Integrated Report 2017 - Nedbank · 2018-07-02 · Nedbank Namibia on 1 May 2014. As from January...

Integrated Report 2017NedNamibia Holdings Limited

nedbank.com.na

An unwavering commitment to be

Africa’s most admired financial services

provider.Migration patterns exemplify efficiency,

falling into place over years and working in the best interest of the group. We see patterns of efficiency in finance. As a visionary bank we recognise that we have a responsibility not only to be good with money, but more importantly

to do good with it. For Namibia and its people. By seeing money differently in

this way, we are confident that we will achieve our vision.

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 ethics review

Directors’ responsibility

Statutory actuary’s report

Independent auditor’s report

Report of the directors

Company annual financial statements

Contact details

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Contents

12017 NEDNAMIBIA HOLDINGS LIMITED 12017 NEDNAMIBIA HOLDINGS LIMITED

Deftly woven into the fabric of Namibia.

GROUP PROFILE

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$17,05 billion (2016: N$16,04 billion).

The principal subsidiary, Nedbank Namibia Limited, is a registered Namibian bank with assets of N$16,59 billion (2016: N$15,65 billion). It provides a full range of domestic and global services to individual, corporate and international clients through a widespread branch network, a business centre and a headoffice in Windhoek. An innovative approach to providing financial services, coupled with indepth 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 bankto grow.

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.

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.

By focusing on what we can do for society,

we are building a bank that is future-fit, competitive

and a formidable force for good.

Our relevance today and in the future lies in the value that we create by generating sustainable financial returns while playing a meaningful role in society through active corporate citizenship.

RETURN TOCONTENTSPAGE

2 2017 INTEGRATED REPORT 32017 NEDNAMIBIA HOLDINGS LIMITED

2011 2012 2013 2014 2015 2016 2017

1 38

8,6

1

633,

2

1

922

,9

2 34

5,5

2 73

3,0

3 16

0,3

3 32

7,7

NET ASSET VALUE PER SHARE (CENTS)

Banking has changed and a new pattern has emerged.

Traditional branches are giving way to digitally enabled branches of the future. As a leading bank in Namibia, we are weaving our own patterns. From Independence Avenue in Windhoek to Dunes Mall in Walvis Bay, our flagship branches highlight this fresh direction.

‣ Group maintains growth trajectory despite economic downturn

‣ Further advances on technology and innovation platform

‣ Enhanced competitiveness through new services and products

‣ Better strategy execution and intensified employee engagement ‣ Successful brand repositioning at Nedbank Namibia

‣ Wealth and bancassurance unit maintains growth record

‣ Further inroads into corporate market with significant deals

‣ New impetus for small and medium enterprise offering

Consistently working

to better our numbers.

4,78%

6,28%

5,51%

16,01%

9,59%

3,22%

8,21%

Total comprehensive income increased

Total assets increased

Growth in loans and advances

Capital adequacy ratio

Net interest income improved

Non-interest revenue increased

Increase in operating expenses, including investment in information technology

HIGHLIGHTS RETURN TOCONTENTSPAGE


GROUP STRUCTURE

5

15

11

17

24

6

8

16

14

12

10

187

3

9

13

1

Enduring focus on being the first choice

for banking.

RETAIL BRANCH NETWORK

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

Dunes Mall Walvis Bay Branch

Kuisebmond

13 Lüderitz

14 Otjiwarongo

15 Okahandja

16 Ongwediva

17 Rehoboth

18 Tsumeb

100%Nedbank NamibiaLimited

Full Spectrum Banking

100%NedProperties(Proprietary) Limited

Property HoldingCompany

100%NedPlan Insurance Brokers Namibia(Proprietary) Limited

Insurance Broker

100%NedNamibia Life Assurance CompanyLimited

Long-term Insurance

100%NedCapital Namibia (Proprietary) Limited

Specialised Financial Service

100%CBN Nominees(Proprietary) Limited

Safe Custodian Services

25%Namclear(Proprietary) Limited

Clearing Service Provider

100%NedLoans(Proprietary) Limited

Personal Lending Administration

50%Ten Kaiser Wilhelm Strasse (Proprietary) Limited

Property Holding

50%Walvis Bay Land Syndicate (Proprietary) Limited

Property Holding

100%NedNamibiaHoldingsLimited

Nedbank Group Limited



BOARD OF DIRECTORS

THEO J FRANK (SC)ChairpersonIndependent non-executive director

BA Law, LLB, Dip Bus Man, Certificate in Tax Law (University of South Africa)

Senior counsel and former judge of the High Court of Namibia and was appointed as an ad hoc Judge of Appeal to the Namibia Supreme Court with effect from 1 March to 31 December 2017. He is the chairperson of both NedNamibia Holdings and Nedbank Namibia and also the chairperson of Free Press of Namibia (Pty) Ltd.

RICHARD W R BUCHHOLZNon-executive director

BCom, CA (SA) He has 24 years’ experience in banking, credit and risk management, both with Nedbank Limited and as a former partner in the Financial Services division of KPMG (SA). He has most recently served as Head of Risk: Nedbank Limited: Rest of Africa, and previously at Nedbank Limited as Managing Director of Business Banking, from 2003 to 2005. Mr Buchholz resigned as director of NedNamibia Holdings Limited with effect from 27 November 2017.

JAN ADRIAAN DU PLESSISNon-executive director

BCom, BCompt (Hons), CA (SA), Certificate in the Theory of Accountancy, HDip in Company Law, Advanced Management Program (Duke University, USA)

A seasoned banker with extensive experience in financial management (including specialised and structured finance products), mergers and acquisitions as well as corporate banking. He is the Managing Executive of the Nedbank Rest of Africa subsidiaries as from January 2014.

TROPHIMUS T HIWILEPOIndependent 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.

Striving towardsresponsive,responsible leadership.

A visionary bank with innovation.



BOARD OF DIRECTORS

LIONEL J MATTHEWSManaging Director

BCompt (Hons), CA (Nam), CA (SA), Executive MBA (University of Cape Town, SA), Executive Business Transformation (Duke University, USA)

Former Chief Executive Officer of Old Mutual Investment Group (Namibia) and the director of banking supervision at the Bank of Namibia. Mr Matthews was appointed as Managing Director of NedNamibia Holdings and Nedbank Namibia in November 2013. He has more than 20 years’ experience in finance, banking, investments and strategic planning.

LIINA M MUATUNGAIndependent non-executive director

NatDip HR Management (Peninsula Technicon, Cape Town, SA), 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 (Pty) Ltd with extensive experience in human resources management, training and development, industrial relations, performance management, operational management and labour law.

RICHARD P NIDDRIEIndependent non-executive director

BCom, BAcc, CA (SA), CA (Nam)

Former audit partner of the Namibian practice of Ernst & Young with 36 years’ experience as a Chartered Accountant. Richard is also a director of the Namibian Stock Exchange and chairman of its audit committee.

AFRA R SCHIMMING-CHASEIndependent non-executive director

LLB, LLM, PGrad Dip International Law (France), Cert Financial Planner CFP® (Member of Financial Planning Institute, SA) Afra is the consultant and owner of Chase & Associates CC; Financial Planning & Coaching Practice. She is a partner and certified facilitator in the FranklinCovey suite of products as well as a customer service expert, seasoned public speaker and dynamic facilitator.

PETER C W HIBBITIndependent non-executive director

BCom, HDip in Tax (University of the Witwatersrand, SA), CA (SA), Advanced Management Program (Harvard University, USA)

Held numerous senior positions during his 32 years’ career as a 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 of Associated Motor Holdings ('AMH'), the latter two being part of the Imperial Group. He retired from the accounting profession at the end of 2014.

KARL-STEFAN ALTMANNChief Financial Officer

BAcc (Hons), CA (Nam), CA (SA)

Karl-Stefan is a member of the Institute of Chartered Accountants both in SA and Namibia. He covered appointments as an Audit Manager with Deloitte & Touche, Financial Manager and Senior Financial Manager at Nedbank Namibia, was Head of Finance at ABSA Namibia and was responsible for short-term assignments in Tanzania and Zambia. Karl-Stefan was appointed as Chief Financial Officer of NedNamibia Holdings and Nedbank Namibia on 1 May 2014. As from January 2016 to date of this report, the Treasury function of Nedbank Namibia also reported to him.



EXECUTIVE COMMITTEE

BERTUS MATTHEEExecutive: Retail (retired on 31 March 2018)

With 40 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 more than 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.

GERNOT DE KLERKHead: Marketing and Communications (co-opted EXCO member)

Gernot 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 University of Stellenbosch and the University of 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.

RICHARD MEEKSChief Operating Officer

Richard, 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.

Driven to succeed every day.


A 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.

LIONEL MATTHEWSManaging director

Lionel, who was appointed managing director of NedNamibia Holdings and Nedbank Namibia from 1 November 2013, is a chartered accountant by profession, with a B Compt (Hons), CA (Nam), CA (SA), an executive MBA from the Graduate School of Business at the University of Cape Town and an Executive Business Transformation Programme from Duke University (USA). He has more than 21 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.



EXECUTIVE COMMITTEE

STEPHEN VAN RHYNChief Information Officer (resigned on 31 March 2018)

A 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 22 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 optimisation 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 chief information officer, head of information technology and manager: information technology business development.

ADVOCATE SUMARI VON KUNOWChief Risk Officer (resigned on 16 December 2017)

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.

DR EDWARD TURNER Executive: Corporate Investment Banking

Edward is a chartered accountant – CA (SA) and CA (Nam) – and has 19 years’ experience in commercial banking, life insurance, 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 the University of Stellenbosch – 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.

SILKE VAN DER MERWEExecutive: Strategy and Human Capital

A graduate of the University of Stellenbosch (BA, MBA) and 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 2016.

ANNETTE STAFFORD-EVANSExecutive: Credit and Market Risk

Following 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').

ELAINE SCHLECHTER Executive: Wealth Management/Bancassurance

Elaine, 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 29-year career in the banking and insurance sector, 19 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.



CHAIRMAN’S REPORT

Optimally refining our purpose.Namibia ended 2017 with hints of green shoots emerging in a sluggish economy labouring under a bleak growth outlook clouded by regional political uncertainty and upheavals.The year saw a downgrading – the first since the introduction of ratings 12 years ago – of the country’s sovereign credit rating in the wake of concerns over imbalances of public finances, weak institutional capacity and liquidity vulnerabilities.



A milestone for the group was its compliance with a banking institutions determination for localisation of core banking systems. The group has effectively implemented local accountability, responsibility and oversight and also assumed technical and operational functionality and support in respect of its core banking and peripheral systems.

Embracing regulatory compliance and sustainable practices that enable a stable financial services system is but one cornerstone of group efforts to deliver value to our broad stakeholder base. Our efforts to make a difference through our corporate social investment activities and positively transform economies and society through our businesses and our lending are more comprehensively described in a following review of how we seek to build Namibia.

LOOKING AHEADIn line with the group’s business growth and in recognising the need to manage the complexity of all business functions in a more demanding environment, plans are being drawn for a new headoffice building in Windhoek that will consolidate operations currently spread across six different locations. This will be an investment that will reflect our confidence in the future of Namibia and provide further tangible proof, notably by creating job opportunities and a great place in which to work and bank, of the group’s commitment to delivering value to clients, staff and our society at large.

It is also a signal that the group is now well set to convert the green shoots materialising from its technology and innovation platform in 2017 and to achieve further meaningful growth in the anticipated recovery phase after the worst performance for sub-Saharan Africa economies in two decades. With moderately brighter prospects for the region in 2018, real GDP growth in Namibia is projected at 1.4%, well ahead of that foreseen for neighbouring South Africa and Angola. Although significant regional risks and uncertainties still linger, the group looks forward to continuing its upward path.

APPRECIATIONThe group has been able to significantly increase its client base in 2017. We thank our supporters, old and new, for entrusting their business to us. Securing and maintaining support of clients was key to group performance and on behalf of the board, I thank management and staff for their efforts in a challenging year. We also continued to enjoy constructive engagement with the regulatory authorities and the considerable contributions of our suppliers and business partners and of many community-minded Namibians in guiding initiatives for sustainable development. I am particularly appreciative of the contribution of my fellow directors and thank them for sharing their wisdom and insight.

THEO FRANKChairperson

Per capita income stalled, gains in job numbers were reversed in some sectors, private sector credit extension slowed (with a brake in both the household and corporate sectors on mortgage and instalment credit) and the annual inflation rate stood at 5,2% during December 2017. The level of private sector indebtedness remained high, with the ratio of household debt to disposable income estimated at being more than 100%.

With the domestic economy under pressure, market confidence at a low and liquidity diminished, Government acted to curb expenditure and aimed, in time, to reduce the growth of total public debt from a projected peak of 44,2% of gross domestic product to a threshold of within 35%.

The containment of Government expenditure, a dominant factor in the economy, slowed economic activity and a cut in the repo rate to 6,75% by the Bank of Namibia did little to revive domestic demand and investment, with the retail and wholesale and construction sectors particularly affected.

Nonetheless, in his Budget Review in November, the Minister of Finance pointed to some green shoots. He indicated that, after a prolonged period of contraction because of subdued commodity prices, particularly for uranium, production constraints in the diamond sector and severe drought conditions in agriculture, primary industries had eased into growth, with exports regaining momentum. The tourism and financial intermediation sectors were relatively robust, he said.

It was against this backdrop that the group maintained its position as a strong and profitable business, delivering value to all our stakeholders and produced profit growth in 2017. That growth though was below expectation – a reflection of the tough conditions in the Namibian market.

The group found its own green shoots in strategies to reposition Nedbank Namibia as an innovative bank using its financial expertise to do good for individuals, families, businesses and society, and from a growth focus at NedNamibia Life Assurance Company through product development and the introduction of new products.

These green shoots have materialised on a digital journey initiated from a stable core banking system, enabling the introduction of valued-added services and form further inroads in the corporate and investment banking market. The board was encouraged to note the vigour and culture of innovation emerging in the repositioning. The rapidly changing face of banking and financial services in the digital era demands, in turn, a change in mindsets and behaviour by personnel to deliver consistently positive client experiences. Management and staff are to be commended for their achievements in adapting to change and dealing with increased operational risks.

The progress made on this growth path as an enabler of sustainable socioeconomic transformation and the detail of the group’s financial performance and risk management are set out in the following reviews by the managing director, the chief financial officer and the chief risk officer.

While confronted by increased risk in 2017, particularly in the information technology, compliance and operational arenas, the group built on its strong risk culture through best-practice enterprisewide risk management. The board’s risk and capital management committee continued to act as an expert monitor of the group’s risk universe. The risks within this universe and their materiality were reassessed, reviewed and challenged regularly by the board and management. The board was satisfied with the resilience through this latest of economic cycles of the framework underpinning group risk management.

Nedbank Namibia provided information for a regulatory investigation of serious trade-based money laundering ('TBML') and exchange control compliance cases. Risks such as these, together with the rise in terrorism, geo-political tensions, cybercrime, mobile phone banking and increasing numbers of non-traditional entrants into the financial services and banking sphere continued to drive the trend in compliance towards increased regulation, increased investment in information technology security, enhancement of localised capacity for client support and heightened capital reserve requirements.

Increased Namibian ownership of our group, in line with the aspirations of the Namibia Financial Sector Strategy and the Financial Sector Charter which advocates for a degree of localisation of the financial sector, continued to receive attention within our parent group which in turn is part of a managed separation by the ultimate parent, Old Mutual plc. Expectations at the Bank of Namibia ('BoN') are that existing banking institutions will increase local shareholding, by either listing on the Namibia Stock Exchange or through private placements or a combination of both within the next two years.

Consultations with the Bank of Namibia and the industry continue on provisions of the proposed Banking Institutions Amendment Act. BoN requested comments on certain key provisions related to restriction of foreign shareholders, recovery plans, minimum capital funds, exposures to holding companies, affiliates and subsidiaries and restriction on dividends in certain circumstances.

Meanwhile, following submission to the Prime Minister of a report of Namibians’ views on the National Equitable Economic Empowerment Bill ('NEEEB'), which provides for the establishment of an Economic Empowerment Advisory Council and Commission to redress the social, economic and educational imbalances in Namibia, it has been indicated that Government has invited further proposals on how to address the income gap in Namibia.

CHAIRMAN’S REPORT



MANAGING DIRECTOR’S REVIEW

Ongoing commitment to being relevant.Further progress on our technology and innovation platform, anchored by a stable core banking system, enhanced competitiveness through new services and products, and a successful brand repositioning at Nedbank Namibia helped the group maintain a growth trajectory in the face of a challenging economic environment.



MANAGING DIRECTOR’S REVIEW

The employee engagement programme, known as the 90-day Challenge, provided an opportunity for staff to better understand the repositioned Nedbank brand and to build team spirit.

To provide more impactful training and ensure training strategies meet workforce demands, we launched Nedlearn, an e-learning platform. This gives staff the opportunity to learn at their own convenience and pace and enables teams from various locations to collaborate on problem-solving challenges. Nedlearn offers 16 training modules as well as the bank’s induction programme.

In addition to Nedlearn, a training hub was established in Northern Namibia to contain travel and accommodation expenses. In leadership development, 15 staffmembers graduated from the management development programme run in collaboration with the University of Stellenbosch. To ensure bankers make sound lending decisions, credit consumer and business consumer lending courses were launched.

Exco Plus, a group of younger talent, was established to review strategy and find new opportunities and innovative solutions.

In surveys, staff gave high ratings for opportunities to learn and grow at work and for levels of engagement and of ethical behaviour. Among priority focus areas emerging from these surveys were low ratings for efforts to retain the best people and for giving equal opportunity to all employees. Nonetheless, staff turnover, while to an extent prompted by better opportunities, still remained within industry norms.

LOOKING AHEADIn continuing our journey of transforming into a truly digital bank, we will focus strongly on our client experience – which in turn demands intensified efforts to build our team of money experts who thrive in a great place to work and who do things even more efficiently. We have expanded our credit representation across Namibia and clients are seeing the benefits in turnaround times. We also have representation in every branch of Nedbank Namibia for bancassurance and financial planning and bankers for small and medium enterprises. In 2018 we will decentralise our finance function to support our business units and to contribute to better client service. We will continue to investigate opportunities to innovate and will bring added mobile banking convenience to clients in the new year.

The year ahead will again present a difficult operating environment in a market that is becoming more and more competitive with new entrants as well as more regulated

and facing increasing trends in cyber and financial crime. New levy structures for all financial markets introduced by the Namibian Financial Institutions Supervisory Authority in November will ultimately have an impact on clients in the financial services sector. We will also have to deal with the Basel 3 framework on banks’ capital adequacy, stress testing and market liquidity risk. We are now, however, a highly visible, well-funded and agile group and well placed to make further strides in growing our transactional banking and our presence in corporate and investment banking where we have a strong pipeline of business.

APPRECIATIONA solid team effort has brought significant advances in the group’s business. For their contributions to the milestones we have achieved in moving towards our 2020 goals, I thank all our group employees. We have shown that we can continue to up our game and that has been recognised by our growing client base whose support we greatly appreciate. I thank the shareholder, board and my fellow executives for their commitment and support to mould and implement our strategy and working tirelessly to achieve our stated strategic objectives.

LIONEL MATTHEWSManaging Director

The progress made, coupled with better strategy execution, a sound management information system and intensified employee engagement, enabled the group to counter the effects of the downturn and to keep sight of our 2020 goals. These are to achieve N$500 million in earnings, 20% return on equity, 20% market share and an efficiency ratio of 55%.

The brand repositioning at Nedbank Namibia, built on a call to ‘to see money differently’ from ‘money experts who do good for individuals, families, businesses and society’, was a key strategic initiative in a ‘Banking Reloaded’ drive to become a better transactional bank. That drive was boosted by the launch of the feature-rich Nedbank Gold account, which cut across client segments and rapidly established itself as a most wanted current account in Namibia. The demand for the Gold account helped the bank achieve its transactional banking target for 2017.

In addition to the introduction of value-added services to internet banking capabilities, a new website provided increased functionality, including the ability to apply online for Nedbank products and Nedbank accounts. A debit order switching service was also introduced, making switching over to Nedbank Namibia extremely easy.

Following the launch of what is an exceptional mobile banking app, the bank forged relationships to improve mobile payment facilities in Namibia. One such relationship, with mobile platform PayToday, allows users to share payments with friends, by splitting a bill for example, and pay directly to their mobile numbers, regardless of which bank they use. The PayToday app is free for anyone to download and is powered by Nedbank Namibia technology. Nedbank also became the first Namibian bank to provide direct mobile payments to businesses via the PayToday platform.

To ensure the experience of clients visiting branches reflect Nedbank’s new technology, products and brand, the flagship branch on Independence Avenue in Windhoek was revamped and a new branch was opened in The Dunes Mall in Walvis Bay. More branch revamps are being done to provide a modern client experience.

While Retail and Business Banking benefitted from client gains through the Banking Reloaded campaign and transactional growth, the core area of vehicle asset finance was severely affected by the downturn. There was also reduced growth in home loans, but the Nedloans unit, offering personal loans, delivered a pleasing result. Given the weak economy and increased pressure on consumers’ disposable income, we were acutely diligent in assessments for both vehicle and home loans.

Following the national launch of its offering for small and medium ('SME') enterprises, a dedicated service offering to SMEs was created through the SME hub in Windhoek, supported by the appointment of an SME banker to each branch.

In the larger business segment, the Corporate and Investment Banking ('CIB') unit made further gains through a focus on property finance in collaboration with counterparts in South Africa.

Following drawdowns on the N$500 million facility for The Dunes Mall and N$250 million facility for the Am-Weinberg development in Windhoek, our CIB unit was appointed as lead arranger for the Ongos Valley property development in Windhoek. The first phase of the project is valued at N$3,7 billion. The development will provide housing for 15 000 families and is expected to create 10 000 job opportunities. Our CIB unit also secured N$156 million financing for expansion of the Eros Manor retirement village in Windhoek and N$98 million financing for a large cold storage facility in Walvis Bay. It also won the tender to finance the acquisition of a larger tug at Walvis Bay as part of the N$3,5 billion harbour expansion by the Namibian Ports Authority.

A credit facility agreement of N$235 million was concluded with Agence Française de Développement ('AFD'), France’s bilateral development finance institution. Nedbank Namibia plans to use the credit line to finance small-scale projects for renewable energy, energy efficiency and sustainable resources development. NedNamibia Life did, however, enjoy exceptional year-on-year premium growth for its funeral products (albeit from a low base) which were introduced to external markets beyond Nedbank. New sales channels were created with the appointment of external sales agents and notwithstanding the anaemic economy there was growth in sales of other life company products.

The Nedplan brokerage turned in a sound financial performance thanks to improved cross selling in financial planning. The focus in financial planning was on a sound overall client value proposition rather than on product, and there was a major drive on estate planning services. The broker distribution network, now comprising 15 life and 14 short-term insurance brokers, achieved representation in all major retail branches of Nedbank Namibia.

Beyond the introduction of new products and services and new business gains, the group’s growth in a difficult year was achieved through greater employee engagement and innovations in training.



CHIEF FINANCIAL OFFICER’S REPORT

Seeking to realise every opportunity.Overall growth in the Namibian economy remained weak in 2017, although there was a welcome uptick in the fortunes of the mining and agriculture sectors. Real growth in Namibian gross domestic product of (0,6)%, compared unfavourably with an expected 1,3% for the South African economy and 1,5% for Angola.



Credit Loss Ratio

Non-interest revenueThe surge in new transactional banking accounts, first noted in the second half of 2016, continued throughout 2017 on the back of a repositioning of the Nedbank Namibia brand and focused marketing campaign. This response to further innovations on the bank’s technology platform along with new products and services in bancassurance and wealth management helped boost non-interest revenue to N$334,2 million, an increase of 3,22%. The group is well positioned to tackle the challenge of growing non-interest revenue in 2018.

Non-Interest Revenue to Total Income

Operating expensesGrowth in operating expenses was contained to 8,21% despite increased marketing expenditure and greater investment in staff and their development and in the technology and innovation platform. Expenses represented 58,9% of total income compared with 58,0% in 2016. The targeted efficiency ratio for 2020 is 55%.

Cost-to-Income Ratio (over five years)

STATEMENT OF FINANCIAL POSITIONIn line with the marked decline in private sector credit extension in the weak economic environment, loans and advances to clients grew by 5,5% to N$11,84 billion. This growth compared well to the average private sector credit extension of 5,1%.

There was a solid increase in deposits by clients in the corporate market, and overall deposits increased by 4,9% to N$14,1 billion. The total liquid asset buffer in place throughout the year was maintained well ahead of the regulatory position given potential liquidity challenges at year end and overall slow growth in loans and advances. At 31 December 2017 this total buffer amounted to N$2,24 billion.

The capital adequacy ratio of 16,01% exceeded our internal target range of 12% and compared to 14,96% at the end of 2016. While we have sufficient capital in place for our rapid growth strategy towards 2020, our current return on average equity after taxation is negatively affected. This amounted to 13,3% (2016: 14,6%).

THE YEAR AHEADWith solid results despite the economic downturn, the group has maintained momentum in moving towards the 2020 goals of N$500 million in earnings, 20% return on equity, 20% market share and an efficiency ratio of 55%. The group is well capitalised and funded and its progress in the technology arena along with strategies for growth in retail, business and corporate banking and in bancassurance and wealth management has positioned it to gain further impetus in 2018.

APPRECIATIONThe support and encouragement of all our stakeholders in 2017 is sincerely appreciated. The collaborative role of our suppliers in implementing systems enhancements was vital in enabling our finance teams to contribute effectively to group progress. I salute our teams for their hard work and ongoing commitment.


CHIEF FINANCIAL OFFICER’S REPORT

Inflation slowed from a peak of 8,2% in January to an average of 6,2% for the year, a level corresponding to inflation levels in 2016. There was a drop to 5,4% in the inflation rate in August, the month in which the Bank of Namibia ('BoN') decided to cut the repo rate by 25 basis points to 6,75%. The rate cut did little to stimulate demand in the remaining months of the year. Annual growth in private sector credit extension dropped to an average of 5,1% from 8,9% in 2016. That was primarily due to the reduced growth in credit advanced to both the household and corporate sectors, particularly in the form of mortgage and instalment credit. Along with a sharp reduction in vehicle sales and a slowdown in the investment property market, business was cautious in its approach to investment and showed a reluctance to commit to capital expenditure.

In a highly competitive environment Nedbank Namibia optimised its technology platform and gained ground as an innovative bank at the forefront of finding solutions for consumers and business, with significant deals in the corporate market and new impetus in the market for small and medium enterprises. Group Finance supported the growth by delivering greatly enhanced management information, with the ability to provide detailed analyses of net-interest revenue and operating expenditure as well as detailed segmented reporting by product, branch, region and relationship manager as well as summarised dashboards for executives.

Treasury operations were enhanced with the implementation of an internationally renowned trading system which helps traders manage their positions and risk.

With the optimisation of the technology platform and execution of business unit strategies, year-on-year market share growth topped 13% and a strong liquidity position was maintained in a market which saw Government competing with banks for funding.

With contributions from the main subsidiaries, Nedbank Namibia and NedNamibia Life Assurance Company, total comprehensive income grew by 4,78% to N$318 million for the financial year.

EPS (over five years)

STATEMENT OF COMPREHENSIVE INCOMEInterest incomeNet interest income improved by 9,59% to N$747,9 million (2016: N$682,4 million). This was behind budget as a result of the weak growth in loans and advances to N$11,8 billion (2016: N$11,2 billion) and funding cost increasing faster than expected.

Market liquidity levels did show some signs of recovery in Q2 2017 after the significant drop in September 2016 to much lower than normal seasonal levels. This was indicative of a market dynamic out of the ordinary. The shortage is specific to the Namibia market and linked to the Government’s own weakened liquidity position as debt levels reached a ceiling, refinancing debt became more difficult and there was pressure on reserves. This negatively impacted the banking sector liquidity as funding with banks through asset managers with government-related portfolios was gradually withdrawn, and SOEs withdrew excess funds. These funds have been slow in flowing back into the banking sector. The increasing shortage of liquidity was also evident through wholesale funding costs that increased consistently and term funding costs in Namibia exceeding that of South Africa.

The industry’s liquidity position showed further improvement in Q3 when measured against the high level of BoN repos that were in place during Q1. This resulted in a drop in market funding rates, indicative of some liquidity returning to the market.

Further downgrades of South African debt, political shocks and reduction in emerging market risk appetite could have a significant negative impact on the rand exchange rate and result in forced rate hikes.

The average yields on new loans and advances have stabilised, with prime decreasing by 25 basis points in August 2017. Further increases in advances yields could be challenging given increased competition in the market and the slow advances growth in the market as a whole.

Over the long run, margins are likely to only increase to levels of main Namibian competitors, once the funding mix is aligned to that of competitors, through reducing dependence on more expensive wholesale funding in favour of a higher level of retail funding in proportions similar to competitors.

Margin analysis

ImpairmentsThe impairment charge at Nedbank Namibia was N$60,6 million (2016: N$41,1 million). The credit loss ratio of 0,52% was higher than the 0,39% recorded in 2016 and reflected the pressure on consumers. The ratio was ahead of competitors’ positions and intervention by senior management on the status of client accounts was heightened.

Funding costs

Average margin

Yielding assets

8,13%

2017

2016

2015

2014

2013

8,51%

9,07%

9,84%

10,33%

4,21%3,92%

4,04%4,47%

3,98%5,09%

4,02%5,82%

3,99%6,34%

2017

2016

2015

2014

2013

0,52%

0,39%

0,58%

0,06%

0,19%

2017

2016

2015

2014

2013

31,50%

32,30%

37,00%

40,30%

41,80%

2017

2016

2015

2014

2013

58,90%

58,00%

57,50%

58,80%

62,20%

2017

2016

2015

2014

2013

429,81

426,42

388,46

347,70

283,70

EPS (in cents)



CHIEF RISK OFFICER’S REPORT

Promoting a worldclass risk-aware culture. The group promotes a risk-aware culture that creates a recognition and understanding among all employees of the value of risk identification, measurement, management, monitoring and reporting as part of their daily business activities. The major risks facing the group in 2017 centred, as in 2016, on the areas of information technology, compliance and operations. Added to these were the threats of cyber and financial crime, outsourcing third-party risk and business continuity planning.



