peter CW Independent non-executive director South African 12 May 2016

Hiwilepo Trophimus T Independent non-executive director Namibian 22 August 2014

Matthews Lionel J Executive director, Managing Director Namibian 30 September 2013

Muatunga Liina M Independent non-executive director Namibian 22 August 2014

Niddrie Richard P Independent non-executive director Namibian 6 November 2014

Schimming-Chase Afra R Independent non-executive director Namibian 22 August 2014

The board welcomes the newly appointed directors as members of the board.The directors’ profiles and qualifications appear on pages 10 to 13 and the details of directors’ remuneration appear on page 59.

SECRETARY AND REGISTERED OFFICEThe group Company Secretary is Mrs. Mechthild Meiring, whose business address as well as that of the registered office is:

Physical address:12-20 Dr Frans Indongo Street, Windhoek, NAMIBIA

Postal address:P O Box 1, Windhoek, NAMIBIA The company’s registration number is 91/075.

After having served as group Company Secretary for more than 3 decades, Mrs. Meiring will retire with effect from 1 March 2017 and will be replaced by Ms. Saretha Malan.

The board conveys its appreciation to Mrs. Meiring for her dedicated and loyal service during her term of office.

TRANSFER SECRETARIESTransfer Secretaries (Proprietary) Limited will remain the company’s transfer secretaries until such time that most

of the minority shareholders have surrendered their original documents of title as defined in the Scheme of Arrangement that was concluded between Nedbank Group Limited and the minority shareholders in 2007. Their business address is 4 Robert Mugabe Avenue, entrance in Burg Street, Windhoek, Namibia, P O Box 2401, Windhoek, Namibia.

DIRECTORS’ INTEREST IN THE CAPITAL OF THE COMPANYNone of the directors have an interest in the share capital of the company.

CONTRACTS AND MATTERS IN WHICH DIRECTORS OF THE COMPANY HAVE AN INTERESTNo contracts in which directors of the company had an interest and that significantly affected the affairs of business of the company or any of its subsidiaries were entered into during the year under review.


Report of theDirectors (continued)


Name of subsidiary Type of business Issued share capital Proportion held

Nedbank Namibia Limited Commercial banking 67 758 596 ordinary shares 100%

NedCapital Namibia (Proprietary) Limited Specialised finance service 8 000 ordinary shares 100%

NedNamibia Life Assurance Long-term insurance 4 000 000 ordinary shares 100%Company Limited

NedPlan Insurance Brokers Insurance broker 100 ordinary shares 100%

Namibia (Proprietary) Limited

NedProperties (Proprietary) Limited Property holding company 100 ordinary shares 100%

More details on direct and indirect subsidiaries of the group are set out in note 11 to these annual financial statements.

SPECIAL RESOLUTIONSSpecial resolutions passed by company

No special resolutions were passed by NedNamibia Holdings Limited during the year under review.

Special resolutions passed by subsidiary companies

NedNamibia Life Assurance Company LimitedOn 7 March 2016 NedNamibia Life Assurance Company Limited passed a special resolution, approving the registration of “NNLA” as the shortened name for NedNamibia Life Assurance Company Limited.

Reason and Effect:The reason and effect of the special resolution are to simplify the utilisation of the registered name NedNamibia Life Assurance Company Limited, by providing for “NNLA” as the shortened registered name.

NedPlan Insurance Brokers Namibia (Proprietary) LimitedOn 7 March 2016 NedPlan Insurance Brokers Namibia (Proprietary) Limited has passed a special resolution, approving

the registration of “NIBN” as the shortened name for NedPlan Insurance Brokers Namibia (Proprietary) Limited.

Reason and Effect:The reason and effect of the special resolution are to simplify the utilisation of the registered name NedPlan Insurance Brokers Namibia (Proprietary) Limited by providing for “NIBN” as the shortened registered name.

GOING CONCERN DECLARATIONThe going-concern basis in preparing annual financial statementshas been adopted. The directors have no reason to doubt thatthe group or any of its subsidiaries has adequate resources tocontinue in operational existence for the foreseeable future.

POST BALANCE SHEET EVENTSThe directors are not aware of any material post-balance sheet events that have occurred between the balance sheet date and 24 February 2017.

SUBSIDIARIES

As at 31 December 2016, NedNamibia Holdings had the following directly held subsidiaries:


Consolidated statement of financial positionAs at 31 December 2016

86 |

Notes

2016 2015 N$’000 N$’000

ASSETS

Cash and balances with central bank 4, 50 384 529 421 968 Due from other banks 5, 50 577 936 1 194 811 Other short-term securities 6, 50 1 704 058 763 335 Derivative financial instruments 7 16 844 14 724 Government and other securities 8 1 663 147 1 253 445 Loans and advances to customers 9 11 225 366 9 802 400 Other assets 10 139 919 47 346 Investment in subsidiaries, associatesand listed investments 11 37 399 35 846 Property and equipment 12 222 770 230 572 Computer software and development cost 13 36 843 35 026 Goodwill 14 29 125 29 125

Total assets 16 037 936 13 828 598

EQUITY AND LIABILITIES

Capital and reservesShare capital 15 17 595 17 595 Share premium 15 99 536 99 536 General risk reserve 16 88 766 67 072 Revaluation reserve 17 85 862 85 758 Share-based payment reserve 18 16 705 16 705 Available-for-sale reserve 19 15 390 15 758 Retained income 1 887 644 1 607 777

Shareholder’s interest 2 211 498 1 910 201 Non-controlling interest 12 803 13 339

Total shareholder’s equity and non-controlling interest 2 224 301 1 923 540

LIABILITIES

Derivative financial instruments 7 11 644 18 765 Due to other banks 20 995 139 301 244 Due to customers 21 7 378 000 6 678 611 Negotiable certificates of deposit 22 5 055 985 4 551 285 Other liabilities 23 155 432 138 158 Deferred taxation liabilities 24 102 488 102 398 Policyholder liabilities under insurance contracts 25 99 535 100 298 Provision for post-retirement medical benefits 26 9 813 9 450 Long-term subordinated debt instruments 27 5 599 4 849

Total liabilities 13 813 635 11 905 058

Total equity and liabilities 16 037 936 13 828 598


Consolidated statement of comprehensive income


Notes

2016 2015 N$’000 N$’000

Interest and similar income 28 1 383 521 1 129 620 Interest expense and similar charges 28 (701 099) (540 838)

Net interest income 28 682 422 588 782 Impairment of loans and advances 30 (41 091) (53 054)

Income from lending activities 641 331 535 728 Non-interest income 29 323 773 344 233 Share of profit/(loss) from associate 11 1 921 1 311

Net income excluding impairments 1 008 116 934 326

Net income 967 025 881 272 Operating expenditure 31 (583 347) (525 404) Transfers to policyholder liabilities under insurance contracts 32 763 (10 664)BEE transaction expenses 33 (2 282) (1 384)

Profit before taxation 382 159 343 820 Taxation 34 (81 069) (70 680)

Total profit after taxation 301 090 273 140

Other comprehensive income net of taxation

Items that will not be reclassified subsequently to profit or loss: Gain on revaluation of property 3 039 12 784 Remeasurement of defined benefit liability – (1 069)

Items that may be reclassified subsequently to profit or loss: Available-for-sale financial instrument reserve (368) (10 059)

Total other comprehensive income net of taxation 2 671 1 656

Total comprehensive income for the year 303 761 274 796

Total profit after tax attributable to: Non-controlling interest 964 (263) Owners of the parent 300 126 273 403

Total profit after taxation 301 090 273 140

Total comprehensive income attributable to: Non-controlling interest 964 425 Owners of the parent 302 797 274 371

Total comprehensive income for the year 303 761 274 796

Earnings per share (cents) 36 426,42 388,46 Diluted earnings per share (cents) 36 426,42 388,46


Share Share General Revaluation Share based Available-for- Retained Total share- Non-controlling capital premium risk reserve reserve payment reserve sale-reserve income holder’s interest interest Total

N$’000 N$’000 N$’000 N$’000 N$’000 N$’000 N$’000 N$’000 N$’000 N$’000

Balance at 1 January 2015 17 595 99 536 65 169 77 365 16 705 25 817 1 335 481 1 637 668 13 119 1 650 787 Total comprehensive income for the year – – – 12 096 – (10 059) 272 334 274 371 425 274 796 Profit for the year – – – – – – 273 403 273 403 (263) 273 140 Other comprehensive income for the year – – – 12 096 – (10 059) (1 069) 968 688 1 656 Non-controlling interest dividends – – – – – – (975) (975) (975) (1 950) Transfers – – – (3 703) – – 2 840 (863) 770 (93)General risk reserve – – 1 903 – – – (1 903) – – –

Balance at 31 December 2015 17 595 99 536 67 072 85 758 16 705 15 758 1 607 777 1 910 201 13 339 1 923 540

Total comprehensive income for the year – – – 3 039 – (368) 300 126 302 797 964 303 761 Profit for the year – – – – – – 300 126 300 126 964 301 090 Other comprehensive income for the year – – – 3 039 – (368) – 2 671 – 2 671 Non-controlling interest dividends – – – – – – (1 500) (1 500) (1 500) (3 000) Transfers – – – (2 935) – – 2 935 – – – General risk reserve – – 21 694 – – – (21 694) – – –


Notes 15 15 16 17 18 19


Consolidated statement of cash flows

Consolidated statement of changes in equityAs at 31 December 2016

Notes

2016 2015 N$’000 N$’000

Cash generated by operating activities 37.1 695 041 533 182 Cash received from customers 37.2 1 662 129 1 513 073 Cash paid to customers 37.3 (599 313) (522 745)Cash paid to employees and suppliers (538 594) (561 994)Dividends received 2 722 2 481 Taxation paid 37.4 (81 007) (58 686)Recoveries of loans previously written off 30.1 (6 149) 563 Cash movements in advances and other accounts (1 542 211) (1 534 972)Cash movements in operating liabilities 37.5 1 797 464 1 695 462

Cash flow from investment activities (1 349 355) (138 159)

Investment in property, equipment, computer software and development cost (22 089) (37 568)Proceeds on sale of property and equipment 187 – (Purchase)/Sale of non-dealing securities 37.6 (1 327 453) (100 591)

Net (decrease)/increase in cash and cash equivalents (654 314) 395 023 Cash and short-term funds at beginning of the year 1 616 779 1 221 756

Cash and short-term funds at end of the year 37.7 962 465 1 616 779


Share Share General Revaluation Share based Available-for- Retained Total share- Non-controlling capital premium risk reserve reserve payment reserve sale-reserve income holder’s interest interest Total

N$’000 N$’000 N$’000 N$’000 N$’000 N$’000 N$’000 N$’000 N$’000 N$’000

Balance at 1 January 2015 17 595 99 536 65 169 77 365 16 705 25 817 1 335 481 1 637 668 13 119 1 650 787 Total comprehensive income for the year – – – 12 096 – (10 059) 272 334 274 371 425 274 796 Profit for the year – – – – – – 273 403 273 403 (263) 273 140 Other comprehensive income for the year – – – 12 096 – (10 059) (1 069) 968 688 1 656 Non-controlling interest dividends – – – – – – (975) (975) (975) (1 950) Transfers – – – (3 703) – – 2 840 (863) 770 (93)General risk reserve – – 1 903 – – – (1 903) – – –


Total comprehensive income for the year – – – 3 039 – (368) 300 126 302 797 964 303 761 Profit for the year – – – – – – 300 126 300 126 964 301 090 Other comprehensive income for the year – – – 3 039 – (368) – 2 671 – 2 671 Non-controlling interest dividends – – – – – – (1 500) (1 500) (1 500) (3 000) Transfers – – – (2 935) – – 2 935 – – – General risk reserve – – 21 694 – – – (21 694) – – –


Notes 15 15 16 17 18 19


1. BASIS OF PREPARATION

The financial statements of NedNamibia Holdings (the ”Company”) and its subsidiaries (the ”group”) are prepared in accordance with and comply with International Financial Reporting Standards (“IFRS”) adopted by the International Accounting Standards Board (“IASB”), and interpretations issued by the International Financial Reporting Interpretations Committee (“IFRIC”) of the IASB and the requirements of the Namibian Companies Act and the Namibian Banking Institutions Act.

The financial statements are presented in Namibian Dollar (“N$”), the functional currency, and are rounded to the nearest thousand Namibian Dollar. The financial statements are prepared on the historical cost basis except that the following assets and liabilities are stated at their fair value:

– financial assets and financial liabilities at fair value through profit or loss;

– financial assets classified as available-for-sale; and – owner-occupied properties.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Bank takes into account the characteristics of the asset or liability if a market participant would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these financial statements are determined on such a basis, except for share-based payment transactions that are within the scope of IFRS 2, leasing transactions that are within the scope of IAS 17, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in IAS 2 or value in use in IAS 36.

In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurement are observable and the significance of the inputs to the fair value measurement in its entirety, which are disclosed as follows:

– Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;

– Level 2 inputs are inputs, other than quoted prices included within level 1, that are observable for the asset or liability, either directly or indirectly; and

– Level 3 inputs are unobservable inputs for the asset or liability.

The accounting policies set out below have been applied consistently to all years presented in these financial statements.

During the year management revised the presentation of items included in the financial statements and reclassified certain amounts to ensure more relevant disclosure. Prior year amounts have been represented accordingly.

Critical accounting judgements and key sources of estimation uncertaintyIn the preparation of the annual financial statements the group has recorded various assets and liabilities on the presumption that the group is an on-going business and as such, certain key sources of estimation have been assumed:

Credit impairmentAllowances for loan impairment represent management’s estimate of the losses incurred in the loan portfolios at the reporting date.

The group assesses its loan portfolios for impairment at each reporting date. In determining whether an impairment loss should be recorded in the statement of comprehensive income, the group makes judgments as to whether there is observable data indicating a measurable decrease in the estimated future cashflows from a portfolio of loans before the decrease can be allocated to an individual loan in that portfolio. Estimates are made of the duration between the occurrence of a loss event and the identification of a loss on an individual basis. The impairment for performing loans is calculated on a portfolio basis, based on historical loss ratios, adjusted for national and industry-specific economic conditions and other indicators present at the reporting date that correlate with defaults on the portfolio. These include early arrears and other indicators of potential default, such as changes in macroeconomic conditions and legislation affecting credit recovery. These annual loss ratios are applied to loan balances in the portfolio and scaled to the estimated loss emergence period.

Statistical techniques are used to calculate impairment allowances on the portfolio, based on historical recovery rates and assumed emergence periods. These statistical analyses use as primary inputs the extent to which accounts in the portfolio are in arrears and historical information on the eventual losses encountered from such delinquent portfolios.

Judgement and knowledge are needed in selecting and reviewing the statistical methods. The impairment allowance reflected in the financial statements is therefore considered to be reasonable and supportable.

For larger non-performing exposures impairment allowances are calculated on an individual basis and all relevant considerations that have a bearing on the expected future cashflows are taken into account, for example the business prospects for the client, the realizable value of collateral, the group’s position relative to other claimants, the reliability of client information and the likely cost and duration of the workout process. The level of the impairment allowance is the difference between the value of


Notes to the consolidatedannual financial statements


the discounted expected future cashflows (discounted at the loan’s original effective interest rate) and its carrying amount. Subjective judgements are made in the calculation of future cashflows. Furthermore, judgements change with time as new information becomes available or as workout strategies evolve, resulting in frequent revisions to the impairment allowance as individual decisions are taken. Changes in these estimates would result in a change in the allowances and have a direct impact on the impairments charge.

Fair value of financial instrumentsCertain of the group’s financial instruments are carried at fair value through profit or loss, such as those held for trading, designated by management under the fair value option and non-cash flow hedging derivatives.

Other non-derivative financial assets may be designated as available for sale. Available-for-sale financial investments are initially recognised at fair value and are subsequently held at fair value. Gains and losses arising from changes in fair value of such assets are included as a separate component of equity.

The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between knowledgeable, willing parties, other than in a forced or liquidation sale. Financial instruments entered into as trading transactions, together with any associated hedging, are measured at fair value and the resultant profits and losses are included in net trading income, along with interest and dividends arising from long and short positions and funding costs relating to trading activities. Assets and liabilities resulting from gains and losses on financial instruments held for trading are reported gross in trading portfolio assets and liabilities or derivative financial instruments, reduced by the effects of netting agreements where there is an intention to settle net with counterparties.

Details of the processes, procedures and assumptions used in the determination of fair value are discussed in note 44.3 to the financial statements.

Financial risk managementThe group’s risk management policies and procedures are disclosed in the corporate governance and compliance report on pages 69 to 73. These risk management procedures include, but are not limited to, credit risk, securitisation risk, liquidity risk, interest rate risk in the banking book and market risk.

Employee BenefitsFor defined-benefit schemes, including post-retirement medical aid schemes, actuarial valuation of each of the scheme’s obligations using the projected-unit credit method and the fair valuation of each of the scheme’s assets are performed every two years.

The actuarial valuation is dependent on a series of assumptions, the key ones being interest rates, mortality, investment returns and inflation. Mortality estimates are based on standard industry and national mortality tables, adjusted where appropriate to reflect the group’s own experience. The returns on fixed-interest investments are set to market yields at the valuation date (less an allowance for risk) to ensure consistency with the asset valuation. The returns on equities are based on the long-term outlook for global equities at the calculation date, having regard to current market yields and dividend growth expectations.

The inflation assumption reflects long-term expectations of both earnings and retail price inflation. Further information on employee benefit obligations, including assumptions, is set out in note 26 to the annual financial statements.

Property valuationsProperty, whose fair value can be reliably measured, are stated at revalued amounts, being fair valued at the date of revaluation less subsequent accumulated depreciation and accumulated impairment losses.

Information about the valuation techniques and inputs used in determining the fair value of the assets are disclosed in note 3.4 and note 12.


Effective for annual Issued/ periods beginningNew/Revised International Financial Reporting Standards Revised on or after

IFRS 5 Non-current Assets Held for Sale and Discontinued Operations September 2014 1 January 2016

– Amendments resulting from September 2014 Annual Improvements to IFRS’s

IFRS 7 Financial Instruments: Disclosures – Servicing contracts September 2014 1 January 2016

IFRS 7 Financial Instruments: Disclosures September 2014 1 January 2016

– Applicability of the offsetting disclosures to condensed interim

financial statements

IFRS 10 & Consolidated Financial Statements September 2014 1 January 2016

IAS 28 – Amendments regarding the sale or contribution of assets between an

investor and its associate or joint venture

IFRS 11 Joint Arrangements – Amendments regarding the accounting May 2014 1 January 2016

for acquisitions of an interest in a joint operation

IFRS 14 Regulatory Deferral Accounts January 2014 1 January 2016

IFRS 10 & Investment Entities December 2014 1 January 2016

IAS 28 – Applying the Consolidation Exception

IAS 16 & Property, Plant and Equipment – Amendments regarding the clarification May 2014 1 January 2016

IAS 38 of acceptable methods of depreciation and amortisation

IAS 1 Disclosure Initiative – Amendments December 2014 1 January 2016

IAS 19 Employee Benefits – Discount rate: regional market issue September 2014 1 January 2016

IAS 34 Interim Financial Reporting September 2014 1 January 2016

– Disclosure of information ‘elsewhere in the interim financial report’

IAS 27 Equity Method in Separate Financial Statements – Amendments August 2014 1 January 2016

2. ADOPTION OF NEW AND REVISED STANDARDS

Standards and interpretations effective in the current yearThe following standards adopted by the International Accounting Standards Board and interpretations issued by the International Financial Reporting Interpretations Committee are effective for the current year:


Notes to the consolidatedannual financial statements (continued)


Description

IFRS 5 – Non-current Assets Held for Sale and Discontinued OperationsIFRS 5 Non-current Assets Held for Sale and Discontinued Operations outlines how to account for non-current assets held for sale (or for distribution to owners). In general terms, assets (or disposal groups) held for sale are not depreciated, are measured at the lower of carrying amount and fair value less costs to sell, and are presented separately in the statement of financial position. Specific disclosures are also required for discontinued operations and disposals of non-current assets.

Changes in methods of disposalAdds specific guidance in IFRS 5 for cases in which an entity reclassifies an asset from held for sale to held for distribution or vice versa and cases in which held-for-distribution accounting is discontinued.

IFRS 7 – Financial Instruments: DisclosuresIFRS 7 Financial Instruments: Disclosures requires disclosure of information about the significance of financial instruments to an entity, and the nature and extent of risks arising from those financial instruments, both in qualitative and quantitative terms. Specific disclosures are required in relation to transferred financial assets and a number of other matters.

Servicing contracts amendmentAdds additional guidance to clarify whether a servicing contract is continuing involvement in a transferred asset for the purpose of determining the disclosures required.

Applicability of the offsetting disclosures to condensed interim financial statementsThe amendment clarifies that the offsetting disclosure requirements do not apply to condensed interim financial statements, unless such disclosures provide a significant update to the information reported in the most recent annual report.The amendments must be applied retrospectively.

IFRS 10/IAS 28 – Consolidated Financial Statements and Investments in Associates and Joint Ventures

Sales or contributions of assets between an investor and its associate/joint ventureThe amendments address the conflict between IFRS 10 and IAS 28 in dealing with the loss of control of a subsidiary that is sold or contributed to an associate or joint venture.

The amendments clarify that a full gain or loss is recognised when a transfer to an associate or joint venture involves a business as defined in IFRS 3 Business Combinations. Any gain or loss resulting from the sale or contribution of assets that does not constitute a business, however, is recognised only to the extent of unrelated investors’ interests in the associate or joint venture.

IFRS 11 – Joint Arrangements

Acquisition of an interest in a joint operationThe amendments require an entity acquiring an interest in a joint operation, in which the activity of the joint operation constitutes a business, to apply, to the extent of its share, all of the principles in IFRS 3 Business Combinations and other IFRSs that do not conflict with the requirements of IFRS 11 Joint Arrangements. Furthermore, entities are required to disclose the information required by IFRS 3 and other IFRSs for business combinations.

The amendments also apply to an entity on the formation of a joint operation if, and only if, an existing business is contributed by one of the parties to the joint operation on its formation.

Furthermore, the amendments clarify that, for the acquisition of an additional interest in a joint operation in which the activity of the joint operation constitutes a business, previously held interests in the joint operation must not be remeasured if the joint operator retains joint control.

IFRS 14 – Regulatory Deferral AccountsIFRS 14 allows an entity, whose activities are subject to rate-regulation, to continue applying most of its existing accounting policies for regulatory deferral account balances upon its first-time adoption of IFRS. The standard does not apply to existing IFRS preparers. Also, an entity whose current GAAP does not allow the recognition of rate- regulated assets and liabilities, or that has not adopted such policy under its current GAAP, would not be allowed to recognise them on first-time application of IFRS.

Entities that adopt IFRS 14 must present the regulatory deferral accounts as separate line items on the statement of financial position and present movements in these account balances as separate line items in the statement of profit or loss and other comprehensive income.

The standard requires disclosure of the nature of, and risks associated with, the entity’s rate regulation and the effects of that rate regulation on its financial statements.

IFRS 10/IAS 28 – Consolidated Financial Statements and Investments in Associates and Joint Ventures

Investment entity amendments

The amendments address three issues that have arisen in applying the investment entities exception under IFRS 10 Consolidated Financial Statements.

The amendments to IFRS 10 clarify that the exemption in paragraph 4 of IFRS 10 from presenting consolidated financial statements applies to a parent entity that is a subsidiary of an investment entity, when the investment entity measures its subsidiaries at fair value.




2. ADOPTION OF NEW AND REVISED STANDARDS (continued)Standards and interpretations effective in the current year (continued)Investment entity amendments (continued)

Furthermore, the amendments to IFRS 10 clarify that only a subsidiary of an investment entity that is not an investment entity itself and that provides support services to the investment entity is consolidated. All other subsidiaries of an investment entity are measured at fair value.

The amendments to IAS 28 Investments in Associates and Joint Ventures allow the investor, when applying the equity method, to retain the fair value measurement applied by the investment entity associate or joint venture to its interests in subsidiaries.

IAS 16/IAS 38 – Property, Plant and Equipment and Intangible Assets

Acceptable methods of depreciation and amortizationThe amendments clarify the principle in IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets that revenue reflects a pattern of economic benefits that are generated from operating a business (of which the asset is part) rather than the economic benefits that are consumed through use of the asset. As a result, the ratio of revenue generated to total revenue expected to be generated cannot be used to depreciate property, plant and equipment and may only be used in very limited circumstances to amortise intangible assets.

IAS 1 – Presentation of Financial Statements

Disclosure initiativeThe amendments to IAS 1 Presentation of Financial Statements clarify, rather than significantly change, the existing IAS 1 requirements.

The amendments clarify:– The materiality requirements in IAS 1.– That specific line items in the statement(s) of profit or loss

and OCI and the statement of financial position may be disaggregated.

– That entities have flexibility as to the order in which they present the notes to financial statements.

– That the share of OCI of associates and joint ventures accounted for using the equity method must be presented in aggregate as a single line item, and classified between those items that will or will not be subsequently reclassified to profit or loss.

Furthermore, the amendments clarify the requirements that apply when additional subtotals are presented in the statement of financial position and the statement(s) of profit or loss and OCI.

IAS 19 – Employee Benefits

Discount rate: regional market issueThe amendment clarifies that market depth of high quality corporate bonds is assessed based on the currency in which the obligation is denominated, rather than the country where the obligation is located. When there is no deep market for high quality corporate bonds in that currency, government bond rates must be used. The amendment must be applied prospectively.

IAS 34 – Interim Financial Reporting

Disclosure of information ‘elsewhere in the interim financial report’The amendment clarifies that the required interim disclosures must be either in the interim financial statements or incorporated by cross-reference between the interim financial statements and wherever they are included within the interim financial report (eg. in the management commentary or risk report).

The other information within the interim financial report must be available to users on the same terms and at the same time as the interim financial statements. The amendment must be applied retrospectively.

IAS 27 – Separate Financial Statements

Equity method in separate financial statementsThe amendments to IAS 27 Separate Financial Statements allow an entity to use the equity method as described in IAS 28 to account for its investments in subsidiaries, joint ventures and associates in its separate financial statements. Therefore, an entity must account for these investments:– At cost;– In accordance with IFRS 9 (or IAS 39) Or– Using the equity method.

The entity must apply the same accounting for each category of investment.

A consequential amendment was also made to IFRS 1 First time Adoption of International Financial Reporting Standards. The amendment to IFRS 1 allows a first-time adopter accounting for investments in the separate financial statements using the equity method, to apply the IFRS 1 exemption for past business combinations to the acquisition of the investment.


