NEDBANK (SWAZILAND) LIMITED ANNUAL REPORT · NedbaNk (SwazilaNd) limited AnnuAl RepoRt 2013 2...

NEDBANK (SWAZILAND) LIMITED

ANNUAL REPORTfor the year ended 31 December 2013

NedbaNk (SwazilaNd) limited AnnuAl RepoRt 2013

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OVERVIEW AND REPORT

OPERATIONALREVIEW

ANNUAL FINANCIALSTATEMENTS

nedbank (Swaziland) limited

prides itself on supplying

stakeholders with updated

information on a regular basis.

this information can be found

at: www.nedbank.co.sz

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OVERVIEW AND REPORT

OPERATIONALREVIEW

ANNUAL FINANCIALSTATEMENTS

Sales Report 22 - 23treasury Report 24 - 25Credit and Risk Management Report 26 - 28Human Capital Report 30 - 33Central operations and technology & Support 34 - 35Internal Audit Report 36 - 37Governance, Compliance and legal Report 38 - 40Corporate Social Investment Report 42 - 49

Annual Financial Statements 50 –116notice of Annual General Meeting 2013 117Definitions 118 – 121Contact Details Inside Back Cover

operational Footprint 4Profile and Structure 5Financial Highlights 6 Financial Highlights at a Glance 7nedbank Strategy 8economic Review 9Chairman’s Statement 10 - 11Board of Directors 12 - 13Management Commitee 14Managing Director’s Report 15 - 17Chief Financial Officer’s Report 18 - 21

Nedbank Branch(es)

Nedbank ATM(s)

Nedbank Agent

Big Bend

Pigg’s Peak

Nhlangano

Mankayane

Hlatikhulu

Ezulwini

MalkernsMatsapha

MBABANE

MANZINI

SimunyeNgwenya

Morocco

CANADA

UAE

USA

UNITEDKINGDOM

London

Dubai

NigerChad

Mali

BeninNigeria

Uganda

Ethopia

Kenya

Seychelles

Mauritius

Malawi

Tanzania

ZambiaAngola

DRCRwanda

ZimbabweNamibia

LesothoSouth Africa

Botswana

CentralAfrican Republic

Burundi

Swaziland

Burundi

Madagascar

Moz

ambi

que

BurkinaFaso

Ghana

Cape Verde

SenegalGambia

Guinea Bissau

Sierra Leone

Equitorial GuineaCameroon

Congo

Luanda

(Brazaville)

São Toméand Principe

Côte d’Ivoire

Gabon

Liberia Togo

Guinea

ecobank footprint

nedbank footprint

nedbank andecobank footprint

nedbankrepresentativeoffices

ecobankrepresentativeoffices

Deals concludedin Africa


OPeRatiONal FOOtPRiNt

4

7

7

2

34

2

1

1

1

2

Siteki

1

21

2

1

1

1

1

1

e2.8 bntOtal aSSetS

e76.1 mHeadliNe eaRNiNGS

89 ktOtal ClieNtS

10bRaNCHeS aNdalteRNate OUtletS

31atmS

239emPlOYeeS

5

PROFile aNd StRUCtURe

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nedbank (Swaziland) limited prides itself on supplying stakeholders with up-to-date

information on a regular basis. this information can be found at: www.nedbank.co.sz

Our ordinary shares are listed in the Swaziland Stock Exchange and we have a market capitalisation of E147 840 804 at 31 December 2013.

HOW WE ARE STRUCTURED

Nedbank Corporate and Business

Banking

Nedbank Retail

Central management functions in

support of frontline businesses

WHERE WE ARE BASED

HeadOfficeatSwaziPlaza,Mbabane Swaziland.

Branch network throughout Swaziland,nineintotal.

Continued focus on people development.X-selling skills training conducted.Franchiseforfinanciers

training conducted.

Total clients over 89 000.Continued to invest in point of representation countrywide.Over875,000innewloans paid out in the year. Enhanced Retail Banking loan offering.Introduced a Nedbank Visa debit card.

Participated in stakeholders review of the proposed Consumer Credit Bill.Stress testing framework introduced on risk-based supervision methodology.Regulatory issued satisfactory status by compliance thereto.

Introduced more entry level banking products in our strive to be a bank for all.Contributedsignificantlyto socio-economic development through our Corporate Social Investment policy.

Final dividend increased to100centspershare,a5.3% increase from prior financialyear.

2009 2010 2011 2012 2013

179.0

203.3218.0

232.0

260.1

tOtal iNCOme (em)

2009 2010 2011 2012 2013

eaRNiNGS PeR SHaRe (cents)

206

248262

303309

SHaReHOldeR’S FUNdS (em)

2009 2010 2011 2012 2013

213.7

254.4

299.6

335.7

401.6

2009 2010 2011 2012 2013

COSt tO iNCOme (%)

56.5

52.4

56.7

50.6

53.6

17%

83%

81%

19%

MARKET SHARE

Assets Liabilities

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2013FiNaNCial HiGHliGHtS

FiNaNCial HiGHliGHtS at a GlaNCe

2013 2012

E’000 E’000

key balance Sheet items Shareholder’s funds 401 570 335 654 Amounts owed to depositors 1 971 466 2 010 879 Cash and cash equivalents 192 133 342 993 Government and public sector securities 272 029 342 197 Loans and advances to customers 2 294 973 1 792 671 Group companies 1 641 50 910

key income Statement items Total income 260 090 231 773 Expenses 139 533 106 041 Profitbeforetax 110 385 118 473 Taxation 34 240 29 669 Profitaftertax 76 145 88 805

Other income Statement items Earnings per share (cents) 309,0 360,0Headline earnings per share (cents) 309,0 360,0Dividend per share (cents) 100,0 95,0

Selected Ratios Return on average shareholders’ funds 19,0% 21,3%Return on average assets 2,7% 3,0%Expenses to total income 53,6% 50,6%Non-interest revenue to total income 50,3% 48,2%Effective tax rate 31,0% 30,3%

EconomicProfit 32 510 29 455

Dividend Cover 3,09 3,22

Capital Adequacy 18,5% 21,0%

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FiNaNCial HiGHliGHtSAt A GlAnCe

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neDBAnK (SWAZIlAnD) lIMIteD StRAteGY

nedbank (Swaziland) limited’s vision of building Swaziland’s most admired bank by our staff, clients, shareholders, regulators and communities continues to be supported by its long-term objectives which are referred to, internally, as Deep Green Aspirations.

OUR VISIONBuilding Swaziland’s most admired bankbyourstaff,clients,

shareholders,regulatorsand communities.

TO BE SWAZILAND’S MOST ADMIRED BANK

OURVALUES

IntegrityRespectAccountabilityPushing beyond boundaries People-centred

WHAt MAKeSuS DIFFeRent?

Greatatlistening,understandingclients’ needs and delivering

A GReAt plACeto WoRKA GReAt plACe to BAnK

OURMISSION

To be a great bank

at providing customised solutions to sustainable and

profitablehighvaluesegmentsinwholesale,businessbanking

and retail banking.

ouR eIGHt StRAteGIC FoCuS AReASPrimary client and cross-sellManage for valueClient-centred Leading

Risk enabler

TransformationGreen and caring bank

Unique and innovative culture

Productivity and execution

DEEP GREENASPIRATIONS

Great atcollaboration

Great placeto invest

Most respected andaspirational brand

Leadingtransformation

Communityof leaders

Livingour values

World class atmanaging risk

Highly involved in the community

and environment

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eCONOmiC RePORtNON- DOMESTIC In2013,advancedeconomypolicymakerssuccessfullydefused two of the biggest short-term threats to the globalrecovery,thethreatofaeuroareabreak-upandasharpfiscalcontractionintheUnitedStatescausedbyaplungeoffthe“fiscalcliff.”Inresponse,financialmarkets have rallied on a broad front. Moreover,financialstabilityhasimproved,asunderscoredintheGlobal Financial Stability Report (GFSR).

TheUnitedStatesexperiencedgrowthinGDPin2013,led by robust exports and strong household spending. The Federal Reserve cut its monthly bond purchases without making any changes to its longer-term plan to keep interest rates low for some time to come. The Eurozone turned the corner from recession to recovery and growth is projected to strengthen to over 1% in 2014. Chinese economic growth has been focused to surpass that of advanced economies and has been projected at 7.5%.

DOMESTIC Domesticeconomicgrowthremainedsubdued,trackinginternational and regional trends, though signs ofrecovery from the 2011 slump gradually emerged. The Swazi economy has been recovering at a steady pace with inflation contained below 6% in 2013. Sectorsthat showed remarkable growth included construction whichgrewbyover9.5%,wholesaleandretailby4%and communications by 8.5%. The higher SACU receipts alleviatedandreducedthecurrentfiscalbudgetdeficit.

The sustained weakness of the Rand/Lilangeni against major trading currencies continues to pose an upside risk

inthe2014medium-terminflationoutlook.Inflationarypressures from the neighbouring South Africa where Swaziland sources nearly 90 percent of its imports will filterthroughtoSwaziland.

OUTlOOK Global economic activity is expected to improve further in 2014-15, largely on account of recovery in theadvanced economies. Global growth is now projected to beslightlyhigherin2014,ataround3.7percent,risingto3.9 percent in 2015 and the growth will positively impact on local exports.

This marks a remarkable period as we adopt the theme presented in the 2014 National budget: “to invigorate economic growth, create employment opportunities,andacceleratepublic sector reforms,”with thegradualrecovery of the global economy.

South Africa has raised concerns about drought in some parts of the maize producing areas which would lead to a surgeinfoodprices.Inaddition,fuelpricesinSouthAfricahavebeenhikedconsecutively in thefirst twomonthsof2014andareexpectedtostayontheupwardtrend,reflectingeffectsoftheweakRand.

South Africa’s growth forecast in 2014 has been revised in the latest IMF World Economic Outlook Report which downgraded South Africa’s growth forecast from 2.8% to 2.3% in January 2014. The expected slow down in SouthAfrican growth was impacted, in part, by strikeactionswhichaffectedtheexchangerateofthecurrency,resultinginanincreaseoninflationandinterestrates.Thiswill have an adverse impact on regional growth.

7.00

6.00

5.00

4.00

3.00

2.00

1.00

0Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

6.54

6.71 6.62

5.58 5.586.05 5.85 5.68

4.424.68

4.39

5.49

SWAZIlAND INFlATION RATES

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IntroductionThe year 2013 marked the second elections to be held under the new constitution. The elections process was completed in a peaceful manner. The business sector is looking forward to the government to introduce robust economic and social policies and programmes that will re-energise the growth of the economy at an accelerated level.

Theturnaroundinthefiscalchallengeshasbroughtalevelof stability in the economic environment. Although growth prospects remain at low levels, there are signs that it istracking the global trends in the recovery mode. The rate of growth in 2013 has been revised slightly upwards to more than 2%, compared to previous projections of 1.9%.Theexpectedthrusthas,however,notyetboostedoureconomicgrowth to the desired levels.

The suppressed economic growth in Swaziland largely tracked the trends elsewhere in the world. Projections of global economic growth are positioned between 3.6% and 3.7%,largely being influenced by trends in the large economiessuchastheUSA,UnitedKingdomandChina.ItexpectedthatChina will outperform the developing economies as has been the trend in the past few years. Whilst the Eurozone economy has stabilised from the effects of the debt crisis experienced at the turn of the decade, the effects of the impendingUkraine – Russia crises remains to be seen. Russia is the major supplier of gas to Europe and any disruption to the gas and oil supply will negatively impact the region.

The SADC’s largest economy, South Africa, also facedsubdued economic growth and the forecasted growth rate for 2013 has been pegged at 2.3%. The outlook for 2014 does not present an overly optimistic prospect either. Also noteworthy is that 2014 is an election year for South Africa and the business environment waits in anticipation of the outcome of these elections.


CHaiRmaN’SStatemeNt

The inflation trends in 2013 were comparatively favourable to the economy, closing the year at 4.4% compared to 8.3% the previous year. It was encouraging that the inflation rate was maintained within the targeted range and we are looking forward to positive policies and programmes that will create a favourable environment to stimulate economic growth.

mr. b.C.F. mhlongo Chairman

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ECONOMY AND BANKING ENVIRONMENTThe demand for credit by the private sector picked up in the year as the signs of positive trends in the economic environment became visible. The economy was looking at the banking sector to play a meaningful role in supporting the economic recovery process.

Nedbank has continued to offer products that support the needs of both the business sector and households. Some of the products were revised to ensure that they aligned with the demands of the environment as the economy was emerging from a dip in credit extension. Thegrowth inassetsbymorethan28%reflectsthebank’s support to stimulate economic activity. The bankwas,however,cautiousthatcreditwasadvancedin a responsible manner, in line with the ConsumerCredit Bill.

With the mention of the Consumer Credit Bill, oneneeds tohighlight thatasabank,weareexcitedbythe planned process to regulate the credit industry. We urge government to expedite the process of bringing the Bill into law. It is also exciting that the Financial Services Regulatory Authority has substantially embedded its operations and we are pleasedwiththesedevelopments,astheystrengthenthecountry’sfinancial sector regulatory regime.Alsopleasing are the developments with regard to the communications industry with the promulgation of the Communications Act and the imminent setting up of the Communication Authority.

The Central Bank of Swaziland opted to keep interest rates unchanged throughout the year and this

positively impacted on the demand for credit. Growth in credit demand resulted in a 21% growth in credit extension to the private sector.

The inflation trends in 2013 were comparativelyfavourable to the economy, closing the year at 4.4%compared to 8.3% the previous year. It was encouraging that the inflation rate was maintained within thetargeted range and we are looking forward to positive policies and programmes that will create a favourable environment to stimulate economic growth.

BOARD OF DIRECTORSWhilst the board remained unchanged in 2013, thereare imminent changes that will take place in 2014. Mr. E. Davidson has since been recalled to Nedbank Rest of AfricaOfficetoassumeanewroleandhasadvisedofhisintention to relinquish his board position. We wish him well in his new challenge and appreciate the positive role he has played on the board in the past 11 years.

APPRECIATIONThecompanydemonstratedresilienceovertheperiod,as growth was achieved in key areas despite the muted economic environment. The management team and staff need to be recognised for their efforts in ensuring that the business remains vibrant and presents an attractive business proposition.

mr. b.C.F. mhlongo Chairman

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nedbank has continued to offer products that supported the needs of both the business sector and households. Some of the products were revised to ensure that they align with the demands of the environment that was emerging from a dip in credit extension.

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bOaRd OF diReCtORS

21

7

5

8 9

3

6

4

Barnabas C.F. MhlongoChairman

Stanley Herbert BeyersNon-Executive Director

Ernest Michael DavidsonExecutive Director

Nomsa R. HlatshwayoNon-Executive Director

Hendrik BritsIndependent Non-Executive Director

Muhawu MaziyaIndependent Non-Executive Director

Panuel GwebuCompany Secretary

Rory CupidoExecutive Director

Fikile NkosiManaging Director

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1. Barnabas C.F. Mhlongo (67)Chairman

Qualifications: ACIS – Southern Africa Institute of Chartered Secretaries and Admi-nistrators, FICBM – Chartered Institute of Business Management, Diploma in CriminalJustice and Forensic Investigations – Uni-versityofJohannesburg,DiplomainBusinessStudies – University of Boleswa.

Barnabas is the present Executive Director of theSwazilandInstituteofAccountants(SIA),a statutory body created to regulate the profession of Accountants. He has previously worked as Company Secretary and later Head of Procurement for Johannesburg Fresh ProduceMarket, andCompany Secretary atSwaziland United Bakeries (Pty) Ltd.Barnabas has been involved, at executivelevel, in various professional bodies, includ-ing the Federation of Swaziland Employers/ChamberofCommerce(BoardMember),and Swaziland Competition Commission (Director).

Committees: Directors Affairs &Remuneration Committee

2. Fikile Nkosi (45)Managing Director

Qualifications: Dip Acc Bus Admin (Uniswa),BCom(Uniswa)BCompt(Hons)(Unisa),MAP(Wits) SMP (GIBS)

Fikile is the Managing Director for Nedbank (Swaziland) Limited. Prior to her appointment asManagingDirector, she held the positionofChiefFinancialOfficer.Shehasalsoservedin the organisation as the Head of Internal Audit. She joined Nedbank (Swaziland) Limitedin2001,havingworkedforaninter-nationalauditfirm.OutsideNedbank,shesitson the Board of AON Swaziland (Pty) Ltd as a non-executive director.She is the Vice-President of the FSE/CC and represents the Bank in various boards.

3. Stanley Herbert Beyers (60)Non-Executive Director

Qualifications: FIBSA,HigherDiplomaAdvanced Banking.Stanley has worked for Nedbank Limited for over 30 years in various Divisions.

Committees: Audit Committee, RiskCompliance&LoanReview,DirectorsAffairsand Remunerations Committee.

4. Nomsa R Hlatshwayo (58)Non-Executive Director

Qualifications: MA Finance & Management(BallStateUniversity,USA),Bcom (UBLS)Diploma in Business Studies (UBLS)

Currently operating her own business as a business consultant. She is a former Director ofOperations Department, CentralBank of Swaziland; Manager Internal Finance,Central Bank of Swaziland; Pensionand Loans Accountant Central Bank. She has held other various positions within Central Bank of Swaziland including Snr. Examinations Applications officer, Purcha-singofficer Snr. SupervisorBankingandSnr.Supervisor Budget Accounts.

Committees: Risk Compliance & Loan Review,DirectorsAffairsandRemuneration.

5. Rory Mark Cupido (51)Executive Director

Qualifications:BA(Law)1,(UniversityofWesternCape),BProc1(WITS),MDP(UniversityofStellenbosch),EDP (GIBS – University of Pretoria)

Rory is Executive Head of Human Resources – Nedbank Rest Africa. He is the current chairman of Nedbank Group Retirement Fund. He is also a board member in Nedbank Malawi,andamemberofvariousinstitutions,including; Corporate Employment Equity Forum and Corporate Engagement Forum. Prior to his appointment with Nedbank,he worked for Old Mutual and Drum Reconditioning Company. Within Nedbank,he has been serving in various managerial personnel positions since 1995 and holds several portfolios in various representative committees.

Committees: Directors Affairs andRemunerations Committee.

6. Ernest Michael Davidson (59)Executive Director

Qualifications: MDP (Stellenbosch University),MDP(Unisa),AEP(Unisa)

Ernest is with the Nedbank Rest of Africa Business cluster and is currently the Executive Head of Flexicube. Ernest has worked in various branches/divisions within Nedbank and has held the following positions: Chief Operating Officer Nedbank (Swaziland) Limited, CreditManager, Branch Manager, CommercialManager,SeniorManagerHomeLoans,AssetBased Finance Assistant General Manager Branch Operations KwaZulu-Natal, GeneralManager Branch Operations East Gauteng,DivisionalDirectorBranchOperations,GeneralManagerATM’s/SST’s/POS,GeneralManagerShared Services.

Committees: Audit Committee and

Risk Compliance & Loan Review

7. Muhawu Maziya (49)Independent Non-Executive Director

Qualifications: LLM,LLB,BALaw,Dip.Journalism,Dip.IndustrialRelations,Advocate

Advocate Muhawu Maziya, a FulbrightAlumnus.He is the General Manager – Commercial at the Royal Swaziland Sugar Corporation (RSSC). Before joining RSSC,he was Head of Law, Faculty of SocialSciences,attheUniversityofSwazilandandsubsequently, Deputy Executive Directorof the Swaziland Federation of Employers/Chamber of Commerce.He has also served as chairman of the Swaziland Financial Services RegulatoryAuthority Board,Non Executive Chairman of Newera Partners Limited Board, Non Executive Chairman ofNational Maize Corporation Board and Non Executive Chairman of the Swaziland Insurance and Retirement Funds Board. He has also served in the Labour Advisory Board and was Deputy Chairman of the Industrial Relations Act 2000 drafting Committee.

Committees: AuditCommittee,DirectorsAffairs and Remunerations Committee.

8. Hendrik Brits (72)Independent Non-Executive Director

Henry is currently the General Manager,Zimswitch Technologies (Private) Limited - a company which operates an electronic funds transfer switch on behalf of Zimbabwean Financial Institutions. Henry is a career banker, having joined MBCABank in Zimbabwe as a Bank Clerk shortly after its inception and performed various banking tasks, including: trade finance,credit and advances and treasury, beforebeing appointed as General Manager and executive director responsible for general banking. Henry was also appointed to the Board of Directors of the various subsidiary companiesofMBCA.Afterretirement,Henrywas appointed into the Board of bancABC Zimbabwe; MBCA Bank Limited Zimbabwe; Nedbank Malawi Limited and Nedbank (Swaziland) Limited.

Committees: Audit Committee (Chairperson)Risk,Compliance&LoanReview

9. Panuel Gwebu (39)Company Secretary

Qualifications:BALaw,LLB(Uniswa),Post Graduate Diploma in Compliance Management,MDP(GIBS).

Panuel Gwebu holds the position of Company Secretary/ChiefComplianceOfficer atNed-bank Swaziland. He was admitted as an Attorney of the High Court of Swaziland in 2001. Panuel practised as a litigation attorneywith S.A. Nkosi & Company. He later took employment with P.M. Shilubane & Asso-ciates also as a litigation attorney prior to his appointment to Nedbank Swaziland as a complianceofficer.Mr. Gwebu has also been engaged by the Institute of Distance Education in the University of Swaziland as a part time tutor in the Faculty of Law.

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maNaGemeNt COmmittee

Isabel Made 34

Head: Internal Audit(2 years’ service)Qualifications: Bcom(UNISWA),CA (Swaziland)

Fikile Nkosi 45

Managing Director(14 years’ service)Qualifications:DipAccBusAdmin(Uniswa),BCom(Uniswa),BCompt(Hons)(Unisa),MAP(Wits)SMP (GIBS)

Phesheya Nkambule 35

Chief Financial Officer(3 years’ service)Qualifications:BCom (Uniswa)CA (Swaziland)

Edward Sithole 45

Head: Human Resources(8 years’ service)Qualifications: BA Soc Science(Uniswa)MBA (UKZN)

Mike Gibbs 60

Head: Sales(2 years’ service)Qualifications:BCom(Wits),MBA(Wits)Fellow of Institute of Bankers

Mbali Sibanyoni 45

Head: Credit and Acting Chief Risk Officer(24 years’ service)Qualifications: BA Social Sciences (UNISWA)Post-Graduate Diploma in Management (University of Natal)MBA (University of KwaZulu-Natal)Senior Management Programme (GIBBS)

Panuel Gwebu 39

Chief Compliance Officer, Company Secretary & Legal Advisor(9 years’ service)Qualifications: BALaw,LLB(Uniswa),MDP (GIBS) PostGrad - Compliance (UJ)

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INTRODUCTIONSwaziland’s domestic performance in 2013 has seen a marked improvement,withnumerousinterventionsandinitiativestostimulatetheeconomy,resultingineconomicgrowthof1.9%.The contribution to this increase was a huge improvement inSACUreceiptsinthe2012/2013fiscalyear.Impactedbya high level of expenditure and government’s limitations to raisenewdebt,thecountrycontinuedtodemonstratelowergrowth in relation to regional performance. This remains a concern for the country.

Wecontinued to focusonour strategic initiatives in2013,and realising our vision of building Swaziland’s most admired bank remained unaltered. As we moved closer to realising this vision we continued in our aspirations to deliver sustainability toallourstakeholders,andembracedourjourneyaswebuiltthe franchise and moved from good to great. The global economy continued to face challenges in 2013,affected by slow economic growth amongst the World’s largesteconomies,namely,theUS,andEuropeaneconomieswhich have adversely impacted the global economy.

My report, therefore, presents the key milestones, andachievements in the context of the local environment and evaluating of our progress against key strategic initiatives embarked on in 2013.

maNaGiNG diReCtOR’SRePORt

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We continued to increase our footprint with the addition of seven (7) new AtMs giving our clients greater access to our products and making our services more tailored to the needs of our clients. one of our key success areas has been the introduction of the debit card. this has resulted in increased efficiencies, and it also enabled us to give our clients added value in our product range.

ms. Fikile NkosiManaging Director

maNaGemeNt COmmittee

MANAGING DIRECTOR’S REPORT (ContInueD)


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INFlATION

HeadlineinflationinDecember2013,remainedthesameas November 2013 at 4.4%.The annual inflation ratedeclined to5.6% in2013, incomparisonwith8.3% in2012.Thisdecreaseininflationrateswasattributedtoanumberoffactors, includingthedecreasingannualratechangesreflectedonfood,nonalcoholicbeveragesandtobacco in the month of November 2013. The public sectorwageincreaseremainedbelowprevailinginflationresultinginmoderateinflationarypressures.

FINANCIAl RESUlTS Headline earnings grew by 1% to E76.1 million (2012: E75.4 million), while earnings per share reached 309 cents (2012: 303 cents).

Credit extension to the private sector grew by 21%, a rise thatwasmainly drivenbynewbusinessopportunities in Asset-Based Financing and on account of an increase in personal loans. Our retail division embarked on a product campaign that effectively created favourable conditions for our clients and saw us maximising value in the personal loans division. Due tolowratesandtheeconomystabilising,householdcredit increased in 2013.

Despite prevailing low economic growth trends in the market, our business continued to grow. Loans andadvances performance indicated an increase of 28%. Netinterestincome(NII)growthwaspositive,withanoverall increase of 8%. In line with our goal to increase non interest revenue (NIR), the bank was able toincreaseNIRby17%in2013,resultinginpositivegains.The Rand on the other hand was affected by a number of factors, including mining sector labour disputes.Asubduedandvulnerablelocaleconomybenefitedfromthe positive impact on the foreign exchange rates.

