Risk and capital management report and annual financial...

Standard Bank Group

Risk and capital management report and

annual financial statements 2014

Contents

1 Our reports

Risk and capital management report

2

3 Overview12 Risk and capital reporting frameworks 17 Capital management 27 Risk appetite and stress testing31 Credit risk63 Compliance risk65 Country risk68 Funding and liquidity risk77 Market risk91 Insurance risk97 Operational risk

101 Business risk102 Reputational risk103 Restatements105 Annexure A – regulatory and legislative developments

impacting the group111 Annexure B – composition of capital – SBG115 Annexure C – reconciliation of audited statement of financial

position and regulatory capital and reserves116 Annexure D – capital instruments: main features

disclosure template

Annual financial statements

122

123 Directors’ responsibility for financial reporting123 Group secretary’s certification124 Report of the group audit committee126 Directors’ report131 Independent auditors’ report132 Statement of financial position133 Income statement135 Statement of other comprehensive income136 Statement of cash flows138 Statement of changes in equity142 Accounting policy elections144 Notes to the annual financial statements258 Standard Bank Group Limited –

company annual financial statements266 Annexure A – subsidiaries, consolidated and unconsolidated

structured entities284 Annexure B – associates and joint ventures289 Annexure C – group share incentive schemes297 Annexure D – detailed accounting policies320 Annexure E – emoluments and share incentives of directors

and prescribed officers334 Annexure F – six-year review346 Annexure G – segmental statement of financial position

348 Annexure H – banking activities average statement of financial position (normalised)

350 Annexure I – third-party funds under management

Additional information

351351 Financial and other definitions354 Acronyms and abbreviations

ibc Contact details

Frameworks applied Assurance Cross-referencing

Risk and capital management report (this report)

Provides a detailed discussion of the management of strategic risks related to the group’s banking and insurance operations, including capital and liquidity management and regulatory developments.

www.standardbank.com/reporting

Various regulations relating to financial services, including Basel III

International Financial Reporting Standards (IFRS)

King Report on Corporate Governance for South Africa 2009 (King Code)

Selected information in the risk and capital management report forms part of the audited annual financial statements.

Annual financial statements (this report)

Sets out the full audited annual financial statements for Standard Bank Group (the group or SBG), including the report of the group audit committee (GAC).


IFRS South African Companies

Act 71 of 2008 (Companies Act)

JSE Limited (JSE) Listings Requirements

King Code

KPMG Inc. and PricewaterhouseCoopers Inc. have audited the annual financial statements and expressed an unmodified opinion for the year ended 31 December 2014.

Annual integrated report

Provides an integrated assessment of the group’s ability to create value over time.


International <IR> Framework

Companies Act JSE Listings Requirements King Code South African Banks Act 94

of 1990 (Banks Act)

While the annual integrated report is itself not audited, it contains information that has been extracted from the audited consolidated annual financial statements. Certain externally assured information has been extracted from the group’s sustainability report.

Sustainability report

Presents a balanced and comprehensive analysis of the group’s sustainability performance in relation to issues material to the group and stakeholders.

www.standardbank.com/sustainability

Global Reporting Initiative G4

KPMG Services Proprietary Limited have provided assurance over selected sustainability information in the 2013 sustainability report and expressed an unmodified opinion.

Our reports

AIR

SR

RCMAFS

Denotes text in the risk and capital management report that forms part of the group’s audited financial statements.

Indicates that additional information is available online.

The above icons refer readers to information elsewhere in this report, or in other reports that form part of the group’s suite of reporting publications.

We welcome the views of our stakeholders. Please contact us at [email protected] with your feedback.

A limited number of printed risk and capital management report and annual financial statements books are available on request. Please contact our investor relations department, using the details at the back of this report, and we will provide a copy to you.

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1


Standard Bank GroupRisk and capital management report and annual financial statements 2014 2

3 Board responsibility

3 Group risk and capital management committee

4 Risk types

4 Highlights

9 Governance framework

9 Governance committees

11 Governance documents

11 Three lines of defence model

Overview

Board responsibility

The group’s board of directors (board) has the ultimate responsibility for the oversight of risk.

For the period under review, the board is satisfied that the group’s risk, compliance, treasury, capital management and group internal audit (GIA) processes generally operated effectively, that the group’s business activities have been managed within the board-approved risk appetite, and that the group is adequately funded and capitalised to support the execution of the group’s strategy.

In the instances where the group incurred losses, breached risk appetite or was fined by its regulators, the board is satisfied that management have taken appropriate remedial action.

Group risk and capital management committee

The group risk and capital management committee (GRCMC) is a subcommittee of the board.

It provides an independent objective oversight of risk, compliance and capital management in the group.

It also reviews and assesses the adequacy and effectiveness of the group risk, compliance and capital management governance framework, and the integrity of risk controls and systems. During 2014, the responsibility for reviewing a newly constituted information technology

3

Risk types

The group’s activities give rise to various risks. These are:

credit risk (starting on page 31)

compliance risk (starting on page 63)

country risk (starting on page 65)

funding and liquidity risk (starting on page 68)

market risk (starting on page 77)

insurance risk (starting on page 91)

operational risk (starting on page 97)

business risk (starting on page 101)

reputational risk (starting on page 102).

Each risk is defined within the relevant section, together with an explanation of the application of the group’s risk, compliance and capital management (RCCM) governance framework to the specific risk, the approved regulatory treatment for capital requirements to be held against the specific risk in terms of Basel, and a description of the relevant portfolio characteristics both in terms of prescribed disclosure and the group’s business model.

Highlights

(IT) governance framework and updates on significant IT investments was transferred from the GRCMC to the group IT committee.

The full terms of reference of the GRCMC can be found in the corporate governance statement on page 117 of the annual integrated report.

These are considered annually by the GRCMC and approved by the board.

The chairmen of the GAC, the remuneration committee and the group IT committee are members of the GRCMC. This common membership supports an integrated view of finance, IT and risk, and ensures that relevant finance and risk input is considered in the determination of levels of compensation.

A total of four meetings of the GRCMC were held during 2014, all of which were attended by our external auditors. One special meeting was held to approve the interim risk and capital management report.

Attendance of each member at meetings of the GRCMC can be found in the corporate governance section on page 122 of the annual integrated report.

The GRCMC considered the group’s current and future risk profile relative to the group’s risk appetite. The committee reported to the board following each meeting on its consideration of the risk profile of the group and any concerns it may have had. It also considered the group’s exposure to country, single name obligor and sector concentration risk on an ongoing basis.

Reports on the South African vehicle and asset finance portfolio, the group’s recovery and resolution plan, and the group’s approach to compliance with principles for effective risk data aggregation and risk reporting were considered. In addition, ongoing committee education sessions were held during the year covering risk appetite and stress testing, expert judgement in the application of risk models, cybercrime (including an on-site introduction to the cybercrime centre) and an update on the proposed implementation of the Twin Peaks model of financial regulation (Twin Peaks) as well as IFRS 9 – Financial Instruments’ impairment requirements.

At each meeting of the GRCMC, the group chief risk officer (CRO) provided the committee with an overview of the key risk issues discussed at the group risk oversight committee (GROC). An update was also given by group risk-type heads and business line CROs on the specific issues of group-level significance, as well as other relevant items in their respective areas of responsibility.

In relation to capital adequacy, the committee approved the internal capital adequacy assessment process (ICAAP) and submission to the South African Reserve Bank (SARB). Capital adequacy was also assessed in light of Basel Capital Accord (Basel) III requirements which are being phased in from 2013 to 2019.

Members of the GRCMC have attended and will continue to attend the risk meetings on site of the group’s major subsidiaries as appropriate.

Stress testing and risk appetite

Year in briefStress testing and its importance as a risk management tool has received a significant amount of attention globally in 2014, most noticeably in the continuing implementation of regular stress testing exercises by a number of international regulators. In South Africa, the group participated in a stress testing exercise conducted by the International Monetary Fund (IMF) as part of their South African financial stability assessment programme in May 2014. In a separate exercise groupwide macroeconomic stress testing results were submitted as part of the ICAAP. As part of the annual review of the group’s recovery plan a selection of extreme scenarios were formulated and the impact quantified in order to test the effectiveness of the recovery options proposed in the recovery plan. For internal purposes the group continued to conduct stress testing at various levels throughout the organisation to give insight into the impact of a changing economic environment on the forward risk profile of the group and to identify areas of vulnerability.

Risk appetite is formally reviewed on an annual basis to ensure that it remains aligned with and relevant to the group’s strategy. No material changes were made in the past year. Incremental improvements were made to the group’s risk appetite framework to facilitate the embedding and cascading of risk appetite throughout the organisation.



Overview | continued

Capital management

Year in briefThe group remains capitalised well above minimum regulatory capital adequacy requirements. The SARB adopted the leverage framework that was issued by the Basel Committee on Banking Supervision (BCBS) in January 2014, with final calibrations and adjustments expected by 2017. Formal disclosure requirements commence on 1 January 2015 and the ratio is expected to transition to a pillar 1 requirement by 2018. The group issued its debut Basel III compliant tier II issue of R2,25 billion in the fourth quarter of 2014.

Focus areas for 2015 providing an optimal capital mix for the group

ensuring that the group is adequately positioned to respond to regulatory capital rules under the Basel III phase-in requirements

optimising financial resource allocation, including capital and liquidity between product lines, trading desks, industry sectors and legal entities to enhance the overall group economic profit and return on equity (ROE)

continuing to participate in the BCBS quantitative impact studies to assess the impact of proposed amendments to regulatory requirements.

Credit risk

Year in briefIn a year where the macroeconomic landscape saw commodity prices tumbling, interest rate hikes and the South African rand weakening, all group credit metrics remained within risk appetite.

The metrics below exclude the group’s discontinued operation.

Gross loans and advances increased 10% in 2014 with growth in Corporate & Investment Banking (CIB) of 18% while Personal & Business Banking’s (PBB) gross loans and advances increased by 6%.

The group credit loss ratio (CLR) improved to 1.00% from 1.12% in 2013. CIB improved to 0.22% from 0.41% in 2013. PBB improved to 1.41% from 1.47% with the deterioration in the South African CLR to 1.53% from 1.45% in 2013 offset by improvements in the rest of Africa. The deterioration in the South African CLR is attributable to deteriorating performance in the card, instalment sale and finance lease portfolios.

Non-performing loans as a percentage of gross loans and advances (NPL %) improved to 3.2% from 3.5% with CIB and PBB both improving marginally. The PBB South Africa home loans book improved to 4.4% from 4.6% while vehicle and asset finance deteriorated to 3.4% from 2.8% and card deteriorated to 5.0% from 4.6%. In the rest of Africa the NPL ratio improved to 5.1% from 5.7%.

Focus areas for 2015 refining the credit risk governance standard and supporting

tools to support the group’s credit risk appetite

applying appropriate and responsible lending criteria to ensure prudent lending practices in line with risk appetite

streamlining and enhancing of credit risk management processes to bring about additional efficiencies

managing concentrations across counterparties, portfolios, industries and geographic regions

proactively mitigating economic stresses already evident such as commodity stresses and electricity load shedding impact on South African corporates and small businesses

assessing, modelling and implementation of IFRS 9’s expected loss credit requirements

improving risk data aggregation and risk reporting practices in line with BCBS 239 requirements.

Focus areas for 2015 As volatility and risks in the global economy increase, the need to continually assess the group’s forward-looking risk profile against its stated risk appetite under different global macroeconomic environments is ever-increasing. The group recognises the importance of stress testing as a management tool to provide insight and is continually:

enhancing its ability to quantify the impact of different macroeconomic environments on its future financial position

enhancing the efficiency of the stress testing process

incrementally improving the risk appetite framework to integrate it with the stress testing framework and the integrated financial resource planning process.

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Compliance risk

Year in briefThe compliance function expanded its resourcing capability to improve sanctions alert and money laundering surveillance, strengthen its business advisory role as a key second line of defence function and embed a culture of compliance in all operations. The development of structural capacity to support market conduct, especially for treating customers fairly (TCF), has received significant focus, as has the revision of key operational processes. The review of capital solvency requirements and governance structures under the solvency assessment and management (SAM) programme has been a key focus area for Liberty Holdings Limited and its subsidiaries (Liberty) in preparation of the 2016 implementation. The partnership with human capital and learning and development in developing and rolling out compulsory compliance training throughout the group was a key initiative during 2014. In line with the group’s strategic focus on Africa, the refinement of the compliance operating model and embedding of compliance risk management processes to support both business and stakeholder expectations of a universal banking group has continued. All our banking operations in Africa were visited by the central compliance function during 2014.

The chairman of the GAC led a presentation to the SARB on the group’s market conduct controls and approach to the management of conduct risk. This approach recognises a clear delineation between the two pillars of conduct risk, being market integrity and conduct of business.

The group continues to be subject to increased scrutiny by multiple regulators. The first joint regulatory compliance-related inspection by the SARB and the Central Bank of Kenya was undertaken on the group’s Kenyan banking subsidiary. The verbal feedback provided by the SARB was positive and no material issues were raised.

The SARB imposed administrative sanctions and directives to implement remedial action on various South African banks. SBSA was fined R60 million. The sanction related to the failure by SBSA to ensure that appropriate measures were in place to comply fully with the relevant provisions of the Financial Intelligence Centre Act. A programme was initiated to address the SARB findings. The SARB noted that the ‘administrative sanctions are not an indication that the banks in question have in any way facilitated transactions involving money laundering and the financing of terrorism’. Anti-money laundering headcount increased from 38 in 2013 to 53 in 2014. A further 90 posts will be filled in 2015.

The group’s UK subsidiary, Standard Bank Plc (SB Plc), was fined GBP76 million (ZAR134 million at the time of settlement) by the UK regulator in January 2014 for shortcomings related to the application of its own anti-money laundering policies and procedures. Extensive remediation exercises were undertaken to address these shortcomings.

The regulator made no finding that the group had handled the proceeds of crime and noted that ‘Standard Bank and its senior management have co-operated with the authority’s investigation and have taken significant steps at significant cost towards remediating the issues identified, including seeking advice and assistance from external consultants’.

Focus areas for 2015 The emphasis for 2015 will continue to be on meeting supervisory and legislative expectations, focusing on market conduct and initiatives to enhance data privacy risk management practices, and on fostering a culture of compliance throughout the group. Continued emphasis will be placed on both business and control functions to affirm compliance responsibilities for both the first and second line of defence functions. Measures to enhance the group’s automated surveillance capability continue, and the 2015 focus will be on extending capability and coverage, particularly to the group’s operations in the rest of Africa. The implications of digital compliance for both market conduct and compliance risk management processes will also be key in 2015. The approach to compliance training has been revised and there will be considerable strengthening of institutional capability during 2015.

The SARB’s flavours of the year topics are IFRS 9, including adequacy of current levels of credit impairments, and shadow banking, which refers to the increased disintermediation within the financial system. Shadow banking represents a business opportunity, a competitive threat and a systemic risk.

Liberty will continue to monitor and actively respond to the rapid pace of change in the regulatory landscape affecting insurance and retirement savings, in particular, the 55 recommendations of the Retail Distribution Review (RDR) paper issued by the Financial Services Board (FSB).

Country risk

Year in briefThe relative concentration of cross-border exposure to the sub-Saharan region continued to increase, consistent with the group’s strategic focus. Cross-border exposure to conflict areas, such as Eastern Europe, and markets experiencing adverse economic conditions, such as Ghana, has been tightly managed.

Focus areas for 2015 Country risk appetite and the mitigation of country-specific risks will be proactively managed in response to a challenging global political risk and economic environment for major energy producers in particular. Risk management measures will be supplemented by continued refinement of the country risk governance framework and portfolio management tools.



Overview | Highlights continued

Funding and liquidity risk

Year in briefThe group maintained its liquidity positions within the approved risk appetite statement. Appropriate liquidity buffers were held in line with regulatory, prudential and internal stress testing requirements, taking into account the global risk profile and market conditions.

The group continued to advance its asset-liability management capabilities and its approach to liquidity and interest rate risk management.

The group further evolved its internal liquidity risk management framework to ensure that the group has, at all times, sufficient liquidity resources to continue operating under a group-specific and industry systemic stress event. The liquidity risk technology framework was updated to support the implementation of new regulations relevant to liquidity risk management.

The group also prepared for the implementation of the Basel III liquidity coverage ratio (LCR) which became a minimum requirement as of 1 January 2015 and worked closely with the SARB to finalise the availability of a committed liquidity facility to assist South African banks in meeting this ratio.

The South African financial markets were disrupted temporarily during the second half of 2014 on the back of the curatorship of African Bank Limited (ABL). The group’s liquidity management systems, processes and frameworks proved to be resilient in the face of these market disruptions. Funding costs for South African banks have increased as a consequence of the ABL curatorship.

Focus areas for 2015 enhancing frameworks and systems to address new liquidity

regulations updating and implementing funds transfer pricing methodologies

across the group to accurately price and measure the internal cost of funding, taking into account, where applicable, the cost of the Basel III liquidity regulations

evaluating the impact of a net stable funding ratio (NSFR) across the group and developing a transition plan for the group’s liquidity risk structure and balance sheet management framework.

Market risk

Year in briefTrading book market risk and banking book interest rate risk remained well within approved limits. Trading book average value-at-risk (VaR) remained low as the group maintained a conservative approach to market risk. The daily profit and loss results for the year showed a profit for 247 out of 260 trading days, which is reflective of CIB’s client flow model.

Focus areas for 2015 The group will focus on monitoring and managing the traded market risk, banking book interest rate risk and associated hedges in the context of current market volatility, including monetary policy decisions.

The implications of the proposed revised trading book and new interest rate regulations will be a continued area of focus.

Insurance risk

Year in briefFocus continued to be placed on the SAM programme in the group’s short- and long-term insurance operations, with the introduction of a number of methodologies and embedding of policies across the business.

A centralised Liberty group reinsurance function was formed and is responsible for the optimisation and monitoring of reinsurance across Liberty.

Focus areas for 2015 There will be continued focus on the management of insurance risks across the group with particular emphasis on the insurance risk components of the SAM programme and ensuring readiness for implementation in 2016. This will include the cascading of risk appetite to the various business units.

Operational risk

Year in briefThe group continued to leverage off the integrated approach to risk management, where financial crime control, information risk and operational risk management are combined into a single integrated operational risk (IOR) management unit.

Progress continues to be made in terms of implementing the IOR framework to support the adoption of the advanced measurement approach (AMA). Further efforts have been focused on ensuring consistent implementation of the operational risk tools throughout the group. The group continued to see benefit in the fraud awareness initiatives that proved to be an effective deterrent mechanism.

China aluminium base metalsPotential losses arising from external fraud in the base metal commodity financing transaction business in China, which is part of the group’s discontinued operation’s results and under legal privilege, has contributed to an operational risk appetite breach at both a CIB and group level. Risk mitigation is in place, including original legal documentation to support our title over metal in port (USD40 million) as well as a strong external legal opinion supporting an insurance claim of USD129 million. As at year end, the group’s insurers are yet to respond to the group’s claim. Developments in this regard are being closely monitored.

Focus areas for 2015 enhancing the risk profile methodology to further enable

comparison with risk appetite and tolerance continuously scanning the environment for emerging threats

and trends promoting continuous customer and employee awareness of

financial crime fighting crime through supporting industry initiatives in the

countries in which the group has a presence and through the South African Banking Risk Information Centre.

The group will also further expand on its cyber security operations centre by creating a ‘24 hour, 7 days a week’ capability.

7

Legal risk

Year in briefThere was a significant increase in litigation against certain of our businesses in Africa, all of which are being defended and none of which are expected to have a material adverse impact on the group. Legal resources were restructured and enhanced to improve the processes and controls to manage legal risks.

Focus areas for 2015 The capacity of the legal resources in South Africa will continue to be enhanced to better service the transactions that originated outside of South Africa but are booked onto the South African balance sheet. Additionally, the legal network will be improved to ensure minimum and uniform standards of legal support and more efficient access groupwide to available legal expertise.

Environmental and social risk

Year in briefOngoing changes in environmental legislation and regulation combined with progressively higher enforcement continues to place pressure on the screening of lending and operational activities across the global banking sector.

Increasingly, central banks and other bodies are promoting codes and best practice norms which are becoming part of the regulatory framework and which build on the requirements from international finance institutions for more stringent environmental and social risk management.

In South Africa, environmental legislation empowering the state to request an investigation of land to establish whether contamination exists that poses risk to human health or the environment came into effect. The Act has a number of potential risks for the banking industry in the financing of property.

Focus areas for 2015 raising environmental and social risk awareness within the

group improving internal processes to manage the risk introduced by

changes in environmental legislation increasing the understanding of risks and opportunities posed

by climate change for the group and its clients.

Risk data aggregation and risk reporting

Year in briefIn January 2013, the BCBS published principles for effective risk data aggregation and risk reporting. This requires global systemically important banks (G-SIBs) to comply by January 2015 or within three years of being designated a G-SIB. National regulators were encouraged to apply these principles to domestic systemically important banks (D-SIBs).

In February 2014 the SARB issued guidance note 3, in which it indicated that it had accepted the BCBS principles, required banks to perform a self-assessment to establish their current level of compliance, to propose remedial plans where necessary, and to indicate the likely date of compliance with the principles.

This was followed by a directive in February 2015 in which the SARB indicated that South African D-SIBs which are not part of a G-SIB group are required to comply with the principles by January 2017.

South African D-SIBs which are part of a G-SIB group are required to comply with the principles within the time frame set by the G-SIB national supervisor.

In response, the group initiated a multi-year project sponsored by the group management committee.

Focus areas for 2015 The multi-year project will be monitored in and of itself, and in relation to the group’s IT and other change programmes. We will also monitor scope clarification and guidance on compliance issued by BCBS and the SARB.



Overview | Highlights continued

Governance framework

The group’s approach to managing risk and capital is set out in the RCCM governance framework approved by the GRCMC. The framework has two components:

governance committees

governance documents such as standards, frameworks and policies.

Governance committees

Governance committees within the RCCM governance framework are in place at both a board and management level. They have mandates and delegated authorities that are reviewed regularly.

Standard Bank Group board

Group executive committee

Group management committee

Executive committees Board committees

CIB model approval

committee

PBB model approval

committee

Group risk and capital management committee

Group IT committee

Group audit committee

Group model approval committee

Group risk oversight

committee

IT steering committee

Direct reporting line.Indirect reporting line.

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Board committeesBoard committees responsible for oversight of the RCCM comprise the GAC, the GRCMC, the group IT committee, and the group model approval committee. Key roles and responsibilities of these committees, as they relate to the RCCM, are summarised in the sections that follow.

Detailed information relating to these committees can be found in the governance section on page 113 of the annual integrated report.

The group risk and capital management committeeThe GRCMC provides independent oversight of risk, compliance and capital management across the group by:

ensuring adequate and effective implementation of risk governance processes, standards, policies and frameworks

ensuring that the risk strategy is executed by management in accordance with the board-approved risk appetite and risk, compliance and capital management governance framework

considering the quarterly risk management report which includes detailed updates on risk types, as well as the separate updates from legal, compliance, capital and liquidity risk

reporting material risk and capital management matters to the board.

The group IT committeeThe group IT committee’s purpose is to assist the board in fulfilling its corporate governance responsibilities with respect to IT and reports to the board through its chairman. The committee has the authority to review and provide guidance on matters related to the group’s IT strategy, budget, operations, policies and controls, as well as oversight of significant IT investments and expenditure.

The group audit committeeThe GAC has oversight of the group’s financial position and makes recommendations to the board on all financial matters, financial risks, internal financial controls, fraud, compliance and, to the extent they impact financial reporting, IT risks. In relation to the RCCM, the GAC plays a role in assessing the adequacy and operating effectiveness of the group’s internal financial controls.

Minutes of the GRCMC and group IT committee meetings are tabled at the GAC meetings. In order to ensure the independence of the second line of defence functions, the chairman of the GAC, who is also a member of the GRCMC, meets with the group chief compliance officer (GCCO), the group CRO, the group financial director, the group chief audit officer and the head of IOR, who is responsible for financial crime control, without management being present.

The chairman of the GAC also meets, without management being present, with the chief audit officer as the third line of defence.

Group model approval committeeThe group model approval committee is designated by the board to discharge the regulatory responsibility of reviewing and approving the group’s material risk models, as well as models used in the calculation of regulatory capital. This committee is supported by the PBB and CIB model approval subcommittees, with the models being assigned to these three committees for approval based on an assessment of the materiality of each model.

Management committeesGroup risk oversight committeeExecutive management responsibility for all material risk types have been delegated by the group management committee to GROC which, in turn, assists the GRCMC in fulfilling its mandate.

As is the case with the GRCMC, GROC calls for and evaluates in-depth investigations and reports based on its assessment of the risk profile and external factors.

GROC delegates authority to various subcommittees which deal with specific risk types or oversight activities. Material matters are escalated to GROC through reports or feedback from each subcommittee chairman.

The GROC subcommittees are as follows:

CIB credit governance committee, chaired by the CIB CRO

group asset and liability committee (ALCO), chaired by the group financial director

group compliance committee, chaired by the GCCO

group country risk management committee, chaired by the group CRO

group equity risk committee (ERC), chaired by the CIB CRO

group internal financial control governance committee, chaired by the group financial director

group operational risk committee, chaired by the group head of IOR

group regulatory and legislative oversight committee, chaired by the group chief executive

group sanctions review committee, chaired by the group chief executive

group stress testing and risk appetite committee, chaired by the group CRO

intragroup exposure committee, chaired by the group financial director

PBB credit governance committee, chaired by the PBB CRO.

Group IT steering committeeThe purpose of the committee is to provide assurance to the group management committee and the board, through the group IT committee, that management has implemented an efficient IT governance framework that supports the effective management of resources, optimisation of costs and the mitigation of risk in a secure and sustainable manner.



Overview | Governance committees continued

Governance documents

Governance documents within the RCCM governance framework comprise standards, frameworks and policies which set out the requirements for the identification, assessment, measurement, monitoring, managing and reporting of risks and effective management of capital.

Governance standards and frameworks are approved by the relevant board committee.

Group policies are approved by the group management committee or subcommittee, relevant GROC subcommittee, GROC itself or, where regulations require board approval, by the board or relevant board committee.

Business line and legal entity policies are aligned to these group policies, and are applied within their governance structures.

Three lines of defence model

The group uses the three lines of defence governance model which promotes transparency, accountability and consistency through the clear identification and segregation of roles.

The first line of defence is made up of the management of business lines and legal entities.

The second line of defence functions provide independent oversight of risks. They have resources at the centre and embedded within the business lines. Central resources provide groupwide oversight of risks, while resources embedded within the business lines support management in ensuring that their specific risks are effectively managed as close to the source as possible. Central and embedded resources jointly oversee risks at a legal entity level. The second line of defence functions develop and implement governance standards, frameworks and policies for each material risk type to which the group is exposed. This ensures consistency in approach across the group’s business lines and legal entities. Compliance with the standards and frameworks is ensured through annual self-assessments by the second line of defence and reviews by GIA.

Internal audit is the third line of defence and reports to and operates under a charter from the GAC. In terms of its charter, the GIA role is to provide independent and objective assurance. GIA has the authority to independently determine the scope and extent of work to be performed. All GIA employees in the group report functionally to the group chief audit officer and operationally to management of their legal entity.

11

12 IFRS and Basel reporting frameworks

14 Reporting framework consolidation differences

15 Basel approaches adopted for regulatory capital purposes

15 Risk disclosure presentation for intercompany transactions between the group’s banking and insurance operations

Risk and capital reporting frameworks

IFRS and Basel reporting frameworks

Tables in this report have been labelled to identify content disclosed in terms of IFRS or Basel reporting frameworks.

The method of measurement in terms of Basel differs from the method of measurement in accordance with IFRS. The Basel amounts in this report are therefore not equal to the IFRS amounts in the annual financial statements. The table below highlights the principal differences between the IFRS and Basel reporting frameworks:

Principle Basel IFRS

Categorisation of exposures

By Basel asset class which, under the internal ratings-based (IRB) approach, is based on homogeneous risk characteristics.

By class of financial instrument, taking into account the nature of the information to be disclosed and the characteristics of the underlying financial instruments.

Exposure Credit exposure, for both IRB and standardised portfolios, consists of on-balance sheet exposure, off-balance sheet exposure, securities financing exposure and derivatives exposure. These exposure values are all gross exposures before the impact of netting, collateral or expected recoveries have been taken into account.

Certain revolving facilities are reported using monthly average balances, per regulatory requirements.

Balances reported per the statement of financial position (SOFP) are determined according to applicable IFRS requirements. Refer to annexure D in the annual financial statements for further detail.

Assets on the group’s IFRS SOFP are reported net of portfolio and specific impairment provisions.

Balances, per the SOFP, are reported based on month end balances.

Valuation Fair value gains and losses attributable to own credit risk are excluded when calculating regulatory capital.

All changes in fair value (including fair value gains and losses attributable to own credit risk) on financial liabilities that, on meeting specific criteria, have been designated to be measured at fair value as well as held-for-trading liabilities, are recognised in profit or loss.


Principle Basel IFRS

Impairment of assets Impairment is based on the concepts of expected and unexpected losses.

Expected losses are accounted for through the level of impairments held against the underlying exposure. Statistical modelling of expected losses is required.

Unexpected losses are accounted for through holding regulatory capital in relation to the size and nature of the exposure held.

The difference between the Basel and IFRS impairment values produces a shortfall if the expected loss amount under Basel exceeds total impairments under IFRS, or an excess if total impairments exceed the expected loss amount. The shortfall, if any, is to be deducted from common equity tier I (CET I) capital.

Assets measured at amortised cost and debt instruments classified as available-for-sale are specifically impaired and the resulting losses recognised in the profit or loss only if:

there is objective evidence of impairment resulting from one or more events that have occurred after the initial recognition of the asset, and

that event has an impact on the estimated future cash flows of assets that can be reliably measured.

To provide for latent losses in a portfolio of loans where the loans have not yet been individually identified as impaired, impairment for incurred but not reported losses is recognised based on historic loss patterns and estimated emergence periods.

The use of statistical models is permitted, but an event of default must occur before an impairment loss can be recognised.

Default Defines default as the obligor being 90 days past due on the obligation (extended to 180 days for some products).

Defines objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset and that objective evidence of impairment has an impact on the asset’s estimated future cash flows.

Examples of objective evidence of impairment include:

actual breach of contract observable data indicating that there is a measurable

decrease in the estimated cash flows from a group of assets since their initial recognition due to:

adverse changes in the payment status of the borrowers in the group, or

a deterioration in national or local economic conditions that correlate with defaults on the assets in the group.

The Basel and IFRS disclosures presented within this risk and capital management report include, unless otherwise specified, the exposures from our global markets outside Africa (GMOA) operations, which for IFRS reporting purposes have been separately classified as non-current assets and liabilities held for sale in terms of IFRS. Subsequent to year end, the group’s controlling interest in its GMOA was disposed of to ICBC.

13

Reporting framework consolidation differences

In accordance with IFRS, all entities, regardless of the nature of their underlying activities, are either consolidated or equity accounted based on the extent of control or influence that the group exerts over those entities. Basel differentiates entities on the underlying activity of the entity combined with the extent of control or influence that the group exerts over those entities. The different treatments for entities for regulatory and accounting consolidation are explained in the table below.

Shareholding Regulatory treatment IFRS treatment

Banking, financial entity

or securities firm1 Insurance entity

Commercial entity

Standardised approach

IRB approach

<10% Aggregate of investments are compared to a threshold of 10% of the group’s CET I capital. Amounts above the threshold are deducted against the corresponding component of capital and amounts below the threshold are risk-weighted.

Risk weight at no less than 100%.

Risk weight up to a maximum of 1 250%.

Typically treated as an investment and is measured at fair value. Where the group has significant influence over that investment, equity accounting is applied unless designated to be measured at fair value through profit or loss in terms of IFRS.

> 10% but ≤ 20%

Apply the deduction method2. Aggregate of investments in tier I and tier II instruments are deducted against the corresponding component of capital.

> 20% but ≤ 50%

Other significant shareholder:

Proportionately consolidate.

No other significant shareholder: apply the deduction method2.

Aggregate of investments in tier I and tier II instruments are deducted against the corresponding component of capital.

Apply the deduction method2.

Aggregate of investments in tier I and tier II instruments are deducted against the corresponding component of capital.

Individual investments in excess of 15% of the group’s CET I, additional tier I and tier II: risk weight at 1 250%.

Individual investments up to 15% of the group’s CET I, additional tier I and tier II: risk weight at no less than 100%.

Aggregate of investments >60% of the group’s CET I, additional tier I and tier II: risk weight excess above 60% at 1 250%.

Individual investments in excess of 15% of the group’s CET I, additional tier I and tier II: risk weight at 1 250%.

Individual investments up to 15% of the group’s CET I, additional tier I and tier II: risk weight at no less than 100%.

Equity accounting (unless designated to be measured at fair value through profit or loss in terms of IFRS) applied unless there is evidence of control in which case the group consolidates the investment into its results.

>50% Consolidated Consolidate unless there is evidence to indicate that the group does not have control over that investment in which case equity accounting will typically be applied unless designated to be measured at fair value through profit or loss in terms of IFRS.

1 For Basel purposes, financial entities other than financial entities acquired through realisation of security in respect of previously contracted debt (held temporarily); subject to other materially different rules and regulations or non-consolidation as required by law.

2 Aggregate of investments compared to 10% of the group’s CET I capital and amounts above the 10% threshold are deducted against CET I capital. Amounts not deducted are combined with mortgage servicing rights and deferred tax assets and compared to 15% of the group’s CET I capital. Amounts above the 15% threshold are deducted against CET I capital and amounts below are risk-weighted at 250%.



Risk and capital reporting frameworks | continued

Standard Bank Group Limited controls 53.6% (2013: 53.6%) of the issued ordinary shares of Liberty Holdings Limited. The nature of the arm’s length transactions entered into between Liberty and the Standard Bank group’s banking operations includes the following:

Standard Bank Group ordinary shares: Liberty purchases the group’s ordinary shares for the risk and reward of its policyholders. From an IFRS perspective these shares are accounted for by the group as treasury shares and by Liberty as a financial investment.

Debt financial instruments: As part of its funding activities, the group’s banking operations issue debt financial instruments which include preference shares, term deposits, debt issued by consolidated structured entities and subordinated bonds. These debt instruments are accounted for by the group’s banking operations as liabilities within deposit and current accounts and subordinated debt as appropriate and are recognised by Liberty as financial investments. These intercompany transactions are eliminated by the group on consolidation. The intercompany debt financial instruments are typically measured by the group’s banking operations on an amortised cost basis and by the group’s insurance operations on a fair value basis. The effect of this measurement inconsistency is assessed and, where applicable, reversed on consolidation.

Derivative financial instruments: In order to hedge the market risk inherent in Liberty’s assets and liabilities, Liberty may enter into derivatives with the group’s banking operations. These derivatives are respectively accounted for as derivative assets and liabilities by the group’s banking and insurance operations and are eliminated by the group on consolidation.

The table on the following page discloses the value of the transactions entered into between the group’s banking and insurance operations and IFRS risk disclosure tables within which such transactions have not been eliminated. The values as included in the group’s banking operation’s liquidity analysis, on page 72, have not been provided as they will not be able to be meaningfully compared to the fair value of the debt instruments as the liquidity risk disclosures are prepared on an undiscounted contractual cash flow basis. The group’s 31 December 2013 comparative risk disclosures have been restated for the effects of the above treatment. Refer to page 104 for further information.

Basel approaches adopted for regulatory capital purposes

Basel provides various approaches for the calculation of regulatory capital to be held against credit, market and operational risk. In general, there are three approaches:

a basic approach

an intermediate approach

an advanced approach.

The regulators approve the approach adopted on a case-by-case basis, both at a solo regulated entity and consolidated regulated entity level.

The group does not adopt advanced approaches for certain portfolios, either because these methods are not yet recognised in a particular jurisdiction or because the group has chosen, on a materiality basis, to adopt the intermediate or basic approaches. In these cases, the group nevertheless adopts practices similar to the advanced approach for its internal economic capital, risk measurement and management purposes where it is felt that these offer better information for managing risks.

The approaches per risk type approved by regulators are specified in the relevant credit, market and operational risk section.

Risk disclosure presentation for intercompany transactions between the group’s banking and insurance operations

In the ordinary course of business, both the group’s banking operations and the insurance operations of its subsidiary, Liberty, enter into arm’s length transactions with each other. The risks arising from these transactions are managed independently within the group’s banking and insurance operations as part of each operation’s risk management framework. The group’s banking operations’ risk and capital management disclosures are predominantly regulated by both IFRS and Basel III, whereas Liberty’s insurance risk disclosures are influenced by both IFRS and the FSB’s planned implementation of the SAM framework with effect from 1 January 2016. The group’s risk and capital management report disclosures are driven by the scope of these regulatory requirements and follow the manner in which the group’s risks are managed, resulting in separately presented disclosures for the group’s banking and insurance operations.

Intercompany transactions between Liberty and the group’s banking operations have not been eliminated for the purposes of separately reporting on the banking and insurance operations’ risk disclosures in this risk and capital management report.

15

Nature of instrument Value

Banking operation’s risk disclosures

Insurance operation’s risk disclosures

2014 2013

Maturityanalysis of

financialliabilities

by contractual

maturity

Tradingbook VaR

andstressed

VaR (SVaR)analysis

Interestrate

sensitivity

Creditexposure

to debtinstru-ments

Financialasset

liquidity

Interestrate

exposure

Currencyexposureby majorcurrency

(page 72) (page 80 – 81) (page 82) (page 60) (page 74) (page 88) (page 88)

Ordinary shares

12 244 000ordinary

shares with a fair value ofR1,8 billion.

7 062 000 ordinary

shares with afair value ofR0,9 billion.

Preference share assets

R169 millionfair value.

R203 million fair value.

Term deposits (including sub-ordinated bonds)

R11,6 billionfair value.

R10 billionfair value.

Derivative liabilities



Deposit and current accounts

R5,9 billioncash balance.

R3,4 billioncash balance.



Risk and capital reporting frameworks | Risk disclosure presentation for intercompany transactions between the group’s banking and insurance operations continued

Objectives

The group’s capital management function is designed to ensure that regulatory requirements are met at all times and that the group and its principal subsidiaries are capitalised in line with the group’s risk appetite and target ratios, both of which are approved by the board.

The capital management division within treasury and capital management (TCM) comprises:

Strategic capital management function: Key responsibilities include raising capital to enable growth opportunities and to provide an optimal capital structure, advising on the dividend policy, facilitating capital allocation and risk-adjusted performance measurement (RAPM), and managing the ICAAP and capital planning process, including stress testing of capital supply and demand.

Portfolio analysis and reporting function: Key responsibilities include the measurement and analysis of regulatory and economic capital, internal and external reporting and implementation of new regulatory requirements.

CIB and PBB capital management functions: Key responsibilities include providing support on deal pricing, balance sheet utilisation and management of capital consumption against budgets.

Regional capital management function: Key responsibilities include supporting the group’s operations in the rest of Africa and outside Africa.

Governance

The primary management level subcommittees that oversee the risks associated with capital management are the group ALCO and its subcommittee, the group capital management committee.

The principal governance documents are the capital management governance framework and the model risk governance standard.

Capital transferability

Subject to compliance with the corporate laws of relevant jurisdictions and appropriate motivation to and approval by exchange control authorities, no significant restrictions exist on the transfer of funds and regulatory capital within the group’s banking operations.

Capital management

17 Objectives

17 Governance

17 Capital transferability

18 Basel III capital requirements

18 • Objectives of Basel III

19 Regulatory capital

19 • Banking operations

25 • Insurance operations

25 Economic capital

25 • Risk-adjusted performance measurement

25 • Cost of equity

25 • Banking operations

26 • Insurance operations

17

Basel III capital requirements

The SARB adopted the Basel III framework introduced by the BCBS from 1 January 2013. The group has been compliant with the minimum requirements from that date.

The group is well positioned to comply with the requirements that are subject to phase-in rules when they become effective.

Basel III aims to improve the quality of capital, increase capital levels and remove inconsistencies in the definition of capital across jurisdictions as explained in the table below.

Objectives of Basel III

Increased quality, quantity and consistency of capital

increased focus on CET I increased capital levels.

Increased risk coverage

credit valuation adjustment for over-the-counter (OTC) derivatives, being the capital charge for potential mark-to-market losses associated with deterioration in counterparty creditworthiness

asset value correlation, being the increased capital charge on exposures to financial institutions strengthened standards for collateral management, margin period of risk, management of general wrong-way risk

and stress testing.

Capital conservation buffer

2.5% CET I capital buffer by 2019 to decrease pro-cyclicality build up capital during favourable economic conditions that can be drawn on during times of stress.

Pillar 2a D-SIB buffer up to 2% of pillar 2a buffer prescribed by the SARB to be held against systemic risk requirements 0 – 2.5% D-SIB buffer required for banks deemed by the SARB to be systemically important the sum of the two requirements is limited to 3.5% and is split over all three tiers of capital.

Countercyclical buffer 0 – 2.5% CET I capital buffer deployed by national jurisdictions when system-wide risk builds up ensures capital adequacy takes macro-financial environment into account.

Leverage ratio constrain build-up of leverage in the banking sector the ratio is calculated as tier I qualifying capital/on- and off-balance sheet exposures, as defined by the BCBS, and is

measured against the SARB prescribed minimum ratio of 4%.


Capital management | continued


The graph below reflects the capital requirements and phase-in periods applicable to South Africa.

SARB ratios (capital as a % of risk�weighted assets)1 effective 1 January each year (%)

14

12

10

8

6

4

2

� CET I � Conservation buffer � Additional tier I Tier II�

2019

6.00

2.50

3.25

14.00

2.25

2018

6.25

1.88

3.00

13.01

1.88

2016

6.50

1.38

2.50

11.01

0.63

2014

5.50

1.50

3.00

10.00

2015

6.50

2.00

10.00

1.50

2017

6.50

1.50

2.75

12.00

1.25

1 Graph excludes countercyclical buffer and confidential bank-specific pillar 2b capital requirements, but includes maximum potential D-SIB requirement which is also bank-specific and therefore confidential.

The South African D-SIB framework assesses the systemic importance of banks, controlling companies and branches of foreign banks licensed to operate in South Africa. While the D-SIB loss-absorbency requirement imposed on banks will only become effective on 1 January 2016, the SARB has advised banks of their bank-specific loss-absorbency requirements in advance of the implementation date to allow banks sufficient time to account for this requirement in their capital planning and management processes.

Regulatory capital

The group manages its capital levels to support business growth, maintain depositor and creditor confidence, create value for shareholders, and ensure regulatory compliance.

The main regulatory requirements to be complied with are those specified in the Banks Act and related regulations which are aligned with Basel III.

Banking operationsRegulatory capital adequacy is measured through three risk-based ratios:

CET I: ordinary share capital, share premium, retained earnings and qualifying non-controlling interest less impairments divided by total risk-weighted assets.

Tier I: CET I and qualifying non-controlling interest plus perpetual, non-cumulative instruments with principal loss absorption features issued under the Basel III rules divided by total risk-weighted assets. Perpetual non-cumulative preference shares issued under Basel I and Basel II are included in tier I capital but are subject to regulatory phase-out requirements over a 10-year period, effective from 1 January 2013.

Total capital adequacy: Tier I plus other items such as the general allowance for credit impairments and subordinated debt with principal loss-absorption features issued under Basel III divided by total risk-weighted assets. Subordinated debt issued under Basel I and Basel II is included in total capital but is subject to regulatory phase-out requirements, over a 10-year period effective from 1 January 2013.

The ratios are measured against internal targets and regulatory minimum requirements.

19

SBG tier II instrument maturity profile (Rm)

12 000

10 000

8 000

6 000

4 000

2 000

� Callable date

201820172016 20192015 2020

The SARB adopted the leverage framework that was issued by the BCBS in January 2014, with final calibrations expected by 2017. Formal disclosure requirements are commencing from 1 January 2015 and the ratio is expected to transition to a pillar 1 requirement by 2018.

The non-risk-based leverage measure is designed to complement the Basel III risk-based capital framework. The group’s leverage ratio inclusive of unappropriated profit was 6.9% as at 31 December 2014 (December 2013: 6.7%, including unappropriated profit), in excess of the minimum SARB requirement of 4%.

Capital adequacy1 (%)

18

16

14

12

10

8

6

4

2

� Tier I Tier II�

2009 2011 2012 20132010

Required capitalTier III

2014

1 2009 to 2011 are on a Basel II basis. Basel III implemented 1 January 2013. Risk weighted assets and capital adequacy for 2012 are on a pro forma Basel III basis.

Risk-weighted assets are calculated in terms of the Banks Act and related regulations, which are aligned with Basel III.

The group complied with all externally imposed capital requirements during the current and prior year.

The group’s CET I capital, including unappropriated profit, is R113,5 billion as at 31 December 2014 (2013: R105,8 billion). The group’s tier I capital, including unappropriated profit, is R118,0 billion as at 31 December 2014 (2013: R110,8 billion) and total capital, including unappropriated profit was R142,0 billion as at 31 December 2014 (2013: R136,1 billion).

The group has a balanced tier II subordinated debt maturity profile.

During 2014, the group issued its debut Basel III compliant tier II issue of R2,25 billion.



Capital management | Regulatory capital continued

Basel III qualifying capital, excluding unappropriated profits

2014Rm

2013Rm

Normalised ordinary shareholders’ equity 139 588 130 8651 Net IFRS adjustments (2 603) (1 929)1

IFRS ordinary shareholders’ equity 136 985 128 936 Qualifying non-controlling interest 4 159 4 196 Less: regulatory adjustments: (27 689) (27 298)

Goodwill (3 711) (3 747)Other intangible assets (net of deferred tax) (15 850) (12 933)Shortfall of provisions to expected losses (2 054) (2 667)Investments in financial, banking and insurance entities exceeding threshold (4 074) (4 705)Other (2 000) (3 246)

Less: regulatory exclusions – unappropriated profit (13 049) (9 328)

CET I capital 100 406 96 506 Qualifying perpetual preference shares 4 396 4 945 Qualifying non-controlling interest profit 119 55

Tier I capital 104 921 101 506

Tier II subordinated debt 22 727 24 273 General allowance for credit impairments 1 266 977

Tier II capital 23 993 25 250

Total regulatory capital 128 914 126 756

Total capital requirement 91 521 79 920

Total risk-weighted assets 915 213 841 272

1 Restated. Refer to page 103.

21

Basel III risk-weighted assets and associated capital requirements

2014 2013

Risk-weighted assets

Rm

Capital requirement1

Rm


Rm


Rm

Credit risk 623 931 62 392 565 234 53 697

Portfolios subject to the standardised approach2 231 670 23 167 180 419 17 139

Corporate 99 468 9 947 82 750 7 861 Sovereign 66 184 6 618 57 930 5 503 Banks 8 791 879 4 349 413 Retail mortgages 12 601 1 260 8 717 828 Retail other3 44 361 4 436 26 399 2 508 Securitisation exposure 265 27 274 26

Portfolios subject to the foundation internal ratings-based (FIRB) approach 5 958 595 16 260 1 546

Corporate 2 834 283 15 562 1 478 Sovereign 1 491 149 301 29 Banks 1 633 163 397 39

Portfolios subject to the advanced internal ratings-based (AIRB) approach 357 222 35 722 341 983 32 488

Corporate 146 252 14 625 141 415 13 434 Sovereign 19 449 1 945 8 053 765 Banks 19 352 1 935 19 292 1 833 Retail mortgages 82 530 8 253 81 978 7 788 Qualifying retail revolving exposure (QRRE) 46 918 4 692 47 163 4 480 Retail other3 40 874 4 087 41 527 3 945 Securitisation exposure 1 847 185 2 555 243

Other assets 29 081 2 908 26 572 2 524

Counterparty credit risk 47 026 4 703 50 121 4 761

Portfolios subject to the standardised approach2 4 434 444 4 423 421

Corporate 2 648 265 4 116 391 Sovereign 403 40 175 17 Banks 1 383 139 132 13

Portfolios subject to the FIRB approach 32 355 3 235 32 425 3 080

Corporate 21 129 2 113 22 737 2 160 Sovereign 243 24 1 657 157 Banks 10 983 1 098 8 031 763

Portfolios subject to the AIRB approach 10 237 1 024 13 273 1 260

Corporate 6 317 632 6 299 598 Sovereign 971 97 171 16 Banks 2 949 295 6 803 646

Footnotes on the following page.




Basel III risk-weighted assets and associated capital requirements continued

2014 2013


Rm


Rm


Rm


Rm

Equity risk in the banking book 14 469 1 447 15 961 1 516

Portfolios subject to the standardised approach2

Unlisted 422 40

Portfolios subject to the market-based approach 7 649 765 9 057 860

Listed 698 70 1 085 103 Unlisted 6 951 695 7 972 757

Portfolios subject to the probability of default (PD)/loss given default (LGD) approach 6 820 682 6 482 616

Market risk 71 153 7 115 69 964 6 647

Portfolios subject to the standardised approach2 29 259 2 926 30 354 2 884

Interest rate risk 25 935 2 594 26 079 2 478 Equity position risk 98 10 109 10 Foreign exchange risk 2 483 248 3 245 308 Commodities risk 743 74 921 88

Portfolios subject to the internal models approach 41 894 4 189 39 610 3 763

VaR-based approach 29 978 2 914 26 084 2 478

Interest rate risk 21 823 2 099 9 381 891 Equity position risk 8 891 889 8 025 762 Foreign exchange risk 7 570 757 18 711 1 778 Commodities risk 8 922 892 12 108 1 150 Diversification benefit (17 228) (1 723) (22 141) (2 103)

Non-VaR-based 11 916 1 275 13 526 1 285

Operational risk 131 459 13 146 115 489 10 971

Portfolios subject to the standardised approach2 82 931 8 293 65 404 6 213 Portfolios subject to the advanced measurement approach 48 528 4 853 50 085 4 758

Risk-weighted assets for investments in financial entities 27 175 2 718 24 503 2 328

Total risk-weighted assets/capital requirement 915 213 91 521 841 272 79 920

1 Capital requirement at 10% (December 2013: 9.5%) excludes confidential bank-specific add-ons.2 Portfolios on the standardised approach relate to the rest of Africa operations and, in addition, portfolios for which application to adopt the internal models approach has not been

submitted, or for which an application has been submitted but approval has not been granted.3 Retail other includes retail small and medium enterprises, vehicle and asset finance, and term lending exposures.

23

Capital adequacy ratios

2014 SARB minimum

regulatory requirement

%

Internaltargetratios

%

Includingunappropriated profits

Excludingunappropriated profits

2014%

2013%

2014%

2013%

Total capital adequacy ratio 10.0 12.5 – 15.0 15.5 16.2 14.1 15.1Tier I capital adequacy ratio 7.0 10.5 – 12.5 12.9 13.2 11.5 12.1CET I capital adequacy ratio 5.5 9.0 – 10.5 12.4 12.6 11.0 11.5

Capital adequacy ratios of banking subsidiaries

Host tier Iregulatory

requirements%

Host totalregulatory

requirements%

2014 2013

Tier I capital%

Total capital%

Tier I capital%

Total capital%

Standard Bank Group 7.01 10.01 12.9 15.5 13.2 16.2The Standard Bank of South Africa Group2 7.0 10.0 12.3 15.8 12.8 16.5Rest of AfricaCfC Stanbic Bank (Kenya) 8.0 12.0 16.9 20.5 16.0 18.8Stanbic Bank Botswana 7.5 15.0 11.7 20.0 11.3 16.2Stanbic Bank Ghana 6.7 10.0 14.1 15.0 18.0 19.2Stanbic Bank Tanzania 10.0 12.0 17.4 19.4 14.9 16.9Stanbic Bank Uganda 8.0 12.0 18.1 19.9 17.1 21.2Stanbic Bank Zambia 5.0 10.0 20.0 23.6 19.3 21.8Stanbic Bank Zimbabwe 8.0 12.0 20.6 23.7 18.6 21.4Stanbic IBTC Bank (Nigeria) 5.0 10.0 10.9 14.4 14.0 16.9Standard Bank de Angola 5.0 10.0 12.9 18.1 9.3 14.0Standard Bank Malawi 10.0 15.0 17.5 20.3 14.4 16.0Standard Bank Mauritius 5.0 10.0 12.9 18.5 11.1 16.5Standard Bank Mozambique 4.0 8.0 9.3 9.8 12.4 13.3Standard Bank Namibia 7.0 10.0 10.9 13.0 10.8 12.1Standard Bank RDC (Democratic Republic of Congo) 5.0 10.0 16.9 24.8 25.6 37.7Standard Bank Swaziland 4.0 8.0 11.9 16.5 10.7 14.3Standard Lesotho Bank 4.0 8.0 10.1 10.9 8.2 9.0Standard Bank London Holdings Limited3 11.5 18.6 15.8 20.2Standard Bank Isle of Man 10.0 10.6 12.5 10.8 12.9Standard Bank Jersey 11.0 9.7 14.0 9.2 13.4

Liberty Group Limited (calculated in terms of the Long-term Insurance Act) – CAR – times covered 3.1 2.6

1 Represents 2014 SARB Basel III minimum capital requirements.2 Incorporating: The Standard Bank of South Africa (SBSA).3 Incorporating: – SB Plc (United Kingdom) – Standard Merchant Bank Plc (Asia) (Singapore).




Liberty Group Limited CAR ratio

2014 20131

Statutory CAR Rm 4 534 4 564 Available statutory capital Rm 13 919 11 695 Target CAR coverage ratio (times) 1.5 1.5 Actual CAR coverage ratio (times) 3.1 2.6


Insurance operationsThe quarterly and annual returns submitted to the FSB in terms of the Long-term Insurance Act 52 of 1998 (Long-term Insurance Act) and the Short-term Insurance Act 53 of 1998 (Short-term Insurance Act) indicated that the capital adequacy requirements (CAR) were met throughout 2014.

Standard Insurance Limited (SIL) regulatory capital adequacy

2014Rm

2013Rm

Actual CAR coverage ratio (times) 2.3 2.3

Cost of equity The group’s rand-based cost of equity (CoE) is estimated using the capital asset pricing model. CoE is recalibrated twice a year using the latest estimates of risk-free rate, beta and equity risk premium.

The group applied a CoE of 13.2% as at 31 December 2014 (2013: 13.4%).

Banking operations

Economic capital by risk type at end of the period

2014Rm

20131

Rm

Credit risk 62 780 50 736 Equity risk 5 286 5 518 Market risk 1 373 1 439 Operational risk 9 520 8 590 Business risk 5 844 5 981 Interest rate risk in the banking book (IRRBB) 3 324 3 924

Economic capital requirement 88 127 76 188

Available financial resources 131 257 123 421

Economic capital coverage ratio (times) 1,49 1,62


Economic capital

Economic capital adequacy is the internal basis for measuring and reporting all quantifiable risks on a consistent risk-adjusted basis. The group assesses its economic capital adequacy by measuring its risk profile under both normal and stress conditions.

ICAAP considers the qualitative capital management processes within the organisation and includes the organisation’s governance, risk management, capital management and financial planning standards and frameworks. Furthermore, the quantitative internal assessments of the organisation’s business models are used to assess capital requirements to be held against all risks the group is or may become exposed to, in order to meet current and future needs as well as to assess the group’s resilience under stressed conditions.

Risk-adjusted performance measurementRAPM supports the maximisation of shareholder value by optimally managing financial resources within the board-approved risk appetite.

Capital is centrally monitored and allocated, based on usage and performance, in a manner that enhances overall group economic profit and return on equity. Business units are held accountable for achieving their RAPM targets.

RAPM is calculated on both regulatory and economic capital measures.

25

Economic capital of R88,1 billion (2013: R76,2 billion) is the amount of permanent capital that is required to support the group’s banking operations’ economic risk profile. For potential losses arising from risk types that are statistically quantifiable, economic capital reflects the worst-case loss commensurate with a confidence level of 99.92%.

Available financial resources refer to capital supply as defined by the group for economic capital purposes. It represents permanent capital (ordinary shareholders’ equity and perpetual preference shares) adjusted for items such as future dividend payments and insurance-related reserves.

The available financial resources exceed the minimum economic capital requirement.

Insurance operationsThe FSB plans to implement the new SAM regulatory regime on 1 January 2016. As prescribed under SAM the assessment of capital will be on an economic basis for South African life insurance entities. This will apply to Liberty Group Limited, Frank Life and STANLIB Multi-Manager. The regulatory capital will be the amount of financial resources required to protect against economic insolvency under extreme events. Liberty has completed the various SAM supervision submissions requested by the FSB in 2014. These indicate that Liberty’s capital is adequate.

SIL is in the process of developing a capital model that will calculate economic capital requirements. We expect to complete this model in 2015.



Capital management | Economic capital continued

Risk appetite is set, and stress testing activities are undertaken, at a group level, in business lines and at a legal entity level within the risk appetite and stress testing governance frameworks.

Governance

The primary management level governance committee overseeing risk appetite and stress testing is the group risk appetite and stress testing committee (GSTRAC). It is chaired by the group CRO and is a subcommittee of GROC.

Liberty is represented on the GSTRAC to ensure a broad level of consistency in the execution of these activities between the insurance and banking operations of the group. Within Liberty, risk appetite and stress testing are governed by the Liberty group balance sheet management committee and overseen by the Liberty group risk and control oversight committee.

The principal governance documents are the risk appetite governance framework and the stress testing governance framework.

Risk appetite

Risk appetite governance frameworkThe risk appetite governance framework provides guidance on the following:

setting and cascading of risk appetite by group, business line and legal entity

measurement and methodology

governance

monitoring and reporting of the risk profile.

The group has adopted the following definitions, where entity refers to a business line or legal entity within the group, or the group itself:

Risk appetite: An expression of the amount or type of risk an entity is generally willing to take in pursuit of its financial and strategic objectives, reflecting its capacity to sustain losses and continue to meet its obligations as they fall due, under both normal and a range of stress conditions. The metric is referred to as a risk appetite trigger.

Risk tolerance: The maximum amount of risk an entity is prepared to tolerate above risk appetite. The metric is referred to as a risk tolerance limit.

Risk capacity: The maximum amount of risk the entity is able to support within its available financial resources.

Risk appetite statement (RAS): The documented expression of risk appetite and risk tolerance which have been approved by the entity’s relevant governance committee. The RAS is reviewed and revised, if necessary, on an annual basis.

Risk appetite and stress testing

27 Governance

27 Risk appetite

27 • Risk appetite governance framework

29 • Risk appetite statement

29 Stress testing

29 • Stress testing governance framework

27

Risk profile: The risk profile is defined in terms of three dimensions, namely:

current risk profile or forward risk profile

unstressed or stressed risk profile

pre- or post-management actions.

The current risk profile is the amount or type of risk the entity is currently exposed to. The unstressed forward risk profile is the forward-looking view of how the entity’s risk profile is expected to evolve under expected conditions. The effectiveness of available management actions can be assessed through an analysis of pre- and post-management action risk profiles against risk appetite triggers and tolerance limits.

The diagram below provides a schematic view of the three levels of risk appetite and the integral role that risk types play in the process of cascading risk appetite from dimensions such as regulatory capital, economic capital, stressed earnings and liquidity to more granular portfolio limits.

Leve

l 1

Risk appetite dimensions (quantitative)

Regulatory capital

Economic capital

Stressed earnings

Liquidity

Leve

l 2 Risk appetite dimensions by risk type

Credit and equity Operational Market Interest rate Business Liquidity

Capital demand/earnings at risk utilisation per risk type

Leve

l 3

Portfolio limits by risk type

Credit and equity risk e.g.

Operational risk e.g.

Market risk e.g.

Interest rate risk e.g.

Business risk e.g.

Liquidity risk e.g.

Loss ratio NPL % Concentrations

Operational losses % to gross income

Normal and SVaR limits

Interest rate sensitivity

Cost-to-income ratio

NSFR

RA

S

Risk appetite


Risk appetite and stress testing | Risk appetite continued


Risk appetite statementExecutive management is responsible for recommending the group’s RAS, which is then approved by the GRCMC on behalf of the board. In developing the RAS, executive management considers the group’s strategy and the desired balance between risk and return. The GRCMC reviews the group’s current risk profile on a quarterly basis and forward risk profile (both stressed and unstressed) at least annually.

Level 1 risk appetite dimensions can be either qualitative or quantitative. Quantitative level 1 risk appetite dimensions relate to available financial resources and earnings volatility. The standardised quantitative dimensions used by the group, as well as legal entities and business lines, are:

stressed earnings

economic capital

regulatory capital

liquidity (short-term liquidity and term liquidity).

Level 2 risk appetite represents the allocation of level 1 risk appetite to risk types. Specifically, the contribution of individual risk types to earnings volatility and overall capital demand (both economic and regulatory) is controlled through triggers and limits.

Level 3 consists of key metrics used to monitor the portfolio. Portfolio triggers and limits are required to be broadly congruent with level 1 and level 2 triggers and limits. These metrics are regularly monitored at a risk type level and ensure proactive risk management.

Stress testing

Stress testing governance frameworkStress testing is a key management tool within the group and is used to evaluate the sensitivity of the current and forward risk profile relative to risk appetite. Stress testing supports a number of business processes, including:

strategic planning and financial budgeting

the ICAAP, including capital planning and management, and the setting of capital buffers

liquidity planning and management

informing the setting of risk appetite triggers and risk tolerance limits

identifying and proactively mitigating risks through actions such as reviewing and changing limits, limiting future and reducing current exposures, and hedging thereof

facilitating the development of risk mitigation or contingency plans, including recovery plans, across a range of stressed conditions

supporting communication with internal and external stakeholders.

Stress testing within the group’s banking and insurance operations is broadly aligned and subject to the group’s stress testing governance framework which sets out the responsibilities for and approaches to stress testing activities. Stress tests are conducted at group, business line, material legal entity and risk type level. Fit-for-purpose stress testing programmes are implemented for the group’s banking and insurance operations to ensure appropriate coverage of the different risks.

Stress testing programmeThe group’s stress testing programme uses one or a combination of stress testing techniques, including scenario analysis, sensitivity analysis and reverse stress testing to perform stress testing for different purposes.

Routine groupwide macroeconomic stress testingRoutine macroeconomic stress testing is conducted across all major risk types, on an integrated basis, for a range of economic scenarios varying in severity from mild to very severe but plausible macroeconomic shocks. The impact, after consideration of mitigating actions, on the group’s income statement, SOFP and capital demand and supply of the group is measured against risk appetite.

Groupwide macroeconomic stress testing for the group and SBSA is performed, as a minimum, once a year for selected scenarios that are specifically designed by a scenario working group targeting the group’s risk profile, geographical presence and strategy.

The results of the groupwide macroeconomic stress testing are presented at a board level for the group and SBSA in order to consider whether the group’s risk profile is consistent with the group’s risk appetite and to set the capital buffer. Groupwide macroeconomic stress testing results are submitted as part of the annual ICAAP.

Additional stress testingGroupwide macroeconomic stress testing results are supplemented with additional ad hoc stress testing at the group, legal entity, business line, or risk type level that may be required from time-to-time for risk management or planning purposes. The purpose of this stress testing is to inform management of risks that may not yet form part of routine stress testing or where the focus is on a specific portfolio or business unit. Additional stress testing can take the form of either scenario analysis or sensitivity analysis. This type of stress testing will be performed and governed at the appropriate group, legal entity, business line, or risk type level. Examples of additional stress tests for 2014 included an interest rate increase scenario as well as various commodities-related stress tests.

Supervisory stress testsRegulators may call for the group or a legal entity to run a supervisory stress test using a common scenario with prescribed assumptions and methodologies. The group participated in a stress testing exercise conducted by the IMF as part of their South African financial stability assessment programme in May 2014.

29

Business model stress testingBusiness model stress testing utilises the reverse stress testing technique to explore vulnerabilities in a particular strategy or business model. The outcome does not necessarily target business or bank failure, but rather seeks to inform what could have a severe impact, given a plausible but in most cases highly improbable event within a given set of circumstances and assumptions.

The purpose of business model stress testing is to identify potential vulnerabilities by:

assuming the business model is severely impacted

identifying potential circumstances/scenarios that could have led to this impact

identifying vulnerabilities in the business model, human capital, infrastructure and control framework highlighted by the failure

reviewing the existing risk mitigants

supplementing risk mitigants if considered necessary.

Stress testing for the recovery planAs part of the annual review of the group’s recovery plan the group’s procedures require the execution of stress tests in order to test the effectiveness of the recovery options proposed in the recovery plan, and to provide guidance on the selection of early warning indicators. The range of scenarios that are considered include both systemic, group-specific and combination events as well as fast- and slow-moving scenarios.

Risk type stress testingRisk type stress tests apply to individual risk types. Risk type stress testing could take the form of scenario or sensitivity analysis.



Risk appetite and stress testing | Stress testing continued

Definition

Credit risk is the risk of loss arising out of the failure of counterparties to meet their financial or contractual obligations when due. Credit risk is composed of counterparty risk (including primary, pre-settlement, issuer and settlement risk) and concentration risk (single counterparty, industry, product, geographic and maturity).

Banking operations

Approach to managing credit riskThe group’s credit risk comprises mainly wholesale and retail loans and advances, together with the counterparty credit risk arising from derivative and securities financing contracts entered into with our clients and market counterparties.

The group manages credit risk through:

maintaining a strong culture of responsible lending and a robust risk policy and control framework

identifying, assessing and measuring credit risk across the group, from the level of individual facilities up to the total portfolio

defining, implementing and continually re-evaluating our risk appetite under actual and stress conditions

monitoring the group’s credit risk relative to limits

ensuring that there is expert scrutiny and independent approval of credit risks and their mitigation.

Primary responsibility for credit risk management resides with the group’s business lines. This is complemented with an independent credit risk function embedded within the business units, which is in turn supported by the group risk function.

GovernanceThe primary management level governance committees overseeing credit risk are the CIB and PBB credit governance committees, the group ERC and the intragroup exposure committee (all GROC subcommittees). These committees are responsible for credit risk and credit concentration risk decision-making, and delegation thereof to credit officers and committees within defined parameters.

The PBB, CIB and group model approval committees approve key aspects of rating systems and credit risk models. Regular model validation and reporting to these committees is undertaken by the central validation function that is independent of the credit risk function.

Credit risk

31 Definition

31 Banking operations

31 • Approach to managing credit risk

31 • Governance

32 • Approved regulatory capital approaches

36 • Credit portfolio characteristics and metrics in terms of Basel

50 • Credit portfolio characteristics and metrics in terms of IFRS

59 Insurance operations

59 • Consolidated mutual funds

60 • Credit exposure to debt instruments

62 • Impairments

62 • Reinsurance

31

Standardised approachThe calculation of regulatory capital is based on a risk weighting and the net counterparty exposures after recognising a limited set of qualifying collateral. The risk weighting is based on the exposure characteristics and, in the case of corporate, bank and sovereign exposures, the external agency credit rating of the counterparty. In the case of counterparties for which there are no credit ratings available, exposures are classified as unrated for determining regulatory capital requirements.

The principal governance documents are the credit governance standard and the model risk governance standard.

Approved regulatory capital approachesThe group has approval from the SARB to adopt the AIRB approach for its credit portfolios in SBSA and the FIRB approach for SB Plc. The group has adopted the standardised approach for the rest of Africa portfolios and for some of its less material subsidiaries and portfolios. The group has approval from the SARB to adopt the market-based and probability of default (PD)/loss given default (LGD) approaches for material equity portfolios.

Basel: Exposure subject to the standardised approach per risk weighting

201420132

Exposure aftermitigation

RmExposure

RmMitigation1

Rm

Exposure aftermitigation

Rm

Based on risk weights0% – 35% 55 372 133 55 239 25 235 50% 28 231 318 27 913 53 405

Rated 340 340 1 484 Unrated 27 891 318 27 573 51 921

75% 31 665 111 31 554 34 037 100% and above 222 014 11 968 210 046 179 888

Rated 36 36 36 Unrated 221 978 11 968 210 010 179 852

Total 337 282 12 530 324 752 292 565

1 Constitutes eligible financial collateral.2 Restated. Refer to page 103.

Internal ratings-based approachIntroductionUnder the IRB regulatory capital approaches the calculation of regulatory capital is based on an estimate of exposure at default (EAD) and a risk weighting. The risk weighting is based on asset class, and estimates of PD, LGD, and maturity. Under the AIRB approaches all the parameters need to be estimated internally, while only PD is estimated internally under the FIRB approach. EAD, LGD and maturity are regulatory-prescribed in this case. All IRB models are managed under model development and validation policies that set out the requirements for model governance structures and processes, and the technical framework within which model performance and appropriateness is maintained. The models are developed using internal historical default and recovery data. In low-default portfolios, internal data is supplemented with external benchmarks and studies.

Models are assessed frequently to ensure ongoing appropriateness as business environments and strategic objectives change, and are recalibrated annually using the most recent internal data.

IRB risk componentsProbability of defaultThe group uses a 25-point master rating scale to quantify the credit risk for each borrower (corporate asset classes) or facility (retail asset classes), as illustrated in the table that follows. Ratings are mapped to PDs by means of calibration formulae that use historical default rates and other data from the applicable portfolio. The group distinguishes between through-the-cycle PDs and point-in-time PDs, and utilises both measures in decision-making, managing credit risk exposures and measuring impairment against credit exposures.



Credit risk | Banking operations continued

Relationship between the group master rating scale and external ratings

Group master rating scale

SARB risk bucket

Moody’s Investor Services

Standard & Poor’s

Fitch Grading Credit quality

1 – 4 AAA to AA- Aaa, Aa1, Aa2, Aa3 AAA, AA+, AA, AA- AAA, AA+, AA, AA- Investment grade Normal monitoring

5 – 7 A+ to A- A1, A2, A3 A+, A, A- A+, A, A-

8 – 12 BBB+ to BBB- Baa1, Baa2, Baa3 BBB+, BBB, BBB- BBB+, BBB, BBB-

13 – 21 BB+ to B- Ba1, Ba2, Ba3, B1, B2, B3

BB+, BB, BB-, B+, B, B-

BB+, BB, BB-, B+, B, B-

Sub-investment grade

22 – 25 Below B- Caa1, Caa2, Caa3, Ca

CCC+, CCC, CCC- CCC+, CCC, CCC- Close monitoring

Default Default C D D Default Default

Loss given defaultLGD measures are a function of customer type, product type, seniority of loan, country of risk and level of collateralisation. LGDs are estimated based on historic recovery data per category of LGD. A downturn LGD is used in the estimation of the capital charge and reflects the anticipated recovery rates in a downturn period.

Exposure at defaultEAD captures the impact of potential draw-downs against unutilised facilities and potential changes in counterparty credit risk positions due to changes in market prices. By using historical data, it is possible to estimate an account’s average utilisation of limits when default occurs, recognising that customers may use more of their facilities as they approach default.

Expected lossThe expected loss provides a measure of the value of the credit losses that may reasonably be expected to occur in the portfolio. Provisions must be sufficient to cover the expected losses in the credit portfolio. In its most basic form the expected loss can be represented as: expected losses = PD x EAD x LGD.

33

Basel: Analysis of PDs, EADs and LGDs by risk grade under the IRB approach

AveragePD%

Corporate Sovereign Banks Retail mortgages QRRE Retail other Equity

TotalEAD1

EADRm

LGD%

Exposureweighted

average riskweight2

%EADRm

LGD%

Exposureweighted

average riskweight2

%EADRm

LGD%

Exposure weighted

average riskweight2

%EADRm

LGD%

Exposureweighted

average riskweight2

%EADRm

LGD%

Exposureweighted

average riskweight2

%EADRm

LGD%

Exposureweighted

average riskweight2

%Exposure

RmPD%

2014Non-default 0.00 976 138 307 178 119 343 85 085 299 845 75 014 89 673 2 759

1 – 4 0.02 24 998 2 848 16.87 18.52 17 220 45.00 8.27 2 979 39.23 12.70 117 12.29 1.18 1 834 38.41 4.38 0 05 – 7 0.06 57 445 12 324 41.67 24.31 328 45.00 27.53 36 992 41.65 24.50 1 457 13.14 2.38 2 613 62.90 3.27 3 731 41.68 7.83 0 08 – 12 0.28 402 742 140 871 30.28 37.90 96 819 27.20 17.26 36 146 43.45 44.19 106 099 12.71 8.20 8 281 63.05 9.19 14 526 41.01 24.74 304 0.26 13 – 21 2.15 455 352 150 058 28.52 67.74 4 921 29.19 64.33 8 968 47.93 92.29 168 756 15.36 31.15 57 893 64.90 56.71 64 756 34.41 49.04 2 455 1.24 22 – 25 30.42 35 601 1 077 30.61 165.48 55 39.54 220.20 23 416 17.43 94.77 6 227 64.77 177.46 4 826 43.55 110.12

Default 100.00 30 675 8 349 40.48 84.04 9 33.07 44.24 69 45.29 13 622 19.25 3.27 4 942 64.34 57.31 3 684 44.21 1.35 78

Total 1 006 813 315 527 30.04 119 352 29.90 85 154 42.99 313 467 14.78 79 956 64.60 93 357 36.67 2 837

2013Non-default 929 444 294 713 78 442 90 270 293 945 78 751 93 323 2 498

1 – 4 0.02 20 760 64 42.08 13.07 15 020 44.38 8.15 1 947 39.52 13.38 169 12.33 1.11 1 150 63.06 1.45 2 410 38.41 4.30 5 – 7 0.06 63 559 11 639 42.10 24.03 293 45.00 27.55 43 117 41.46 22.05 1 521 13.15 2.30 3 049 62.86 2.67 3 940 41.68 8.26 8 – 12 0.29 338 619 113 047 33.31 41.02 60 089 17.16 11.83 35 872 43.83 41.29 103 857 12.72 8.34 10 262 62.79 10.63 15 492 40.96 23.00 247 0.44 13 – 21 2.19 470 703 169 228 30.95 69.17 2 951 27.35 59.61 9 322 47.24 88.07 164 998 15.37 31.65 57 830 64.76 55.55 66 374 34.40 48.59 2 251 1.35 22 – 25 30.84 35 803 735 28.52 118.62 89 35.27 187.90 12 59.16 328.51 23 400 17.46 97.61 6 460 64.54 178.37 5 107 43.51 108.29

Default 100.00 27 847 6 190 38.41 92.51 136 43.62 70 44.80 13 484 19.29 0.98 4 353 64.21 70.03 3 614 44.24 0.06 16

Total 957 291 300 903 32.42 78 578 22.91 90 340 42.96 307 429 14.79 83 104 64.37 96 937 36.69 2 514

1 Excludes equity EAD.2 Exposure weighted average risk weights have been weighted by the sum of the EAD within each of the PD bands.

Retail portfolioRetail mortgage exposures relate to mortgage loans to individuals and are a combination of both drawn and undrawn EADs.

QRRE relates to cheque accounts, credit cards and revolving personal loans and products, and include both drawn and undrawn exposures.

Retail other covers other branch lending and vehicle finance for retail, retail small and retail medium enterprise portfolios. Branch lending includes both drawn and undrawn exposures, while vehicle and asset finance only has drawn exposures.

Internally developed behavioural scorecards are used to measure the anticipated performance for each account. Mapping of the behaviour score to a PD is performed for each portfolio using a statistical calibration of portfolio-specific historical default experience.

The behavioural scorecard PDs are used to determine the portfolio distribution on the master rating scale. Separate LGD models are used for each product portfolio and are based on historical recovery data. EAD is measured as a percentage of the credit facility limit and is based on historical averages. EAD is estimated per portfolio and per portfolio-specific segment, using internal historical data on limit utilisation.

Corporate, sovereign and bank portfoliosCorporate entities include large companies as well as small and medium enterprises that are managed on a relationship basis or have a combined exposure to the group of more than R7,5 million. Corporate exposures also include specialised lending (project, object and commodity finance as well as income-producing real estate), public sector entities and central counterparties.

Sovereign and bank borrowers include sovereign government entities, central banks, local and provincial government entities, bank financial institutions and non-bank financial institutions.

The creditworthiness of corporate (excluding specialised lending), sovereign and bank exposures is assessed based on a detailed individual assessment of the financial strength of the borrower. This quantitative analysis coupled with a detailed qualitative analysis of the entity together with expert judgement and external rating agency ratings, leads to an allocation of an internal rating to the entity.

Specialised lending’s creditworthiness is assessed on a transactional level, rather than on the financial strength of the borrower, as the group relies on repayment from the cash flows generated by the underlying asset.




Basel: Analysis of PDs, EADs and LGDs by risk grade under the IRB approach

AveragePD%

Corporate Sovereign Banks Retail mortgages QRRE Retail other Equity

TotalEAD1

EADRm

LGD%

Exposureweighted

average riskweight2

%EADRm

LGD%

Exposureweighted

average riskweight2

%EADRm

LGD%

Exposure weighted

average riskweight2

%EADRm

LGD%

Exposureweighted

average riskweight2

%EADRm

LGD%

Exposureweighted

average riskweight2

%EADRm

LGD%

Exposureweighted

average riskweight2

%Exposure

RmPD%

2014Non-default 0.00 976 138 307 178 119 343 85 085 299 845 75 014 89 673 2 759

1 – 4 0.02 24 998 2 848 16.87 18.52 17 220 45.00 8.27 2 979 39.23 12.70 117 12.29 1.18 1 834 38.41 4.38 0 05 – 7 0.06 57 445 12 324 41.67 24.31 328 45.00 27.53 36 992 41.65 24.50 1 457 13.14 2.38 2 613 62.90 3.27 3 731 41.68 7.83 0 08 – 12 0.28 402 742 140 871 30.28 37.90 96 819 27.20 17.26 36 146 43.45 44.19 106 099 12.71 8.20 8 281 63.05 9.19 14 526 41.01 24.74 304 0.26 13 – 21 2.15 455 352 150 058 28.52 67.74 4 921 29.19 64.33 8 968 47.93 92.29 168 756 15.36 31.15 57 893 64.90 56.71 64 756 34.41 49.04 2 455 1.24 22 – 25 30.42 35 601 1 077 30.61 165.48 55 39.54 220.20 23 416 17.43 94.77 6 227 64.77 177.46 4 826 43.55 110.12

Default 100.00 30 675 8 349 40.48 84.04 9 33.07 44.24 69 45.29 13 622 19.25 3.27 4 942 64.34 57.31 3 684 44.21 1.35 78

Total 1 006 813 315 527 30.04 119 352 29.90 85 154 42.99 313 467 14.78 79 956 64.60 93 357 36.67 2 837

2013Non-default 929 444 294 713 78 442 90 270 293 945 78 751 93 323 2 498

1 – 4 0.02 20 760 64 42.08 13.07 15 020 44.38 8.15 1 947 39.52 13.38 169 12.33 1.11 1 150 63.06 1.45 2 410 38.41 4.30 5 – 7 0.06 63 559 11 639 42.10 24.03 293 45.00 27.55 43 117 41.46 22.05 1 521 13.15 2.30 3 049 62.86 2.67 3 940 41.68 8.26 8 – 12 0.29 338 619 113 047 33.31 41.02 60 089 17.16 11.83 35 872 43.83 41.29 103 857 12.72 8.34 10 262 62.79 10.63 15 492 40.96 23.00 247 0.44 13 – 21 2.19 470 703 169 228 30.95 69.17 2 951 27.35 59.61 9 322 47.24 88.07 164 998 15.37 31.65 57 830 64.76 55.55 66 374 34.40 48.59 2 251 1.35 22 – 25 30.84 35 803 735 28.52 118.62 89 35.27 187.90 12 59.16 328.51 23 400 17.46 97.61 6 460 64.54 178.37 5 107 43.51 108.29

Default 100.00 27 847 6 190 38.41 92.51 136 43.62 70 44.80 13 484 19.29 0.98 4 353 64.21 70.03 3 614 44.24 0.06 16

Total 957 291 300 903 32.42 78 578 22.91 90 340 42.96 307 429 14.79 83 104 64.37 96 937 36.69 2 514

1 Excludes equity EAD.2 Exposure weighted average risk weights have been weighted by the sum of the EAD within each of the PD bands.

Equity portfolioThe market-based and PD/LGD approaches are used to model the capital requirement for equity exposure. The market-based approach includes portfolios subject to the simple risk-weight method. For the PD/LGD approach, the group’s approved credit risk grade models are used together with the regulatory prescribed LGD of 90% and maturity factor of five years.

Equity exposures under the simple risk-weight method

2014Rm

2013Rm

Listed 89 89 Unlisted 1 056 2 569

Total 1 145 2 658

Use of internal estimatesThe group’s credit risk rating systems and processes differentiate and quantify credit risk across counterparties and asset classes. Internal risk parameters are used extensively in risk management and business processes, including:

setting risk appetite

setting limits for concentration risk and counterparty limits

credit approval and monitoring

pricing transactions

determining portfolio impairment provisions

calculating economic capital.

35

Credit portfolio characteristics and metrics in terms of BaselCredit portfolio analysisThe credit portfolio is analysed in the tables that follow in terms of the Basel approach and asset class.

Basel: Exposure by approach and asset class1

On-balance sheet Off-balance sheet Securities financing transactions Derivative instruments Total by approach

TotalRm

EAD Grosspast due but not

impaired exposures

Rm

Gross defaulted exposures

Rm

Impairment of exposures

Standard-isedRm

FIRBRm

AIRBRm

Standard-isedRm

FIRBRm

AIRBRm

Standard-isedRm

FIRBRm

AIRBRm

Standard-isedRm

FIRBRm

AIRBRm

Standard-isedRm

FIRBRm

AIRBRm

FIRBRm

AIRBRm

SpecificRm

PortfolioRm

2014Corporate 107 392 12 622 230 356 30 313 54 96 778 2 019 15 267 40 369 31 641 20 497 15 944 171 365 48 440 383 447 603 252 26 454 289 073 1 621 10 540 3 372

Sovereign 77 148 16 957 97 579 521 8 688 2 024 7 670 232 540 4 733 79 925 17 497 118 670 216 092 17 719 101 633 1 9 3

Banks 23 677 14 202 34 496 1 918 69 11 997 147 14 112 73 790 723 73 889 35 073 26 465 102 272 155 356 284 093 28 651 56 503 70 61

Retail exposure 47 892 438 181 11 635 89 163 59 527 527 344 586 871 486 780 30 397 25 575 10 017

Retail mortgages 14 633 300 478 1 782 30 463 16 415 330 941 347 356 313 467 16 940 14 273 3 513

QRRE 3 59 679 35 927 3 95 606 95 609 79 956 4 076 5 061 2 967

Retail other 33 256 78 024 9 853 22 773 43 109 100 797 143 906 93 357 9 381 6 241 3 537

Total 256 109 43 781 800 612 44 387 123 206 626 4 190 29 379 121 829 32 596 94 926 55 750 337 282 168 209 1 184 817 1 690 308 72 824 933 989 32 019 36 194 13 453 5 315

20132

Corporate 85 745 13 064 198 900 27 349 3 144 95 622 1 940 33 255 16 980 14 735 13 564 19 262 129 769 63 027 330 764 523 560 33 455 267 448 537 7 877 3 590

Sovereign 59 150 14 697 60 634 506 3 507 1 350 1 119 190 641 1 233 61 196 15 338 66 493 143 027 16 093 62 485 1 134 95

Banks 48 283 8 608 37 231 1 570 956 11 864 263 20 060 62 761 862 31 929 37 144 50 978 61 553 149 000 261 531 25 230 65 110 70 1

Retail exposure 43 925 429 429 12 611 90 454 56 536 519 883 576 419 487 470 30 878 24 271 10 293

Retail mortgages 13 658 293 391 820 31 809 14 478 325 200 339 678 307 429 17 235 13 923 3 914

QRRE 1 56 089 35 461 1 91 550 91 551 83 104 5 106 4 594 2 874

Retail other 30 266 79 949 11 791 23 184 42 057 103 133 145 190 96 937 8 537 5 754 3 505

Total 237 103 36 369 726 194 42 036 4 100 201 447 3 553 53 315 80 860 15 787 46 134 57 639 298 479 139 918 1 066 140 1 504 537 74 778 882 513 31 416 32 352 13 979 5 469

1 Amount before the application of any offset, mitigation or netting.2 Restated. Refer to pages 103 – 104.




Credit portfolio characteristics and metrics in terms of BaselCredit portfolio analysisThe credit portfolio is analysed in the tables that follow in terms of the Basel approach and asset class.

Basel: Exposure by approach and asset class1

On-balance sheet Off-balance sheet Securities financing transactions Derivative instruments Total by approach

TotalRm

EAD Grosspast due but not

impaired exposures

Rm


Rm


Standard-isedRm

FIRBRm

AIRBRm

Standard-isedRm

FIRBRm

AIRBRm

Standard-isedRm

FIRBRm

AIRBRm

Standard-isedRm

FIRBRm

AIRBRm

Standard-isedRm

FIRBRm

AIRBRm

FIRBRm

AIRBRm

SpecificRm

PortfolioRm

2014Corporate 107 392 12 622 230 356 30 313 54 96 778 2 019 15 267 40 369 31 641 20 497 15 944 171 365 48 440 383 447 603 252 26 454 289 073 1 621 10 540 3 372

Sovereign 77 148 16 957 97 579 521 8 688 2 024 7 670 232 540 4 733 79 925 17 497 118 670 216 092 17 719 101 633 1 9 3

Banks 23 677 14 202 34 496 1 918 69 11 997 147 14 112 73 790 723 73 889 35 073 26 465 102 272 155 356 284 093 28 651 56 503 70 61

Retail exposure 47 892 438 181 11 635 89 163 59 527 527 344 586 871 486 780 30 397 25 575 10 017

Retail mortgages 14 633 300 478 1 782 30 463 16 415 330 941 347 356 313 467 16 940 14 273 3 513

QRRE 3 59 679 35 927 3 95 606 95 609 79 956 4 076 5 061 2 967

Retail other 33 256 78 024 9 853 22 773 43 109 100 797 143 906 93 357 9 381 6 241 3 537

Total 256 109 43 781 800 612 44 387 123 206 626 4 190 29 379 121 829 32 596 94 926 55 750 337 282 168 209 1 184 817 1 690 308 72 824 933 989 32 019 36 194 13 453 5 315

20132

Corporate 85 745 13 064 198 900 27 349 3 144 95 622 1 940 33 255 16 980 14 735 13 564 19 262 129 769 63 027 330 764 523 560 33 455 267 448 537 7 877 3 590

Sovereign 59 150 14 697 60 634 506 3 507 1 350 1 119 190 641 1 233 61 196 15 338 66 493 143 027 16 093 62 485 1 134 95

Banks 48 283 8 608 37 231 1 570 956 11 864 263 20 060 62 761 862 31 929 37 144 50 978 61 553 149 000 261 531 25 230 65 110 70 1

Retail exposure 43 925 429 429 12 611 90 454 56 536 519 883 576 419 487 470 30 878 24 271 10 293

Retail mortgages 13 658 293 391 820 31 809 14 478 325 200 339 678 307 429 17 235 13 923 3 914

QRRE 1 56 089 35 461 1 91 550 91 551 83 104 5 106 4 594 2 874

Retail other 30 266 79 949 11 791 23 184 42 057 103 133 145 190 96 937 8 537 5 754 3 505

Total 237 103 36 369 726 194 42 036 4 100 201 447 3 553 53 315 80 860 15 787 46 134 57 639 298 479 139 918 1 066 140 1 504 537 74 778 882 513 31 416 32 352 13 979 5 469


37

Basel: Exposure by approach and asset class (Rbn)

450

400

350

300

250

200

150

100

50

Other retailCorporate Sovereign Banks Retail mortgages QRRE

� Standardised 2013 � FIRB 2013 � AIRB 2013

Standardised 2014� FIRB 2014� AIRB 2014�

Concentration riskConcentration risk is the risk of loss arising from an excessive concentration of exposure to a single counterparty, an industry, a product, a geography, maturity, or collateral. The group’s credit risk portfolio is well diversified. The bank’s management approach relies on reporting of concentration risk along key dimensions, the setting of portfolio limits and stress testing.