Effective for annual Issued/ periods beginningNew/Revised International Financial Reporting Standards Revised on or after

IFRS 12 Disclosure of Interests in Other Entities – Clarification of the scope November 2013 1 January 2017

of the disclosure requirements in IFRS 12

IFRS 9 Financial Instruments – Deferral of mandatory effective date December 2011 1 January 2018

of IFRS 9 and amendments to transition disclosures

IFRS 9 Financial Instruments – Classification and Measurement November 2009 1 January 2018

IFRS 9 Financial Instruments – Accounting for financial liabilities October 2010 1 January 2018

and derecognition

IFRS 9 Financial Instruments – Accounting for hedge accounting November 2013 1 January 2018

IFRS 15 Revenue from Contracts with Customers April 2016 1 January 2018

IFRS 2 Classification and measurement of Share-based June 2016 1 January 2018

Payment Transactions – Amendments

IFRS 1 First-time Adoption of International Financial Reporting Standards December 2016 1 January 2018

– Deletion of short-term exemptions for first-time adopters

IFRS 4 Insurance Contracts – Amendments September 2016 1 January 2018

IFRS 16 Leases – Replaces IAS 17 January 2016 1 January 2019

IFRIC 22 Foreign Currency Transactions and Advance Consideration December 2016 1 January 2018

IAS 7 Disclosure Initiative – Amendments January 2016 1 January 2017

IAS 12 Recognition of Deferred Tax Assets for Unrealised Losses – Amendments January 2016 1 January 2017

IAS 40 Investment Property – Amendments to Transfers of Investment Property December 2016 1 January 2018

IAS 28 Investments in Associates and Joint Ventures – Clarification that measuring December 2016 1 January 2018

investees at fair value through profit or loss is an investment-by-investment choice

Recent amendments to standards and interpretations not effective in the current year The following table contains effective dates of IFRS’s and recently revised IAS’s, which have not been early adopted by the Bank and that might affect future financial periods:

A reliable estimate of the impact of the adoption of the recent amendments for the group has not yet been determined.

Description

IFRS 12 – Disclosure of Interests in Other Entities

Clarification of the scope of the disclosure requirements in IFRS 12The amendments clarify that the disclosure requirements in IFRS 12, other than those in paragraphs B10–B16, apply to an entity’s interest in a subsidiary, a joint venture or an associate (or a portion of its interest in a joint venture or an associate) that is classified (or included in a disposal group that is classified) as held for sale.

The amendments are effective from 1 January 2017 and must be applied retrospectively.

IFRS 9 – Financial InstrumentsIFRS 9 Financial Instruments (IFRS 9) was issued in its entirety in July 2014 and will replace IAS 39: Financial Instruments: Recognition and Measurement (IAS 39). The final version of this standard incorporates amendments to the classification and measurement, hedge accounting guidance, as well as the accounting requirements for the impairment of debt instruments measured at amortised cost and fair value through other comprehensive income (FVOCI). These elements of the final standard, and a description of the expected impact on the company’s statement of financial position, and performance, are discussed in detail below:




2. ADOPTION OF NEW AND REVISED STANDARDS (continued)Recent amendments to standards and interpretations not effective in the current year (continued)IFRS 9 – Financial Instruments (continued)

Classification and measurementFinancial assets are to be classified and measured based on the business model for managing the financial asset and the cash flow characteristics of the financial asset. Debt instruments are carried at amortised cost if it is the entity’s business model to hold that asset for the purpose of collecting contractual cash flows (‘held to collect’) and those cash flows comprise solely payments of principal and interest.

However, where the entity’s business model considers both the collection of contractual cash flows and sale of financial assets (‘held to collect and sell’) and those cash flows comprise solely payments of principal and interest, such financial assets will be subsequently measured at FVOCI. Movements in the carrying amount should be taken through other comprehensive income (OCI), except for the recognition of impairment gains or losses, interest revenue, and foreign exchange gains and losses which are recognised in profit and loss. Where the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss.

Where the business model is neither ‘held to collect’ nor ‘held to collect and sell’ or the cash flows are not solely payments of principal and interest, the financial asset is carried at fair value through profit or loss in its entirety.

The company has initiated a process to determine the various business models that are applied by the company, and whether the company’s financial assets meet the solely payments of principal and interest characteristic. Until the process has been completed the company is unable to quantify the expected impact.

For financial liabilities designated as at fair value through profit or loss, a further requirement is that all changes in the fair value of financial liabilities attributable to changes in the entity’s own credit risk are recognised in OCI. Where the financial liability is derecognised, the cumulative gain or loss previously recognised in OCI is not reclassified from equity to profit or loss, however it may be reclassified within equity.

The company currently designates certain fixed rate assets and liabilities, which are economically hedged via interest rate swaps, at fair value through profit or loss. This option remains available under IFRS 9.

Impairments: IFRS 9’s expected credit loss modelImpairments in terms of IFRS 9 will be determined based on an expected credit loss model rather than the current incurred loss model required by IAS 39. Entities are required to recognise an allowance for either 12-month or lifetime expected credit losses (ECLs), depending on whether there has been a significant increase

in credit risk since initial recognition. The measurement of ECLs reflects a probability-weighted outcome, the time value of money and the entity’s best available forward-looking information. The aforementioned probability-weighted outcome must consider the possibility that a credit loss occurs and the possibility that no credit loss occurs, even if the possibility of a credit loss occurring is low.

The expected credit loss model applies to debt instruments recorded at amortised cost or at FVOCI, such as loans, debt securities and trade receivables, lease receivables and most loan commitments and financial guarantee contracts.

The Bank has initiated a process to determine the quantitative impact of the standard on the Bank’s statement of financial position and on-going performance metrics. Until the process has been completed, the Bank is unable to quantify the expected impact.

Hedge accountingThe hedge accounting requirements under IFRS 9 are closely aligned with how entities undertake risk management activities when hedging financial and non-financial risk exposures.

IFRS 9 allows the deferral of the requirements relating to hedge accounting, permitting continuation with IAS 39 principles until the IASB’s macro-hedging project is completed, so as to ensure that reporting entities do not have to comply with interim measures before macro-hedging rules are finalised.

The company, like most financial institutions, is considering adopting the deferral option. Accordingly, the new hedging model is not expected to have a significant impact on the micro hedge accounting of the Bank.

The standard is effective for financial years commencing on or after 1 January 2018.

The Bank has initiated a process to determine the impact of the standard on its statement of financial position and performance. Until the process has been completed the Bank is unable to quantify the expected impact.

IFRS 15 – Revenue from Contracts with Customers

IFRS 15 replaces all existing revenue requirements in IFRS (IAS 11 Construction Contracts, IAS 18 Revenue, IFRIC 13 Customer Loyalty Programmes, IFRIC 15 Agreements for the Construction of Real Estate, IFRIC 18 Transfers of Assets from Customers and SIC 31 Revenue - Barter Transactions Involving Advertising Services) and applies to all revenue arising from contracts with customers, unless the contracts are in the scope of other standards, such as IAS 17 (or IFRS 16 Leases, once applied). Its requirements also provide a model for the recognition and measurement of gains and losses on disposal of certain non-financial assets, including property, plant and equipment and intangible assets.

The standard outlines the principles an entity must apply to measure and recognise revenue. The core principle is that an entity will recognise revenue at an amount that reflects the


consideration to which the entity expects to be entitled in exchange for transferring goods or services to a customer.

The principles in IFRS 15 will be applied using a five-step model:1. Identify the contract(s) with a customer.2. Identify the performance obligations in the contract.3. Determine the transaction price.4. Allocate the transaction price to the performance obligations

in the contract.5. Recognise revenue when (or as) the entity satisfies a

performance obligation.

The standard requires entities to exercise judgement, taking into consideration all of the relevant facts and circumstances when applying each step of the model to contracts with their customers.

The standard also specifies how to account for the incremental costs of obtaining a contract and the costs directly related to fulfilling a contract.

Application guidance is provided in IFRS 15 to assist entities in applying its requirements to certain common arrangements, including licences of intellectual property, warranties, rights of return, principal-versus-agent considerations, options for additional goods or services and breakage.

IFRS 2 – Classification and Measurement of Share-based Payment Transactions

The IASB issued amendments to IFRS 2 Share-based Payment in relation to the classification and measurement of share-based payment transactions. The amendments address three main areas:– The effects of vesting conditions on the measurement

of a cash-settled share-based payment transaction. The amendments clarify that the approach used to account for vesting conditions when measuring equity-settled share-based payments also applies to cash-settled share-based payments.

– The classification of a share-based payment transaction with net settlement features for withholding tax obligations. This amendment adds an exception to address the narrow situation where the net settlement arrangement is designed to meet an entity’s obligation under tax laws or regulations to withhold a certain amount in order to meet the employee’s tax obligation associated with the share- based payment. This amount is then transferred, normally in cash, to the tax authorities on the employee’s behalf. To fulfil this obligation, the terms of the share-based payment arrangement may permit or require the entity to withhold the number of equity instruments that are equal to the monetary value of the employee’s tax obligation from the total number of equity instruments that otherwise would have been issued to the employee upon exercise (or vesting) of the share-based payment (‘net share settlement feature’). Where transactions meet the criteria, they are not divided into two components but are classified in their entirety as equity-settled share-based payment transactions, if they would have been so classified in the absence of the net share settlement feature.

– The accounting where a modification to the terms and conditions of a share-based payment transaction changes its classification from cash-settled to equity- settled. The amendment clarifies that, if the terms and conditions of a cash-settled share-based payment transaction are modified, with the result that it becomes an equity-settled share-based payment transaction, the transaction is accounted for as an equity-settled transaction from the date of the modification. Any difference (whether a debit or a credit) between the carrying amount of the liability derecognised and the amount recognised in equity on the modification date is recognised immediately in profit or loss.

IFRS 1 – First-time Adoption of International Financial Reporting Standards

Deletion of short-term exemptions for first-time adoptersShort-term exemptions in paragraphs E3-E7 of IFRS 1 were deleted because they have now served their intended purpose.

IFRS 4 – Insurance Contracts

The amendments address concerns arising from implementing the new financial instruments Standard, IFRS 9, before implementing the new insurance contracts standard that the Board is developing to replace IFRS 4. The amendments introduce two options for entities issuing insurance contracts: a temporary exemption from applying IFRS 9 and an overlay approach.

Temporary exemption from IFRS 9The optional temporary exemption from IFRS 9 is available to entities whose activities are predominantly connected with insurance. The temporary exemption permits such entities to continue to apply IAS 39 Financial Instruments: Recognition and Measurement while they defer the application of IFRS 9 until 1 January 2021 at the latest. Predominance must be initially assessed at the annual reporting date that immediately precedes 1 April 2016 and before IFRS 9 is implemented. Also the evaluation of predominance can only be reassessed in rare cases. Entities applying the temporary exemption will be required to make additional disclosures.

The overlay approachThe overlay approach is an option for entities that adopt IFRS 9 and issue insurance contracts, to adjust profit or loss for eligible financial assets; effectively resulting in IAS 39 accounting for those designated financial assets. The adjustment eliminates accounting volatility that may arise from applying IFRS 9 without the new insurance contracts standard. Under this approach, an entity is permitted to reclassify amounts between profit or loss and other comprehensive income (OCI) for designated financial assets. An entity must present a separate line item for the amount of the overlay adjustment in profit or loss, as well as a separate line item for the corresponding adjustment in OCI.




2. ADOPTION OF NEW AND REVISED STANDARDS (continued)Recent amendments to standards and interpretations not effective in the current year (continued)

IFRS 16 – Leases

The IASB issued IFRS 16 Leases (IFRS 16) in January 2016. IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract, ie the customer (‘lessee’) and the supplier (‘lessor’). IFRS 16 replaces the previous leases standard, IAS 17 Leases (IAS 17), and related Interpretations.

The company as lesseeIFRS 16 eliminates the classification of leases as either operating leases or finance leases as is required by IAS 17 and, instead, introduces a single lessee accounting model. Applying that model, a lessee is required to recognise:(a) assets and liabilities for all leases with a term of more than

12 months, unless the underlying asset is of low value; and(b) depreciation of lease assets separately from interest on

lease liabilities in the income statement.

The company as lessorIFRS 16 substantially carries forward the lessor accounting requirements in IAS 17. Accordingly, a lessor continues to classify its leases as operating leases or finance leases, and to account for those two types of leases differently.

The most significant effect of the new requirements in IFRS 16 will be an increase in lease assets and financial liabilities. The group is in the process of quantifying the aforementioned increase in lease assets and financial liabilities.

The standard is effective for financial years commencing on or after 1 January 2019.

IFRIC 22 – Foreign Currency Transactions and Advance Consideration

The interpretation clarifies that in determining the spot exchange rate to use on initial recognition of the related asset, expense or income (or part of it) on the de-recognition of a non-monetary asset or non-monetary liability relating to advance consideration, the date of the transaction is the date on which an entity initially recognises the non-monetary asset or non-monetary liability arising from the advance consideration. If there are multiple payments or receipts in advance, then the entity must determine a date of the transactions for each payment or receipt of advance consideration.

IAS 7 – Statement of Cash Flows

Disclosure initiativeThe amendments to IAS 7 Statement of Cash Flows are part of the IASB’s Disclosure Initiative and help users of financial

statements better understand changes in an entity’s debt. The amendments require entities to provide disclosures about changes in their liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes (such as foreign exchange gains or losses).

IAS 12 – Income Taxes

Recognition of deferred tax assets for unrealised lossesThe IASB issued the amendments to IAS 12 Income Taxes to clarify the accounting for deferred tax assets for unrealised losses on debt instruments measured at fair value.

The amendments clarify that an entity needs to consider whether tax law restricts the sources of taxable profits against which it may make deductions on the reversal of that deductible temporary difference. Furthermore, the amendments provide guidance on how an entity should determine future taxable profits and explain the circumstances in which taxable profit may include the recovery of some assets for more than their carrying amount.

IAS 40 – Investment Property

Transfers of Investment Property The amendments clarify when an entity should transfer property, including property under construction or development into, or out of investment property. The amendments state that a change in use occurs when the property meets, or ceases to meet, the definition of investment property and there is evidence of the change in use. A mere change in management’s intentions for the use of a property does not provide evidence of a change in use.

IAS 28 – Investments in Associates and Joint Ventures

Clarification that measuring investees at fair value through profit or loss is an investment-by-investment choiceThe amendments clarifies that:– An entity that is a venture capital organisation, or other

qualifying entity, may elect, at initial recognition on an investment-by-investment basis, to measure its investments in associates and joint ventures at fair value through profit or loss.

– If an entity that is not itself an investment entity has an interest in an associate or joint venture that is an investment entity, the entity may, when applying the equity method, elect to retain the fair value measurement applied by that investment entity associate or joint venture to the investment entity associate’s or joint venture’s interests in subsidiaries. This election is made separately for each investment entity associate or joint venture, at the later of the date on which (a) the investment entity associate or joint venture is initially recognised; (b) the associate or joint venture becomes an investment entity; and (c) the investment entity associate or joint venture first becomes a parent.


3. SIGNIFICANT ACCOUNTING POLICIES

The following significant accounting policies have been applied consistently in dealing with items that are considered material in relation to the group’s annual financial statements.

3.1 Basis of consolidation The consolidated annual financial statements incorporate the annual financial statements of the Company and entities controlled by the Company. Control is achieved where the group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Control is presumed to exist when the group owns directly or indirectly through its subsidiaries, more than half of the voting power of an entity, unless, in exceptional circumstances, it can be clearly demonstrated that such ownership does not constitute control. The group considers the existence and effect of potential voting rights that are currently exercisable or convertible when assessing whether it has control. Entities in which the group holds half or less of the voting rights, but are controlled by the group by retaining the majority of risks or benefits, are also included in the consolidated financial statements.

Subsidiary undertakings include special-purpose entities (“SPEs”) that are created to accomplish a narrow, well-defined objective, and may take the form of a company, corporation, trust, partnership or unincorporated entity. The assessment of control for SPEs is based on the substance of the relationship between the group and the SPE. SPEs in which the group holds half or less of the voting rights, but which are controlled by the group by retaining the majority of risks or benefits, are also included in the group financial statements.

Acquisitions of subsidiaries and businesses are accounted for using the purchase method. The cost of the business combination is measured as the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by the group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3: Business Combinations are recognised at their fair values at the acquisition date, except for non-current assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5: Non-current Assets Held for Sale and Discontinued Operations, which are measured at fair value less cost to sell.

Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the group’s interest in the fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the group’s interest in the fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities exceeds the costs of the business combination, the excess is immediately recognised in profit or loss. The interest of minority shareholders in the acquiree is initially measured at the minority’s proportion of the net fair value of the assets, liabilities and contingent liabilities recognised.

The group consolidated financial statements include the assets, liabilities and results of NedNamibia Holdings Limited and its subsidiaries (including SPEs) controlled by the group. The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the annual financial statements of subsidiaries to bring their accounting policies into line with those of the group. All intra-group transactions, balances, and profits and losses arising from intra-group transactions, are eliminated in the preparation of the group consolidated annual financial statements. Unrealised losses are not eliminated to the extent that they provide evidence of impairment.

The difference between the proceeds from the disposal of a subsidiary and its carrying amount as of the date of disposal, including the cumulative amount of any exchange differences that relate to the subsidiary in equity, is recognised in the group statement of comprehensive income as the gain or loss on the disposal of the subsidiary.

Non-controlling interest in the net assets of consolidated subsidiaries are identified separately from the group’s equity therein. Non-controlling interest consist of the amount of those interests at the date of the original business combination and the minority’s share of changes in the equity since the date of the combination. Losses applicable to the minority in excess of the minority’s interest in the subsidiary’s equity are allocated against the interest of the group except to the extent that the minority has a binding obligation and is able to make an additional investment to cover the losses.

3.1.1 Investment in associatesAn associate is an entity, including an unincorporated entity such as a partnership, over which the group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies.

The results and assets and liabilities of associates are incorporated in the group financial statements using the equity method of accounting, from the date significant influence commences until the date significant influence ceases. Under the equity method, investments in associates are carried in the consolidated statement of financial position at the cost as adjusted for post-acquisition changes in the group’s share of the net assets of the associate, less any impairment in the value of individual investments. Losses of an associate in excess of the group’s interest in that associate are not recognised. When the group’s share of losses exceeds the carrying amount of the associate, the carrying amount is reduced to nil, inclusive of any debt outstanding, and recognition of further losses is discontinued, except to the extent that the group has incurred or guaranteed obligations in respect of the associate.


3. SIGNIFICANT ACCOUNTING POLICIES (continued)3.1 Basis of consolidation (continued)3.1.1 Investment in associates (continued)

Any excess of the cost of acquisition over the group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the associate recognised at the date of acquisition is recognised as goodwill. The goodwill is included within the carrying amount of the investment and is assessed for impairment as part of the investment. Any excess of the group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in profit or loss. Where a group entity transacts with an associate of the group, unrealised profits and losses are eliminated to the extent of the group’s interest in the relevant associate.

3.1.2 Interests in joint ventures A joint venture is a contractual arrangement whereby the group and other parties undertake an economic activity that is subject to joint control, that is when the strategic financial and operating policy decisions relating to the activities of the joint venture require the unanimous consent of the parties sharing control.

Where a group entity undertakes its activities under joint venture arrangements directly, the group’s share of jointly controlled assets and any liabilities incurred jointly with other venturers are recognised in the financial statements of the relevant entity and classified according to their nature. Liabilities and expenses incurred directly in respect of interests in jointly controlled assets are accounted for on an accrual basis. Income from the sale or use of the group’s share of the output of jointly controlled assets, and its share of joint venture expenses, are recognised when it is probable that the economic benefits associated with the transactions will flow to/from the group and their amount can be measured reliably.

Joint venture arrangements that involve the establishment of a separate entity in which each venturer has an interest are referred to as jointly controlled entities. The group reports its interests in jointly controlled entities using proportionate consolidation, except when the investment is classified as held for sale, in which case it is accounted for in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. The group’s share of the assets, liabilities, income and expenses of jointly controlled entities are combined with the equivalent items in the consolidated financial statements on a line-by-line basis.

Any goodwill arising on the acquisition of the group’s interest in a jointly controlled entity is accounted for in accordance with the group’s accounting policy for goodwill arising on the acquisition of a subsidiary (see 3.2 below). Where the group transacts with its jointly controlled entities, unrealised profits and losses are eliminated to the extent of the group’s interest in the joint venture.

3.1.3 Goodwill Goodwill arises on the acquisition of subsidiaries, associates or a jointly controlled entity. Goodwill is measured at cost less accumulated impairment losses. In respect of equity accounted investments, the carrying amount of goodwill is included in the carrying amount of the investment.

All business combinations are accounted for by applying the purchase method. At acquisition date, the group recognises the fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities that satisfy the recognition criteria at their respective fair values. The cost of a business combination is the fair value of purchase consideration due at date of acquisition plus any directly attributable transaction costs. Any contingent purchase consideration is recognised to the extent that it is probable and can be measured reliably. Any excess between the cost of the business combination and the group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities acquired, is recognised as goodwill in the statement of financial position. Goodwill is adjusted for any subsequent remeasurement of contingent purchase consideration.

For the purpose of impairment testing, goodwill is allocated to each of the group’s cash-generating units expected to benefit the synergies of the combination. A cash-generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or group of assets. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit.

The recoverable amount of a cash-generating unit is the higher of its fair value less cost to sell and its value in use. The fair value less cost to sell is determined by ascertaining the current market value of an asset and deducting any costs related to the realisation of the asset. In assessing value in use, the expected future cash flows from the cash-generating unit are discounted to their present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to the cash-generating unit. Impairment losses relating to goodwill are not reversed in a subsequent period and all impairment losses are recognised in profit and loss.

On disposal of a subsidiary or jointly controlled entity, the attributable amount of goodwill is included in the determination of the profit or loss on disposal. The group’s policy for goodwill arising on the acquisition of an associate is described under “Investment in associate” above.




3.2 Financial instrumentsFinancial instruments as reflected on the statement of financial position, include all financial assets and financial liabilities, including derivative instruments, but exclude investments in subsidiaries and associate companies, employee benefit plans, property and equipment, provisions, deferred taxation, taxation payable/receivable, intangible assets and leases. Financial instruments are accounted for under IAS 32: Financial Instruments: Presentation, IAS 39: Financial Instruments: Recognition and Measurement IFRS 7: Financial Instruments: Disclosures and IFRS 13: Fair Value Measurement.

The group does not apply hedge accounting. This accounting policy should be read in conjunction with the categorised statement of financial position and the group’s risk management policies and procedures in the Corporate Governance Report.

(i) Initial recognitionFinancial instruments are recognised on the statement of financial position when the group becomes a party to the contractual provisions of a financial instrument. All purchases of financial assets that require delivery within the time frame established by regulation or market convention (“regular way” purchases) are recognised at trade date, which is the date on which the group commits to purchase the asset. Financial liabilities are recognised on trade date, which is when the group becomes a party to the contractual provisions of the financial instruments.

Contracts that require or permit net settlement of the change in the value of the contract are not considered ‘regular way’ contracts and are treated as derivatives between the trade and settlement dates of the contract.

(ii) Initial measurementFinancial instruments that are categorised and designated at initial recognition as being at fair value through profit or loss are recognised at fair value. Transaction costs, which are directly attributable to the acquisition or on issue of these financial instruments, are recognised immediately in profit and loss.

Financial instruments that are not carried at fair value through profit or loss are initially measured at fair value plus transaction costs that are directly attributable to the acquisition or issue of the financial instruments.

Where the transaction price in a non-active market is different to the fair value from other observable current market transactions in the same instrument or based on a valuation technique, the variables of which include only data from observable markets, the group defers such differences (day-one gains or losses). Day-one gains or losses are amortised on a straight-line basis over the life of the financial instrument. To the extent that the inputs determining the fair value of the instrument become observable, or on derecognition of the

instrument, day-one gains or losses are recognised immediately in profit or loss.

(iii) Subsequent measurementSubsequent to initial measurement, financial instruments are either measured at fair value or amortised cost, depending on their classification and whether fair value can be measured reliably:

Financial instruments at fair value through profit or lossFinancial instruments at fair value through profit or loss consist of instruments that are held for trading and instruments that the group has designated, at the initial recognition date, as at fair value through profit or loss.

The group classifies instruments as held for trading if they have been acquired or incurred principally for the purpose of sale or repurchase in the near term, they are part of a portfolio of identified financial instruments for which there is evidence of a recent actual pattern of short-term profit taking or they are derivatives. The group’s derivative transactions include foreign exchange contracts, interest rate futures, forward rate agreements, currency and interest rate swaps and currency and interest rate options (both written and purchased).

Financial instruments that the group has elected, on initial recognition date, to designate as at fair value through profit or loss are those that meet any one of the following criteria:

– where the fair value through profit or loss designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise from using different bases to measure and recognise the gains and losses on financial assets and financial liabilities; or

– the instrument forms part of a group of financial instruments that is managed and its performance is evaluated on a fair value basis in accordance with a documented risk management or investment strategy, and information about the group is provided internally on that basis to key management personnel, using a fair-value basis; or

– a contract contains one or more embedded derivatives that require separation from the host contract or a derivative that significantly modifies the cash flows of the host contract.

Financial assets and financial liabilities at fair value through profit or loss are measured at fair value, with fair value gains and losses (excluding impairment losses, interest income and interest expense calculated on the amortised cost basis relating to those interest-bearing instruments that have been designated as at fair value through profit or loss) reported in non-interest revenue as they arise. Impairment losses calculated on the amortised cost basis are recognised in the statement of comprehensive income in impairment losses on loans and advances. Interest income and interest expense calculated on the amortised cost basis are reported in interest income and expense.


3. SIGNIFICANT ACCOUNTING POLICIES (continued)3.2 Financial instruments (continued)(iii) Subsequent measurement (continued)

Other financial liabilitiesAll financial liabilities, other than those at fair value through profit and loss, are classified as other financial liabilities and are measured at amortised cost. The carrying amounts are disclosed in the notes to the financial statements. If the approximation of the fair value of other financial liabilities have proven to be reasonably close to the carrying value of such instruments then in terms of IFRS 7.29(a) the group is not required to disclose the fair value of these instruments in the notes to the financial statements.

Held-to-maturity financial assetsHeld-to-maturity financial assets are non-derivative financial assets with fixed or determinable payments and fixed maturity that the group has the positive intent and ability to hold to maturity, other than those that meet the definition of loans and receivables or those that were designated as at fair value through profit or loss or available-for-sale. Held-to-maturity financial assets are measured at amortised cost, with interest income recognised in profit or loss.

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

Financial assets that are classified as loans and receivables are carried at amortised cost less any impairment, with interest income recognised in profit or loss. The majority of the group’s advances are included in the loans and receivables category. The carrying amounts are disclosed in the notes to the financial statements.

If the approximation of the fair value of loans and receivables have proven to be reasonably close to the carrying value of such instruments then in terms of IFRS 7.29(a) the group is not required to disclose the fair value of these instruments in the notes to the financial statements.

Available-for-sale assetsFinancial assets are classified as available-for-sale where the intention, origination and designation of the instrument do not fall within the ambit of the other financial asset classifications. Available-for-sale instruments are typically assets that are held for a longer period and in respect of which short-term fluctuations in value do not affect the group’s hold or sell decision.

Available-for-sale financial assets are measured at fair value, with fair value gains and losses recognised directly in other comprehensive income along with the associated deferred taxation.

Foreign currency translation gains or losses on monetary items, impairment losses and interest income calculated using the effective-interest-rate method, are recognised in profit or loss.

(iv) Embedded derivativesDerivatives in a host contract that is a financial or non-financial instrument, such as an equity conversion option in a convertible bond, are separated from the host contract when all of the following conditions are met: The economic characteristics and risks of the embedded

derivative are not closely related to those of the host contract; A separate instrument with the same terms as the embedded

derivative would meet the definition of a derivative; and The combined contract is not measured at fair value, with

changes in fair value recognised in profit or loss. The host contract is accounted for:

– under IAS 39 if it is a financial instrument; and – in accordance with other appropriate accounting standards

if it is not a financial instrument.