Expense management continues to be a priority in the short-term and long-term, with consistent expenseanalysis that allows the Bank to allocate and monitor expenditure. One of the success factors in 2013 was that we were able to maximise economies of scale where possible.

Our vision as Nedbank, Swaziland is to buildSwaziland’s most admired bank. This has enabled us to continuedelivering toour clients, shareholders, staff,regulators and community. To assist us in maximising growth and key value proposition differentiators in the market,weembarkedontargeted initiativesthroughProject Genesis. As a direct result of the Project Genesis initiative,growthoccurredinallretailassetlinesandthe debit card rollout that commenced in October 2013 has gained momentum. This has allowed us to improve value propositions and take advantage of the opportunities presented to us; thus we have been able to leverage our capabilities and delivering maximum value and service to our customers.

ClIENTS We continued to increase our footprint with the addition of seven (7) new ATMs giving our clients greater access to our products and making our services more tailored to the needs of our clients. One of our key success areas has been the introduction of the debit card. This has resultedinincreasedefficiencies,andalsoenabledustogive our clients added value in our product range.

InadditiontotheinceptionofProjectGenesis,customerfocus remained a key driver in our business growth. We remain committed to promoting a client-centred approach to relationship management with our clients. In2013,ourteamsconsistentlydeliveredaprofessionaland exciting customer experience to our clients.

PEOPlE Some key changes happened in the executive of the bank, with Leonard Dlamini retiring after 42 years ofservice.The Head of Marketing andTreasury, NoziphoZwane,leftNedbankattheendofAugust,andGoodmanChakanyuka, the Chief Risk officer left the bank inOctober.

APPRECIATION I continue to appreciate the expertise, guidance anddirection provided to me by the board and chairman

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of the board Mr. Barnabas Mhlongo. I would like to thank the chairman and the board of directors whose contribution have been invaluable. Their sharedcommitmenttotheoversight,governanceandperformance of the bank has positively contributed to our success and growth. The constant support and feedback allowed us to effectively deliver on our strategic focus areas.

I would also like to thank the management of the bank for the dedication and commitment to our work which hassignificantlytransformedourwayofdoingbusinessand enabled the business to continually deliver to our stakeholders.

In conclusion, I would like to thank our clients forallowing us to be their bank and to our staff - the drivingforcebehindthebusiness,fortheirdedicationand focus on constantly delivering superior service to our clients and consistently creating a customer experience that moves us towards building the most admired bank in Swaziland.

ms. Fikile Nkosi Managing Director

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OVERVIEW

Results

Headline earnings stood at E76.1 million (2012: E75.4 million), as both net interest income and non interestrevenue displayed strong growth year-on-year and interest rates remainedflat for the duration of the year. Loans andadvances increased by 28% to E2 295 million (2013) from E1 793 million (2012) as there was growth in demand within the sugar industry and commercial property development.


CHieF FiNaNCialOFFiCeR’S ReView

Good performanceunderpinned by strongnIR growth and riskmanagement.

Phesheya Nkambule (35)Chief Financial Officer

Our Financial perFOrmance in 2013

2013

309

1,0%

76,145

2012

303

14.1%

75,368

2011

262

11.2%

66,043

2010

248

21.0%

59,398

2009

206

9.4%

49,108

Headline earnings

Earnings per share (cents)

Growth in headline earnings (%)

Headline earnings (E000)

19

Customer deposits declined year-on-year by 2% to E1 971 million (2012: E2 011 million). This is the outcome of the margin improvement measures implemented to improve the cost of funds as deposits priced at a premium were off-loaded and replaced with cheaper funds as the liquidity pressures observed in the previous year had eased. The Bank continues to pursue its strategic objective of growing deposits and increasing its market share.

ACCOUNTING POlICIESThe financial statements have been prepared inaccordance with the measurement and recognition requirements of the Swaziland and International Financial Reporting Standards (IFRS), and in themanner required by the Swaziland Companies Act 2009.

Exceptasnotedbelow,theaccountingpoliciesappliedin the preparation of the financial statements areconsistent with those applied in the previous years. ThefinancialstatementsarepresentedinEmalangeni,which is Nedbank (Swaziland) Limited functional and presentation currency. Certain comparative amounts in the Statement of Comprehensive Income and Statement of Financial Position have been re-presented as a result of a change in the accounting policy regarding the measurement of items of other comprehensive income.

MARKET SHARE Credit extension increased in comparison to the previousyear,emanatingfromtheimprovedeconomicactivity thus contributing to the growth in the bank’s market share ot assets to 19%, from 17% in thepreviousfinancialyear.Stronggrowthwasobservedinhome loans, asset-based finance and personal loans;the bank continues to focus on market share growth.

CAPITAl RISK MANAGEMENT Total capital improved to E401.6 million (2012: E335.7 million). The bank’s capital adequacy ratio is 18.5% and was maintained within the bank’s guidelines of 15% to 20%. It is also of note that it is above the Basel I regulatory requirement of 8%.

The Bank is reporting in line with Basel II using the standardised methodology adopted for all the Nedbank Group’s African subsidiaries. The Bank monitors its capital adequacy through its ALCO process.

The Board of Directors is satisfied that the Bank’scapital meets Regulatory Requirements.

FINANCIAl REVIEW

Balance Sheet Analysis

In pursuit of a portfolio tilt strategy in order to achieve therightmixofassetstoimprovemargins,theBank’stotal assets grew by 11% to E2 845 million (2012: E2 552million),mainly attributable to solid growthinhomeloans,termloans,asset-basedfinancingandpersonal loans. This has resulted in the Bank improving itsassetprofileratioto81%(2012:70%)inloansandadvances of total assets. Non-performing loans book increasedby5%toE29.1million(2012:E27.7million),reflectinganeffectivecreditmanagementsystemandthe credit loss ratio was recorded at 0.47%.

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E129.3 millionnet InteReSt InCoMe (nII)

7,8 %

E76.1 millionHeADlIneeARnInGS

1,0 %

19.0%ASSetS MARKetSHARe

19%81%

Assets

CHIEF FINANCIAl OFFICER’S REVIEW (ContInueD)


20

2013

7,8%

2012

2.0%

2009

11.5%

NEt INtErEst INcomE

Net interest income (E’000) NII growth (%)

129,339

119,982

2011

7.2%

117,606

2010

15.9%

109,703

94,645

2013

17.0%

2012

11.4%

2009

16.2%

NoN- INtErEst rEvENuE

Non- Interest Revenue (E’000) NIR growth (%)

130,749

111,791

2011

7.2%

100,346

2010

11.3%

93,625

84,113

Cash and cash equivalents and Government securities are held for both profitability and compliance withregulatory liquidity requirements. These decreased by 32%year-on-year,inlinewiththereductionindeposits.Derivative assets, together with the correspondingderivative liabilities, represent an accounting baseddisaggregation of the Bank’s portfolio of client deal structuring activities. These positions are offsetting fromariskprofileperspective.

Deposits decreased by 2% to E1 971 million (2012: E2 011 million). The Bank continues with its deposit mobilisation strategies of growing free funds and lengtheningthematurityprofile.

Key financial performance indicators

2013 2012 Actual Actual Indicator % % Return on average shareholders’ funds 19.0 21.3Return on average assets 2.7 3.0 Expenses to total income 53.6 50.6 Non interest revenue to total income 50.3 48.2 Effective tax rate 31.0 30.3

Income Statement Analysis

Net Interest Income

In line with the growth in loans and advances and despiteratesbeingflat,netinterestincomeincreasedby 8% to E129.3 million (2012: E120.0 million). Home loansandassetbasedfinancinghadpositivegrowthof21%and35%respectively,comparedtothepreviousyear. The increased productivity in the sugar industry contributedsignificantlytothegrowth,asexposuretothe industry increased by 30% compared to previous year. Margin improvement was observed as measures to improve the cost of funds by off-loading deposits priced at a premium and replaced with cheaper funds bore fruit.

Non- Interest Revenue

As a result of the Bank’s focus on NIR and increasing its client base, non interest revenue increased by17% to E130.7 million (2012: E111.8 million). As the Lilangeni/Rand weakened against major currencies,foreign exchange transactions picked up during the year leading to an increase in foreign exchange income. The NIR to expenses ratio for the year was 93.7% (2012: 105.4% after restatement). The adverse movement in the ratio is mainly as a result of expenses increasingduetothereclassificationoftheemployeebenefitcostsasaresultoftheadoptionofIAS19(R).

17%nIR

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Expenses

Total expenses increased by 35% year-on-year to E140.0 million (2012: E103.8 million) due to the reclassification of the employee benefit costs asa result of the adoption of IAS 19 (R). Excluding the impact of adopting IAS 19 (R), expenses grewby 8%. The bank’s cost to income ratio is 53.7% (2012: 44.8%) and the Bank’s management remains committed to monitoring costs and aims to maintain them at acceptable levels. Staff related expenses constitute 47% of total expenses (2012: 42%). The increase is driven by the Bank’s funding of the shortfall inemployeepensionsreflectedintheIAS19valuation.

Taxation

Taxation increased by 15% to E34.2 million (2012: E29.7 million) as a result of a combination of the Bank’s profitsincreasingandachangeintaxrateduringtheyear which had an impact on deferred taxation. The effective tax rate increased to 31.0% (2012: 30.3 %.)

Shareholders’ funds

Capital and reserves increased by 20% to E401.6 million (2012: E335.7 million), resulting in a capitaladequacy ratio of 18.5% (2012: 21.0%).

DIVIDENDA dividend declaration of 100 cents per share has been approved by the board signifying a milestone for the BankasitreachestheE1.00mark,anincreaseof5.3%from the previous year. Dividend cover is 3.09 times in line with the Bank’s dividend policy of maintaining a dividend cover of not less than 2.5 times of headline earnings per share.

PROSPECTS The Bank continues to focus on both the corporate and retail sectors with its strategic objective being to grow the customer base. The Bank aims to leverage on its client relations and provide customised products to its clients. We expect the economy to grow at a higherratein2014andtheBanktobenefitfromtheimproved level of economic activity.

21

2013

53.7%

2012

50.6%

2009

56.7%

ExpENsEs

Expenses (E’000)

Expenses to income ratio (%)

20112010

114,977

114,207117,271

139,533

101,362

52.4%56.5%

2013

19.0%

2012

26.5%

2009

23.0%

sHArEHoLDErs’ FuNDs

Shareholders’ Funds (E’000)

Return on Equity (%)

20112010

22.0%

20.2%

254,366

289,482335,654

401,570

213,720

100 CentSDIVIDenDpeR SHARe

2013 saw the introduction of a more focused and disciplined approach to serving customers and to meeting all their banking needs. This has ensured that the sales team’s strategicobjectivesfortheyearweremet,andthattheunitiswellpositionedtoleveragesignificantbusinessgrowthinthe year ahead.

PERSONAl BANKINGThe Personal Banking team achieved significant growthin assets which was mainly driven by the Premier loan product. Liabilities also grew year-on-year, due to thenewly launched Sivuno Plus Savings account and the other savings and investment accounts on offer.

Aggressive marketing campaigns were successfully under-taken to promote retail products, which included radioadverts, radio talk-shows and new product promotionssuch as retail ‘trolley dashes’; with groceries going to the top three winners. SMS messaging was also introduced where-in clients were kept abreast of new products and services from within the retail range. November saw the successful launch of the Nedbank VISA debit card that will be used to enhance the product offerings and attract new customers going forward.

The ABF book continued to grow with the ABF team re-enforcing relationships with car dealerships. A Dealer Recognition Award function was held in February 2013 with top dealers and salesmen being rewarded for increasing vehiclefinancingopportunities.Thefocusoncorporatesasamarket forABFgrowthwasalso intensifiedwithvisibleasset growth from this sector. Improved customer service and turn-around time gave a marketing edge against competitors.

SME AND INSTITUTIONAl BANKINGSME Banking continued to experience economic challenges in a small market where the majority of SMEs rely on banks forfinancewithmostofthemhavinglimitedalternatives.

SaleSRePORt

michael Gibbs (60)

Head of Sales

the personal Banking strategy for 2014 will be to intensify client focus through the ‘nedbank@Work’ concept and the introduction of other appropriate products and services.


22

To those qualifying for lending, the bank usedcustomised solutions in addressing client needs. The SME value proposition was enhanced through pre-approvednon secured overdraft facilities, a re-engineered club savings account and access to the VISA debit card.

PRIVATE BANKINGThe Private Banking unit continued to offer top qualitypersonalisedfinancialandbankingservicestoclients via dedicated bankers spread across the two majorbranchesofMbabaneandManzini,aswellasthe Private Banking suite at the Gables in eZulwini. Throughthestrengthenedrelationshipapproach,theteam has been able to achieve satisfactory growth of this key sector of the market. The Private Banking unit has strategically positioned our business in delivering value and improved services to our clients. Future growth in this segment during 2014 is still anticipated as the unit aggressively targets new business opportunities.

CHANNEl MANAGEMENTOperational efficiencies, through‘ideas generation’,continuedtoimproveoperationalprocesses,aswellascustomerservice.Focuswasalsoonsales,whichresulted in positive results that strengthened the balancesheet,bothassetsandliabilities.TheSharedServices Model that was introduced in June 2012,withtheaimofcentralisingbackofficefunctionshasworked well and has given sales staff more time to focus on sales targets and collaborations that have yielded better fruits.

A key strategic initiative was to increase the ATM footprint countrywide in prime areas with high traffic. NewATM’swere installed at theCorporatePlace,MbabaneSuperSpar,KwaluseniSupermarket,and Gables at the Galleria, Siteki Shoprite andMalkerns Sentra Complex.

During2014,anumberofstrategicsiteshavebeenidentified for further expansion of the Nedbankfootprint. An Internet Banking kiosk will also be installed in the following branches: Mbabane Corporate Place,Gables, Matsapha, Riverstone andManzini. This will provide customers with the ability to access Internet Banking in a secure location.

CUSTOMER SERVICEInitiatives to improve customer service continued throughout the year. Overall performance was tracked using customer services devices and it stood at 92.6% against 94.2% for the previous year. During theyear,aCommentsBoxwasintroducedinthefourlarge branches. These interactive devices allowed customers to submit complaints, complimentsand suggestions. Valuable information was gleaned from these devices, in order to further streamlineprocesses and improve customer experiences.

CORPORATE AND BUSINESS BANKINGThe division continued to operate in an economic environment characterised by low GDP growth and decreased foreign direct investment. Non-financialinstitutions have become major money lenders,following the promulgation of the Retirement FundsActsof2008,bringinginoutsidecompetitionand Asset Managers are also proving to be serious competitors.

The retention of liabilities continues to be a challenge, asAsset Managers continue to mop upliquidity and drive up pricing by offering money market rates. There has been a concerted effort to grow the account base and use electronic products to attract ‘cash rich’ entities.

OUTlOOK The Personal Banking strategy for 2014 will be to intensify client focus through the ‘Nedbank@Work’ concept and the introduction of other appropriate productsand services. Inaddition, thehousingandABF market will also be a focal point. SME unit focus for2014will beonaccountgrowth,balancesheet growth and further partnering with external stakeholders to exploit business opportunities. The Corporate and business banking division will focusonbuildingvaluepropositionsforfranchising,agriculture and the Public Sector. Success will be spearheaded by close collaboration with other Divisions in the Group and maintaining a motivated and professional team.

23


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OVERVIEWThedepartmentcontinuedtofulfillitsfunctionofprovidingmarket funding, investment and meeting customerforeign exchange requirements.Treasury manages market,investment,interestrateandliquidityriskswithinthebank.Margin management is also a key deliverable. Customised solutions and client focus are the main strategic pillars within the department.

In order to deliver on itsmandate, theTreasury operationadheres to laiddownoperationalpolicies, as stipulatedbythegoverningauthority,theCentralBankofSwaziland,andorganisational policies and standards.

REVIEW OF THE YEARInspiteoftherecentglobalrecessionexperienced,Treasuryforeign exchange income increased by 34% to E18.3 million (2012:E13.7million).Thesignificantgrowth resulted fromcontinued strengthening of existing relationships with our clients, the broadening of our client base, and with theweakened Lilangeni/Rand against major currencies, andforeign exchange transactions that were favourable during the year leading to an increase in foreign exchange income.

24

tReaSURY

With the improved market liquidity the Bank managed to keep its average cost of funds at lowest levels of 2.3% (2012: 2.7%).


Client acquisition and visitation remained a key focus area,asthreenewmajorclientswerebrought intothebooks. Leveraging on Group support has assisted in improving service delivery and processes and reviewing and streamlining proceses to provide more efficientservicetoourclients.Withtheimprovedmarketliquidity,the Bank managed to keep its average cost of funds at 2.3% (2012: 2.7%).

Average Cost of Funds

With the Rand and consequently the Lilangeni vulnerable for the largerpartof theyear, the currencty remainedunder pressure amidst general uncertainty for emerging

markets.Most notably, the decision by theUS FederalReserve to taper their quantitative easing programme saw the Rand weaken against the US Dollar to its lowest levelsinfiveyears.

lilangeni Against USD and Euro

OUTlOOKIncreased collaboration with stakeholders and customer focuswill remainamajordifferentiator, in the comingperiod. Building capacity through training and systems enhancement will be given priority as a means to improveefficiencies.

25


ContACt DetAIlS

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4,0%

3,0%

2,0%

1,0%

0%Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

J F M A M J J A S O N D

15.0000

14.0000

13.0000

12.0000

11.0000

10.0000

9.0000

8.0000

2012

2013

EUR/SZL

USD/SZL

OVERVIEWEconomic conditions in Swaziland for the year 2013remainedsluggishfollowingthe2011fiscalchallenges. The country’s economy has struggled to recover and this has seen household budgets andthejobmarketremainingfragile,andcreditdemandremainedsoft.However,thistrendwasreversed in the second quarter of 2013.

Nedbank has a strong risk culture and follows world-class enterprise-wide risk management,whichaligns:strategy,policies,people,processes,technology and business intelligence in order to evaluate, manage, and optimise opportunities,threats and uncertainties. A culture of risk aware-ness and compliance is embedded in Nedbank’s day-to-day activities, ensuring sound businessdecisions that properly balance the diverse risks inherent in any transaction.

The Bank’s Enterprise-wide Risk Management Framework (ERMF) places emphasis on: account-ability, responsibility, independence, reporting,communications and transparency. It comprises seventeenkeyriskcategoriesthataremanaged,measured and reported on by all functions across the bank. The role of risk management is: identifying, assessing, measuring and managingthese risks thus ensuring adherence to policies and procedures.

REVIEW FOR THE YEARCredit Risk Nedbankdefinesclientcreditexposureasthe

amount representing the maximum potential loss arising from total facilities granted to a client. Effective credit risk management is fundamental to the sustainability of the Bank. In ensuring alignment to best practice, theBank continually reviews its credit policies,procedures and measures. The Credit and Risk DepartmentreportstotheRisk,Complianceand Loan Review Committee on a quarterly

26

CRedit aNd RiSk maNaGemeNt

Nedbank has a strong risk culture and follows world-class enterprise-wideriskmanagement,whichalignsstrategy,policies,people,processes,technologyandbusiness intelligence in order to evaluate,manage,andoptimisetheopportunities,threatsanduncertainties.


mbali Sibanyoni (45)Head of Credit and Acting Chief RiskOfficer

basis, providing the Boardwith the assurance thatthe various risk categories are being effectively managed and controlled to ensure soundness and profitability.

2013 growth in the Bank’s total loans and advances extended to the private sector remained fairly subdued,inlinewiththeslowpaceofexpansionindomestic economic activity despite the lowest level of interest rates in three decades.

The Bank’s loans and advances grew by 28% to E2.29 billion (2012: E1.79billion). It is however imperative to mention that this growth was largely driven by a seasonal transaction in the sugar industry and the unsecured personal loans due to the marketing drive that was undertaken in the Retail space.

Growth in advances in Business Banking and Corporate was stagnant for the better part of the year andsignificantchangewasonlyseentowardstheendof the year. The stagnant growth was a result of the slow economic growth and businesses being cautious.

Impressive growth in gross advances in the Asset Based Finance portfolio of 35% (2012: 5%) was recorded. Other areas that showed impressive growth was the home loan portfolio showing growth at 21%. The overdraft portfolio recorded a decrease of 31% when compared to previous year as a result of major companies not making any major expansionsandremainingcashflushforthebetterpart of the year.

Credit Impairments and Credit losses

Non-Performing loans (NPL) as a percentage of total loans and advances improved to 1.23% (2012: 1.48%). Early cycle delinquencies improved as lower interest rates helped consumers to recover andthebenefitsofeffectivecollectionsandsoundcredit policy became evident. Write offs and other loan restructuring initiatives also contributed to the significantimprovementinimpairedadvances.

The Bank’s credit-loss ratio slightly deteriorated from 0.38% (2012) to 0.47% in the current year due to a conservative approach adopted in provisioning. However,thisremainedbelowtheBank’slimitof2%.

Operational RiskTheaimofanoperationalriskframeworkistoidentify,assess, control and mitigate operational risk and tochampion effective reporting of risk and emerging risk issues. Operational risk is defined as the risk of lossresulting from inadequate or failed internal processes,people and systems or from external events. Successful operationalriskmanagementiskeyindiversifiedfinancialservicesmainlybecauseofthevolumes,complexityandthe nature our business. Operational risk is not typically takeninpursuitofanexpectedreturn,butexistsaspartof normal course of business at all levels.

Risk Control Self Assessment (RCSA) is the primary operational risk measurement tool used by the Bank and forms an integral element of the overall operational risk framework, as it provides anexcellentopportunityfor the bank to integrate and co-ordinate its risk identificationandriskmanagementeffortsandgenerallyto improvetheunderstanding,controlandoversightofits operational risks. Quality assurance for RCSA has been a major focus in the year and will continue to be so for the coming year. The RCSA is a forward-looking process through which business unit management identifiesrisks that could threaten the achievability of business objectives and offers a set of controls and actions to mitigate risk tolerance.

The internal loss data collection process and tracking is backward-looking and enables the monitoring of trends and the analysing of root causes of loss events. Operational risk losses are reported in the Nedbank Internal Loss Data Collection System.

27

29.5

29.0

28.5

28.0

27.5

27.0

26.6

1.80

1.60

1.40

1.20

1.00

0.80

0.60

0.40

0.20

0.002011

Credit Loss Ratio NPL Ratio

NPL Value

2012 2013


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Gross losses by event type 2010-2013Nedbank’soperationalriskprofile,frominternallossdata,overthefouryearperiodisdominatedbyinternalfraud,execution delivery and process management (EDPM),business disruption and systems failure (BDSF) and external fraud. EDPM and BDSF losses have become more significant in 2012with internal fraud (IF) contributingless in 2012.

Market Risk Market risk emanates from changes in market variables such as interest rate changes, foreign exchange ratesand commodity prices and cause uncertainties in security’s price.

To ensure implementation of risk management strategies regardingmarketrisk,Nedbankcreatesamutualcheckingsystemwheredecisionmaking,execution,andmonitoringfunctions are systematically separated and organised into different units. The bank’s main market risk objective is to understand and control market risk by robust measurement,limitsetting,reportingandoversight.

OUTlOOK FOR 2014The country’s growth outlook still remains uncertain in the region. While interest rates have remained at their lowest levelforthepastfiveyears,economistshavepredictedanincrease in the third quarter of 2014. This will put pressure on the household lending due to over commitment.

Strategic focus areas in 2014 include the following:

Primary clients and cross-sell:- sound risk principles willbemaintained,focusingonnon-interestrevenue(NIR) and primary client growth, usingClientValue

Propositions in the areas of agriculture, franchising,and small business sector as well as the retail banking sector;

Portfolio tilt- Strategic portfolio management to optimise allocation and use of scarce resources (e.g. funding, liquidity and marketing spend) and riskappetite. Effective risk management within desired risk appetite;

Risk as an enabler- continues to ensure risk versus reward optimisation with emphasis on pricing for risk. Focus will be on facilitating client solutions (being solution-orientated) and of course within set risk parameters. The Bank will continue to focus on growing a quality loan book rather than chase market share at any cost. There will be a strong focus on loan portfolio administration at different levels within the organisation. The Bank will continue to be aggressive and conservative in providing for bad loans and defaults. Embedding world-class risk and balance sheet management will continue;

Productivity and execution- simplifying policies and procedures,streamlininginternalapprovalprocesses,thereby improving on turnaround time, reducingvolumes of paper and creating efficiency throughconsistency; and

Unique and innovative culture- re-engineering processes to demonstrate consistent and proactive responses to business needs and offer relevant risk management guidelines. Agility and proportionate responsetoregulation,riskmanagementandstrategywill continue.

28

crEDIt AND rIsK mANAGEmENt (ContInueD)


29


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30

ouR StRAteGIC FoCuS AReAS The people management strategy enables us to differentiate and compete through shaping the business workforce profile to ensure that we have the requisiteskills and competencies to meet current business and future growth requirements. The planning for the next three-year phase had been completed and the focus of our human resources strategy is:

2013 HIGHlIGHtS

The future success of any organisation is directly related to the capabilities, motivation andcontribution of all its employees and the calibre of itsleadersatalllevels.Indeed,theonlyconstantintoday’s challenging and changing business landscape is people. To attract and retain good employees,business organisations need to build a dynamic HR infrastructure that supports growth. It needs to nurture knowledge, skills, attitudes and valuesthat make it possible for people to do their jobs competently with commitment.