Basel: Exposures by type of asset and industry1

On-balance sheet

Rm

Off-balance sheet

Rm

Securities financing

transactionsRm

Derivativeinstruments

Rm

Total gross exposure

Rm


Rm


SpecificRm

PortfolioRm

2014Agriculture 22 775 5 684 55 28 514 685 285 Mining 39 964 31 861 588 72 413 2 112 857 Manufacturing 62 641 25 491 464 4 698 93 294 852 478 Electricity 15 065 7 629 3 858 26 552 216 89 Construction 12 386 10 743 466 23 595 1 403 294 Wholesale 63 032 23 029 6 163 6 326 98 550 4 897 1 665 Transport 22 324 16 665 1 433 40 422 1 628 395 Finance, real estate and other business services 245 740 41 815 146 546 165 436 599 537 1 458 571 Private households 426 371 70 423 496 794 21 781 8 136 Other 190 204 17 796 2 225 412 210 637 1 162 683

Total 1 100 502 251 136 155 398 183 272 1 690 308 36 194 13 453 5 315

20132

Agriculture 10 302 3 058 158 16 13 534 500 251 Mining 40 054 31 649 2 699 788 75 190 833 418 Manufacturing 55 687 25 880 425 2 760 84 752 1 549 609 Electricity 12 343 5 448 232 93 18 116 16 6 Construction 8 752 11 081 68 19 901 1 280 267 Wholesale 42 509 24 911 14 790 5 520 87 730 2 366 1 751 Transport 17 860 8 247 788 26 895 949 314 Finance, real estate and other business services 268 238 47 799 117 397 108 625 542 059 2 954 1 455 Private households 410 649 72 236 13 482 898 20 576 8 302 Other 133 272 17 274 2 027 889 153 462 1 329 606

Total 999 666 247 583 137 728 119 560 1 504 537 32 352 13 979 5 469

1 Amount before the application of any offset, mitigation or netting.2 Restated. Refer to page 103.

Total gross exposure by industry (%)

� 35 Finance, real estate and other business services (2013: 36)� 29 Private households (2013: 32)� 12 Other (2013: 10)� 6 Wholesale (2013: 6)� 18 Agriculture, mining, manufacturing, electricity, construction and transport (2013: 16)

39

Basel: Exposures by type of asset and geographic region1

On-balance sheet

Rm

Off-balance sheet

Rm

Securities financing

transactionsRm

Derivativeinstruments

Rm


Rm


Rm


SpecificRm

PortfolioRm

2014South Africa 747 098 190 729 21 328 22 928 982 083 24 784 9 297 Other African countries 237 128 39 438 4 101 2 732 283 399 7 498 2 617 Europe 64 394 9 730 109 477 119 017 302 618 70 61 Asia 29 005 5 184 14 863 17 281 66 333 3 503 1 225 North America 9 361 4 947 519 20 454 35 281 South America 10 822 544 4 766 608 16 740 174 140 Other 2 694 564 344 252 3 854 165 113

Total 1 100 502 251 136 155 398 183 272 1 690 308 36 194 13 453 5 315

20132

South Africa 692 319 185 938 20 801 21 257 920 315 23 834 9 746 Other African countries 214 691 39 402 5 513 3 303 262 909 5 986 2 337 Europe 43 876 10 543 81 704 71 529 207 652 465 277 Asia 28 066 5 569 23 159 5 756 62 550 1 762 1 378 North America 10 168 3 989 456 16 794 31 407 174 107 South America 7 876 1 972 6 081 654 16 583 Other 2 670 170 14 267 3 121 131 134

Total 999 666 247 583 137 728 119 560 1 504 537 32 352 13 979 5 469

1 Amount before the application of any offset, mitigation or netting.2 Restated. Refer to page 103.

Total gross exposure by geographic region (%)

� 58 South Africa (2013: 61)� 17 Rest of Africa (2013: 18)� 25 Outside Africa (2013: 21)




Basel: Exposures by residual contractual maturity1

Less than1 year

Rm

1 to 5years

Rm

Greater than5 years

Rm


Rm

2014Corporate 288 276 272 969 42 007 603 252 Sovereign 153 666 45 307 17 119 216 092 Banks 212 334 56 775 14 984 284 093 Retail exposure 165 309 67 621 353 941 586 871

Retail mortgages 4 641 2 828 339 887 347 356 QRRE 95 609 95 609 Retail other 65 059 64 793 14 054 143 906

Total 819 585 442 672 428 051 1 690 308

20132

Corporate 252 033 234 722 36 805 523 560Sovereign 94 067 36 492 12 468 143 027 Banks 197 544 49 744 14 243 261 531 Retail exposure 168 122 62 753 345 544 576 419

Retail mortgages 8 962 4 124 326 592 339 678 QRRE 91 551 91 551 Retail other 67 609 58 629 18 952 145 190

Total 711 766 383 711 409 060 1 504 537


41

Estimated losses versus actual lossesThe table on the next page provides a comparison of actual PDs, LGDs and EADs to the estimated through-the-cycle PDs, LGDs and EADs.

Note that this comparison is an approximation as the PD, LGD and EAD actual and estimated parameters are different for reasons that include:

Estimated PDs are determined at the beginning of the 12-month period to 31 December 2014 using calibrated regulatory models. The models are calibrated to long-run default experience to ensure stable regulatory models over an entire credit cycle and would tend to underestimate actual defaults at the top of the credit cycle and overestimate actual defaults at the bottom of the credit cycle. The actual PDs are the defaults experienced over the 12-month period. A change in the vehicle and asset finance definition of default has occurred between the 2013 and 2014 reporting periods, resulting in different PD values for other retail exposure class.

LGD estimates are determined at the beginning of the 12-month cycle using the regulatory long-run average-based models that include downturn adjustments. Actual LGD values can take several years to be determined as defaulted exposures have to reach a write-off stage to allow for accurate LGD calculations. In order to determine comparable actual LGD values, all accounts that reached a write-off stage during the prior three-year period were used to determine the actual LGD values.

The EAD ratio reflects estimated through-the-cycle EADs, used to derive the regulatory expected loss, as a percentage of EADs derived from the actual losses. The calculated EAD ratios are averages over the prior three-year period, to enable meaningful averages to be determined.

The analysis is based only on the AIRB portfolios.

The zero or low level of bank and sovereign defaults, experienced in the AIRB portfolio during the period and comparative periods, did not allow for a meaningful calculation of actual LGD and PD values for sovereign and banks’ values or a meaningful calculation of sovereign or bank EAD ratios.

Loss analysisActual lossesThe table below shows the actual losses experienced in the group’s IRB exposure classes during the year ended 31 December 2014, compared to the comparable year ended 31 December 2013.

Actual losses comprise impairments as determined by IFRS, and exclude post write-off recoveries. The values displayed in the table exclude all standardised approach portfolios.

Basel: Analysis of actual losses1

2014Rm

2013Rm

IRB exposure classCorporate 1 296 1 078 Sovereign 32 Banks 53 Retail exposure 7 486 7 308

Retail mortgages 2 541 2 496 QRRE 3 036 3 079 Other retail 1 909 1 733

Total 8 867 8 386

1 Excludes recoveries post write-off recoveries and all the standardised approach portfolios.




Basel: IRB exposure class1,2

PD LGD3 EAD

Estimated%

Actual%

Estimated%

Actual%

Estimate toactual ratio

%

2014Corporate 1.60 0.62 33.00 21.96 110.10 Sovereign 2.23 29.22 Banks 0.93 40.74 Retail exposure 4.01 4.57 27.10 22.91 102.72

Retail mortgages 3.97 4.21 18.64 15.53 101.11 QRRE 4.91 6.33 63.72 51.21 104.47 Other retail 3.43 4.22 42.25 41.98 106.51

Total 2.56 2.15 27.49 22.79 102.88

2013Corporate 1.94 1.40 32.66 15.20 103.31 Sovereign 1.52 16.75 Banks 0.85 0.17 37.21 66.10 261.79 Retail exposure 4.67 4.37 26.19 22.54 104.70


Total 2.83 2.27 26.56 22.27 105.07

2012Corporate 2.24 1.54 34.40 21.58 137.42 Sovereign 1.23 16.54 Banks 0.78 39.69 Retail exposure 4.21 4.12 26.61 22.60 105.10


Total 2.64 2.11 27.16 22.53 107.40

1 Excludes all the standardised approach portfolios.2 No data in the columns headed actual reflects either that no default occurred or, if there was a default, there was no loss incurred.3 Excludes FIRB portfolios.

43

Wrong-way risk arises where there is a positive correlation between counterparty default and transaction exposure, and a negative correlation between transaction exposure and the value of collateral at the point of counterparty default. This risk is addressed by taking into consideration the high correlation between the default event and exposure to the counterparty when calculating the potential exposure and security margin requirements on these transactions.

To manage actual or potential portfolio risk concentrations in areas of higher credit risk and credit portfolio growth, the group implements hedging and other strategies from time-to-time. This is done at individual counterparty, sub-portfolio and portfolio levels through the use of syndication, distribution and sale of assets, asset and portfolio limit management, credit derivatives and credit protection.

Exposure and mitigation by asset class (Rbn)

700

600

500

400

300

200

100

� Gross exposure 2014

Gross exposure 2013�

Corporate Banks Sovereign Retail

� Credit risk mitigation 2014

Credit risk mitigation 2013�

Credit risk mitigationCollateral, guarantees, credit derivatives and on- and off-balance sheet netting are widely used to mitigate credit risk. Credit risk mitigation policies and procedures ensure that credit risk mitigation techniques are acceptable, used consistently, valued appropriately and regularly, and meet the risk requirements of operational management for legal, practical and timely enforcement. Detailed processes and procedures are in place to guide each type of mitigation used.

The main types of banking book collateral taken are:

mortgage bonds over residential, commercial and industrial properties

cession of book debts

bonds over plant and equipment

the underlying movable assets financed under leases and instalment sales.

Reverse repurchase agreements are underpinned by the assets being financed.

Refer to the table on page 46, Basel: Securities financing transactions.

Guarantees and related legal contracts are often required, particularly in support of credit extension to groups of companies and weaker counterparties. Guarantor counterparties include banks, parent companies, shareholders and associated counterparties. Creditworthiness is established for the guarantor as for other counterparty credit approvals.

For derivative transactions, the group typically uses internationally recognised and enforceable International Swaps and Derivatives Association (ISDA) agreements, with a credit support annexure, where collateral support is considered necessary. Other credit protection terms may be stipulated, such as limitations on the amount of unsecured credit exposure acceptable, collateralisation if mark-to-market credit exposure exceeds acceptable limits, and termination of the contract if certain credit events occur, for example, downgrade of the counterparty’s public credit rating.




Basel: Credit risk mitigation for portfolios under the IRB approach

Eligiblefinancial

collateralRm

Othereligible IRB

collateralRm

Guaranteesand credit

derivativesRm

Effectsof netting

agreements1

Rm

Totalcredit riskmitigation

Rm

Totalexposure

Rm

2014Corporate 64 600 69 867 6 173 29 773 170 413 431 887Sovereign 8 031 1 708 4 344 14 083 136 167 Banks 94 386 103 898 198 284 257 628 Retail exposure 374 992 374 992 527 344

Retail mortgages 317 036 317 036 330 941 QRRE 305 305 95 606 Retail other 57 651 57 651 100 797

Total 167 017 446 567 6 173 138 015 757 772 1 353 026

20132

Corporate 65 620 57 459 15 771 20 807 159 657 393 791Sovereign 1 545 367 1 004 2 916 81 831 Banks 83 563 160 60 531 144 254 210 553 Retail exposure 374 862 374 862 519 883

Retail mortgages 317 383 317 383 325 200 QRRE 313 313 91 550 Retail other 57 166 57 166 103 133

Total 150 728 432 688 15 931 82 342 681 689 1 206 058

1 Netting is not equivalent to offsetting in terms of IFRS.2 Restated. Refer to pages 103 – 104.

Basel: Credit risk mitigation for portfolios under the standardised approach

Eligiblefinancial

collateralRm

Guaranteesand credit

derivativesRm

Effectsof netting

agreements1

Rm

Totalcredit riskmitigation

Rm

Totalexposure

Rm

2014Corporate 12 166 299 9 479 21 944 171 365Sovereign 2 2 79 925 Banks 251 58 309 26 465 Retail exposure 111 111 59 527

Total 12 530 299 9 537 22 366 337 282

20132

Corporate 5 659 414 1 527 7 600 129 769Sovereign 61 196 Banks 255 1 256 50 978 Retail exposure 56 536

Total 5 914 414 1 528 7 856 298 479

1 Netting is not equivalent to offsetting in terms of IFRS.2 Restated. Refer to pages 103 – 104.

45

Counterparty credit riskThe group is exposed to counterparty credit risk through movements in the fair value of securities financing and derivative contracts. The risk amounts reflect the aggregate replacement costs that would be incurred by the group in the event of counterparties defaulting on their obligations.

The group’s exposure to counterparty credit risk is affected by the nature of the trades, the creditworthiness of the counterparty, and netting and collateral arrangements. Counterparty credit risk is measured in potential future exposure terms and recognised on a net basis where netting agreements are in place and are legally recognised, or otherwise on a gross basis. Exposures are generally marked-to-market daily. Cash or near cash collateral is posted where contractually provided for.

Counterparty credit risk is subjected to explicit credit limits which are formulated and approved for each counterparty and economic group, with specific reference to its credit rating and other credit exposures.

The tables that follow detail the group’s exposure to securities financing transactions and derivatives.

Basel: Securities financing transactions

2014Rm

20131

Rm

ExposureWith master netting agreement 29 164 42 459 Without master netting agreement 126 234 95 269

Total 155 398 137 728

CollateralCash 32 561 40 581 Commodities 5 378 7 880 Debt securities 117 806 93 302 Equities 8 359 6 584

Total 164 104 148 347

EAD 9 250 10 416





Basel: Derivatives exposure

2014 20131

Non-centrally

clearedRm

Centrally cleared

Non-centrally

clearedRm

Centrally cleared

On behalfof clients

Rm

Totalexposure to CCPs

Rm

On behalfof clients

Rm

Totalexposure to CCPs

Rm

Notional principal amount2

Interest rate products 4 246 161 61 936 585 838 4 036 291 2 162 459 Forex and gold 1 424 311 1 886 12 555 1 905 490 71 124 Equities 71 177 150 390 204 320 49 352 159 041 228 040 Precious metals 37 928 52 6 535 45 204 3 9 046 Other commodities 137 046 9 923 151 151 193 094 18 326 109 984 Credit derivatives 131 936 176 316

Protection bought 72 603 95 201 Protection sold 59 333 81 115

Total 6 048 559 224 187 960 399 6 405 747 177 443 509 653

Netted current credit exposure (net fair value)Gross positive fair value 168 495 1 473 13 304 108 387 379 10 794

Interest rate products 35 154 2 4 256 39 429 744 Forex and gold 93 473 14 49 49 614 Equities 1 997 1 370 2 796 3 113 339 589 Precious metals 2 291 33 2 512 76 Other commodities 33 285 87 6 170 11 300 40 9 385 Credit derivatives 2 295 2 419

Protection bought 1 756 1 362 Protection sold 539 1 057

Netting benefits (148 625) (1 059) (5 021) (82 892) (248) (7 826)

Total 19 870 414 8 283 25 495 131 2 968

EAD 59 756 1 263 20 861 59 072 2 925 13 949

CollateralCash 14 413 14 767 Gold 1 3 Debt securities 1 937 1 525

Total 16 351 16 295

1 Restated. Refer to page 103. 2 Notional principal amount for derivative assets and liabilities.

47

The group uses SEs to securitise customer loans and advances that it has originated to diversify its sources of funding for asset origination, for capital efficiency purposes and to reduce risk. In addition, the group plays a secondary role as an investor in certain third party securitisation note issuances (SEs established by third parties).

The SEs established by the group are:

Blue Granite Investments No 1 (RF) Limited (BG 1)




Siyakha Fund (RF) Limited (Siyakha)

Blue Titanium Conduit (RF) Limited (BTC).

SecuritisationSecuritisation is a transaction whereby the credit risk associated with an exposure, or pool of exposures, is tranched and where payments to investors in the transaction are dependent upon the performance of the exposure or pool of exposures.

A traditional securitisation involves the transfer of the exposures being securitised to a structured entity (SE) which issues securities. In a synthetic securitisation, the tranching is achieved by the use of credit derivatives and the exposures are not removed from the SOFP.

Basel: Roles fulfilled in securitising assets

Securitisation transactions Originator Investor ServicerLiquidityprovider

Creditenhancement

providerSwap

counterparty

Traditional securitisationsBG 1BG 2BG 3BG 4Siyakha

Asset-backed commercial paper programmeBTC

Third party transactions

Basel: Securitisation transactions

Asset typeYear

initiatedExpected

close

Assets securitised

Rbn

Assetsoutstanding

Notesoutstanding1

Retainedexposure1,2

2014Rbn

2013Rbn

2014Rbn

2013Rbn

2014Rbn

2013Rbn

Traditional securitisations 17,9 8,9 10,0 9,8 11,0 5,4 5,9

BG 13,4 Retail mortgages 2005 2032 4,6 1,0 1,3 1,1 1,4 1,0 1,2BG 23 Retail mortgages 2006 2041 2,8 2,0 2,1 2,2 2,3 1,2 1,2BG 33 Retail mortgages 2006 2032 3,0 1,6 1,8 1,8 2,0 1,1 1,2BG 43 Retail mortgages 2007 2037 5,1 2,7 3,0 3,0 3,4 1,2 1,4Siyakha Retail mortgages 2007 2043 2,4 1,6 1,8 1,7 1,9 0,9 0,9

Asset-backed commercial paper programme BTC4 Various 2002 N/A N/A 4,1 4,3 4,1 4,3 0,7 0,3

Total N/A 17,9 13,0 14,3 13,9 15,3 6,1 6,2

1 Capital plus accrued interest.2 Includes notes, first and second loss subordinated loans and notes held by BTC.3 Rating agency: Moody’s.4 Rating agency: Fitch.




Moody’s Investor Services and/or Fitch act as rating agencies. R4,6 billion of securitisation activities took place during the year ended 31 December 2014 (2013: R2,3 billion) (relates to the facilitation of the securitisation of third-party assets into an SE that is not consolidated by the group).

The transfer of assets by the group to an SE may give rise to the full or partial derecognition of the financial assets concerned. Only in the event that derecognition is achieved are sales and any resultant gains or losses on sales recognised in the financial statements. Where the SEs are consolidated at group level, such gains or losses are eliminated.

For originated and sponsored or administered securitisations consolidated under IFRS (that is, BG1 – 4, Siyakha Fund and BTC) intragroup exposures to and between these securitisations have been eliminated and the underlying assets consolidated in the relevant sections (that is, primarily retail mortgages) of the risk disclosure. Only exposures to securitisations of assets originated by third parties are disclosed below. The approach applied in the calculation of risk-weighted assets is dependent on the group’s approved model for the underlying assets and the existence of a rating from an eligible external credit assessment institution. To date, the group has applied the standardised approach, ratings-based approach and standard formula approach, where relevant, in the calculation of risk-weighted assets. For local securitisations in South Africa,

Basel: Securitised on-balance sheet exposures

2014 2013

Retailmortgages

Rm

Retailloans

RmTotal

RmTotal

Rm

Standardised – unrated1 100IRB 1 606 569 2 175 1 552

Unrated1 766 766 141Investment grade 840 569 1 409 1 411

Total 1 606 569 2 175 1 652

1 This includes rated securitisation exposures whose ratings are not eligible for recognition from a regulatory perspective.

Basel: Securitised off-balance sheet exposures

2014 2013

Retailmortgages

Rm

Retailloans

Rm Total

Rm Total

Rm

Standardised – unrated1 500 500 400 IRB 2 011 218 2 229 3 425

Unrated1 1 438 1 438 2 701 Investment grade 573 218 791 724

Total 2 011 718 2 729 3 825

1 This includes rated securitisation exposures whose ratings are not eligible for recognition from a regulatory perspective.

49

Non-performing loansNon-performing loans are those loans for which:

the group has identified objective evidence of default, such as a breach of a material loan covenant or condition, or

instalments are due and unpaid for 90 days or more.

Non-performing but not specifically impaired loans are not specifically impaired due to the expected recoverability of the full carrying value when considering the recoverability of future cash flows, including collateral.

Non-performing specifically impaired loans are those loans that are regarded as non-performing and for which there has been a measurable decrease in estimated future cash flows. Specifically impaired loans are further analysed into the following categories:

Sub-standard: Items that show underlying well-defined weaknesses and are considered to be specifically impaired.

Doubtful: Items that are not yet considered final losses due to some pending factors that may strengthen the quality of the items.

Loss: Items that are considered to be uncollectible in whole or in part. The group provides fully for its anticipated loss, after taking collateral into account.

Credit portfolio characteristics and metrics in terms of IFRSAnalysis of loans and advancesThe tables on the pages that follow analyse the credit quality of loans and advances measured in terms of IFRS.

Maximum exposure to credit riskLoans and advances are analysed and categorised based on credit quality using the following definitions.

Performing loansPerforming loans are loans which are neither past due nor specifically impaired loans. These loans are current and fully compliant with all contractual terms and conditions. Normal monitoring loans within this category are generally rated 1 to 21, and close monitoring loans are generally rated 22 to 25 using the group’s master rating scale.

Early arrears but not specifically impaired loans include those loans where the counterparty has failed to make contractual payments and payments are less than 90 days past due, but it is expected that the full carrying value will be recovered when considering future cash flows, including collateral. Ultimate loss is not expected but could occur if the adverse conditions persist.




Non-performing loans

Performing loans

Normal monitoring

(Rm)

2014

865 486

2013

780 159

Close monitoring

(Rm)

2014

20 239

2013

18 311

Neither past due nor specifically

impaired loans (Rm)

2014

885 725

2013

798 470

Early arrears but not

specifically impaired loans

(Rm)

2014

32 019

2013

31 416

Sub-standard (Rm)

2014

7 222

2013

6 343

Doubtful (Rm)

2014

18 871

2013

18 128

Loss (Rm)

2014

4 384

2013

4 650

Loans1

Non- performing but not specifically impaired loans

(Rm)

2014

30

2013

978

Specifically impaired

loans (Rm)

2014

30 477

2013

29 121

1 Excluding discontinued operation’s exposures which are presented separately in the table that follows. Portfolio credit impairments. Specific credit impairments.

51

IFRS: Maximum exposure to credit risk by credit quality

Gross advances

totalRm

Performing loans Non-performing loans

Total non-

performing loans

Rm

Non-performing

loans%

Neither past due nor specifically impaired Not specifically impaired Specifically impaired loans

Normal monitoring

Rm

Close monitoring

Rm

Earlyarrears

Rm

Non-performing1

Rm

Sub-standard

RmDoubtful

RmLossRm

TotalRm

Securitiesand

expectedrecoveries

onspecifically

impaired loans

Rm

Net after securities

andexpected

recoverieson

specifically impaired

loansRm

Balancesheet

impair-ments

for non-performing specifically

impaired loans

Rm

Grossspecific

impairment coverage

%

2014Personal & Business Banking 589 811 514 379 20 054 30 817 4 865 16 163 3 533 24 561 14 314 10 247 10 247 42 24 561 4.2

Mortgage loans 317 069 274 374 11 803 16 996 3 062 10 420 414 13 896 10 351 3 545 3 545 26 13 896 4.4Instalment sale and finance leases 72 483 63 766 1 908 4 119 285 1 399 1 006 2 690 1 259 1 431 1 431 53 2 690 3.7Card debtors 30 029 24 723 1 910 1 898 391 333 774 1 498 468 1 030 1 030 69 1 498 5.0Other loans and advances 170 230 151 516 4 433 7 804 1 127 4 011 1 339 6 477 2 236 4 241 4 241 65 6 477 3.8

Personal unsecured lending 54 362 43 594 1 943 4 667 454 2 885 819 4 158 1 247 2 911 2 911 70 4 158 7.6Business lending and other 115 868 107 922 2 490 3 137 673 1 126 520 2 319 989 1 330 1 330 57 2 319 2.0

Corporate & Investment Banking 412 717 405 386 185 1 202 30 2 357 2 708 849 5 914 2 771 3 143 3 143 53 5 944 1.4

Corporate loans 365 008 357 977 185 1 201 28 2 192 2 610 815 5 617 2 611 3 006 3 006 54 5 645 1.5Commercial property finance 47 709 47 409 1 2 165 98 34 297 160 137 137 46 299 0.6

Other services (54 277) (54 279) 2 2 2 2 100 2

Gross loans and advances 948 251 865 486 20 239 32 019 30 7 222 18 871 4 384 30 477 17 085 13 392 13 392 44 30 507 3.2

Discontinued operation’s loans and advances 50 026 49 965 61 61 61 61 100 61 0.1

Less:Impairments for loans and advances (18 707)Tutuwa2 loans and advances IFRS adjustment (1 303)Discontinued operation’s loans and advances (50 026)

Net loans and advances 928 241

Add the following other banking activities exposures:Cash and balances with central banks 64 302 Derivative assets 56 382 Financial investments 148 225 Trading assets 70 823 Pledged assets 7 194 Other financial assets 8 508

Total on-balance sheet exposure of continuing operations 1 283 675 Discontinued operation – financial assets 218 900

Total on-balance sheet exposure 1 502 575 Off-balance sheet exposureLetters of credit and bankers’ acceptances 16 162 Guarantees 53 365 Irrevocable unutilised facilities 80 881 Commodities and securities lending transactions 18 797

Total exposure to credit risk 1 671 780

1 Includes loans of R24 million that are past due but not specifically impaired.2 Tutuwa is the group’s black economic empowerment (BEE) ownership initiative.




IFRS: Maximum exposure to credit risk by credit quality

Gross advances

totalRm


Total non-

performing loans

Rm

Non-performing

loans%


Normal monitoring

Rm

Close monitoring

Rm

Earlyarrears

Rm

Non-performing1

Rm

Sub-standard

RmDoubtful

RmLossRm

TotalRm

Securitiesand

expectedrecoveries

onspecifically

impaired loans

Rm


andexpected

recoverieson


loansRm

Balancesheet

impair-ments


impaired loans

Rm

Grossspecific

impairment coverage

%


Mortgage loans 317 069 274 374 11 803 16 996 3 062 10 420 414 13 896 10 351 3 545 3 545 26 13 896 4.4Instalment sale and finance leases 72 483 63 766 1 908 4 119 285 1 399 1 006 2 690 1 259 1 431 1 431 53 2 690 3.7Card debtors 30 029 24 723 1 910 1 898 391 333 774 1 498 468 1 030 1 030 69 1 498 5.0Other loans and advances 170 230 151 516 4 433 7 804 1 127 4 011 1 339 6 477 2 236 4 241 4 241 65 6 477 3.8

Personal unsecured lending 54 362 43 594 1 943 4 667 454 2 885 819 4 158 1 247 2 911 2 911 70 4 158 7.6Business lending and other 115 868 107 922 2 490 3 137 673 1 126 520 2 319 989 1 330 1 330 57 2 319 2.0

Corporate & Investment Banking 412 717 405 386 185 1 202 30 2 357 2 708 849 5 914 2 771 3 143 3 143 53 5 944 1.4

Corporate loans 365 008 357 977 185 1 201 28 2 192 2 610 815 5 617 2 611 3 006 3 006 54 5 645 1.5Commercial property finance 47 709 47 409 1 2 165 98 34 297 160 137 137 46 299 0.6

Other services (54 277) (54 279) 2 2 2 2 100 2


Discontinued operation’s loans and advances 50 026 49 965 61 61 61 61 100 61 0.1





Total on-balance sheet exposure 1 502 575 Off-balance sheet exposureLetters of credit and bankers’ acceptances 16 162 Guarantees 53 365 Irrevocable unutilised facilities 80 881 Commodities and securities lending transactions 18 797


1 Includes loans of R24 million that are past due but not specifically impaired.2 Tutuwa is the group’s black economic empowerment (BEE) ownership initiative.

53

IFRS: Maximum exposure to credit risk by credit quality continued

Gross advances

totalRm


Total non-

performing loans

Rm

Non-performing

loans%


Normal monitoring

Rm

Close monitoring

Rm

Earlyarrears

Rm

Non-performing1

Rm

Sub-standard

RmDoubtful

RmLossRm

TotalRm

Securitiesand

expectedrecoveries

onspecifically

impaired loans

Rm


andexpected

recoverieson


loansRm

Balancesheet

impair-ments


impaired loans

Rm

Grossspecific

impairment coverage

%


Mortgage loans 308 908 267 160 10 469 17 292 3 835 9 623 529 13 987 10 044 3 943 3 943 28 13 987 4.5Instalment sale and finance leases 70 700 62 467 1 789 4 197 305 1 253 689 2 247 1 092 1 155 1 155 51 2 247 3.2Card debtors 27 786 22 550 1 882 2 058 230 337 729 1 296 372 924 924 71 1 296 4.7Other loans and advances 148 178 130 073 3 781 7 753 1 162 3 688 1 721 6 571 2 077 4 494 4 494 68 6 571 4.4

Personal unsecured lending 50 476 39 457 1 906 5 055 503 2 357 1 198 4 058 1 131 2 927 2 927 72 4 058 8.0Business lending and other 97 702 90 616 1 875 2 698 659 1 331 523 2 513 946 1 567 1 567 62 2 513 2.6

Corporate & Investment Banking 350 880 344 376 390 116 978 811 3 227 982 5 020 1 735 3 285 3 285 65 5 998 1.7

Corporate loans 308 667 302 825 390 92 918 512 3 012 918 4 442 1 318 3 124 3 124 70 5 360 1.7Commercial property finance 42 213 41 551 24 60 299 215 64 578 417 161 161 28 638 1.5

Other services (46 467) (46 467) (1) 1 1


Discontinued operation’s loans and advances 58 838 58 564 251 23 274 98 176 176 64 274 0.5





Total on-balance sheet exposure 1 311 486Off-balance sheet exposureLetters of credit and bankers’ acceptances 17 303 Guarantees 50 287 Irrevocable unutilised facilities 77 695 Commodities and securities lending transactions 9 365


1 Includes loans of R42 million that are past due but not specifically impaired.2 Tutuwa is the group’s BEE ownership initiative.




IFRS: Maximum exposure to credit risk by credit quality continued

Gross advances

totalRm


Total non-

performing loans

Rm

Non-performing

loans%


Normal monitoring

Rm

Close monitoring

Rm

Earlyarrears

Rm

Non-performing1

Rm

Sub-standard

RmDoubtful

RmLossRm

TotalRm

Securitiesand

expectedrecoveries

onspecifically

impaired loans

Rm


andexpected

recoverieson


loansRm

Balancesheet

impair-ments


impaired loans

Rm

Grossspecific

impairment coverage

%


Mortgage loans 308 908 267 160 10 469 17 292 3 835 9 623 529 13 987 10 044 3 943 3 943 28 13 987 4.5Instalment sale and finance leases 70 700 62 467 1 789 4 197 305 1 253 689 2 247 1 092 1 155 1 155 51 2 247 3.2Card debtors 27 786 22 550 1 882 2 058 230 337 729 1 296 372 924 924 71 1 296 4.7Other loans and advances 148 178 130 073 3 781 7 753 1 162 3 688 1 721 6 571 2 077 4 494 4 494 68 6 571 4.4

Personal unsecured lending 50 476 39 457 1 906 5 055 503 2 357 1 198 4 058 1 131 2 927 2 927 72 4 058 8.0Business lending and other 97 702 90 616 1 875 2 698 659 1 331 523 2 513 946 1 567 1 567 62 2 513 2.6

Corporate & Investment Banking 350 880 344 376 390 116 978 811 3 227 982 5 020 1 735 3 285 3 285 65 5 998 1.7

Corporate loans 308 667 302 825 390 92 918 512 3 012 918 4 442 1 318 3 124 3 124 70 5 360 1.7Commercial property finance 42 213 41 551 24 60 299 215 64 578 417 161 161 28 638 1.5

Other services (46 467) (46 467) (1) 1 1


Discontinued operation’s loans and advances 58 838 58 564 251 23 274 98 176 176 64 274 0.5





Total on-balance sheet exposure 1 311 486Off-balance sheet exposureLetters of credit and bankers’ acceptances 17 303 Guarantees 50 287 Irrevocable unutilised facilities 77 695 Commodities and securities lending transactions 9 365


1 Includes loans of R42 million that are past due but not specifically impaired.2 Tutuwa is the group’s BEE ownership initiative.

55

IFRS: Ageing of loans and advances past due but not impaired

Less than31 days

Rm

31 – 60days

Rm

61 – 90days

Rm

91 – 180days

Rm

More than180 days

RmTotal

Rm

2014Personal & Business Banking 20 813 6 562 3 442 30 817

Mortgage loans 11 028 4 098 1 870 16 996 Instalment sale and finance leases 3 045 823 251 4 119 Card debtors 1 222 433 243 1 898 Other loans and advances 5 518 1 208 1 078 7 804

Personal unsecured lending 3 215 853 599 4 667 Business term lending and other 2 303 355 479 3 137

Corporate & Investment Banking 694 508 24 1 226

Corporate loans 694 507 24 1 225 Commercial property finance 1 1

Total 20 813 7 256 3 950 24 32 043

2013Personal & Business Banking 20 569 7 142 3 589 31 300

Mortgage loans 10 701 4 431 2 160 17 292 Instalment sale and finance leases 2 869 951 377 4 197 Card debtors 1 251 507 300 2 058 Other loans and advances 5 748 1 253 752 7 753

Personal unsecured lending 3 654 858 543 5 055 Business term lending 2 094 395 209 2 698

Corporate & Investment Banking 26 90 42 158

Corporate loans 2 90 42 134 Commercial property finance 24 24

Total 20 595 7 232 3 589 42 31 458

Renegotiated loans and advancesRenegotiated loans and advances are exposures which have been refinanced, rescheduled, rolled over or otherwise modified following weaknesses in the counterparty’s financial position, and where it has been judged that normal repayment under the revised conditions will likely continue after the restructure. Loans renegotiated in 2014 that would otherwise be past due or impaired comprised R4,3 billion (2013: R6,7 billion).

Of this amount, R3,4 billion (2013: R2,5 billion) of mortgage loans that would otherwise be past due or impaired were restructured during 2014.

CollateralThe table on the following page shows the financial effect that collateral has on the group’s maximum exposure to credit risk. The table is presented according to Basel asset categories and includes collateral that may not be eligible for recognition under Basel but that management takes into consideration in the management of the group’s exposures to credit risk. All on- and off-balance sheet exposures that are exposed to credit risk, including non-performing loans, have been included.

Collateral includes:

financial securities that have a tradable market, such as shares and other securities

physical items, such as property, plant and equipment

financial guarantees, suretyships and intangible assets.




Netting agreements, which do not qualify for offset under IFRS but which are nevertheless enforceable, are included as part of the group’s collateral for risk management purposes. All exposures are presented before the effect of any impairment provisions. In the retail portfolio, 56% (2013: 56%) is fully collateralised. The R4 138 million (2013: R2 703 million) of retail accounts that lie within the 0% to 50% range of collateral coverage mainly comprise accounts which are either in default or legal. The total average collateral coverage for all retail mortgage exposures in the 50% to 100% collateral coverage category is 90% (2013: 90%). Of the group’s total exposure, 35% (2013: 36%) is unsecured and mainly reflects exposures to well-rated corporate counterparties, bank counterparties and sovereign entities.

IFRS: Collateral

Total exposure

Rm

Un-secured

Rm

Secured exposure

Rm

Netting agree-ments

Rm

Secured exposure

after netting

Rm

Total collateral coverage

≤0%to 50%

Rm

51% – 100%

Rm>100%

Rm

2014Corporate 569 940 204 918 365 022 32 155 332 867 89 645 190 129 53 093Sovereign 189 208 168 104 21 104 3 200 17 904 6 120 11 784Banks 309 602 69 484 240 118 98 346 141 772 9 724 54 919 77 129Retail 515 820 111 400 404 420 95 404 325 4 138 113 414 286 773

Retail mortgage 322 949 1 022 321 927 321 927 575 42 081 279 271Other retail 192 871 110 378 82 493 95 82 398 3 563 71 333 7 502

Total 1584 570 553 906 1030 664 133 796 896 868 103 507 364 582 428 779

Add: financial assets not exposed to credit risk 107 301Less: impairments for loans and advances (18 707)Less: unrecognised off-balance sheet items (169 205)Less: IFRS adjustment (1 384)

Total exposure 1 502 575

Reconciliation to SOFPCash and balances with central banks 64 302Derivative assets 56 382Trading assets 70 823Pledged assets 7 194Financial investments 148 225Loans and advances 928 241Other financial assets 8 508Discontinued operation – financial assets 218 900

Total 1 502 575

57

IFRS: Collateral continued

Total exposure

Rm

Un-secured

exposureRm

Secured exposure

Rm

Netting agree-ments

Rm

Secured exposure

after netting

Rm

Total collateral coverage

≤0%– 50%

Rm

51% – 100%

Rm>100%

Rm

2013Corporate 530 760 212 061 318 699 22 756 295 943 77 758 145 895 72 290Sovereign 123 877 110 394 13 483 575 12 908 698 11 322 888Banks 251 039 67 673 183 366 56 073 127 293 7 239 60 660 59 394Retail exposure 494 908 112 504 382 404 1 382 403 2 703 103 508 276 192

Retail mortgage 313 246 7 901 305 345 305 345 1 082 33 798 270 465Other retail 181 662 104 603 77 059 1 77 058 1 621 69 710 5 727

Total 1 400 584 502 632 897 952 79 405 818 547 88 398 321 385 408 764

Add: financial assets not exposed to credit risk 85 736Less: impairments for loans and advances (19 166)Less: unrecognised off-balance sheet items (154 650)Less: Tutuwa and treasury shares IFRS adjustment (1 018)

Total exposure 1 311 486

Reconciliation to SOFPCash and balances with central banks 53 310Derivative assets 61 657Trading assets 53 982Pledged assets 5 365Financial investments 104 822Loans and advances 839 620Other financial assets 10 524Discontinued operation – financial assets 182 206

Total on-balance sheet exposure 1 311 486




Insurance operations

Consolidated mutual fundsLiberty invests in mutual funds and is therefore also exposed to credit risk of the underlying assets in which the mutual funds are invested. Liberty’s exposure to mutual funds is classified at fund level and not at the underlying asset level and, although mutual funds are not rated, fund managers are required to invest in credit assets within the defined parameters stipulated in the fund’s mandate. These rules limit the extent to which fund managers can invest in unlisted and/or unrated credit assets and generally restrict funds to the acquisition of investment grade assets. Liberty assesses the funds in which it has invested to determine whether such funds are controlled by Liberty, in which case the funds are consolidated into Liberty’s results and therefore the group’s results.

The mutual funds, into which Liberty and the group has invested and which are defined as subsidiaries, are managed by STANLIB Limited, a wholly-owned Liberty subsidiary, and other asset managers as selected and mandated by Liberty from time to time.

59

Credit exposure to debt instrumentsThe table below provides information regarding the aggregated credit risk exposure of Liberty to debt instruments categorised by credit ratings, if available, as at 31 December 2014.

Exposure to credit risk

A- andabove

Rm BBB+

Rm BBBRm

BBB-Rm

BB+ BBBB- and

belowRm

Notrated

Rm

Pooledfunds

Rm

Totalcarrying

valueRm

20141

Debt instruments 5 184 38 213 28 750 13 390 1 660 5 503 3 928 3 239 18 715 118 582 Investment policies 6 515 1 128 7 643 Local prepayments, insurance and other receivables 52 9 12 3 87 69 82 2 604 2 918 Foreign prepayments, insurance and other receivables 8 742 750 Reinsurance assets 61 998 142 138 219 1 558 Derivatives and collateral deposits 1 259 1 644 4 717 102 55 7 777 Loan receivables to joint ventures and associatesCash and cash equivalents 3 255 1 446 6 589 1 305 196 1 194 13 985

Total assets bearing credit risk 9 811 41 312 40 068 21 323 2 745 5 714 4 344 9 181 18 715 153 213

Credit exposure allocation estimated attributable to:Shareholders 76 294 Policyholders 56 340 Non-controlling interest and third party liabilities on mutual funds 20 579

Total assets bearing credit risk 153 213

20131,2

Debt instruments 4 767 49 164 10 431 15 153 2 160 3 529 637 2 356 14 551 102 748 Investment policies 25 271 1 085 26 356 Local prepayments, insurance and other receivables 11 24 130 51 8 3 075 3 299 Foreign prepayments, insurance and other receivables 614 614 Reinsurance assets 35 1 026 3 29 516 1 609 Derivatives and collateral deposits 1 004 3 756 1 450 128 49 6 387 Loan receivables to joint ventures and associates 4 4 Cash and cash equivalents 1 224 4 262 1 958 105 1 383 90 848 9 870

Total assets bearing credit risk 6 995 57 193 39 169 16 542 2 160 4 966 764 8 547 14 551 150 887

Credit exposure allocation estimated attributable to:Shareholders 63 290Policyholders 66 310 Non-controlling interest and third party liabilities on mutual funds 21 287


1 As reported by Liberty, refer to Liberty’s annual financial statements. 2 Restated. Refer to page 104.



Credit risk | Insurance operations continued

Credit exposure to debt instrumentsThe table below provides information regarding the aggregated credit risk exposure of Liberty to debt instruments categorised by credit ratings, if available, as at 31 December 2014.

Exposure to credit risk

A- andabove

Rm BBB+

Rm BBBRm

BBB-Rm

BB+ BBBB- and

belowRm

Notrated

Rm

Pooledfunds

Rm

Totalcarrying

valueRm

20141

Debt instruments 5 184 38 213 28 750 13 390 1 660 5 503 3 928 3 239 18 715 118 582 Investment policies 6 515 1 128 7 643 Local prepayments, insurance and other receivables 52 9 12 3 87 69 82 2 604 2 918 Foreign prepayments, insurance and other receivables 8 742 750 Reinsurance assets 61 998 142 138 219 1 558 Derivatives and collateral deposits 1 259 1 644 4 717 102 55 7 777 Loan receivables to joint ventures and associatesCash and cash equivalents 3 255 1 446 6 589 1 305 196 1 194 13 985

Total assets bearing credit risk 9 811 41 312 40 068 21 323 2 745 5 714 4 344 9 181 18 715 153 213

Credit exposure allocation estimated attributable to:Shareholders 76 294 Policyholders 56 340 Non-controlling interest and third party liabilities on mutual funds 20 579


20131,2

Debt instruments 4 767 49 164 10 431 15 153 2 160 3 529 637 2 356 14 551 102 748 Investment policies 25 271 1 085 26 356 Local prepayments, insurance and other receivables 11 24 130 51 8 3 075 3 299 Foreign prepayments, insurance and other receivables 614 614 Reinsurance assets 35 1 026 3 29 516 1 609 Derivatives and collateral deposits 1 004 3 756 1 450 128 49 6 387 Loan receivables to joint ventures and associates 4 4 Cash and cash equivalents 1 224 4 262 1 958 105 1 383 90 848 9 870

Total assets bearing credit risk 6 995 57 193 39 169 16 542 2 160 4 966 764 8 547 14 551 150 887

Credit exposure allocation estimated attributable to:Shareholders 63 290Policyholders 66 310 Non-controlling interest and third party liabilities on mutual funds 21 287


1 As reported by Liberty, refer to Liberty’s annual financial statements. 2 Restated. Refer to page 104.

61

ReinsuranceReinsurance is used to manage insurance risk and consequently, in the liability valuation process, reinsurance assets are raised for expected recoveries on projected claims. This does not, however, discharge liability as primary insurer. In addition, reinsurance debtors are raised for specific recoveries on claims recognised.

Creditworthiness is assessed prior to the appointment of reinsurers. Financial position strength, performance, track record, relative size or ranking within the industry and credit ratings of reinsurers are taken into account when determining the allocation of business to reinsurers. Credit exposure to reinsurers is also limited through the use of several reinsurers. These reinsurers are reviewed at least annually.

The group is exposed to counterparty credit risk on investment reinsurance policies as well as the underlying debt instruments supporting the valuation of the policies.

To further mitigate credit exposures to reinsurers the following checks are undertaken annually as a minimum:

internal credit assessment of the creditworthiness of the reinsurers

analyses of reports on reinsurers’ claim paying abilities as assessed by reputable ratings agencies

analyses of valuators’ certificates

audits of administration processes of reinsurers to whom Liberty has larger exposures

reviews and renegotiation of reinsurance agreements.

SIL has indirect exposure to debt instruments through its asset managers. Approximately 15% of SIL’s assets are in a multi-manager fund with a return objective of CPI plus 3% of which less than 50% are in debt instruments. The asset manager’s mandate also stipulates capital preservation in any one year. The majority of SIL’s assets are invested in cash or cash equivalent instruments.

ImpairmentsInvestment credit assets are valued on a fair value basis, with credit revaluations are reported in the income statement as and when these arise.

Following the curatorship of ABL and consequential devaluation of their various issued financial instruments, losses have been incurred. These have mostly been borne by policyholders in terms of investment mandates with losses on shareholder exposures amounting to R20 million.

Policyholder loans are carried at amortised costs. The table below therefore only indicates the impairments raised by Liberty against these financial assets. SIL has no recognised impairments.

Financial assets impaired

2014Rm

2013Rm

Loans1, 2

Gross carrying value 1 360 1 253 Less: accumulated impairment (33) (39)

Net carrying value 1 327 1 214

1 Loans, comprising of policy loans, are impaired when the amount of the loan exceeds the policyholder’s investment balance. The fair value of loans is R1 194 million (2013: R1 091 million). The loans are recoverable through offset against policyholders’ investment balances at policy maturity date.

2 As reported by Liberty. Refer to Liberty annual financial statements.



Credit risk | Insurance operations continued

Definition

Compliance risk is the risk of legal or regulatory sanction, financial loss or damage to reputation that the group may suffer as a result of its failure to comply with laws, regulations, codes of conduct and standards of good practice applicable to its financial services activities.

This includes addressing new laws as well as amendments to existing laws by regulatory authorities.

Approach to managing compliance risk

General approachThe compliance function operates independently of business as a second line of defence in terms of its mandate. The mandate is approved annually by the GAC and is drawn primarily from Regulation 49 of the Banks Act. All compliance teams report through compliance executives to the GCCO.

The group’s approach to managing compliance risk is proactive and premised on internationally accepted principles of compliance risk management and supervisory expectations.

Compliance risk management is a core risk management activity overseen by the GCCO. The GCCO has unrestricted access to the group chief executives and to the chairman of the GAC, thereby facilitating the function’s independence.

A robust risk management reporting and escalation procedure requires business unit and functional area compliance heads to report on the status of compliance risk management in the group to the GCCO, who escalates significant matters to group management and both executive and independent board committees. There is a key focus on TCF and market conduct as the South African regulatory framework moves towards a Twin Peaks model of supervision. This model of regulation will create two regulators for the financial sector:

a prudential regulator regulating the solvency and liquidity of the financial services sector

a market conduct regulator regulating how financial services institutions conduct their business and treat their customers.

The anti-money laundering and combating the financing of terrorism function includes the group sanctions desk and has expanded its human resourcing and technical surveillance capability extensively to meet the group’s supervisory expectations.

Compliance risk

63 Definition

63 Approach to managing compliance risk

63 • General approach

64 • Approach to market conduct

64 • Approach to managing money laundering and terrorist financing

64 • Approach to sanctions management

64 • Approach to managing regulatory change

64 • Approach to occupational health and safety

64 Governance

63

Approach to managing regulatory changeThe group operates in a highly regulated industry across multiple jurisdictions and is increasingly subject to international legislation with extra-territorial reach.

The group aims to embed regulatory best-practice in our operations in a way that balances the interests of various stakeholders, while supporting the long-term stability and growth in the markets where we have a presence.

The group’s regulatory advocacy unit assesses the impact that emerging policy and regulation will have on the business. The group’s approach to regulatory advocacy is to engage with government policymakers, legislators and regulators in a proactive and constructive manner.

The group regulatory and legislative oversight committee (a subcommittee of GROC) enhances regulatory risk management by proactively considering the impacts of regulatory developments on the group.

Approach to occupational health and safetyAny risks to the health and safety of employees resulting from hazards in the workplace or potential exposure to occupational illness are managed by the occupational health and safety team and are supported by executive management accountability structures. Training of health and safety officers and employee awareness is ongoing. Recent reporting periods have indicated a reduction in reportable incidents.

Governance

The primary management level governance committee overseeing compliance risk is the group compliance committee. It is chaired by the GCCO and is a subcommittee of GROC. Compliance is now also represented on the group management committee which facilitates executive awareness of compliance risk-related matters.

The group compliance committee reports, through the GCCO, to both GAC and GRCMC.

The principal governance document is the compliance risk governance standard.

Employees, including senior management, are made aware of their statutory compliance responsibilities through ongoing training and awareness initiatives.

Approach to market conductConduct risk is defined by the group as the risk that detriment is caused to the group’s clients, the markets or the group itself because of inappropriate execution of business activities.

We anticipate that market conduct supervision will intensify under Twin Peaks. The group has thus actively responded to TCF by assigning oversight accountability to the social and ethics committee. Responsibility for the delivery of the fairness outcomes has been delegated to executives to ensure that we drive a fairness culture from the top. Strategy and business models are being interrogated from a market conduct perspective and risk standards, policies and governance frameworks are being reviewed from a conduct risk perspective. TCF is also considered in decision-making, communication, performance, reward and recognition.

This outcomes-based approach to the conduct of business casts a fresh perspective on every stage in the product life cycle, raising the standards of how we do business to benefit consumers and increasing their confidence in the financial services industry.

Approach to managing money laundering and terrorist financingLegislation pertaining to money laundering and terrorist financing control imposes significant requirements in terms of customer due diligence, record keeping, staff training and the obligation to detect, prevent and report suspected money laundering and terrorist financing. The group subscribes to the principles of the Financial Action Task Force, an intergovernmental body that develops and promotes policies to combat money laundering and terrorist financing. An integrated systems approach is being followed to support surveillance and reporting responsibilities.

Group minimum standards are implemented throughout the group, taking into account local jurisdictional requirements.

Approach to sanctions managementThe group actively manages the legal, regulatory, reputational and operational risks associated with doing business in jurisdictions which, or with clients who, are subject to embargoes or sanctions imposed by competent authorities. Sanctions surveillance capability has been enhanced to manage sanctions alerts and the staff complement has been increased to meet supervisory expectations. The group sanctions review committee, supported by a sanctions desk, is responsible for providing advice on all sanctions-related matters in a fluid sanctions environment.



Compliance risk | Approach to managing compliance risk continued

Definition

Country risk, also referred to as cross-border country risk, is the uncertainty that obligors (including the relevant sovereign, and including the obligations of group branches and subsidiaries in a country) will be able to fulfil obligations to the group given political or economic conditions in the host country.

Approach to managing country risk

All countries to which the group is exposed are reviewed at least annually. Internal rating models are employed to determine ratings for country, sovereign and transfer and convertibility risk. In determining the ratings, extensive use is made of the group’s network of operations, country visits and external information sources. These ratings are also a key input into the group’s credit rating models, with credit loan conditions and covenants linked to country risk events.

The model inputs are continuously updated to reflect economic and political changes in countries. The model outputs are internal risk grades that are calibrated to a country risk grade (CR) from CR01 to CR25, as well as sovereign risk grade (SB) and transfer and convertibility risk grade (SB) from SB01 to SB25. Countries rated CR08 and higher, referred to as medium- and high-risk countries, are subject to increased analysis and monitoring.

Country risk is mitigated through a number of methods, including:

political and commercial risk insurance

co-financing with multilateral institutions

structures to mitigate transferability and convertibility risk such as collection, collateral and margining deposits outside the jurisdiction in question.

Governance

The primary management level governance committee overseeing this risk type is the group country risk management committee. It is chaired by the group CRO and is a subcommittee of GROC.

The principal governance documents are the country risk governance standard and the model risk governance standard.

Country risk

65 Definition

65 Approach to managing compliance risk

65 Governance

66 Approved regulatory capital approaches

66 Country risk portfolio characteristics and metrics

65

Approved regulatory capital approaches

There are no regulatory capital requirements for country risk. Country risk is, however, incorporated into regulatory capital for credit in the IRB approaches through the country risk and transfer and convertibility risk ratings’ impact on credit grades.

Country risk portfolio characteristics and metrics

The risk distribution of cross-border country risk exposures is weighted towards European and North American low-risk countries, as well as sub-Saharan African medium- and high-risk countries.

Country risk exposure by region and risk grade

Europe%

Asia%

NorthAmerica

%

Sub-Saharan

Africa%

LatinAmerica

%

Middle Eastand

North Africa%

Australasia%

2014Risk gradeCR01-CR07 22.4 5.7 7.5 0.3 0.5 1.4 CR08-CR11 1.0 14.4 5.4 2.7 2.3 CR12-CR14 3.6 0.1 7.6 0.3 CR15-CR17 0.2 0.4 20.9 0.6 CR18-CR21 0.1 1.8 0.1 CR22+ 0.7

2013Risk gradeCR01-CR07 24.7 6.3 8.3 0.6 0.3 1.9 CR08-CR11 0.4 11.3 5.2 2.8 1.6 CR12-CR14 6.1 0.8 9.6 0.1 0.5 CR15-CR17 0.3 0.4 14.9 0.5 0.1 CR18-CR21 0.1 2.0 0.1 0.1 CR22+ 1.0

Total medium- and high-risk country risk exposures and total low-risk country risk exposures for the year ended 31 December 2014 amounted to USD17 billion and USD10 billion, respectively (2013: USD18 billion and USD14 billion, respectively).

Medium� and high�risk country exposure by region (%)

25

20

15

10

5

CR08 – CR11 CR12 – CR14 CR15 – CR17 CR18 – CR21 CR22+

� Europe � Asia � North America � Sub-Saharan Africa � Latin America � Middle East and North Africa � Australasia



Country risk | continued

Exposure to the top five medium- and high-risk countries is shown together with comparatives in the graph that follows. These exposures are in line with the group’s growth strategy focused on Africa and selected emerging markets.

Top five medium� and high�risk country risk EAD (USDm)

3 500

3 000

2 500

2 000

1 500

1 000

500

� 2014

China Nigeria Zambia Kenya Ghana

� 2013

Medium� and high�risk country EAD concentration by country rating (%)

25.00

20.00

15.00

10.00

5.00

CR08CR08 CR09 CR10 CR11 CR12 CR13 CR14 CR15 CR16 CR17 CR18 CR19 CR20 CR21 CR22+

� 2014 � 2013

67

Definition

Liquidity risk is defined as the risk that an entity, although solvent, cannot maintain or generate sufficient cash resources to meet its payment obligations in full as they fall due, or can only do so at materially disadvantageous terms.

Banking operations

The group’s liquidity risk framework is designed to ensure the comprehensive management of liquidity risks within the group in all geographies and that regulatory, prudential as well as internal minimum requirements are met at all times. This is achieved through a combination of maintaining adequate liquidity buffers to ensure that cash flow requirements can be met and ensuring that the group’s SOFP is structurally sound and supportive of the group’s strategy. Liquidity risk is managed on a consistent basis across the group’s banking subsidiaries, allowing for local requirements.

Information relating to the year ended 31 December 2014 is based on Basel III principles, including behavioural profiling methods and assumptions, as well as phasing-in requirements where applicable. As a result, in preparation for the implementation of Basel III, liquidity policies and calculations were reviewed and updated accordingly.

Approach to managing liquidity riskThe nature of the group’s banking and trading activities gives rise to continuous exposure to liquidity risk. Liquidity risk arises when the group, despite being solvent, cannot maintain or generate sufficient cash resources to meet its payment obligations as they fall due, or can only do so at materially disadvantageous terms. This type of event may arise where counterparties, who provide the group with short-term funding, withdraw or do not roll over that funding, or normally liquid assets become illiquid as a result of a generalised disruption in asset markets.

The group manages liquidity in accordance with applicable regulations and within the group’s risk appetite framework. The group’s liquidity risk management governance framework supports the measurement and management of liquidity across both the corporate and retail sectors to ensure that payment obligations can be met by the group’s legal entities, under both normal and stressed conditions. Liquidity risk management ensures that the group has the appropriate amount, diversification and tenor of funding and liquidity to support its asset base at all times.

Funding and liquidity risk

68 Definition


68 • Approach to managing liquidity risk

70 • Governance

70 • Liquidity characteristics and metrics

74 • The group’s credit ratings

74 • Conduits


74 • Long-term insurance

76 • Short-term insurance


The group manages liquidity risk as three interrelated pillars, which are aligned to Basel III liquidity requirements.

Liquidity management categories

Tactical (shorter-term) liquidity risk management

Structural (long-term) liquidity risk management

Contingency liquidity risk management

manage intra-day liquidity positions monitor interbank and repo shortage levels monitor daily cash flow requirements manage short-term cash flows manage daily foreign currency liquidity set deposit rates in accordance with structural

and contingent liquidity requirements as informed by ALCO.

ensure a structurally sound balance sheet identify and manage structural liquidity

mismatches determine and apply behavioural profiling manage long-term cash flows preserve a diversified funding base inform term funding requirements assess foreign currency liquidity exposures establish liquidity risk appetite ensure appropriate transfer pricing

of liquidity costs ensure Basel III NSFR readiness by

1 January 2018.

monitor and manage early warning liquidity indicators

establish and maintain contingency funding plans

undertake regular liquidity stress testing and scenario analysis

convene liquidity crisis management committees, if needed

set liquidity buffer levels in accordance with anticipated stress events

advise diversification of liquidity buffer portfolios

ensure compliance with Basel III LCR from 1 January 2015.

As from 1 January 2015, the group is required to comply with the LCR, a metric introduced by the BCBS to measure a bank’s ability to manage a sustained outflow of customer funds in an acute stress event over a 30-day period. The ratio is calculated by taking the group’s high-quality liquid assets (HQLA) and dividing it by net cash outflows. The minimum regulatory LCR requirement effective 1 January 2015 is 60%, increasing by 10% annually to reach 100% by 1 January 2019.

The group is on track to meet the minimum phased-in Basel III LCR standards and as at 31 December 2014, exceeded the 60% minimum requirement.

From 2018, the group will also be required to comply with the Basel III NSFR, a metric designed to ensure that the majority of term assets are funded by stable sources, such as capital, term borrowings or funds from stable sources. The final BCBS NSFR framework was issued in October 2014.

2013 2014 2015 2016 2017 2018 2019

Liqu

idit

y

LCRBank

disclosure starts

60% minimum standard




100%

NSFRBank

disclosure starts 100% 100%

Basel III implementation timeline

69

GovernanceThe primary governance committee overseeing liquidity risk is the group ALCO, which is chaired by the group financial director and is a subcommittee of GROC. ALCOs have been established in each of the banking subsidiaries of the group and manage in-country liquidity risk.

The principal governance documents are the liquidity risk governance standard and model risk governance standard.

Liquidity characteristics and metricsContingency liquidity risk managementContingency funding plansContingency funding plans are designed to protect stakeholder interests and maintain market confidence in the event of a liquidity crisis. The plans incorporate an early warning indicator process supported by clear crisis response strategies. Early warning indicators cover bank-specific and systemic crises and are monitored according to assigned frequencies and tolerance levels.

Crisis response strategies are formulated for the relevant crisis management structures and address internal and external communications and escalation processes, liquidity generation management actions and operations, and heightened and supplementary information requirements to address the crisis event. The updating of contingency funding plans while considering budget forecasting continues to be a focus for the ALM teams across the group.

The group submits its recovery plan to the SARB on an annual basis, in line with the SARB’s requirement for banks to submit a recovery and resolution plan. The group’s recovery plan incorporates the contingent liquidity funding plan in addition to the focus given to capital planning and business continuity planning.

Liquidity stress testing and scenario analysisStress testing and scenario analysis are based on hypothetical as well as historical events. These are conducted on the group’s funding profiles and liquidity positions. The crisis impact is typically measured over a 30 calendar day period as this is considered the most crucial time horizon for a liquidity event. This measurement period is also consistent with the Basel III LCR requirements. This measure is, however, adapted to meet different regulatory environments.

Anticipated on- and off-balance sheet cash flows are subjected to a variety of bank-specific and systemic stresses and scenarios to evaluate the impact of unlikely but plausible events on liquidity positions. The results are assessed against the liquidity buffer and contingency funding plans to provide assurance as to the group’s ability to maintain sufficient liquidity under adverse conditions.

Internal stress testing metrics are supplemented with the regulatory Basel III LCR in monitoring the group’s ability to survive severe stress scenarios.

Liquidity bufferPortfolios of highly marketable liquid securities to meet prudential, regulatory and internal stress testing requirements are maintained as protection against unforeseen disruptions in cash flows. These portfolios are managed within ALCO-defined limits on the basis of diversification and liquidity.

The table below provides a breakdown of the group’s liquid and marketable securities as at 31 December 2014 and 31 December 2013. Eligible Basel III LCR HQLA are defined according to the BCBS January 2013 LCR and liquidity risk monitoring tools framework. Management liquidity represents unencumbered marketable securities other than eligible Basel III LCR HQLA (excluding trading assets) which would be able to provide significant sources of liquidity in a stress scenario.

Total liquidity

2014Rbn

2013Rbn

Eligible LCR HQLA1 comprising: 174,2 129,7

Notes and coins 19,0 15,9 Cash and deposits with central banks 45,7 33,4 Government bonds and bills 97,7 70,6 Other eligible liquid assets 11,8 9,8

Management liquidity 121,9 108,8

Total liquidity 296,1 238,5

Total liquidity as a % of funding-related liabilities 25.5% 23.2%

1 Eligible LCR HQLA considers any liquidity transfer restrictions that will inhibit the transfer of HQLA across jurisdictions.

Liquid assets held remain adequate to meet all internal stress testing, prudential and regulatory requirements.



Funding and liquidity risk | Banking operations continued

Behaviourally adjusted cumulative liquidity mismatch1 (%)

10

5

0

(5)

(10)

(15)

(20)

(25)

� December 2014

0 – 7days

� December 2013

0 – 1month

0 – 3months

0 – 6months

0 – 12months

– Internal limit

1 % of funding-related liabilities.

Maturity analysis of financial liabilities by contractual maturityThe table that follows analyses cash flows on a contractual, undiscounted basis based on the earliest date on which the group can be required to pay (except for trading liabilities and derivative liabilities, which are presented as redeemable on demand) and will, therefore, not agree directly to the balances disclosed in the consolidated statement of financial position.

Derivative liabilities are included in the maturity analysis on a contractual, undiscounted basis when contractual maturities are essential for an understanding of the derivatives’ future cash flows. Management considers only contractual maturities to be essential for understanding the future cash flows of derivative liabilities that are designated as hedging instruments in effective hedge accounting relationships. All other derivative liabilities, together with trading liabilities are treated as trading and are included at fair value in the redeemable on demand bucket since these positions are typically held for short periods of time.

The table also includes contractual cash flows with respect to off-balance sheet items which have not yet been recorded on-balance sheet. Where cash flows are exchanged simultaneously, the net amounts have been reflected.

Structural liquidity mismatchMaturity analysis of financial liabilities using behavioural profilingWith actual cash flows typically varying significantly from the contractual position, behavioural profiling is applied to assets, liabilities and off-balance sheet commitments as well as to certain liquid assets. Behavioural profiling assigns probable maturities based on historical customer behaviour. This is used to identify significant additional sources of structural liquidity in the form of core deposits, such as current and savings accounts, which exhibit stable behaviour despite being repayable on demand or at short notice.

Structural liquidity mismatch analyses are performed regularly to anticipate the mismatch between payment profiles of SOFP items, in order to highlight potential risks within the group’s defined liquidity risk thresholds.

The graph alongside shows the group’s cumulative maturity mismatch between assets and liabilities for the 0 to 12 months bucket, after applying behavioural profiling. The cumulative maturity is expressed as a percentage of the group’s total funding-related liabilities.

Expected aggregate cash outflows are subtracted from expected aggregate cash inflows. Limits are set internally to restrict the cumulative liquidity mismatch between expected inflows and outflows of funds in different time buckets. These mismatches are monitored on a regular basis with active management intervention if potential limit breaches are evidenced. Liquidity transfer restrictions across the group are considered as part of the prudent liquidity risk management assumptions that are followed. The behaviourally adjusted cumulative liquidity mismatch remains within the group’s liquidity risk appetite.

Whilst following a consistent approach to liquidity risk management in respect of the foreign currency component of the balance sheet, specific indicators are observed in order to monitor changes in market liquidity as well as the impacts on liquidity as a result of movements in exchange rates.

71

Maturity analysis of financial liabilities by contractual maturity

Redeemableon demand

Rm

Maturingwithin

1 monthRm

Maturingbetween

1 – 6months

Rm

Maturingbetween

6 – 12months

Rm

Maturingafter

12 monthsRm

TotalRm

20141

Financial liabilitiesDerivative financial instruments 65 718 115 174 3 349 66 359

Instruments settled on a net basis 43 021 132 81 3 322 43 559 Instruments settled on a gross basis 22 697 (17) 93 27 22 800

Trading liabilities 46 033 46 033 Deposit and current accounts 643 557 109 465 114 090 62 352 145 533 1 074 997 Subordinated debt 459 40 3 675 738 25 285 30 197 Other 14 855 14 855

Total 755 767 124 475 117 939 63 093 171 167 1 232 441

Unrecognised financial instrumentsLetters of credit and bankers’ acceptances 16 162 16 162 Guarantees 53 365 53 365 Irrevocable unutilised facilities 80 881 80 881 Commodities and securities borrowing transactions 5 757 179 422 28 6 386

Total 156 165 179 422 28 156 794

20131, 2

Financial liabilitiesDerivative financial instruments 66 457 326 181 234 104 67 302

Instruments settled on a net basis 46 343 301 87 62 46 793 Instruments settled on a gross basis 20 114 25 181 147 42 20 509

Trading liabilities 36 988 36 988 Deposit and current accounts 552 360 47 801 118 458 44 824 518 282 1 281 725 Subordinated debt 124 2 588 459 19 051 22 222Other 18 710 18 710

Total 655 929 66 837 121 227 45 517 537 437 1 426 947

Unrecognised financial instrumentsLetters of credit and bankers’ acceptances 17 303 17 303 Guarantees 50 287 50 287 Irrevocable unutilised facilities1 77 695 77 695 Commodities and securities borrowing transactions 5 635 322 442 6 399

Total 150 920 322 442 151 684

1 The amounts presented exclude the discontinued operation.2 Restated. Refer to page 104.




Funding activitiesFunding markets are evaluated on an ongoing basis to ensure appropriate group funding strategies are executed depending on the market, competitive and regulatory environment. The group continued to focus on building its deposit base as a key component of the group’s funding mix. Deposits sourced from South Africa and other major jurisdictions in the rest of Africa, Isle of Man and Jersey provide diversity of stable sources of funding for the group.

Primary funding sources are in the form of deposits across a spectrum of retail and wholesale clients, as well as loan and debt capital markets across the group. Total funding-related liabilities grew from R1 029 billion in 2013 to R1 161 billion in 2014.

Funding diversification by product (%)

� 22 Call deposits (2013: 22)� 21 Term deposits (2013: 21)� 16 Current accounts (2013: 17)� 11 Cash management deposits (2013: 12)� 10 Deposits from banks and central banks (2013: 7)� 8 Negotiable certificates of deposits (2013: 9)� 6 Senior and subordinated debt (2013: 6)� 4 Other funding (2013: 4)� 2 Savings accounts (2013: 2)

Funding-related liabilities composition

2014Rbn

20131

Rbn

Corporate funding 351 288 Retail deposits2 268 245 Institutional funding 233 209 Deposits from banks 98 69 Non-current funding-related liabilities held for sale 74 72Government and parastatals 69 86 Senior debt 42 33 Subordinated debt 23 22 Other liabilities to the public 3 5

Total funding-related liabilities 1 161 1 029

1 Restated. Refer to page 104.2 Comprises of individual and small business customers.

Concentration risk limits are used within the group to ensure that funding diversification is maintained across products, sectors, geographic regions and counterparties.

Depositor concentrations

2014%

20131

%

Single depositor 1.9 2.1

Top 10 depositors 8.1 9.3


A component of the group's funding strategy is to ensure that sufficient contractual term funding is raised in support of term lending and to ensure adherence to the structural mismatch tolerance limits and appetite guidelines.

The group successfully accessed the longer-term funding market during 2014 raising R32,2 billion through a combination of senior and subordinated debt, and syndicated loans. Notably, SBSA issued R2,25 billion of the group’s first Basel III compliant tier II instruments.

The graph below is a representation of the market cost of liquidity, which is measured as the spread paid on the negotiable certificates of deposits (NCDs) relative to the prevailing swap curve for that tenor. The graph is based on actively-issued money market instruments by banks, namely 12- and 60-month NCDs. During the year under review, long-term funding spreads increased due to the increased supply of bank issuance in money markets and debt capital markets, and lower demand for term bank credit given the ABL curatorship.

12� and 60�month liquidity spread (bps)

140

120

100

80

60

40

20

– 12-month liquidity spread – 60-month liquidity spread

December2010

December2011

December2012

December2013

December2014

73


The principal risk relating to long-term insurance operations is a function of policyholder behaviour. For short-term insurance operations it is a function of the variation in actual claims and expenses from expected claims and expenses. Liquidity requirements are reviewed on a monthly basis. These requirements are also monitored on an ongoing basis as part of normal operating activities.

Long-term insurance

Financial, property and insurance asset liquidity

20141 20131, 2

% Rm % Rm

Liquid3 78 289 173 75 261 626 Medium4 14 52 589 16 54 296 Illiquid5 8 31 305 9 31 637

100 373 067 100 347 559

1 As reported by Liberty. Refer to Liberty’s annual financial statements.2 Restated. Refer to page 104.3 Liquid assets are those that are considered to be realisable within one month (for example, cash, listed equities and term deposits).4 Medium assets are those that are considered to be realisable within six months (for example, unlisted equities and certain unlisted term deposits).5 Illiquid assets are those that are considered to be realisable in excess of six months (for example, investment properties).

collateral calls or lead to the activation of downgrade clauses and early termination associated with certain structured deposits.

Rating downgrades will reduce thresholds above which collateral must be posted with counterparties to cover the group’s negative mark-to-market on derivative contracts. These are managed within the liquidity management pillar. The potential cumulative impact on additional collateral requirements is as follows:

1, 2 and 3 notch rating downgrades

Impact on the group’s liquidity of a collateral call linked to downgrading by

December2014

Rm

December20131

Rm

1 notch 296 2922 notch 724 663

3 notch 781 832

1 Restated refer to page 104.

ConduitsThe group provides standby liquidity facilities to two conduits, namely BTC and Thekwini Warehouse Conduit. These facilities, which totalled R4,9 billion as at 31 December 2014 (2013: R6,8 billion), had not been drawn on.

The liquidity risk associated with these facilities is managed in accordance with the group’s overall liquidity position and represents less than 2% of the group’s total funding (2013: 2%). The liquidity facilities are included in both the group’s structural liquidity mismatch as well as in liquidity risk stress testing.

The group’s credit ratingsThe group’s ability to access funding at cost-effective levels is dependent on maintaining or improving the borrowing entity’s credit rating.

The following table provides a summary of the major credit ratings for the group and its principal operating subsidiary, SBSA.

Credit ratings

Long-term Fitch

SBG foreign currency issuer default rating BBBSBSA foreign currency issuer default rating BBBRSA sovereign foreign currency issuer rating BBB

Moody’s

SBG issuer rating Baa3SBSA foreign currency deposit rating Baa2RSA sovereign foreign currency rating Baa2

Credit ratings for SBSA are dependent on multiple factors, including the sovereign rating, capital adequacy levels, quality of earnings, credit exposure, the credit risk governance framework and funding diversification. These parameters and their possible impact on the borrowing entity’s credit rating are monitored closely and incorporated into the group’s liquidity risk management and contingency planning considerations.

A reduction in these ratings could have an adverse effect on the group’s access to liquidity sources and funding costs, may trigger




During 2014, portfolios such as the STANLIB Institutional Money Market Fund experienced liquidity pressure as a result of the ABL curatorship. It was necessary to take the extraordinary step of creating African Bank Investments Limited Retention Funds (side-pockets), in effect ring fencing the ABL assets from the balance of this money market fund. The FSB approved the industry-wide side-pockets mechanism as a way to ensure equitable treatment for all investors in affected portfolios.

Maturity profiles of financial instrument liabilities in long-term insurance operationsThe table below summarises the maturity profile of the financial instrument liabilities in the long-term insurance operations on the remaining undiscounted contractual obligations. This will, therefore, not equal the balances disclosed in the consolidated SOFP. Policyholders’ liabilities under investment contracts, investment contracts with discretionary participation features (DPFs) and insurance contracts are managed according to expected and not contractual cash flows, and hence are reflected in a separate table.

Liquidity profile of assetsAssets held are predominantly liquid. However, given the quantum of investments held relative to the volumes of trading within the relevant exchanges and counterparty transactions, a substantial short-term liquidation may result in current values not being realised. It is considered highly unlikely, however, that a short-term realisation of that magnitude would occur.

As is the case with all insurance companies, no maturity profile can be reliably given for investments in mutual funds, equities and non-term financial debt instruments given the volatility of equity markets and uncertain policyholder behaviour. To the extent that Liberty’s liabilities profile changes or policyholders choose to disinvest, Liberty uses its own balance sheet to avoid the need to sell assets under distressed circumstances. Accordingly, Liberty retains a conservative liquid asset coverage ratio backed by investments in high quality liquid assets.

Maturity profile of financial instrument liabilities – contractual cash flows

0 – 3months1

Rm

4 – 12months

Rm

1 – 5years

Rm

6 – 10years

RmVariable

RmTotal

Rm

2014At amortised costSubordinated notes 95 154 2 884 1 678 4 811 Redeemable preference shares2 5 5 Third-party financial liabilities arising on consolidation of mutual funds 34 501 34 501 Insurance and other payables 13 103 539 609 14 251

Total 47 699 693 3 493 1 678 5 53 568

2013At amortised costSubordinated notes 85 160 2 865 1 183 4 293 Redeemable preference shares2 5 5 Non-controlling interests’ loan 93 93 Third-party financial liabilities arising on consolidation of mutual funds 39 983 39 983 Insurance and other payables 9 261 350 69 36 9 716

Total 49 422 510 2 934 1 219 5 54 090

1 0 – 3 months are either due within the time frame or are payable on demand. 2 No fixed maturity date, however, redeemable with a two-year notice period at the instance of the company or the holder.

75

Short-term insuranceSIL manages its liquidity risk in accordance with its risk appetite statement. This covers monitoring available liquid assets against immediate expenses, and includes the impact of unexpected losses from several catastrophic events. SIL manages liquidity risk on a stand-alone basis with no reliance on the group to provide contingent funding.

Liquidity risks arising from long-term insurance obligations to policyholdersThe following table indicates liquidity needs with respect to expected cash flows required to meet obligations arising under investment contracts, investment contracts with DPFs and insurance contracts. All the cash flows are shown gross of reinsurance on an undiscounted basis.

Expected cash flows – long-term insurance contracts

Within1 year

Rm

1 – 5years

Rm

6 – 10years

Rm

11 – 20years

Rm

Over20 years

Rm

Effect ofdiscounting

cash flowsRm

TotalRm

2014Investment contracts 5 201 11 790 10 209 20 949 35 378 (1 544) 81 983 Investment with DPF 382 330 1 262 2 928 5 275 10 177 Insurance contracts 15 880 72 780 22 261 63 597 98 215 (77 377) 195 356

Total 21 463 84 900 33 732 87 474 138 868 (78 921) 287 516

2013Investment contracts 4 843 11 319 9 314 17 112 31 938 (380) 74 146 Investment with DPF 386 357 1 132 2 452 4 729 9 056 Insurance contracts 15 289 64 335 17 503 55 135 87 176 (58 696) 180 742

Total 20 518 76 011 27 949 74 699 123 843 (59 076) 263 944

The table below shows the cash surrender value for long-term insurance policyholders’ liabilities. The rand amount payable on surrender, on contracts which provide a surrender value, is closely related to the carrying value. For the majority of unit-linked contracts the surrender value adjusts to the respective realisation values as surrender instructions are executed. Therefore the impact of market risk adjustments on surrender lies largely with the policyholder.

Cash surrender value for policyholders’ liabilities

2014 2013

Carryingvalue

Rm

Surrendervalue

Rm

Carryingvalue

Rm

Surrendervalue

Rm

Investment contracts 81 983 81 155 74 146 73 295 Investment contracts with DPF 10 177 9 621 9 056 8 316 Insurance contracts 195 356 164 767 180 742 154 148

Total policyholders’ liabilities 287 516 255 543 263 944 235 759

Liquidity requirements associated with issuance of subordinated debtThe FSB’s approval of Liberty’s issuance of subordinated debt, namely R3,5 billion callable capital bonds, includes a requirement to hold qualifying liquid assets in a manner prescribed by the FSB. As at 31 December 2014 and 2013, this requirement has been met and attested to by the statutory actuary of Liberty.



Funding and liquidity risk | Insurance operations continued

Definition

Market risk is the risk of a change in the market value, actual or effective earnings, or future cash flows of a portfolio of financial instruments, including commodities, caused by adverse movements in market variables such as equity, bond and commodity prices, currency exchange and interest rates, credit spreads, recovery rates, correlations and implied volatilities in all of these variables.

The group’s key market risks are:

trading book market risk

IRRBB

equity risk in the banking book

foreign currency risk

own equity-linked transactions.

Banking operations

GovernanceThe governance management level committees overseeing market risk are group ALCO, which is chaired by the group financial director, and the group equity risk committee, which is chaired by the CIB CRO. Both are subcommittees of GROC.

The principal governance documents are the market risk governance standard and the model risk governance standard.

Approved regulatory capital approachesThe group has approval from the SARB to adopt the internal models approach for most asset classes and across most market variables.

For material equity portfolios, the group has approval from the SARB to adopt either the market-based or PD/LGD approach.

There are no regulatory capital requirements for IRRBB, structural foreign exchange exposures or own equity-linked transactions.

Market risk

77 Definition


77 • Governance

77 • Approved regulatory capital approaches

78 • Trading book market risk

81 • Interest rate risk in the banking book

83 • Equity risk in the banking book

84 • Foreign currency risk

85 • Own equity-linked transactions


86 • Long-term insurance

90 • Short-term insurance

77

Where the group has received internal model approval, the market risk regulatory capital requirement is based on VaR and SVaR, both of which use a confidence level of 99% and a 10-day holding period.

Limitations of historical VaR are acknowledged globally and include:

The use of historical data as a proxy for estimating future events may not encompass all potential events, particularly those which are extreme in nature.

The use of a one-day holding period assumes that all positions can be liquidated or the risk offset in one day. This will usually not fully reflect the market risk arising at times of severe illiquidity, when a one-day holding period may be insufficient to liquidate or hedge all positions fully.

The use of a 95% confidence level, by definition, does not take into account losses that might occur beyond this level of confidence.

VaR is calculated on the basis of exposures outstanding at the close of business and, therefore, does not necessarily reflect intra-day exposures.

VaR is unlikely to reflect loss potential on exposures that only arise under significant market moves.

Trading book credit riskCredit issuer risk is assumed in the trading book by virtue of normal trading activity, and managed according to the market risk governance standard. These exposures arise from, inter alia, trading in debt securities issued by corporate and government entities as well as trading derivative transactions with other banks and corporate clients. The credit spread risk is incorporated into the daily price movements used to compute VaR and SVaR mentioned above. The VaR models used for credit risk are only intended to capture the risk presented by historical day-to-day market movements, and therefore do not take into account instantaneous or jump to default risk. Issuer risk is incorporated in the standardised approach interest rate risk charge for SBSA and in the regulatory approved incremental risk charge (non-VaR-based model) for Standard Bank Plc. The largest single issuer risk exposure is to the SA Sovereign with an EAD of R12 751 million (2013: R8 933 million).

Stop-loss triggersStop-loss triggers are used to protect the profitability of the trading desks, and are monitored by market risk on a daily basis. The triggers constrain cumulative or daily trading losses through acting as a prompt to a review or close-out positions.

Stress testsStress testing provides an indication of the potential losses that could occur under extreme but plausible market conditions, including where longer holding periods may be required to exit positions. Stress tests comprise individual market risk factor testing, combinations of market factors per trading desk and combinations of trading desks using a range of historical, hypothetical and Monte Carlo simulations. Daily losses experienced during the year ended 31 December 2014 did not exceed the maximum tolerable losses as represented by the group’s stress scenario limits.

Trading book market riskDefinitionTrading book market risk is represented by financial instruments, including commodities, held in the trading book, arising out of normal global market’s trading activity.

Approach to managing market risk in the trading bookThe group’s policy is that all trading activities are undertaken within the group’s global markets’ operations.

The market risk functions are independent of trading operations and are accountable to the relevant legal entity ALCOs. ALCOs have a reporting line into group ALCO, a subcommittee of GROC.

All VaR and SVaR limits require prior approval from the respective entity ALCOs. The market risk functions have the authority to set these limits at a lower level.

Market risk teams are responsible for identifying, measuring, managing, monitoring and reporting market risk as outlined in the market risk governance standard.

Exposures and excesses are monitored and reported daily. Where breaches in limits and triggers occur, actions are taken by market risk functions to bring exposures back in line with approved market risk appetite, with such breaches being reported to management and entity ALCOs.

MeasurementThe techniques used to measure and control trading book market risk and trading volatility include VaR and SVaR, stop-loss triggers, stress tests, backtesting and specific business unit and product controls.

VaR and SVaRThe group uses the historical VaR and SVaR approach to quantify market risk under normal and stressed conditions.

For risk management purposes VaR is based on 251 days of unweighted recent historical data, a holding period of one day and a confidence level of 95%. The historical VaR results are calculated in four steps:

Calculate 250 daily market price movements based on 251 days’ historical data.

Calculate hypothetical daily profit or loss for each day using these daily market price movements.

Aggregate all hypothetical profits or losses for day one across all positions, giving daily hypothetical profit or loss, and then repeat for all other days.

VaR is the 95th percentile selected from the 250 days of daily hypothetical total profit or loss.

Daily losses exceeding the VaR are likely to occur, on average, 13 times in every 250 days.

SVaR uses a similar methodology to VaR, but is based on a period of financial stress and assumes a 10-day holding period and a 99% confidence interval.



Market risk | Banking operations continued

BacktestingThe group backtests its VaR models to verify the predictive ability of the VaR calculations and ensure the appropriateness of the models within the inherent limitations of VaR. Backtesting compares the daily hypothetical profit and losses under the one-day buy and hold assumption to the prior day’s calculated VaR. In addition, VaR is tested by changing various model parameters, such as confidence intervals and observation periods to test the effectiveness of hedges and risk-mitigation instruments.

Refer to the graph below for the results of the group’s backtesting for the year ended 31 December 2014. The drop in oil prices caused

currencies and interest rates of oil producing countries to be volatile in December 2014, giving rise to an increase in backtesting exceptions.

Regulators categorise a VaR model as green, amber or red and assign regulatory capital multipliers based on this categorisation. A green model is consistent with a satisfactory VaR model and is achieved for models that have four or less backtesting exceptions in a 12-month period. All the group’s approved models were assigned green status for the year ended 31 December 2014 (2013: green). Eleven exceptions occurred during the year ended December 2014 (December 2013: 8) for 95% VaR and 1 exception (December 2013: 2) for 99% VaR.

Backtesting: Hypothetical profit/loss of trading units and VaR – global (Rm)

60

40

20

0

(20)

(40)

(60)

(80)

(100)

(120)January 2014 December 2014

� Hypothetical profit/loss – 95% VaR (including diversification benefits) – 99% VaR (including diversification benefits)

1 Includes outside Africa global market.

Backtesting: Hypothetical profit/loss of trading units and VaR – outside Africa (Rm)

60

40

20

0

(20)

(40)

(60)

(80)



79

Trading book normal VaR analysis by market variable

Normal VaR

Maximum1

RmMinimum1

RmAverage

RmClosing

Rm

2014Commodities risk 19,8 8,4 13,3 14,2 Foreign exchange risk 18,6 5,3 10,2 17,8 Equity position risk 18,2 2,5 8,6 6,1 Debt securities 55,0 23,6 36,2 27,5 Diversification benefits2 (27,5) (25,6)

Aggregate 52,0 27,9 40,8 40,0

2013Commodities risk 28,4 7,7 14,4 9,5 Foreign exchange risk 20,3 6,9 10,9 10,9 Equity position risk 21,7 7,5 15,7 9,8 Debt securities 61,7 32,3 42,8 37,3 Diversification benefits2 (37,9) (29,6)

Aggregate 64,7 32,8 45,8 37,8

1 The maximum and minimum VaR figures reported for each market variable do not necessarily occur on the same day. As a result, the aggregate VaR will not equal the sum of the individual market VaR values, and it is inappropriate to ascribe a diversification effect to VaR when these values may occur on different dates.

2 Diversification benefit is the benefit of measuring the VaR of the trading portfolio as a whole, that is, the difference between the sum of the individual VaRs and the VaR of the whole trading portfolio.

Trading book portfolio characteristicsVaR for the period under reviewTrading book market risk exposures arise mainly from residual exposures from client transactions and limited trading for the group’s own account. In general, the group’s trading desks have run similar levels of market risk throughout the year when compared to 2013.

Specific business unit and product controlsOther market risk limits and controls specific to individual business units include permissible instruments, concentration of exposures, gap limits, maximum tenor, stop-loss triggers, price validation and balance sheet substantiation.

Backtesting: Hypothetical profit/loss of trading units and VaR – Africa (Rm)

60

40

20

0

(20)

(40)

(60)

(80)






Trading book stressed VaR analysis

Stressed VaR

MaximumRm

MinimumRm

AverageRm

ClosingRm

2014 Pre-diversification 722,0 703,1Aggregate 676,2 286,1 436,9 409,3

2013 Pre-diversification 670,5 787,8

Aggregate 642,7 268,5 396,7 475,7

Analysis of trading profitThe graph below shows the distribution of daily profit and losses for the period. It captures trading volatility and shows the number of days in which the group’s trading-related revenues fell within particular ranges. The distribution is skewed favourably to the profit side.

For the year ended 31 December 2014, trading profit was positive for 247 out of 260 days (2013: 245 out of 259 days) on an aggregated global basis.

Distribution of daily trading income (Rm)

90

80

70

60

50

40

30

20

10

� Global

<(40) (40) (30) (20) (10)

� Africa

0

Freq

uenc

y of

day

s

10 20 30 40 50 60 70 80 90 100 110 120 130 >130

� Outside Africa

Interest rate risk in the banking bookDefinitionThis risk results from the different repricing characteristics of banking book assets and liabilities.

IRRBB is further divided into the following sub-risk types:

Repricing risk: timing differences in the maturity (fixed rate) and repricing (floating rate) of assets and liabilities.

Yield curve risk: shifts in the yield curve that have adverse effects on the group’s income or underlying economic value.

Basis risk: hedge price not moving in line with the price of

the hedged position. Examples include bonds/swap basis, futures/underlying basis and prime/Johannesburg Interbank Agreed Rate (JIBAR) basis.

Optionality risk: options embedded in bank asset and liability portfolios, providing the holder with the right, but not the obligation, to buy, sell, or in some manner alter the cash flow of an instrument or financial contract.

Endowment risk: exposure arising from the net differential between interest rate insensitive assets such as non-earning assets, interest rate insensitive liabilities such as non-paying liabilities and equity.

81

Approach to managing IRRBBBanking book-related market risk exposure principally involves managing the potential adverse effect of interest rate movements on banking book earnings (net interest income and banking book mark-to-market profit or loss) and the economic value of equity.

The group’s approach to managing IRRBB is governed by applicable regulations and is influenced by the competitive environment in which the group operates. The group’s TCM team monitors banking book interest rate risk operating under the oversight of group ALCO.

MeasurementThe analytical techniques used to quantify IRRBB include both earnings- and valuation-based measures. The analysis takes account of embedded optionality such as loan prepayments and accounts where the account behaviour differs from the contractual position.

The results obtained from forward-looking dynamic scenario analyses, as well as Monte Carlo simulations, assist in developing optimal hedging strategies on a risk-adjusted return basis.

Desired changes to a particular interest rate risk profile are achieved through the restructuring of on-balance sheet repricing or maturity profiles, or through derivative overlays.

LimitsInterest rate risk limits are set in relation to changes in forecast banking book earnings and the economic value of equity. The economic value of equity sensitivity is calculated as the net present value of aggregate asset cash flows less the net present value of aggregate liability cash flows.

All assets, liabilities and derivative instruments are allocated to gap intervals based on either their repricing or maturity characteristics. Assets and liabilities for which no identifiable contractual repricing or maturity dates exist are allocated to gap intervals based on behavioural profiling.

Hedging of endowment riskIRRBB is predominantly the consequence of endowment exposures, being the net effect of non-rate sensitive assets less non-rate sensitive liabilities and equity.

The endowment risk is hedged using liquid instruments as and when it is considered opportune. Where permissible, hedge accounting is adopted using the derivatives designated as hedging instruments. Following meetings of the monetary policy committees, or notable market developments, the interest rate view is formulated through ALCO processes.

Non-endowment IRRBB (repricing, yield curve, basis and optionality) is managed within the treasury and the global markets portfolios.

Banking book interest rate exposure characteristicsThe table below indicates the rand equivalent sensitivity of the group’s banking book earnings (net interest income and banking book mark-to-market profit or loss) and other comprehensive income (OCI) given a parallel yield curve shock. A floor of 0% is applied to all interest rates under the decreasing interest rate scenario resulting in asymmetric rate shocks in low-rate environments. Hedging transactions are taken into account while other variables are kept constant.