If an embedded derivative is required to be separated from its host contract, but it is not possible separately to measure the fair value of the embedded derivative, either at acquisition or at a subsequent financial reporting date, the entire hybrid instrument is categorised as at fair value through profit or loss and measured at fair value.

(v) Measurement basis of financial instruments

Amortised costAmortised cost financial assets and financial liabilities are measured at fair value on initial recognition, plus or minus the cumulative amortisation using the effective interest rate method of any difference between that initial amount and the maturity amount, less any cumulative impairment losses.

The effective-interest method is a method of calculating the amortised cost of a financial instrument and of allocating the interest income and 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 instrument or, when appropriate, a shorter period, to the net carrying amount of the financial instrument.

When calculating the effective interest rate, cash flows are estimated considering all contractual terms of the financial instrument, but future credit losses are not considered. The calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs, and all other premiums or discounts.




Fair valueDirect and incremental transaction costs are included in the initial fair value of financial assets and financial liabilities, other than those at fair value through profit or loss. The best evidence of the fair value of a financial asset or financial liability at initial recognition is the transaction price, unless the fair value of the instrument is evidenced by comparison with other current observable market transactions in the same instrument or based on a valuation technique whose variables include market observable data.

Where quoted market prices are available, such market data is used to determine the fair value of financial assets and financial liabilities that are measured at fair value. The bid price is used to measure financial assets held and the offer price is used to measure the fair value of financial liabilities. Mid-market prices are used to measure fair value only to the extent that the group has assets and liabilities offsetting risk positions (refer to note 3.2 (ix)).

If quoted bid prices are unavailable, the fair value of the financial asset is estimated using pricing models or discounted cash flow techniques. Where discounted cash flow techniques are used, estimated future cash flows are based on management’s best estimates and the discount rate used is a market-related rate at the reporting date for an instrument with similar terms and conditions. Where pricing models are used, inputs are based on market-related measures (prices from observable current market transaction in the same instrument without modification or other observable market data) at the reporting date.

When market related measures are not available, observable market data is modified to incorporate relevant factors that a market participant in an arm’s length exchange motivated by normal business considerations would consider in determining the fair value of the financial instrument (non-observable market inputs). The International Private Equity and Venture Capital Valuation Guidelines and industry practice, which have demonstrated the capability to provide reliable estimates of prices obtained in actual market transactions, are used to determine the adjustments to observable market data. Consideration is given to the nature and circumstances of the financial instrument in determining the appropriate non-observable market input.

Non-observable market inputs are used to determine the fair values of, among others, private equity investments, management buyouts and development capital. Valuation techniques applied by the group and that incorporate non-observable market inputs include, among others, earnings multiples, the price of recent investments, the value of the net assets of the underlying business and discounted cash-flows.

The fair value of a financial liability with a demand feature is not less than the amount payable on demand, discounted from the first date on which the amount could be required to be paid. In cases where the fair value of financial liabilities cannot be reliably determined, these liabilities are recorded at the amount due.

Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured, and derivatives that are linked to and have to be settled by delivery of such unquoted equity instruments, are not measured at fair value but at cost. Fair value is considered reliably measured if:– the variability in the range of reasonable fair value estimates

is not significant for that instrument; or– the probabilities of the various estimates within the range can

be reasonably assessed and used in estimating fair value.

Transfers between levels of the fair value hierarchy are recognised as of the end of the reporting period during which the change has occurred.

(vi) DerecognitionAll financial assets and financial liabilities are derecognised on trade date, which is when the group commits to selling a financial asset or redeeming a financial liability.

The group derecognises a financial asset when and only when:– The contractual rights to the cash flows arising from the

financial assets have expired or been forfeited by the group; or

– It transfers the financial asset including substantially all the risks and rewards of ownership of the asset; or

– It transfers the financial asset, neither retaining nor transferring substantially all the risks and rewards of ownership of the asset, but no longer retains control of the asset.

A financial liability (or part of a financial liability) is derecognised when and only when the liability is extinguished, that is, when the obligation specified in the contract is discharged, cancelled or has expired.

The difference between the carrying amount of a financial asset or financial liability (or part thereof) that is derecognised and the consideration paid or received, including any non-cash assets transferred or liabilities assumed, is recognised in non-interest revenue for the period.

(vii) Impairment of financial assetsThe 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 if, and 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 asset or group of financial assets that can be reliably estimated. Objective evidence that a financial asset or group of assets is impaired includes observable data that comes to the attention of the group about the following loss events:– significant financial difficulty of the issuer or obligor;– a breach of contract, such as a default or delinquency in

interest or principal payments;


3. SIGNIFICANT ACCOUNTING POLICIES (continued)3.2 Financial instruments (continued)(vii) Impairment of financial assets (continued)

– the group, for economic or legal reasons relating to the borrower’s financial difficulty, enters a concession that the lender would not otherwise consider;

– it becomes probable that the borrower will enter bankruptcy or other financial reorganisation;

– the disappearance of an active market for that financial asset because of financial difficulties; or

– observable data indicating that there is a measurable decrease in the estimated future cash flows from a group of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the group, including:

•adversechangesinthepaymentstatusofborrowersinthegroup; or

•nationalorlocaleconomicconditionsthatcorrelatewithdefaults on the assets in the group.

Loans that would otherwise be past due or impaired and whose terms have been renegotiated and display the characteristics of a performing loan are reset to performing status. Loans whose terms have been renegotiated continue to be monitored to determine whether they are considered to be impaired or past due.

Assets carried at amortised cost If there is objective evidence that an impairment loss on loans and receivables or held-to-maturity investments carried at amortised cost has been incurred, the amount of the impairment 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. The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in profit or loss.

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.

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 reversal may not result in a carrying amount of the financial asset that exceeds what the amortised cost would have been had the impairment not been recognised at the date on which the impairment is reversed. The amount of the reversal is recognised in profit or loss for the year.

Financial assets carried at costIf there is objective evidence that an impairment loss has been incurred on an unquoted equity instrument that is not carried at fair value, because its fair value cannot be reliably measured, or on a derivative asset that is linked to and has to be settled by delivery of such an unquoted equity instrument, the amount of the impairment loss is measured at the difference between the carrying amount of the financial asset and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment losses are not reversed.

Available–for–sale financial assetsWhen a decline in the fair value of an available-for-sale financial asset has been recognised directly in other comprehensive income and there is objective evidence that the asset is impaired, the cumulative loss that has been recognised directly in other comprehensive income is removed from other comprehensive income and recognised in profit or loss.

The amount of the cumulative loss that is removed from other comprehensive and recognised in profit or loss is the difference between the acquisition cost (net of any principal repayment and amortisation) and current fair value, less any impairment loss on that financial asset previously recognised in profit or loss. Impairment losses recognised in profit and loss for an investment in an equity instrument classified as available-for-sale are not reversed through profit or loss.

If, in a subsequent period, the fair value of a debt instrument classified as available-for-sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit and loss, the impairment loss is reversed, with the amount of the reversal recognised in profit or loss for the period.

Maximum credit riskCredit risk arises principally from loans and advances to clients, investment securities derivatives and irrevocable commitments to provide facilities. The maximum credit risk is typically the gross carrying amount, net of any amounts offset and impairment losses. The maximum credit exposure for loan commitments is the full amount of the commitment if the loan cannot be settled net in cash or using another financial asset.

Renegotiated financial assetsFinancial assets are deemed as renegotiated financial assets when the terms of financial assets that would otherwise be past due or impaired have been renegotiated and restructured in an effort to reduce the risk of the borrower defaulting and the group ultimately incurring a loss. Restructuring is done by granting a concession to the borrower, such as restructuring the repayment terms or interest rate to improve the borrower’s cash flow position, and then obtaining further or better security, subsequently reducing the risk of default.

Renegotiation of asset based finance accounts are only done in exceptional circumstances and after the asset has been inspected and found to be in an acceptable condition.




Grade Description Description of rating quality

Performing

NGR 0 No risk (political grade) No risk

NGR 1 – 12 Investment grade Extremely good creditworthiness

NGR 13 Transition: Investment to sub investment Satisfactory average creditworthiness

NGR 14 – 16 Sub investment grade Still satisfactory creditworthiness

NGR 17 – 18 Sub investment grade Generally still sufficient creditworthiness

NGR 19 – 20 Sub investment grade Increased risk

NGR 22 – 23 Watch list High risk

NGR 24 Watch list Default imminent

Unrated Unrated Retail book, unrated

Non-performing

NGR 25 Default Sub-standard to loss

Credit ratings The grades and the description of the grades utilised by the group in grading the loans and advances are detailed in the table below:

An arrangement for repayment of arrears or legal collections matters, whether by means of an increased debit order against un-adjusted instalment, or by means of a borrower’s transfer or deposit of additional funds into the account, does not constitute as a restructuring. Only short term arrangements (i.e. arrears to be rectified within two to three months) are accepted on active accounts in arrears.

(viii) Financial liabilities and equity instruments issued by the groupClassification as debt or equityDebt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement.

Equity instrumentsAn 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 recorded at the proceeds received, net of direct issue costs.

Compound instrumentsThe 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 arrangement. At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for similar non-convertible instruments.

This amount is recorded as a liability on an amortised cost basis using the effective interest method until extinguished upon conversion or at the instrument’s maturity date. The equity component is determined by deducting the amount of the liability component from the fair value of the compounded instrument as a whole. This is recognised and included in equity, net of income taxation effects, and is not subsequently re-measured.

(ix) Offsetting financial instruments and related incomeFinancial assets and liabilities are offset and the net amount reported in the statement of financial position only when there is a legally enforceable right to set-off and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.

Income and expense items are offset only to the extent that their related instruments have been offset in the statement of financial position.

(x) CollateralFinancial and non-financial assets are held as collateral in respect of certain recognised financial assets. Such collateral is not recognised by the group, as the group does not retain the risks and rewards of ownership, and is obliged to return such collateral to counterparties on settlement of the related obligations. Should a counterparty be unable to settle its obligations, the group takes possession of collateral or calls on other credit enhancements as full or part settlement of such amounts. These assets are recognised when the applicable recognition criteria under IFRS are met, and the group’s accounting policies are applied from the date of recognition (refer to note 49.4 to the annual financial statements).

Collateral is also given to counterparties under certain financial arrangements, but such assets are not derecognised where the group retains the risks and rewards of ownership. Such assets are at risk to the extent that the group is unable to fulfil its obligations to counterparties (refer to note 8 to the annual financial statements).

(xi) AcceptancesAcceptances comprise undertakings by the group to pay bills of exchange drawn on clients. The group expects most acceptances to be settled simultaneously with the reimbursement from clients. Acceptances are disclosed as liabilities with the corresponding asset recorded in the statement of financial position within loans and advances.


3. SIGNIFICANT ACCOUNTING POLICIES (continued)3.2 Financial instruments (continued)

(xii) Financial guarantee contractsFinancial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with the terms of a debt instrument.

Issued financial guarantee contracts are recognised as insurance contracts and are measured at the best estimate of the expenditure required to settle any financial obligation as of the reporting date. Liability adequacy testing is performed to ensure that the carrying amount of the liability for issued financial guarantee contracts is sufficient. Any increase in the liability relating to guarantees is recognised in profit or loss.

3.3 Instalment transactionsInstalment credit agreements are regarded as financing transactions and the total instalments, less unearned finance charges, are included in advances and other accounts. Finance charges are computed at the commencement of the contractual periods and are recognised in income in proportion to the net cash investment capital balances outstanding. Unearned finance charges are carried forward as deferred income and deducted from advances.

3.4 Property and equipment

3.4.1 Initial recognition and subsequent expenditureItems of property and equipment are initially recognised at cost if it is probable that any future economic benefits associated with the items will flow to the group and it has a cost that can be measured reliably.

Subsequent expenditure is capitalised to the carrying amount of items of property and equipment if it is measurable and it is probable that it increases the future economic benefits associated with the asset. Expenditure incurred to replace a component of an item of property or equipment is capitalised to the cost of the item of property and equipment and the part replaced is derecognised. All other expenditure is recognised in profit or loss as an expense when incurred.

Certain items of property and equipment that had been revalued to fair value on 1 January 2004, the date of transition to IFRSs, are measured on the basis of deemed cost, being the revalued amount at the date of that revaluation.

3.4.2 Measurement after recognitionEquipmentSubsequent to initial recognition, equipment, consisting principally of computer equipment, motor vehicles, fixtures and furniture, are stated at cost less accumulated depreciation and impairment losses.

PropertyProperty, whose fair values can be reliably measured, are stated at revalued amounts, being fair value at the date of revaluation less subsequent accumulated depreciation and accumulated impairment losses. Revaluations are performed with sufficient regularity such that the carrying amounts do not differ materially from those that would be determined using fair values at the reporting date. An external valuation is performed on an annual basis. In the event of a material change in the market conditions between the valuation date and the reporting date an internal valuation is performed and adjustments made to reflect any material changes in value.

An independent valuation of the group’s land and buildings was performed during the current year to determine the fair value of land and buildings. The effective date of the revaluation was 31 December 2016. The revaluation of the group’s properties has been done, where appropriate for the specific property being valued, with reference to one of the income capitalisation method or the depreciated replacement cost method.

The fair value is dependent on the method of valuation and assumptions utilised by the independent valuator, being key sources of estimation uncertainty. The valuation methodology adopted is dependent upon the nature of the property. Income generating assets are valued using discounted cash flows. Vacant land, land holdings and residential flats are valued according to sales of comparable properties. Near vacant properties are valued at land value less the estimated cost of demolition. Where neither of the income capitalisation method or sales value of comparable properties is available or reasonable, the depreciated replacement cost method is utilised.

Significant assumptions used by the independent valuators under the income capitalisation method include capitalisation rates of between 9.75% and 11.50% (2015: between 9.50% and 11.50%), rental income of between N$85 and N$230 (2015: N$80 and N$215) per m2 and total expenditure being 18.5% (2015: 18.5%) of rental income.

When an individual property is revalued, any increase in its carrying amount (as a result of the revaluation) is recognised in other comprehensive income and accumulated in equity, except to the extent that it reverses a revaluation decrease of the same property previously recognised as an expense in profit or loss, in which case the increase is credited to profit and loss to the extent of the decrease previously expensed.

When the value of an individual property is decreased as a result of a revaluation, the decrease is charged against any related credit balance in the revaluation reserve in respect of that property. However, to the extent that it exceeds any surplus, it is recognised as an expense in profit or loss.




3.4.3 Reclassifications of property and equipmentWhere properties are reclassified during the year from property and equipment to investment properties any revaluation gain arising is initially recognised in profit or loss to the extent of previous charged impairment losses. Any residual excess is taken to the revaluation reserve. Revaluation deficits are recognised in the revaluation reserve to the extent of previously recognised gains and any residual deficit is accounted for in profit or loss.

Investment properties that are reclassified to owner occupied property are revalued at the date of transfer, with any difference being taken to profit or loss.

3.4.4 DepreciationEach part of an item of property and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately. The depreciable amounts of property and equipment are charged to profit or loss on a straight-line basis over the estimated useful lives of items of property and equipment, unless they are included in the carrying amount of another asset. Useful lives and residual values are assessed on an annual basis.

In the case of owner-occupied property, on revaluation any accumulated depreciation at the date of the revaluation is eliminated against the gross carrying amount of the property concerned and the net amount restated to the revalued amount. Subsequent depreciation charges are adjusted based on the revalued amount for each property. Any difference between the depreciation charge on the revalued amount and that which would have been charged under historic cost is transferred net of any related deferred taxation, between the revaluation reserve and retained earnings as the property is utilised.Land is not depreciated.

The maximum estimated useful lives are as follows:Freehold buildings 50 yearsLeasehold buildings 20 yearsFurniture, fittings and equipment 10 yearsComputer equipment 5 yearsMotor vehicles 6 years

3.4.5 DerecognitionItems of property and equipment are derecognised on disposal or when no future economic benefits are expected from their use or disposal.

On derecognition of a property or equipment, any gain or loss on disposal, determined as the difference between the net disposal proceeds and the carrying amount of the asset, is recognised in profit or loss in the period of the derecognition. In the case of property, any surplus in the revaluation reserve in respect of the individual property is transferred directly to other comprehensive income.

Compensation from third parties for items of property and equipment that were impaired, lost or given up is included in profit or loss when the compensation becomes receivable.

3.5 Impairment of assetsThe group assesses all assets, other than financial instruments, for indications of an impairment loss or the reversal of a previously recognised impairment at each reporting date.

Should there be indications of impairment, the assets’ recoverable amounts are estimated. These impairments (where the carrying amount of an asset exceeds its recoverable amount) or the reversal of a previously recognised impairment are recognised in profit or loss for the year.

Intangible assets not yet available for use are tested annually for impairment.

The recoverable amount of an asset is the higher of its fair value less cost to sell and its value in use. The fair value less cost to sell is determined by ascertaining the current market value of an asset and deducting any costs related to the realisation of the asset.

In assessing value-in-use, the expected future cash flows from the asset are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An asset whose cash flows are largely dependent on those of other assets, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

A previously recognised impairment loss will be reversed if the recoverable amount increases as a result of a change in the estimates used previously to determine the recoverable amount, but not to an amount higher than the carrying amount that would have been determined, net of depreciation or amortisation, had no impairment loss been recognised in prior periods.

3.6 LeasesThe group as lesseeLeases where the lessor retains the risk and rewards of ownership of the underlying asset are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are recognised in the statement of comprehensive income on a straight-line basis over the term of the lease.

The group as lessorRental income (net of any incentives given to lessees) from operating leases is recognised on a straight-line basis over the term of the relevant lease.

Assets leased out under operating leases are included under property and equipment in the statement of financial position. Initial direct costs incurred in negotiating and arranging are added to the carrying amount of the leased asset and recognised as an expense over the lease term on the same basis as the rental income. Leased assets are depreciated over their expected useful lives on a basis consistent with similar assets.


3. SIGNIFICANT ACCOUNTING POLICIES (continued)

3.7 TaxationTaxation expense, recognised in the statement of comprehensive income, comprises current and deferred taxation. Current or deferred taxation is recognised in profit or loss, except to the extent that it relates to items recognised directly in equity, in which case it too is recognised in equity and to the extent that it relates to items recognised in other comprehensive income, in which case it too is recognised in other comprehensive income.

3.7.1 Deferred taxationDeferred taxation is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes Temporary differences are differences between the carrying amounts of assets and liabilities for financial reporting purposes and their respective taxation base. The amount of deferred taxation provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities using taxation rates enacted or substantively enacted at the reporting date that are expected to be applied to temporary differences when they reverse.

Deferred taxation is recognised in profit or loss for the period, except to the extent that it relates to a transaction that is recognised directly in other comprehensive income. The effect on deferred taxation of any changes in taxation rates is recognised in profit or loss for the period, except to the extent that it relates to items previously charged or credited directly to other comprehensive income.

Deferred taxation liabilities are generally recognised for all taxable temporary differences, and deferred taxation 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. Deferred taxation is not recognised where the initial recognition of assets or liabilities in a transaction that is not a business combination affects neither accounting nor taxable profit.

A deferred taxation asset is recognised to the extent that it is probable that future taxable income will be available, against which the unutilised tax losses and deductible temporary differences can be used. Deferred taxation assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related taxation benefits will be realised.

Deferred taxation assets and liabilities are offset if there is a legally enforceable right to offset current taxation liabilities against current taxation assets, and they relate to income taxes levied by the same taxation authority on the same taxable entity, or on different taxation entities, but they intend to settle current tax liabilities and assets on a net basis or their taxation assets and liabilities will be realised simultaneously.

Deferred taxation assets and liabilities are not discounted.

3.7.2 Direct and indirect taxationDirect taxation is the expected taxation payable on the taxable income for the year, as adjusted for items which are not taxable or disallowed, using taxation rates enacted or substantively enacted in Namibia at the reporting date, and any adjustment to taxation payable in respect of previous years.

Indirect taxation includes Value Added Taxation paid to central government and has been expensed in the statement of comprehensive income, to the extent that it has not been claimed under the Value Added Taxation apportionment ratio.

3.8 Foreign currency transactionsTransactions in foreign currencies are translated into the functional currency by applying the spot rate of exchange ruling at the date of the transaction.

Monetary assets and liabilities in foreign currencies are translated into the functional currency of the group at spot rates of exchange ruling at the reporting date.

Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are translated into the functional currency of the group at foreign exchange rates ruling at the date fair value is determined. Non-monetary assets and liabilities denominated in foreign currencies, which are stated at historical cost, are converted into the functional currency of the group at the rate of exchange ruling at the date of the initial recognition and are not subsequently retranslated.

Exchange gains and losses on the translation and settlement during the year of foreign currency monetary assets and liabilities are recognised in the statement of comprehensive income. Exchange differences on non-monetary items, for example equity instruments, are recognised in equity when the changes in the fair value of the non-monetary item is recognised in other comprehensive income, and in profit or loss if the changes in fair value of the non-monetary item is recognised in profit or loss.

3.9 Properties in possessionUnsold properties in possession are stated at the lower of the net outstanding amount at date of purchase and net realisable value.

3.10 Employee benefitsShort-term employee benefitsShort-term employee benefits include salaries, accumulated leave payments, bonuses and non-monetary benefits such as medical aid contributions.

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.

A liability is recognised for the amount to be paid under short-term cash bonus plans or accumulated leave if the Bank has a present, legal or constructive obligation to pay this amount as a result of past services provided by the employee and the obligation can be estimated reliably.




Defined contribution planA defined contribution plan has been established for eligible employees of the group, with assets held in separate trustee-administered funds.

Contributions in respect of defined contribution pension schemes are recognised as an expense in profit or loss as incurred.

Post-retirement medical benefitsThe group provides post-retirement medical benefits to eligible employees. Non-pension post-retirement benefits are accounted for according to their nature, either as defined contribution or defined benefit plans. The expected costs of post-retirement benefits that are defined benefit plans are accounted for in accordance with IAS 19: Employee Benefits.

The projected unit credit method is used to determine the defined benefit obligations based on actuarial assessments, which incorporate not only the post-retirement benefit obligations known on the reporting date, but also information relevant to their expected future development. The expected costs of post-retirement benefits are accrued over the period of employment and are determined by independent qualified actuaries. Actuarial gains and losses and service costs are immediately realised in the profit and loss when incurred or received.

3.11 ProvisionsProvisions are recognised when the group has a present legal or constructive obligation as a result of past events, for which it is probable that an outflow of economic benefits will occur and where a reliable estimate can be made of the amount of obligation.

The amount recognised as a provision is the reasonable estimate of the expenditure required to settle the obligation at the reporting date. Where the effect of discounting is material, provisions are discounted. The discount rate reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Gains from the expected disposal of assets are not taken into account in measuring provisions. Provisions are reviewed at each reporting date and adjusted to reflect the current reasonable estimate. If it is no longer probable that an outflow of resources will be required to settle the obligation, the provision is reversed.

3.12 Contingent liabilitiesThe group discloses a contingent liability where:– it is a possible obligation arising from past events, the

existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the enterprise; or

– it is not probable that an outflow of resources will be required to settle an obligation; or

– the amount of the obligation cannot be measured with sufficient reliability.

3.13 Borrowing costsBorrowing costs directly attributable to the acquisition, construction and production of qualifying assets are capitalised as part of the costs of these assets. Qualifying assets are assets that necessarily take a substantial period of time to prepare for their intended use or sale. Capitalisation of borrowing costs continues up to the date when the assets are substantially ready for their use or sale.

All other borrowing costs are expensed in the period in which they are incurred.

Interest expense is recognised in profit or loss using the effective interest method taking into account the expected timing and amount of cash flows. Interest expense includes the amortisation of any discount or premium or other differences between the initial carrying amount of an interest-bearing instrument and its amount at maturity calculated on an effective interest rate basis.

3.14 Computer software and development costExpenditure on research activities, undertaken with the prospect of gaining new technical knowledge and understanding are recognised in the statement of comprehensive income as an expense incurred.

If costs can be reliably measured and future economic benefits are available, expenditure on computer software and other development activities, whereby set procedures and processes are applied to a project for the production of new or substantially improved products and processes, is capitalised if the computer software and other development products or processes are technically and commercially feasible and the group has intention and sufficient resources to complete development.

The expenditure capitalised includes cost of materials, and directly attributable employee and other direct costs. Computer development expenditure is amortised only once the relevant software has been commissioned. Capitalised software is stated at cost, less accumulated amortisation and impairment losses. Computer development expenditure is amortised only once the relevant software is available for use in the manner intended by management. Capitalised software is stated at cost less accumulated amortisation and impairment losses. Expenditure for the development of computers that are not yet available for use is not amortised and is stated at cost less impairment losses.

Amortisation on computer software and development costs is charged to the statement of comprehensive income on a straight-line basis over the estimated useful lives of these assets, which do not exceed 5 years and are reviewed annually.

Subsequent expenditure relating to computer software is capitalised only when it is probable that future economic benefits from the use of assets will increase beyond its original assessed standard of performance. All other subsequent expenditure is recognised as an expense in the period in which it is incurred. Surpluses or deficits on the disposal of computer software are recognised in the statement of comprehensive income. The surplus or deficit is the difference between the net disposal proceeds and the carrying amount of the asset.



3.15 Revenue recognitionRevenue relates to banking activities and comprises net income from funds, dividends from investments, fees and commissions from banking and related transactions and net income from exchange dealings.

Revenue is shown net of value added tax.

Interest incomeInterest income is recognised in profit or loss using the effective interest method taking into account the expected timing and amount of cash flows. The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating the interest income over the relevant period. Interest income includes the amortisation of any discount or premium or other differences between the initial carrying amount of an interest-bearing instrument and its amount at maturity calculated on an effective interest rate basis.

Non-interest revenueDividend incomeDividend income from investments is recognised when the shareholder’s rights to receive payment have been established on the ex-dividend date for equity instruments and is included in dividend income.

Fees and commissions Fees and commissions are generally recognised on an accrual basis

when the service has been provided, such as loan syndication fees. Income earned from the provision of services is recognised as

the service is rendered by reference to the stage of completion of the service.

Loan origination fees for loans that are probable of being drawn down, are deferred (together with related direct costs) and recognised as an adjustment to the effective interest rate on the advance.

Commission and fees arising from negotiating, or participating in the negotiation of a transaction for a third party, such as the acquisition of loans, shares or other securities or the purchase or sale of businesses, are recognised on completion of the underlying transaction, unless it forms an integral part of the effective interest rate of the underlying financial instruments.

Foreign exchange gains and lossesForeign exchange gains and losses on monetary items arising from foreign currency transactions that have not been settled at the reporting date are recognised in income in the year in which the exchange rate movement occurred. The premium or discount on forward exchange contracts is amortised to income over the term of the forward exchange contract.

Rental incomeThe group’s policy for recognition of revenue from operating leases is described in 3.6 above.

OtherRevenue other than interest, fees and commission, which includes exchange and securities trading income, dividends from investments and net gains on the sale of investment banking assets, is recognised in profit or loss when the amount of revenue from the transaction or service can be measured reliably, it is probable that the economic benefits of the transaction or service will flow to the group and the costs associated with the transaction or service can be measured reliably.