In keeping with our belief that ‘Great things begin with Great people’ 2013 was a year in which we continued the strong focus on our people, theirdevelopmentandretention,thecultureandclimateinwhich theyoperate.Thehighlightsbelow reflectsome of the achievements for the period under review:

Cultural entropy level of 10% at worldclass levels.

Continued high levels of staff morale. Introduced recognition of Top Bankers and

Top Tellers. Empowered staff through targeted training and

coaching 46 managers went through Dynamic

Leadership in a Project Environment training. 45 managers went through Managing

Complex Business Relationships training. 40 managers went through Performance

Management training. 220 staff members participated in Winning Teams

Product Knowledge training.

our belief is that true cultural sustainability can only be achieved when employees are encouraged and enabled to achieve their goals through the alignment of their personal and career growth objectives and values.

HUmaN CaPital RePORt

edward Sithole (45)

Head of Human Resources


31

Leadership/management effectiveness; Informed stakeholders; Building a unique culture for competitive

advantage; Effective management of our talent; Product knowledge.

THE 2013 BARRETT SURVEY The bank remunerates non-managerial staff on the basis of basic salary, “remuneration” plus add-onbenefitsandremuneratesmanagerialstaffonatotal-cost-to-company basis (the guaranteed package),whichincludesabasicsalary,13thcheque(ifselected),andcontributionstothebenefitsfunds.

Annual remuneration increases are performance-and-market-related, based on the local rate ofinflation, increases awarded by the relevant peergroup, individual performance and affordability.Non-managerial staff members are covered under a collective bargaining agreement with the Swaziland Union of Financial and Allied Workers.

SHORT TERM INCENTIVE (STI)The short term incentive scheme is intended to encourage particular behaviours and obtain desired results within the agreed risk appetite framework.

There is one scheme in place for all permanent employeesofNedbankSwaziland,includingexecutivecommittee members, managerial staff and non-managerial staff. It excludes South African expatriate personnel who participate in a similar scheme in South Africa.

Distribution of the incentive pool is done on the basis of individual performance against criteria set out in annual performance agreements. The Remuneration Committee reviews and approves the STI Pool on an annual basis.

SINAKEKElWE EMPlOYEE SHARE SCHEMES NedbankSwazilandhastwoschemesforthebenefitof qualifying employees, namely the Broad-basedScheme and Management Scheme. In addition,a long-term Incentive Plan (LTIP) is in place for the benefit of qualifying employees. These schemeshave trustees appointed by the board to manage the scheme on behalf of employees. In 2013 the broad-based and the management schemes had 135 and 36 participants respectively. In 2013 there were no share allocations.

RETIREMENT FUNDAll permanent staffmembers are members of the NedbankSwazilandDefinedBenefitPensionFundwith222activemembers,85pensionersand12deferredpensioners as at 31 December 2013. The Pension Fund Actuarial Valuation report as at 31 March 2012 revealedthattheFundhadadeficitofE18.1millioncorresponding to a funding level of 77.7% as at the valuation date. The Fund Trustees made changes in the pensionfuturebenefitsaimedatcurbingthedeficit.

Based on the defined benefit structure of the Fund,the following amendments were made to the Fund structure:

A unIque AnD InnoVAtIVe CultuRe Our belief is that true cultural sustainability can only be achieved when employees are encouraged and enabled to achieve their goals through the alignment of their personal and career growth objectivesandvalues.Asignificantcomponentofour vision of becoming the most admired bank in Swaziland by all stakeholders is a focus on effective two-way staff engagement. The annual Barrett Survey and Nedbank Staff Survey (NSS) have become integral tools in terms of understanding the organisational culture and the overall corporate climate and working environment. By analysing the results of these surveys,wenot only ensure thatwe constantly measure our cultural sustainability progress, but we are also able to implementpractical, staff-driven initiatives supporting ourcultural sustainability journey.


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32


Increasing the averaging period for the “Final PensionableSalary”fromoneyeartothreeyears;

Increasing the Normal Retirement Age from 60 to 65; and

Removing spouse’s pension payable on death of a member before retirement and replacing it with an enhanced lump sum payment which is fivetimes the member’s pensionable salary.

An application to amend the rules of the Fund was been submitted to the office of the Registrar ofInsurance and Retirement to incorporate the changes.

A snapshot actuarial valuation as at 31 March 2013 was conducted to determine the impact of the changes on the funding level of the Scheme. The snapshot valuation revealed that if the proposed changes to the Fund Rules are approved by the Registrar of Insurance and Retirement Funds, the Fund’s financial positionwould improve significantly to reflect a surplus of E3million,correspondingtoafundinglevelof104%.

DEVElOPING OUR PEOPlEWeunderstandthat, ratherthanmerelydoinga job,our employees have unique career aspirations and place a priority on continuous personal development. Providing them with the support they need to reach their full potential is key to our ability to create a great place to work. Empowering employees to perform optimally also enables higher engagement levels and increases the ability of staff members to push beyond theirboundaries,bothfortheirownbenefitandthatof the organisation.

The training and development programmes and initiatives available to our people include: Business education programmes (BEPs). Executive development programmes (EDPs). Internal study loans through the Education Policy. Coaching. Graduate Development Programme

EMPlOYEE WEllBEING PROGRAMMEIn 2013 we continued to offer our employees a compre-hensive Employee Wellbeing Programme (EWP), facilitated through Independent Counselling and Advisory Services (ICAS). The EWP is integral to our

overall employee wellness strategy, which aims tocreate a culture of physical and emotional health that, in turn, fosters personal commitment tohealthy lifestyles and the reduction of health risks by employees themselves.

MANAGING HIV/AIDS AND lIFESTYlE DISEASESWe remain proactively committed to addressing HIV/Aidsinapositive,supportiveandnon-discriminatorymanner. We offer treatment to HIV-positive staffmembers through the Swaziland Medical Aid Scheme Aid for AIDS programme. Employees and their dependants who are registered on the programme qualify for an additional unlimited benefit perregisteredbeneficiary.

DIRECTORS AFFAIRS’ AND REMUNERATIONS COMMITTEE (REMCO) [INCORPORATING NOMINATIONS]

Composition of the committeeIn 2013 the committee comprised of B. Mhlongo,(Chairman), M.Maziya, N. Hlatshwayo, S. Beyers, R.Cupido. The Managing Director and Head of Human Resources are permanent invitees to the meetings and recuse themselves from discussions on their own remuneration. The committee met four times in 2013.

Functioning of Directors Affairs and Remunerations CommitteeThe Directors Affairs’ and Remunerations Committee is delegated by the board to discharge its corporate governance duties related to remuneration strategy,policy and practices. The board ensures that the Directors Affairs and Remco is:

o constituted in a way that enables it to exercise competent and independent judgement on remuneration policy and practices, while alsoconsidering the management of related risk;

o functioning in compliance with statutory requirements,codesofrelevantbestremunerationpractice as well as applicable regulatory requirements; and remuneration practices.

HUMAN CAPITAl REPORT (ContInueD)

33


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The committee operates according to a charter approved by the board. The board delegates responsibility to the committee for the investigation andbenchmarkingofremunerationpracticesand,allproposals made on remuneration practices that have a directorindirectfinancialimpactinthebank.

The committee’s responsibilities which are set out in theDirectorsAffairsandRemcocharter,areto:

• Approveo the annual performance scorecard of the

Managing Director;o the annual short-term incentive (STI) pool; ando the overall guaranteed remuneration increase

budget or mandate for all staff; ando the remuneration levels for executives and

senior management;

• Recommend and Reporto to the board after each meeting and more

frequently if required. o to the board for approval all elements of

remuneration on an individual basis for the Managing Director; and

o to the board the remuneration remuneration of Chairman, non-executive directors andexecutive directors;

o to the board on the appointment of new executive and non-executive directors;

o to the board on its composition generally and on the balance between executive and non-executive directors and independent non-executive directors; and

o to the board on the continuation (or not) in services of any non-executive director who has reached the age of 70 and of directors who are retiring by rotation to be put forward (or not) for re-election;

• Reviewo remuneration proposals and practices for the

bank to ensure alignment with best practice and the latest governance principles; the overall financial liability related to all elements ofremuneration for the bank;

o the material terms and conditions of service of all the bank staff (where appropriate) to ensure that they are fair and competitive;

o the proposals for non-executive directors’ fees;o the allocation of guaranteed variable remune-

ration awards; o the use of independent external advice where

necessary;o regularly the composition of board and

committees and monitor the attendance of directors at Board and Committee meetings; and

o remuneration policy and strategy; ando plansforsuccession,andensuretheiradequacy,for the Chairperson, Managing Director andExecutives.

• Assist o the board in its determination and evaluation oftheadequacy,efficiencyandappropriatenessof the corporate governance structure and practices of the Bank;

o the board on any issues of a fundamental strategic importance to the bank that are beyond the scope of the specific authoritiesmandated to the other board committees;

o the board in determining whether the employ-ment of any director should be terminated;

o the board in ensuring that the Bank is at all times in compliance with all applicable laws,regulations and codes of conduct and practices; and

o the board in ensuring that the right calibre of executiveandseniormanagementisattracted,retained,motivatedandrewarded;

Thecommitteesatisfieditsobjectivesfortheyearinaccordance with its charter.

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CeNtRal OPeRatiONS &teCHNOlOGY aNdSUPPORt SeRViCeS

CENTRAl OPERATIONS OVERVIEWFor the year under review the bank remained focused on improving operational efficiencies, improving turn-around times, reducing costs and improving customerservice and product offerings. With a view to also improving productivity and to create a sales focus/culturewithinthebranches,duringApril2013theBankrolled out Project Genesis. Within this project a number ofbusiness initiativeswere identifiedwhichcutacrossthefivebusinessstreamsofthebank.ProjectGenesisisalso aimed at assisting the bank to meet and sustain its financialcommitmentsoverthenextthreeyears.

ACHIEVEMENTS The implementation of Project Genesis resulted in successes within the business in particular within the retail division where our teams were more focused,target driven and results oriented. Within the risk area the Introduction of parameters enabled us to track turnaround times resulting in improvements in overall delivery times and the collaboration among staff in retaining costs enabled effective revenue leakage management.

With a view to streamlining and improving real time settlements within the SADC region and to also improve securityand reducecheque fraud, theCentralBankofSwaziland working in conjunction with the other SADC members introduced SIRESS – SADC Interbank Regional Electronic Settlement System. This system went live on 22July2013,andalsoreplacedtheissuanceofallcrossborder cheques.

Oursystems improved,allowingus tostoptheuseoftravellersandcrossbordercheques,resultinginimprovedefficienciesandenablingourclients tohaveaccess toelectronic banking channels such as Webbank. The Debit card roll out enabled us to improve our delivery and value proposition to Nedbank Swaziland Clients.

We migrated from Nedinform to netbank business for cross border rand transactions with additional security features on the users and business side that have allowed ustominimisefileduplicationsandimproveefficiencies.

CONTROlS We rolled out a conformance tool for DIP in Matsapha which is a self assessment based on daily functions performed by users. This is completed by every staff member including the branch manager and measures efficiencies, how aligned staff are to processes andproceduresandoveranabovethesebenefitsenabledusto identify training and development requirements.

leonard dlamini (60)

Head of Operations

34


TSS OVERVIEWTechnology and Support Services is a support function. TSS is responsible for the maintenance and support of all IT systemswithinNedbank Swaziland, namelyGlobus, Banking Platform, NTE, UNIX, Windows,Exchange, Track IT, SWIFT, PSiberWorks, NetBoltz,technology infrastructure i.e. servers, routers, ATMs,POS, printers, UPSs, etc, software development anduser support on a daily basis. TSS also manages the physicalaccess intoheadoffice,creditandMbabanebranch. This support is done in liaison with Group Technology by ensuring that the bank’s strategy is supported through enhanced IT Initiatives and user friendly systems. TSS is also responsible for the network availability.

TOP PROjECTS IN 2013

Card Project: the TSS team worked hard to ensure that the long awaited Nedbank debit card is delivered in 2013. The card was launched to customers on the 29th October 2013.

webbank Release 2: The internet banking site was once again upgraded with the highlight additional functionality being verification of all SwazilandRevenueAuthority(SRA)paymentsusingthespecifi-cations provided by SRA to all banks.

POS dial-Up Solution: With a view to improving speed of transactions on POS and enable our clients to phonealocalnumber,asopposedtoaSouthAfricannumber,thisinitiativewasbornanddeliveredinApril2013.

Video Conferencing: The video conferencing facility was implemented successfully last year and is now fully functional.

Mbabane branch relocation: this branch was moved from the Nedcentre building to the Corporate place in May 2013. The network connection used for this branchfromHeadofficeenabledthebanktomakeacost saving of over E150 000.

Revenue leakage Phase 1: A project to identify the gaps where the business could be losing revenue was initiated and delivered in 2013. The bank is currently making over E350 000 monthly from this initiative.

atm Projects: Seven ATMs were delivered in the year 2013andtheseareatKwaluseniSupermarket,GablestheGalleria,MalkernsSentraComplex,SitekiShopriteand the relocation of the Mbabane ATM to Mbabane SuperSpar,andtwoattheCorporatePlace.

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Internal Audit (IA) is an independent assurance function,whosepurpose,authorityandresponsibilityare formally defined in a charter approved by theBoard Audit Committee (BAC) annually. The Head of Internal Audit reports functionally to the BAC Chairman, and administratively, to the ManagingDirector. The IA function forms part of the Enterprise-wide Risk Management Framework (ERMF) as a third lineofdefence,andengageswiththefirstandsecondline of defence to facilitate the escalation of key control breakdowns. IA is responsible for developing a 12-month flexible audit plan using a risk-basedmethodology, includingsignificantstructuralchangesinthebusiness,newsignificantentitiessuchasthirdparty relationships, joint ventures, etc, significantchangeactivities, emerging risks and increasing risks.This plan is approved by the BAC on an annual and quaterly basis.

The purpose of IA is to provide independent and objective assurance to the Nedbank (Swaziland) Limited Board of Directors via the BAC. This is to ensure that the governance processes, management of riskand systems of internal control are adequate and effective to mitigate the most significant risks, thatare both current and emerging, which threaten theachievement of the Bank and Group’s objectives. In so doing IA helps improve the control culture of the Bank. The scope of IA’s work is determined by the key risks facingtheBankandtherequirementsoftheBAC,theGroup and Nedbank Swaziland Executive Committees.

36

iNteRNalaUdit

Theemphasisisonflexibility,adaptabilityandcreativity,whilstadhering to a core set of rules.

isabel made(34)

Head of Internal Audit


Theemphasisisonflexibility,adaptabilityandcreativity,whilst adhering to a core set of rules. The methodology usedisalignedto,andcompliantwiththeStandardsforthe Professional Practice of Internal Auditing as published by the Institute of Internal Auditors.

In adopting the COSO II elements, IA leverages onmanagement’s identification and assessment of risk.IA’s focus is on those risks that have a material impact on the achievement of strategic and business objectives. A critical component of our IA process is that we adopt a 3+9 planning approach with regard to our annual audit plan. IA have implemented this process during 2013,andthisallowedIAtoprovideinputandchallengefor each quarter’s plan to ensure that appropriate flexibilityisbuiltintotheplantoaddressandrespondtoemergingrisksandchangingriskprofileswithintheBank,forthesubsequentninemonths.

IA has responsibility to: develop a twelve month rolling audit plan using a risk-basedmethodology, taking into considerationspecific regulatory requirements pertaining tointernal audit, as well as including any risks orcontrolconcernsidentifiedbymanagementandtheboard;

submit the twelve month rolling audit plan to BAC for review and approval prior to the commencement of a calendar year;

deliveronthecalendaryearauditplanasapproved,includinganyspecialtasksorprojects,asappropriateand requested by the BAC; and

The methodology used ensures that IA under-stands and can comfortably implement the meth-odologyinday-to-dayactivities,therebyremoving“grey” areas,whichwere subject to interpretationby auditors and improving the quality of work performed and evidenced in TeamMate (audit software).

Review of internal audit activities performedIA completed its tasks as set out in the approved audit plan for 2013. There has been an overall improvement in audit outcomes. Out of the seven audits that were plannedforandcompletedin2013,86%(75%:2012)

received an acceptable rating, which is improvementrequired. There were no unsatisfactory audit opinions issued in the year (Refer to graph below). The audit results gathered during the year indicated that the controls put in place by management remain adequate andeffective,withsomecontrolissuesidentifiedwhichmanagement committed to rectifying.

Monitoring audit IssuesThe IA monitored the implementation of agreed management actions on all issues raised, includingissuesraisedbyexternalauditors.Materialorsignificantcontrol weaknesses and management remedial actions are reported to the BAC. These issues are tracked to ensure timely implementation of agreed management action to enhance the control environment. Overdue issues are reported to the Group Audit Committee on a quarterly basis.

Quality of AuditsIn2013,IAwassubjectedtoaqualityassessmentbytheGroup’sQualityAssurancedepartment,andtheresultsdemonstrated general compliance with standards in all material aspects.

Audit Outcomes Over Four Years

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unsatisfactory

Improvement Required

Satisfactory

2010

12

10

8

6

4

2

02011 2012 2013

75%

12.5%

100%75%

25%

86%

12.5% 14%

The bank continuously reviews and evaluates its compliance framework to ensure that the framework is adequate to support the carrying on of business in a responsible manner.

Compliance Risk and Regulatory Risk We seek to achieve compliance with all pre-set legislative and regulatory requirement. The policies and frameworks underpinning the compliance practices of the bank prescribe zero tolerance to non compliance. The bank understands that compliance can only be achieved by embedding the compliance standards into the operations of the Bank.

King IIIThe Bank has aligned itself with the principles of governance set in the King Code Governance Principles (King III). We strive to apply those principles in so far as it is practicable for the business, and relevant tothe Swaziland environment. Where application of the principlesisnotpracticable,thereasonsfornotapplyingareexplained.Fortheyear2013,theboardwassatisfiedby the extent of application of the principles set out in the code. The principles that have been determined to be currently not in application are that: • The chairman is a non executive director but not

independent director. The chairman is appointed to board in accordance with the shareholder’s agreement;

38

GOVeRNaNCe aNd COmPliaNCe

Panuel Gwebu (39)

Chief Compliance Officer,

Company Secretary & Legal

Nedbank has a strong risk culture and follows world-class enterprise-wideriskmanagement,whichalignsstrategy,policies,people,processes,technologyandbusiness intelligence in order to evaluate,manage,andoptimizetheopportunities,threatsanduncertainties.


• NotallmembersoftheDirectorsAffairsandRemuneration Committee are independent non- executive directors; and

• ThechairmanoftheDirectorsAffairsandRemuneration Committee is non-executive director.

Board of Directors Theboardconsideredthestructureoftheboard,andissatisfiedwith theunitary structurecomprisedofninedirectors. There were no changes on the composition and structure of the board in 2013. As at 31 December 2013,theboardwasmadeupofthefollowingmembers:1. Barnabas Mhlongo2. Fikile Nkosi3. Muhawu Maziya4. Hendrik Brits5. Nomsa Hlatshwayo6. Stanley Beyers7. Ernest Davidson8. Rory Cupido9. Panuel Gwebu

The constitution of the board has taken into account the prescription of the shareholders’ agreement,Financial InstitutionsAct,2005andrecommendationsof King III. The role of the chairman is distinct from that of the managing director.

Board Appointments The board has approved a policy for board appointments that provides for a programme that addresses skills,experience and ancillary qualities necessary for an effectively functioning board.

The Directors Affairs Committee assists the board in the appointment of directors where necessary. The process for appointment is transparent and is supported by the applicable charters, policies and relevant governancedocuments.

International best practice requires that the role of the Chairman and the Managing Director should be separate. This has been further pronounced in Swaziland through the Financial InstitutionsAct, 2005 and hasalso been recommended in King III. The bank adheres to all these standards and has kept the roles separate to ensure a balance of power and authority. The separation however, does not prohibit ongoing inter-action to ensure the enhancement and implementation of strategic goals.

Board Evaluation The board carried board evaluation in 2013, andthe evaluation covered various aspects including role of directors, effectiveness of board meetings,accountability, skills, communications and othermatters. Whilst the evaluation indicated that the overall level of effectiveness was satisfactory, therewere aspects that were highlighted as requiring further attentionbytheboard, includingsuccessionplanning,stakeholder communication and frequency of meetings for non executive directors. These issues remain on the agenda of the board for 2014 to ensure that they receive appropriate attention.

Board Committees The board is assisted in the discharge of its obligations by three board committee. The terms of reference for all three committees which are approved by the board, were reviewed in 2013 and determined to beadequate for the objectives for which the committees are established. The board committees are comprised of the following: • AuditCommittee;• DirectorsAffairsandRemunerationsCommittee;and• Risk,ComplianceandLoanReviewCommittee.

Management Committees There are in place, technical committees that existwithin the executive committee structure that are mandated to implement the corporate strategy in a responsible manner. The committees include: • TheAssetandLiabilityCommittee;• EnterpriseRiskCommittee;• InformationTechnologySteeringCommittee;• CreditCommittee;and• StrategyCommittee.

Company Secretary and Director Development Ongoing director development has been incorporated into the board agenda. The ongoing development takes the format of both formal and informal interventions. The ongoing development also incorporate directors being regularly updated with regard to industry developments and relevant technical spheres. All directors attend a compulsory formal director develop-ment with the University of Pretoria’s Gordon Institute of Business Science (GIBS) Board leadership programme.

New directors are also required to attend an induction programme that is aimed at assisting the new directors appreciate the business and the roles and responsibilities they have to play. Various heads of divisions conduct presentations on their functions and particular subjects suchastechnology,riskandcompliance.

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The responsibility for the coordination of board activities and meetings rests with the company secretary, including the collation and circulation ofboard packs to directors. Directors interact liberally with the company secretary and other management executives of specialised functions such as internal audit,riskandcompliance.

Board Meetings Therewere fivemeetings held in the year, and thenumber of meetings met the prescription of all the key governance documents, including the boardcharter, Articles and Memorandum of Associationas well as the Financial Institutions Act. The record of attendance to all the meetings is included in this report. All directors are required to attend meetings at all times. Each of the three board committees also met separately on four occasions to consider and discharge their business.

Outsideformalmeetings,directorsareabletointeractfreelyamongstthemselvesandwithmanagement,inpursuit of their duties and obligations as directors.

These interactions enhance the process of decision making and assist the business in pursuing its objectives with agility.

Code of Ethics The code of ethics sets the minimum standards of ethics that all employees and directors are required to adhere to. The code also sets out the bank’s commitment to its stakeholders.On an annual basis,all the bank employees are required to commit to the code through signing individual declarations. In addition tocommittingtothecode,allemployeesin2013werefor the first time, required to sign an anti-corruptionpledge, wherein they committed to abiding by all laws,nottoacceptbribesandtoreportcorruptpractices.

The board of directors reviewed and signed the board ethics statement. The board undertook to be bound by the ethics’ statement on an individual and collective basis.

Attendance at Nedbank (Swaziland) Limited board and board committee meetings:

* Executive Director

# Non-executive Director

¤IndependentNon-executiveDirector

Attendance at Nedbank (Swaziland) Limited Board and Board Committee meetings:

Board Audit committee

risk compliance & Loan review

committee

Directors Affairs & remuneration

committee

Number of meetings

Directors Status

S Beyers # 5/5 3/4 3/4 3/4

H Brits ¤ 5/5 4/4 4/4

R Cupido * 5/5 4/4

eM Davidson * 5/5 4/4 4/4

nR Hlatshwayo # 3/5 3/4 3/4

MI Maziya ¤ 3/5 3/4 3/4

BCF Mhlongo # 5/5 4/4

F nkosi * 5/5


GovErNANcE AND compLIANcE (CONtiNUed)

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EMPOWERING OUR PEOPLE...

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CORPORate SOCial iNVeStmeNt

...AND REWARDING OUR STAKEHOLDERS

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CORPORate SOCial iNVeStmeNt (ContInueD)

STaKeHOlDer OVerVieW

We continue to lead as a corporate citizen to ensure that we

remainSwaziland’sleading‘greenandcaring’bank,thereby

building a sustainable and highly relevant business in the

communities we serve. Our Corporate Social Investment

(CSI) programme continues to play a central role in enabling

us to fulfil our ‘Deep Green’ aspiration of being highly

involved in the community and the environment. We do

this by supporting community enlistment and development

programmes that are empowering in the short-term, and

sustainable in the long-term, with a particular focus on

thesixkeyfocusareaswhichare:economicdevelopment,

education, health and HIV/AIDS initiatives, community

development,sport&arts,andtheenvironment.

Staffvolunteerism,throughtheNedbankcharity,isanother

channel through which our staff members are encouraged

to support our social sustainability objectives.

ByfocusingourCSIspendingontheseprimaryfocusareas,

weavoidtheriskofdilutingourfinancialsupport,andensure

that we remain an effective enabler of transformation,

enlistment and development in Swaziland.

We remain committed to promoting a client centred approach to relationship management with our clients. In 2013, our teams consistently delivered a professional and exciting customer experience to our clients.

We strive to make a sustainable difference to deserving individuals and communities, through supporting various organisations and projects focused on the following main areas:

Economic Development, which includes concerted support initiatives that seek to promote the standard of living and economic health of Swazis.

Health and HIV/AIDS Initiatives, which include interventions for people withdisabilities,diseaseslikeHIV/AIDS,cancer,diabetesandTB,aswellas providing training and infrastructure development in communities.