28 2017 INTEGRATED REPORT

CHIEF RISK OFFICER’S REPORT

A market conduct regulatory project which aims to ensure that defined standards (including Treating Customers Fairly) meet international best practices is under way and a detailed implementation plan is being prepared. All staff and directors filed annual declarations of outside interests and conflicts of interests as required by the board-approved code of conduct and ethics. There were also 100% submissions by directors and staff to the ethics office of personal account trading policy acknowledgements and declarations.

All security systems throughout the group were reviewed during the year, resulting where necessary in replacements, upgrades or installation of new equipment. A full infrastructure risk evaluation was conducted during annual branch visits. Health and safety training conducted during the year saw all 110 delegates pass.

THE YEAR AHEADThe enhancement of risk technology will form the basis of the enterprisewide risk management strategy in 2018. Investigations into the current risk management system are aimed at assessing its functionality and capability against risk strategy, policies and framework requirements, to set the platform from which the group is able to meet ever increasing risk management standards.

The initiative will enable:▸ standardised risk reporting across all management, operational and risk committees;▸ automated and integrated risk reporting (including governance, risk and compliance);▸ coordinated risk reporting cycles so that current information about risks and issues is incorporated into business plans and daily operations; and▸ use of analytics to optimise the risk dashboards and improve current and forward looking decisionmaking.

The group recognises that it must respond to the forces of change by taking a more fluid, progressive approach to risk management. To strengthen the risk function we will continue to invest in harnessing smart technology, rising to meet coordination challenges and building new layers of talent.The smart technologies and new processes are required to improve the interaction between our risk teams and business, regulators and external stakeholders. Risk management is also fast moving towards robotic process automation, artificial intelligence and a wide range of data-driven technologies to speed up our operations and improve measurement, modelling, analysis, integration, predictions and anomaly detection.

We will continue to invest in risk data aggregation and reporting systems with the flexibility to integrate multiple data sources and strong data governance features.

The risk fraternity now needs people with quantitative and analytical skills, but also creativity, technology acumen and industry knowledge. We continue to strive to build teams that are responsive and anticipatory – able to catch issues early and respond to increasingly ad hoc requirements from regulators and the business – and so excel in modern banking risk management.

ANNETTE STAFFORD-EVANSActing Chief Risk Officer

The focus on the combating of financial crime, amid ever-increasing regulatory pressure, led to the appointment of further personnel for anti-money laundering ('AML'), combating financing of terrorism ('CFT'), proliferation and sanctions compliance risk management.

Ongoing enhancement of the core banking system and AML technology, with improvement of data quality assisted with the management of the AML, CFT and sanctions compliance programme. A comprehensive combined audit and management assurance programme has been scheduled for 2018 to review the implementation of the enhancements of risk management technology and automation of processes.

For outsourcing/third-party risk and business continuity planning, ongoing projects are envisaged for finalisation in 2018, which will allow for adherence to Nedbank Group minimum requirements, regulatory requirements and improved risk mitigation.

To deal with the risk of strategic objectives being inhibited or delayed by inadequate and/or system-inappropriate IT investment, development, implementation and support, there was close collaboration and engagement with the Nedbank Group to accelerate our group’s digital journey.

In Treasury operations, significant manual processes gave way to an internationally accepted and automated solution which helps traders to trade and manage positions and risk.

The group addressed risk relating to execution and delivery of group strategy and its 2020 goals and after careful consideration of prevailing economic circumstances, a revised and refreshed strategy execution plan was approved by the board.

To counter the increasing risk of illegal cyber activities being used against the group’s computer systems, computer networks and internet, which might lead to operational losses and reputational damage, the group invested in upskilling of business information security officers as part of its robust, worldclass cybercrime risk framework.

Continued remediation of Namibian Financial Intelligence Act requirements was balanced with the requirements of the Nedbank Group and the South African Financial Intelligence Centre Act which were recently amended to promote a risk-based approach. Accounts where identification of clients is outstanding, outdated or incomplete continue to be restricted. Significant focus continued on the implementation of procedures to ensure upfront sanctions screening and client risk profiling and improvements in transactions monitoring.

Trade-based money laundering ('TBML') and exchange control compliance risks materialised in the Namibian economy in 2017 and the regulator investigated a number of serious cases for which Nedbank Namibia provided information. To mitigate TBML risks the Financial Intelligence Centre issued a revised directive to strengthen controls on cross-border remittances. The FIC then conducted a review of the bank’s AML controls in March 2017 raising issues which are being remediated as part of a Nedbank Group AML remediation programme. Coupled with this, the FIC issued related guidance and training to local banks, based on deficiencies noted.

As a result of increased sanctions and anti-money laundering compliance pressure, the bank has seen an increase in de-risking from high-risk client relationships.

To further mitigate TBML and exchange control compliance risks the bank embarked on a review of its trade finance business operations. This was designed to address systems development issues that would enable the bank to effectively implement its risk-based AML and exchange control compliance controls. The project, which is ongoing, aims to also ensure the bank’s client and transactional data is adequate to ensure compliance and to enrich data for improved transaction monitoring.

Despite an increasingly stressed socioeconomic environment and greater investigative support required by law enforcement authorities from the forensic services function, incidents of internal fraud and theft investigated by function and operational losses remained low. This evidences a robust operational control environment. NedNamibia Holdings consolidated gross operational losses remained within all prescribed thresholds in the Basel framework on banks’ capital adequacy, stress testing and market liquidity risk. Events related to the Basel category ‘execution, delivery and process management’ remained the primary cause for internal losses in terms of frequency and severity.

In addition to the FIC review, the Namibian Financial Institutions Supervisory Authority ('NAMFISA') performed a targeted risk review of AML, CFT and sanctions compliance at NedNamibia Life Assurance Company. Shortcomings similar to the FIC 2017 review will be remediated under the AML remediation programme.

The South African Reserve Bank per the Office of the Registrar of Banks visited Nedbank Namibia and discussed with the managing director and executive management, operations, operating environment, strategy and developments at the bank.



SUSTAINABILITY REPORT

Creating value for our clients and society at large.As a diversified financial services provider, we play an important role in facilitating economic growth. We use our expertise to gather and direct capital to where it is needed for the benefit of our clients and other stakeholders and to enable a thriving and stable society.

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We depend on the people of our group to achieve our goals and to create value. Along with competitive remuneration for challenging and rewarding work, and effective performance management and recognition, a cornerstone of our approach is the development of our staff to further their careers and to improve our services and products.

‣ In 2017, staff costs, including benefits, increased 9,9% to N$305,2 million, underpinned by an average salary increase of 7%.

‣ Our staff turnover was within the industry norm. This was supported by survey findings that staff felt their work was important and gave them personal accomplishment in a conducive environment where they had the opportunity to learn and grow.

‣ We placed fifth in the Deloitte Best Company to Work for survey. This survey benchmarks us an employer in the Namibian market and gives insights to where we can improve. ‣ Our training spend amounted to N$6,5 million. ‣ We adopted training strategies to meet workforce demand

and established a training hub in the north of our country.‣ We launched an e-learning platform called Nedlearn. This

attracted high levels of participation from staff for many of the 16 modules on the platform, as they took advantage of the autonomy to learn at their own convenience and pace. The highest participation was for courses on corruption awareness and cyber security awareness. Besides enabling teams from various geographical locations to collaborate on problem-solving challenges in real time, Nedlearn brought instant connectivity to subject matter experts, regardless

of their location. ‣ There was increased participation in our management

development programmes aimed at equipping supervisory, middle and senior managers with the knowledge, leadership and change management skills to function effectively in a demanding corporate environment.

‣ Fifteen staffmembers graduated from the management development programme ('MDP') run in collaboration with the University of Stellenbosch. Two senior staffmembers attended a leadership course offered by the Nedbank Group. We continued to identify candidates for the senior management programme ('SMP') of the Nedbank Group which attracts 3 000 potential candidates from operations across Southern Africa.

‣ We established Exco Plus, a junior executive committee. This supports our aim of creating a high performance culture, which encourages innovation and contribution on various levels and values the voice of the next generation that is willing to be daring in its approach in an already challenging environment. As a team of younger talent, Exco Plus addresses projects that will benefit the group in fulfilling our overall strategy.

Engaging with our staff is central to our understanding and responding to their needs and concerns, and improving their working environment experience. Regular communication also takes place to provide staff with strategic direction and to keep them informed about group activities.

In 2017, specific employee engagements included:‣ The 90-day Challenge, to support the repositioning of the

Nedbank brand and the bank’s transformational journey. During the rollout of the campaign to ‘see money differently’, a team of change agents promoted discussions to ensure understanding of the rebranding and employees’ role as money experts who do good in improving client experience.

‣ Roadshows by the managing director and Exco members.‣ Results presentations and briefings on the managed

separation of the Nedbank Group from its parent, Old Mutual plc.

‣ Staff surveys to assess the state of the culture of our organisation and staff attitudes.

‣ Regular electronic and printed newsletters.‣ Staff recognition functions with awards for top achievers.


Developing our staff.

‘We’re steering Nedbank to becoming the employer and bank of choice as part of our overall strategic objectives. Exco Plus is a manifestation of that.’

– Christopher Chipeio, chairperson of Exco Plus

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We create value for our clients by safeguarding deposits, investments and wealth. We provide credit that enables wealth creation, economic development and job creation. Our client-centred innovation strategies are aimed at delivering great client experiences through simpler, convenient and efficient service and innovative, competitively priced products. To continuously understand what is important to our clients we engage with them through client forums and events, face-to-face personal interviews and client surveys. We also utilise the Ned Promoter Score ('NPS') to measure our service levels and review client feedback from our bankers and financial advisors, service resolution teams, social media centre and website.

‣ In 2017, total deposits amounted to N$14,1 billion and extended loans to customers of N$11,8 billion. Major investments include the financing of N$500 million for Dunes Mall in Walvis Bay and N$250 million for the Am-Weinberg development in Windhoek.

‣ Our product innovations in retail and business banking provided transactions and cash access through more efficient and cost-effective channels. We increased our transactional accounts by 18,6%. Online applications for transactional accounts and improved functionality of our mobile banking platform brought convenience to clients to help them bank whenever, wherever they want.

‣ We teamed up with PayToday, a local fintech to enable not only Nedbank clients but all bank clients to easily pay each other and local business from a single app.

‣ We extended a helping hand to clients in a difficult economy. Our Nedbank Gold account provided unlimited transactional banking for clients at one fixed fee. We informed home loans clients about the possibility of paying loans over longer periods and thus countering economic factors influencing affordability. We incorporated a broader, more affordable range of second hand vehicles in our vehicle loan offering.

‣ We launched new products and services in bancassurance and wealth management and extended the reach of existing products.

‣ We rolled out representation to all branches of Nedbank for our small and medium enterprise division and for our bancassurance unit. The SME division provides loans to SMEs to finance their operations as well as business skills training and a mentorship programme.

‣ A new Nedbank branch in Walvis Bay and revamping of our flagship branch in Windhoek and other branches improved our client experience and supported our brand repositioning.

‣ We maintained a stable core banking system, limiting inconvenience to clients by ensuring that they can always transact on our systems and access their funds.

‣ We countered the growing threat of cybercrime to the banking industry and its clients. We appointed more staff to our risk management team and enhanced our detection systems.


Delivering value to our clients.

‘SME development is a tool to achieve Vision 2030. It needs serious support ... if we are to arrest poverty.’

– Erongo governor, Cleophas Mutjavikua, at the launch of SME banking by Nedbank in Walvis Bay

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Delivering value to our regulators.

We embrace sustainable practices in the financial services sector that enable a safe and stable banking system and a thriving society.

‣ We paid N$209,7 million in direct, indirect and staff taxes to support the Namibian government and society at large. We invested N$332,7 million in Government and public sector bonds to help meet Government funding needs.‣ We maintained a close and transparent working

relationship with the Bank of Namibia, the Namibian Financial Institutions Supervisory Authority ('NAMFISA') and the Financial Intelligence Centre. Through our focus

on regulatory compliance, we did significant work on anti money laundering, countering financial terrorism and sanctions. We provided information for investigations into trade based money laundering and exchange control compliance. ‣ With regulatory scrutiny and inspections in the financial

services sector continuing to increase, in line with international and local trends, we attended to regulatory reviews from the Bank of Namibia and NAMFISA with professionalism and prompt reaction to matters raised. We engaged with regulators through industry associations on legislative and other developments. We discussed the Namibian operating environment, our strategy and developments at Nedbank with visiting executives of the South African Reserve Bank.

‣ We complied with or made progress on all key aspects of the requirements of the Basel framework on banks’ capital adequacy, stress testing and market liquidity risk. Our Tier 1 capital ratio was 13,12%, which is above regulatory requirements.‣ As a partner of the Financial Literacy Initiative of the

Ministry of Finance, we worked to improve the financial capability of all Namibians. This is an important role, since, according to the last available survey, the financial literacy of the average Namibian above 16 years of age was calculated at 42,75%.

‣ We began work on a market conduct project which aims to ensure that defined standards (including Treating Customers Fairly) meet international best practices.

‣ We invested in maintaining our disaster recovery capability and the resilience of business continuity management processes.

‘The collective efforts of the partners of the Financial Literacy Initiative under the Ministry of Finance have done a lot of work to educate consumers and this work should be intensified to close the gap’

– Governor of the Bank of Namibia, Ipumbu Shiimi

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Creating shareholder value.

‘Committed people who think strategically and execute diligently are our priority. We’re driving our employee engagement aggressively, building our talent management framework and our investment in leadership development.’

– Silke van der Merwe, executive: strategy and human capital

We maintained our record as a strong and profitable business, thus enabling continued investment in staff and operations and in turn creating value for shareholders.

‣ Group total comprehensive income was up by 4,78%.‣ Total assets increased by 6,28%.‣ Net asset value per share increased to 3 327,7 cents from 3 160,3 cents.‣ Paid N$200 million dividend to our shareholders.

Our efforts to make sure that the business is sustainable over the long run is included in creating shareholder value. The collective effort to create value for the various stakeholders as reflected in this report demonstrates our commitment to creating shared value for all our stakeholders, who in turn ensure that our business remains sustainable.


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We play a meaningful part in broader society as a procurer of goods and services and through our social investment and sponsorship activities. We created the position of head of stakeholder engagement to develop and maintain sound relationships and partnerships.

‣ We began to expand the impact of environmental sustainability programmes after concluding a credit facility agreement to the value of N$235 million with the Agence Française de Développement ('AFD'), France’s bilateral development finance institution. We are using the credit line to finance projects dedicated to renewable energy, energy efficiency and sustainable resources management. We are working closely with the Environmental Investment Fund, providing technical assistance. Nedbank Namibia can provide its expert knowledge and its network, especially through the work it has been doing through its Go Green Fund. This targeted environmental fund supports individuals and organisations in Namibia that are working towards a more sustainable future.

‣ We reached a milestone in Go Green Fund support with the presentation of over N$1 million to the Namibia Nature Foundation ('NNF'). This will be used for funding environmental projects which are, in most cases, focused

on research that helps generate new information needed to manage our country’s environment and wildlife resources sustainably. The projects that benefited this year are: – Resource partitioning and conservation genetics of endemic Hartmann’s mountain zebra and plain zebra in Etosha National Park – Kenneth Uiseb. – Collecting and monitoring lacewings (Insecta: Neropterra) in Namibia – Dr Rolf Becker. – Quantifying bat diversity and habitat use in the Namib

Desert – developing protocols for assessing conservation status and development impact – Angela Curtis.

‣ As part of our 90-Day Reloaded Challenge, staffmembers participated in a tree planting exercise. The planting of Namibian indigenous trees was part of an in-house transformational initiative to encourage staff to be more mindful of the environment and to be sustainable in all

their efforts.

‣ The property development projects financed by Nedbank Namibia in 2017 had a multiplier effect. Job creation estimates vary, but some research has indicated that an average of six to eight construction jobs is created for every N$2 million spent on construction; and for every 100 jobs on

a building site, another 200 are engaged in supply off site.‣ We continued to contribute to cycling development in Namibia.

Much more than a sporting event, the Nedbank Desert Dash has become a significant contributor to economic activity, which benefits the retail trade in particular. Our estimates indicate that up to N$20 million was injected into the Namibian economy through participation in the 2017 Nedbank Desert Dash. This is from expenditure on accommodation, food and entertainment, vehicle rental, flights and gear by 900 cyclists and their estimated 2 000 supporters, 40% of them from 16 different countries. In addition, the two cycle series we support – mountain biking and road racing – have grown exponentially and both clubs have seen improved skills from cyclists.

‣ Our partnership with The Namibian newspaper in the Newspaper Cup replicates the economic benefits of the Desert Dash. As a showcase for young soccer talent which attracts more than N$1 million in sponsorship, the Newspaper Cup partnership again proved to be a developmental tool for communities, with investments in upgrading youth sports facilities in hosting regions.

‣ We broadened our Kapana cook-off competition to include professional chefs and so encourage established hospitality outlets to incorporate kapana, as a Namibian delicacy, on their menus. Entry-level kapana connoisseurs competed for a first prize of N$15 000, a mobile kitchen worth N$80 000, as well as entry to an all-expenses paid SME mentorship programme.

‣ We helped staff to contribute to the communities in which they live and work through our Green Warrior staff volunteer programme. We provided funds to the value of N$5 000 for approved staff volunteer projects to support worthy causes.

‣ We signed a memorandum of understanding with the University of Namibia to encourage collaboration on projects

of mutual interest and to share research outputs.


‘We must continue to build on these environmental sustainability successes. We have a long way to go, but with the experts within Namibia, our engaged civil society and with public and private partnership, we will find solutions to ensure the conservation of our environment for future generations to come.’

– Tommy Nambahu, Deputy Minister of Environment and Tourism, at the Go Green Fund presentation to the foundation

Delivering value to our communities.

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‘As a bank committed to doing good for individuals, businesses, society and our communities, opportunities such as these allow us to go that much further in ensuring a better future for all. It is very clear that continued investment in sustainable development is imperative if we want to preserve the finite resources of our world, and continue to address the developmental needs of the future.’

– Lionel Matthews, managing director, at the announcement of the AFD partnership

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GROUP ANNUALFINANCIAL STATEMENTS

Our dedication to ensuring our banking services are secure and

stable is supported by worldclass banking practices and robust

institutional frameworks.

ContentsGroup annual financial statements

Value added statement

Corporate governance and ethics review

Group governance structure

Enterprisewide risk management framework

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

46

48

50

80

82

84

85

88

90

92

93

94

94

96

Continually adapting to rapidly

changing times.


46 2017 GROUP ANNUAL FINANCIAL STATEMENTS 472017 NEDNAMIBIA HOLDINGS LIMITED46 2017 GROUP ANNUAL FINANCIAL STATEMENTS

RETURN TOCONTENTSPAGE The NedNamibia Holdings group,

as part of Nedbank Group Limited, is committed to

the highest standards of governance, ethics

and integrity.

2017 2016 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 1 926 851 1 709 215 Interest paid and other expenditure 1 154 332 974 602

772 519 734 613

VALUE ALLOCATED Employees Salaries, wages and other benefits 278 884 36% 254 661 35% Government Direct and Indirect Tax 158 874 21% 146 358 20% Shareholders Dividends 200 000 26% 0 0% Retentions for expansion and growth 134 760 17% 333 595 45%

Retained income 103 506 301 090 Depreciation 31 254 32 505

772 518 100% 734 614 100%

VALUE ADDED 2017 VALUE ADDED 2016

Employees

Government

Shareholders

Retentions for expansion & growth

36%

21%

26%

17%

Employees

Government

Shareholders

Retentions for expansion & growth

35%

20%

0%

45%

For the year ended 31 December 2017

VALUE ADDEDSTATEMENT


48 2017 GROUP ANNUAL FINANCIAL STATEMENTS 492017 NEDNAMIBIA HOLDINGS LIMITED


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 ensures that the group adheres to high standards of ethical behaviour. The board monitors and holds the managing director accountable for the group’s operational and financial performance and management is expected to bring in an open and transparent manner all significant matters to the board’s attention.

Board structure and composition The board is governed by formal written terms of reference, which are set out in ‘the board charter’, which is reviewed every second year or more frequently if necessary. The terms of

reference are subordinate to the articles of association and any governing legislation and are 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 NedNamibia Holdings Limited (‘NNH’) and Nedbank Namibia Limited (‘NBN’) boards comprise the same members, ie two executive-, one non-executive- and seven independent non-executive directors, totalling ten directors. The boards’ diversity and demographic mix comprise five white directors (50%), five black directors (50%), two of the latter being women (20%) and eight Namibians (80%). This is in compliance with the Financial Sector Charter (‘FSC’).

CORPORATE GOVERNANCEAND ETHICS REVIEW

NNH board diversity and demographic mix versus FSC targets

Category FSC target by 2019 Current achievement Outcome

Black boardmembers as a percentage of all boardmembers 40% 50% Exceeded

Black women boardmembers as a percentage of all boardmembers 20% 20% Met

Boardmembers with Namibian nationality 40% 80% Exceeded

During the year and to the date of this report, the board comprised the following members, classified in terms of The NamCode definition on independence:

The profiles and qualifications of the members of the board are disclosed on page 8 of this integrated report.

Appointment date Nationality Age Current status

Independent non-executive directors

Frank Theo J (SC) (Chairperson) 11 February 2005 Namibian 66 No change

Hibbit Peter CW 12 May 2016 South African 68 No change

Hiwilepo Trophimus T 22 August 2014 Namibian 52 No change

Maasdorp Ramon L 9 February 2018 Namibian 38 Appointed 9 February 2018

Muatunga Liina M 22 August 2014 Namibian 50 No change

Niddrie Richard P 6 November 2014 Namibian 63 No change

Schimming-Chase Afra R 22 August 2014 Namibian 45 No change

Non-executive directors

Buchholz Richard WR 19 August 2014 South African 59 Resigned 27 November 2017

Du Plessis Adriaan J 19 August 2014 South African 58 No change

Executive directors

Altmann Karl-Stefan (Chief Financial Officer) 22 June 2016 Namibian 41 No change

Matthews Lionel J (Managing Director) 30 September 2013 Namibian 53 No change

Composition of NNH/NBN Boards

GOVERNANCE STRATEGY

The NedNamibia Holdings (‘NNH’) group (‘the group’) believes that good governance contributes to value creation through enhanced accountability, strong risk and performance management, greater transparency, effective leadership and a values-driven approach to everything we do to earn the trust and 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.

For any business to run effectively there needs to be a clear commitment to sound corporate governance. In the NNH group’s case, this requires that processes must be effective and make it easier for clients to bank with us and that boardmembers must be independent and skilled enough to make the right decisions to ensure a sustainable and profitable business. The board’s approach to governance is to embrace relevant local and international best practices.

The principles of The NamCode inform the governance framework and practices of the NedNamibia Holdings group. The group’s existing governance framework and culture provide a solid foundation to embed the principles of King IV in as far as it does not contradict with The NamCode and Namibian legislation. If for any reason NNH does not align with the principles of King IV, this will be disclosed and an explanation will be given in the integrated report. King IV replaces King III, in its entirety. King IV is up to date with international governance codes and best practice, to align it to shifts in the approach to capitalism (towards inclusive, integrated thinking across the six capitals) and to take account of specific corporate governance developments in relation to effective governing bodies, increased compliance requirements, new governance structures (eg Social and Ethics committee), emerging risks and opportunities from new technologies and new reporting and disclosure requirements in terms of integrated reporting. To align with King IV, where relevant, the NNH group will in 2018 undergo another governance refresh, which is especially relevant in stressed environments and significant operational business or structural changes.

The focus will be on:▸ rationalising the business governance structure;▸ revision of powers and authorities;▸ enhancement of efficiencies; ▸ introducing electronic record keeping of documents; and▸ enhancement of board reporting format.

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) report and whether any material malfunction has occurred in the functioning of the internal controls, procedures and systems, measured as part of the Regulation 40 report 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.

Compliance with The NamCodeWe endeavour at all times to apply the principles of The NamCode in such a way that these requirements are met. There is presently one instance of deviation from The NamCode, namely:▸ Non-executive directors’ fees do not comprise a base fee and a

sitting fee per meeting. On the ground 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 non-executive directors in the group only receive a basic fee, which is paid monthly on a pro-rata basis.

Codes, regulations and complianceBanking laws are becoming increasingly rigorous and onerous and banks are expected to adapt to these regulatory changes in a short space of time, which means that we have to have deeply entrenched good governance practices, while at the same time retaining the flexibility to respond proactively to the fast-changing regulatory environment. Complying with all applicable legislation, regulations, standards and codes is an integral part of the group’s culture.

As the group’s main business is diversified into banking and non-banking financial services, the banking business is regulated by the Bank of Namibia in terms of the Banking Institutions Act No 2 of 1998, as amended and determinations passed in terms thereof, while the long-term insurance and insurance brokerage business are regulated by the Namibia Financial Institutions Supervisory Authority (‘NAMFISA’) in terms of different legislation.

The board has delegated the oversight of compliance risk management to the Group Risk and Capital Management Committee (‘GRCMC’), which on a quarterly basis monitors, amongst others, the status of compliance risk management in the group, areas of non-compliance, as well as feedback on interactions with the regulators.

The board is satisfied that the group has not suffered any material losses for non-compliance with all these laws and regulations for the past year.

BOARD OF DIRECTORS

Role of the NedNamibia Holdings boardThe role of the NedNamibia Holdings board is to provide entrepreneurial leadership and strategic guidance to the group to safeguard shareholder value creation within a framework of prudent and effective controls, which enable risk to be assessed



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

▸ 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;

▸ 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; and

▸ delegating the oversight over the professional management of the group subsidiaries to the managing director and the group EXCO.

Delegation of authorityThe board retains effective control through a well-developed governance structure that provides a framework for delegation. A schedule of delegated authorities, setting out the mandates, powers and authority levels that apply to the various decisionmaking bodies and officers who are responsible for governance and management of the group, is in place.

The board has delegated certain roles and responsibilities to board committees, which facilitate the discharge of the board responsibilities and provide indepth focus on specific areas. The committees are tasked with providing oversight and guidance, and report to the board through their respective chairpersons.

The board has also delegated certain powers and authorities to the managing director jointly with any member of the group EXCO to manage the business and affairs of the group and reserved others for itself.

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.

MATTERS RESERVED BY THE BOARD

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 of 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 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 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 boardmembers 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, ie 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


IndependenceThe majority of the boardmembers are independent directors, which is in compliance with The NamCode:

Chairperson of the Board The chairperson of the board is an independent non-executive director. There is a clear distinction between the roles of the chairperson, Adv 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 role and responsibilities of the chairperson are encapsulated in the board charter.

Skills, knowledge, experience and attributes of directorsThe board is satisfied that directors possess the skills, knowledge and experience to fulfil their duties. The directors come from diverse backgrounds and bring to the board a wide range of experience in commerce, industry and banking. 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 decisionmaking process, thereby ensuring that no one director holds unfettered decisionmaking powers.

The profiles and qualifications of the members of the board are disclosed on page 8 of this report.

Succession planningThe board, assisted by the GDAC, reviews the composition of the board and its committees on an ongoing basis. A board continuity plan is in place that addresses:▸ the skills, experience and other qualities required for the

effective functioning of the board;▸ the processes around the selection and appointment of

directors;▸ the induction and ongoing training of directors; ▸ the evaluation of directors’ performance; and ▸ directors’ succession planning.

In terms of the board continuity plan, a senior independent director will be earmarked by the board to assume the role of the chairperson should the current chairperson become incapacitated and will facilitate the appointment process of the new chairperson.

At the annual general meeting held in terms of Section 187(9) of the Companies Act, Act 28 of 2004, on 30 June 2017, the following directors who retired by rotation in accordance with the provisions of the company’s articles of association, made themselves available for re-election and were duly elected as directors of the company for a further term: ▸ Mr Theo Frank▸ Mrs Liina Muatunga▸ Ms Afra Schimming-Chase

On 27 November 2017 Mr Richard Buchholz resigned as non-executive director of NedNamibia Holdings Limited.

After a 25-year journey with Nedbank Group Limited, Mr Adriaan du Plessis has elected to go on early retirement with effect from 1 April 2018. He will remain a director of NBN and NNH.

Post the reporting period, Adv Ramon Lorenzo Maasdorp was appointed as director of both NBN and NNH on 9 February 2018. Adv Maasdorp is a practicing member of the Society of Advocates of Namibia. As part of the board succession planning, his appointment aims to provide legal expertise to the board, as the chairperson of the board, Adv Theo Frank, has indicated that he will be retiring from the board at the expiration of his tenure in 2019.

The board succession planning will continue to receive focus to ensure that the board composition comprises the appropriate mix of skills and experience.

BOARD RESPONSIBILITIES

Key responsibilities of the board are inter alia:▸ annually approving the group’s strategic plan and continually

monitoring management’s performance and implementation of such plan to ensure that the group achieves its strategic objectives;

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

▸ ensuring that the group adheres to high standards of ethical and corporate behaviour;

▸ overseeing the adequacy of the group’s systems of governance, risk and compliance controls;

▸ ensuring the group has appropriate systems, 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;

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

▸ 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;

▸ appointment of directors (including the managing director), subject to regulatory approval and election by the members in general meeting;

▸ appointment of members of the EXCO, the company secretary and the chief internal auditor;

Executive Directors

Non-executive Directors

Independent non-executive Directors

20%

10%

70%

Mix of directors

BOARD OF DIRECTORS (continued)



DIRECTORS’ REMUNERATION The directors in the group only receive a basic fee, which is paid monthly on a pro-rata basis. Monthly directors’ and board committee fees are rounded up to the nearest N$500.