Fair value gains or losses on financial instruments at fair value through profit or loss, including derivatives are included in non-interest revenue. These fair value gains or losses are determined after deducting the interest component, which is recognised separately in interest income and expense.

Gains or losses on derecognition of any financial assets or financial liabilities are included in non-interest revenue.

3.16 Share-based paymentsEquity-settled share-based payment transactions The services received in an equity-settled share-based payment transaction with employees are measured at the fair value of the equity instruments granted. The fair value of the equity instruments is measured at grant date and is not subsequently remeasured.

If the equity instruments granted vest immediately and the employee is not required to complete a specified period of service before becoming unconditionally entitled to those instruments, the services received are recognised in full on grant date in profit or loss for the period, with a corresponding increase in equity.

Where the equity instruments do not vest until the employee has completed a specified period of service, it is assumed that the services rendered by the employee, as consideration for those equity instruments, will be received in the future, during the vesting period. These services are accounted for in profit or loss as they are rendered during the vesting period, with a corresponding increase in equity. Share-based payment expenses are adjusted for non-market related performance conditions.

Where the equity instruments are no longer outstanding, the accumulated share-based payment reserve in respect of those equity instruments is transferred to retained earnings.

Cash-settled share-based payment transactions with employeesThe services received in cash-settled share-based payment transactions with employees and the liability to pay for those services, are recognised at fair value as the employee renders services. Until the liability is settled, the fair value of the liability is re-measured at each reporting date and at the date of settlement, with any changes in fair value recognised in profit or loss for the year. Where the equity instruments do not vest until the employee has completed a specified period of service, it is assumed that the services rendered by the employee, as consideration for those equity instruments, will be received in




the future, during the vesting period. These services are accounted for in profit or loss as they are rendered during the vesting period, with a corresponding increase in the liability. Share-based payment expenses are adjusted for non-market related performance conditions.

Measurement of fair value of equity instruments grantedThe equity instruments granted by Nedbank group Limited are measured at fair value at measurement date using standard option pricing valuation models. The valuation technique is consistent with generally acceptable valuation methodologies for pricing financial instruments, and incorporates all factors and assumptions that knowledgeable, willing market participants would consider in setting the price of the equity instruments. Vesting conditions, other than market conditions, are not taken into account in determining fair value. Vesting conditions are taken into account by adjusting the number of equity instruments included in the measurement of the transaction amount.

Share-based payments with persons or entities other than employeesThe transactions in which equity instruments are issued to historically disadvantaged individuals and organisations in Namibia are accounted for as share-based payments. Where Nedbank group Limited has issued such shares and expects to receive services in return for equity instruments, the share-based payments charge is spread over the relating vesting (i.e. service) period of these instruments. In instances where such goods and services could not be identified the cost has been expensed with immediate effect. The valuation techniques are consistent with those mentioned above.

3.17 Cash and cash equivalentsCash and cash equivalents comprise balances with less than 90 days maturity from the date of acquisition including: cash and balances with central Groups, treasury bills and other eligible bills, amounts due from other Groups and trading securities.

3.18 Share capital Ordinary share capital, preference share capital or any financial instrument issued by the group is classified as equity when:– payment of cash, in the form of a dividend or redemption,

is at the discretion of the group;– the instrument does not provide for the exchange of financial

instruments under conditions that are potentially unfavourable to the group;

– settlement in the group’s own equity instruments is for a fixed number of equity instruments at a fixed price; and

– the instrument represents a residual interest in the assets of the group after deducting all of its liabilities.

The group’s ordinary and preference share capital is classified as equity.

Share capital issued by the group is recorded at the proceeds received, less incremental directly attributable issue costs

(net of any related income tax benefit). Dividends are recognised as distributions within equity in the period in which they are approved by the shareholders. Dividends for the year that are declared after the reporting date are disclosed in note 35.

3.19 Non-current assets held for sale Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally through the sale transaction rather than through continuing use.

This condition is regarded as met only when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify as a complete sale within one year from the date of classification. An active programme to find a buyer should be in place with appropriate level of management approving the sale.

Immediately before classification as held-for-sale, all assets are remeasured in accordance with the group’s accounting policies. Non-current assets (or disposal groups) held for sale are measured at the lower of carrying amount and fair value less incremental directly attributable cost to sell (excluding taxation and finance charges) and are not depreciated. Gains or losses recognised on initial classification as held-for-sale and subsequent remeasurements are recognised in profit or loss, regardless of whether the assets were previously measured at revalued amounts. The maximum gains that can be recognised are the cumulative impairment losses previously recognised in profit or loss. A disposal group continues to be consolidated while held for sale. Income and expenses continue to be recognised, however, assets are not depreciated or amortised. Non-current assets (or disposal groups) are reclassified from held-for-sale to held-for-use if they no longer meet the held-for-sale criteria. On reclassification, the non-current asset (or disposal group) is remeasured at the lower of its recoverable amount and the carrying amount that would have been recognised had the asset (or disposal group) never been classified as held-for-sale.

Any gains or losses are recognised in profit or loss, unless the asset was carried at a revalued amount prior to classification as held-for-sale. Gains or losses on such assets are recognised as revaluation increases or decreases.

3.20 Policyholders’ fund The policyholders’ fund represents net revenue from life business for the current year as a reserve against future claims. The policyholders’ fund provision has been computed using a gross premium valuation method. Provision has been made in accordance with the Financial Soundness Valuation basis as set out in the guidelines issued by the Actuarial Society of South Africa in Prudential Guidance Note (PGN) 104 (2001). Under this guideline, provisions are valued using realistic expectations of future experience.



3.21 Policyholder insurance contracts

NedNamibia Life Assurance Company Limited is licenced as long-term insurer in Namibia in accordance with the Long-Term Insurance Act of 1998 as amended (“LTIA”). The LTIA requires the determination of liabilities to be on a reasonable valuation basis; which according to generally accepted actuarial standards and principles; is considered actuarially sound by its valuator.

In terms of IFRS 4: Insurance Contracts, defined insurance liabilities are allowed to be measured under existing local practice. The group has adopted the Financial Soundness Valuation (FSV) supported by Advisory Practice Notes (APN’s) and Standards of Actuarial Practice (SAP’s) issued by the Actuarial Society of South Africa to determine the liability in respect of insurance contracts issued in Namibia.

The following APN’s and SAP’s are of relevance to the determination of policyholder liabilities: APN 103: Report by the Statutory Actuary in the annual financial statements of South African Long Term Insurers SAP 104: Calculation of the value of assets, liabilities and capital adequacy requirement of long-term insurers SAP 105: Minimum requirements for deriving aids extra mortality rates APN 106: Actuaries and Long-Term Insurance

Insurance contracts classification The group issues contracts that transfer insurance risk or financial risk or, in some cases, both.

An insurance contract is a contract under which the group (“insurer”) accepts significant insurance risk from the policyholder by agreeing to compensate the policyholder if a specified uncertain future event (“the insured event”) adversely affects

the policyholder. Such contracts may also transfer financial risk. The group defines significant insurance risk as the possibility of having to pay benefits on the occurrence of an insured event that are significantly more than the benefits payable if the insured event did not occur.

Insurance contracts measurement These contracts are valued in terms of the Financial Soundness Valuation (“FSV”) basis, on a gross premium valuation methodology, described in (SAP) 104 (Version 8) and the liability is reflected as Policyholders’ liabilities under insurance contracts.The liability is based on assumptions of the best estimate of future experience, plus compulsory margins for prudent liabilities as required in terms of (SAP) 104 (Version 8).

The liability assumptions are reviewed annually. Any changes in assumptions and/or other changes to the liability calculation are reflected in the statement of comprehensive income as they occur.

Outstanding claims provision Provision is made in the policyholders’ liabilities under insurance contracts for the estimated cost of claims outstanding at the end of the year.

Liability adequacy test At each financial position date, liability adequacy tests are performed to ensure the adequacy of the insurance contract liabilities net of related intangible present value of acquired in-force business assets. The liability is calculated in terms of the FSV basis described in (SAP) 104 (Version 8). The FSV basis meets the minimum requirement of liability adequacy test.

Acquisition costs Acquisition costs for insurance contracts represent commission that relate to the securing of new contracts.

The FSV method for valuing insurance contracts makes explicit allowance for the deferral of acquisition costs and hence no explicit deferred acquisition cost asset is recognised in the statement of financial position for insurance contracts.




7. DERIVATIVE FINANCIAL INSTRUMENTS Financial assets classification: At fair value through profit and loss – held for trading These transactions have been entered into in the normal course of business and no material losses are anticipated other than those for which

provision has been made in the statement of comprehensive income. There are no commitments or contingent commitments under derivative instruments that are settled otherwise than with cash. The principal types of derivative contracts into which the group enters are described below:

Swaps These are over-the-counter (“OTC”) agreements between two parties to exchange periodic payments of interest, or payment for the

change in value of a commodity, or related index, over a set period based on notional principal amounts. The group enters into swap transactions in several markets. Interest rate swaps exchange fixed rates for floating rates of interest based on notional amounts. Basis swaps exchange floating or fixed interest calculated using different bases. Cross currency swaps are the exchange of interest based on notional values of different currencies.

Forwards Forward contracts are OTC agreements and are principally dealt in by the group in interest rates as forward rate agreements and in

currency as forward foreign exchange contracts.

2016 2015 N$’000 N$’000

4. CASH AND BALANCES WITH CENTRAL BANK Financial assets classification: Amortised cost Bank notes and coins 120 673 133 084 Balances with central bank - other than mandatory reserve deposit 131 330 172 273 Cash and balances with central bank excluding mandatory reserve 252 003 305 357 Mandatory reserve deposit with central bank 132 526 116 611

384 529 421 968

Mandatory reserve deposits are not available for use in the bank’s day-to-day operations. Cash on hand and mandatory reserve deposits are non-interest bearing.

5. DUE FROM OTHER BANKS5.1 Investment portfolio Financial assets classification: At amortised cost Placements with other banks 449 161 564 775 Financial assets classification: Designated at fair value through profit and loss Foreign Correspondents 12 904 494 150 Financial assets classification: At fair value through profit and loss – held for trading Deposits placed under reverse repurchase agreements 115 871 135 886

577 936 1 194 811

5.2 Valuation The estimation of the fair value of the deposit placed under reverse repurchase agreements has proven to approximate the

present value of cash flows of such instruments.

6. OTHER SHORT-TERM SECURITIES Financial assets classification: At fair value through profit and loss – held for trading

6.1 Investment portfolio Negotiable certificates of deposit 559 456 384 330 Money market funds 1 144 602 379 005 1 704 058 763 335

6.2 Expected maturity structure One year or less 1 704 058 712 884 Five years or less but over one year – 50 451 1 704 058 763 335

6.3 Valuation The estimation of the fair value of the negotiable certificates of deposit has proven to be reasonably close to the carrying value of

such instruments.


7.2 Notional principal of derivative financial instruments This represents the gross notional amounts of all outstanding contracts at year-end for the group. This gross notional amount is the

sum of the absolute amount of all purchases and sales of derivative instruments. The notional amounts do not represent amounts exchanged by the parties and therefore represent only the measure of involvement by the group in derivative contracts and not its exposure to market or credit risks arising from such contracts. The amounts actually exchanged are calculated on the basis of the notional amounts and other terms of the derivative, which relate to interest rates, exchange rates, securities’ prices or financial and other indices.

7.3 Carrying amount of derivative financial instruments The amounts disclosed represent the value of all derivative instruments held at 31 December 2016. The fair value of a derivative

financial instrument is the amount at which it could be exchanged in a current transaction between willing parties, other than a forced liquidation or sale. Fair values are obtained from quoted market prices, discounted cash flow models and market-accepted option-pricing models.

2015 2015 2015 N$’000 N$’000 N$’000 Notional Positive Negative principal value value

Exchange rate derivatives Forwards 126 392 14 724 18 765 126 392 14 724 18 765

Interest rate derivatives Interest rate swaps – – –

126 392 14 724 18 765

2016 2016 2016 N$’000 N$’000 N$’000 Notional Positive Negative principal value value

Exchange rate derivatives Forwards 293 720 15 558 10 392 293 720 15 558 10 392

Interest rate derivatives Interest rate swaps 200 000 1 286 1 252 493 720 16 844 11 644

7. DERIVATIVE FINANCIAL INSTRUMENTS (cont) 2016 2015 N$’000 N$’000

7.1 Total carrying amount of derivative financial instruments Gross carrying amount of assets 16 844 14 724 Gross carrying amount of liabilities (11 644) (18 765)

Net carrying amount 5 200 (4 041)

A detailed breakdown of the carrying amount, notional principal and fair value of the various types of derivative financial instruments held by the group is presented in the following tables.




N$’000 N$’000 N$’000 Exchange rate Interest rate Total contracts contracts

7.4 Analysis of derivative financial instruments Positive fair value of derivatives 2016 Maturity analysis Under one year 15 558 1 286 16 844 One to five years – – –

15 558 1 286 16 844

2015 Maturity analysis Under one year 14 724 – 14 724 One to five years – – –

14 724 – 14 724

Negative fair value of derivatives

2016 Maturity analysis Under one year 10 392 1 252 11 644 One to five years – – – Over five years – – –

10 392 1 252 11 644

2015 Maturity analysis* Under one year 18 765 – 18 765 One to five years – – – Over five years – – –

18 765 – 18 765

Notional principal of derivatives

2016 Maturity analysis Under one year 293 720 200 000 493 720 One to five years – – – Over five years – – –

293 720 200 000 493 720

2015 Maturity analysis* Under one year 126 392 – 126 392 One to five years – – – Over five years – – –

126 392 – 126 392


2016 2015

N$’000 N$’000

8. GOVERNMENT AND OTHER SECURITIES Financial assets classification: At fair value through profit and loss – held for trading

8.1 Investment portfolio Treasury bills 963 292 529 706 Government registered stock 265 985 293 177 Credit Linked Notes 398 910 396 405 Other public sector securities 34 960 34 157

1 663 147 1 253 445

8.2 Expected maturity structure One year or less 1 276 785 904 869 Five years or less but over one year 233 694 125 797 Over five years 152 668 222 779

1 663 147 1 253 445

8.3 Valuation – Book value 1 681 319 1 253 357 – Market valuation 1 663 147 1 253 445

Treasury bills with a maturity value of N$340 million (2015: N$155 million) and government registered stock or other public sector securities with a maturity value of N$122 million (2015: N$170 million) have been encumbered to secure the current account with Bank of Namibia in the event that it is in overdraft.

Treasury bills with a maturity value of N$285 million (2015: N$ nil) have been encumbered to secure the deposits received under repurchase agreement from Bank of Namibia. (refer note 20)

Banking institutions may overdraw their current account against certain pledged eligible securities to cover possible shortages. Overdrafts are limited to 90% of the maturity or redemption value of the securities pledged. Daily interest is charged at the prevailing repo rate on the amount received from Bank of Namibia (90% of the maturity value).

9. LOANS AND ADVANCES TO CUSTOMERS Financial assets classification: Loans and receivables

9.1 Category analysis Home Loans 5 313 118 4 601 266 Other loans and overdrafts 2 649 664 2 254 581 Net leases and instalment debtors 2 415 683 2 237 488 Gross leases and instalment debtors 2 901 434 2 697 824 Less: Unearned finance charges on leases and instalment debtors (485 751) (460 336) Personal loans 973 159 814 025

11 351 624 9 907 360 Impairment of advances (note 30) (126 258) (104 960)

11 225 366 9 802 400

9.2 Sectoral analysis Individuals 6 857 095 6 777 125 Manufacturing 339 568 283 115 Wholesale and trade 64 115 51 900 Retailers, catering and accommodation 221 634 170 224 Agriculture, hunting, forestry and fishing 283 695 280 513 Mining and quarrying 209 891 176 500 Financial services, insurances and real estates 2 467 643 1 236 095 Government and public sector 295 153 299 468 Building and property development 189 998 163 021 Transport, storage and communication 201 198 184 786 Other services 221 634 284 613

11 351 624 9 907 360




2016 2015 N$’000 N$’000

9.3 Expected maturity structure Less than three months but not repayable on demand or at short-term notice 2 281 780 1 987 793 One year or less but over three months 1 049 626 879 776 Five years or less but over one year 4 058 302 3 684 272 Over five years 3 961 916 3 355 519

11 351 624 9 907 360

9.4 Geographical analysis Namibia 11 351 624 9 907 360

9.5 Non-performing advances

9.5.1 Category analysis (included under note 9.1) Home Loans 95 078 69 057 Other loans and overdrafts 45 813 36 864 Net leases and instalment debtors 50 938 35 650 Personal loans 25 282 9 747

217 111 151 318

9.5.2 Sectoral analysis (included under note 9.2) Individuals 182 227 122 843 Manufacturing 826 5 888 Wholesale and trade 11 105 8 577 Retailers, catering and accommodation 10 052 6 004 Agriculture, hunting, forestry and fishing 105 111 Mining and quarrying 434 2 Financial services, insurances and real estates 4 630 2 579 Government and public sector 225 37 Building and property development 1 919 2 177 Transport, storage and communication 2 456 1 464 Other services 3 132 1 636

217 111 151 318

10. OTHER ASSETS Financial assets classification: Loans and receivables 136 616 43 087 Remittances in transit 115 987 14 876 Sundry debtors and other accounts 20 629 28 211 Non - financial instruments 3 303 4 259 Prepayments 3 042 4 130 Taxation 261 129 139 919 47 346

11. INVESTMENT IN SUBSIDIARIES, ASSOCIATES AND LISTED INVESTMENTS Investment in associates 6 351 4 430 – Carrying value at beginning of the year 4 430 3 119 – Dividend received from associate – – – Share of associate’s profit/(loss) 1 921 1 311 Listed investments 31 048 31 416

37 399 35 846

Market valuation 37 399 35 846


Aggregate profits after Nature of business Issued ordinary share capital Proportion held Shares at cost tax of subsidiary 2016 2015 2016 2015 2016 2015 2016 2015 ’000 ’000 % % N$’000 N$’000 N$’000 N$’000

11. INVESTMENT IN SUBSIDIARIES, ASSOCIATES AND LISTED INVESTMENTS (continued) Indirect Subsidiary Companies of the group CBN Nominees (Proprietary) Limited Safe custody company – – 100 100 – – 470 364 NedLoans (Proprietary) Limited Administration company – – 100 100 4 250 4 250 5 526 5 305 Ten Kaiser Wilhelm Strasse (Proprietary) Limited Property company 582 582 50 50 291 291 631 (150) Walvis Bay Land Syndicate (Proprietary) Limited Property company 3 000 3 000 50 50 1 500 1 500 1 115 1 257

The directors valued the investments in the subsidiary companies at net asset value. The group has control over financial and operational decisions in both Ten Kaiser Wilhelm Strasse (Proprietary) Limited and Walvisbay Land Syndicate (Proprietary) Limited by means of majority representation on the board of directors of these companies.

Nature of business Issued ordinary share capital Proportion held Shares at cost Indebtedness by Associate 2016 2015 2016 2015 2016 2015 2016 2015 ’000 ’000 % % N$’000 N$’000 N$’000 N$’000

Associate Namclear (Proprietary) Limited Clearing agent 4 4 25 25 1 162 1 162 – –

Due to the unavailability of audited annual financial statements of Namclear (Proprietary) Limited for the year ended 31 December 2016 at the time of approval of the group’s 2016 annual financial statements, un-audited management accounts of Namclear have been used to provide statement of financial position and statement of comprehensive income information. Summarised financial information in respect of Namclear (Proprietary) Limited: 31 December 31 December 2016 2015 N$’000 N$’000

Total assets 64 699 51 796 Total liabilities (39 292) (34 074) Net assets 25 407 17 722 Bank’s share of associate’s net assets 6 351 4 430 Total revenue 44 003 32 405 Total profit for the year 9 179 5 019 Share of associate’s profit for the year 2 295 1 255 Less previous year’s losses not consolidated (374) 56 Share of associate’s profit 1 921 1 311

Issued ordinary share capital Proportion held Shares at cost Fair value of shares Nature of business 2016 2015 2016 2015 2016 2015 2016 2015 ’000 ’000 % % N$’000 N$’000 N$’000 N$’000

Listed investments Nedbank Group Limited Banking 198 198 0.02 0.02 18 747 18 747 31 048 31 416 The shares in Nedbank Group Limited are held by the BEE trusts, which are consolidated on group level. Refer to note 6 in the Company annual financial statements on page 168 for details of direct subsidiaries.




Aggregate profits after Nature of business Issued ordinary share capital Proportion held Shares at cost tax of subsidiary 2016 2015 2016 2015 2016 2015 2016 2015 ’000 ’000 % % N$’000 N$’000 N$’000 N$’000

11. INVESTMENT IN SUBSIDIARIES, ASSOCIATES AND LISTED INVESTMENTS (continued) Indirect Subsidiary Companies of the group CBN Nominees (Proprietary) Limited Safe custody company – – 100 100 – – 470 364 NedLoans (Proprietary) Limited Administration company – – 100 100 4 250 4 250 5 526 5 305 Ten Kaiser Wilhelm Strasse (Proprietary) Limited Property company 582 582 50 50 291 291 631 (150) Walvis Bay Land Syndicate (Proprietary) Limited Property company 3 000 3 000 50 50 1 500 1 500 1 115 1 257

The directors valued the investments in the subsidiary companies at net asset value. The group has control over financial and operational decisions in both Ten Kaiser Wilhelm Strasse (Proprietary) Limited and Walvisbay Land Syndicate (Proprietary) Limited by means of majority representation on the board of directors of these companies.

Nature of business Issued ordinary share capital Proportion held Shares at cost Indebtedness by Associate 2016 2015 2016 2015 2016 2015 2016 2015 ’000 ’000 % % N$’000 N$’000 N$’000 N$’000

Associate Namclear (Proprietary) Limited Clearing agent 4 4 25 25 1 162 1 162 – –

Due to the unavailability of audited annual financial statements of Namclear (Proprietary) Limited for the year ended 31 December 2016 at the time of approval of the group’s 2016 annual financial statements, un-audited management accounts of Namclear have been used to provide statement of financial position and statement of comprehensive income information. Summarised financial information in respect of Namclear (Proprietary) Limited: 31 December 31 December 2016 2015 N$’000 N$’000

Total assets 64 699 51 796 Total liabilities (39 292) (34 074) Net assets 25 407 17 722 Bank’s share of associate’s net assets 6 351 4 430 Total revenue 44 003 32 405 Total profit for the year 9 179 5 019 Share of associate’s profit for the year 2 295 1 255 Less previous year’s losses not consolidated (374) 56 Share of associate’s profit 1 921 1 311

Issued ordinary share capital Proportion held Shares at cost Fair value of shares Nature of business 2016 2015 2016 2015 2016 2015 2016 2015 ’000 ’000 % % N$’000 N$’000 N$’000 N$’000

Listed investments Nedbank Group Limited Banking 198 198 0.02 0.02 18 747 18 747 31 048 31 416 The shares in Nedbank Group Limited are held by the BEE trusts, which are consolidated on group level. Refer to note 6 in the Company annual financial statements on page 168 for details of direct subsidiaries.


Furniture, Freehold Freehold Leasehold fittings and Computer land buildings buildings equipment hardware Total N$’000 N$’000 N$’000 N$’000 N$’000 N$’000

12. PROPERTY AND EQUIPMENT 2016 Carrying amount at 1 January 2016 45 761 117 651 – 52 490 14 670 230 572 – at cost/revaluation 45 761 117 651 1 500 140 184 70 226 375 322 – accumulated depreciation – – (1 500) (87 694) (55 556) (144 750) Additions at cost – 170 – 6 803 6 878 13 851 Revaluation – 4 535 – – – 4 535 Cost – – – – – – Accumulated depreciation eliminated on revaluation – 4 535 – – – 4 535 Disposals at net book value – – – (104) – (104) Disposals at cost – – – (478) – (478) Accumulated depreciation of disposals – – – 374 – 374 Depreciation for the year – (4 705) – (15 228) (6 151) (26 084)

Carrying amount at 31 December 2016 45 761 117 651 – 43 961 15 397 222 770 – at cost/revaluation 45 761 117 821 1 500 146 509 77 104 388 695 – accumulated depreciation – (170) (1 500) (102 548) (61 707) (165 925)

2015 Carrying amount at 1 January 2015 39 454 112 322 – 45 566 16 449 213 791 – at cost/revaluation 39 454 112 322 1 500 119 597 66 052 338 925 – accumulated depreciation – – (1 500) (74 031) (49 603) (125 134) Additions at cost – – – 20 587 4 174 24 761 Revaluation 6 307 9 525 – – – 15 832 Cost 6 307 5 329 – – – 11 636 Accumulated depreciation eliminated on revaluation – 4 196 – – – 4 196 Depreciation for the year – (4 196) – (13 663) (5 953) (23 812)

Carrying amount at 31 December 2015 45 761 117 651 – 52 490 14 670 230 572 – at cost/revaluation 45 761 117 651 1 500 140 184 70 226 375 322 – accumulated depreciation – – (1 500) (87 694) (55 556) (144 750)

Information regarding land and buildings required in terms of the Companies Act is available for inspection, by the shareholder or duly authorised agents, at the group’s registered office.

12.2 Valuation 2016 Independent valuations of freehold land and buildings were performed by FA Frank-Schultz who has appropriate qualifications

and recent experience in the fair value measurement of properties in the relevant locations. The effective date of the valuation is 31 December 2016.

The revaluation of properties has been done, where appropriate for the specific property being valued, with reference to one of: – income capitalisation method using a capitalisation rate of 9.75% - 11.5%; and – the depreciated replacement cost method. The valuations conforms to International Valuation Standards.




Development Computer Customer cost software Relationships Total N$’000 N$’000 N$’000 N$’000

13. COMPUTER SOFTWARE AND DEVELOPMENT COST

2016 Carrying amount at 1 January 2016 14 789 19 499 738 35 026 – at cost 14 789 74 435 1 475 90 699 – accumulated amortisation – (54 936) (737) (55 673) Additions at cost – 215 93 309 Development cost incurred 7 930 – – 7 930 Transfer of development cost (9 096) 9 096 – – Amortisation for the year – (5 674) (747) (6 421) Carrying amount at 31 December 2016 13 623 23 136 84 36 843 – at cost 13 623 83 746 1 568 98 937 – accumulated amortisation – (60 610) (1 484) (62 094)

2015 Carrying amount at 1 January 2015 5 818 22 070 – 27 888 – at cost 5 818 72 074 – 77 892 – accumulated amortisation – (50 004) – (50 004) Additions at cost – 2 361 1 475 3 836 Development cost incurred 8 971 – – 8 971 Amortisation for the year – (4 932) (737) (5 669) Carrying amount at 31 December 2015 14 789 19 499 738 35 026 – at cost 14 789 74 435 1 475 90 699 – accumulated amortisation – (54 936) (737) (55 673)

2015 Independent valuations of freehold land and buildings were performed by FA Frank-Schultz who has appropriate qualifications

and recent experience in the fair value measurement of properties in the relevant locations. The effective date of the valuation is 31 December 2015.