Assuming no management intervention, a downward 100 basis point parallel interest rate shock across all foreign currency yield curves and a 200 basis point parallel interest rate shock across rand yield curves, would decrease the forecast 12-month net interest income on 31 December 2014 by R2,6 billion (2013: R2,7 billion).

Interest rate sensitivity analysis1

ZAR USD GBP Euro Other Total

2014Increase in basis points 200 100 100 100 100 Sensitivity of annual net interest income Rm 1 975 217 1 (11) 323 2 505 Sensitivity of OCI Rm 18 (74) (3) (149) (208)Decrease in basis points 200 100 100 100 100 Sensitivity of annual net interest income Rm (2 170) (103) (1) 1 (349) (2 622)Sensitivity of OCI Rm (18) 19 2 149 152

2013Increase in basis points 200 100 100 100 100 Sensitivity of annual net interest income Rm 1 969 122 (1) 336 2 426 Sensitivity of OCI Rm (5) 9 (8) (172) (176)Decrease in basis points 200 100 100 100 100 Sensitivity of annual net interest income Rm (2 136) (199) 1 (368) (2 702)Sensitivity of OCI Rm 5 (9) 8 172 176

1 Before tax.




Equity risk in the banking bookDefinitionEquity risk is defined as the risk of loss arising from a decline in the value of an equity or equity-type instrument held on the banking book, whether caused by deterioration in the underlying operating asset performance, net asset value, enterprise value of the issuing entity, or by a decline in the market price of the equity or instrument itself.

Though issuer risk in respect of tradable equity instruments constitutes equity risk, such traded issuer risk is managed under the trading book market risk framework.

Approach to managing equity risk in the banking bookEquity risk relates to all transactions and investments subject to approval by the ERC, in terms of that committee’s mandate, and includes debt, quasi-debt and other instruments that are considered to be of an equity nature.

Equity risk excludes strategic investments by the group in subsidiaries, associates and joint ventures (other than those originated by the strategic investments and alliances business unit) deployed in delivering the group’s business and service offerings unless the group financial director and group CRO deem such investments to be subject to the consideration and approval by the ERC.

Governance committeesThe ERC is constituted as a subcommittee of GROC and operates under delegated authority from that committee, with additional reporting accountability to the CIB equity governance committee closed session.

GROC grants the ERC authority to approve equity risk transactions to be held on the banking book and to manage such equity risk in accordance with the provisions of the group equity risk governance standard and associated policies. This includes the authority to:

exercise such powers as are necessary to discharge its responsibilities in terms of this mandate

seek independent advice at the group’s expense, and investigate matters within its mandate

delegate authority to a combination of ERC voting members based on the investment size.

Equity banking book price risk sensitivity analysisThe table below illustrates the market risk sensitivity for all non-trading equity investments assuming a 10% shift in the fair value. The analysis is shown before tax.

Market risk sensitivity of non-trading equity investments

10% reduction

Rm

Fairvalue

Rm

10% increase

Rm

2014Equity securities listed and unlisted 1 982 2 202 2 422 Impact on profit or loss (200) 200 Impact on OCI (20) 20

2013Equity securities listed and unlisted 2 753 3 059 3 365 Impact on profit or loss (284) 284

Impact on OCI (22) 22

Banking book equity portfolio characteristics

Basel equity positions in the banking book

2014Rm

20131

Rm

Fair valueListed 162 88 Unlisted 2 131 2 590

Total2 2 293 2 678

1 Restated. Refer to page 104.2 Banking book equity exposures are equity investments which comprise listed

and unlisted private equity and strategic investments, and do not form part of the trading book.

83

Foreign currency riskDefinitionThe group’s primary non-trading-related exposures to foreign currency risk arise as a result of the translation effect on the group’s net assets in foreign operations, intragroup foreign-denominated debt and foreign-denominated cash exposures and accruals.

Approach to managing foreign currency riskThe group foreign currency management committee, a subcommittee of the group capital management committee, manages the risk according to existing legislation, South African exchange control regulations and accounting parameters. It takes into account naturally offsetting risk positions and manages the group’s residual risk by means of forward exchange contracts, currency swaps and option contracts.

Hedging is undertaken in such a way that it does not constrain normal operational activities. In particular, for banking entities outside of the South African common monetary area, the need for capital to fluctuate with risk-weighted assets is taken into account.

The repositioning of the currency profile, which is coordinated at a group level, is a controlled process based on underlying economic

As indicated below, the impact of a 10% (2013: 10%) depreciation in foreign currency rates on the OCI and profit or loss of the group before tax is a R1 231 million gain (2013: R414 million gain).

Foreign currency risk sensitivity in ZAR equivalents

USD Euro GBP Naira Other Total

2014Total net long/(short) position Rm (5 786) (5 238) 998 (962) (1 322) (12 310)Sensitivity % 10 10 10 10 10 10

Impact on OCI Rm 578 (97) 97 132 710 Impact on profit or loss Rm 524 (2) (1) 521

2013Total net long/(short) position Rm 1 361 (5 267) 2 617 (244) (2 388) (3 921)Sensitivity % 10 10 10 10 10 10

Impact on OCI Rm 524 (260) 24 272 560Impact on profit or loss Rm (136) 3 (1) (12) (146)

views of the relative strength of currencies. The group does not ordinarily hold open exposures of any significance with respect to the banking book.

Gains or losses on derivatives that have been designated as either net investment or cash flow hedging relationships are reported directly in OCI, with all other gains and losses on derivatives being reported in profit or loss.

Foreign currency risk sensitivity analysisThe table that follows reflects the expected financial impact, in rand equivalent, resulting from a 10% (2013: 10%) shock to foreign currency risk exposures, against ZAR. The sensitivity analysis is based on net open foreign currency exposures arising from designated net investment hedges, other derivative financial instruments, foreign-denominated cash balances and accruals and intragroup foreign-denominated debt.

The sensitivity analysis reflects the sensitivity to equity and profit or loss on the group’s foreign-denominated exposures other than those trading positions for which sensitivity has been included in the trading book VaR analysis.




Own equity-linked transactionsDefinitionThe group has exposure to changes in its share price arising from its equity-linked remuneration contractual commitments.

Details of the group’s equity-linked share incentive schemes have been set out in annexure C of the annual financial statements.

The group’s remuneration report can be found in the annual integrated report on pages 133 to 161.

The group’s accounting policies for the accounting for the equity-linked share incentive schemes has been set out in annexure D of the annual financial statements. Refer to annexure C of the annual financial statements for details regarding the number of units outstanding at the end of the year together with the extent to which those outstanding units have been hedged.

Depending on the nature of the group’s equity-linked share schemes, the group is exposed to either income statement risk or net asset value through equity risk (NAV risk) due to changes in its own share price as follows:

Income statement risk arises as a result of losses being recognised in the group’s income statement as a result of increases in the price of the group’s share price on cash-settled share schemes above the award price.

NAV risk arises as a result of the group settling an equity-linked share scheme at a higher price than the price at which the share incentive was awarded to the group’s employees.

The following table summarises the group’s most material share schemes together with an explanation of which risk (where applicable) the share scheme exposes the group to, and why, and an indication as to whether the share schemes are hedged:

Share scheme Risk to the group Explanation Hedged

Equity growth scheme (EGS) and the group share incentive scheme (GSIS)

N/A The EGS and GSIS are equity-settled share schemes that are settled through the issuance of new shares. Accordingly, the group is not required to incur any cash flow in settling the share schemes and hence is not exposed to any risk as a result of changes in its own share price.

No

Quanto stock unit scheme (Quanto)

Income statement risk The Quanto is a cash-settled share scheme. Increases in the group’s share price result in losses being recognised in the income statement.

Yes

Deferred bonus scheme (DBS) and performance reward plan (PRP)

NAV risk The DBS and PRP are equity-settled share schemes that are settled through the purchase of shares from the external market. Accordingly, increases in the group’s share price above the grant price will result in losses being recognised in the group’s equity.

Yes

Refer to annexure C in the annual financial statements for details regarding the number of units outstanding at the end of the year.

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LibFin is responsible for managing Liberty’s aggregate market risks, including exposures arising from shareholder funds and asset-liability mismatches, in terms of its delegated authority and within set limits. STANLIB, and other external asset managers remain responsible for managing the investment risks within their investment mandates. An independent market risk team provides oversight of the effectiveness of market risk management processes and reports on the status of market risk management to the relevant governance committees. Liberty, via STANLIB, invests in various instruments for the benefit of policyholders as well as other third parties. In doing so, the market risk associated with such investments is for the risk of those investors. During the course of 2014, certain of these investment portfolios did experience market disruption caused by the curatorship of ABL. The resultant market risk impact (devaluation of the assets) has been attributed to these portfolios and communicated to policyholders. The impact on portfolio performance was, however, muted due to prescribed limits to concentration risk within mandates.

Shareholder investment portfolioLiberty recognises the importance of investing its capital base in a diversified portfolio of financial assets. The market risk arising from this shareholder fund exposure is modelled and managed together with the 90/10 fee exposure that exposes shareholders to 10% of the returns on a defined portion of assets backing unit-linked liabilities.

The Liberty board approves the long-term asset mix of this investment portfolio assuming a strategic asset allocation methodology with a long-term investment horizon. The typical asset classes included in this portfolio are equity, fixed income, property and cash, in both local and foreign currency. STANLIB and other asset managers are mandated by LibFin Investments to manage the underlying assets in this portfolio.

Tactical asset allocation is performed by STANLIB within their mandate. This is similar to the way in which an asset manager would invest on behalf of a client with a long-term investment horizon.

On a through-the-cycle basis, this conservative, diversified portfolio was constructed to maximise after-tax returns for a level of risk consistent with Liberty’s risk appetite.

In the short term, market movements will contribute to some earnings volatility. The diversified nature of the portfolio should, however, shield against significant earnings volatility.

Market risk exposure from management fee revenues, other than exposure to the 90/10 fee exposure, is not currently managed as part of the shareholder investment portfolio.

Asset liability management portfolioLiberty has a number of market risk exposures arising from asset-liability mismatches to which it does not wish to be exposed on a long-term strategic basis. As a result, it has chosen to mitigate these risks through a dedicated ongoing hedging programme.

Approach to managing own equity-linked transactionsThe ALCOs of the respective group entities that issue the equity-linked transactions approve hedges of the group’s share price risk with quarterly reporting to group ALCO which is chaired by the group finance director. Hedging is undertaken taking into account a number of considerations which include expected share price levels based on investment analyst reports; the value of the issued share scheme awards; the cost of hedging; and the ability to hedge taking into account the nature of the share scheme and applicable legislative requirements. Hedging instruments typically include equity forwards and equity options. Hedge accounting in terms of IFRS is applied to the extent that the hedge accounting requirements are complied with.

Hedges are only transacted outside of the group’s closed periods which are in effect from 1 June until the publication of the group’s interim results; 1 December until the publication of the group’s year end results; and any period where the group is trading under a cautionary announcement.


Long-term insuranceMarket risk management and reporting processes continue to mature. For management purposes, Liberty’s market risk remains split into three main categories:

Market risks to which Liberty wishes to maintain exposure on a long-term strategic basis: These include market risks arising from assets backing shareholder funds as well as from a 90/10 fee exposure. In aggregate, this is referred to as the shareholder investment portfolio and is managed by Liberty Financial Solutions (LibFin) Investments.

Market risks to which Liberty does not wish to maintain exposure on a long-term strategic basis as these are not expected to provide adequate return on economic capital over time: This includes the asset-liability mismatch risk arising from Liberty’s interest rate exposure to annuity business, and the mismatch risk arising from embedded derivatives, including policyholders’ investment guarantees. It also includes market risk arising from negative rand reserves, which represents the present value of future charges less the present value of future expenses and risk claims. In aggregate, this is referred to as the asset liability management portfolio and is managed by LibFin Markets.

Market risks to which Liberty does not wish to maintain exposure but which Liberty is unable to adequately and/or economically mitigate through hedging: In certain instances, these market risks are second order risks resulting from, for example, liquidity risks or reputational risks. Whilst these risks cannot necessarily be hedged, they are identified and measured as far as possible and, where applicable, are taken into account for the purposes of assessing risk appetite and overall sensitivity to changes in the market.




The exposures which are included in this hedging programme include the following:

embedded derivatives provided in contracted policies, for example, minimum investment return guarantees and guaranteed annuity options

the interest rate exposure from writing annuities and guaranteed investment products. However, credit risk on the backing assets is not hedged and serves as a diversified source of revenue for Liberty

guaranteed index trackers

negative rand reserves.

The decision to hedge these risks is based on the following factors:

The assumption that these market risks would result in Liberty operating outside its risk appetite.

There is a liquid tradable market in which to hedge these risks.

The capital-intensive nature of these market risks, particularly in an economic capital framework, which over time could potentially reduce shareholders’ returns on capital unless actively managed.

Some of the market risks, for example, those that arise from selling investment guarantees, are asymmetric in nature and could compromise Liberty’s solvency under severe market conditions. This is due to current regulatory capital rules requiring available capital to be impaired for IFRS mark-to-market changes on such instruments.

Exposure to financial, property and insurance assetsThe table below summarises Liberty’s exposure to financial, property and insurance assets. This exposure has been split into the relevant market risk categories and then attributed to the effective holders of the risk.

Exposure to financial, property and insurance assets by risk category

Totalfinancial,

property andinsurance

assetsRm

Attributable to

Policyholderlong-term

market-related

liabilitiesRm

Otherlong-term

policyholderliabilities1

Rm

Ordinaryshareholders

of LibertyRm

Non-controlling

interestsRm

Third-partyfinancialliabilities

arising on consolidation

of mutualfunds

Rm

20142,3,6

Equity price 149 318 136 057 (5 676) 3 555 15 382 Interest rate 141 603 67 693 29 484 33 630 427 10 369 Property price 36 474 27 918 (891) 2 842 3 720 2 885 Mixed portfolios4 44 114 34 583 (2 954) 6 620 5 865 Reinsurance assets5 1 558 1 302 256

Total 373 067 266 251 21 265 46 903 4 147 34 501

Percentage (%) 100 71 6 13 1 9

20132, 3, 6

Equity price 131 810 116 239 (6 126) 3 602 18 095 Interest rate 121 608 60 535 24 112 30 678 199 6 084 Property price 36 420 29 028 (1 100) 1 982 3 503 3 007 Mixed portfolios4 56 512 42 827 (2 732) 3 620 12 797 Reinsurance assets5 1 609 1 161 448

Total 347 959 248 629 15 315 40 330 3 702 39 983

Percentage (%) 100 72 4 11 1 12

1 Negative exposure to the various risk categories can occur in ‘Other policyholder liabilities’ since the present value of future inflow can exceed the present value of future benefits and expenses resulting in a negative liability. The group offsets these negative liabilities against policyholders’ market-related liabilities. The policyholders’ market risk exposure, however, remains unchanged. Hence, shareholders bear all the risks of shorting assets backing the policyholder market-related liabilities by the amount of these negative liabilities.

2 The group has a 54% interest in Liberty and therefore shares in 54% of this exposure.3 As reported by Liberty, refer to Liberty’s annual financial statements.4 Mixed portfolios are subject to a combination of equity price, interest rate and property price risks depending on each portfolio’s construction. A substantial portion of the mixed

portfolios will be subject to equity price and interest rate risk. The exact proportion is practically difficult to accurately calculate given the number of mutual funds and hedge funds contained in the group portfolios.

5 Reinsurance assets are claims against reinsurers outstanding at the reporting date. They are not subject to market risk other than time value of money (interest rate) for the periods to settlement.

6 The risk category exposures have been refined to categorise equity price and interest rate risk to property price risk where the invested entity only has exposure to investment properties. The 2013 comparatives have been adjusted on the same basis.

87

Interest rate riskThe table on the right gives additional detail on financial instrument assets and liabilities and their specific interest rate exposure. Due to practical considerations, interest rate risk details contained in investments in non-subsidiary mutual funds are not provided. Accounts receivable and accounts payable, where settlement is expected within 90 days, are not included in the analysis. The effect of interest rate risk on these balances is not considered significant given the short-term duration of the underlying cash flows.

Interest rate exposure1

2014Rm

20132

Rm

Financial instrument liabilitiesCarrying value 3 570 3 162

Exposed to cash flow interest rate risk 499 93 Exposed to fair value interest rate risk 3 071 3 069

Financial instrument assetsCarrying value 116 651 99 502

Exposed to cash flow interest rate risk 62 499 47 556Exposed to fair value interest rate risk 54 152 51 946

1 Based on information as reported by Liberty. Refer to Liberty’s annual financial statements.


Foreign currency riskOffshore assets are held in policyholders’ portfolios to match the corresponding liabilities. Liberty is exposed to currency risk through minimum investment return guarantees issued on contracts invested in offshore portfolios and related mismatches, as well as through the 90/10 fee exposure and management fees. In addition, some of the shareholder capital base is invested in offshore assets.

The gross exposure to financial instruments expressed in rand (converted at closing rates) at 31 December 2014 is R62 billion (2013: R57 billion). It is not practical to isolate accurately any detailed currency risk contained in investments in mutual funds and investment policies which are priced in rand and are not subsidiaries. The implied currency exposure to mutual funds and investment policies, however, is not material to Liberty.

The table below segregates the currency exposure by major currency at 31 December 2014.

Currency exposure by major currency1

GBP USD Euro Japanese Yen Swiss Franc Other

2014 20132 2014 20132 2014 20132 2014 20132 2014 2013 2014 2013

Foreign currency risk (Rm) 3 899 4 383 41 889 36 396 4 988 4 863 3 421 3 417 1 650 1 590 6 400 6 517 Gross exposure in foreign currency (m) 216 253 3 621 3 469 356 337 35 357 34 196 142 135 Derivative protection in foreign currency (m) (7) (16) (449) (807) (11) (34) 1 854 1 059 Net exposure in foreign currency (m) 209 237 3 172 2 662 345 303 37 211 35 255 142 135

1 Based on information as reported by Liberty. Refer to Liberty’s annual financial statements. 2 Restated. Refer to page 104.



Market risk | Insurance operations continued

Property market riskLiberty is exposed to tenant default. Unlet space within its investment property portfolio will affect property values and rental income. This risk is mainly attributable to the matching of policyholders’ liabilities. The shareholder exposure is mainly limited to management fees and profit margins. The managed diversity of the property portfolio and the existence of multi-tenanted buildings significantly reduce the exposure to this risk. At 31 December 2014, the proportion of unlet space in the property portfolio was 10% (2013: 6%).

Property market risk also arises with respect to shareholder exposures to investment guarantees and negative rand reserves, and this risk is managed as part of the dedicated hedging programme.

Liberty’s exposure to property market risk at 31 December 2014 is shown below.

Exposure to property market risk

20141 20131,2

Investment properties 28 283 28 614 Owner-occupied properties 1 464 1 410 Mutual funds with >80% property exposure 2 087 1 747

Gross exposure 31 834 31 771 Indirect exposure through debt and equity shareholdings 4 640 4 649

36 474 36 420

Attributable to non-controlling interests (3 720) (3 503)

Net exposure 32 754 32 917

Concentration use risk within directly held properties is summarised below: Shopping malls 24 485 23 767 Office buildings 2 868 2 826 Hotels 1 219 2 455South African listed property securities held via mutual fund investments 2 087 1 747 Convention centre and residential property 1 175 976

31 834 31 771


2 The property market risk disclosures have been enhanced to include indirect exposures in addition to direct exposures.

Derivative financial instruments and risk mitigationCertain Liberty entities are party to contracts for derivative financial instruments, mainly entered into as part of the dedicated hedging strategy. These instruments are used to mitigate equity, interest rate and currency risk and include vanilla futures, options, swaps, swaptions and forward exchange contracts.

Derivative financial instruments are either traded on a regulated exchange or negotiated OTC as a direct arrangement between two counterparties. Exchange instruments are margined in accordance with the exchange or clearing member’s requirements and the clearing house is the counterparty to each trade. OTC instruments are only entered into with appropriately approved counterparties. Signed ISDA agreements are held with all counterparties.

Sensitivity analysisThe table below provides a description of risk sensitivities to various market variables. The interest rate yield curve and implied option volatility sensitivities below reflect the financial impact of an instantaneous event at the financial position date. In determining the financial impact of such an event, new asset levels are applied to both the measurement of policyholders’ liabilities and to long-term assumptions dependent on interest rate yield curves and implied option volatilities.

The equity price and rand currency sensitivities also reflect the impact of an instantaneous event at the financial position date. However, in the calculation of the financial impact of such an event, new asset levels are only applied to the measurement of policyholders’ liabilities. No changes are made to long-term assumptions used in the measurement of policyholders’ liabilities.

The market sensitivities are applied to all assets held by Liberty, not just assets backing the policyholders’ liabilities.

Market variable Description of sensitivity

Interest rate yield curve A parallel shift in the interest rate yield curve

Implied option volatilities A change in the implied short-term equity, property and interest rate option volatility assumptions

Equity prices A change in the local and foreign equity prices

Rand exchange rates A change in the ZAR exchange rate to all applicable currencies

89

The table below summarises the impact of the change in the aforementioned risk variables on policyholder’ liabilities, and ordinary shareholders’ equity and attributable profit after taxation.

Sensitivity analysis of risk variables1

2014 2013

Change invariable

%

Impact onpolicyholders’

liabilitiesRm

Impact onordinary

shareholderequity and

attributableprofit after

taxationRm

Change invariable

%


liabilitiesRm

Impact onordinary

shareholderequity and


taxationRm

Market assumptionsInterest rate yield curve 12 (3 638) (285) 12 (3 022) (213)

(12) 4 288 224 (12) 3 558 135 Option price volatilities 20 34 (22) 20 106 (55)

(20) (2) (2) (20) (74) 33 Equity prices4 15 18 909 1 284 15 18 470 1 258

(15) (19 077) (1 260) (15) (18 460) (1 256)Rand exchange rates 122 (4 373) (655) 122 (3 862) (627)

(12)3 4 462 652 (12)3 3 873 624

1 Based on information as reported by Liberty. Refer to Liberty’s annual financial statements. 2 Strengthening of the rand.3 Weakening of the rand.4 Currently option price volatilities are not hedged and consequently the analysis is performed on market data at 31 December 2014. The sensitivities are non-linear and will be

significantly impacted by the mix of future new business.

Short-term insuranceMarket risk arises from investments in cash, corporate money market and collective investment schemes. It is not material in the group context. Management of the investment portfolio is outsourced with target returns and capital preservation as specified in the mandate.



Market risk | Insurance operations continued

Definition

Insurance risk is the risk that actual future demographic and related expense experience will differ from that expected and hence that used in measuring policyholder liabilities and in pricing products.

Insurance risk arises due to uncertainty regarding the timing and amount of future cash flows from insurance contracts.

Insurance risk applies to long-term insurance operations housed in Liberty and the short-term insurance operations housed in Liberty Africa and SIL. Insurance risk is referred to within Liberty as business risk.

Long�term insurance risk

OverviewThe statutory actuaries, group business risk department and the heads of risk in the business units provide independent oversight of compliance with Liberty’s risk management policies and procedures and the effectiveness of the group’s insurance risk management processes.

The timing of expected future cash flow is specifically influenced by assumptions on future mortality, longevity, morbidity, withdrawal and expenses made in the measurement of policyholders’ liabilities and in product pricing.

Deviations from assumptions will result in actual cash flows being different from those expected. As such, each assumption represents a source of uncertainty.

Experience investigations are conducted, at least annually, on all significant insurance risks to ascertain the extent of deviations from assumptions and their financial impacts. If the investigations indicate that these deviations are likely to persist in future, the assumptions will be adjusted accordingly for the subsequent measurement of policyholder liabilities.

Insurance risks are assessed and reviewed against Liberty’s risk appetite and risk target. To reduce the level of risk, mitigating actions are developed for any insurance risks that fall outside management’s assessment of risk appetite.

Insurance risk

91 Definition

91 Long-term insurance risk

91 • Overview

92 • Approach to managing insurance risk

92 • Long-term insurance risk subtypes

94 • Sensitivity analysis

95 Short-term insurance risk

95 • Overview

95 • Approach to the management of short-term insurance risks

95 • Short-term insurance risk types

91

gain assurance that material insurance risks are being monitored and that the level of risk taken is satisfactorily in line with the Liberty risk appetite statement at all times

consider any new insurance risks introduced through new product development or strategic development and how they should be managed

monitor, ratify and/or escalate to GCROC all material insurance risk-related breaches or excesses highlighting the corrective action undertaken to resolve the issue

monitor insurance risk regulatory requirements as they apply to the management of the group and its subsidiaries’ balance sheets.

Reinsurance arrangements are put in place to reduce the mortality and morbidity exposure per individual and provide cover in catastrophic events. Liberty has a centralised reinsurance function which is responsible for the optimisation and monitoring of reinsurance across its business. The group performs an annual review of the reinsurance cover in line with the stated risk appetite and reinsurance strategy.

Long-term insurance risk subtypesPolicyholder behaviour riskPolicyholder behaviour risk is the risk of adverse financial impact caused by actual policyholders’ behaviour deviating from expected policyholders’ behaviour, mainly due to:

regulatory and law changes (including taxation)

changes in economic conditions

sales practices

competitor behaviour

policy conditions and practices

policyholders’ perceptions.

Policyholders’ behaviour risk includes a consideration of comparable risks in the asset management business.

The primary policyholder behaviour risk is persistency risk. This arises when policyholders discontinue or reduce contributions, or withdraw benefits at a rate that is not in line with expectations. This behaviour results in a loss of future charges that are designed to recoup expenses and commission incurred early in the life of the contract, and to provide a return on capital. A deterioration in persistency generally gives rise to a loss.

The business has continued to focus on a broad programme of initiatives to manage persistency risk and withdrawal rates on major product lines are broadly in line with expectations.

Approach to managing insurance riskInsurance risks are managed through processes applied prior to and on acceptance of risks and those applied once the risks are contracted.

Risk management prior to and on acceptance of risksPrior to acceptance of risks in new products, inherent risks are identified, quantified and priced. Sensitivity tests are performed to obtain an understanding of the risk types and appropriateness of mitigating actions. Product design also takes account of various factors, including size and timing of fees and charges, appropriate levels of minimum premiums, commission structures and policy terms and conditions. Where applicable, an underwriting assessment is conducted to assess a new individual’s risk at the point of sale. Furthermore, Liberty makes use of reinsurance to reduce its exposures to some business risks. Post implementation reviews are performed to ensure that intended outcomes are realised and to determine if any further action is required.

Risk management once risks have been acceptedThe ongoing management of insurance risk, once the risk is contracted, is effectively the management of deviations of actual experience from the assumed best estimate of future experience.

The statutory actuaries provide oversight of Liberty’s insurance risk in that they are required to:

report at least annually on the financial soundness of the life companies within Liberty

oversee the setting of assumptions used to provide best estimate liabilities plus compulsory and discretionary margins (as described in the accounting policies) in accordance with the assumption setting policy

report on the actuarial soundness of premium rates in use for new business and the profitability of the business, taking into consideration the reasonable benefit expectations of policyholders and the associated insurance and market risks.

All new products and premium rates are approved through the product approval process and signed-off by the relevant statutory actuary.

Second line oversight is provided by the group business risk committee (GBRC) that reports into Liberty’s group control and risk oversight committee (GCROC). The following are the main duties and responsibilities of the GBRC:

recommend for approval insurance risk-related policies to GCROC and ensure compliance therewith

ensure that insurance risk is appropriately controlled by monitoring insurance risk triggers against agreed limits and/or procedures



Insurance risk | Long-term insurance risk continued

Liberty views mortality and morbidity risks as risks that are core to the business. These risks will be retained if they cannot be mitigated or transferred on risk-adjusted value-enhancing terms. Mortality and morbidity risk gives rise to significant economic capital requirements in particular due to potential catastrophic events. Since it is difficult to obtain reinsurance for certain catastrophic events, such as epidemics on reasonable terms, the mortality and morbidity economic capital requirements are likely to remain significant.

The table below summarises the profiles of the sums assured at risk per life in terms of mortality benefits before and after reinsurance for individual and group risk business.

Underwritten risksMortality and morbidity riskMortality risk is the risk of loss arising due to actual death claims on life assurance business being higher than expected. Morbidity risk is the risk of loss arising due to policyholders’ health-related (disablement and dread disease) claims being higher than expected.

Liberty has a range of standard processes and procedures in place to manage mortality and morbidity risk, including differentiating by the individual characteristics, right of review of premiums, underwriting at inception, medical tests, and use of experienced reinsurers and claims assessors.

Profile for amounts at risk for individual and group business – retail and corporate1

Sum assured at risk band (Rands)

Before reinsurance After reinsurance

Rm % Rm %

20140 – 1 499 999 582 782 44 555 747 49 1 500 000 – 2 999 999 265 956 20 239 963 21 3 000 000 – 7 499 999 296 279 23 252 645 22 7 500 000 and above 165 218 13 88 679 8

Total 1 310 235 100 1 137 034 100

20130 – 1 499 999 552 690 46 535 661 51 1 500 000 – 2 999 999 238 771 20 218 018 21 3 000 000 – 7 499 999 263 565 22 223 097 21 7 500 000 and above 141 282 12 66 987 7

Total 1 196 308 100 1 043 763 100


The table above demonstrates that the sums assured are spread over many lives in terms of amounts at risk, and that the exposure to individual lives has been reduced by means of reinsurance arrangements. Given the large number of assured lives, the random fluctuation in mortality claims is expected to be small, as the larger the portfolio of uncorrelated insurance risks, the smaller the relative variability around the expected outcome becomes.

Catastrophe reinsuranceCatastrophe reinsurance is consolidated across Liberty’s life licences and is in place to reduce the risk of many claims arising from the same event. Various events are excluded from the catastrophe reinsurance (for example, epidemics and radioactive contamination).

For corporate risk business, the exposure per industry class is monitored to maintain a diversified portfolio of risks and manage concentration exposure to a particular industry class. The following table splits the annual corporate risk business by industry class.

Annual corporate business by industry class1

2014%

2013%

Administrative/professional 34 34Retail 23 21Light manufacturing 25 27Heavy manufacturing 15 15Heavy industrial and other high risk 3 3

Total 100 100

1 As reported by Liberty, refer to Liberty’s annual financial statements.

93

incurred are considerably higher than those of insurers offering competing products, the ability of Liberty to sell business on a profitable basis will be impaired. This not only has capital implications, but can also affect Liberty’s ability to function as a going concern in the long term.

Tax expectation risk is mitigated through the implementation of Liberty’s tax risk framework as well as the employment of tax experts to identify and manage tax risks.

Sensitivity analysisThe table below provides a description of the sensitivities that are provided on insurance risk assumptions.

Insurance risk variable Description of sensitivity

Assurance mortality A level percentage change in the expected future mortality rates on assurance contracts

Annuitant mortality A level percentage change in the expected future mortality rates on annuity contracts

Morbidity A level percentage change in the expected future morbidity rates

Withdrawals A level percentage change in the policy withdrawal rates

Expense per policy A level percentage change in the expected maintenance expenses

Insurance risk sensitivities are applied as a proportional percentage change to the assumptions made in measuring policyholders’ liabilities. Over a reporting period, assets are expected to earn a return consistent with the long-term assumptions used in measuring policyholders’ liabilities. Each sensitivity is applied in isolation with all other assumptions left unchanged.

The table on the following page summarises the impact of the change in the aforementioned risk variables on policyholders’ liabilities and attributable profit after taxation.

Longevity riskLongevity risk is the risk of loss arising due to annuitants living longer than expected. For life annuities, the loss arises as a result of Liberty’s undertaking to make regular payments to annuitants for their remaining lives, and possibly to the annuitants’ spouses for their remaining lives. The most significant risk on these liabilities is continued medical advances and improvement in social conditions that lead to longevity improvements being better than expected.

Liberty manages longevity risk by monitoring the actual longevity experience and identifying trends over time, and allowing for future mortality rates falling in the pricing of new business and the measurement of policyholders’ liabilities.

Expense expectation, tax expectation and new business riskExpense expectation risk is the risk of adverse financial impact due to the timing or amount of administration expenses incurred, or both differing from those expected in the administration of policies, for example, the actual cost per policy differing from that assumed in the pricing or reserving basis.

Tax expectation risk is the risk of losses arising due to the actual tax assessed being more than the tax expected.

New business risk is the risk of adverse financial impact due to the actual volume, mix and/or quality of new business deviating from that expected in calculating expected financial outcomes.

Allowance is made for expected future maintenance expenses in the measurement of policyholders’ liabilities utilising a cost per policy methodology. These expected expenses are dependent on estimates of the number of in-force and new business policies. As a result, the risk of expense loss arises due to expenses increasing by more than expected and the number of in-force and new business policies being less than expected.

Liberty manages the expense and new business risk by:

Regularly monitoring actual expenses against the budgeted expenses

Regularly monitoring new business volumes and mix

Regularly monitoring withdrawal rates including lapses

Implementing cost control measures in the event of expenses exceeding budget or of significant unplanned reductions in the number of in-force polices.

Even though expense risk does not give rise to large capital requirements, the measurement of expense risk is core to the business. The expenses that Liberty is expected to incur on policies are allowed for in product pricing. If the expenses expected to be



Insurance risk | Long-term insurance risk continued

Sensitivity analysis of risk variables1

2014 2013

Change invariable

%


liabilitiesRm

Impact onordinary

shareholdersequity and


taxationRm

Change invariable

%


liabilitiesRm

Impact onordinary

shareholdersequity and


taxationRm

Insurance assumptionsMortalityAssured lives 2 263 (189) 2 227 (164)

(2) (264) 190 (2) (228) 164 Annuitant longevity4 42 349 (251) 42 226 (162)

(4)3 (334) 241 (4)3 (217) 156 Morbidity 5 426 (306) 5 361 (260)

(5) (425) 306 (5) (360) 259 Withdrawals 83 506 (364) 83 471 (339)

(8) (562) 405 (8) (533) 384 Expense per policy 5 271 (195) 5 260 (187)

(5) (271) 195 (5) (260) 187

1 Based on information as reported by Liberty. Refer to Liberty’s annual financial statements. 2 Annuitant life expectancy increases, i.e. annuitant mortality reduces.3 Annuitant life expectancy reduces, i.e. annuitant mortality increases.4 The significant increase in sensitivity impact is as a consequence of large annuity new business written during 2014.

Short-term insurance risk

OverviewSIL writes mainly property, motor, accident and health insurance on a countrywide basis within South Africa. Approximately 70% of the total gross written premium is property insurance which indemnifies, subject to any limits or excesses, the policyholder against loss or damage to their own property and business interruption arising from this damage.

Liberty Africa writes mainly property and motor business through Liberty Kenya Holdings Limited, and medical expense business through Total Health Trust Limited in Nigeria.

Approach to the management of short-term insurance risksInsurance risk is managed primarily through pricing, product design, investment strategy, risk rating and reinsurance.

The principal governance document is the short-term insurance risk governance standard.

Short-term insurance risk typesThe underwriting strategy seeks diversity to ensure a balanced portfolio and is based on a large portfolio of similar risks over a large geographical area. This strategy is cascaded down to individual underwriters through detailed underwriting authorities that set out the limits that any one underwriter can write by line size, class of business, territory and industry in order to enforce appropriate risk selection within the portfolio.

The key risks associated with this product are underwriting risk, competitor risk and claims experience risk (including the variable incidence of natural disasters). Property is subject to a number of risks, including theft, fire, business interruptions and weather. For property classes of business there is a significant geographical concentration of risk so that external factors such as adverse weather conditions may adversely impact upon a large proportion of a particular geographical portion of the company’s property risks. Claim inducing perils such as storms, floods, subsidence, fires, explosions and rising crime levels will occur on a regional basis, meaning that SIL has to manage its geographical risk dispersion carefully.

The greatest likelihood of significant losses to the group arises from catastrophe events such as flood, storm or earthquake damage. To mitigate this risk, we buy reinsurance across a diversified panel of 38 reinsurers.

95

Risk and catastrophe reinsuranceThe business reinsures a portion of the risks it underwrites in order to control its exposure to losses and protect capital resources. For example, excess of loss reinsurance and catastrophe reinsurance protect against major losses on high sums insured and major natural disasters, respectively.

Policyholder behaviour riskPolicyholder behaviour risk is the risk of loss arising due to actual policyholders discontinuing their insurance policies earlier or more frequently than expected. This may arise due to a change in economic conditions and/or inconsistent policy practices, regulatory and tax changes, selling practices and policyholder perceptions.

The primary policyholder behaviour risk is persistency risk, which arises due to policyholders discontinuing insurance on short-term insurance business, where the policyholder cancels cover. This could lead to a reduction in premium income, an increase in the expense ratio and a reduction on the return on capital.

Catastrophe riskThe risk of adverse financial impact due to a single event or series of events of major magnitude, usually over a short period (often 72 hours), leads to a significant deviation in actual claims from the total expected claims.

Claims incidence riskThis is the risk of loss in excess of what has been priced for, arising from accident, fire and theft on short-term insurance business.

On certain types of business, for example, third-party liability claims, the claim distribution is longer tailed. This means that the final cost of the claim is only known many years into the future. The risk here is that we reserve inadequately for this ultimate claims cost.

Expense riskThis is the risk of an adverse financial impact due to the timing and/or amount of expenses incurred, or both differing from those expected in administering policies, e.g. assumed in the pricing basis or actual cost per policy.

The expenses that the group is expected to incur on policies are allowed for in product pricing. If the expenses expected to be incurred are considerably higher than those of insurers offering competing products, our ability to sell business on a profitable basis will be restricted. This does not only have capital implications, but can also affect the group’s ability to function as a going concern in the long term.

New business riskThis is the risk of adverse financial impact due to the actual volume and/or quality of new business deviating from the expected volume and/or quality.

Emerging risksIn addition to monitoring and assessing existing risks, there also needs to be a focus on emerging risks. These are likely to take the form of a change in the quantification of one of the aforementioned risks. Examples of this include an increase in natural disasters due to climate change and/or changes in regulation.

Short-term insurance operations are impacted by adverse economic conditions which could lead to lower new business take-up rates, higher than budgeted cancellation rates and fraud. The potential for fraudulent behaviour is also very high.

New business and lapse rates are budgeted each year and monitored on a monthly basis. These rates are reported and compared to budget figures.



Insurance risk | Short-term insurance risk continued

Definition

Operational risk is defined as the risk of loss suffered as a result of the inadequacy of, or a failure in, internal processes, people and/or systems or from external events.

Operational risk subtypes are managed and overseen by specialist functions. These subtypes include:

model risk

tax risk

legal risk

environmental and social risk

information technology and change risk

information risk

cyber risk

compliance risk (dealt with on page 63)

financial crime risk

physical commodities.

Approach to managing operational risk

Operational risk exists in the natural course of business activity. The group operational risk governance standard sets out the minimum standards for operational risk management to be adopted across the group. The governance standard seeks to ensure adequate and consistent governance, identification, assessment, monitoring, managing and reporting of operational risk to support the group’s business operations. In addition, it ensures that the relevant regulatory criteria can be met by those banking entities adopting the advanced measurement approach, and those adopting the basic indicator approach or the standardised approach for regulatory capital purposes.

It is not an objective to eliminate all exposure to operational risk as this would be neither commercially viable nor possible. The group’s approach to managing operational risk is to adopt fit-for-purpose operational risk practices that assist business line management in understanding their inherent risk and reducing their risk profile while maximising their operational performance and efficiency.

The IOR management function is independent from business line management and is part of the second line of defence reporting to the group CRO. It is responsible for the development and maintenance of the operational risk governance framework, facilitating business’s adoption of the framework, oversight and reporting, as well as for challenging the risk profile. The team proactively analyses root causes, trends and emerging threats, advises on the remediation of potential control weaknesses and recommends best-practice solutions.

Individual teams are dedicated to each business line and report to

Operational risk

97 Definition

97 Approach to managing operational risk

98 • Insurance cover

98 Governance committees

99 Approved regulatory capital approach

99 Operational risk subtypes

99 • Operational risk subtype: Model risk

99 • Operational risk subtype: Tax risk

99 • Operational risk subtype: Legal risk

99 • Operational risk subtype: Environmental and social risk

100 • Operational risk subtype: Information technology and change risk

100 • Operational risk subtype: Information risk

100 • Operational risk subtype: Cyber risk

100 • Operational risk subtype: Financial crime risk

100 • Operational risk subtype: Physical commodities

97

In April 2014, a crisis management simulation was utilised to test the group crisis management leadership team and plan. The simulation proved to be an effective mechanism to validate the group’s crisis management capability and confirmed the embedding of this capability in the group’s overall integrated recovery planning process.

The group is fully cognisant of the risks which the prevailing electricity shortages in South Africa pose to the continuity of its SBSA services and operations and to the broader group through services provided out of South Africa. The group has completed a high-level assessment of its readiness to withstand both routine load shedding and a national grid interruption to ensure the risks are mitigated proactively.

Insurance coverThe group buys insurance to mitigate operational risk. This cover is reviewed on an annual basis. The group insurance committee oversees a substantial insurance programme designed to protect the group against loss resulting from its business activities.

The principal insurance policies in place are the group crime, professional indemnity, and group directors’ and officers’ liability policies. In addition, the group has fixed assets and liabilities coverage in respect of office premises and business contents; third-party liability for visitors to the group’s premises, and employer’s liability. The group’s business travel policy provides cover for group staff, whilst travelling on behalf of the group.

the business unit CRO. IOR also provides dedicated teams to enabling functions such as finance, IT and human capital. These teams work alongside their business areas and facilitate the adoption of the operational risk governance framework. As part of the second line of defence, they also monitor and challenge the business units’ and enabling functions’ management in respect of their operational risk profile.

A central function, based at a group level, provides groupwide oversight and reporting. It is also responsible for developing and maintaining the operational risk governance framework.

Business continuity management (BCM) is a process that identifies potential operational disruptions and provides a basis for planning for the mitigation of the negative impact from such disruptions. In addition, it promotes operational resilience and ensures an effective response that safeguards the interests of the group and its stakeholders. The group’s BCM framework encompasses emergency response preparedness and crisis management capabilities to manage the business through a crisis to full recovery. The group’s business continuity capabilities are evaluated by testing business continuity plans and conducting crisis simulations.

Governance committees

The primary management level governance committees overseeing operational risk, including the various subtypes, are:

Governance committee Governance document

Group internal financial control governance committee N/A

Group operational risk committee

Information risk governance standard Operational risk governance standard Operational risk governance framework Business resilience governance framework IT risk and IT change risk governance standard

Group regulatory and legislative oversight committee N/A

Group and business line model approval committees Model risk governance standard

Group IT steering committee N/A

IT architecture governance committee N/A

Legal executive committee Legal risk governance standard

Tax risk committee Tax risk governance standard



Operational risk | Approach to managing operational risk continued

Models are recommended by the relevant technical committee for approval or ongoing use to the relevant model approval committee.

Operational risk subtype: Tax riskTax risk is defined as any event, action or inaction in tax strategy, operations, financial reporting, or compliance that either adversely affects the group’s tax or business objectives or results in an unanticipated or unacceptable level of monetary, financial statement or reputational exposure.

The group’s approach to tax risk is governed by the GAC-approved tax risk control framework which, in turn, is supported by policies dealing with specific aspects of tax risk such as, for example, transfer pricing, indirect taxes, withholding taxes and remuneration taxes.

Operational risk subtype: Legal riskLegal risk is defined as the exposure to the adverse consequences resulting from inaccurately drafted contracts, their execution, the absence of written agreements or inadequate agreements. This includes exceeding authority as contained in a contract. It applies to the full scope of group activities and may also include the activities of third parties acting on behalf of the group. The adverse consequences are the financial losses arising from judgments or private settlements, including punitive damages.

The group has processes and controls in place to manage its legal risks. Failure to manage these risks effectively could result in legal proceedings impacting the group adversely, both financially and reputationally.

Operational risk subtype: Environmental and social riskEnvironmental risk is described as a measure of the potential threats to the environment. It combines the probability that events will cause or lead to the degradation of the environment and the magnitude of such degradation. Environmental risk includes risks related to or resulting from climate change, human activities or from natural processes that are disturbed by changes in natural cycles.

Social risk is described as risks to people, their livelihoods, health and welfare, socioeconomic development, social cohesion and the ability to adapt to changing circumstances.

Environmental and social risk assessment and management deals with two aspects:

Risks over which the group does not have control but which have potential to impact on the group’s operations and its clients.

Risks over which the group has direct control. These include our immediate direct impact, such as our waste management and the use of energy and water as well as our broader impact, including risks that occur as a result of our lending or financial services activities.

The group sustainability management unit develops the strategy, policy and management frameworks that enable the identification, management, monitoring and reporting of both aspects.

Approved regulatory capital approach

The group has approval from the SARB to adopt the AMA for SBSA and the standardised approach for all other legal entities.

The journey to migrate all countries in Africa to the AMA is underway.

The group does not include insurance as a mitigant in the calculation of regulatory capital.

Operational risk subtypes

Operational risk subtype: Model riskModel risk arises from potential weaknesses in a model that is used in the measurement, pricing and management of risk. These weaknesses include incorrect assumptions, incomplete information, inaccurate implementation, limited model understanding, inappropriate use or inappropriate methodologies leading to incorrect conclusions by the user.

The group’s approach to managing model risk is based on the following principles:

Fit-for-purpose governance, which includes:

an approved model risk governance framework

a three-lines-of-defence governance structure comprising independent model development, model validation and IA oversight functions

model approval committees with board and executive management membership based on model materiality and regulatory requirements

policies that define minimum standards, materiality, validation criteria, approval criteria, and roles and responsibilities.

A skilled and experienced pool of technically competent staff is maintained in the development, validation and audit functions.

Robust model-related processes, including:

the application of best-practice modelling methodologies

independent model validation in accordance with both regulatory and internal materiality assessments

adequate model documentation, including the coverage of model use and limitations

controlled implementation of approved models into production systems

ongoing monitoring of model performance

review and governance of data used as model inputs

peer challenge in technical forums.

Credit IRB models and operational risk AMA models are validated at initial development and at least annually thereafter by the validation function. Other models are validated at initial development and reviewed at intervals determined by materiality and performance criteria. Validation techniques test the appropriateness and effectiveness of the models, and indicate if the model is fit-for-purpose.

99

The group has an environmental and social risk management policy and subscribes to a number of international norms and codes, such as those of the United Nations Environment Programme Finance Initiative, the Equator Principles and the Banking Association of South Africa’s code of conduct for banks. In support of these policy commitments, it has developed guidance to bankers, screening tools to assist in categorising environmental and social risk and various training programmes to assist credit evaluators, deal makers and other key individuals.

Operational risk subtype: Information technology and change riskInformation technology risk encompasses both IT risk and IT change risk. The group’s IT risk refers to the risk associated with the use, ownership, operation, involvement, influence and adoption of IT within the group. It consists of IT-related events and conditions that could potentially impact the business. IT change risk refers to risk arising from changes, updates or alterations made to the IT infrastructure, systems or applications that could affect service reliability and availability. The group relies heavily on technology to support complex business processes and handle large volumes of critical information. As a result, a technology failure can have a crippling impact on the group’s brand and reputation.

The IOR IT risk function oversees compliance with the IT risk and IT change risk governance standard.

Operational risk subtype: Information riskInformation risk encompasses the risk of accidental or intentional unauthorised use, modification, disclosure or destruction of information resources, which would compromise the confidentiality, integrity or availability of information and which would potentially be harmful to the group’s business. Additionally, it comprises of all the challenges that result from the need to control and protect the group’s information.

The group has adopted a risk-based approach to managing information risks. The IOR management function oversees the information risk management system, policies and practices across the group.

The execution of these policies and practices is driven through a network of embedded representatives within the business lines. The head of group information risk oversees the execution in conjunction with the heads of embedded operations risk per business area.

The Promotion of Access to Information Act 2 of 2000 gives effect to the constitutional right of access to information that is held by a private or public body. The following information was disclosed in terms of applicable regulations:

From January 2014 to December 2014, the group processed six (January 2013 to December 2013: 16) requests for access to information, of which two were granted, three were denied, and one is still in progress.

The reason for the denial of access was that the owners of the personal information declined to give consent for access to be given to the requestor.

Operational risk subtype: Cyber riskCyber risk is the risk associated with injury, damage or loss from electronic exposure that can result in an adverse impact on the group’s business. This risk may arise due to the disclosure, modification, destruction or theft of information, or from the unavailability of the transaction site, systems or networks. The cyber security operations centre, within IOR, manages this risk by proactively identifying malicious activity that poses a risk to the confidentiality, integrity and availability of the group’s information assets. Identification and mitigation of cyber threats includes services to deliver both the proactive immobilisation of threats that are active in the group and the identification, investigation, resolution and reporting of threats that have materialised into cyber incidents.

Operational risk subtype: Financial crime riskFinancial crime risk includes fraud, bribery, corruption, theft and integrity misconduct by staff, customers, suppliers, business partners and stakeholders. The group financial crime control (GFCC) function combats financial crime risk through the prevention and detection of, and response to, all financial crime incidents to mitigate economic loss, reputational risk and regulatory sanction. As is the case with the other functions within operational risk, GFCC maintains close working relationships with other risk functions, specifically compliance, legal risk and credit risk, and with other group functions such as IT, human capital, and finance.

Operational risk subtype: Physical commoditiesA physical commodities specialist function based in Johannesburg, London, Singapore and Shanghai manages physical commodities transactions where the group takes ownership of the underlying commodity. The role of the team is to focus on the risks embedded in each trade, on a pre- and post-trade basis, and to ensure they are understood, tracked, controlled and escalated if appropriate. The team works with approved third parties who play a key role in the process and the provision of related control functions such as shipbrokers, insurers, warehouse providers and security companies.



Operational risk | Operational risk subtypes continued

Business risk is the risk of loss due to operating revenues not covering operating costs.

Business risk is usually caused by the following:

inflexible cost structures

market-driven pressures, such as decreased demand, increased competition or cost increases

group-specific causes, such as a poor choice of strategy, reputational damage or the decision to absorb costs or losses to preserve reputation.

The group mitigates business risk in a number of ways, including:

performing extensive due diligence during the investment appraisal process, in particular for new acquisitions and joint ventures

detailed analysis of the business case for, and financial, operational and reputational risk associated with, disposals

the application of new product processes per business line through which the risks and mitigating controls for new and amended products and services are evaluated

stakeholder management to ensure favourable outcomes from external factors beyond the group’s control

monitoring the profitability of product lines and customer segments

maintaining tight control over the group’s cost base, including the management of its cost-to-income ratio, which allows for early intervention and management action to reduce costs

being alert and responsive to changes in market forces

a strong focus in the budgeting process on achieving headline earnings growth while containing cost growth; contingency plans are built into the budget that allow for costs to be significantly reduced in the event that expected revenues do not materialise

increasing the ratio of variable costs to fixed costs which creates flexibility to reduce costs during an economic downturn.

Business risk includes strategic risk and post-employment obligation risk as follows:

Strategic risk is the risk that the group’s future business plans and strategies may be inadequate to prevent financial loss or protect the group’s competitive position and shareholder returns. The group’s business plans and strategies are discussed and approved by executive management and the board and, where appropriate, subjected to stress tests.

Post-employment obligation risk arises from the requirement to contribute as an employer to an under-funded defined benefit plan. The group operates both defined contribution plans and defined benefit plans, with the majority of its employees participating in defined contribution plans. The group’s defined benefit pension and healthcare provider schemes for past and certain current employees create post-employment obligations.

The group mitigates these risks through independent asset managers and independent asset and liability management advisors for material funds. Potential residual risks which may impact the group are managed within the group asset and liability management process.

The primary governance committee for overseeing this risk is the group ALCO which is chaired by the group financial director.

Business risk

101

Reputational risk Reputational risk is the risk of potential or actual damage to the group’s image which may impair the profitability and/or sustainability of its business.

Such damage may result from a breakdown of trust, confidence or business relationships on the part of customers, counterparties, shareholders, investors or regulators that can adversely affect the group’s ability to maintain existing business or generate new business relationships and continued access to sources of funding. The breakdown may arise from a number of factors or incidents such as a poor business model, continued losses and failures in risk management.

Safeguarding the group’s reputation is of paramount importance. There is growing emphasis on reputational risks arising from compliance breaches, as well as from ethical considerations linked to countries, clients and sectors, and environmental considerations.

The breakdown may be triggered by an event or may occur gradually over time. The group’s crisis management processes are designed to minimise the reputational impact of such events or developments. Crisis management teams are in place both at executive and business line level. This includes ensuring that the group’s perspective is fairly represented in the media.

The principal governance document is the reputational risk governance standard.

The group’s code of ethics is an important reference point for all staff. The group ethics officer and group chief executives are the formal custodians of the code of ethics.

For more information on the group’s code of ethics go to www.standardbank.com.


Restatements Capital management – Basel III: qualifying capital, excluding unappropriated profits

In accordance with IFRS the group reported, in its 2013 financial results, its GMOA as a discontinued operation in the income statement with its assets and liabilities being separately reported as non-current assets/liabilities held for sale. The group normalised its 2013 financial results and, specifically, its segment results, for the disposal of GMOA to reflect GMOA as part of its continuing operations and not as separate asset/liabilities. For purposes of 2014 comparative financial reporting purposes, the group has reversed the normalised results and presented and accounted for GMOA in accordance with IFRS.

Refer to page 21.

Liberty CAR ratio:

The 2013 statutory CAR amount was erroneously transposed and has accordingly been restated.

Refer to page 25.

Economic capital

Credit risk economic capital has been restated to reflect certain positions that were previously not modelled for economic capital purposes.

Refer to page 25.

Credit risk: Basel derivatives exposure

The gross positive fair value of derivatives (GPFV) and netting benefits, reported on page 47, previously included cash collateral held on derivative liability positions. The GPFV was also previously determined after the application of offsetting risk positions. The previously reported GPFV has been restated to exclude the cash collateral and to be presented before the effects of offsetting. The netting benefit was restated to include the effects of offsetting and to exclude the cash collateral on the derivative liability positions. The restatement had no effect on the group’s capital requirements.

103

Depositor concentration

The underlying calculation of depositor concentration was reviewed and revised during 2014 and the comparative results have accordingly been restated.

Refer to page 73.

Funding-related liabilities composition

The underlying calculation of funding-related liabilities composition was reviewed and revised during 2014 and the comparative results have accordingly been restated.

Refer to page 73.

Liquidity risk: Impact on collateral requirements of ratings downgrade

The method used to calculate the impact on collateral requirements has been updated to include those contracts referencing different thresholds for different rating agencies. The comparative results have accordingly been restated.

Refer to page 74.

Market risk: Basel equity positions in the banking book

The total banking book equity positions amount was erroneously calculated to include certain non-banking book positions. The comparative results have accordingly been restated.

Refer to page 83.

These two adjustments have also been adjusted in the following tables:

Exposure subject to the standardised approach per risk weighting: page 32

Exposure by approach and class: page 36

Exposures by type of asset and industry: page 39

Exposures by type of asset and geographic region: page 40

Exposures by residual contractual maturity: page 41

Credit risk mitigation for portfolios under the IRB approach: page 45

Credit risk mitigation for portfolios under the standardised approach: page 45

Central counterparties (CCP) exposure

Certain Basel tables were restated to include CCP exposures in order to ensure consistent presentation across all Basel tables, where CCP was previously excluded.

Refer to pages 36, 41, 45.

Credit risk-based: Securities financing transactions

The exposure amounts without master netting agreements were erroneously transposed. The comparative results have accordingly been restated.

Refer to page 46.

Liberty

As noted on page 15, under ‘Risk disclosure presentation for intercompany transactions between the group’s banking and insurance operations’, transactions between the group’s banking and insurance operations have not been eliminated for the purposes of separately reporting on the banking and insurance operations’ risk disclosures in this risk report. The previously reported information has been restated to conform to this manner of presentation.

Refer to pages 60, 72, 74, 88.



Restatements | continued

Global

Basel III

NSFR

Large exposures

Revised standardised approach for counterparty credit risk

Capital requirements for banks’ equity investments in funds

Leverage ratio

Securitisation

Fundamental review of the trading book

Revised standardised approach for operational risk

Interest rate risk in the banking book

Pillar 3 disclosure requirements

Loss-absorbing capacity of G-SIBs

OTC derivatives

Recovery and resolution planning

IFRS

IFRS 9

Revenue

Accounting for leases

Insurance contracts

South Africa

Twin Peaks regulatory framework

Financial Markets Act

TCF

Protection of Personal Information Act (PoPI)

Consumer credit insurance

RDR

Insurance

SAM

RDR

Retirement reform

TCF

Consumer credit insurance

UK, EU and US

UK’s fair and effective market review

UK Banking Reform Act

EU recast capital requirements directive and new regulation

EU markets in financial instruments recast directive and new regulation

EU benchmark regulation

EU financial transaction tax (FTT)

EU market abuse regulation (MAR)

EU 4th money laundering directive

European market infrastructure regulation

Dodd Frank Wall Street reform and Consumer Protection Act

Rest of Africa

Exchange control

Financial crime (anti-money laundering)

Capital adequacy and prudential requirements

Consumer protection

Regulatory and legislative developments impacting the group

105

Annexure A

a capital requirement for interest rate risk in the banking book

pillar 3 disclosure requirements

adequacy of loss-absorbing capacity of G-SIBs in resolution.

OTC derivativesGlobally there has been a focus on increasing the transparency and regulation of OTC derivatives and to reduce the systemic risk posed by OTC derivative transactions, markets and practices. The G20’s reform programme and subsequent agreements resulted in various principles being defined for use of exchanges or electronic platforms, clearing through central counterparties, reporting to trade repositories and higher capital and margin requirements for derivatives that are not cleared centrally.

Many of the G20 jurisdictions are already making good progress in implementation of the G20 agreed commitments, with most of the EU and US regulatory frameworks already effective. South African financial market participants are largely impacted only indirectly by these regulatory developments, which translates into only a reciprocating responsibility to assist our cross border counterparts in complying with their regulatory obligations. Once the South African OTC derivatives reform regulations are finalised, the impact will be direct.

The South African OTC derivatives reform framework is expected to be finalised over the course of 2015/2016.

Recovery and resolution planningSouth Africa is in the process of adopting the global Financial Stability Board standards for the effective management of institutions under severe circumstances that could affect the stability of the financial system. These guidelines require the development of recovery and resolution plans. The recovery plans for systemically important institutions proactively identifies management actions which can be adopted during periods of severe stress to ensure the survival of the entity and the sustainability of the economy within which it operates. In the event that these actions prove unsuccessful, the resolution plan sets out the approach for unwinding the entity in an orderly manner minimising the impact on its stakeholders.

The group submitted its first comprehensive integrated recovery plan in July 2013 and is now maintaining and annually submitting this plan to ensure that it remains relevant with the most current view of the group’s strategy, legal entity structure and financial and risk positions. The group integrated recovery plan was developed to provide a valuable tool to management and the board to manage the implications of severe stress and proactively addresses potential hurdles in effecting these actions. The group is obtaining similar benefits from planning for the stability of its subsidiaries under severe conditions.

The National Treasury (NT) and regulatory authorities are in the process of defining the Resolution Framework for South Africa. It will address the globally requisite topics of resolution authority mandate, tools available under resolution such as bail-in and sale of business, and approach for cross-border cooperation with other regulators. It is anticipated that the resolution framework will be adopted in 2016.

IFRSThe International Accounting Standards Board (IASB) has finalised and issued a number of new accounting requirements as well as

GlobalBasel IIIOver the past year, the BCBS has substantially completed the remaining components of Basel III. It has agreed on a globally consistent definition of the leverage ratio, issued the final standard for the NSFR and has set out its plan to address excessive variability in risk-weighted asset calculations.

More details on some of the topics finalised during the past year follow below:

NSFR: The final NSFR retains the structure of the January 2014 consultative proposal. The key changes introduced in the final standard published cover the required stable funding for short-term exposures to banks and other financial institutions, derivatives exposures and assets posted as initial margin for derivative contracts.

Framework for measuring and controlling banks’ large exposures: The new framework is intended to be a common minimum standard to apply from 1 January 2019. G-SIBs exposures to other G-SIBs will be capped at 15% of tier I capital, while other individual exposures to single counterparties or groups of connected counterparties will be capped at 25%. Reporting of large exposures will be required for any exposure above 10% eligible capital.

The standardised approach for measuring counterparty credit risk exposures: The new standardised approach (SA-CCR) calculation introduces significant changes to the methodology from the current non-internal model method approaches. From 1 January 2017 the SA-CCR will be used to calculate the counterparty credit risk exposure associated with OTC derivatives, exchanges traded derivatives and long settlement transactions instead of the standardised method, current exposure method, or internal model method shortcut.

Capital requirements for banks' equity investments in funds: The revised framework will take effect 1 January 2017 and will apply to investments in all types of funds (e.g. hedge funds, managed funds and investment funds).

Leverage ratio: The revised framework will be effective on 1 January 2017. The SARB requires banks’ leverage ratio to be above a 4% minimum requirement, where the leverage ratio is calculated as tier I capital divided by the sum of on-balance and off-balance sheet exposures, securities financing transactions and derivatives.

Securitisation: The revisions to the securitisation framework, which will come into effect in January 2018, aims to address shortcomings in the Basel II securitisation framework and to strengthen the capital standards for securitisation exposures held in the banking book.

The BCBS and Group of Twenty (G20) Financial Stability Board also released a number of consultative papers on key topics for comment during the past year. The group participated in quantitative impact studies and on industry forums to inform authorities on the potential impact of proposed regulatory guidance. The following consultation papers received focus during the past year:

trading book capital requirements

the revised standardised approach for measuring operational risk capital



Annexure A | Regulatory and legislative developments impacting the group continued

LeasesIFRS currently requires an entity to classify its lease arrangements as either finance or operating leases based on the terms of the underlying contract and the risks and rewards incidental to ownership of the leased assets. The IASB has released proposed changes to the accounting for leases. The proposals include changes in the manner in which leases are identified and classified. The core principle of the proposed requirements is that the lessee and lessor should recognise all rights and obligations arising from leasing arrangements on balance sheet. The most significant proposed change pertaining to the accounting treatment of operating leases is from the lessees’ perspective where a right of use (ROU) asset together with a liability for the future payments is to be recognised. From a South African regulatory perspective, the increase in both assets and liabilities will have an impact on the group’s prudential requirements as follows:

The ROU assets will attract a risk weighting of 100% for purposes of determining capital requirements in support of these assets.

Given the long-term nature of the ROU assets, the ROU assets are expected to be categorised under Basel III as ’other assets’ and will attract a 100% stable funding requirement.

Liabilities arising from the lease agreement will increase the group’s total liabilities, resulting in a reserving requirement of 2.5% of the balance, as well as a liquid asset requirement of 5% of the balance. The liability does not contribute to the stable funding Basel III requirement.

Insurance contractsThe IASB’s exposure draft on insurance contracts proposes a comprehensive measurement approach for all types of insurance contracts that are issued by entities (and reinsurance contracts held by entities) with a modified approach for some short-duration contracts.

The comprehensive measurement approach is based on the principle that insurance contracts create a bundle of rights and obligations that work together to generate a package of cash inflows (premiums) and outflows (benefits and claims). The proposals state that an insurer applies a measurement approach utilising building blocks to this package of cash flows. The proposals and effective date are both yet to be finalised.

With respect to all of the abovementioned accounting developments, the group continues to participate in industry body discussions on the new and proposed changes. The group is currently developing its adoption framework to ensure that it is positioned to adopt the requirements of the new standards on their respective effective dates in line with the standards’ required transition requirements.

South AfricaTwin Peaks regulatory frameworkThe second draft of the Financial Sector Regulation Bill was released by NT on 12 December 2014 following public comments and engagement with stakeholders. It is expected to be tabled in Parliament in 2015. Its aim is to make the financial sector safer and better serve South Africa by providing the legislative framework for the adoption of a ’Twin Peaks system’ of regulating the financial sector. The Twin Peaks system will comprise a Prudential Authority focused on the safety and soundness of financial institutions, and a

issued a number of proposed accounting changes. The most significant of these being as follows:

IFRS 9 Financial InstrumentsThe IASB has issued IFRS 9 which is the replacement for IAS 39 Financial Instruments: Recognition and Measurement (IAS 39). The effective date of IFRS 9 will be 1 January 2018. The replacement of IAS 39 was achieved through the following phases:

Classification and measurement of financial assets: IFRS 9 requires financial assets to be categorised based on the group’s business model for managing the financial assets and the contractual cash flow characteristics of the financial asset. The financial assets will be measured at either amortised cost or fair value according to its classification.

Credit risk in financial liability measurement: IFRS 9 requires changes in the fair value of financial liabilities (that are designated at fair value) due to changes in own credit risk to be recognised in OCI as opposed to the income statement.

Expected loss impairment model proposals: IFRS 9 replaces IAS 39’s incurred loss impairment requirements with an expected loss impairment model requirement. This new expected loss impairment model will require more timely recognition of expected credit losses and will be applied to financial assets measured at either amortised cost or fair value through OCI, as well as defined loan commitments.

With the exception of purchased or originated credit impaired financial assets, expected credit losses are required to be measured through a loss allowance at an amount equal to either 12-month expected credit losses or full lifetime expected credit losses.

A loss allowance for full lifetime expected credit losses is required for a financial instrument if the credit risk of that financial instrument has increased significantly since initial recognition as well as for certain contract assets or trade receivables. For all other financial instruments, expected credit losses are measured at an amount equal to 12-month expected credit losses.

Hedge accounting requirements: IFRS 9 simplifies the existing hedge accounting requirements and will allow the group to better reflect its risk management activities in its financial statements and will provide more opportunities to apply hedge accounting.

RevenueIFRS 15 Revenue from Contracts with Customers (IFRS 15) replaces the existing revenue standards and their related interpretations. IFRS 15 sets out the requirements for recognising revenue that applies to all contracts with customers (except for contracts that are within the scope of the standards on leases, insurance contracts or financial instruments).

The core principle of the standard is that revenue recognised reflects the consideration to which the company expects to be entitled in exchange for the transfer of promised goods or services to the customer. The standard incorporates a five step analysis to determine the amount and timing of revenue recognition. The standard will be applied retrospectively with an effective date of 1 January 2017.

107

Retail Distribution ReviewThe SA FSB has released the RDR document for comment. The review centres on the insurance and investment value change, including the product providers, intermediaries and customers. It focuses on the financial advice and products sold to customers and makes proposals to address potential areas in the value chain which could result in conflicts of interest. The proposals would impact the SBSA’s insurance and investment business models. A process is in place to engage with stakeholders on the document.

United Kingdom, Europe and the United StatesKey regulatory developments in the group’s operations in future are:

UK Fair and Effective Market review: The UK is reviewing the fairness and effectiveness of fixed income, currency and commodity (FICC) markets, including the feasibility of a global code of conduct. The review will also extend the regulatory regime which applies to LIBOR, to a broader range of FICC benchmarks.

UK Banking Reform Act: A number of measures will be phased in up to 2019, including ring fencing of deposit taking activities and measures to enhance individual accountability. The latter will include new enforceable conduct rules, applying to nearly all bank employees, ‘reverse burden of proof’ for senior managers. Subsequent to any material breach in a senior managers area, they will be required to demonstrate that all reasonable steps were taken to mitigate the breach. A new criminal offence of reckless misconduct has also been adopted, relating to any senior manager actions, which results in a bank failure.

EU recast capital requirements directive and new regulation: 1 January 2014 saw the implementation of Basel III across the European Union, via the capital requirements directive (CRD) and the capital requirements regulation (CRR), collectively referred to as the CRD IV package. The combined reforms have introduced new capital, leverage and liquidity requirements, whilst also introducing new concepts such as capital buffers and imposing regulatory frameworks on securitisations, derivatives trading and remuneration policies.

EU Markets in Financial Instruments recast directive and new regulation:

This will become effective January 2017, introducing requirements which include:

all multilateral trading in financial instruments (unless qualifying as OTC), will be required to be traded on a regulated venue, and subject to pre- and post-trade transparency

harmonised EU position limit regime for commodity derivatives

restrictions on algorithmic trading and direct electronic access

measures to harmonise EU approaches to third country equivalence regimes.

EU Benchmark Regulation: The regulation is expected to become effective in 2017, establishing a legal basis for the International Organization of Securities Commissions Principles for Financial Benchmarks. Once adopted, administration of benchmarks will become a regulated activity, requiring prior regulatory approval. Use of unregulated benchmarks will be prohibited, along with any third country benchmarks, not deemed

Financial Sector Conduct Authority focused on the manner in which financial institutions conduct their business and the fair treatment of financial customers. The Bill also takes steps to strengthen financial stability and crisis resolution. Once enacted the Bill will be adopted in two phases:

to establish the two regulatory authorities

to harmonise the various sub-sectoral legislation and align prudential and/or market conduct standards across the sector.

Financial Markets ActThe Financial Markets Act 19 of 2012 impacts a number of activities of corporate and investment banking. This Act regulates the functioning of the stock exchange, as well as market abuse such as insider trading and price manipulation. Draft regulations were released by the NT for OTC derivatives with specific requirements in terms of reporting, clearing, and OTC product providers. Following public comment and stakeholder engagement, the regulatory framework for OTC derivatives is expected to be finalised in 2015.

Treating customers fairlyThe SA FSB published a roadmap for the programme TCF which outlines a framework on aspects of market conduct of financial services firms. TCF comprises six fairness outcomes and seeks to ensure that the fair treatment of customers is embedded within the culture of financial services firms.

In order to meet the outcomes, the group has initiated a TCF programme, put governance structures in place and is developing suitable measures and implementing control mechanisms. While the various boards of directors of affected group entities will ensure that TCF is central to the entities’ ethics, values, culture and strategy, senior management owns TCF.

Protection of Personal Information ActThe PoPI Act provides for conditions of privacy and protection of personal information. PoPI has an extensive impact on the group, particularly in relation to the manner in which it uses information, both within South Africa and internationally. The group takes care to protect the personal information of customers and will be strengthening controls to align to PoPI’s requirements. A group data privacy officer has been appointed and the group’s PoPI project is progressing satisfactorily. The Banking Association of South Africa is drafting a banking code on PoPI which, if approved by the new information regulator (when established), will govern the banking industry.

Consumer creditThe National Credit Amendment Act includes changes in the regulation of consumer credit which have implications for several of the group’s models, systems and processes. These changes include amendments to the conditions of registration to empower the Minister of Trade and Industry to prescribe codes of conduct and verify, review or remove consumer credit information.

The credit information amnesty came into effect 1 April 2014 and involved the removal of certain adverse credit information from credit records at the credit bureaus. The draft Affordability Assessment Regulations outline specific steps to assess customers’ ability to afford credit. A programme has been initiated in PBB SA to ensure the continuation of sound credit extension within its risk appetite.




than USD10 000 cannot be effected, except in cities or towns where there are financial institutions, branches or points of representation; thus promoting the development of formal economy (including the banking system) and also supporting the fight against money laundering and terrorism financing.

Developments relating to financial crime, specifically anti-money laundering, have included the enhancement of existing regulations and the introduction of new legislation. This has included enhanced and focused reporting of suspicious transactions, strengthening of regulatory authorities, stricter time frames for reporting and the introduction of offences for terrorist financing to give effect to international best practice measures to combat terrorist proliferation activities.

Directives on capital adequacy and prudential liquidity requirements have been issued or re-enforced in a number of countries. In Mauritius guidelines on the scope and application of Basel III, eligible capital, and new measures to assess liquidity risk management were introduced. In countries such as Nigeria, measures to ensure a more prudent assessment of regulatory capital and raise the quality and loss absorbency of the capital base of banks have been introduced. Mozambique saw the introduction of requirements to publicly disclose information relating to capital structure, capital adequacy, credit risk, mitigation of credit risk, market risk, operational risk and equity stakes disclosure relating to banking books.

Consumer protection measures noted in some of the countries have varied from the introduction of specific fee disclosures (in Angola, Nigeria and Lesotho) to the placement of moratoriums on fees for a period of time (in Botswana). The Bank of Mauritius proposed fairness measures for banks in Mauritius. The recommendations made are guided by the principles of fairness and rest on eight pillars of fairness, which include banking accessibility to all fair fees and charges, fair terms and condition, TCF, protecting and empowering customers and treating bankers fairly.

Based on the increase in regulatory developments in 2014, it is anticipated that these will continue on an upward trend in 2015.

Impacting the group’s short- and long-term insurance operationsSouth AfricaSolvency Assessment and ManagementThe SA FSB is developing a risk-based regulatory requirement for South African insurance and reinsurance organisations, known as SAM. This new regulatory standard aims to address the adequacy of capital allocation and risk management to protect policyholders. This initiative will align the South African insurance industry with international standards.

A two-phase SAM parallel run will facilitate a smooth transition to this new regulatory standard. A ’light’ phase was conducted during the second half of 2014, with a ’comprehensive’ phase to be conducted during 2015. Insurers will need to be in a position to comply with most of the SAM requirements by 2015; however, full implementation of the SAM framework will only be effective from 1 January 2016.

equivalent to the proposed regulation. The regulation also introduces prescriptive requirements for contributors to benchmarks.

EU FTT: Once adopted, the FTT will introduce tax on financial transactions. Agreement on an EU 28 FTT has not been achievable and 11 member states (Belgium, Germany, Estonia, Greece, Spain, France, Italy, Austria, Portugal, Slovenia and Slovakia) have decided to proceed with the adoption of an EU 11 FTT.

EU Market Abuse Regulation: The Market Abuse Regulation will become effective in June 2016 and will extend the current market abuse regime to all financial instruments, including trading on the spot market, under certain circumstances. New offences in relation to insider dealing and market manipulation will also be introduced.

EU 4th Money Laundering Directive: The directive is expected to become effective in 2016, introducing a more risk-based approach to:

money laundering and terrorist financing risk assessments, at an EU, member state and an obliged entity level

customer due diligence

approach to third world countries.

The European Market Infrastructure Regulation: This regulation has been in effect since August 2012 with further details still being phased in. It specifies requirements for central clearing, reporting to trade repositories and risk mitigation for non-centrally cleared OTC derivatives. The clearing requirement for certain specified OTC derivatives products will take effect on a phased in basis from January 2015. The group is able to support its EU counterparties in their compliance with this regulatory framework and has not experienced any disruption in trading activities with their EU counterparts.

Dodd Frank Wall Street Reform and Consumer Protection Act: This came into effect in the US in July 2010. It was designed to promote the financial stability of the US economy by improving accountability and transparency in the financial system, specifically the derivative markets where US persons are the counterparty. The majority of rules have now taken effect, with only some products yet to be made available to trade on swap execution facilities, or to be made subject to mandatory clearing.

Rest of AfricaContinued focus on enhancing the regulatory framework in countries across Africa during 2014 resulted in an increase in the complexity and tightening of regulatory requirements. The most significant developments noted have related to exchange control, financial crime (anti-money laundering), prudential requirements (capital adequacy and liquidity) and market conduct requirements.

Emphasis on local currencies being the mode of settlement and tightening of repatriation periods in countries such as Ghana, the Democratic Republic of Congo (DRC) and Angola was highlighted in developments relating to foreign exchange and exchange control with a resultant impact on cash payment procedures, pricing and the handling of imports and exports. The extent of regulations in DRC included emphasis of the Congolese franc in-country as the settlement currency for transactions, including all local charges and taxes due to the tax authority. Foreign currencies equal to or greater

109

Retirement reformThe overarching objective of retirement reform is to safeguard savers and pensioners against presumed market failures in costs, access and disclosure and to mobilise additional savings. The proposed reforms aim to improve the transparency and disclosure of product offerings to encourage competition (and decrease cost) and to allow consumers to effectively compare and choose savings products.

A number of retirement reform proposals have been implemented through the Taxation Laws Amendment Act 2013, the Financial Services Laws General Amendment Act 2013 and the draft Taxation Laws Amendment Bill 2014. Some of the amendments proposed in the Taxation Laws Amendment Act 2013 have been delayed because of political pressure from the labour unions who have argued that retirement reforms must take place within the context of broader social security reform.

Liberty has introduced a retirement reform regulatory project which will ensure that the organisation is compliant with the proposed reforms.

Treating customers fairly Further to the original TCF documents released in 2011, in October 2014 the SA FSB has released discussion documents implementing and standardising a complaints management process; the categorisation of complaints; engagement with the Ombudsman and reporting of complaints.

Liberty currently has a TCF regulatory project in place which will ensure that the organisation is adopting TCF principles.

Consumer credit insurance (CCI)In July 2014, a technical report on the CCI market in South Africa was issued by the NT. The purpose of the technical report was to conduct a review of business practices in the CCI sector and to propose mechanisms of strengthening the existing framework. The technical report will be used to finalise the policy framework with a view to regulating the CCI industry more effectively.

The report highlights the following key concerns in the CCI market:

lack of transparency in the total cost of credit

high premiums and different pricing

product differentiation limits comparison

CCI cover does not meet the needs of the target market.

The report proposes the following mechanisms in order to address the weaknesses in the CCI market:

regulating the pricing of CCI

regulating market conduct non-pricing practices

protecting consumers through insurance cover for credit providers.

SAM requires organisations to integrate risk and capital management within the organisation. Liberty can derive certain business benefits from implementing SAM principles, such as:

Increased risk transparency: Improved measurement and management of risk across all processes in the organisation will create more detailed information. Transparency of risk reporting will enable the avoidance of risks before they result in losses by taking mitigating action.

Reduced capital requirements: Adoption of a sophisticated risk management approach could be rewarded by lower regulatory capital requirements. Investment to improve the risk management could, therefore, be recovered through long-term capital savings.

Greater diversification of investments: Reduced capital requirements will release funds for alternative investment opportunities. Improved risk management processes will allow for investment in assets with higher risk and return, depending on risk appetite.

Higher profit potential: Sophisticated capital management will enable improved capital allocation between business units to focus on higher return opportunities. Advanced risk management processes will support sensible engagement in high margin business. Communicating enhanced risk management and capital allocation arrangements as part of brand will create greater demand from customers and shareholders.

Improved credit rating: This will entail increased market disclosure of risk management practices to both investors and analysts. Evidence of sophisticated risk management processes will lead to improved analyst ratings driving down capital costs.

The new SAM regime will drive key changes to Liberty’s business applications. These changes will predominantly lead to enhanced business capability in respect of risk-adjusted decision-making processes within Liberty.

Liberty is well represented at all levels of the SA FSB’s SAM industry forums through participation in the task groups and working groups, the SAM steering committee and its subcommittees.

Retail Distribution ReviewIn November 2014, the SA FSB released a RDR discussion paper. The SA FSB has indicated that the changes will be effected in a phased manner both under the current regulatory framework (Financial Advisory and Intermediary Services (FAIS) Act 2002) and as the Twin Peaks legislative framework evolves. It is proposed than an implementation period of 12 months is provided for once proposals are finalised.

RDR is broadly underpinned by the regulator’s aim to implement international-standard market conduct and consumer protection frameworks in South Africa. The review is directed at addressing the complexity of financial investment and risk products and the perceived misalignment of incentives between customers, intermediaries and product providers. RDR aims to ensure that remuneration structures do not prejudice the customer and that there are level playing fields and payment structures across similar investment products. Furthermore, RDR promotes awareness among customers of how much and how their advisers are remunerated.




Composition of capital – SBG1

December2014

Basel III Rm

December2013

Basel III Rm Reference

CET I capital 100 406 96 506

Instruments and reservesCET I capital before regulatory adjustments 123 936 119 608

Directly issued qualifying common share capital plus related stock surplus 18 067 18 126 (c)Retained earnings 97 455 93 834 (d)Accumulated other comprehensive income (and other reserves) 8 414 7 648 (d)Directly issued capital subject to phase out from CET I (only applicable to non-joint stock companies)Public sector capital injections grandfathered until 1 January 2018Common share capital issued by subsidiaries and held by third parties (amount allowed in group CET I) 4 159 4 196 (f)

Regulatory adjustmentsLess: total regulatory adjustments to CET I (27 689) (27 298)

Prudential valuation adjustmentsGoodwill (net of related tax liability) (3 711) (3 747) (b)Other intangibles other than mortgage-servicing rights (net of related tax liability) (15 850) (12 933) (b)Deferred tax assets that rely on future profitability, excluding those arising from temporary differences (net of related tax liability) (511) (1 054) (a)Cash flow hedge reserve (467) (761)Shortfall of provisions to expected losses (2 054) (2 667)Securitisation gain on saleGains and losses due to changes in own credit risk on fair valued liabilities (195) (747)Defined benefit pension fund net assets (516) (669)Investments in own shares (if not already netted of paid-in capital on reported balance sheet) (308)Reciprocal cross-holdings in common equityInvestments in the capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation, net of eligible short positions, where the bank does not own more than 10% of the issued share capital (amount above 10% threshold)

Significant investments in the capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation, net of eligible short positions (amount above 10% threshold) (4 074) (4 705)

Mortgage servicing rights (amount above 10% threshold)Deferred tax assets arising from temporary differences (amount above 10% threshold, net of related tax liability)Amount exceeding the 15% threshold, relating to:

Significant investments in the common stock of financialsMortgage servicing rightsDeferred tax assets arising from temporary differences

National-specific regulatory adjustments (3) (15)

Regulatory adjustments applied to CET I in respect of amounts subject to pre-Basel III treatment

Regulatory adjustments applied to CET I due to insufficient additional tier I and tier II to cover deductions

1 Disclosure based on prescribed SARB template. All blank line items are not applicable as at 31 December 2014 and 31 December 2013.