The following directors’ fees were approved for the 2017 financial year:

NEDNAMIBIA HOLDINGS LIMITED Annual Directors’ and Board Committee Remuneration

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

Directors’ fees N$58 000 N$29 000

Group Audit Committee N$132 000 N$66 000 Group Risk and Capital Management Committee N$132 000 N$66 000 Group Remuneration, Human Resources, Transformation, Social and Ethics Committee N$66 500 N$33 250 Group Directors’ Affairs Committee N$31 500 N$15 750

NNH BOARD ATTENDANCE 2017

Group Group Risk & Capital Group Remuneration, Human Group Directors’ Audit Management Resources, Transformation, Affairs Names of Directors Boards Committee Committee Social and Ethics Committee Committee NBN NNH (‘REMCO’) Board Board Meetings held: 4 5 5 4 4 4

Attendance:

Frank TJ 4# 5# 4 4 4#

Altmann K-S 4 5 5* 4*

Buchholz RWR 4 5 5 4

Du Plessis JA 3 4 4* 3 3

Hibbit PCW 4 5 5 4#

Hiwilepo TT 4 5 5

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

Muatunga LM (Mrs) 4 5 4# 4

Niddrie RP 4 5 5# 4

Schimming-Chase AR (Ms) 4 5 4

# Chairperson * Attended board committee meetings by invitation.

For the period under review, all the directors attended at least 75% of the board/committee meetings, thereby complying with the requirements set out in Determination BID-1 (as amended) of the Banking Institutions Act, Act 2 of 1998.

Board and committee meetings are held quarterly and additional meetings may be held if and when required. Separately from the formal board meeting schedule, the chairperson has met with the non-executive directors, with no executive present, to provide a forum where any issues can be raised.

ATTENDANCE REGISTER OF THE BOARD AND BOARD COMMITTEES Directors’ attendance of board and board committee meetings is monitored by the GDAC quarterly. Irregular attendance of meetings is dealt with by the chairperson of the board.

The following attendances of board and board committee meetings have been recorded for 2017:


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 of 60.

Ongoing evaluationBoard and board committee evaluations are conducted annually to gain an insight into how well the board and board committees are meeting their objectives and to monitor effectiveness and transparency. An appraisal of the board and board committees was conducted in 2017 and the results are as follows:

With an overall composite rating of 93%, the evaluation results revealed that the board and board committees are in operational compliance with their charters, that good governance is generally practiced and that the board and board committees are functioning effectively and achieving their objectives. Members have taken the time to provide valuable comments around the workings of the board and committees and identified developmental needs that directors might have. Any concerns or developmental needs raised by members are followed up and action plans are implemented to address concerns and comments.

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.

In addition to the annual directors’ peer evaluation, the executive directors’ performances are assessed bi-annually by way of a performance scorecard.

Director development A formal, ongoing directors’ development programme is in place, which 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 development programme took place on 15 August 2017 and covered the following topics:

▸ Maintaining the basics in a fast changing risk environment;

▸ Financial Crime – AML, CFT and Sanctions;

▸ International Financial Reporting Standards (‘IFRS’);

▸ Strategy Review Presentation; and

▸ Structuring and interpretation of management accounts (Income Statement and Balance Sheet).

The following directors of subsidiary boards in the group have attended the Gordons Institute of Business Science’s (‘GIBS’) two-day ‘2017 Banking Board Programme’:

▸ Mr Karl-Stefan Altmann (NedNamibia Holdings Limited/Nedbank Namibia Limited)

▸ Mr Ulrich Etzold (NedNamibia Life Assurance Company Limited/ NedPlan Insurance Brokers Namibia (Proprietary) Limited)

▸ Mr Patterson Tjipueja (NedNamibia Life Assurance Company Limited/ NedPlan Insurance Brokers Namibia (Proprietary) Limited)

The company has a comprehensive induction programme for new non-executive directors to enable new appointees to familiarise themselves with the group’s operations, financial affairs and strategic positions, so that they can make a constructive contribution as soon as possible after they have joined the board. This programme includes sessions with the heads of each of the group’s major business units, functional heads and the group internal auditors.

Boardmembers are expected to keep themselves abreast of changes and trends in the business and in the group environment and markets, including changes and trends in the economic, political, social and legal climate generally.

Directors’ conflict of interestProcesses are in place for any potential conflicts of interest to be disclosed and for directors to avoid participation in any decisions where they may have any such conflict or potential conflict.

We have a code of conduct that applies to all directors and addresses outside interests and conflicts of interest within the group. At each board meeting in 2017, directors were given an opportunity to disclose outside interests and possible conflicts of interests.

During the period under review, a contract had been entered into between Chase & Associates CC (represented by Ms Afra Schimming-Chase, independent non-executive director) and Nedbank Namibia, whereby a personal financial wellness service was provided to financially distressed employees in the group on a once-off basis. The board has ratified the contract, since it believed that all employees in the group would benefit from the services.

No other contracts in which directors of the company have an interest and that significantly affect the affairs of the business of the company or any of its subsidiaries were entered into during the year under review.

NedNamibia Holdings overall board effectiveness dashboard assessment results for 2017

98%

96%

94%

92%

90%

88%

86%

84%

82%

Overall

Board role and responsibilities

Board relationships

Board meetings

Committees of the board

BOARD APPOINTMENTS (continued)



REFLECTION ON KEY FOCUS AREAS AND PERTINENT MATTERS ADDRESSED BY THE BOARD IN 2017

STRATEGY EXECUTIONOverseeing the execution of the three-year strategic plan, with a specific focus on the growth of transactional banking in retail and the implementation of a wealth offering.

The board approved the NNH group’s three-year strategic and business plans as well as the annual budget and obtained quarterly updates from the managing director on strategy execution. Various brand and marketing campaigns were launched and initiatives taken by the group, aiming to achieve strategic objectives, such as▸ New Nedbank brand: The new Nedbank brand was launched

in the first quarter of 2017. It embraces the group’s purpose, enables its strategy to come to life and delivers value in various manners. Through the revitalisation of the Nedbank brand the group aims to position itself in the hearts and minds of society as the group that uses its core expertise in financial services to do good and secure positive outcomes for individuals, families, businesses and society.

– Brand internalisation: Staffmembers attended various service excellence, credit and financial wellness training sessions to enhance client service excellence.

▸ Wealth & Bancassurance: NedNamibia Life Assurance Company (‘NNLA’) launched a campaign to actively grow its funeral insurance cover. A payroll deduction facility was obtained from Government in terms of which contributions would be deducted from government employees’ salaries.

▸ Retail and business banking: The Nedbank Gold Account was restructured and marketed intensively. Client demands for this account increased substantially, resulting in a remarkable increase in the issuing of Gold Account cards.

▸ SME banking: Community engagements included the ‘Kapana Cook-off’, held regionally with the final competition being hosted in Windhoek and the winner receiving a mobile kitchen, SME mentorship and training by the bank’s brand ambassador, Ms Twapewa Kadhikua.

▸ Corporate and investment banking managed to secure the following deals:

– Am Weinberg property development project, comprising residential and commercial units, with a total project value in excess of N$400 million;

– Dunes Mall Walvis Bay development project, which was completed and opened end of October 2017. Total project value: N$584 million; and

– Eros Manor Retirement and Lifestyle Village residential development project (2nd phase) with a total project value of N$156 million.

▸ People achievements: The focus areas of the Human Capital (‘HC’) strategy were redefined and the strategic enablers introduced. Strategic HC initiatives that were successfully concluded are disclosed on page 67, in the REMCO chairperson’s report on pertinent matters addressed by the REMCO in 2017.

GLOBAL TRADEEnhanced Anti-Money Laundering (‘AML’), Combating the Financing of Terrorism (‘CFT’) and sanctions compliance oversight.

▸ Global trade business risk mitigation: The implementation of the Global Business Risk Mitigation Program (‘RMP’) has progressed with the following having been achieved since October 2017:

– The new structure for Global Business was implemented with two (2) managers responsible for transaction vetting/processing having been appointed at Global Business on 1 November 2017;

– New mandates to effectively manage delegation of authority risk for Global Business were implemented;

– Guidance documents for supporting client and transactional due diligence were issued to relevant staff; and

– New and improved processes for Advance Payments and Single Discretionary Allowances will be implemented beginning 2018.

▸ The 2016 AML remediation programme continued in all earnest and comprises various projects aimed at addressing money laundering-related compliance risk, focusing predominantly on processes and including the review and enhancement of forms, policies and manuals. One of the most complex initiatives under the AML remediation programme relate to data quality and risk management information technology, to better the ability to understand client money laundering risk profiles for real-time, improved transaction monitoring and sanctions screening. A document imaging project was at the core of the remediation programme, followed by the remediation of due diligence on high-risk clients. The aim was to have all client documents at hand, scanned and quality assured by end of 2017. AML staff had provided training to fellow Nedbank employees who are managing AML risks. An e-learning course had been developed and introduced. Roles-based training will be enhanced in 2018.

▸ As at the date of this report, the Executive: Treasury position was still vacant and until such time that the position is filled, the Chief Financial Officer (‘CFO’) Mr Karl-Stefan Altmann, and the head of Nedbank Africa treasury, Mr Kevin Whitfield, will be overseeing the Treasury department. Stakeholders are herewith assured that the existing senior managers within the Finance division are duly equipped to manage the department while the CFO is involved in the daily management of the Treasury department.

FINANCIAL STATEMENTSMonitoring and approving the financial statements to ensure that they fairly present the group’s affairs and the profit or loss at the end of the financial year.▸ Financial reports were presented by the chief financial officer

to the board on a quarterly basis.▸ The board was satisfied that the 2017 financial statements

have been prepared in accordance with International Financial Reporting Standards (‘IFRS’) and in the manner required by the Namibian Companies Act and that it fairly presents the group’s affairs.


NEDNAMIBIA HOLDINGS LIMITED

Fees paid for 2017 financial year to individual directors

Names of directors Fees paid per annum


Frank TJ (Chairperson) 203 500

Buchholz RWR NIL

Du Plessis JA NIL

Hibbit Peter CW 226 000

Hiwilepo TT 95 000

Muatunga LM 113 000

Niddrie RP 226 000

Schimming-Chase AR 95 000

Executive directors

Altmann K-S (Chief Financial Officer) NIL

Matthews LJ (Managing Director) NIL

NEDBANK NAMIBIA LIMITED

Names of directors N$ paid per annum


Frank TJ (Chairperson) 209 000

Buchholz RWR NIL

Du Plessis JA NIL

Hibbit PCW 108 873

Hiwilepo TT 109 000

Muatunga LM 109 000

Niddrie RP 111 000

Schimming-Chase AR 109 000

Executive directors

Remuneration 4 421 800

Performance bonus 2 150 000

Retention bonus 2 038 200

Share options 1 811 300

NEDBANK NAMIBIA LIMITED Annual Directors’ Remuneration



Fees for time spent by directors on bank related matters that fall outside the normal course of board/board committee business/preparation. N$2 000 per hour

DIRECTORS’ REMUNERATION (continued)



ENTERPRISEWIDE RISK MANAGEMENT Overseeing enterprisewide risk and capital management.▸ The Enterprisewide Risk Management Framework (‘ERMF’)

establishes formal governance, procedures and processes for all risks, both known and unknown. This framework is reviewed regularly by the GRCMC and the board to ensure that it is responsive to both the internal, external and regulatory environments in which the group operates. The board is advised of all developments and approves changes to the ERMF.

▸ The board herewith assures stakeholders that: – the group’s governance and risk management systems

and processes enable management to appropriately identify, measure and mitigate risks; and

– the monitoring and mitigation of all risks were enhanced through the implementation of key risk indicators.

THE INTERNAL CAPITAL ADEQUACY ASSESSMENT PROCESS (‘ICAAP’) The board is responsible for reviewing and approving the outcome of the ICAAP annually. ▸ The board has reviewed the ICAAP in the bank and confirms that: – A comprehensive internal audit has been conducted on

Nedbank Namibia’s ICAAP, in line with principle 9.6 of Determination 20 of the Banking Institutions Act, in terms of which the ICAAP is subject to regular review through an internal audit process, separately from the Supervisory Review and Evaluation Process (‘SREP’) conducted by the Bank of Namibia, to ensure that the ICAAP is comprehensive and proportionate to the nature and scale of the bank’s activities so that it accurately reflects the major sources of risk that the bank is exposed to. The audit results revealed that:

› NBN has implemented the required procedures of the ICAAP as per BID-20;

› the accuracy, completeness and validity of data inputs into the ICAAP were confirmed to be adequate; and

› a comprehensive assessment of risks against capital was found to be in place with the bankwide interaction of management and the Enterprisewide Risk division.

▸ The board has approved: – the 2016 ICAAP report, which was submitted to Bank of

Namibia. The 2017 ICAAP report will be tabled for board approval and subsequent submission to Bank of Namibia in 2018; and

– the Capital Plan.▸ The board herewith assures stakeholders that the bank is

adequately capitalised for the business model and the risk appetite that was defined by the board.

BOARD KEY FOCUS AREAS IN 2018 AND BEYOND

Key focus areas for 2018 and beyond include inter alia:Ethical and effective leadershipSetting the tone at the top and leading the group ethically and effectively. This means that, in their decisionmaking, individual boardmembers should act with independence, inclusivity,

competence, diligence, courage and with the necessary insight, information and challenge.

Leadership for sustainable growth and corporate citizenshipProviding leadership and vision to the group that will ensure sustainable growth and appropriate corporate citizenship for the benefit of all group stakeholders.

Effective controls facilitating risk vs opportunity analysisEnsuring that there is a framework of prudent and effective controls, which enables risk and opportunity to be assessed and managed effectively, but with the necessary entrepreneurial mindset.

Responsibility and accountability for the group’s performanceBeing ultimately responsible and accountable for the performance of the group and supporting the group in setting its purpose and vision and achieving its strategic objectives. These responsibilities include:

▸ delegating management of the group to a competent executive management;

▸ providing input and oversight regarding succession planning for key management roles;

▸ governing technology;

▸ governing information;

▸ ensuring compliance with appropriate legislation, including regulations, supervisory codes and appropriate best practices;

▸ governing disclosure so that stakeholders can effectively assess the performance of the group;

▸ safeguarding the interests of the group’s stakeholders;

▸ ensuring fair, responsible and transparent people practices; and

▸ having oversight of the risk appetite and adequacy and effectiveness of the ERMF, which will include key risks, key performance indicators, as well as strategic, business and operational risk arising from the execution of the NedNamibia Holdings group’s business strategies, decision-making practices and/or processes.

Responsibility for sound corporate governanceBeing responsible for sound corporate governance in the group and for governance at board and board committee level. The board is responsible for its own and its committees’ performance, including:

▸ evaluating the effectiveness and composition of the board and its committees to improve their performance;

▸ disclosing all outside interests or possible conflicts;

▸ providing oversight and guidance with regard to succession planning;

▸ creating governance structures to ensure the effective discharge of responsibilities; and

▸ taking responsibility for the group’s remuneration practices, which should be aligned to best market practices but also consider the sociopolitical environment in which the group operates.

Responsibility for overseeing the group’s transformation agendaOverseeing the preparations for and realisation of the group’s transformation agenda, including the NNH group’s localisation plan.


▸ The group’s annual financial statements for the 2017 financial year were, on recommendation of the GAC, approved by the board.

▸ The board, on recommendation of the GAC, approved the declaration and payment of a special dividend of N$200 million by Nedbank Namibia Limited (‘NBN’) and NedNamibia Holdings Limited (‘NNH’) respectively. The dividend was subsequently confirmed by the shareholder at the companies’ annual general meetings held on 30 June 2017. Both dividends were paid on 2 August 2017.

GOVERNANCE AND LEGAL COMPLIANCECompliance in substance, not just in form, with the provisions of Namibia’s corporate governance code, The NamCode as well as the main acts and regulations affecting the financial services industry.

The group in all instances endeavours to apply the principles and recommendations of The NamCode. When this cannot be done, alternative measures are applied where possible and explained. The compliance framework makes provision for our compliance risk management procedure, which deals with the identification, assessment, management, control, monitoring and reporting of compliance risk through the various governance structures, including the Enterprisewide Risk Committee processes.

ETHICSEnsuring that the group adheres to high standards of ethical and corporate behaviour.

▸ The board assumes ultimate responsibility for the group’s ethics performance. It sets the tone for the EXCO and staff to act ethically. Various tools are being used to instil an ethics culture into the group, including inter alia:

– a Board Ethics Statement; – a Code of Ethics; – a Code of Conduct; and – an ethics awareness programmes and annual declarations. A detailed ethics report is disclosed on pages 60 to 61 of this

report.▸ The REMCO assists the board in overseeing ethical practices

in the group.

INFORMATION TECHNOLOGYContinuous monitoring of information technology and the Flexcube remediation programme.

▸ Quarterly updates were given to the board on the Flexcube stabilisation programme and status reports on information technology were tabled at committee and board meetings.

▸ The Flexcube core banking platform remediation programme remained a key focus area of the board. Nedbank Group Technology had agreed to increase the velocity of the defect resolution by increasing the development and test resources at Nedbank group level.

▸ BID-19 Localisation of the core banking system: The service-level agreement between NNH and Nedbank Group

Technology has been signed. The NNH group has taken accountability of the core banking operations and also assumed technical and operational functionality and support in respect of its core banking and peripheral systems. The implementation plan is expected to come to fruition within the next year and is being monitored by the Information and Communication Technology Committee.

▸ Front Arena system: The Front Arena system has been implemented and is being used as the primary source for monthly profit and loss instrument valuations with significant improvement from manual to automated processes.

▸ Network outage (June 2017): On 15 June 2017, NBN experienced a network outage with all customer-facing channels, branches, internet and emails being unavailable. As an interim measure, NBN at the time concluded a 90-day Master Service Level Agreement with Paratus Telecommunication Proprietary Ltd, in line with the BID-19 principles. On 29 November 2017, NBN entered into a five-year Service Level Agreement with Paratus Telecommunication for the delivery of services covering the bank’s entire network.

▸ Cybersecurity: The board was given the assurance that all machines and servers in both NBN and Nedbank Group were patched to the required levels so as to be certified as secure. Assurance could not be given that NBN would never come under cyber threat or attack, but this risk is mitigated by firewalls blocking any malicious or hacking attempts. Back-ups were done at more frequent intervals in the unlikely event that NBN would need to go into recovery mode. Regular updates and training were provided to ensure staff vigilance in order to mitigate the risk.

TRANSFORMATIONContinuous focus on the preparations for and realisation of the group’s transformation agenda, including the NNH localisation in 2019.

▸ The New Equitable Economic Empowerment Bill (‘NEEEB’), which addresses government’s approach to redressing the social, economic and educational imbalances in Namibian society, arising from discriminatory laws and/or practices, had been withdrawn by Government and the Law Reform and Development Commission was requested to redraft the Bill, taking into account the concerns raised by the public.

▸ The NNH group’s localisation plan will be concluded once the applicable legislative and regulatory frameworks have been finalised.

BOARD COMMITTEESMonitoring board committee deliberations and considering matters recommended by board committees for board approval.The chairpersons of the board committees give quarterly feedback to the board on committee deliberations. The main issues attended to during the year are disclosed in the chairpersons of the respective committees’ reports, which are encapsulated in this integrated report.

FINANCIAL STATEMENTS (continued)



Declarations – personal account and insider trading – 2017

ENABLING ENGAGEMENT ON ETHICSA key component of a truly ethical culture is the ability for stakeholders to engage with the NNH group regarding their ethics concerns. There are a variety of internal and external mechanisms in place for reporting actual or suspected unethical or unlawful behaviour and matters related to organisational integrity. These include:▸ a tip-offs anonymous hotline;▸ a Nedbank Group risk reporting line called ‘talk to the ethics

office’ (this is not an anonymous channel); and▸ an ethics office at Nedbank Group SA or compliance and

ethics department locally, where any unethical behaviour or human rights violations can be reported.

HUMAN RIGHTS

COMMITTED TO UPHOLDING HUMAN RIGHTSThe group embraces and upholds the protection of human rights as enshrined in the Namibian Constitution and specifically, the Bill of Rights. We also adhere to the 10 principles of the United Nations Global Compact (‘UNGC’) and have shown significant progress in implementing the requirements of the John Ruggie Report, which was commissioned by the UNGC.

GOVERNANCE OF HUMAN RIGHTS IN BUSINESSThe human-rights-in-business policy was approved by the board to ensure that there is an effective framework in place to manage the implementation of human rights in the business. Additional policies will be introduced in 2018 to enhance the governance of human rights.

HUMAN RIGHTS COMPLIANCE ASSESSMENTA commitment to ongoing screening for the violation of human rights is integral to the group’s operations and relations with its stakeholders. NBN, through the compliance and ethics function, completed and submitted the Human Rights Compliance Assessment to Nedbank Group for screening.

COMPANY SECRETARYThe 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 and business governance level with the support of the enterprisewide risk and compliance and ethics functions, reporting to the chief risk officer of the group.

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

Mrs Saretha Louw resigned as group company secretary with effect from 16 November 2017. The assistant company secretary, Mrs Lizelle Engels will perform the group company secretary’s duties until the position has been permanently filled.

BOARD COMMITTEESThe board as a whole remains responsible for the operations of the group, but to assist in discharging its responsibilities, it delegates certain functions to committees established by the board. Each board committee has formal written terms of reference that are reviewed every second year, or more frequently if necessary. The board monitors these responsibilities to ensure effective coverage of and control over the operations of the group. All board- and board committee charters are published on the group’s intranet.

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 reappointment. Any boardmember 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.


800

600

400

200

0

Num

ber

of

emp

loye

es

NNH employees (including 24 contract workers)

Employees – declaring outside interests

Employees – nil returns

783

133

650

800

600

400

200

0

Num

ber

of

emp

loye

es

NNH employees (including 16 contract workers)

Declarations received (as at 29 November 2017)

Declarations outstanding (as at 29 November 2017)

773 768

5

ACCESS TO INDEPENDENT ADVICEThe board and board committees may seek outside legal or other independent professional advice if it considers this necessary.

The board has unrestricted access to the executive management team of the group to engage on and discuss any matters regarding which they require additional information or understanding.

LEADERSHIP THROUGH ETHICS AND HUMAN RIGHTSGovernance of ethicsThe board assumes ultimate responsibility for the group’s ethics performance. It sets the tone for the EXCO and staff to act ethically. 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.

Various management frameworks are used to instil an ethical culture into the group, including inter alia:

Board Ethics StatementEthical and effective leadership should complement and reinforce each other. In line with this requirement, ethics statements for the year 2017 have been signed by all directors in the group as well as group executives, undertaking to uphold high ethical standards and to conduct their business honestly, scrupulously and with integrity also acknowledging that a business relies on trust and that they will do their utmost to earn it and nothing to impair it. The quality aimed at in all dealings is integrity. The ethics statement is in line with the principle of The NamCode.

Code of EthicsAt the core of the Code of Ethics are the NNH group’s values of integrity, accountability, respect, being people-centred and pushing beyond boundaries, which must be used to guide and direct the way we do business. Being responsible is at the heart of our approach to business. This commitment is encapsulated in the group’s Code of Ethics, to which all employees (including contractors and temporary employees) must adhere. The Code of Ethics is available on the group’s intranet and is reviewed annually to ensure it stays relevant in a changing business environment. The Employee Conduct Pledge is also on Nedlearn, the e-learning platform, and employees were invited to complete this pledge through a compliance circular.

Code of Conduct The group’s Code of Conduct expands on the Code of Ethics. This operational document offers examples of ethical behaviour to help employees make ethical decisions. The Code of Conduct is posted on the group’s intranet so that it is accessible to all employees in the group.

Ethics programmeThe compliance and ethics team has developed an e-course on ethics and code of conduct rules for the stated Nedlearn portal. Employees were encouraged to complete a training and assessment quiz provided thereafter.

DRIVING ETHICAL AWARENESSPromoting ethics among our staff The ethics awareness training is continuously provided to employees in the group. The majority of the staff attended ethics awareness sessions presented by the Nedbank Group ethics officer. Employees who have not received the in-person ethics awareness training are being encouraged to complete an in-house developed e-learning ethics course. The REMCO is tasked with the oversight of ethical practices.

Ethics awareness training

Training on ethics awareness – 2013 to 2017

The majority of the 79 untrained staff are mostly from outlying branches.

Code of Conduct/Declarations of outside interests The tracking and recording of annual declarations is a manual process performed by the group’s compliance and ethics function. A 100% submission rate has been attained on the declarations of outside interest by staff. Directors had the opportunity to disclose their outside interest at quarterly board meetings.

Declarations – outside interest – 2017

1000

500

0

704

79

Num

ber

of

emp

loye

es

NNH employees (including temporary workers)

NNH employees not trained

BOARD KEY FOCUS AREAS IN 2018 AND BEYOND (continued)



GAC membershipThe GAC members are:

On 27 November 2017, Mr Richard Buchholz resigned as a director of NedNamibia Holdings Limited and consequently ceased to be a member of the GAC.

Post the reporting period, Adv Ramon Lorenzo Maasdorp was appointed as member to the GAC, with effect from 9 February 2018.

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

Discharge of audit committee dutiesThe GAC discharged its duties in respect of the NNH group by:▸ ensuring the expertise, resources and experience of the

financial management function;▸ ensuring integrity, reliability and accuracy of the financial

statements and the efficiency of the internal financial control systems, accounting practices, information systems and auditing processes;

▸ collectively having an understanding of IFRS and other regulatory requirements and assuring stakeholders that the accounting policies and practices within the group are in compliance with IFRS and regulatory requirements;

▸ evaluating the adequacy and effectiveness of internal audit assurance functions;

▸ maintaining transparent and appropriate relationships with the external auditors;

▸ reviewing the scope, quality and cost of the statutory audit and the independence and objectivity of the auditors and ensuring that the appointment of the external auditor complies with Namibian legislation;

▸ ensuring that there is adequate reliance placed on effective internal, external and management assurance providers;

▸ ensuring that the internal audit function is independent and has the necessary resources, budget, standing and authority within the group to enable it to discharge its functions;

▸ ensuring that a combined assurance model has been adopted and implemented to provide a coordinated approach to all assurance activities;

▸ ensuring that the integrated sustainability reporting obligations are met;

▸ reviewing and approving the integrated report and recommending the report to the board for approval;

▸ satisfying itself that the external auditor was independent of the group and determining the nature and extent of non-audit services;

▸ understanding how the board and the external auditor evaluate materiality for integrated reporting purposes;

▸ considering and recommending the internal audit charter for approval by the board; and

▸ considering and approving the internal audit plan and ensuring co-ordination between the internal audit plan and audits conducted by the external auditors.

KEY FOCUS AREAS AND PERTINENT MATTERS ADDRESSED IN 2017

The GAC met five times during the year and confirms that it has met its statutory obligations in all material respects.The following pertinent matters were addressed by the board in 2017:

FINANCIAL CONTROL, ACCOUNTING AND TAXATIONThe GAC reviews and comments on the financial statements, the accounting practices, taxation and the effectiveness of the internal financial control of the group and reports to the board thereon. It provides assurance on the integrity and completeness of the group’s financial report.▸ The GAC reviewed the separate and consolidated financial

statements for the financial year ended 31 December 2017 and assessed the accounting practices applied in the group. The committee also monitored quarterly status reports on taxation and assessed the effectiveness of the internal financial controls of the group. Stakeholders are herewith assured that:

– the accounting policies and practices within the group are in compliance with IFRS, the Namibian Companies Act and other applicable legislation;

– the IFRS-9 impairment project was on track to enable NBN to meet the reporting requirements under IFRS-9 as from 1 January 2018;

– the financial statements of the group accurately reflect the financial position and records of the group;

– effective accounting practices and policies have been maintained;

– the skills and resources of the finance function are competent and effective and the finance division is adequately resourced to fulfil the finance function in the group;

– the Infostack system was actively being used as the group’s management information systems and to perform the reconciliation of key suspense accounts; and

– with regard to taxation: NNH and NBN are in good standing with the Receiver of Revenue. All tax returns of companies in the group have been submitted to the Receiver of Revenue and no compliance breaches occurred.

▸ The GAC approved the group’s 2017 annual financial statements and recommended them to the board for approval.

▸ The GAC further assessed and confirmed the appropriateness of the going-concern assumption used


NedNamibia Holdings Period served GAC members on committee

*Niddrie RP (Chairperson) 2014 – 2017 **Buchholz RWR 2014 – resigned 27/11/2017 *Hibbit PCW 2016 – 2017 *Hiwilepo TT 2014 – 2017 *Maasdorp RL Appointed 09/02/2018

* independent non-executive members

** non-executive member

For members’ qualifications refer to directors’ profiles on page 8 of this report.

REPORT OF THE GROUP AUDIT COMMITTEE (‘GAC’) CHAIRPERSON

The GAC fulfils a vital role in corporate governance in ensuring the integrity of integrated reporting and internal financial controls and identifies and manages financial risks. It 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 organisation and oversees management’s financial reporting controls and processes through the review of significant accounting and reporting issues.

MandateThe GAC assists the board in fulfilling its oversight responsibility in the group, particularly with regard to:▸ the evaluation of the integrity of our financial statements

through the assessment of the adequacy and efficiency

of our internal control systems, accounting practices, information systems and auditing processes applied in the day-to-day management of the group’s business;

▸ the assessment of the effectiveness of the internal audit- and finance functions as well as the independence and effectiveness of the external auditors; and

▸ the monitoring of the adequacy and reliability of management information and the efficiency of management information systems and effectiveness of information security as well as information technology as it relates to financial reporting and the going concern of group entities.

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

During 2017, the following board committees operated within the NedNamibia Holdings group:

BOARD COMMITTEES Name of committee Role of committee

Group Audit Committee (‘GAC’) The GAC assists the board in discharging its duties relating to the evaluation and review of the adequacy and efficiency of the internal control systems, accounting practices, information systems and auditing processes applied within the NNH group. It also highlights measures to enhance the credibility and objectivity of financial statements and reports and adopts the Integrated Report for recommendation to the board for approval.

Group Risk and Capital The GRCMC acts as the board’s expert monitor of the group’s risk universe as listed and Management Committee defined in the ERMF. The committee assists the board in discharging its responsibility to: (‘GRCMC’) ▸ recognise all material risks to which the group is exposed and ensuring that the requisite

risk management culture, practices, policies, resources and systems are in place and are functioning effectively;

▸ periodically review the risk management methodologies, policies and frameworks of the group;

▸ ensure an appropriate credit approval mandate structure is in place; and

▸ monitor adherence to internal risk management policies, procedures, processes and practices.