Land Buildings Valuation Significant 2016 2015 2016 2015 Type of Property Method Inputs Parameters N$’000 N$’000 N$’000 N$’000

Income capitalisation and Income 9,75% – 11,50% depreciated replacement capitalisation (2015: 8,50% Commercial property cost method rates – 11,50%) 45 761 45 761 117 651 117 651

Total Land and Buildings 45 761 45 761 117 651 117 651

In accordance with IFRS 13 Fair Value Measurement, the measurement of the group’s properties are considered to be recurring. Recurring fair-value measurements are those that IFRS requires or permits to be recognised in the statement of financial position at the end of each reporting period. Furthermore, the group classifies its properties measured at fair value into Level 3 of the fair value hierarchy. Level 3 fair-value measurements are those that include the use of significant unobservable inputs.

If land and buildings were carried under the cost and not the revaluation model, the carrying amount would have been N$29 137 (2015: N$29 792).


2016 2015 N$’000 N$’000

14. GOODWILL Carrying amount at beginning of year 29 125 29 125 – Cost 29 125 29 125 – Impairment losses – –

Carrying amount at end of year 29 125 29 125 – Cost 29 125 29 125 – Impairment losses – –

15. SHARE CAPITAL AND SHARE PREMIUM Ordinary shares 17 595 17 595 Share premium 99 536 99 536

117 131 117 131

The total number of authorised shares at year end was: 80 000 000 (2015: 80 000 000) ordinary shares of 25 cents each The total number of issued shares at year end was: 70 381 644 (2015: 70 381 644) ordinary shares of 25 cents each All issued shares are fully paid. Subject to the restrictions of the Companies Act, the unissued shares are under the control of the directors until the forthcoming

annual general meeting.

16. GENERAL RISK RESERVE Balance at the beginning of the year 67 072 65 169 Movement during the year 21 694 1 903

Balance at the end of the year 88 766 67 072 The general risk reserve is created to comply with the requirements of BID-2 of the Bank of Namibia regarding the general

risk provision.

17. REVALUATION RESERVE Balance at the beginning of the year 85 758 77 365 Increase/(Release) of revaluation reserve (2 935) (3 703) Revaluation of land and buildings 3 039 12 784 Attributable to non-controlling interest – (688)

Balance at the end of the year 85 862 85 758 The revaluation reserve arises on the revaluation of land and buildings. Where revalued land or buildings are sold, the portion of the

property’s revaluation reserve that relates to that asset, and is effectively realised, is transferred directly to other comprehensive income. As revalued buildings are depreciated, the depreciation related to the property’s revaluation reserve is also transferred directly to other comprehensive income.

18. SHARE-BASED PAYMENT RESERVE Balance at the beginning of the year 16 705 16 705 Charge to statement of changes in equity – – Balance at the end of the year 16 705 16 705

The share-based payment reserve, is a contribution from the parent and equals the amount at which the services from the employees are measured that arises from the grants of share options and restricted shares issued to employees under the BEE schemes detailed in note 41.




2016 2015

N$’000 N$’000

19. AVAILABLE-FOR-SALE RESERVE Balance at the beginning of the year 15 758 25 817 Movement during the year (368) (10 059)

Balance at the end of the year 15 390 15 758

The available-for-sale reserve arises on revaluation of an available for sale investment which is listed shares in Nedbank Group Limited through the BEE scheme. Refer to note 11 and 41.

20. DUE TO OTHER BANKS Financial liabilities classification: Financial liabilities at amortised cost Deposits and borrowings from other banks 603 600 166 528 Deposits received under repurchase agreement from Bank of Namibia 275 401 – Financial liabilities classification: designated at fair value Short-trading securities and spot positions 116 138 134 716


21. DUE TO CUSTOMERS Financial liabilities classification: Financial liabilities at amortised cost

21.1 Category analysis Current accounts 1 467 672 1 493 639 Savings accounts 392 173 399 628 Other deposits and loan accounts 5 229 342 4 172 324 Foreign currency liabilities 288 813 613 020

7 378 000 6 678 611

21.2 Sectoral analysis Government and quasi government 283 907 201 368 Insurance and pension funds 955 866 1 885 992 Companies and close corporations 4 925 851 3 299 153 Individuals and other 1 212 376 1 292 098

7 378 000 6 678 611

21.3 Geographical analysis Namibia 7 378 000 6 678 611

22. NEGOTIABLE CERTIFICATES OF DEPOSIT Financial liabilities classification: Financial liabilities at amortised cost Negotiable certificates of deposit 3 371 724 2 986 910 Promissory notes 1 485 512 1 372 031

Financial liabilities classification: Designated at fair value through profit and loss Promissory notes 198 749 192 344

5 055 985 4 551 285

23. OTHER LIABILITIES Financial liabilities classification: Financial liabilities at amortised cost 119 708 105 421 Creditors and other accounts 30 171 45 469 Managerial fees - Nedbank Group Limited 89 537 59 952 Non-financial instruments 35 724 32 737 Deferred revenue 4 542 4 542 Taxation 5 160 3 675 Bonus accrual 14 233 13 689 Leave pay accrual 11 789 10 831

155 432 138 158


2016 2015 N$’000 N$’000

24. DEFERRED TAXATION LIABILITIES The movement on the deferred taxation account is as follows:

Balance at beginning of the year 102 398 86 094

– Temporary differences recognised in the statement of

comprehensive income (1 292) 13 256

Capital allowances (568) 10 Credit impairments 1 241 (3 577) Debentures (240) (565) Prepaid expenses (1 595) 518 Suspensive sales (6 367) 8 970 Financial Instruments 1 988 1 929 Provision for expenses (358) 3 450 Other income and expense items 4 607 2 521

– Recognised directly in equity 1 382 3 048

Revaluation of property – movement through revaluation reserve 1 430 3 048 Other income and expense items (48) –

Balance at end of the year 102 488 102 398

The balance comprises: Capital allowances 49 380 49 928 Credit impairments (9 470) (10 711) Debentures 11 008 11 248 Prepaid expenses 1 041 2 636 Suspensive sales 37 048 43 415 Financial Instruments 3 999 2 011 Provision for expenses (2 961) (2 603) Other income and expense items 12 443 6 474

102 488 102 398

25. POLICYHOLDER LIABILITIES UNDER INSURANCE CONTRACTS Balance at beginning of the year 100 298 89 639 Amounts recognised in statement of comprehensive income (763) 10 659


An actuarial valuation was performed on the policyholders’ liability, as at 31 December 2016, in March 2017 (2015: March 2016) by the statutory actuary, Svenja Poriazis.

Changes in valuation methods or assumptions The value of the liabilities decreased by N$7.4m (before tax) as a result of changes to the valuation assumptions and methodology. These were: – Economic Assumptions The economic basis was reviewed to reflect the current economic environment. This has resulted in a lower overall investment

return to discount future liability outgo. At the same time, the expense inflation assumption was decreased. – Non-Economic Assumptions The expense and retrenchment assumptions were reviewed in the light of recent and historic experience. In addition, the

discretionary reserve of N$5 million held last year was reduced to N$2.5 million over the valuation period and other minor modelling refinements were made.

Valuation basis of assets Assets are valued at statement of financial position values i.e. at market or director’s value as described in the Annual Financial

Statements. NedNamibia Life Assurance Company Limited has disallowed assets as defined in section 27 of the Long-Term Insurance Act.




Valuation of policy liabilities The valuation of the policy liabilities was conducted based on the assumptions below. The assumptions are based on best estimates of the expected experience. The main assumptions, before allowing for prescribed

margins, were as follows:

– An interest rate of 5.6% (gross of tax) per annum was used (2015: 6.6%); – Expense inflation was assumed to be 5.9% per annum (2015: 6.4%); – Future persistency, mortality and other decrements are estimated taking into account historical and recent experience; – Mortality was allowed for based on a percentage of SA85/90 Heavy plus an allowance for AIDS; and, – Withdrawals were allowed for based on expected experience.

No negative reserves were held.

An Incurred But Not Reported (IBNR) reserve of 4/12ths of the annual expected claims was established.

A reserve of N$7.3m was held in respect of policies that were sold but not included in the valuation data as at the valuation date.

Compulsory margins have been allowed for as outlined in the Actuarial Society of Namibia’s guidance note – PGN 104 (version 8). Discretionary margins held are the elimination of negative and additional reserve, totalling N$0.5m.

26. PROVISION FOR POST-RETIREMENT MEDICAL BENEFITS The Bank subsidises 50% of the medical aid contribution of all employees who joined Nedbank Namibia between 1 April 2000 and

31 January 2003. The subsidy does not apply to any employees who joined the Bank on or after 1 February 2003. Provisions are made for these costs. The charge for the year is included in the staff costs expense in the statement of comprehensive income.

Valuation method and assumptions: The actuarial valuation method used to value the liabilities is the Projected Unit Credit Method prescribed by IAS 19 Employee

Benefits. Future benefits valued are projected using specific actuarial assumptions and the liability for in-service members is accrued over expected working lifetime. The actuarial valuation is obtained once every two years. The most recent valuation was obtained for the year ended 31 December 2015 performed by Strategic Actuarial Partners Namibia.

The most significant assumptions used are: 2016 2015

Valuation interest rate: 10,90% 10,90% Medical aid contribution inflation: 9,30% 9,30% Net sensitivity (real rate) 1,60% 1,60% Average longevity at retirement age for current pensioners (years)* 23,0 23,0 Average longevity at retirement age for current employees (Future pensioners) (years)* 10,5 10,5 * Based on the British derived a (55) ultimate life table less a 3 year age adjustment. This assumption was updated to the PA (90) life table less a

1 year age adjustment allowing for improvements in the mortality.

The key financial assumptions are the valuation interest rate and Medical Aid contribution inflation rate. It is the relationship between these two financial assumptions that are critically important when performing the sensitivity analysis.

2016 2015 N$’000 N$’000

Movement in accrued liability if the real rate increase with 1% 1 019 988 Movement in accrued liability if the real rate decrease with 1% (869) (831) Movement in accrued liability if the life expectancy increase by 2 years 741 776 Movement in accrued liability if the life expectancy decrease by 2 years (710) (749) Reconciliation of net liability in the statement of financial position: Balance at beginning of the year 9 450 8 224 Movements during the year 363 1 226 Interest cost 996 685 Current service cost 76 79 Benefits paid (709) (607) Actuarial loss – 1 069

Balance at end of the year 9 813 9 450


2016 2015 N$’000 N$’000

27. LONG-TERM SUBORDINATED DEBT INSTRUMENTS Financial liabilities classification: Other liabilities

Unsecured, subordinated debentures, at issue price as adjusted for

amortised discount and the portion of the coupon payments in excess

of the effective interest expense 5 599 4 849

The debentures were issued at a discount on 15 September 1995 and are redeemable at their nominal value of N$40 million on 15 September 2030. Interest was payable on these debentures on a six-monthly basis at the rate of 17% per annum on nominal value until 15 September 2000.

Prior to 2001, these coupon payments are partially charged against income and partially against the capital value of the debentures. For the years 2001 to 2030 the effective interest expense is capitalised. The coupon holders are entitled, in the event of interest default, to put the coupon covering such interest payments to Nedbank Group Limited.

28. NET INTEREST INCOME Interest and similar income

Financial assets classification: Loans and receivables 1 254 161 986 235

Due from other banks 53 850 63 665

Home loans 510 257 401 997

Other loans and overdrafts 290 059 195 897

Preference share finance – 902

Lease and instalment debtors 239 894 196 268

Personal loans 160 089 127 482

Other assets 12 24

Financial assets classification: Fair value through profit or loss – held for trading 129 360 143 385

Government and other securities 80 683 127 968

Short-term funds and securities 48 677 15 417

Total interest and similar income 1 383 521 1 129 620

Interest expense and similar charges Financial liabilities classification: Financial liabilities at amortised cost 701 099 540 838

Deposit and loan accounts 236 043 159 790

Current and savings accounts 65 942 62 020

Negotiable certificates of deposit 396 045 317 538

Other liabilities 2 319 841

Long-term debt instruments 750 649

Total interest expense and similar charges 701 099 540 838

Net interest income 682 422 588 782

29. NON-INTEREST INCOME Commission and fees 161 984 148 453

Premiums received 100 061 105 372

Dividends 2 722 2 481

Exchange earnings 52 762 68 828

– Exchange commission 14 405 13 947

– Foreign exchange profit 38 357 54 881

(Loss)/profit on sale of property and equipment 83 –

Sundry trading gains – 764

Changes in fair value of Financial instruments designated as fair value

through profit or loss – held for trading (2 051) 4 413

– Financial assets and liabilities designated as fair value through profit or loss – held for trading (2 051) 4 413

Other income 8 212 13 922

323 773 344 233




Other Leases and Home loans and instalment Personal loans overdrafts debtors loans Total

30. IMPAIRMENT OF LOANS N$’000 N$’000 N$’000 N$’000 N$’000

AND ADVANCES

30.1 Movements 2016 Balance at beginning of the year 26 851 25 372 32 564 20 173 104 960 – specific impairment 15 714 20 262 16 786 7 569 60 331 – portfolio impairment 11 137 5 110 15 778 12 604 44 629 Debts written off (166) (3 858) (5 766) (3 854) (13 644) Statement of comprehensive income charge net of recoveries 16 274 5 315 10 518 8 984 41 091 – specific impairment 13 318 5 066 15 438 6 616 40 438 – portfolio impairment (3 193) 249 (4 920) 2 368 (5 496) – debts recovered 6 149 – – – 6 149 Balance at end of the year (note 9) 36 810 26 829 37 316 25 303 126 258 – specific impairment 28 866 21 470 26 458 10 331 87 125 – portfolio impairment 7 944 5 359 10 858 14 972 39 133

2015 Balance at beginning of the year 15 857 18 441 14 386 16 017 64 701 – specific impairment 6 300 13 620 7 173 8 783 35 876 – portfolio impairment 9 557 4 821 7 213 7 234 28 825 Debts written off (166) (885) (726) (11 581) (13 358) Statement of comprehensive income charge net of recoveries 10 597 7 816 18 904 15 737 53 054 – specific impairment 9 580 7 527 10 339 10 367 37 813 – portfolio impairment 1 580 289 8 565 5 370 15 804 – debts recovered (563) – – – (563) Balance at end of the year (note 9) 26 851 25 372 32 564 20 173 104 960 – specific impairment 15 714 20 262 16 786 7 569 60 331 – portfolio impairment 11 137 5 110 15 778 12 604 44 629

Included under the statement of comprehensive income charge for specific impairment is interest in suspense amounting to N$17 million (2015: N$9.2 million) and under the specific impairment balance is interest in suspense amounting to N$38.4 million (2015: N$28.1 million).

Specific impairments Portfolio impairments

2016 2015 2016 2015 N$’000 N$’000 N$’000 N$’000

30.2 Sectoral analysis Individuals 68 907 42 791 28 625 36 822 Manufacturing 826 9 422 885 3 635 Wholesale and trade 5 058 325 2 177 73 Retailers, catering and accommodation 3 899 4 579 670 2 422 Agriculture, forestry and fishing 45 – 720 – Mining and quarrying 217 34 558 8 Financial services, insurance and real estate 2 270 951 2 072 428 Government and public sector 97 – 721 – Building and property development 1 558 557 704 524 Transport, storage and communication 1 117 1 496 591 583 Other services 3 131 176 1 410 134

87 125 60 331 39 133 44 629

30.3 Ratio of impairments Impairment of loans and advances at end of year 126 258 104 960 Total gross loans and advances 11 351 624 9 907 360 Ratio (%) 1,11% 1,06%


2016 2015 N$’000 N$’000

31. OPERATING EXPENDITURE Expenses include the following items which are

separately disclosable:

Auditors’ remuneration 4 836 5 244

– Audit fees 3 608 4 513

– Other services 1 228 731

Post-retirement medical aid benefit 1 072 764

– Interest cost 996 685

– Current service cost 76 79

Depreciation 26 084 23 812

Amortisation and write off of computer software

and development cost 6 421 5 669

Staff costs 281 640 255 321

Operating lease charges 26 537 23 163

– Fixed property 23 042 20 847

– Other 3 495 2 316

Remuneration other than to employees for:

– Managerial services 90 977 59 383

Value-added tax charge in respect of current expenditure

net of input credits 16 982 15 748

Directors’ fees paid by the group 10 472 6 273

– For services as directors 1 592 1 522

– Managerial services 8 880 4 751

Key management 12 897 17 871

– Basic salary and other benefits 11 468 16 454

– Employer pension contribution 835 983

– Employer medical aid contribution 594 434

Other expenses 105 429 112 156

583 347 525 404

32. TRANSFER TO POLICYHOLDER LIABILITIES

UNDER INSURANCE CONTRACTS Transfer to policyholder liabilities under insurance contracts (763) 10 664

33. BEE TRANSACTION EXPENSES BEE share-based payment expenses 2 282 1 384

2 282 1 384




2016 2015 N$’000 N$’000

34. TAXATION34.1 Charge for the year

Normal taxation – current year 82 361 57 424

Deferred taxation – prior year – 55

Deferred taxation – current year (1 292) 13 201

81 069 70 680

% %

34.2 Reconciliation of rate of taxation

Namibian normal rate of taxation 32,0 32,0

Reduction in rate for the year: (14,2) (18,2)

– Non-taxable income (14,2) (17,3)

– Tax rate change – (0,9)

– Non deductible expenses 3,4 6,8

Effective rate of taxation 21,2 20,6

N$’000 N$’000

35. DIVIDENDS No dividend was declared for 2016 (2015: Nil) – –

Cents per share Cents per share

36. EARNINGS PER SHARE Basic earnings per share 426,42 388,46

Diluted earnings per share 426,42 388,46

Basic earnings per share N$’000 N$’000

Earnings used in the calculation of basic earnings per share 300 126 273 403

’000 ’000

Weighted average number of ordinary shares for the purpose of basic earnings per share 70 382 70 382

Diluted earnings per share

The earnings and the weighted average number of ordinary shares used in the calculation of all diluted earnings per share measures are the same as those for the equivalent basic earnings per shares measures, as outlined above.


2016 2015 N$’000 N$’000

37. CASH FLOW INFORMATION

37.1 Reconciliation of profit before taxation to cash generated by operating activities

Profit before taxation 382 159 343 820 Adjustments for non-cash items: 219 537 237 773 – Accrued interest 60 477 18 264 – Negotiable certificates of deposit (13 186) 5 130 – (Income)/Loss from associates (1 921) (1 311) – Deferred revenue – 203 – Profit on disposal of property and equipment (83) – – Fair value adjustment to financial instruments 2 051 30 954 – Impairment of advances 34 942 53 617 – Non-cash movement in accruals 108 703 78 468 – Non-cash movement in leave pay accrual 3 008 15 803 – Fair value movement in derivatives (9 241) 4 622 – Non-cash movement in deferred staff compensation – 1 158 – BEE share-based payment expense 2 282 1 384 – Depreciation 26 084 23 812

– Computer software amortisation 6 421 5 669

(incl. impairment loss on development costs)

Other Adjustments (80 257) (58 038) – Movement in long-term subordinated debt instruments 750 648 – Taxation paid (81 007) (58 686) Movement in operating assets 173 602 9 627 – Deposit, current and other accounts 1 664 436 1 551 932 – Advances and other accounts (1 490 834) (1 542 305)

Cash generated by operating activities 695 041 533 182

37.2 Cash received from customers Interest received 1 329 776 1 135 569 Commission and fees received 276 450 267 772 Other income received 55 903 109 732

1 662 129 1 513 073

37.3 Cash paid to customers Interest paid on deposits (599 313) (522 745)

37.4 Taxation paid Amounts (outstanding)/prepaid – beginning of year (3 546) (4 808) Charge to statement of comprehensive income (82 361) (57 424) Amounts (prepaid)/outstanding – end of year 4 900 3 546

(81 007) (58 686)




2016 2015 N$’000 N$’000

37.5 Cash movement in operating liabilities

Due to other banks 693 895 (7 320) Current accounts (25 967) (48 876) Savings deposits (7 455) 38 105 Other deposits and loan accounts 1 010 690 425 111 Foreign currency accounts (324 207) 266 945 Negotiable certificates of deposit 450 508 1 021 497

1 797 464 1 695 462

37.6 Sale/(Purchase) of non-dealing securities Other short-term securities (1 347 441) (86 637) Government and other securities 19 988 (13 954)

(1 327 453) (100 591)

37.7 Cash and short-term funds For the purpose of the cash flow statement, cash and short-term funds comprises the following balances with less than 90 days maturity: Bank notes and coins (note 4) 120 673 133 084 Balances with central bank (note 4) 263 856 288 884 Due from other banks (note 5) 577 936 1 194 811

962 465 1 616 779

38. COMMITMENTS

38.1 Capital expenditure Not yet contracted – Property and equipment 59 010 60 172

59 010 60 172

Funds to meet capital expenditure will be provided from internal resources.

38.2 Bond commitments Bonds granted, not yet paid out 178 636 158 566

38.3 Undrawn facilities Original term of maturity of one year or less 1 110 642 1 014 106


2016 2015 N$’000 N$’000

38. COMMITMENTS (continued)

38.4 Operating leases The group has entered into leases over fixed property and

other equipment for various periods. The charges will increase

in future in line with negotiated escalations and expansions.

The future minimum lease payments in respect of operating

leases are as follows:

Premises 2016 – 8 882 2017 9 041 8 639 2018 6 742 6 307

2019 2 566 2 261

2020 2 048 2 048 Thereafter – –

20 397 28 137

39. PENSION FUND

All eligible employees are members of the Nedbank Namibia

Pension Fund, a defined contribution plan, which has been

registered in Namibia in accordance with the requirements

of the Pension Fund Act.

The fund is governed by the Pension Fund Act, 1956, which requires an actuarial valuation every three years. The findings of independent consulting actuaries, based on their appraisal of the fund during June 2013, confirmed that the fund was financially sound.

The total value of contributions to the pension fund during the year amounted to:

Number of members 726 730 Employer contributions 20 131 20 117 Employee contributions 14 512 14 455

40. CONTINGENT LIABILITIES Confirmed letters of credit 4 381 4 266 Liabilities under guarantees 945 984 651 128 Legal actions against the group 2 368 2 250

952 733 657 644




41. SHARE-BASED PAYMENTS Shares and share options are granted to employees as part of their remuneration package for services rendered, and in terms of

the BEE scheme to clients and partners as an incentive to retain business and develop growth within the group. The following are share and share options schemes that have been in place during the year. The traditional employee schemes are cash settled and the BEE schemes will be treated as equity settled.

As the group cannot estimate reliably the fair value of services received nor the value of additional business received, the group rebuts the presumption that such services and business can be measured reliably and, as such, measures their fair value by reference to the fair value of the options or shares granted. The fair value of such options and shares is measured at the grant date utilising the Black-Scholes valuation model.

41.1 Description of arrangements

Scheme Trust Description Vesting requirementsMaximum term

41.1.1 Black Economic Empowerment schemes – Business partners and affinity groups

Black Business Partner Scheme (BBP)

Central Consortium SPV Three Investments (Proprietary) Limited, Coastal Consortium SPV Three Investments (Proprietary) Limited and Northern Empowerment SPV Three Investments (Proprietary) Limited

Each SPV was issued an equal number of restricted shares at N$2.53 per share, with notional funding over a period of 10 years. The beneficial ownership of the shares resides with the participants, including the voting and dividend rights.

No dealing in the shares during the 10-year notional funding period.

10 years

Affinity Group Scheme (AG)

Southern Consortium SPV Three Investments (Proprietary) Limited and Eastern Consortium SPV Three Investments (Proprietary) Limited

Each SPV was issued an equal number of restricted shares at N$1 per share, with notional funding over a period of 10 years. The beneficial ownership of the shares resides with the participants, including the voting and dividend rights.


10 years

Benefit scheme in respect of higher education (Education Scheme)

The Old Mutual and Nedbank Namibia Education Trust

The SPV was issued restricted shares at N$1 per share, with notional funding over a period of 10 years. The beneficial ownership of the shares resides with the participants, including the voting and dividend rights.


10 years


41. SHARE-BASED PAYMENTS (CONTINUED)

41.1 Description of arrangements (continued)

Scheme Trust Description Vesting requirementsMaximum term

41.1.2 Black Economic Empowerment schemes – Employees

Black Management Scheme (Black Management)

Ofifiya Black Management Trust

Restricted shares and share options were granted to certain black employees on middle and senior management level. The beneficial ownership of the shares resides with the participants, including the voting and dividend rights.

Participants must remain in service for four, five and six years, after each of which 1/3 of the shares become unrestricted and 1/3 of the options vest. Allocations are forfeited in the case of fault termination prior to vesting date.

7 years

Broad-based Employee Scheme (Broad-based)

Ofifiya Broad-based Employee Trust

Restricted shares granted to all qualifying employees who do not participate in any other share incentive scheme operating in the group. The beneficial ownership of the shares resides with the participants, including the voting and dividend rights.

No dealing in the shares during the restricted period of 5 years. Forfeiture is not applicable as it is not required for a beneficiary to be in the employ when allocations become unrestricted.

5 years

NedNamibia Holdings Long-term Incentive Scheme (LTIP)

NedNamibia Holdings Long-term Incentive Scheme Trust

Restricted shares and options awarded to all eligible employees to promote the continued growth of NedNamibia Holdings Limited and to attract and retain suitably skilled and competent personnel. The beneficial ownership of the shares resides with the participants, including the voting and dividend rights.

Participants must remain in service of NedNamibia Holdings Limited or any one of its subsidiaries to qualify as a eligible employee. Allocations are forfeited in the case of fault termination prior to vesting or if specific performance criteria as determined on allocation is not met at vesting date.

3 years




Share-based payments Share-based payments expense reserve 2016 2015 2016 2015 N$’000 N$’000 N$’000 N$’000

41.2 Effect on profit and financial position Black Economic Empowerment schemes Black Business Partners (BBP) – – 8 996 8 996 Affinity Groups (AG) – – 3 299 3 299 Education – – 4 398 4 398 Black Management – – 12 12

– – 16 705 16 705

2016 2015

Weighted Weighted Number of average Number of average instruments exercise price instruments exercise price N$ N$

41.3 Black Economic Empowerment schemes Black Business Partner Scheme Outstanding shares at the beginning of the year2 328 685 166,69 318 715 278,98 Additional shares acquired in current year 18 888 – 9 970 – Outstanding at the end of the year 347 573 – 328 685 – Shares subject to call right1 (250 175) – (278 849) – Net Shares 97 398 166,69 49 836 278,98

Exercisable at end of year – – – – Weighted average share price for options exercised (N$) – –

Affinity Group Scheme Outstanding shares at the beginning of the year2 120 721 170,23 115 350 282,47 Additional shares acquired in current year 7 058 – 5 371 – Outstanding at the end of the year 127 779 – 120 721 – Shares subject to call right1 (93 928) – (104 673) – Net Shares 33 851 170,23 16 048 282,47

Exercisable at end of year – – – – Weighted average share price for options exercised (N$) – – – –

Education Scheme Outstanding shares at the beginning of the year2 109 029 227,64 108 162 282,47 Additional shares acquired in current year 1 054 – 867 – Outstanding at the end of the year 110 083 – 109 029 – Shares subject to call right1 (108 205) – (109 029) –

Net Shares 1 878 227,64 – 282,47

Exercisable at end of year – – – – Weighted average share price for options exercised (N$) – – – –


42. RELATED PARTY DISCLOSURE

42.1 Parent company NedNamibia Holdings Limited’s majority shareholder is Nedbank Group Limited (100%) (2015: 100%), which is incorporated in

South Africa. The ultimate holding company is Old Mutual plc. The subsidiaries and associates of these companies are also seen as related companies.