Community Development,withaparticular focus on initiatives that support and care for communities in need and vulnerable groups.

Education, which includes school-basededucationalprojects,rural-schoolrefurbishment,tertiaryeducationandothergovernment-identifiedpriorities.

Sports and Arts,whichincludesoccer,road-running,golf,swimming,etc.Sportsand Arts appeal to a wide segment of our economicpopulation,andisthereforeideal to use as a vehicle to engage the mass market.

The Environment, when selecting all of our CSI projects due consideration is also given to environmental impact and related issues.

BUIlDING SWAZIlAND’S MOST ADMIRED BANK

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1. ECONOMIC DEVElOPMENT Our Economic Development portfolio has enabled

numerous beneficiaries to actively participate in the

economy. We understand that economic sustainability

requires significant investment of time, money and

effort. Given the moral imperative for transformation

and the clear strategic and business opportunities it

presentsourbusinesswith,theseareinvestmentsthat

we are more than happy to make.

Examples of Economic Development initiatives supported

in 2013 include:

business woman of the Year awards (bwtYa)

We have sponsored and supported the Business Woman

of theYear Award (BWTYA), in partnership with the

RegionalExcellenceandDevelopmentInitiatives(REDI),

for the past nine years. The Award has grown in stature

over the past years, and now plays a pivotal role in

gender transformation within the Swazi Community.

The Award serves a number of purposes: it recognises

excellence amongst women in business, and honours

them for their achievements and outstanding work. The

Awardfinalistsandwinnershavebecomerolemodels

for future generations of Swazi business women. In

2013, we invested E300 000 towards the success of

this event. Ms.NelisiweMabuza, theCEOatAfrican

Alliance Swaziland Limited, was crowned the 2013

Business Woman of the Year Winner.

enactus

Enactus is an international non-profit making organi-

sation that brings together students, academics and

business leaders who are committed to using the power

of entrepreneurial action to improve quality of life and

standard of living for people in need. Guided by academic

advisorsandbusinessexperts,thestudent-leaderscreate

and implement community projects. The experience

does not only transform their lives; it also helps students

develop the kind of talent and perspective that are essential

for leadership. In 2013, we continued with our long-

standing support of Enactus with a sponsorship amount

of E128 000. Southern Africa Nazarene University were

crowned National Champions. They represented the

country in the World Cup that was held in Mexico on

29 September to 1 October 2013.

2. EDUCATION Education is the fuel that drives success and prosperity

forallSwazis,andpowerscompetitivenessintheglobal

struggle for trade, employment and investment for

the country. At Nedbank, we believe that the future

of our nation is inextricably linked to the future of the

learners currently in our education system. World-class

qualityeducation,clearly,isaprerequisitetocontinued

economic growth and poverty alleviation, yet inade-

quate resources such as furniture and equipment still

remain a major challenge for most schools in our

CORPORate SOCial iNVeStmeNt (ContInueD)

46


country- especially those in rural areas. Our intervention

strategy,therefore, istoprovidesuchresourceswhere

possible.In2013,wedistributedatotalof34desksand

53 chairs to both primary and high schools across the

country. Our total investment to educational support

amounted to over E30 000.

3. COMMUNITY DEVElOPMENT Wherever possible, the social and economic develop-

ment initiatives we support are integrated sustainably to

meet the living,financial and transformationalneedsof

communities. A large number of our interventions address

the immediate needs of the most vulnerable members of

society–children,women, theelderlyand thedisabled.

Through our community development initiatives, we

have provided funding to various welfare organisations.

Examples of community development initiatives under-

taken or supported in 2013 are as follows:

imvelo Spring water Project

One of the most important aims of the Nedbank

Swaziland’s Imvelo Mountain Bike Classic, staged at

MlilwaneWildlifeSanctuary in Juneeachyear,wasto

raise funds for community and conservation projects.

The Hlabazonkhe community bordering Mlilwane North

in the Siphocosini district has benefited from such

funds since 2008. Assistance provided has included:

the painting of the school, instalation of gutters to

capture rain water and the donation of water tanks and

officeequipment.In2013,weofficiallycompletedand

handedovertheImveloSpringWaterProject,ensuring

that clean water is provided to the community of

Hlabazonke.

CORPORATE SOCIAl INVESTMENT (ContInueD)

AlWAYS READY TO lEND HElPWHERE IT IS NEEDED MOST

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4. HEAlTH & HIV/AIDS INITIATIVESWefirmlyofthebelievethatthesustainablesuccessof

any community is inextricably linked to the health and

wellbeingofitspeople.Forthisreason,wecontinueto

partner with organisations committed to driving long-

term and sustainable health initiatives. Investment

takes the formof both financial aid and sponsorship.

Examples of health and HIV/AIDS initiatives supported

by Nedbank in 2013 include:

esicojeni Foundation

The Esicojeni Foundation is a charity founded and

patronised by His Majesty King Mswati III. The foundation

brings together eminent individuals and businesses

dedicated to eradicating hunger in Swaziland. The

foundation’sworkincludes,constructingneighbourhood

carepointsandschoolkitchens,establishingboreholes,

initiating gardening projects – all in an effort to end

hunger, malnutrition, provide the basic needs of

vulnerable Swazi children. In 2013, we contributed

E5 000 to the End Hunger- Walk the World. This event is

organised to raise funds and awareness of the plight of

orphaned and vulnerable children in Swaziland.

brave the breast Challenge

Forthethirdyearrunning,wecontributedanamount

of E22 000 to the Swaziland Breast Cancer Network

(SBCCN). This sponsorship went towards the prepa-

rations for the 2013 Brave the Breast Challenge, an

annual fundraising campaign staged to support the

SBCCN in their sterling efforts to raise awareness of

Breast and Cervical Cancer across Swaziland.

imbali Foundation

The Imbali Foundation is a non-profit making

organisation founded and patronised by Her Royal

Highness,PrincessSikhanyiso.Thefoundationaddresses

five areas of engagement pertaining to the girl child:

Leadership, Voice and Rights, Social Opportunities,

EconomicOpportunities,Education,HealthandSecurity.

In2013,weextendedadonationofE10000insupport

of the foundation.

5. SPORTS AND ARTS Our Sports and Arts programmes continue to make a

significant contribution to social, environmental, and

economicsustainabilityinSwaziland,atthesametime,

helping to drive vital transformation across the country.

Projects and initiatives funded in 2013 are as follows:

Soccer

Forthepastsevenconsecutiveyears,wehavesponsored

the football team that represents our country in the

Orange CAF Champions League. In 2013, Mbabane

Swallows Football Club represented Swaziland and we

supporteditwithtwentythreetracksuits,thirtysports

bags and two sets of soccer kit jerseys all valued at

E50 000.

Golf

Golf has grown significantly in popularity, and now

enjoys a broad following across the full spectrum of

Swazi society. The sport offers sponsorship opportunities

at every level – from professional competitions to golf

development. Our current golf sponsorship portfolio

includes:

• Swaziland Golf Union – The Union is tasked with

the mammoth responsibility of managing golf

development in the country. In2013,wematched

our E25 000 donation of the previous year to the

Swaziland Golf Union. We hope this sponsorship

will enable the Union to deliver more effective golf

development initiatives.


CORPORATE SOCIAl INVESTMENT (ContInueD)

• The Nedbank Corporate Golf Day – In 2013, we

again hosted our Corporate Golf Day. This event has

become aflagship event on the SwazilandGolfing

Calendar. It attracts the attention of Swaziland’s

bestprofessionalgolfers,andisanexcellentwayfor

profilingtheNedbankbrandonthegolfingstage.

Running

AsoneofSwazi’smostaccessibleandpopularsports,

running affords Nedbank an excellent platform from

which to engage effectively with participants and

spectators across the country. We annually engage in

two major running events. These are the Golden Foot

Club Tuff One Run and the Trelawney Park KwaMagogo

Marathon. Both events continue to enjoy a strong and

steady increase in popularity and attract both local and

international participants. In 2013, we continued our

associationwiththeseevents,sponsoredanumberof

staff members and clients to participate in the races.

We also manned a Nedbank branded water station for

the runners and co-sponsored various prizes. During

2013,ourrunningsponsorshipamountedtoE40000.

Cycling

The Nedbank Swaziland’s Imvelo MTB Classic is the

country’s major mountain biking event that was

initiated in 2005. This event is hosted by Big Game

Parks, and it attracts over 500 cyclists locally and

internationally. Funds generated from this event are used

forcommunityandconservationprojects.In2013,we

invested E70 000 towards the success of this event.

Swimming

For the seventh year running, we sponsored the

Swaziland Swimming Association with an amount of

E25 000. The sponsorship went towards the purchase of

aswimmingkitforthenationalyouthteam,tobeworn

in both local and international competitions.

6. THE ENVIRONMENTWe have a well-established reputation for environmental

awareness, investment and action. While our green

credentials offer evidence of our commitment to caring

for the environment, we believe that effectiveness in

environmental sustainability requires an approach that

also delivers positive social and economic consequences

for Swaziland and her people.

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Sibebe walk

Nedbank’s longstanding support of the Sibebe Walk

began in 2004. The Sibebe Walk, organised by the

Mbabane/Mbuluzi RotaryClub, and it aims at raising

the awareness of the natural history of the Sibebe

Rockandsurroundingareas.In2013,wesupportedthis

event with a sponsorship amount of E122 000. Funds

generated from this walk were used to support the

Sibebe Community Trust projects and other project such

as:HIV/AIDShome-basedcare,water supplyprojects,

educational projects and provision of scholarships for

the Mbuluzi community OVCs.

Re-cycling bins

Being a financial services organisation certainly does

not excuse us from taking responsibility of looking

after the environment. As Swaziland’s ‘Green Bank’,

we embrace the role we have to play in conserving

our country’s natural beauty and protecting its diverse

flora and fauna for future generations to enjoy. As

such,wehaveprovided three recyclingbins inallour

retailbranchnetworks.Inaddition,wehaveintroduced

environmentally friendly paper towels in all our ablution

facilities.

wwF earth Hour

AsSwaziland’s‘GreenBank’,weknowthatwehavethe

opportunityandtheresponsibilitytouseourinfluence

to encourage others to maximise their positive impact.

We therefore work closely with selected partners and

interested stakeholders to build a more sustainable

business and society. We again participated in the WWF

Earth Hour campaign on Saturday, 23 March 2013,

from 8:30 to 9:30pm. The Earth Hour is the world’s

biggest mass action initiative aimed at addressing

climatechange. Inthespiritofgreencollaboration, in

addition to our own efforts to switch off as many lights

aspossibleinourbuildings,wealsoencourageourstaff

members to observe the WWF Earth Hour and show

their support for it in their various homes.

Staff Volunteerism

Nedbank volunteerism programmes form an integral

part of our CSI agenda and offer a tangible way for staff

members to become personally involved in tackling

the social, economic and environmental issues that

pertain to Swaziland. All employees are encouraged

to actively contribute to social upliftment, rather

than viewing CSI as purely a marketing responsibility.

Nedbank’s efforts at developing and growing workplace

volunteerism,throughourNedbankStaffCharity,area

logicalextensionof itsvision-led,values-drivenethos,

as well as its Deep Green aspiration of being highly

involved in the community and environment. 2013

sawasignificantincreaseinthevolunteerismactivities

acrossthebank,withmorestaffmembersparticipating

in employee-generated volunteerism events.

Nedbank brand ambassadors

Whileourpolicy istoneversponsor individuals,wedo

support a number of ‘brand ambassadors’ that represent

the Nedbank brand and promote the association of

the bank with various sports or sponsorship properties.

In2013,wecontinued to support twoNedbankbrand

ambassadors,GeorgeFalcomer(golf)andMorrisDlamini

(running),bothofwhomareexceptionalsportingtalents.

PUTTING THE ENVIRONMENT FIRST

FOR tHe YeaR eNded 31 deCembeR 2013

Contents Page

Directors’ Responsibility Statement 51

Independent Auditors’ Report 52

Report of the Directors 53 - 55

Statement of Comprehensive Income 56

Statement of Changes in Equity 57

Statement of Financial Position 58

Statement of Cash Flows 59

Notes to the Financial Statements 60 - 116

50


aNNUal FiNaNCialStatemeNtS

ThedirectorsareresponsibleforthepreparationandfairpresentationoftheannualfinancialstatementsofNedbank

(Swaziland)Limited,comprisingthestatementoffinancialpositionat31December2013,andthestatementsof

comprehensiveincome,changesinequityandcashflowsfortheyearthenended,andthenotestothefinancial

statements, which include a summary of significant accounting policies and other explanatory notes, and the

directors’report,inaccordancewithInternationalFinancialReportingStandards,andinthemannerrequiredbythe

Swaziland Companies Act.

The directors are also responsible for such internal control as the directors determine is necessary to enable the

preparationoffinancialstatementsthatarefreefrommaterialmisstatement,whetherduetofraudorerrorandfor

maintaining adequate accounting records and an effective system of risk management.

The directors have made an assessment of the ability of the company to continue as a going concern and have no

reason to believe that the business will not be a going concern in the year ahead.

Theauditorisresponsibleforreportingonwhethertheannualfinancialstatementsarefairlypresentedinaccordance

withtheapplicablefinancialreportingframework.

Approval of annual financial statements

TheannualfinancialstatementsofNedbank(Swaziland)Limited,asidentifiedinthefirstparagraph,wereapproved

by the board of directors on 12 March 2014 and signed on its behalf by

……………………....……………… …………………..........…………….. b C F mhlongo F m Nkosi Chairman Managing Director

51

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DIrEctors’ rEspoNsIBILItY stAtEmENtFOR tHe aNNUal FiNaNCial StatemeNtS

for the year ended 31 December 2013

aNNUal FiNaNCialStatemeNtS

12 march 2014

iNdePeNdeNt aUditORS’ RePORttO tHe membeRS OF NedbaNk (SwazilaNd) limited

Report on the Financial Statements

We have audited the financial statements of Nedbank (Swaziland) Limited, which comprise the statement of

financialpositionat31December2013,andthestatementsofcomprehensiveincome,changesinequityandcash

flowsfortheyearthenended,andthenotestothefinancialstatementswhichincludeasummaryofsignificant

accountingpoliciesandotherexplanatorynotes,andthedirectors’report,assetoutonpages53to116.

Directors’ responsibility for the financial statements

Thedirectorsareresponsibleforthepreparationandfairpresentationofthesefinancialstatementsinaccordance

withInternationalFinancialReportingStandards,andinthemannerrequiredbytheSwazilandCompaniesAct,and

forsuchinternalcontrolasthedirectorsdetermineisnecessarytoenablethepreparationoffinancialstatements

thatarefreefrommaterialmisstatement,whetherduetofraudorerror.

Auditor’s responsibility

Ourresponsibility istoexpressanopiniononthesefinancialstatementsbasedonouraudit.Weconductedour

audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical

requirementsandplanandperformtheaudittoobtainreasonableassurancewhetherthefinancialstatementsare

free from material misstatement.

Anauditinvolvesperformingprocedurestoobtainauditevidenceabouttheamountsanddisclosuresinthefinancial

statements.Theproceduresselecteddependontheauditor’sjudgement,includingtheassessmentoftherisksof

materialmisstatementofthefinancialstatements,whetherduetofraudorerror.Inmakingthoseriskassessments,

the auditor considers internal control relevant to the entity’s preparation and fair presentationof thefinancial

statementsinordertodesignauditproceduresthatareappropriateinthecircumstances,butnotforthepurpose

of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the

appropriatenessofaccountingpoliciesusedandthereasonablenessofaccountingestimatesmadebymanagement,

aswellasevaluatingtheoverallpresentationofthefinancialstatements.

Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideabasisforourauditopinion.

Opinion

Inouropinion,thesefinancialstatementspresentfairly,inallmaterialrespects,thefinancialpositionofNedbank

(Swaziland)Limitedat31December2013,anditsfinancialperformanceandcashflowsfortheyearthenended

in accordance with International Financial Reporting Standards, and in the manner required by the Swaziland

Companies Act.

kPmG Chartered accountants (Swaziland)

auditors

12 march 2014

mbabane

52


INDEpENDENt AuDItors’ rEportto the members of Nedbank (Swaziland) limited

TheDirectorshavepleasureinsubmittingtheirreporttogetherwiththeannualfinancialstatementsofthebankfor

thefinancialyearended31December2013.

State of affairs

Thecompany,whichis incorporatedintheKingdomofSwaziland, isabankoperatingcommercialbranchesand

agencies throughout the country.

The state of affairs of the bank at 31 December 2013 and the results of its operations for the year then ended are

fullysetoutintheannualfinancialstatements.

Share capital

The authorised and issued share capital is 26 650 000 (2012: 26 650 000) and 24 640 134 (2012: 24 640 134) ordinary

shares of 50c each respectively. The paid up value of the issued share capital remains unchanged at E 11 930 554.

IntermsofSection20(1)(a)(iii)oftheFinancialInstitutionsAct2005(“theAct”),whichcameintooperationon26

October2005, thesumofcapitalandreservesshallnotbe less thaneightpercentof thesumof thebank’s risk

weighted assets computed in the manner prescribed by the Central Bank of Swaziland from time to time by notice in

the Gazette. As at 31 December 2013 the bank’s risk weighted assets totalled E2 223 million (2012: E1 724 million)

requiring a minimum capital of E178.6 million (2012: E137.9 million). This requirement has been met as the bank’s

regulatory capital and reserves totalled E413.9 million (2012: E361.7 million) providing a capital adequacy ratio of

18.5 % (2012: 21.0%).

AfurtherrequirementunderSection20(1)(a)(i)oftheActisthatafinancialinstitutionisrequiredtomaintaincapital

ofat leastfivepercentof its liabilities to thepublic in termsof themost recent statementoffinancialposition

prepared in accordance with Section 35. As at 31 December 2013 the bank’s liabilities to the public totalled E2 447.5

million (2012: E2 192.6 million) requiring a minimum capital of E122.4 million (2012: E109.6 million). This requirement

has been met as the issued capital and reserves of E401.6 million (2012: E353.2 million) are enough to cover both the

Section 20 (1)(a)(iii) and the Section 20(1)(a)(i) requirements providing a ratio of 16.9% (2012: 16.5%).

Results of operations

The bank recognised a profit after tax for the year under review of E76 145 310 (2012: E75 367 615 before

restatements).

transfer to statutory reserve

IntermsofSection20(1)(a)(ii)oftheActthebank isrequiredtotransfernot lessthan10%of itsnetprofitto

a statutory reserve account until the balance in this reserve account is equal to its minimum required capital.

Accordingly an amount of E7 614 531 (2012: E7 536 762) is transferred to the Statutory Reserve.

53

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oVeRVIeW AnD RepoRt


opeRAtIonAl ReVIeW

rEport oF tHE DIrEctorsfor the year ended 31 December 2013

54


rEport oF tHE DIrEctors (ContInueD)

for the year ended 31 December 2013 (continued)

board of directors

The directors who served during the year under review were:

Mr B C F Mhlongo (Chairman)

Mr E M Davidson

Mr S Beyers

Ms N R Hlatshwayo

Mr M I Maziya

Ms F Nkosi (Managing Director)

Mr R Cupido

Mr H Brits

Secretary

Mr P Gwebu

Committees of the Board:

Audit Committee

Mr H Brits (Chairman)

Mr E M Davidson

Mr S Beyers

Mr M I Maziya

Risk, Compliance and loan Review Committee

Mr S Beyers (Chairman)

Mr E M Davidson

Ms N R Hlatshwayo

Mr H Brits

Directors Affairs and Remuneration Committee(incorporating nominations)

Mr B C F Mhlongo (Chairman)

Mr S Beyers

Ms N R Hlatshwayo

Mr M I Maziya

Mr R Cupido

55

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oVeRVIeW AnD RepoRt


opeRAtIonAl ReVIeW

Registered office

Third Floor

Nedbank Centre

SwaziPlaza,Mbabane

P O Box 68

Mbabane

Holding company

Thebank’simmediateholdingcompanyisNedbankLimited,registeredintheRepublicofSouthAfricaandawholly-

ownedsubsidiaryofNedbankGroupLimited.TheultimateholdingcompanyisOldMutualPlc.,registeredinthe

United Kingdom.

independent auditors

Attheannualgeneralmeeting,theshareholderswillbeaskedtodeterminetheremunerationoftheauditors,KPMG,

in respect of the past audit and to appoint auditors until the conclusion of the next annual general meeting.

dividends

Detailsofdividendsappearinnote4.2totheannualfinancialstatements.

events after the reporting date

No material events have occurred between the reporting date and the date of this report.

Note 2013 2012 2011 E e e

(Restated) (Restated)

Interest income 2.0 185 651 400 184 739 884 181 263 043

Interest expense 2.0 (56 311 449) (64 757 744) (63 657 094)

Net interest income 129 339 951 119 982 140 117 605 949

Impairment charge on loans and advances 2.1 (10 171 273) (7 258 601) (7 373 862)

income from lending activities 119 168 678 112 723 539 110 232 087

Fees and other commission income 2.2 106 508 909 96 276 425 90 088 743

Other income 5 950 347 1 835 842 1 751 721

Foreign exchange trading and dealing gains

and losses 18 290 564 13 678 484 8 505 335

income after impairment of advances and

interest expense 249 918 498 224 514 290 210 577 886

Operating expenses 2.3 (139 533 012) (106 040 842) (114 206 595)

Profit before taxation 110 385 486 118 473 448 96 371 291

Income tax expense 3.1 (34 240 176) (29 668 733) (30 327 903)

Profit for the year 76 145 310 88 804 715 66 043 388

Other Comprehensive income

Itemsthatwillnotbereclassifiedsubsequenlty

toprofitorloss

Re-measurementsofdefinedbenefitliability 18 276 000 (21 820 000) (14 435 000)

Related tax (5 096 850) 969 900 4 330 500

total other comprehensive income 13 179 150 (20 850 100) (10 104 500)

total comprehensive income 89 324 460 67 954 615 55 938 888

Basic and diluted earnings per share (cents) 4.1 309 360 268

56


stAtEmENt oF comprEHENsIvE INcomEfor the year ended 31 December 2013

ContACt DetAIlS

oVeRVIeW AnD RepoRt


opeRAtIonAl ReVIeW

stAtEmENt oF cHANGEs IN EQuItYfor the year ended 31 December 2013

57

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StatemeNt OF FiNaNCial POSitiONat 31 December 2013

Note 2013 2012 2011 E e e

(Restated) (Restated)

ASSETS

Cash and cash equivalents 5 192 132 645 342 992 936 380 926 288

Government and public sector securities 6 272 029 093 342 196 724 188 327 887

Amounts due from other banks 7 6 645 040 8 913 833 9 062 106

Derivative assets 25.8 18 072 725 11 956 856 15 376 911

Loans and advances to customers 8 2 294 973 340 1 792 670 604 1 941 542 087

Other receivables 10 22 259 820 15 797 426 8 088 161

Investments 11 2 491 011 2 045 742 1 689 293

Property and equipment 12 19 509 927 15 618 588 19 402 810

Deferred tax 13 14 389 222 19 460 490 17 314 766

Intangible assets 14 2 615 745 744 375 2 038 107

total assets 2 845 118 568 2 552 397 574 2 583 768 416

EQUITY AND lIABIlITIES

equity

Share capital 15 11 930 554 11 930 554 11 930 554

Share premium and reserves 389 639 592 323 723 259 277 551 406

Total equity attributable to equity holders of the bank 401 570 146 335 653 813 289 481 960

liabilities

Deposits from customers 16 1 971 465 700 2 010 879 472 1 684 241 188

Deposits from banks 17 5 215 585 2 254 467 135 840

Current tax liabilities 18 3 351 734 1 051 204 5 227 880

Trade and other payables 20.1 52 418 174 156 700 033 82 648 743

Payables for staff costs 20.2 9 429 170 9 477 472 9 111 576

Employeebenefitsobligations 24 8 766 000 25 025 000 21 792 000

Derivative liabilities 25.8 12 665 773 9 846 206 13 942 741

Funding from other banks 5 380 236 286 1 509 907 477 186 488

total equity and liabilities 2 845 118 568 2 552 397 574 2 583 768 416

Guaranteesonbehalfofcustomers,excludedfrom

liabilities 21 58 397 770 78 007 317 49 145 091

58


stAtEmENt oF FINANcIAL posItIoNat 31 December 2013

StatemeNt OF CaSH FlOwSfor the year ended 31 December 2013

Note 2013 2012

E E

Cash flows from operating activities

Cash received from customers 23.1 126 190 097 104 313 307

Cashpaidtocustomers,staffandsuppliers 23.2 (129 755 513) (109 426 851)

Interest received 2 185 651 400 184 739 884

Interest paid 2 (56 311 449) (64 757 744)

Cash generated by operating activities 23.3 125 774 535 114 868 596

Change in working funds

Increase in operating assets 23.4 (445 726 353) (12 957 251)

(Decrease)/increase in operating liabilities 23.5 (140 782 813) 395 817 096

Net (decrease)/increase in working funds (586 509 166) 382 859 845

Taxation paid 23.6 (32 329 424) (35 021 234)

Net cash (used in)/generated by operating activities (493 064 055) 462 707 207

Cash flows from investment activities

Purchase of property and equipment 12 (10 558 486) (2 766 037)

Purchase of computer software 14 (2 576 001) -

Proceeds from disposals of property and equipment 20 000 22 000

Net cash used in investment activities (13 114 487) (2 744 037)

Cash flows from financing activities

Dividends paid to shareholders 23.7 (23 408 128) (22 219 941)

Net cash used in financing activities (23 408 128) (22 219 941)

Net (decrease)/increase in cash and cash equivalents (529 586 670) 437 743 229

Cash and cash equivalents at beginning of year 341 483 029 (96 260 200)

Cash and cash equivalents at end of year 23.8 (188 103 641) 341 483 029

59

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oVeRVIeW AnD RepoRt


opeRAtIonAl ReVIeW

stAtEmENt oF cAsH FLoWsfor the year ended 31 December 2013

Reporting entity

Nedbank (Swaziland)Limited (“thebank”) isacompanydomiciled inSwaziland.Thebank’sholdingcompany is

NedbankLimited,awholly-ownedsubsidiaryofNedbankGroupLimitedwhichisincorporatedinSouthAfrica.The

bankoperatesasacommercialbank,primarilyinvolvedinretailandcorporatebanking.

basis of preparation

i) Statement of compliance

The financial statements of Nedbank (Swaziland) Limited have been prepared in accordance with the

International Financial Reporting Standards (IFRS) and the requirements of the Swaziland Companies Act.