Group Remuneration, Human The REMCO assists the board in discharging its responsibilities in terms of remuneration,

Resources, Social, Ethics and human capital, social, ethics and transformation matters. Transformation Committee (‘REMCO’)

Group Directors’ Affairs The GDAC considers, monitors and reports to the board on corporate governance and related Committee (‘GDAC’) responsibilities and the group’s compliance with The NamCode and other governing Namibian legislation. It furthermore acts as the board’s expert monitor and sounding board in relation to directors’ affairs.

Other standing invitees who attend the GAC and GRCMC meetings are the members of the EXCO, the chief internal auditor and the external auditors (who only attend GAC 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.

Frequency of meetingsThe board annually approves the meeting programme. Board committees meet quarterly or more frequently if necessary.

BOARD COMMITTEES (continued)



▸ reviewing the scope, quality and cost of the statutory audit and the independence and objectivity of the external auditor and ensuring that the appointment of the external auditor complies with Namibian legislation.

EXTERNAL AUDITThe external auditor, Deloitte & Touche, has assured the committee that it had established various safeguards and procedures to ensure its independence and objectivity.

The external auditor reaffirmed to the GAC:i. its independence and objectivity for the year ended

31 December 2017;ii. that the external audit has been conducted without any audit

scope restrictions; andiii. that the external audit team was sufficiently resourced.

The report of the independent auditors on pages 88 to 89 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 in as far as it relates to the preparation of annual financial statements that are free from material misstatements. The external auditor provided non-audit services to the group. Fees paid to the external auditor are disclosed in note 31 to the annual financial statements.

The external auditor has unrestricted access to the chairperson of the GAC.

NNH GROUP INTERNAL AUDIT (‘NNHGIA’)NNHGIA performs an independent assurance function and forms part of the third line of defence as set out in the ERMF on pages 82 to 83 of this report. The purpose, authority and responsibility of NNHGIA is formally defined in a board-approved charter. 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 (‘CIA’) has a direct reporting line to the GAC 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.

Post the retirement of the CIA, Mr Willem Burger, in June 2017, Nedbank Group, as an interim measure, made Internal Audit resources available to the NNH group to assist the local internal audit team in executing the Internal Audit Plan. Ms Brigitte Kisting was appointed as CIA with effect from 1 March 2018, but as from 1 January 2018 was seconded to the NNH group by Pricewaterhouse Coopers (‘PwC’) to perform the position’s duties. The Internal Audit team delivered the board approved Internal Audit Plan for 2017, despite the aforementioned changes.

INTERNAL CONTROLFor 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 effective systems of internal control. The board has ultimate responsibility for the systems of internal control and reviews its 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 NGIA.

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 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.

The group’s effectiveness of internal controls and risk management has been assessed by Nedbank Group Internal Audit, which confirmed to the GAC that, based on the audit work that has been performed during the period 1 January 2017 to 31 December 2017, nothing has come to GIA’s attention that adversely affects the adequacy and effectiveness of the NNH 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.


in the annual financial statements, taking into account management budgets and the group’s capital and the liquidity profiles.

▸ The GAC recommended to the NNH and NBN boards that they approve the declaration and payment of a special dividend of N$200 million by both NNH and NBN.

INTERNAL CONTROLThe GAC reviews the effectiveness of systems for internal control, financial reporting and considers the major findings of any internal investigations into control weaknesses, fraud or misconduct and managements’ response thereto.The GAC received quarterly reports to assist in evaluating the group’s internal controls. Requirements for improvements in internal controls in certain business areas have been identified through internal audits. Stakeholders are assured that identified control weaknesses are being given the necessary attention by management and that risk mitigation plans, programmes and structures are being implemented in these areas to enhance internal controls and mitigate risk. The audit findings progress report is monitored by the GAC quarterly.

INTERNAL AUDIT FUNCTIONThe GAC monitors that the internal audit function is effective in terms of its scope, plans, coverage, independence, skills, staffing, overall performance and position within the NNH group.The GAC has▸ assessed the internal audit function in the group and confirms

that it was adequately performed by the internal audit team with the assistance of Nedbank Group (SA) internal audit;

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

▸ approved the internal audit plans for 2017 and 2018 and assures stakeholders that the plan was duly coordinated with audits planned and/or conducted by the external auditors and Nedbank Group Internal Audit (‘NGIA’); and

▸ approved the revised internal audit charter and recommended it to the board for approval.

EXTERNAL AUDIT FUNCTIONReviewing of the scope, quality and cost of the statutory audit and the independence and objectivity of the auditors and ensuring that the appointment of the external auditor complies with Namibian legislation.▸ The GAC monitored the effectiveness of the external auditor

in terms of its audit quality, expertise and the content and execution of the audit plan. The GAC considered and is satisfied with the independence of the external auditors.

▸ The GAC adopted the annual external audit plan and related scope of work, confirming suitable reliance on group internal audit and the appropriateness of key audit risks identified.

▸ The GAC considered and approved the audit- and non-audit fees for the 2017 financial year.

▸ The revised provision of non-audit services policy was considered by the committee and recommended to the board for approval.

▸ The GAC has recommended the reappointment of Deloitte & Touche as external auditor to the shareholder.

In accordance with the requirements of The NamCode and the GAC charter, a separate meeting was held by the GAC with the external auditor, without the presence of management.

COMBINED ASSURANCEThe GAC ensures the application of a combined assurance model, which provides a coordinated approach to all assurance activities within the group.The GAC confirms to stakeholders that it is satisfied that the relationship between internal and external assurance providers is conducive to the attainment of assurance objectives of assurance providers.

INFORMATION TECHNOLOGYThe GAC monitors the adequacy and reliability of management information and the efficiency of management information systems and effectiveness of information security as well as 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 and information security. ▸ The committee is satisfied that the ‘Infostack’ management

information system, which relates to financial reporting, is functioning effectively. Various existing offerings were enhanced, and new offerings were added to the system.

▸ Cybersecurity: The GAC has been given the assurance that all machines and servers in both NBN and Nedbank Group were patched to the required levels so as to be certified as secure. Assurance could not be given that NBN would never come under cyber threat or attack, but this risk was mitigated by firewalls blocking any malicious or hacking attempts. Backups were done at more frequent intervals in the unlikely event that NBN would need to go into recovery mode. Regular updates and training were provided to ensure staff vigilance in order to minimise the risk.

KEY FOCUS AREAS FOR 2018 AND BEYONDKey focus areas for 2018 and beyond include, inter alia:▸ 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;

▸ monitoring of the financial statements to ensure that they fairly present the group’s affairs and the profit or loss at the end of the financial year;

▸ continued monitoring of the further development of the Infostack management information system in terms of enhancements and additional offerings;

▸ monitoring that the internal audit function is effective in terms of its scope, plans, coverage, independence, skills, staffing, overall performance and position within the NNH group;

KEY FOCUS AREAS AND PERTINENT MATTERS ADDRESSED IN 2017 (continued)



REMCO membershipThe REMCO members are:


The REMCO has met quarterly during the period under review.The following pertinent matters were addressed by the REMCO in 2017:

HUMAN CAPITAL (‘HC’) STRATEGYTo instil a human resources philosophy which attracts, retains, motivates and rewards staff to successfully implement the group’s strategy.▸ The focus areas of the HC strategy were redefined and the

strategic enablers introduced. Quarterly updates on the HC strategy execution were provided by management to enable the REMCO to monitor strategy execution.

▸ The committee confirms that the following strategic HC initiatives were, amongst others, successfully concluded in 2017:

– A job matching exercise performed by Pricewaterhouse Coopers (‘PwC’);

– EXCO succession management assessments;

– The lodging of the 2016 affirmative action report with the EEC;

– The implementation of the new E-induction program on the NedLearn platform;

– The implementation of the new E-recruit system;

– The implementation of the new E-recognition system (‘Sparkfolios’);

– Bi-annual performance reviews;

– The ’best company to work for survey’ (76% participation rate);

– The newly introduced ’compass survey’ (66% participation rate);

– Informal recognition and long service functions, held September 2017;

– Staff engagement in the 90-day reload challenge, ended September 2017; and

– NHP wellness days.

▸ Training initiatives concluded in 2017: – Affirmative action training;

– A new and improved credit consumer lending training programme;

– An internal human capital strategic dialogue was conducted as part of the HR effectiveness journey to equip and familiarise the HR business partners with the business partnering model;

– The employee financial wellness coaching programme; and

– The brand internalisation journey: 43 NedXchange workshops conducted, with a 87% staff participation rate.

▸ The REMCO adopted and recommended the following matters to the board for approval:

– the revised EXCO organogram; and – HR related policies, manuals and charters.

REMUNERATION STRATEGY, STRUCTURE AND COSTTo consider remuneration in its totality in an integrated and holistic manner.▸ The REMCO continuously monitors remuneration practices

and differentials in the group to ensure that they are fair and defensible and confirms that:

– a Remchannel online salary survey was conducted by PwC to benchmark the group’s remuneration practices against that of the Namibian financial and banking sectors. Salary anomalies that have been identified will be attended to on a case-by-case basis, based on merit and performance;

– the committee has, inter alia, adopted and recommended to the board for approval the annual salary increase and short-term incentive bonus pool for 2017; and

– the 2017 salaries negotiations between the NNH group and the Namibia Financial Institutions Union (‘NAFINU’) were successfully concluded with agreement having been reached in various remuneration components.

ETHICS AND STAKEHOLDER RELATIONSHIPSTo oversee and monitor the group’s activities in the field of transformation, ethics, human capital development and sustainability, public safety, stakeholder relationships as well as labour and employment matters.▸ Since the ethics and stakeholder relationship monitoring

responsibility was added to the existing REMCO responsibilities and incorporated with the revised REMCO charter, the first ethics and stakeholder relationship reports were tabled for noting at the November REMCO meeting.

– Details on ethics awareness in the group are disclosed in the ethics report on pages 60 to 61.

The monitoring of stakeholder relationships is still in its initial stages and will be enhanced in 2018.

KEY FOCUS AREAS FOR 2018 AND BEYONDKey focus areas for 2018 and beyond include, inter alia:

▸ monitoring the execution of the human resources strategy and continued focus on ensuring that the REMCO fulfils its responsibilities to meet the group’s HR objectives;


NedNamibia Holdings Group Period served REMCO members on committee

*Muatunga LM (Chairperson) 2014 – 2017 Du Plessis JA 2014 – 2017 *Frank TJ 2014 – 2017 * independent non-executive members


INTEGRATED REPORTINGThe GAC reviewed and discussed the audited annual financial statements with the CFO, the managing director, the Chief Risk Officer (‘CRO’), internal audit and the external auditors. The GAC has assessed, and found to be effective and appropriate, the accounting policies adopted, the reporting process and controls that led to the preparation of the annual financial statements in accordance with IFRS and the requirements 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 has adopted the going concern assumptions in preparing the consolidated and separate annual financial statements. The committee has made an assessment of the group’s and company’s ability to continue as a going concern and has no reason to believe that the company or any other company within the group will not be a going concern in the year ahead and recommended to the board for approval the annual financial statements and the financial information included in the integrated report. The board has subsequently approved the 2017 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 2017 consolidated and separate financial statements is reflected in the independent auditor’s report on pages 88 to 89.

GAC EVALUATION 2017An internal appraisal of the GAC was conducted by NNH group company secretariat in the second half of 2017. The appraisal confirmed that the GAC is well functioning, effective and in operational compliance with its charter.

CONCLUSIONThe GAC is satisfied and herewith confirms that it has complied with its legal, regulatory and other responsibilities and that it has met its objectives.

RICHARD NIDDRIEChairperson of the Group Audit Committee

REPORT OF THE GROUP REMUNERATION, HUMAN RESOURCES, SOCIAL, ETHICS AND TRANSFORMATION COMMITTEE (‘REMCO’) CHAIRPERSON

During the period under review, the board has approved that the committee’s name be changed from:

‘Remuneration, Nomination, Employment Equity and Skills Retention Committee’ to‘Remuneration, Human Resources, Social, Ethics and Transformation Committee’;

The reason for the name change was to reveal in the new name the social, ethics and transformation oversight function which, instead of establishing an independent Social, Ethics and Transformation Committee, was added to the REMCO’s responsibilities and incorporated with the revised REMCO charter. The abbreviation of the committee’s name remains REMCO.

MandateThe REMCO assists the board with the general oversight and monitoring responsibility over the group’s human resources, social, ethics and transformation functions to fulfil the following objectives:

▸ To instil a human resources philosophy (including but not limited to a remuneration philosophy) which attracts, retains, motivates and rewards staff to successfully implement the group’s 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 (‘EEC’) as well as affirmative action initiatives, to support superior business performance; and

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

▸ To oversee and monitor the group’s activities in the field of transformation, ethics, human capital development and sustainability, public safety, stakeholder relationships as well as industrial relations matters.

Charter The terms of reference of the REMCO are set out in a board-approved REMCO charter. The committee is satisfied that it has executed its responsibilities for the year in compliance with its charter.

KEY FOCUS AREAS FOR 2018 AND BEYOND (continued)



Nedbank Compass SurveyThe previous Nedbank Staff survey (‘NSS’) has been replaced with ‘the Nedbank Compass survey’ (‘NCS’), which measures engagement, alignment, agility and all competencies that employees need to be successful, including critical workforce capabilities, such as innovation and client centricity. The group received a 66% participation rate (2015: 78%).

The survey revealed the following results:▸ there is a strong clan culture present in the group;▸ employees are proud to work for the group and have

confidence in the future success of the group; ▸ the group’s strategy is well understood, with an overall

rating of 70%;▸ the levels of agility require improvement;▸ the lack of wellness support is a concern which will be

attended to in 2018;▸ Net Promoter Score (‘NPS’) and Execution achieved the

lowest ratings; and▸ Brand Ambassadorship and NPS highlighted the gap

between the aspirational and the lived brand experience. Bringing the brand promise into day-to-day employee and client experiences will be a focus for improvement in 2018.

The Nedbank Compass survey is conducted every second year.

Barrett surveyThe Barrett survey will continue to measure values alignment and will run every second year in alternative years. The most critical difference between the Barrett survey and the Nedbank Compass survey is its organisational focus. No Barrett survey was conducted in 2017.

REMCO evaluationAn internal evaluation of the effectiveness of the REMCO was conducted by NNH group company secretariat in the second half of 2017. The REMCO achieved an overall composite rating of 80%, affirming that the committee is 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 complies with its legal, regulatory and other responsibilities.

L MUATUNGA (MRS)Chairperson of the Group REMCO

REPORT OF THE GROUP DIRECTORS’ AFFAIRS COMMITTEE (‘GDAC’) CHAIRPERSON

MandateThe 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/chairperson/

individual directors;▸ Termination, rotation, retirement and dismissal of directors;

and▸ Directors’ outside interests.

Charter The terms of reference of the GDAC are set out in a board-approved GDAC charter. The committee is satisfied that it has executed its responsibilities for the year in compliance with its charter.

GDAC membershipThe GDAC members are:


The GDAC has met quarterly during the period under review.The following pertinent matters were addressed by the GDAC in 2017:

BOARD GOVERNANCEThe GDAC assists the board with its corporate governance and related responsibilities and acts as the board’s expert monitor and sounding board with respect to corporate governance issues.In 2017, the GDAC met quarterly, focusing on board governance and related responsibilities within the group. ▸ The committee confirms that the following governance

initiatives were, amongst others, successfully concluded in 2017:


▸ overseeing and monitoring the group’s activities in the field of transformation, ethics, human capital development and sustainability, public safety, stakeholder relationships as well as labour and employment matters;

▸ overseeing and monitoring the group’s remuneration policy and practices, ensuring the appropriateness of our reward arrangements;

▸ overseeing and monitoring the review and optimisation of the group’s management structure and the implementation of the group’s change management plan; and

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

Performance management The 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. Employee performance assessments are conducted across the group bi-annually.

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; and

▸ 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 action The 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. NNH’s 2016 affirmative action (‘AA’) report has been lodged with the EEC. The issuing of the affirmative action compliance certificate from the EEC is still pending. The 2017 AA report will be lodged with the EEC in 2018.

Remuneration The 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’s 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.

Achieving fair and responsible remuneration outcomes is a matter which the REMCO continuously applies its mind to. To this end, a Remchannel online salary survey was conducted by PwC to benchmark the group’s remuneration practices against that of the Namibian financial and banking sectors. The outcome of the survey revealed that, although the group was generally in line with the market, it was behind the market median in certain job grades. Salary anomalies will be addressed on a case-by-case basis, based on merit and performance. The REMCO continuously monitors remuneration differentials to ensure they are fair and defensible. In line with our Remuneration Policy, the distribution of variable pay between the different job levels must be fair and in line with our pay-for-performance principle.

Culture and surveys In 2017, the group participated in two employee surveys, namely the internal Nedbank Compass survey and the Deloitte’s Best Company to Work For (‘BCTWF’) survey.

Best Company To Work For (‘BCTWF’) surveyDeloitte’s BCTWF survey was conducted with a 76% participation rate and assessed the employees’ perception of the organisation’s people practices.

NNH group Industry Index indicator What this measures results benchmark

Best Company Index This index measures the overall attraction of the organisation among 61,65% 62,2% its employees. It is an expression of the employees’ alignment with the organisation and a reflection of the organisation’s internal brand which supports employee retention. Engagement Index This index measures the overall engagement state of the organisation’s 68,63% 67,78% employees and reflects employees’ particular state of mind, which maximizes their work related behaviours and associated discretionary effort.

Nedbank Namibia Limited ranked 5th of 18 Namibian companies that competed in the 2017 survey.

Two indexes were measured, with the following results:

NedNamibia Holdings Period served GDAC members on committee

*Frank TJ (Chairperson) 2014 – 2017 Du Plessis JA 2014 – 2017 *Muatunga LM 2014 – 2017 * independent non-executive members


KEY FOCUS AREAS FOR 2018 AND BEYOND (continued)




The role of the GRCMC is primarily to set and own the risk strategy of the NNH group, taking into account all variables and to ensure that both risks and opportunities are appropriately identified, monitored, managed, priced and/or appropriately provisioned within the group’s defined risk appetite.

The GRCMC monitors risk across the group’s ERMF and assists the board in fulfilling its credit risk oversight responsibilities, particularly with regard to the evaluation of credit mandates and governance, policies and credit risk appetite. It is responsible for confirming the adequacy and efficiency of credit impairments and ongoing monitoring of the overall credit portfolio.

In terms of the committee’s mandate, it oversees the development of a risk strategy and the group risk plan, adopts the group’s risk appetite, adopts and reviews the group’s risk and other policies, ensures the development and maintenance of an ICAAP, monitors asset and liability management processes and maintains the group’s ERMF.

Charter The terms of reference of the GRCMC are set out in a board-approved GRCMC charter. The committee is satisfied that it has executed its responsibilities for the year in compliance with its charter.

GRCMC membershipThe GRCMC members are:

On 27 November 2017 Mr Richard Buchholz resigned as director of NedNamibia Holdings Limited and consequently ceased to be a member to the GRCMC.

Adv Ramon Lorenzo Maasdorp was appointed as a member to the GRCMC, with effect from 9 February 2018.


The GRCMC has met quarterly during the period under review. The following pertinent matters were addressed by the GRCMC in 2017:

ENSURING AND PROTECTING VALUEThe board has ultimate responsibility for any financial loss or reduction in shareholder value suffered by the group. The GRCMC assists the board with recognising all material risks to which the group is exposed and to ensure that the requisite risk management culture, practices, policies, resources and systems are in place and are functioning effectively.Quarterly reports were submitted to the GRCMC, to enable the committee to fulfil the duties and responsibilities assigned to it by the board.

▸ The committee confirms that it is satisfied that: – Credit risk monitoring and impairments – credit risk

portfolios were prudently monitored by NBN and impairments were adequately provisioned. The risk is priced appropriately and monitored on an ongoing basis.

– Overseeing financial crime risk remained one of the committees key focus areas. The financial crime unit has increased capacity through the appointment of three AML analysts, one financial crime risk officer and a financial crime head. The following structures were put in place to mitigate financial crime risk:

› A global trade business risk mitigation plan was implemented to control and enhance AML, CFT and Sanctions compliance in trade finance business;

› Cybersecurity remained a key focus area and there is a drive to enhance alignment between operational risk management and cybersecurity processes. Systems and mainframes were analysed to ensure that the bank was proactively bolstered against cybercrime; and

› Physical security – assistance was provided by Nedbank Group Risk Services to identify and address vulnerabilities in the group’s physical security systems, infrastructure and the premises. Furthermore, a security risk officer was appointed, with effect from 7 April 2017.

– Information technology risk – overseeing the broader risks of information technology (those not covered by the GAC) remained a key focus area. The solving of unresolved IT issues was receiving ongoing attention, internally and by Nedbank Group Technology.

– BID-19 localisation of core banking system – the relevant service-level agreement has been concluded with Nedbank Group Technology and the implementation plan was expected to come to fruition in 2018.

– The Key Issue Control log (‘KICL’) continued to be adequately managed through the identification of high-rated issues by way of the Risk and Control Self-Assessments (‘RCSAs’) performed by the relevant business units.

– The ERMF establishes formal governance, procedures and processes for all risks, both known and unknown. This framework is reviewed regularly by the GRCMC and the board to ensure that it is responsive to both the internal, external and regulatory environments in which the group operates.

– Concentration risk was well managed and in line with the risk appetite.

NedNamibia Holdings Period served GRCMC members on committee

*Hibbit PCW (Chairperson) 2016 – 2017 Buchholz RWR 2014 – resigned 27/11/2017 *Frank TJ 2010 – 2017 *Maasdorp RL Appointed 09/02/2018 *Niddrie RP 2015 – 2017 *Schimming-Chase AR 2014 – 2017 * independent non-executive members


– Board-/Board committee-/chairperson- and peer evaluations;

– Directors declared their outside interests to the GDAC and board quarterly. One conflict of interest occurred with respect to Ms Schimming-Chase, which is duly disclosed on page 54 of this integrated report;

– Directors have signed the Board Ethics Statement thereby confirming that they have read and understood the contents thereof and agreeing to be bound by the terms thereof;

– Board and board committee attendance by directors was monitored quarterly and the GDAC confirms that, during the period under review, all directors complied with the 75% attendance rule determined in Determination BID-1;

– Annual general meetings were held by all companies within the NNH group;

– The GDAC further adopted and recommended the newly established NedCapital Namibia board charter to the NNH board for endorsement and the NedCapital Namibia board for approval,

– The GDAC adopted and recommended to the board for approval the reappointment of Mr Richard Niddrie as member to the GAC and the GRCMC. His term of office as member of the aforesaid committees has, in terms of the provisions of the respective board committee charters, expired in August 2017;

– As part of board succession planning, the GDAC recommended to the NNH/NBN boards the appointment of Adv Ramon Maasdorp as independent non-executive director, with effect from 9 February 2018;

– The committee noted Mr Richard Buchholz’ resignation from the NNH and NBN boards;

– The GDAC furthermore adopted and recommended for board approval:

› That, instead of establishing an independent Social, Ethics and Transformation Committee (‘SETC’), the functions and responsibilities of such committee be added to the REMCO’s existing functions and responsibilities and that it be incorporated with the revised REMCO charter;

› That REMCO’s name be changed to reflect in the new name the additional social, ethics and transformation functions;

› The revised REMCO charter, including the functions and responsibilities of the SETC;

› The proposed directors’ fees for 2017 for all boards of companies within the NNH group; and

– The GDAC ensured that all the training needs identified in the board-/board committee evaluations were duly addressed at the 2017 annual board training session that took place in August 2017.

KEY FOCUS AREAS FOR 2018 AND BEYOND

Key focus areas for 2018 and beyond include, inter alia:

▸ ensuring that sound corporate governance processes and structures are in place to protect the shareholder’s interests;

▸ ensuring that balanced board structures are established and maintained in the group to ensure the proper and effective functioning of the boards and board sub-committees of the group;

▸ ensuring proper board succession planning; and

▸ overseeing the transition by the group to the principles of King IV, in so far as it does not contradict the Namibian legislation and/or The NamCode.

GDAC evaluation An internal evaluation of the effectiveness of GDAC has been conducted by NNH group company secretariat in the second half of 2017. With an overall composite rating of 83% the committee was rated as well functioning and effective. Structures were being put in place to address areas that required improvement.

CONCLUSIONThe GDAC is satisfied and confirms 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 integrated report.

▸ To align with King IV where relevant, the NNH group will in 2018 undergo yet another governance refresh.

▸ The GDAC complied with its legal, regulatory and other responsibilities.

THEO FRANKChairperson of the GDAC

REPORT OF THE GROUP RISK AND CAPITAL MANAGEMENT COMMITTEE (‘GRCMC’) CHAIRPERSON

The world is rapidly evolving with the emergence of new technology, shifting political, economic and regulatory change, all heralding corresponding risk. Risk management is not only about pricing and appropriate provisioning, but also about protecting the group against the growing and ongoing threats of cyber- and financial crime risks. The GRCMC regularly monitors and ensures that the bank is adequately capitalised and maintains adequate liquidity and that asset and liability, enterprisewide risk as well as cyber- and financial crime risk continue to be managed effectively in the group. In 2017, the NNH group maintained a stable operating risk environment, despite a continued high inherent operational risk profile.

MandateThe GRCMC has a monitoring and decisionmaking responsibility and is considered the board’s expert monitors of

the risk universe as listed and defined in the group’s ERMF.





GRCMC evaluation An internal evaluation of the effectiveness of the GRCMC was conducted by NNH group company secretariat in the second half of 2017. With an overall composite rating of 88.1% the GRCMC was rated as well functioning and effective.

A few matters were identified that only ‘partially meet objectives’ which will be addressed through the implementation of appropriate structures and training.

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 innovation, risk management has 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 manages 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.

PETER HIBBITChairperson of the Group Risk and Capital Management Committee

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 EXCO must execute the annual NNH group business plans as approved by the board. The committee furthermore assists the managing director to guide and control the overall direction of the business of the group and acts as a medium of communication and coordination between business units and the board. Responsibility for material management decisionmaking 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.

Changes to the EXCO team during the period under review:

▸ Advocate Sumari von Kunow resigned as CRO of the group, effective 16 December 2017. The managing director, assisted by the senior risk team and the broader EXCO team will take care of the group risk function until the CRO position has been filled.

▸ The executive: treasury position is still vacant and the treasury division continues to report to the CFO, Mr Karl-Stefan Altmann.

The performance of individual EXCO members is assessed bi-annually by way of a performance scorecard.

– NNH group-related policies, charters, manuals and frameworks have been reviewed by the GRCMC quarterly and those adopted by the committee were recommended to the board for approval.

– Operational risk management: › An extensive review of the business impact analyses

(‘BIAs’) and business continuity plans (‘BCPs’) was performed and testing and embedment finalised;

› Business units have finalised a review of allocated high-risk/impact processes and risks and controls were identified with quality assurance under way; and

› A business process management framework was adopted for the NNH group.

THE INTERNAL CAPITAL ADEQUACY ASSESSMENT PROCESS (‘ICAAP’) AND ASSET AND LIABILITY MANAGEMENTThe GRCMC assists the board with overseeing the ICAAP and monitoring the adequacy and efficiency of the asset and liability process in the group. ▸ The committee confirms to its stakeholders that it is

satisfied that: – The asset and liability management process in the group

was adequate and efficient. – The 2016 ICAAP report was reviewed and adopted by the

GRCMC and recommended to the board for approval. The report was subsequently lodged with Bank of Namibia. More details on ICAAP governance are reported on page 78.

– Liquidity Risk Contingency Plan – all matters identified by way of the liquidity simulation exercise that was conducted in 2016, and which specifically focused on the bank’s ability to deal with a liquidity crisis, have been incorporated in the Liquidity Risk Contingency Plan.

– Capital risk – based on the capital adequacy calculations, NBN has sufficient capital for its current and projected operations. The total risk-weighted capital adequacy ratio increased year-on-year from 14.96% (31 December 2016) to 16.01% in (31 December 2017) after incorporating full year expected audited profits for 2017.

KEY FOCUS AREAS FOR 2018 AND BEYOND

Key focus areas for 2018 and beyond include, inter alia:▸ Staying ahead of the curve in all matters pertaining to

cybersecurity to protect our clients and stakeholders;

▸ Overseeing the broader risks of information technology (those not covered by the GAC) and monitoring the stabilisation and ongoing enhancement of the bank’s core banking system, the Flexcube system, and AML technology;

▸ 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;

▸ Monitoring the adequacy and efficiency of the asset and liability management (‘ALCO’) process in the group;

▸ Continue to have a keen eye set on macroeconomic conditions and to monitor the implementation of liquidity and capital requirements as required by Basel III;

▸ Overseeing anti-money laundering, combating the financing of terrorism and sanctions compliance;

▸ Overseeing all aspects of credit management, including the quality of the bank’s loan portfolio and ensuring adequate provisioning for potential loss exposures;

▸ Continue to monitor and determine credit and concentration risk appetite and the impact thereof on origination strategies;

▸ Perform risk management of distressed portfolios, key watch-list clients and industry specific concentration risk; and

▸ Monitoring legal and compliance risks.

Emerging risks Although 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 RCSA process. Material emerging risks are tabled and discussed at the quarterly Enterprisewide 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/or fraud;

▸ Draft Rents Bill – the potential impact of the Bill on: – business strategy and consequently budgeted performance; – the default in payments as lessors have limited rights due

to limitations placed on the eviction of the lessee; ▸ Basel III – implications thereof on capital requirements; and▸ South Africa’s and Namibia’s credit rating downgrade by

credit ratings agencies – the political and economic instability in South Africa and the consequent downgrading of South Africa’s credit rating combined with Namibia’s downgrading and the impact thereof on the Namibian economy and consequently the operations of NNH and its subsidiaries.

Policy governance The prescribed policy approval process in the group determines that policies are to be submitted to the following forums for adoption/approval:

▸ NNH Group Enterprisewide Risk Committee;

▸ NNH Group Risk and Capital Management Committee;

▸ NNH Group Audit Committee (only those policies that relate to the GAC’s responsibilities);

▸ NNH Group REMCO (only those policies that relate to the REMCO’s responsibilities);

▸ NNH Board.