42.2 Identity of related parties with whom transactions have occurred Subsidiaries and the associate of the group are identified in note 11. All of these entities are related parties. Transactions with

directors and director controlled entities are related party transactions.

2016 2015 Weighted Weighted average average remaining remaining Number of contractual Number of contractual instruments life (years) instruments life (years)41.4 Instruments outstanding at the end of the year by exercise price

Black Business Partner Scheme N$ 166.69 97 398 0.30 49 836 1,00

Affinity Group Scheme N$ 170.23 33 851 0.30 16 048 1,00

Education Scheme N$ 227.64 1 878 0.30 – 1,00

41.5 Instruments granted during the year ¹ At the end of the lock-in period, the shares are subject to a call option that allows Nedbank Group Ltd to acquire so many shares,

at market value, that equals the outstanding notional funding pool.

² For 2015, only initial shares issued to the scheme were disclosed. For 2016, the opening outstanding shares less the additional shares acquired during the year and less those shares that are subject to call rights have been disclosed.



41. SHARE-BASED PAYMENTS (CONTINUED)


2016 2015 42.3 Related party balances N$’000 N$’000

Loans from related parties Nedbank Group Limited (holding company) 1 428 974 Nedbank Group Limited (holding company) (Internal settlement account) 43 223 – Nedbank Group Limited (holding company) (Fixed deposits) 457 367 – Nedbank Group Limited (holding company) (accrual for management fees) 89 535 59 952 Nedbank Group Limited (Derivative instruments included under note 7) 10 188 2 143 Old Mutual Namibia Limited (fellow subsidiary) 371 616 584 083 Nedbank Limited: London Branch (fellow subsidiary) 61 61 Nedbank Limited: London Branch (fellow subsidiary) (Derivative instruments included under note 7) – 1 672 Nedbank (Lesotho) Limited (fellow subsidiary) 101 454 150 639 NedCapital Investment Holdings (Namibia) (Proprietary) Limited (fellow subsidiary) 58 114 14 858 Nedbank Namibia Pension Fund (pension fund) 15 642 28 829 Balances with directors 3 248 139 Balances with key management 2 220 1 954

Loans to related parties Nedbank Group Limited (holding company) (Internal settlement account) – 202 289 Nedbank Group Limited (holding company) (Credit Linked Note) 398 910 396 405 Nedbank Group Limited (Derivative instruments included under note 7) 2 673 12 258 Nedbank Limited: London Branch (fellow subsidiary) Placement 447 065 119 814 Nedbank Group Limited (holding company) 115 871 135 886 Old Mutual US Dollar Money Market Fund 480 861 – Old Mutual Namibia Limited (Fellow subsidiary) 430 700 430 420 Balances with directors 1 504 3 526 Balances with key management 7 349 12 531


42. RELATED PARTY DISCLOSURE (continued)

42.4 Related party transactions Expenses and Interest income Other income Interest expense dividends paid 2016 2015 2016 2015 2016 2015 2016 2015 N$’000 N$’000 N$’000 N$’000 N$’000 N$’000 N$’000 N$’000

Related party

Nedbank Group Limited (holding company) Interest income on internal settlement account – – – – 4 153 909 – –Interest income on Nedbank London Branch placement 27 251 19 814 – – – – – –Interest expense on fixed deposits – – – – 901 – – –Interest expense on term loan – – – – – 1 069 – –Interest income on Credit Linked Note 33 547 33 992 – – – – – –Management fees – – – – – – 90 977 59 952

Old Mutual Limited (fellow subsidiary) Interest income on corporate fund 28 425 22,365 – – – – – –Interest expense on current account – – – – 31 023 25 648 – –

Nedbank Namibia Pension Fund (pension fund) Pension contributions – – – – – – 19 145 19 827

NedCapital Holdings Namibia (Pty) Ltd(fellow subsidiary) Interest expense – – – – 1 522 475 – –

Nedbank (Lesotho) Limited (fellow subsidiary)Interest expense – – – – 11 086 7 581 – –

Transactions with directors Services as directors – – – – – – 1 592 1 522 Other services – – – – – – 8 880 4 751 Staff costs – – – – – – 12 897 17 871

Old Mutual US Dollar Money Market Fund (related party) Interest income 1 088 – – – – – – –




43.1 CAPITAL RISK MANAGEMENT The capital adequacy is managed in terms of the Banking Institutions Act, 1998 (“Act”). The aim of capital risk management

is to ensure that the group’s major subsidiary, Nedbank Namibia Limited (”the Bank”), maintains a level of capital which (i) is adequate to protect its depositors and creditors; (ii) is commensurate with the risk activities and profile of the Bank; and (iii) promotes public confidence in the Bank and the banking system. Capital is managed under the following definitions: Tier 1 (core) capital Tier 1 capital includes permanent shareholders’ equity (issued and fully paid-up ordinary shares and perpetual non-cumulative

preference shares) plus disclosed reserves (additional paid-in share premium plus retained earnings/undistributed profits) plus minority interests in consolidated subsidiaries, less intangible assets (goodwill, equity funded through capitalisation of revaluation reserves).

Tier 2 (supplementary) capital Tier 2 capital includes asset revaluation reserves; general loan loss provisions; subordinated debt; and hybrid (debt-equity) capital

instruments.

Total Qualifying Capital Total qualifying capital means the sum of Tier 1 capital and Tier 2 capital after the deduction of investments in and loans to

unconsolidated financial subsidiaries; investments in the capital of other financial institutions; encumbered assets (assets acquired using capital funds but subsequently pledged to secure loans or that are no longer available to cover losses from operations); and reciprocal holdings of capital instruments of banks.

Capital measures The ratios used for measuring capital adequacy are: Leverage (equity) capital ratio (i.e. Tier 1 capital divided by gross assets; for purposes herein, “gross assets” means total

assets plus general and specific provisions); Tier 1 risk-based capital ratio (i.e. Tier 1 capital divided by total risk-weighted assets); and Total risk-based capital ratio (i.e. total qualifying capital divided by total risk weighted assets).

Total risk-weighted capital Total risk-weighted capital is the total assets reported in financial returns required to be submitted to the Bank of Namibia, less

intangible assets and the excess of assets classified as loss but not fully provisioned for, after applying the different risk weights to the prescribed category of assets as set forth in BID-5 of the Act.

Minimum Requirements The following minimum ratios shall apply (unless higher ratios are set by the Bank) for an individual bank based on criteria set

forth below: (a) Leverage Capital: the minimum leverage ratio shall be 6.0%. In accordance with the Act, if a bank is pursuing or experiencing

significant growth, has inadequate risk management systems, an inordinate level of risk, or less than satisfactory asset quality, management, earnings or liquidity, a higher minimum may be required.

(b) Tier 1 Risk-Based Capital: the minimum Tier 1 ratio shall be 7.0%. In accordance with the Act, if a bank is pursuing or experiencing significant growth, has inadequate risk management systems, an inordinate level of risk, or less than satisfactory asset quality, management, earnings or liquidity, a higher minimum may be required.

(c) Total Risk-Weighted Capital: the minimum total ratio shall be 10.0%. In accordance with the Act, if a bank is pursuing or experiencing significant growth, has inadequate risk management systems, an inordinate level of risk, or less than satisfactory asset quality, management, earnings or liquidity, a higher minimum may be required.


43.1 CAPITAL RISK MANAGEMENT (continued) Minimum requirements (continued)

The Bank follows the minimum ratios as prescribed by the Act.

2016 2015

N$’000 N$’000

Share capital and share premium 65 392 65 392 Retained earnings 1 512 758 1 321 059 General banking reserves 16 705 16 705

Total qualifying tier 1 capital 1 594 855 1 403 156

Subordinated debt 5 599 4 849 Asset revaluation reserves 19 582 19 582 Portfolio impairment 111 517 97 854

Total qualifying tier 2 capital 136 698 122 285

Total regulatory capital 1 731 553 1 525 441

Risk-weighted assets:

Operational risk 992 202 896 845 Credit risk 10 569 427 8 772 364 Market risk 10 924 8 353

Total risk-weighted assets 11 572 553 9 677 562

Capital adequacy ratios: % %

Leverage capital 10,13 10,40 Tier 1 risk-based capital 13,78 14,50 Total risk-weighted capital 14,96 15,76

43.2 NedNamibia Life Assurance Company

The current capital adequacy ratio for NedNamibia Life Assurance Company Limited is 34 times (2015:34 times) in surplus of the regulatory requirements.

Refer to the Statutory Actuary’s Report on page 79 for more detail.




At fair value Designated Financial Non- through profit at fair value instruments financial and loss – held through profit Available- at amortised assets and for trading and loss for-sale cost liabilities Total

Notes N$’000 N$’000 N$’000 N$’000 N$’000 N$’000

44.1 STATEMENT OF FINANCIAL POSITION – CATEGORIES OF FINANCIAL INSTRUMENTS 2016 ASSETS Cash and balances with central bank 4 – – – 384 529 – 384 529 Due from other banks 5 115 871 12 904 – 449 161 – 577 936 Other short-term securities 6 1 704 058 – – – – 1 704 058 Derivative financial instruments 7 16 844 – – – – 16 844 Government and other securities 8 1 628 187 34 960 – – – 1 663 147 Loans and advances to customers 9 – – – 11 225 366 – 11 225 366 Other assets 10 – – – 136 616 3 303 139 919 Investment in subsidiaries, associates and listed investments 11 – – 34 516 – 2 883 37 399 Property and equipment 12 – – – – 222 770 222 770 Computer software and development cost 13 – – – – 36 843 36 843 Goodwill 14 – – – – 29 125 29 125

Total assets 3 464 960 47 864 34 516 12 195 672 294 924 16 037 936

LIABILITIES Derivative financial instruments 7 11 644 – – – – 11 644 Due to other banks 20 – 116 138 – 879 001 – 995 139 Due to customers 21 – – – 7 378 000 – 7 378 000 Negotiable certificates of deposit 22 – 198 749 – 4 857 236 – 5 055 985 Other liabilities 23 – – – 119 709 35 723 155 432 Deferred taxation liabilities 24 – – – – 102 488 102 488 Policyholder liabilities under insurance contracts 25 – – – – 99 535 99 535 Provision for post-retirement medical benefits 26 – – – – 9 813 9 813 Long-term subordinated debt instruments 27 – – – 5 599 – 5 599

Total liabilities 11 644 314 887 – 13 239 545 247 559 13 813 635


At fair value Designated Financial Non- through profit at fair value instruments financial and loss – held through profit Available- at amortised assets and for trading and loss for-sale cost liabilities Total

Notes N$’000 N$’000 N$’000 N$’000 N$’000 N$’000

44.1 STATEMENT OF FINANCIAL POSITION – CATEGORIES OF FINANCIAL INSTRUMENTS (continued) 2015 ASSETS Cash and balances with central bank 4 – – – 421 968 – 421 968 Due from other banks 5 135 886 494 150 – 564 775 – 1 194 811 Other short-term securities 6 763 335 – – – – 763 335 Derivative financial instruments 7 14 724 – – – – 14 724 Government and other securities 8 1 230 645 22 800 – – – 1 253 445 Loans and advances to customers 9 – – – 9 802 400 – 9 802 400 Other assets 10 – – – 43 087 4 259 47 346 Investment in subsidiaries, associates and listed investments 11 – – 32 963 – 2 883 35 846 Property and equipment 12 – – – – 230 572 230 572 Computer software and development cost 13 – – – – 35 026 35 026 Goodwill 14 – – – – 29 125 29 125

Total assets 2 144 590 516 950 32 963 10 832 230 301 865 13 828 598

LIABILITIES Derivative financial instruments 7 18 765 – – – – 18 765 Due to other banks 20 – 134 716 – 166 528 – 301 244 Due to customers 21 – – – 6 678 611 – 6 678 611 Negotiable certificates of deposit 22 – 192 344 – 4 358 941 – 4 551 285 Other liabilities 23 – – – 105 421 32 737 138 158 Deferred taxation liabilities 24 – – – – 102 398 102 398 Policyholder liabilities under insurance contracts 25 – – – – 100 298 100 298 Provision for post-retirement medical benefits 26 – – – – 9 450 9 450 Long-term subordinated debt instruments 27 – – – 4 849 – 4 849

Total liabilities 18 765 327 060 – 11 314 350 244 883 11 905 058




Financial Non- instruments financial at amortised assets and Level 1 Level 2 Level 3 cost liabilities Total

Notes N$’000 N$’000 N$’000 N$’000 N$’000 N$’000

44.2 STATEMENT OF FINANCIAL POSITION – FAIR VALUE HIERARCHY OF FINANCIAL INSTRUMENTS 2016 ASSETS Cash and balances with central bank 4 – – – 384 529 – 384 529 Due from other banks 5 115 871 12 904 – 449 161 – 577 936 Other short-term securities 6 – 1 704 058 – – – 1 704 058 Derivative financial instruments 7 – 16 844 – – – 16 844 Government and other securities 8 – 1 663 147 – – – 1 663 147 Loans and advances to customers 9 – – – 11 225 366 – 11 225 366 Other assets 10 – – – 136 616 3 303 139 919 Investment in subsidiaries, associates and listed investments 11 34 516 – – – 2 883 37 399 Property and equipment 12 – – – – 222 770 222 770 Computer software and development cost 13 – – – – 36 843 36 843 Goodwill 14 – – – – 29 125 29 125

Total assets 150 387 3 396 953 – 12 195 672 294 924 16 037 936

LIABILITIES Derivative financial instruments 7 – 11 644 – – – 11 644 Due to other banks 20 – 116 138 – 879 001 – 995 139 Due to customers 21 – – – 7 378 000 – 7 378 000 Negotiable certificates of deposit 22 – 198 749 – 4 857 236 – 5 055 985 Other liabilities 23 – – – 119 708 35 724 155 432 Deferred taxation liabilities 24 – – – – 102 488 102 488 Policyholder liabilities under insurance contracts 25 – – – – 99 535 99 535 Provision for post-retirement medical benefits 26 – – – – 9 813 9 813 Long-term subordinated debt instruments 27 – – – 5 599 – 5 599

Total liabilities – 326 531 – 13 239 544 247 560 13 813 635


Financial Non- instruments financial at amortised assets and Level 1 Level 2 Level 3 cost liabilities Total

Notes N$’000 N$’000 N$’000 N$’000 N$’000 N$’000

44.2 STATEMENT OF FINANCIAL POSITION – FAIR VALUE HIERARCHY OF FINANCIAL INSTRUMENTS (continued) 2015 ASSETS Cash and balances with central bank 4 – – – 421 968 – 421 968 Due from other banks 5 135 886 494 150 – 564 775 – 1 194 811 Other short-term securities 6 – 763 335 – – – 763 335 Derivative financial instruments 7 – 14 724 – – – 14 724 Government and other securities 8 – 1 253 445 – – – 1 253 445 Loans and advances to customers 9 – – – 9 802 400 – 9 802 400 Other assets 10 – – – 43 087 4 259 47 346 Investment in subsidiaries, associates and listed investments 11 32 963 – – – 2 883 35 846 Property and equipment 12 – – – – 230 572 230 572 Computer software and development cost 13 – – – – 35 026 35 026 Goodwill 14 – – – – 29 125 29 125

Total assets 168 849 2 525 654 – 10 832 230 301 865 13 828 598

LIABILITIES Derivative financial instruments 7 – 18 765 – – – 18 765 Due to other banks 20 – 134 716 – 166 528 – 301 244 Due to customers 21 – – – 6 678 611 – 6 678 611 Negotiable certificates of deposit 22 – 192 344 – 4 358 941 – 4 551 285 Other liabilities 23 – – – 105 421 32 737 138 158 Deferred taxation liabilities 24 – – – – 102 398 102 398 Policyholder liabilities under insurance contracts 25 – – – – 100 298 100 298 Provision for post-retirement medical benefits 26 – – – – 9 450 9 450 Long-term subordinated debt instruments 27 – – – 4 849 – 4 849

Total liabilities – 345 825 – 11 314 350 244 883 11 905 058

The appropriateness of the financial instruments classification and fair value hierarchy is reviewed on an annual basis.




44.3 STATEMENT OF FINANCIAL POSITION – VALUATION OF FINANCIAL INSTRUMENTS

BackgroundInformation obtained from the valuation of financial instruments is used by the group to assess the performance of the business and, in particular, provide assurance that the risk and return measures that the business has taken are accurate and complete. It is important that the valuation of financial instruments accurately represent the financial position of the group while complying with the requirements of the applicable accounting standards.

The fair value of a financial instrument is the amount that would be received to sell the asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Underlying the definition of fair value is a presumption that an entity is a going concern without any intention or need to liquidate, to curtail materially the scale of its operations or to undertake a transaction on adverse terms. Fair value is not, therefore, the amount that an entity would receive or pay in a forced transaction, involuntary liquidation or distressed sale. Control Environment

Validation and approvalThe business unit entering into the transaction is responsible for the initial determination and recording of the fair value of the transaction. There are normalised review protocols for the independent review and validation of fair values separate from the business unit entering into the transaction.

These include, but are not limited to: daily controls over the profit or loss recorded by trading and

treasury frontoffice traders; specific controls to ensure consistent pricing policies and

procedures are adhered to; independent valuation of structures, products and trades;

and periodic review of all elements of the modelling process.

The validation of pricing and valuation methodologies is verified by a specialist team that is part of the group’s risk management function and that is independent of all the business units. A specific area of focus is the marking-to-model of illiquid and/or complex financial instruments. The review of the modelling process includes approval of model revisions, vetting of model inputs, review of model results and more specifically the verification of risk calculations. All valuation techniques are validated and reviewed by qualified senior staff and are calibrated and back-tested for validity by using prices from any observable current market transaction in the same instrument (ie without modification or repackaging) or based on any observable market data. The group obtains market data consistently in the same market where the instrument was originated or purchased.

If the fair-value calculation deviates from the quoted market value due to inaccurate observed market data, these deviations in the valuation are documented and presented at a review committee, which is independent of both the business unit and the specialist team, for approval. The committee will need to consider both the regulatory and accounting requirements in arriving at an opinion on whether the deviation is acceptable.

The group refines and modifies its valuation techniques as markets and products develop and as the pricing for individual products becomes more or less readily available. While the group believes its valuation techniques are appropriate and consistent with those of other market participants, the use of different methodologies or assumptions may result in different estimates of fair value at the different reporting dates. Valuation Methodologies

The objective of a fair-value measurement is to estimate the price at which an orderly transaction to sell the asset or to transfer the liability would take place between market participants at the measurement date under current market conditions. A fair-value measurement includes, but is not limited to, consideration of the following: The particular asset or liability that is being measured

(consistently with its unit of account), The principal (or most advantageous) market for the asset or

liability and The valuation technique(s) appropriate for the measurement,

considering the availability of data with which to develop inputs that represent the assumptions that market participants would use when pricing the asset or liability and the level of the fair value hierarchy within which the inputs are categorised.

Quoted priceA financial instrument is regarded as quoted in an active market if quoted prices are readily available from an exchange, industry bank, pricing service or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis. The appropriate quoted market price for an asset held or a liability to be issued is usually the current bid price and, for an asset to be acquired or a liability held, the asking price.

The objective of determining fair value is to arrive at the transaction price of an instrument on the measurement date (ie without modifying or repackaging the instrument) in the principal (or most advantageous) active market to which the business has immediate access.

The existence of published price quotations in an active market is the most reliable evidence of fair value and, when they exist, they are used without adjustment to measure the financial asset or financial liability. A market is considered to be active if transactions occur with sufficient volume and frequency to provide pricing information on an ongoing basis.

These quoted prices would generally be classified as level 1 in terms of the fair-value hierarchy prescribed by IFRS 13 Fair Value Measurement.


44.3 STATEMENT OF FINANCIAL POSITION – VALUATION OF FINANCIAL INSTRUMENTS (continued)Valuation Methodologies (continued)

Valuation techniquesIf the market for a financial instrument is not active, the group establishes fair value by using various valuation techniques. These valuation techniques may include: using recent arm’s length market transactions between

knowledgeable, willing parties; reference to the current fair value of another instrument that is

substantially the same in nature; reference to the value of the net asset of the underlying

business; earnings multiples; discounted-cashflow analysis; and various option pricing models.

If there is a valuation technique that is commonly used by market participants to price the financial instrument and that technique has been demonstrated to provide reasonable estimates of prices obtained in actual market transactions, the group will use that technique. In applying valuation techniques, and to the extent possible, the group maximises the use of relevant observable inputs and minimises the use of unobservable inputs. The objective of using a valuation technique is to establish what the transaction price would have been on the measurement date in an arm’s length exchange and motivated by normal business considerations. In applying valuation techniques, the group uses estimates and assumptions that are consistent with available information about the estimates and assumptions that market participants would use in setting a price for the financial instrument.

Fair value is therefore estimated on the basis of the results of a valuation technique that makes maximum use of market inputs and relies as little as possible on entity-specific inputs. A valuation technique would be expected to arrive at a realistic estimate of the fair value if: it reasonably reflects how the market could be expected to

price the instrument; and the inputs to the valuation technique reasonably represent

market expectations and measures of the risk-return factors inherent in the financial instrument.

Therefore, a valuation technique: will incorporate all relevant factors that market participants

would consider in determining a price and is consistent with accepted economic methodologies for pricing

financial instruments.

If a published price quotation in an active market does not exist for a financial instrument in its entirety, but active markets exist for its component parts, fair value is determined on the basis of the relevant market prices for the various component parts.

If a rate (rather than a price) is quoted in an active market, the group uses that market-quoted rate as an input into a valuation technique to determine fair value. If the market-quoted rate does not include credit risk or other factors that market participants would include in valuing the instrument, the bank adjusts for these factors.

Valuation techniques applied by the group would generally be classified as level 2 or level 3 in terms of the fair-value hierarchy prescribed by IFRS 13 Fair Value Measurement. The determination of whether an instrument is classified as level 2 or level 3 is dependent on the significance of observable inputs versus unobservable inputs in relation to the fair value of the instrument. Observable markets

Quoted market prices in active markets are the best evidence of fair value and are used as the basis of measurement, if available. A determination of what constitutes ‘observable market data’ will necessitate significant judgement. It is the group’s belief that ‘observable market data’ comprises, in the following hierarchical order: prices or quotes from an exchange or listed markets in which

there are sufficient liquidity and activity; proxy observable market data that is proven to be highly

correlated and has a logical, economic relationship with the instrument that is being valued; and

other direct and indirect market inputs that are observable in the marketplace.

Data is considered by the group to be ‘observable’ if the data is: verifiable; readily available; regularly distributed; from multiple independent sources; transparent; and not proprietary.

Data is considered by the group to be ‘market-based’ if the data is: reliable; based on consensus within reasonable narrow, observable ranges; provided by sources that are actively involved in the relevant

market; and supported by actual market transactions.

It is not intended to imply that all of the above characteristics must be present to conclude that the evidence qualifies as observable market data. Judgement is applied based on the strength and quality of the available evidence.

Inputs to Valuation Techniques

An appropriate valuation technique for estimating the fair value of a particular financial instrument would incorporate observable market data about the market conditions and other factors that are likely to affect the instrument’s fair value. Inputs are selected on a basis that is consistent with the characteristics of the instrument that market participants would take into account in a transaction for that instrument.




Principal inputs to valuation techniques applied by the group include, but are not limited to, the following: Discount rate: Where discounted-cashflow techniques are

used, estimated future cashflows are based on management’s best estimates and the discount rate used is a market rate at the reporting date for an instrument with similar terms and conditions.

The time value of money: The business may use well-accepted and readily observable general interest rates, such as the Johannesburg Interbank Agreed Rate (SA), London Interbank Offered Rate (UK) or an appropriate swap rate, as the benchmark rate to derive the present value of a future cashflow.

Credit risk: Credit risk is the risk of loss associated with a counterparty’s failure or inability to fulfil its contractual obligations. The valuation of the relevant financial instrument takes into account the effect of credit risk on fair value by including an appropriate adjustment for the risk taken.

Foreign currency exchange prices: Active currency exchange markets exist for most major currencies, and prices are quoted daily on various trading platforms and in financial publications.

Commodity prices: Observable market prices are available for those commodities that are actively traded on exchanges in SA, London, New York, Chicago and other commercial exchanges.

Equity prices: Prices (and indices of prices) of traded equity instruments are readily observable on JSE Ltd or any other recognised international exchange. Present value techniques may be used to estimate the current market price of equity instruments for which there are no observable prices.

Volatility: Measures of the volatility of actively traded items can be reasonably estimated by the implied volatility in current market prices. The shape and skew of the volatility curve is derived from a combination of observed trades and doubles in the market. In the absence of an active market, a methodology to derive these volatilities from observable market data will be developed and utilised.

Recovery rates/Loss given default: These are used as an input to valuation models as an indicator of the severity of losses on default. Recovery rates are primarily sourced from market data providers or inferred from observable credit spreads.

Prepayment risk and surrender risk: Expected repayment patterns for financial assets and expected surrender patterns for financial liabilities can be estimated on the basis of historical data.

Servicing costs: If the cost of servicing a financial asset or financial liability is significant and other market participants would face comparable costs, the issuer would consider them in determining the fair value of that financial asset or financial liability.

Dividends: Consistent consensus dividend forecasts adjusted for internal investment analysts’ projections can be applied to each share. Forecasts are usually available for the current year plus one additional year. Thereafter, a constant growth rate would be applied to the specific dates into the future for each individual share.

Inception profit (day-one gain or loss): The best evidence of the fair value of a financial instrument at initial recognition is the transaction price (ie the fair value of the consideration given or received), unless the fair value of that instrument is evidenced by comparison with other observable current market transactions in the same instrument (ie without modification or repackaging) or based on a valuation technique, the variables of which include data from observable markets only.

Valuation Adjustments

To estimate a reliable fair value, where appropriate, the group applies certain valuation adjustments to the pricing information derived from the above sources. In making appropriate adjustments, the group considers certain adjustments to the modelled price that market participants would make when pricing that instrument. Factors that would be considered include, but are not limited to, the following:

Own credit on financial liabilities: The carrying amount of financial liabilities held at fair value is adjusted to reflect the effect of changes in the bank’s own credit spreads. As a result, the carrying value of issued bonds and subordinated-debt instruments that have been designated at fair value through profit or loss is adjusted by reference to the movement in the appropriate spreads. The resulting gain or loss is recognised in profit and loss in the statement of other comprehensive income.

Counterparty credit spreads: Adjustments are made to market prices when the creditworthiness of the counterparty differs from that of the assumed counterparty in the market price (or parameter).

Valuation Techniques by Instrument

In accordance with IFRS 13 Fair-value Measurement, the measurement of the following financial instruments are considered to be recurring.

Other short-term securities and government and other securitiesThe fair value of these instruments is based on quoted market prices from an exchange dealer, broker, industry bank or pricing service, when available. When they are unavailable, the fair value is determined by reference to quoted market prices for similar instruments, adjusted as appropriate for the specific circumstances of the instruments.