111

Annexure B

Composition of capital – SBG1 continued

December2014

Basel III Rm

December2013


Additional tier I capital 4 515 5 000

InstrumentsAdditional tier I capital before regulatory adjustments 4 515 5 000

Directly issued qualifying additional tier I instruments plus related stock surplus, classified as: 4 396 4 945 (e)

Equity under applicable accounting standards 4 396 4 945 (e)Liabilities under applicable accounting standards

Directly issued capital instruments subject to phase out from additional tier I 5 495 5 495 (e)

Additional tier I instruments (and CET I instruments not included in common share capital ) issued by subsidiaries and held by third parties

(amount allowed in group additional tier I), including: 119 55

Instruments issued by subsidiaries subject to phase out

Regulatory adjustmentsTotal regulatory adjustments to additional tier I capital

Investments in own additional tier I instrumentsReciprocal cross-holdings in additional tier I instrumentsInvestments in the capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation, net of eligible short positions, where the bank does not own more than 10% of the issued share capital (amount above 10% threshold)

Significant investments in the capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation, net of eligible short positions (amount above 10% threshold)

National-specific regulatory adjustments:

Regulatory adjustments applied to CET I in respect of amounts subject to pre-Basel III treatment

Regulatory adjustments applied to additional tier I due to insufficient additional tier I due to insufficient tier II to cover deductions

Tier I capital 104 921 101 506




Annexure B | continued


December2014

Basel III Rm

December2013


Capital and provisionsTier II capital before regulatory adjustments 23 993 25 250

Directly issued qualifying tier II instruments plus related stock surplus

Directly issued capital instruments subject to phase out from tier II

Tier II instruments (and CET I and additional tier I instruments not included in common share capital and additional tier I instruments) issued by

subsidiaries and held by third parties (amount allowed in group tier II), including: 22 727 24 273 (g)

Instruments issued by subsidiaries subject to phase out 26 283 27 687

Provisions 1 266 977

Regulatory adjustmentsTotal regulatory adjustments to tier II capital

Investments in own tier II instrumentsReciprocal cross-holdings in tier II instrumentsInvestments in the capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation, net of eligible short

positions, where the bank does not own more than 10% of the issued share capital (amount above 10% threshold)

Significant investments in the capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation

(net of eligible short positions)National-specific regulatory adjustments

Regulatory adjustments applied to tier II in respect of amounts subject to pre-Basel III treatment

Tier II capital 23 993 25 250

Total capital 128 914 126 756

Total risk-weighted assets 915 213 841 272

Risk-weighted assets in respect of amounts subject to pre-Basel III treatment

Capital ratios and buffersCET I (as a percentage of risk-weighted assets) % 11.0 11.5Tier I (as a percentage of risk-weighted assets) % 11.5 12.1Total capital (as a percentage of risk-weighted assets) % 14.1 15.1Institution-specific buffer requirement (minimum CET I requirement plus capital conservation buffer plus countercyclical buffer

requirements plus global systemically important banks (G-SIB) buffer requirement, expressed as a percentage of risk-weighted assets) % 7.0 7.0

Capital conservation buffer requirement % 2.5 2.5Bank-specific countercyclical buffer requirement %G-SIB buffer requirement %

Common equity tier I available to meet buffers (as a percentage of risk-weighted assets) % 11.0 11.5


113


December2014

Basel III Rm

December2013


National minima (if different from Basel III)National CET I minimum ratio (if different from Basel III minimum) – excluding individual capital requirement (ICR) and domestic

systemically important banks (D-SIB) % 5.5 3.5National tier I minimum ratio (if different from Basel III minimum) – excluding ICR and D-SIB % 7.0 4.5National total capital minimum ratio (if different from Basel III minimum) – excluding ICR and D-SIB % 10.0 8.0

Amounts below the threshold for deductions (before risk weighting)Non-significant investments in the capital of other financials 484 849Significant investments in the capital of financials 10 448 10 121Mortgage servicing rights (net of related tax liability)Deferred tax assets arising from temporary differences (net of related tax liability) 422 320

Applicable caps on the on the inclusion of provisions in tier IIProvisions eligible for inclusion in tier II in respect of exposures subject to standardised approach (prior to application of cap) 5 315 5 469Cap on inclusion of provisions in tier II under standardised approach 2 951 3 372Provisions eligible for inclusion in tier II in respect of exposures subject to internal ratings-based approach (prior to application of cap)

Cap for inclusion of provisions in tier II under internal ratings-based approach 2 435 3 294

Capital instruments subject to phase-out arrangements (only applicable between 1 January 2013 and 1 January 2022)Current cap on CET I instruments subject to phase-out arrangementsAmount excluded from CET I due to cap (excess over cap after redemptions and maturities)Current cap on additional tier I instruments subject to phase-out arrangements 4 396 4 945Amount excluded from additional tier I due to cap (excess over cap after redemptions and maturities) 1 099 550Current cap on tier II instruments subject to phase-out arrangements 22 834 25 689Amount excluded from tier II due to cap (excess over cap after redemptions and maturities) 687 2 356




Annexure B | continued

115

Reconciliation of audited statement of financial position and regulatory capital and reserves

Statement of financial

position Rm

Underregulatory

scope of consolidation

Rm Reference1

2014AssetsCash and balances with central banks 64 302Financial investments, trading and pledged assets 537 146Non-current assets held for sale 219 958Loans and advances 928 241Current tax assets 498Deferred tax assets 1 715 511 (a)Derivatives and other assets 82 324Interest in associates and joint ventures 3 727Investment property 27 022Goodwill and other intangible assets 21 175 19 561 (b)Property and equipment 16 737

Total assets 1 902 845

Equity and liabilitiesEquity 161 634 128 094

Equity attributable to ordinary shareholders 136 985 123 935

Ordinary share capital 162 162 (c)Ordinary share premium 17 905 17 905 (c)Reserves 118 918 105 868 (d)

Preference share capital and premium 5 503 (e)Non-controlling interests 19 146 4 159 (f)

Liabilities 1 741 211 22 727

Derivative, trading and other liabilities 189 913Non-current liabilities held for sale 182 069Deposit and current accounts 1 047 212Current tax liabilities 4 505Deferred tax liabilities 4 475Policyholders’ liabilities 287 516Subordinated debt 25 521 22 727 (g)

Total equity and liabilities 1 902 845

1 Reference to annexure B on preceding pages.

Annexure C

Capital instruments:Main features disclosure template1

Ordinaryshare capital

(includingshare premium)

Subordinatedbond – SBK7













Cumulativepreference

share capital

Non-cumulativepreference

share capital

2014Issuer SBSA SBSA SBSA SBSA SBSA SBSA SBSA SBSA SBSA SBSA SBSA SBSA SBG SBG SBG

Unique identifier (for example, CUSIP, ISIN or Bloomberg identifier for private placement)

ZAG000024894 ZAG000029687 ZAG000073388 ZAG000073396 ZAG000091018 ZAG000092339 ZAG000093741 ZAG000097619 ZAG000100827 ZAG000100835 ZAG000121781 SBKZAE000109815

SBKPZAE000038881

SBPPZAE000056339

Governing law(s) of the instrument SA SA SA SA SA SA SA SA SA SA SA SA SA SA SA

Regulatory treatmentTransitional Basel III rules CET I Tier II Tier II Tier II Tier II Tier II Tier II Tier II Tier II Tier II Tier II N/A CET I Tier II Additional tier I

Post-transitional Basel III rules CET I Tier II Tier II Tier II Tier II Tier II Tier II Tier II Tier II Tier II Tier II Tier II CET I Tier II Additional tier I

Eligible at solo/group/group & solo Solo Group & solo Group & solo Group & solo Group & solo Group & solo Group & solo Group & solo Group & solo Group & solo Group & solo Group & solo Group Group Group

Instrument type (types to be specified by each jurisdiction)

Ordinaryshare capitaland premium

Subordinateddebt

Subordinateddebt

Subordinateddebt

Subordinateddebt

Subordinateddebt

Subordinateddebt

Subordinateddebt

Subordinateddebt

Subordinateddebt

Subordinateddebt

Subordinateddebt


Preferenceshare capital and

share premium


share premium

Amount recognised in regulatory capital (currency in Rm, as of most recent reporting date)

ZAR36 356 ZAR3 000 ZAR1 500 ZAR1 600 ZAR1 150 ZAR1 780 ZAR1 220 ZAR2 000 ZAR2 000 ZAR3 500 ZAR500 ZAR2 250 ZAR18 067 ZAR8 ZAR4 396

Par value of instrument (currency in millions) ZAR1 ZAR3 000 ZAR1 500 ZAR1 600 ZAR1 150 ZAR1 780 ZAR1 220 ZAR2 000 ZAR2 000 ZAR3 500 ZAR500 ZAR2 250 10c ZAR1 1c

Accounting classification Equityattributableto ordinary

shareholders

Subordinateddebt

Subordinateddebt

Subordinateddebt

Subordinateddebt

Subordinateddebt

Subordinateddebt

Subordinateddebt

Subordinateddebt

Subordinateddebt

Subordinateddebt

Subordinateddebt

Equityattributableto ordinary

shareholders


share premium


share premium

Original date of issuance Ongoing 2005/05/24 2006/04/10 2009/11/24 2009/11/24 2011/12/01 2012/01/23 2012/03/15 2012/07/30 2012/10/24 2012/10/24 2014/12/02 Ongoing 1969/11/25 2004/07/07,2006/05/23,2006/08/12

Perpetual or dated Perpetual Dated Dated Dated Dated Dated Dated Dated Dated Dated Dated Dated Perpetual Perpetual Perpetual

Original maturity date N/A 2020/05/24 2023/04/10 2021/11/24 2021/11/24 2022/12/01 2022/01/23 2023/03/15 2024/07/30 2025/10/24 2024/10/24 2024/12/02 N/A N/A N/A

Issuer call subject to prior supervisory approval No Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes No No No

Optional call date, contingent call dates and redemption amount (currency in Rm)

N/A 2015/05/24 ZAR3 000

2018/04/10 ZAR1 500

2016/11/24 ZAR1 600

2016/11/24 ZAR1 150

2017/12/01 ZAR1 780

2017/01/23ZAR1 220

2018/03/15 ZAR2 000

2019/07/30ZAR2 000

2020/10/24 ZAR3 500

2019/10/24ZAR500

2019/12/02 ZAR2 250

N/A N/A N/A

Subsequent call dates, if applicable N/A 2015/05/24or any

interestpayment date

thereafter

2018/04/10or any


thereafter

2016/11/24or any


thereafter

2016/11/24or any


thereafter

2017/12/01or any


thereafter

2017/01/23or any


thereafter

2018/03/15or any


thereafter

2019/07/30or any


thereafter

2020/10/24or any


thereafter

2019/10/24or any


thereafter

2019/12/02or any


thereafter

N/A N/A N/A

Coupons/dividendsFixed or floating dividend/coupon N/A Fixed Fixed Fixed Floating Fixed Floating Floating Floating Floating Floating Floating N/A Fixed Floating

Coupon rate and any related index N/A 9.63%semi-annual

8.40%semi-annual

10.82%semi-annual

JIBAR + 2.20 9.66%semi-annual

JIBAR + 2.00 JIBAR + 2.10 JIBAR + 2.20 JIBAR + 2.35 JIBAR + 2.20 JIBAR + 3.50 N/A 6.50% 77% of primeinterest rate

Existence of a dividend stopper No No No No No No No No No No No No No No No

Fully discretionary, partially discretionary or mandatory

Full discretionary Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory Fulldiscretionary

Fulldiscretionary

Fulldiscretionary

Existence of step up or other incentive to redeem

No Yes Yes Yes Yes No No No No No No No No No No

Non-cumulative or cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative Cumulative Non-cumulative

Convertible or non-convertible Non-convertible Non-convertible Non-convertible Non-convertible Non-convertible Non-convertible Non-convertible Non-convertible Non-convertible Non-convertible Non-convertible Non-convertible Non-convertible Non-convertible Non-convertible

Write-down feature N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Yes N/A N/A N/A

Position in subordination hierarchy in liquidation (specify instrument type immediately senior to instrument)

Mostsubordinated

Seniorunsecured

Senior unsecured

Senior unsecured

Senior unsecured

Senior unsecured

Seniorunsecured

Seniorunsecured

Seniorunsecured

Seniorunsecured

Seniorunsecured

Seniorunsecured


shares

Subordinateddebt


shares

Non-compliant transitioned features No Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes No No Yes Yes

If yes, specify non-compliant features N/A Regulation 38(14) (a)(i) Regulation 38(14) (a)(iv)(D) Regulation 38(14) (a)(iv)(H)(ii)

Regulation 38(14) (a)(i) Regulation 38(14) (a)(iv)(D) Regulation 38(14) (a)(iv)(H)(ii)



Regulation 38(14) (a)(i) Regulation 38(14) (a)(iv)(H)(ii)






N/A N/A No lossabsorbency

features at the point of

non-viability

No lossabsorbency


non-viability

1 For related carrying values of subordinated debt, refer to note 23 in the annual financial statements.



Annexure D

Capital instruments:Main features disclosure template1

















share capital


share capital

2014Issuer SBSA SBSA SBSA SBSA SBSA SBSA SBSA SBSA SBSA SBSA SBSA SBSA SBG SBG SBG


ZAG000024894 ZAG000029687 ZAG000073388 ZAG000073396 ZAG000091018 ZAG000092339 ZAG000093741 ZAG000097619 ZAG000100827 ZAG000100835 ZAG000121781 SBKZAE000109815

SBKPZAE000038881

SBPPZAE000056339

Governing law(s) of the instrument SA SA SA SA SA SA SA SA SA SA SA SA SA SA SA

Regulatory treatmentTransitional Basel III rules CET I Tier II Tier II Tier II Tier II Tier II Tier II Tier II Tier II Tier II Tier II N/A CET I Tier II Additional tier I

Post-transitional Basel III rules CET I Tier II Tier II Tier II Tier II Tier II Tier II Tier II Tier II Tier II Tier II Tier II CET I Tier II Additional tier I

Eligible at solo/group/group & solo Solo Group & solo Group & solo Group & solo Group & solo Group & solo Group & solo Group & solo Group & solo Group & solo Group & solo Group & solo Group Group Group



Subordinateddebt

Subordinateddebt

Subordinateddebt

Subordinateddebt

Subordinateddebt

Subordinateddebt

Subordinateddebt

Subordinateddebt

Subordinateddebt

Subordinateddebt

Subordinateddebt



share premium


share premium


ZAR36 356 ZAR3 000 ZAR1 500 ZAR1 600 ZAR1 150 ZAR1 780 ZAR1 220 ZAR2 000 ZAR2 000 ZAR3 500 ZAR500 ZAR2 250 ZAR18 067 ZAR8 ZAR4 396

Par value of instrument (currency in millions) ZAR1 ZAR3 000 ZAR1 500 ZAR1 600 ZAR1 150 ZAR1 780 ZAR1 220 ZAR2 000 ZAR2 000 ZAR3 500 ZAR500 ZAR2 250 10c ZAR1 1c

Accounting classification Equityattributableto ordinary

shareholders

Subordinateddebt

Subordinateddebt

Subordinateddebt

Subordinateddebt

Subordinateddebt

Subordinateddebt

Subordinateddebt

Subordinateddebt

Subordinateddebt

Subordinateddebt

Subordinateddebt

Equityattributableto ordinary

shareholders


share premium


share premium

Original date of issuance Ongoing 2005/05/24 2006/04/10 2009/11/24 2009/11/24 2011/12/01 2012/01/23 2012/03/15 2012/07/30 2012/10/24 2012/10/24 2014/12/02 Ongoing 1969/11/25 2004/07/07,2006/05/23,2006/08/12

Perpetual or dated Perpetual Dated Dated Dated Dated Dated Dated Dated Dated Dated Dated Dated Perpetual Perpetual Perpetual

Original maturity date N/A 2020/05/24 2023/04/10 2021/11/24 2021/11/24 2022/12/01 2022/01/23 2023/03/15 2024/07/30 2025/10/24 2024/10/24 2024/12/02 N/A N/A N/A

Issuer call subject to prior supervisory approval No Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes No No No


N/A 2015/05/24 ZAR3 000

2018/04/10 ZAR1 500

2016/11/24 ZAR1 600

2016/11/24 ZAR1 150

2017/12/01 ZAR1 780

2017/01/23ZAR1 220

2018/03/15 ZAR2 000

2019/07/30ZAR2 000

2020/10/24 ZAR3 500

2019/10/24ZAR500

2019/12/02 ZAR2 250

N/A N/A N/A

Subsequent call dates, if applicable N/A 2015/05/24or any


thereafter

2018/04/10or any


thereafter

2016/11/24or any


thereafter

2016/11/24or any


thereafter

2017/12/01or any


thereafter

2017/01/23or any


thereafter

2018/03/15or any


thereafter

2019/07/30or any


thereafter

2020/10/24or any


thereafter

2019/10/24or any


thereafter

2019/12/02or any


thereafter

N/A N/A N/A

Coupons/dividendsFixed or floating dividend/coupon N/A Fixed Fixed Fixed Floating Fixed Floating Floating Floating Floating Floating Floating N/A Fixed Floating

Coupon rate and any related index N/A 9.63%semi-annual

8.40%semi-annual

10.82%semi-annual

JIBAR + 2.20 9.66%semi-annual

JIBAR + 2.00 JIBAR + 2.10 JIBAR + 2.20 JIBAR + 2.35 JIBAR + 2.20 JIBAR + 3.50 N/A 6.50% 77% of primeinterest rate



Full discretionary Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory Fulldiscretionary

Fulldiscretionary

Fulldiscretionary


No Yes Yes Yes Yes No No No No No No No No No No

Non-cumulative or cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative Cumulative Non-cumulative


Write-down feature N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Yes N/A N/A N/A


Mostsubordinated

Seniorunsecured

Senior unsecured

Senior unsecured

Senior unsecured

Senior unsecured

Seniorunsecured

Seniorunsecured

Seniorunsecured

Seniorunsecured

Seniorunsecured

Seniorunsecured


shares

Subordinateddebt


shares

Non-compliant transitioned features No Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes No No Yes Yes

If yes, specify non-compliant features N/A Regulation 38(14) (a)(i) Regulation 38(14) (a)(iv)(D) Regulation 38(14) (a)(iv)(H)(ii)










N/A N/A No lossabsorbency


non-viability

No lossabsorbency


non-viability


117

Main features disclosure template1 continued

Subordinatedbond

– Standard BankSwaziland 1

Subordinatedbond

– Standard Bank Swaziland 2

Subordinatedbond

– Stanbic BankBotswana 1

Subordinatedbond


Subordinatedbond

– Standard BankMozambique

Subordinatedbond

– CfC StanbicBank Kenya 3

Subordinatedbond


Subordinatedbond

– CfC StanbicBank Kenya

Subordinatedbond

– Stanbic BankGhana 1

Subordinatedloan


Subordinatedloan

– Standard BankMauritius

Subordinatedloan

– Standard BankTanzania

Subordinatedloan

– Stanbic BankUganda

Subordinatedloan

– Standard BankAngola

Subordinatedloan

– Stanbic BankIBTC

2014Issuer Standard Bank

SwazilandLimited

Standard Bank Swaziland

Limited

Stanbic Bank Botswana

Limited


Limited

Standard Bank Mozambique

CFC StanbicBank Limited

CfC Stanbic BankLimited

CfC Stanbic Bank Limited

Stanbic BankGhana Limited


Standard Bank Mauritius

Standard Bank Tanzania

Stanbic Bank Uganda

Standard Bank Angola

Stanbic BankIBTC


SZD000551465 SZD000551242 SBBL056 SBBL057 SBM-2007 KE1000001684 KE1000001672 KE4000002438 IFC IFC Standard Bank South Africa

Standard Bank South Africa

SAHL Standard Bank South Africa

NGSB2024S1B1 South Africa

Governing law(s) of the instrument Swaziland Swaziland Botswana Botswana Mozambique Kenya Kenya Kenya Ghanaian law Ghana Mauritius Tanzania Uganda Angola Nigeria

Regulatory treatmentTransitional Basel III rules N/A Tier II Tier II Tier II Tier II Tier II Tier II N/A Tier II Tier II Tier II Tier II Tier II N/A N/A

Post-transitional Basel III rules N/A Tier II Tier II Tier II Tier II Tier II Tier II N/A Tier II Tier II Tier II Tier II Tier II N/A N/A

Eligible at solo/group/group & solo Solo Group & solo Group & solo Group & solo Group & solo Group & solo Group & solo Solo Group & solo Group & solo Solo Solo Solo Solo Solo


Subordinated debt

Subordinated debt

Subordinated debt

Subordinated debt

Subordinated debt

Subordinateddebt

Subordinateddebt

Subordinateddebt

Subordinateddebt

Subordinatedloan

Subordinatedloan

Subordinatedloan

Subordinatedloan

Subordinatedloan

Subordinatedloan


ZAR50E50

ZAR50E50

ZAR61BWP50

ZAR97BWP80

ZAR88MT260

ZAR307KES2 402

ZAR12KES98

ZAR511KES4 000

ZAR25GHS7

ZAR58GHS16

ZAR289USD25

ZAR58TZS8 664

ZAR81UGX19 416

ZAR347AOA3 086

ZAR463NGN7 309

Par value of instrument (currency in millions) ZAR50E50

ZAR50E50

ZAR61BWP50

ZAR97BWP80

ZAR88MT260

ZAR307KES2 402

ZAR12KES98

ZAR511KES4 000

ZAR25GHS7

ZAR58GHS16

ZAR289USD25

ZAR58TZS8 664

ZAR81UGX19 416

ZAR347AOA3 086

ZAR463NGN7 309

Accounting classification Subordinateddebt

Subordinateddebt

Subordinateddebt

Subordinateddebt

Subordinateddebt

Subordinateddebt

Subordinateddebt

Subordinateddebt

Subordinateddebt

Subordinatedloan

Subordinatedloan

Subordinatedloan

Subordinatedloan

Subordinatedloan

Subordinatedloan

Original date of issuance 2014/12/14 2010/10/14 2011/06/13 2012/05/23 2007/06/29 2009/07/07 2009/07/07 2014/12/15 2012/01/23 2010/03/29 2012/12/03 2011/12/15 2011/10/31 2013/05/23 2013/04/30

Perpetual or dated Dated Dated Dated Dated Dated Dated Dated Dated Dated Dated Dated Dated Dated Dated Dated

Original maturity date 2024/12/14 2020/10/14 2021/06/13 2022/05/23 2017/06/29 2016/07/07 2016/07/07 2021/12/08 2022/01/23 2018/03/29 2022/12/04 2021/12/15 2021/10/31 2023/04/23 2025/10/31

Issuer call subject to prior supervisory approval Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes


2019/12/14E 50

2015/10/14E 50

2016/06/13BWP 50

2017/05/23BWP 80

N/A N/A N/A June 2020KES4 000

2017/01/23GHS7

2015/03/29GHS16

2017/12/04USD25

2016/12/15TZS8 664

2016/10/31UGX19 416

2018/04/23AOA3 086

2020/05/31NGN7 309

Subsequent call dates, if applicable 15 Decemberor any

interest payment date thereafter

On or after2015/10/14



N/A N/A N/A June 2020or any


23 January 2017or any


29 March 2015or any


5 December 2017 or any




1 November 2016 or any


24 April 2018or any


1 November 2016or any


Coupons/dividendsFixed or floating dividend/coupon Fixed Fixed Fixed

margin linkedto a floating

base rate

Fixedmargin linkedto a floating

base rate


base rate

Fixed Fixedmargin linkedto a floating

base rate

Fixed Fixed Fixedmargin linkedto a floating

base rate


base rate


base rate


base rate


base rate


base rate

Coupon rate and any related index 8.75% 8.1% 91 dayBoBC +130bps

91 dayBoBC +150bps

WA+50bps

12.5% 182 dayT-bill +175 bps

12.95% 11.25% LIBOR + 325bps LIBOR + 300bps LIBOR + 395bps LIBOR + 376bps LIBOR + 360bps LIBOR + 360bps



Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory


Yes Yes Yes Yes Yes Yes Yes No Yes Yes Yes Yes Yes Yes Yes

Non-cumulative or cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative


Write-down feature N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A


Senior/unsecured

Senior unsecured

Senior unsecured

Senior unsecured

Senior unsecured

Senior unsecured

Seniorunsecured

Senior/unsecured

Senior unsecured

Senior unsecured

Senior debt

Senior debt

Senior debt

Senior debt

Senior debt

Non-compliant transitioned features N/A Yes Yes Yes Yes Yes Yes N/A Yes Yes Yes Yes Yes N/A N/A

If yes, specify non-compliant features Regulation 38(14) (a)(i) Regulation 38(14) (a)(iv)(D) Regulation 38(14) (a)(iv)(H)(ii)














Annexure D | Capital instruments continued


Subordinatedbond

– Standard BankSwaziland 1

Subordinatedbond

– Standard Bank Swaziland 2

Subordinatedbond


Subordinatedbond


Subordinatedbond

– Standard BankMozambique

Subordinatedbond


Subordinatedbond


Subordinatedbond

– CfC StanbicBank Kenya

Subordinatedbond


Subordinatedloan


Subordinatedloan

– Standard BankMauritius

Subordinatedloan

– Standard BankTanzania

Subordinatedloan

– Stanbic BankUganda

Subordinatedloan

– Standard BankAngola

Subordinatedloan

– Stanbic BankIBTC


SwazilandLimited

Standard Bank Swaziland

Limited


Limited


Limited

Standard Bank Mozambique

CFC StanbicBank Limited

CfC Stanbic BankLimited

CfC Stanbic Bank Limited




Standard Bank Tanzania

Stanbic Bank Uganda

Standard Bank Angola

Stanbic BankIBTC


SZD000551465 SZD000551242 SBBL056 SBBL057 SBM-2007 KE1000001684 KE1000001672 KE4000002438 IFC IFC Standard Bank South Africa


SAHL Standard Bank South Africa

NGSB2024S1B1 South Africa

Governing law(s) of the instrument Swaziland Swaziland Botswana Botswana Mozambique Kenya Kenya Kenya Ghanaian law Ghana Mauritius Tanzania Uganda Angola Nigeria

Regulatory treatmentTransitional Basel III rules N/A Tier II Tier II Tier II Tier II Tier II Tier II N/A Tier II Tier II Tier II Tier II Tier II N/A N/A

Post-transitional Basel III rules N/A Tier II Tier II Tier II Tier II Tier II Tier II N/A Tier II Tier II Tier II Tier II Tier II N/A N/A

Eligible at solo/group/group & solo Solo Group & solo Group & solo Group & solo Group & solo Group & solo Group & solo Solo Group & solo Group & solo Solo Solo Solo Solo Solo


Subordinated debt

Subordinated debt

Subordinated debt

Subordinated debt

Subordinated debt

Subordinateddebt

Subordinateddebt

Subordinateddebt

Subordinateddebt

Subordinatedloan

Subordinatedloan

Subordinatedloan

Subordinatedloan

Subordinatedloan

Subordinatedloan


ZAR50E50

ZAR50E50

ZAR61BWP50

ZAR97BWP80

ZAR88MT260

ZAR307KES2 402

ZAR12KES98

ZAR511KES4 000

ZAR25GHS7

ZAR58GHS16

ZAR289USD25

ZAR58TZS8 664

ZAR81UGX19 416

ZAR347AOA3 086

ZAR463NGN7 309

Par value of instrument (currency in millions) ZAR50E50

ZAR50E50

ZAR61BWP50

ZAR97BWP80

ZAR88MT260

ZAR307KES2 402

ZAR12KES98

ZAR511KES4 000

ZAR25GHS7

ZAR58GHS16

ZAR289USD25

ZAR58TZS8 664

ZAR81UGX19 416

ZAR347AOA3 086

ZAR463NGN7 309

Accounting classification Subordinateddebt

Subordinateddebt

Subordinateddebt

Subordinateddebt

Subordinateddebt

Subordinateddebt

Subordinateddebt

Subordinateddebt

Subordinateddebt

Subordinatedloan

Subordinatedloan

Subordinatedloan

Subordinatedloan

Subordinatedloan

Subordinatedloan

Original date of issuance 2014/12/14 2010/10/14 2011/06/13 2012/05/23 2007/06/29 2009/07/07 2009/07/07 2014/12/15 2012/01/23 2010/03/29 2012/12/03 2011/12/15 2011/10/31 2013/05/23 2013/04/30

Perpetual or dated Dated Dated Dated Dated Dated Dated Dated Dated Dated Dated Dated Dated Dated Dated Dated

Original maturity date 2024/12/14 2020/10/14 2021/06/13 2022/05/23 2017/06/29 2016/07/07 2016/07/07 2021/12/08 2022/01/23 2018/03/29 2022/12/04 2021/12/15 2021/10/31 2023/04/23 2025/10/31

Issuer call subject to prior supervisory approval Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes


2019/12/14E 50

2015/10/14E 50

2016/06/13BWP 50

2017/05/23BWP 80

N/A N/A N/A June 2020KES4 000

2017/01/23GHS7

2015/03/29GHS16

2017/12/04USD25

2016/12/15TZS8 664

2016/10/31UGX19 416

2018/04/23AOA3 086

2020/05/31NGN7 309

Subsequent call dates, if applicable 15 Decemberor any





N/A N/A N/A June 2020or any


23 January 2017or any


29 March 2015or any






1 November 2016 or any


24 April 2018or any


1 November 2016or any


Coupons/dividendsFixed or floating dividend/coupon Fixed Fixed Fixed

margin linkedto a floating

base rate


base rate


base rate

Fixed Fixedmargin linkedto a floating

base rate

Fixed Fixed Fixedmargin linkedto a floating

base rate


base rate


base rate


base rate


base rate


base rate

Coupon rate and any related index 8.75% 8.1% 91 dayBoBC +130bps

91 dayBoBC +150bps

WA+50bps

12.5% 182 dayT-bill +175 bps

12.95% 11.25% LIBOR + 325bps LIBOR + 300bps LIBOR + 395bps LIBOR + 376bps LIBOR + 360bps LIBOR + 360bps



Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory


Yes Yes Yes Yes Yes Yes Yes No Yes Yes Yes Yes Yes Yes Yes

Non-cumulative or cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative


Write-down feature N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A


Senior/unsecured

Senior unsecured

Senior unsecured

Senior unsecured

Senior unsecured

Senior unsecured

Seniorunsecured

Senior/unsecured

Senior unsecured

Senior unsecured

Senior debt

Senior debt

Senior debt

Senior debt

Senior debt

Non-compliant transitioned features N/A Yes Yes Yes Yes Yes Yes N/A Yes Yes Yes Yes Yes N/A N/A













119


Subordinatedloan

– Standard Bank Zambia

Subordinated loan

– Stanbic BankDRC

Subordinated bond

– Stanbic Bank IBTC

Subordinated bond

– Standard Bank Namibia

Subordinated loan

– Stanbic Bank Botswana

Subordinated bond – SB2

Plc 1


Plc 2

Subordinated loan

– Standard Bank Offshore Group

Subordinated loan


Subordinated loan


Subordinated loan


Subordinated loan


Subordinated loan



ZambiaStanbic Bank

DRCStanbic Bank

IBTCStandard Bank

NamibiaStanbic Bank

BotswanaSB Plc SB Plc SBOG SBOG SBOG SBOG SBOG SBOG




NGSB2024S1B1 NA000A1ZRK11 Standard Bank South Africa

BXS0262708554 BXS0470473231 Standard Bank Offshore Group

Standard Bank Offshore Group


Standard Bank Group

International Ltd



Governing law(s) of the instrument Zambia DRC Congo Nigeria Namibia Botswana UK UK IOM Ltd IOM Ltd Jersey Jersey Jersey Jersey

Regulatory treatmentTransitional Basel III rules Tier II N/A N/A N/A N/A Tier II Tier II Tier II Tier II Tier II Tier II Tier II Tier II

Post-transitional Basel III rules Tier II N/A N/A N/A N/A Tier II Tier II Tier II Tier II Tier II Tier II Tier II Tier II

Eligible at solo/group/group & solo Solo Solo Solo Solo Solo Group & solo Group & solo Solo Solo Solo Solo Solo Solo

Instrument type (types to be specified by each jurisdiction) Subordinated loan

Subordinated loan

Subordinated debt

Subordinated debt

Subordinated loan

Subordinated debt

Subordinated debt

Subordinated debt

Subordinated debt

Subordinated debt

Subordinated debt

Subordinated debt

Subordinated debt


ZAR174 ZMK96

ZAR35CDF2 736

ZAR977NGN15 440

ZAR100NAD100

ZAR364BWP300

ZAR1 639USD142

ZAR5 784USD500

ZAR144GBP8

ZAR54GBP3

ZAR180GBP10

ZAR108GBP6

ZAR180GBP10

ZAR198GBP11

Par value of instrument (currency in millions) ZAR174 ZMK96

ZAR35CDF2 736

ZAR977NGN15 440

ZAR100NAD100

ZAR364BWP300

ZAR1 639USD142

ZAR5 784USD500

ZAR144GBP8

ZAR54GBP3

ZAR180GBP10

ZAR108GBP6

ZAR180GBP10

ZAR198GBP11

Accounting classification Subordinated loan

Subordinated loan

Subordinated debt

Subordinated debt

Subordinated loan

Subordinateddebt

Subordinateddebt

Subordinateddebt

Subordinateddebt

Subordinateddebt

Subordinateddebt

Subordinateddebt

Subordinateddebt

Original date of issuance 2011/12/13 2014/06/03 2014/09/30 2014/10/23 2014/11/28 2006/07/27 2009/12/02 2011/06/09 2011/06/09 2010/06/10 2011/06/15 2011/06/15 2011/06/29

Perpetual or dated Dated Dated Dated Dated Dated Perpetual Dated Dated Dated Dated Dated Dated Dated

Original maturity date 2021/12/13 2024/06/03 2024/09/30 2024/10/23 2024/11/28 N/A 2019/12/02 2021/06/30 2020/06/30 2020/06/30 2021/06/30 2020/06/30 2021/06/30

Issuer call subject to prior supervisory approval Yes Yes Yes Yes Yes Yes N/A N/A N/A N/A N/A N/A N/A


2016/12/13ZMK96

2019/06/03 CDF2 736

2019/10/01 NGN15 440

2019/10/23 NAD100

2019/11/28BWP300

2016/07/27USD142

N/A N/A N/A N/A N/A N/A N/A

Subsequent call dates, if applicable 14 December2016

or anyinterest

payment date thereafter

4 June 2019or any


thereafter

1 October 2019or any


thereafter



thereafter

29 November or any


thereafter

27 July 2016or any


thereafter


Coupons/dividendsFixed or floating dividend/coupon Fixed margin

linked to a floating base rate

Fixed margin linked to

a floating base rate

Fixed Fixed Fixed Fixed until 27/07/2016then floating

Fixed Floating Floating Floating Floating Floating Floating

Coupon rate and any related index LIBOR + 385bps LIBOR + 975bps 13.25% 9.00% 10.25% 8.012%per annum until 27/07/2016. Then 3 month

LIBOR + 3.25%

8.125%per annum

25bps over LIBOR,

payable 6 monthly

25bps over LIBOR,

payable 3 monthly

340bps over LIBOR,

payable 3 monthly

25bps over LIBOR,

payable 3 monthly

LIBOR + 420bps, payable

3 monthly

25bps over LIBOR,

payable 3 monthly

Existence of a dividend stopper No No No No No No No No No No No No No

Fully discretionary, partially discretionary or mandatory Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory

Existence of step up or other incentive to redeem Yes Yes No Yes No Yes No No No No No No No

Non-cumulative or cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative

Convertible or non-convertible Non-convertible Non-convertible Non-convertible Non-convertible Non-convertible Non-convertible Non-convertible Non-convertible Non-convertible Non-convertible Non-convertible Non-convertible Non-convertible

Write-down feature N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A


Senior debt

Senior debt

Senior unsecured

Senior unsecured

Senior debt

Seniorunsecured

Seniorunsecured

Senior unsecured

Senior unsecured

Senior unsecured

Senior unsecured

Senior unsecured

Senior unsecured

Non-compliant transitioned features Yes N/A N/A N/A N/A Yes Yes Yes Yes Yes Yes Yes N/A


CRR CRR Non compliant with Basel III

post transition

Non compliant with Basel III

post transition


post transition


post transition


post transition


post transition

1 For related carrying values of subordinated debt, refer to note 23 in the annual financial statements. 2 SB Plc’s subordinated debt is disclosed within non-current liabilities held for sale, a controlling interest of which was disposed of by the group on 1 February 2015.



Annexure D | Capital disclosure continued


Subordinatedloan

– Standard Bank Zambia

Subordinated loan

– Stanbic BankDRC

Subordinated bond

– Stanbic Bank IBTC

Subordinated bond

– Standard Bank Namibia

Subordinated loan

– Stanbic Bank Botswana


Plc 1


Plc 2

Subordinated loan


Subordinated loan


Subordinated loan


Subordinated loan


Subordinated loan


Subordinated loan



ZambiaStanbic Bank

DRCStanbic Bank

IBTCStandard Bank

NamibiaStanbic Bank

BotswanaSB Plc SB Plc SBOG SBOG SBOG SBOG SBOG SBOG




NGSB2024S1B1 NA000A1ZRK11 Standard Bank South Africa

BXS0262708554 BXS0470473231 Standard Bank Offshore Group



Standard Bank Group

International Ltd



Governing law(s) of the instrument Zambia DRC Congo Nigeria Namibia Botswana UK UK IOM Ltd IOM Ltd Jersey Jersey Jersey Jersey

Regulatory treatmentTransitional Basel III rules Tier II N/A N/A N/A N/A Tier II Tier II Tier II Tier II Tier II Tier II Tier II Tier II

Post-transitional Basel III rules Tier II N/A N/A N/A N/A Tier II Tier II Tier II Tier II Tier II Tier II Tier II Tier II

Eligible at solo/group/group & solo Solo Solo Solo Solo Solo Group & solo Group & solo Solo Solo Solo Solo Solo Solo

Instrument type (types to be specified by each jurisdiction) Subordinated loan

Subordinated loan

Subordinated debt

Subordinated debt

Subordinated loan

Subordinated debt

Subordinated debt

Subordinated debt

Subordinated debt

Subordinated debt

Subordinated debt

Subordinated debt

Subordinated debt


ZAR174 ZMK96

ZAR35CDF2 736

ZAR977NGN15 440

ZAR100NAD100

ZAR364BWP300

ZAR1 639USD142

ZAR5 784USD500

ZAR144GBP8

ZAR54GBP3

ZAR180GBP10

ZAR108GBP6

ZAR180GBP10

ZAR198GBP11

Par value of instrument (currency in millions) ZAR174 ZMK96

ZAR35CDF2 736

ZAR977NGN15 440

ZAR100NAD100

ZAR364BWP300

ZAR1 639USD142

ZAR5 784USD500

ZAR144GBP8

ZAR54GBP3

ZAR180GBP10

ZAR108GBP6

ZAR180GBP10

ZAR198GBP11

Accounting classification Subordinated loan

Subordinated loan

Subordinated debt

Subordinated debt

Subordinated loan

Subordinateddebt

Subordinateddebt

Subordinateddebt

Subordinateddebt

Subordinateddebt

Subordinateddebt

Subordinateddebt

Subordinateddebt

Original date of issuance 2011/12/13 2014/06/03 2014/09/30 2014/10/23 2014/11/28 2006/07/27 2009/12/02 2011/06/09 2011/06/09 2010/06/10 2011/06/15 2011/06/15 2011/06/29

Perpetual or dated Dated Dated Dated Dated Dated Perpetual Dated Dated Dated Dated Dated Dated Dated

Original maturity date 2021/12/13 2024/06/03 2024/09/30 2024/10/23 2024/11/28 N/A 2019/12/02 2021/06/30 2020/06/30 2020/06/30 2021/06/30 2020/06/30 2021/06/30

Issuer call subject to prior supervisory approval Yes Yes Yes Yes Yes Yes N/A N/A N/A N/A N/A N/A N/A


2016/12/13ZMK96

2019/06/03 CDF2 736

2019/10/01 NGN15 440

2019/10/23 NAD100

2019/11/28BWP300

2016/07/27USD142


Subsequent call dates, if applicable 14 December2016

or anyinterest

payment date thereafter

4 June 2019or any


thereafter



thereafter



thereafter

29 November or any


thereafter

27 July 2016or any


thereafter


Coupons/dividendsFixed or floating dividend/coupon Fixed margin

linked to a floating base rate

Fixed margin linked to

a floating base rate

Fixed Fixed Fixed Fixed until 27/07/2016then floating

Fixed Floating Floating Floating Floating Floating Floating

Coupon rate and any related index LIBOR + 385bps LIBOR + 975bps 13.25% 9.00% 10.25% 8.012%per annum until 27/07/2016. Then 3 month

LIBOR + 3.25%

8.125%per annum

25bps over LIBOR,

payable 6 monthly

25bps over LIBOR,

payable 3 monthly

340bps over LIBOR,

payable 3 monthly

25bps over LIBOR,

payable 3 monthly

LIBOR + 420bps, payable

3 monthly

25bps over LIBOR,

payable 3 monthly

Existence of a dividend stopper No No No No No No No No No No No No No

Fully discretionary, partially discretionary or mandatory Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory

Existence of step up or other incentive to redeem Yes Yes No Yes No Yes No No No No No No No

Non-cumulative or cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative

Convertible or non-convertible Non-convertible Non-convertible Non-convertible Non-convertible Non-convertible Non-convertible Non-convertible Non-convertible Non-convertible Non-convertible Non-convertible Non-convertible Non-convertible

Write-down feature N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A


Senior debt

Senior debt

Senior unsecured

Senior unsecured

Senior debt

Seniorunsecured

Seniorunsecured

Senior unsecured

Senior unsecured

Senior unsecured

Senior unsecured

Senior unsecured

Senior unsecured

Non-compliant transitioned features Yes N/A N/A N/A N/A Yes Yes Yes Yes Yes Yes Yes N/A


CRR CRR Non compliant with Basel III

post transition


post transition


post transition


post transition


post transition


post transition

1 For related carrying values of subordinated debt, refer to note 23 in the annual financial statements. 2 SB Plc’s subordinated debt is disclosed within non-current liabilities held for sale, a controlling interest of which was disposed of by the group on 1 February 2015.

121


The consolidated and separate annual financial statements were audited in terms of the Companies Act 71 of 2008.

The preparation of the group’s consolidated and separate annual financial statements was supervised by the group financial director, Simon Ridley, BCom (Natal), CA(SA) AMP (Oxford).

A summary of these results were made publicly available on 5 March 2015.

123 Directors’ responsibility for financial reporting

123 Group secretary’s certification

124 Report of the group audit committee

126 Directors’ report

131 Independent auditors’ report

132 Statement of financial position

133 Income statement

135 Statement of other comprehensive income

136 Statement of cash flows

138 Statement of changes in equity

142 Accounting policy elections

144 Notes to the annual financial statements

258 Standard Bank Group Limited – company annual financial statements

266 Annexure A – subsidiaries, consolidated and unconsolidated structured entities

284 Annexure B – associates and joint ventures

289 Annexure C – group share incentive schemes

297 Annexure D – detailed accounting policies

320 Annexure E – emoluments and share incentives of directors and prescribed officers

334 Annexure F – six-year review

346 Annexure G – segmental statement of financial position

348 Annexure H – banking activities average statement of financial position (normalised)

350 Annexure I – third-party funds under management

AFS


In accordance with the Companies Act, the directors are responsible

for the preparation of the annual financial statements. These annual

financial statements conform to IFRS as issued by the IASB, and fairly

present the affairs of Standard Bank Group Limited (the company)

and Standard Bank Group (the group) as at 31 December 2014, and

the net income and cash flows for the year then ended.

It is the responsibility of the independent auditors to report on the

fair presentation of the financial statements.

The directors are ultimately responsible for the internal controls

of the company and the group. Management enables the directors

to meet these responsibilities. Standards and systems of internal

controls are designed and implemented by management to provide

reasonable assurance of the integrity and reliability of the financial

statements and to adequately safeguard, verify and maintain

accountability for shareholder investments and company and

group assets.

Accounting policies, supported by judgements, estimates and

assumptions in compliance with IFRS, are applied on the basis that

the company and the group shall continue as a going concern.

Systems and controls include the proper delegation of responsibilities

within a clearly defined framework, effective accounting procedures

and adequate segregation of duties.

Systems and controls are monitored throughout the company and the

group. Greater detail of these systems and controls, including the

operation of the group’s internal audit function, is provided in the

corporate governance statement in the group’s annual integrated

report and the risk and capital management section of this report.

Based on the information and explanations provided by management and the group’s internal auditors, the directors are of the opinion that the internal financial controls are adequate and that the financial records may be relied upon for preparing the financial statements in accordance with IFRS and to maintain accountability for the company and the group’s assets and liabilities. Nothing has come to the attention of the directors to indicate that a breakdown in the functioning of these controls, resulting in material loss to the company and the group, has occurred during the year and up to the date of this report.

The directors have a reasonable expectation that the company and the group will have adequate resources to continue in operational existence and as a going concern in the financial year ahead. The 2014 annual financial statements which appear on pages 132 to 333 and specified sections of the risk and capital management report contained within pages 3 to 121 were approved by the board on 4 March 2015 and signed on its behalf by:

Fred PhaswanaChairman4 March 2015

Ben Kruger Sim TshabalalaGroup chief executive Group chief executive4 March 2015 4 March 2015

123

Directors’ responsibility for financial reporting

Group secretary’s certification

Compliance with the Companies Act 71 of 2008 (Companies Act)In terms of the Companies Act and for the year ended 31 December 2014, I certify that Standard Bank Group Limited has filed all returns and notices required by the Companies Act with the Companies and Intellectual Property Commission and that all such returns and notices are true, correct and up to date.

Zola StephenGroup secretary4 March 2015



This report is provided by the audit committee, in respect of the 2014 financial year of Standard Bank Group Limited, in compliance with section 94 of the Companies Act, as amended from time-to-time and in terms of the JSE Listings Requirements. The committee’s operation is guided by a detailed mandate that is informed by the Companies Act, the Banks Act and the Code of Corporate Practices and Conduct set out in the King Code and is approved by the board.

The committee is appointed by the board annually. Information on the membership and composition of the audit committee, its terms of reference and its activities is provided in greater detail in the corporate governance statement.

Execution of functionsThe audit committee has executed its duties and responsibilities during the financial year in accordance with its mandate as it relates to the group’s accounting, internal auditing, internal control and financial reporting practices.

During the year under review, the committee, amongst other matters, considered the following:

In respect of the external auditors and the external audit:

approved the reappointment of KPMG Inc. and PricewaterhouseCoopers Inc. as joint external auditors for the financial year ended 31 December 2014, in accordance with all applicable legal requirements

approved the external auditors’ terms of engagement, the audit plan and budgeted audit fees payable

reviewed the audit process and evaluated the effectiveness of the audit

obtained assurance from the external auditors that their independence was not impaired

considered the nature and extent of all non-audit services provided by the external auditors

through the chairman, approved proposed contracts with the external auditors for the provision of non-audit services and pre-approved proposed contracts with the external auditors for the provision of non-audit services above an agreed threshold amount

confirmed that no reportable irregularities were identified and reported by the external auditors in terms of the Auditing Profession Act 26 of 2005

considered reports from subsidiary audit committees and from management through the group’s governance structures on the activities of subsidiary entities.

In respect of the financial statements:

confirmed the going concern basis for the preparation of the interim and annual financial statements

examined and reviewed the interim and annual financial statements prior to submission and approval by the board

reviewed reports on the adequacy of the provisions for performing and non-performing loans and impairment of other assets, and the formulae applied by the group in determining charges for and levels of impairment of performing loans

ensured that the annual financial statements fairly present the financial position of the company and of the group as at the end of the financial year and the results of operations and cash flows for the financial year and considered the basis on which the group was determined to be a going concern

ensured that the annual financial statements conform with IFRS

considered accounting treatments, significant unusual transactions and accounting judgements

considered the appropriateness of the accounting policies adopted and changes thereto

reviewed and discussed the external auditors’ audit report

considered and made recommendations to the board on the interim and final dividend payments to shareholders

noted that there were no material reports or complaints received concerning accounting practices, internal audit, internal financial controls, content of annual financial statements, internal controls and related matters.

In respect of the annual integrated report:

recommended the annual integrated report to the board for approval

evaluated management’s judgements and reporting decisions in relation to the annual integrated report and ensured that all material disclosures are included

reviewed forward-looking statements, financial and sustainability information.

In respect of internal control, internal audit and financial crime control:

reviewed and approved the annual internal audit charter and audit plan and evaluated the independence, effectiveness and performance of the internal audit department and compliance with its charter

considered reports of the internal and external auditors on the group’s systems of internal control, including internal financial controls, and maintenance of effective internal control systems

reviewed significant issues raised by the internal audit processes and the adequacy of corrective action in response to such findings

noted that there were no significant differences of opinion between the internal audit function and management

assessed the adequacy of the performance of the internal audit function and adequacy of the available internal audit resources and found them to be satisfactory

received assurance that proper and adequate accounting records were maintained and that the systems safeguarded the assets against unauthorised use or disposal thereof

based on the above, the committee formed the opinion that, at the date of this report, there were no material breakdowns in internal control, including internal financial controls, resulting in any material loss to the group

reviewed and approved the mandate of financial crime as an independent risk function

Report of the group audit committee

discussed significant financial crime matters and control weaknesses identified

over the course of the year, met with the chief audit officer, the GCCO, the group CRO, the head of financial crime control, management and the external auditors

reviewed any significant legal and tax matters that could have a material impact on the financial statements

considered quarterly reports from the group’s internal financial controls committee

considered the independent assessment of the effectiveness of the internal audit function conducted by Ernst and Young in accordance with the five-yearly requirement by the International Institute of Internal Auditors, the results of which confirmed that internal audit generally aligns to global and local leading internal audit standards

considered the routine independent quality assurance review of audit execution conducted by Deloitte, the results of which confirmed that internal audit had complied with the International Institute of Internal Auditors Standards for the Professional Practice of Internal Auditing.

In respect of legal, regulatory and compliance requirements:

reviewed, with management, matters that could have a material impact on the group

monitored compliance with the Companies Act, the Banks Act, all other applicable legislation and governance codes and reviewed reports from internal audit, external auditors and compliance detailing the extent of this

noted that no complaints were received through the group’s ethics and fraud hotline concerning accounting matters, internal audit, internal financial controls, contents of financial statements, potential violations of the law and questionable accounting or auditing matters

reviewed and approved the annual compliance mandate and compliance plan.

In respect of risk management and information technology:

considered and reviewed reports from management on risk management, including fraud and information technology risks as they pertain to financial reporting and the going concern assessment

the chairman is a member of and attended the risk and capital management committee and the group IT committee meetings held during the year under review

Peter Sullivan, an independent non-executive board member and member of the GAC, was appointed as the chairman of the group IT committee.

In respect of the coordination of assurance activities, the committee:

reviewed the plans and work outputs of the external and internal auditors, as well as compliance and financial crime control, and concluded that these were adequate to address all significant financial risks facing the business

considered the expertise, resources and experience of the finance function and the senior members of management responsible for this function and concluded that these were appropriate

considered the appropriateness of the experience and expertise of the group financial director and concluded that these were appropriate.

Independence of the external auditorsThe audit committee is satisfied that KPMG Inc. and PricewaterhouseCoopers Inc. are independent of the group.

This conclusion was arrived at, inter alia, after taking into account the following factors:

the representations made by KPMG Inc. and PricewaterhouseCoopers Inc. to the audit committee

the auditors do not, except as external auditors or in rendering permitted non-audit services, receive any remuneration or other benefits from the group

the auditors’ independence was not impaired by any consultancy, advisory or other work undertaken by the auditors

the auditors’ independence was not prejudiced as a result of any previous appointment as auditor

the criteria specified for independence by the Independent Regulatory Board for Auditors and international regulatory bodies were met.

In conclusion, the audit committee has complied with its legal, regulatory and governance responsibilities as set out in its mandate.

On behalf of the group audit committee

Richard DunneChairman, group audit committee3 March 2015

125



Directors’ reportfor the year ended 31 December 2014

Nature of businessStandard Bank Group Limited is the holding company for the interests of the group, an African financial services organisation with South African roots. It is South Africa’s largest banking group by assets and currently operates in 20 countries on the African continent. Our strategic position enables us to connect Africa to other selected emerging markets and pools of capital in developed markets.

Headquartered in Johannesburg, South Africa, the group’s primary listing is on the JSE and its secondary listing is on the Namibian Stock Exchange (NSX). Subsidiary entities are listed on exchanges in Kenya, Malawi, Nigeria and Uganda.

A simplified group organogram is shown in annexure A on page 266.

Group results

A general review of the business and operations of major subsidiaries is provided in the chief executives’ review and operational reviews in the annual integrated report on pages 27 to 31 and 32 to 45, respectively.

A financial review of the group’s results for the year is provided in the annual integrated report on pages 54 to 72.

Property and equipmentThere was no change in the nature of the group’s fixed assets or in the policy regarding their use during the year.

Share capitalOrdinary sharesDuring the year, 4 879 268 ordinary shares (2013: 4 304 866 ordinary shares) were issued in terms of equity compensation plans and no ordinary shares (2013: 10 281 204 ordinary shares) were issued as scrip distributions. Surplus capital was used to repurchase 4 361 547 ordinary shares (2013: 2 877 768) to partially counteract the dilution impact of the shares issued under the equity compensation plans.

Non-redeemable, non-cumulative, non-participating preference shares (second preference shares)No second preference shares were issued during the year.

Directors’ interest in shares

The directors’ interest in shares are listed on page 194 of this report.

Equity compensation plans

Information on options or rights granted to executive directors under the group’s equity compensation plans is provided in the remuneration report in the annual integrated report starting on page 133 and in annexure E.

Details of options granted to all employees under equity compensation plans are given in annexure C.

Directors’ and prescribed officers’ emoluments

Directors’ and prescribed officers’ emoluments are disclosed in annexure E.

Information relating to the determination of directors’ and prescribed officers’ emoluments, share incentive allocations, details of prescribed officers’ interest in group shares and related matters is contained in the remuneration report in the annual integrated report starting on page 133.

Shareholder analysis

The analysis of ordinary shareholders is provided on pages 195 to 196.

Shareholders at the close of the financial year, holding beneficial interests in excess of 5% of the company’s issued share capital, determined from the share register and investigations conducted on our behalf, were as follows:

% held

2014 2013

Ordinary sharesIndustrial and Commercial Bank of China Limited (ICBC) 20.1 20.1Government Employees Pension Fund (investment managed by PIC) 13.1 13.8

6.5% preference sharesOld Sillery Proprietary Limited 9.1 9.1L Lombard 8.8 8.5DJ Saks 7.5 7.5DF Foster 6.0 6.0

127

Distributions

Ordinary shares

6.5% cumulative preference shares

(first preference shares)

Non-redeemable,non-cumulative,

non-participatingpreference shares

(second preference shares)

Interim2013Dividend per share (cents) 233,00 3,25 324,56

2014Dividend per share (cents) 259,00 3,25 340,58Record date in respect of the cash dividend

Friday,12 September 2014



Dividend cheques posted and CSDP*/broker accounts credited/updated (payment date)

Monday,15 September 2014



Final2013Dividend per share (cents) 300,00 3,25 329,94

2014Dividend per share (cents) 339,00 3,25 358,16Record date in respect of the cash dividend

Friday,24 April 2015



Dividend cheques posted and CSDP*/broker accounts credited/updated (payment date)

Tuesday,28 April 2015

Monday,20 April 2015

Monday,20 April 2015

* Central Securities Depository Participant.



Directors’ report | continued

Directorate

The directorate is listed in the annual integrated report on pages 104 to 108.

The following changes in directorate have taken place during the financial year ended 31 December 2014:

Standard Bank Group Limited

Appointments

Kaisheng Yang as director 16 January 2014

Wenbin Wang as director 16 January 2014

FA Du Plessis as director 14 March 2014

AC Parker as director 14 March 2014

BS Tshabalala as director 14 March 2014

ANA Peterside CON as director 22 August 2014

Shu Gu as director 10 December 2014

Retirements

DDB Band as director 29 May 2014

AC Nissen as director 29 May 2014

Resignations

Hongli Zhang as director 16 January 2014

Yagan Liu as director 16 January 2014

KP Kalyan as director 3 March 2014

Kaisheng Yang as director 10 December 2014

SJ Macozoma as director 31 December 2014

129

The Standard Bank of South Africa Limited

Appointments

FA du Plessis as director 14 March 2014

AC Parker as director 14 March 2014

BS Tshabalala as director 14 March 2014

ANA Peterside CON as director 22 August 2014

Retirements

DDB Band as director 28 May 2014

AC Nissen as director 28 May 2014

Resignations

KP Kalyan as director 3 March 2014


Standard Bank Plc

Appointments

PD Sullivan as director 19 February 2014

MM van der Spuy as chief executive 17 November 2014

Resignations

JK Knott as chief executive 17 July 2014

Liberty Holdings Limited

Appointments

JB Hemphill as director 1 March 2014

T Dloti as chief executive 1 March 2014

MG IIsley as director 1 November 2014

Resignations

JB Hemphill as chief executive 28 February 2014




Directors’ report | continued

Stanbic IBTC Bank PLC

Appointments

Z Manyathi as director 26 June 2014

SK Tshabalala as chairman 1 October 2014

Resignations

ANA Peterside CON as chairman and director 30 September 2014

D Bruynseels as director 1 October 2014

I Esiri as director 1 October 2014

RI Mahtani as director 1 October 2014

Group secretary and registered officeThe group secretary is Zola Stephen. The address of the group secretary is that of the registered office, 9th Floor, Standard Bank Centre, 5 Simmonds Street, Johannesburg 2001.

Management by third-partiesNone of the businesses of the company or its subsidiaries had, during the financial year, been managed by a third-party or a company in which a director had an interest.

Further details can be found in the directors’ emoluments in annexure E.

Subsidiaries, associates and joint ventures

The interests in subsidiary, associated and joint venture companies, where considered material in light of the group’s financial position and results, are set out in annexure A and annexure B, respectively.

Special resolution passed during 2014Authorisation of the acquisition of shares by Standard Bank Group Limited.

ContractsSaki Macozoma, a former director and deputy chairman of the company has an effective shareholding of 28.40% (2013: 28.40%) in Safika which is a member of three different consortia that were party to the Andisa Capital and the Tutuwa transactions. Safika holds effective interests of 2.38% (2013: 2.39%) in Liberty Holdings Limited and 1.33% (2013: 1.34%) in the company. The group has an effective interest of 26.67% (2013: 26.67%) in Safika.

InsuranceThe group protects itself against loss by maintaining banker’s comprehensive crime and professional indemnity cover. The insurance terms and conditions are reviewed by the group insurance committee annually to ensure they are ’fit-for-purpose’ against the group’s risk exposures.

Events subsequent to balance sheet dateFor details relating to the completion of the disposal of SB Plc to ICBC, as well as the expiry of the group’s Tutuwa initiative’s 10-year lock in restriction, refer to note 39 for further information.

131

To the shareholders of Standard Bank Group LimitedReport on the financial statementsWe have audited the consolidated group and separate company financial statements of the Standard Bank Group Limited, which comprise the statements of financial position as at 31 December 2014, and the income statement and statements of comprehensive income, changes in equity and cash flows for the year then ended and a summary of significant accounting policies and notes to the financial statements, as set out on pages 132 to 333 and specified sections marked as ’audited’ in the risk and capital management report contained within pages 3 to 121.

Directors’ responsibility for the financial statementsThe company’s directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards, and the requirements of the Companies Act of South Africa, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ responsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatements.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OpinionIn our opinion, the consolidated and separate financial statements present fairly, in all material respects, the consolidated and separate financial position of Standard Bank Group Limited as at 31 December 2014, its consolidated and separate financial performance and its consolidated and separate cash flows for the year then ended in accordance with International Financial Reporting Standards, and the requirements of the Companies Act of South Africa.

Other reports required by the Companies ActAs part of our audit of the financial statements for the year ended 31 December 2014, we have read the directors’ report, the report of the group audit committee and the group secretary’s certificate for the purpose of identifying whether there are material inconsistencies between these reports and the audited financial statements. These reports are the responsibility of the respective preparers. Based on our reading of these reports, we have not identified material inconsistencies between these reports and the audited financial statements. However, we have not audited these reports and accordingly do not express an opinion on these reports.

KPMG Inc. PricewaterhouseCoopers Inc.Registered Auditor Registered Auditor

Per Peter MacDonald Per Fulvio TonelliChartered Accountant (SA) Chartered Accountant (SA)Registered Auditor Registered AuditorDirector Director4 March 2015 4 March 2015

85 Empire Road 2 Eglin RoadParktown Sunninghill2193 2157

Independent auditors’ report



Statement of financial positionas at 31 December 2014

Group

Note2014

Rm2013

Rm

Assets Cash and balances with central banks 3 64 302 53 310Derivative assets 4.7 61 633 64 474Trading assets 5.1 72 040 54 588Pledged assets 6.1 14 185 6 713Non-current assets held for sale 7 219 958 183 284Financial investments 8 450 921 395 717Loans and advances 9.1 928 241 839 620Current tax assets 10 498 407Deferred tax assets 10 1 715 1 536Other assets 11 20 691 24 217Interest in associates and joint ventures 12 3 727 4 797Investment property 13 27 022 27 299Goodwill and other intangible assets 14 21 175 18 085Property and equipment 15.1 16 737 16 882

Total assets 1 902 845 1 690 929

Equity and liabilitiesEquity 161 634 152 648

Equity attributable to ordinary shareholders 136 985 128 936

Ordinary share capital 16.2 162 162Ordinary share premium 16.2 17 905 17 964Reserves 118 918 110 810

Preference share capital and premium 16.2 5 503 5 503Non-controlling interests 19 146 18 209

Liabilities 1 741 211 1 538 281

Derivative liabilities 4.7 72 281 69 244Trading liabilities 18 43 761 35 368Non-current liabilities held for sale 7 182 069 134 504Deposit and current accounts 19 1 047 212 921 738Current tax liabilities 20 4 505 4 912Deferred tax liabilities 20 4 475 3 995Provisions and other liabilities 21 73 871 80 060Policyholders’ liabilities 22 287 516 263 944Subordinated debt 23 25 521 24 516

Total equity and liabilities 1 902 845 1 690 929

133

Income statementfor the year ended 31 December 2014

Group

Note2014

Rm2013

Rm

Continuing operationsIncome from banking activities 84 214 73 406

Net interest income 45 152 39 095

Interest income 29.1 83 397 71 869Interest expense 29.2 38 245 32 774

Non-interest revenue 39 062 34 311

Net fee and commission revenue 29.3 26 250 23 184

Fee and commission revenue 29.3 30 570 26 714Fee and commission expense 29.3 4 320 3 530

Trading revenue 29.4 9 294 7 811Other revenue 29.5 3 518 3 316

Income from investment management and life insurance activities 79 467 85 240

Net insurance premiums 29.6 40 724 34 466Investment income and gains 29.7 35 505 47 585Management and service fee income 3 238 3 189

Total income 163 681 158 646Credit impairment charges 29.8 9 009 9 158Benefits due to policyholders 58 258 63 295

Net insurance benefits and claims 29.9 47 200 45 245Fair value adjustment to policyholders’ liabilities under investment contracts 7 473 10 135Fair value adjustment on third-party fund interests 3 585 7 915

Income after credit impairment charges and policyholders’ benefits 96 414 86 193Revenue sharing agreements with discontinued operation 171 142

Income after revenue sharing agreements with discontinued operation 96 243 86 051Operating expenses in banking activities 46 871 42 055

Staff costs 29.10 24 961 23 087Other operating expenses 29.12 21 910 18 968

Operating expenses in investment management and life insurance activities 14 546 14 226

Acquisition costs 29.11 4 579 4 233Other operating expenses 29.12 9 967 9 993

Net income before goodwill impairment and gains on disposal of subsidiaries 34 826 29 770Goodwill impairment 29.13 4Gains on disposal and liquidation of subsidiaries 29.14 1 212 64

Net income before share of profits from associates and joint ventures 36 034 29 834Share of profit from associates and joint ventures 12 679 685

Net income before indirect taxation 36 713 30 519Indirect taxation 30.1 2 439 1 911

Profit before direct taxation 34 274 28 608Direct taxation 30.2 8 061 7 580

Profit for the year from continuing operations 26 213 21 028



Income statement | continued

Group

Note2014

Rm2013

Rm

Profit for the year from continuing operations continued 26 213 21 028

Discontinued operation (4 048) (1 022)

Loss for the year from discontinued operation – SB Plc 29.15 (3 895) (419)Held for sale impairment – SB Plc 29.15 (153) (603)

Profit for the year 22 165 20 006

Attributable to non-controlling interests 3 904 3 451Attributable to equity holders of the parent 18 261 16 555

Attributable to preference shareholders 356 349Attributable to ordinary shareholders 17 905 16 206

Earnings per share from continuing operations and discontinued operationBasic earnings per ordinary share (cents) 32 1 129,9 1 034,4Diluted earnings per ordinary share (cents) 32 1 107,3 1 008,6Earnings per share from continuing operationsBasic earnings per ordinary share (cents) 32 1 385,3 1 099,6Diluted earnings per ordinary share (cents) 32 1 357,6 1 072,2

135

Statement of other comprehensive incomefor the year ended 31 December 2014

Group

Ordinary shareholders’

equityRm

Non-controlling

interests and

preference shareholders

Rm

Total equity

Rm

2014Profit for the year 17 905 4 260 22 165Other comprehensive income after tax for the year1 327 (1 215) (888)

Items that may be reclassified subsequently to profit and lossExchange differences on translating foreign operations2 1 085 (1 090) (5)Net change on hedges of net investments in foreign operations (147) (147)Net change in fair value of cash flow hedges before reclassification 314 (42) 272Realised fair value adjustments of cash flow hedges transferred to profit or loss (651) (651)Net change in fair value of available-for-sale financial assets before reclassification (116) (92) (208)Realised fair value adjustments on available-for-sale financial assets transferred to profit or loss (18) (18)Items that may not be reclassified to profit and lossDefined benefit fund remeasurements (108) 9 (99)Other losses (32) (32)

Total comprehensive income for the year 18 232 3 045 21 277

Attributable to non-controlling interests 2 689 2 689Attributable to equity holders of the parent 18 232 356 18 588


2013Profit for the year 16 206 3 800 20 006Other comprehensive income after tax for the year1 6 205 1 698 7 903

Items that may be reclassified subsequently to profit and lossExchange differences on translating foreign operations2 6 276 1 809 8 085Net change on hedges of net investments in foreign operations (176) (176)Net change in fair value of cash flow hedges before reclassification 259 (59) 200Realised fair value adjustments of cash flow hedges transferred to profit or loss 39 39Net change in fair value of available-for-sale financial assets before reclassification 82 33 115Realised fair value adjustments on available-for-sale financial assets transferred to profit or loss (13) (11) (24)Items that may not be reclassified to profit and lossDefined benefit fund remeasurements (202) 16 (186)Other losses (60) (90) (150)

Total comprehensive income for the year 22 411 5 498 27 909

Attributable to non-controlling interests 5 149 5 149Attributable to equity holders of the parent 22 411 349 22 760


1 Income tax relating to each component of other comprehensive income is disclosed in note 30.2.2 Includes realised foreign currency translation losses on foreign operations of R1 203 million (2013: R16 million) transferred to profit or loss.



Statement of cash flowsfor the year ended 31 December 2014

Group

Note2014

Rm2013

Rm

Net cash flows from operating activities 29 654 24 020

Cash flows used in operations (21 943) (9 659)

Net income before goodwill impairment – continuing operations 34 826 29 770Adjusted for: (48 201) (34 449)

Amortisation of intangible assets 1 329 1 065Credit impairment charges on loans and advances 9 009 9 158Defined benefit pension fund and post-employment benefits 732 676Depreciation of property and equipment 2 915 2 795Dividends included in trading revenue and investment income (4 225) (3 673)Equity-settled share-based payments 651 297Indirect taxation (2 439) (1 911)Interest expense 38 395 32 340Interest income (93 699) (79 513)Fair value adjustment on third-party fund interests 3 585 7 915Investment gains due to policyholders (19 077) (33 578)Net fund flows after service fees on policyholder investment contracts 364 (4 152)Non-cash flow movements to bonds 257 761Other impairment losses 257 456Policyholders’ liability transfers 22 942 30 833Gain on sale of businesses and divisions (27)Loss/(profit) on sale of property and equipment 16 (4)Net (outflows)/inflows from third-party financial liabilities arising on consolidation of mutual funds (7 850) 3 561Distributions to third-party financial liabilities arising on consolidation of mutual funds (1 217) (1 425)Other (146) (23)

Increase in income-earning assets 34.1 (149 791) (21 333)Increase in deposits, trading and other liabilities 34.2 141 223 16 353

Dividends received 6 209 5 148Interest paid (39 156) (33 187)Interest received 91 143 77 271Direct taxation paid 34.3 (8 070) (7 059)Net cash flows from/(used in) operating activities in discontinued operation 34.4 1 471 (8 494)

137

Group

Note2014

Rm2013

Rm

Net cash flows from operating activities continued 29 654 24 020

Net cash flows used in investing activities (8 298) (17 345)

Capital expenditure on – property (1 199) (880)– equipment, furniture and vehicles (2 337) (2 645)– intangible assets (4 890) (4 618)Proceeds from sale of property, equipment, furniture and vehicles 735 229Proceeds from sale of intangible assets 46Net investment from/(in) investment properties 1 470 (561)Net increase in investments by insurance operations (3 145) (8 917)Net cash inflow resulting from the disposal of subsidiaries 34.7 9 310Net cash outflow resulting from the acquisition of subsidiaries 38 (13)Decrease/(increase) in investment in associates and joint ventures 1 235 (274)Net cash flows used in investing activities in discontinued operation 34.4 (163) (35)

Net cash flows used in financing activities (10 262) (9 238)

Proceeds from issue of share capital to shareholders 14 165Share buy-backs (613) (343)Equity transactions with non-controlling interests (743) (1 019)Proceeds from issue of share capital to minorities 126 184Release of empowerment reserve 1 676Subordinated debt issued 4 385Subordinated debt redeemed (2 425) (1 890)Net dividends paid 34.5 (10 694) (8 011)Net cash flows used in financing activities in discontinued operation 34.4 (312)

Effect of exchange rate changes on cash and cash equivalents 2 376 7 987

Net increase in cash and cash equivalents 13 470 5 424Cash and cash equivalents at the beginning of the year 67 409 61 985

Cash and cash equivalents at the end of the year 34.6 80 879 67 409



Statement of changes in equityfor the year ended 31 December 2014

Ordinary share

capital and

premiumRm

Empower-ment

reserve1

Rm

Treasury shares2

Rm

Foreign currency

translation reserve3

Rm

Foreign currency

hedge of net

investment reserve4

Rm

Cash flow hedging reserve5

Rm

Statutory credit risk

reserve6

Rm

Available-for-sale

revaluation reserve7

Rm

Share-based

payment reserve8

Rm

Other reserves

Rm

Retained earnings

Rm

Ordinary share-

holders’ equity

Rm

Preference share

capital and

premiumRm

Non-controlling

interestsRm

Total equity

Rm

Balance at 1 January 2014 18 126 (1 846) (285) 6 274 (268) 804 1 295 196 1 233 245 103 162 128 936 5 503 18 209 152 648Total comprehensive income/(loss) for the year 1 085 (147) (337) (134) (11) 17 776 18 232 356 2 689 21 277

Profit for the year 17 905 17 905 356 3 904 22 165Other comprehensive income/(loss) for the year 1 085 (147) (337) (134) (11) (129) 327 (1 215) (888)

Increase in statutory credit risk reserve 810 (810)Unincorporated property partnerships capital reductions and distributions (79) (79)Transactions with shareholders, recorded directly in equity (59) (88) (351) (61) (9 624) (10 183) (356) (1 673) (12 212)

Equity-settled share-based payment transactions 580 (359) 221 48 269Transfer of vested equity options (641) 641Issue of share capital and share premium and capitalisation of reserves 554 (540) 14 14Share buy-back (613) (613) (613)Deferred tax on share-based payment transactions 150 150 150Transactions with non-controlling shareholders (1) (415) (416) (26) (442)Net increase in treasury shares (350) (242) (592) (304) (896)Net dividends paid (88) (8 859) (8 947) (356) (1 391) (10 694)

Dividends paid to equity holders (141) (8 911) (9 052) (356) (1 480) (10 888)Dividends received from Tutuwa initiative and policyholders’ deemed treasury shares 53 52 105 89 194

Balance at 31 December 2014 18 067 (1 934) (636) 7 359 (415) 467 2 105 62 1 172 234 110 504 136 985 5 503 19 146 161 634

1 The empowerment reserve is explained in note 17.2 The treasury share reserve relates to group shares held by entities within the group. Refer to pages 70 to 72 of the annual integrated report for an explanation of treasury shares

held by entities within the group.3 Refer to annexure D, accounting policy 2 – Foreign currency translations.4 Refer to the net investment hedges section in annexure D, accounting policy 4 – Financial instruments.5 Refer to the cash flow hedges section in annexure D, accounting policy 4 – Financial instruments.6 The statutory credit risk reserve represents the amount by which local regulatory authorities within the group’s rest of Africa operations requires an impairment provision which

exceeds the IFRS impairments provision.7 Refer to the available-for-sale financial assets section in annexure D, accounting policy 4 – Financial instruments.8 Refer to annexure D, accounting policy 20 – Equity-linked transactions.

All balances are stated net of tax, where applicable.

139

Ordinary share

capital and

premiumRm

Empower-ment

reserve1

Rm

Treasury shares2

Rm

Foreign currency


Rm

Foreign currency

hedge of net

investment reserve4

Rm


Rm


reserve6

Rm

Available-for-sale


Rm

Share-based

payment reserve8

Rm

Other reserves

Rm

Retained earnings

Rm

Ordinary share-

holders’ equity

Rm

Preference share

capital and

premiumRm

Non-controlling

interestsRm

Total equity

Rm

Balance at 1 January 2014 18 126 (1 846) (285) 6 274 (268) 804 1 295 196 1 233 245 103 162 128 936 5 503 18 209 152 648Total comprehensive income/(loss) for the year 1 085 (147) (337) (134) (11) 17 776 18 232 356 2 689 21 277

Profit for the year 17 905 17 905 356 3 904 22 165Other comprehensive income/(loss) for the year 1 085 (147) (337) (134) (11) (129) 327 (1 215) (888)

Increase in statutory credit risk reserve 810 (810)Unincorporated property partnerships capital reductions and distributions (79) (79)Transactions with shareholders, recorded directly in equity (59) (88) (351) (61) (9 624) (10 183) (356) (1 673) (12 212)

Equity-settled share-based payment transactions 580 (359) 221 48 269Transfer of vested equity options (641) 641Issue of share capital and share premium and capitalisation of reserves 554 (540) 14 14Share buy-back (613) (613) (613)Deferred tax on share-based payment transactions 150 150 150Transactions with non-controlling shareholders (1) (415) (416) (26) (442)Net increase in treasury shares (350) (242) (592) (304) (896)Net dividends paid (88) (8 859) (8 947) (356) (1 391) (10 694)









Statement of changes in equity continuedfor the year ended 31 December 2014

Ordinary share

capital and

premiumRm

Empower-ment

reserve1

Rm

Treasury shares2

Rm

Foreign currency


Rm

Foreign currency

hedge of net

investmentreserve4

Rm


Rm


reserve6

Rm

Available-for-sale


Rm

Share-based

payment reserve8

Rm

Other reserves

Rm

Retained earnings

Rm

Ordinary share-

holders’ equity

Rm

Preference share capital

and premium

Rm

Non-controlling interests

Rm

Total equity

Rm

Balance at 1 January 2013 18 092 (3 270) (190) (2) (92) 506 1 002 127 1 142 232 93 538 111 085 5 503 14 301 130 889Total comprehensive income/(loss) for the year 6 276 (176) 298 69 13 15 931 22 411 349 5 149 27 909

Profit for the year 16 206 16 206 349 3 451 20 006Other comprehensive income/(loss) after tax for the year 6 276 (176) 298 69 13 (275) 6 205 1 698 7 903

Increase in statutory credit risk reserve 293 (293)Unincorporated property partnerships capital reductions and distributions (6) (6)Transactions with shareholders, recorded directly in equity 34 1 424 (95) 91 (6 014) (4 560) (349) (1 235) (6 144)

Equity-settled share-based payment transactions 411 (169) 242 38 280Transfer of vested equity rights (320) 320Issue of share capital and share premium and capitalisation of reserves 377 (212) 165 165Share buy-back (343) (343) (343)Deferred tax on share-based payment transactions 76 76 76Transactions with non-controlling shareholders 2 1 (53) (50) 4 (46)Net increase in treasury shares (96) 119 23 36 59Redemption of preference shares 1 658 18 1 676 1 676Net dividends paid (236) (6 113) (6 349) (349) (1 313) (8 011)







141

Ordinary share

capital and

premiumRm

Empower-ment

reserve1

Rm

Treasury shares2

Rm

Foreign currency


Rm

Foreign currency

hedge of net

investmentreserve4

Rm


Rm


reserve6

Rm

Available-for-sale


Rm

Share-based

payment reserve8

Rm

Other reserves

Rm

Retained earnings

Rm

Ordinary share-

holders’ equity

Rm

Preference share capital

and premium

Rm


Rm

Total equity

Rm

Balance at 1 January 2013 18 092 (3 270) (190) (2) (92) 506 1 002 127 1 142 232 93 538 111 085 5 503 14 301 130 889Total comprehensive income/(loss) for the year 6 276 (176) 298 69 13 15 931 22 411 349 5 149 27 909

Profit for the year 16 206 16 206 349 3 451 20 006Other comprehensive income/(loss) after tax for the year 6 276 (176) 298 69 13 (275) 6 205 1 698 7 903

Increase in statutory credit risk reserve 293 (293)Unincorporated property partnerships capital reductions and distributions (6) (6)Transactions with shareholders, recorded directly in equity 34 1 424 (95) 91 (6 014) (4 560) (349) (1 235) (6 144)

Equity-settled share-based payment transactions 411 (169) 242 38 280Transfer of vested equity rights (320) 320Issue of share capital and share premium and capitalisation of reserves 377 (212) 165 165Share buy-back (343) (343) (343)Deferred tax on share-based payment transactions 76 76 76Transactions with non-controlling shareholders 2 1 (53) (50) 4 (46)Net increase in treasury shares (96) 119 23 36 59Redemption of preference shares 1 658 18 1 676 1 676Net dividends paid (236) (6 113) (6 349) (349) (1 313) (8 011)









Accounting policy elections

The principal accounting policies applied in the presentation of the group and company’s annual financial statements are set out below.

Basis of preparationThe group’s consolidated and company’s separate annual financial statements (annual financial statements) are prepared in accordance with IFRS as issued by the IASB, its interpretations adopted by the IASB, the South African Institute of Chartered Accountants (SAICA) Financial Reporting Guides as issued by the Accounting Practices Committee, the JSE Listings Requirements, and the South African Companies Act. The annual financial statements have been prepared on the historical cost basis except for the following material items in the statement of financial position:

available-for-sale financial assets, financial assets and liabilities at fair value through profit or loss, investment property, liabilities for cash-settled share-based payment arrangements, interests in mutual funds, policyholder investment contract liabilities and third-party financial liabilities arising on the consolidation of mutual funds that are measured at fair value

policyholder insurance contract liabilities and related reinsurance assets that are measured in terms of the Financial Soundness Valuation (FSV) basis as set out in accounting policy 18 – Policyholder insurance and investment contracts

post-employment benefit obligations that are measured in terms of the projected unit credit method.

The following principal accounting policy elections in terms of IFRS have been made, with reference to the detailed accounting policies shown in brackets:

purchases and sales of financial assets under a contract whose terms require delivery of the asset within the time frame established generally by regulation or convention in the marketplace concerned are recognised and derecognised using trade date accounting (accounting policy 4)

cumulative gains and losses recognised in OCI in terms of a cash flow hedge relationship are transferred from OCI and included in the initial measurement of the non-financial asset or liability (accounting policy 4)

commodities acquired principally for the purpose of selling in the near future or generating a profit from fluctuation in price or broker-traders’ margin are measured at fair value less cost to sell (accounting policy 4)

investment property is accounted for using the fair value model (accounting policy 5)

mutual fund investments held by investment-linked insurance funds, that do not meet the definition of a subsidiary, are designated on initial recognition as at fair value through profit or loss (accounting policy 6)

intangible assets and property and equipment are accounted for using the cost model (accounting policies 7 and 8)

intercompany transactions between the group’s continuing and discontinued operation are not eliminated but presented as part of the group’s respective continuing and discontinued operations results (accounting policy 16)

the portfolio exception to measure the fair value of certain groups of financial assets and financial liabilities on a net basis (accounting policy 17).

Functional and presentation currencyThe annual financial statements are presented in South African rand, which is the functional and presentation currency of the group and the company. All amounts are stated in millions of rand (Rm), unless indicated otherwise.

Changes in accounting policiesThe accounting policies are consistent with those reported in the previous year except as required in terms of the adoption of the following:

Adoption of new and amended standards effective for the current financial period

IAS 32 Financial Instruments: Presentation – Amendment to Offsetting Financial Assets and Financial Liabilities (IAS 32)

IFRS 10 Consolidated Financial Statements – Investment Entities amendment (IFRS 10)

IFRIC 21 Levies (IFRIC 21).

143

Early adoption of revised standards Amendment to IAS 16 Property, Plant and Equipment

(IAS 16) and IAS 38 Intangible Assets – Clarification of Acceptable Methods of Depreciation and Amortisation (2014 amendment) (IAS 38)

Annual improvements 2012 – 2014 cycle (excluding the amendments relating to IFRS 7 Financial instruments: Disclosure – Servicing Contracts) (2014 amendment)

Amendments to IFRS 10 Consolidated Financial Statements, IFRS 12 Disclosure of Interests in Other Entities and IAS 28 Investments in Associates and Joint Ventures (2014 amendment)

IFRS 14 Regulatory Deferral Accounts (2014 issued) (IFRS 14).

The revised standards and interpretations did not have any effect on the group and company’s reported earnings or financial statement position and had no material impact on the accounting policies.



Notes to the annual financial statementsfor the year ended 31 December 2014

1. Segmental reporting Operating segments

Personal & Business Banking

Corporate & Investment Banking

Central and other

Banking activities Liberty

NormalisedStandard Bank Group

Adjustments to IFRS1

IFRSStandard Bank Group

2014Rm

20132

Rm2014

Rm20132

Rm2014

Rm20132

Rm2014

Rm20132

Rm2014

Rm2013

Rm2014

Rm20132

Rm2014

Rm20132

Rm2014

Rm2013

Rm

Income from banking activities 55 410 48 621 29 466 25 849 (636) (965) 84 240 73 505 84 240 73 505 (26) (99) 84 214 73 406

Net interest income 31 732 27 609 13 414 11 398 110 241 45 256 39 248 45 256 39 248 (104) (153) 45 152 39 095

Interest income 55 541 48 684 40 740 19 221 (12 780) 4 117 83 501 72 022 83 501 72 022 (104) (153) 83 397 71 869Interest expense 23 809 21 075 27 326 7 823 (12 890) 3 876 38 245 32 774 38 245 32 774 38 245 32 774

Non-interest revenue 23 678 21 012 16 052 14 451 (746) (1 206) 38 984 34 257 38 984 34 257 78 54 39 062 34 311

Net fee and commission revenue 21 444 19 143 5 800 4 972 (994) (931) 26 250 23 184 26 250 23 184 26 250 23 184

Fee and commission revenue 24 567 21 852 6 137 5 255 (134) (97) 30 570 27 010 30 570 27 010 (296) 30 570 26 714Fee and commission expense 3 123 2 709 337 283 860 834 4 320 3 826 4 320 3 826 (296) 4 320 3 530

Trading revenue 169 (31) 8 880 8 123 167 (335) 9 216 7 757 9 216 7 757 78 54 9 294 7 811Other revenue 2 065 1 900 1 372 1 356 81 60 3 518 3 316 3 518 3 316 3 518 3 316

Income from investment management and life insurance activities 79 744 85 406 79 744 85 406 (277) (166) 79 467 85 240

Total income 55 410 48 621 29 466 25 849 (636) (965) 84 240 73 505 79 744 85 406 163 984 158 911 (303) (265) 163 681 158 646Credit impairment charges 8 204 7 817 804 1 341 1 9 009 9 158 9 009 9 158 9 009 9 158Benefits due to policyholders 58 258 63 295 58 258 63 295 58 258 63 295

Income after credit impairment charges and policyholders’ benefits 47 206 40 804 28 662 24 508 (637) (965) 75 231 64 347 21 486 22 111 96 717 86 458 (303) (265) 96 414 86 193Revenue sharing agreements with discontinued operation (171) (142) (171) (142) (171) (142) (171) (142)

Income after revenue sharing agreements 47 206 40 804 28 491 24 366 (637) (965) 75 060 64 205 21 486 22 111 96 546 86 316 (303) (265) 96 243 86 051Operating expenses in banking activities 33 287 29 311 16 031 14 790 (2 447) (2 046) 46 871 42 055 46 871 42 055 46 871 42 055

Staff costs 9 328 8 257 4 594 4 601 11 039 10 229 24 961 23 087 24 961 23 087 24 961 23 087Other operating expenses 23 959 21 054 11 437 10 189 (13 486) (12 275) 21 910 18 968 21 910 18 968 21 910 18 968

Operating expenses in investment management and life insurance activities 14 546 14 226 14 546 14 226 14 546 14 226

Net income before goodwill impairment, disposal of subsidiaries and equity accounted earnings 13 919 11 493 12 460 9 576 1 810 1 081 28 189 22 150 6 940 7 885 35 129 30 035 (303) (265) 34 826 29 770

Goodwill impairment 4 4 4 4Gains on disposal and liquidation of subsidiaries 9 1 203 64 1 212 64 1 212 64 1 212 64Share of profit from associates and joint ventures 229 307 64 96 372 270 665 673 14 12 679 685 679 685

Net income before indirect taxation 14 148 11 800 12 529 9 672 3 385 1 415 30 062 22 887 6 954 7 897 37 016 30 784 (303) (265) 36 713 30 519Indirect taxation 494 414 231 240 1 022 860 1 747 1 514 692 397 2 439 1 911 2 439 1 911

Profit before direct taxation 13 654 11 386 12 298 9 432 2 363 555 28 315 21 373 6 262 7 500 34 577 28 873 (303) (265) 34 274 28 608Direct taxation 3 571 2 985 2 154 1 603 397 8 6 122 4 596 1 926 2 968 8 048 7 564 13 16 8 061 7 580

Profit for the year from continuing operations 10 083 8 401 10 144 7 829 1 966 547 22 193 16 777 4 336 4 532 26 529 21 309 (316) (281) 26 213 21 028

Refer to footnotes on page 146.

145

1. Segmental reporting Operating segments



Central and other





2014Rm

20132

Rm2014

Rm20132

Rm2014

Rm20132

Rm2014

Rm20132

Rm2014

Rm2013

Rm2014

Rm20132

Rm2014

Rm20132

Rm2014

Rm2013

Rm

Income from banking activities 55 410 48 621 29 466 25 849 (636) (965) 84 240 73 505 84 240 73 505 (26) (99) 84 214 73 406

Net interest income 31 732 27 609 13 414 11 398 110 241 45 256 39 248 45 256 39 248 (104) (153) 45 152 39 095

Interest income 55 541 48 684 40 740 19 221 (12 780) 4 117 83 501 72 022 83 501 72 022 (104) (153) 83 397 71 869Interest expense 23 809 21 075 27 326 7 823 (12 890) 3 876 38 245 32 774 38 245 32 774 38 245 32 774

Non-interest revenue 23 678 21 012 16 052 14 451 (746) (1 206) 38 984 34 257 38 984 34 257 78 54 39 062 34 311

Net fee and commission revenue 21 444 19 143 5 800 4 972 (994) (931) 26 250 23 184 26 250 23 184 26 250 23 184

Fee and commission revenue 24 567 21 852 6 137 5 255 (134) (97) 30 570 27 010 30 570 27 010 (296) 30 570 26 714Fee and commission expense 3 123 2 709 337 283 860 834 4 320 3 826 4 320 3 826 (296) 4 320 3 530

Trading revenue 169 (31) 8 880 8 123 167 (335) 9 216 7 757 9 216 7 757 78 54 9 294 7 811Other revenue 2 065 1 900 1 372 1 356 81 60 3 518 3 316 3 518 3 316 3 518 3 316

Income from investment management and life insurance activities 79 744 85 406 79 744 85 406 (277) (166) 79 467 85 240

Total income 55 410 48 621 29 466 25 849 (636) (965) 84 240 73 505 79 744 85 406 163 984 158 911 (303) (265) 163 681 158 646Credit impairment charges 8 204 7 817 804 1 341 1 9 009 9 158 9 009 9 158 9 009 9 158Benefits due to policyholders 58 258 63 295 58 258 63 295 58 258 63 295

Income after credit impairment charges and policyholders’ benefits 47 206 40 804 28 662 24 508 (637) (965) 75 231 64 347 21 486 22 111 96 717 86 458 (303) (265) 96 414 86 193Revenue sharing agreements with discontinued operation (171) (142) (171) (142) (171) (142) (171) (142)

Income after revenue sharing agreements 47 206 40 804 28 491 24 366 (637) (965) 75 060 64 205 21 486 22 111 96 546 86 316 (303) (265) 96 243 86 051Operating expenses in banking activities 33 287 29 311 16 031 14 790 (2 447) (2 046) 46 871 42 055 46 871 42 055 46 871 42 055

Staff costs 9 328 8 257 4 594 4 601 11 039 10 229 24 961 23 087 24 961 23 087 24 961 23 087Other operating expenses 23 959 21 054 11 437 10 189 (13 486) (12 275) 21 910 18 968 21 910 18 968 21 910 18 968

Operating expenses in investment management and life insurance activities 14 546 14 226 14 546 14 226 14 546 14 226

Net income before goodwill impairment, disposal of subsidiaries and equity accounted earnings 13 919 11 493 12 460 9 576 1 810 1 081 28 189 22 150 6 940 7 885 35 129 30 035 (303) (265) 34 826 29 770

Goodwill impairment 4 4 4 4Gains on disposal and liquidation of subsidiaries 9 1 203 64 1 212 64 1 212 64 1 212 64Share of profit from associates and joint ventures 229 307 64 96 372 270 665 673 14 12 679 685 679 685

Net income before indirect taxation 14 148 11 800 12 529 9 672 3 385 1 415 30 062 22 887 6 954 7 897 37 016 30 784 (303) (265) 36 713 30 519Indirect taxation 494 414 231 240 1 022 860 1 747 1 514 692 397 2 439 1 911 2 439 1 911

Profit before direct taxation 13 654 11 386 12 298 9 432 2 363 555 28 315 21 373 6 262 7 500 34 577 28 873 (303) (265) 34 274 28 608Direct taxation 3 571 2 985 2 154 1 603 397 8 6 122 4 596 1 926 2 968 8 048 7 564 13 16 8 061 7 580

Profit for the year from continuing operations 10 083 8 401 10 144 7 829 1 966 547 22 193 16 777 4 336 4 532 26 529 21 309 (316) (281) 26 213 21 028




Notes to the annual financial statements | continued

1. Segmental reporting continued Operating segments continued



Central and other





2014Rm

20132

Rm2014

Rm20132

Rm2014

Rm20132

Rm2014

Rm20132

Rm2014

Rm2013

Rm2014

Rm20132

Rm2014

Rm20132

Rm2014

Rm2013

Rm

Profit for the year from continuing operations continued 10 083 8 401 10 144 7 829 1 966 547 22 193 16 777 4 336 4 532 26 529 21 309 (316) (281) 26 213 21 028Loss for the year from discontinued operation (3 853) (419) (195) (603) (4 048) (1 022) (4 048) (1 022) (4 048) (1 022)

Profit for the year 10 083 8 401 6 291 7 410 1 771 (56) 18 145 15 755 4 336 4 532 22 481 20 287 (316) (281) 22 165 20 006

Attributable to non-controlling interests 384 87 1 412 977 52 82 1 848 1 146 2 178 2 379 4 026 3 525 (122) (74) 3 904 3 451Attributable to preference shareholders 364 348 364 348 364 348 (8) 1 356 349Attributable to ordinary shareholders 9 699 8 314 4 879 6 433 1 355 (486) 15 933 14 261 2 158 2 153 18 091 16 414 (186) (208) 17 905 16 206

Headline earnings 9 834 8 401 4 983 6 500 348 82 15 165 14 983 2 158 2 211 17 323 17 194 (186) (208) 17 137 16 986ROE (%) 18.2 18.6 10.2 14.1 12.3 13.2 20.9 24.7 12.9 14.1 13.0 14.2Net interest margin (%) 5.32 5.07 2.14 2.13 3.80 3.67 3.80 3.67 3.79 3.67Credit loss ratio (%) 1.41 1.47 0.22 0.41 1.00 1.12 1.00 1.12 1.00 1.12Cost-to-income ratio (%) 59.8 59.9 54.6 57.3 54.5 56.8 54.5 56.8 54.6 56.8Total assets 621 299 574 352 954 063 802 343 (25 101) (18 838) 1 550 261 1 357 857 356 445 335 826 1 906 706 1 693 683 (3 861) (2 754) 1 902 845 1 690 929Average assets – banking activities excluding trading derivatives 596 848 544 901 626 095 534 440 (30 588) (11 310) 1 192 355 1 068 031 1 192 355 1 068 031 (977) (1 503) 1 191 378 1 066 528Average loans and advances (gross) 580 840 530 717 373 597 327 252 (56 309) (38 029) 898 128 819 940 898 128 819 940 (1 148) (1 676) 896 980 816 293Average ordinary shareholders’ equity 54 106 45 104 49 058 46 172 20 601 21 988 123 765 113 264 10 310 8 963 134 075 122 227 (2 005) (2 356) 132 070 119 871Total liabilities 562 906 525 352 900 059 754 612 (53 683) (55 268) 1 409 282 1 224 696 332 057 313 615 1 741 339 1 538 311 (128) (30) 1 741 211 1 538 281Interest in associates and joint ventures 866 2 055 625 631 1 989 1 874 3 480 4 560 247 237 3 727 4 797 3 727 4 797Depreciation and amortisation 1 773 1 557 125 126 1 912 1 728 3 810 3 411 425 449 4 235 3 860 9 4 244 3 860Impairment loss on non-financial assets 234 118 143 23 47 257 308 257 308 257 308Number of employees 21 468 21 247 2 306 2 305 18 868 18 669 42 642 42 221 6 617 6 587 49 259 48 808 49 259 48 808

1 The group’s segmental results are prepared on a normalised basis which normalises or adjusts the group’s IFRS results to reflect the group’s view of the economics and legal substance for deemed treasury share arrangements, which include the group’s Tutuwa initiative and group shares held by Liberty for the benefit of policyholders or to facilitate client trading activities. The normalised results reflect the basis on which management manages the group and is consistent with that reported in the group’s segment report. These adjustments are described in detail on pages 70 to 72 in the annual integrated report.

2 Where reporting responsibility for individual cost centres and divisions within business units changes, the segmental analysis’ comparative figures are reclassified accordingly. In 2013, the group reported its GMOA business as part of its continuing operations’ results in the segmental report. For 2014 financial reporting purposes, GMOA’s financial results have been disclosed as a discontinued operation with its assets and liabilities being separately reported as non-current assets/liabilities held for sale.