This process is guided and managed by Enterprisewide Risk Management (‘ERM’) through the central policy repository. Policies are regularly reviewed and are tailored to suit the environment of the NNH group, meet legislative requirements and ensure relevance to meet the group’s risk management objective. The group’s policies are published on the Intranet to provide staff with ready access to the policies. For EXCO members’ qualifications refer to EXCO members’ profiles on page 12 of this report.

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 Resigned 16/12/2017

Matthee H Executive Retail & Business Banking No change

Van der Merwe S Executive Strategy & Human Capital No change

Turner E Executive Corporate & Investment Banking No change

Altmann K-S Chief Financial Officer No change

Van Rhyn S Chief Information Officer No change

Schlechter E Executive Wealth Management No change

Executive Treasury Vacant

The composition of EXCO is as follows:





Credit risk has the following sub-risks: ▸ Collateral risk, concentration risk, counterparty risk,

country risk, issuer risk, industry risk, settlement risk, transfer (sovereign) risk, underwriting (lending) risk; and securitisation risk or re-securitisation structures.

OPERATIONAL RISKThe possibility of loss resulting from inadequate or failed internal processes, people and systems or from external events. This includes legal risk, but excludes strategic risk and reputational risk. Operational risks affect the NNH group’s ability to execute its strategic plan.

FINANCIAL CRIME RISKFinancial crime risk is: ▸ any kind of unlawful conduct, arising from either common

law, any current statutory law or regulation and any conduct which the NNH group deems to be dishonest;

▸ regardless of whether the NNH 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 bank or its employees, clients and any other stakeholder.

LIQUIDITY & FUNDING RISKSThe possibility that the NNH group is unable to meet its payment obligations as they fall due. These payment obligations could emanate from depositor withdrawals, the inability to roll over maturing debt or meet contractual commitments to lend.

CAPITAL RISKThe possibility that the NNH group will become unable to absorb losses, maintain public confidence and support the competitive growth of the business. It includes failure of the NNH group’s entities to maintain the minimum regulatory capital requirements laid down by the Bank of Namibia.

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 the pool being mis-priced; and▸ In terms of non-independence risk, the risk of a single event

resulting in claims from multiple clients.

MARKET RISKThe possibility of losses in on- and off-balance sheet positions arising from movements in market prices. In particular from changes in interest rates, foreign exchange rates and equity and commodity prices.

Market risk in the Banking Book The possibility of loss in the banking book as a result of unfavourable changes in foreign exchange rates and interest rates.

Market risk in the Trading Book The possibility 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 trading market risk within the NNH group’s

proprietary trading activities (trading on the NNH group’s own account).

CONCENTRATION RISKThe possibility of losses resulting from an excessive concentration of exposure to a single client or group of related clients, specific financial instrument(s), an individual transaction, a specific industry sector or geographical location, security or collateral.▸ The degree of positive correlation between clients and

groups of clients as well as between financial instruments/markets under stressed economic conditions.

▸ In terms of liquidity risk, over reliance on funding or liquidity from a single depositor or small group of depositors.

Note: Concentration risk is not limited to credit, market, capital plus liquidity and funding risks and should be considered as relevant to any concentrated risk exposures within a business entity.

CONDUCT RISK▸ The NNH group’s pattern of behaviour in executing its pricing

and promotion strategy.

▸ The relationship between the NNH group and the public in so far as any product or service is concerned and its response to the realities of, and changes in the market it serves.

▸ The nature and extent to which the NNH group complies with and meets the laws that govern the NNH group, especially those related to the creation and marketing of products and services, established best practices, codes of conduct, directives and client expectations and requirements.

▸ The NNH group’s relationship with regulators and the ethical standards the NNH group adheres to in conducting its business.

REGULATORY RISK▸ Non-compliance with applicable laws and regulations,

inter alia, Competition Law (the risk that competition law is not followed and the possibility that relationships with competition authorities are not appropriately managed in the territories where the NNH group carries on business).

▸ It is the possibility that a change in regulations might have a negative effect on the business; and to which the NNH group is exposed, resulting from a failure to comply with applicable regulatory requirements or codes but excludes provisions of relevant regulatory requirements from its operational procedures, all of which, if not responded to with a strategic intention, will fail to deliver what potentially can be a competitive advantage.

As reflected in the corporate governance structure on pages 80 to 81 of this report, the group EXCO is supported by the following business 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 Committee (‘OPCO’)▸ Operational Distribution Committee; ▸ Product and Pricing Committee;▸ Financial Crime Committee;▸ Bank Credit Committee▸ Tender Committee▸ Social Investment Committee;▸ Go Green Committee;▸ Information and Communication Technology Committee;▸ Health and Safety Committee;▸ High Risk Client Committee▸ Transformation and Human Capital Committee; ▸ Formal Recognition Committee; and▸ Vendor and Procurement Management Committee.

RISK MANAGEMENT AND GOVERNANCE

ENTERPRISEWIDE RISK MANAGEMENT At the heart of the group’s business and management processes are integrated risk and balance sheet management frameworks. The NNH group has a strong risk culture which is built on best-practice ERM, a strong ‘tone from the top’ from the managing director, top management and the board and ongoing risk leadership by the CRO. Our approach aligns strategy, policies, people, processes, technology and business intelligence to measure, evaluate, manage and optimise the opportunities, threats and uncertainties which the group faces every day. In this way the group is able to maximise sustainable shareholder value within its defined risk appetite.

Enterprisewide Risk Management Framework (‘ERMF’) The risk management function is embedded in the ERMF that sets out the major risk classifications. The ERMF forms the basis of risk governance and is underpinned by the three lines of defence model, which places strong emphasis on accountability and responsibility of business management, supported by appropriate internal control-, risk management- and governance structures. The three lines defence model is encapsulated in the ERMF diagram on pages 82 to 83.

The enterprisewide risk management function is a risk-monitoring function that is independent from business activities. Integrating risk with other business functions remains a key coordination challenge, which the group attempts addressing by allocating business unit risk officers to business operations. This ultimately serves to mature the risk culture in the group and create capacity to perform truly independent second line assurance.

Root cause framework (‘RCF’) Root cause analyses are conducted on top risks and issues in line with the group’s RCF. The well-structured groupwide approach

aims to address the root cause of problems rather than focusing merely on symptoms and ultimately leads to sustainable resolutions which prevent reoccurrences of the same issues and simultaneously improve the risk and control culture.

RISK UNIVERSE

Collectively there are 17 key risks that make up the risk universe in the group’s ERMF, ie:

ACCOUNTING, FINANCIAL & TAXATION RISKSAccounting risk is the possibility that: ▸ inappropriate accounting information causes suboptimal

decisions to be made, due to inappropriate policy, faulty interpretation of policy, or plain error;

▸ the financial statements and other statutory and regulatory reporting do not accord with IFRS and/or other relevant statutory requirements are not based on appropriate accounting policies and do not incorporate required disclosures; and

▸ internal financial and operational controls of accounting and administration do not provide reasonable assurance that transactions are executed and recorded in accordance with generally accepted business practices and NNH group’s policies and procedures and that assets are safeguarded.

Financial risk is the possibility that: ▸ financial targets and key performance indicators are not met;

▸ inaccurate financial information causes suboptimal investment and operational decisions to be made; and

▸ stakeholders and regulatory bodies are not adequately informed of significant variances in financial performance.

Taxation risk is the possibility that: ▸ effective tax planning, coordination 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 exits, resulting in reputational damage, loss and/or missed opportunities;

▸ taxation risk can arise from: – non-compliance with tax regulations resulting in penalties,

interest or under provision of tax; – incorrect assessment, deduction and payment of tax

liabilities; – ineffective tax planning and implementation at NNH

group level; – non-compliance with current and future legislative,

regulatory and industry best practice requirements; – poor relationships with Revenue Authorities; and – an inability to engage and influence Revenue Authorities

and other relevant governmental departments.

CREDIT RISKThe possibility of loss arising from borrowers and/or counterparties failing to meet their repayment commitments, from impaired or problem assets and the bank’s related impairments, provisions or reserves and from exposure to related persons.

MANAGEMENT COMMITTEES (continued)



The NNH operational loss management process is of a centralised nature, allowing for firm validation control and 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.

RISK ESCALATIONEscalation criteria is in place and significant risks, issues and/or limit breaches are raised and included in all relevant forum and committee meeting packs, which is a key feature of the ERMF and risk reporting across the NNH group. The process of corporate governance, including the risk management process, as contemplated in regulation 39 of the South African Banks Act, is assessed annually against the existing internal control environment. Similarly an assessment of whether the NNH group can continue as a going concern, as required in terms of regulation 40 of

similar Act, is carried out with due regard to governance, risk management and long-term planning of the NNH group.

RISK APPETITEThe NNH group has cultivated a strong risk culture and embedded a prudent and conservative risk appetite, focused on the basics and core activities of banking and other financial services in the group. While our risk appetite is prudent and appropriately conservative, it remains enabling for our businesses, promoting competitive growth and returns. There is no material change proposed in our risk appetite in the group’s 2018-2020 business and risk plans.

THE BASEL CAPITAL ACCORDBasel II The group places significant focus on risk management in compliance with Basel II. NBN presently applies the ‘standardised approach’ (standardised approach for credit risk and operational risk and ‘standardised duration approach’ for market risk) for regulatory purposes in line with the rest of the industry.


INFORMATION TECHNOLOGY RISKThe possibility of losses associated with information technology has a strategic and an operational component. Information technology risk encompasses the strategic component, while the operational component is included in operational risk.▸ The possibility of losses 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 NNH group objectives.

▸ This includes the possibility of an uncoordinated, inefficient and/or under-resourced information technology strategy, as a result of which the NNH group becomes progressively less competitive.

BUSINESS & STRATEGIC (EXECUTION) RISKSBusiness riskThe possibility of losses assumed due to potential changes in general business conditions, such as our competitive market environment, client behaviour and disruptive technological innovation. Business risk includes the impact of reputational risk but excludes long term strategic risk.

Strategic riskThese affect or are created by the NNH group’s business strategy decisions and strategic objectives. Strategic risk is the possibility of an adverse impact on the NNH group’s 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.

Execution riskThe possibility that the NNH group’s business plans will not be successful when they are put into action or full implementation is not achieved.

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

GOVERNANCE & COMPLIANCE RISKSGovernance riskGovernance refers to the institutions, rules conventions, processes and mechanisms by which decisions about risks are taken and implemented. Risk governance goes beyond traditional risk analysis to include the involvement and participation of various stakeholders as well as considerations of the broader legal, political, economic and social contexts in which a risk is evaluated and managed. The scope of risk governance encompasses public health and safety, the environment, old and new technologies, security, finance and many others.

Compliance riskThe current and prospective possibility of damage to the NNH group’s business model or objectives, reputation and financial soundness arising from non-adherence to regulatory requirements and expectations of key stakeholders such as customers, employees and society as a whole. It exposes the NNH group to fines, civil claims, loss of authorisation to operate and an inability to enforce contracts.

TRANSFORMATION, SOCIAL & ENVIRONMENTAL RISKSTransformation risk▸ Business Transformation risk concerns the failure to respond

to and address and uphold the Codes of Good Practice on Broad Based Black Economic Empowerment.

▸ People Transformation risk concerns the failure to respond to and address and uphold related law such as the Employment Equity Act, Skills Development Act and Skills Development Levies Act.

Social risk is the possibility of: ▸ Not adequately contributing to the development of a

sustainable and robust social structure.

▸ 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 NNH group business practices on a broad range of matters related to human, societal and community welfare such as health and economic opportunity.

Environmental risk The possibility of damage to the environment, harm to the NNH group’s employees or people in the community, due to lending to or investing in environmentally unfriendly/harmful companies and due to activities of the NNH group in the facilities they occupy.

PEOPLE RISKPeople risk is the possibility of losses 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, at the same time having a negative impact on the achievement of NNH group strategic objectives. It includes the possibility:▸ that effective risk-adjusted performance measurement and

indicators are not implemented in the NNH group, resulting in incorrect reward allocation, failure to optimise the use/allocation of the NNH group’s capital and wrong corporate behaviour resulting in sub-optimal returns;

▸ that the NNH group fails to motivate staff through the use of inappropriate incentive schemes or the poor administration of incentive schemes;

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

▸ of losses arising from or related to inappropriate compensation practices for directors and executive officers.

The possibility of losses associated with people has a strategic component, while the operational component is included in operational risk.

The materiality of these risks is regularly assessed, reviewed and challenged by the GRCMC, the board and by management at the ERCO. As part of the annual review by the board of the group’s ultimate parent company, Old Mutual plc (‘OM plc’), letters of representation from the managing director of the NNH group are submitted bi-annually to OM plc confirming the assurance that:

▸ Adequate and effective risk management and systems of internal control are maintained in the NNH group;

▸ The systems of internal control and risk management within the NNH group are:

– operating effectively; – operated by trained and skilled personnel; and – designed to provide reasonable assurance that

management and financial information emanating from the business is reliable and that assets are safeguarded, verified and maintained.

▸ The NNH group will continue as a going concern for the year ahead.

Material issues and or any emerging/potential issues are highlighted in relation to the internal control environment of the NNH group and exceptions are reported and noted.

ENTERPRISEWIDE RISK COMMITTEE (‘ERCO’)The ERCO forms part of the group’s enterprisewide risk governance structure. The primary role of ERCO is to assess, monitor and report on 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.

OPERATIONAL RISKThe management and measurement of operational risk require key elements to be defined and used within the group. The operational risk management framework (‘ORMF’) defines and requires the use of:

Risk and Control Self-assessment (‘RCSA’)Enable proactive identification of key potential, operational risk and assessment of effectiveness of the controls in place to manage these risks within defined and acceptable risk tolerance and appetite levels.

Key Risk Indicator (‘KRI’)Process of continuous monitoring, measurable variables that are correlated with performance, losses or loss variability and track business, risk and control factors where applicable.

Internal and External Loss Data (‘ILD’)Actual losses that have taken place within the group. Near misses are reported and monitored.

Where gross loss amounts are recoverable a recovery process has been implemented and is monitored.

OPERATIONAL RISK

RISK UNIVERSE (continued)




Basel IIIBanking institutions have been advised by Bank of Namibia that all banking institutions that are considered ‘Domestically Systemically Important Banks (‘DSIB’)’ are required to implement Basel III. NBN has been notified in October 2017 that it has been designated as a DSIB. Bank of Namibia issued a circular in October 2017, providing a progress update on Basel III capital standards implementation, revised timelines and indicating Bank of Namibia’s intention to implement Basel III liquidity standards. The implementation timelines indicate that BID-5A is to become effective in March 2018. NBN is presently preparing for the implementation of Basel III capital standards in 2018.

The circular also sets out a timeline for the implementation of Basel III liquidity standards for DSIBs, introducing the Liquidity Coverage Ratio (‘LCR’) and the Net Stable Funding Ratio (‘NSFR’), with industry consultation to commence in the second half of 2018.

INTERNAL CAPITAL ADEQUACY PROCESS (‘ICAAP’)The Bank of Namibia requires that Namibian banking institutions review and evaluate their ICAAP annually and report thereon by submitting an ICAAP report to Bank of Namibia (per BID-20).

The ICAAP is aligned with Basel II Pillar 2 processes and comprises a bank’s procedures and measures designed to ensure:a) an appropriate identification and measurement of risks;b) an appropriate level of internal capital in relation to the

bank’s risk profile; andc) application and further development of suitable risk

management systems in the bank.

The capital management (incorporating ICAAP) responsibilities of the board and management are incorporated in their respective terms of reference and are assisted by the board’s GRCMC, ALCO and EXCO, respectively.

It is the responsibility of the board to review the outcome of the ICAAP annually and provide constructive feedback to management to improve the ICAAP, based on their assessment. The board has, on recommendation of the GRCMC, approved the 2016 ICAAP report, which was submitted to Bank of Namibia. The board is satisfied that the capital levels (both regulatory capital (‘ReCap’) and internal capital assessment (‘ECap’) are appropriate and believe that NBN is strongly capitalised relative to its business activities, strategy, risk appetite, risk profile and the external environment in which the bank operates. As the ICAAP is a forward-looking process, it takes into consideration capital and risk projections and additionally applies stress scenarios on such projections. Additionally, the board is satisfied with the overall effectiveness of the processes relating to corporate governance, internal controls, risk management, capital management and capital adequacy.The 2017 ICAAP report will be tabled for board approval and subsequent submission to Bank of Namibia in 2018.A comprehensive risk report by the CRO is disclosed on page 28.

NNH GROUP SUBSIDIARIES

NedNamibia Life Assurance Company Limited (‘NNLA’);NedPlan Insurance Brokers Namibia (Proprietary) Limited (‘NIBN’); NedCapital Namibia (Proprietary) Limited and NedProperties (Proprietary) Limited

These companies are wholly owned subsidiaries of NNH. The companies’ internal control environments are monitored by the GAC while the GRCMC monitors the companies’ capital management as well as their risk management, information technology and compliance environments. Both committees report into the NNH board.

The board composition of both companies is compliant with King III, NAMFISA and The NamCode in terms of independence and the boards’ sizes are compliant with the companies’ articles of association.

* On 20 June 2017 Mr Reginald Blumeris resigned both as an employee from Nedbank Group and as director from the NNLA board. As an interim measure, Mr Walter Marte (interim Executive Head: Nedbank Insurance – Nedbank Group) will attend NNLA board meetings as an invitee.



Peters Rolf H (Chairperson) 29 October 2003 German 70 No change

Etzolt Ulrich M 1 September 2015 Namibian 47 No change

Hiwilepo Trophimus T 14 June 2016 Namibian 52 No change

Niddrie Richard P 14 June 2016 Namibian 63 No change

Tjipueja Patterson K 25 September 2014 Namibian 53 No change


* Blumeris Reginald L 14 June 2016 South African 45 Resigned 20/06/2017

Matthews Lionel J 30 September 2013 Namibian 53 No change

Executive director

Vermeulen Gilliam JG 1 March 2016 Namibian 52 No change

Composition of NNLA Board

DIRECTORS’ DECLARATION

The directors of NedNamibia Holdings Limited 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.

Composition of NIBN board

Appointment date Nationality Age


Peters Rolf H (Chairperson) 1 January 2015 German 70

Etzolt Ulrich M 15 October 2015 Namibian 47

Tjipueja Patterson K 15 October 2015 Namibian 53

Non-executive director

Meeks Richard 9 March 2016 Namibian 48

Executive director

Erasmus Monique A 15 February 2016 Namibian 41

DIRECTORS’ REMUNERATION The directors of NNL and NIBN only receive a basic fee, which is paid monthly on a pro-rata basis and rounded up to the nearest N$500. Directors’ fees are only paid to independent non-executive directors.

The following directors’ fees were approved for NNL and NIBN for the 2017 financial year:

NEDNAMIBIA LIFE ASSURANCE COMPANY LIMITED NEDPLAN INSURANCE BROKERS NAMIBIA (PROPRIETARY) LIMITED Annual Directors’ Remuneration



No directors’ fees are paid to directors of the other smaller subsidiaries in the group.

THE BASEL CAPITAL ACCORD (continued)



INSURANCE RISK COMMITTEE (IRC)

*GROUP RISK ANDCAPITAL MANAGEMENT COMMITTEE

*GROUP DIRECTORS’AFFAIRS COMMITTEE

*GROUP REMUNERATION, HUMAN RESOURCES, TRANSFORMATION, SOCIAL AND ETHICS COMMITTEE

*GROUP AUDITCOMMITTEE

CREDIT RISK AND MONITORING COMMITTEE (MONITORING CRAM)

GROUP ENTERPRISEWIDE RISK MANAGEMENT COMMITTEE (ERCO)

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

VENDOR AND PROCUREMENT MANAGEMENT COMMITTEE

PRODUCT AND PRICING COMMITTEE

TRANSFORMATION AND HUMAN CAPITAL COMMITTEE

SOCIAL INVESTMENT COMMITTEE

TENDER MANAGEMENTCOMMITTEE

FINANCIAL CRIME COMMITTEE

GO GREENCOMMITTEE

HIGH RISK CLIENTCOMMITTEE

OPERATIONAL COMMITTEE (OPCO)

INFORMATION AND COMMUNICATION TECHNOLOGY COMMITTEE (ICTC)

FORMAL RECOGNITION COMMITTEE

HEALTH AND SAFETYCOMMITTEE

BANK CREDITCOMMITTEE

ASSET AND LIABILITY COMMITTEE (ALCO)

OPERATIONAL DISTRIBUTION COMMITTEE

* Group relates to NedNamibia Holdings Group

31 December 2017

GROUP GOVERNANCESTRUCTURE

NEDNAMIBIA HOLDINGS LIMITEDBOARD OF DIRECTORS

NEDBANK NAMIBIA LIMITEDBOARD OF DIRECTORS

GROUP EXECUTIVE COMMITTEE (EXCO)

NEDPROPERTIES(PROPRIETARY) LIMITEDBOARD OF DIRECTORS

NEDCAPITAL NAMIBIA(PROPRIETARY) LIMITEDBOARD OF DIRECTORS

NEDPLAN INSURANCE BROKERS NAMIBIA (PROPRIETARY) LIMITEDBOARD OF DIRECTORS

NEDNAMIBIA LIFEASSURANCE COMPANY LIMITEDBOARD OF DIRECTORS

NEDBANK NAMIBIA LIMITEDBOARD OF DIRECTORS




Accounting, Financial and Taxation Risk

Concentration Risk

CreditRisk

Conduct Risk

Operational Risk

Regulatory Risk

Financial Crime Risk

Information Technology

RiskLiquidity and Funding Risk

Business and Strategic

(execution) RiskCapital

RiskReputational

Risk

Insurance Risk (including non-banking risks)

Governance and Compliance

Risk

Transformation, Social and

Environmental RiskPeople

Risk

Market Risk

TradingBook

BankingBook

RISKUNIVERSE

KEY FEATURES OF THE ERMF

BOARD COMMITTEES

BUSINESS COMMITTEES

1. The board of directors is ultimately responsible for all risks in the NedNamibia Holdings Limited and its subsidiaries (NNH Group), approval and oversight of the risk measurement and management system and the setting of risk appetite.

2. The ERMF provides the foundation and underpins the entire risk management structure and system of the NNH Group (implementation, monitoring, reporting and remediation).

•StrongemphasisintheERMFisplacedonindividualaccountabilityandnotonunduerelianceoncommittees. •Riskmanagementframeworks(forallmajorrisktypes)areinplace. •Providesasetofsub-riskswhererelevant,toeachmainriskcategory. •ShowstheBoardCommitteesandtheirrespectiverolesasthefinaloversightandmonitoringfunctionfortheNNHGroup.

NedNamibia Holdings Board of DirectorsChairperson: TJ Frank **Independent Non-Executive Director

Nedbank Limited Board of DirectorsChairperson: TJ Frank *

Group Audit CommitteeChairperson: RP Niddrie *

Group Risk and Capital Management CommitteeChairperson: PCW Hibbit *

Group Remuneration, Human Resources, Social, Ethics and Transformation CommitteeChairperson: LM Muatunga *

Group Directors’ AffairsChairperson: TJ Frank *

Asset and Liability Committee (‘ALCO’)

Transformation and Human Capital Committee

Enterprisewide Risk Management Committee (‘ERCO’)

Internal Audit

Tender Committee

Divisional Enterprisewide Risk Forum

Operational Distribution Committee (‘ODC’)

Bank Credit Committee

Insurance Risk Committee (‘IRC’)

Go Green Committee

Payment Steerco

Pricing and Product Committee

Information and Communication Technology Committee

Credit Risk and Monitoring Committee (‘CRAM’)

External Audit Group Internal Audit

Legal

Employee Equity Forum

Financial Crime Committee

Social Investment Committee

Compliance and Ethics

Regulatory Risk and Compliance Forum

Vendor and Procurement Management Committee

Health and Safety Committee

Enterprisewide Risk Management

Exco Plus Forum

Formal Recognition Committee

High Risk Client Committee

Financial Crime: Forensic Services, AML/CFT/SANCTIONS

•DepictsthestructureoftheExecutivemanagementcommitteesandtheirrolesandresponsibilitiesfortheproper,efficientandeffective functioning of the NNH Group’s business.

•ReportingPhilosophy–ProvidesareportingstructurefrombusinessunitsthroughtotheBoard.

3. Three Lines of Defence Model - Sets out and positions the Three Lines of Defence model across the NNH group and the role and responsibility of each within the overall framework.

•Primaryresponsibilityandaccountabilityfortherisksoriginatinginthebusinessesareclearlyassignedtotherespectiveheadsofdepartment and executives.

4. The Chief Risk Officer reports to the Managing Director, who has ultimate individual accountability for risk.

1ST LINE OF DEFENCE

2ND LINE OF DEFENCE

3RD LINE OF DEFENCE

Board of Directors

Executive Committee (EXCO)

Operational Committee (OPCO)

Group Risk

Internal and External Audit

ENTERPRISEWIDE RISK MANAGEMENT FRAMEWORK (‘ERMF’)



The directors are responsible for the preparation and fair presentation of the consolidated and separate annual financial statements of NedNamibia Holdings Limited. The consolidated and separate annual financial statements presented on pages 74 to 77 (section relating to risk management and governance) and 90 to 178 have been prepared in accordance with International Financial Reporting Standards (‘IFRS’) and interpretations issued by the International Accounting Standards Board (‘IASB’), as well as the Companies Act of Namibia and the Namibian Banking Institutions Act and include amounts based on judgments and estimates made by management. The directors have also sanctioned other information included in the integrated annual report, since they are responsible for both its accuracy and consistency.

The directors set the standards for internal control to reduce the risk of error or loss in a cost effective manner. 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 the 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 board approved 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 audit report of the independent auditors is presented on pages 88 to 89.

To the best of their knowledge and belief, based on the above, the directors are satisfied that, other than the AML and EXCON control gaps that were identified in 2017, no material breakdown in the operation of the systems of internal control and procedures has occurred during the year under review.

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

T J FRANK (SC)Chairman

L J MATTHEWSManaging Director

The consolidated annual financial statements of NedNamibia Holdings Limited were approved by the NedNamibia Holdings board of directors on 17 May 2018 and are signed on its behalf by:

STATEMENT OF ASSETS, LIABILITIES, EXCESS ASSETS AND CAPITAL REQUIREMENTS 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

2017 2016 N$ N$

Value of assetsTotal value of assets per statement of financial position 217 366 167 247 072 271 Value of assets on the published basis 217 366 167 247 072 271 Less liabilities: Actuarial value of policy liabilities 103 910 731 99 534 898 Current and other liabilities 5 842 213 5 506 399

Excess of assets over liabilities 107 613 223 142 030 974

Represented by:Share capital and premium 4 000 000 4 000 000 Accumulated surplus 103 613 223 138 030 974

Ordinary shareholder’s interest 107 613 223 142 030 974

2017 2016 N$ N$

Value of assetsTotal value of assets per statement of financial position 217 366 167 247 072 271 Less: Disallowed assets 7 232 194 7 091 783 Value of assets on the statutory basis 210 133 973 239 980 488 Less liabilities: Actuarial value of policy liabilities 103 910 731 99 534 898 Current and other liabilities 5 842 213 5 506 399

Excess of assets over liabilities 100 381 029 134 939 191

Capital adequacy requirement (‘CAR’) 8 054 737 4 000 000

Excess of assets over liabilities as a multiple of CAR 12 times 34 times

ACTUARIAL BALANCE SHEET – STATUTORY REPORTING BASISThe excess of assets over liabilities on the Statutory Reporting Basis is shown in the table below:


DIRECTORS’RESPONSIBILITY



ANALYSIS OF CHANGE IN EXCESS ASSETS

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

CHANGES IN VALUATION METHODS AND ASSUMPTIONSThe value of the liabilities increased by N$2.2 million (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 assumption was reviewed in light of recent experience. In addition, the contingency reserve of N$2.5 million held last year was increased to N$4 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 ie 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 Namibian Long-Term Insurance Act.

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

The decrement assumptions are based on prudent best estimates of the expected experience. The main assumptions, before allowing for prescribed margins, were as follows: ▸ 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 4.95% p.a. (gross of tax) per annum was used; and,▸ Expense inflation was assumed to be 5.3% 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$5.8 million 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 9). The elimination of negative reserves was included as a discretionary margin and amounted to N$1.2 million.

CAPITAL ADEQUACY REQUIREMENTThe capital adequacy requirement (‘CAR’) is calculated, in accordance with SAP104 (version 9) (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 exceeded the termination capital adequacy requirement (‘TCAR’) at the valuation date, and thus the capital adequacy requirements have been based on the OCAR. This amounts to N$8.1 million. However, Namibian regulation requires that a Life Company with multiple products hold at least N$4 million in capital. Therefore current CAR for NedNamibia Life Assurance is in excess of N$4 million and sufficient as per regulations. The excess assets are 12 times the capital adequacy requirement (2016: 34 times).

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 2017, 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.

SVENJA PORIAZIS (FASSA) Statutory Actuary for NedNamibia Life Assurance Company LimitedQED Actuaries and Consultants

14 May 2018

2017 2016 N$ N$

Excess assets as at end of reporting period 107 613 223 142 030 974 Excess assets as at beginning of reporting period 142 030 974 207 039 852

Change in excess assets over the reporting period (34 417 751) (65 008 878)

This change in the excess is due to the following factors:Investment return generated Investment income plus capital gains 20 191 939 22 863 019 Total investment return 20 191 939 22 863 019 Operating profit 48 677 159 56 135 684 Changes in valuation methods and assumptions (2 180 191) 7 441 318Taxation (1 106 658) (1 448 899) Total reported earnings per financial statements 65 582 249 84 991 122Dividends paid (100 000 000) (150 000 000)

Total change in excess assets (34 417 751) (65 008 878)

Reconciliation to reported earnings:Total earnings as per above table 65 582 249 84 991 122 Reported earnings in the financial statements 65 582 249 84 991 122

Difference – –

2017 2016 N$ N$

Excess assets on Published Reporting Basis 107 613 223 142 030 974 Less: Disallowed assets 7 232 194 7 091 783

Excess assets on Statutory Basis 100 381 029 134 939 191

RECONCILIATION OF EXCESS ASSETS BETWEEN PUBLISHED REPORTING BASIS AND STATUTORY BASISThe excess assets on the published basis reconcile to the excess assets on the statutory basis as follows:

STATUTORYACTUARY’S REPORT

To the Member of NedNamibia Life Assurance Company Limited



INDEPENDENT AUDITOR’S REPORT

To the Shareholder of NedNamibia Holdings Limited

OPINIONWe have audited the consolidated and separate financial statements of NedNamibia Holdings Limited and its subsidiaries (the Group), which comprise the consolidated and separate statements of financial position as at 31 December 2017 and 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 consolidated and separate financial statements, including a summary of significant accounting policies and other explanatory notes and the Report of the directors as set out on pages 74 to 77 (section relating to risk management and governance) and 90 to 178.