Where these instruments include corporate bonds, the bonds are valued using observable active quoted prices or recently executed transactions, except where observable price quotations are not available. Where price quotations are not available, the fair value is determined based on cashflow models, where significant inputs may include yield curves and bond or singlename credit default swap spreads.


44.3 STATEMENT OF FINANCIAL POSITION – VALUATION OF FINANCIAL INSTRUMENTS (continued) Valuation techniques by instrument (continued)

Derivative financial instrumentsDerivative contracts can either be traded via an exchange or over the counter (OTC) and are valued using market standard models and quoted parameter inputs. Parameter inputs are obtained from pricing services, consensus pricing services and recently occurring transactions in active markets, whenever possible. Certain inputs may not be observable in the market directly, but can be determined from observable prices via model calibration procedures. Other inputs are not observable, but can generally be estimated from historical data or other sources. Loans and advancesLoans and advances include mortgage loans (home loans and commercial mortgages), other asset-based loans, including collaterised debt obligations, and other secured and unsecured loans.

In the absence of an observable market for these instruments, the fair value is determined by using internally developed models that are specific to the instrument and that incorporate all available observable inputs. These models involve discounting the contractual cashflows by using an at-inception credit-adjusted zerocoupon curve. Loans and advances are reviewed for observed and verified changes in credit risk and the credit spread is adjusted at subsequent dates if there has been an observable change in credit risk relating to a particular loan or advance. Other assetsShort positions or long positions in equities arise in trading activities where equity shares, not owned by the group, are sold in the market to third parties. The fair value of these instruments is determined by reference to the gross short/long position valued at the offer rate.

Investments in instruments that do not have a quoted market price in an active market and the fair value of which cannot be reliably measured, as well as derivatives that are linked to and have to be settled by delivery of such unquoted equity instruments, are measured at fair value, using models considered to be appropriate by management.

Amounts owed to depositors Amounts owed to depositors include deposits under repurchase agreements, negotiable certificates of deposit and other deposits. These instruments incorporate all market risk factors,

including a measure of the group’s credit risk relevant for that financial liability when designated at fair value through profit or loss.

The fair value of these financial liabilities is determined by discounting the contractual cashflows using a Nedbank Ltd-specific credit-adjusted yield curve that reflects the level at which the bank would issue similar instruments at the reporting date. The market risk parameters are valued consistently to similar instruments held as assets.

The fair value of a financial liability with a demand feature is not less than the amount payable on demand, discounted from the first date on which the amount could be required to be paid. When the fair value of a financial liability cannot be reliably determined, the liability is recorded at the amount due. Fair value is considered reliably measurable if: the variability in the range of reasonable fair-value estimates is

not significant for that instrument; or the probabilities of the various estimates within the range can

be reasonably assessed and used in estimating fair value.

Investment contract liabilitiesThe fair value of investment contract liabilities is determined by reference to the fair value of the underlying assets.

Long-term debt instrumentsThe fair value of long-term debt instruments is determined by reference to published market values on the relevant exchange, when they are: available and considered to be trading with sufficient volume and frequency.

When the above conditions are not met, the fair value is determined using models considered to be appropriate by management. As far as possible, inputs to these models will leverage observable inputs for similar instruments with similar coupons and maturities.

Other liabilitiesShort positions or long positions in equities arise in trading activities where equity shares, not owned by the group, are sold in the market to third parties. The fair value of these instruments is determined by reference to the gross short/long position valued at the offer rate.

Where the group has assets and liabilities with offsetting market risks, it may use mid-market prices as a basis for establishing fair values for the offsetting risk positions and apply the bid or asking price to the net open position, as appropriate.




SUMMARY OF PRINCIPAL VALUATION TECHNIQUES – LEVEL 2 INSTRUMENTSThe following table sets out the group’s principal valuation techniques used in determining the fair value of financial assets and financial liabilities classified as level 2 in the fair value hierarchy:

Assets Valuation technique Key Inputs

Other short term securities Discounted cashflow model Discount rates Derivative financial instruments Discounted cashflow model Discount rates Black-Scholes model Risk-free rate and volatilities Multiple valuation techniques Valuation multiples Government and other securities Discounted cashflow model Discount rates Loans and advances Discounted cashflow model Interest rate curves

Liabilities Valuation technique Key Inputs

Negotiable certificates of deposit and promissory notes Discounted cashflow model Discount rates Derivative financial instruments Discounted cashflow model Discount rates Black-Scholes model Risk-free rate and volatilities Multiple valuation techniques Valuation multiples Amounts owed to depositors Discounted cashflow model Discount rates

45. LIQUIDITY RISK Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial

liabilities.

45.1 Liquidity risk management By monitoring the maturity profile of the current statement of financial position as well as its expected future

structure ALCO proactively manages this risk and is able to address any potential mismatches in accordance with best banking practice. Refer to the section under the heading “Liquidity risk” in the Corporate Governance and Compliance report to the annual financial statements for more detail on liquidity risk management.


46. MARKET RISK Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in the

market prices. Market risk comprises three types of risk: currency risk, interest rate risk and other price risk. The group is exposed to both currency and interest rate risk. Refer to note 47 and note 48 for disclosure regarding these risks.

47. CURRENCY RISK Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in the

foreign exchange rates.

47.1 Currency risk management Foreign exchange dealers monitor exchange rate movements on an ongoing basis and operate within pre-approved limits, based on

their knowledge, expertise and experience. The risk of money market/capital market instruments being repriced due to interest rate movements are also monitored by dealers to remain within approved limits. Refer to the section under the heading “Currency risk” in the Corporate Governance report to the annual financial statements for more detail on currency risk management.

On Up to 3 3 - 6 6 - 12 1 - 5 Over 5 Equity/Non- demand months months months years years determined Total N$’000 N$’000 N$’000 N$’000 N$’000 N$’000 N$’000 N$’000

45.2 Contractual liquidity risk analysis for financial liabilities 2016 LIABILITIES Derivative financial instruments – 11 506 138 – – – – 11 644 Due to other banks 44 739 482 130 100 297 273 651 58 751 102 494 – 1 062 062 Due to customers 4 322 139 1 402 999 392 471 1 159 594 452 996 – 99 127 7 829 326 Negotiable certificates of deposit – 1 322 479 227 649 2 173 026 1 422 936 – – 5 146 090 Other liabilities – – – – – – 155 432 155 432 Deferred taxation liabilities – – – – – – 102 488 102 488 Policyholder liabilities under insurance contracts – – – – – – 99 535 99 535 Provision for post-retirement medical benefits – – – – – – 9 813 9 813 Long-term subordinated debt instruments – – – – – 40 000 – 40 000

Total liabilities 4 366 878 3 219 114 720 555 3 606 271 1 934 683 142 494 466 395 14 456 390 Off statement of financial position Financial and other guarantees – 1 124 620 4 381 – – – 2 368 1 131 369 Undrawn facilities 1 110 642 – – – – – – 1 110 642

2015 LIABILITIES Derivative financial instruments – 14 294 2 296 2 172 – – – 18 762 Due to other banks – – 166 528 – 20 398 114 316 – 301 242 Due to customers 5 253 185 1 167 406 306 328 253 076 364 – – 6 980 359 Negotiable certificates of deposit – 982 696 667 908 1 908 857 1 220 301 228 872 – 5 008 634 Other liabilities – – – – – – 138 158 138 158 Deferred taxation liabilities – – – – – – 102 398 102 398 Policyholder liabilities under insurance contracts – – – – – – 100 298 100 298 Provision for post-retirement medical benefits – – – – – – 9 450 9 450 Long-term subordinated debt instruments – – – – – 40 000 – 40 000

Total liabilities 5 253 185 2 164 396 1 143 060 2 164 105 1 241 063 383 188 350 304 12 699 301 Off statement of financial position Financial and other guarantees – 809 694 4 266 – – – 2 250 816 210 Undrawn facilities 392 648 367 065 78 437 126 508 5 186 44 262 – 1 014 106

The maturity analysis detailed under the contractual liquidity risk analysis for financial liabilities include future interest.

45. LIQUIDITY RISK (continued)




N$ EUR US$ GBP ZAR and Other Total N$’000 N$’000 N$’000 N$’000 N$’000 N$’00047.2 Currency risk profile 2016 ASSETS Cash and balances with central bank 368 154 8 627 7 267 77 404 384 529 Due from other banks 2 096 237 11 239 200 564 164 577 936 Other short-term securities 1 222 536 – 481 522 – – 1 704 058 Derivative financial instruments 2 025 1 539 12 858 18 404 16 844 Government and other securities 1 264 237 – – – 398 910 1 663 147 Loans and advances to customers 11 215 999 – 8 – 9 359 11 225 366 Other assets 139 919 – – – – 139 919 Investment in subsidiaries, associates and listed investments 37 399 – – – – 37 399 Property and equipment 222 770 – – – – 222 770 Computer software and development cost 36 843 – – – – 36 843 Goodwill 29 125 – – – – 29 125

Total assets 14 541 103 10 403 512 894 295 973 241 16 037 936


Capital and reserves Share capital 17 595 – – – – 17 595 Share premium 99 536 – – – – 99 536 General risk reserve 88 766 – – – – 88 766 Revaluation reserve 85 862 – – – – 85 862 Share-based payment reserve 16 705 – – – – 16 705 Available-for-sale reserve 15 390 – – – – 15 390 Retained income 1 887 644 – – – – 1 887 644 Shareholder’s interest 2 211 498 – – – – 2 211 498 Non-controlling interest 12 803 – – – – 12 803

Total shareholder’s equity and non-controlling interest 2 224 301 – – – – 2 224 301

LIABILITIES Derivative financial instruments 13 1 054 516 – 10 061 11 644 Due to other banks 629 174 – 206 570 – 159 395 995 139 Due to customers 7 098 756 75 635 203 182 211 216 7 378 000 Negotiable certificates of deposit 4 202 195 – – – 853 790 5 055 985 Other liabilities 155 432 – – – – 155 432 Deferred taxation liabilities 102 488 – – – – 102 488 Policyholder liabilities under insurance contracts 99 535 – – – – 99 535 Provision for post-retirement medical benefits 9 813 – – – – 9 813 Long-term subordinated debt instruments 5 599 – – – – 5 599

Total liabilities 12 303 005 76 689 410 268 211 1 023 462 13 813 635

Total equity and liabilities 14 527 306 76 689 410 268 211 1 023 462 16 037 936

Net balance sheet position 13 797 (66 286) 102 626 84 (50 221) – Off balance sheet net notional position – (1 048) 686 – 3 072 2 710 Rates of exchange – 14,58 13,77 16,95 – –


47. CURRENCY RISK (continued) N$ EUR US$ GBP ZAR and Other Total N$’000 N$’000 N$’000 N$’000 N$’000 N$’00047.2 Currency risk profile (continued) 2015 ASSETS Cash and balances with central bank 405 113 3 945 12 471 61 378 421 968 Due from other banks 202 806 64 746 467 389 – 459 870 1 194 811 Other short-term securities 763 335 – – – – 763 335 Derivative financial instruments 2 465 23 1 – 12 235 14 724 Government and other securities 857 040 – – – 396 405 1 253 445 Loans and advances to customers 9 802 395 – 4 1 – 9 802 400 Other assets 47 346 – – – – 47 346 Investment in subsidiaries, associates and listed investments 35 846 – – – – 35 846 Property and equipment 230 572 – – – – 230 572 Computer software and development cost 35 026 – – – – 35 026 Goodwill 29 125 – – – – 29 125

Total assets 12 411 069 68 714 479 865 62 868 888 13 828 598


Capital and reserves Share capital 17 595 – – – – 17 595 Share premium 99 536 – – – – 99 536 General risk reserve 67 072 – – – – 67 072 Revaluation reserve 85 758 – – – – 85 758 Share-based payment reserve 16 705 – – – – 16 705 Available-for-sale reserve 15 758 – – – – 15 758 Retained income 1 607 777 – – – – 1 607 777 Shareholder’s interest 1 910 201 – – – – 1 910 201 Non-controlling interest 13 339 – – – – 13 339

Total shareholder’s equity and non-controlling interest 1 923 540 – – – – 1 923 540

LIABILITIES Derivative financial instruments 5 088 2 779 10 898 – – 18 765 Due to other banks – – – – 301 244 301 244 Due to customers 6 024 399 108 970 542 933 2 093 216 6 678 611 Negotiable certificates of deposit 4 551 285 – – – – 4 551 285 Other liabilities 138 158 – – – – 138 158 Deferred taxation liabilities 102 398 – – – – 102 398 Policyholder liabilities under insurance contracts 100 298 – – – – 100 298 Provision for post-retirement medical benefits 9 450 – – – – 9 450 Long-term subordinated debt instruments 4 849 – – – – 4 849

Total liabilities 10 935 925 111 749 553 831 2 093 301 460 11 905 058

Total equity and liabilities 12 859 465 111 749 553 831 2 093 301 460 13 828 598

Net balance sheet position (448 396) (43 035) (73 966) (2 031) 567 428 – Off balance sheet net notional position – 570 1 010 – – 1 580 Rates of exchange – 17,06 15,62 23,16 – –




Reasonable possible change (increase/decrease)

Possible effect on Balance the statement as at of comprehen- reporting sive income* EUR US$ GBP ZAR and Other date N$’000 N$ N$ N$ N$ N$’000

47.3 Currency risk sensitivity analysis 2016 ASSETS Cash and balances with central bank 864 1,06 1,05 1,06 1,00 384 529 Due from other banks 581 1,06 1,05 1,06 1,00 577 936 Other short-term securities 23 787 1,06 1,05 – – 1 704 058 Derivative financial instruments 726 1,06 1,05 – – 16 844 Government and other securities – – – – – 1 663 147 Loans and advances to customers – – – – – 11 225 366 Other assets – – – – – 139 919 Investment in subsidiaries, associates, joint ventures and listed investments – – – – – 37 399 Property and equipment – – – – – 222 770 Computer software and development cost – – – – – 36 843 Goodwill – – – – – 29 125

Total assets 25 958 16 037 936

LIABILITIES Derivative financial instruments 87 1,06 1,05 1,06 1,00 11 644 Due to other banks – – – – – 995 139 Due to customers 14 437 1,06 1,05 1,06 – 7 378 000 Negotiable certificates of deposits – – – – – 5 055 985 Other liabilities – – – – – 155 432 Deferred taxation liabilities – – – – – 102 488 Policyholder liabilities under insurance contracts – – – – – 99 535 Provision for post-retirement medical benefits – – – – – 9 813 Long-term subordinated debt instruments – – – – – 5 599

Total liabilities 14 524 13 813 635


48. INTEREST RATE RISK Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes

in market interest rate.

48.1 Interest rate risk management Interest rate risk is assessed through the use of traditional gap analysis techniques. Gap analysis measures the volumes of assets

and liabilities subject to repricing within a given period. For this purpose assets and liabilities are classified according to their contractual repricing characteristics. Through the use of balance sheet stress testing and net interest income scenarios the impact of interest rate movements and risk concentrations can be identified and measured. Strategies are then developed for mitigating such risks. Refer to the section under the heading “Interest rate risk” in the Corporate Governance and Compliance report to the annual financial statements for more detail on interest rate risk management.

47. CURRENCY RISK (continued) Possible effect on Balance the statement as at of comprehen- reporting sive income* EUR US$ GBP ZAR and Other date N$’000 N$ N$ N$ N$ N$’000

47.3 Currency risk sensitivity analysis (continued) 2015 ASSETS Cash and balances with central bank 1 355 1,05 1,09 1,10 1,00 421 968 Due from other banks 46 575 1,05 1,09 1,10 1,00 1 194 811 Other short-term securities – – – – – 763 335 Derivative financial instruments 1 1,05 1,09 – – 14 724 Government and other securities – – – – – 1 253 445 Loans and advances to customers 225 1,05 1,09 – – 9 802 400 Other assets – – – – – 47 346 Investment in subsidiaries, associates, joint ventures and listed investments – – – – – 35 846 Property and equipment – – – – – 230 572 Computer software and development cost – – – – – 35 026 Goodwill – – – – – 29 125

Total assets 48 156 13 828 598

LIABILITIES Derivative financial instruments 1 147 1,05 1,09 1,10 1,00 18 765 Due to other banks – – – – – 301 244 Due to customers 55 933 1,05 1,09 1,10 – 6 678 611 Negotiable certificates of deposits – – – – – 4 551 285 Other liabilities – – – – – 138 158 Deferred taxation liabilities – – – – – 102 398 Policyholder liabilities under insurance contracts – – – – – 100 298 Provision for post-retirement medical benefits – – – – – 9 450 Long-term subordinated debt instruments – – – – – 4 849

Total liabilities 57 080 11 905 058

* The possible effect on the statement of comprehensive income has been determined by applying the possible change in currency to the outstanding balance reported at year end. The possible change in currency can be either positive or negative and the figures reflected above are in absolute format. The possible change is based on forward rates for a 12 month period instrument by applying expectations determined by Nedbank Group Limited.




Up to 3 3 - 6 6 - 12 1 - 5 Over 5 Non-interest months months months years years sensitive Total N$’000 N$’000 N$’000 N$’000 N$’000 N$’000 N$’00048.2 Interest rate risk analysis 2016 ASSETS Cash and balances with central bank 131 330 – – – – 253 199 384 529 Due from other banks 115 871 – – 440 163 – 21 902 577 936 Other short-term securities 1 334 060 165 000 185 000 – – 19 998 1 704 058 Derivative financial instruments – – – – – 16 844 16 844 Government and other securities 245 800 330 880 746 563 220 578 155 000 (35 674) 1 663 147 Loans and advances to customers 11 093 832 37 76 684 2 036 128 701 11 225 366 Other assets – – – – – 139 919 139 919 Investment in subsidiaries, associates and listed investments – – – – – 37 399 37 399 Property and equipment – – – – – 222 770 222 770 Computer software and development cost – – – – – 36 843 36 843 Goodwill – – – – – 29 125 29 125

Total assets 12 920 893 495 917 931 639 661 425 157 036 871 026 16 037 936

EQUITY AND LIABILITIES Capital and reserves Share capital – – – – – 17 595 17 595 Share premium – – – – – 99 536 99 536 General risk reserve – – – – – 88 766 88 766 Revaluation reserve – – – – – 85 862 85 862 Share-based payment reserve – – – – – 16 705 16 705 Available-for-sale reserve – – – – – 15 390 15 390 Retained income – – – – – 1 887 644 1 887 644

Shareholder’s interest – – – – – 2 211 498 2 211 498 Non-controlling interest – – – – – 12 803 12 803

Total shareholder’s equity and non-controlling interest – – – – – 2 224 301 2 224 301

LIABILITIES Derivative financial instruments – – – – – 11 644 11 644 Due to other banks 525 221 100 297 271 927 47 000 51 000 (306) 995 139 Due to customers 4 042 165 367 777 1 020 523 141 610 – 1 805 925 7 378 000 Negotiable certificates of deposit 3 321 419 94 000 1 079 518 450 477 – 110 571 5 055 985 Other liabilities – – – – – 155 432 155 432 Deferred taxation liabilities – – – – – 102 488 102 488 Policyholder liabilities under insurance contracts – – – – – 99 535 99 535 Provision for post-retirement medical benefits – – – 9 813 – – 9 813 Long-term subordinated debt instruments – – – – 5 599 – 5 599

Total liabilities 7 888 805 562 074 2 371 968 648 900 56 599 2 285 289 13 813 635

Total equity and liabilities 7 888 805 562 074 2 371 968 648 900 56 599 4 509 590 16 037 936

On balance sheet interest sensitivity gap 5 032 088 (66 157) (1 440 329) 12 525 100 437 (3 638 564) – Cumulative on balance sheet interest sensitivity gap 5 032 088 4 965 931 3 525 602 3 538 127 3 638 564 – –


48. INTEREST RATE RISK (continued)

Up to 3 3 - 6 6 - 12 1 - 5 Over 5 Non-interest months months months years years sensitive Total N$’000 N$’000 N$’000 N$’000 N$’000 N$’000 N$’00048.2 Interest rate risk analysis (continued) 2015 ASSETS Cash and balances with central bank 172 273 – – – – 249 695 421 968 Due from other banks 1 194 811 – – – – – 1 194 811 Other short-term securities 526 245 – 186 638 50 452 – – 763 335 Derivative financial instruments – – – – – 14 724 14 724 Government and other securities 223 000 236 550 462 906 138 213 215 700 (22 924) 1 253 445 Loans and advances to customers 9 601 761 83 171 1 527 6 544 192 314 9 802 400 Other assets – – – – – 47 346 47 346 Investment in subsidiaries, associates and listed investments – – – – – 35 846 35 846 Property and equipment – – – – – 230 572 230 572 Computer software and development cost – – – – – 35 026 35 026 Goodwill – – – – – 29 125 29 125

Total assets 11 718 090 236 633 649 715 190 192 222 244 811 724 13 828 598

EQUITY AND LIABILITIES Capital and reserves Share capital – – – – – 17 595 17 595 Share premium – – – – – 99 536 99 536 General risk reserve – – – – – 67 072 67 072 Revaluation reserve – – – – – 85 758 85 758 Share-based payment reserve – – – – – 16 705 16 705 Available-for-sale reserve – – – – – 15 758 15 758 Retained income – – – – – 1 607 777 1 607 777

Shareholder’s interest – – – – – 1 910 201 1 910 201 Non-controlling interest – – – – – 13 339 13 339

Total shareholder’s equity and non-controlling interest – – – – – 1 923 540 1 923 540

LIABILITIES

Derivative financial instruments – – – – – 18 765 18 765 Due to other banks 166 530 – – 20 000 129 000 (14 286) 301 244 Due to customers 4 837 999 288 896 244 492 361 – 1 306 863 6 678 611 Negotiable certificates of deposit 2 896 753 451 265 879 797 258 264 65 206 – 4 551 285 Other liabilities – – – – – 138 158 138 158 Deferred taxation liabilities – – – – – 102 398 102 398 Policyholder liabilities under insurance contracts – – – – – 100 298 100 298 Provision for post-retirement medical benefits – – – 9 450 – – 9 450 Long-term subordinated debt instruments – – – – 4 849 – 4 849

Total liabilities 7 901 282 740 161 1 124 289 288 075 199 055 1 652 196 11 905 058

Total equity and liabilities 7 901 282 740 161 1 124 289 288 075 199 055 3 575 736 13 828 598

On balance sheet interest sensitivity gap 3 816 808 (503 528) (474 574) (97 883) 23 189 (2 764 012) – Cumulative on balance sheet interest sensitivity gap 3 816 808 3 313 280 2 838 706 2 740 823 2 764 012 – –




Possible effect on the Reason- Balance statement of able Non- as at comprehensive possible Rate interest Fixed Variable reporting income* change sensitive sensitive rate rate date N$’000 N$’000 N$’000 N$’000 N$’000 N$’000 N$’00048.3 Interest rate risk sensitivity 2016 ASSETS Cash and balances with central bank 1 313 1,0 131 330 253 199 – 131 330 384 529 Due from other banks 5 779 1,0 577 936 – – 577 936 577 936 Other short-term securities 17 041 1,0 1 704 058 – 676 309 1 027 749 1 704 058 Derivative financial instruments – – – 16 844 – – 16 844 Government and other securities 16 988 1,0 1 698 821 (35 674) 1 473 237 225 584 1 663 147 Loans and advances to customers 110 967 1,0 11 096 665 128 701 11 826 11 084 839 11 225 366 Other assets – – – 139 919 – – 139 919 Investment in subsidiaries, associates and listed investments – – – 37 399 – – 37 399 Property and equipment – – – 222 770 – – 222 770 Computer software and development cost – – – 36 843 – – 36 843 Goodwill – – – 29 125 – – 29 125

Total assets 152 088 15 208 810 829 126 2 161 372 13 047 438 16 037 936

LIABILITIES Derivative financial instruments – – – 11 644 – – 11 644 Due to other banks – 1,0 995 445 (306) 995 445 – 995 139 Due to customers 26 916 1,0 5 572 075 1 805 925 2 880 524 2 691 551 7 378 000 Negotiable certificates of deposit 25 582 1,0 4 945 414 110 571 2 387 200 2 558 214 5 055 985 Other liabilities – – – 155 432 – – 155 432 Deferred taxation liabilities – – – 102 488 – – 102 488 Policyholder liabilities under insurance contracts – – – 99 535 – – 99 535 Provision for post-retirement medical benefits 98 1,0 9 813 – – 9 813 9 813 Long-term subordinated debt instruments – – 5 599 – 5 599 – 5 599

Total liabilities 52 596 11 528 346 2 285 289 6 268 768 5 259 578 13 813 635

* The possible effect on the statement of comprehensive income has been determined by applying the possible change in interest rate to the outstanding balance reported at year end. The possible change in interest rate can be either positive or negative and the figures reflected above are in absolute format. A linear risk relationship has been assumed to interest rate moves. Assumptions used in quantifying interest rate risk are in line with those used by Nedbank Group Limited. The possible change in interest rate is determined by means of applying a prime/call interest rate differential similar to those used in determining forward interest rates of a 12 month instrument.


48. INTEREST RATE RISK (continued) Possible effect on the Reason- Balance statement of able Non- as at comprehensive possible Rate interest Fixed Variable reporting income* change sensitive sensitive rate rate date N$’000 N$’000 N$’000 N$’000 N$’000 N$’000 N$’00048.3 Interest rate risk sensitivity 2015 ASSETS Cash and balances with central bank – – – 249 695 – 172 273 421 968 Due from other banks 17 461 1,0 1 194 811 – – 1 194 811 1 194 811 Other short-term securities 3 843 1,0 763 335 – 147 241 616 094 763 335 Derivative financial instruments – – – 14 724 – – 14 724 Government and other securities 12 764 1,0 1 276 369 (22 924) 1 050 785 225 584 1 253 445 Loans and advances to customers 96 101 1,0 9 610 086 192 314 11 826 9 598 260 9 802 400 Other assets – – – 47 346 – – 47 346 Investment in subsidiaries, associates and listed investments – – – 35 846 – – 35 846 Property and equipment – – – 230 572 – – 230 572 Computer software and development cost – – – 35 026 – – 35 026 Goodwill – – – 29 125 – – 29 125

Total assets 130 169 12 844 601 811 724 1 209 852 11 807 022 13 828 598

LIABILITIES

Derivative financial instruments – – – 18 765 – – 18 765 Due to other banks – – 315 530 (14 286) 315 530 – 301 244 Due to customers 44 949 1,0 5 371 748 1 306 863 876 799 4 494 949 6 678 611 Negotiable certificates of deposit 30 023 1,0 4 551 285 – 1 549 020 3 002 265 4 551 285 Other liabilities – – – 138 158 – – 138 158 Deferred taxation liabilities – – – 102 398 – – 102 398 Policyholder liabilities under insurance contracts – – – 100 298 – – 100 298 Provision for post-retirement medical benefits 95 1,0 9 450 – – 9 450 9 450 Long-term subordinated debt instruments – – 4 849 – 4 849 – 4 849

Total liabilities 75 067 10 252 862 1 652 196 2 746 198 7 506 664 11 905 058




49. CREDIT RISK Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss

to the group.

49.1 Credit risk management The Credit Department assesses all exposures and monitors the implementation of the group’s credit policy to

ensure that the extension, control and maintenance of credit, as well as the process of providing for and writing off of bad debts, are executed in a proper way and within laid-down policy.