ThesefinancialstatementswereapprovedandauthorisedforissuebytheBoardofDirectorson12March2014.

ii) basis of measurement

Thefinancialstatementshavebeenpreparedonthehistoricalcostbasisexceptforthefollowing:

• Derivativefinancialinstrumentsaremeasuredatfairvalue.

• Financialinstrumentsatfairvaluethroughprofitorlossaremeasuredatfairvalue.

• Landandbuildingsaremeasuredatrevaluedamounts.

• Employeebenefitobligationsaremeasuredatfairvalueofplanassetslessthepresentvalueofthedefined

benefitobligation.

iii) Functional and presentation currency

Thesefinancial statementsarepresented inEmalangeni,which is thebank’s functional currency. Exceptas

otherwiseindicated,financialinformationpresentedinEmalangeniisroundedofftothenearestLilangeni.

iv) Use of estimates and judgement

ThepreparationoffinancialstatementsinconformitywithIFRSrequiresmanagementtomakejudgements,

estimates and assumptions that affect the application of accounting policies and the reported amounts of

assets,liabilities,incomeandexpenses.Actualresultsmaydifferfromtheseestimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are

recognised in the period in which the estimate is revised and in any future periods affected.

Therewerenocriticalaccountingestimatesthathaveasignificantriskofcausingmaterialadjustmentstothe

carryingamountsofassetsandliabilitieswithinthenextfinancialyear.Accountingestimatesmostlywerein

relationtoemployeebenefitsobligationsanddepreciation.

.

60


NotEs to tHE FINANcIAL stAtEmENtsfor the year ended 31 December 2013

v) Changes in accounting policies

(a) Overview

The bank has changed its accounting policies in the following areas:

• AccountingfordefinedbenefitliabilityasperIAS19REmployee Benefits.

(b) Accountingfordefinedbenefitliability

The bank has adopted the amendments to IAS 19R Employee Benefits which has a date of initial adoption of 1

January2013.Theamendmentisappliedretrospectively.Intermsoftheamendment,thebankhaschanged

itsaccountingpolicywithrespecttothebasisfordeterminingtheincomeorexpenserelatedtoitsdefined

benefitplansandthediscontinuingofthecorridorapproachindeterminingemployeebenefitsliabilities.

UnderIAS19(2011),thebankdeterminesthenetinterestexpense(income)onthenetdefinedbenefit

liability(asset)fortheperiodbyapplyingthediscountrateusedtomeasurethedefinedbenefitobligation

atthebeginningoftheannualperiodtothethen-netdefinedbenefitliability(asset),takingintoaccount

anychangesinthenetdefinedbenefitliability(asset)duringtheperiodasaresultofcontributionsand

benefitpayments.Consequently,thenetinterestonthenetdefinedbenefitliability(asset)nowcomprises:

• interestcostonthedefinedbenefitobligation;

• interestincomeonplanassets;and

• interestontheeffectontheassetceiling.

Previously,thebankdeterminedinterestincomeonplanassetsbasedontheirlong-termrateofexpectedreturn

andusedthecorridorapproachindeterminingemployeebenefitsliabilities.

Impactofchangeinaccountingpolicy

The effect on the bank is summarised below.

employee Share benefits Deferred premium obligation tax asset and reserves e e e

Balance as reported at 31 December 2011 7 357 000 12 984 266 287 655 906

Effect of change in accounting policy 14 435 000 4 330 500 (10 104 500)

Restated balance at 31 December 2011 21 792 000 17 314 766 277 551 406

Balance at January 2012 21 792 000 17 314 766 277 551 406

Other movements - - 67 021 953

Effect of change in accounting policy 3 233 000 2 145 724 (20 850 100)

Restated balance at 31 December 2012 25 025 000 19 460 490 323 723 259

(c) Fair value measurement

InaccordancewiththetransitionalprovisionsofIFRS13,thebankhasappliedthenewdefinitionoffair

valueprospectively.Thechangehadnosignificantimpactonthemeasurementsofthebank’sassetsand

liabilities,butthebankhasincludednewdisclosuresinthefinancialstatements,whicharerequiredunder

IFRS13.Thesenewdisclosurerequirementsarenotincludedinthecomparativeinformation.However,to

theextentthatdisclosureswererequiredbyotherstandardsbeforetheeffectivedateofIFRS13,thebank

has provided the relevant comparative disclosures under those standards. 61

ContACt DetAIlS

oVeRVIeW AnD RepoRt


opeRAtIonAl ReVIeW

1. Significant accounting policies

The accounting policies set out below have been applied consistently to all periods presented in these

financialstatements.

1.1 Financial instruments

Financial instrumentsas reflected in the statementoffinancialposition includeallfinancial assetsand

financial liabilities, including derivative instruments. Financial instruments are disclosed/accounted for

under IFRS 7 Financial Instruments: Disclosures, IAS 32: Financial Instruments: Presentation and IAS 39

Financial Instruments: Recognition and Measurement. The bank does not apply hedge accounting.

1.1.1 Recognition

Financial instruments are recognised in the statement of financial positionwhen the bank becomes a

partytothecontractualprovisionsofafinancialinstrument.Allpurchasesoffinancialassetsthatrequire

deliverywithinthetimeframeestablishedbyregulationormarketconvention(“regularway”purchases)

arerecognisedattradedate,whichisthedatethatthebankcommitstopurchasetheasset.Regularway

purchasesandsalesoffinancialassetsare recognisedonthetradedateatwhichthebankcommits to

purchase or sell the asset. Contracts that require or permit net settlement of the change in the value of the

contract are not considered ‘regular way’ and are treated as derivatives between the trade and settlement

of the contract.

1.1.2 Initial measurement

Financialinstrumentsareinitiallymeasuredatfairvalueplus,inthecaseofafinancialassetorfinancial

liability not at fair value through profit or loss, transaction costs that are directly attributable to the

acquisition or issue of the instrument.

1.1.3 Subsequent measurement

Subsequenttoinitialmeasurement,financialinstrumentsareeithermeasuredatfairvalueoramortised

cost,dependingontheirclassification.

Financial assets and financial liabilities at fair value through profit or loss

Financial instrumentsat fair value throughprofitor loss comprise trading instrumentsand instruments

wherethebankhaselected,oninitialrecognitiondate,todesignateasatfairvaluethroughprofitorloss.

Tradinginstrumentsarefinancialassetsorfinancialliabilitiesthatwereacquiredorincurredprincipallyfor

thepurposeofsaleorrepurchaseinthenearterm,formpartofaportfoliowitharecentactualpattern

ofshort-termprofit-takingorarederivatives.Thebank’sderivativetransactionsincludeforeignexchange

contracts.

62


NotEs to tHE FINANcIAL stAtEmENts (ContInueD)


1. Significant accounting policies (continued)

1.1.3 Subsequent measurement (continued)

Financialassetsandfinancialliabilitiesthatthebankhaselected,oninitialrecognitiondate,todesignateas

atfairvaluethroughprofitorlossarethosethatmeetanyoneofthefollowingcriteria:

• Wherethefairvaluethroughprofitorlossdesignationeliminatesorsignificantlyreducesameasurement

or recognition inconsistency that would otherwise arise from using different bases to measure or

recognisethegainsandlossesonfinancialassetsandfinancialliabilities;or

• Theinstrumentformspartofagroupoffinancialinstrumentsthatismanaged,evaluatedandreported

usingafairvaluebasis,inaccordancewithadocumentedriskmanagementorinvestmentstrategyand

information is provided to key management personnel on this basis; or

• Thefinancialinstrumentcontainsanembeddedderivative,whichsignificantlymodifiesthecashflows

of the host contract or where the embedded derivative clearly requires separation.

Financialassetsandfinancialliabilitiesatfairvaluethroughprofitorlossaremeasuredatfairvalue,with

fair value gains and losses (excluding interest income and interest expense calculated on the amortised cost

basisrelatingtothoseinterest-bearinginstrumentsthathavebeendesignatedasfairvaluethroughprofitor

loss) reported in foreign exchange trading and dealing gains and losses in the statement of comprehensive

income as they arise.

Non-trading financial liabilities

Allfinancial liabilities,other thanthoseat fairvaluethroughprofitor loss,areclassifiedasnon-trading

financialliabilitiesandaremeasuredatamortisedcost,usingtheeffectiveinterestmethod.

Loans and receivables

Loansandreceivablesarenon-derivativefinancialassetswithfixedordeterminablepaymentsthatarenot

quotedinanactivemarket,otherthanthoseclassifiedbythebankasatfairvaluethroughprofitorlossor

available-for-sale.Financialassetsclassifiedasloansandreceivablesaremeasuredatamortisedcostusing

theeffectiveinterestmethod,withinterestincomerecognisedinprofitorloss.Thebank’sadvances,cash

and cash equivalents and amounts due to other banks are included in the loans and receivables category.

1.1.4 Measurementbasisoffinancialinstruments

Amortised cost

Theamortisedcostofafinancialassetandfinancial liability istheamountatwhichthefinancialasset

or financial liability is measured at initial recognition, minus principal repayments, plus or minus the

cumulative amortisation using the effective interest method of any difference between that initial amount

recognisedandthematurityamount,lessanycumulativeimpairmentlosses(inthecaseoffinancialassets).

If the bank is the lessor in a lease agreement that transfers substantially all of the risks and rewards incidental

totheownershipoftheassettothelease,thenthearrangementisclassifiedasafinanceleaseandareceivable

equal to the net investment in the lease is recognised and presented within loans and advances.

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1.1.4 Measurementbasisoffinancialinstruments(continued)

Fair value

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.

Direct and incremental transaction costs are included in the initial carrying amount and added to the initial

fairvalueoffinancialassetsandfinancialliabilities,otherthanthoseatfairvaluethroughprofitorloss.The

bestevidenceofthefairvalueofafinancialassetorfinancialliabilityatinitialrecognitionisthetransaction

price,unlessthefairvalueoftheinstrumentisevidencedbycomparisonwithothercurrentobservablemarket

transactions in the same instrument or based on a valuation technique whose variables include only market

observable data.

Wherequotedmarketpricesinanactivemarketareavailable,suchmarketdataisusedtodeterminethe

fairvalueoffinancialassetsandfinancialliabilitiesthataremeasuredatfairvalue.Thebidpriceisusedto

measurefinancialassetsheldandtheofferpriceisusedtomeasurethefairvalueoffinancialliabilities.Mid-

market prices are used to measure fair value only to the extent that the bank has assets and liabilities with

offsetting risk positions.

If quoted bid prices are unavailable, the fair value of financial assets and financial liabilities is estimated

usingpricingmodelsordiscountedcashflowtechniques.Wherediscountedcashflowtechniquesareused,

estimated future cash flows are based onmanagement’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

modelsareused,inputsarebasedonmarket-relatedmeasuresatthereportingdate.

Thefairvalueofafinancialliabilitywithademandfeatureisnotlessthantheamountpayableondemand,

discountedfromthefirstdatethattheamountcouldberequiredtobepaid.

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 must be settled by delivery of

such unquoted equity instruments are not measured at fair value but at cost. Fair value is considered reliably

measurable if:

• Thevariabilityintherangeofreasonablefairvalueestimatesisnotsignificantforthatinstrument;or

• The probabilities of the various estimateswithin the range can be reasonably assessed and used in

estimating fair value.

1.1.5 Derecognition

Thebankderecognisesafinancialasset(orgroupoffinancialassets)whenandonlywhen:

• Thecontractualrightstothecashflowsarisingfromthefinancialassetshaveexpired;or

• Ittransfersthefinancialassetinatransactioninwhichsubstantiallyalltherisksandrewardsofownership

ofthefinancialassetaretransferred;or

• Ittransfersthefinancialasset,neitherretainingnortransferringsubstantiallyalltherisksandrewardsof

ownershipoftheasset,butnolongerretainscontroloftheasset.64





1.1.5 Derecognition (continued)

A financial liability (or part of a financial liability) is derecognisedwhen and onlywhen the liability is

extinguished,thatis,whentheobligationspecifiedinthecontractisdischarged,cancelledorhasexpired.

Thedifferencebetweenthecarryingamountofafinancialassetorfinancialliability(orpartthereof)thatis

derecognisedandtheconsiderationpaidorreceived,includinganynon-cashassetstransferredorliabilities

assumed,isrecognisedinprofitorlossfortheperiod.

1.1.6 Impairmentoffinancialassets

Thebankassessesateachreportingdatewhetherthereisobjectiveevidencethatafinancialassetorgroup

offinancialassetsisimpaired.Afinancialassetoragroupoffinancialassetsisimpairedandimpairment

lossesareincurredif,andonlyif,thereisobjectiveevidenceofimpairmentasaresultofoneormoreevents

that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an

impactontheestimatedfuturecashflowsofthefinancialassetorgroupoffinancialassetsthatcanbe

reliablyestimated.Objectiveevidencethatafinancialassetorgroupoffinancialassetsisimpairedincludes

observable data that comes to the attention of the bank about the following loss events:

• Significantfinancialdifficultyoftheissuerorobligor;

• Abreachofcontract,suchasadefaultordelinquencyininterestorprincipalpayments;

• Thebank,foreconomicorlegalreasonsrelatingtotheborrower’sfinancialdifficulty,grantingtothe

borrower a concession that the bank would not otherwise consider;

• Itbecomingprobablethattheborrowerwillenterbankruptcyorotherfinancialreorganisation;

• Thedisappearanceofanactivemarketforthatfinancialassetbecauseoffinancialdifficulties;or

• Observabledataindicatingthatthereisameasurabledecreaseintheestimatedfuturecashflowsfrom

agroupoffinancialassetssincetheinitialrecognitionofthoseassets,althoughthedecreasecannot

yetbeidentifiedwiththeindividualfinancialassetsinthegroup,including:

• Adversechangesinthepaymentstatusofborrowersinthegroup;

• Nationalorlocaleconomicconditionsthatcorrelatewithdefaultsontheassetsinthegroup;

• Adverseprolongedchangesinthemarketvalueofafinancialasset.

Financial assets measured at amortised cost

If there is objective evidence that an impairment loss on loans and receivables measured at amortised

costhasbeenincurred,theamountofthelossismeasuredasthedifferencebetweentheasset’scarrying

amountandthepresentvalueofestimatedfuturecashflows(excludingfuturecreditlossesthathavenot

beenincurred)discountedatthefinancialasset’soriginaleffectiveinterestrate.Thecarryingamountof

the asset is reduced through the use of an allowance account and the amount of the loss is recognised in

profitorloss.

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1.1.6 Impairmentoffinancialassets (continued)

Financial assets measured at amortised cost (continued)

Thebankfirstassesseswhetherobjectiveevidenceof impairmentexists individually forfinancialassets

thatareindividuallysignificant,andindividuallyorcollectivelyforfinancialassetsthatarenotindividually

significant. If thebankdetermines that noobjective evidenceof impairment exists for an individually

assessedfinancialasset,whethersignificantornot,itincludestheassetinagroupoffinancialassetswith

similar credit risk characteristics and collectively assesses them for impairment.

If,inasubsequentperiod,theamountoftheimpairmentlossdecreasesandthedecreasecanberelated

objectively to an event occurring after the impairment was recognised (such as an improvement in the

debtor’screditrating),thepreviouslyrecognised impairment loss is reversedbyadjustingtheallowance

account.Thereversaldoesnotresultinacarryingamountofthefinancialassetthatexceedswhatthe

amortised cost would have been had the impairment not been recognised at the date the impairment is

reversed.Theamountofthereversalisrecognisedinprofitorloss.

Statutory reserve requirements that exceed the allowance for impairment losses are recognised in the

reserves by a transfer directly from retained earnings to a separate category of equity.

Financial assets measured at cost

If there is objective evidence that an impairment loss has been incurred on an unquoted equity instrument

thatisnotcarriedatfairvaluebecauseitsfairvaluecannotbereliablymeasured,oronaderivativeasset

thatislinkedtoandmustbesettledbydeliveryofsuchanunquotedequityinstrument,theamountofthe

impairmentlossismeasuredasthedifferencebetweenthecarryingamountofthefinancialassetandthe

presentvalueofestimatedfuturecashflowsdiscountedatthecurrentmarketrateofreturnforasimilar

financialasset.Suchimpairmentlossesarenotreversed.

1.1.7 Offset

Financialassetsandfinancialliabilitiesareoffsetandthenetamountreportedinthestatementoffinancial

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 expenses are presented

onanetbasisonlywhenpermittedunder IFRSs,or forgainsand lossesarising fromagroupofsimilar

transactions such as the bank’s trading activities.

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1.2 Interest

Interestincomeandexpenseisrecognisedinprofitorlossusingtheeffectiveinterestmethodtakinginto

accounttheexpectedtimingandamountofcashflows.Theeffectiveinterestrateistheratethatexactly

discountstheestimatedfuturecashpaymentsandreceiptsthroughtheexpectedlifeofthefinancialasset

orfinancialliabilitytothecarryingamountofthefinancialassetorfinancialliability.

Theeffectiveinterestmethodisamethodofcalculatingtheamortisedcostofafinancialassetorfinancial

liability(orgroupoffinancialassetsorfinancialliabilities)andofallocatingtheinterestincomeorinterest

expense over the relevant period. Interest income and expense include 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 basis.

Interest income and interest expense are calculated on the amortised cost basis for interest bearing

instrumentsthathavebeendesignatedatfairvaluethroughprofitorlossandareincludedintheinterest

income and interest expense line items and not as part of non-interest income.

1.3 Non-interest income

Fees and other commission income and expense

The bank earns fees and commissions from a range of services it provides to customers.

Feesandcommissionincomeandexpensethatareintegraltotheeffectiveinterestrateonafinancialasset

or liability are included in the measurement of the effective interest rate.

Otherfeesandcommissionincome,includingaccountservicingfees,investmentmanagementfees,sales

commission,placement feesandsyndication fees,are recognisedas the related servicesareperformed.

When a loan commitment is not expected to result in the draw-down of a loan, the related loan

commitment fees are recognised on a straight-line basis over the commitment period.

Otherfeesandcommissionexpenserelatedmainlytotransactionandservicefees,whichareexpensedas

the services are received.

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1.3 Non-interest income (continued)

Foreign exchange trading and dealing gains

Foreign exchange trading and dealing gains comprises all gains and losses from changes in the fair value of

financialassetsandfinancialliabilitiesheldfortrading,allrealisedgainsandlossesfortrading,togetherwith

therelatedinterest,expenseanddividend.

Other

Revenueotherthaninterest,feesandcommission,foreignexchangetradinganddealinggainsisrecognised

inprofitorlosswhentheamountofrevenuefromthetransactionorservicecanbemeasuredreliably,it

isprobablethattheeconomicbenefitsofthetransactionorservicewillflowtothebankandthecosts

associated with the transaction or service can be measured reliably.

Fairvaluegainsorlossesonfinancialinstrumentsdesignatedatfairvaluethroughprofitorloss,areincluded

inotherincome.Thesefairvaluegainsorlossesaredeterminedafterdeductingtheinterestcomponent,

which is recognised separately in interest income.

Gainsorlossesonderecognitionofanyfinancialassetsorfinancialliabilitiesareincludedinotherincome.

1.4 Cash and cash equivalents

Cashandcashequivalentscomprisenotesandcoinsonhand,unrestrictedandrestrictedbalancesheldwith

centralbanks,short-termfundsandcallandcurrentaccountbalanceswithgroupcompaniesandotherbanks.

Cashandcashequivalentsaremeasuredatamortisedcostinthestatementoffinancialposition.Funding

fromotherbankshasbeenoffsetforthepurposesofthestatementofcashflows.

1.5 leases

The bank as lessee – Operating leases

Leasesinrespectofwhichasignificantportionoftherisksandrewardsofownershipareretainedbythe

lessor are classifiedasoperating leases. Paymentsmadeunderoperating leases (netof any incentives

receivedfromthelessor)arerecognisedinprofitorlossonastraight-linebasisoverthetermofthelease.

Whenanothersystematicbasisismorerepresentativeofthetimepatternoftheuser’sbenefit,thenthat

method is used.

The bank as lessor – Finance leases

Whereassetsareleasedoutunderafinanceleasearrangement,thereceivabletoberecognisedequalsthe

“grossinvestment”intheleasediscountedattherateimplicit intheleasetoobtaina“netinvestment”

figure. The difference between the gross receivable and unearned finance income is presented in the

statementoffinancialposition.Financeleaseincomeisallocatedtoaccountingperiodssoastoreflecta

constant periodic rate of return on the bank’s net investment outstanding in respect of the leases.68





1.6 Provisions

Provisions are recognised when the bank has a present legal or constructive obligation as a result of past

events,forwhichitisprobablethatanoutflowofeconomicbenefitswilloccur,andwhereareliableestimate

canbemadeoftheamountoftheobligation.Wheretheeffectofdiscountingismaterial,provisionsare

discountedandthediscountrateused isapre-taxratethatreflectscurrentmarketassessmentsofthe

timevalueofmoneyand,whereappropriate,therisksspecifictotheliability.Theunwindingofdiscountis

recognisedasafinancecost.

1.7 Property and equipment

Items of property and equipment are measured at cost less accumulated depreciation and accumulated

impairment losses.

Items of property and equipment are initially recognised at cost if it is probable that any future economic

benefitsassociatedwiththeitemswillflowtothebankandithasacostthatcanbemeasuredreliably.

Subsequent expenditure is recognised in the carrying amount of items of property and equipment if it is

probablethatfutureeconomicbenefitsassociatedwiththeexpenditurewillflowtothebankanditscost

canbemeasuredreliably.Allotherexpensesarerecognisedinprofitorlossasanexpensewhenincurred.

Landandbuildings,whosefairvaluescanbereliablymeasured,aremeasuredatrevaluedamounts,beingthe

fair value at the date of revaluation less any subsequent accumulated depreciation and impairment losses.

Revaluation increases are credited directly to other comprehensive income and presented in equity under the

heading“revaluationreserve”.However,revaluationincreasesarerecognisedinprofitorlosstotheextent

thattheyreversearevaluationdecreaseofthesameassetpreviouslyrecognisedinprofitorloss.Revaluation

decreasesarerecognisedinprofitorloss.However,decreasesaredebiteddirectlytoothercomprehensive

income to the extent of any credit balances existing in the revaluation reserve in respect of the same asset.

Depreciation

Eachcomponentofpropertyandequipmentwithacostthatissignificantinrelationtothetotalcostof

the item,orhasadifferentuseful life isdepreciatedseparately. Itemsofpropertyandequipmentthat

areclassifiedasheldforsaleunderIFRS5arenotdepreciated.Thedepreciableamountsofpropertyand

equipmentarerecognised inprofitor lossonastraight-linebasisovertheestimateduseful livesofthe

itemsofpropertyandequipment,unlesstheyareincludedinthecarryingamountofanotherasset.Useful

lives,residualvaluesanddepreciationmethodsareassessedonanannualbasisateachreportingdate.Land

is not depreciated.

Onrevaluation,anyaccumulateddepreciationatthedateoftherevaluationiseliminatedagainstthegross

carrying amount of the item concerned and the net amount restated to the revalued amount. Subsequent

depreciation charges are adjusted based on the revalued amount.

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1.7 Property and equipment (continued)

Depreciation (continued)

The estimated useful lives for the current and comparative periods are as follows:

• Computerequipment 3-6years

• Vehicles 4-6years

• Furnitureandotherequipment 4-10years

• Freeholdlandandbuildings 50years

Derecognition

Itemsofpropertyandequipmentarederecognisedondisposalorwhennofutureeconomicbenefitsare

expectedfromtheiruse.Thegainorlossonderecognitionisrecognisedinprofitorlossandisdetermined

as thedifferencebetween thenetdisposal proceeds, if any, and the carryingamountof the item. On

derecognition any surplus in the revaluation reserve in respect of individual items of property and equipment

is transferred directly to retained earnings. Compensation from third parties for items of property and

equipmentthatwereimpaired,lostorgivenupisincludedinprofitorlosswhenthecompensationbecomes

receivable.

1.8 taxation

Taxationexpensecomprisescurrentanddeferredtax.Currentanddeferredtaxisrecognisedinprofitor

lossexcepttotheextentthatitrelatestoabusinesscombinationoritemsrecogniseddirectlyinequity,or

other comprehensive income.

Current taxation

Current tax is the expected taxation payable on the taxable income for the year using the tax rates enacted or

substantivelyenactedatthereportingdate,andanyadjustmentoftaxpayableinrespectofpreviousyears.