147

1. Segmental reporting continued Operating segments continued



Central and other





2014Rm

20132

Rm2014

Rm20132

Rm2014

Rm20132

Rm2014

Rm20132

Rm2014

Rm2013

Rm2014

Rm20132

Rm2014

Rm20132

Rm2014

Rm2013

Rm

Profit for the year from continuing operations continued 10 083 8 401 10 144 7 829 1 966 547 22 193 16 777 4 336 4 532 26 529 21 309 (316) (281) 26 213 21 028Loss for the year from discontinued operation (3 853) (419) (195) (603) (4 048) (1 022) (4 048) (1 022) (4 048) (1 022)

Profit for the year 10 083 8 401 6 291 7 410 1 771 (56) 18 145 15 755 4 336 4 532 22 481 20 287 (316) (281) 22 165 20 006

Attributable to non-controlling interests 384 87 1 412 977 52 82 1 848 1 146 2 178 2 379 4 026 3 525 (122) (74) 3 904 3 451Attributable to preference shareholders 364 348 364 348 364 348 (8) 1 356 349Attributable to ordinary shareholders 9 699 8 314 4 879 6 433 1 355 (486) 15 933 14 261 2 158 2 153 18 091 16 414 (186) (208) 17 905 16 206

Headline earnings 9 834 8 401 4 983 6 500 348 82 15 165 14 983 2 158 2 211 17 323 17 194 (186) (208) 17 137 16 986ROE (%) 18.2 18.6 10.2 14.1 12.3 13.2 20.9 24.7 12.9 14.1 13.0 14.2Net interest margin (%) 5.32 5.07 2.14 2.13 3.80 3.67 3.80 3.67 3.79 3.67Credit loss ratio (%) 1.41 1.47 0.22 0.41 1.00 1.12 1.00 1.12 1.00 1.12Cost-to-income ratio (%) 59.8 59.9 54.6 57.3 54.5 56.8 54.5 56.8 54.6 56.8Total assets 621 299 574 352 954 063 802 343 (25 101) (18 838) 1 550 261 1 357 857 356 445 335 826 1 906 706 1 693 683 (3 861) (2 754) 1 902 845 1 690 929Average assets – banking activities excluding trading derivatives 596 848 544 901 626 095 534 440 (30 588) (11 310) 1 192 355 1 068 031 1 192 355 1 068 031 (977) (1 503) 1 191 378 1 066 528Average loans and advances (gross) 580 840 530 717 373 597 327 252 (56 309) (38 029) 898 128 819 940 898 128 819 940 (1 148) (1 676) 896 980 816 293Average ordinary shareholders’ equity 54 106 45 104 49 058 46 172 20 601 21 988 123 765 113 264 10 310 8 963 134 075 122 227 (2 005) (2 356) 132 070 119 871Total liabilities 562 906 525 352 900 059 754 612 (53 683) (55 268) 1 409 282 1 224 696 332 057 313 615 1 741 339 1 538 311 (128) (30) 1 741 211 1 538 281Interest in associates and joint ventures 866 2 055 625 631 1 989 1 874 3 480 4 560 247 237 3 727 4 797 3 727 4 797Depreciation and amortisation 1 773 1 557 125 126 1 912 1 728 3 810 3 411 425 449 4 235 3 860 9 4 244 3 860Impairment loss on non-financial assets 234 118 143 23 47 257 308 257 308 257 308Number of employees 21 468 21 247 2 306 2 305 18 868 18 669 42 642 42 221 6 617 6 587 49 259 48 808 49 259 48 808

1 The group’s segmental results are prepared on a normalised basis which normalises or adjusts the group’s IFRS results to reflect the group’s view of the economics and legal substance for deemed treasury share arrangements, which include the group’s Tutuwa initiative and group shares held by Liberty for the benefit of policyholders or to facilitate client trading activities. The normalised results reflect the basis on which management manages the group and is consistent with that reported in the group’s segment report. These adjustments are described in detail on pages 70 to 72 in the annual integrated report.

2 Where reporting responsibility for individual cost centres and divisions within business units changes, the segmental analysis’ comparative figures are reclassified accordingly. In 2013, the group reported its GMOA business as part of its continuing operations’ results in the segmental report. For 2014 financial reporting purposes, GMOA’s financial results have been disclosed as a discontinued operation with its assets and liabilities being separately reported as non-current assets/liabilities held for sale.




1. Segmental reporting continued Operating segments continued The group is organised on the basis of products and services and the segments have been identified on this basis. The principal

business units in the group are as follows:

Business Unit Scope of operations

Personal & Business Banking Banking and other financial services to individual customers and small- to medium-sized enterprises in South Africa, rest of Africa and the Channel Islands.

Mortgage lending – provides residential accommodation loans to mainly personal market customers.

Instalment sale and finance leases – provides finance of vehicles for personal market customers and finance of vehicles and equipment in the business market.

Card products – provides credit card facilities to individuals and businesses (credit card issuing) and merchant transaction acquiring services (card acquiring).

Transactional and lending products – provides a comprehensive suite of transactional, saving, investment, trade, foreign exchange, payment and liquidity management solutions made accessible through a range of physical and electronic facilities. Lending products offered to both personal and business, including structured working capital finance and commercial property solutions.

Bancassurance and wealth – provides short- and long-term insurance products, financial planning and wealth services. Short- and long-term insurance products comprise simple embedded products and complex insurance products. Simple embedded products include homeowners’ insurance, funeral cover, household contents and vehicle insurance and loan protection plans sold in conjunction with related banking products. Complex insurance products include life, disability and investment policies sold by qualified intermediaries.

Corporate & Investment Banking Corporate and investment banking services to clients, including governments, parastatals, larger corporates, financial institutions and international counterparties.

CIB offers client coverage, relationship management and sector expertise.

Global markets – includes fixed income and currencies (FIC), commodities and equities.

Transactional Products and services – includes transactional banking, trade finance and investor services.

Investment banking – includes advisory, debt products, structured finance, structured trade and commodity finance, debt capital markets and equity capital markets.

Real estate and principal investment management – includes real estate finance and investment in real estate, principal investment and client coverage.

Liberty Life insurance and investment management activities of group companies in the Liberty Holdings Group. Liberty includes long-term investments, long-term risk (life and disability), pension fund management, asset management, endowment and retirement annuities, corporate benefits, healthcare, health insurance, as well as investment-related advice and solutions.

Central and other Includes the impact of the Tutuwa initiative, group hedging activities, group capital instruments and group surplus capital and strategic acquisition costs. Includes the results of centralised support functions (back office), including those functions that were previously embedded in the business segments. The direct costs of support functions are recharged to the business segments.

149

1. Segmental reporting continued Geographic information

South Africa

Rm

Rest of

Africa Rm

Outside Africa

RmEliminations1

Rm

Standard Bank

Group Rm

Adjust-ments

to IFRS2

Rm

IFRS Standard

Bank Group

Rm

2014Total income3 135 684 26 971 3 508 (2 179) 163 984 (303) 163 681

Banking activities 58 278 24 633 3 508 (2 179) 84 240 (26) 84 214Liberty 77 406 2 338 79 744 (277) 79 467

Total headline earnings 16 662 3 939 (3 433) 155 17 323 (186) 17 137

Banking activities 14 621 3 822 (3 433) 155 15 165 (42) 15 123Liberty 2 041 117 2 158 (144) 2 014

Total assets 1 480 896 287 968 296 158 (158 316) 1 906 706 (3 861) 1 902 845

Banking activities 1 129 649 282 770 296 158 (158 316) 1 550 261 (1 384) 1 548 877Liberty 351 247 5 198 356 445 (2 477) 353 968

Non-current assets4 53 055 11 895 63 (79) 64 934 64 934

Banking activities 23 772 11 349 63 (79) 35 105 35 105Liberty 29 283 546 29 829 29 829

20135

Total income3 137 348 20 214 3 969 (2 620) 158 911 (265) 158 646

Banking activities 51 942 20 214 3 969 (2 620) 73 505 (99) 73 406Liberty 85 406 85 406 (166) 85 240

Total headline earnings 14 275 2 626 265 28 17 194 (208) 16 986

Banking activities 12 064 2 626 265 28 14 983 (118) 14 865Liberty 2 211 2 211 (90) 2 121

Total assets 1 352 596 236 099 248 198 (143 210) 1 693 683 (2 754) 1 690 929

Banking activities 1 016 770 236 099 248 198 (143 210) 1 357 857 (1 018) 1 356 839Liberty 335 826 335 826 (1 736) 334 090

Non-current assets4 51 451 10 814 80 (79) 62 266 62 266

Banking activities 21 153 10 814 80 (79) 31 968 31 968Liberty 30 298 30 298 30 298

1 Eliminations include intersegmental transactions and balances. 2 The group’s segmental results are prepared on a normalised basis which normalises or adjusts the group’s IFRS results to reflect the group’s view of the economics

and legal substance for deemed treasury share arrangements, which include the group’s Tutuwa initiative and group shares held by Liberty for the benefit of policyholders or to facilitate client trading activities. The normalised results reflect the basis on which management manages the group and is consistent with that reported in the group’s segment report. These adjustments are described in detail on pages 70 to 72 in the annual integrated report.

3 Total income from continuing operations. Total income is attributable based on where the operations are located. 4 Non-current assets are assets that are expected to be recovered more than 12 months after the reporting period. 5 In 2013, the group reported its GMOA business as part of its continuing operations’ results in the segmental report. For 2014 financial reporting purposes, GMOA’s

financial results have been disclosed as a discontinued operation with its assets and liabilities being separately reported as non-current assets/liabilities held for sale.




2. Key management assumptions In preparing the financial statements, estimates and assumptions are made that could materially affect the reported amounts of assets

and liabilities within the next financial year. Estimates and judgements are continually evaluated and are based on factors such as historical experience and current best estimates of uncertain future events that are believed to be reasonable under the circumstances. Unless otherwise stated, no material changes to assumptions have occurred during the year.

2.1 Credit impairment losses on loans and advances Portfolio loan impairments The group assesses its loan portfolios for impairment at each reporting date. In determining whether an impairment loss should

be recorded in profit or loss, the group makes judgements as to whether there is observable data indicating a measurable decrease in the estimated future cash flows from a portfolio of loans before the decrease can be allocated to an individual loan in that portfolio. Estimates are made of the duration between the occurrence of a loss event and the identification of a loss on an individual basis.

The impairment for performing and non-performing but not specifically impaired loans is calculated on a portfolio basis, based on historical loss ratios, adjusted for national and industry-specific economic conditions and other indicators present at the reporting date that correlate with defaults on the portfolio. These include early arrears and other indicators of potential default, such as changes in macroeconomic conditions and legislation affecting credit recovery. These annual loss ratios are applied to loan balances in the portfolio and scaled to the estimated loss emergence period. At year end, the group applied the following loss emergence periods:

Average loss emergence period Sensitivity1

2014Months

2013Months

2014Rm

2013Rm

Personal & Business Banking 3 3 354 308

Mortgage loans 3 3 73 93Instalment sale and finance leases 3 3 67 62Card debtors 3 3 45 6Other lending 3 3 169 147

Corporate & Investment Banking 12 12 76 101

South Africa 12 12 29 53Rest of Africa 12 12 40 40Outside Africa 12 12 7 8

430 409

1 Sensitivity is based on the effect of a one month increase in the emergence period on the value of the impairment.

Specific loan impairments Non-performing loans include those loans for which the group has identified objective evidence of default, such as a breach of a

material loan covenant or condition, as well as those loans for which instalments are due and unpaid for 90 days or more. Management’s estimates of future cash flows on individually impaired loans are based on historical loss experience for assets with similar credit risk characteristics. The methodology and assumptions used for estimating both the amount and timing of future cash flows are reviewed regularly to reduce any differences between loss estimates and actual loss experience. Expected time to recover securities and recoveries of individual loans as a percentage of the outstanding balances are estimated as follows:

151

2. Key management assumptions continued2.1 Credit impairment losses on loans and advances continued

Expected time to recovery1

Expected recoveries as a percentage of

impaired loansImpairment loss

sensitivity2

2014Months

2013Months

2014%

2013%

2014Rm

2013Rm

Personal & Business Banking 10 – 15 6 – 15 58 57 144 136

Mortgage loans 15 15 74 72 104 100Instalment sale and finance leases 10 6 47 51 13 11Card debtors 15 15 31 29 5 4Other lending 14 13 35 31 22 21

Corporate & Investment Banking 17 – 22 6 – 24 47 55 28 30

South Africa 22 6 55 75 21 24Rest of Africa 18 24 41 27 7 4Outside Africa 17 9 54 23 2

172 166

1 The expected time to recovery has been adjusted in 2014 due to changes in market conditions.2 Sensitivity is based on the effect of a one percentage point increase in the value of the estimated recovery on the value of the impairment.

2.2 Fair value of financial instruments The fair value of financial instruments, such as unlisted equity investments and equity derivatives, that are not quoted in active markets

is determined using valuation techniques. Wherever possible, models use only observable market data. Where required, these models incorporate assumptions that are not supported by prices from observable current market transactions in the same instrument and are not based on available observable market data. Such assumptions include risk premiums, liquidity discount rates, credit risk, volatilities and correlations. Changes in these assumptions could affect the reported fair values of financial instruments.

The total amount of the change in fair value estimated using valuation techniques not based on observable market data that was recognised in profit or loss for the year ended 31 December 2014, was a net loss of R1 235 million (2013: R3 651 million net loss). Other financial instruments are utilised to mitigate the risk of these changes in fair value.

Refer to page 89 for the group’s risk mitigation strategy. Additional disclosures on fair value measurements of financial instruments are set out in note 25.

2.3 Impairment of available-for-sale equity investments The group determines that available-for-sale equity investments are impaired and recognised as such in profit or loss when there has

been a significant or prolonged decline in the fair value below its cost. The determination of what is significant or prolonged requires judgement. In making this judgement, the group evaluates, among other factors, the normal volatility in the fair value. In addition, impairment may be appropriate when there is evidence of a deterioration in the financial health of the investee, industry or sector, or operational and financing cash flows or significant changes in technology.

Had the declines of financial instruments with fair values below cost been considered significant or prolonged, the group would have suffered an additional loss attributable to ordinary shareholders of R129 million (2013: R45 million) in its financial statements, being the transfer of the negative revaluations within the available-for-sale reserve to profit or loss.

2.4 Consolidation of entities The group controls and consolidates an entity where the group has power over the entity’s relevant activities, is exposed to variable

returns from its involvement with the investee and has the ability to affect the returns through its power over the entity, including SEs. Determining whether the group controls another entity requires judgement by identifying an entity’s relevant activities, being those activities that significantly affect the investee’s returns, and whether the group controls those relevant activities by considering the rights attached to both current and potential voting rights, de facto control and other contractual rights, including whether such rights are substantive.

Refer to annexure A for a list of the group’s principal subsidiaries that are controlled by the group, as well as further details regarding the group’s consolidated SEs.




2. Key management assumptions continued2.5 Significant influence – investment funds The group accounts for its interests in investment funds as associates where the group is the fund manager, for which there is an

irrevocable fund management agreement, and the group has a monetary interest in the particular fund. Such associates are equity accounted unless designated to be measured at fair value through profit or loss (refer to accounting policy 6 – Interest in associates and joint ventures).

2.6 Structured entities (including securitisation vehicles) An SE is an entity that has been designed so that voting or similar rights are not the dominant factor in deciding who controls the

entity, such as when voting rights relate to administrative tasks only and the relevant activities are directed by means of contractual arrangements. The group is required, for disclosure purposes, to determine whether it has any interests in unconsolidated SEs, as well as whether it sponsors any unconsolidated SEs and, where applicable, to disclose various information for such relationships.

Interests in unconsolidated SEs that are not considered to be a typical customer-supplier relationship are required to be identified and disclosed. An interest would be a typical customer-supplier relationship where the level of risk inherent in that interest in the SE exposes the group to a similar risk profile to that found in standard market-related transactions.

The group sponsors an SE where it provides financial support to the SE when not contractually required to do so. Financial support may be provided by the group for events such as litigation, tax and operational difficulties.

Refer to annexure A for further details regarding the group’s interest in unconsolidated SEs.

The group has consolidated SEs with assets of R32 519 million (2013: R13 975 million). The consolidated SEs made net profits of R24 million (2013: R10 million net losses).

2.7 Held-to-maturity investments The group applies the requirements of IFRS on classifying certain non-derivative financial assets with fixed or determinable

payments and fixed maturity, as held-to-maturity. This classification requires judgement of the group’s ability to hold such investments to maturity. If the group fails to keep these investments to maturity, other than in specific defined circumstances, it will be required to classify the entire category as available-for-sale and measure it at fair value and not amortised cost. If the entire class of held-to-maturity investments were tainted in this way and reclassified as available-for-sale, the carrying amount would increase by R726 million (2013: R888 million) to fair value, with a corresponding entry in OCI.

2.8 Computer software intangible assets Direct computer software development costs that are clearly associated with an identifiable and unique system, which will be

controlled by the group and have a probable future economic benefit beyond one year, are capitalised and disclosed as computer software intangible assets. Computer software intangible assets are carried at cost less accumulated amortisation and accumulated impairment losses.

The group reviews assets brought into use for impairment at each reporting date and tests for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. These circumstance include, but are not limited to, technological developments, obsolescence, changes in the manner in which the software is used or is expected to be used, changes in discount rates or changes in estimates of related future cash benefits. The group is required to annually test its intangible assets not yet available for use for impairment in terms of IFRS irrespective of whether there are any indications of impairment.

The impairment tests are performed by comparing an asset’s recoverable amounts to their carrying amounts. The review and testing of assets for impairment inherently requires significant management judgement as it requires management to derive the estimates of the identified assets' future cash flows in order to derive the assets’ recoverable amount. The recoverable amount is based on the value in use and is calculated by estimating future cash benefits that will result from each asset and discounting those cash benefits at an appropriate pre-tax discount rate. During 2014, impairments to the amount of R450 million (2013: R440 million) was recognised within other operating expenses in profit or loss relating to computer software intangible assets.

The carrying value of computer software intangible assets capitalised as at 31 December 2014 amounted to R17 125 million (2013: R14 040 million). This includes work in progress of R6 733 million (2013: R6 602 million) for which amortisation has not yet commenced. The carrying values as at 31 December 2014 is representative of the estimated minimum probable future economic benefits to be derived from the use of these assets.

153

2. Key management assumptions continued2.9 Goodwill impairment In terms of IFRS, the group is required on an annual basis to test its recognised goodwill for impairment. The impairment tests are

performed by comparing the cash-generating units’ (CGU) recoverable amounts to the carrying amounts. The recoverable amount is defined as the higher of the entity’s fair value less costs to sell and its value in use. IFRS requires goodwill acquired in a business combination to be allocated to each of the acquirer’s CGUs, or groups of CGUs that are expected to benefit from the synergies of the business combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units or groups of units.

Further details regarding the group’s accounting policy for goodwill can be found in annexure D, accounting policy 7.

The total goodwill of the group at 31 December 2014, amounted to R3 752 million (2013: R3 786 million), the majority of which relates to Stanbic IBTC Holdings PLC (Nigeria) and CfC Stanbic Holdings Limited (Kenya). The respective goodwill balances were allocated between the CGUs, which are represented by the PBB and CIB operating segments, based on the nature of the business as at acquisition, and then tested for impairment. Note 14 lists the composition of the goodwill by legal entity.

The review and testing of goodwill for impairment inherently requires significant management judgement as it requires management to derive the estimates of the identified CGUs’ future cash flows. The principal assumptions considered in determining an entity’s value in use include:

Future cash flows – the forecast periods adopted, reflect a set of cash flows that, based on management's judgement and expected market conditions, could be sustainably generated over such a period. A forecast period of greater than five years has been used in order to take into account the level of development in these markets. The cash flows from the final discrete cash flow period are extrapolated into perpetuity to reflect the long-term plans for the entity. It is common valuation methodology to avoid placing too high a proportion of the total value on the perpetuity value.

Discount rates – the CoE discount rates utilised in the equity pricing models are deemed appropriate based on the entities under review. The risk-free rate used to determine the CoE has been derived from the respective local 10-year government bonds. The future cash flows are discounted using the CoE assigned to the appropriate CGUs and by nature can have a significant effect on their valuations.

The following table summarises the impairment test methodology applied and the key inputs used in testing the group’s goodwill relating to Nigeria and Kenya.

Stanbic IBTC Holdings PLCValue in use

CfC Stanbic Holdings LimitedValue in use

Methodology 2014 2013 2014 2013

Discount rate (nominal) (%) 18.3 19.7 17.6 17.7Terminal growth rate (nominal) (%) 10.0 10.0 8.8 10.3Forecast period (years) 10 10 8 8

Note 14 summarises the group’s impairment test results and lists the composition of goodwill per legal entity.

2.10 Income taxes The group is subject to direct and indirect taxation in a number of jurisdictions. There may be transactions and calculations for which

the ultimate tax determination has an element of uncertainty during the ordinary course of business. The group recognises provisions for tax based on objective estimates of the quantum of taxes that may be due. Where the final tax determination is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions, disclosed in note 30 and note 20, respectively, in the period in which such determination is made. Uncertain tax positions, which do not meet the probability criteria defined within IFRS, are not provided for but are rather disclosed as contingent liabilities or assets as appropriate.




2. Key management assumptions continued2.11 Deferred tax assets Deferred tax assets are recognised to the extent that it is probable that future taxable income will be available against which the

unused tax losses can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Management’s judgement surrounding the probability and sufficiency of future taxable profits, future reversals of existing taxable differences and ongoing developments will determine the recognition of deferred tax. The most significant management assumption is the forecasts used to support the probability assessment that sufficient taxable profits will be generated by the entities in the group in order to utilise the deferred tax assets.

Refer to note 20.1 for details of the carrying amount of the deferred tax assets and annexure D for further details regarding the group’s deferred tax accounting policy.

2.12 Share-based payment The group has a number of cash and equity-settled share incentive schemes which are issued to qualifying employees based on the

rules of the respective schemes. The group uses the group’s share price and the Black-Scholes option pricing model where applicable to determine the fair value of awards on grant date for its equity-settled share incentive schemes. The valuation of the group’s obligation with respect to its cash-settled share incentive scheme obligations is determined with reference to the group’s share price, which is an observable market input. In determining the expense to be recognised for both the cash and equity-settled share schemes, the group estimates the expected future vesting of the awards by considering staff attrition levels. The group also makes estimates of the future vesting of awards that are subject to non-market vesting conditions by taking into account the probability of such conditions being met.

Refer to annexure C for further details regarding the carrying amount of the liabilities arising from the group’s cash-settled share incentive schemes and the expenses recognised in the income statement.

2.13 Provisions The principal assumptions taken into account in determining the value at which provisions are recorded at in the group’s statement of

financial position include determining whether there is an obligation, as well as assumptions about the probability of the outflow of resources and the estimate of the amount and timing for the settlement of the obligation.

The probability of an event of a significant nature occurring will be assessed by management and, where applicable, in consultation with the group’s legal counsel. In determining the amount and timing of the obligation once it has been assessed to exist, management exercises its judgement by taking into account all available information, including that arising after the balance sheet date up to the date of the approval of the financial statements.

The accounting policy for provisions is set out in accounting policy 13 in annexure D.

155

2. Key management assumptions continued2.14 Post-employment benefits The group’s post-employment benefits consist of both post-employment retirement funds and healthcare benefits. The measurement

of the group’s obligations to fund these benefits are derived from actuarial valuations performed by the appointed actuaries taking into account various assumptions. The funds are subject to a statutory financial review by the group’s independent actuaries at intervals of not more than three years. The principal assumptions used in the determination of the group’s obligations include the following:

Standard Bank Liberty

Retirement fundPost-employmentmedical aid fund

Defined benefitpension fund

Post-employment medical aid

2014Discount rate Nominal

government bond yield curve

Nominalgovernment

bond yield curve

Nominal government bond yield curve

Return on investments 8.29% – discountedrate of term equalto the discounted

mean term ofthe liabilities

8.84% Unfunded liability and

therefore there is no asset-

backing portfolio

Salary/benefit inflation Inflation ratesplus 1%

Future salaryincreases based

on inflation curveplus 1% pa toeach point on

the curve

CPI inflation Difference between nominal andindex-linked

bond yield curves

Difference between nominal andindex-linked

bond yield curves

Medical cost rate trend (applicable to members who retired before 1 January 2013)

Difference betweennominal andindex-linked

bond yield curvesplus 1.5%

Inflation curveadjusted upwards

by 1% pa

Medical cost rate trend (applicable to members who retired after 1 January 2013)

Curve implied bythe difference

between a nominalgovernment bond

curve and anindex-linked gilt

Provider benefit escalation Inflation ratesplus 2%

Pension increase in allowance Inflation rates

Remaining service life of employees (years) 12.50




2. Key management assumptions continued2.14 Post-employment benefits continued

Standard Bank Liberty

Retirement fundPost-employmentmedical aid fund

Defined benefitpension fund

Post-employment medical aid

2013Discount rate Nominal

government bond yield curve

Nominalgovernment

bond yield curve

Nominal government bond yield curve

Return on investments 8.52% – discountrate of term equalto the discounted

mean term ofthe liabilities

9.84% Unfunded liability and

therefore there is no

asset backing portfolio

Salary/benefit inflation Inflation ratesplus 1%

Future salaryincreases based

on inflation curve plus 1% pa toeach point on

the curve

CPI inflation Difference betweennominal andindex-linked

bond yield curves

Difference betweennominal andindex-linked

bond yield curves

Medical cost rate trend (applicable to members who

retired before 1 January 2013)

Difference between nominal andindex-linked

bond yield curvesplus 1.5%

Inflation curve adjusted upwards

by 7% pa

Medical cost rate trend (applicable to members who retired after 1 January 2013)

Curve implied bythe difference

between a nominal government bond

curve and an index-linked gilt

Provider benefit escalation Inflation ratesplus 2%

Pension increase in allowance Inflation rates

Remaining service life of employees (years) 12.70

Refer to note 37 for further details regarding the group’s post-employment benefits.

157

2. Key management assumptions continued2.15 Valuation of investment property Investment property is measured at fair value taking into account characteristics of the properties that market participants would

consider when pricing the property at measurement date. These include various inputs relating to existing tenant terms, location, vacancy levels and restrictions, if any, on the sale or use of the asset. The group makes judgement regarding the unit of account, i.e. whether it should be valued as a stand-alone property or as a group of properties. Determination of fair value for a non-financial asset also considers the current use of the property in terms of its highest and best use, taking into account the use of the asset that is physically possible, legally permissible and financially feasible. Management derived risk adjusted discount rates factor in liquidity and asset class risk. Given the number of management judgements applied in the valuation, these assets are considered to be level 3 in the fair value hierarchy.

The South African located investment properties were independently valued as at 31 December 2014 by registered professional valuers with the South African Council for the Property Valuers Profession, as well as members of the Institute of Valuers of South Africa. The valuation of the South African properties is prepared in accordance with the guidelines of the South African Institute of Valuers for valuation reports and in accordance with the appraisal and valuation manual of the Royal Institution of Chartered Surveyors, adapted for South African law and conditions. The valuation assumes that there will be no change in the social, economic or political circumstances between the date of the valuation and the financial year end of the company. The Kenyan and Nigerian located properties were independently valued as at 31 December 2014 by various registered professional valuers in each territory.

The properties have been valued on a discounted cash flow basis. In the majority of cases, discounted cash flows have been used and summed together with the capitalised and discounted value of the projected income to give a present value as at 31 December 2014. In order to determine the reversionary rental income on lease expiry, renewal or review, a market gross rental income (basic rental plus operating cost rental) has been applied to give a market-related rental value for each property as at 31 December 2014. Market rental growth has been determined based on the individual property, property market trends and economic forecasts. Vacancies have been considered based on historic and current vacancy factors, as well as the nature, location, size and popularity of each building.

Appropriate discount rates have been applied to cash flows for each property to reflect the relative investment risk associated with the particular building, tenant, covenant and the projected income flow. Extensive market research has been conducted to ascertain the most appropriate market-related discount rate to apply, with regard to the current South African long-term bond yield (R204 risk-free rate) and the relative attractiveness that an investor may place on property as an asset class.

Primary discount rates used to value the South African properties range from 6.75% to 10.5% (2013: 7% to 11%) on a property by property basis. Exit capitalisation rates generally range from 6.75% to 10.5% (2013: 7% to 11%). This compares to the 10-year government yield of 8.04%. The non-observable adjustments included in the valuation can therefore be referenced to the variance to the ten year government rate.

On the basis that turnover or profit rental income has a greater degree of uncertainty and risk than the contractual base rental, a risk premium of between 1% and 6% (2013: 1% and 6%) has been added to the discount rate and to the exit capitalisation rate, to reflect the greater investment risk associated with the variable rental element on a property by property basis.

A 1% absolute change to the capitalisation rate assumption would increase the total fair value by R4,1 billion (2013: R4,1 billion) if the assumption decreased, and decrease the total fair value by R3,2 billion (2013: R3,1 billion) if the assumption increased.

2.16 Long-term insurance contracts Policyholder liabilities under insurance contracts and reinsurance assets are derived from actual claims submitted which are not settled

at the reporting date, and estimates of the net present value of future claims and benefits under existing contracts, offset by probable future premiums to be received or paid (net of expected service costs). The key assumptions applied and analysis of their sensitivity have been detailed in the insurance risk and sensitivity analysis components of the risk and capital management report.

Process used to decide on assumptions and changes in assumptions Mortality An appropriate base table of standard mortality is chosen depending on the type of contract and class of business. Industry standard

tables are used for smaller classes of business. Company-specific tables, based on graduated industry standard tables modified to reflect the company-specific experience, are used for larger classes.

Investigations into mortality experience are performed every half year for the large classes of business and annually for all other classes of business. The period of investigation extends over at least the latest three full years.




2. Key management assumptions continued2.16 Long-term insurance contracts continued Process used to decide on assumptions and changes in assumptions continued Mortality continued The results of the investigation are used to set the valuation assumptions, which are applied as an adjustment to the respective

base table.

In setting the assumptions, provision is made for the expected increase in Aids-related claims. Allowance for Aids-related deaths is made in the base mortality rates at rates consistent with the requirements of Advisory Practice Note (APN) 105 issued by the Actuarial Society of South Africa (ASSA). The rates are defined using the appropriate ASSA models calibrated to reflect Liberty’s assurance lives.

For contracts insuring survivorship, an allowance is made for future mortality improvements based on trends identified in the data and in the continuous mortality investigations performed by independent actuarial bodies.

Morbidity The incidence of disability claims is derived from the risk premium rates determined from annual investigations. The incidence

rates are reviewed on an annual basis, based on medical claims experience. The adjusted rates are intended to reflect future expected experience.

Withdrawal The withdrawal assumptions are based on the most recent withdrawal investigations taking into account past, as well as expected

future trends. The withdrawal investigations are performed every half year for the large lines of business and annually for the smaller classes and incorporate two years’ experience. The withdrawal rates are analysed by product type and policy duration. These withdrawal rates vary considerably by duration, policy term and product type. Typically, the assumptions are higher for risk-type products than for investment-type products, and are higher at early durations.

Investment return Future investment returns are set for the main asset classes as follows:

Gilt rate – Effective 10-year yield curve rate at the reporting date, 8.04% (2013: 8.14%).

Equity rate – Gilt rate plus 3.5 percentage points as an adjustment for risk, 11.54% (2013: 11.64%).

Property rate – Gilt rate plus 1 percentage point as an adjustment for risk, 9.04% (2013: 9.14%).

Cash – Gilt rate less 1.5 percentage points, 6.54% (2013: 6.64%).

The overall investment return for a block of business is based on the investment return assumptions allowing for the current mix of assets supporting the liabilities.

The pre-taxation discount rate is set at the same rate. The rate averaged across the blocks of business (excluding annuity and guaranteed capital bond business) is 10% per annum in 2014 (2013: 10.5% per annum). Where appropriate the investment return assumption will be adjusted to make allowance for investment expenses, taxation and the relevant prescribed margins in accordance with Standard of Actuarial Practice (SAP) 104 issued by the ASSA.

For life annuity and guaranteed endowments, discount rates are set at risk-free rates consistent with the duration and type of the liabilities allowing for an average illiquidity premium on the backing assets and reduced by an allowance for investment expenses and the relevant prescribed margin.

Expenses An expense analysis is performed on the actual expenses incurred in the calendar year preceding the statement of financial position

date. This analysis is used to calculate the acquisition costs incurred and to set the maintenance expense assumption which is based on the budget approved by the board.

Expense inflation The inflation rate is set at 60% of the risk-free rate (gilt rate) when the risk-free rate is below 6.5%. The inflation rate is set

at the risk-free rate less 3% when the risk-free rate is above 8.5%. At risk-free rates between 6.5% and 8.5% the inflation rate is interpolated to ensure a smooth transition between the two methodologies. This results in a best estimate inflation assumption of 5.06% at 31 December 2014 (2013: 5.15%). The expense inflation assumption is set taking into consideration the expected future development of the number of in-force policies, as well as the expected future profile of maintenance expenses.

159

2. Key management assumptions continued2.16 Long-term insurance contracts continued Process used to decide on assumptions and changes in assumptions continued Taxation Future taxation and taxation relief are allowed for at the rates and on the bases applicable to section 29A of the South African Income

Tax Act 58 of 1962 (Income Tax Act) at the statement of financial position date. Each company’s current tax position is taken into account. Taxation rates consistent with that position, and the likely future changes in that position, are allowed for. In respect of capital gains taxation (CGT), taxation is allowed for at the full CGT rate. Deferred taxation liabilities include a provision for CGT on unrealised gains/(losses) at the valuation date, at the full undiscounted value. Allowance is also made for dividend withholding tax at the applicable rate.

Correlations No correlations between assumptions are allowed for.

Contribution increases In the valuation of the liabilities, voluntary premium increases that give rise to expected profits are not allowed for. However,

compulsory increases, and increases that give rise to expected losses are allowed for. This is consistent with the requirements of SAP 104.

Embedded investment derivative assumptions The assumptions used to value embedded derivatives in respect of policyholder contracts are set in accordance with APN 110.

Account is taken of the yield curve at the valuation date. Both implied market volatility and historical volatility are taken into account when setting volatility assumptions. The 30-year annualised implied-at-the-money volatility assumption, estimated using the economic scenario generator output for the FTSE/JSE Top 40 index, is 39.44% (2013: 35.85%). Correlations between asset classes are set based on historical data. Twenty thousand simulations are performed in calculating the liability.

Using the simulated investment returns, but based on 2 000 simulations, the prices and implied volatilities of the following instruments are:

Instrument

2014 2013

Price %

Volatility %

Price %

Volatility %

A one-year at-the-money (spot) put on the FTSE/JSE Top 40 index 5.75 19.35 6.01 18.91A one-year put on the FTSE/JSE Top 40 index, with a strike price equal to 80% of spot 1.31 23.24 1.49 23.57A one-year at-the-money (forward) put on the FTSE/JSE Top 40 index 7.25 18.71 7.10 18.34A five-year at-the-money (spot) put on the FTSE/JSE Top 40 index 8.53 23.28 8.76 23.64A five-year put on the FTSE/JSE Top 40 index, with a strike price equal to 1,045# of spot 15.32 22.28 15.40 22.36A five-year (forward) put on the FTSE/JSE Top 40 index 17.04 22.09 17.02 22.14A five-year put with a strike price equal to 1,045# of spot on an underlying index constructed as 60% FTSE/JSE Top 40 and 40% All Bond Index (ALBI), with rebalancing of the underlying index back to these weights taking place annually 7.00 N/A 6.66 N/A

A 20-year at-the-money (spot) put on the FTSE/JSE Top 40 index 3.58 29.45 2.67 28.60A 20-year put on the FTSE/JSE Top 40 index, with a strike price equal to 1,0420# of spot 15.61 31.02 12.26 29.61A 20-year at-the-money (forward) put on the FTSE/JSE Top 40 index 30.63 32.05 29.37 30.51A 20-year put option based on an interest rate with a strike equal to the present 5-year forward rate as at maturity of the put option, which pays out if the 5-year interest rate at the time of maturity (in 20 years) is lower than the strike price 0.53 N/A 0.41 N/A

# Exponent




2. Key management assumptions continued2.16 Long-term insurance contracts continued Process used to decide on assumptions and changes in assumptions continued The Top 40 index in the previous page/table is a capital index whereas the ALBI is a total return index. Spot refers to the value

of the index at market close at the relevant date.

At-the-money (spot) means that the strike price of the option is equal to the current market value of the underlying.

At-the-money (forward) means that the strike price of the option is equal to the market’s expectation of the capital index at the maturity date of the option.

The zero coupon yield curve used in the projection is as follows (rates calculated on the nominal annualised compounded continuously method):

Model output yield curve

Maturity2014

%2013

%

1 year 6.41 5.512 years 6.77 6.123 years 7.02 6.644 years 7.21 7.065 years 7.37 7.4110 years 8.05 8.4515 years 8.64 9.2120 years 8.74 9.2825 years 8.46 9.1730 years 8.22 8.9735 years 8.26 9.0040 years 8.29 9.0245 years 8.21 8.9450 years 8.12 8.86

Process used to decide on assumptions and changes in assumptions for non-South African life companies Assumptions used in the valuation of policyholder liabilities are set by reference to local guidance and, where applicable, to the

ASSA guidance. Economic assumptions are set by reference to local economic conditions at the valuation date. Margins are allowed for as prescribed by local guidance and regulations.

Changes in assumptions Modelling and other assumption changes were made to realign valuation assumptions with expected future experience.

These changes resulted in a net decrease in long-term policyholder liabilities of R110 million in 2014 compared to a net increase of R216 million in 2013.

The primary items were:

a change in the assumptions to allow for expected future withdrawals, resulting in a decrease in the liability of R121 million (2013: increase of R98 million)

a change in future mortality and morbidity assumptions to reflect expected future experience, amounting to a decrease in the liability of R72 million (2013: decrease of R6 million)

a change in the economic valuation assumptions to realign these with expected future experience, resulting in a decrease in the liability of R15 million (2013: increase of R286 million)

a change in tax assumptions resulted in a decrease in the liability of R4 million (2013: decrease of R16 million)

the balance of modelling and other changes resulted in an increase in liabilities of R102 million (2013: decrease of R146 million).

161

3. Cash and balances with central banks

2014Rm

2013Rm

Coins and bank notes 19 218 14 557Balances with central banks 45 084 38 753

64 302 53 310

Cash and balances with central banks include R32 257 million (2013: R27 645 million) that is not available for use by the group. These balances primarily comprise of reserving requirements held with central banks.

4. Derivative instruments All derivatives are classified as either derivatives held-for-trading or derivatives held-for-hedging.

4.1 Use and measurement of derivative instruments In the normal course of business, the group enters into a variety of derivative transactions for both trading and hedging purposes.

Derivative financial instruments are entered into for trading purposes and for hedging foreign exchange, interest rate, inflation, credit, commodity and equity exposures. Derivative instruments used by the group in both trading and hedging activities include swaps, options, forwards, futures and other similar types of instruments based on foreign exchange rates, credit risk, inflation risk, interest rates and the prices of commodities and equities.

The risks associated with derivative instruments are monitored in the same manner as for the underlying instruments. Risks are also measured across the product range in order to take into account possible correlations.

The fair value of all derivatives is recognised in the statement of financial position and is only netted to the extent that there is both a legal right of set-off and an intention to settle on a net basis, or the intention to realise the derivative asset and settle the derivative liability simultaneously.

Refer to note 27 for disclosure relating to offsetting.

Swaps are transactions in which two parties exchange cash flows on a specified notional amount for a predetermined period.

The major types of swap transactions undertaken by the group are as follows:

interest rate swap contracts which generally entail the contractual exchange of fixed and floating interest payments in a single currency, based on a notional amount and an interest reference rate

credit default swaps which are the most common form of credit derivative, under which the party buying protection makes one or more payments to the party selling protection during the life of the swap in exchange for an undertaking by the seller to make a payment to the buyer following a credit event, as defined in the contract, with respect to a third-party reference asset

total return swaps which are contracts in which one party (the total return payer) transfers the economic risks and rewards associated with an underlying asset to another counterparty (the total return receiver). The transfer of risk and reward is affected by way of an exchange of cash flows that mirror changes in the value of the underlying asset and any income derived therefrom.

Options are contractual agreements under which the seller grants the purchaser the right, but not the obligation, either to buy (call option) or to sell (put option) by or at a set date, a specified amount of a financial instrument or commodity at a predetermined price. The seller receives a premium from the purchaser for this right. Options may be traded OTC or on a regulated exchange.

Forwards and futures are contractual obligations to buy or sell financial instruments or commodities on a future date at a specified price. Forward contracts are tailor-made agreements that are transacted between counterparties in the OTC market, whereas futures are standardised contracts transacted on regulated exchanges.




4. Derivative instruments continued4.2 Derivatives held-for-trading The group trades derivative instruments on behalf of its clients and for its own positions. Trading derivative products include the

following derivative instruments:

4.2.1 Foreign exchange derivatives Foreign exchange derivatives are primarily used to economically hedge foreign currency risks on behalf of clients and for the group’s

own positions. Foreign exchange derivatives primarily consist of foreign exchange forwards and swaps, foreign exchange futures and foreign exchange options.

4.2.2 Interest rate derivatives Interest rate derivatives are primarily used to modify the volatility and interest rate characteristics of interest-earning assets and

interest-bearing liabilities on behalf of clients and for the group’s own positions. Interest rate derivatives primarily consist of bond options, caps and floors, forwards, options, swaps and swaptions.

4.2.3 Commodity derivatives Commodity derivatives are used to address client commodity demands and to take proprietary positions for the group’s own position.

Commodity derivatives primarily consist of commodity forwards, commodity futures and commodity options.

4.2.4 Credit derivatives Credit derivatives are used to hedge the credit risk of a reference asset or liability on behalf of clients and for the group’s own

positions. Credit derivatives primarily consist of credit default swaps, credit default swaps embedded in credit-linked notes and total return swaps.

4.2.5 Equity derivatives Equity derivatives are used to address client equity demands and to take proprietary positions for the group’s own position.

Equity derivatives primarily consist of forwards, futures, index options, options, swaps and other equity-related derivative instruments.

4.3 Derivatives held-for-hedging The group enters into derivative transactions, which are designated and qualify as either fair value, cash flow, or net investment hedges

for recognised assets or liabilities or highly probable forecast transactions. Derivatives designated as hedging instruments consist of:

4.3.1 Derivatives designated in fair value hedge relationships The group’s fair value hedges principally consist of currency swaps and interest rate swaps that are used to mitigate the risk of changes

in market interest rates and currencies. The group uses interest rate swaps for the portfolio hedge of interest rate risk.

4.3.2 Derivatives designated in cash flow hedge relationships The group uses currency forwards, swaps and options to mitigate against the risk of changes in future cash flows on its foreign-

denominated exposures. Interest rate swaps are primarily used to hedge, by major currency, variable rate financial assets and liabilities with the objective to mitigate against changes in future interest cash flows resulting from the impact of changes in market interest rates and reinvestment or reborrowing of current balances.

The group uses currency forwards to mitigate against the changes in cash flows arising from changes in foreign currency rates on the forecasted placement of funds between group entities. The group applies hedge accounting where the forecasted intragroup placement of funds is both denominated in a currency other than the functional currency of the entity providing the funds and where the placement of funds will affect consolidated profit or loss in the future.

The group manages its risks arising from change in cash flows from cash-settled share schemes by using equity forwards. The equity forward mitigates the changes in share price by locking in a fixed price at maturity.

163

4. Derivative instruments continued4.3 Derivatives held-for-hedging continued4.3.3 Derivatives designated as hedges of net investments in foreign operations The objective of the hedges of net investments is to limit the risk of a decline in the net asset value of the group’s investments

in foreign operations brought about by changes in exchange rates. To limit this risk, the group enters into currency option contracts and forward exchange contracts where considered appropriate.

4.4 Day one profit or loss Where the fair value of an instrument differs from the transaction price, and the fair value of the instrument is evidenced by

comparison with other observable current market transactions in the same instrument, or based on a valuation model whose variables include only data from observable markets, the difference, commonly referred to as day one profit or loss, is recognised in profit or loss immediately. If the fair value of the financial instrument is not able to be evidenced by comparison with other observable current market transactions in the same instrument or non-observable market data is used as part of the input to the valuation models, any resulting difference between the transaction price and the valuation model is deferred and subsequently recognised in accordance with the group’s accounting policies (refer to accounting policy 4 – Financial instruments in annexure D).

4.5 Fair values The fair value of a derivative financial instrument represents, for quoted instruments in an active market (level 1), the quoted market

price and, for an unquoted instrument (level 2 and 3 instruments) the present value of the positive and/or negative cash flows, which would have occurred if the rights and obligations arising from that instrument were closed out in an orderly marketplace transaction at the reporting date.

4.6 Notional amount The contract/notional amount is the sum of the absolute value of all bought and sold contracts. The notional amounts have been

translated at the closing exchange rate at the reporting date where cash flows are payable or receivable in foreign currency. The amount cannot be used to assess the market risk associated with the positions held and should be used only as a means of assessing the group’s participation in derivative contracts.




4. Derivative instruments continued 4.7 Derivative assets and liabilities

Maturity analysis of net fair value

Within 1 year

Rm

After 1 year but

within 5 years

Rm

After 5 years

Rm

Net fair value

Rm

Fair value of assets

Rm

Fair value of

liabilitiesRm

Contract/notional amount

Rm

2014Derivatives held-for-tradingForeign exchange derivatives (2 728) 416 (22) (2 334) 21 772 (24 106) 1 120 660

Forwards (2 879) 624 43 (2 212) 20 850 (23 062) 1 046 505Futures 86 86 92 (6) 24 816Swaps (65) (65) (65) 80Options 65 (208) (143) 830 (973) 49 259

Interest rate derivatives (2 342) (3 711) (1 406) (7 459) 31 510 (38 969) 4 495 406

Bond options 14 14 14 1 003Caps and floors (1) (19) 7 (13) 16 (29) 5 227Forwards (71) 7 (64) 1 282 (1 346) 2 370 097Options (1) (1) (1) 61 227Swaps (2 287) (3 918) (1 624) (7 829) 29 760 (37 589) 2 037 507Swaptions 4 219 211 434 438 (4) 20 345

Commodity derivatives (353) (544) (897) 196 (1 093) 8 315

Forwards 62 2 64 168 (104) 5 623Futures 2 2 9 (7) 78Options (417) (546) (963) 19 (982) 2 614

Credit derivativesCredit default swaps 31 (288) (294) (551) 3 103 (3 654) 65 112Equity derivatives (10) 1 013 1 003 2 683 (1 680) 150 764

Forwards 60 (367) (307) 92 (399) 4 226Futures 67 (2) 65 85 (20) 22 800Index options (163) 78 (85) 149 (234) 16 715Options 168 (13) 155 815 (660) 69 437Swaps (82) 84 2 307 (305) 33 398Other (60) 1 233 1 173 1 235 (62) 4 188

Total derivative (liabilities)/assets held-for-trading (5 402) (3 114) (1 722) (10 238) 59 264 (69 502) 5 840 257

165

4. Derivative instruments continued 4.7 Derivative assets and liabilities continued


Net fair value

Rm


Rm

Fair value of

liabilitiesRm


Rm

Within 1 year

Rm

After 1 year but

within 5 years

Rm

After 5 years

Rm

2014Derivatives held-for-hedgingDerivatives designated as fair value hedgesInterest rate swaps 482 221 (79) 624 1 709 (1 085) 25 172

Derivatives designated as cash flow hedges 534 (670) (805) (941) 547 (1 488) 13 940

Currency forwards and swaps 529 (683) (805) (959) 529 (1 488) 13 696Equity forwards 5 13 18 18 244

Derivatives designated as hedges of net investments in foreign operations

Forward exchange contracts (93) (93) 113 (206) 7 451

Total derivative assets/(liabilities) held-for-hedging 923 (449) (884) (410) 2 369 (2 779) 46 563

Total derivative (liabilities)/assets (4 479) (3 563) (2 606) (10 648) 61 633 (72 281) 5 886 820






Net fair value

Rm


Rm

Fair value of liabilities

Rm


Rm

Within 1 year

Rm

After 1 year but

within 5 years

Rm

After 5 years

Rm

2013Derivatives held-for-tradingForeign exchange derivatives (840) 59 84 (697) 19 125 (19 822) 1 467 089

Forwards (883) 41 97 (745) 18 640 (19 385) 1 019 814Futures 32 32 36 (4) 29 843Swaps (1) (2) (13) (16) (16) 146Options 12 20 32 449 (417) 417 286

Interest rate derivatives (271) (2 961) (1 635) (4 867) 38 263 (43 130) 3 764 255

Bond options 224 (36) 188 281 (93) 3 816Caps and floors (2) (27) (1) (30) 27 (57) 10 186Forwards 62 (17) 45 893 (848) 1 919 547Options 1 1 16 (15) 102 157Swaps (549) (3 062) (1 723) (5 334) 36 730 (42 064) 1 709 994Swaptions (7) 181 89 263 316 (53) 18 555

Commodity derivatives (410) (84) (494) 98 (592) 5 717

Forwards (308) (79) (387) 55 (442) 3 955Futures (2) (2) 10 (12) 301Options (100) (5) (105) 33 (138) 1 461

Credit derivatives (87) 117 (328) (298) 889 (1 187) 58 232

Credit default swaps (97) 117 (328) (308) 877 (1 185) 58 075Credit-linked notes 10 10 12 (2) 157

Equity derivatives 275 1 153 328 1 756 4 463 (2 707) 153 971

Forwards (218) (39) (257) 39 (296) 2 868Futures 24 1 25 102 (77) 30 820Index options 97 (188) (27) (118) 1 240 (1 358) 42 092Options 283 172 271 726 1 497 (771) 72 043Swaps (11) 102 96 187 306 (119) 5 014Other 100 1 105 (12) 1 193 1 279 (86) 1 134

Total derivative (liabilities)/assets held-for-trading (1 333) (1 716) (1 551) (4 600) 62 838 (67 438) 5 449 264

167



Net fair value

Rm


Rm

Fair value of liabilities

Rm


Rm

Within 1 year

Rm

After 1 year but

within 5 years

Rm

After 5 years

Rm

2013Derivatives held-for-hedgingDerivatives designated as fair value hedgesInterest rate swaps 1 058 (625) (248) 185 1 150 (965) 30 925

Derivatives designated as cash flow hedges 368 (321) (405) (358) 479 (837) 10 744

Currency forwards and swaps 368 (328) (405) (365) 472 (837) 10 397Equity forwards 7 7 7 347

Derivatives designated as hedges of net investments in foreign operations

Forward exchange contracts 3 3 7 (4) 2 150

Total derivative assets/(liabilities) held-for-hedging 1 429 (946) (653) (170) 1 636 (1 806) 43 819

Total derivative assets/(liabilities) 96 (2 662) (2 204) (4 770) 64 474 (69 244) 5 493 083




4. Derivative instruments continued 4.8 Derivatives held-for-hedging4.8.1 Derivatives designated as fair value hedges Gains or losses arising from fair value hedges

2014Rm

2013Rm

Gains/(losses)on hedging instruments 201 171on the hedged items attributable to the hedged risk (244) (269)

4.8.2 Derivatives designated as cash flow hedges The forecasted timing of the release of net cash flows from the cash flow hedging reserve into profit or loss at 31 December is

as follows:

3 months or less

Rm

More than 3 months

but less than 1 year

Rm

More than 1 year but

less than 5 years

Rm

More than 5 years

Rm

2014Net cash inflow/(outflow) 529 389 (458) (20)

2013Net cash inflow 49 141 257 669

Reconciliation of movements in the cash flow hedging reserve

2014Rm

2013Rm

Balance at the beginning of the year 804 506Amounts recognised directly in OCI before tax 349 179Less: amounts released to profit or loss before tax– net interest income 10 23– trading revenue 6– other operating expenses (687) 41Add/(less): deferred tax 33 (10)Non-controlling interests (42) 59

Balance at the end of the year 467 804

Ineffectiveness that arises from cash flow hedges is recognised immediately in profit or loss. No gain or loss (2013: R6 million loss) was recognised in profit or loss due to ineffectiveness arising from cash flow hedges.

There were no transactions for which cash flow hedge accounting had to be discontinued during 2014 or 2013 as a result of highly probable cash flows no longer being expected to occur.

4.8.3 Derivatives designated as hedges of net investments in foreign operations No ineffectiveness was recognised in profit or loss for the year ended 31 December 2014, that arose from hedges of net investments

in foreign operations (2013: Rnil).

169

4. Derivative instruments continued 4.9 Day one profit or loss – derivatives held-for-trading and held-for-hedging The table below sets out the aggregate net day one profits to be recognised in profit or loss at the beginning and end of the year

with a reconciliation of changes in the balance during the year:

2014Rm

2013Rm

Unrecognised net profit at the beginning of the year 244 384Additional net profit on new transactions 144 13Recognised in profit or loss during the year (85) (153)

Unrecognised net profit at the end of the year 303 244

2014Rm

2013Rm

5. Trading assets5.1 Classification

Listed 39 984 36 069Unlisted 32 056 18 519

72 040 54 588

Comprising:Government, municipality, utility bonds and treasury bills 20 080 19 094Corporate bonds and floating rate notes 4 811 4 653Listed equities 17 418 13 041Collateral 3 339 3 400Reverse repurchase and other collateralised agreements 16 723 12 317Commodities 5 47Other instruments 9 664 2 036

72 040 54 588

Maturity analysisThe maturities represent periods to contractual redemption of the trading assets recorded.

Redeemable on demand 1 349 1 932Maturing within 1 month 7 546 9 102Maturing after 1 month but within 6 months 10 949 5 233Maturing after 6 months but within 12 months 3 774 3 306Maturing after 12 months 28 974 20 452Undated assets 19 448 14 563

72 040 54 588

5.2 Day one profit or loss – trading assetsThe table below sets out the aggregate net day one profits to be recognised in the profit or loss at the beginning and end of the year with a reconciliation of changes in the balance during the year:

Unrecognised net profit at the beginning of the year 16 13Exchange differences 3

Unrecognised net profit at the end of the year 16 16




6. Pledged assets

2014Rm

2013Rm

6.1 Pledged assetsFinancial assets that may be repledged or resold by counterpartiesGovernment, municipality and utility bonds 8 781 6 366Corporate bonds 870 347Listed equities 4 265Commodities 269

14 185 6 713

Maturity analysisThe maturities represent periods to contractual redemption of the pledged assets recorded.

Maturing within 1 month 1 970 2 730Maturing after 1 month but within 6 months 1 511 26Maturing after 6 months but within 12 months 333 128Maturing after 12 months 5 627 3 607Undated assets 4 744 222

14 185 6 713

6.2 Total assets pledged The total amount of financial assets that have been pledged as collateral for liabilities at 31 December 2014 was R20 307 million

(2013: R7 828 million).

The assets pledged by the group are strictly for the purpose of providing collateral to the counterparty. To the extent that the counterparty is permitted to sell or repledge the assets in the absence of default, they are classified in the statement of financial position as pledged assets.

These transactions are conducted under terms that are usual and customary to repurchase securities and lending activities.

6.3 Collateral accepted as security for assets As part of the reverse repurchase and securities borrowing agreements, the group has received securities which are not recorded

on the statement of financial position that it is allowed to sell or repledge. The fair value of the financial assets accepted as collateral that the group is permitted to sell or repledge in the absence of default is R100 843 million (2013: R67 233 million).

The fair value of financial assets accepted as collateral and commodities received through commodity leases that have been sold, repledged or leased in terms of repurchase agreements or leasing transactions is R23 685 million (2013: R7 306 million). This amount is limited to the fair value of financial assets accepted as collateral or commodities received through commodity leases.

These transactions are conducted under terms that are usual and customary to reverse repurchase, securities borrowing and commodity leasing activities.

171

6. Pledged assets continued6.4 Assets transferred not derecognised Securitisations The group enters into transactions in the normal course of business by which it transfers recognised financial assets directly to third

parties or structured entities. These transfers may give rise to full derecognition of the financial assets concerned.

Full derecognition occurs when the group transfers substantially all the risks and rewards of ownership and its contractual right to receive cash flows from the financial assets or retains the contractual rights to receive the cash flows of the financial assets but assumes a contractual obligation to pay the cash flows to one or more recipients in an arrangement that meets the conditions in IFRS. The risks include interest rate, currency, prepayment and other price risks.

However, where the group has retained substantially all of the credit risk associated with the transferred assets, it continues to recognise these assets.

The table below analyses the carrying amount of securitised financial assets that did not qualify for derecognition, and their associated liabilities:

Carrying amount of

transferred assets

Rm

Carrying amount of

associated liabilities

Rm

Fair value of

transferred assets1

Rm

Fair value of

associated liabilities1

Rm

Net fair value

Rm

Nature of transaction2014Mortgage loans 25 117 4 976 24 394 4 989 19 405

2013Mortgage loans 9 937 5 626 9 755 5 642 4 113

1 The associated liabilities relating to the transferred assets only include external funding for the assets. The transferred assets are also funded by intercompany funding, which has been eliminated at a group level.

The interests and rights to the mortgage loans have been ceded as security for the associated liabilities, which have recourse only to the transferred assets.

The cash flows from the transferred assets are required to service the associated liabilities.




6. Pledged assets continued6.4 Assets transferred not derecognised continued Other assets transferred not derecognised The majority of other financial assets that do not qualify for derecognition are debt securities held by counterparties as collateral under

repurchase agreements, listed equities held as collateral under scrip lending transactions, and financial assets leased out to third parties. Risks to which the group remains exposed include credit and interest rate risk.

The following table presents details of other financial assets which have been sold or otherwise transferred, but which have not been derecognised in their entirety, and their associated liabilities. This table does not disclose the total risk exposure in terms of these transactions, instead it provides disclosures as required by IFRS.

Carrying amount of

transferred assets

Rm

Carrying amount of

associated liabilities

Rm

Fair value of

transferred assets1

Rm

Fair value of

associated liabilities1

Rm

Net fair

value1

Rm

2014Bonds 9 651 9 272 9 619 9 272 347Listed equities 4 265 4 265 4 265Commodities 269 269 269

Pledged assets 14 185 9 272 14 153 9 272 4 881Financial investments 7 679 6 993 7 679 7 670 9

Total 21 864 16 265 21 832 16 942 4 890

2013Bonds 6 713 4 506 6 713 4 405 2 308

Pledged assets 6 713 4 506 6 713 4 405 2 308

Total 6 713 4 506 6 713 4 405 2 308

1 Where the counterparty has recourse to the transferred asset.

There were no instances during the year of assets sold or otherwise transferred, but which were partially derecognised.

6.5 Assets transferred and derecognised There were no instances of financial assets transferred and derecognised for which the group had continuing involvement

during the year.

173

7. Non-current assets and liabilities held for sale Standard Bank Plc The group entered into an agreement on 29 January 2014 in terms of which ICBC, a 20.1% shareholder of the group, would upon

completion acquire a controlling interest in the group’s London-based GMOA business, focusing on commodities, fixed income, currencies, credit and equities products.

SB Plc is the primary legal entity used by GMOA business and was, until 31 January 2015, wholly-owned by Standard Bank London Holdings Limited (SBLH), which in turn is a wholly-owned subsidiary of Standard Bank Group Limited. Under the agreement, ICBC acquired 60% of SB Plc from SBLH for cash.

During the course of the 2014 financial year, SB Plc and relevant group subsidiaries and operations were restructured to form a focused global markets platform. As part of this restructure, all activities that the group currently performs and any previously discontinued activities and legacy assets, which do not form part of the GMOA business, were transferred from the SB Plc Group. These activities include investment banking, transactional products and services, principal investment management, and the group’s London-based services unit, which provides key skills and services to the group (together, the excluded business). The excluded business has been moved to new or existing group non-bank entities, such that these activities will be continued post completion in the UK, US, Dubai and Hong Kong.

The SB Plc group is classified in both the 2013 and 2014 financial statements as a disposal group held for sale in terms of IFRS. The disposal group is remeasured to the lower of its fair value less cost to sell and its carrying value. The difference between its fair value less cost to sell and its carrying value is recognised within the discontinued operation's line item in the income statement and in the central and other segment. This loss is limited to the disposal group’s carrying value of its non-financial assets, being its property and equipment and intangible assets. Any further loss on disposal (together with the release of the associated foreign currency translation reserve (FCTR) and other OCI releases), in addition to that recognised on classification of the disposal group as held for sale, will be recognised in the income statement and in the central and other segment on the date of completion of the transaction.

The disposal was completed on 1 February 2015, therefore the disposal group remains a discontinued operation and disposal group held for sale in line with the requirements of IFRS for the financial year ended 31 December 2014. The assets and liabilities, classified as held for sale, have been separately disclosed in the statement of financial position. The disposal group qualifies as a discontinued operation as it is a component of the group that has been classified as held for sale and represents a separate major geographical area of business. In line with the requirements of IFRS, the income and expenses relating to the disposal group have been presented in the income statement and statement of other comprehensive income as a single after tax amount within the discontinued operation’s line item relating to the after-tax loss and other comprehensive income relating to the discontinued operation. The discontinued operation’s results have been determined based on an assessment of the attribution of both direct and support-related costs. Support-related costs have been allocated using cost allocation methodologies for each support function. The disposal group’s operating results continued to be included within the CIB segment for the 2014 financial period.

The disposal proceeds on the initial 60% disposal are, based on the best information available, expected to amount to approximately USD690 million. The proceeds will be calculated from SB Plc’s net asset value as at the 1 February 2015 closing date (the closing NAV), which remains subject to audit verification. The final proceeds are to be calculated based on 60% of the closing NAV less a discount of USD80 million.

As disclosed in the circular to shareholders dated 24 February 2014, the group provided ICBC with certain indemnities to be paid in cash to ICBC or, at ICBC’s direction, to any SB Plc group company, a sum equal to the amount of losses suffered or incurred by ICBC arising from certain circumstances. Where an indemnity payment is required to be made by the group to the SB Plc group, such payment would be grossed up from ICBC’s shareholding at the time in SB Plc to 100%. Such payments may arise as a result of the ownership, conduct or operation of all or any part of the businesses that have, in terms of the transaction agreements, been transferred from SB Plc to the group prior to disposal (excluded business) or from an enforcement action, the cause of which occurred prior to the completion date of 1 February 2015. Enforcement actions include actions taken by regulatory or governmental authorities to enforce the relevant laws in any jurisdiction. The indemnities provided are uncapped and of unlimited duration as they reflect that the risks of ownership and conduct of the excluded business, and pre-completion regulatory risks attaching to the GMOA business, remain with the group post completion.

As disclosed in the announcement on 10 December 2014, the group retains the right to any net recoveries on the metal exposures that may result from, inter alia, ongoing litigation in China and insurance claims. While the group maintains insurance for such loss events, no insurance recovery was recognised at 31 December 2014, because the insurance recovery did not meet the virtually certain recognition criteria in IFRS at that date. The group’s right to recoveries on the metal exposures will be recognised at fair value as a contingent right to compensation on the date of disposal of SB Plc.




7. Non-current assets and liabilities held for sale continued ICBC has a five-year option to acquire 50% of the remaining shares in SB Plc held by SBLH for cash. The purchase price, subject

to a maximum price of USD500 million, will be determined as the higher of (i) the most recent audited consolidated NAV of SB Plc, and (ii) the most recent audited consolidated profit before tax of SB Plc, capitalised at a 5 times multiple, both being attributable to 50% of the group’s remaining shareholding in SB Plc. Contingent upon ICBC exercising its call option, and from six months after such exercise, SBLH will have a 5-year option to dispose of its residual shares (being 50% of the remaining shares in SB Plc) to ICBC at a price determined as being 90% of the most recent audited consolidated NAV of SB Plc, attributable to such shareholding, and subject to a maximum of USD600 million.

Banco Standard de Investimentos S.A. In March 2014, the group entered into an agreement with Grupo Financiero Inbursa SAB (Inbursa), a listed Mexican banking group, in

terms of which Inbursa will acquire SBG’s Brazilian licensed banking subsidiary, Banco Standard de Investimentos S.A. (BSI), subject to regulatory approvals. Inbursa will acquire BSI for a price to be determined with reference to the closing net asset value of BSI, which is USD41 million as at 31 December 2014.

The agreed disposal resulted in the group classifying its investment in BSI as a disposal group held for sale in line with the requirements of IFRS. The group has accordingly, included BSI in the statement of financial position within non-current assets and liabilities held for sale.

BSI does not meet the definition of a discontinued operation in terms of IFRS and accordingly, its operating results will continue to be consolidated within the group’s continuing operations and within the CIB segment up to the completion date. BSI is not regarded as being a discontinued operation representing a separate major line of business or geographical area of operations.

Details of non-current assets and liabilities held for sale:

2014SB Plc

and BSIRm

2013SB Plc

Rm

Assets held for saleCash and balances with central banks 16 577 14 099Derivative assets 90 644 39 420Trading assets 47 722 61 347Pledged assets 12 222 6 539Financial investments 702 29Loans and advances 49 818 58 556Deferred tax assets 285 254Other assets 1 988 3 040

Total assets held for sale 219 958 183 284

Liabilities held for saleDerivative liabilities 91 323 39 221Trading liabilities 13 183 17 973Deposit and current accounts 66 605 65 043Current tax liabilities 69 49Provisions and other liabilities 2 967 4 771Subordinated debt 7 922 7 447

Total liabilities held for sale 182 069 134 504

175

8. Financial investments

2014Rm

2013Rm

Financial investments held in banking activities (note 8.1) 148 225 103 636Financial investments held by investment management and life insurance activities (note 8.2) 286 199 276 284Interest in associates held at fair value (annexure B) 16 497 15 797

450 921 395 717

8.1 Financial investments held in banking activitiesShort-term negotiable securities 94 204 66 921

Listed 16 187 13 534Unlisted 78 017 53 387

Other financial investments 54 021 36 715

Listed 43 609 30 097Unlisted 10 412 6 618

148 225 103 636

Comprising:Government, municipality, utility bonds and treasury bills 128 846 79 021Corporate bonds 8 176 15 238Listed equities 555 195Unlisted equities 1 647 2 857Mutual funds and unit-linked investments 7 782 4 282Other instruments 1 219 2 043

148 225 103 636

Maturity analysisThe maturities represent periods to contractual redemption of the financial investments recorded.

Redeemable on demand 512 1 878Maturing within 1 month 14 090 12 473Maturing after 1 month but within 6 months 60 639 37 819Maturing after 6 months but within 12 months 30 744 15 844Maturing after 12 months 32 572 29 918Undated 9 668 5 704

148 225 103 636




8. Financial investments continued

2014Rm

2013Rm

8.2 Financial investments held by investment management and life insurance activitiesQuoted in an active market – listed 188 215 182 757

Equities 121 553 110 725Preference shares 1 247 1 928Commercial term deposits 22 803 26 067Mutual funds 11 078 11 703Government, municipal and utility bonds 31 534 32 334

Quoted in an active market – unlisted 79 548 57 796

Commercial term deposits 26 157 14 360Mutual funds 53 323 43 366Government, municipal and utility bonds 68 70

Unquoted and unlisted 9 054 27 779

Equities 720 173Preference shares 691 1 250Investment policies 7 643 26 356

Loans and receivables 9 382 7 952

Mortgages and loans 1 327 1 214Cash held with banks 8 055 6 738

286 199 276 284

Maturity analysisThe maturities represent periods to contractual redemption of the financial investments recorded.

Maturing within 1 year 25 151 25 059Maturing after 1 year but within 5 years 23 180 17 344Maturing after 5 years but within 10 years 17 067 16 057Maturing after 10 years but within 20 years 19 858 10 994Maturing after 20 years 8 903 5 071Open ended1 1 043 977Undated2 190 997 200 782

286 199 276 284

1 Open ended represents certain loans which are secured against policyholder contracts. The maturity profile is not determinable as the holder has the option to settle at any time prior to the contract maturity date.

2 There is no maturity profile for listed and unlisted equities and other non-term instruments.

177

9. Loans and advances

2014Rm

2013Rm

9.1 Loans and advances net of impairmentsLoans and advances to banks 116 220 94 904

Call loans 3 352 3 207Loans granted under resale agreements 62 064 45 572Balances with banks 50 804 46 125

Loans and advances to customers 812 021 744 716

Gross loans and advances to customers 830 728 763 882

Mortgage loans 317 069 308 916Instalment sale and finance leases (note 9.2) 74 793 73 502Card debtors 30 029 27 786Overdrafts and other demand loans 80 918 77 174Other term loans 262 702 225 738Loans granted under resale agreements 10 948 4 896Commercial property finance 54 157 45 858Other loans and advances 112 12

Credit impairments for loans and advances (note 9.3) (18 707) (19 166)

Specific credit impairments (13 392) (13 802)Portfolio credit impairments (5 315) (5 364)

Net loans and advances 928 241 839 620

Comprising:Gross loans and advances 946 948 858 786Less: credit impairments (18 707) (19 166)

Net loans and advances 928 241 839 620




9. Loans and advances continued9.1 Loans and advances net of impairments continued

2014Rm

2013Rm

Maturity analysisThe maturity analysis is based on the remaining periods to contractual maturity from year end.

Redeemable on demand 103 646 105 130Maturing within 1 month 100 430 80 430Maturing after 1 month but within 6 months 75 819 68 199Maturing after 6 months but within 12 months 45 566 41 948Maturing after 12 months 621 487 563 079

Gross loans and advances 946 948 858 786

Segmental analysis – industryAgriculture 25 537 22 937Construction 24 032 20 306Electricity 10 970 6 852Finance, real estate and other business services 224 042 185 899Individuals 421 343 405 191Manufacturing 49 358 42 207Mining 37 038 40 262Transport 17 217 13 717Wholesale 68 983 64 114Other services 68 428 57 301

Gross loans and advances 946 948 858 786

179

9. Loans and advances continued9.1 Loans and advances net of impairments continued The following table sets out the distribution of the group’s loans and advances by geographic area where the loans are recorded.

2014 2013

% Rm % Rm

Segmental analysis – geographic areaSouth Africa 80 759 613 80 689 461Rest of Africa 14 130 525 14 116 965Outside Africa 6 56 810 6 52 360

Gross loans and advances 100 946 948 100 858 786

2014Rm

2013Rm

9.2 Instalment sale and finance leasesThe maturity analysis is based on the remaining periods to contractual maturity from year end.

Gross investment in instalment sale and finance leases 87 728 86 055

Receivable within 1 year 26 394 25 022Receivable after 1 year but within 5 years 61 020 60 485Receivable after 5 years 314 548

Unearned finance charges deducted (12 935) (12 553)

Net investment in instalment sale and finance leases 74 793 73 502

Receivable within 1 year 21 384 20 518Receivable after 1 year but within 5 years 53 138 52 488Receivable after 5 years 271 496

Leases entered into are at market-related terms.

9.3 Credit impairments for loans and advances A summary of the allowance for impairment losses for loans and advances, by class:

Total impairmentsMortgage loans 4 349 4 697Instalment sale and finance leases 2 060 1 678Card debtors 1 607 1 510Personal unsecured lending 4 301 4 409Business lending and other 2 415 2 449Corporate lending 3 741 4 165Commercial property finance 234 258

18 707 19 166




9. Loans and advances continued9.3 Credit impairments for loans and advances continued A summary of the allowance for impairment losses for loans and advances, by class:

Mortgage loans

Rm

Instalmentsale and finance

leasesRm

Card debtors

Rm

Personal unsecured

lendingRm

Business lending

andother

Rm

Corporate lending

Rm

Commercial property

financeRm

TotalRm

2014Specific impairmentsBalance at beginning of the year 3 943 1 158 924 2 927 1 567 3 122 161 13 802Net impairments raised1 2 559 1 266 1 342 2 800 943 1 233 11 10 154Impaired accounts written off (2 597) (1 003) (1 172) (2 618) (986) (1 497) (35) (9 908)Discount element recognised in

interest income (348) (54) (63) (235) (54) (9) (763)Exchange and other movements (12) 68 (1) 37 (140) 155 107

Balance at end of the year 3 545 1 435 1 030 2 911 1 330 3 004 137 13 392

Portfolio impairmentsBalance at beginning of the year 754 520 586 1 482 882 1 043 97 5 364Net impairments raised/(released)1 57 112 (9) (104) 210 (313) (47)Exchange and other movements (7) (7) 12 (7) 7 (2)

Balance at end of the year 804 625 577 1 390 1 085 737 97 5 315

Total 4 349 2 060 1 607 4 301 2 415 3 741 234 18 707

1 Net impairments raised/(released) less recoveries of amounts written off in previous years, as well as credit recovery on off-balance sheet exposures, equals income statement impairment charges (note 29.8).

181

9. Loans and advances continued9.3 Credit impairments for loans and advances continued

Mortgage loans

Rm

Instalmentsale and finance leases

Rm

Card debtors

Rm

Personal unsecured

lendingRm

Business lending

andother

Rm

Corporate lending

Rm

Commercial property

financeRm

TotalRm

2013Specific impairmentsBalance at beginning of the year 4 166 787 580 1 908 1 174 3 721 180 12 516Net impairments raised1 2 565 1 050 1 107 2 819 1 207 1 459 52 10 259Impaired accounts written off (2 546) (803) (718) (1 623) (784) (2 699) (71) (9 244)Discount element recognised in

interest income (304) (29) (51) (123) (51) (558)Exchange and other movements 62 153 6 (54) 21 641 829

Balance at end of the year 3 943 1 158 924 2 927 1 567 3 122 161 13 802

Portfolio impairmentsBalance at beginning of the year 716 520 494 1 347 796 1 212 103 5 188Net impairments raised/(released)1 9 (31) 91 245 (50) (149) (6) 109Exchange and other movements 29 31 1 (110) 136 (20) 67

Balance at end of the year 754 520 586 1 482 882 1 043 97 5 364

Total 4 697 1 678 1 510 4 409 2 449 4 165 258 19 166

1 Net impairments raised/(released) less recoveries of amounts written off in previous years, as well as credit recovery on off-balance sheet exposures, equals income statement impairment charges (note 29.8).




9. Loans and advances continued9.3 Credit impairments for loans and advances continued

2014Rm

2013Rm

Segmental analysis of specific impairments – industryAgriculture 389 511Construction 555 564Electricity 11 6Finance, real estate and other business services 653 561Individuals 7 590 7 880Manufacturing 386 605Mining 866 370Transport 408 327Wholesale 691 1 166Other services 1 843 1 812

13 392 13 802

Segmental analysis of specific impairments – geographic area The following table sets out the distribution of the group’s specific impairments by geographic area where the loans are recorded.

2014 2013

% Rm % Rm

South Africa 81 10 902 77 10 637Rest of Africa 19 2 475 20 2 705Outside Africa 15 3 460

100 13 392 100 13 802

10. Current and deferred tax assets

2014Rm

2013Rm

Current tax assets 498 407Deferred tax assets (note 20.1) 1 715 1 536

2 213 1 943

183

11. Other assets

2014Rm

2013Rm

Trading settlement assets 6 192 8 715Items in the course of collection 1 606 743Operating leases – accrued income (note 13) 1 261 1 315Deferred acquisition costs (DAC) 590 527Retirement funds and post-employment healthcare benefits (note 37) 1 658 1 795Insurance prepayments and reinsurance assets 4 193 3 905Accounts receivable 716 389Prepayments 2 253 1 974Properties in possession 109 398Property developments 549 1 465Other debtors 1 564 2 991

20 691 24 217




12. Interest in associates and joint ventures

2014Rm

2013Rm

Associates and joint ventures accounted for under the equity method 3 727 4 797

Equity accounted associates and joint venturesCarrying value at beginning of the year 4 797 3 035Share of profits – continuing operations 626 684Reversal of impairments of associates 34 1Reversal of impairments of private equity associates included in non-interest revenue 21Acquisitions 361Disposal of associate - carrying value (1 216) (84)

Gain on disposal of associate 191

Disposal of associate - fair value (1 235) (84)

Share of direct reserve movements (264) (152)Distribution of profit (250) (29)Reclassified as an interest in associate 960

Carrying value at end of the year 3 727 4 797

Comprising:Cost of investments 2 841 3 799Share of reserves 1 554 1 913Cumulative impairment (668) (915)

3 727 4 797

Share of profits from associates and joint venturesShare of profits 626 684Reversal of impairments of associates 34 1Gain on disposal of associate 19

Share of profits – continuing operations 679 685

1 The gain on disposal of associate relates to the sale of RCS Investment Holdings Proprietary Limited.

There are no significant restrictions on the ability of associates and joint ventures to transfer funds to the group in the form of cash dividends or in the repayment of loans or advances.

Refer to annexure B for further information.

185

13. Investment property

2014Rm

2013Rm

Fair value at beginning of the year 27 299 24 133Revaluations net of lease straight-lining 1 178 2 530

Revaluations 1 124 2 598Net movement on straight-lining operating leases 54 (68)

Additions – capitalised subsequent expenditure 735 546Additions – property acquired 163 42Disposals (2 346) (35)Transfers (to)/from property and equipment (note 15.2) (14) 69Exchange movements 7 14

Fair value at end of the year 27 022 27 299

Investment property and related operating lease balances comprise the following:Investment properties at fair value 27 022 27 299Operating leases – accrued income (note 11) 1 261 1 315

Total investment property 28 283 28 614

Located in:South Africa 28 145 28 452Kenya 119 142Nigeria 19 20


At the end of the year, investment property comprised the following property types:Office buildings 1 404 1 416Shopping malls 24 485 23 772Hotels 1 219 2 455Other 1 175 971


The South African located investment properties were independently valued as at 31 December 2014 by registered professional valuers with the South African Council for the Property Valuers Profession, as well as members of the Institute of Valuers of South Africa. The method of valuation is consistent with that described in note 2.15.

The Kenyan and Nigerian located properties were independently valued as at 31 December 2014 by various registered professional valuers in each territory.

At 31 December 2014, unlet space amounted to 9.7% (2013: 6.0%) of available lease area in the investment properties held by the group. The average net rental growth is 0.6% (2013: 2.3%).

The property rental income earned by the group from its investment property, all of which is leased out under operating leases, amounted to R2 095 million (2013: R2 210 million), including straight-lining operating leases or R2 149 million (2013: R2 110 million), excluding straight-lining operating leases. Direct operating expenses arising on the investment property amounted to R638 million (2013: R633 million).




14. Goodwill and other intangible assets

2014Rm

2013Rm

Goodwill (note 14.1) 3 752 3 786Other intangible assets (note 14.2) 17 423 14 299

21 175 18 085

14.1 GoodwillGoodwill on subsidiariesCost at the beginning of year 5 373 4 544Acquisitions 16Disposals (7)Exchange movements (75) 836

Cost at the end of year 5 314 5 373

Accumulated impairment at beginning of the year (1 587) (1 420)Goodwill impairment charge (note 29.13) (4)Disposals 7Exchange movements 29 (174)

Accumulated impairment at the end of year (1 562) (1 587)

Carrying amount 3 752 3 786

2014 2013

Gross goodwill

Rm

Accumulated impairment

Rm

Net goodwill

Rm

Gross goodwill

Rm

Accumulated impairment

Rm

Net goodwill

Rm

Goodwill comprises:Standard Bank S.A.R.L (Mozambique) 124 124 128 128Capital Alliance Holdings Limited 397 397 397 397Neil Harvey and Associates 114 114 114 114Melville Douglas Investment Management Proprietary Limited 44 22 22 44 22 22Stanbic Bank Botswana Limited 20 20 20 20Standard Bank Limited (Malawi) 16 16 15 15Stanbic Bank Uganda Limited 11 3 8 11 3 8Standard Bank Asia Limited (Hong Kong) 71 71 71 71Triskelion Trust Company Limited 71 71 71 71Stanbic IBTC Holdings PLC (Nigeria) 3 366 805 2 561 3 487 835 2 652CfC Stanbic Holdings Limited (Kenya) 985 985 936 936eCentric Switch Proprietary Limited 36 36 36 36MTN Mobile Money 39 39 39 39LC Golf SA Proprietary Limited 4 4 4 4Integrated Processing Solution Electronic Payments Proprietary Limited

(IPS EP) 16 16

5 314 1 562 3 752 5 373 1 587 3 786

187

14. Goodwill and other intangible assets continued14.1 Goodwill continued Stanbic IBTC Holdings PLC Based on the impairment testing performed, no impairment was identified in 2014 or 2013.

CfC Stanbic Holdings Limited Based on the impairment testing performed, no impairment was identified in 2014 or 2013.

Goodwill relating to other entities The remaining aggregated carrying amount of the goodwill of R206 million (2013: R198 million) has been allocated to CGUs that are

not considered to be individually significant. These entities were tested for impairment during the year, and no impairment was recognised (2013: Rnil).

14.2 Other intangible assets14.2.1 Summary

2014 2013

CostRm

Accumulated amortisation

and impairment

Rm

Net book value

RmCostRm

Accumulated amortisation

and impairment

Rm

Net book value

Rm

Computer software 22 298 5 173 17 125 18 470 4 553 13 917Other intangible assets 789 617 172 702 553 149Present value of in-force life insurance (PVIF)1 1 691 1 565 126 1 688 1 455 233

24 778 7 355 17 423 20 860 6 561 14 299

1 Represents the present value (at acquisition date) of future profits before taxation on policyholder contracts acquired from business acquisitions, less amortisation. No internally generated value of in-force life insurance has been recognised since it does not meet the recognition criteria in IFRS.




14. Goodwill and other intangible assets continued14.2 Other intangible assets continued14.2.2 Movement

2013 net book

valueRm

Additions1

Rm

Impair-ments

Rm

Amorti-sation

Rm

Exchange move-ments

Rm

2014 net book

value2

Rm

Computer software 13 917 4 805 (450) (1 162) 15 17 125Other intangible assets 149 90 (59) (8) 172PVIF 233 (108) 1 126

14 299 4 895 (450) (1 329) 8 17 423

2012 net book

valueRm

Reclassi-fied

as held for sale

RmAdditions1

RmDisposals

Rm

Impair-ments

Rm

Amorti-sation

Rm

Exchange move-ments

Rm

2013 net book

value2

Rm

Computer software 11 039 (339) 4 606 (70) (440) (911) 32 13 917Other intangible assets 181 12 3 (37) (39) 29 149PVIF 343 (115) 5 233

11 563 (339) 4 618 (67) (477) (1 065) 66 14 299

1 During 2014, R337 million (2013: R204 million) of interest was capitalised. Included in additions is R13 million (2013: Rnil) acquired through business combinations. Refer to note 38.

2 Includes work in progress of R6 733 million (2013: R6 602 million) for which amortisation has not yet commenced.

There are no intangible assets pledged as security for liabilities.

189

15. Property and equipment

2014 2013

CostRm

Accumulated depreciation

and impairment

Rm

Net book value

RmCostRm

Accumulated depreciation

and impairment

Rm

Net book value

Rm

15.1 SummaryPropertyFreehold 7 378 682 6 696 6 903 653 6 250Leasehold 3 682 1 731 1 951 3 585 1 396 2 189

11 060 2 413 8 647 10 488 2 049 8 439

EquipmentComputer equipment 10 199 6 476 3 723 10 069 6 020 4 049Motor vehicles 609 341 268 619 344 275Office equipment 1 611 849 762 1 451 774 677Furniture and fittings 6 980 3 643 3 337 6 808 3 366 3 442

19 399 11 309 8 090 18 947 10 504 8 443

Total 30 459 13 722 16 737 29 435 12 553 16 882

2013 net book

value Rm

Reclassi-fied as

held for saleRm

Additions1

RmDisposals

Rm

Depre-ciation

RmTransfers2

Rm

Exchange movements

Rm

2014 net book

value3

Rm

15.2 MovementPropertyFreehold 6 250 849 (328) (107) 14 18 6 696Leasehold 2 189 (3) 350 (97) (443) (45) 1 951

8 439 (3) 1 199 (425) (550) 14 (27) 8 647

EquipmentComputer equipment 4 049 (2) 1 292 (83) (1 520) (13) 3 723Motor vehicles 275 120 (35) (93) 1 268Office equipment 677 262 (39) (141) 3 762Furniture and fittings 3 442 (6) 664 (169) (611) 17 3 337

8 443 (8) 2 338 (326) (2 365) 8 8 090

Total 16 882 (11) 3 537 (751) (2 915) 14 (19) 16 737

1 During 2014, R9 million (2013: R43 million) of interest was capitalised. Included in additions is R2 million (2013: Rnil) acquired through business combinations. Refer to note 38.

2 Transfer from investment property, refer to note 13.3 Includes work in progress of R648 million (2013: R1 035 million) for which depreciation has not yet commenced.




15. Property and equipment continued15.2 Movement continued

2012 net book

value Rm

Reclassi-fied

as held for sale

RmAdditions1,2

RmDisposals

Rm

Depre-ciation

RmTransfers3

Rm

Exchange move-ments

Rm

2013 net book

value4

Rm

PropertyFreehold 5 686 563 (45) (91) (22) 159 6 250Leasehold 2 100 (115) 319 (24) (426) 335 2 189Property under development 13 34 (47)

7 799 (115) 916 (69) (517) (69) 494 8 439

EquipmentComputer equipment 3 658 (98) 1 729 (19) (1 436) 215 4 049Motor vehicles 286 (1) 112 (41) (95) 14 275Office equipment 606 (36) 193 (65) (118) 97 677Furniture and fittings 3 384 (21) 632 (30) (629) 106 3 442

7 934 (156) 2 666 (155) (2 278) 432 8 443

Total 15 733 (271) 3 582 (224) (2 795) (69) 926 16 882

1 During 2013, R43 million of interest was capitalised. Includes no additions arising from business acquisitions. 2 Included in additions is an amount of R21 million that has been transferred from intangible assets.3 Transfer from investment property, refer to note 13.4 Includes work in progress of R1 035 million for which depreciation has not yet commenced.

There is no significant property or equipment for which title is restricted or which is pledged as security for liabilities.

15.3 Valuation The fair value of completed freehold property, based on valuations undertaken for the period 2012 to 2014, was estimated at

R8 581 million (2013: R7 936 million). Registers of freehold property are available for inspection by members, or their authorised agents, at the registered office of the company and its subsidiaries. Valuations were generally in terms of the investment method whereby net income is capitalised having regard to tenancy, location and the physical nature of the property.

191

16. Share capital

2014Rm

2013Rm

16.1 Authorised2 000 000 000 (2013: 2 000 000 000) ordinary shares of 10 cents each 200 2008 000 000 (2013: 8 000 000) 6.5% first cumulative preference shares of R1 each 8 81 000 000 000 (2013: 1 000 000 000) non-redeemable, non-cumulative, non-participating preference shares of 1 cent each 10 10

218 218

16.2 IssuedOrdinary share capital1 618 361 849 (2013: 1 617 844 128) ordinary shares of 10 cents each 162 162

Ordinary share premium 17 905 17 964A premium of R554 million (2013: R377 million) was raised on the allotment and issue during the year of 4 879 268 ordinary shares (2013: 4 304 866 ordinary shares).

Surplus capital was used to repurchase 4 361 547 ordinary shares (2013: 2 877 768 ordinary shares).

Preference share capital and premium 5 503 5 503

8 000 000 (2013: 8 000 000) 6.5% first cumulative preference shares of R1 each – first preference shares 8 852 982 248 (2013: 52 982 248) non-redeemable, non-cumulative, non-participating preference shares of 1 cent each – second preference shares 1 1Preference share premium – non-redeemable, non-cumulative, non-participating preference shares – second preference shares 5 494 5 494

The non-redeemable, non-cumulative, non-participating preference shares are entitled to an annual dividend, if declared, payable in two semi-annual instalments of not less than 77% of the prime interest rate multiplied by the subscription price of R100 per share.

All classes of preference shares in issue are non-redeemable.

23 570 23 629




16. Share capital continued16.2 Issued continued

Number of ordinary

shares

Number of first

preference shares

Number of second

preference shares

Reconciliation of shares issuedShares in issue at 1 January 2013 1 606 135 826 8 000 000 52 982 248Shares issued during 2013 in terms of the group’s equity compensation plans 4 304 866Share buy-back (2 877 768)Shares issued in terms of the interim scrip distribution declared in respect of 2012 and distributed on 22 April 2013 10 281 204

Shares in issue at 31 December 2013 1 617 844 128 8 000 000 52 982 248

Net shares held in terms of the group’s Tutuwa initiative 27 725 901

Total number of shares held initially by Tutuwa SEs (note 17) 99 190 197Less: portion of shares financed directly by third parties (note 17) (60 444 267)Less: number of shares sold in terms of ICBC transaction (note 17) (11 020 029)

Shares held by entities within the group 5 669 530Shares held by other shareholders 1 584 448 697 8 000 000 52 982 248

Shares issued during 2014 in terms of the group’s equity compensation plans 4 879 268Share buy-back (4 361 547)

Shares in issue at 31 December 2014 1 618 361 849 8 000 000 52 982 248

Net shares held in terms of the group’s Tutuwa initiative 27 725 901

Total number of shares held initially by Tutuwa SEs (note 17) 99 190 197Less: portion of shares financed directly by third parties (note 17) (60 444 267)Less: number of shares sold in terms of ICBC transaction (note 17) (11 020 029)

Shares held by entities within the group 12 807 677Shares held by other shareholders 1 577 828 271 8 000 000 52 982 248

All issued shares are fully paid up.