In our opinion, the consolidated and separate financial statements present fairly, in all material respects, the consolidated and separate financial position of the NedNamibia Holdings Limited (the Company) and its subsidiaries (together the Group) as at 31 December 2017 and its consolidated and separate financial performance and consolidated and separate 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 Financial Statements section of our report. We are independent of the Group 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.

OTHER INFORMATIONThe directors are responsible for the other information. The other information comprises content under the following subheadings:

▸ 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 ▸ Value added statement

▸ Corporate governance and ethics review,▸ Group governance structure▸ Enterprisewide risk management framework▸ Directors’ responsibility▸ Statutory actuary’s report▸ Contact details

The other information does not include the consolidated and separate financial statements and our auditor’s report thereon.

Our opinion on the consolidated and separate financial statements does not cover the other information and we do not express an audit opinion or any form of assurance conclusion thereon.

In connection with our audit of the consolidated and separate financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated and separate financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

If based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

RESPONSIBILITIES OF THE DIRECTORS FOR THE 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’s and the 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 and/or the Company or to cease operations, or have no realistic alternative but to do so.

AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE 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’s and the 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’s and/or the 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/or the Company to cease to continue as a going concern.

▸ 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 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: 9407PO Box 47, Windhoek, Namibia

ERWIN TJIPUKA PartnerWindhoek17 May 2018




REPORT OF THEDIRECTORS

SPECIAL RESOLUTIONSSpecial resolutions passed by company and subsidiariesNo special resolutions were passed by NedNamibia Holdings Limited or any of its subsidiaries during the period under review.

POST BALANCE SHEET EVENTSThe directors are not aware of any material post-balance sheet events that have occurred between the balance sheet date and 17 May 2018.

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 2017. 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 accordance with International Financial Reporting Standards (‘IFRS’) and Interpretations issued by the International Accounting Standards Board (‘IASB’), as well as the Companies Act of Namibia and the Namibian Banking Institutions Act and include amounts based on judgments and estimates made by management.

INTEGRATED REPORTThe NedNamibia Holdings group integrated report is produced and published annually and covers the period 1 January to 31 December 2017. The directors are committed to the principles of integrated reporting. Our integrated reporting process as well as the contents of this report are guided by 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. In compiling this integrated report, cognisance was also taken of the principles contained in King IV, the fundamental concept of which is value creation that is accomplished in a sustainable manner by operating in the triple context of the economy, society and the environment. Our thinking and our approach to long-term value creation are aligned with these principles, which allow us to tell a clear and comprehensive story about how value is created through strategy and how we deliver on our purpose to see money differently.

NATURE OF THE BUSINESSNedNamibia Holdings is a Namibian registered holding company which, through its subsidiaries, is a diversified financial services provider, offering a wide range of wholesale and retail banking services as well as insurance, asset management and wealth management solutions. 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 7 of this report.

REGISTERED AND BUSINESS ADDRESSThe 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

Registration number: The company’s registration number is 91/075.

Country of incorporation: Republic of Namibia

COMPANY SECRETARYMrs Saretha Louw has resigned as group company secretary with effective date 16 November 2017. Mrs Lizelle Engels will perform the group company secretary’s duties until the position has been permanently filled.

AUDITORSDeloitte & Touche will continue in office in accordance with Section 278 (2) of the Companies Act.Physical address: Deloitte Building, Maerua Mall Complex, Jan Jonker Road, Windhoek, NamibiaPostal address: P O Box 47, Windhoek, Namibia

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; P O Box 2401, Windhoek, Namibia.

FINANCIAL RESULTS FOR THE YEAR Full details of the consolidated annual financial results are set out on pages 90 to 178 of this report.

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.

SHARE CAPITALNedNamibia Holdings Limited has an authorised share capital of 80 000 000 ordinary shares with a nominal value of 25 cents each. The company’s issued share capital comprises 70 381 644 ordinary shares. At the annual general meeting held on 30 June 2017 the shareholder placed the unissued share capital of 9 618 356 ordinary shares under the control of the directors until the next annual general meeting.

DIVIDENDSA dividend of N$200 million was declared and paid in the year under review (2016: nil).

PROPERTY AND EQUIPMENTThe group’s property and equipment are disclosed in note 12 of the annual financial statements.

BOARD OF DIRECTORSAt the annual general meeting held in terms of Section 187(9) of the Companies Act, Act 28 of 2004, on 30 June 2017, the following directors who retired by rotation in accordance with the provisions of the company’s articles of association, made themselves available for re-election and were duly elected as directors of the company for a further term:

▸ Mr. Theo Frank

▸ Mrs. Liina Muatunga

▸ Ms. Afra Schimming-Chase

On 27 November 2017, Mr Richard Buchholz resigned as director of NedNamibia Holdings Limited.

After a 25-year journey with Nedbank Group Limited, Mr Adriaan du Plessis has elected to go on early retirement with effective date 1 April 2018. He will remain a director of NBN and NNH.

Post the reporting period, Mr Ramon Lorenzo Maasdorp was appointed as director of NedNamibia Holdings Limited, with effect from 9 February 2018. Mr Maasdorp is a practicing member of the Society of Advocates of Namibia. As part of the board succession planning his appointment aims to provide legal expertise to the boards, as the chairperson of the board, Mr Theo Frank (Senior Council), has indicated that he will be retiring from the board at the expiration of his tenure in 2019.

The board succession planning will continue to receive focus to ensure that the board composition comprises the appropriate mix of skills and experience.


Independent non-executive directors Frank Theo J (SC) (Chairperson) 11 February 2005 Namibian 66 No changeHibbit Peter CW 12 May 2016 South African 68 No changeHiwilepo Trophimus T 22 August 2014 Namibian 52 No changeMaasdorp Ramon L 9 February 2018 Namibian 38 Appointed 9 February 2018Muatunga Liina M 22 August 2014 Namibian 50 No changeNiddrie Richard P 6 November 2014 Namibian 63 No changeSchimming-Chase Afra R 22 August 2014 Namibian 45 No changeNon-executive directors Buchholz Richard WR 19 August 2014 South African 59 Resigned 27 November 2017Du Plessis Adriaan J 19 August 2014 South African 58 No changeExecutive directors Altmann Karl-Stefan (Chief Financial Officer) 22 June 2016 Namibian 41 No changeMatthews Lionel J (Managing Director) 30 September 2013 Namibian 53 No change

The profiles and qualifications of the members of the board are disclosed on page 8 of this report. The board conveys its appreciation to the outgoing director, Mr Richard Buchholz, for his dedicated services and constructive contribution to board and board committees deliberations during his term of office.

DIRECTORS EMOLUMENTSDirectors’ emoluments are disclosed on pages 55 to 56 of this report.

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 INTERESTDuring the period under review, a contract had been entered into between Chase & Associates CC (represented by Ms Afra Schimming-Chase) and Nedbank Namibia, whereby a personal financial wellness service was provided to financially distressed employees in the group on a once-off basis. The board has ratified the contract, since it believed that all employees in the group would benefit from the services.

No other contracts in which directors of the company have an interest and that significantly affect the affairs of the business of the company or any of its subsidiaries were entered into during the year under review.

The composition of the board during the year and to the date of this report was as follows:

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

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 Company Limited Long-term insurance 4 000 000 ordinary shares 100%NedPlan Insurance Brokers Insurance broker 100 ordinary shares 100%Namibia (Proprietary) LimitedNedProperties (Proprietary) Limited Property holding company 100 ordinary shares 100%

INTEREST IN SUBSIDIARIESAs at 31 December 2017, NedNamibia Holdings had the following directly held subsidiaries:




CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 December 2017

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME


Notes 2017 2016

N$’000 N$’000

Interest and similar income 1 590 899 1 383 521 Interest expense and similar charges (843 011) (701 099)

Net interest income 28 747 888 682 422 Impairment of loans and advances 30 (60 626) (41 091)

Income from lending activities 687 262 641 331 Non-interest income 29 334 205 323 773 Share of profit from associate 11 1 747 1 921

Net income excluding impairments 1 083 840 1 008 116

Net income 1 023 214 967 025 Operating expenditure 31 (631 225) (583 347) Transfers to policyholder liabilities under insurance contracts 32 (4 376) 763 BEE transaction expenses 33 (2 778) (2 282)

Profit before taxation 384 835 382 159 Taxation 34 (81 329) (81 069)

Total profit after taxation 303 506 301 090

Other comprehensive income net of taxation

Items that will not be reclassified subsequently to profit or loss: Gain on revaluation of property 3 150 3 039 Remeasurement of defined benefit liability 23 –

Items that may be reclassified subsequently to profit or loss: Available-for-sale financial instrument reserve 11 589 (368)

Total other comprehensive income net of taxation 14 762 2 671

Total comprehensive income for the year 318 268 303 761

Total profit after tax attributable to: Non-controlling interest 995 964 Owners of the parent 302 511 300 126


Total comprehensive income attributable to: Non-controlling interest 995 964 Owners of the parent 317 273 302 797

Total comprehensive income for the year 318 268 303 761

Earnings per share (cents) 36 429,81 426,42 Diluted earnings per share (cents) 36 429,81 426,42

Notes 2017 2016

N$’000 N$’000

ASSETS

Cash and balances with central bank 4 497 144 384 529

Due from other banks 5 902 147 577 936 Other short-term securities 6 1 504 298 1 704 058 Derivative financial instruments 7 35 065 16 844 Government and other securities 8 1 797 774 1 663 147 Loans and advances to customers 9 11 843 645 11 225 366 Other assets 10 110 693 139 919 Investment in subsidiaries, associatesand listed investments 11 50 735 37 399 Property and equipment 12 227 413 222 770 Computer software and development cost 13 47 469 36 843 Goodwill 14 29 125 29 125

Total assets 17 045 508 16 037 936

EQUITY AND LIABILITIES

Capital and reservesShare capital 15 17 595 17 595 Share premium 15 99 536 99 536 General risk reserve 16 110 891 88 766 Revaluation reserve 17 86 078 85 862 Share-based payment reserve 18 – 16 705 Available-for-sale reserve 19 26 979 15 390 Retained income 1 987 442 1 887 644

Shareholder’s interest 2 328 521 2 211 498 Non-controlling interest 13 548 12 803

Total shareholder’s equity and non-controlling interest 2 342 069 2 224 301

LIABILITIES

Derivative financial instruments 7 20 490 11 644 Due to other banks 20 1 809 624 995 139 Due to customers 21 7 482 478 7 378 000 Negotiable certificates of deposit 22 4 800 478 5 055 985 Other liabilities 23 161 516 155 432 Deferred taxation liabilities 24 102 043 102 488 Policyholder liabilities under insurance contracts 25 103 911 99 535 Provision for post-retirement medical benefits 26 10 213 9 813 Long-term subordinated debt instruments 27 212 686 5 599

Total liabilities 14 703 439 13 813 635

Total equity and liabilities 17 045 508 16 037 936

92 2017 GROUP ANNUAL FINANCIAL STATEMENTS 932017 NEDNAMIBIA HOLDINGS LIMITED92 2017 GROUP ANNUAL FINANCIAL STATEMENTS 932017 NEDNAMIBIA HOLDINGS LIMITED


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 2016 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) – – –

Balance at 31 December 2016 17 595 99 536 88 766 85 862 16 705 15 390 1 887 644 2 211 498 12 803 2 224 301

Total comprehensive income for the year – – – 3 150 – 11 589 302 534 317 273 995 318 268 Profit for the year – – – – – – 302 511 302 511 995 303 506 Other comprehensive income for the year – – – 3 150 – 11 589 23 14 762 – 14 762 Non-controlling interest dividends – – – – – – (250) (250) (250) (500) Dividend paid (note 35) – – – – – – (200 000) (200 000) – (200 000) Transfers – – – (2 934) – – 2 934 – – – General risk reserve – – 22 125 – – – (22 125) – – –Share based payments reserve movement – – – – (16 705) – 16 705 – – –

Balance at 31 December 2017 17 595 99 536 110 891 86 078 – 26 979 1 987 442 2 328 521 13 548 2 342 069

Notes 15 15 16 17 18 19


Notes 2017 2016

N$’000 N$’000

Cash flows from operating activities 37.1 424 924 695 041 Cash received from customers 37.2 1 908 496 1 662 129 Cash paid to customers 37.3 (844 325) (599 313)Cash paid to employees and suppliers (603 026) (538 594)Dividends received 1 695 2 722 Taxation paid 37.4 (93 816) (81 007)Recoveries of loans previously written off 30.1 10 038 (6 149) Cash movements in advances and other accounts (626 955) (1 542 211)Cash movements in operating liabilities 37.6 672 817 1 797 464

Cashflows from/(utilised by) financing activities – – Issue of long-term debt instruments 200 000 – Dividends paid to ordinary shareholders 37.5 (200 000) –

Cash flows from investment activities 11 902 (1 349 355)

Investment in property, equipment, computer software and development cost (42 653) (22 089)Proceeds on sale of property and equipment 412 187 Sale/(Purchase) of non-dealing securities 37.7 54 143 (1 327 453)

Net increase /(decrease) in cash and cash equivalents 436 826 (654 314) Cash and short-term funds at beginning of the year 962 465 1 616 779

Cash and short-term funds at end of the year 37.8 1 399 291 962 465

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

CONSOLIDATED STATEMENT OF CASH FLOWS




1. BASIS OF PREPARATION

The financial statements of NedNamibia Holdings (the ‘company’) and its subsidiaries together, (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 Dollars. 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 group 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

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 74 to 77. 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.


NOTES TO THE CONSOLIDATEDANNUAL FINANCIAL STATEMENTS

Effective for annual periods beginningNew/Revised International Financial Reporting Standards Issued/Revised on or after

IFRS 12 Disclosure of Interests in Other Entities November 2013 1 January 2017

– Clarification of the scope of the disclosure requirements in IFRS 12

IAS 7 Disclosure Initiative – Amendments January 2016 1 January 2017

IAS 12 Recognition of Deferred Tax Assets for Unrealised Losses January 2016 1 January 2017

– Amendments

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:



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.

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.

DESCRIPTION

IFRS 9 – Financial Instruments

Clarification of the scope of the disclosure requirements in IFRS 12IFRS 9: Financial Instruments (IFRS 9) was issued in July 2014 and will replace IAS 39: Financial Instruments: Recognition and Measurement. The standard is effective for financial years commencing on or after 1 January 2018. 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 financial assets measured at amortised cost and fair value through other comprehensive income (‘FVTOCI’). IFRS 9’s enhanced disclosure requirements will result in improved presentation of risk management strategy and increased transparency. A description of the expected impact of IFRS 9 on the group’s statement of financial position and performance, are discussed in detail below.

The group will implement IFRS 9 with effect from 1 January 2018, with the impact of the cumulative adjustment reflected as an adjustment to opening retained income.

Classification and measurementAll financial assets under IFRS 9 continue to be initially recognised at fair value, including directly attributable transactions costs for financial assets not measured at fair value through profit or loss (‘FVTPL’).

Financial assets are to be classified based on (i) the business model within which the financial assets are managed and (ii) the contractual cash flow characteristics of the financial assets (whether the cash flows represent ‘solely payment of principal and interest’). Financial assets are measured at amortised cost if they are held within a business model whose objective is to hold those assets for the purpose of collecting contractual cash flows and those cash flows comprise solely payments of principal and interest (‘hold to collect’). Financial assets are measured at fair value through other comprehensive income if they are held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets, and those contractual cash flows comprise solely payments of principal and interest (‘hold to collect and sell’). Movements in the carrying amount of these financial assets should be taken through other comprehensive income (‘OCI’), except for impairment gains or losses, interest revenue and foreign exchange gains or losses, which are recognised in profit or loss. Where the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss.

The remaining financial assets are measured at FVTPL. All derivative instruments that are either financial assets or financial liabilities will continue to be classified as held for trading and measured at FVTPL.

The accounting for financial liabilities is largely unchanged, except for financial liabilities designated at FVTPL. Changes in the fair value of these financial liabilities that are attributable to the group’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.

Impairments: IFRS 9’s expected credit loss modelImpairments in terms of IFRS 9 will be determined based on an expected credit loss (‘ECL’) model rather than the current incurred loss model required by IAS 39. The group will be required to recognise an allowance for either 12-month or lifetime 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 ECL model applies to financial assets measured at amortised cost and FVTOCI, lease receivables and certain loan commitments as well as financial guarantee contracts.

The IFRS 9 Impairment Implementation continued to progress during 2017. The following were the main areas of focus for 2017:▸ Implementation of an IT framework facilitating efficient

model management;▸ Development, building and testing of models with respect to

a substantial portion of the group’s portfolios, leveraging off the aforementioned IT framework;

▸ Finalisation of the reporting and disclosure framework, and completion of the supporting business rules; and

▸ Documentation and implementation of the relevant control environment and related governance processes.

Significant development in the above areas facilitated the performance of a parallel run for the group’s significant portfolios during the latter part of 2017.

The following areas will continue to receive the required attention as the implementation of IFRS 9 progresses during the 2018 financial reporting period:▸ Development, building and testing of certain models

currently not operating within the IT framework.

The group has estimated that the impact of adopting IFRS 9’s ECL model is a transitional impact on the group’s opening retained income at 1 January 2018 will be N$ 110 million.



2. ADOPTION OF NEW AND REVISED STANDARDS (continued)

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 group 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, except for the IFRS 9 impact. However, the directors anticipate that the adoption of the recent standards and interpretations, other than IFRS 9, will have no material impact on the annual financial statements in future periods, except for disclosure to the annual financial statements.

Effective for annual periods beginningNew/Revised International Financial Reporting Standards Issued/Revised on or after

IFRS 9 Financial Instruments – Amendments July 2014 1 January 2018

IFRS 15 Revenue from Contracts with Customers April 2016 1 January 2018

IFRS 2 Classification and measurement of Share-based Payment Transactions June 2016 1 January 2018

– Amendments

IFRS 4 Insurance Contracts – Amendments September 2016 1 January 2018

IFRS 16 Leases – Replaces IAS 17 January 2016 1 January 2019

IFRS 9 Financial Instruments – Prepayment Features with Negative Compensation October 2017 1 January 2019

IFRS 3 Business Combinations – Previously held Interests in joint operation December 2017 1 January 2019

IFRS 11 Joint Arrangements – Previously held Interests in joint operation December 2017 1 January 2019

IFRS 17 Insurance Contracts May 2017 1 January 2021

IFRIC 22 Foreign Currency Transactions and Advance Consideration December 2016 1 January 2018

IFRIC 23 Uncertainty over Income Tax Treatments June 2017 1 January 2019

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

IAS 28 Long-term interests in Associates and Joint Ventures October 2017 1 January 2019

IAS 12 Income Taxes – Income tax consequences of payments on financial instruments December 2017 1 January 2019 classified as equity

IAS 23 Borrowing costs – Borrowing costs eligible for capitalisation December 2017 1 January 2019



2. ADOPTION OF NEW AND REVISED STANDARDS (continued)Recent amendments to standards and interpretations not effective in the current year (continued)

Hedge accountingIFRS 9 hedge accounting applies to all hedge relationships, with the exception of fair value hedges of the interest rate exposure of a portfolio of financial assets or financial liabilities (referred to as ‘fair value macro hedges’). NBN will adopt a fair value macro hedge accounting solution which accounts for changes in the fair value of interest rate risk. As a consequence, certain fixed-rate assets and liabilities previously designated at FVTPL, have been de-designated in terms of macro-hedging project.

For equity investments that are neither held for trading nor contingent consideration, the group may irrevocably elect to present subsequent changes in fair value of these equity investments in either (i) profit or loss (‘FVTPL’); or (ii) other comprehensive income (‘FVTOCI’). Where the equity investment 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.

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 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 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.

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.

IFRS 9 – Financial Instruments

Prepayment features with negative compensationUnder IFRS 9, a debt instrument can be measured at amortised cost or at fair value through other comprehensive income, provided that the contractual cash flows are ’solely payments of principal and interest on the principal amount outstanding’ (the SPPI criterion) and the instrument is held within the appropriate business model for that classification. The amendments to IFRS 9 clarify that a financial asset passes the SPPI criterion regardless of the event or circumstance that causes the early termination of the contract and irrespective of which party pays or receives reasonable compensation for the early termination of the contract.

The basis for conclusions to the amendments clarified that the early termination can result from a contractual term or from an event outside the control of the parties to the contract, such as a change in law or regulation leading to the early termination of the contract.

The amendments are intended to apply where the prepayment amount approximates to unpaid amounts of principal and interest plus or minus an amount that reflects the change in a benchmark interest rate. This implies that prepayments at current fair value or at an amount that includes the fair value of the cost to terminate an associated hedging instrument, will normally satisfy the SPPI criterion only if other elements of the change in fair value, such as the effects of credit risk or liquidity, are small.

Most likely, the costs to terminate a ‘plain vanilla’ interest rate swap that is collateralised, so as to minimise the credit risks for the parties to the swap, will meet this requirement.

Modification or exchange of a financial liability that does not result in derecognitionIn the basis for conclusions to the amendments, the IASB also clarified that the requirements in IFRS 9 for adjusting the amortised cost of a financial liability, when a modification (or exchange) does not result in derecognition, are consistent with those applied to the modification of a financial asset that does not result in derecognition.

This means that the gain or loss arising on modification of a financial liability that does not result in derecognition, calculated by discounting the change in contractual cash flows at the original effective interest rate, is immediately recognised in profit or loss.





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)Modification or exchange of a financial liability that does not result in derecognition (continued)

The IASB made this comment in the basis for conclusions to the amendments as it believes that the existing requirements in IFRS 9 provided an adequate basis for entities to account for modifications and exchanges of financial liabilities and that no formal amendment to IFRS 9 was needed in respect of this issue.The amendments must be applied retrospectively; earlier application is permitted. The amendment provides specific transition provisions if it is only applied in 2019 rather than in 2018 with the remainder of IFRS 9.

IFRS 3 – Business Combinations

Previously held interests in joint operationThe amendments clarify that, when an entity obtains control of a business that is a joint operation, it applies the requirements for a business combination achieved in stages, including remeasuring previously held interests in the assets and liabilities of the joint operation at fair value. In doing so, the acquirer remeasures its entire previously held interest in the joint operation. An entity applies those amendments to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 January 2019. Earlier application is permitted.

IFRS 11 – Joint Arrangements

Previously held interests in joint operationA party that participates in, but does not have joint control of, a joint operation might obtain joint control of the joint operation in which the activity of the joint operation constitutes a business as defined in IFRS 3. The amendments clarify that the previously held interests in that joint operation are not remeasured. An entity applies those amendments to transactions in which it obtains joint control on or after the beginning of the first annual reporting period beginning on or after 1 January 2019. Earlier application is permitted.

IFRS 17 – Insurance Contracts

The IASB issued IFRS 17 in May 2017 as a replacement for the IFRS 4 Insurance Contracts. The new IFRS 17 standard is effective for reporting periods beginning on or after 1 January 2021. The new rules will affect the financial statements and key performance indicators of all entities in the group that issue insurance contracts or investment contracts with discretionary participation features. The group will commence assessing the impact of IFRS 17.

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.

IFRIC 23 – Uncertainty over Income Tax Treatments

The interpretation addresses the accounting for income taxes when tax treatments involve uncertainty that affects the application of IAS 12. The interpretation does not apply to taxes or levies outside the scope of IAS 12, nor does it specifically include requirements relating to interest and penalties associated with uncertain tax treatments.

The interpretation specifically addresses the following:

▸ Whether an entity considers uncertain tax treatments separately.

▸ The assumptions an entity makes about the examination of tax treatments by taxation authorities.

▸ How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates.

▸ How an entity considers changes in facts and circumstances.

An entity has to determine whether to consider each uncertain tax treatment separately or together with one or more other uncertain tax treatments. The approach that better predictsthe resolution of the uncertainty should be followed.

The interpretation is effective for annual reporting periods beginning on or after 1 January 2019, but certain transition reliefs are available.

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 choice The 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.

Long-term interests in Associates and Joint Ventures The amendments clarify that an entity applies IFRS 9 Financial Instruments to long-term interests in an associate or joint venture to which the equity method is not applied but that, in substance, form part of the net investment in the associate or joint venture (long-term interests). This clarification is relevant because it implies that the expected credit loss model in IFRS 9 applies to such long-term interests.

The Board also clarified that, in applying IFRS 9, an entity does not take account of any losses of the associate or joint venture, or any impairment losses on the net investment, recognised as adjustments to the net investment in the associate or joint venture that arise from applying IAS 28 Investmentsin Associates and Joint Ventures.

Entities must apply the amendments retrospectively, with certain exceptions. Early application of the amendments is permitted and must be disclosed.

IAS 12 – Income Taxes

Income tax consequences of payments on financial instruments classified as equityThe amendments clarify that the income tax consequences of dividends are linked more directly to past transactions or events that generated distributable profits than to distributions to owners. Therefore, an entity recognises the income tax consequences of dividends in profit or loss, other comprehensive income or equity according to where the entity originally recognised those past transactions or events.

An entity applies those amendments for annual reporting periods beginning on or after 1 January 2019. Earlier application is permitted. When an entity first applies those amendments, it applies them to the income tax consequences of dividends recognised on or after the beginning of the earliest comparative period.

IAS 23 – Borrowing costs

Borrowing costs eligible for capitalisationThe amendments clarify that an entity treats as part of general borrowings any borrowing originally made to develop a qualifying asset when substantially all of the activities

necessary to prepare that asset for its intended use or sale are complete.

An entity applies those amendments to borrowing costs incurred on or after the beginning of the annual reporting period in which the entity first applies those amendments.

An entity applies those amendments for annual reporting periods beginning on or after 1 January 2019. Earlier application is permitted.

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.



3. SIGNIFICANT ACCOUNTING POLICIES(continued) 3.1 Basis of consolidation (continued)

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). 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 associates An 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.

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 instruments

Financial 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 at present. This accounting policy should be read in conjunction with the categorised statement of financial position, the group’s risk management policies, procedures in the Corporate Governance Report and the note on the adoption of new and revised standards (note 2).

(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.



3. SIGNIFICANT ACCOUNTING POLICIES(continued) 3.2 Financial instruments (continued) (ii) Initial measurement (continued)

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.

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.



3. SIGNIFICANT ACCOUNTING POLICIES(continued) 3.2 Financial instruments (continued) (v) Measurement basis of financial instruments (continued)Fair value (continued)

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;▸ 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:

▸ adverse changes in the payment status of borrowers in the group; or

▸ national or local economic conditions that correlate with defaults 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.

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 (ie arrears to be rectified within two to three months) are accepted on active accounts in arrears.

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:

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



3. SIGNIFICANT ACCOUNTING POLICIES(continued) 3.2 Financial instruments (continued)

(viii) Financial liabilities and equity instruments issued by the group

Classification 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 income

Financial 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) Collateral

Financial 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) Acceptances

Acceptances 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.

(xii) Financial guarantee contracts

Financial 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 transactions

Instalment 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 2017. 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 8.75% and 11.50% (2016: between 9.75% and 11.50%), rental income of between N$ 85 and N$ 240 (2016: N$ 85 and N$ 230) per m2 and total expenditure being 16.5% (2016: 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 years

Leasehold buildings 20 years

Furniture, fittings and equipment 10 years

Computer equipment 5 years

Motor vehicles 6 years



3. SIGNIFICANT ACCOUNTING POLICIES(continued) 3.4 Property and equipment (continued)

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 assets

The 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 Leases

The 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.

3.7 Taxation

Taxation 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 transactions

Transactions 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 possession

Unsold properties in possession are stated at the lower of the net outstanding amount at date of purchase and net realisable value.

3.10 Employee benefits

Short-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 group 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. SIGNIFICANT ACCOUNTING POLICIES(continued)

3.11 Provisions

Provisions 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 liabilities

The 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 costs

Borrowing 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 cost

Expenditure 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 recognition

Revenue 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 revenue

Dividend 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 payments

Equity-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.



3. SIGNIFICANT ACCOUNTING POLICIES(continued) 3.16 Share-based payments (continued)

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 (ie 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 equivalents

Cash 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 Standard of Actuarial Practice 104 (SAP104) (Version 9). 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 9) 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 9).

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 9). The FSV basis meets the minimum requirement of liability adequacy test.

Acquisition costs Acquisition costs for insurance contracts represent commission that relates 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.

2017 2016 N$’000 N$’000

4. CASH AND BALANCES WITH CENTRAL BANK Financial assets classification: Amortised cost Bank notes and coins 125 877 120 673 Balances with central bank - other than mandatory reserve deposit 223 228 131 330 Cash and balances with central bank excluding mandatory reserve 349 105 252 003 Mandatory reserve deposit with central bank 148 039 132 526

497 144 384 529

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 888 099 449 161 Financial assets classification: Designated at fair value through profit and loss Foreign Correspondents 14 048 12 904 Financial assets classification: At fair value through profit and loss – held for trading Deposits placed under reverse repurchase agreements – 115 871

902 147 577 936

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 427 286 559 456 Money market funds 1 077 012 1 144 602 1 504 298 1 704 058

6.2 Expected maturity structure One year or less 1 453 515 1 704 058 Five years or less but over one year 50 783 – 1 504 298 1 704 058

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 2017. 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.