Deferred taxation

Deferred taxation is recognised in respect of temporary differences between the carrying amounts of assets

andliabilitiesforfinancialreportingpurposesandtheamountsusedfortaxationpurposes.Theamount

of deferred taxation provided is based on the expected manner of realisation or settlement of the carrying

amount of assets and liabilities and is measured at the taxation rates that are expected to be applied to

the temporary differences when they reverse based on the laws that have been enacted or substantively

enacted by the reporting date.

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1.8 taxation (continued)

Deferred taxation (continued)

Theeffectondeferredtaxationofanychangesintaxratesisrecognisedinprofitorloss,excepttotheextent

that it relates to items previously recognised directly in other comprehensive income or equity. Deferred

taxationisnotrecognisedforthefollowingtemporarydifferences:theinitialrecognitionofgoodwill,the

initial recognition of assets or liabilities in a transaction that is not a business combination and that affects

neitheraccountingnor taxableprofit,and temporarydifferences relating to investments in subsidiaries,

associates and jointly controlled entities to the extent that it is probable that they will not reverse in the

foreseeable future.

A deferred tax asset is recognised to the extent that it is probable that future taxable income will be

available,againstwhichtheunutilisedtaxationlossesanddeductibletemporarydifferencescanbeutilised.

Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer

probablethattherelatedtaxationbenefitswillberealised.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax assets

andliabilities,andtheyrelatetoincometaxesleviedbythesametaxauthorityonthesametaxableentity,

or on different entities but they intend to settle on a net basis or their tax assets and liabilities will be

realised simultaneously.

1.9 Foreign currency transactions

Transactions in foreign currencies are translated into the functional currency of the bank at the date of such

transactions by applying to the foreign currency the spot exchange rate ruling at the transaction date.

Monetary assets and liabilities denominated in foreign currencies at reporting date are translated into the

functional currency at the spot exchange rate on the reporting date. Non-monetary assets and liabilities

denominated in foreign currencies that are measured at fair value are translated into the functional currency

at the spot rate at the date that the fair value was determined. Non-monetary assets and liabilities in a

foreign currency that are measured in terms of historical cost are translated using the exchange rate at the

date of the transaction.

Exchange differences that arise on the settlement and translation of monetary items at rates different

fromthoseatwhichtheyweretranslatedoninitialrecognitionduringtheperiodorinpreviousfinancial

statementsarerecognisedinprofitorlossintheperiodtheyarise.


1.10 associate companies

Anassociateisanentity, includinganunincorporatedentitysuchasapartnership,overwhichthebank

hastheabilitytoexercisesignificantinfluence,butnotcontrolorjointcontrol,throughparticipationinthe

financialandoperatingpolicydecisionsoftheinvestee(andthatisneitherasubsidiarynoraninvestment

in a joint venture).

Theinvestmentsinassociatesareincorporatedinthesefinancialstatementsatcost.Thecarryingamount

of such investments is reduced to recognise any impairment in the value of individual investments.

1.11 Employee benefits

Post employment defined benefit plans

Theliabilityrecognisedinthestatementoffinancialpositioninrespectofdefinedbenefitpensionplansis

thepresentvalueofthedefinedbenefitobligationatthereportingdatelessthefairvalueofplanassets.

Thedefinedbenefitobligation is calculatedannuallyby independentactuariesusing theprojectedunit

credit method. The present value of the defined benefit obligation is determined by discounting the

estimatedfuturecashoutflowsusingyieldsforgovernmentbondsthathavematuritydatesapproximating

the terms of the group’s obligations.

Gains or losses resulting from re-measurements are recognised immediately in other comprehensive

income.Re-measurementsincludeactuarialgainsandlosses,returnonplanassetsandtheassetceiling.

Current service costs are recognised immediately as an expense in profit or loss. Past service costs,

experienceadjustments,changesinactuarialassumptionsandplanamendmentsarerecognisedinprofitor

loss over the expected remaining working lives of employees. The costs are expensed immediately in the

case of retired employees.

Planassetsareonlyoffsetagainstplanliabilitieswheretheyareassetsheldbylong-termemployeebenefit

funds or qualifying insurance policies.

.

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1.11 Employee benefits (continued)

Short-term benefits

Short-termemployeebenefitsareexpensedastherelatedserviceisprovided.Aliabilityisrecognisedforthe

amount expected to be paid if the bank has a present legal or constructive obligation to pay this amount as

a result of past service provided by the employee and the obligation can be estimated reliably.

Share based payment transactions

The grant-date fair value of share-based payment awards – i.e. stock options – granted to employees

is recognised as personnel expenses,with a corresponding increase in equity, over the period inwhich

the employees become unconditionally entitled to the awards. The amount recognised as an expense

isadjusted to reflect thenumberofawards forwhich the relatedserviceandnon-marketperformance

conditionsareexpectedtobemet,suchthattheamountultimatelyrecognisedasanexpense isbased

on the number of awards that meet the related service and non-market performance conditions at the

vestingdate.Forshare-basedpaymentawardswithnon-vestingconditions,thegrant-datefairvalueofthe

share-basedpaymentismeasuredtoreflectsuchconditionsandthereisnotrue-upfordifferencesbetween

expected and actual outcomes.

The fair value of the amount payable to employees in respect of share award that are settled in cash is

recognised as an expense with a corresponding increase in liabilities over the period in which the employees

become unconditionally entitled to payment. The liability is remeasured at each reporting date and at

settlement date based on the fair value of the share awards. Any changes in the liability are recognised as

personnelexpensesinprofitorloss.

Measurement of fair value of equity instruments granted

The equity instruments granted by Nedbank are measured at fair value at measurement date using

standard option pricing valuation models and the liability is re-measured annually to its fair value until

settlement,withanydifferencebeing recognised inprofitor loss.Thevaluation technique is consistent

withgenerallyacceptablevaluationmethodologies forpricingfinancial instrumentsand incorporatesall

factors and assumptions that knowledgeable,willingmarket participantswould consider in setting the

price of the equity instruments. Service and non-market performance 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.

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1.12 Share capital

Sharecapitalissuedbythebankismeasuredattheproceedsreceived,netofdirectissuecost.Nogainor

lossisrecognisedinprofitorlossonthepurchase,sale,issueorcancellationofthebank’ssharecapitaland

preferencesharesthatareclassifiedasequity.

Ordinaryandpreference sharecapital is classifiedasequity if it isnon-redeemableby the shareholder,

dividends are discretionary and if it represents a residual interest in the assets of the bank after deducting

all of its liabilities.

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 the notes.

1.13 intangible assets

Computer software and capitalised development costs

Software acquired by the bank is measured at cost less accumulated amortisation and any accumulated

impairment losses.

Expenditure on internally developed software is recognised as an asset when the bank is able to demonstrate

its intention and ability to complete the development and use the software in a manner that will generate

futureeconomicbenefits,andcanreliablymeasurethecoststocompletethedevelopment.Thecapitalised

costs of internally developed software include all costs directly attributable to developing the software and

capitalisedborrowingcosts,andareamortisedoveritsusefullife.Internallydevelopedsoftwareisstatedat

capitalised cost less accumulated amortisation and impairment.

Subsequent expenditure on software assets is capitalised only when it increases the future economic

benefitsembodiedinthespecificassettowhichitrelates.Allotherexpenditureisexpensedasincurred.

Softwareisamortisedonastraight-linebasisinprofitorlossoveritsestimatedusefullife,fromthedateon

which it is available for use. The estimated useful life of software for the current and comparative periods is

three to six years.

Amortisationmethods,usefullivesandresidualvaluesarereviewedateachreportingdateandadjustedif

appropriate.

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1.14 Impairment of non-financial assets

Thebankassessesallnon-financialassets(excludingdeferredtaxassets)forindicationsofimpairmentor

the reversal of a previously recognised impairment at each reporting date. Should there be indications of

impairment; the assets’ recoverable amounts are estimated.

Intangible assets not yet available for use are tested annually for impairment and when there is an indication

of impairment, the impairment is recognised inprofitor losswhenever thecarryingamountofanasset

exceeds its recoverable amount.

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.

Inassessingvalue-in-use,theexpectedfuturecashflowsfromtheassetarediscountedtotheirpresentvalue

usingapre-taxdiscountratethatreflectscurrentmarketassessmentsofthetimevalueofmoneyandthe

risksspecifictotheasset.Foranassetwhosecashflowsarelargelydependentonthoseofotherassets,the

recoverable amount is determined for the cash-generating unit to which the asset belongs. An impairment

loss is allocated pro–rata to all assets in a cash - generating unit.

A previously recognised impairment loss will be reversed if the recoverable amount increases as a result of a

changeintheestimatesusedpreviouslytodeterminetherecoverableamount,butnottoanamounthigher

thanthecarryingamountthatwouldhavebeendetermined,netofdepreciationoramortisation,hadno

impairment loss been recognised in prior periods.

1.15 earnings per share

The bank presents earnings per share for its ordinary shares, calculated by dividing the profit or loss

attributable to ordinary shareholders of the bank by the weighted average number of ordinary shares

outstanding during the period. Diluted earnings per share is determined by adjusting the profit or loss

attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for

the effects of all dilutive potential ordinary shares.

1.16 Financial guarantees

Financialguaranteesarecontractsthatrequirethebanktomakespecificpaymentstoreimbursetheholder

foralossitincursbecauseaspecifieddebtorfailstomakepaymentwhendueinaccordancewiththeterms

ofadebtinstrument.Theliabilityarisingfromafinancialguaranteeisrecognisedinitiallyatthefairvalue,

andtheinitialfairvalueisamortisedoverthelifeofthefinancialguarantee.Theliabilityissubsequently

carried at the higher of this amortised amount and the present value of any expected payment when a

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1.17 Standards and interpretations issued but not yet effective

Atthedateofauthorisationofthefinancialstatementsofthebankfortheyearended31December2013

the following Standards and Interpretations were in issue but not yet effective.

All Standards and Interpretations will be adopted at their effective date and these standards are not

expected to have any impact on the bank.

1.18 Segmental reporting

The bank only has a single reportable segment. The bank’s business activities are not organised on the

basis of differences in products and services or differences in geographic areas as all operations are based in

Swaziland. All of the bank’s revenue is obtained from external customers. The bank does not have a single

customer on which it derives 10% or more of its revenue.

Standard/interpretation effective date periods

beginning on or after

IFRS10,IFRS12and

IAS 27 amendment

Investment Entities 1 January 2014

IAS 32 Offsetting Financial Assets and Financial Liabilities 1 January 2014

IAS 36 Recoverable amount disclosures for Non-financial

Assets

1 January 2014

IFRIC 21 Levies 1 January 2014

IAS 39 Novation of Derivatives and Continuation of Hedge

Accounting

1 January 2014

IAS 19 Defined Benefit Plans: Employee Contributions 30 June 2015

IFRS 9 (2009) Financial Instruments To be decided

IFRS 9 (2010) Financial Instruments To be decided

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2013 2012 E E 2. Income and expenses interest income Cash and cash equivalents 9 287 888 5 898 239 Loans and advances to customers 154 331 555 161 200 150 Government and public sector securities 22 031 957 17 641 495

185 651 400 184 739 884 interest expense Deposits from customers 52 016 354 63 872 205 Other 4 295 095 885 539

Interest expense 56 311 449 64 757 744 Net interest income 129 339 951 119 982 140 Included in interest income is a total of E905 785

(2012:E1590264)accruedon impairedfinancialassets.

Total interest income and expense calculated using the effective interest method reported above that relate to financial assets or financial liabilities notmeasured at fair value through profit or loss areE154 331 555 (2012: E161 200 150) and E52 016 354 (2012: E63 872 205) respectively.

2.1 impairment of advances Specificimpairmentsrecognised 7 419 956 7 158 601 Portfolio impairments recognised 2 751 317 100 000

10 171 273 7 258 601 2.2 Fees and other commission income Retail banking customer fees 43 092 145 36 963 770 Corporate banking customer fees 63 416 764 59 312 655

Fees and other commission 106 508 909 96 276 425

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2. Income and expenses (continued) 2.3 Operating expenses

Auditors’ remuneration:

- Audit fees - fee for the audit 914 149 795 995

- other services 248 840 360 848

- expenses 28 487 19 921

Depreciation and amortisation

- Computer equipment 2 841 714 2 856 646

- Furniture and other equipment 3 675 066 3 552 507

- Vehicles 77 937 69 734

- Land and buildings 71 372 71 372

- Computer software 704 631 1 293 732

Staff costs 65 366 244 38 423 841

Operating lease expenses 8 210 786 8 032 122

Management fees 27 377 783 23 963 075

Other operating expenses 30 016 003 26 601 049

139 533 012 106 040 842

Directors’ emoluments are disclosed in note 26.

3. income tax expense 3.1 Charge for the year

Swazilandnormaltaxation:recognisedinprofitorloss;

Current year 34 629 954 30 844 558

Deferred

- charge for the year (1 478 739) (1 175 825)

- change in tax rate 1 088 961 -

total taxation on income 34 240 176 29 668 733

3.2 tax rate reconciliation % %

Standard rate of Swaziland normal taxation 30.00 30.00

The standard rate has been affected by:

Rate change 0.91 -

Non deductible expenses 0.11 0.28

Effective taxation rate 31.02 30.28

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2013 2012 E E

4. Earnings per share and dividends

4.1 earnings per share

Profitfortheyear 76 145 310 88 804 715

Headline earnings 76 145 310 88 804 715

Weighted average number of shares for calculating basic

and diluted EPS 24 640 134 24 640 134

4.2 dividends

Subsequenttothereportingdate,thedirectorsproposedadividendof100cents(2012:95cents)pershare;

total E24 640 134 (2012: E23 408 127).

The dividend will have the following tax consequences:

- Local residents withholding tax amounting to 10% of dividend declared

- Non-resident withholding tax amounting to 15%

- Non-resident withholding tax amounting 12.5% if the shareholder is a company incorporated or

registeredassuchinBotswana,Lesotho,NamibiaortheRepublicofSouthAfricaandprovidedthatitis

neither a subsidiary nor a branch of a company incorporated or registered outside any of such countries.

5. Cash and cash equivalents

5.1 Analysis

Coins and bank notes 51 510 935 58 999 878

Money at call and short notice 8 581 328 30 265 728

Balance with Central Bank of Swaziland 127 594 650 175 517 028

Other short term deposits 3 837 965 77 602 535

Money market unit trust investments 607 767 607 767

Total cash and cash equivalents 192 132 645 342 992 936

Funding from other banks (380 236 286) (1 509 907)

Net cash and cash equivalents (188 103 641) 341 483 029

The balance with the Central Bank of Swaziland has a restriction arising from regulatory liquidity

requirements. The Financial Institutions Act, 2005 prescribes that financial institutions shall maintain

reserves equal to 6% of total liabilities to the public in Swaziland excluding any balances for which it is liable

toanyfinancialinstitutionandsuchreservesmaybemaintainedbywayofdepositswiththeCentralBank

of Swaziland which bear no interest. At 31 December 2013 E127 million (2012: E128 million) was under the

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5. Cash and cash equivalents (continued)

5.2 Currency analysis

Common Monetary Area currencies (197 577 021) 310 247 056

Customer deposits in foreign currencies 9 473 380 31 235 973

(188 103 641) 341 483 029

Included in cash and cash equivalents is an amount of

E12 944 096 (2012: E155 625 497) which is invested

with other banks and is interest bearing. The remainder

is invested with the Central Bank of Swaziland and is not

interest bearing.

6. Government and public sector securities

Treasurybillsatfairvalue(throughprofitorloss) 272 029 093 342 196 724

All these securities mature within one year.

7. Amounts due from other banks

Clearances with banks 6 645 040 8 784 400

Remittances in transit - 129 433

6 645 040 8 913 833

These are client cheques not yet cleared with other banks.

8. loans and advances to customers (at amortised cost)

8.1 Category analysis

Home loans 468 526 557 388 332 768

Other loans and overdrafts 1 511 382 267 1 171 959 624

Finance leases and instalment debtors 414 236 507 306 146 708

Less:Unearnedfinancechargesonfinancelease

and instalment debtors (72 613 018) (53 775 587)

2 321 532 313 1 812 663 513

Impairment of advances (refer note 9) (26 558 973) (19 992 909)

2 294 973 340 1 792 670 604

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8. loans and advances to customers (continued)

8.2 Sectoral analysis

Individuals:

Home loans 468 526 557 388 332 768

Personal loans 441 495 257 331 512 367

910 021 814 719 845 135 Manufacturing 603 585 243 468 760 627 Wholesale and trade 11 075 846 6 373 714 Retailers,cateringandaccommodation 115 369 255 91 967 106 Agriculture,hunting,forestryandfishing 19 280 437 16 891 011 Mining and quarrying 8 964 - Building and property development 210 817 553 103 994 771 Transport,storageandcommunication 178 132 640 198 820 002 Government and public sector 59 106 644 29 371 464 Other 214 133 917 176 639 683

2 321 532 313 1 812 663 513

8.3 maturity structure Call 624 241 637 490 626 158

Less than 3 months 45 400 999 15 237 906 Between 3 months and 1 year 26 862 482 36 387 778 Between 1 year and 5 years 593 534 069 455 206 342 Greater than 5 years 1 031 493 126 815 205 329

2 321 532 313 1 812 663 513

Outstanding Specific balance impairments 2013 Security 2013 E E E

8.4 Non-performing advances Sectoral analysis 2013

Individuals:

Other personal loans 16 676 659 6 189 389 2 217 357

16 676 659 6 189 389 2 217 357 Manufacturing 296 402 150 000 33 207 Retailers,cateringandaccommodation 3 323 806 2 311 114 308 752 Building and property development 2 027 339 10 950 645 174 418 Transport,storageandcommunication 861 474 267 000 182 368 Other 5 879 607 6 932 092 9 982 454

29 065 287 26 800 240 12 898 556

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8. loans and advances to customers (continued)

8.4 Non-performing advances (continued) Sectoral analysis 2012

Outstanding Specific balance impairments 2012 Security 2012 E E E

Individuals:

Other personal loans 17 301 115 11 280 953 1 695 146

17 301 115 11 280 953 1 695 146

Manufacturing 419 690 - 61 450

Retailers,cateringandaccommodation 1771410 2853248 342316

Building and property development 355 601 412 228 95 018

Transport,storageandcommunication 1518044 188190 206355

Other 6 284 470 4 454 628 7 720 318

27 650 330 19 189 247 10 120 603

8.5 Finance lease receivables

Loans and advances to customers include the following finance lease receivables for leases of certain

property and equipment where the bank is the lessor:

2013 2012 E E

Grossinvestmentinfinanceleasesreceivable:

Less than one year 133 971 818 10 688 537

Betweenoneandfiveyears 272 279 085 292 872 285

Morethanfiveyears 7 985 605 2 585 886

414 236 508 306 146 708

Unearnedfinanceincome (72 613 019) (53 775 587)

Netinvestmentinfinanceleases 341 623 489 252 371 121

Netinvestmentinfinanceleasesreceivable:

Less than one year 132 050 247 7 898 055

Betweenoneandfiveyears 209 440 418 244 232 694

Morethanfiveyears 132 824 240 372

341 623 489 252 371 121

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2013 2012 E E

9. Allowance for impairment of advances

Specific- amortised cost

Balance at beginning of year 10 120 603 6 603 146

Applied in respect of debts written off (5 626 312) (3 912 722)

Interest suspended during the year - 323 370

Recoveries of previously recognised impairment losses 984 310 (51 793)

5 478 601 2 962 001

Impairment of advances charged 7 419 956 7 158 601

12 898 557 10 120 602

Portfolio- amortised cost

Balance at beginning of year 9 872 306 12 537 443

Applied in respect of debts written off - (100 787)

Amounts written off against impairments/other transfers 1 036 794 (2 664 350)

10 909 100 9 772 306

Impairment of advances charged 2 751 317 100 000

13 660 417 9 872 306

Comprising:-

Specificimpairmentsandinterestinsuspense 12 898 557 10 120 603

Portfolio impairment 13 660 417 9 872 306

26 558 974 19 992 909

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10. Other receivables

Sundry debtors and accrued interest earned on investments 22 259 820 15 797 426

The balance is made up as follows:

Prepayments and suspense accounts 5 987 992 9 440 422

Other receivables 16 271 828 6 357 004

22 259 820 15 797 426

11. investments

Unlisted investments at cost : Associate company* 20 20

: Other** - shares 375 000 375 000

African Alliance Lilangeni Fund*** 2 115 991 1 670 722

2 491 011 2 045 742

Directors’ valuation : Associate company* 20 20

: Other** - shares 375 000 375 000

African Alliance Lilangeni Fund*** 2 115 991 1 670 722

2 491 011 2 045 742

Percentage Percentage holding holding

* Swaziland Automated Electronic Clearing House

Limited (SAECH) – refer note 25.8.3 20% 20%

**Swaziland Industrial Development Company

Limited – refer note 25.8.3 1.6% 1.6%

*** This is a unit trust investment held by the

Employee Share Trust – refer 25.8.3

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12. Property and equipment

Freehold Furniture land and Computer and other buildings equipment equipment Vehicles total e e e e e

Cost/valuation

Balance at 1 January 2012 1 640 741 20 587 226 28 138 942 897 606 51 264 515

Additions - 341 401 2 424 636 - 2 766 037

Disposals - (4 975 924) - (122 107) (5 098 031)

Balance at 31 December 2012 1 640 741 15 952 703 30 563 578 775 499 48 932 521

Balance at 1 January 2013 1 640 741 15 952 703 30 563 578 775 499 48 932 521

Additions - 2 639 546 7 431 906 487 034 10 558 486

Disposals - - (179 062) (126 290) (305 352)

Balance at 31 December 2013 1 640 741 18 592 249 37 816 422 1 136 243 59 185 655

depreciation and impairment losses

Balance at 1 January 2012 (426 230) (14 770 148) (16 018 277) (647 050) (31 861 705)

Depreciation for the year (71 372) (2 856 645) (3 552 508) (69 734) (6 550 259)

Disposals - 4 975 924 - 122 107 5 098 031

Balance at 31 December 2012 (497 602) (12 650 869) (19 570 785) (594 677) (33 313 933)

Balance at 1 January 2013 (497 602) (12 650 869) (19 570 785) (594 677) (33 313 933)

Depreciation for the year (71 372) (2 841 714) (3 676 124) (77 937) (6 667 147)

Disposals - - 179 062 126 290 305 352

Balance at 31 December 2013 (568 974) (15 492 583) (23 067 847) (546 324) (39 675 728)

Carrying amounts

At 1 January 2012 1 214 511 5 817 078 12 120 665 250 556 19 402 810

At 31 December 2012 1 143 139 3 301 834 10 992 793 180 822 15 618 588

At 1 January 2013 1 143 139 3 301 834 10 992 793 180 822 15 618 588

At 31 December 2013 1 071 767 3 099 666 14 748 575 589 919 19 509 927

12. Property and equipment (continued)

FreeholdlandandbuildingswerevaluedbyMeldanePropertyandValuationServicesCC,on25September2012 on the basis of open market value in continuation of existing use at E1 100 000. Management has not adjusted for this valuation as they believe the revalued amount and the carrying amount are equal.

Detailsofpropertiesownedareavailableforinspectionattheregisteredofficeofthebank.Allpropertyandequipment is free of lien.

There were no capitalised borrowing costs relating to the acquisition of equipment during the year (2012: Nil). The initial cost of freehold land and buildings was E950 000 (2012: E950 000).

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13. deferred taxation

13.1 Recognised deferred tax assets

Property and equipment 2 835 872 2 909 931

Impairment of advances 7 303 718 5 997 873

Unrealised (losses)/gains on FECs (906 483) (202 944)

Operating leases 204 225 222 791

Employeebenefitsobligations 2 410 650 7 507 500

Payable for staff costs 2 593 022 2 843 241

Prepayments (51 782) 182 098

Deferred tax assets 14 389 222 19 460 490

13.2 deferred taxation movements:

(in statement of comprehensive income)

Deferred tax assets - beginning of year 19 460 490 17 314 766

Re-measurementofdefinedprovisionliability (363 697) -

Movements arising from:

- Property and equipment (74 058) 719 896

- Impairment of advances 1 305 845 255 696

- Unrealised gains on FECs (703 539) (91 634)

-Employeebenefitsobligations (5 097 350) 969 900

- Payable for staff costs (250 220) 109 769

- Prepayments 130 317 182 097

- Operating lease (18 566) -

Deferred tax assets - end of year 14 389 222 19 460 490

There are no unrecognised deferred tax assets and liabilities at year end (2012: Nil). There was no deferred

tax recognised directly in equity (2012: nil).

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14. intangible assets

Computer

software

e

Cost

Balance at 1 January 2012 15 515 353

Additions -

Balance at 31 December 2012 15 515 353

Balance at 1 January 2013 15 515 353

Additions 2 576 001

Balance at 31 December 2013 18 091 354

amortisation and impairment losses

Balance at 1 January 2012 (13 477 246)

Amortisation for the year (1 293 732)

Balance at 31 December 2012 (14 770 978)

Balance at 1 January 2013 (14 770 978)

Amortisation for the year (704 631)

Balance at 31 December 2013 (15 475 609)

Carrying amounts

At 1 January 2012 2 038 107

At 31 December 2012 744 375

At 1 January 2013 744 375

At 31 December 2013 2 615 745

There were no capitalised borrowing costs related to the internal development of software during the year

(2012: Nil). The bank does not have restricted or pledged intangible assets and there were no contractual

commitments for acquisition of intangible assets at reporting date.