193

16. Share capital continued

2014Number of

shares

2013Number of

shares

16.3 Unissued sharesOrdinary shares of 10 cents each, of which 80 892 206 (2013: 80 306 791) are under the general authority of the directors which authority expires at the annual general meeting to be held on 28 May 2015 246 439 770 242 078 223

Ordinary shares of 10 cents per share reserved to meet the requirements of the EGS and GSIS 135 198 381 140 077 649

Ordinary shares of 10 cents each reserved in terms of the rules of the EGS and GSIS as approved by members’ resolution dated 27 May 2010 155 825 715 155 825 715Less: issued to date of the above resolution for the EGS and GSIS schemes (20 627 334) (15 748 066)

Total ordinary unissued shares 381 638 151 382 155 872

The group has resolved to buy back ordinary shares to prevent shareholder dilution arising on the exercise of equity-settled share-based payment awards.

At the end of the year, the group would need to issue 13 582 079 (2013: 17 093 357) SBG ordinary shares to settle the outstanding options in GSIS and rights in EGS awarded to participants historically.

Non-redeemable, non-cumulative, non-participating preference shares of 1 cent each of which 947 017 752 (2013: 947 017 752) are under the general authority of the directors which authority expires at the annual general meeting to be held on 28 May 2015 947 017 752 947 017 752

Total non-redeemable, non-cumulative, non-participating unissued shares 947 017 752 947 017 752

The GSIS and EGS reconciliations are disclosed in annexure C.




16. Share capital continued16.4 Interest of directors in the capital of the company

Direct beneficial1 Indirect beneficial1

2014Number

of shares

2013Number

of shares

2014Number

of shares

2013Number

of shares

Ordinary sharesDDB Band2 9 742RMW Dunne 14 000 14 000 28 000TS Gcabashe 111 112 111 112KP Kalyan2 125 000BJ Kruger 275 000 148 004SJ Macozoma2, 3, 5 6 092 295KD Moroka4 515 515 111 112 111 112AC Nissen2 111 112ANA Peterside CON2 100 000SP Ridley 28 589 10 328MJD Ruck 175 000 175 000SK Tshabalala4 40 900 15 900 698 339 698 339EM Woods 52 450 52 450

586 454 411 939 1 034 563 7 276 970

Direct beneficial1

2014Number

of shares

2013Number

of shares

Second preference sharesDDB Band2 16 958KP Kalyan2 3 214BJ Kruger 26 791 26 791

26 791 46 963

2014Number

of shares

2013Number

of shares

Shares as at 31 DecemberShare incentives 3 065 191 3 454 661

1 As per Listings Requirements of the JSE.2 DDB Band and AC Nissen retired as directors in 2014. KP Kalyan and SJ Macozoma resigned as directors in 2014. ANA Peterside con was appointed as director

in 2014.3 SJ Macozoma holds an effective 28.4% (2013: 28.4%) interest in Safika, which acquired 24 132 911 shares in terms of the black ownership initiative of which

2 681 166 were sold to ICBC.4 Subsequent to 31 December 2014, SK Tshabalala disposed of 279 525 ordinary shares and KD Moroka disposed of 44 476 SBG ordinary shares in order to settle

employees' tax and associated funding and transaction costs arising from the lifting of the final restrictions imposed in terms of the group’s black economic empowerment initiative, by means of participation in a volume weighted average price bulk sale transaction, at an average price of R143,20 per share. The sales in question were executed under a transaction made available to all the beneficiaries of the Tutuwa Managers’ Trusts, in which these directors elected to participate prior to 31 October 2014. The directors had no discretion as to price or volumes of shares sold. The shares were sold on the open market. Pre-approval for these transactions was obtained from the JSE. TS Gcabashe elected not to sell any shares in this regard and settled the employee’s tax directly.

5 The 2013 number of shares has been restated in order to align with the 28.4% shareholding as disclosed in 2013.

195

16. Share capital continued16.5 Shareholder analysis

2014 20131

Number of shares

(million) % holding

Number of shares

(million) % holding

16.5.1 10 major shareholders2

ICBC 325,0 20.1 325,0 20.1Government Employees Pension fund (investment managed by PIC) 212,6 13.1 222,8 13.8Tutuwa participants 88,2 5.5 88,2 5.5

Staff 34,5 2.2 34,5 2.2Strategic partners 35,8 2.2 35,8 2.2Communities and regional businesses 17,9 1.1 17,9 1.1

Investment Solutions 33,5 2.1 23,7 1.5Allan Gray Balanced Fund 31,8 2.0 23,4 1.4Dodge & Cox 28,2 1.7 28,2 1.7Allan Gray Equity Fund 24,5 1.5 21,7 1.3Vanguard Emerging Markets Fund 22,6 1.4 23,5 1.5GIC Asset Management 21,7 1.3 22,4 1.4Dimensional Emerging Markets Value Fund 19,3 1.2 19,7 1.2

807,4 49.9 798,6 49.4

16.5.2 Geographic spread of shareholdersSouth Africa 831,3 51.3 859,4 53.1Foreign shareholders 787,1 48.7 758,6 46.9

China 327,7 20.2 326,9 20.2United States of America 222,5 13.7 217,8 13.5United Kingdom 68,5 4.2 73,7 4.6Singapore 25,9 1.6 25,1 1.6Australia 15,7 1.0 13,6 0.8Ireland 15,5 1.0 16,0 1.0Namibia 12,6 0.8 11,8 0.7Saudi Arabia 10,7 0.7 9,1 0.6Netherlands 10,7 0.7 8,7 0.5Japan 9,8 0.6 2,2 0.1Canada 7,5 0.5 8,4 0.5Luxembourg 6,4 0.4 7,5 0.5Other 53,6 3.3 37,8 2.3

1 618,4 100.0 1 618,0 100.0

1 Comparative information has been restated to align with current year representation.2 Beneficial holdings determined from the share register and enquiries conducted on our behalf in terms of section 56 of the Companies Act.




16. Share capital continued16.5 Shareholder analysis continued

2014 20131

Number of shares (million)

% holding

Number of shares

(million)%

holding

16.5.3 Spread of ordinary shareholdersPublic2 988,9 61.1 978,4 60.5Non-public2 629,5 38.9 639,6 39.5

Directors and prescribed officers of Standard Bank Group, and its subsidiaries3 1,3 0.1 1,3 0.1ICBC 325,0 20.1 325,0 20.1Government Employees Pension fund (investment managed by PIC) 212,6 13.1 222,8 13.7Standard Bank Group retirement funds 2,3 0.1 2,2 0.1Tutuwa participants4 88,2 5.5 88,2 5.5Associates of directors 0,1 0,1

1 618,4 100.0 1 618,0 100.0

2014 2013

Number of shares

% holding

Number of shares

% holding

16.5.4 Spread of 6.5% cumulative preference shareholdersPublic2 8 000 000 100.0 8 000 000 100.0

8 000 000 100.0 8 000 000 100.0

16.5.5 Spread of non-redeemable, non-cumulative, non-participating preference shareholdersPublic2 52 929 457 99.9 52 908 285 99.9Non-public2 52 791 0.1 73 963 0.1

Directors and prescribed officers of Standard Bank Group, and its subsidiaries3 52 791 0.1 72 963 0.1Associates of directors 1 000

52 982 248 100.0 52 982 248 100.0

1 Comparative information has been restated to align with current year representation.2 As per Listings Requirements of the JSE.3 Excludes indirect holdings of strategic partners which are included in Tutuwa participants.4 Includes Tutuwa Strategic Holdings 1 and 2, Tutuwa Staff Holdings 1, 2 and 3, Tutuwa Community and General Staff Share Trust.

16.6 Purchased equity securities Subsidiaries of the group purchased equity securities in Standard Bank Group Limited during the financial year to be held for the

benefit of the group’s policyholders and to facilitate client trading activities. The total number of equity securities purchased during the financial year was 54 331 546 (2013: 39 012 666) for which the average share price was R134,58 (2013: R116,20). The total number of treasury shares held at the end of the year was 12 807 677 (2013: 5 669 530). Of the total number of equity securities purchased during the financial year, 4 361 547 (2013: 2 877 768) ordinary shares were delisted and reinstated back to authorised share capital.

197

17. Empowerment reserve SBG and Liberty entered into a series of transactions in 2004 whereby investments were made in cumulative redeemable

preference shares issued by BEE entities which are SEs. The initial investments made by SBG and Liberty totalled R4 017 million and R1 251 million, respectively.

The proceeds received from the issue of the cumulative redeemable preference shares were used by the BEE entities to purchase SBG and Liberty shares. The BEE entities initially purchased and owned 99 190 197 ordinary shares of SBG.

The preference shares owned by the group do not meet the definition of a financial asset in terms of IFRS and are therefore treated as a reduction of equity and are disclosed in the statement of changes in equity as a negative empowerment reserve. The empowerment reserve represents SBG shares held by the SEs that are deemed to be treasury shares in terms of accounting conventions.

Refer to pages 70 to 72 in the annual integrated report for a detailed explanation of the accounting treatment of the group’s Tutuwa initiative.

On 20 December 2007, the group obtained external financing to the group for a portion of the financing provided to the SEs. As a result, the negative empowerment reserve was reduced by the value of the external financing obtained of R1 billion and a proportion of the SBG shares held by the SEs (24 691 358 shares) were no longer deemed to be treasury shares for accounting purposes.

On 3 March 2008, the BEE entities sold 11.1%, or 11 020 029, of their ordinary shares in SBG to ICBC, partly using the proceeds towards the repayment of their preference share liability, amounting to R986 million. These shares were no longer deemed to be treasury shares for accounting purposes.

On 3 March 2010, the contractual terms of the preference share agreements with the BEE entities were amended. The amendment permitted dividends paid on SBG ordinary shares and received by the BEE entities to flow through to the participants in those entities and not to be paid as a preference dividend to settle the preference share obligation, subject to specific conditions. To the extent that preference dividends are received from the BEE entities, these are credited directly to reserves and disclosed as a reduction in the ordinary dividends paid on SBG shares. Preference dividends accrued but not received due to cash distributions being made to participants, has the effect of increasing the negative empowerment reserve. The legal accrual of the preference dividend does not result in an accounting entry but rather lengthens the repayment period.

In May and June 2013, Tutuwa Strategic Holdings 1 Proprietary Limited (Tutuwa 1) and Tutuwa Strategic Holdings 2 Proprietary Limited (Tutuwa 2), respectively, obtained third-party financing and repaid in full their outstanding preference share funding and accrued dividends thereon of R668 million and R1 007 million, respectively, to the group. This resulted in a release of R1 675 million of the group’s negative empowerment reserve relating to Tutuwa 1 and Tutuwa 2 and resulted in 35 752 909 ordinary shares no longer being deemed to be treasury shares for accounting purposes.

The preference share funding, including accrued dividends (the maximum exposure to credit risk), owing to the group is represented in the table below. The group would be exposed to losses if the market value of the shares held within the BEE entities drops below the preference share debt outstanding.

2014Rm

2013Rm

Standard Bank Group (Tutuwa) BEE entitiesPreference share debt owing by the BEE entities to the group 2 735 2 516Less: amount financed by external parties (1 192) (1 120)

Preference share debt owing by the BEE entities to the group 1 543 1 396

Liberty BEE entitiesPreference share debt owing by the BEE entities to the group 823 922

Total preference share debt owing to the group 2 366 2 318




17. Empowerment reserve continued The investment in the cumulative redeemable preference shares of the BEE entities, accounted for by the group as a negative

empowerment reserve, is set out below:

2014 Number ofpreference

shares

2013Number of

preference shares

Issue price

per share (R)

2014Rm

2013Rm

Standard Bank Group 1 802 1 802

Black Managers’ Trust – Tutuwa Staff Holdings 1 – 3 Proprietary Limited1 1 187 532 1 187 532 1 000 1 187 1 187The Community Trust – Tutuwa Community Holdings Proprietary Limited1 614 603 614 603 1 000 615 615

Liberty 807 905

Shanduka 127 000 144 000 1 000 127 144Safika 191 000 215 000 1 000 191 215Black Managers’ Trust 324 000 365 000 1 000 324 365The Community Trust 165 000 181 000 1 000 165 181

Total investment 2 609 2 707Financing by parties external to the group (1 000) (1 000)Preference dividends accrued but not received due to dividends distributed 696 555Attributable to non-controlling interests of Liberty (371) (416)

Standard Bank Group empowerment reserve 1 934 1 846

Standard Bank

GroupRm

LibertyRm

TotalRm

Reconciliation of investment in preference sharesOriginal amount invested in 2004 4 017 1 251 5 268Redemption – 20062 (92) (92)Financing by external parties (1 000) (1 000)Redemption – 20083 (986) (986)Redemption – 20102 (40) (40)Redemption – 20112 (44) (44)Redemption – 20122 (63) (63)Redemption – 20132, 4 (1 229) (107) (1 336)

Redemption – 20142 (98) (98)Attributable to non-controlling interests of Liberty (371) (371)Preference dividends accrued but not received due to dividends distributed 696 696

Remaining amounts invested at 31 December 2014 1 498 436 1 934

1 The SEs owned 88 170 168 (2013: 88 170 168) ordinary shares of SBG at 31 December 2014, of which 60 444 267 (2013: 60 444 267) ordinary shares are funded by third-party financing.

2 Redemption of cumulative preference shares.3 On 3 March 2008, Tutuwa participants sold 11.1%, or 11 020 029, of their ordinary shares in the group to ICBC, partly using the proceeds for the repayment of their

preference share liability, amounting to R986 million.4 In May and June 2013, Tutuwa 1 and Tutuwa 2 obtained third-party financing and repaid in full their outstanding preference share funding of R1,7 billion.

This resulted in 35 752 909 ordinary shares being recognised as issued shares.

The cumulative redeemable preference shares owned by the group attract dividends at 8.5% per annum, while those of Liberty accrue dividends at 67% of the Standard Bank prime lending rate (2013: 67%). The dividend obligation of the preference shares compounds on each date when the issuing company receives a dividend from the group or Liberty, respectively.

For the purposes of the earnings per share calculation, the weighted average number of company shares in issue is reduced by the number of shares held by the BEE entities bought with the proceeds received from the preference shares (note 32).

199

18. Trading liabilities

2014Rm

2013Rm

ClassificationListed 23 451 18 882Unlisted 20 310 16 486

43 761 35 368

Comprising:Government, municipality and utility bonds 4 119 1 456Corporate bonds 42Listed equities 16 777 16 041Collateral 346 211Repurchase and other collateralised agreements 13 188 9 501Credit-linked notes 1 106 2 702Other instruments 8 225 5 415

43 761 35 368

Maturity analysisThe maturities represent periods to contractual redemption of trading liabilities recorded.

Repayable on demand 716 212Maturing within 1 month 16 796 10 696Maturing after 1 month but within 6 months 2 458 1 691Maturing after 6 months but within 12 months 1 389 1 116Maturing after 12 months 5 371 5 056Undated 17 031 16 597

43 761 35 368




19. Deposit and current accounts

2014Rm

2013Rm

Deposits from banks 97 606 68 650

Deposits from banks and central banks 91 274 67 963Deposits from banks under repurchase agreements 6 332 687

Deposits from customers 949 606 853 088

Current accounts 188 739 168 457Cash management deposits 124 766 123 932Call deposits 246 722 214 353Savings accounts 20 332 19 369Term deposits 227 055 196 926Negotiable certificates of deposit 95 421 94 979Repurchase agreements 3 345 432Securitisation issuances 3 819 4 699Other funding 39 407 29 941

Total deposit and current accounts 1 047 212 921 738

Maturity analysisThe maturity analysis is based on the remaining periods to contractual maturity from year end.

Repayable on demand 653 352 571 519Maturing within 1 month 108 006 78 504Maturing after 1 month but within 6 months 108 717 114 192Maturing after 6 months but within 12 months 57 217 38 600Maturing after 12 months 119 920 118 923

1 047 212 921 738

Segmental analysis – geographic area The following table sets out the distribution of the group’s deposit and current accounts by geographic area where recorded.

2014 2013

% Rm % Rm

South Africa 75 780 377 76 701 643Rest of Africa 19 202 322 18 166 703Outside Africa 6 64 513 6 53 392

100 1 047 212 100 921 738

201

20. Current and deferred tax liabilities

2014Rm

2013Rm

Current tax liabilities 4 505 4 912Deferred tax liabilities 4 475 3 995

8 980 8 907

20.1 Deferred tax analysisAccrued interest receivable 5 25Assessed losses1 (571) (1 054)Assets on lease 226 300CGT 1 717 1 461Credit impairment charges (977) (809)DAC 161 144Deferred revenue liability (DRL) (59) (53)Property and equipment 1 755 1 249Derivatives and financial instruments 711 843Fair value adjustments on financial instruments 214 351Intangible asset – PVIF 65 59Policyholder change in valuation basis 2 239 1 997Post-employment benefits 149 218Share-based payments (617) (512)Special transfer to life fund (442) (379)Provisions and other items (1 816) (1 381)

Deferred tax closing balance 2 760 2 459

Deferred tax liabilities 4 475 3 995Deferred tax assets (note 10) (1 715) (1 536)

1 The deferred tax asset has arisen from the group entities incurring operational tax losses. This asset is anticipated to be recovered as financial projects indicate these entities are likely to produce sufficient taxable income in the near future. The group has estimated tax losses of R2 080 million (2013: R3 815 million), which are available for set-off against future taxable income. These deferred tax asset balances were offset against deferred tax liabilities, refer to annexure D, accounting policy 15 – Taxation.




20. Current and deferred tax liabilities continued

2014Rm

2013Rm

20.2 Deferred tax reconciliationDeferred tax at the beginning of the year 2 459 2 509Deferred tax adjustment due to change in tax rate

Assessed losses 24Originating/(reversing) temporary differences for the year: 277 (50)

Accrued interest receivable (20) 29Assessed losses 459 (358)Assets on lease (74) (84)CGT 256 630Credit impairment charges (168) 49DAC 17 21DRL (6) (6)Property and equipment 506 886Derivatives and financial instruments (132) (1 608)Fair value adjustments on financial instruments (137) 51Intangible asset – PVIF 6 (52)Policyholder change in valuation basis 242 282Post-employment benefits (69) (70)Share-based payments (105) 123Special transfer to life fund (63) (68)Provisions and other differences (435) 125

Deferred tax at the end of the year 2 760 2 459

Temporary differences for the year comprise:Recognised in OCI from continuing operationsRecognised in OCI (43) (48)

Fair value adjustments on financial instruments (26) 30Defined benefit fund remeasurements (17) (78)

Recognised in equity-deferred tax on share-based payments (150) (76)Recognised in the income statement 494 (101)Translation movement 175

Recognised in OCI 5 5Recognised in the income statement (5) 170

301 (50)

203

21. Provisions and other liabilities

2014Rm

2013Rm

21.1 SummaryTrading settlement liabilities 6 568 20 134Items in the course of transmission 1 383 1 992Post-employment benefits (note 37) 1 277 1 258

Third-party liabilities arising on consolidation of mutual funds (note 21.2) 34 503 41 817Cash-settled share-based payment liability 1 236 1 394Insurance payables 7 170 6 104Staff-related accruals 5 055 4 126DRL 216 194Accounts payable 2 268 2 461Deemed disposal taxation liability 268 544Other liabilities 13 927 36

73 871 80 060

21.2 Third-party liabilities arising on consolidation of mutual fundsBalance at the beginning of the year 41 817 31 974Additional mutual funds classified as subsidiaries 2 152 1 054Repayments through withdrawal or change in effective ownership (11 719) 3 146Mutual funds no longer classified as subsidiaries (115) (847)Distributions (1 217) (1 425)Fair value adjustment 3 585 7 915

Balance at the end of the year 34 503 41 817

The group has classified certain mutual funds as investments in subsidiaries. Consequently, fund interests not held by the group are classified as third-party liabilities as they represent demand deposit liabilities measured at fair value. A maturity analysis is not possible as it is dependent on external unit holders’ behaviour outside of the group’s control.

2014Rm

2013Rm

22. Policyholders’ liabilitiesPolicyholders’ liabilities under insurance contracts 205 533 189 798

Insurance contracts (note 22.1) 195 356 180 742Investment contracts with DPF (note 22.1) 10 177 9 056

Policyholders’ liabilities under investment contracts (note 22.2) 81 983 74 146

287 516 263 944




22. Policyholders’ liabilities continued

2014 2013

Insurance contracts

Rm

Investment contracts with DPF1

Rm

Reinsurance assets2

Rm

Insurance contracts

Rm

Investment contracts with DPF1

Rm

Reinsurance assets2

Rm

22.1 Policyholders’ liabilities under insurance contracts and reinsurance assetsBalance at the beginning of the year 180 742 9 056 (1 161) 164 666 3 855 (978)Inflows 59 339 2 614 (1 138) 57 926 2 716 (1 031)

Insurance premiums 38 882 1 820 (1 015) 32 756 1 745 (965)Investment returns 20 450 794 (123) 25 170 971 (66)

Unwinding of discount rate 753 2 (128) 947 1 (67)Investments 19 697 792 5 24 223 970 1

Fee revenue 7

Outflows (42 324) (1 529) 970 (39 158) 2 239 801

Claims and policyholders’ benefits (30 677) (1 367) 925 (27 223) 2 472 763

Claims and policyholders’ benefits under insurance contracts (30 677) (581) 925 (27 223) (741) 763Switches between investment contracts with DPF (to)/from investment contracts without DPF (786) 3 213

Acquisition costs associated with insurance contracts (3 804) (70) 7 (3 473) (122) 6General marketing and administration expenses (4 887) (87) 18 (4 581) (104) 10Preference dividend (867) (971)Finance costs (266) (209)Taxation (1 823) (5) 20 (2 701) (7) 22

Net income from insurance operations (2 444) (35) 28 (2 809) (14) 50

Changes in estimates (103) (6) (1) 218 (2)Planned margins and other variances (3 952) (42) 43 (4 667) (21) 69New business 190 1 59Shareholder taxation on transfer of net income 1 421 13 (15) 1 581 7 (17)

Foreign currency translation 43 71 (1) 117 260 (3)

Balance at the end of the year 195 356 10 177 (1 302) 180 742 9 056 (1 161)

Liquidity profileCurrent 15 880 382 (261) 15 289 386 (215)Non-current 179 476 9 795 (1 041) 165 453 8 670 (946)

195 356 10 177 (1 302) 180 742 9 056 (1 161)

1 The group cannot reliably measure the fair value of investment contracts with DPF. The DPF is a contractual right that gives investors in these contracts the right to receive supplementary discretionary returns through participation in the surplus arising from the assets held in the investment DPF fund. These supplementary returns are subject to the discretion of the group.

2 Reinsurance contracts are included in the insurance prepayments and reinsurance assets under other assets in note 11.

205

22. Policyholders’ liabilities continued

2014Rm

2013Rm

22.2 Policyholders’ liabilities under investment contractsBalance at the beginning of the year 74 146 68 163Fund inflows from investment contracts (excluding switches) 14 729 13 379Net fair value adjustments including the change in deferred taxation on investment property 7 473 10 135Fund outflows from investment contracts (excluding switches) (14 213) (13 398)Switches between investments with DPF to/(from) investments without DPF 786 (3 213)Service fee income (938) (920)


Liquidity profileCurrent 5 201 4 843Non-current 76 782 69 303

81 983 74 146

Net income from investment contracts1 45 (31)

Service fee income 938 920Expenses (893) (951)

Property expenses applied to investment returns 348 369Shareholder taxation on transfer of net income (17) 13Acquisition costs (302) (239)General marketing and administration expenses (837) (1 026)Finance costs (85) (68)

1 Prior to DAC and DRL adjustments.




23. Subordinated debt

Redeemable/repayable date Date issued Rate % Callable date Rate after call date %

Notional value2014LCm

Carrying value1

2014Rm

Notional value2014

Rm

Carrying value1

2013Rm

Notional value2013

Rm

Subordinated bonds2

The Standard Bank of South Africa 20 735 20 500 20 815 20 050

SBK 7 24 May 2020 24 May 2005 9.633 24 May 20154 JIBAR5 + 1.97 ZAR3 000 3 030 3 000 3 031 3 000SBK 9 10 April 2023 10 April 2006 8.403 10 April 20184 JIBAR5 + 1.68 ZAR1 500 1 529 1 500 1 528 1 500SBKi 116 9 April 2019 9 April 2009 CPI indexed7 10 April 20144 RY8 of 7.25 ZAR1 800 2 357 1 800SBK 12 24 November 2021 24 November 2009 10.82 3 24 November 2016 JIBAR5 + 3.90 ZAR1 600 1 618 1 600 1 618 1 600SBK 13 24 November 2021 24 November 2009 JIBAR5 + 2.20 24 November 2016 JIBAR5 + 4.20 ZAR1 150 1 160 1 150 1 159 1 150SBK 14 1 December 2022 1 December 2011 9.663 1 December 20174 CPI indexed7 + 2.69 ZAR1 780 1 795 1 780 1 795 1 780SBK 15 23 January 2022 23 January 2012 JIBAR5 + 2.00 23 January 2017 CPI indexed7 + 2.36 ZAR1 220 1 239 1 220 1 237 1 220SBK 16 15 March 2023 15 March 2012 JIBAR5 + 2.10 15 March 2018 CPI indexed7 + 2.42 ZAR2 000 2 008 2 000 2 006 2 000SBK 17 30 July 2024 30 July 2012 JIBAR5 +2.20 30 July 2019 JIBAR5 +2.20 ZAR2 000 2 029 2 000 2 025 2 000SBK 18 24 October 2025 24 October 2012 JIBAR5 + 2.35 24 October 2020 JIBAR5 + 2.35 ZAR3 500 3 558 3 500 3 552 3 500SBK 19 24 October 2024 24 October 2012 JIBAR5 + 2.20 24 October 2019 JIBAR5 + 2.20 ZAR500 508 500 507 500SBK 209 2 December 2024 2 December 2014 JIBAR5 + 3.50 2 December 20194 JIBAR5 + 3.50 ZAR2 250 2 261 2 250

Standard Bank Swaziland 14 October 2020 14 October 2010 8.106 14 October 2015 JIBAR5 + 1.00 E50 50 50 80 80Stanbic Bank Botswana June 2021 – May 2022 June 2011 – May 2012 BoBC10 + (1.30 to 1.50) June 2016 – May 2017 BoBC10 + (2.05 – 2.25) BWP130 158 158 156 156Standard Bank Mozambique 29 June 2017 29 June 2007 WA11 + 0.5012 MT260 88 88 92 92CfC Stanbic Bank Kenya 7 July 2016 7 July 2009 12.5 8 July 2014 12.5 KES2 500 321 319 608 608Stanbic Bank Uganda6 10 August 2016 10 August 2009 14.50 and T-Bill14 + 1.5015 UGX30 000 125 125Stanbic Bank Ghana 23 January 2022 23 January 2012 11.253 23 January 2017 15.753 GHS7 25 25 31 31Subordinated bonds issued to group companies (1 140) (1 114) (649) (639)

Total bonds qualifying as SARB regulatory banking capital 20 237 20 026 21 258 20 503Rest of Africa bonds not qualifying as SARB regulatory banking capital 1 652 1 638

Standard Bank Swaziland 14 December 2024 14 December 2014 8.75 14 December 20194 JIBAR5 + 2.70 E50 50 50CfC Stanbic Bank Kenya 8 December 2021 15 December 2014 12.95 1 June 20204 12.95 KES4 000 511 511Stanbic IBTC Bank (Nigeria) 30 September 2024 30 September 2014 13.25 1 October 20194 13.25 NGN15 440 991 977Standard Bank Namibia 23 October 2024 23 October 2014 9.00 24 October 20194 JIBAR5 + 1.30 NAD100 100 100

Total subordinated bonds – banking activities 21 889 21 664 21 258 20 503

Refer to footnotes on pages 208 to 209.

207

23. Subordinated debt



Carrying value1

2014Rm

Notional value2014

Rm

Carrying value1

2013Rm

Notional value2013

Rm

Subordinated bonds2

The Standard Bank of South Africa 20 735 20 500 20 815 20 050

SBK 7 24 May 2020 24 May 2005 9.633 24 May 20154 JIBAR5 + 1.97 ZAR3 000 3 030 3 000 3 031 3 000SBK 9 10 April 2023 10 April 2006 8.403 10 April 20184 JIBAR5 + 1.68 ZAR1 500 1 529 1 500 1 528 1 500SBKi 116 9 April 2019 9 April 2009 CPI indexed7 10 April 20144 RY8 of 7.25 ZAR1 800 2 357 1 800SBK 12 24 November 2021 24 November 2009 10.82 3 24 November 2016 JIBAR5 + 3.90 ZAR1 600 1 618 1 600 1 618 1 600SBK 13 24 November 2021 24 November 2009 JIBAR5 + 2.20 24 November 2016 JIBAR5 + 4.20 ZAR1 150 1 160 1 150 1 159 1 150SBK 14 1 December 2022 1 December 2011 9.663 1 December 20174 CPI indexed7 + 2.69 ZAR1 780 1 795 1 780 1 795 1 780SBK 15 23 January 2022 23 January 2012 JIBAR5 + 2.00 23 January 2017 CPI indexed7 + 2.36 ZAR1 220 1 239 1 220 1 237 1 220SBK 16 15 March 2023 15 March 2012 JIBAR5 + 2.10 15 March 2018 CPI indexed7 + 2.42 ZAR2 000 2 008 2 000 2 006 2 000SBK 17 30 July 2024 30 July 2012 JIBAR5 +2.20 30 July 2019 JIBAR5 +2.20 ZAR2 000 2 029 2 000 2 025 2 000SBK 18 24 October 2025 24 October 2012 JIBAR5 + 2.35 24 October 2020 JIBAR5 + 2.35 ZAR3 500 3 558 3 500 3 552 3 500SBK 19 24 October 2024 24 October 2012 JIBAR5 + 2.20 24 October 2019 JIBAR5 + 2.20 ZAR500 508 500 507 500SBK 209 2 December 2024 2 December 2014 JIBAR5 + 3.50 2 December 20194 JIBAR5 + 3.50 ZAR2 250 2 261 2 250

Standard Bank Swaziland 14 October 2020 14 October 2010 8.106 14 October 2015 JIBAR5 + 1.00 E50 50 50 80 80Stanbic Bank Botswana June 2021 – May 2022 June 2011 – May 2012 BoBC10 + (1.30 to 1.50) June 2016 – May 2017 BoBC10 + (2.05 – 2.25) BWP130 158 158 156 156Standard Bank Mozambique 29 June 2017 29 June 2007 WA11 + 0.5012 MT260 88 88 92 92CfC Stanbic Bank Kenya 7 July 2016 7 July 2009 12.5 8 July 2014 12.5 KES2 500 321 319 608 608Stanbic Bank Uganda6 10 August 2016 10 August 2009 14.50 and T-Bill14 + 1.5015 UGX30 000 125 125Stanbic Bank Ghana 23 January 2022 23 January 2012 11.253 23 January 2017 15.753 GHS7 25 25 31 31Subordinated bonds issued to group companies (1 140) (1 114) (649) (639)

Total bonds qualifying as SARB regulatory banking capital 20 237 20 026 21 258 20 503Rest of Africa bonds not qualifying as SARB regulatory banking capital 1 652 1 638

Standard Bank Swaziland 14 December 2024 14 December 2014 8.75 14 December 20194 JIBAR5 + 2.70 E50 50 50CfC Stanbic Bank Kenya 8 December 2021 15 December 2014 12.95 1 June 20204 12.95 KES4 000 511 511Stanbic IBTC Bank (Nigeria) 30 September 2024 30 September 2014 13.25 1 October 20194 13.25 NGN15 440 991 977Standard Bank Namibia 23 October 2024 23 October 2014 9.00 24 October 20194 JIBAR5 + 1.30 NAD100 100 100


Refer to footnotes on pages 208 to 209.




23. Subordinated debt continued



Carrying value1

2014Rm

Notional value2014

Rm

Carrying value1

2013Rm

Notional value2013

Rm


LibertyQualifying as regulatory insurance capital 3 570 3 500 3 069 3 000

Redeemable – 13 August 2017 13 August 2017 13 August 2012 7.673 7.673 ZAR1 000 1 026 1 000 1 025 1 000Redeemable – 3 April 2018 3 April 2018 3 October 2012 7.643 7.643 ZAR1 000 1 015 1 000 1 014 1 000Redeemable – 14 August 2020 14 August 2020 14 August 2013 9.173 9.173 ZAR1 000 1 030 1 000 1 030 1 000Redeemable – 12 December 2021 12 December 2021 12 December 2014 JIBAR5 + 2.5 JIBAR5 + 2.5 ZAR 500 499 500

Total subordinated bonds 25 459 25 164 24 327 23 503

Subordinated loans issued within the rest of Africa 29 March 2018 29 March 2010 LIBOR13 + 2.25 29 March 2015 LIBOR13 + 3.25 USD5 62 58 189 189

Total subordinated debt 25 521 25 222 24 516 23 692

1 The difference between the carrying and notional value represents foreign exchange movements, accrued interest and the unamortised fair value adjustments relating to bonds hedged for interest rate risk.

2 Tier II, unless stated otherwise.3 Fixed semi-annual coupon.4 The issuer may redeem on this date, or any subsequent interest payment date.5 JIBAR is the three-month floating Johannesburg interbank agreed rate.6 Redeemed during 2014.7 The interest rate is calculated in terms of the pricing supplement using the base rate as defined adjusted for changes in the CPI as published by Statistics South Africa.8 RY is the real yield, which is the return from an investment adjusted for the effects of inflation, compounded semi-annually.9 The terms of the SBK 20 bonds which were issued in 2014, include a regulatory requirement for Tier II capital instruments which provides for the write-off in whole

or, if permitted by the relevant regulator (SARB), in part, on the earlier of a decision that a write off, without which the issuer would become non-viable, is necessary; or a decision to make a public sector injection of capital, or equivalent support, without which the issuer would have become non-viable, as determined and notified by the relevant regulator (SARB).

10 BoBC is the rate for three-month Botswana certificates.11 WA is the rate on bonds which carry a floating rate equal to the weighted average of the last six treasury bills maturing at 60 or more days.12 The interest is payable quarterly.13 LIBOR is the London interbank offer rate for three-month US dollar deposits.14 T-Bill refers to the yield on the latest 182-day Uganda Treasury Bill.15 Up to 50% of the notes may be issued at a floating rate. The fixed rate is 14.50% and the floating rate is the weighted average of the most recent published 182-day Uganda

Government Treasury Bill plus a margin of 150 basis points.

209

23. Subordinated debt continued



Carrying value1

2014Rm

Notional value2014

Rm

Carrying value1

2013Rm

Notional value2013

Rm


LibertyQualifying as regulatory insurance capital 3 570 3 500 3 069 3 000

Redeemable – 13 August 2017 13 August 2017 13 August 2012 7.673 7.673 ZAR1 000 1 026 1 000 1 025 1 000Redeemable – 3 April 2018 3 April 2018 3 October 2012 7.643 7.643 ZAR1 000 1 015 1 000 1 014 1 000Redeemable – 14 August 2020 14 August 2020 14 August 2013 9.173 9.173 ZAR1 000 1 030 1 000 1 030 1 000Redeemable – 12 December 2021 12 December 2021 12 December 2014 JIBAR5 + 2.5 JIBAR5 + 2.5 ZAR 500 499 500

Total subordinated bonds 25 459 25 164 24 327 23 503

Subordinated loans issued within the rest of Africa 29 March 2018 29 March 2010 LIBOR13 + 2.25 29 March 2015 LIBOR13 + 3.25 USD5 62 58 189 189

Total subordinated debt 25 521 25 222 24 516 23 692

1 The difference between the carrying and notional value represents foreign exchange movements, accrued interest and the unamortised fair value adjustments relating to bonds hedged for interest rate risk.

2 Tier II, unless stated otherwise.3 Fixed semi-annual coupon.4 The issuer may redeem on this date, or any subsequent interest payment date.5 JIBAR is the three-month floating Johannesburg interbank agreed rate.6 Redeemed during 2014.7 The interest rate is calculated in terms of the pricing supplement using the base rate as defined adjusted for changes in the CPI as published by Statistics South Africa.8 RY is the real yield, which is the return from an investment adjusted for the effects of inflation, compounded semi-annually.9 The terms of the SBK 20 bonds which were issued in 2014, include a regulatory requirement for Tier II capital instruments which provides for the write-off in whole

or, if permitted by the relevant regulator (SARB), in part, on the earlier of a decision that a write off, without which the issuer would become non-viable, is necessary; or a decision to make a public sector injection of capital, or equivalent support, without which the issuer would have become non-viable, as determined and notified by the relevant regulator (SARB).

10 BoBC is the rate for three-month Botswana certificates.11 WA is the rate on bonds which carry a floating rate equal to the weighted average of the last six treasury bills maturing at 60 or more days.12 The interest is payable quarterly.13 LIBOR is the London interbank offer rate for three-month US dollar deposits.14 T-Bill refers to the yield on the latest 182-day Uganda Treasury Bill.15 Up to 50% of the notes may be issued at a floating rate. The fixed rate is 14.50% and the floating rate is the weighted average of the most recent published 182-day Uganda

Government Treasury Bill plus a margin of 150 basis points.




24. Classification of assets and liabilities Accounting classifications and fair values of assets and liabilities The table below categorises the group’s assets and liabilities as at 31 December 2014 between that which is financial

and non-financial. All financial assets and liabilities have been classified according to their measurement category with disclosure of the fair value being provided for these items.

Held-for-trading1

Rm

Designated at fair value

RmHeld-to-maturity

Rm

Loans and receivables2

RmAvailable-for-sale

Rm

Other amortised cost2

Rm

Other assets/liabilities

Rm

Total carrying amount

RmFair value3

Rm

2014AssetsCash and balances with central banks 64 302 64 302 64 302Derivative assets 61 633 61 633 61 633Trading assets 72 040 72 040 72 040Pledged assets 5 084 6 990 206 1 905 14 185 14 191Non-current assets held for sale 150 587 671 66 396 30 1 216 1 058 219 958 213 096Financial investments 133 376 894 16 786 16 644 40 464 450 921 448 411Loans and advances to banks 363 115 857 116 220 122 389Loans and advances to customers 83 811 938 812 021 810 484Interest in associates and joint ventures 3 727 3 727Investment property 27 022 27 022 27 022Other financial assets4 10 513 10 5134

Other non-financial assets 50 303 50 303

289 477 385 001 16 786 1 085 856 42 399 1 216 82 110 1 902 845

LiabilitiesDerivative liabilities 72 281 72 281 72 281Trading liabilities 43 761 43 761 43 761Deposits from banks 21 97 585 97 606 104 675Deposits from customers 21 808 927 798 949 606 965 097Policyholders' liabilities5 81 983 205 533 287 516 81 983Subordinated debt 25 521 25 521 23 095Non-current liabilities held for sale 104 507 76 146 1 416 182 069 172 356Other financial liabilities4 36 335 28 561 64 8964

Other non-financial liabilities 17 955 17 955

220 549 140 147 1 155 611 224 904 1 741 211

1 Includes derivative assets or liabilities held-for-hedging. Refer to note 4.3.2 Includes financial assets and financial liabilities for which the carrying value has been adjusted for changes in fair value due to designated hedged risks.3 Carrying value has been used where it closely approximates fair values, excluding non-financial assets and liabilities. Refer to note 25 for a description on how

fair values are determined.4 The fair value of the other financial assets and liabilities approximates the carrying value due to their short-term nature.5 The fair value has been provided for financial liabilities under investment contracts which have been designated at fair value. The remaining liabilities for which fair

value disclosure has not been provided relate to insurance contracts and investment contracts with discretionary participation features that are not defined as financial instruments.

211

24. Classification of assets and liabilities Accounting classifications and fair values of assets and liabilities The table below categorises the group’s assets and liabilities as at 31 December 2014 between that which is financial


Held-for-trading1

Rm


RmHeld-to-maturity

Rm



Rm


Rm


Rm


RmFair value3

Rm

2014AssetsCash and balances with central banks 64 302 64 302 64 302Derivative assets 61 633 61 633 61 633Trading assets 72 040 72 040 72 040Pledged assets 5 084 6 990 206 1 905 14 185 14 191Non-current assets held for sale 150 587 671 66 396 30 1 216 1 058 219 958 213 096Financial investments 133 376 894 16 786 16 644 40 464 450 921 448 411Loans and advances to banks 363 115 857 116 220 122 389Loans and advances to customers 83 811 938 812 021 810 484Interest in associates and joint ventures 3 727 3 727Investment property 27 022 27 022 27 022Other financial assets4 10 513 10 5134


289 477 385 001 16 786 1 085 856 42 399 1 216 82 110 1 902 845

LiabilitiesDerivative liabilities 72 281 72 281 72 281Trading liabilities 43 761 43 761 43 761Deposits from banks 21 97 585 97 606 104 675Deposits from customers 21 808 927 798 949 606 965 097Policyholders' liabilities5 81 983 205 533 287 516 81 983Subordinated debt 25 521 25 521 23 095Non-current liabilities held for sale 104 507 76 146 1 416 182 069 172 356Other financial liabilities4 36 335 28 561 64 8964


220 549 140 147 1 155 611 224 904 1 741 211

1 Includes derivative assets or liabilities held-for-hedging. Refer to note 4.3.2 Includes financial assets and financial liabilities for which the carrying value has been adjusted for changes in fair value due to designated hedged risks.3 Carrying value has been used where it closely approximates fair values, excluding non-financial assets and liabilities. Refer to note 25 for a description on how

fair values are determined.4 The fair value of the other financial assets and liabilities approximates the carrying value due to their short-term nature.5 The fair value has been provided for financial liabilities under investment contracts which have been designated at fair value. The remaining liabilities for which fair





24. Classification of assets and liabilities continued Accounting classifications and fair values of assets and liabilities continued The table below categorises the group’s assets and liabilities as at 31 December 2013 between that which is financial


Held-for-trading1

Rm


RmHeld-to-maturity

Rm



Rm


Rm


Rm


RmFair value3

Rm

2013AssetsCash and balances with central banks 53 310 53 310 53 310Derivative assets 64 474 64 474 64 474Trading assets 54 588 54 588 54 588Pledged assets 3 324 1 348 2 041 6 713 6 713Non-current assets held for sale 107 306 74 871 29 1 078 183 284 180 051Financial investments 506 342 896 13 264 11 162 27 889 395 717 396 243Loans and advances to banks 668 94 236 94 904 95 034Loans and advances to customers 1 074 181 4 743 457 744 716 736 389Interest in associates and joint ventures 4 797 4 797Investment property 27 299 27 299 27 299Other financial assets4 8 365 8 3654


231 272 345 093 13 268 985 401 29 959 85 936 1 690 929

LiabilitiesDerivative liabilities 69 244 69 244 69 244Trading liabilities 35 368 35 368 35 368Non-current liabilities held for sale 57 194 294 75 505 1 511 134 504 130 031Deposits from banks 961 67 689 68 650 68 877Deposits from customers 24 377 828 711 853 088 858 875Policyholders’ liabilities5 74 146 189 798 263 944 74 146Subordinated debt 24 516 24 516 22 096Other financial liabilities4 39 983 31 347 71 3304


161 806 139 761 1 027 768 208 946 1 538 281

1 Includes derivative assets or liabilities held-for-hedging. Refer to note 4.3.2 Includes financial assets and financial liabilities for which the carrying value has been adjusted for changes in fair value due to designated hedged risks.3 Carrying value has been used where it closely approximates fair values, excluding non-financial assets and liabilities. Refer to note 25 for a description on

how fair values are determined.4 The fair value of the other financial assets and liabilities approximates the carrying value due to their short-term nature.5 The fair value has been provided for financial liabilities under investment contracts which have been designated at fair value. The remaining liabilities for which fair


213

24. Classification of assets and liabilities continued Accounting classifications and fair values of assets and liabilities continued The table below categorises the group’s assets and liabilities as at 31 December 2013 between that which is financial


Held-for-trading1

Rm


RmHeld-to-maturity

Rm



Rm


Rm


Rm


RmFair value3

Rm

2013AssetsCash and balances with central banks 53 310 53 310 53 310Derivative assets 64 474 64 474 64 474Trading assets 54 588 54 588 54 588Pledged assets 3 324 1 348 2 041 6 713 6 713Non-current assets held for sale 107 306 74 871 29 1 078 183 284 180 051Financial investments 506 342 896 13 264 11 162 27 889 395 717 396 243Loans and advances to banks 668 94 236 94 904 95 034Loans and advances to customers 1 074 181 4 743 457 744 716 736 389Interest in associates and joint ventures 4 797 4 797Investment property 27 299 27 299 27 299Other financial assets4 8 365 8 3654


231 272 345 093 13 268 985 401 29 959 85 936 1 690 929

LiabilitiesDerivative liabilities 69 244 69 244 69 244Trading liabilities 35 368 35 368 35 368Non-current liabilities held for sale 57 194 294 75 505 1 511 134 504 130 031Deposits from banks 961 67 689 68 650 68 877Deposits from customers 24 377 828 711 853 088 858 875Policyholders’ liabilities5 74 146 189 798 263 944 74 146Subordinated debt 24 516 24 516 22 096Other financial liabilities4 39 983 31 347 71 3304


161 806 139 761 1 027 768 208 946 1 538 281

1 Includes derivative assets or liabilities held-for-hedging. Refer to note 4.3.2 Includes financial assets and financial liabilities for which the carrying value has been adjusted for changes in fair value due to designated hedged risks.3 Carrying value has been used where it closely approximates fair values, excluding non-financial assets and liabilities. Refer to note 25 for a description on

how fair values are determined.4 The fair value of the other financial assets and liabilities approximates the carrying value due to their short-term nature.5 The fair value has been provided for financial liabilities under investment contracts which have been designated at fair value. The remaining liabilities for which fair





25. Fair value disclosures Financial assets and liabilities measured at fair value Fair value hierarchy of instruments measured at fair value In terms of IFRS, the group is either required to or elects to measure a number of its financial assets and financial liabilities at fair

value, being the price that would, respectively, be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal (or most advantageous) market between market participants at the measurement date. Regardless of the measurement basis, the fair value is required to be disclosed, with some exceptions, for all financial assets and financial liabilities. Fair value is a market-based measurement and uses the assumptions that market participants would use when pricing an asset or liability under current market conditions. When determining fair value it is presumed that the entity is a going concern and is not an amount that represents a forced transaction, involuntary liquidation or a distressed sale. Information obtained from the valuation of financial instruments is used to assess the performance of the group and, in particular, provides assurance that the risk and return measures that the group has taken are accurate and complete.

Valuation process The group’s valuation control framework governs internal control standards, methodologies, and procedures over its valuation

processes, which include:

Prices quoted in an active market: The existence of quoted prices in an active market represents the best evidence of fair value. Where such prices exist, they are used in determining the fair value of financial assets and financial liabilities.

Valuation techniques: Where quoted market prices are unavailable, the group establishes fair value using valuation techniques that incorporate observable inputs, either directly, such as quoted prices, or indirectly, such as derived from quoted prices, for such assets and liabilities. Parameter inputs are obtained directly from the market, consensus pricing services or recent transactions in active markets, whenever possible. Where such inputs are not available, the group makes use of theoretical inputs in establishing fair value (unobservable inputs). Such inputs are based on other relevant input sources of information and incorporate assumptions that include prices for similar transactions, historic data, economic fundamentals, and research information, with appropriate adjustment to reflect the terms of the actual instrument being valued and current market conditions. Changes in these assumptions would affect the reported fair values of these financial instruments. Valuation techniques used for financial instruments include the use of financial models that are populated using market parameters that are corroborated by reference to independent market data, where possible, or alternative sources, such as, third-party quotes, recent transaction prices or suitable proxies. The fair value of certain financial instruments is determined using industry standard models such as, discounted cash flow analysis and standard option pricing models. These models are generally used to estimate future cash flows and discount these back to the valuation date. For complex or unique instruments, more sophisticated modelling techniques may be required, which require assumptions or more complex parameters such as correlations, prepayment spreads, default rates and loss severity.

Valuation adjustments: Valuation adjustments are an integral part of the valuation process. In making appropriate valuation adjustments, the group applies methodologies that consider factors such as bid-offer spreads, liquidity, counterparty and own credit risk.

Validation and control: All financial instruments carried at fair value, regardless of classification, and for which there are no quoted market prices for that instrument, are fair valued using models that conform to international best practice and established financial theory. These models are validated independently by the group’s model validation unit and formally reviewed and approved by the market risk methodologies committee. This control applies to both off-the-shelf models, as well as those developed internally by the group. Further, all inputs into the valuation models are subject to independent price validation procedures carried out by the group’s market risk unit. Such price validation is performed on at least a monthly basis, but daily where possible given the availability of the underlying price inputs. Independent valuation comparisons are also performed and any significant variances noted are appropriately investigated. Less liquid risk drivers, which are typically used to mark level 3 assets and liabilities to model, are carefully validated and tabled at the monthly price validation forum to ensure that these are reasonable and used consistently across all entities in the group. Sensitivities arising from exposures to such drivers are similarly scrutinised, together with movements in level 3 fair values. They are also disclosed on a monthly basis at the market risk and asset and liability committees.

Portfolio exception: The group has, on meeting certain qualifying criteria, elected the portfolio exception to measure the fair value of certain groups of financial assets and financial liabilities on a net basis.

215

25. Fair value disclosures continued Financial assets and liabilities measured at fair value continued Fair value hierarchy The table that follows analyses the group’s financial instruments carried at fair value, by level of fair value hierarchy. The different

levels are based on the extent that available market data is used in the calculation of the fair value of the financial instruments. The levels have been defined as follows:

Level 1 – fair value is based on quoted market prices (unadjusted) in active markets for an identical financial asset or liability. An active market is a market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2 – fair value is determined through valuation techniques based on observable inputs, either directly, such as quoted prices, or indirectly, such as those derived from quoted 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 where all significant inputs are directly or indirectly observable from market data.

Level 3 – fair value is determined through valuation techniques using significant unobservable inputs. This category includes all instruments where the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument’s valuation. This category includes instruments that are valued based on quoted prices for similar instruments where significant unobservable adjustments or assumptions are required to reflect differences between the instrument being valued and the similar instrument.

Significant unobservable inputs The fair value of level 3 assets and liabilities is determined using valuation techniques which include reference to recent arm’s length

transactions, discounted cash flow analyses, pricing models and other valuation techniques commonly used by market participants. However, such techniques typically have unobservable inputs that are subject to management judgement. Although the group believes that its estimates of fair values are appropriate, changing one or more of these assumptions to reasonably possible alternative values could impact the fair value of the financial instruments. These inputs include, but are not limited to, credit spreads on illiquid issuers, implied volatilities on thinly traded stocks, correlation between risk factors, prepayment rates, and other illiquid risk drivers. Exposure to such illiquid risk drivers is typically managed by:

using bid-offer spreads that are reflective of the relatively low liquidity of the underlying risk driver

raising day one profit provisions in accordance with IFRS

quantifying and reporting the sensitivity to each risk driver

limiting exposure to such risk drivers and analysing this exposure on a regular basis.

Recurring fair value measurements of assets or liabilities are those assets and liabilities that IFRS require or permit to be carried at fair value in the statement of financial position at the end of each reporting period. Non-recurring fair value measurements of assets or liabilities are those assets and liabilities that IFRS require or permit to be carried at fair value in the statement of financial position at the end of the reporting period in particular circumstances.




25. Fair value disclosures continued25.1 Fair value disclosures

Level 1Rm

Level 2Rm

Level 3Rm

TotalRm

2014Assets Measured on a recurring basisDerivative assets 242 60 638 753 61 633Trading assets 25 671 41 722 4 647 72 040Pledged assets 9 482 4 497 13 979Financial investments 203 332 208 352 5 807 417 491Loans and advances to banks 363 363Loans and advances to customers 11 72 83Investment property 27 022 27 022Measured on a non-recurring basis Non-current assets held for sale1 38 426 109 288 3 574 151 288

277 527 424 569 41 803 743 899

Comprising:Held-for-trading 289 477Designated at fair value 385 001Available-for-sale 42 399Other assets measured at fair value 27 022

743 899

2014LiabilitiesMeasured on a recurring basis Derivative liabilities 17 66 306 5 958 72 281Trading liabilities 20 889 20 950 1 922 43 761Deposits from banks 21 21Deposits from customers 21 808 21 808Policyholders’ liabilities 81 983 81 983Other financial liabilities 36 335 36 335Measured on a non-recurring basis Non-current liabilities held for sale1 11 869 86 156 6 482 104 507

32 775 313 559 14 362 360 696

Comprising:Held-for-trading 220 549Designated at fair value 140 147

360 696

1 While the disposal group has been classified as held for sale and has been measured to its fair value less costs to sell, the disposal group’s fair value measured assets and liabilities have been categorised within the fair value hierarchy in the table above. For further details regarding the disposal group, refer to note 7.

217

25. Fair value disclosures continued25.1 Fair value disclosures continued

Level 1Rm

Level 2Rm

Level 3Rm

TotalRm

2013Assets Measure on a recurring basisDerivative assets 91 62 293 2 090 64 474Trading assets 19 477 33 001 2 110 54 588Pledged assets 3 525 3 180 8 6 713Financial investments 178 044 189 066 4 181 371 291Loans and advances to banks 668 668Loans and advances to customers 7 1 205 43 1 255Investment property 27 299 27 299Measured on a non-recurring basisNon-current assets held for sale1 24 942 76 780 5 613 107 335

226 754 365 525 41 344 633 623

Comprising:Held-for-trading 231 272Designated at fair value 345 093Available-for-sale 29 959Other assets measured at fair value 27 299

633 623

2013LiabilitiesMeasured on a recurring basis Derivative liabilities 162 61 207 7 875 69 244Trading liabilities 18 384 16 552 432 35 368Deposits from banks 961 961Deposits from customers 389 23 988 24 377Policyholders’ liabilities 74 146 74 146Other financial liabilities 39 983 39 983Measured on a non-recurring basisNon-current liabilities held for sale1 7 981 42 579 6 928 57 488

26 916 259 416 15 235 301 567

Comprising:Held-for-trading 161 806Designated at fair value 139 761

301 567

1 While the disposal group has been classified as held for sale and has been measured to its fair value less costs to sell, the disposal group’s fair value measured assets and liabilities have been categorised within the fair value hierarchy in the table above. For further details regarding the disposal group, refer to note 7.




25. Fair value disclosures continued25.1 Fair value disclosures continued Level 2 and 3 – valuation techniques and inputs Derivative financial instruments Derivative financial instruments comprise foreign exchange, interest rate, commodity, credit and equity derivatives that are either

held-for-trading or designated as hedging instruments in hedge relationships. Standard derivative contracts are valued using market accepted models and quoted parameter inputs. More complex derivative contracts are modelled using more sophisticated modelling techniques applicable to the instrument. Inputs used in the valuation process include spot prices of the underlying, dividend yields, risk-free rates, risk premiums, timing of settlement, storage/services costs, credit risks, volatilities, prepayment risk/surrender risk and recovery rates/loss given default.

Trading assets and liabilities, pledged assets and financial investments Trading assets and liabilities comprise instruments which are part of the group’s underlying trading activities. These instruments

primarily include sovereign and corporate debt, commodities, collateral, collateralised lending agreements and equity securities. Pledged assets comprise instruments that may be sold or repledged by the group’s counterparties in the absence of default by the group. Pledged assets include sovereign and corporate debt, equity, commodities pledged in terms of repurchase agreements and commodities that have been leased to third parties.

Financial investments are non-trading financial assets and comprise primarily of sovereign and corporate debt, listed and unlisted equity instruments, listed sovereign or corporate debt, investments in debentures issued by the SARB, investments in mutual fund investments and unit-linked investments. Where there are no recent transactions, fair value is derived from the last available market price adjusted for changes in risks and information since that date. Where a proxy instrument is quoted in an active market, the fair value for the financial investment is determined by adjusting the proxy fair value for differences between the proxy instrument and the financial investment. Where proxies are not available, then fair value is estimated using more complex modelling techniques. These techniques include discounted cash flow and Black-Scholes models using current market rates for credit, interest, liquidity, volatility and other risks. Combination techniques are used to value unlisted equity securities and include inputs such as earnings and dividend yields of the underlying entity.

Loans and advances Loans and advances comprise:

Loans and advances to banks: call loans, loans granted under resale agreements and balances held with other banks

Loans and advances to customers: mortgage loans (home loans and commercial mortgages), other asset-based loans, including collateralised debt obligations (instalment sale and finance leases), and other secured and unsecured loans (card debtors, overdrafts, other demand lending, term lending and loans granted under resale agreements).

For certain loans fair value may be determined from the market price of a recently occurring transaction adjusted for changes in risks and information between the transaction and valuation dates. Loans and advances are reviewed for observed and verified changes in credit risk and the credit spread is adjusted at subsequent dates if there has been an observable change in credit risk relating to a particular loan or advance. In the absence of an observable market for these instruments, discounted cash flow models are used to determine fair value. Discounted cash flow models incorporate parameter inputs for interest rate risk, foreign exchange risk, liquidity and credit risk, as appropriate. For credit risk, probability of default and loss given default parameters are determined using credit default swaps (CDS) markets, where available and appropriate, as well as the relevant terms of the loan and loan counterparty such as the industry classification and subordination of the loan.

Deposits from banks and customers and other financial liabilities Deposits from banks and customers comprise amounts owed to banks and customers, deposits under repurchase agreements,

negotiable certificates of deposit, credit-linked deposits and other deposits. For certain deposits, fair value may be determined from the market price on a recently occurring transaction adjusted for all changes in risks and information between the transaction and valuation dates. In the absence of an observable market for these instruments discounted cash flow models are used to determine fair value based on the contractual cash flows related to the instrument. The fair value measurement incorporates all market risk factors including a measure of the group’s credit risk relevant for that financial liability. The market risk parameters are valued consistently to similar instruments held as assets stated in the section above. The credit risk of the reference asset in the embedded CDS in credit-linked deposits is incorporated into the fair value of all credit-linked deposits that are designated to be measured at fair value through profit or loss. For collateralised deposits that are designated to be measured at fair value through profit or loss, such as securities repurchase agreements, the credit enhancement is incorporated into the fair valuation of the liability.

The fair values of third-party financial liabilities arising on the consolidation of mutual funds are determined using the quoted put (exit) price provided by the fund manager and discounted for the applicable notice period. The fair value of a financial liability with a demand feature is not less than the amount payable on demand, discounted from the first date on which the amount could be required to be paid.

219

25. Fair value disclosures continued25.1 Fair value disclosures continued Level 2 and 3 – valuation techniques and inputs continued Policyholder liabilities Policyholder liabilities comprise unit-linked policies and annuity certains. The fair value for these items is derived as follows:

Unit-linked policies: assets which are linked to the investment contract liabilities are owned by the group. The investment contract obliges the group to use these assets to settle these liabilities. Therefore, the fair value of investment contract liabilities is determined with reference to the fair value of the underlying assets (i.e. amount payable on surrender of the policies).

Annuity certains: discounted cash flow models are used to determine the fair value of the stream of future payments and incorporate parameter inputs for interest rate risk, liquidity and credit risk as appropriate.

Level 2 financial assets and financial liabilities The following table sets out the group’s principal valuation techniques used in determining the fair value of its financial assets and

financial liabilities that are classified within level 2 of the fair value hierarchy.

Level 2 Valuation basis/technique Main assumptions

Derivative instruments Discounted cash flow, Black-Scholes and combination technique models

Discount rate1, spot price of the underlying, volatility and correlation factors, dividend yield, earnings yield and valuation multiples.

Trading assets Discounted cash flow model Discount rate1 and spot price of the underlying

Pledged assets Discounted cash flow model Discount rate1 and spot price of the underlying

Financial investments Discounted cash flow, combination technique models and adjusted quoted exit price model

Discount rate1, spot price of the underlying, notice period, dividend yield, earnings yield and valuation multiples

Loans and advances to banks and customers

Discounted cash flow model Discount rate1

Trading liabilities Discounted cash flow model Discount rate1 and spot price of the underlying

Deposits from banks and customers

Discounted cash flow model Discount rate1

Policyholders’ liabilities Discounted cash flow model and unit-linked underlying asset value method

Discount rate1 and spot price of the underlying

Other financial liabilities Quoted put (exit) price provided by the fund manager

N/A

1 Discount rates, where applicable, include the risk-free rate, risk premiums, liquidity spreads, credit risk (own and counterparty as appropriate), timing of settlement, service costs, prepayment and surrender risk assumptions.

Assets and liabilities transferred between level 1 and level 2 During the year, no assets were transferred into level 1 from level 2 (2013: R60 million). There were no significant transfers of

financial liabilities between level 1 and 2 during the period under review (2013: Rnil).




25. Fair value disclosures continued25.1 Fair value disclosures continued Level 3 financial assets and financial liabilities Reconciliation of level 3 assets The following table provides a reconciliation of the opening to closing balance for all assets that are measured at fair value and

incorporate inputs that are not based on observable market data (level 3).

Measured on a recurring basis

Measured on a non-recurring

basis

TotalRm

Derivative assets

Rm

Trading assets

Rm

Pledged assets

Rm

Loans and advances

to customers

Rm

Financial invest-

ments Rm

Invest-ment

property Rm

Non-current

assets held for sale1

Rm

Balance at 1 January 2014 2 090 2 110 8 43 4 181 27 299 5 613 41 344Total gains/(losses) included in profit or loss 186 (126) 3 717 1 179 142 2 101

Interest income 143 143Trading revenue 186 (126) 3 142 205Other revenue 136 136Investment gains 438 1 179 1 617

Total gains included in OCI 2 (1) 1

Originations and purchases 553 3 875 1 620 858 770 7 676Sales and settlements (1 889) (665) (8) (46) (1 601) (2 348) (2 565) (9 122)Transfers into level 32 791 349 1 140Transfers out of level 33 (190) (84) (1 068) (1 342)Reclassifications4 (546) (546)Exchange movement gains/(losses) 3 (1) 181 34 334 551

Balance at 31 December 2014 753 4 647 5 807 27 022 3 574 41 803

1 Relates to financial assets within the disposal group that have been classified as level 3.2 Transfers of financial assets between levels of the fair value hierarchy are deemed to have occurred at the end of the reporting period. During 2014, the valuation

inputs of certain financial assets became unobservable. The fair value of these assets was transferred into level 3.3 During 2014, the valuation inputs of certain level 3 financial assets became observable. The fair value of these financial assets was transferred into level 2.4 In the current financial year, assets with a carrying value of R546 million (2013: Rnil) was reclassified from held-for-trading to loans and receivables. Refer to note 35

for more information regarding the reclassification.

221

25. Fair value disclosures continued25.1 Fair value disclosures continued Reconciliation of level 3 assets continued


Measured on a

non-recurring basis

TotalRm

Derivative assets

Rm

Trading assets

Rm

Pledged assets

Rm

Loans and advances

to customers

Rm

Financial invest-ments

Rm

Invest-ment

property Rm

Non-current

assets held for sale1

Rm

Balance at 1 January 2013 3 397 6 344 215 5 528 24 133 39 617Classified as held for sale (1 914) (5 992) (5) 7 911Total gains/(losses) included in profit or loss 1 282 (60) 132 207 2 530 (1 589) 2 502

Interest income (2) (2)Trading revenue 1 282 (60) 132 (22) (1 589) (257)Other revenue 225 225Investment gains 6 2 530 2 536

Total gains/(losses) included in OCI 1 (1)Originations and purchases 499 3 087 6 1 325 588 961 6 466Sales and settlements (1 182) (2 019) (291) (3 267) (35) (2 748) (9 542)Transfers into level 32 12 798 118 928Transfers out of level 33 (7) (13) (21) (36) (77)Reclassifications 69 69Exchange movement gains/(losses) 2 (35) 2 8 312 14 1 078 1 381

Balance at 31 December 2013 2 090 2 110 8 43 4 181 27 299 5 613 41 344

1 Relates to financial assets within the disposal group that have been classified as level 3.2 Transfers of financial assets between levels of the fair value hierarchy are deemed to have occurred at the end of the reporting period. During 2013, the valuation

inputs of certain financial assets became unobservable. The fair value of these assets was transferred into level 3.3 There were no significant transfers of financial assets between level 1 and 2 during the period under review. During 2013, the valuation inputs of certain level 3

financial assets became observable. The fair value of these financial assets was transferred into level 2.




25. Fair value disclosures continued25.1 Fair value disclosures continued Unrealised gains/(losses) for the period included in profit or loss for level 3 assets held at the end of the

reporting period



basis

TotalRm

Derivative assets

Rm

Trading assets

Rm

Financial investments

Rm

Loans and advances to

customersRm

Investment property

Rm

Non-current

assets held for sale

Rm

2014Trading revenue 37 (102) (205) (270)Other revenue 103 103Investment gains (80) 1 141 1 061

37 (102) 23 1 141 (205) 894

2013Trading revenue 1 271 (35) 913 2 149Other revenue 76 76Investment gains 2 598 2 598

1 271 (35) 76 2 598 913 4 823

223

25. Fair value disclosures continued25.1 Fair value disclosures continued Reconciliation of level 3 liabilities The following table provides a reconciliation of the opening to closing balance for all liabilities that are measured at fair value based on

the inputs that are not based on observable market data (level 3).



basis

TotalRm


Rm

Trading liabilities

Rm

Policy-holders’

liabilitiesRm

Non-current

liabilities held for sale1

Rm

Balance at 1 January 2013 2 335 5 021 10 7 366Classified as held for sale (898) (5 021) 5 919Total losses/(gains) included in profit or loss – trading revenue 4 084 (27) (434) 3 623Originations and purchases 3 050 458 590 4 098Sales and settlements (633) (856) (1 489)Transfers into level 32 58 378 436Transfers out of level 33 (8) (8)Net change in policyholders' liabilities (10) (10)Exchange movement (gains)/losses (113) 1 1 331 1 219

Balance at 31 December 2013 7 875 432 6 928 15 235

Balance at 1 January 2014 7 875 432 6 928 15 235Total losses included in profit or loss – trading revenue 699 179 841 1 719Originations and purchases 764 1 309 2 073Sales and settlements (2 444) (1 603) (4 047)Transfers into level 32 306 54 360Transfers out of level 33 (1 242) (573) (1 815)Exchange movement losses 2 835 837

Balance at 31 December 2014 5 958 1 922 6 482 14 362

1 Relates to financial liabilities within the disposal group that have been classified as level 3.2 Transfers of financial liabilities between the levels of the fair value hierarchy are deemed to have occurred at the end of the reporting period. During 2014 and 2013,

the valuation inputs of certain financial liabilities became unobservable. The fair value of these liabilities was transferred into level 3.3 There were no significant transfers of financial liabilities between level 1 and 2 during the period under review. During 2014 and 2013, the valuation inputs of

certain financial liabilities became observable. The fair value of these financial liabilities was transferred into level 2.




25. Fair value disclosures continued25.1 Fair value disclosures continued Unrealised losses/(gains) for the period included in profit or loss for level 3 liabilities held at the end of the

reporting period


Measured on a non-

recurring basis

TotalRm


Rm

Trading liabilities

Rm

Non-current

liabilities held for

sale Rm

2014Trading revenue 692 179 414 1 285

2013Trading revenue 3 862 (32) 436 4 266

Sensitivity and interrelationships of inputs The behaviour of the unobservable parameters used to fair value level 3 assets and liabilities is not necessarily independent, and may

often hold a relationship with other observable and unobservable market parameters. Where material and possible, such relationships are captured in the valuation by way of correlation factors, though these factors are, themselves, frequently unobservable. In such instances, the range of possible and reasonable fair value estimates is taken into account when determining appropriate model adjustments. The table that follows indicates the valuation techniques and main assumptions used in the determination of the fair value of the level 3 assets and liabilities measured at fair value on a recurring basis. The table further indicates the effect that a significant change in one or more of the inputs to a reasonably possible alternative assumption would have on profit or loss and OCI (where applicable) at the reporting date (where the change in the unobservable input would change the fair value of the asset or liability significantly). The changes in the inputs that have been used in the analysis on the next page have been determined taking into account several considerations such as the nature of the asset or liability and the market within which the asset or liability is transacted.

225

25. Fair value disclosures continued25.1 Fair value disclosures continued The valuation techniques used in determining the fair value of assets and liabilities classified within level 3

Valuation basis/technique

Main inputs/assumptions

Variance in fair value

measurement

Effect on profit or loss

FavourableRm

(Unfavourable)Rm

20141


Discount rate2, spot price of the underlying volatility and correlation factors, dividend yield, earnings yield and valuation multiples

(1%) – 1% 512 (512)


(1%) – 1% 418 (418)

Financial investments Discounted cash flow and combination technique models

Discount rate2, spot price of the underlying, dividend yield, earnings yield and valuation multiples

(1%) – 1% 287 (275)


(1%) – 1% 310 (310)

1 527 (1 515)

20131


Discount rate2, spot price of the underlying volatility and correlation factors, dividend yield, earnings yield and valuation multiple

(1%) – 1% 207 (209)


(1%) – 1% 548 (548)

Financial investments Discounted cash flow and combination technique models

Discount rate2, spot price of the underlying, dividend yield, earnings yield and valuation multiples

(1%) – 1% 235 (205)

Loans and advances to customers

Discounted cash flow model Discount rate2 (1%) – 1% 1 (1)


(1%) – 1% 126 (126)

1 117 (1 089)

1 Level 3 non-current assets and liabilities are included in the asset classes and inputs and changes in assumptions in the table above.2 Discount rates, where applicable, include the risk-free rate, risk premiums, liquidity spreads, credit risk (own and counterparty as appropriate) timing of settlement,

service costs, prepayment and surrender risk assumptions.




25. Fair value disclosures continued25.2 Assets and liabilities not measured at fair value for which fair value is disclosed

Level 1Rm

Level 2Rm

Level 3Rm

TotalRm

2014AssetsCash and balances with central banks 64 302 64 302Financial investments 28 955 1 921 44 30 920Non-current assets held for sale 37 571 20 358 3 879 61 808Loans and advances to banks 7 751 107 580 6 695 122 026Pledged assets 212 212Loans and advances to customers 12 110 113 088 685 203 810 401

150 689 242 947 696 033 1 089 669

Liabilities Deposits from banks 46 505 55 222 2 927 104 654Deposits from customers 519 885 389 034 34 370 943 289Subordinated debt 791 22 304 23 095Non-current liabilities held for sale 10 692 7 687 49 470 67 849

577 873 474 247 86 767 1 138 887

2013AssetsCash and balances with central banks 53 310 53 310Financial investments 21 999 2 046 907 24 952Non-current assets held for sale 23 308 36 155 13 253 72 716Loans and advances to banks 29 968 58 935 5 463 94 366Loans and advances to customers 21 438 119 732 593 964 735 134

150 023 216 868 613 587 980 478

Liabilities Deposits from banks 32 785 33 724 1 407 67 916Deposits from customers 430 746 361 691 42 061 834 498Subordinated debt 21 261 835 22 096Non-current liabilities held for sale 8 984 12 212 51 347 72 543

472 515 428 888 95 650 997 053

25.3 Third-party credit enhancements There were no significant liabilities measured at fair value that existed during the year, which had been issued with inseparable

third-party credit enhancements.

227

26. Financial assets and financial liabilities designated at fair value through profit or loss26.1 Loans and advances The group’s maximum exposure to credit risk for loans and advances designated at fair value through profit or loss

is R446 million (2013: R849 million).

The maximum exposure to credit risk is mitigated by a R62 million decrease (2013: R115 million decrease) through using credit derivatives and similar instruments. Fair value changes attributable to change in credit risk on loans and advances designated at fair value through profit or loss amounted to a gain of R390 million (2013: R127 million gain).

The change for the year in fair value of the designated loans and advances, that is attributable to changes in credit risk, is determined as the amount of change in fair value that is not attributable to changes in market conditions that give rise to market risk.

26.2 Financial liabilities Fair value changes attributable to changes in credit risk on financial liabilities designated at fair value through profit or loss amounted

to a gain of R27 million (2013: R33 million loss).

The changes in the fair value of the designated financial liabilities attributable to changes in credit risk are calculated by reference to the change in the credit risk implicit in the market value of the bank’s senior loan notes.

The amount the group would contractually be required to pay at maturity of the financial liabilities designated at fair value through profit or loss amounts to R18 058 million (2013: R34 028 million), R3 771 million lower (2013: R8 396 million higher) than the carrying amount. This does not include policyholders’ liabilities with a carrying value of R81 983 million (2013: R74 146 million) and third-party liabilities arising on consolidation of mutual funds with a carrying value of R36 335 million (2013: R39 983 million).

27. Financial instruments subject to offsetting, enforceable master netting arrangements or similar agreements

IFRS requires a financial asset and a financial liability to be offset and the net amount presented in the statement of financial position when, and only when, the group has a current legally enforceable right to set off recognised amounts, as well as the intention to settle on a net basis or to realise the asset and settle the liability simultaneously.

The following table sets out the impact of offset, as well as the required disclosures where financial assets and financial liabilities that are subject to enforceable master netting arrangements, or similar agreements, irrespective of whether they have been offset in accordance with IFRS. There are no items measured on different measurement bases within the line items in the tables.

It should be noted that the information below is not intended to represent the group’s actual credit exposure nor will it agree to that presented in the statement of financial position.




27. Financial instruments subject to offsetting, enforceable master netting arrangements or similar agreements continued

Gross amount of

recognised financial

assets1

Rm

Gross amount of recognised

financial liabilities set

off in the statement of

financial position2

Rm

Net amount of financial assets

subject to offset3

Rm

Financial collateral and

cash collateral received4,5

Rm

Net amount

Rm

2014AssetsDerivative assets 170 304 (40 676) 129 628 (109 362) 20 266Trading assets 8 990 8 990 (7 566) 1 424Loans and advances6 141 118 (39 082) 102 036 (24 266) 77 770

320 412 (79 758) 240 654 (141 194) 99 460

Gross amount of


liabilities1

Rm

Gross amount of recognised

financial assets set off in the

statement of financial position2

Rm

Net amount of financial liabilities

subject to offset3

Rm


cash collateral pledged4,7

Rm

Net amount

Rm

2014LiabilitiesDerivative liabilities 184 537 (40 676) 143 861 (116 334) 27 527Trading liabilities 6 479 6 479 (6 477) 2Deposit and current accounts6 56 462 (39 082) 17 380 (6 644) 10 736

247 478 (79 758) 167 720 (129 455) 38 265


229


Gross amount of


assets1

Rm

Gross amountsof recognised

financial liabilities set

off in the statement of

financial position2

Rm

Net amount of financial assets

subject to offset3

Rm


cash collateral received4,5

Rm

Net amount

Rm

2013AssetsDerivative assets 104 088 (16 236) 87 852 (73 437) 14 415Trading assets 19 079 19 079 (18 506) 573Loans and advances6 116 322 (33 743) 82 579 (79 294) 3 285

239 489 (49 979) 189 510 (171 237) 18 273

Gross amount of

recognised financial liabilities1

Rm

Gross amountsof recognised

financial assets set off in the

statement of financial position2

Rm

Net amount of financial liabilities subject to offset3

Rm


cash collateral pledged4,7

Rm

Net amount

Rm

2013LiabilitiesDerivative liabilities 107 339 (16 236) 91 103 (72 749) 18 354Trading liabilities 7 879 7 879 (7 879)Deposit and current accounts6 47 696 (33 743) 13 953 (3 932) 10 021

162 914 (49 979) 112 935 (84 560) 28 375

1 Gross amounts are disclosed for recognised financial assets and financial liabilities that are either offset in the statement of financial position or are subject to a master netting arrangement or a similar agreement, irrespective of whether the offsetting criteria is met.

2 The amounts that qualify for offset in accordance with the IFRS criteria.3 Refer to reconciliation of net amounts included in the SOFP on page 132.4 Recognised financial instruments that do not qualify for offset in terms of the criteria per IFRS, but that are subject to an enforceable master netting arrangement or

similar agreement, including financial collateral (whether recognised or unrecognised).5 In most instances, the group is allowed to sell or re-pledge collateral received.6 The most material amounts offset in the statement of financial position pertain to cash management accounts. The cash management accounts allow holding

companies (or central treasury functions) to manage the cash flows of a group by linking the current accounts of multiple legal entities within a group. It allows for cash balances of the different legal entities to be offset against each other to arrive at a net balance for the whole group. In addition, it should be noted that all repurchase agreements and reverse repurchase agreements, subject to a master netting arrangement (or similar agreement), have been included.

7 In most cases, the counterparty may not sell or re-pledge collateral pledged by the group.





Reconciliation of net amounts included in the statement of financial position

Net amount subject to

offsetRm

Amount not subject

to offsetRm

TotalRm

Held for sale

Rm

Amount disclosed per

the statement of financial

positionRm

2014AssetsCash and balances with central banks 80 879 80 879 16 577 64 302Derivative assets 129 628 22 649 152 277 90 644 61 633Trading assets 8 990 110 772 119 762 47 722 72 040Pledged assets 26 407 26 407 12 222 14 185Financial investments 451 623 451 623 702 450 921Loans and advances 102 036 876 023 978 059 49 818 928 241Non-current assets held for sale (219 958) 219 958Other financial and non-financial assets 93 838 93 838 2 273 91 565

240 654 1 662 191 1 902 845 1 902 845

LiabilitiesDerivative liabilities 143 861 19 743 163 604 91 323 72 281Trading liabilities 6 479 50 465 56 944 13 183 43 761Deposit and current accounts 17 380 1 096 437 1 113 817 66 605 1 047 212Subordinated debt 33 443 33 443 7 922 25 521Policyholders’ liabilities 287 516 287 516 287 516Non-current liabilities held for sale (182 069) 182 069Other financial and non-financial liabilities 85 887 85 887 3 036 82 851

167 720 1 573 491 1 741 211 1 741 211

2013AssetsCash and balances with central banks 67 409 67 409 14 099 53 310Derivative assets 87 852 16 042 103 894 39 420 64 474Trading assets 19 079 96 856 115 935 61 347 54 588Pledged assets 13 252 13 252 6 539 6 713Financial investments 395 746 395 746 29 395 717Loans and advances 82 579 815 597 898 176 58 556 839 620Non-current assets held for sale (183 284) 183 284Other financial and non-financial assets 96 517 96 517 3 294 93 223

189 510 1 501 419 1 690 929 1 690 929

LiabilitiesDerivative liabilities 91 103 17 362 108 465 39 221 69 244Trading liabilities 7 879 45 462 53 341 17 973 35 368Deposit and current accounts 13 953 972 828 986 781 65 043 921 738Subordinated debt 31 963 31 963 7 447 24 516Policyholders’ liabilities 263 944 263 944 263 944Non-current liabilities held for sale (134 504) 134 504Other financial and non-financial liabilities 93 787 93 787 4 820 88 967

112 935 1 425 346 1 538 281 1 538 281

231


The table below sets out the nature of agreement, and the types of rights relating to items which do not qualify for offset but that are subject to a master netting arrangement or similar agreement.

Nature of agreement Related rights

Derivative assets and liabilities ISDAs The agreement allows for offset in the event of default.

Trading assets and trading liabilities Global master repurchase agreements The agreement allows for offset in the event of default.

Loans and advances to banks Customer agreement and Banks Act In the event of liquidation or bankruptcy, offset shall be enforceable subject to meeting Banks Act requirements.

Deposits and current accounts Customer agreement and Banks Act In the event of liquidation or bankruptcy, offset shall be enforceable subject to meeting Banks Act requirements.

2014Rm

2013Rm

28. Contingent liabilities and commitments28.1 Contingent liabilities

Letters of credit and bankers’ acceptances 16 162 17 303Guarantees 53 365 50 287

69 527 67 590

Loan commitments of R80 881 million (2013: R77 695 million) that are irrevocable over the life of the facility or revocable only in response to material adverse changes are included in the risk management section on page 52.

28.2 Capital commitmentsContracted capital expenditure 4 216 1 315

Investment property 2 934 418Property, plant and equipment 456 262Other intangible assets 826 635

Capital expenditure authorised but not yet contracted 10 867 11 411

Investment property 1 468 3 124Property, plant and equipment 4 486 4 417Other intangible assets 4 913 3 870

15 083 12 726

The expenditure will be funded from the group’s internal resources.




28. Contingent liabilities and commitments continued

2014Rm

2013Rm

28.3 Operating lease commitmentsThe future minimum payments under non-cancellable operating leases are as follows:PropertiesWithin 1 year 1 112 1 099After 1 year but within 5 years 2 507 3 425After 5 years 785 1 287

4 404 5 811

EquipmentWithin 1 year 4 43After 1 year but within 5 years 3 11After 5 years 58

7 112

The operating lease commitments comprise a number of separate operating leases in relation to properties and equipment, none of which is individually significant to the group.

28.4 Legal proceedings In the conduct of its ordinary course of business, the group is involved in litigation, lawsuits and other proceedings relating to alleged

errors and omissions, or receives claims arising from the conduct of its business which can require the group to engage in legal proceedings in order to enforce and/or defend its rights.

From time-to-time the group is also the subject of various regulatory reviews, requests for information and investigations by various governmental and regulatory bodies arising from the group’s business operations. While the group seeks to comply with the letter and spirit of all applicable laws and regulations, the outcome of these reviews, requests for information and investigations is uncertain and it is not possible to predict the extent of any liabilities or other consequences that may arise.

While recognising the inherent difficulty of predicting the outcome of defended legal proceedings, management believes, based upon current knowledge and after consulting with legal counsel, that the legal proceedings currently pending against it should not have a material adverse effect on the consolidated financial position. The directors are satisfied, based on present information and the assessed probability of claims eventuating, that the group has adequate insurance programmes and provisions in place to meet such claims.

29. Supplementary income statement information29.1 Interest income

2014Rm

2013Rm

Interest on loans and advances 77 998 66 186Interest on investments 2 843 3 441Unwinding of discount element of credit impairments for loans and advances (note 9.3) 763 558Fair value adjustments on debt financial instruments 59 238Dividends on dated securities 1 734 1 446

83 397 71 869

All interest income reported above with the exception of R5 931 million (2013: R3 802 million) relates to financial assets not carried at fair value through profit or loss.

233

29. Supplementary income statement information continued

2014Rm

2013Rm

29.2 Interest expenseCurrent accounts 479 347Savings and deposit accounts 12 253 9 410Foreign finance creditors 695 773Subordinated debt 2 392 2 043Other interest-bearing liabilities 22 426 20 201

38 245 32 774

All interest expense reported above with the exception of R1 390 million (2013: R1 592 million) relates to financial liabilities not carried at fair value through profit or loss.

29.3 Net fee and commission revenueFee and commission revenue 30 570 26 714

Account transaction fees 10 267 9 568Card-based commission 5 511 4 769Knowledge-based fees and commission 2 778 2 016Electronic banking 2 777 2 407Insurance – fees and commission 1 747 1 670Foreign currency service fees 1 813 1 572Documentation and administration fees 1 639 1 497Other 4 038 3 215

Fee and commission expense (4 320) (3 530)

26 250 23 184

All net fee and commission revenue reported above relates to financial assets or liabilities not carried at fair value through profit or loss.

29.4 Trading revenueFIC and commodities 7 984 7 133Equities and other 1 310 678

9 294 7 811

29.5 Other revenueBanking and other 2 524 1 515Property-related revenue 248 322Insurance – bancassurance profit 749 1 490Net loss on undated financial instruments designated at fair value through profit or loss (3) (11)

3 518 3 316

29.6 Net insurance premiumsInsurance premiums 42 139 35 782Reinsurance premiums (1 415) (1 316)

40 724 34 466





2014Rm

2013Rm

29.7 Investment income and gainsInvestment income 16 418 14 021Investment gains 19 087 33 564

35 505 47 585

Comprising:Investment income 16 418 14 021

Interest income1 10 224 7 648Dividends received 3 357 3 262

Listed shares 2 343 2 790Unlisted instruments 863 472Manufactured dividends on scrip lending 151

Scrip lending fees 9Rental income from investment property 2 095 2 210Hotel operations’ sales 673 809Adjustment to surplus recognised on defined benefit pension fund 19 14Sundry income 41 78

Investment gains 19 087 33 564

Investment property 1 178 2 530Financial instruments designated at fair value through profit or loss 17 102 27 200Financial instruments held for trading through profit or loss (1 083) (2 581)Foreign exchange differences on intercompany monetary items 6 1Foreign currency translation reserve recycled through profit or loss 18Joint ventures measured at fair value 3 26Mutual funds 1 881 6 370

35 505 47 585

29.8 Credit impairment chargesNet credit impairments raised and released for loans and advances 10 107 10 368Recoveries on loans and advances previously written off (1 098) (1 210)

9 009 9 158

Comprising:Net specific credit impairment charges 9 056 9 049

Specific credit impairment charges (note 9.3) 10 154 10 259Recoveries on loans and advances previously written off (1 098) (1 210)

Portfolio credit impairment (reversal)/charges (note 9.3) (47) 109

9 009 9 158

1 Interest of R10 210 million (2013: R7 556 million) relates to financial assets designated at fair value through profit or loss.

235


2014Rm

2013Rm

29.9 Net insurance benefits and claimsClaims and policyholders’ benefits under insurance contracts 32 629 25 904Insurance claims recovered from reinsurers (898) (1 357)

31 731 24 547Change in policyholder liabilities under insurance contracts 15 469 20 698

Insurance contracts 14 559 15 937Investment contracts with DPF 1 050 4 941Reinsurance assets (140) (180)

47 200 45 245

29.10 Staff costs – banking activitiesSalaries and allowances 23 509 21 966Equity-linked transactions – group equity compensation plans 1 452 1 121

24 961 23 087

29.11 Acquisition costs – investment management and live insurance activitiesInsurance contracts 3 867 3 589Investment contracts 242 165Short-term insurance 84 74Asset management 386 405

4 579 4 233

Comprising:Incurred during the year 4 642 4 309Deferred acquisition costs (309) (304)Amortisation and impairment of deferred acquisition costs 246 228

4 579 4 233





2014Rm

2013Rm

29.12 Other operating expenses

Banking activities 21 910 18 968

Information technology 5 355 4 257Communication 1 141 1 303Premises 3 589 3 170Other 11 825 10 238

Investment management and life insurance activities 9 967 9 993

Staff costs 3 828 3 675Office costs 2 992 2 931Training and development costs 647 542Other 2 500 2 845

31 877 28 961

The following disclosable items are included in other operating expenses:Amortisation – intangible assets (note 14.2) 1 329 1 065Auditors’ remuneration 305 273

Audit fees 230 212

Current year 228 211Prior year 2 1

Fees for other services1 75 61

Depreciation (note 15.2) 2 915 2 795

Property– freehold 107 91– leasehold 443 426Equipment– computer equipment 1 520 1 436– motor vehicles 93 95– office equipment 141 118– furniture and fittings 611 629

ImpairmentsIntangible assets – computer software (note 14.2) 450 477

Computer software 450 440Other intangible assets 37

Operating lease charges 2 169 2 054

Properties 2 167 2 043Equipment 2 11

Premises – other expenses 2 735 2 517Professional fees 2 562 2 182

Managerial 153 50Technical and other 2 409 2 132

Profit/(loss) on sale of property and equipment 16 (4)

1 All fees for services paid to the group’s auditors were considered and approved by the group’s audit committee in terms of its non-audit services policy.

237


2014Rm

2013Rm

29.13 Goodwill impairmentGoodwill impairment charge on subsidiaries (note 14.1) 4

29.14 Gain on disposal and liquidation of subsidiariesGain on disposal of subsidiary 9 64FCTR release on liquidation of group companies 1 203

1 212 64

During the year, the group liquidated several wholly-owned international investment holding companies. The R1 203 million relates to the recognition in the profit or loss of the foreign currency translation reserve that related to those entities. The liquidation proceeds were distributed to Standard Bank Group Limited.

29.15 Loss for the year from discontinued operationStandard Bank PlcThe agreed disposal resulted in the group classifying its investment in the SB Plc group as a discontinued operation in both the current and prior year. The income and expenses relating to the disposal group have been presented in the income statement as a single amount relating to the after-tax loss for the current and prior year. Refer to note 7 for further details.