The Credit Committee approves all third - party risks, including sovereign and counterparty risks, within a prescribed limit, as delegated by the Board of directors. All credit exposures in excess of the authorised limits of the Credit Committee are referred to the Nedbank Africa Credit Committee for approval.

Refer to the section under the heading ”Credit risk” in the Corporate Governance and Compliance report to the annual financial statements for more detail on credit risk management.

See note 3.2 (vii) for an explanation of the credit ratings used.


Non-IFRS7 NGR 0 NGR 1-4 NGR 5-7 NGR 8-10 NGR 11-13 NGR 14 NGR 15 NGR 16 NGR 17 NGR 18 NGR 19 NGR 20 NGR 21-23 NGR 24-25 Unrated Instruments Total N$’000 N$’000 N$’000 N$’000 N$’000 N$’000 N$’000 N$’000 N$’000 N$’000 N$’000 N$’000 N$’000 N$’000 N$’000 N$’000 N$’000

49. CREDIT RISK (continued)49.2 Credit risk analysis Classification: Neither past due nor impaired

2016 Cash and balances with central bank 384 529 – – – – – – – – – – – – – – – 384 529 Due from other banks – – 577 936 – – – – – – – – – – – – – 577 936 Other short-term securities – – 1 704 058 – – – – – – – – – – – – – 1 704 058 Derivative financial instruments – – 16 844 – – – – – – – – – – – – – 16 844 Government and other securities 1 241 437 421 710 – – – – – – – – – – – – – – 1 663 147 Loans and advances to customers – – 67 678 3 660 741 578 412 518 143 937 85 459 267 112 76 188 158 634 42 717 3 044 26 161 8 677 717 – 10 706 403 – Home loans – – – – 22 807 13 118 54 161 26 885 32 366 27 572 69 005 18 450 284 – 4 709 056 – 4 973 704 – Other loans and overdrafts – – – – 712 351 374 557 74 271 27 563 205 593 39 963 65 501 19 624 2 740 – 1 063 701 – 2 585 864 – Net leases and instalment debtors – – 67 678 3 660 6 420 24 843 15 505 31 011 29 153 8 653 24 128 4 643 20 26 161 2 017 005 – 2 258 880 – Personal loans – – – – – – – – – – – – – – 887 955 – 887 955 Other assets – 136 616 – – – – – – – – – – – – – 3 303 139 919 Investment in subsidiaries, associates and listed investments – – – – – – – – – – – – – – – 37 399 37 399 Property and equipment – – – – – – – – – – – – – – – 222 770 222 770 Computer software and development cost – – – – – – – – – – – – – – – 36 843 36 843 Goodwill – – – – – – – – – – – – – – – 29 125 29 125

1 625 966 558 326 2 366 516 3 660 741 578 412 518 143 937 85 459 267 112 76 188 158 634 42 717 3 044 26 161 8 677 717 329 440 15 518 973

2015 Cash and balances with central bank 421 968 – – – – – – – – – – – – – – – 421 968 Due from other banks – – 1 194 881 – – – – – – – – – – – – – 1 194 811 Other short-term securities – – 763 335 – – – – – – – – – – – – – 763 335 Derivative financial instruments – – 14 724 – – – – – – – – – – – – – 14 724 Government and other securities 834 240 419 205 – – – – – – – – – – – – – – 1 253 445 Loans and advances to customers – 48 310 – 198 933 414 756 590 746 128 876 105 685 245 278 109 608 93 079 54 198 7 092 34 842 7 155 467 – 9 186 870 – Home loans – – – – – 36 512 15 695 20 117 19 044 37 330 74 340 15 128 448 – 3 919 614 – 4 138 228 – Other loans and overdrafts – – – 197 810 384 182 534 885 91 632 49 414 214 157 56 230 13 590 34 119 6 503 – 617 234 – 2 199 756 – Net leases and instalment debtors – 48 310 – 1 123 30 574 19 349 21 549 36 154 12 077 16 048 5 149 4 951 141 34 842 1 849 556 – 2 079 823 – Personal loans – – – – – – – – – – – – – – 769 063 – 769 063 Other assets – 43 087 – – – – – – – – – – – – – 4 259 47 346 Investment in subsidiaries, associates and listed investments – – – – – – – – – – – – – – – 35 846 35 846 Property and equipment – – – – – – – – – – – – – – – 230 572 230 572 Computer software and development cost – – – – – – – – – – – – – – – 35 026 35 026 Goodwill – – – – – – – – – – – – – – – 29 125 29 125

1 256 208 510 602 1 972 940 198 933 414 756 590 746 128 876 105 685 245 278 109 608 93 079 54 198 7 092 34 842 7 155 467 334 828 13 213 068




Non-IFRS7 NGR 0 NGR 1-4 NGR 5-7 NGR 8-10 NGR 11-13 NGR 14 NGR 15 NGR 16 NGR 17 NGR 18 NGR 19 NGR 20 NGR 21-23 NGR 24-25 Unrated Instruments Total N$’000 N$’000 N$’000 N$’000 N$’000 N$’000 N$’000 N$’000 N$’000 N$’000 N$’000 N$’000 N$’000 N$’000 N$’000 N$’000 N$’000

49. CREDIT RISK (continued)49.2 Credit risk analysis Classification: Neither past due nor impaired

2016 Cash and balances with central bank 384 529 – – – – – – – – – – – – – – – 384 529 Due from other banks – – 577 936 – – – – – – – – – – – – – 577 936 Other short-term securities – – 1 704 058 – – – – – – – – – – – – – 1 704 058 Derivative financial instruments – – 16 844 – – – – – – – – – – – – – 16 844 Government and other securities 1 241 437 421 710 – – – – – – – – – – – – – – 1 663 147 Loans and advances to customers – – 67 678 3 660 741 578 412 518 143 937 85 459 267 112 76 188 158 634 42 717 3 044 26 161 8 677 717 – 10 706 403 – Home loans – – – – 22 807 13 118 54 161 26 885 32 366 27 572 69 005 18 450 284 – 4 709 056 – 4 973 704 – Other loans and overdrafts – – – – 712 351 374 557 74 271 27 563 205 593 39 963 65 501 19 624 2 740 – 1 063 701 – 2 585 864 – Net leases and instalment debtors – – 67 678 3 660 6 420 24 843 15 505 31 011 29 153 8 653 24 128 4 643 20 26 161 2 017 005 – 2 258 880 – Personal loans – – – – – – – – – – – – – – 887 955 – 887 955 Other assets – 136 616 – – – – – – – – – – – – – 3 303 139 919 Investment in subsidiaries, associates and listed investments – – – – – – – – – – – – – – – 37 399 37 399 Property and equipment – – – – – – – – – – – – – – – 222 770 222 770 Computer software and development cost – – – – – – – – – – – – – – – 36 843 36 843 Goodwill – – – – – – – – – – – – – – – 29 125 29 125

1 625 966 558 326 2 366 516 3 660 741 578 412 518 143 937 85 459 267 112 76 188 158 634 42 717 3 044 26 161 8 677 717 329 440 15 518 973

2015 Cash and balances with central bank 421 968 – – – – – – – – – – – – – – – 421 968 Due from other banks – – 1 194 881 – – – – – – – – – – – – – 1 194 811 Other short-term securities – – 763 335 – – – – – – – – – – – – – 763 335 Derivative financial instruments – – 14 724 – – – – – – – – – – – – – 14 724 Government and other securities 834 240 419 205 – – – – – – – – – – – – – – 1 253 445 Loans and advances to customers – 48 310 – 198 933 414 756 590 746 128 876 105 685 245 278 109 608 93 079 54 198 7 092 34 842 7 155 467 – 9 186 870 – Home loans – – – – – 36 512 15 695 20 117 19 044 37 330 74 340 15 128 448 – 3 919 614 – 4 138 228 – Other loans and overdrafts – – – 197 810 384 182 534 885 91 632 49 414 214 157 56 230 13 590 34 119 6 503 – 617 234 – 2 199 756 – Net leases and instalment debtors – 48 310 – 1 123 30 574 19 349 21 549 36 154 12 077 16 048 5 149 4 951 141 34 842 1 849 556 – 2 079 823 – Personal loans – – – – – – – – – – – – – – 769 063 – 769 063 Other assets – 43 087 – – – – – – – – – – – – – 4 259 47 346 Investment in subsidiaries, associates and listed investments – – – – – – – – – – – – – – – 35 846 35 846 Property and equipment – – – – – – – – – – – – – – – 230 572 230 572 Computer software and development cost – – – – – – – – – – – – – – – 35 026 35 026 Goodwill – – – – – – – – – – – – – – – 29 125 29 125

1 256 208 510 602 1 972 940 198 933 414 756 590 746 128 876 105 685 245 278 109 608 93 079 54 198 7 092 34 842 7 155 467 334 828 13 213 068


49. CREDIT RISK (continued)

49.2 Credit risk analysis (continued) 2016 2015 N$’000 N$’000

Classification: Past due

Cash and balances with central bank – – Due from other banks – – Other short-term securities – – Derivative financial instruments – – Government and other securities – – Loans and advances to customers 428 110 569 172 – Home loans 244 336 393 981 – Other loans and overdrafts 17 987 17 961 – Net leases and instalment debtors 105 865 122 015 – Personal loans 59 922 35 215 Impairment of advances (note 30) (39 133) (44 630) – Home loans (7 945) (11 138) – Other loans and overdrafts (5 358) (5 110) – Net leases and instalment debtors (10 858) (15 778) – Personal loans (14 972) (12 604) Other assets – – Investment in subsidiaries, associates and listed investments – – Property and equipment – – Computer software and development cost – – Goodwill – –

388 977 524 542

Classification: Impaired

Cash and balances with central bank – – Due from other banks – – Other short-term securities – Derivative financial instruments – – Government and other securities – – Loans and advances to customers 217 111 151 318 – Home loans 95 078 69 057 – Other loans and overdrafts 45 813 36 864 – Net leases and instalment debtors 50 938 35 650 – Personal loans 25 282 9 747 Impairment of advances (note 30) (87 125) (60 331) – Home loans (28 866) (15 714) – Other loans and overdrafts (21 470) (20 262) – Net leases and instalment debtors (26 458) (16 786) – Preference shares (10 331) – – Personal loans – (7 569) Other assets – – Investment in subsidiaries, associates and listed investments – – Property and equipment – – Computer software and development cost – – Goodwill – –

129 986 90 987




2016 2015 N$’000 N$’000

Cash and balances with central bank 384 529 249 695 Due from other banks 577 936 1 746 089 Other short-term securities 1 704 058 384 330 Derivative financial instruments 16 844 14 724 Government and other securities 1 663 147 1 253 445 Loans and advances to customers 11 351 624 9 907 360 Other assets 139 919 47 346

15 838 057 13 602 989

49.4 Credit risk: Collateral held in respect of 49.3 Collateral is only held in respect of loans and advances. Below follows a description of the type of collateral held per class of loans and advances to customers: Property loans: Secured by commercial property mortgage, residential property mortgage, suretyship, guarantees. Cession of life

cover and fire cover is not considered security but is recommended as additional safety measure in the event of death or fire. Other loans and overdrafts: Cession of life cover, secured by non-movable property, suretyship, guarantees, unsecured. Preference share finance: Put option for sale of preference shares, guarantees from foreign banks. Leases and instalment debtors: Secured by movable property under debt granted. Personal loans: Cession of life cover and credit guarantee insurance.

Cash and balances with central bank – – Due from other banks – – Other short-term securities – – Derivative financial instruments – – Government and other securities – – Loans and advances to customers 8 060 215 7 008 739 – Home loans 4 752 055 4 115 372 – Other loans and overdrafts 1 428 629 1 201 930 – Net leases and instalment debtors 1 328 626 1 230 618 – Preference shares – – – Personal loans 550 905 460 819 Other assets – – Investment in subsidiaries and associates – – Investment in listed investments – – Property and equipment – – Computer software and development cost – –

8 060 215 7 008 739

49.5 Credit risk: Fair value of collateral The group determines the fair value only on the following instances: – on the date the loan or advance is initiated; and/or – when the loan or advance is being renegotiated; or – when a loan or advance has been transferred to the legal department of the group for collection.

At reporting date the fair value of the collateral held has not been provided due to the impracticality thereof. The system currently maintaining the collateral do not have the fair value readily available. The fair value of the collateral is determined by means of a manual process and the volume of collateral held makes it impractical for the group.

50. Reclassifications Reclassification of balances with Central bank - other than mandatory reserve deposit: In prior periods the Central bank current

account balance was disclosed as part of balances Due from other banks in the statement of financial position. In the current year, the Central bank current account balance is disclosed as part of Cash and balances with central bank.

Reclassification of Money market funds: In prior periods money market funds were disclosed as part of balances Due from other banks in the statement of financial position. In the current year Money market funds are disclosed as a part of Other short term securities.

Reported Reclassification (Restated) 2015 Notes N$’000 N$’000 N$’000 Assets Cash and balances with central bank 4 249 695 172 273 421 968 Due from other banks 5 1 746 089 (551 278) 1 194 811 Other short-term securities 6 384 330 379 005 763 335

49.3 Credit risk: Maximum exposure

Company AnnualFinancial Statements

164 2016 COMPANY ANNUAL FINANCIAL STATEMENTS|

Contents

Statement of financial position

Statement of comprehensive income

Statement of changes in equity

Statement of cash flows

Notes to the company annual financial statements

Contact details

166

166

167

167

168

172


Statement of financial positionAs at 31 December 2016

Statement of comprehensive incomeFor the year ended 31 December 2016

Notes

2016 2015 N$’000 N$’000

Interest and similar income 490 31 Interest expense and similar charges – –

Net interest income 9 490 31 Non-interest income 10 190 674 –

Net income 191 164 31 Operating expenditure 11 911 217

Profit before taxation 190 253 (186) Taxation 12 – – Total profit after taxation 190 253 (186)

Other comprehensive income – – Total comprehensive income 190 253 (186)

Total profit after taxation attributable to: Owners of the parent 190 253 (186) Total profit after taxation 190 253 (186)

Total comprehensive income attributable to: Owners of the parent 190 253 (186) Total comprehensive income 190 253 (186)

Notes

2016 2015 N$’000 N$’000

ASSETS Due from other banks 4 124 21 Other assets 5 191 359 1 418 Investment in subsidiaries 6 133 642 133 642

Total assets 325 125 135 081

EQUITY AND LIABILITIESCapital and reservesShare capital 7 17 595 17 595 Share premium 7 99 536 99 536 Retained income 207 992 17 739

Shareholder’s interest 325 123 134 870

LIABILITIES Other liabilities 8 2 211

Total liabilities 2 211

Total equity and liabilities 325 125 135 081



Statement ofcash flows

Statement ofchanges in equityFor the year ended 31 December 2016

Notes

2016 2015 N$’000 N$’000

Cash generated by operating activities 13.1 103 17 Cash received from customers 13.2 490 31 Cash paid to customers 13.3 – –Cash paid to employees and suppliers (911) (217)Dividends received 190 674 – Cash movements in advances and other accounts 13.1 (189 941) (8)Cash movements in operating liabilities 13.1 (209) 211

Cash and short-term funds generated 103 17 Cash and short-term funds at beginning of the year 21 4

Cash and short-term funds at end of the year 124 21

Total Share Share Retained shareholder’s capital premium income interest N$’000 N$’000 N$’000 N$’000

Balance at 1 January 2015 17 595 99 536 17 925 135 056

Net profit for the year attributable to the equityholders of the parent – – (186) (186)

Balance at 31 December 2015 17 595 99 536 17 739 134 870 Net profit for the year attributable to the equityholders of the parent – – 190 253 190 253

Balance at 31 December 2016 17 595 99 536 207 992 325 123


Notes to the companyannual financial statementsFor the year ended 31 December 2016

1. BASIS OF PREPARATION Refer to the notes to the consolidated annual financial statements.

2. ADOPTION OF NEW AND REVISED STANDARDS Refer to the notes to the consolidated annual financial statements.

3. SIGNIFICANT ACCOUNTING POLICIES Refer to the notes to the consolidated annual financial statements.

2016 2015 N$’000 N$’000

4. DUE FROM OTHER BANKS Financial assets classification: Loans and receivables Placements with other banks 124 21

5. OTHER ASSETS Financial assets classification: Loans and receivables Sundry debtors and other accounts 7 – Other investments 191 352 1 418

191 359 1 418

6. INVESTMENT IN SUBSIDIARIES Investment in subsidiaries 133 642 133 642 – Carrying value at beginning of the year 133 642 133 642 – Transfer from non-current assets held for sale – –

Market valuation 133 642 133 642

Aggregate profits/(losses) Issued ordinary after tax of subsidiary/ share capital Proportion held Shares at cost joint venture

Nature of 2016 2015 2016 2015 2016 2015 2016 2015 Subsidiary companies business ’000 ’000 % % N$’000 N$’000 N$’000 N$’000

NedProperties Property (Proprietary) Limited company – – 100 100 4 000 4 000 2 405 2 928

NedNamibia Life Assurance Insurance Company Limited company 4 000 4 000 100 100 4 000 4 000 84 991 77 898

Nedbank Namibia Banking Limited company 67 759 67 759 100 100 125 634 125 634 195 134 176 144

NedCapital Namibia Financing (Proprietary) Limited company 8 8 100 100 8 8 2 003 1 404

NIB Mining Finance Financing (Proprietary) Limited company – – 100 100 – – – –

Nedplan Insurance Insurance Brokers Namibia broker (Proprietary) Limited – – 100 100 – – 6 070 5 725


2016 2015 N$’000 N$’000

7. SHARE CAPITAL AND SHARE PREMIUM Ordinary shares 17 595 17 595 Share premium 99 536 99 536

117 131 117 131

The total number of authorised shares at year end was: 80 000 000 (2015: 80 000 000) ordinary shares of 25 cents each The total number of issued shares at year end was: 70 381 644 (2015: 70 381 644) ordinary shares of 25 cents each All issued shares are fully paid. Subject to the restrictions of the Companies Act, the unissued

shares are under the control of the directors until the forthcoming annual general meeting.

8. OTHER LIABILITIES Financial liabilities classification: Other liabilities Creditors and other accounts 2 211

9. NET INTEREST INCOME Interest and discount income

Financial assets classification: Loans and receivables Due from other banks 490 31

Other assets – –

490 31

Interest expense

Financial liabilities classification: Other liabilities

Current and savings accounts – –

10. NON-INTEREST INCOME Other income – –

Dividend received 190 674 –

190 674 –

11. OPERATING EXPENDITURE Expenses include the following items which are

separately disclosable:

Auditors’ remuneration – prior year 57 –

Directors’ fees 726 53

Other expenses 128 164

911 217

12. TAXATION

12.1 Charge for the year

Normal taxation – current year – –

12.2 Reconciliation of rate of taxation

Namibian normal rate of taxation 32,0 32,0

Reduction in rate for the year: (32,0) (32,0)

– Non taxable income (32,0) (32,0)

Effective rate of taxation – –


Notes to the companyannual financial statementsFor the year ended 31 December 2016

15. LIQUIDITY, CREDIT AND MARKET RISK INFORMATION The assets and liabilities of the company consist of accounts receivables, investments and creditors and accruals. The company

only enters into investments with institutions of high credit standing and/or related parties. As a result, the company’s exposure to liquidity, credit and market risks is insignificant. Accounts receivables, investments and creditors and accruals are repayable on demand or short notice.

2016 2015 N$’000 N$’000

13. CASH FLOW INFORMATION13.1 Reconciliation of profit before taxation to cash generated by operating activities

Net income before taxation 190 253 (186) Movement in working capital (190 150) 203 – Deposit, current and other accounts – –

– Advances and other accounts (189 941) (8)

– Other liabilities (209) 211

Cash flow from operating activities 103 17

13.2 Cash received from customers Interest received 490 31

13.3 Cash paid to customers Interest paid on deposits – –

14. RELATED PARTY TRANSACTIONS

14.1 Related party balances Loans to related parties Nedbank Namibia Limited (subsidiary) (bank account) 124 21 Nedbank Namibia Limited (subsidiary) (fixed deposit) 191 359 1 418

Loans from related parties

NedNamibia Life Assurance Company Limited (subsidiary) (sundry creditor) 14 14 Nedbank Namibia Limited (subsidiary) (sundry creditor) 202 202

14.2 Related party transactions

Nedbank Namibia Limited (subsidiary) (interest income) 490 31


1712016 NEDNAMIBIA HOLDINGS LIMITED | 1712016 NEDNAMIBIA HOLDINGS LIMITED |


NEDBANK NAMIBIA LIMITED

NEDBANK EXECUTIVE SUITE7th Floor, Mutual Towers322 Independence Avenue, WindhoekP.O. Box 1, Windhoek, NamibiaTel (061) 295 9111Fax (061) 295 2120

HEAD OFFICE12-20 Dr Frans Indongo Street, WindhoekP.O. Box 1, Windhoek, NamibiaTel (061) 295 9111Fax (061) 295 2120E-mail: [email protected]

WINDHOEK MAIN BRANCHGround Floor, 12-20 Dr Frans Indongo Street, WindhoekP.O. Box 1, Windhoek, NamibiaTel (061) 295 2163Fax (061) 295 2258

WINDHOEK CASH CENTREBusiness Centre 55 Rehobother Road, Ausspannplatz, WindhoekP.O. Box 1, Windhoek, NamibiaTel (061) 295 2952Fax (061) 295 2162

WINDHOEK HIDASHidas Centre Nelson Mandela Avenue, Klein WindhoekP.O. Box 1, Windhoek, NamibiaTel (061) 295 2706Fax (061) 295 2205

WINDHOEK INDEPENDENCE AVENUECarl List Haus, 27 Independence Avenue, WindhoekP.O. Box 1, Windhoek, NamibiaTel (061) 295 2180Fax (061) 295 2269

WINDHOEK KATUTURAIndependence CentreIndependence Avenue, WindhoekP.O. Box 1, Windhoek, NamibiaTel (061) 295 2751Fax (061) 295 2757

WINDHOEK MAERUA MALLShop 38 & 39, Maerua Mall,Robert Mugabe Avenue, WindhoekP.O. Box 1, Windhoek, NamibiaTel (061) 295 2686Fax (061) 295 2681

WINDHOEK PROSPERITA39 Platinum Street, WindhoekP.O. Box 1, Windhoek, NamibiaTel (061) 295 2720Fax (061) 295 2721

WINDHOEK THE GROVE MALLShop 254, The Grove Mall, Chasie StreetKleinne Kuppe, WindhoekP.O. Box 1, Windhoek, NamibiaTel (061) 295 2772Fax (061) 295 2771

WINDHOEK WERNHILShop 36, Wernhil ParkMandume Ndemufayo Avenue, WindhoekP.O. Box, 1 Windhoek, NamibiaTel (061) 295 2582Fax (061) 295 2267

WINDHOEK WESTLANE Shop 2 & 3, Westlane Shopping Centrec/o Scheppmann Str & Hochland RoadPionierspark Ext. 1, WindhoekP.O. Box 1, Windhoek, NamibiaTel (061) 295 2783Fax (061) 295 2781

WINDHOEK SOUTHc/o Kelvin & Voigts StreetGarthanri Park, Windhoek P.O. Box 1, Windhoek, NamibiaTel (061) 295 2422Fax (061) 295 2427

NEDBANK BUSINESS CENTRE55 Rehobother RoadAusspannplatz, WindhoekP.O. Box 1, Windhoek, NamibiaTel (061) 295 2180Fax (061) 295 2477

ASSET FINANCE CENTRENedbank Business Centre,55 Rehobother Road, Ausspannplatz, WindhoekP.O. Box 1, Windhoek, NamibiaTel (061) 295 2896Fax (061) 295 2846

EENHANABH Complex, EenhanaP.O. Box 2374, OndangwaTel (065) 26 3016Fax (065) 26 3139

GROOTFONTEINc/o Hage Geingob Avenue & Okavango RoadP.O. Box 146, GrootfonteinTel (067) 24 0730Fax (067) 24 0732

KATIMA MULILOShop 6B & 7, Zambezi Shopping CentreP.O. Box 2500, NgweziTel (066) 25 2507Fax (066) 25 2598

ContactDetails


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751KEETMANSHOOP

c/o Fifth Avenue & Mittel StreetP.O. Box 166, KeetmanshoopTel (063) 22 3354Fax (063) 22 3814

LÜDERITZ240 Bismarck StreetPrivate Bag 2031, LüderitzTel (063) 20 2577Fax (063) 20 2566

OUTAPICity CentreTsandi Main RoadP.O. Box 1604, OshakatiTel (065) 25 1950Fax (065) 25 1953

ONDANGWAErf 1231, Main RoadP.O. Box 2374, OndangwaTel (065) 24 1796Fax (065) 24 3706

OSHAKATIGame Centre, Okatana RoadP.O. Box 1604, OshakatiTel (065) 22 0062Fax (065) 22 0089

OSHIKANGOErf 104, Main RoadP.O. Box 2374, OndangwaTel (065) 26 5091Fax (065) 26 5094

OTJIWARONGOErf 28, Hage Geingob Avenue P.O. Box 7231, OtjiwarongoTel (067) 31 4807Fax (067) 31 4801

OKAHANDJAShop 26, Okahandja Shopping CentreWest StreetP.O. Box 1660, OkahandjaTel (062) 50 7000Fax (062) 50 7001

ONGWEDIVAShop 62 & 64Oshana MallErf 6315, Main RoadP.O. Box 3840, OngwedivaTel (065) 23 5400Fax (065) 23 5401

REHOBOTHShop 25, Rehoboth Shopping MallErf 825, Block F, Sparrow StreetP.O. Box 4059 RehobothTel (062) 52 1304Fax (062) 52 1301

RUNDU1234, c/o Maria Mwengere &Eugene Kakuru StreetsPrivate Bag 2079, RunduTel (066) 26 6900Fax (066) 26 6901

SWAKOPMUND10 Sam Nujoma AvenueP.O. Box 1471, SwakopmundTel (064) 41 4311Fax (064) 41 4300

TSUMEBUnit 001, Omeg Stadt PlatzErf 103, Hage Geingob DriveP.O. Box 29412, TsumebTel (067) 22 5050Fax (067) 22 5051

WALVIS BAYc/o Sam Nujoma Avenue & 11th RoadP.O. Box 166, Walvis BayTel (064) 21 6111Fax (064) 21 6100

KUISEBMOND WALVIS BAYShop 3, The King’s Mall,c/o 21st Avenue & Nathaniel Maxuilili StreetP.O. Box 590, Walvis BayTel (064) 21 6182Fax (064) 21 6181

NEDCAPITAL NAMIBIA(PROPRIETARY) LIMITEDBusiness Centre, 55 Rehobother RoadAusspannplatz, WindhoekP.O. Box 1, WindhoekTel (061) 295 2237Fax (061) 295 2046

NEDLOANS(PROPRIETARY) LIMITED1st Floor, Zanlumor BuildingPost Street MallP.O. Box 3140, WindhoekTel (061) 299 4200Fax (061) 299 4205

Documents

Integrated Report 2016 NedNamibia Holdings Limited · 2017-11-24 · full range of domestic and global services to individual, ... 2014 2 345,5 NET ASSET VALUE PER SHARE (CENTS) 2015