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15. Share capital and reserves

15.1 Share capital

15.1.1 authorised share capital

26 650 000 (2012: 26 650 000) ordinary shares of 50 cents each 13 325 000 13 325 000

15.1.2 issued and fully paid share capital

24 640 134 (2012 : 24 640 134) ordinary shares of 50 cents each 12 320 067 12 320 067

779 026 (2012 : 779 026) treasury shares of 50 cents each (389 513) (389 513)

11 930 554 11 930 554

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the bank. The unissued shares are under the control of the directors.

15.2 Share premium and reserves

15.2.1 Share premium

Share premium account 7 952 360 7 952 360

15.2.2 Revaluation reserve

Gains on revaluation of commercial premises and residential

properties 1 366 260 1 366 260

The property was last revalued in September 2012 in accordance

with the bank’s accounting policy, by Meldane Property and

ValuationServicesCC,independentpropertyvaluers.

15.2.3 Statutory reserve

IntermsofSection20(1)(a)(ii)oftheFinancialInstitutionsAct,

2005 60 819 856 53 205 325

15.2.4 General risk reserve

Thisisastatutorygeneralcreditriskreserve,beingthedifference

between credit reserves as required by the Central Bank of Swazi-

land and portfolio impairment losses on advances per the state-

mentoffinancialposition. 8 014 457 8 014 457

Movements on reserves are disclosed in the statement of changes in equity set out on page 57.

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16. amounts owed to depositors

16.1 analysis Current accounts 570 327 884 533 552 075 Savings deposits 179 785 288 146 912 621 Other customer deposits and loan accounts 1 216 346 547 1 301 714 080 Foreign currency deposits 5 005 981 28 700 696

1 971 465 700 2 010 879 472

16.2 Sectoral analysis Individuals 641 299 850 551 617 696 Corporates and other 1 330 165 850 1 459 261 776

1 971 465 700 2 010 879 472

At 31 December 2013: E750 233 (2012: E206 714) of deposits from customers are expected to mature more than 12 months after the reporting date.

17. deposits from banks Current accounts 5 215 585 2 254 467

The deposits are repayable on demand. These accounts do not earn interest.

18. Current taxation liabilities Balance at beginning of the year 1 051 204 5 227 880 Income tax expense in the year 34 629 954 30 844 558 Income tax paid during the year (32 329 424) (35 021 234)

3 351 734 1 051 204

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19. employee share ownership scheme

Share options over Nedbank (Swaziland) Limited shares and equity instruments in respect of Nedbank

(Swaziland) Limited shares are granted to employees as part of their remuneration package as services

are rendered as an incentive to retain business and develop growth within the bank.

As the bank cannot estimate reliably the fair value of services received nor the value of additional

businessreceived,thebankrebutsthepresumptionthatsuchservicesandbusinesscanbemeasured

reliably.Thebankthereforemeasurestheirfairvaluebyreferencetothefairvalueoftheshares,share

options or equity instruments granted, in line with the bank’s accounting policy. The fair value of

suchshares,shareoptionsandequityinstrumentsismeasuredatthegrantdateutilisingthedirectors

simplifiedfairvaluationmodel.Bothschemesarecashsettledastheshareswillultimatelybesettledby

the bank. The following are the share and share option schemes that have been in place during the year.

* The employee share trust scheme is treated as an agent of the bank.

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Scheme trust/special- purpose vehicle(SPV)*

descriptiontraditional employee schemes

Vestingrequirements

maximumterm

Nedbank (Swaziland) Limited (2012) Share Option Scheme and restricted share scheme.

Nedbank Employee Share Trust (Sinakekelwe Management Scheme)

Share options and restricted shares were granted to key person-nel to motivate senior employees to remain with the group. The granting of share options was based onjoblevel,meritandperformance,andwasentirely at the discretion of the trustees acting on recommendations of executive management.

Share options granted on appointment are time-based,ofwhich 33% vest afterthreeyears,an additional 33% after the fourth year and the remaining 34% after the fifthyear.

5 years

Nedbank (Swaziland) Limited (2012) employee share scheme.

Nedbank Employee Share Trust (Sinakekelwe Broad-Based Scheme)

Restricted shares were granted to all other employees who do not qualify for any other share scheme within the bank.

Share options granted on appointment are time-based,ofwhich 33% vest afterthreeyears,an additional 33% after the fourth year and the remaining 34% after the fifthyear.

5 years

19. employee share ownership scheme (continued)

Effect on profit and financial position

Share-based payments

Share-based expense liability

2013 2012 2013 2012

E E E E Sinakekelwe broad-based scheme 938 534 229 221 2 139 128 1 200 594

Sinakekelwe Management scheme (options) 1 748 431 402 897 3 858 697 2 110 266 2 686 965 632 118 5 997 825 3 310 860

Fair value of share options and

assumptions 2013 2012 Fair value at grant date 4.25 4.25 Share price at grant date 4.25 4.25 Exercise price - - Expected volatility 96% 96% Option life 12 months 24 months

Risk free interest rate 5.5% 5.5%

weighted average

Number of instruments price per unit

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movement in number of instruments

Share options

Outstanding at the beginning of the year 465 882 472 941 - -

Granted - - 5.94 5.26

Forfeited (12 706) (7 059) 5.94 5.26

Outstanding at the end of the year 453 176 465 882 5.94 5.26

Exercisable at the end of the year 299 096 - - -

Restricted shares

Outstanding at the beginning of the year 378 075 391 132 - -

Granted - - 5.94 5.26

Forfeited (10 705) (13 057) 5.94 5.26

Outstanding at the end of the year 367 370 378 075 5.94 5.26

Exercisable at the end of the year 242 464 - - -

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20. accounts payable

20.1 trade and other payables Trade payables 22 544 126 144 284 570 Accrual for service fee 4 841 143 8 485 865 Creditors and accruals 25 032 905 3 929 598

52 418 174 156 700 033

Trade payables relate to uncleared funds/cheques due to customers and other banks.

20.2 Payables for staff costs Share based payment liability 3 310 860 3 310 860 Leave accrual 2 587 748 2 610 675 Bonus accrual 3 175 714 3 512 937 Accrual for severance pay 354 848 43 000

9 429 170 9 477 472

21. Contingent liabilities Confirmedlettersofcreditanddiscountingtransactions - - Liabilities under guarantees 58 397 770 78 007 317 Other : Commitments to sell foreign currency under forward exchange contracts 225 166 411 415 987 933 Unutilised facilities 459 235 136 379 732 870

742 799 317 873 728 120

Letters of credit and liabilities under guarantee are those issued by the bank to its customers to present to third parties. These have been stated at nominal value of the guarantee given. 22. Commitments Operating lease commitments Less than one year 8 152 830 5 896 423 Betweenoneandfiveyears 18 654 199 6 454 662

26 807 029 12 351 085

The bank leases 26 (2012: 20) properties. The leases typically run for an initial period of a maximum of threeyears,withanoptiontorenewtheleaseafterthatdate.Leasepaymentsincreaseannuallybyafixedamounttoreflectmarketrentals.Therewerenocontractualcommitmentstoacquirepropertyandequipment (2012: Nil).

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23. Cash flow information

23.1 Cash received from customers

Commission and fees 106 508 909 96 276 425

Foreign exchange dealing gains 18 290 564 13 678 484

Netunrealisedprofitonforeigncurrencytransactions(Note25.8) (5 406 952) (2 110 650)

Foreign currency gains realised 2 110 650 1 434 171

Other income 5 950 347 1 835 842

Recoveries of debt previously written off (1 263 421) (6 800 965)

126 190 097 104 313 307

23.2 Cash paid to customers, staff and suppliers

Staff costs (63 349 244) (49 653 841)

Payments to customers and suppliers (66 406 269) (59 773 010)

(129 755 513) (109 426 851)

23.3 Cash generated by operating activities

Netprofitbeforetaxation 110 385 486 107 243 448

Adjustment for:

- Depreciation and amortisation 7 371 778 7 843 991

- Impairment of advances (net) 10 171 273 7 258 601

- Netunrealisedprofitonforeign

currency transactions (Note 25.8) (5 406 952) (2 110 650)

- Prior year’s net unrealised foreign currency

gain now realised 2 110 650 1 434 171

- Recoveries of impairment losses credited to allowance for

credit impairments and other movements 1 162 300 (6 778 965)

- Profitondisposalofpropertyandequipment (20 000) (22 000)

125 774 535 114 868 596

23.4 increase in operating assets

Advances and other accounts (515 893 984) 140 911 586

Government and public sector securities 70 167 631 (153 868 837)

(445 726 353) (12 957 251)

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23. Cash flow information (continued)

23.5 (decrease)/increase in operating liabilities

Current and savings accounts 69 648 477 146 288 695

Other deposits and foreign currency liabilities (106 101 131) 182 468 215

Trade and other payables (104 330 159) 67 060 186

(140 782 813) 395 817 096

23.6 taxation paid

Amounts payable at beginning of year (1 051 204) (5 227 880)

Statement of comprehensive income charge (Note 3.1) (34 629 954) (30 844 558)

Amounts payable at end of year 3 351 734 1 051 204

(32 329 424) (35 021 234)

23.7 dividends paid to shareholders

Dividends declared and paid during the year (23 408 128) (22 219 941)

23.8 Cash and cash equivalents

Cash and short-term funds 179 105 585 234 516 906

Other short-term funds 11 385 874 57 566 400

Deposits with banks within the group (refer to note 26) 1 641 186 50 909 630

192 132 645 342 992 936

Funding from other banks (380 236 286) (1 509 907)

(188 103 641) 341 483 029

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24. Employee benefits obligations

24.1 Recognised liability of defined benefit obligation

Estimated present value of plan obligations (93 371 000) (93 186 000) (85 864 000)

Fair value of plan assets 84 605 000 68 161 000 64 072 000

Present value of future funded obligations (8 766 000) (25 025 000) (21 792 000)

Recognisedliabilityfordefinedbenefitobligations (8 766 000) (25 025 000) (21 792 000)

Thebankmakescontributionstoadefinedbenefitplan,theNedbankSwazilandPensionFund,whichprovidespensionbenefitsforemployeesuponretirement.Thedefinedbenefitplanexposestheentitytocreditriskdueto the investments in plan assets. All permanent employees are members of the fund. In accordance with the rulesofthefundthefinancialpositionofthefundisexaminedandreporteduponbytheactuaryatintervalsnot exceeding three years. The latest available actuarial valuation was at 31 December 2013. Plan assets comprisecollectiveinvestmentschemeswithAfricanAlliancemadeupofequities61.52%(2012:60%),debtinstruments 20.98% (2012: 30%) and cash at bank 17.5% (2012: 10%). The Bank’s fund administrators are AON Swaziland Limited and the actuarial valuator is Alexander Forbes.

A valuation of the fund for IAS 19 purposes was performed as at 31 December 2013 by independent external actuarieswhoestimateadeficitasreflectedabove.

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24.2 Expense recognised in the profit or loss

Service costs 4 376 000 2 983 000

Net interest cost 2 166 000 2 061 000

Past service cost - (19 571 000)

6 542 000 (14 527 000)

Recognised in other comprehensive income

Actuarial (gains)/losses (8 970 000) 19 692 000

Fair value adjustment on plan assets (9 306 000) 2 128 000

(18 276 000) 21 820 000

The expected return on plan assets is based on market yields on high quality corporate bonds at reporting date.

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Restated

24. Employee benefits obligations (continued)

24.3 movement in plan assets

Fair value of plan assets at 1 January 68 161 000 64 072 000

Contribution paid into the plan 6 910 000 6 202 000

Benefitspaidbytheplan (3 387 000) (4 384 000)

Actuarial gains/(losses) 9 306 000 (2 128 000)

Expected return on plan assets 5 451 000 5 724 000

Risk and administration fees (1 836 000) (1 325 000)

Fair value of plan assets at year end 84 605 000 68 161 000

24.4 Movement in the present value of defined benefit obligation

Liabilityfordefinedbenefitobligationat1January 93 186 000 85 864 000

Actuarial (gains)/losses (8 970 000) 19 692 000

Benefitspaidbytheplan (3 387 000) (4 384 000)

Current service costs and interest 12 542 000 11 585 000

Pastservicecostduetochangeinbenefits - (19 571 000)

Liabilityfordefinedbenefitobligationsatyearend 93 371 000 93 186 000

24.5 Actuarial assumptions for defined benefit obligations

Principal actuarial assumption at the date of the last provisional

actuarial valuation (expressed as weighted averages):

Discount rate at 31 December 8.5% 7.9%

Expected return on plan assets at 31 December 8.5% 8.8%

Future pension increases 2.1% 2.2%

Inflation 6.0% 6.4%

Salary increases 7.0% 7.0%

Expected contributions by members and employer for 2014 are E7 394 000 (2013: E6 035 000).

96




25. Financial risk management

Thebank’sfinancialinstrumentsarisedirectlyfromitsoperationsandcomprisecoinandbanknotes,balances

with central and other banks, Government and public sector securities, investments, loans, overdrafts,

financeleasereceivables,savingsaccounts,depositandloanaccounts,accruedinterestandothercreditors,

remittancesintransit,andindebtednessbyandtotheholdingcompanyandfellowsubsidiaries.Themain

purposeofthesefinancialinstrumentsistoearnincomefrombankingoperations.Thebankalsoentersinto

derivative contracts principally forward foreign currency contracts on behalf of customers.

Thebankhasexposuretothefollowingrisksfromfinancialinstruments:

• Market risk

• Credit risk

• Liquidity risk

Risk management framework

The Board together withNedbankAfrica (a division of Nedbank Limited), theCreditCommittee and

the Assets and Liabilities Committee (ALCO) assess and monitor risks based on policies formulated in

conjunction with the holding company and approved by the Board of Directors.

Thebank’sriskmanagementpoliciesareestablishedtoidentifyandanalysetherisksfacedbythebank,to

setappropriateriskslimitsandcontrols,andtomonitorrisksandadherencetolimits.Riskmanagement

policiesandsystemsarereviewedregularlytoreflectchangesinmarketconditions,productsandservices

offered.

The Risk Committee is responsible for monitoring compliance with the bank’s risk management policies

andprocedures,andfor reviewingtheadequacyof theriskmanagement framework in relationtothe

risks faced by the bank. Internal Audit undertakes both regular and ad-hoc reviews of risk management

controls and procedures.

The methods for assessing and monitoring used in the current year are consistent with prior years. There

werenofinancialassetsandfinancialliabilitiesreclassifiedinthecurrentperiod(2012:Nil).

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25. Financial risk management (continued)

25.1 market risk

Market risk is the risk of a decrease in the value of a portfolio as a result of an adverse move in market variablesand futurecashflowsofafinancial instrumentwillfluctuatebecauseofchanges inmarketprices. This existswhere the bank has a trading position or financial instrument denoted in foreigncurrencies. The bank’smajor exposure from trading operations andfinancial instruments denoted inforeign currencies is undertaken in terms of general authority granted to ALCO by the Board of Directors and is controlled within the treasury operations. Trading limits are pre-determined and exposure to market risk is limited as counterparty positions are taken with the holding company for all material trades of forward foreign currency contracts. The bank’s market risk comprises of interest rate risk and currency risk. The principal tool used to measure and control market risk is back to back hedging for foreign currency risk and repricing and gap analysis for interest rate risk.

25.2 Credit risk

Creditriskistheriskoffinanciallosstothebankifacustomerorcounterpartytoafinancialinstrumentfails to meet its contractual obligations. Direct credit risk arises as a result of traditional lending and dealing with others. Indirect credit risk arises as a result of issuing guarantees and similar undertakings. Generally lending decisions are made in accordance with credit management parameters laid down by AFCRAM (Africa Credit Risk Management Committee). There are reporting requirements designed to identify unsatisfactory accounts at an early stage. Distinction is drawn between the fundamental credit characteristics of corporate customers and smaller individual advances. Policies are in place to ensure that the bank is not overexposed to particular concentrations of credit. Lending decisions are made by credit managers or in the case of large exposures by the appropriate Credit Committee. Any facility requests in excess of the Credit Committee’s lending limit are referred to the Africa Credit Risk Management Committee at Nedbank Limited. All facilities are risk rated against a standard rating scale and are reviewed at least annually.

exposure to credit risk

Note 2013 2012

E E

Loans and receivables at amortised cost Loans and advances 8 2 294 973 340 1 792 670 604 Cash and cash equivalents 5 192 132 645 342 992 936 Amounts due from banks 7 6 645 040 8 913 833

2 493 751 025 2 144 577 373

Held for to maturity at fair value through profit or loss Government and public sector securities* 6 272 029 093 342 196 724 Derivative assets held for risk management** 25.8 18 072 725 11 956 856 Investments – at cost 11 2 491 011 2 045 742

292 592 829 356 199 322

2 786 343 854 2 500 776 695

* Treasury bills with the Central Bank of Swaziland

** Derivative assets are with related counterparties

98





25.2 Credit risk (continued)

impaired loans and advances

Forindividuallyassessedaccounts,loansaretreatedasimpairedassoonasthereisobjectiveevidence

that an impairment loss has been incurred. The criteria used by the bank to determine that there is such

objectiveevidenceincludes,interalia:

Knowncashflowdifficultiesexperiencedbytheborrower;

Overdue contractual payments of either principal or interest;

Breach of loan covenants or conditions;

Theprobabilitythattheborrowerwillenterbankruptcyorotherfinancialrealisation;and

Asignificantdowngradingincreditratingbyanexternalcreditratingagency.

The IAS 39 impairment allowance is calculated based on the difference between the outstanding advancesbalancesandthepresentvalueofexpectedfuturecashflows.

TheCentralBankofSwazilandimpairmentsaredividedintotwo;namelySpecificimpairmentswhicharebased on 100% of the loss position (Outstanding advances balance less the market value of collateral) and General impairments which are based on a certain percentage of performing advances book (based on the historical performance of the advances book).

The difference between IFRS impairments and Central Bank of Swaziland impairments is credited to the general risk reserve.

25.2.1 Credit commitments and guarantees

The bank has outstanding, at any time, a significant number of commitments to extend credit. To

accommodate major customers the bank also provides financial guarantees to third parties. These

arrangements are subject to strict credit assessments. Guarantees specify limits to the bank’s obligations

assetoutinnote21.Thebankhasenteredintocontracts(guarantees)thatrequireittomakespecified

payments to reimburse the holder for a loss it makes if a debtor fails to make payments when it falls due

in accordance with the debt instrument in place. Because most commitments and almost all guarantees

expirewithoutbeingfundedinwholeorinpart,thecontractamountsarenotestimatesoffuturecash

flows.Loancommitments,lettersofcreditandguaranteeshaveoffbalancesheetcreditriskamounts

equal to the contractual amounts.

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25.2.2 Concentrations of credit risk

Concentrations of credit risk arising fromfinancial instruments exist in relation to certain groups ofcustomers. A group concentration arises when a number of counterparties have similar economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by the changes in economic and other conditions. The bank has exposure to major concentrations of credit riskwhicharisebycustomertypeinrelationtoloansandcreditcommitmentstospecificindustries(refernote 8.2 for sectoral analysis).

Thebankmonitorsconcentrationsofcreditriskbysector.Ananalysisofsignificantconcentrationsofcredit risk from loans and advances at reporting date is as follows:-

- sugar manufacturing entity E47.2 million (2012: E65.9 million) - sugar wholesaling entity E512.5 million (2012: E363.4 million) - public sector entity E59.1 million (2012: E29.4 million) - construction company E210.8 million (2012: E104.0 million) - manufacturing company E556.4 million (2012: E402.8 million) - sugar packaging entity E5.3 million (2012: E15.8 million)

The facilities that are above 25% of the bank’s capital and reserves at the end of the previous year are subject to a risk participation agreement between the bank and Nedbank Limited. The effect of this agreement is to limit the bank’s exposure for each of these facilities to 25% of capital and reserves. The bank’s published capital and reserves at the end of the year were E401.6 million (2012: E335.7 million)

25.2.3 Collateral and other credit enhancements

Collateral and other credit enhancement held by the bank at year end are disclosed in note 8.4 for non-performing loans and advances. The value of all collateral that the bank is permitted to sell or re-pledge held at year end was E824 542 362 (2012: E695 497 596) all of which are readily convertible into cash.

The bank holds collateral against loans and advances to customers in the form of mortgage interest over property,otherregisteredsecuritiesandguarantees.Theamountandtypeofcollateralrequireddependson an assessment of the credit risk of the counterparty. The main types of collateral are as follows:

Forcommercial lending,chargesover realestateproperties, inventory,callandfixeddepositsand trade receivables;

Forretaillending,mortgagesoverresidentialpropertiesandlienovercallandfixeddeposits;and For non-performing advances, collateral consists of cash, funds on security realisation accounts,

intrinsicvalueofunderlyingasset,guaranteesbyCentralBankofSwazilandandmortgagebonds.

Atyearend,thefairvalueoffinancialassetsacceptedascollateralthathavebeensoldwasE8060425(2012: E8 426 734). These transactions are conducted under terms that are usual and customary to standard lending transactions.

100






25.2.4 Financial assets that are either past due or impaired

Past due but not impaired loans and advances are those for which contractual interest or principal

paymentsarepastdue,butthebankbelievesthatimpairmentisnotappropriateonthebasisofthestage

of collection of amounts owed to the bank.

Financial assets of the bank which were neither past due nor impaired at year end amount to E2 287

million (2012: E1 769 million).

Financial assets of the bank which were past due and impaired at year end are disclosed in note 8.4 (for

those impaired) and those that are past due but not impaired are disclosed below. Factors considered in

deteriorating impairment are disclosed in note 25.2.

Financial assets of the bank which were past due but not impaired are as follows:

2013

Class total 0 – 30 days 30 – 60 days 60 – 90 days +90 days

e e e e e

Mortgage loans 1 287 750 1 061 822 215 626 10 302 -

Leases 1 958 534 1 504 266 364 610 89 658 -

Personal loans 1 362 321 1 142 449 170 553 40 808 8 511

Other loans 958 793 716 903 179 391 45 087 17 412

5 567 398 4 425 440 930 180 185 855 25 923

2012

Class total 0 – 30 days 30 – 60 days 60 – 90 days +90 days

e e e e e

Mortgage loans 2 805 244 2 446 073 346 687 12 484 -

Leases 4 298 812 3 950 820 312 430 32 725 2 837

Personal loans 1 170 800 1 034 630 104 291 25 405 6 474

Other loans 7 508 592 7 441 684 62 371 3 426 1 111

15 783 448 14 873 207 825 779 74 040 10 422

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25.2.5 loans with re-negotiated terms Loans with re-negotiated terms are loans that have been restructured due to deterioration in the

borrower’sfinancial positionandwhere thebankhasmade concessions that itwouldnototherwiseconsider. Re-negotiated loans at year end are as follows:

Class 2013 2012

e E

Mortgage loans 1 142 422 1 423 210 Leases 411 021 422 153 Personal loans 19 700 140 035 Other loans 246 424 -

1 819 567 1 985 398

There were no properties in possession at year end (2012: E Nil).

25.2.6 write off policy

The bank writes off a loan and any related allowance for impairment losses when it is determined that the loan or security is uncollectible. This determination is made after consideration of information such as the occurrenceofsignificantchangesintheborrower’sfinancialpositionsuchthattheborrowercannolongerpaytheobligation,orthatproceedsfromcollateralwillnotbesufficienttopaybacktheentireexposure.

25.3 liquidity risk

Liquidityriskistheriskthatthebankwillencounterdifficultyinmeetingobligationsassociatedwithitsfinancialliabilitiesthataresettledbydeliveringcashoranotherfinancialasset.Thisriskarisesmainlyinthe treasury operations. ALCO is responsible for ensuring that the bank meets its planned commitments as they fall due.

The maturities of assets and liabilities are closely monitored and diversified to avoid any undueconcentration of funding requirements at any one time or from any one source.

The daily liquidity position is monitored and regular liquidity stress testing is conducted under a variety of

scenarios covering both normal and more severe market conditions. All liquidity policies and procedures aresubjecttoreviewandapprovalbyALCO.Asummaryreport,includinganyexceptionsandremedialactiontaken,issubmittedregularlytoALCO.

Thebankreliesondepositsfromcustomersandbanks,andfromgroupborrowingsasitsprimarysourcesoffunding.Whilethebank’sdebtsecuritiesandsubordinatedliabilitieshavematuritiesofoveroneyear,deposits from customers and banks generally have shorter maturities and a large proportion of them are repayable on demand. The short-term nature of these deposits increases the bank liquidity risk and the bank actively manages this risk through maintaining competitive pricing and constant monitoring of market trends.

exposure to liquidity risk The key measures used by the bank for managing liquidity risk include the ratio of loans and advances to

deposits; sources of quick liquidity to liabilities to the public; and checking of key sources of quick liquidity cover over the bank’s top ten depositors.

Disclosureofamaturityanalysisoffinancialliabilitiesisasfollows:

102




25.3

Fi

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103

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25.4 interest rate sensitivity analysis

Interestrateriskistheriskthatthefairvalueorfuturecashflowsofafinancialinstrumentwillfluctuate

because of changes in market interest rates.