Net interest income 59 (23)

Interest income 338 309Interest expense 279 332

Non-interest revenue 110 2 554

Net fee and commission revenue 96 259Net trading revenue 9 2 291

Trading revenue 1 634 2 291Loss on commodity repurchase agreements (1 625)

Other revenue 5 4

Total income 169 2 531Credit impairment charges 50 56

Income after credit impairment charges 119 2 475Operating expenses in banking activities 4 007 2 807

Staff costs 2 240 1 673Other operating expenses (including restructuring costs) 1 767 1 134

Net loss before indirect taxation (3 888) (332)Indirect taxation 36 58

Loss before direct taxation (3 924) (390)Direct taxation (29) 29

Loss for the year from discontinued operation (3 895) (419)Held for sale impairment – SB Plc (153) (603)

Discontinued operation loss attributable to ordinary shares (4 048) (1 022)




30. Taxation

2014Rm

2013Rm

Indirect taxation (note 30.1) 2 439 1 911Direct taxation (note 30.2) 8 061 7 580

10 500 9 491

30.1 Indirect taxationValue added tax (VAT) 1 977 1 724Duties 7 4Financial services levy 33 32Skills development levy 58 126Other indirect taxes 364 25

2 439 1 911

239

30. Taxation continued

2014Rm

2013Rm

30.2 Direct taxationCurrent year 8 242 7 623

South African normal tax 4 769 5 413South African withholding tax 324 132South African deferred tax 195 (625)Foreign normal and withholding tax 2 473 1 909Foreign deferred tax (175) (157)Capital gains tax current 380 322Capital gains tax deferred 252 629Deferred tax adjustment attributable to decrease in tax rate 24

Prior years (369) (162)

South African normal tax (400) (115)South African deferred tax 8 (17)Foreign normal and withholding tax 26 (12)Foreign deferred tax (3) (18)

7 873 7 461Income tax recognised in OCI 38 43

Deferred tax 38 43

Deferred tax recognised directly in equity 150 76

Direct taxation per the income statement 8 061 7 580




30. Taxation continued30.2 Direct taxation continued Income tax recognised in other comprehensive income from continuing operations The table below sets out the amount of income tax relating to each component within OCI:

Before taxRm

Tax(expense)/

benefitRm

Net of taxRm

2014Items that may be reclassified subsequently to profit or lossExchange differences on translating foreign operations (5) (5)Net change on hedges of net investments in foreign operations (147) (147)Net change in fair value of cash flow hedges before reclassification 349 (77) 272Realised fair value adjustments of cash flow hedges transferred to profit or loss (761) 110 (651)Net change in fair value of available-for-sale financial assets before reclassification (221) 13 (208)Realised fair value adjustments on available-for-sale financial assets transferred to profit or loss (19) 1 (18)

Items that may not be reclassified to profit or lossDefined benefit fund adjustments (116) 17 (99)Other losses (6) (26) (32)

(926) 38 (888)

2013Items that may be reclassified subsequently to profit or lossExchange differences on translating foreign operations 8 085 8 085Net change on hedges of net investments in foreign operations (176) (176)Net change in fair value of cash flow hedges 179 21 200Realised fair value adjustments of cash flow hedges transferred to profit or loss 70 (31) 39Net change in fair value of available-for-sale financial assets 138 (23) 115Realised fair value adjustments on available-for-sale financial assets transferred to profit or loss (22) (2) (24)

Items that may not be reclassified to profit or lossDefined benefit fund adjustments (264) 78 (186)Other losses (150) (150)

7 860 43 7 903

241

30. Taxation continued30.2 Direct taxation continued Tax rate reconciliation

2014%

2013%

Rate reconciliation including indirect and direct taxThe total tax charge for the year as a percentage of net income before indirect tax 28.6 31.0VAT (5.4) (6.0)Duties, skills development levy and other indirect taxes (1.3) (1.0)Policyholder funds - normal tax (0.2) (1.0)

The corporate tax charge for the year as a percentage of profit before indirect tax 21.7 23.0CGT (1.7) (3.0)Change in tax rate (0.1)Tax relating to prior years 1.0 1.0

Net tax charge 20.9 21.0The charge for the year has been reduced/(increased) as a consequence of:Dividends received 2.5 3.0Other non-taxable income 4.8 2.0Effect of profits taxed in different jurisdictions 0.2 0.4Other permanent differences (0.4) 1.6

Standard rate of South African tax 28.0 28.0

Direct taxation rate reconciliationThe direct taxation charge for the year as a percentage of profit before direct taxation 23.5 26.0Policyholder funds – normal tax (0.2) (0.6)CGT (1.8) (3.0)Change in tax rate (0.1)Tax relating to prior years 1.0 1.0

Net tax charge 22.4 23.4The charge for the year has been reduced/(increased) as a consequence of:Dividends received 2.7 2.6Other non-taxable income 5.2 2.0Effect of profits taxed in different jurisdictions 0.2 0.4Other permanent differences (2.5) (0.4)

Standard rate of South African tax 28.0 28.0




31. Headline earnings

2014 2013

GrossRm

Direct taxRm

Non-controlling

interests and

preference share-holders

Rm

Profit attributable to ordinary

share-holders

RmGross

Rm

Direct taxRm


and preference

shareholdersRm

Profit attributable to ordinary

shareholdersRm

Profit for the year from continuing operations 34 274 (8 061) (4 260) 21 953 28 608 (7 580) (3 800) 17 228Headline adjustable items (reversed)/added (1 017) (81) 27 (1 071) 350 (88) (85) 177

Goodwill impairment – IAS 36 4 4Loss/(profit) on sale of property and equipment – IAS 16 16 (17) 15 14 (4) 2 (2)

Realised foreign currency translation profit on foreign operations – IAS 21 (16) 7 (9)

Profit on disposal of subsidiary – IAS 27 (9) (9) (91) (91)FCTR on liquidation of group companies – IAS 21 (1 203) (1 203)Disposal profit and reversal of impairment of associate – IAS 27/IAS 36 (53) (53)

Impairment of intangible assets – IAS 36 257 (63) 194 477 (86) (102) 289Realised gains on available-for- sale assets - IAS 39 (29) (1) 12 (18) (16) (4) 10 (10)

Standard Bank Group headline earnings from continuing operations 33 257 (8 142) (4 233) 20 882 28 958 (7 668) (3 885) 17 405

Loss for the year from discontinued operation (4 077) 29 (4 048) (1 022) (1 022)Headline adjustable items reversed 346 (43) 303 603 603

Impairment of intangible assets – IAS 36 193 (43) 150Impairment of non-current assets held for sale – IFRS 5 153 153 603 603

Standard Bank Group headline earnings from discontinued operation (3 731) (14) (3 745) (419) (419)

Standard Bank Group headline earnings 29 526 (8 156) (4 233) 17 137 28 539 (7 668) (3 885) 16 986

Headline earnings are calculated in accordance with Circular 2/2013 Headline Earnings issued by SAICA at the request of the JSE.

243

32. Earnings per ordinary share

2014 2013

The calculations of basic earnings and headline earnings per ordinary share and diluted earnings and diluted headline earnings per ordinary share are as follows:

Earnings based on weighted average shares in issue (Rm)Headline earnings 17 137 16 986

Continuing operations 20 882 17 405Discontinued operations (3 745) (419)

Earnings attributable to ordinary shareholders 17 905 16 206

Continuing operations 21 953 17 228Discontinued operations (4 048) (1 022)

Weighted average number of ordinary shares in issue (number of shares)Weighted average number of ordinary shares in issue before adjustments 1 618 556 221 1 614 674 078Adjusted for shares held pursuant to Tutuwa initiative1 (27 725 901) (42 908 643)Adjusted for deemed treasury shares held by entities within the group2 (6 110 379) (5 071 049)

1 584 719 941 1 566 694 386

Headline earnings per ordinary share (cents) 1 081,4 1 084,2

Continuing operations 1 317,7 1 110,9Discontinued operation (236,3) (26,7)

Basic earnings per ordinary share (cents) 1 129,9 1 034,4


Diluted earnings per ordinary shareWeighted average number of ordinary shares in issue (number of shares) 1 584 719 941 1 566 694 386Adjusted for the following potential dilution:Standard Bank GSIS 1 188 465 1 218 600Standard Bank EGS 8 440 089 9 649 326DBS (2012) 5 687 619 4 665 805PRP 693 272Tutuwa initiative3 16 278 524 24 554 812

Tutuwa consortium and Community Trust 5 551 650 14 278 209Black Managers’ Trust 10 726 874 10 276 603

Diluted weighted average number of ordinary shares in issue (number of shares) 1 617 007 910 1 606 782 929

Diluted headline earnings per ordinary share (cents) 1 059,8 1 057,1


Diluted earnings per ordinary share (cents) 1 107,3 1 008,6


1 The number of shares held by the Tutuwa participants are deducted as they are deemed not to be issued in terms of IFRS.2 The number of shares held by entities within the group are deemed to be treasury shares for IFRS purposes.3 Dilutive effect of shares held pursuant to Tutuwa initiative.

Refer to pages 70 to 72 of the annual integrated report for further details on the Tutuwa initiative and the group shares held by entities within the group.




32. Earnings per ordinary share continued 4 152 884 (2013: 6 874 243) share options were outstanding at the end of the year in terms of the Standard Bank GSIS.

285 151 142 (2013: 1 084 828) rights outstanding at the end of the year in terms of the Standard Bank EGS, convertible into 15 477 832 (2013: 116 053) ordinary shares that is equivalent to the full value of the rights at year end, were not included in the calculation of diluted earnings per ordinary share because they were non-dilutive.

Dilutive impact of shares issued during the year 1 433 067 (2013: 1 106 570) rights were issued during the year in terms of the Standard Bank EGS. In 2014, of those rights,

1 433 067 rights were convertible into 165 900 ordinary shares which were included in the calculation of diluted earnings per ordinary share because they were dilutive.

5 603 792 (2013: 5 482 534) units were issued to individuals in employment of the group entity domiciled in South Africa during the year in terms of the DBS (2012), of which 5 603 792 (2013: 4 204 612) were included in the calculation of diluted earnings per ordinary share because they were dilutive. 541 094 (2013: 981 078) of these issued units were hedged by entering into a forward contract, and 541 094 (2013:103 960) were included in the calculation of diluted earnings per ordinary share because they were dilutive.

Refer to annexure C for further details on the group’s share incentive schemes.

33. Distributions Ordinary shares

2014Rm

2013Rm

Ordinary sharesCash distribution elected by shareholders 4 860 2 687

Distribution No. 89 of 300 cents per share (2013: 243 cents per share), paid on 14 April 2014 to shareholders registered on 11 April 2014 4 860 2 688Less: scrip taken up by shareholders in respect of the cash dividend/capitalisation issue (1)

Cash distribution elected by shareholders 4 192 3 772

Dividend No. 90 of 259 cents per share (2013: 233 cents per share), paid on 15 September 2014 to shareholders registered on 12 September 2014 4 192 3 772

9 052 6 459

A final dividend No. 91 of 339 cents per share was declared on 5 March 2015, payable on 28 April 2015 to all shareholders registered on 24 April 2015, bringing the total dividends declared in respect of 2014 to 598 cents per share (2013: 533 cents per share).

Preference shares6.5% first cumulative preference shares:Dividend No. 89 of 3,25 cents per share (2013: 3,25 cents) paid on 7 April 2014 to shareholders registered on 4 April 2014Dividend No. 90 of 3,25 cents per share (2013: 3,25 cents) paid on 8 September 2014 to shareholders registered on 5 September 2014

Non-redeemable, non-cumulative, non-participating preference sharesDividend No. 19 of 329,94 cents per share (2013: 331,96 cents) paid on 7 April 2014 to shareholders registered on 4 April 2014 175 176Dividend No. 20 of 340,58 cents per share (2013: 324,56 cents) paid on 8 September 2014 to shareholders registered on 5 September 2014 181 173

356 349

6.5% first cumulative preference shares dividend No. 91 of 3,25 cents per share (2013: 3,25 cents) was declared on 5 March 2015, payable on 20 April 2015 to all shareholders registered on 17 April 2015.

Non-redeemable, non-cumulative, non-participating preference shares dividend No. 21 of 358,16 cents per share (2013: 329,94 cents), payable on 20 April 2015, was declared to shareholders registered on 17 April 2015.

245

34. Statement of cash flows notes

2014Rm

2013Rm

34.1 Decrease/(increase) in income-earning assetsNet derivative assets 5 596 4 118Trading assets (17 530) 9 549Pledged assets (1 866) 2 583Financial investments (47 986) (4 315)Loans and advances (89 851) (41 909)Other assets 1 846 8 641

(149 791) (21 333)

34.2 Increase/(decrease) in deposits, trading and other liabilitiesDeposit and current accounts 130 588 18 485Trading liabilities 9 191 1 488Other liabilities and provisions 1 444 (3 620)

141 223 16 353

34.3 Direct taxation paidTaxation payable and deferred taxation at the beginning of the year (6 964) (6 408)Reclassified as held for sale (167)Net disposal/(addition) through business acquisition 13Direct taxation (7 873) (7 461)

Recognised directly in equity and OCI 188 119Recognised in profit or loss (8 061) (7 580)

Current and deferred taxation at the end of the year 6 767 6 964

(8 070) (7 059)

34.4 Net cash flows from/(used in) discontinued operationDiscontinued operationCash and cash equivalents at the beginning of the year 14 099 18 890Net cash flows from operating activities 1 471 (8 494)Net cash flows used in investing activities (163) (35)Net cash flows used in financing activities (312)Effect of exchange rate changes on cash and cash equivalents 1 482 3 738

Cash and cash equivalents at the end of the year 16 577 14 099




34. Statement of cash flows notes continued

2014Rm

2013Rm

34.5 Net dividends paidDividends to ordinary shareholders (9 052) (6 459)Dividends to preference shareholders (356) (349)Dividends received in terms of the Tutuwa initiative and on deemed treasury shares 194 202Dividends to non-controlling shareholders in subsidiaries (1 480) (1 405)

(10 694) (8 011)

34.6 Cash and cash equivalentsCash and balances with central banks (note 3) 64 302 53 310Cash and balances with central banks held for sale (note 7) 16 577 14 099

80 879 67 409

247

34. Statement of cash flows notes continued

2014Rm

2013Rm

34.7 Disposal of subsidiariesNet cash inflow resulting from the disposal of subsidiaries (9) (310)

Other assets (481)Deposit and current accounts 39Current and deferred tax liabilities 13Other liabilities 217

Net asset value disposed of (212)Non-controlling interest 38

Share of subsidiary disposed of (174)Profit on disposal (9) (91)Loan repaid (45)

Sale consideration (9) (310)

Net cash inflow resulting from disposal of subsidiaries (9) (310)

35. Reclassification of financial assets The group reclassified assets from held-for-trading to loans and receivables for which there was a clear change in intent to hold the

assets for the foreseeable future rather than to exit or trade in the short term. In the current financial year, assets with a carrying value of R546 million (2013: Rnil) was reclassified from held-for-trading to loans and receivables. This represents the estimated amounts of future cash flows expected to be recovered at the date of reclassification. The weighted average effective interest rate on the reclassified assets amounted to 10.18%.

2014Rm

2013Rm

Carrying value of reclassified financial assets at the end of the year 1 095 510Fair value of reclassified financial assets at the end of the year 1 109 441

A fair value gain of R49 million (2013: R112 million loss) after tax would have been recognised in 2014 had all reclassifications not been effected.

The table below sets out the amounts actually recognised in profit or loss:

Period after reclassificationNet interest income 31 46




36. Related party transactions36.1 Parent Standard Bank Group Limited is the ultimate holding company of the Standard Bank Group of companies.

36.2 Subsidiaries Details of effective interest, investments in and loans to subsidiaries are disclosed in annexure A.

36.3 Associates and joint ventures Details of effective interest, investments in and loans to associates and joint ventures are disclosed in annexure B.

36.4 Key management personnel Key management personnel include: the members of the Standard Bank Group Limited board of directors and prescribed officers

effective for 2014 and 2013. Non-executive directors are included in the definition of key management personnel as required by IFRS. The definition of key management includes the close family members of key management personnel and any entity over which key management exercise control or joint control. Close members of family are those family members who may be expected to influence, or be influenced by that person in their dealings with SBG. They include the person’s domestic partner and children, the children of the person’s domestic partner, and dependents of the person or the person’s domestic partner.

2014Rm

2013Rm

Key management compensationSalaries and other short-term benefits paid 110 133Post-employment benefits 5 5IFRS 2 value of share options, rights and units expensed 59 24

174 162

The transactions below are entered into in the normal course of business.

Loans and advancesLoans outstanding at the beginning of the year 9 20Change in key management structures (1)Loans granted during the year 24 22Loans repaid during the year (23) (32)

Loans outstanding at the end of the year 10 9

Interest earned 1 1

Loans include mortgage loans, instalment sale and finance leases and credit cards. No specific credit impairments have been recognised in respect of loans granted to key management (2013: Rnil).

The mortgage loans and instalment sale and finance leases are secured by the underlying assets. All other loans are unsecured.

Deposit and current accountsDeposits outstanding at the beginning of the year 125 113Change in key management structures (63) 12Net deposits received during the year 88

Deposits outstanding at the end of the year 150 125

Interest expense 2 2Deposits includes cheque, current and savings accounts.

Investment productsBalance at the beginning of the year 430 258Change in key management structures (131) 69Investments placed during the year 280 234Investments repaid during the year (179) (131)

Balance at the end of the year 400 430

249

36. Related party transactions continued36.4 Key management personnel continued

2014Rm

2013Rm

Third-party funds under managementFund value at the beginning of the year 748 500Change in key management structures 28 96Net deposits including commission and other transaction fees 83 152

Fund value at the end of the year 859 748

Other feesFinancial consulting fees and commission 12 7

Shares and share options heldAggregate details of Standard Bank Group Limited shares and share options held by key management personnel.Shares beneficially owned (number) 1 647 808 8 481 211Share options held (number) 4 938 802 6 581 189

36.5 Transactions with a shareholderThe following transactions took place between the group and ICBC, a 20.1% shareholder of Standard Bank Group Limited:

RevenueTrading revenue 94 33Fee and commission income 2Net interest income 60 17

Total revenue earned 156 50

Net loans and advances/depositsNet deposits outstanding at beginning of the year 455Net loans and advances incurred/(deposits repaid) during the year 1 462 (455)

Net loans and advances outstanding at the end of the year 1 462

Net loans and advances to ICBC include fixed term loans with a maturity of less than 12 months from the reporting date. Net interest income from these arrangements amounted to R60 million in 2014 (2013: R17 million). These facilities were entered into at market related terms and conditions.

Trading assetsTrading Assets outstanding at beginning of the yearNet trading positions opened during the year 20

Trading assets outstanding at end of the year 20

During the year, the group entered into commodity leasing transactions with ICBC at market related terms and conditions, from which gross trading revenue of R94 million was recognised. As at 31 December 2014, a trading asset of R20 million with respect to these transactions was recognised.

Letters of creditThe group has off-balance sheet letters of credit exposure issued to ICBC as at 31 December 2014 of R646 million. The group received R2 million in fee and commission income relating to these transactions. 646




36. Related party transactions continued36.6 Other contracts Saki Macozoma, a former director and deputy chairman of the company, has an effective shareholding of 28.4% (2013: 28.4%) in

Safika which is a member of three different consortia that were party to the Andisa Capital and the Tutuwa transactions. Safika holds effective interests of 2.38% (2013: 2.39%) in Liberty Holdings and 1.33% (2013: 1.34%) in Standard Bank Group Limited. The group has an effective interest of 26.67% (2013: 26.67%) in Safika.

2014Rm

2013Rm

36.7 Post-employment benefit plansDetails of balances with SBG and transactions between SBG and the group’s post-employment benefit plans are listed below:Fee income 18 33Deposits held with the group 160 363Interest paid 54 47Value of assets under management 9 077 11 276Investments held in bonds and money market 655 797Value of ordinary SBG shares held 330 7 281

36.8 Tutuwa initiative refinancing The group concluded its Tutuwa initiative in October 2004 when it sold an effective 10% interest in its South African banking

operations to a broad-based grouping of black-owned entities. The group subscribed for 8.5% redeemable, cumulative preference shares that were issued by SEs, including Tutuwa 1 and Tutuwa 2 that used the funds to acquire shares in the group. These two vehicles were in turn acquired by Shanduka Group Proprietary Limited and Safika Holdings Proprietary Limited, respectively. From an IFRS perspective, all of the preference shares subscribed for by the group were accounted for as a negative empowerment reserve.

In May and June 2013, Tutuwa 1 and Tutuwa 2, respectively, obtained third-party financing and repaid in full their outstanding preference share funding and accrued dividends thereon of R668,3 million and R1 007,2 million, respectively, to the group. This resulted in a release of R1 675,5 million of the group’s negative empowerment reserve relating to Tutuwa 1 and Tutuwa 2 and resulted in 35 752 909 ordinary shares, no longer deemed to be treasury shares for accounting purposes.

2014Rm

2013Rm

37. Pensions and other post-employment benefitsAmount recognised as assets in the statement of financial position (note 11)Standard Bank banking activitiesRetirement funds (note 37.1) 1 382 1 585

LibertyRetirement funds (note 37.1) 276 210

1 658 1 795

Amounts recognised as liabilities in the statement of financial position (note 21.1)Standard Bank banking activitiesRetirement funds (note 37.1) 71 119Post-employment healthcare benefits – other funds (note 37.2) 783 764

LibertyPost-employment healthcare benefits (note 37.3) 423 375

1 277 1 258

The total amount recognised as an expense for the defined contribution plans operated by the group amounted to R872 million (2013: R1 146 million).

251

37. Pensions and other post-employment benefits continued37.1 Retirement funds37.1.1 Standard Bank retirement funds Membership of the principal fund, the Standard Bank Group Retirement Fund (SBGRF), exceeds 95% of SBSA’s permanent staff.

The fund, one of the 10 largest in South Africa, is a defined contribution fund governed by the Pension Funds Act 24 of 1956 (Pension Funds Act). Member-elected trustees represent 50% of the trustee board. The assets of the fund are held independently.

SBGRF is regulated by the Pension Funds Act, as well as the FSB.

The fund is subject to a statutory financial review by actuaries at an interval of not more than three years. The latest full actuarial valuation was performed on 31 December 2012 and, in the opinion of the actuary, the fund was considered to be financially sound. The next actuarial valuation is to be performed on 31 December 2015.

From 1 January 1995, new employees became entitled to defined contribution benefits only. Employees who were members of the fund on 31 December 1994 were entitled to guaranteed benefits under the old rules of the defined benefit fund. Given the defined benefit nature of the guaranteed benefits, the entire plan is classified as a defined benefit plan and accounted for as such. A specific liability was recognised within the fund to provide for the guaranteed defined benefits.

On 1 November 2009, the fund introduced individual member investment choice for defined contribution members and the pre-1995 members could choose to give up their guaranteed defined benefits and instead accept an offer of a 10% enhancement to their actuarial reserve values. Over 90% of the pre-1995 defined benefit members accepted the offer and converted to defined contribution plans. The assets and liabilities of the Provider Fund were transferred by way of a Section 14 transfer in terms of the Pension Funds Act, 1956 as amended, into the SBGRF.

The majority of employees in South Africa who are not members of the SBGRF are members of two other funds designed for their occupational groups. Employees in territories beyond South African jurisdiction are members of either defined contribution or defined benefit plans governed by legislation in their respective countries.

37.1.2 Liberty retirement funds1

The Liberty defined benefit pension scheme closed to new employees from 1 March 2001 and with effect from this date, the majority of employees accepted an offer to convert their retirement plans from defined benefit to defined contribution plans. Employees joining after 1 March 2001, automatically become members of the defined contribution schemes. The ACA and Rentmeester defined benefit pension funds are all fully funded. All funds are governed by the Pension Funds Act.

Description of risks Post-retirement obligation risk is the risk to the group’s comprehensive income that arises from the requirement to contribute as an

employer to an under-funded defined benefit plan. The group operates both defined contribution plans and defined benefit plans, with the majority of its employees participating in defined contribution plans. The defined benefit pension and healthcare schemes for past and certain current employees, create post-retirement obligations. The group mitigates these risks through independent asset managers and independent asset and liability management advisors for material funds. Potential residual risks which may impact the group are managed within the group asset and liability management process.

1 This includes the Liberty Group defined benefit pension fund. The ACA defined benefit fund and Rentmeester defined benefit fund are not deemed to be material.




37. Pensions and other post-employment benefits continued37.1 Retirement funds continued

2014Rm

2013Rm

The amounts recognised in the statement of financial position in respect of theretirement funds are determined as follows:Present value of funded obligations 30 368 29 067Fair value of plan assets (32 028) (30 987)

Surplus (1 660) (1 920)Asset ceiling 73 244

Included in the statement of financial position (1 587) (1 676)

Comprising:SBGRF (1 382) (1 585)Liberty retirement funds (276) (210)Other retirement funds 71 119

(1 587) (1 676)

Movement in the present value of funded obligationsBalance at the beginning of the year 29 067 25 645Current service cost 786 767Interest cost 2 411 2 060Employee contributions 588 565Actuarial losses 553 2 020Exchange differences 20 162Benefits paid (2 855) (2 143)Settlement payments (202) (9)


Movement in the fair value of plan assetsBalance at the beginning of the year 30 987 27 723Interest on assets 17 17Expected return on plan assets 2 536 2 224Contributions received 1 312 1 188Actuarial gains 273 1 857Acquisitions/assets acquired in a business combination 16Reduction in employer surplus account (14) (14)Exchange differences 14 130Benefits paid (2 855) (2 144)Settlement payments (242) (10)


Plan assets consist of the following:Cash 1 108 1 559Equities 13 280 13 499Bonds 9 964 8 925Property and other 7 676 7 004

32 028 30 987

Plan assets include no (2013: R32 million) property occupied by the group.

The group expects to pay R662 million in contributions to the Standard Bank retirement funds in 2015 (2013: R617 million).

253

37. Pensions and other post-employment benefits continued37.1 Retirement funds continued

2014Rm

2013Rm

The amounts recognised in profit or loss are determined as follows:Current service cost 786 767Net interest income (116) (153)

Included in staff costs 670 614

The expected long-term rate of return is based on the expected long-term returns on equities, cash and bonds. The split between the individual asset categories is considered in setting these assumptions. Adjustments were made to reflect the effect of expenses.

Components of statement of other comprehensive incomeNet return on assets (297) (1 886)Actuarial gains 553 2 020

(Gain)/loss from changes in demographic assumptions (71) 2 468Loss/(gain) from changes in financial assumptions 586 (464)Loss from changes in experience adjustments 38 16

Asset ceiling (171) 141

Remeasurements recognised in other comprehensive income 85 275

Reconciliation of net defined benefit assetNet defined benefit asset at the beginning of the year (1 676) (1 974)Net expense recognised 670 614Amounts recognised in OCI 85 275Company contributions (710) (609)Acquisitions/assets acquired in a business combination (14)Settlement payments 40Exchange differences 4 32

Net defined benefit asset at the end of the year (1 587) (1 676)

Defined benefit pension fund employer surplus included in other assets in the statement of financial position 276 210

Experience adjustments arising on plan liabilities 553 2 020Experience adjustments arising on plan assets 273 1 857




37. Pensions and other post-employment benefits continued37.2 Standard Bank post-employment healthcare benefits The group provides the following post-employment healthcare benefits to its employees:

Provider fund A post-employment healthcare benefit fund provides eligible employees, who were in service on 29 February 2000, with a lump sum

benefit on retirement or withdrawal enabling them to purchase an annuity to be applied towards their post-employment healthcare costs. This benefit is pre-funded in a provident fund and replaced the subsidy arrangement that was in place prior to this. Any shortfall in the payment to be made by these employees towards their healthcare costs subsequent to retirement is the responsibility of the employee. The last statutory valuation was performed on 1 April 2010 and reflected an excess in the fund. The assets and liabilities of the Provider Fund were transferred by way of a Section 14 transfer in terms of the Pension Funds Act, as amended, into the SBGRF and are no longer disclosed separately.

Other The largest portion of this liability represents a South African post-employment healthcare benefit scheme that covers all employees

who went on retirement before 1 March 2000. The liability is unfunded and is valued every year using the projected unit credit method. The latest full actuarial valuation was performed at 31 December 2014. The next actuarial valuation is to be performed on 31 December 2015.

2014Rm

2013Rm

The amounts recognised in the statement of financial position in respectof post-employment healthcare benefits are determined as follows:Present value of unfunded defined benefit obligations 783 764

Included in the statement of financial position 783 764

Comprising:Other funds 783 764

Movement in the present value of defined benefit obligationsBalance at beginning of the year 764 747Current service cost and interest cost 62 62Actuarial gains 15 12Benefits paid (58) (57)

Balance at end of the year 783 764

The amounts recognised in profit or loss are determined as follows:Current service cost 3 4Net interest cost 59 58


Components of statement of other comprehensive incomeActuarial losses arising from changes in financial assumptions 25 11Actuarial (gains)/losses arising from experience adjustments (10) 1

Remeasurements recognised in other comprehensive income 15 12

Reconciliation of net defined benefit assetNet defined benefit asset at the beginning of the year 764 747Net income recognised 62 62Amounts recognised in OCI 15 12Company contributions (58) (57)

783 764

255

37. Pensions and other post-employment benefits continued37.2 Standard Bank post-employment healthcare benefits continued Assumed medical inflation rates have a significant effect on the amounts recognised in profit or loss. A one percentage point change in

the medical inflation rate would have the following effects on amounts recognised:

2014 2013

1% increaseRm

1% decreaseRm

1% increaseRm

1% decreaseRm

Effect on the aggregate of the current service cost and interest cost 7 2 (4)Effect on the defined benefit obligation 78 (65) 25 (21)

2014Rm

2013Rm

Historical informationUnfunded obligation 783 764

Experience adjustments arising on plan liabilities 15 12

37.3 Liberty post-employment healthcare benefits Liberty operates an unfunded post-employment medical aid benefit for employees who joined before 1 July 1998. For past service of employees, Liberty recognises and provides for the actuarially determined present value of post-employment medical aid employer contributions on an accrual basis using the projected unit credit method.

Movement in the liability recognised in the statement of financial positionPresent value of unfunded defined benefit obligations at the beginning of the year 375 371Interest cost on projected benefit obligation 35 30Benefits paid (11) (10)Service cost benefit earned during the year 8 8Actuarial (gain)/loss included in OCI 16 (24)

Present value of unfunded defined benefit obligations at the end of the year 423 375

The amounts recognised in profit or loss are determined as follows:Current service cost 8 8Net interest cost 35 30


A one percentage point change in medical inflation rates would have the following effect on the post-employment medical aid liability recognised:

2014 2013

1% increaseRm

1% decreaseRm

1% increaseRm

1% decreaseRm

Increase/(decrease) in the liability 61 (51) 43 (52)




38. Business acquisitions38.1 Business acquisitions

Fair value

Integrated Processing

Solutions Electronic Payments

Proprietary Limited

Rm

Oltio Holding Proprietary

Limited Rm

2014Cash and cash equivalents 1 29Other assets 2 34Intangible assets 5 8Property and equipment 1 1Provisions and other liabilities (2) (38)Deposits and current accounts (10) (34)

Net asset value (3)Goodwill1 (note 14.1) 16

Cash consideration paid 13 *

1 Goodwill represents the premium paid for control.* The consideration paid was Rnil.

Integrated Processing Solutions Electronic Payments Proprietary Limited On 1 December 2014, the group acquired 100% of Integrated Processing Solutions Electronic Payments Proprietary Limited (IPS EP),

a specialised technology company which provides innovative security and authenticated payment solutions that utilise mobile devices. The company was acquired because of the positive synergies with the banking businesses.

From the date of acquisition, IPS EP contributed R5,8 million to revenue and (R4,4 million) to profit before tax from continuing operations of the group. If the combination had taken place at the beginning of the year, IPS EP would have contributed revenue from continuing operations of R10,8 million and profit before tax from continuing operations of (R4,9 million).

Oltio Holding Proprietary Limited On 1 April 2014, the group acquired 50% of Oltio Holding Proprietary Limited (Oltio), a specialised technology company which provides

innovative security and authenticated payment solutions that utilise mobile devices. The acquisition increased the group’s stake in the company from 50% to 100%. The company was acquired to increase Standard Bank’s presence in the mobile payments bank stream.

The net assets recognised in the 31 December 2013 financial statements were based on a provisional assessment of their fair value while the group sought an independent valuation for the intangible assets owned by Oltio. The valuation had not been completed by the date the 2014 financial statements were approved for issue by SBG’s board of directors.

The group had held a 50% interest in Oltio before acquiring the additional controlling stake. The fair value of the previously held equity interest at the acquisition date was Rnil.

From the date of acquisition, Oltio contributed R13 million to revenue and (R19 million) to profit before tax from continuing operations of the group. If the combination had taken place at the beginning of the year, Oltio would have contributed revenue from continuing operations of R14,8 million and loss before tax from continuing operations of R4 million.

257

39. Post balance sheet events39.1 Disposal of the controlling interest in SB Plc The group announced on 1 February 2015, the completion of the disposal of its controlling interest in Standard Bank’s London-based

GMOA business to ICBC. ICBC acquired 60% of SB Plc, the group’s UK banking subsidiary and has a five-year call option to purchase a further 20% of the outstanding shares of SB Plc, exercisable from the second anniversary of the date of completion. The group has a put option exercisable after ICBC’s option is exercised, to sell its residual shareholding in SB Plc to ICBC for cash. The disposal cash proceeds are expected to total approximately USD690 million (calculated based on 60% of the closing NAV less a discount on the 60% shareholding sold of USD80 million) and is based on the best information available at the time at which these financial statements are authorised for issue. The proceeds will be calculated from the net asset value of SB Plc as at 1 February 2015 (the closing NAV), which remains subject to audit verification.

For more details, refer to note 7.

39.2 Tutuwa As noted in note 17, SBG and Liberty entered into a series of transactions in 2004 whereby investments were made in cumulative

redeemable preference shares issued by BEE entities. The group’s banking operations BEE initiative is referred to throughout this report as Tutuwa and that pertaining to Liberty is referred to as Lexshell or their Black Economic Empowerment transaction.

A key feature of the BEE initiative is that all participants were subject to a ten-year lock-in restriction, during which time they were not permitted to access the underlying equity value in their shares. This lock-in period expired on 31 December 2014.

The expiry of the lock-in period had no effect on the group’s 2014 financial results. To the extent that participants access their underlying equity value and to the extent that those equity shares are financed by the group, a proportionate amount of the group’s negative empowerment reserve will be released to retained earnings. Such transactions will also affect the group’s IFRS earnings to the extent that the group’s funding to the BEE entities is repaid.



Standard Bank Group Limited – company annual financial statementsfor the year ended 31 December 2014

Statement of financial positionas at 31 December 2014

Company

Note2014

Rm2013

Rm2012

Rm

Assets Current tax 45 13 8Deferred tax 40 26Other assets 332 332 867Interest in subsidiaries1 41 67 104 66 168 63 555Interest in associates 42 313 313 142

Total assets 67 794 66 852 64 572

Equity and liabilitiesEquity 65 808 65 249 63 284

Share capital and premium 16 23 570 23 629 23 595Reserves 42 238 41 620 39 689

Liabilities 1 986 1 603 1 288

Indebtedness by the company1 41 1 700 1 586 1 267Derivative liabilities 43 174Other liabilities 112 17 21

Total equity and liabilities 67 794 66 852 64 572

1 Reclassification, refer to note 41.

Statement of comprehensive incomefor the year ended 31 December 2014

Company

Note2014

Rm2013

Rm

Dividends from subsidiaries 10 623 7 341Interest income 31 27Interest expense (32) (89)Other income 44 (80) (225)

Total income 10 542 7 054Operating expenses 41 53

Income after operating expenses 10 501 7 001Gain on disposal 256 64Impairment of investment (631) (30)

Profit before taxation 10 126 7 035Direct taxation 45 120 13

Profit for the year 10 006 7 022

Other comprehensive income

Total comprehensive income 10 006 7 022

259

Statement of cash flowsfor the year ended 31 December 2014

Company

Note2014

Rm2013

Rm

Operating activitiesProfit before taxation 10 126 7 035Adjusted for:Dividends received (10 623) (7 341)Interest income (31) (27)Interest expense 32 89Gain on disposal of subsidiary (256) (64)Impairment of investment 631 30Mark-to-market adjustments on derivatives 12 225Foreign exchange gains and losses 86

Net cash flows used in operating activities (23) (53)Interest received 31 27Interest expense (32) (89)Dividends received 10 576 7 341Taxation paid 46.1 (79) (26)Net cash flows generated from operating activities 46.2 258 287Net cash flows used in investing activities (1 263) (2 388)

Increase in interest in associates (169)Increase in investment in subsidiaries 46.3 (1 263) (2 219)

Net cash flows used in financing activities (9 468) (5 099)

Proceeds from issue of share capital 553 377Share buy-backs (613) (343)Preference share redemption 1 675Net dividends paid 46.4 (9 408) (6 808)

Net increase in cash and cash equivalentsCash and cash equivalents at beginning of the year

Cash and cash equivalents at end of the year



Standard Bank Group Limited | company annual financial statements continued

Statement of changes in equityfor the year ended 31 December 2014

Note

Share capital

and premium

Rm

Share-based

payment reserve

Rm

Revalu-ation

reserveRm

Cash flow hedging reserve

Rm

Empower-ment

reserveRm

Retained earnings

RmTotal

Rm

CompanyBalance at 1 January 2013 23 595 144 3 100 969 (2 720) 38 196 63 284Issue of share capital and share premium 16.2 377 377Repurchase of share capital and share premium (343) (343)Equity-settled share-based payment transactions 42 42Total comprehensive income 7 022 7 022Dividends paid 33 (294) (6 514) (6 808)Preference share redemption 1 657 18 1 675

Balance at 31 December 2013 23 629 186 3 100 969 (1 357) 38 722 65 249

Balance at 1 January 2014 23 629 186 3 100 969 (1 357) 38 722 65 249Issue of share capital and share premium 16.2 554 554Repurchase of share capital and share premium (613) (613)Equity-settled share-based payment transactions 20 20Total comprehensive income 10 006 10 006Dividends paid 33 (141) (9 267) (9 408)Preference share redemption

Balance at 31 December 2014 23 570 206 3 100 969 (1 498) 39 461 65 808

261

NotesCompany

2014Rm

2013Rm

40. Deferred taxDeferred tax asset 26

40.1 Deferred tax reconciliationDeferred tax asset at the beginning of the year 26(Reversing)/originating temporary difference for the year (26) 26

Deferred tax on assessed loss (utilised)/raised (26) 26

Deferred tax asset at end of the year 26

41. Interest in subsidiariesCompany

2014Rm

2013Rm

2012Rm

Shares at cost 63 973 64 040 61 981Net indebtedness to the company 2 261 1 278 766Investment through equity-settled share incentives 870 850 808

67 104 66 168 63 555Indebtedness by the company (1 700) (1 586) (1 267)

Total interest in subsidiaries 65 404 64 582 62 288

Principal subsidiaries and investments and related loans are listed in annexure A.

Indebtness to the company are all current assets and not impaired and have been classified as loans and advances which are measured on an amortised cost basis and are classified as level 3 in the fair value hierarchy. Changes in the indebtedness during the year include repayments, new loans, interest accruals and exchange rate differences.

Indebtness by the company are all liabilities repayable on demand, measured at amortised cost and classified as level 3 in the fair value hierarchy. Changes in the indebtedness during the year include repayments, new loans, interest accruals and exchange rate differences.

Reclassification of indebtedness (by)/to the company Indebtedness to the company (liabilities) of R1 700 million (2013: R1 586 million) was previously presented and disclosed in the

company’s statement of financial position after netting indebtedness to the company (assets) of R2 261 million (2013: R1 278 million). In accordance with IFRS and the group’s accounting policies, the company does not currently have a legally enforceable right to set off the recognised amounts and does not intend to settle on a net basis, or to realise the assets and settle the liabilities simultaneously. Accordingly, the indebtedness liabilities and assets should have been presented on a gross basis. The company’s comparative statement of financial position has accordingly been restated. The restatement had no impact on the company’s reserves or profit and loss.

The above reclassification had no impact on the group’s consolidated financial statements as the effects of these entries are eliminated on consolidation.




Notes continued

Company

2014Rm

2013Rm

42. Interest in associatesCarrying value at beginning of the year 313 142Acquisition of associate 171

Carrying value at end of the year 313 313

The associates include an investment in South African Home Loans Proprietary Limited and Ünlü Finansal Yatirimlar A.S., refer to annexure B.

43. Derivative liabilities The maturity analysis of the derivative liabilities is as follows:

Within 1 year

Rm

After 1 year but

within 5 years

Rm

After 5 years

Rm

Net fair value

Rm

Fair value of

assetsRm

Fair value of

liabilitiesRm


Rm

2014Derivatives held-for-tradingForeign exchange derivatives 174 174 174 5 421

Forwards 174 174 174 5 421

Total derivative liabilities held-for-trading 174 174 174 5 421

All derivatives are classified as derivatives held-for-trading and classified as level 2 in the fair value hierarchy.

For an explanation regarding the measurement techniques for derivative instruments, refer to note 25.

263

Company

2014Rm

2013Rm

44. Trading revenueLosses on derivatives (19) (225)Foreign exchange losses (86)Other 25

(80) (225)

45. Direct taxationCurrent yearSouth African normal tax 23 (16)Deferred tax charge 26 (26)Foreign and withholding taxes 48 40Prior yearsSouth African normal tax – under provision 23 15

Total direct taxation recognised in statement of comprehensive income 120 13

South African tax rate reconciliation (%)Effective tax rate 1Secondary tax on companies

Net tax charge 1The charge for the year has been reduced as a consequence of:Withholding tax (1)Gain on disposal 1Impairment on investment (2)Dividends received 29 29

Standard rate of South African tax 28 28

There are no unutilised tax losses (2013: R93 million) for which a deferred tax asset (2013: R26 million) was raised. There are no other deductible temporary differences or unused tax credits for which no deferred tax asset was recognised. It is probable that there will be future taxable profits against which the tax losses, in respect of which a deferred tax asset has been recognised, can be utilised.




Notes continued

Company

2014Rm

2013Rm

46. Cash flow statement notes46.1 Taxation (paid)/received

Current and deferred taxation receivable at beginning of the year 39 8Direct taxation – profit or loss (120) (13)Withholding taxes realised 47Prior year tax adjustment 18Current taxation receivable at end of the year (45) (13)Deferred taxation payable at end of the year (26)

(79) (26)

46.2 Net cash flows generated from/(used in) operating activitiesIncrease in other assets 516Increase in derivative liabilities 162Increase/(decrease) in other liabilities 96 (229)

258 287

46.3 Increase in investment in subsidiariesCost of investment in subsidiaries net of disposal (308) (2 026)Movement in indebtedness to the company (983)Movement in indebtedness by the company 28 (193)

(1 263) (2 219)

46.4 Net dividends paidAmounts unpaid at beginning of the yearDividends paid to ordinary shareholders (9 052) 6 459Dividends paid to preference shareholders (356) 349

(9 408) (6 808)

47. Liquidity, credit and market risk information Other assets and liabilities consist mainly of non-financial assets and liabilities which are not subject to liquidity, credit and market risk.

265

48. Related party transactions During 2013, the company:

increased its shareholding in its subsidiary, Standard International Holdings (SIH) to 100%

acquired a 28.84% interest in SBLH (the remaining 71.16% in SBLH was economically owned by the company principally through its shareholding in SIH’s subsidiary SBIC Investments SA)

acquired an interest in an associate – Ünlü Finansal Yatirimlar A.S.

During 2014, the company:

increased its legal ownership interest in SBLH to 100%

liquidated its interest in SIH.

The company’s acquisition of its interest in the above-mentioned companies were acquired from other group companies. The investments were acquired as part of the group’s restructure of its international legal entity structure. These transactions were accounted for in terms of its accounting policy for common control transactions (refer to annexure D – accounting policy 1). The investments were recognised at cost, being the acquiree’s original recorded carrying value.

Where the purchase price was greater (less) than the original cost, that difference has been recognised as an additional investment in the company’s investment in the transferor of that investment (dividend income).

Following the restructure the company assessed its investments in subsidiaries that were part of the above-mentioned restructure for impairment. Impairments were recognised within dividend income to the extent of the dividends received as a result of the restructure and within impairments of interests in subsidiaries to the extent that there were insufficient dividends arising from the restructure.

No other profit or loss or fair value adjustments were recognised as a result of these transactions.

During the year, the company received interest on loans to its subsidiaries and dividends on its investments in its subsidiaries. The company also paid interest on its loans from subsidiary companies.

During the year, the company entered into several foreign currency derivative transactions with its subsidiary, the Standard Bank of South Africa Limited. These derivatives were entered into to hedge the company's foreign currency exposures arising from its interests in foreign operations. As at 31 December 2014, the fair value of the outstanding derivatives was R174 million. The derivatives were entered into on an arm's length basis.

A list of principal subsidiaries is detailed within annexure A.



Standard Bank

Group1

1 Incorporated in South Africa.

2 Following the sale of a 60% interest in SB Plc to ICBC, effective 1 February 2015, these entities became associates and were deconsolidated from the group’s accounts from that date. Refer to the following page for the group structure as at 1 February 2015.

3 This entity has been classified in the group’s statement of financial position within non-current assets and liabilities held for sale. Refer to note 7 for further information.

AnnexureA

Subsidiaries, consolidated and unconsolidated structured entities

As at 31 December 2014

Standard Lesotho Bank (80%)

Standard Bank Namibia (90%)

Standard Bank Swaziland (65%)

Standard Bank de Angola (51%)

Banco Standard de Investimentos, Brazil3

Standard Advisory (China)

Standard Advisory London, UK

Standard New York, USA

Melville Douglas Investment Management1

Standard Insurance1

Standard Trust1

Stanvest1

SBG Securities1

Standard Bank Properties1

Standard Bank Jersey

Standard Bank Offshore Trust Company, Jersey

Standard Bank International Investments, Jersey

Standard Bank Isle of Man

Standard Bank Trust Company (Mauritius)

Standard BankOffshore Group,

Jersey

Standard Bank Plc (UK)2

Standard Resources (China)2

Standard Merchant Bank (Asia), Singapore

Standard NY Holdings, USA2

Standard Americas, USA2

Standard New York Securities, USA2

Standard Advisory Asia, Hong Kong

Standard Bank London Holdings,

UK

Stanbic International Insurance, Isle of Man

Standard Finance, Isle of Man

SBIC Finance, Isle of Man

SML, Isle of Man

Standard Bank Group

International, Isle of Man

CfC Stanbic Holdings, Kenya (60%)


Stanbic Bank Ghana (99.5%)

Stanbic Bank Tanzania (99.9%)

Stanbic Bank Uganda (80%)

Stanbic Bank Zambia (99.9%)

Stanbic IBTC Holdings, Nigeria (53.2%)

Stanbic IBTC Bank, Nigeria (53.1%)

Standard Bank, Malawi (60.2%)


Standard Bank S.A.R.L, Mozambique (98.1%)

Standard Bank RDC S.A. (99.99%)

Stanbic Bank Zimbabwe

Stanbic Africa Holdings, UK

Diners Club (S.A.)1

Blue Bond Investments1

Standard Bank Insurance Brokers1

The Standard Bank of

South Africa1

Liberty Group

STANLIB1

STANLIB Collective Investments

STANLIB Multi-Manager

STANLIB Wealth Management

STANLIB Asset Management

STANLIB Fund Managers Jersey

Liberty Holdings1

(53.6%)

Liberty Active1

Capital Alliance Holdings1

Liberty Kenya Holdings (56.8%)

Neil Harvey and Associates1 (74.9%)

Liberty Group Properties1

267

Standard Bank

Group1

Standard Lesotho Bank (80%)

Standard Bank Namibia (89.9%)

Standard Bank Swaziland (65%)

Standard Bank de Angola (51%)

Banco Standard de Investimentos, Brazil3

Standard Advisory (China)

Standard Advisory London, UK

Standard New York, USA

Melville Douglas Investment Management1

Standard Insurance1

Standard Trust1

Stanvest1

SBG Securities1

Standard Bank Properties1

Standard Bank Jersey

Standard Bank Offshore Trust Company, Jersey

Standard Bank International Investments, Jersey

Standard Bank Isle of Man

Standard Bank Trust Company (Mauritius)

Standard BankOffshore Group,

Jersey

Stanbic International Insurance, Isle of Man

Standard Finance, Isle of Man

SBIC Finance, Isle of Man

SML, Isle of Man

Standard Bank Group

International, Isle of Man

CfC Stanbic Holdings, Kenya (60%)


Stanbic Bank Ghana (99.5%)

Stanbic Bank Tanzania (99.9%)

Stanbic Bank Uganda (80%)

Stanbic Bank Zambia (99.9%)

Stanbic IBTC Holdings, Nigeria (53.2%)

Stanbic IBTC Bank, Nigeria (53.1%)

Standard Bank, Malawi (60.2%)


Standard Bank S.A.R.L, Mozambique (98.1%)

Standard Bank RDC S.A., (99.99%)

Stanbic Bank Zimbabwe

Stanbic Africa Holdings, UK

Diners Club (S.A.)1

Blue Bond Investments1

Standard Bank Insurance Brokers1

The Standard Bank of

South Africa

Liberty Group

STANLIB1

STANLIB Collective Investments

STANLIB Multi-Manager

STANLIB Wealth Management

STANLIB Asset Management

STANLIB Fund Managers Jersey

Liberty Holdings1

(53.6%)

Liberty Active1

Capital Alliance Holdings1

Liberty Kenya Holdings (56.8%)

Neil Harvey and Associates1 (74.9%)

Liberty Group Properties1

Standard Bank London Holdings,

UK4

Standard Merchant Bank (Asia), Singapore

Standard Advisory Asia, Hong Kong

With effect from 1 February 2015

The diagrams on the left and on this page depict principal subsidiaries only. A full list of the group's subsidiaries and consolidated structured entities is available at the company's registered office.

The holding in subsidiaries is 100% unless otherwise indicated. The country of incorporation is stated where it is not obvious from the entity’s name.

4 With effect from 1 February 2015, the group has a 40% associate interest in SB Plc, which is held by Standard Bank London Holdings.



Annexure A | Subsidiaries, consolidated and unconsolidated structured entities continued

Subsidiaries

Effective holding Non-controlling interest Book value of shares Net indebtedness to/(by)

the company

Nature of operation

Nominal sharecapital issued

Rm2014

%2013

%2014

%2013

%2014

Rm2013

Rm2014

Rm2013

Rm

Standard Bank Group Limited will ensure that, except in the case of political risk, subsidiaries within the Standard Bank Group, denoted by # are able to meet their contractual liabilities while they remain group subsidiaries. For subsidiaries denoted by ¤, support was in place until the effective date of disposal of SB Plc and its subsidiaries to ICBC on 1 February 2015 from which date the group's capital support undertaking was no longer applicable in respect of these entities.

Banking subsidiariesBanco Standard de Investimentos S.A. (Brazil)# Investment bank 462 100 100 496 496CfC Stanbic Bank Limited (Kenya)1# Commercial bank 418 60 60 40 40Stanbic Bank Botswana Limited (Botswana)1#9 Commercial bank 174 100 100 Stanbic Bank Ghana Limited (Ghana)1# Commercial bank 630 99 99 1 1Standard Bank RDC S.A.1,4#† Commercial bank 85 100 100 Stanbic Bank Tanzania Limited (Tanzania)1#† Commercial bank 44 100 100 Stanbic Bank Uganda Limited (Uganda)1# Commercial bank 227 80 80 20 20Stanbic Bank Zambia Limited (Zambia)1# Commercial bank 660 100 100 Stanbic Bank Zimbabwe Limited (Zimbabwe)1 Commercial bank ** 100 100 136 135Stanbic IBTC Bank PLC (Nigeria)1#† Commercial bank 103 53 53 47 47Standard Bank de Angola S.A. (Angola)# Commercial bank 768 51 51 49 49 359 359Standard Bank Isle of Man Limited (Isle of Man)1# Merchant bank 25 100 100 Standard Bank Jersey Limited (Jersey)1# Merchant bank 222 100 100 Standard Bank Limited (Malawi)1# Commercial bank 23 60 60 40 40Standard Bank (Mauritius) Limited (Mauritius)1# Commercial bank 342 100 100 Standard Bank Namibia Limited (Namibia)1# Commercial bank 2 90 100 10 400 444Standard Bank Plc (UK)2,¤ Investment bank 6 533 100 100 2 024 Standard Bank S.A.R.L. (Mozambique)1# Commercial bank 309 98 98 2 2Standard Bank Swaziland Limited (Swaziland)# Commercial bank 15 65 65 35 35 33 33Standard Lesotho Bank Limited (Lesotho)# Commercial bank 21 80 80 20 20 13 13Standard Merchant Bank (Asia) Limited (Singapore)1# Investment bank 214 100 100 The Standard Bank of South Africa Limited# Commercial bank 60 100 100 36 163 36 163 1 473 473

Non-banking subsidiariesCfC Stanbic Holdings Limited (Kenya) Bank holding company 232 60 60 40 40Ecentric Payment Systems Proprietary Limited Development and marketing transactions –

switching software and services ** 80 80 20 20Liberty Group Limited1 Insurance company 28 54 54 46 46Liberty Holdings Limited6 Insurance holding company 26 54 54 46 46 7 668 7 668Melville Douglas Investment Management Proprietary Limited# Asset and portfolio management ** 100 100 53 53Standard Bank International Investments Limited (Jersey)1# Portfolio management ** 100 100 SBG Securities Proprietary Limited# Stockbrokers ** 100 100 320 320Stanbic IBTC Holdings (Nigeria)1 Bank holding company 275 53 53 47 47 SBN Holdings Limited (Namibia) Bank holding company ** 90 100 10 Stanbic Africa Holdings Limited (UK)2 Investment holding company 385 100 100 Standard Americas, Inc (US)1¤ Trading company ** 100 100 2 160 2 161Standard Bank Group International Limited (Isle of Man) Investment holding company ** 100 100 5 588 5 588 Standard Bank London Holdings Limited1# Investment holding company 2 650 100 100 9 795 3 101 (867) (750)Standard Bank Offshore Group Limited (Jersey)3 Investment holding company 17 100 100 49 49Standard Bank Offshore Trust Company Jersey Limited (Jersey)1# Trust company 4 100 100Standard Bank Trust Company (Mauritius) Limited (Mauritius)1# Trust company ** 100 100

269

Subsidiaries


the company

Nature of operation


Rm2014

%2013

%2014

%2013

%2014

Rm2013

Rm2014

Rm2013

Rm

Standard Bank Group Limited will ensure that, except in the case of political risk, subsidiaries within the Standard Bank Group, denoted by # are able to meet their contractual liabilities while they remain group subsidiaries. For subsidiaries denoted by ¤, support was in place until the effective date of disposal of SB Plc and its subsidiaries to ICBC on 1 February 2015 from which date the group's capital support undertaking was no longer applicable in respect of these entities.

Banking subsidiariesBanco Standard de Investimentos S.A. (Brazil)# Investment bank 462 100 100 496 496CfC Stanbic Bank Limited (Kenya)1# Commercial bank 418 60 60 40 40Stanbic Bank Botswana Limited (Botswana)1#9 Commercial bank 174 100 100 Stanbic Bank Ghana Limited (Ghana)1# Commercial bank 630 99 99 1 1Standard Bank RDC S.A.1,4#† Commercial bank 85 100 100 Stanbic Bank Tanzania Limited (Tanzania)1#† Commercial bank 44 100 100 Stanbic Bank Uganda Limited (Uganda)1# Commercial bank 227 80 80 20 20Stanbic Bank Zambia Limited (Zambia)1# Commercial bank 660 100 100 Stanbic Bank Zimbabwe Limited (Zimbabwe)1 Commercial bank ** 100 100 136 135Stanbic IBTC Bank PLC (Nigeria)1#† Commercial bank 103 53 53 47 47Standard Bank de Angola S.A. (Angola)# Commercial bank 768 51 51 49 49 359 359Standard Bank Isle of Man Limited (Isle of Man)1# Merchant bank 25 100 100 Standard Bank Jersey Limited (Jersey)1# Merchant bank 222 100 100 Standard Bank Limited (Malawi)1# Commercial bank 23 60 60 40 40Standard Bank (Mauritius) Limited (Mauritius)1# Commercial bank 342 100 100 Standard Bank Namibia Limited (Namibia)1# Commercial bank 2 90 100 10 400 444Standard Bank Plc (UK)2,¤ Investment bank 6 533 100 100 2 024 Standard Bank S.A.R.L. (Mozambique)1# Commercial bank 309 98 98 2 2Standard Bank Swaziland Limited (Swaziland)# Commercial bank 15 65 65 35 35 33 33Standard Lesotho Bank Limited (Lesotho)# Commercial bank 21 80 80 20 20 13 13Standard Merchant Bank (Asia) Limited (Singapore)1# Investment bank 214 100 100 The Standard Bank of South Africa Limited# Commercial bank 60 100 100 36 163 36 163 1 473 473

Non-banking subsidiariesCfC Stanbic Holdings Limited (Kenya) Bank holding company 232 60 60 40 40Ecentric Payment Systems Proprietary Limited Development and marketing transactions –

switching software and services ** 80 80 20 20Liberty Group Limited1 Insurance company 28 54 54 46 46Liberty Holdings Limited6 Insurance holding company 26 54 54 46 46 7 668 7 668Melville Douglas Investment Management Proprietary Limited# Asset and portfolio management ** 100 100 53 53Standard Bank International Investments Limited (Jersey)1# Portfolio management ** 100 100 SBG Securities Proprietary Limited# Stockbrokers ** 100 100 320 320Stanbic IBTC Holdings (Nigeria)1 Bank holding company 275 53 53 47 47 SBN Holdings Limited (Namibia) Bank holding company ** 90 100 10 Stanbic Africa Holdings Limited (UK)2 Investment holding company 385 100 100 Standard Americas, Inc (US)1¤ Trading company ** 100 100 2 160 2 161Standard Bank Group International Limited (Isle of Man) Investment holding company ** 100 100 5 588 5 588 Standard Bank London Holdings Limited1# Investment holding company 2 650 100 100 9 795 3 101 (867) (750)Standard Bank Offshore Group Limited (Jersey)3 Investment holding company 17 100 100 49 49Standard Bank Offshore Trust Company Jersey Limited (Jersey)1# Trust company 4 100 100Standard Bank Trust Company (Mauritius) Limited (Mauritius)1# Trust company ** 100 100




Subsidiaries continued


the company

Nature of operation


Rm2014

%2013

%2014

%2013

%2014

Rm2013

Rm2014

Rm2013

Rm

Non-banking subsidiaries continuedStandard Trust Limited# Trust company ** 100 100Standard Finance Limited (Isle of Man)1# Finance company ** 100 100Standard Insurance Limited Short-term insurance 15 100 100 30 30Standard International Holdings S.A. (Luxembourg)2,5# Investment holding company 100 100 5 298Standard New York, Inc (US)7 Securities broker/dealer 55 100 Standard NY Holdings, Inc (US)1,8,¤ Investment holding company 43 100 100 55Standard New York Securities, Inc (US)1,¤ Securities broker/dealer 37 100 100Standard Resources (China) Limited1¤ Trading company 118 100 100

Standard Advisory (China) Limited (China)1 Trading company 8 100 100 10 10STANLIB Limited1 Wealth and asset management ** 54 54 46 46Standard Advisory London Limited (UK) Arranging and advisory company ** 100 557Miscellaneous Finance companies 88 95 (45) (31)

63 973 64 040 561 (308)

1 Held indirectly, no book value in Standard Bank Group Limited. 2 Effective holding company comprises direct and indirect holdings.3 Represents mainly cash held in current and call accounts. 4 Name changed from Standard Bank RDC s.a.r.l. (Democratic Republic of Congo). 5 This company was deregistered in 2014. 6 Listed on the exchange operated by the JSE. 7 Incorporated in 2014 to house the non-global markets operations of New York pursuant to the sale of SB Plc.8 Name changed from Standard New York, Inc.9 Minorities hold 0.5% of this company.† Minorities hold 0.01% of this company.** Issued share capital less than R1 million.

The nominal share capital issued of foreign subsidiaries has been stated in the above table at their rand equivalents at the rates of exchange ruling on the dates of provision of capital. The country of incorporation is South Africa unless otherwise indicated. The table above lists those group subsidiaries in which there is a non-controlling interest, those subsidiaries for which the company has a direct shareholding, subsidiaries for which there is net indebtedness to/(from) the company, as well as those subsidiaries for which the company has stated that it will ensure that, except in the case of political risk, its subsidiaries denoted by # are able to meet their contractual liabilities.

A full list of the group's subsidiaries and consolidated structured entities is available at the company's registered office.

271

Subsidiaries continued


the company

Nature of operation


Rm2014

%2013

%2014

%2013

%2014

Rm2013

Rm2014

Rm2013

Rm

Non-banking subsidiaries continuedStandard Trust Limited# Trust company ** 100 100Standard Finance Limited (Isle of Man)1# Finance company ** 100 100Standard Insurance Limited Short-term insurance 15 100 100 30 30Standard International Holdings S.A. (Luxembourg)2,5# Investment holding company 100 100 5 298Standard New York, Inc (US)7 Securities broker/dealer 55 100 Standard NY Holdings, Inc (US)1,8,¤ Investment holding company 43 100 100 55Standard New York Securities, Inc (US)1,¤ Securities broker/dealer 37 100 100Standard Resources (China) Limited1¤ Trading company 118 100 100

Standard Advisory (China) Limited (China)1 Trading company 8 100 100 10 10STANLIB Limited1 Wealth and asset management ** 54 54 46 46Standard Advisory London Limited (UK) Arranging and advisory company ** 100 557Miscellaneous Finance companies 88 95 (45) (31)

63 973 64 040 561 (308)

1 Held indirectly, no book value in Standard Bank Group Limited. 2 Effective holding company comprises direct and indirect holdings.3 Represents mainly cash held in current and call accounts. 4 Name changed from Standard Bank RDC s.a.r.l. (Democratic Republic of Congo). 5 This company was deregistered in 2014. 6 Listed on the exchange operated by the JSE. 7 Incorporated in 2014 to house the non-global markets operations of New York pursuant to the sale of SB Plc.8 Name changed from Standard New York, Inc.9 Minorities hold 0.5% of this company.† Minorities hold 0.01% of this company.** Issued share capital less than R1 million.

The nominal share capital issued of foreign subsidiaries has been stated in the above table at their rand equivalents at the rates of exchange ruling on the dates of provision of capital. The country of incorporation is South Africa unless otherwise indicated. The table above lists those group subsidiaries in which there is a non-controlling interest, those subsidiaries for which the company has a direct shareholding, subsidiaries for which there is net indebtedness to/(from) the company, as well as those subsidiaries for which the company has stated that it will ensure that, except in the case of political risk, its subsidiaries denoted by # are able to meet their contractual liabilities.

A full list of the group's subsidiaries and consolidated structured entities is available at the company's registered office.




Details of group companies with material non-controlling interests

Summarised financial information on an IFRS basis before

intercompany eliminations



Non-controlling

interests%

Profitattributable

to non-controlling

interestsafter inter-

companyeliminations2

Rm

Dividendspaid to

non-controlling

interests2

Rm

Totalassets1

Rm

Totalliabilities1

Rm

Totalincome2

Rm

Profit forthe year2

Rm

Changein cash

balanceswith central

banks2

Rm

Subsidiaries with non-controlling interests2014The following material subsidiaries are not wholly-owned by the group:CfC Stanbic Bank Limited (Kenya) 21 940 18 392 2 002 700 11 40 280 48Liberty Group Limited 375 732 352 098 79 705 4 283 4 083 46 2 168 829Stanbic IBTC Bank PLC (Nigeria) 59 801 52 559 6 873 2 115 1 977 47 1 090 494

2013The following material subsidiaries are not wholly-owned by the group:CfC Stanbic Bank Limited (Kenya) 20 813 17 980 1 729 570 (1 557) 40 228 11Liberty Group Limited 350 639 329 283 85 273 4 470 (661) 46 2 360 908Stanbic IBTC Bank PLC (Nigeria) 50 029 43 597 5 164 1 286 337 47 674 296

1 Translated using the closing exchange rate.2 Translated using the average cumulative exchange rate.

The place of business and country of incorporation is South Africa unless otherwise indicated.

273

Details of group companies with material non-controlling interests





Non-controlling

interests%

Profitattributable

to non-controlling

interestsafter inter-

companyeliminations2

Rm

Dividendspaid to

non-controlling

interests2

Rm

Totalassets1

Rm

Totalliabilities1

Rm

Totalincome2

Rm

Profit forthe year2

Rm

Changein cash

balanceswith central

banks2

Rm

Subsidiaries with non-controlling interests2014The following material subsidiaries are not wholly-owned by the group:CfC Stanbic Bank Limited (Kenya) 21 940 18 392 2 002 700 11 40 280 48Liberty Group Limited 375 732 352 098 79 705 4 283 4 083 46 2 168 829Stanbic IBTC Bank PLC (Nigeria) 59 801 52 559 6 873 2 115 1 977 47 1 090 494

2013The following material subsidiaries are not wholly-owned by the group:CfC Stanbic Bank Limited (Kenya) 20 813 17 980 1 729 570 (1 557) 40 228 11Liberty Group Limited 350 639 329 283 85 273 4 470 (661) 46 2 360 908Stanbic IBTC Bank PLC (Nigeria) 50 029 43 597 5 164 1 286 337 47 674 296

1 Translated using the closing exchange rate.2 Translated using the average cumulative exchange rate.

The place of business and country of incorporation is South Africa unless otherwise indicated.




Consolidated structured entitiesThe group has an interest in the following material consolidated structured entities:

Name of entity Nature of operations

Financial support provided without any contractual obligation to do so

Amount of supportprovided as at1,2,3

Type ofsupport4

Terms of contractual arrangements that require the group to provide financial support to the SE

Events/circumstances that could expose the group to a loss as a result of the contractual arrangement

2014Rm

2013Rm

2014 2013

Blue Granite Investments No. 1 (RF) Limited (BG1)

Facilitates mortgage backed securitisations. The group is the primary liquidity facility provider to BG1.

159 145 Subordinated loan

Subordinated loan

The subordinated loan does not have a fixed term or repayment date. All the profits in BG1 are paid out to the group as interest on the loan granted.

Should BG 1's customers be unable to meet their contractual obligations under the mortgage loan agreement and the loans are classified as non-performing.

871 1 605 Mortgagebacked notes

Mortgagebacked notes

The group holds class A4, A6, B, C, D, E and F notes. Interest for the different classes of notes accrues at the following rates:

Class A4 notes – three-month JIBAR plus 0.55% Class A6 notes – three-month JIBAR plus 1.60% Class B notes – three-month JIBAR plus 0.57% Class C notes – three-month JIBAR plus 0.90% Class D notes – three-month JIBAR plus 1.50% Class E notes – three-month JIBAR plus 4.00% Class F notes – three-month JIBAR plus 8.00%.

Interest is payable quarterly. The notes’ maturity date is 21 November 2032.




Subordinatedloan

The loan does not have a fixed term or repayment date. Interest is charged at prime plus 5.50% and is only payable when BG2 has sufficient cash reserves.


1 372 1 392 Mortgagebacked notes


The group holds the class A1, A2, A3, B, C, D and Y notes. Interest for the different classes of notes accrues at the following rates:

Class A1 notes – three-month JIBAR plus 1.40%



Class B notes – three-month JIBAR plus 2.10%

Class C notes – three-month JIBAR plus 2.60%

Class D notes – three-month JIBAR plus 4.00%

Class Y notes – prime plus 3.00%.

Interest is payable quarterly. The notes' maturity date is 21 July 2041.



96 94 Subordinatedloan

Subordinatedloan

The subordinated loan does not have a fixed term or repayment date. Interest is charged at prime plus 5.50% and is only payable when BG3 has sufficient cash reserves.


990 1 076 Mortgage backed notes


The group holds notes of classes A1, A2, A3, A4, B, C, D and Y. Interest for the different classes of notes accrues at the following rates:







Class D notes – prime plus 1.00%


Interest is payable quarterly. The notes maturity date is 30 October 2031.


275

Consolidated structured entitiesThe group has an interest in the following material consolidated structured entities:




Type ofsupport4



2014Rm

2013Rm

2014 2013




Subordinated loan

The subordinated loan does not have a fixed term or repayment date. All the profits in BG1 are paid out to the group as interest on the loan granted.


871 1 605 Mortgagebacked notes


The group holds class A4, A6, B, C, D, E and F notes. Interest for the different classes of notes accrues at the following rates:

Class A4 notes – three-month JIBAR plus 0.55% Class A6 notes – three-month JIBAR plus 1.60% Class B notes – three-month JIBAR plus 0.57% Class C notes – three-month JIBAR plus 0.90% Class D notes – three-month JIBAR plus 1.50% Class E notes – three-month JIBAR plus 4.00% Class F notes – three-month JIBAR plus 8.00%.

Interest is payable quarterly. The notes’ maturity date is 21 November 2032.




Subordinatedloan

The loan does not have a fixed term or repayment date. Interest is charged at prime plus 5.50% and is only payable when BG2 has sufficient cash reserves.




The group holds the class A1, A2, A3, B, C, D and Y notes. Interest for the different classes of notes accrues at the following rates:






Class D notes – three-month JIBAR plus 4.00%


Interest is payable quarterly. The notes' maturity date is 21 July 2041.




Subordinatedloan



990 1 076 Mortgage backed notes


The group holds notes of classes A1, A2, A3, A4, B, C, D and Y. Interest for the different classes of notes accrues at the following rates:









Interest is payable quarterly. The notes maturity date is 30 October 2031.





Consolidated structured entities continued




Type ofsupport4



2014Rm

2013Rm

2014 2013




Subordinatedloan





The group holds class A1, A3, A4, B, C, D and Y notes. Interest for the different classes of notes accrues at the following rates:

Class A1 – three-month JIBAR plus 1.15%







Interest is payable quarterly. The notes’ maturity date is 15 June 2037.


Facilitates mortgage backed securitisations. The group is the primary liquidity facility provider to Siyakha.


Subordinatedloan

The loan does not have a fixed term or repayment date. Interest is charged at prime plus 5.50% and is only payable when Siyakha has sufficient cash reserves.

Should Siyakha' s customers be unable to meet their contractual obligations under the mortgage loan agreement and the loans are classified as non-performing.



The group holds class A1, A2, B, C, and D notes. Interest for the different classes of notes accrues at the following rates:

Class A1 notes – three-month JIBAR plus 1.10% Class A2 notes – prime less 2.10% Class B notes – prime less 1.00% Class C notes – prime plus 1.00% Class D notes – prime plus 2.00%.

Interest is payable quarterly. The notes’ maturity date is 11 February 2045.

Tabistone 06 (RF) Limited(Tabistone)

Facilitates mortgage backed securitisations. The group is the primary liquidity facility provider to Tabistone.

477 Subordinatedloan

Subordinatedloan

The subordinated loan is provided by the group. Interest is charged at the lower of prime plus 10% or net profit after tax or cash balance available in Tabistone.

Should Tabistone's customers be unable to meet their contractual obligations under the mortgage loan agreement and the loans are classified as non-performing.

16 073 Mortgagebacked notes


The group holds class A1, A2, A3 and C notes. Interest for the different classes of notes accrues at the following rates:


Class A2 notes –three-month JIBAR plus 1.55%




Blue Banner SecuritisationVehicle RC1 Proprietary Limited (Blue Banner)

Originates mortgage loans on behalf of group. The group is required to provide the funding for these mortgage loans.

195 238 Bridgingfinance

Bridgingfinance

The loan does not have a fixed term or repayment date. Any profits in Blue Banner are paid out as interest to the group.

Should Blue Banner's customers be unable to meet their contractual obligations under the mortgage loan agreement and the loans are classified as non-performing.


277





Type ofsupport4



2014Rm

2013Rm

2014 2013




Subordinatedloan





The group holds class A1, A3, A4, B, C, D and Y notes. Interest for the different classes of notes accrues at the following rates:








Interest is payable quarterly. The notes’ maturity date is 15 June 2037.


Facilitates mortgage backed securitisations. The group is the primary liquidity facility provider to Siyakha.


Subordinatedloan

The loan does not have a fixed term or repayment date. Interest is charged at prime plus 5.50% and is only payable when Siyakha has sufficient cash reserves.

Should Siyakha' s customers be unable to meet their contractual obligations under the mortgage loan agreement and the loans are classified as non-performing.



The group holds class A1, A2, B, C, and D notes. Interest for the different classes of notes accrues at the following rates:

Class A1 notes – three-month JIBAR plus 1.10% Class A2 notes – prime less 2.10% Class B notes – prime less 1.00% Class C notes – prime plus 1.00% Class D notes – prime plus 2.00%.


Tabistone 06 (RF) Limited(Tabistone)

Facilitates mortgage backed securitisations. The group is the primary liquidity facility provider to Tabistone.

477 Subordinatedloan

Subordinatedloan

The subordinated loan is provided by the group. Interest is charged at the lower of prime plus 10% or net profit after tax or cash balance available in Tabistone.

Should Tabistone's customers be unable to meet their contractual obligations under the mortgage loan agreement and the loans are classified as non-performing.

16 073 Mortgagebacked notes


The group holds class A1, A2, A3 and C notes. Interest for the different classes of notes accrues at the following rates:


Class A2 notes –three-month JIBAR plus 1.55%




Blue Banner SecuritisationVehicle RC1 Proprietary Limited (Blue Banner)

Originates mortgage loans on behalf of group. The group is required to provide the funding for these mortgage loans.

195 238 Bridgingfinance

Bridgingfinance

The loan does not have a fixed term or repayment date. Any profits in Blue Banner are paid out as interest to the group.

Should Blue Banner's customers be unable to meet their contractual obligations under the mortgage loan agreement and the loans are classified as non-performing.









Type ofsupport4



2014Rm

2013Rm

2014 2013

Out of the Blue Originator Proprietary Limited (OTB)

OTB originates loans on behalf of Blue Titanium Conduit Limited (BTC). BTC is consolidated by the group.

650 250 Overdraftfacility

Overdraftfacility

OTB applies for the necessary overdraft facility as and when it originates loans. The amount drawn down is settled on the same day of the draw down. The terms are negotiated and agreed upon at the time of the grant of the overdraft facility. OTB applied for and was granted an overdraft facility of R650 million in 2014 and R250 million in 2013. OTB drew down on the overdraft facility in both 2014 and 2013.

This SE does not expose the group to a risk of loss as it acts as a conduit between the group and BTC. OTB draws down on the overdraft facility as and when BTC originates loans and the facility is repaid on the same day of the draw down.

Blue Titanium Conduit (RF) Limited (BTC)

Purchases eligible term assets and funds such investments through the issuance of commercial paper. The group is the primary liquidity facility provider to BTC.

2 845 3 597 Liquidityfacility

Liquidityfacility

The liquidity facility is limited to the value of the underlying assets in BTC. As at 31 December 2014 and 2013, the liquidity facility limit is R4 078 million and R4 298 million, respectively. BTC had not drawn down on the liquidity facility as at 31 December 2014.

In the event that the underlying assets are classified as non-performing loans.

715 271 Commercialpaper

Commercialpaper

The commercial paper is short tem in nature, with the term normally being three months or less. At maturity the group can acquire new commercial paper issued by BTC. The commercial paper was acquired during different months in 2013 and 2014. The rate of interest differs depending on when the notes were acquired. The interest rate ranged from JIBAR to JIBAR plus 0.375% during the reporting period.

518 430 Creditenhancement

facility

Creditenhancement

facility

The credit enhancement facility is limited to 10% of the outstanding commercial paper issued in the market. BTC had not drawn down on the credit enhancement facility as at 31 December 2014.

Rapvest Investment Proprietary Limited

Facilitates finance deals for other group companies and third parties through preference share investments and loans to clients.

2 321 2 368 Loan Loan The loan is repayable on demand and no interest is charged on the loan.


1 054 1 041 Preferenceshares

Preferenceshares

The preference shares accrue dividends at a rate of 85% of the prime interest rate in April and October annually. The maturity date of the preference shares is 28 November 2022.

SB-Debtors Discounting No. 1 Proprietary Limited (SB-Debtors)

SB-Debtors was set up to enable Main Street 367 Proprietary Limited (Main Street) to fund the subordinated loans to BG1, BG 2, BG 3, BG 4 and Siyakha. The group provides the funding to enable SB-Debtors to originate these loans.

105 105 Loan Loan The loan has no fixed repayment date. Interest is calculated as the higher of the variable rate of three-month JIBAR plus 0.7% per annum and the cash available less R15 000.

In the event that customers of BG1, BG2, BG3, BG4 and Siyakha are unable to meet their contractual obligations under the mortgage loan agreement and the loans are classified as non-performing.

Main Street Facilitates financing to BG1, BG2, BG3, BG 4 and Siyakha. SB-Debtors provides the funding to Main Street to enable Main Street to originate these loans.


Subordinatedloan

The loan is only repayable to the extent that Main Street receives payment from the BG1, BG2, BG3, BG 4 and Siyakha. Interest is charged at the higher of JIBAR plus 10% and the cash available in terms of Main Street's priority of payments less R15 000.


1 The amount of support provided includes loans and advances and undrawn credit facilities provided to SEs by the group.2 During the reporting period, the group did not provide any financial or other support to any subsidiary without having a contractual obligation to do so. 3 This is the amount as reported on the individual company's statement of financial position as at 31 December 2014 and 2013, respectively. For credit

facilities, the amount shown is the undrawn balance as at the reporting date.4 In addition to the financial support provided to the SEs, the group enters into other transactions with SEs in the ordinary course of business.

These transactions include loans and advances, deposits and current accounts and derivatives.

279





Type ofsupport4



2014Rm

2013Rm

2014 2013

Out of the Blue Originator Proprietary Limited (OTB)

OTB originates loans on behalf of Blue Titanium Conduit Limited (BTC). BTC is consolidated by the group.

650 250 Overdraftfacility

Overdraftfacility

OTB applies for the necessary overdraft facility as and when it originates loans. The amount drawn down is settled on the same day of the draw down. The terms are negotiated and agreed upon at the time of the grant of the overdraft facility. OTB applied for and was granted an overdraft facility of R650 million in 2014 and R250 million in 2013. OTB drew down on the overdraft facility in both 2014 and 2013.

This SE does not expose the group to a risk of loss as it acts as a conduit between the group and BTC. OTB draws down on the overdraft facility as and when BTC originates loans and the facility is repaid on the same day of the draw down.

Blue Titanium Conduit (RF) Limited (BTC)

Purchases eligible term assets and funds such investments through the issuance of commercial paper. The group is the primary liquidity facility provider to BTC.

2 845 3 597 Liquidityfacility

Liquidityfacility

The liquidity facility is limited to the value of the underlying assets in BTC. As at 31 December 2014 and 2013, the liquidity facility limit is R4 078 million and R4 298 million, respectively. BTC had not drawn down on the liquidity facility as at 31 December 2014.


715 271 Commercialpaper

Commercialpaper

The commercial paper is short tem in nature, with the term normally being three months or less. At maturity the group can acquire new commercial paper issued by BTC. The commercial paper was acquired during different months in 2013 and 2014. The rate of interest differs depending on when the notes were acquired. The interest rate ranged from JIBAR to JIBAR plus 0.375% during the reporting period.

518 430 Creditenhancement

facility

Creditenhancement

facility

The credit enhancement facility is limited to 10% of the outstanding commercial paper issued in the market. BTC had not drawn down on the credit enhancement facility as at 31 December 2014.

Rapvest Investment Proprietary Limited

Facilitates finance deals for other group companies and third parties through preference share investments and loans to clients.

2 321 2 368 Loan Loan The loan is repayable on demand and no interest is charged on the loan.


1 054 1 041 Preferenceshares

Preferenceshares

The preference shares accrue dividends at a rate of 85% of the prime interest rate in April and October annually. The maturity date of the preference shares is 28 November 2022.

SB-Debtors Discounting No. 1 Proprietary Limited (SB-Debtors)

SB-Debtors was set up to enable Main Street 367 Proprietary Limited (Main Street) to fund the subordinated loans to BG1, BG 2, BG 3, BG 4 and Siyakha. The group provides the funding to enable SB-Debtors to originate these loans.

105 105 Loan Loan The loan has no fixed repayment date. Interest is calculated as the higher of the variable rate of three-month JIBAR plus 0.7% per annum and the cash available less R15 000.


Main Street Facilitates financing to BG1, BG2, BG3, BG 4 and Siyakha. SB-Debtors provides the funding to Main Street to enable Main Street to originate these loans.


Subordinatedloan

The loan is only repayable to the extent that Main Street receives payment from the BG1, BG2, BG3, BG 4 and Siyakha. Interest is charged at the higher of JIBAR plus 10% and the cash available in terms of Main Street's priority of payments less R15 000.


1 The amount of support provided includes loans and advances and undrawn credit facilities provided to SEs by the group.2 During the reporting period, the group did not provide any financial or other support to any subsidiary without having a contractual obligation to do so. 3 This is the amount as reported on the individual company's statement of financial position as at 31 December 2014 and 2013, respectively. For credit

facilities, the amount shown is the undrawn balance as at the reporting date.4 In addition to the financial support provided to the SEs, the group enters into other transactions with SEs in the ordinary course of business.

These transactions include loans and advances, deposits and current accounts and derivatives.




Unconsolidated structured entitiesThe group has an interest in the following unconsolidated structured entities:

Types of income received by the group

Name of entity Nature and purpose of entity Principal nature of funding

Principal nature of assets

Weighted average remaining useful life of assets

Terms of contractual arrangements

Events/circumstances that could expose the group to a loss 2014 2013

Blue Diamond Investments No. 1 (RF) LimitedBlue Diamond Investments No. 2 (RF) LimitedBlue Diamond Investments No. 3 (RF) Limited

The group purchases credit protection from these entities in the form of credit-linked notes on single or multiple corporate names. These entities then purchase credit protection from third-party investors on single or multiple corporate names. The group purchases high quality collateral with maturities that match the entities’ obligations in respect of its issued credit-linked notes. The collateral is sold to the entities and is held by the entities to compensate the group, as the protection buyer, for credit losses suffered on the protected names and to repay investors on maturity of the notes. The collateral is ring-fenced such that it is linked to a particular series of notes and the relevant related contract(s) as part of a transaction. This structure has been designed to give investors indirect exposure to corporate names, and in doing so, reducing the group’s exposure to credit risk.

The unconsolidated entities issued credit-linked notes to third-party investors

Credit-linked notes purchased in the group

13 years The group compensates these entities to provide it with credit protection over single or multiple corporate names. The group also settles these entities' operating expenses as and when necessary and typically where the entities have liquidity constraints. Any payment for such amounts is to be refunded by these entities to the group.

In the event that there is a credit event and the entities are unable to pay, the group will be exposed to a credit loss – this risk is, however, considered to be remote given the collateral that is held by these entities. The group is further exposed to the risk of loss should these entities have unexpected expenses for which the entities are unable to pay.

Once-offfee and

commission income earnedfor structuring

the SE.

Once-off fee and

commission income earned for structuring

the SE.

2014Rm

2013Rm

The following represents the group’s interests in these entities:

Balance sheetFinancial investments 199 402Deposit and current accounts from customers (1 732) (1 919)

Net carrying amount (1 533) (1 517)

Irrevocable unutilised facility 352

281

Unconsolidated structured entitiesThe group has an interest in the following unconsolidated structured entities:


Name of entity Nature and purpose of entity Principal nature of funding




Events/circumstances that could expose the group to a loss 2014 2013

Blue Diamond Investments No. 1 (RF) LimitedBlue Diamond Investments No. 2 (RF) LimitedBlue Diamond Investments No. 3 (RF) Limited

The group purchases credit protection from these entities in the form of credit-linked notes on single or multiple corporate names. These entities then purchase credit protection from third-party investors on single or multiple corporate names. The group purchases high quality collateral with maturities that match the entities’ obligations in respect of its issued credit-linked notes. The collateral is sold to the entities and is held by the entities to compensate the group, as the protection buyer, for credit losses suffered on the protected names and to repay investors on maturity of the notes. The collateral is ring-fenced such that it is linked to a particular series of notes and the relevant related contract(s) as part of a transaction. This structure has been designed to give investors indirect exposure to corporate names, and in doing so, reducing the group’s exposure to credit risk.

The unconsolidated entities issued credit-linked notes to third-party investors

Credit-linked notes purchased in the group

13 years The group compensates these entities to provide it with credit protection over single or multiple corporate names. The group also settles these entities' operating expenses as and when necessary and typically where the entities have liquidity constraints. Any payment for such amounts is to be refunded by these entities to the group.

In the event that there is a credit event and the entities are unable to pay, the group will be exposed to a credit loss – this risk is, however, considered to be remote given the collateral that is held by these entities. The group is further exposed to the risk of loss should these entities have unexpected expenses for which the entities are unable to pay.

Once-offfee and

commission income earnedfor structuring

the SE.

Once-off fee and

commission income earned for structuring

the SE.

2014Rm

2013Rm

The following represents the group’s interests in these entities:

Balance sheetFinancial investments 199 402Deposit and current accounts from customers (1 732) (1 919)

Net carrying amount (1 533) (1 517)

Irrevocable unutilised facility 352




Unconsolidated structured entities continued

Name of unconsolidated structured entity Nature and purpose of entity

Principal nature of funding




Events/circumstances that could expose the group to a loss


Africa ETF Issuer (Limited) offering the following:

AfricaPalladium ETF (JSE code: ETFPLD)

AfricaPlatinum ETF (JSE code: ETFPLT)

AfricaGold ETF (JSE code: ETFGLD)

The palladium, platinum and gold exchange traded funds (ETFs) have been established for investors to participate in changes in the spot price of underlying commodities. The ETFs issue debentures to investors with each debenture backed by the respective physical commodity. On issuance each debenture is based on 1/100th of a troy ounce of the respective commodity. The physical commodities are stored at recognised custodian stored in vaults in London. The ETFs are denominated in rands and are classified as domestic assets. The ETFs are regulated by the Financial Markets Act and the JSE’s Listing Requirements. The ETFs are not registered with the FSB as a Collective Investments Scheme (CIS).

The unconsolidated structured entity is funded by the issue of non-interest bearing debentures that are 100% backed by the underlying physical commodity

Physical Commodities (Palladium, Platinum and Gold)

Undated The group established these structured entities to accommodate client requirements to hold investments in specific commodity assets. The group manages the ETFs and also provides liquidity to the ETF's by acting as a committed market maker.

The maximum exposure to loss is limited to the on balance sheet position held by the group through acting as a committed market maker for the ETFs. This exposes the group to the commodity price risk associated with the underlying commodity and is managed in accordance with the group's market risk management policy.

The group earns fees net of related expenses for managing the ETFs. These fees are recognised within non-interest revenue. Interest income is recognised on any funding provided to SEs. Any trading revenue as a result of transactions with the SEs is recognised in trading revenue.

2014Rm

The following represents the group’s interests in these entities (relating to the "free-float" held at 31 December):

Balance sheetTrading assets 60

283

Unconsolidated structured entities continued

Name of unconsolidated structured entity Nature and purpose of entity

Principal nature of funding




Events/circumstances that could expose the group to a loss


Africa ETF Issuer (Limited) offering the following:

AfricaPalladium ETF (JSE code: ETFPLD)

AfricaPlatinum ETF (JSE code: ETFPLT)

AfricaGold ETF (JSE code: ETFGLD)

The palladium, platinum and gold exchange traded funds (ETFs) have been established for investors to participate in changes in the spot price of underlying commodities. The ETFs issue debentures to investors with each debenture backed by the respective physical commodity. On issuance each debenture is based on 1/100th of a troy ounce of the respective commodity. The physical commodities are stored at recognised custodian stored in vaults in London. The ETFs are denominated in rands and are classified as domestic assets. The ETFs are regulated by the Financial Markets Act and the JSE’s Listing Requirements. The ETFs are not registered with the FSB as a Collective Investments Scheme (CIS).

The unconsolidated structured entity is funded by the issue of non-interest bearing debentures that are 100% backed by the underlying physical commodity

Physical Commodities (Palladium, Platinum and Gold)

Undated The group established these structured entities to accommodate client requirements to hold investments in specific commodity assets. The group manages the ETFs and also provides liquidity to the ETF's by acting as a committed market maker.

The maximum exposure to loss is limited to the on balance sheet position held by the group through acting as a committed market maker for the ETFs. This exposes the group to the commodity price risk associated with the underlying commodity and is managed in accordance with the group's market risk management policy.

The group earns fees net of related expenses for managing the ETFs. These fees are recognised within non-interest revenue. Interest income is recognised on any funding provided to SEs. Any trading revenue as a result of transactions with the SEs is recognised in trading revenue.

2014Rm

The following represents the group’s interests in these entities (relating to the "free-float" held at 31 December):

Balance sheetTrading assets 60



Safika Holdings Proprietary

Limited

Industrial and Commercial Bank of China

(Argentina) S.A.