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

2017 2017 2017 N$’000 N$’000 N$’000 Notional Positive Negative principal value value

Exchange rate derivatives Forwards 353 675 27 944 17 282 353 675 27 944 17 282

Interest rate derivatives Interest rate swaps 1 108 800 7 121 3 208 1 462 475 35 065 20 490

2017 2016 N$’000 N$’000

7.1 Total carrying amount of derivative financial instruments Gross carrying amount of assets 35 065 16 844 Gross carrying amount of liabilities (20 490) (11 644)

Net carrying amount 14 575 5 200

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 2017 Maturity analysis Under one year 27 944 – 27 944 One to five years – 6 644 6 644 Over five years – 477 477

27 944 7 121 35 065

2016 Maturity analysis Under one year 15 558 1 286 16 844 One to five years – – – Over five years – – –

15 558 1 286 16 844

Negative fair value of derivatives

2017 Maturity analysis Under one year 17 282 – 17 282 One to five years – 3 208 3 208 Over five years – – –

17 282 3 208 20 490

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

Notional principal of derivatives

2017 Maturity analysis Under one year 353 675 – 353 675 One to five years – 1 057 800 1 057 800 Over five years – 51 000 51 000

353 675 1 108 800 1 462 475

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



2017 2016

N$’000 N$’000

8. GOVERNMENT AND OTHER SECURITIES8.1 Investment portfolio Financial assets classification: At fair value through profit and loss – held for trading Treasury bills 1 170 695 963 292 Government registered stock 309 237 265 985 Credit Linked Notes 294 424 398 910

Financial assets classification: Designated at fair value through profit and loss Other public sector securities 23 418 34 960

1 797 774 1 663 147

8.2 Expected maturity structure One year or less 1 316 305 1 276 785 Five years or less but over one year 281 636 233 694 Over five years 199 833 152 668

1 797 774 1 663 147

8.3 Valuation – Book value 1 804 653 1 681 319 – Market valuation 1 797 774 1 663 147

Treasury bills with a maturity value of N$689 million (2016: N$340 million) and government registered stock or other public sector securities with a maturity value of N$89 million (2016: N$122 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$200 million (2016: N$285 million) 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).



9.3 Expected maturity structure Less than three months but not repayable on demand or at short-term notice 2 063 600 2 281 780 One year or less but over three months 1 325 714 1 049 626 Five years or less but over one year 4 384 990 4 058 302 Over five years 4 215 433 3 961 916

11 989 737 11 351 624

2017 2016

N$’000 N$’000

9.4 Geographical analysis Namibia 11 989 737 11 351 624

9.5 Non-performing advances

9.5.1 Category analysis (included under note 9.1) Home Loans 165 030 95 078 Other loans and overdrafts 56 436 45 813 Net leases and instalment debtors 61 393 50 938 Personal loans 29 479 25 282

312 338 217 111

9.5.2 Sectoral analysis (included under note 9.2) Individuals 260 777 182 227 Manufacturing 3 005 826 Retailers, catering and accommodation 10 137 10 052 Agriculture, hunting, forestry and fishing 1 078 105 Mining and quarrying 518 434 Financial services, insurances and real estates 19 279 15 735 Government and public sector 248 225 Building and property development 3 597 1 919 Transport, storage and communication 5 134 2 456 Other services 8 565 3 132

312 338 217 111



2017 2016

N$’000 N$’000

9. LOANS AND ADVANCES TO CUSTOMERS Financial assets classification: Loans and receivables

9.1 Category analysis Home Loans 6 163 937 5 313 118 Other loans and overdrafts 2 439 660 2 649 664 Net leases and instalment debtors 2 302 309 2 415 683 Leases and instalment debtors 2 711 012 2 901 434 Less: Unearned finance charges on leases and instalment debtors (408 703) (485 751) Personal loans 1 083 831 973 159

11 989 737 11 351 624 Impairment of advances (note 30) (146 092) (126 258)

11 843 645 11 225 366

9.2 Sectoral analysis Individuals 7 300 924 6 857 095 Manufacturing 372 218 339 568 Retailers, catering and accommodation 253 967 221 634 Agriculture, hunting, forestry and fishing 365 672 283 695 Mining and quarrying 322 800 209 891 Financial services, insurances and real estates 1 448 450 2 531 758 Government and public sector 263 628 295 153 Building and property development 806 084 189 998 Transport, storage and communication 246 399 201 198 Other services 609 595 221 634

11 989 737 11 351 624



Total NGR 1 – 12 NGR 13 – 20 NGR 21 – 25 Unrated 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 N$’000 N$’000 N$’000 N$’000 N$’000 N$’000 N$’000 N$’000 N$’000 N$’000

9. LOANS AND ADVANCES TO CUSTOMERS (continued)

9.6 Credit quality of loans and advances Neither past due nor impaired 11 278 713 10 706 403 1 020 160 599 641 2 212 945 1 617 353 19 052 31 237 8 026 556 8 458 172

Property loans 5 778 366 4 964 389 377 280 51 509 582 149 277 497 5 077 697 4 813 860 4 634 686

Net leases and instalment debtors 2 162 263 2 258 880 42 332 77 029 444 142 162 185 6 740 27 622 1 669 049 1 992 044

Other loans and overdrafts 2 378 746 2 595 679 600 548 471 103 1 186 654 1 177 671 7 235 2 918 584 309 943 987

Personal loans 959 338 887 455 – – – – – – 959 338 887 455

Past due but not impaired 398 686 428 110 – – – – – – 398 686 428 110

Property loans 220 541 247 173 – – – – – – 220 541 247 173

Net leases and instalment debtors 78 653 105 865 – – – – – – 78 653 105 865

Other loans and overdrafts 4 478 15 150 – – – – – – 4 478 15 150

Personal loans 95 014 59 922 – – – – – – 95 014 59 922

Defaulted 312 338 217 111 – – – – – – 312 338 217 111

Property loans 165 030 101 556 – – – – – – 165 030 101 556

Net leases and instalment debtors 61 393 50 938 – – – – – – 61 393 50 938

Other loans and overdrafts 56 436 38 835 – – – – – – 56 436 38 835

Personal loans 29 479 25 782 – – – – – – 29 479 25 782

Total 11 989 737 11 351 624 1 020 160 599 641 2 212 945 1 617 353 19 052 31 237 8 737 580 9 103 393



The group uses a master rating scale for measuring credit risk, which measures borrower risk excluding the effect of collateral and any credit

mitigation (ie probability of default only). The comprehensive probability of default rating scale, which is mapped to default probabilities

and external rating agency scales, enables the group to measure credit risk consistently and accurately across its entire portfolio. A brief

explanation of the scale follows:

NGR 1-12: Represents borrowers who demonstrate a strong capacity to meet financial obligations, and who have a negligible or low

probability of default. This category comprises, but is not limited to, the group’s large corporate clients, including financial institutions,

parastatals and other government-related institutions.

NGR 13-20: Represents borrowers who demonstrate a satisfactory ability to make payments and who have a low or moderate probability of

default. This category comprises, but is not limited to, small and medium-sized businesses, medium-sized corporate clients and individuals.

NGR 21-25: Represents borrowers who are of higher risk. This category comprises higher-risk individuals or small businesses, as well as

borrowers that were rated higher on inception, but have since migrated down the rating scale as a result of poor financial performance.

However, the borrower has not defaulted and is continuing to make repayments.

NP 1-3: Represents clients who have defaulted. Where this rating appears in the ‘past due but not impaired’ category, the borrowers are

continuing to make repayments against their obligation and are being closely monitored.

2017 2016

N$’000 N$’000

10. OTHER ASSETS Financial assets classification: Loans and receivables 99 344 136 616 Remittances in transit 78 819 115 987 Sundry debtors and other accounts 20 525 20 629 Non - financial instruments 11 349 3 303 Prepayments 5 689 3 042 Taxation 5 660 261 110 693 139 919

11. INVESTMENT IN SUBSIDIARIES, ASSOCIATES AND LISTED INVESTMENTS Investment in associates 8 098 6 351 – Carrying value at beginning of the year 6 351 4 430 – Share of associate’s profit 1 747 1 921 Listed investments 42 637 31 048

50 735 37 399

Market valuation 50 735 37 399



Aggregate profits after Nature of business Issued ordinary share capital Proportion held Shares at cost tax of subsidiary 2017 2016 2017 2016 2017 2016 2017 2016 ’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 – – 684 470 NedLoans (Proprietary) Limited Administration company – – 100 100 4 250 4 250 3 671 5 526 Ten Kaiser Wilhelm Strasse (Proprietary) Limited Property company 582 582 50 50 291 291 875 631 Walvis Bay Land Syndicate (Proprietary) Limited Property company 3 000 3 000 50 50 1 500 1 500 1 114 1 115

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 2017 2016 2017 2016 2017 2016 2017 2016 ’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 2017 at the time of approval of the group’s 2017 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 2017 2016 N$’000 N$’000

Total assets 69 696 64 699 Total liabilities (37 305) (39 292) Net assets 32 391 25 407 Bank’s share of associate’s net assets 8 098 6 351 Total revenue 41 873 44 003 Total profit for the year 6 113 9 179 Share of associate’s profit for the year 1 528 2 295 Less previous year’s losses not consolidated 219 (374) Share of associate’s profit 1 747 1 921

Issued ordinary share capital Proportion held Shares at cost Fair value of shares Nature of business 2017 2016 2017 2016 2017 2016 2017 2016 ’000 ’000 % % N$’000 N$’000 N$’000 N$’000

Listed investments Nedbank Group Limited Banking 198 198 0.02 0.02 15 649 15 657 42 637 31 048 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 176 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

12.1 PROPERTY AND EQUIPMENT 2017 Carrying amount at 1 January 2017 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) Additions at cost – 256 – 19 848 5 666 25 770 Reclassification of assets cost – 669 – (721) 52 – Reclassification of assets depreciation – (449) – 449 – – Revaluation – 4 632 – – – 4 632 Cost – – – – – – Accumulated depreciation eliminated on revaluation – 4 632 – – – 4 632 Disposals at net book value – – – (559) (203) (762) Disposals at cost – – – (15 349) (31 569) (46 918) Accumulated depreciation of disposals – – – 14 790 31 366 46 156 Depreciation for the year – (5 108) – (13 852) (6 037) (24 997)

Carrying amount at 31 December 2017 45 761 117 651 – 49 126 14 875 227 413 – at cost/revaluation 45 761 118 746 1 500 150 287 51 253 367 547 – accumulated depreciation – (1 095) (1 500) (101 161) (36 378) (140 134)

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 6 877 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)

Information regarding land and buildings required in terms of the Companies Act is available for inspection at the group’s registered office.

12.2 Valuation 2017 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 2017.

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 8.75% - 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

2017 Carrying amount at 1 January 2017 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) Additions at cost – 52 – 52 Development cost incurred 16 831 – – 16 831 Transfer of development cost (14 841) 14 841 – – Amortisation for the year – (6 257) – (6 257) Carrying amount at 31 December 2017 15 613 31 772 84 47 469 – at cost 15 613 98 639 1 568 115 820 – accumulated amortisation – (66 867) (1 484) (68 351)

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)

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.

Land Buildings Valuation Significant 2017 2016 2017 2016 Type of Property Method Inputs Parameters N$’000 N$’000 N$’000 N$’000

Income capitalisation and Income 8,75% – 11,50% depreciated replacement capitalisation (2016: 9,75% Commercial property cost method rates – 11,50%) 48 112 47 982 127 464 123 364

Total Land and Buildings 48 112 47 982 127 464 123 364

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$28 554 (2016: N$29 173).





2017 2016 N$’000 N$’000

14. GOODWILL Carrying amount at beginning of year 29 125 29 125 – Cost 29 125 29 125 – Impairment losses – –

Arising on acquisitions – – Transfer to current year comprehensive income – –

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 (2016: 80 000 000) ordinary shares of 25 cents each The total number of issued shares at year end was: 70 381 644 (2016: 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 88 766 67 072 Movement during the year 22 125 21 694

Balance at the end of the year 110 891 88 766 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 85 862 85 758 Increase/(Release) of revaluation reserve (2 934) (2 935) Revaluation of land and buildings 3 150 3 039

Balance at the end of the year 86 078 85 862 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 (16 705) – Balance at the end of the year – 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.

2017 2016 N$’000 N$’000

19. AVAILABLE-FOR-SALE RESERVE Balance at the beginning of the year 15 390 15 758 Movement during the year 11 589 (368)

Balance at the end of the year 26 979 15 390

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: Other liabilities Deposits and borrowings from other banks 1 534 618 603 600 Deposits received under repurchase agreement from Bank of Namibia 189 388 275 401 Financial liabilities classification: designated at fair value Short-trading securities and spot positions 85 618 116 138

Balance at the end of the year 1 809 624 995 139

21. DUE TO CUSTOMERS Financial liabilities classification: Other liabilities

21.1 Category analysis Current accounts 1 532 988 1 467 672 Savings accounts 414 089 392 173 Other deposits and loan accounts 5 257 580 5 229 342 Foreign currency liabilities 277 821 288 813

7 482 478 7 378 000

21.2 Sectoral analysis Government and quasi government 1 626 052 283 907 Insurance and pension funds 1 346 778 955 866 Companies and close corporations 2 714 665 4 925 851 Individuals and other 1 794 983 1 212 376

7 482 478 7 378 000

21.3 Geographical analysis Namibia 7 482 478 7 378 000

22. NEGOTIABLE CERTIFICATES OF DEPOSIT Financial liabilities classification: Financial liabilities at amortised cost Negotiable certificates of deposit 3 076 678 3 371 724 Promissory notes 1 520 396 1 485 512

Financial liabilities classification: Designated at fair value through profit and loss Promissory notes 203 404 198 749

4 800 478 5 055 985

23. OTHER LIABILITIES Financial liabilities classification: Other liabilities 127 003 119 708 Creditors and other accounts 33 044 30 171 Managerial fees - Nedbank Group Limited 93 959 89 537 Non-financial instruments 34 513 35 724 Deferred revenue 4 542 4 542 Taxation - 5 160 Bonus accrual 17 050 14 233 Leave pay accrual 12 921 11 789

161 516 155 432





Valuation of policy liabilities The valuation of the policy liabilities was conducted based on the assumptions below. The decrement 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 4.95% (gross of tax) per annum was used (2016: 5.6%); – Expense inflation was assumed to be 5.3% per annum (2016: 5.9%); – 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$5.8 million 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 9). The elimination of negative reserves was included as a discretionary margin and amounted to N$1.2 million.

2017 2016 N$’000 N$’000

24. DEFERRED TAXATION LIABILITIES The movement on the deferred taxation account is as follows:

Balance at beginning of the year 102 488 102 398 – Temporary differences recognised in the statement of

comprehensive income (1 927) (1 292)

Capital allowances (2 972) (568) Credit impairments (21) 1 241 Debentures (277) (240) Prepaid expenses 954 (1 595) Suspensive sales 4 809 (6 367) Financial Instruments (2 477) 1 988 Provision for expenses (581) (358) Other income and expense items (1 362) 4 607

– Recognised directly in equity 1 482 1 382

Revaluation of property – movement through revaluation reserve 1 482 1 430 Other – (48)

Balance at end of the year 102 043 102 488

The balance comprises: Capital allowances 48 074 49 380 Credit impairments (9 491) (9 470) Debentures 10 731 11 008 Prepaid expenses 1 980 1 041 Suspensive sales 41 857 37 048 Financial Instruments 1 522 3 999 Provision for expenses (3 704) (2 961) Other income and expense items 11 074 12 443

102 043 102 488

25. POLICYHOLDER LIABILITIES UNDER INSURANCE CONTRACTS Balance at beginning of the year 99 535 100 298 Amounts recognised in statement of comprehensive income 4 376 (763)

Balance at the end of the year 103 911 99 535

An actuarial valuation was performed on the policyholders’ liability, as at 31 December 2017, in March 2018 (2016: March 2017) by Svenja Poriazis.

Changes in valuation methods or assumptions The value of the liabilities increased by N$2.2 million (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 assumption was reviewed in light of recent experience. In addition, the contingency reserve of N$2.5 million held

last year was increased to N$4 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 ie 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.

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 2017 performed by Strategic Actuarial Partners Namibia.

The most significant assumptions used are: 2017 2016

Valuation interest rate 9,70% 10,90% Medical aid contribution inflation 7,90% 9,30% Net sensitivity (real rate) 1,80% 1,60% Average longevity at retirement age for current pensioners (years)* 26,0 23,0 Average longevity at retirement age for current employees (Future pensioners) (years)* 8,5 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.

2017 2016 N$’000 N$’000

Movement in accrued liability if the real rate increased with 1% 1 121 1 019 Movement in accrued liability if the real rate decreased with 1% (933) (869) Movement in accrued liability if the life expectancy increased by 2 years 847 741 Movement in accrued liability if the life expectancy decreased by 2 years (818) (710) Reconciliation of net liability in the statement of financial position: Balance at beginning of the year 9 813 9 450 Movements during the year 400 363 Interest cost 1 037 996 Current service cost 82 76 Benefits paid (696) (709) Actuarial loss (23) –

Balance at end of the year 10 213 9 813





2017 2016 Interest rate Final maturity date Notes N$’000 N$’000

27. LONG-TERM SUBORDINATED DEBT INSTRUMENTS Unsecured Subordinated debt instruments Subordinated debentures 17,00% 15 September 2030 (i) 6 463 5 599

NEDNAM01 fixed rate notes 10,82% 1 August 2029 (ii) 100 000 –

NEDNAM02 floating rate notes Three month JIBAR + 2.75% 2 August 2027 (iii) 100 000 –

Accrued interest 6 060 –

Accumulated fair value movement 163 –

Total 212 686 5 599

The notes listed above qualify as Tier two capital for Nedbank Namibia Limited.

i) 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 were 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.

(ii) The NEDNAM01 fixed rate notes may be redeemed in full at the option of the group on 1 August 2024. Interest is paid semi-annually in arrears.

(iii) The NEDNAM02 floating rate notes may be redeemed in full at the option of the group on 1 August 2022. Interest is paid quarterly in arrears.

Refer to note 44, fair value of financial instruments for the methodologies used to determine the fair value of Long-term subordinated debt instruments.

Information regarding Long-term subordinated debt instruments is available for inspection at the group’s registered office.

2017 2016

N$’000 N$’000

28. NET INTEREST INCOME Interest and similar income

Financial assets classification: Loans and receivables 1 444 376 1 254 161 Due from other banks 65 635 53 850 Home loans 592 930 510 257 Other loans and overdrafts 357 429 290 059 Lease and instalment debtors 243 383 239 894 Personal loans 184 999 160 089 Other assets – 12 Financial assets classification: Fair value through profit or loss – held for trading 146 523 129 360 Government and other securities 112 571 80 683 Short-term funds and securities 33 952 48 677 Total interest and similar income 1 590 899 1 383 521

Interest expense and similar charges Financial liabilities classification: Other liabilities 843 011 701 099 Deposit and loan accounts 338 620 236 043 Current and savings accounts 70 431 65 942 Negotiable certificates of deposit 416 542 396 045 Other liabilities 8 046 2 319 Long-term debt instruments 9 372 750 Total interest expense and similar charges 843 011 701 099

Net interest income 747 888 682 422

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 2017 Balance at beginning of the year 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 Debts written off (2 001) (7 840) (13 411) (27 578) (50 830) Statement of comprehensive income charge net of recoveries 8 037 10 528 6 521 35 540 60 626 – specific impairment 6 388 12 788 17 650 33 421 70 247 – portfolio impairment 1 649 (2 260) (1 091) 2 119 417 – debts recovered - - (10 038) - (10 038) Balance at end of the year (note 9) 42 846 29 517 40 464 33 265 146 092 – specific impairment 33 253 26 418 30 697 16 174 106 542 – portfolio impairment 9 593 3 099 9 767 17 091 39 550

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

Included under the statement of comprehensive income charge for specific impairment is interest in suspense amounting to N$24.6 million (2016: N$17 million) and under the specific impairment balance is interest in suspense amounting to N$59.5 million (2016: N$38.4 million).



2017 2016

N$’000 N$’000

29. NON-INTEREST INCOME Commission and fees 180 536 161 984 Premiums received 87 729 100 061 Dividends 1 695 2 722 Exchange earnings 52 816 52 762 – Exchange commission 14 240 14 405 – Foreign exchange profit 38 576 38 357 (Loss)/profit on sale of property and equipment (350) 83 Changes in fair value of Financial instruments designated as fair value through profit or loss – held for trading 8 607 (2 051) – Financial assets and liabilities designated as fair value through profit or loss – held for trading 8 607 (2 051) Other income 3 172 8 212

334 205 323 773



2017 2016 N$’000 N$’000

31. OPERATING EXPENDITURE Expenses include the following items which are separately disclosable: Auditors’ remuneration 4 479 4 836 – Audit fees 4 082 3 608 – Other services 397 1 228 Post-retirement medical aid benefit 1 119 1 072 – Interest cost 1 037 996 – Current service cost 82 76 Depreciation 24 997 26 084 Amortisation and write off of computer software and development cost 6 257 6 421 Staff costs 306 441 281 640 Operating lease charges 28 400 26 537 – Fixed property 24 592 23 042 – Other 3 808 3 495 Remuneration other than to employees for: – Managerial services 93 653 90 977 Value-added tax charge in respect of current expenditure net of input credits 23 748 16 982 Directors’ fees paid by the group 12 370 10 472 – For services as directors 1 949 1 592 – Managerial services 10 421 8 880 Key management 15 859 12 897 – Basic salary and other benefits 13 733 11 468 – Employer pension contribution 1 495 835 – Employer medical aid contribution 631 594 Other expenses 113 902 105 429

631 225 583 347

2017 2016 N$’000 N$’000

32. TRANSFER TO POLICYHOLDER LIABILITIES

UNDER INSURANCE CONTRACTS Transfer to policyholder liabilities under insurance contracts 4 376 (763)

33. BEE TRANSACTION EXPENSES BEE share-based payment expenses 2 778 2 282

2 778 2 282

34. TAXATION34.1 Charge for the year

Normal taxation – current year 83 256 82 361

Deferred taxation – current year (1 927) (1 292)

81 329 81 069

% %

34.2 Reconciliation of rate of taxation

Namibian normal rate of taxation 32,0 32,0

Reduction in rate for the year: (10,9) (10,8)

– Non-taxable income (11,5) (14,2)

– Non deductible expenses 0,6 3,4

Effective rate of taxation 21,1 21,2

N$’000 N$’000

35. DIVIDENDS Dividends declared and paid 200 000 –

Cents per share Cents per share

36. EARNINGS PER SHARE Basic earnings per share 429,81 426,42

Diluted earnings per share 429,81 426,42

Basic earnings per share N$’000 N$’000

Earnings used in the calculation of basic earnings per share 302 511 300 126

’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.



Specific impairments Portfolio impairments

2017 2016 2017 2016 N$’000 N$’000 N$’000 N$’000

30.2 Sectoral analysis Individuals 91 606 68 907 23 803 28 625 Manufacturing 1 353 826 1 247 885 Retailers, catering and accommodation 2 927 3 899 825 670 Agriculture, forestry and fishing 142 45 1 243 720 Mining and quarrying 101 217 1 100 558 Financial services, insurance and real estate 7 138 7 328 4 824 4 249 Government and public sector 56 97 899 721 Building and property development 687 1 558 2 738 704 Transport, storage and communication 848 1 117 823 591 Other services 1 684 3 131 2 048 1 410

106 542 87 125 39 550 39 133

30.3 Ratio of impairments Impairment of loans and advances at end of year 146 092 126 258 Total gross loans and advances 11 989 737 11 351 624 Ratio (%) 1,22% 1,11%



2017 2016 N$’000 N$’000

37. CASH FLOW INFORMATION

37.1 Reconciliation of profit before taxation to cash generated by operating activities

Profit before taxation 384 835 382 159 Adjustments for non-cash items: 75 866 219 537 – Accrued interest (43 022) 60 477 – Negotiable certificates of deposit 7 171 (13 186) – Income from associates (1 747) (1 921) – Loss/(profit) on disposal of property and equipment 350 (83) – Fair value adjustment to financial instruments (8 607) 2 051 – Impairment of advances 70 664 34 942 – Non-cash movement in accruals 22 800 108 703 – Non-cash movement in leave pay accrual 3 600 3 008 – Fair value movement in derivatives (9 375) (9 241) – BEE share-based payment expense 2 778 2 282 – Depreciation 24 997 26 084

– Computer software amortisation 6 257 6 421

(incl. impairment loss on development costs)

Other Adjustments (84 260) (80 257) – Movement in long-term subordinated debt instruments 7 087 750 – Taxation paid (91 347) (81 007) Movement in operating assets 48 483 173 602 – Deposit, current and other accounts 645 208 1 664 436 – Advances and other accounts (596 725) (1 490 834)

Cash generated by operating activities 424 924 695 041

37.2 Cash received from customers Interest received 1 563 449 1 329 776 Commission and fees received 282 505 276 450 Other income received 62 542 55 903

1 908 496 1 662 129

37.3 Cash paid to customers Interest paid on deposits (844 325) (599 313)

37.4 Taxation paid Amounts outstanding – beginning of year (4 900) (3 546) Charge to statement of comprehensive income (83 256) (82 361) Amounts (prepaid)/outstanding – end of year (5 660) 4 900

(93 816) (81 007)

37.5 Dividends paid Amounts outstanding – beginning of year – – Dividend declared (200 000) – Amounts outstanding – end of year – –

(200 000) –

2017 2016 N$’000 N$’000

37.6 Cash movement in operating liabilities

Due to other banks 814 485 693 895 Current accounts 65 316 (25 967) Savings deposits 21 916 (7 455) Other deposits and loan accounts 43 217 1 010 690 Foreign currency accounts (10 992) (324 207) Negotiable certificates of deposit (261 125) 450 508

672 817 1 797 464

37.7 Sale/(Purchase) of non-dealing securities Other short-term securities (12 204) (1 347 441) Government and other securities 66 349 19 988

54 143 (1 327 453)

37.8 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) 125 877 120 673 Balances with central bank (note 4) 371 267 263 856 Due from other banks (note 5) 902 147 577 936

1 399 291 962 465

38. COMMITMENTS

38.1 Capital expenditure Not yet contracted – Property and equipment 69 065 59 010

69 065 59 010

Funds to meet capital expenditure will be provided from internal resources.

38.2 Bond commitments Bonds granted, not yet paid out 264 102 178 636

38.3 Undrawn facilities Original term of maturity of one year or less 1 082 123 1 110 642





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

2017 2016 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 2017 – 9 041 2018 6 742 6 742

2019 2 566 2 566

2020 2 048 2 048 Thereafter – –

11 356 20 397

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 2017, confirmed that the fund was financially sound.

The total value of contributions to the pension fund during the year amounted to:

Number of members 741 726 Employer contributions 27 158 20 131 Employee contributions 13 222 14 512

40. CONTINGENT LIABILITIES Confirmed letters of credit – 4 381 Liabilities under guarantees 293 292 945 984 Legal actions against the group 2 313 2 368

295 605 952 733





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 2017 2016 2017 2016 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 Affinity Groups (AG) – – – 3 299 Education – – – 4 398 Black Management – – – 12 – – – 16 705

2017 2016

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 347 573 216 ,18 328 685 166,69 Additional shares acquired in current year 9 828 – 18 888 – Outstanding at the end of the year – – 347 573 – Shares subject to call right1 (253 387) – (250 175) – Shares distributed to beneficiaries (104 014) – – – Net Shares – 216 ,18 97 398 166,69

Exercisable at end of year – – – – Weighted average share price for options exercised (N$) – –

Affinity Group Scheme Outstanding shares at the beginning of the year2 127 779 216 ,18 120 721 170,23 Additional shares acquired in current year 3 774 – 7 058 – Outstanding at the end of the year – – 127 779 – Shares subject to call right1 (94 652) – (93 928) – Shares distributed to beneficiaries (36 901) – – – Net Shares – 216 ,18 33 851 170,23


Education Scheme Outstanding shares at the beginning of the year2 110 083 216 ,18 109 029 227,64 Additional shares acquired in current year 505 – 1 054 – Outstanding at the end of the year – – 110 083 – Shares subject to call right1 (110 588) – (108 205) – Shares distributed to beneficiaries – – – –

Net Shares – 216 ,18 1 878 227,64






42. RELATED PARTY DISCLOSURE

42.1 Parent company NedNamibia Holdings Limited’s majority shareholder is Nedbank Group Limited (100%) (2016: 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 6 of the Company Annual Financial Statements on page 176.

All of these entities are related parties. Transactions with directors and director controlled entities are related party transactions.

2017 2016 42.3 Related party balances N$’000 N$’000

Loans from related parties Nedbank Group Limited (holding company) 720 1 428 Nedbank Group Limited (holding company) (Internal settlement account) 2 199 43 223 Nedbank Group Limited (holding company) (Fixed deposits) 1 274 819 457 367 Nedbank Group Limited (holding company) (accrual for management fees) 93 959 89 535 Nedbank Group Limited (Derivative instruments included under note 7) 18 843 10 188 Nedbank Group Limited (holding company) 85 618 – Old Mutual Namibia Limited (fellow subsidiary) 1 002 826 371 616 Old Mutual Namibia Limited (fellow subsidiary) (Long-term subordinated debt instruments included under note 27) 206 224 – Nedbank Limited: London Branch (fellow subsidiary) 190 61 Nedbank (Lesotho) Limited (fellow subsidiary) 256 677 101 454 NedCapital Investment Holdings (Namibia) (Proprietary) Limited (fellow subsidiary) 60 058 58 114 Nedbank Namibia Pension Fund (pension fund) 20 988 15 642 Balances with directors 1 540 3 248 Balances with key management 2 119 2 220

Loans to related parties Nedbank Group Limited (holding company) (Credit Linked Note) 294 424 398 910 Nedbank Group Limited (Derivative instruments included under note 7) 10 411 2 673 Nedbank Limited: London Branch (fellow subsidiary) Placement 487 280 447 065 Nedbank Group Limited (holding company) – 115 871 Nedbank Group Limited (holding company) (Step up deposits) 400 819 – Old Mutual US Dollar Money Market Fund 375 506 480 861 Old Mutual Namibia Limited (Fellow subsidiary) 430 513 430 700 Balances with directors 8 092 1 504 Balances with key management 5 612 7 349

2017 2016 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

Affinity Group Scheme N$ 170.23 – – 33 851 0,30

Education Scheme N$ 227.64 – – 1 878 0,30

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 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)





42. RELATED PARTY DISCLOSURE (continued)

42.4 Related party transactions

43.1 CAPITAL RISK MANAGEMENT The capital adequacy is managed in terms of the Banking Institutions Act, 1998 (‘the 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 (ie 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 (ie Tier 1 capital divided by total risk-weighted assets); and ▸ Total risk-based capital ratio (ie 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.