Partofthebank’sreturnonfinancialinstrumentsisobtainedfromcontrolledmismatchingofthedates

onwhichinterestreceivableonassetsandinterestpayableonliabilitiesarenextresettomarketratesor,

ifearlier,thedatesonwhichtheinstrumentsmature.TheALCOisalsoresponsibleformanagementof

the interest rate sensitivity gap using the re-pricing analysis of assets and liabilities as disclosed in note

25.9. The concentration of interest rate risk is disclosed in note 25.9.

Tomeasureinterestraterisk,thebankmeasurestheresponsivenessofthedifferentportfoliostochanges

in interest rate. From the use of the Basel stress scenario based on a 1st and 99th percentile of observed

interestratechangesusingaoneyearholdingperiodandaminimumoffiveyearsofobservation,the

bank calculated 5% and 2.5% respectively. The bank uses this margin to shock its assets and liabilities to

ascertaintheimpactoftheinterestratechangesinprofitorloss.Theeffectofthesensitivityanalysison

profitorlossiscalculatedasfollows:

2013 2012

E’000 E’000

500 bp instantaneous parallel decline in interest rates (42 900) (48 497)

250 bp instantaneous parallel increase in interest rates 21 450 24 248

25.5 Operational risk

Operational risk is the risk of a loss arising from fraud, transactional or control error or systemflaw.

Exposures to operational risks are managed by an Operational Risk Committee (ORCO) which was

established in January2006, throughanon-going reviewof transactionaldataand reconciling items,

evaluation and adoption of international best practice and management of information technology

resources.

25.6 Commercial risk

This is the risk of the adverse effect of initiating or suffering change in the scope or extent of business

activities. The bank and the holding company constantly monitor trends and events and carry out

appropriate research with a view to anticipating and avoiding adverse effects.

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25.7 Currency risk

Currencyriskistheriskthatthefairvalueorfuturecashflowsofafinancial instrumentwillfluctuate

because of changes in foreign exchange rates.

The following net foreign exchange assets recognised in the statement of financial position are not

covered by forward exchange contracts:

2013 2013 2012 2012

Foreign Local Foreign Local

currency currency currency currency

000 E’000 000 E’000

British Pounds 208 3 630 7 107

United States Dollars 9 98 52 446

Canadian Dollars 7 66 10 86

Euros 24 346 140 1 577

Botswana Pula 45 54 72 78

Other 25 276 28 252

4 470 2 546

These assets make up less than 5% of the bank’s total assets. These funds are held by the bank on behalf

ofclientsandanyforeignexchangeriskisbornedirectlybytheclient.Assuch,asensitivityanalysisisnot

included.

ForwardforeignexchangecontractsaredenominatedmainlyinBritishPounds,UnitedStatesDollarsand

Eurosandconstituteoffullycoveredpositions.Whenenteringintoforwardforeignexchangecontracts,

credit risk is assessed with reference to customers’ available facilities.

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25.

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106





25.8.1 Derivative financial instruments

These transactions have been entered into in the normal course of business and no material losses are

anticipated other than those forwhich provision has been recognised in profit or loss. There are no

commitmentsorcontingentcommitmentsunderderivativefinancialinstrumentsthataresettledother

than in cash.

25.8.2 Notional principal

Notional principal represents the gross value of all outstanding contracts as at 31 December 2013. This

gross notional value is the sum of the absolute value of all purchases and sales of derivative instruments.

Thisamountreflectstheamountreceivableorpayableunderaderivativecontract.Thenotionalamount

represents only the measure of involvement by the bank in derivative contracts and not its exposure to

market or credit risks arising from these contracts.

25.8.3 Fair value of financial instruments

The amounts disclosed represent the fair value of all derivative financial instruments held as at 31

December2013.Thefairvalueofafinancialinstrumentisthepricethatwouldbereceivedtosellanasset

or paid to transfer a liability in an orderly transaction between market participants at the measurement

date.The fair value of a derivative financial instrument represents themarket value if the rights and

obligations arising from that instrument were closed out by the bank in normal trading conditions as at

31December2013.Fairvaluesareobtainedfromquotedmarketprices,discountedcashflowmodels,and

market-acceptedpricingmodels.Allderivativefinancialinstrumentsmatureinlessthan12months.

At 31 December 2013 the carrying amount of unlisted assets approximated their fair values.

Management’s valuation of unlisted investments is equal to the carrying value. All unlisted investments

were valued at cost at 31 December 2013. Disclosure of fair value is not provided because their fair value

cannot be reliably measured. The SAECH investment is an investment in a mutual breakeven entity that

provides transaction processing and settlement services to all the banks in Swaziland. The bank does

nothaveasignificantinfluenceoverthisinvestmentasthisisasharedserviceentityunderthecontrol

oftheCentralBankofSwaziland,theadministrator. The investment inSIDCis inanentitythatplays

theroleofafacilitatorforprivatesectorinvestmentsinSwaziland,inlinewithgovernment’spolicyof

supporting private sector development as a key factor for economic growth and employment creation.

The bank is not considering disposing of these two investments due to their nature and the unavailability

of markets. The Lilangeni Fund is a unit trust investment through African Alliance. The bank does not hold

significantpercentagesnorhavecontrolofthisinvestment.Thebankdoesnotintendtodisposeofthese

investments.

There have been no changes in valuation techniques during the year under review.

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25.8.3 Fair value of financial assets and liabilities (continued)

Fair Value Hierarchy of financial instruments measured at fair value

Thebankmeasuresfairvaluesusingthefollowingfairvaluehierarchy,whichreflectsthesignificanceof

the inputs used in making the measurements.

• Level 1: inputs that are quoted market prices (unadjusted) in active markets for identical instruments.

• Level 2: inputs other than quoted prices included within Level 1 that are observable either directly

(i.e. as prices) or indirectly (i.e. derived from prices). This category includes instruments valued using:

quoted market prices in active markets for similar instruments; quoted prices for identical or similar

instruments in markets that are considered less than active; or other valuation techniques in which

allsignificantinputsaredirectlyorindirectlyobservablefrommarketdata.

• Level 3: inputs that are unobservable. This category includes all instruments for which the valuation

techniqueincludesinputsnotbasedonobservabledataandtheunobservableinputshaveasignificant

effect on the instrument’s valuation. This category includes instruments that are valued based on

quotedpricesforsimilarinstrumentsforwhichsignificantunobservableadjustmentsorassumptions

arerequiredtoreflectdifferencesbetweentheinstruments.

Fairvaluesoffinancialassetsandfinancialliabilitiesthataretradedinactivemarketsarebasedonquoted

marketpricesordealerpricequotations. Forallotherfinancial instruments thebankdetermines fair

values using valuation techniques.

Thetablebelowanalysesfinancialinstrumentsmeasuredatfairvalueattheendofthereportingperiod

by the level in the fair value hierarchy in to which the fair value measurement is categorised.

level 1 level 2 level 3 total e e e e

31 December 2013

Derivative assets held for risk management – foreign exchange - 18 072 725 - 18 072 725

Investment securities

Unlisted equities - - 375 000 375 000

Government securities - 272 029 093 - 272 029 093

African Alliance unit trust - 2 115 991 - 2 115 991

Hlomendlini unit trust - 607 787 - 607 787

- 292 825 596 375 000 293 200 596

Trading liabilities

Derivative liabilities held for risk

management- foreign exchange - 12 665 773 - 12 665 773

- 12 665 773 - 12 665 773

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25.8.3 Fair value of financial assets and liabilities (continued)

level 1 level 2 level 3 total e e e e

31 December 2012

Derivative assets held for risk management – foreign exchange - 11 956 856 - 11 956 856

Investment securities

Unlisted equities - - 375 000 375 000 Government securities - 342 196 724 - 342 196 724 African Alliance unit trust - 1 670 722 - 1 670 722 Hlomendlini unit trust - 607 787 - 607 787 - 356 432 089 375 000 356 807 089

Trading liabilities

Derivative liabilities held for risk management- foreign exchange - 9 846 206 - 9 846 206 - 9 846 206 - 9 846 206

There were no movements (transfers) in Level 3 and as such a reconciliation has not been included.

Financial instruments not measured at fair value

Thefollowingtablesetsoutthefairvaluesoffinancialinstrumentsnotmeasuredatfairvalueandanalyses

them by the level in the fair value hierarchy into which each fair value measurement is categorised.

total total carrying level 1 level 2 level 3 fair value amounts e’000 e’000 e’000 e’000 e’000

assets

Cash and cash equivalents - 233 785 - 233 785 192 133 Loan and advances to customers - 2 294 974 - 2 294 974 2 294 974 Amount due from other banks - 6 645 - 6 645 6 645 Other receivables - - 22 260 22 260 22 260 - 2 535 404 22 260 2 557 664 2 516 012

liabilities

Deposits from customers - 1 993 618 - 1 993 618 1 971 466 Deposits from banks - 5 216 - 5 216 5 216 Trade and other payables - 52 418 - 52 418 52 418 Funding from other banks - 380 236 - 380 236 380 236 - 2 431 488 - 2 431 488 2 409 336

Whereavailable, the fair valueof loansandadvancesandamountdue fromotherbanks, isbasedonobservablemarket transactions.Where observablemarket transactions are not available, fair value isestimatedusingvaluationmodelssuchasdiscountedcashflowtechniques.

Thefairvalueofdepositsfromcustomers,depositsfrombanksandfundingfromotherbanksisestimatedusingdiscountedcashflow techniques. The fair valueofdepositspayableondemand is theamountpayable at the reporting date.

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25.8.4 Detailsofthebank’sriskmanagementstructure,policiesandmethodsaresetout innote25andthe

interest rate risk analysis is detailed in notes 25.4 and 25.9.

25.8.5 Capital management

The bank’s capital management policies have not changed from those of prior years. The bank reports

to the regulator which is the Central Bank of Swaziland (“CBS”) which monitor the banks’ capital

requirements.

In implementing current capital requirements the bank has to maintain prescribed ratios of capital to total

risk-weighted assets. The bank has complied with the externally imposed capital requirements as in prior years.

Capitalisclassifiedintotwotiersforregulatorypurposes:

TierIcapital,whichincludesordinarysharecapital,sharepremium,retainedearningsandother

regulatory adjustments.

TierIIcapital,whichincludesqualifyingsubordinatedliabilities.

The bank’s regulatory capital position at 31 December was as follows:

2013 2012

E’000 E’000

tier i Capital

Ordinary share capital 11 931 11 931

Share premium 7 952 7 952

Statutory reserves 60 820 53 205

Retained earnings 235 341 164 380

Profitfortheyear 76 145 88 805

392 189 326 273

tier ii Capital

General debt provision 21 041 17 253

Revaluation reserves 615 615

21 656 17 868

total regulatory capital 413 845 344 141

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25.8.5 Capital management (continued)

2013 2012

E E

risk weighted assets

CBS calculated total 2 222 660 1 724 123

capital ratios

Total capital as % of total risk weighted assets

CBS 18.5% 21.0%

Total tier 1 as % of risk weighted assets

CBS 17.6% 19.8%

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114




26. Related parties

Related parties comprise the Nedbank Group Limited group of companies.

2013 2012

E’000 E’000

26.1 amounts due to/by holding company and fellow subsidiaries

Amounts due by holding company and fellow subsidiaries

Nedbank Lesotho Limited (fellow subsidiary) 680 728

Nedbank Limited (parent - included in Note 5) 961 50 182

1 641 50 910

Amounts due to holding company and fellow subsidiaries

Nedbank London Limited (fellow subsidiary) 33 38

Nedbank Limited (parent) 380 203 1 472

380 236 1 510

Transactions with related companies are on an arm’s length basis

andthetermsandconditionsarereflectedintherelevantnote.

26.2 Related party transactions

Funds are invested with and by correspondent banks (within the

group) and interest at commercial rates has been (received)

and paid as follows:

Interest received – Nedbank Limited (parent) 3 118 4 659

Service charge – Nedbank Lesotho Limited (fellow subsidiary) 7 7

Interest paid – Nedbank Limited (parent) 173 15 172

Included in other operating expenses are the following amounts

paid to the parent company

Management fees paid 27 378 23 963

Computer support 657 1 038

Group insurance 1 382 985

Risk participating fee 2 284 1 946

No impairments have been recognised for loans granted to fellow related entities.

26. Related parties (continued)

transactions with key management personnel

Keymanagementpersonnelarethosewhohaveauthorityandresponsibilityforplanning,directingand

controllingtheactivitiesofthebank,directlyorindirectly,includingalldirectorsofthecompanyaswell

as close members of the family of any of these individuals.

Transactionswithkeymanagementpersonnelincludesalaries,bonusesandloans.

Compensationpaidtotheboardofdirectorsandcompensationpaidtootherkeymanagementpersonnel,

aswellasshared-basedpaymenttransactions,isshownbelow:

Compensation

key management directors personnel total e e e

2013

Directors’ fees 426 352 - 426 352

Remuneration 1 104 029 4 292 523 5 396 552

Shorttermemployeebenefits 958 430 3 726 425 4 684 855

Share based payments - - -

Postemploymentbenefits 145 599 566 098 711 697

1 530 381 4 292 523 5 822 904

key management directors personnel total e e e

2012

Directors’ fees 267 933 - 267 933

Remuneration 994 371 5 094 104 6 088 475

Shorttermemployeebenefits 840553 4195494 5036047

Share based payments 26 126 261 254 287 380

Postemploymentbenefits 127692 637356 765048

1 262 304 5 094 104 6 356 408

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2013 2012

E E

26. Related parties (continued)

26.3 transactions with key management personnel (continued)

Number of restricted shares and share options

Restricted Shares

Outstanding at the beginning of the year 41 177 41 177

Granted - -

Forfeited - -

Outstanding at year end 41 177 41 177

Share Options

Outstanding at the beginning of the year 164 706 164 706

Granted - -

Forfeited - -

Outstanding at year end 164 706 164 706

e’000 E’000

loans to key personnel

Mortgage lending and other secured loans 7 031 7 148

Other loans 843 1 401

7 874 8 549

No impairments has been recognised for loans granted to key management. These loans are repayable monthly over a period of 20 years for mortgages and these loans are collaterised by the properties that werefinanced.Interestischargedatanarm’slengthrate.

26.3 Related party contingent liabilities and commitments

There were no guarantees issued in favour of the holding company (2012: Nil). Forward foreign currency exchange contracts are entered into with the holding company – refer to note 25.8.

27. Operating segments Thedirectorsofthebankhavedeterminedthattheyoperatethebankandreportasonlyonesegment,

both in terms of business and geography after taking into consideration the internal organisational and management structure, the system of internal financial reporting, the services/products offered, themarketsandcustomers.Assuch,nosegmentreportingisnecessary.

Allrevenuesarefromnumerouscustomersthatarenotsignificantwhenconsideredindividuallyandwhoare based in Swaziland. All non-current assets of the bank are in Swaziland.

116




aNNUal GeNeRal meetiNG

NOtiCe tO SHaReHOldeRS

Notice is hereby given that the 39th Annual General Meeting of the members of Nedbank (Swaziland) Limited will

beheldonWednesday28May,2014intheLibandlaRoomatRoyalSwaziSun,OldMbabane/ManziniMainRoad,

Ezulwini at 14h15 hours to transact the following business:-

1. To approve the Minutes of the Annual General Meeting held on 22 May 2013.

2. To receive, considerandadopt theAnnualfinancialStatements for theyearended31December2013,

together with the Reports of the Directors and Auditors thereon.

3. InordertocomplywithSection20(1)oftheFinancialInstitutionsAct,2005SZL7614531tobetransferred

toaStatutoryReserveAccountbeinganamountnotlessthan10%ofthenetprofitfortheperiod.

4. To note and confirm thefinal dividendof 100 cents per share for the year ended31December 2013,

declaredon12March2014,paidtomemberson28May2014.

5. To appoint Independent Auditors for the ensuing year and to authorise directors to determine the

remunerationofthecompany’sauditorsandfixtheremunerationoftheAuditorsforthepastyear.

6. InaccordancewithArticle100oftheArticlesofAssociation,Messrs.M.HillieandA.duPlessisretireas

Directors and being willing and eligible offer themselves for re-election.

7. TonoteandconfirmtheremunerationpaidtoDirectorsforthepastfinancialyear.

by Order of the board

P. GwebU

Company Secretary

117

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ANNuAL GENErAL mEEtING

deFiNitiONS

atm

Automated tellermachine.Acashmachineor free-standingdevicedispensingcash,whichmayalsoprovide

otherinformationorservicestoclientswhohaveacardandapersonalidentificationnumber,passwordorother

personalidentification.

baSel CaPital aCCORd (baSel ii)

The new Basel Capital Accord (Basel II) of the Bank for International Settlements is an improved capital adequacy

framework accomplished by closely aligning banks’ capital requirements with improved modern risk management

practices and sophisticated risk assessment capabilities. It further ensures the risk sensitivity of the minimum

capital requirements by including supervisory reviews and market discipline through enhanced disclosure.

CaPital adeQUeCY RatiO (CaR)

The capital adequacy of South African banks is measured in terms of the South African Banks Act requirements.

Theratioiscalculatedbydividingtheprimary(Tier1),secondary(Tier2)andtertiary(Tier3)capitalbythe

risk-weighted assets.

CaPital RiSk

The risk that the group will become unable to absorb losses, maintain public confidence and support the

competitivegrowthofthebusiness.Thisentailsensuringthatopportunitiescanbeactedontimeously,while

solvency is never threatened.

CaSHFlOw

Financing activities

Activities that result in changes to the capital and liability structure of the bank.

investment activities

Activitiesrelatingtotheacquisition,holdinganddisposalofsubsidiaries,propertyandequipmentandlong-term

investments.

Operating activities

Activitiesthatarenotfinancingorinvestingactivitiesandthatarisefromtheoperationsconductedbythebank.

COmPliaNCe RiSk

Therisktoearningsandcapitalarisingfromviolationsofornon-compliancewithlaws,rulesandregulations,as

wellasinternalbankpoliciesandauthoritylevels,prescribedpracticesandethicalstandards.

CRedit RiSk

The risk to earnings and capital arising from the probability of borrowers and counterparties failing to meet their

repaymentcommitments,(includingaccruedinterest).Creditconcentrationriskarisesonaportfoliobasiswhere

thebankhassignificantaggregatedexposurestoparticularcreditsegments,

sectors of industry or other portfolio.

118


DEFINItIoNs

deFeRRed taXatiON aSSetS

Deferred taxation assets are the amounts of income taxation recoverable in future years in respect of:

• Deductible temporary differences arising from differences between the taxation and accounting treatment

of transactions; and

• the carry-forward of unused taxation transactions.

deFeRRed taXatiON liabilitieS

Deferred taxation liabilities are the amounts of income taxation payable in future years as a result of differences

between the taxation and accounting treatment of transactions.

diVideNd deClaRed PeR SHaRe

Dividendpershareistheactualinterimdividendpaid/capitalisationawardissuedandthefinaldividend/

capitalisationawarddeclaredfortheyearunderconsideration,expressedincents.

eaRNiNGS PeR SHaRe (ePS)

Basic earnings basis

Income attributable to equity holders for the year divided by the weighted average number of ordinary shares in

issue (net of shares held by bank entities) during the year.

Headline earnings basis

Headline earnings divided by the weighted average number of shares in issue (net of shares held by bank entities)

during the year.

eFFiCieNCY RatiO (COSt-tO-iNCOme RatiO)

Total operating expenses (excluding indirect taxation) as a percentage of total income from normal operations

(net interest income plus non-interest revenue).

eNteRPRiSe-wide RiSk

Allrisktypesandcategoriesacrossallbusinesslines,functions,geographicallocationsandlegalentitiesofthe

bank collectively known as its ‘risk universe’.

eRCO

Enterprisewide Risk Committee.

eRmF

Enterprisewide Risk Management Framework.

119

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deFiNitiONS - continued

eXPeNSeS tO aVeRaGe aSSetS

Operating expenses for the year divided by average total assets.

GROSS dOmeStiC PROdUCt (GdP)

Thetotalmarketvalueofthegoodsandservicesproducedbyacountry’seconomyduringaspecificperiodof

time.

HeadliNe eaRNiNGS

Headlineearningsdonotmeasuremaintainableearnings.Forpurposesofdefinitionandcalculationtheguidance

givenonheadlineearnings,asissuedbytheSouthAfricanInstituteofCharteredAccountantsincircular07/02of

December2002,hasbeenused.Headlineearningsconsistoftheearningsattributabletoordinaryshareholders,

excluding non-trading and capital items.

HedGe

Ariskmanagementtechniqueusedtoinsulatefinancialresultsfrommarket,interestrateofforeigncurrency

exchange risk (exposure) arising from normal banking operations. The elimination or deduction of such exposure

isaccomplishedbyestablishingoffsettingpositions.Forexample,assetsdenominatedinforeigncurrenciescan

be offset against liabilities in the same currencies or through the use of foreign exchange hedging instruments

suchasfutures,optionsorforeignexchangecontracts.

iFRS

InternationalFinancialReportingStandards,asadoptedbytheInternationalAccountingStandardsBoard,(IASB),

and interpretations issued by the International Reporting Interpretations Committee (IFRIC) of the IASB. Nedbank

Group’sconsolidatedfinancialstatementsarepreparedinaccordancewith(IFRS).

imPaiRemeNt OF lOaNS aNd adVaNCeS

Impairment of loans and advances arises where there is objective evidence that the bannk will not be able

to collect an amount due. The impairment is the difference between the carrying amount and the estimated

recoverable amount.

iNteReSt Rate RiSk

Interest rate risk in the banking book is the risk that a bank’s earnings or economic value will decline as a result

ofchangesofbankassets,liabilitiesandoff-balance-sheetpositions;

• basisrisk-imperfectcorrelationintheadjustmentoftheratesearnedandpaidondifferentinstrumentswith

otherwise similar repricing characteristics;

• yieldcurveriskchangesintheshapeandslopeoftheyieldcurve;and

• embedded-optionsrisk–pertainingtointerest-relatedoptionsembeddedinbankproducts.

120


DEFINItIoNs (ContInueD)

kiNG iii (tHe COde)

TheKingReportonCorporateGovernance2002,whichsetsoutprinciplesofgoodcorporategovernance for

companies and organisations.

maRket RiSk

Market risk is the potential impact on earnings of unfavourable changes in foreign exchange rates, interest

rates,prices,marketvolatilitiesandliquidity.Marketriskincludestradingriskand,intermsofthebankingbook,

derivativeinstrumentsusedforhedgingriskinnon-tradingportfolios,investmentrisk,translationriskandinterest

rate risk. Investment risk arises from changes in the fair value of investments and includes private equity and

property as well as strategic investments.

NON-iNteReSt ReVeNUe tO tOtal iNCOme

Incomefromnormaloperations,excludingnetinterest,asapercentageoftotalincomefromnormaloperations.

OPeRatiONal RiSk

Therisklossresultingfrominadequateorfailedinternalprocessesandsystems,incompetentpeopleorexternal

events.Thisdefinitionincludeslegalrisk.

ORdiNaRY SHaReHOldeRS’ FUNdS

Total equity attributable to equity holders of the parent.

PeRFORmiNG adVaNCeS

Loans and advances on which all instalments have been paid to date.

RetURN ON tOtal aSSetS

Headline earnings expressed as a percentage of average total assets.

RetURN ON ORdiNaRY SHaReHOldeRS’ eQUitY (ROe)

Headline earnings expressed as a percentage of average equity attributable to equity holders of the parent.

StRateGiC RiSk

Strategic risk relates to the consequences that arise when the environment in which decisions that are hard

to implement quickly and to reverse has an unattractive or adverse impact. Strategic risk ultimately has two

elements; doing the right thing at the right time; and doing it well.

121

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122


NotEs

Designed by Sibane Icons.

Head OFFiCeNedCentre Building

Cnr. Dr. Sishayi & Sozisa Roads

P.O.Box68,Mbabane

Tel: +268-2408 1000

Fax: +268-2404 4060

Website: www.nedbank.co.sz

MBABANE BRANCHCorporatePlace,SwaziPlaza

P.O.Box70,Mbabane

Tel: +268- 2408 1000

Fax: +268- 2404 3049

GWAMILE STREET BRANCH21 Gwamile Street

P.O.Box70,Mbabane

Tel: +268-2404 8249

Fax: +268-2404 9132

THE GABLESTheGablesShoppingCentre,Ezulwini

P.O.Box70,Mbabane

Tel: +268-2416 3458

Fax: +268-2416 3476

MATSAPHA BRANCHBig Tree Shopping Centre

P.O.Box325,Matsapha

Tel: +268-2518 5554

Fax:+268-2518 5727

MANZINI BRANCHCnr. Nkoseluhlaza & Louw Streets

P.O.Box11,Manzini

Tel: +268-2505 2441/3

Fax: +268-2505 2059

RIVERSTONE BRANCHRiverstone Mall

Shop No.1.1

P.O.Box11,Manzini

Tel: +268-2505 3166

Fax: +268-2505 3412

SIMUNYE BRANCHSimunyePlaza,Simunye

c/oP.O.Box325,Matsapha

Tel: +268-2383 8361/2

Fax:+268-2383 8361/2

MANKAYANE AGENCYThuthuka Shopping Centre

Mankayane

Tel: +268-2538 8209

NHLANGANO BRANCHSNPF Building

Skonkwane Street

P.O.Box1352,Nhlangano

Tel: +268-2207 7733/5

Fax: +268-2207 7758

BIG BEND BRANCHPlot1,SchiollaComplex

P.O.Box45,BigBend

Tel: +268-2363 6994/5

Fax: +268-2363 6993

123

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ContACt DetAIlS

CONtaCt detailS

www.nedbank.co.sz

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NEDBANK (SWAZILAND) LIMITED ANNUAL REPORT · NedbaNk (SwazilaNd) limited AnnuAl RepoRt 2013 2...

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