Expenses and Interest income Other income Interest expense dividends paid 2017 2016 2017 2016 2017 2016 2017 2016 N$’000 N$’000 N$’000 N$’000 N$’000 N$’000 N$’000 N$’000

Related party

Nedbank Group Limited (holding company) Interest on internal settlement account 2 079 – – – 4 057 4 153 – –Interest income on Nedbank London Branch placement 40 215 27 251 – – – – – –Interest expense on fixed deposits – – – – 25 740 901 – –Interest expense on R - Bond – – – – 1 706 – – –Interest income on Step up deposit 16 606 – – – – – – –Interest income on Credit Linked Note 37 835 33 547 – – – – – –Interest income on Buy sell back 5 670 – – – – – – –Management fees – – – – – – 93 653 90 977 Dividends – – – – – – 200 000 –

Old Mutual Limited (fellow subsidiary) Interest income on corporate fund 32 694 28 425 – – – – – –Interest expense Long-term subordinated debt instruments – – – – 6 060 – – –Interest expense on current account – – – – 36 183 31 023 – –

Nedbank Namibia Pension Fund (pension fund) Pension contributions – – – – – – 25 857 19 145

NedCapital Holdings Namibia (Pty) Ltd(fellow subsidiary) Interest expense – – – – 2 784 1 522 – –

Nedbank (Lesotho) Limited (fellow subsidiary)Interest expense – – – – 12 696 11 086 – –

Transactions with directors Services as directors – – – – – – 1 949 1 592 Other services – – – – – – 10 421 8 880 Staff costs – – – – – – 15 859 12 897

Old Mutual US Dollar Money Market Fund (related party) Interest income 6 376 1 088 – – – – – –





43.1 CAPITAL RISK MANAGEMENT (continued) Minimum requirements (continued)

The Bank follows the minimum ratios as prescribed by the Act.

2017 2016

N$’000 N$’000

Share capital and share premium 65 392 65 392 Retained earnings 1 521 956 1 512 758 General banking reserves – 16 705

Total qualifying tier 1 capital 1 587 348 1 594 855

Subordinated debt 212 686 5 599 Asset revaluation reserves 19 582 19 582 Portfolio impairment 116 369 111 517

Total qualifying tier 2 capital 348 637 136 698

Total regulatory capital 1 935 985 1 731 553

Risk-weighted assets:

Operational risk 1 092 306 992 202 Credit risk 11 001 217 10 569 427 Market risk 2 145 10 924

Total risk-weighted assets 12 095 668 11 572 553

Capital adequacy ratios: % %

Leverage capital 9,52 10,13 Tier 1 risk-based capital 13,12 13,78 Total risk-weighted capital 16,01 14,96

43.2 NedNamibia Life Assurance Company

The current capital adequacy ratio for NedNamibia Life Assurance Company Limited is 12 times (2016: 34 times) in surplus of the regulatory requirements.

Refer to the Statutory Actuary’s Report on pages 85 to 87 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 2017 ASSETS Cash and balances with central bank 4 – – – 497 144 – 497 144 Due from other banks 5 – 14 048 – 888 099 – 902 147 Other short-term securities 6 1 504 298 – – – – 1 504 298 Derivative financial instruments 7 35 065 – – – – 35 065 Government and other securities 8 1 774 356 23 418 – – – 1 797 774 Loans and advances to customers 9 – – – 11 843 645 – 11 843 645 Other assets 10 – – – 99 344 11 349 110 693 Investment in subsidiaries, associates and listed investments 11 – – 42 637 – 8 098 50 735 Property and equipment 12 – – – – 227 413 227 413 Computer software and development cost 13 – – – – 47 469 47 469 Goodwill 14 – – – – 29 125 29 125

Total assets 3 313 719 37 466 42 637 13 328 232 323 454 17 045 508

LIABILITIES Derivative financial instruments 7 20 490 – – – – 20 490 Due to other banks 20 – 85 618 – 1 724 006 – 1 809 624 Due to customers 21 – – – 7 482 478 – 7 482 478 Negotiable certificates of deposit 22 – 203 404 – 4 597 074 – 4 800 478 Other liabilities 23 – – – 127 003 34 513 161 516 Deferred taxation liabilities 24 – – – – 102 043 102 043 Policyholder liabilities under insurance contracts 25 – – – – 103 911 103 911 Provision for post-retirement medical benefits 26 – – – – 10 213 10 213 Long-term subordinated debt instruments 27 – 104 476 – 108 210 – 212 686

Total liabilities 20 490 393 498 – 14 038 771 250 680 14 703 439





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) 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

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 2017 ASSETS Cash and balances with central bank 4 – – – 497 144 – 497 144 Due from other banks 5 – 14 048 – 888 099 – 902 147 Other short-term securities 6 – 1 504 298 – – – 1 504 298 Derivative financial instruments 7 – 35 065 – – – 35 065 Government and other securities 8 – 1 797 774 – – – 1 797 774 Loans and advances to customers 9 – – – 11 843 645 – 11 843 645 Other assets 10 – – – 99 344 11 349 110 693 Investment in subsidiaries, associates and listed investments 11 42 637 – – – 8 098 50 735 Property and equipment 12 – – – – 227 413 227 413 Computer software and development cost 13 – – – – 47 469 47 469 Goodwill 14 – – – – 29 125 29 125

Total assets 42 637 3 351 184 – 13 328 232 323 454 17 045 508

LIABILITIES Derivative financial instruments 7 – 20 490 – – – 20 490 Due to other banks 20 – 85 618 – 1 724 006 – 1 809 624 Due to customers 21 – – – 7 482 478 – 7 482 478 Negotiable certificates of deposit 22 – 203 404 – 4 597 074 – 4 800 478 Other liabilities 23 – – – 127 003 34 513 161 516 Deferred taxation liabilities 24 – – – – 102 043 102 043 Policyholder liabilities under insurance contracts 25 – – – – 103 911 103 911 Provision for post-retirement medical benefits 26 – – – – 10 213 10 213 Long-term subordinated debt instruments 27 – 104 476 – 108 210 – 212 686

Total liabilities – 413 988 – 14 038 771 250 680 14 703 439





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 represents 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 front office 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.

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) 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

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 (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 zero-coupon 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 Long-term subordinated debt instruments Discounted cashflow model Discount rates







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

2017

ASSETS Cash and balances with central bank 349 105 – – – – 148 039 – 497 144 Due from other banks 14 048 400 819 – 487 280 – – – 902 147 Other short-term securities – 1 026 228 175 397 251 889 50 784 – – 1 504 298 Derivative financial instruments – 23 685 4 017 242 3 436 3 685 – 35 065 Government and other sector – 712 872 232 038 376 658 281 636 194 570 – 1 797 774 Loans and advances to customers 122 104 1 828 372 434 580 891 135 4 487 053 4 226 493 (146 092) 11 843 645 Other assets – – – – – – 110 693 110 693 Investments in subsidiaries and associates – – – – – – 50 735 50 735 Investment in listed investments – – – – – – 227 413 227 413 Property and equipment – – – – – – 47 469 47 469 Computer software and development cost – – – – – – 29 125 29 125

485 257 3 991 976 846 032 2 007 204 4 822 909 4 572 787 319 343 17 045 508 LIABILITIES Total equity – – – – – – 2 342 069 2 342 069 Derivative financial instruments – 12 997 4 066 219 – 3 208 – 20 490 Due to other banks – 1 413 212 26 565 369 847 – – – 1 809 624 Due to customers 5 568 708 1 042 779 410 366 371 511 3 321 – 85 793 7 482 478 Negotiable certificates of deposit – 1 211 290 713 175 1 960 036 915 977 – 4 800 478 Other liabilities – – – – – – 161 516 161 516 Deferred taxation liabilities – – – – – – 102 043 102 043 Policyholder liabilities under insurance contracts – – – – – – 103 911 103 911 Provision for post-retirement medical benefits 10 213 10 213 Long-term subordinated debt instruments – – – – 101 585 111 101 – 212 686

5 568 708 3 680 278 1 154 172 2 701 613 1 020 883 114 309 2 805 545 17 045 508

Net liquidity gap (5 083 451) 311 698 (308 140) (694 409) 3 802 026 4 458 478 (2 486 202) –


45.1 Liquidity GAP (continued) 2016

ASSETS Cash and balances with central bank 252 003 – – – – 132 526 – 384 529 Due from other banks 12 904 115 871 – – 449 161 – – 577 936 Other short-term securities – 1 144 601 367 745 191 712 – – – 1 704 058 Derivative financial instruments – 15 905 743 196 – – – 16 844 Government and other sector – 257 186 319 683 713 062 211 636 161 580 – 1 663 147 Loans and advances to customers 46 304 2 102 936 345 099 688 652 4 087 241 4 081 392 (126 258) 11 225 366 Other assets – – – – – – 139 919 139 919 Investments in subsidiaries and associates – – – – – – 37 399 37 399 Investment in listed investments – – – – – – 222 770 222 770 Property and equipment – – – – – – 36 843 36 843 Computer software and development cost – – – – – – 29 125 29 125

311 211 3 636 499 1 033 270 1 593 622 4 748 038 4 375 498 339 798 16 037 936 LIABILITIES Total equity – – – – – – 2 224 301 2 224 301 Derivative financial instruments – 11 506 138 – – – – 11 644 Due to other banks 44 772 481 971 100 297 272 484 45 270 50 345 – 995 139 Due to customers 4 392 168 1 356 289 353 159 1 034 070 143 189 – 99 125 7 378 000 Negotiable certificates of deposit – 1 316 965 222 926 2 082 258 1 433 836 – – 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

4 436 940 3 166 731 676 520 3 388 812 1 622 295 55 944 2 690 694 16 037 936

Net liquidity gap (4 125 729) 469 768 356 750 (1 795 190) 3 125 743 4 319 554 (2 350 896) –

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

liabilities.

45.1 Liquidity GAP 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.






45.3 Contractual liquidity risk analysis for financial liabilities 2017 LIABILITIES Derivative financial instruments – 12 997 4 066 219 3 208 – – 20 490 Due to other banks 3 132 1 433 256 27 167 379 372 – – – 1 842 927 Due to customers 5 590 871 1 058 438 423 513 409 309 3 694 – 85 793 7 571 618 Negotiable certificates of deposit – 1 220 578 734 875 2 069 097 1 076 733 – – 5 101 283 Other liabilities – – – – – – 161 516 161 516 Deferred taxation liabilities – – – – – – 102 043 102 043 Policyholder liabilities under insurance contracts – – – – – – 103 911 103 911 Provision for post-retirement medical benefits – – – – – – 10 213 10 213 Long-term subordinated debt instruments – – – – 146 503 215 903 – 362 406

Total liabilities 5 594 003 3 725 269 1 189 621 2 857 997 1 230 138 215 903 463 476 15 276 407 Off statement of financial position Financial and other guarantees – 265 594 422 5 137 34 699 184 629 69 226 559 707 Undrawn facilities 1 082 123 – – – – – – 1 082 123

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

The maturity analysis detailed under the contractual liquidity risk analysis for financial liabilities include future interest.

45. LIQUIDITY RISK (continued)

45.2 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.

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 of the integrated report for more detail on currency risk management.

N$ EUR US$ GBP ZAR and Other Total N$’000 N$’000 N$’000 N$’000 N$’000 N$’000

47.2 Currency risk profile 2017 ASSETS Cash and balances with central bank 485 854 2 969 7 256 34 1 031 497 144 Due from other banks – 7 525 – 2 818 891 804 902 147 Other short-term securities 1 128 131 – 376 167 – – 1 504 298 Derivative financial instruments 8 589 144 22 044 1 017 3 271 35 065 Government and other securities 1 415 878 – – – 381 896 1 797 774 Loans and advances to customers 11 839 914 – 25 – 3 706 11 843 645 Other assets 110 693 – – – – 110 693 Investment in subsidiaries, associates and listed investments 50 735 – – – – 50 735 Property and equipment 227 413 – – – – 227 413 Computer software and development cost 47 469 – – – – 47 469 Goodwill 29 125 – – – – 29 125

Total assets 15 343 801 10 638 405 492 3 869 1 281 708 17 045 508

EQUITY AND LIABILITIES Capital and reserves Share capital 17 595 – – – – 17 595 Share premium 99 536 – – – – 99 536 General risk reserve 110 891 – – – – 110 891 Revaluation reserve 86 078 – – – – 86 078 Available-for-sale reserve 26 979 – – – – 26 979 Retained income 1 987 442 – – – – 1 987 442 Shareholder’s interest 2 328 521 – – – – 2 328 521 Non-controlling interest 13 548 – – – – 13 548

Total shareholder’s equity and non-controlling interest 2 342 069 – – – – 2 342 069

LIABILITIES Derivative financial instruments – 1 647 34 – 18 809 20 490 Due to other banks 532 607 – 123 100 – 1 153 917 1 809 624 Due to customers 7 327 757 64 072 84 752 2 699 3 198 7 482 478 Negotiable certificates of deposit 4 295 185 – – – 505 293 4 800 478 Other liabilities 161 516 – – – – 161 516 Deferred taxation liabilities 102 043 – – – – 102 043 Policyholder liabilities under insurance contracts 103 911 – – – – 103 911 Provision for post-retirement medical benefits 10 213 – – – – 10 213 Long-term subordinated debt instruments 212 686 – – – – 212 686

Total liabilities 12 745 918 65 719 207 886 2 699 1 681 217 14 703 439

Total equity and liabilities 15 087 987 65 719 207 886 2 699 1 681 217 17 045 508

Net balance sheet position 255 814 (55 081) 197 606 1 170 (399 509) – Off balance sheet net notional position 14 375 2 260 (1 836) – (14 451) 348 Rates of exchange – 14,73 12,29 16,60 – –

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.





N$ EUR US$ GBP ZAR and Other Total N$’000 N$’000 N$’000 N$’000 N$’000 N$’000

47.2 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

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 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 – –

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 2017 ASSETS Cash and balances with central bank 92 1,01 1,01 1,01 1,00 497 144 Due from other banks 72 1,01 1,01 1,01 1,00 902 147 Other short-term securities 3 686 1,01 1,01 – – 1 504 298 Derivative financial instruments 224 1,01 1,01 – – 35 065 Government and other securities – – – – – 1 797 774 Loans and advances to customers 106 1,01 1,01 – – 11 843 645 Other assets – – – – – 110 693 Investment in subsidiaries, associates, joint ventures and listed investments – – – – – 50 735 Property and equipment – – – – – 227 413 Computer software and development cost – – – – – 47 469 Goodwill – – – – – 29 125

Total assets 4 180 17 045 508

LIABILITIES Derivative financial instruments 12 1,01 1,01 1,01 1,00 20 490 Due to other banks – – – – – 1 809 624 Due to customers 2 522 1,01 1,01 1,01 – 7 482 478 Negotiable certificates of deposits – – – – – 4 800 478 Other liabilities – – – – – 161 516 Deferred taxation liabilities – – – – – 102 043 Policyholder liabilities under insurance contracts – – – – – 103 911 Provision for post-retirement medical benefits – – – – – 10 213 Long-term subordinated debt instruments – – – – – 212 686

Total liabilities 2 534 14 703 439





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)

* 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$’000

48.2 Interest rate risk analysis 2017 ASSET Cash and balances with central bank 223 228 – – – – 273 916 497 144 Due from other banks 400 819 – 440 163 – – 61 165 902 147 Other short-term securities 1 077 012 165 000 250 000 – – 12 286 1 504 298 Derivative financial instruments – – – – – 35 065 35 065 Government and other securities 694 300 238 363 402 400 283 020 192 300 (12 609) 1 797 774 Loans and advances to customers 11 617 551 11 23 205 704 225 151 11 843 645 Other assets – – – – – 110 693 110 693 Investment in subsidiaries, associates and listed investments – – – – – 50 735 50 735 Property and equipment – – – – – 227 413 227 413 Computer software and development cost – – – – – 47 469 47 469 Goodwill – – – – – 29 125 29 125

Total assets 14 012 910 403 374 1 092 586 283 225 193 004 1 060 409 17 045 508

EQUITY AND LIABILITIES Capital and reserves Share capital – – – – – 17 595 17 595 Share premium – – – – – 99 536 99 536 General risk reserve – – – – – 110 891 110 891 Revaluation reserve – – – – – 86 078 86 078 Available-for-sale reserve – – – – – 26 979 26 979 Retained income – – – – – 1 987 442 1 987 442

Shareholder’s interest – – – – – 2 328 521 2 328 521 Non-controlling interest – – – – – 13 548 13 548

Total shareholder’s equity and non-controlling interest – – – – – 2 342 069 2 342 069

LIABILITIES Derivative financial instruments – – – – – 20 490 20 490 Due to other banks 1 421 400 25 000 350 000 – – 13 224 1 809 624 Due to customers 4 891 118 388 690 378 433 3 224 – 1 821 013 7 482 478 Negotiable certificates of deposit 2 449 395 619 100 1 490 029 120 282 – 121 672 4 800 478 Other liabilities – – – – – 161 516 161 516 Deferred taxation liabilities – – – – – 102 043 102 043 Policyholder liabilities under insurance contracts – – – – – 103 911 103 911 Provision for post-retirement medical benefits – – – – – 10 213 10 213 Long-term subordinated debt instruments 100 000 – – – 106 462 6 224 212 686

Total liabilities 8 861 913 1 032 790 2 218 462 123 506 106 462 2 360 306 14 703 439

Total equity and liabilities 8 861 913 1 032 790 2 218 462 123 506 106 462 4 702 375 17 045 508

On balance sheet interest sensitivity gap 5 150 997 (629 416) (1 125 876) 159 719 86 542 (3 641 966) – Cumulative on balance sheet interest sensitivity gap 5 150 997 4 521 581 3 395 705 3 555 424 3 641 966 – –





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$’000

48.2 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 – –

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

48.3 Interest rate risk sensitivity 2017 ASSETS Cash and balances with central bank 2 232 1,0 223 228 273 916 – 223 228 497 144 Due from other banks 8 410 1,0 840 982 61 165 – 840 982 902 147 Other short-term securities 14 920 1,0 1 492 012 12 286 440 163 1 051 849 1 504 298 Derivative financial instruments – – – 35 065 – – 35 065 Government and other securities 18 104 1,0 1 810 383 (12 609) 1 584 799 225 584 1 797 774 Loans and advances to customers 116 185 1,0 11 618 494 225 151 11 826 11 606 668 11 843 645 Other assets – – – 110 693 – – 110 693 Investment in subsidiaries, associates and listed investments – – – 50 735 – – 50 735 Property and equipment – – – 227 413 – – 227 413 Computer software and development cost – – – 47 469 – – 47 469 Goodwill – – – 29 125 – – 29 125

Total assets 159 851 15 985 099 1 060 409 2 036 788 13 948 311 17 045 508

LIABILITIES Derivative financial instruments – – – 20 490 – – 20 490 Due to other banks 17 942 1,0 1 796 400 13 224 2 199 1 794 201 1 809 624 Due to customers 23 503 1,0 5 661 465 1 821 013 3 311 182 2 350 283 7 482 478 Negotiable certificates of deposit 18 174 1,0 4 678 806 121 672 2 861 359 1 817 447 4 800 478 Other liabilities – – – 161 516 – – 161 516 Deferred taxation liabilities – – – 102 043 – – 102 043 Policyholder liabilities under insurance contracts – – – 103 911 – – 103 911 Provision for post-retirement medical benefits – – – 10 213 – – 10 213 Long-term subordinated debt instruments 1 000 1,0 206 462 6 224 106 462 100 000 212 686

Total liabilities 60 619 12 343 133 2 360 306 6 281 202 6 061 931 14 703 439

* 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.



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

48.3 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.

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 of the integrated report for more detail on credit risk management.

See note 3.2 (vii) for an explanation of the credit ratings used. 2017 2016 2017 2016 2017 2016 2017 2016 N$’000 N$’000 N$’000 N$’000 N$’000 N$’000 N$’000 N$’000

49.2 Credit risk analysis Credit analysis of other short-term securities, and government and other securities Other short-term securities 1 504 298 1 704 058 – – – – 1 504 298 1 704 058

Negotiable certificates of deposit 427 286 559 456 – – – – 427 286 559 456 Money market funds 1 077 012 1 144 602 – – – – 1 077 012 1 144 602 Government and other securities 1 797 774 1 663 147 – – – – 1 797 774 1 663 147

Treasury bills 1 170 695 963 292 – – – – 1 170 695 963 292 Government registered stock 309 237 265 985 – – – – 309 237 265 985 Credit linked notes 294 424 398 910 – – – – 294 424 398 910 Other public sector securities 23 418 34 960 – – – – 23 418 34 960

Investment grade Subinvestment grade Not rated Total

Debt securities that are purchased by the group are rated using an internal rating system, being the Nedbank Group Rating (NGR) scale. The group requires that all investments be rated using the NGR scale to ensure that credit risk is measured consistently and accurately across the group. This ensures compliance with the group’s policy on the rating of investments. The NGR scale has been mapped to the Standard & Poor’s credit-rating system. According to the NGR scale, investment grade can be equated to a Standard & Poor’s rating of above BBB- (stable). All government and other short-term securities are current and not impaired. Investment grade includes credit ratings from NGR01 to NGR11 and subinvestment grade includes credit ratings from NGR12 to NGR25.



49. CREDIT RISK (continued)

49.2 Credit risk analysis (continued) 2017 2016 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 398 686 428 110 – Home loans 220 541 244 336 – Other loans and overdrafts 4 478 17 987 – Net leases and instalment debtors 78 653 105 865 – Personal loans 95 014 59 922 Impairment of advances (note 30) (39 224) (39 133) – Home loans (9 593) (7 945) – Other loans and overdrafts (2 773) (5 358) – Net leases and instalment debtors (9 767) (10 858) – Personal loans (17 091) (14 972) Other assets – – Investment in subsidiaries, associates and listed investments – – Property and equipment – – Computer software and development cost – – Goodwill – –

359 462 388 977

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 312 338 217 111 – Home loans 165 030 101 556 – Other loans and overdrafts 56 436 38 835 – Net leases and instalment debtors 61 393 50 938 – Personal loans 29 479 25 782 Impairment of advances (note 30) (106 542) (87 125) – Home loans (33 253) (28 866) – Other loans and overdrafts (26 418) (21 470) – Net leases and instalment debtors (30 697) (26 458) – Personal loans (16 174) (10 331) Other assets – – Investment in subsidiaries, associates and listed investments – – Property and equipment – – Computer software and development cost – – Goodwill – –

205 796 129 986

2017 2016 N$’000 N$’000

Cash and balances with central bank 497 144 384 529 Due from other banks 902 147 577 936 Other short-term securities 1 504 298 1 704 058 Derivative financial instruments 35 065 16 844 Government and other securities 1 797 774 1 663 147 Loans and advances to customers 11 989 737 11 351 624 Other assets 110 693 139 919

16 836 858 15 838 057

49.4 Credit risk: Collateral held in respect of note 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 8 654 066 8 060 215 – Home loans 5 398 376 4 752 055 – Other loans and overdrafts 1 161 561 1 428 629 – Net leases and instalment debtors 1 526 201 1 328 626 – Personal loans 567 928 550 905 Other assets – – Investment in subsidiaries and associates – – Investment in listed investments – – Property and equipment – – Computer software and development cost – –

8 654 066 8 060 215

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 does 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.

49.3 Credit risk: Maximum exposure





Committed to building a better Namibia for all.

ContentsStatement 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

174

174

175

175

176

180

COMPANY ANNUAL FINANCIAL STATEMENTS


172 2017 COMPANY ANNUAL FINANCIAL STATEMENTS 1732017 NEDNAMIBIA HOLDINGS LIMITED


Notes

2017 2016 N$’000 N$’000

Cash (utilised in)/generated by operating activities 13.1 (113) 103 Cash received from customers 13.2 14 401 490 Cash paid to customers 13.3 – –Cash paid to employees and suppliers (839) (911)Dividends received 10 300 000 190 674 Dividends paid 13.1 (200 000) – Taxation (1 268) – Cash movements in advances and other accounts 13.1 (112 407) (189 941)Cash movements in operating liabilities 13.1 – (209)

Cash and short-term funds generated (113) 103 Cash and short-term funds at beginning of the year 124 21

Cash and short-term funds at end of the year 11 124

Total Share Share Retained shareholder’s capital premium income interest N$’000 N$’000 N$’000 N$’000

Balance at 1 January 2016 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 Net profit for the year attributable to the equityholders of the parent – – 312 136 312 136 Dividend paid – – (200 000) (200 000)

Balance at 31 December 2017 17 595 99 536 320 128 437 259

STATEMENT OFCOMPREHENSIVE INCOME


Notes

2017 2016 N$’000 N$’000

Interest and similar income 14 399 490 Interest expense and similar charges – –

Net interest income 9 14 399 490 Non-interest income 10 300 002 190 674

Net income 314 401 191 164 Operating expenditure 11 (839) (911)

Profit before taxation 312 562 190 253 Taxation 12 (1 426) –


Other comprehensive income – – Total comprehensive income 312 136 190 253

Total profit after taxation attributable to: Owners of the parent 312 136 190 253


Total comprehensive income attributable to: Owners of the parent 312 136 190 253

Total comprehensive income 312 136 190 253

Notes

2017 2016 N$’000 N$’000

ASSETS Due from other banks 4 11 124 Other assets 5 303 766 191 359 Investment in subsidiaries 6 133 642 133 642

Total assets 437 419 325 125

EQUITY AND LIABILITIESCapital and reservesShare capital 7 17 595 17 595 Share premium 7 99 536 99 536 Retained income 320 128 207 992

Shareholder’s interest 437 259 325 123

LIABILITIES Other liabilities 8 160 2

Total liabilities 160 2

Total equity and liabilities 437 419 325 125


STATEMENT OFFINANCIAL POSITION

STATEMENT OFCHANGES IN EQUITY


STATEMENT OFCASH FLOWS




2017 2016

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 (2016: 80 000 000) ordinary shares of 25 cents each The total number of issued shares at year end was: 70 381 644 (2016: 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 Non-financial liabilities Taxation 160 2

9. NET INTEREST INCOME Interest and discount income

Financial assets classification: Loans and receivables Due from other banks 14 399 490

Other assets – –

14 399 490

Interest expense

Financial liabilities classification: Other liabilities

Current and savings accounts – –

10. NON-INTEREST INCOME Other income 2 –

Dividend received 300 000 190 674

300 002 190 674

11. OPERATING EXPENDITURE Expenses include the following items which are

separately disclosable:

Auditors’ remuneration – 57

Directors’ fees 757 726

Other expenses 82 128

839 911

12. TAXATION12.1 Charge for the year

Normal taxation – current year 1 426 –

12.2 Reconciliation of rate of taxation

Namibian normal rate of taxation 32,0 32,0

Reduction in rate for the year: (31,5) (32,0)

– Non taxable income (31,5) (32,0)

Effective rate of taxation 0,5 –

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.

2017 2016 N$’000 N$’000

4. DUE FROM OTHER BANKS Financial assets classification: Loans and receivables Placements with other banks 11 124

5. OTHER ASSETS Financial assets classification: Loans and receivables Sundry debtors and other accounts 19 7 Other investments 303 747 191 352

303 766 191 359

6. INVESTMENT IN SUBSIDIARIES Investment in subsidiaries 133 642 133 642 – Cost 133 642 133 642

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 2017 2016 2017 2016 2017 2016 2017 2016 Subsidiary companies business ’000 ’000 % % N$’000 N$’000 N$’000 N$’000

NedProperties Property (Proprietary) Limited company – – 100 100 4 000 4 000 3 098 2 405

NedNamibia Life Assurance Insurance Company Limited company 4 000 4 000 100 100 4 000 4 000 65 648 84 991

Nedbank Namibia Banking Limited company 67 759 67 759 100 100 125 634 125 634 202 471 195 134

NedCapital Namibia Financing (Proprietary) Limited company 8 8 100 100 8 8 4 473 2 003

NIB Mining Finance Financing (Proprietary) Limited company – – 100 100 – – – –

Nedplan Insurance Insurance Brokers Namibia broker (Proprietary) Limited – – 100 100 – – 5 960 6 070


NOTES TO THE COMPANYANNUAL FINANCIAL STATEMENTS



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.

2017 2016 N$’000 N$’000

13. CASH FLOW INFORMATION13.1 Reconciliation of profit before taxation to cash generated by operating activities

Net profit before taxation 313 562 190 253 Movement in working capital (313 675) (190 150) – Taxation (1 268) –

– Advances and other accounts (112 407) (189 941)

– Other liabilities – (209)

Dividends paid (200 000) –

Cash flow from operating activities (113) 103

13.2 Cash received from customers Interest received 14 399 490 Other income 2 –

14 401 490

13.3 Cash paid to customers Interest paid on deposits – – Other deposits and loan accounts – –

– –

14. RELATED PARTY TRANSACTIONS

14.1 Related party balances Loans to related parties Nedbank Namibia Limited (subsidiary) (bank account) 11 124 Nedbank Namibia Limited (subsidiary) (fixed deposit) 303 766 191 359

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) 14 399 490


NOTES TO THE COMPANYANNUAL FINANCIAL STATEMENTS




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2NEDBANK 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 MallRobert 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 Centre55 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

KEETMANSHOOPc/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 Centre, Tsandi 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 & 64, Oshana Mall, Erf 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 Mallc/o 21st Avenue & Nathaniel Maxuilili StreetP.O. Box 590, Walvis BayTel (064) 21 6182Fax (064) 21 6181

DUNES MALL WALVIS BAYShop 65, Erf No. 5433c/o M36 & 18th RoadDunes MallP.O. Box 590, Walvis BayTel (064) 28 3700Fax (064) 28 3701

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

CONTACT DETAILS


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