RCS Investment Holdings

Proprietary Limited

South African Home Loans Proprietary

Limited (SAHL)3

Otherjoint

venturesOther

associates

Total associates and joint ventures – equity accounted

Ownership structure Associate Associate Associate Associate Joint ventures Associates Associates and joint ventures

Nature of business Investment holding company Banking Finance Finance Various Various Various

Principal place of business and country of incorporation South Africa Argentina South Africa South Africa Various Various Various

Year end February December March February Various Various Various

Accounting treatment Equity accounted Equity accounted Equity accounted Equity accounted Equity accounted Equity accounted Equity accounted

Date to which equity accounted 31 December 2014 31 December 2014 * 31 December 2014 31 December 2014 31 December 2014 Various

2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013

Effective holding (%) 26.67 26.67 20 20 * 45 50 44 Various Various Various Various Various Various

Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm

Carrying value 698 643 1 716 1 616 * 1 117 592 673 54 63 667 685 3 727 4 797

Income statementRevenue 562 449 12 995 10 621 460 1 300 741 612

Total comprehensive income 306 307 1 780 1 203 96 351 17 36Non-controlling interest (26) 17 (86) (83)

Total comprehensive income attributable to equity holders of the associate and joint ventures 280 324 1 780 1 203 96 351 241 217

Dividends received from associates/ joint ventures 20 (200)

Statement of financial position1

Cash and cash equivalents 171 88 1 481 1 269 571 1 997 581

Non-current assets 2 819 2 619 12 367 14 566 162 22 261 946Current assets 179 157 39 896 27 954 6 205 2 203 1 080Non-current liabilities (248) (248) (2 022) (1 073) (4 198) (22 749) (405)Current liabilities (27) (120) (44 098) (36 306) (367) (250) (106)Non-controlling interest (108)

Net asset value attributable to equity holders of the associate and joint venture 2 615 2 408 6 142 5 141 1 802 1 465 1 515

Proportion of net asset value based on effective holding 698 643 1 228 1 028 811 733 673Goodwill 488 588 366Cumulative impairment (60) (141)

Carrying value 698 643 1 716 1 616 1 117 592 673

Loans to group entities2 2 2 2 2Share of profits from associates and joint ventures 75 73 356 248 43 158 120 101 (10) 7 41 97 626 684

1 Summarised financial information of the associates and joint ventures is provided based on the latest available management financial information.2 These loans are provided on an arm's length basis.3 During the year, SAHL bought back shares from one of its other shareholders which resulted in an increase in the group's effective shareholding from 44% to 50%. The group

has equity-accounted for the post-acquisition reserves of SAHL up to the date of the share buy-back by applying a percentage rate of 44% to reflect its share of the reserves accumulated before the share buy-back. Only the profits that arose after the share buy-back were accounted for by applying the group's new effective holding of 50%. This has resulted in a difference between 50% of the NAV, representing the Group's current interest in SAHL, and the carrying amount of the investment. SAHL was previously regarded as a joint venture by the group.

* The group sold its 45% investment in RCS Investment Holdings Proprietary Limited during August 2014 at a selling price of R1 179 million. The carrying amount of the investment at the date of sale was R1 160 million in the group, resulting in a profit of R19 million for the group on the sale.

AnnexureB

Associates and joint venture

285

Safika Holdings Proprietary

Limited

Industrial and Commercial Bank of China

(Argentina) S.A.

RCS Investment Holdings

Proprietary Limited

South African Home Loans Proprietary

Limited (SAHL)3

Otherjoint

venturesOther

associates

Total associates and joint ventures – equity accounted

Ownership structure Associate Associate Associate Associate Joint ventures Associates Associates and joint ventures

Nature of business Investment holding company Banking Finance Finance Various Various Various

Principal place of business and country of incorporation South Africa Argentina South Africa South Africa Various Various Various

Year end February December March February Various Various Various

Accounting treatment Equity accounted Equity accounted Equity accounted Equity accounted Equity accounted Equity accounted Equity accounted

Date to which equity accounted 31 December 2014 31 December 2014 * 31 December 2014 31 December 2014 31 December 2014 Various

2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013

Effective holding (%) 26.67 26.67 20 20 * 45 50 44 Various Various Various Various Various Various

Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm

Carrying value 698 643 1 716 1 616 * 1 117 592 673 54 63 667 685 3 727 4 797

Income statementRevenue 562 449 12 995 10 621 460 1 300 741 612

Total comprehensive income 306 307 1 780 1 203 96 351 17 36Non-controlling interest (26) 17 (86) (83)

Total comprehensive income attributable to equity holders of the associate and joint ventures 280 324 1 780 1 203 96 351 241 217

Dividends received from associates/ joint ventures 20 (200)


Cash and cash equivalents 171 88 1 481 1 269 571 1 997 581

Non-current assets 2 819 2 619 12 367 14 566 162 22 261 946Current assets 179 157 39 896 27 954 6 205 2 203 1 080Non-current liabilities (248) (248) (2 022) (1 073) (4 198) (22 749) (405)Current liabilities (27) (120) (44 098) (36 306) (367) (250) (106)Non-controlling interest (108)

Net asset value attributable to equity holders of the associate and joint venture 2 615 2 408 6 142 5 141 1 802 1 465 1 515

Proportion of net asset value based on effective holding 698 643 1 228 1 028 811 733 673Goodwill 488 588 366Cumulative impairment (60) (141)

Carrying value 698 643 1 716 1 616 1 117 592 673

Loans to group entities2 2 2 2 2Share of profits from associates and joint ventures 75 73 356 248 43 158 120 101 (10) 7 41 97 626 684

1 Summarised financial information of the associates and joint ventures is provided based on the latest available management financial information.2 These loans are provided on an arm's length basis.3 During the year, SAHL bought back shares from one of its other shareholders which resulted in an increase in the group's effective shareholding from 44% to 50%. The group

has equity-accounted for the post-acquisition reserves of SAHL up to the date of the share buy-back by applying a percentage rate of 44% to reflect its share of the reserves accumulated before the share buy-back. Only the profits that arose after the share buy-back were accounted for by applying the group's new effective holding of 50%. This has resulted in a difference between 50% of the NAV, representing the Group's current interest in SAHL, and the carrying amount of the investment. SAHL was previously regarded as a joint venture by the group.

* The group sold its 45% investment in RCS Investment Holdings Proprietary Limited during August 2014 at a selling price of R1 179 million. The carrying amount of the investment at the date of sale was R1 160 million in the group, resulting in a profit of R19 million for the group on the sale.



Annexure B | Associates and joint ventures continued

The Cullinan HotelProprietary

Limited

STANLIBIncome Fund

SA Infrastructure

Fund

STANLIB Income Fund

STANLIB Balanced

Fund

STANLIB Corporate Money Market

Fund

Other associatesand joint ventures –

fair value accounted3,4

Total associatesand joint ventures –fair value accounted

Ownership structure Associate Associate Associate Associate Associate Associate Associate/joint venture Associates and joint ventures

Nature of business Leisure Fund Fund Fund Fund Fund Various Various

Principal place of business South Africa South Africa South Africa South Africa South Africa South Africa Various Various

Year end March

Accounting treatment Fair value accounted Fair value accounted Fair value accounted Fair value accounted Fair value accounted Fair value accounted Fair value accounted Fair value accounted

2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013

Effective holding (%) 40 50 16 14 31 31 15 16 25 26 12 2 Various Various Various Various

Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm

Fair value 406 400 3 276 3 532 2 026 1 869 1 043 888 1 532 1 169 2 973 569 4 697 7 370 15 593 15 797

Income statementRevenue 450 215 1 893 1 662 377 312 321 207 193 745 2 102 2 036

Total profit for the year 62 52 1 691 1 752 355 270 234 429 129 695 1 691 1 966

Total comprehensive income 62 52 1 691 1 752 355 270 234 429 129 695 1 691 1 966

Dividends received from associate 238 231 10 10 37 25 31 20 95 87


Cash and cash equivalents

Non-current assets 2 354 714 20 557 25 504 4 471 8 150 6 792 5 339 5 936 4 533 19 057 28 064Current assets 67 132 562 352 31 339 220 126 182 68 6 614 2 712Non-current liabilities Current liabilities (32) (64) (328) (12) (2) (2) (119) (7) (107) (5) (5) (6)

Net asset value 2 389 782 20 791 25 844 4 500 8 487 6 893 5 458 6 011 4 596 25 666 30 770

Loans measured at fair value2

544 544

Total carrying value including loans measured at fair value 950 400 3 276 3 532 2 026 1 869 1 043 888 1 532 1 169 2 973 569 4 697 7 370 16 497 15 797

1 Summarised financial information of the associates is provided based on the latest available financial information.2 These loans are provided on an arm's length basis.3 The STANLIB Money Market Fund was separately disclosed as an associate in the previous year. For 2014 financial reporting purposes, the fund is not a material associate and has

accordingly been included in other associates.4 The STANLIB Balanced Cautious Fund was not regarded as a material associate in the previous year and was included in other associates measured at fair value. For the 2014

financial reporting purposes, the fund is a material associate and has accordingly been separately disclosed.

287

The Cullinan HotelProprietary

Limited

STANLIBIncome Fund

SA Infrastructure

Fund

STANLIB Income Fund

STANLIB Balanced

Fund

STANLIB Corporate Money Market

Fund

Other associatesand joint ventures –

fair value accounted3,4

Total associatesand joint ventures –fair value accounted

Ownership structure Associate Associate Associate Associate Associate Associate Associate/joint venture Associates and joint ventures

Nature of business Leisure Fund Fund Fund Fund Fund Various Various

Principal place of business South Africa South Africa South Africa South Africa South Africa South Africa Various Various

Year end March

Accounting treatment Fair value accounted Fair value accounted Fair value accounted Fair value accounted Fair value accounted Fair value accounted Fair value accounted Fair value accounted

2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013

Effective holding (%) 40 50 16 14 31 31 15 16 25 26 12 2 Various Various Various Various

Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm

Fair value 406 400 3 276 3 532 2 026 1 869 1 043 888 1 532 1 169 2 973 569 4 697 7 370 15 593 15 797

Income statementRevenue 450 215 1 893 1 662 377 312 321 207 193 745 2 102 2 036

Total profit for the year 62 52 1 691 1 752 355 270 234 429 129 695 1 691 1 966

Total comprehensive income 62 52 1 691 1 752 355 270 234 429 129 695 1 691 1 966

Dividends received from associate 238 231 10 10 37 25 31 20 95 87


Cash and cash equivalents

Non-current assets 2 354 714 20 557 25 504 4 471 8 150 6 792 5 339 5 936 4 533 19 057 28 064Current assets 67 132 562 352 31 339 220 126 182 68 6 614 2 712Non-current liabilities Current liabilities (32) (64) (328) (12) (2) (2) (119) (7) (107) (5) (5) (6)

Net asset value 2 389 782 20 791 25 844 4 500 8 487 6 893 5 458 6 011 4 596 25 666 30 770

Loans measured at fair value2

544 544

Total carrying value including loans measured at fair value 950 400 3 276 3 532 2 026 1 869 1 043 888 1 532 1 169 2 973 569 4 697 7 370 16 497 15 797

1 Summarised financial information of the associates is provided based on the latest available financial information.2 These loans are provided on an arm's length basis.3 The STANLIB Money Market Fund was separately disclosed as an associate in the previous year. For 2014 financial reporting purposes, the fund is not a material associate and has

accordingly been included in other associates.4 The STANLIB Balanced Cautious Fund was not regarded as a material associate in the previous year and was included in other associates measured at fair value. For the 2014

financial reporting purposes, the fund is a material associate and has accordingly been separately disclosed.



Annexure B | Associates and joint ventures continued

Private equity/venture capital associates and joint ventures1

2014Rm

2013Rm

Cost 94 150Carrying value 625 631


Non-current assets 3 882 3 981Current assets 621 962Non-current liabilities (893) (866)Current liabilities (238) (1 070)

Income statementAttributable income before impairment 64 92Other income 93 26Fair value 589 579

1 Included in associates and joint ventures on note 12.2 Summarised financial information of the associates and joint ventures is provided based off the latest available management accounts received.

The investments in associates and joint ventures were made by the group's private equity operations and have been ring-fenced for headline earnings purposes. On the disposal of these associates and joint ventures held by the private equity division of the group, the gain or loss on the disposal will be included in headline earnings in terms of Circular 2/2013 Headline Earnings, issued by the South African Institute of Chartered Accountants at the request of the JSE.

289

Share-based paymentsThe group’s share incentive schemes enable key management personnel and senior employees to benefit from the performance of Standard Bank Group Limited, Liberty Holdings Limited and Stanbic IBTC's shares (as applicable).

2014Rm

2013Rm

Expenses recognised in staff costs:Banking activities 1 452 1 121

EGS 108 164GSIS 20 38Quanto stock scheme 611 489DBS 10 39DBS (2012) 618 391PRP 85

Liberty 126 108

Share options 126 108

Total expenses recognised in staff costs 1 578 1 229

Liabilities recognised in other liabilitiesQuanto stock scheme 1 123 1 219DBS 48 137DBS (2012) 47 38PRP 18

Total liability recognised in other liabilities 1 236 1 394

Group share incentive schemeThe GSIS is an equity-settled scheme and confers rights to employees to acquire shares at the value of the SBG share price at the date the option is granted. The scheme has five different subtypes of vesting categories as illustrated by the table below:

Vesting categories Year % vesting Expiry (years)

Type A 3, 4, 5 50, 75, 100 10Type B 5, 6, 7 50, 75, 100 10Type C 2, 3, 4 50, 75, 100 10Type D 2, 3, 4 33, 67, 100 10Type E 3, 4, 5 33, 67, 100 10

AnnexureC

Group share incentive schemes



Annexure C | Group share incentive schemes continued

Equity-settled share-based paymentsA reconciliation of the movement of share options is detailed below:

GSISOption pricerange (rand)

Number of options

2014 2014 2013

ReconciliationOptions outstanding at the beginning of the year 6 874 243 10 039 475 Exercised1 39,90 – 111,94 (1 984 632) (2 459 844)Lapsed 62,39 – 111,94 (736 727) (705 388)

Options outstanding at the end of the year2 4 152 884 6 874 243

1 During the year, 1 984 632 (2013: 2 459 844) SBG shares were issued to settle the GSIS awards.2 At the end of the year, the group would need to issue 4 152 884 (2013: 6 874 243) SBG shares to settle the outstanding share options.

Share options were exercised regularly throughout the year. The weighted average share price for the year was R134,83 (2013: R115,39).

The following options granted to employees, including executive directors, had not been exercised at 31 December 2014:

Number of ordinary shares

Option price range (rand)

Weighted average price (rand) Option expiry period

37 800 65,60 65,60 Year to 31 December 2015 158 200 76,4 – 85,80 79,64 Year to 31 December 2016 215 350 98,00 – 105,00 98,57 Year to 31 December 2017 651 250 92,00 91,89 Year to 31 December 2018 640 100 62,39 – 98,20 62,92 Year to 31 December 2019

1 209 320 102,00 – 114,60 110,87 Year to 31 December 20201 240 864 93,74 – 107,55 98,94 Year to 31 December 2021

4 152 884

The following options granted to employees, including executive directors, had not been exercised at 31 December 2013:

Number of ordinary shares

Option price range (rand)

Weighted average price (rand) Option expiry period

441 300 39,90 – 48,00 40,97 Year to 31 December 2014 39 200 65,60 65,60 Year to 31 December 2015

236 700 76,40 – 85,80 79,64 Year to 31 December 2016 391 013 97,95 – 105,00 98,57 Year to 31 December 2017

1 013 600 89,00 – 92,00 91,89 Year to 31 December 20181 209 230 62,39 – 98,20 62,92 Year to 31 December 20191 791 450 102,00 – 114,60 110,87 Year to 31 December 20201 751 750 93,74 – 107,55 98,94 Year to 31 December 2021

6 874 243

291

Equity growth schemeThe EGS is an equity-settled share scheme and represents appreciation rights allocated to employees. The converted value of the rights is effectively settled by the issue of shares equivalent to the value of the rights. The scheme has five different subtypes of vesting categories as illustrated by the table below:

Vesting categories Year % vesting Expiry (years)

Type A 3, 4, 5 50, 75, 100 10Type B 5, 6, 7 50, 75, 100 10Type C 2, 3, 4 50, 75, 100 10Type D 2, 3, 4 33, 67, 100 10Type E 3, 4, 5 33, 67, 100 10

A reconciliation of the movement of appreciation rights is detailed below:

EGSAverage price

range (rand) Number of rights

2014 2014 2013

ReconciliationRights outstanding at the beginning of the year 36 180 992 44 434 341Granted 1 433 067 1 106 570Exercised¹ 60,35 – 117,30 (7 369 177) (6 465 842)Lapsed 62,39 – 115,51 (1 729 740) (2 894 077)

Rights outstanding at the end of the year² 28 515 142 36 180 992

1 During the year 2 092 064 (2013: 1 257 606) SBG shares were issued to settle the appreciated rights value.2 At the end of the year, the group would need to issue 9 429 195 (2013: 10 219 114) SBG shares to settle the outstanding appreciated rights value.

The EGS rights are only awarded to individuals in the employment of a group entity domiciled in South Africa.

The group is required to ensure that employees’ tax arising from benefits due in terms of the scheme is paid in accordance with the Fourth Schedule of the Income Tax Act of South Africa. Where employees have elected not to fund the tax from their own resources, the tax due is treated as a diminution of the gross benefits due under the scheme. A total of 802 572 (2013: 587 416) SBG shares were issued and sold to settle the employees’ tax due during the year. This reduces the liability due in respect of the outstanding appreciated rights value.

The following rights granted to employees, including executive directors, had not been exercised at 31 December 2014:

Number of rights

Option price range(rand)

Weighted averageprice (rand) Option expiry period

622 602 60,35 – 65,60 65,41 Year to 31 December 20151 799 113 77,83 – 87,00 79,74 Year to 31 December 20161 785 677 98,00 – 111,00 98,18 Year to 31 December 20173 878 382 69,99 – 100,08 91,93 Year to 31 December 20183 932 205 62,39 – 98,20 64,33 Year to 31 December 20196 283 765 102,00 – 116,80 111,69 Year to 31 December 20207 050 318 90,50 – 107,55 98,77 Year to 31 December 2021


1 433 067 126,87 126,87 Year to 31 December 2024

28 515 142




Equity growth scheme continuedThe following rights granted to employees, including executive directors, had not been exercised at 31 December 2013:

Number of rights

Option price range(rand)

Weighted averageprice (rand) Option expiry period

1 240 035 60,35 – 65,60 65,36 Year to 31 December 20152 823 345 77,83 – 87,00 79,68 Year to 31 December 20162 700 145 98,00 – 117,30 98,55 Year to 31 December 20175 496 215 69,99 – 100,08 91,83 Year to 31 December 20185 951 878 62,39 – 98,20 64,54 Year to 31 December 20197 681 979 102,00 – 116,80 111,60 Year to 31 December 20208 400 546 90,50 – 107,55 98,79 Year to 31 December 2021


36 180 992

The share appreciation rights granted during the year were valued using a Black-Scholes option pricing model. Each grant was valued separately. The weighted fair value of the options granted per vesting type and the assumptions utilised are illustrated below:

Type D Type E

2014 2013 2014 2013

Number of appreciation rights granted 1 433 067 682 117 424 453 Weighted average fair value at grant date (rand) 32,39 29,07 27,00The principal inputs are as follows:Weighted average share price (rand) 126,87 115,51 115,51Weighted average exercise price (rand) 126,87 115,51 115,51Expected life (years) 5,96 7,0 5,9Expected volatility (%) 22.45 25.40 25.40Risk-free interest rate (%) 7.94 6.42 6.14Dividend yield (%) 3.8 3.9 3.9

No A, B, C or E rights were granted during the year.

The appreciation rights granted during the year which are estimated to vest, have a fair value of R46.4 million (2013: R31,3 million) at grant date.

Quanto stock schemeSince 2007, SB Plc has operated a deferred incentive arrangement in the form of the Quanto stock unit plan. Qualifying employees, with an incentive award above a set threshold are awarded Quanto stock units denominated in USD for nil consideration. The Quanto stock scheme is a cash-settled scheme, the value of which moves in parallel to the change in price of the SBG shares listed on the JSE. The cost of the award is accrued over the vesting period (generally three years), normally commencing in the year in which these are awarded and communicated to employees.

Special terms apply to employees designated by the Prudential Regulatory Authority as Code Staff. For these employees, the deferred portion of the incentive is delivered in Quanto stock units with a three year vesting and an additional six months holding period after vesting. Thereafter half of the remaining incentive (non-deferred portion) is paid immediately in cash and the other half is delivered in Quanto stock units with a six month vesting period.

The provision in respect of liabilities under the scheme amounted to USD97,1 million (ZAR1 123,3 million) as at 31 December 2014 (2013: USD116,2 million, ZAR1 344,3 million), and the charge for the year is USD56,9 million (ZAR658 million) (2013: USD50,5 million, ZAR584 million). The change in liability due to the change in the SBG share price, is hedged through the use of equity options designated as cash flow hedges.

293

Quanto stock scheme continuedQuanto stock scheme Units (’000)

2014 2013

Reconciliation Units outstanding at the beginning of the year 917 1 328 Granted 363 389 Lapsed (42) (155)Exercised (562) (645)

Units outstanding at the end of the year 676 917

Quanto stock units granted but not yet exercised at 31 December 2014:

Number of units (’000) Unit expiry period

53 Year to 31 December 2015161 Year to 31 December 2016182 Year to 31 December 2017279 Year to 31 December 2018

1 Year to 31 December 2019

676

Quanto stock units granted but not yet exercised at 31 December 2013:

Number of units (’000) Unit expiry period



917




Deferred bonus schemeIt is essential for the group to retain key skills over the longer term. This is done particularly through share-based incentive plans. The purpose of these plans is to align the interests of the group, its subsidiaries and employees, as well as to attract and retain skilled, competent people.

The group implemented a scheme to defer a portion of incentive bonuses over a minimum threshold for key management and executives. This improves the alignment of shareholder and management interests by creating a closer linkage between risk and reward, and also facilitates the retention of key employees.

All employees who were awarded short-term incentives over a certain threshold, were subject to a mandatory deferral of a percentage of their cash incentive into the DBS. Vesting of the deferred bonus occurs after three years, conditional on continued employment at that time. The final payment of the deferred bonus is calculated with reference to the SBG share price at the payment date. To enhance the retention component of the scheme, additional increments on the deferred bonus become payable at vesting and one year thereafter. The DBS was replaced in 2012 by the DBS (2012) scheme.

The provision in respect of liabilities under the scheme amounts to R48 million at 31 December 2014 (2013: R137 million) and the charge to the income statement for the year was R10 million (2013: R39 million).

Units

DBS 20141 2013

ReconciliationUnits outstanding at the beginning of the year 1 168 727 2 022 529 Exercised (831 881) (749 883)Lapsed (103 919)

Units outstanding at the end of the year 336 846 1 168 727

1 No units were granted during the year.

295

Deferred bonus scheme (2012)In 2012 changes were made to the existing DBS to provide for a single global incentive deferral scheme across the regions. The purpose of the DBS (2012) scheme is to encourage a longer-term outlook in business decision-making and closer alignment of performance with long-term value creation.

All employees granted an annual performance award over a threshold have part of their award deferred. The award is indexed to the group's share price and accrues notional dividends during the vesting period, which are payable on vesting. The awards vest in three equal amounts at 18 months, 30 months and 42 months from the date of award. The final payout is determined with reference to the group's share price on the vesting date.

Awards issued to individuals in employment of a group entity domiciled in South Africa are equity-settled. The expense recognised during 2014 with regards to these awards was R563 million (2013: R353 million). These awards have been partially hedged through the use of equity forwards.

Awards issued to individuals in the employment of group entities domiciled outside South Africa are cash-settled. The provision in respect of these awards are recognised in liabilities at 31 December 2014 and the amount charged for the year under the scheme amounts to R56 million (2013: R38 million).

Units

DBS (2012) 2014 2013

ReconciliationUnits outstanding at the beginning of the year 8 770 144 5 547 893 Units granted during the year 6 458 429 5 538 441 Exercised (3 157 841) (1 654 768)Lapsed (828 526) (661 422)

Units outstanding at the end of the year 11 242 206 8 770 144

Weighted average fair value at grant date (R) 127,79 115,99Expected life (years) 2,51 2,51




Performance reward planA new long-term performance driven share plan commenced in March 2014 which rewards value delivered against specific targets. The PRP incentivises a group of senior executives to meet the strategic long-term objectives that deliver value to shareholders, to align the interests of those executives with those of shareholders and to act as an attraction and retention mechanism in a highly competitive marketplace for skills. The PRP operates alongside the existing conditional, equity-settled long-term plans, namely the EGS, the group share incentive scheme (GSIS) and DBS (2012).

The PRP is settled in shares to the employee on the applicable vesting dates together with notional dividends that are settled in cash. The shares that vest (if any) and that are delivered to the employee are conditional on the pre-specified performance metrics.

Awards issued to individuals in employment of a group entity domiciled in South Africa are equity-settled. The expense recognised during 2014 with regards to these awards was R85 million (2013: Rnil).

Awards issued to individuals in employment of group entities domiciled outside South Africa are cash-settled. The provision in respect of these awards is recognised in liabilities at 31 December 2014 and the amount charged for the year under the scheme amounts to R18 million (2013: Rnil).

Units

PRP 2014

ReconciliationUnits granted during the year 3 086 100 Lapsed (106 400)

Units outstanding at the end of the year 2 979 700

Weighted average fair value at grant date (R) 126,87Expected life (years) 3,07

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297 Basis of consolidation

298 Foreign currency translations

299 Cash and cash equivalents

299 Financial instruments

304 Investment property

304 Interest in associates and joint ventures

305 Intangible assets

306 Property and equipment

306 Property developments and properties in possession

307 Capitalisation of borrowing costs

307 Impairment of non-financial assets

307 Leases

308 Provisions, contingent assets and contingent liabilities

1. Basis of consolidationSubsidiariesThe group1 controls an investee when:

it has power over the investee

has exposure or rights to variable returns from its involvement with the investee

has the ability to use its power to affect the returns from its involvement with the investee.

Mutual funds, in which the group has both an irrevocable asset management agreement and a significant investment, are consolidated. The group further assesses its control over mutual funds by considering the existence of either voting rights or significant economic power. The consolidation principles applied to these mutual funds are consistent with those applied to the consolidation of subsidiary companies.

Investees that the group controls are consolidated from the date on which the group acquires control up to the date that control is lost. Control is assessed on a continuous basis.

Intragroup transactions, balances and unrealised gains and losses are eliminated on consolidation. Unrealised losses are eliminated in the same manner as unrealised gains, but only to the extent that there is no evidence of impairment.

AnnexureD

Detailed accounting policies

308 Employee benefits

309 Taxation

309 Non-current assets held for sale, disposal groups and discontinued operations

310 Fair value

311 Policyholder Insurance and Investment contracts

313 Equity

314 Equity-linked transactions

314 Revenue and expenditure

316 Segment reporting

316 Fiduciary activities

316 Comparative figures

317 New standards and interpretations not yet adopted

The proportion of comprehensive income and changes in equity allocated to the group and non-controlling interests are determined on the basis of the group’s present ownership interest in the subsidiary.

The accounting policies of subsidiaries that are consolidated by the group conform to the group’s accounting policies.

Investments in subsidiaries are accounted for at cost less accumulated impairment losses (where applicable) in the separate financial statements. The carrying amounts of these investments are reviewed annually for impairment indicators and, where an indicator of impairment exists, are impaired to the higher of the investment’s fair value less costs to sell and value in use.

Business combinationsThe acquisition method of accounting is used to account for the acquisition of subsidiaries by the group. The consideration transferred is measured as the sum of the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the acquisition date. The consideration includes any asset, liability or equity resulting from a contingent consideration arrangement. The obligation to pay contingent consideration is classified as either a liability or equity based on the terms of the arrangement. The right to a return of previously transferred consideration is classified as an asset. Transaction costs for business combinations after 1 January 2010 are recognised within profit or loss as and when they are incurred.

1 For the purpose of this annexure all references to group include the company, unless indicated otherwise.



Annexure D | Detailed accounting policies continued

Where the initial accounting for a business combination is incomplete by the end of the reporting period in which the business combination occurs, the group reports provisional amounts. Where applicable, the group adjusts retrospectively the provisional amounts to reflect new information obtained about facts and circumstances that existed at the acquisition date and affected the measurement of the provisional amounts.

The group elects on each acquisition to initially measure non-controlling interests on the acquisition date at either fair value or at the non-controlling interest’s proportionate share of the subsidiary’s identifiable net assets.

Identifiable assets acquired, liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any non-controlling interest. The excess of the sum of the consideration transferred (including contingent consideration), the value of non-controlling interest recognised and the acquisition date fair value of any previously held equity interest in the subsidiary over the fair value of identifiable net assets acquired is recorded as goodwill and accounted for in terms of accounting policy 7 – Intangible assets.

If the sum of the consideration transferred, including contingent consideration, the value of non-controlling interest recognised and the acquisition date fair value of any previously held equity interest in the subsidiary is less than the fair value of the identifiable net assets acquired, the difference, referred to as a gain from a bargain purchase, is recognised directly in profit or loss.

When a business combination occurs in stages, the previously held equity interest is remeasured to fair value at the acquisition date and any resulting gain or loss is recognised in profit or loss.

DisposalsWhen the group loses control of a subsidiary (including mutual funds), the profit or loss on disposal is calculated as the difference between the fair value of the consideration received (including the fair value of any retained interest), the carrying amount of the subsidiary’s assets and liabilities and any non-controlling interests. Any gains or losses in OCI that relate to the subsidiary are reclassified to profit or loss at the time of the disposal.

Transactions with non-controlling interestsTransactions with non-controlling interests that do not result in the gain or loss of control, are accounted for as transactions with equity holders of the group. For purchases of additional interests from non-controlling interests, the difference between the purchase consideration and the group’s proportionate share of the subsidiary’s additional net asset value acquired is accounted for directly in equity. Gains or losses on the partial disposal (where control is not lost) of the group’s interest in a subsidiary to non-controlling interests are computed as the difference between the sales consideration

and the group’s proportionate share of the subsidiary’s net asset value disposed of, is also accounted for directly in equity.

Common control transactionsCommon control transactions, in which the company is the ultimate parent entity both before and after the transaction, are accounted for at book value.

2. Foreign currency translationsFunctional and presentation currencyItems included in the annual financial statements of each of the group’s entities are measured using the currency of the primary economic environment in which the entity operates (functional currency).

These annual financial statements are presented in South African rand, which is the functional and presentation currency of the company.

Group companiesThe results and financial position of all foreign operations that have a functional currency different from the group’s presentation currency are translated into the group’s presentation currency as follows:

assets and liabilities (including goodwill, intangible assets and fair value adjustments arising on acquisition) are translated at the closing rate at the reporting date

income and expenses are translated at average exchange rates for the month, to the extent that such average rates approximate actual rates for the transactions

all resulting foreign exchange differences are accounted for directly in a separate component of OCI, being the foreign currency translation reserve.

On the partial disposal of a subsidiary that includes a foreign operation, a proportionate share of the balance of the foreign currency translation reserve is transferred to the non-controlling interests. For all other partial disposals of a foreign operation, the proportionate share of the balance of the foreign currency translation reserve is reclassified to profit or loss.

On disposal (where a change in ownership occurs and control is lost) of a subsidiary that includes a foreign operation, the relevant amount in the foreign currency translation reserve is reclassified to profit or loss at the time at which the profit or loss on disposal of the foreign operation is recognised.

These gains and losses are recognised in profit or loss either on disposal (loss of control of a subsidiary, loss of significant influence over an associate or the loss of joint control over a joint venture that includes a foreign operation) or partial disposal (a reduction in ownership interest in a foreign operation other than a disposal) of an associate or joint venture that includes a foreign operation. In the case of a partial disposal of a subsidiary that includes a foreign

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operation, the proportionate share of the cumulative amount of the

exchange differences recognised in OCI is reclassified to the

non-controlling interests in that foreign operation.

Transactions and balancesForeign currency transactions are translated into the respective

functional currencies of group entities at exchange rates prevailing

at the date of the transactions. Foreign exchange gains and losses

resulting from the settlement of such transactions and from the

translation of monetary assets and liabilities denominated in foreign

currencies at year end exchange rates, are recognised in profit or loss

(except when recognised in OCI as part of qualifying cash flow

hedges and net investment hedges).

Non-monetary assets and liabilities denominated in foreign currencies

that are measured at historical cost are translated using the exchange

rate at the transaction date, and those measured at fair value are

translated at the exchange rate at the date that the fair value was

determined. Exchange rate differences on non-monetary items are

accounted for based on the classification of the underlying items.

Foreign exchange gains and losses on equities (debt) classified

as available-for-sale financial assets are recognised in the available-

for-sale reserve in OCI (profit or loss) whereas the exchange

differences on equities and debt that are classified as held at fair

value through profit or loss are reported as part of the fair value

gain or loss in profit or loss.

Foreign currency gains and losses on intragroup loans are recognised

in profit or loss except where the settlement of the loan is neither

planned nor likely to occur in the foreseeable future. In these cases

the foreign currency gains and losses are recognised in the group’s

foreign currency translation reserve. These gains and losses

are accounted for similarly to the exchange gains and losses

as described in this accounting policy for group companies.

3. Cash and cash equivalentsCash and cash equivalents presented in the statement of cash flows

consist of cash and balances with central banks.

Cash and balances with central banks comprise coins and bank notes,

and balances with central banks.

4. Financial instrumentsInitial recognition and measurementFinancial instruments include all financial assets and liabilities.

These instruments are typically held for liquidity, investment, trading

or hedging purposes. All financial instruments are initially recognised

at fair value plus directly attributable transaction costs, except those

carried at fair value through profit or loss where transaction costs

are recognised immediately in profit or loss. Financial instruments

are recognised (derecognised) on the date the group commits

to purchase (sell) the instruments (trade date accounting).

Subsequent measurementSubsequent to initial measurement, financial instruments are measured either at fair value or amortised cost, depending on their classifications as follows:

Held-to-maturityHeld-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that management has both the positive intent and ability to hold to maturity. Where the group is to sell more than an insignificant amount of held-to-maturity investments, the entire category would be tainted and reclassified as available-for-sale assets with the difference between amortised cost and fair value being accounted for in OCI.

Held-to-maturity investments are carried at amortised cost, using the effective interest method, less any impairment losses.

Held-for-trading assets and liabilitiesHeld-for-trading assets and liabilities include those financial assets and liabilities acquired or incurred principally for the purpose of selling or repurchasing in the near term, those forming part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking, and commodities that are acquired principally by the group for the purpose of selling in the near future and generating a profit from fluctuations in price or broker-traders’ margin. Derivatives are always categorised as held-for-trading.

Subsequent to initial recognition, the financial instruments’ fair values are remeasured at each reporting date. All gains and losses, including interest and dividends arising from changes in fair value are recognised in profit or loss as trading revenue within non-interest revenue with the exception of derivatives that are designated and effective as hedging instruments (refer to ‘Derivative financial instruments and hedge accounting’ within this accounting policy for further details).

Financial assets and liabilities designated at fair value through profit or lossThe group designates certain financial assets and liabilities, other than those classified as held-for-trading, as at fair value through profit or loss when:

this designation eliminates or significantly reduces an accounting mismatch that would otherwise arise. Under this criterion, the main classes of financial instruments designated by the group are loans and advances to banks and customers and financial investments. The designation significantly reduces measurement inconsistencies that would have otherwise arisen. For example, where the related derivatives were treated as held-for-trading and the underlying financial instruments were carried at amortised cost. This category also includes financial assets used to match investment contracts or insurance contract liabilities




groups of financial assets, financial liabilities or both are managed, and their performance evaluated, on a fair value basis in accordance with a documented risk management or investment strategy, and reported to the group’s key management personnel on a fair-value basis. Under this criterion, certain private equity associates and joint ventures, short-term insurance and other investment portfolios have been designated at fair value through profit or loss

financial instruments containing one or more embedded derivatives that significantly modify the instruments’ cash flows.

The fair value designation is made on initial recognition and is irrevocable. Subsequent to initial recognition, the fair values are remeasured at each reporting date. Gains and losses arising from changes in fair value are recognised in interest income (interest expense) for all debt financial assets (financial liabilities) and in other revenue within non-interest revenue for all equity instruments.

Private equity and property equity investments designated at fair value through profit or loss in terms of IAS 28 Investments in Associates and Joint Ventures (IAS 28), are accounted for in the designated at fair value through profit or loss category. Mutual funds held by investment-linked insurance funds in which the group has significant influence over are interests in associates and are also designated at fair value through profit or loss.

Available-for-saleFinancial assets classified by the group as available-for-sale are generally strategic capital investments held for an indefinite period of time, which may be sold in response to needs for liquidity or changes in interest rates, exchange rates or equity prices, or non-derivative financial assets that are not classified within another category of financial assets.

Available-for-sale financial assets are subsequently measured at fair value. Unrealised gains or losses are recognised directly in the available-for-sale reserve until the financial asset is derecognised or impaired. When debt (equity) available-for-sale financial assets are disposed of, the cumulative fair value adjustments in OCI are reclassified to interest income (other revenue).

Available-for-sale financial assets are impaired when there has been a significant or prolonged decline in the fair value of the financial asset below its cost. The cumulative fair value adjustments previously recognised in OCI on the impaired financial assets are reclassified to profit or loss. Reversal of impairments on equity available-for-sale financial assets are recognised in OCI.

Interest income, calculated using the effective interest method, is recognised in profit or loss. Dividends received on debt (equity) available-for-sale instruments are recognised in interest income (other revenue) within profit or loss when the group’s right to receive payment has been established.

Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, other than those classified by the group as at fair value through profit or loss or available-for-sale.

Loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses. Origination transaction costs and fees received that are integral to the effective interest rate are capitalised to the value of the loan and amortised through interest income. The majority of the group’s loans and advances are included in the loans and receivables category.

Financial liabilities at amortised costFinancial liabilities that are neither held for trading nor designated at fair value are measured at amortised cost.

Reclassification of financial assetsThe group may choose to reclassify non-derivative trading assets out of the held-for-trading category if the financial asset is no longer held for the purpose of selling it in the near term. Financial assets that would not otherwise have met the definition of loans and receivables are permitted to be reclassified out of the held-for-trading category only in rare circumstances. In addition, the group may choose to reclassify financial assets that would meet the definition of loans and receivables out of the held-for-trading or available-for-sale categories if the group, at the date of reclassification, has the intention and ability to hold these financial assets for the foreseeable future or until maturity.

Derivatives or any financial instrument designated at fair value through profit or loss shall not be reclassified out of their respective categories.

Reclassifications are made at fair value as of the reclassification date. Effective interest rates for financial assets reclassified to loans and receivables, held-to-maturity and available-for-sale categories are determined at the reclassification date. Subsequent increases in estimates of cash flows adjust the financial asset’s effective interest rates prospectively.

On reclassification of a trading asset, all embedded derivatives are reassessed and, if necessary, accounted for separately.

Impairment of financial assetsAssets carried at amortised costThe group assesses at each reporting date whether there is objective evidence that a loan or group of loans is impaired. A loan or group of loans is impaired if objective evidence indicates that a loss event has occurred after initial recognition which has a negative effect on the estimated future cash flows of the loan or group of loans that can be estimated reliably.

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Criteria that are used by the group in determining whether there is objective evidence of impairment include:

known cash flow difficulties experienced by the borrower

a breach of contract, such as default or delinquency in interest and/or principal payments

breaches of loan covenants or conditions

it becoming probable that the borrower will enter bankruptcy or other financial reorganisation

where the group, for economic or legal reasons relating to the borrower’s financial difficulty, grants the borrower a concession that the group would not otherwise consider.

The group first assesses whether there is objective evidence of impairment individually for loans that are individually significant, and individually or collectively for loans that are not individually significant. Non-performing loans include those loans for which the group has identified objective evidence of default, such as a breach of a material loan covenant or condition, as well as those loans for which instalments are due and unpaid for 90 days or more. The impairment of non-performing loans takes into account past loss experience adjusted for changes in economic conditions and the nature and level of risk exposure since the recording of the historic losses.

When a loan carried at amortised cost has been identified as specifically impaired, the carrying amount of the loan is reduced to an amount equal to the present value of its estimated future cash flows, including the recoverable amount of any collateral, discounted at the financial asset’s original effective interest rate. The carrying amount of the loan is reduced through the use of a specific credit impairment account and the loss is recognised as a credit impairment charge in profit or loss.

The calculation of the present value of the estimated future cash flows of collateralised financial assets recognised on an amortised cost basis includes cash flows that may result from foreclosure less costs of obtaining and selling the collateral, whether or not foreclosure is probable.

If the group determines that no objective evidence of impairment exists for an individually assessed loan, whether significant or not, it includes the loan in a group of financial loans with similar credit risk characteristics and collectively assesses for impairment. Loans that are individually assessed for impairment and for which an impairment loss is recognised are not included in a collective assessment for impairment.

Impairment of groups of loans that are assessed collectively is recognised where there is objective evidence that a loss event has occurred after the initial recognition of the group of loans but before the reporting date. In order to provide for latent losses in a group of loans that have not yet been identified as specifically impaired, a

credit impairment for incurred but not reported losses is recognised based on historic loss patterns and estimated emergence periods (time period between the loss trigger events and the date on which the group identifies the losses). Groups of loans are also impaired when adverse economic conditions develop after initial recognition, which may impact future cash flows. The carrying amount of groups of loans is reduced through the use of a portfolio credit impairment account and the loss is recognised as a credit impairment charge in profit or loss.

Increases in loan impairments and any subsequent reversals thereof, or recoveries of amounts previously impaired (including loans that have been written off), are reflected within credit impairment charges in profit or loss. Previously impaired loans are written off once all reasonable attempts at collection have been made and there is no realistic prospect of recovering outstanding amounts. Any subsequent reductions in amounts previously impaired are reversed by adjusting the allowance account with the amount of the reversal recognised as a reduction in impairment for credit losses in profit or loss.

Subsequent to impairment, the effects of discounting unwind over time as interest income.

Renegotiated loansLoans that would otherwise be past due or impaired and whose terms have been renegotiated and exhibit the characteristics of a performing loan are reset to performing loan status. Loans whose terms have been renegotiated are subject to ongoing review to determine whether they are considered to be impaired or past due.

The effective interest rate of renegotiated loans that have not been derecognised (described under the heading Derecognition of financial instruments), is redetermined based on the loan’s renegotiated terms.

Available-for-sale financial assetsAvailable-for-sale financial assets are impaired if there is objective evidence of impairment, resulting from one or more loss events that occurred after initial recognition but before the reporting date, that have a negative impact on the future cash flows of the asset. In addition, an available-for-sale equity instrument is considered to be impaired if a significant or prolonged decline in the fair value of the instrument below its cost has occurred. In that instance, the cumulative loss, measured as the difference between the acquisition price and the current fair value, less any previously recognised impairment losses on that financial asset, is reclassified from OCI to profit or loss.

If, in a subsequent period, the amount relating to an impairment loss decreases and the decrease can be linked objectively to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed through profit or loss for available-




for-sale debt instruments. Any reversal of an impairment loss in respect of an available-for-sale equity instrument is recognised directly in OCI.

Offsetting financial instrumentsFinancial assets and liabilities are offset and the net amount reported in the statement of financial position when there is a legally enforceable right to set-off the recognised amounts and there is an intention to settle the asset and the liability on a net basis, or to realise the asset and settle the liability simultaneously.

Income and expenses are presented on a net basis only when permitted by the accounting standards, or for gains and losses arising from a group of similar transactions.

Derivative financial instruments and hedge accountingA derivative is a financial instrument whose fair value changes in response to an underlying variable, requires no initial net investment or an initial net investment that is smaller than would be required for other types of contracts that would be expected to have a similar response to changes in market factors and is settled at a future date. Derivatives are initially recognised at fair value on the date on which the derivatives are entered into and subsequently remeasured at fair value as described under accounting policy 17 – Fair value.

All derivative instruments are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative, subject to offsetting principles as described under the heading Offsetting financial instruments.

Embedded derivatives included in hybrid instruments are treated and disclosed as separate derivatives when their economic characteristics and risks are not closely related to those of the host contract, the terms of the embedded derivative are the same as those of a stand-alone derivative and the combined contract is not measured at fair value through profit or loss. The financial host contracts are accounted for and measured applying the rules of the relevant financial instrument category.

The method of recognising fair value gains and losses depends on whether the derivatives are designated as hedging instruments, and if so, the nature of the hedge relationship, or if they are classified as held-for-trading.

Derivatives that qualify for hedge accountingWhen derivatives are designated in a hedge relationship, the group designates them as either:

hedges of the fair value of recognised financial assets or liabilities or firm commitments (fair value hedges)

hedges of highly probable future cash flows attributable to a recognised asset or liability, a forecast transaction, or a highly

probable forecast intragroup transaction in the consolidated annual financial statements (cash flow hedges)

hedges of net investments in a foreign operation (net investment hedges).

Hedge accounting is applied to derivatives designated in this way provided certain criteria are met. The group documents, at the inception of the hedge relationship, the relationship between hedged items and hedging instruments, as well as its risk management objective and strategy for undertaking various hedging relationships. The group also documents its assessment, both at the inception of the hedge and on an ongoing basis, of whether the hedging instruments are highly effective in offsetting changes in fair values or cash flows of hedged items.

Fair value hedgesWhere a hedging relationship is designated as a fair value hedge, the hedged item is adjusted for the change in fair value in respect of the risk being hedged. Gains or losses on the remeasurement of both the derivative and the hedged item are recognised in profit or loss. Fair value adjustments relating to the hedging instrument are allocated to the same line item in profit or loss as the related hedged item. Any hedge ineffectiveness is recognised in profit or loss as trading revenue.

If the derivative expires, is sold, terminated, exercised, no longer meets the criteria for fair value hedge accounting, or the designation is revoked, then hedge accounting is discontinued. The adjustment to the carrying amount of a hedged item measured at amortised cost, for which the effective interest method is used, is amortised to profit or loss as part of the hedged item’s recalculated effective interest rate over the period to maturity.

Cash flow hedgesThe effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in the cash flow hedging reserve. The ineffective part of any changes in fair value is recognised immediately in profit or loss as trading revenue.

Amounts recognised in OCI are transferred to profit or loss in the periods in which the hedged forecast cash flows affect profit or loss. However, when the forecast transaction that is hedged results in the recognition of a non-financial asset or a non-financial liability, the cumulative gains or losses recognised previously in OCI are transferred and included in the initial measurement of the cost of the asset or liability.

If the derivative expires, is sold, terminated, exercised, no longer meets the criteria for cash flow hedge accounting, or the designation is revoked, then hedge accounting is discontinued. The cumulative gains or losses recognised in OCI remain in OCI until the forecast transaction is recognised in the case of a non-financial asset or a non-financial liability, or until the forecast transaction affects

303

profit or loss in the case of a financial asset or a financial liability. If the forecast transaction is no longer expected to occur, the cumulative gains and losses recognised in OCI are immediately reclassified to profit or loss and classified as trading revenue.

Net investment hedgesWhere considered appropriate, the group hedges net investments in foreign operations using derivative instruments. For such hedges, the designated component of the hedging instrument that relates to the effective portion of the hedge, is recognised directly in the foreign currency hedge of net investment reserve. On the partial disposal of an associate or a joint venture that includes a foreign operation, the hedged component of the gains and losses recognised in OCI is reclassified to profit or loss. On the partial disposal of a foreign operation that includes a subsidiary, the group reattributes a proportionate share of the cumulative amounts recognised previously in the foreign currency hedge of net investment reserve to non-controlling interests. For all other partial disposals, a proportionate share of the foreign currency hedge of net investment reserve is reattributed to profit or loss.

Derivatives that do not qualify for hedge accountingAll gains and losses from changes in the fair values of derivatives that do not qualify for hedge accounting are recognised immediately in profit or loss as trading revenue.

BorrowingsBorrowings are recognised initially at fair value, generally being their issue proceeds, net of directly attributable transaction costs incurred. Borrowings are subsequently measured at amortised cost and interest is recognised using the effective interest method.

Preference shares, which carry a mandatory coupon and/or redemption, or are redeemable on a specific date, at the occurrence of a contingent future event, or at the option of the shareholder are classified as financial liabilities or compound financial instruments (instruments with debt and equity components). All other preference shares are classified as equity instruments. Dividends on preference shares classified as financial liabilities are accounted for as interest on an amortised cost basis using the effective interest method. Dividends on preference shares classified as equity instruments are recognised within equity as a dividend payment when dividends are declared.

Financial guarantee contractsA financial guarantee contract is a contract that requires the group (issuer) to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument.

Financial guarantee contracts are initially recognised at fair value, which is generally equal to the premium received, and then amortised

over the life of the financial guarantee. Subsequent to initial recognition, the financial guarantee liability is measured at the higher of the present value of any expected payment, when a payment under the guarantee has become probable, and the unamortised premium.

Derecognition of financial instrumentsFinancial assets are derecognised when the contractual rights to receive cash flows from the financial assets have expired, or where the group has transferred its contractual rights to receive cash flows on the financial asset such that it has transferred substantially all the risks and rewards of ownership of the financial asset. Any interest in transferred financial assets that is created or retained by the group is recognised as a separate asset or liability.

The group enters into transactions whereby it transfers assets recognised in its statement of financial position, but retains either all or a portion of the risks or rewards of the transferred assets. If all or substantially all risks and rewards are retained, then the transferred assets are not derecognised. Transfers of assets with the retention of all or substantially all risks and rewards include securities lending and repurchase agreements.

When assets are sold to a third-party with a concurrent total rate of return swap on the transferred assets, the transaction is accounted for as a secured financing transaction, similar to repurchase transactions. In transactions where the group neither retains nor transfers substantially all the risks and rewards of ownership of a financial asset, the asset is derecognised if control over the asset is lost. The rights and obligations retained in the transfer are recognised separately as assets and liabilities as appropriate.

In transfers where control over the asset is retained, the group continues to recognise the asset to the extent of its continuing involvement, determined by the extent to which it is exposed to changes in the value of the transferred asset.

Financial liabilities are derecognised when they are extinguished, that is, when the obligation is discharged, cancelled or expires.

Where an existing financial asset or liability is replaced by another with the same counterparty on substantially different terms, or the terms of an existing financial asset or liability are substantially modified, such an exchange or modification is treated as a derecognition of the original asset or liability and the recognition of a new asset or liability, with the difference in the respective carrying amounts being recognised in profit or loss.

In all other instances, the renegotiated asset or liability’s effective interest rate is redetermined taking into account the renegotiated terms.




Sale and repurchase agreements and lending of securities (including commodities)Securities sold subject to linked repurchase agreements (repurchase agreements) are reclassified in the statement of financial position as pledged assets when the transferee has the right by contract or custom to sell or repledge the collateral. The liability to the counterparty is included under deposit and current accounts or trading liabilities, as appropriate.

Securities purchased under agreements to resell (reverse repurchase agreements), at either a fixed price or the purchase price plus a lender’s rate of return, are recorded as loans and included under trading assets or loans and advances, as appropriate.

For repurchase and reverse repurchase agreements measured at amortised cost, the difference between the purchase and sales price is treated as interest and amortised over the expected life using the effective interest method.

Securities lent to counterparties are retained in the annual financial statements. Securities borrowed are not recognised in the annual financial statements unless sold to third parties. In these cases, the obligation to return the securities borrowed is recorded at fair value as a trading liability.

Income and expenses arising from the securities borrowing and lending business are recognised over the period of the transactions.

CommoditiesCommodities that are acquired principally by the group for the purpose of selling in the near future or generating a profit from fluctuations in price or broker-traders’ margin are measured at fair value less cost to sell and are reported as trading assets. All changes in fair value less cost to sell are recognised in trading revenue in the period of the change.

Forward contracts to purchase or sell commodities, where net settlement occurs or where physical delivery occurs and the commodities are held to settle another derivative contract, are recognised as derivative financial instruments and measured at fair value. All changes in fair value are recognised in trading revenue in the period of the change.

5. Investment propertyProperty held to earn rental income and/or for capital appreciation that is not owner-occupied is classified as investment property. Investment property includes property under construction or development for future use as investment property.

Investment property is measured initially at cost, including transaction costs. Subsequent to initial recognition, investment property is measured at fair value with fair value changes recognised in profit or loss as investment gains or losses.

The fair value of investment property is based on valuation information at the reporting date. If the valuation information cannot be reliably determined, the group uses alternative valuation methods such as discounted cash flow projections or recent prices in active markets.

Fair value adjustments on investment property recognised in profit or loss are adjusted for any double-counting arising from the recognition of lease income on the straight-line basis compared to the accrual basis normally assumed in the fair value determination.

When the use of a property changes such that it is reclassified as property and equipment, its fair value at the date of reclassification becomes its cost for subsequent accounting purposes.

6. Interest in associates and joint venturesAssociates and joint venturesThose entities in which the group has significant influence, but not control or joint control, over the financial and operating policies are classified as associates.

A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement. Joint control is the contractually agreed sharing of control of an arrangement which only exists when decisions about the relevant activities of the joint arrangement require unanimous consent of the parties sharing control.

Interests in associates and joint ventures are accounted for using the equity method and are measured in the consolidated statement of financial position at an amount that reflects the group’s share of the net assets of the associate or joint venture (including goodwill).

Equity accounting involves recognising the investment initially at cost, including goodwill, and subsequently adjusting the carrying value for the group’s share of the associates’ and joint ventures income and expenses and OCI. Equity accounting of losses in associates and joint ventures is restricted to the interests in these entities, including unsecured receivables or other commitments, unless the group has an obligation or has made payments on behalf of the associate or joint ventures. Unrealised profits from ‘upstream’ and ‘downstream’ transactions are eliminated in determining the group’s share of equity accounted profits. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

Equity accounting is applied from the date on which the entity becomes an associate or joint venture up to the date on which it ceases to be an associate or joint venture. The accounting policies of associates and joint ventures have been changed where necessary to ensure consistency with the policies of the group.

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Because goodwill that forms part of the carrying amount of an investment in an associate or joint venture, it is not tested for impairment separately by applying the requirements for impairment testing of goodwill. The entire carrying amount of the investment is tested for impairment as a single asset, by comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying amount, whenever there is indicates that the investment may be impaired. Impairment losses are recognised through profit or loss.

Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed through profit or loss only to the extent that the Investments carrying amount does not exceed the carrying amount that would have been determined, net of equity accounted losses, if no impairment loss had been recognised.

Private equity and property equity investments, which are associates, are either designated on initial recognition at fair value through profit or loss, or equity accounted.

Investments in associates and joint ventures are accounted for at cost less impairment losses in the company’s annual financial statements.

Joint operationsA joint operation is a joint arrangement whereby the joint operators who have joint control have rights to the assets and obligations for the liabilities relating to the arrangement. The joint operator recognises:

assets it controls, including the assets jointly controlled

liabilities, including its share of liabilities incurred jointly

revenue from the sale of its share of output and from the sale of the output by a joint operation

expenses, including the share of expenses incurred jointly.

7. Intangible assetsGoodwillGoodwill represents the excess of the consideration transferred and the acquisition date fair value of any previously held equity interest (including transaction costs for acquisitions prior to 1 January 2010) over the group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquired subsidiary, associate or joint venture at the date of the acquisition. The group’s interest in acquired subsidiaries takes into account any non-controlling interest.

Refer to accounting policy 1 – Basis of consolidation.

Goodwill arising on the acquisition of subsidiaries is reported in the statement of financial position as part of ‘Goodwill and other intangible assets’. Goodwill arising on the acquisition of associates or joint ventures are included in ‘Interest in associates and joint ventures’ in the statement of financial position.

Refer to accounting policy 6 – Interest in associates and joint ventures.

Goodwill is allocated to cash-generating units (CGUs) (not larger than operating segments of the group as defined) and is tested annually for impairment. An impairment loss is recognised whenever the carrying amount of an asset or its CGU exceeds its recoverable amount. Impairment losses are allocated first to reduce the carrying amount of any goodwill allocated to a CGU and then to reduce the carrying amount of other assets in the CGU on a pro rata basis. The carrying amount of these other assets may, however, not be reduced below the higher of the CGU’s fair value less costs to sell and its value in use.

If the group’s interest in the fair value of the acquiree’s identifiable net assets exceeds the sum of the consideration transferred plus the amount of any non-controlling interest in the acquiree and the fair value of the acquiree’s previously held equity interest (if any), this excess results in a gain from a bargain purchase.

A gain from a bargain purchase is recognised as income in profit or loss in the period in which it arises. Gains or losses on the disposal of an entity are determined after taking into account the carrying amount of goodwill (if any) relating to the entity sold.

Computer softwareCosts associated with developing or maintaining computer software programmes and the acquisition of software licences are generally recognised as an expense as incurred. However, direct computer software development costs that are clearly associated with an identifiable and unique system, which will be controlled by the group and have a probable future economic benefit beyond one year, are recognised as intangible assets. Capitalisation is further limited to development costs where the group is able to demonstrate its intention and ability to complete and use the software, the technical feasibility of the development, the availability of resources to complete the development, how the development will generate probable future economic benefits and the ability to reliably measure costs relating to the development. Direct costs include software development employee costs and an appropriate portion of relevant overheads.

Expenditure subsequently incurred on computer software is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates.




Direct computer software development costs recognised as intangible assets are amortised on the straight-line basis at rates appropriate to the expected useful lives of the assets (two to 15 years) from the date that the assets are available for use, and are carried at cost less accumulated amortisation and accumulated impairment losses. The carrying amount of capitalised computer software is reviewed annually and is written down when impaired.

Amortisation methods, useful lives and residual values are reviewed at each financial year end and adjusted, if necessary.

There have been no significant changes in the estimated useful lives from those applied in the previous financial year.

Other intangible assetsThe group recognises the costs incurred on internally generated intangible assets such as brands, customer lists, customer contracts and similar rights and assets, in profit or loss as incurred.

The group capitalises brands, customer lists, customer contracts, distribution forces and similar rights acquired in business combinations.

Capitalised intangible assets are measured at cost less accumulated amortisation and accumulated impairment losses. Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, not exceeding 20 years, from the date that they are available for use.

Amortisation methods, useful lives and residual values are reviewed at each financial year end and adjusted, if necessary. There have been no changes in the estimated useful lives from those applied in the previous financial year.

Present value of acquired in-force policyholder contracts and investment contracts with discretionary participation featuresWhere a portfolio of policyholder contracts is acquired either directly from another insurer or through the acquisition of a subsidiary, the PVIF business on the portfolio, being the net present value of estimated future cash flows of the existing contracts, is recognised as an intangible asset and amortised on a basis consistent with the settlement of the relevant liability in respect of the purchased contracts (four to 12 years). The estimated life is re-evaluated annually. The PVIF intangible asset is carried in the statement of financial position at cost less accumulated amortisation and accumulated impairment losses.

8. Property and equipmentEquipment and owner-occupied properties Equipment, furniture, vehicles and other tangible assets are measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset. Where significant parts of an item of property or equipment have different useful lives, they are

accounted for as separate items (major components) of property and equipment.

Costs that are subsequently incurred are included in the asset’s related carrying amount or are recognised as a separate asset, as appropriate, only when it is probable that future economic benefits will flow to the group and the cost of the item can be measured reliably. Expenditure, which does not meet these criteria, is recognised in profit or loss as incurred. Depreciation, impairment losses and gains and losses on disposal of assets are included in profit or loss.

Owner-occupied properties are held for use in the supply of services or for administrative purposes.

Property and equipment are depreciated on the straight-line basis over the estimated useful lives of the assets to their residual values. Land is not depreciated. Leasehold buildings are depreciated over the period of the lease or over a lesser period, as is considered appropriate.

The assets’ residual values, useful lives and the depreciation method applied are reviewed, and adjusted if appropriate, at each financial year end.

The estimated useful lives of tangible assets are typically as follows:

Buildings 40 years

Computer equipment 3 to 5 years

Motor vehicles 4 to 5 years

Office equipment 5 to 10 years

Furniture and fittings 5 to 13 years

Capitalised leased assets over the shorter of the lease term or its useful life

There has been no significant change to the estimated useful lives and depreciation methods from those applied in the previous financial year.

Items of property and equipment are derecognised on disposal or when no future economic benefits are expected from their use or disposal. The gain or loss on derecognition is recognised in profit or loss and is determined as the difference between the net disposal proceeds and the carrying amount of the item.

9. Property developments and properties in possession

Property developments are stated at the lower of cost or net realisable value. Cost is assigned by specific identification and includes the cost of acquisition and where applicable, development and borrowing costs during development. When development is completed borrowing costs and other charges are expensed as incurred.

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Properties in possession are properties acquired by the group which were previously held as collateral for underlying lending arrangements that, subsequent to origination, have defaulted. The property is recognised at the time at which the risks and rewards of the properties are transferred to the group. The properties are initially recognised at cost and are subsequently measured at the lower of cost and its net realisable value. Any subsequent write-down in the value of the acquired properties is recognised as an operating expense. Any subsequent increases in the net realisable value, to the extent that it does not exceed its original cost, are also recognised within operating expenses.

10. Capitalisation of borrowing costsBorrowing costs that relate to qualifying assets, that is, assets that necessarily take a substantial period of time to get ready for their intended use or sale and which are not measured at fair value, are capitalised. All other borrowing costs are recognised in profit or loss.

11. Impairment of non-financial assetsIntangible assets that have an indefinite useful life and goodwill are tested annually for impairment and additionally when an indicator of impairment exists. Intangible assets that are subject to amortisation and other non-financial assets are reviewed for impairment at each reporting date and tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

An impairment loss is recognised in profit or loss for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. Fair value less costs to sell is determined by ascertaining the current market value of an asset and deducting any costs related to the realisation of the asset. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purposes of assessing impairment, assets that cannot be tested individually are grouped at the lowest levels for which there are separately identifiable cash inflows from continuing use (CGUs). Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units, and then to reduce the carrying amounts of the other assets in the unit on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. In respect of other non-financial assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed through profit or loss only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been

determined, net of depreciation or amortisation, if no impairment loss had been recognised.

12. LeasesA lease is an agreement whereby the lessor conveys to the lessee in return for a payment or series of payments the right to use an asset for an agreed period of time. A lease of assets is either classified as a finance lease or operating lease.

Group as lesseeLeases, where the group assumes substantially all the risks and rewards incidental to ownership, are classified as finance leases. All other leases are classified as operating leases.

Finance leases are capitalised at the inception of the lease at the lower of the fair value of the leased asset and the present value of the minimum lease payments. Lease payments are calculated using the interest rate implicit in the lease, or the group’s incremental borrowing rate to identify the finance cost, which is recognised in profit or loss over the lease period, and the capital repayment, which reduces the liability to the lessor.

Payments made under operating leases, net of any incentives received from the lessor, are recognised in profit or loss on a straight-line basis over the term of the lease. Contingent rentals are expensed as they are incurred. When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of penalty is recognised as an expense in the period in which termination takes place.

Group as lessorLeases, where the group transfers substantially all the risks and rewards incidental to ownership, are classified as finance leases. All other leases are classified as operating leases.

Lease and instalment sale contracts are primarily accounted for as financing transactions in banking activities, with rentals and instalments receivable, less unearned finance charges, being included in loans and advances in the statement of financial position.

Finance charges earned are computed using the effective interest method, which reflects a constant periodic rate of return on the investment in the finance lease. Initial direct costs and fees are capitalised to the value of the lease receivable and accounted for over the lease term as an adjustment to the effective rate of return. The tax benefits arising from investment allowances on assets leased to clients are accounted for in the direct taxation line.

Operating lease income from properties held as investment properties, net of any incentives given to lessees, is recognised on the straight-line basis or a more representative basis where applicable over the lease term. When an operating lease is terminated before the lease period has expired, any payment required by the group by way of a penalty is recognised as income in the period in which termination takes place.




13. Provisions, contingent assets and contingent liabilities

Provisions are recognised when the group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the amount of the obligation can be made. Provisions are determined by discounting the expected future cash flows using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the liability.

A provision for restructuring is recognised when the group has approved a detailed formal plan, and the restructuring either has commenced or has been announced publicly. Future operating costs or losses are not provided for.

A provision for onerous contracts is recognised when the expected benefits to be derived by the group from a contract are lower than the unavoidable cost of meeting its obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the group recognises any impairment loss on the assets associated with that contract. Reimbursement of expenditure to settle a provision is recognised when and only when it is virtually certain that reimbursement will be received where the group settles the obligation.

Contingent assets are not recognised in the annual financial statements but are disclosed when, as a result of past events, it is probable that economic benefits will flow to the group, but this will only be confirmed by the occurrence or non-occurrence of one or more uncertain future events which are not wholly within the group’s control.

Contingent liabilities include certain guarantees, other than financial guarantees, and letters of credit. Contingent liabilities are not recognised in the annual financial statements but are disclosed in the notes to the annual financial statements unless they are remote.

14. Employee benefitsPost-employment benefitsDefined contribution plansThe group operates a number of defined contribution plans, based on a percentage of pensionable earnings funded by both employer companies and employees, the assets of which are generally held in separate trustee-administered funds.

Contributions to these plans are recognised as an expense in profit or loss in the periods during which services are rendered by employees.

Defined benefit plansThe group also operates a number of defined benefit plans, with membership generally limited to employees who were in the

employment of the various companies at specified dates.

Employer companies contribute to the cost of benefits taking

account of the recommendations of the actuaries. Statutory actuarial

valuations are required every three years using the projected unit

credit method. Interim valuations are also performed annually

at the financial year end. Within the defined benefit plans, the group

operates a number of funded and unfunded post-employment

medical aid schemes, with membership limited to employees

who were retired or in the employment of the various companies

at specified dates and complying with specific criteria.

The assets or liabilities recognised in the statement of financial

position in respect of defined benefit plans are measured at the

present value of the estimated future cash outflows, using interest

rates of government bonds denominated in the same currency

as the defined benefit plan (corporate bonds are used for currencies

for which there is a deep market of high quality corporate bonds),

with maturity dates that approximate the expected maturity of the

obligations, less the fair value of plan assets. A defined benefit asset

is only recognised to the extent that economic benefits are available

to the group from reductions in future contributions or future

refunds from the plan.

Net interest income/(expense) is determined on the defined benefit

asset/(liability) by applying the discount rate used to measure the

defined benefit obligation at the beginning of the annual period

to the net defined benefit asset/(liability). The net interest income/

(expense) is recognised in profit or loss. Other expenses related

to the defined benefit plans are also recognised in profit or loss.

Remeasurements of the net defined benefit obligation, including

actuarial gains and losses, the return on plan assets (excluding

interest calculated) and the effect of any asset ceiling are recognised

within OCI.

When the benefits of a plan are changed or when a plan is curtailed,

the resulting change in benefit that relates to past service or the gain

or loss on curtailment is recognised immediately in profit or loss. The

group recognises gains and losses on the settlement of a defined

benefit plan when the settlement occurs.

Termination benefitsTermination benefits are recognised as an expense when the group is

committed, without realistic possibility of withdrawal, to a formal

detailed plan to terminate employment before the normal retirement

date, or to provide termination benefits as a result of an offer made

to encourage voluntary redundancy. Termination benefits for

voluntary redundancies are recognised as an expense if the group has

made an offer encouraging voluntary redundancy, it is probable that

the offer will be accepted, and the number of acceptances can be

estimated reliably.

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Short-term benefitsShort-term benefits consist of salaries, accumulated leave payments,

profit share, bonuses and any non-monetary benefits such as medical

aid contributions.

Short-term employee benefit obligations are measured on an

undiscounted basis and are expensed as the related service

is provided.

A liability is recognised for the amount expected to be paid under

short-term cash bonus plans or accumulated leave if the group has a

present legal or constructive obligation to pay this amount as a result

of past service provided by the employee and the obligation can be

estimated reliably.

15. TaxationDirect taxationDirect taxation includes all domestic and foreign taxes based

on taxable profits and capital gains tax. Current tax is determined

for current period transactions and events and deferred tax

is determined for future tax consequences. Current and deferred tax

are recognised in profit or loss except to the extent that it relates

to a business combination (relating to a measurement period

adjustment where the carrying amount of the goodwill is greater

than zero), or items recognised directly in equity or in OCI.

Current tax represents the expected tax payable on taxable income

for the year, using tax rates enacted or substantively enacted

at the reporting date, and any adjustments to tax payable

in respect of previous years.

Deferred tax is recognised in respect of temporary differences arising

between the tax bases of assets and liabilities and their carrying

values for financial reporting purposes. Deferred tax is measured at

the tax 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 at the reporting date. Deferred tax

is not recognised for the following temporary differences:

the initial recognition of goodwill

the initial recognition of assets and liabilities in a transaction

that is not a business combination, which affects neither

accounting nor taxable profits or losses

investments in subsidiaries, associates and jointly controlled

arrangements (excluding mutual funds) where the group

controls the timing of the reversal of temporary differences

and it is probable that these differences will not reverse

in the foreseeable future.

The amount of deferred tax provided is based on the expected

manner of realisation or settlement of the carrying amount of the

asset or liability and is not discounted.

Deferred tax assets are recognised to the extent that it is probable that future taxable income will be available against which the unused tax losses can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Current and deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

Dividends taxTaxes on dividends declared by the group are recognised as part of the dividends paid within equity as dividend tax represents a tax on the shareholder and not the group.

Dividends tax withheld by the group on dividends paid to its shareholders and payable at the reporting date is included in trade and other payables in the statement of financial position.

Indirect taxationIndirect taxes, including non-recoverable VAT, skills development levies and other duties for banking activities, are recognised in profit or loss and disclosed separately in the income statement.

16. Non-current assets held for sale, disposal groups and discontinued operations

Non-current assets, or disposal groups comprising assets and liabilities that are expected to be recovered primarily through sale or distribution to owners rather than continuing use, are classified as held for sale or for distribution and are accounted for as follows:

Non-current assets held as investments for the benefit of policyholders as part of the group’s investment management and life insurance activities are not classified as held for sale as ongoing investment management implies regular purchases and sales in the ordinary course of business

Immediately before classification as held for sale or for distribution, the assets (or components of a disposal group) are remeasured in accordance with the group’s accounting policies and tested for impairment (refer accounting policy 11 – Impairment of non-financial assets). Thereafter, the assets are measured at the lower of their carrying amount and fair value less costs to sell. Impairment losses on initial classification as held for sale or for distribution as well as subsequent gains and losses on remeasurement of these assets or disposal groups are recognised in profit or loss

Assets (or components of a disposal group) are presented separately in the statement of financial position

Property and equipment and intangible assets, once classified as held for sale, are not depreciated or amortised




Once an interest in an associate or joint venture is classified as held for sale, equity accounting is suspended

In presenting the group’s non-current assets and liabilities as held for sale, intercompany balances are eliminated in full.

The group classifies a component of the business as a discontinued operation when that component has been disposed of, or is classified as held for sale or for distribution, and:

represents a separate major line of business or geographical area of operations

is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations

is a subsidiary acquired exclusively with a view to resale.

Discontinued operations are presented separately within the income statement and the cash flow statement.

Intercompany income and expense transactions between the group’s continuing and discontinued operations are not eliminated.

17. Fair valueFair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal (or most advantageous) market between market participants at the measurement date under current market conditions.

When a price for an identical asset or liability is not observable, fair value is measured using another valuation technique that maximises the use of relevant observable inputs and minimises the use of unobservable inputs.

In estimating the fair value of an asset or a liability, the group takes into account the characteristics of the asset or liability that market participants would take into account when pricing the asset or liability at measurement date.

For financial instruments, where the fair value of the financial instrument differs from the transaction price, the difference is commonly referred to as day one profit or loss. Day one profit or loss is recognised in profit or loss immediately where the fair value of the financial instrument is either evidenced by comparison with other observable current market transactions in the same instrument, or is determined using valuation models with only observable market data as inputs.

Day one profit or loss is deferred where the fair value of the financial instrument is not able to be evidenced by comparison with other observable current market transactions in the same instrument, or determined using valuation models that utilise non-observable market data as inputs.

The timing of the recognition of deferred day one profit or loss is determined individually depending on the nature of the instrument

and availability of market observable inputs. It is either amortised over the life of the transaction, deferred until the instrument’s fair value can be determined using market observable inputs, or realised through settlement.

Subsequent to initial recognition, fair value is measured based on quoted market prices or dealer price quotations for the assets and liabilities that are traded in active markets and where those quoted prices represent fair value at the measurement date. If the market for an asset or liability is not active or the instrument is unlisted, the fair value is determined using other applicable valuation techniques. These include the use of recent arm’s length transactions, discounted cash flow analyses, pricing models and other valuation techniques commonly used by market participants.

Where discounted cash flow analyses are used, estimated future cash flows are based on management’s best estimates and a market related discount rate at the reporting date for an asset or liability with similar terms and conditions.

If an asset or a liability measured at fair value has both a bid and an ask price, the price within the bid-ask spread that is most representative of fair value is used to measure fair value.

The group has elected the portfolio exception to measure the fair value of certain groups of financial assets and financial liabilities. This exception permits the group of financial assets and financial liabilities to be measured at fair value on a net basis. This election is applied where the group:

manages the group of financial assets and financial liabilities on the basis of the group’s net exposure to a particular market risk (or risks) or to the credit risk of a particular counterparty in accordance with the group’s documented risk management or investment strategy

provides information on that basis about the group of financial assets and financial liabilities to the group’s key management personnel

is required to or has elected to measure those financial assets and financial liabilities at fair value at the end of each reporting period.

Where the fair value of investments in equity instruments or identical instruments do not have a quoted price in an active market, and derivatives that are linked to and must be settled by delivery of such equity instruments, are unable to be reliably determined, those instruments are measured at cost less impairment losses. Impairment losses on these financial assets are not reversed.

Fair value measurements are categorised into level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement.

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18. Policyholder insurance and investment contracts

Policyholder contracts are classified into four categories, depending on the duration of or type of investment benefit or insurance risks, namely, short-term insurance, long-term insurance, investment contracts with DPF and investment contracts without DPF.

Insurance and investment contract classificationThe group issues contracts that transfer insurance risk or financial risk or, in some cases, both.

An insurance contract is a contract under which the group (insurer) accepts significant insurance risk from the policyholder by agreeing to compensate the policyholder if a specified uncertain future event (the insured event) adversely affects the policyholder or, in the case of life annuities, the lifespan of the policyholder is greater than that assumed. Such contracts may also transfer financial risk. The group defines significant insurance risk as the possibility of having to pay benefits on the occurrence of an insured event that are significantly more than the benefits payable if the insured event did not occur.

Investment contracts are those contracts that transfer financial risk with no significant insurance risk. Financial risk is the risk of a possible future change in one or more of a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index or other variable.

Discretionary participation featuresA number of insurance and investment contracts contain a DPF feature. This feature entitles the policyholder to receive, as a supplement to guaranteed benefits, additional benefits or bonuses at the discretion of the group.

The terms and conditions or practice relating to these contracts are in accordance with the group’s published Principles and Practices of Financial Management, as approved by the Financial Services Board. The terms ‘reversionary bonus’ and ‘smoothed bonus’ refer to the specific forms of DPF contracts underwritten by the group.

All components in respect of DPFs are included in policyholder liabilities.

Short-term insuranceShort-term insurance provides benefits under short-term policies, which include engineering, fire, personal liability, marine and aviation, motor, personal accident, medical expenses, theft and the Workmen’s Compensation Act, or a contract comprising a combination of any of those policies.

Recognition and measurementGross written premiumsGross premiums exclude VAT. Premiums are accounted for as income when the risk related to the insurance policy commences and are

amortised over the contractual period of risk cover by using an unearned premium provision. All premiums are shown before deduction of commission payable to intermediaries.

Provision for unearned premiumsThe provision for unearned premiums represents the portion of the current year’s premiums that relate to risk periods extending into the following year. The unearned premiums are calculated using a straight-line basis, except for those insurance contracts where allowance is made for uneven exposure.

Liability adequacyProvision is made for underwriting losses that may arise from unexpired risks when it is anticipated that unearned premiums will be insufficient to cover future claims, as well as claims-handling fees and related administrative costs.

Provision for reported claims and claims incurred but not reportedProvision is made on a prudent basis for the estimated final cost of all claims that had not been settled on the accounting date, less amounts already paid. Claims and loss adjustment expenses are charged to income as incurred based on the estimated liability for compensation owed to contract holders or third parties damaged by the contract holders. The group’s own assessors or contracted external assessors individually assess claims. The claims provision includes an estimated portion of the direct expenses of the claims and assessment charges.

Provision is also made for claims arising from insured events that occurred before the close of the accounting period, but which had not been reported to the group at that date incurred but not reported (IBNR) claims. This provision is calculated using run-off triangle techniques. The provision for claims is not discounted for the time value of money due to the expected short duration to settlement.

Deferred acquisition costs in respect of short-term contractsCommissions that vary and are related to securing new contracts and renewing existing contracts are deferred over the period in which the related premiums are earned, and recognised as a current asset. All other costs are recognised as expenses when incurred.

Deferred revenue liability in respect of short-term contractsA DRL is raised for any income receivable on the placement of reinsurance for risks arising from short-term insurance contracts. The DRL is released to income systematically over the coverage period of the respective reinsurance contract.

Receivables and payables related to insurance contractsReceivables and payables are recognised when due. These include amounts due to and from agents, intermediaries and insurance contract holders and are included under prepayments, insurance and other receivables and insurance and other payables.




Professional Guidance issued by the Actuarial Society of South AfricaIn terms of IFRS 4 Insurance Contracts (IFRS 4), insurance liabilities

are measured under existing local practice at the date of adoption

of IFRS 4. The group had, prior to the adoption of IFRS 4, adopted

the Professional Guidance Notes (PGNs) issued by the Actuarial

Society of South Africa to determine the liability in respect of

insurance contracts issued in South Africa. The group has continued

to value long-term insurance liabilities in accordance with these.

In 2012, the naming convention was changed and the term PGN

was replaced with either APN or SAP depending on whether the

former PGN was best-practice or mandatory, respectively.

These are available on the Actuarial Society of South Africa website – www.actuarialsociety.org.za

Where applicable, the APNs and SAPs are referred to in the

accounting policies and notes to the annual financial statements.

Long-term insurance contracts and investment contracts with DPFMeasurementThese contracts are valued in terms of the FSV basis as described

in SAP 104 Life offices – valuation of long-term insurers (SAP 104),

using a discounted cash flow methodology. The liability is reflected

as policyholders’ liabilities in the statement of financial position.

The discounted cash flow methodology allows for premiums

and benefits payable in terms of the contract, future administration

expenses and commission, investment return and tax and any

expected losses in respect of options. The liability is based

on assumptions of the best estimate of future experience,

plus compulsory margins as required in terms of SAP 104,

plus additional discretionary margins.

Derivatives embedded in the group’s insurance contracts

are not separated and measured at fair value if the embedded

derivative itself meets the definition of an insurance contract.

The liabilities in respect of the investment guarantees’ underlying

maturity and death benefits, and guaranteed annuity options

are measured in accordance with APN 110 Reserving for minimum investment return guarantees on a market-consistent basis.

Discretionary margins are held to ensure that the profit

and risk margins in the premiums are not capitalised before

it is probable that future economic benefits will flow to the entity.

These profits emerge over the lifetime of the contract in line with

the risk borne by the group.

Liabilities for individual market-related policies, where benefits are in part dependent on the performance of underlying investment portfolios, are taken as the aggregate value of the policies’ investment in the investment portfolio at the valuation date (the unit reserve element), reduced by the excess of the present value of the expected future risk and expense charges over the present value of the expected future risk benefits and expenses on a policy-by-policy cash flow basis (the rand reserve element).

Reversionary bonus classes of policies, and policies with fixed and guaranteed benefits are valued by discounting the expected future cash flows at market-related rates of interest reduced by an allowance for investment expenses and the relevant compulsory margins (the guaranteed element). Future bonuses have been allowed for at the latest declared rates where appropriate.

The rand reserve element of market-related policies and the guaranteed element in respect of other policies are collectively known as the rand reserve.

In respect of corporate life and lump sum disability business, no discounting of future cash flows is performed. However, a provision will be held if the expected guaranteed premiums under the current basis and investment returns in the short term are not sufficient to meet expected future claims and expenses. For corporate investment contracts with DPF, in addition to the value of the policies’ investment in the investment portfolios held, an additional provision will be held if the expected fee recoveries in the short term are not sufficient to meet expected expenses.

Within the group all investment contracts invested in smoothed bonus portfolios are classified as investment contracts with DPF. In respect of insurance and investment contracts with DPF where bonuses are smoothed, bonus stabilisation provisions are held arising from the difference between the after taxation investment performance of the assets net of the relevant management fees and the value of the bonuses declared. In accordance with SAP 104, where the bonus stabilisation provision is negative, this provision is restricted to an amount that can reasonably be expected to be recovered through under-distribution of bonuses during the ensuing three years. All bonus stabilisation provisions are included in policyholders’ liabilities.

The liability estimates are reviewed biannually. The effect of any change in estimates is recognised in profit or loss.

Incurred but not reported claimsProvision is made in policyholders’ liabilities for the estimated cost at the end of the year of claims incurred but not reported at that date.

Liability adequacy testAt each reporting date the adequacy of the insurance liabilities is assessed. If that assessment shows that the carrying amount of

313

insurance liabilities net of any related intangible PVIF business assets is inadequate in the light of the estimated future cash flows, then the deficiency is recognised in profit or loss.

Long-term investment contracts without DPFThe group issues investment contracts without fixed benefits (unit-linked and structured products) and investment contracts with fixed and guaranteed benefits (term certain annuity). These investment contracts are accounted for as financial liabilities and are designated at fair value through profit or loss.

Refer to accounting policy 4 – Financial instruments.

Investment contracts with a DPF switching optionOn certain investment contracts, policyholders have an option to switch some or all of their investment from a DPF fund to a non-DPF fund (and vice versa). The value of the liability held with respect to these contracts is taken at the aggregate value of the policyholders’ investment in the investment portfolio at the valuation date.

Receivables and payables related to insurance contracts and investment contractsReceivables and payables are recognised when due. These include amounts due to and from agents, brokers and policyholders. Outstanding claims and benefit payments are stated gross of reinsurance.

Reinsurance contracts heldThe group cedes some insurance risk in the normal course of business. Reinsurance contracts are contracts entered into by the group with reinsurers under which the group is compensated for the entire, or a portion of, losses arising on one or more of the insurance contracts issued by the group.

The expected benefits to which the group is entitled under its reinsurance contracts held are recognised as reinsurance assets and included in ‘Other assets’ in the statement of financial position. Reinsurance assets are assessed for impairment at each reporting date. Any impairment loss is recognised in profit or loss.

19. EquityReacquired equity instrumentsWhere subsidiaries purchase/(short) the holding entity’s equity instruments, the consideration paid/(received) is deducted/(added) from/(to) equity attributable to ordinary shareholders as treasury shares on consolidation. Fair value changes recognised by subsidiaries on these instruments are reversed on consolidation and dividends received are eliminated against dividends paid. Where such shares are subsequently sold or reissued/(reacquired) outside the group, any consideration received/(paid) is included in equity attributable to ordinary shareholders.

Black Economic empowerment ownership initiative (Tutuwa)The group concluded its Tutuwa initiative in October 2004 when it sold an effective 10% interest in its South African banking operations to a broad-based grouping of black entities. The group subscribed for 8.5% redeemable, cumulative preference shares issued by the Tutuwa entities controlled by the group. The initial repurchase of group shares by the SPEs was treated as a reduction in the group’s equity. Subsequent to the repurchase of the group shares, the Tutuwa entities containing these shares were sold to the black participants. The capital and dividends on the preference shares are repayable from future ordinary dividends received on group shares or from the disposal of the group’s shares. As a result of the group’s right to receive its own dividends back in the form of preference dividends and capital on the preference shares, the subsequent sale of the Tutuwa entities and consequent delivery of the group shares to the black participants (although legally effected) is not accounted for as a sale. The preference share investment in the Tutuwa entities is also not accounted for as an asset. The preference share asset is effectively eliminated against equity as a negative empowerment reserve.

As a consequence of the above, the IFRS accounting treatment followed until full redemption, or third-party financing, is as follows:

the 8.5% redeemable, cumulative preference shares issued by the Tutuwa entities and subscribed for by the group are not recognised as financial assets, but eliminated against equity as a negative empowerment reserve

the preference dividends received from the Tutuwa entities are eliminated against the ordinary dividends paid on the group shares held by the Tutuwa entities

preference dividends accrued but not received, due to cash distributions paid to participants, increase the empowerment reserve

for purposes of the calculation of earnings per share, the weighted average number of shares in issue is reduced by the number of shares held by those Tutuwa entities that have been sold to the black participants. The shares will be restored on full redemption of the preference shares, or to the extent that the preference share capital is financed by a third-party

perpetual preference shares issued by the group for the purposes of financing the repurchased group shares are classified as equity. Dividends paid are accounted for on declaration.

Share issue costsIncremental external costs directly attributable to a transaction that increases or decreases equity are deducted from equity, net of related tax. All other share issue costs are expensed.

Distributions on ordinary sharesDistributions are recognised in equity in the period in which they are declared. Distributions declared after the reporting date are disclosed in the distributions note.




20. Equity-linked transactionsEquity compensation plansThe group operates both equity-settled and cash-settled share-based compensation plans.

The fair value of equity-settled share options is determined on the grant date and accounted for as staff costs over the vesting period of the share options, with a corresponding increase in the share-based payment reserve. Non-market vesting conditions, such as the resignation of employees and retrenchment of staff, are not considered in the valuation but are included in the estimate of the number of options expected to vest. At each reporting date, the estimate of the number of options expected to vest is reassessed and adjusted against profit or loss and equity over the remaining vesting period.

On vesting of share options, amounts previously credited to the share-based payment reserve are transferred to retained earnings through an equity transfer. On exercise of equity-settled share options, proceeds received are credited to share capital and premium.

Share-based payments settled in cash are accounted for as liabilities at fair value until settled. The liability is recognised over the vesting period and is revalued at every reporting date and on settlement. Any changes in the liability are recognised in profit or loss as part of staff costs.

21. Revenue and expenditureBanking activitiesRevenue is derived substantially from the business of banking and related activities and comprises interest income, fee and commission revenue, trading revenue and other non-interest revenue.

Net interest incomeInterest income and expense (with the exception of those borrowing costs that are capitalised – refer to accounting policy 10 – Capitalisation of borrowing costs) are recognised in profit or loss on an accrual basis using the effective interest method for all interest-bearing financial instruments, except for those classified at fair value through profit or loss. In terms of the effective interest method, interest is recognised at a rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or, where appropriate, a shorter period, to the net carrying amount of the financial asset or financial liability. Direct incremental transaction costs incurred and origination fees received, including loan commitment fees, as a result of bringing margin-yielding assets or liabilities into the statement of financial position, are capitalised to the carrying amount of financial instruments that are not at fair value through profit or loss and amortised as interest income or expense over the life of the asset or liability as part of the effective interest rate.

Where the estimates of payments or receipts on financial assets (except those that have been reclassified – refer to accounting policy

4 – Financial instruments) or financial liabilities are subsequently revised, the carrying amount of the financial asset or financial liability is adjusted to reflect actual and revised estimated cash flows. The carrying amount is calculated by computing the present value of the estimated cash flows at the financial asset or financial liability’s original effective interest rate. Any adjustment to the carrying value is recognised in net interest income.

Where financial assets have been impaired, interest income continues to be recognised on the impaired value based on the original effective interest rate.

Fair value gains and losses on realised debt financial instruments, including amounts reclassified from OCI in respect of available-for-sale debt financial assets, and excluding those classified as held-for-trading, are included in net interest income.

Dividends received on preference share investments classified as debt form part of the group’s lending activities and are included in interest income.

Non-interest revenueNet fee and commission revenueFee and commission revenue, including transactional fees, account servicing fees, investment management fees, sales commissions and placement fees are recognised as the related services are performed. Loan commitment fees for loans that are not expected to be drawn down are recognised on a straight-line basis over the commitment period. Loan syndication fees, where the group does not participate in the syndication or participates at the same effective interest rate for comparable risk as other participants, are recognised as revenue when the syndication has been completed. Syndication fees that do not meet these criteria are capitalised as origination fees and amortised as interest income.

The fair value of issued financial guarantee contracts on initial recognition is amortised as income over the term of the contract.

Fee and commission expense included in net fee and commission revenue are mainly transaction and service fees relating to financial instruments, which are expensed as the services are received. Expenditure is recognised as fee and commission expenses where the expenditure is linked to the production of fee and commission revenue.

Trading revenueTrading revenue comprises all gains and losses from changes in the fair value of trading assets and liabilities, together with related interest income, expense and dividends.

Other revenueOther revenue includes gains and losses on equity instruments designated at fair value through profit or loss, dividends relating to those financial instruments, underwriting profit from the group’s short-term insurance operations and related insurance activities and remeasurement gains and losses from contingent consideration on disposals and purchases.

315

Gains and losses on equity available-for-sale financial assets are reclassified from OCI to profit or loss on derecognition or impairment of the investments. Dividends on these instruments are recognised in profit or loss.

Dividend incomeDividends are recognised in profit or loss when the right to receipt is established. Scrip dividends are recognised as dividends received where the dividend declaration allows for a cash alternative.

Short-term insurance incomeShort-term insurance income includes premium income, commission and policy fees earned, as well as net incurred claim losses and broker commission paid. Annual business income is accounted for on the accrual basis and comprises the cash value of commission and fees earned when premiums or fees are payable directly to the group. Direct commission income is accounted for as and when cash is received and comprises the cash value of commission earned when premiums are payable directly to the underwriters.

Revenue sharing agreements with group companiesRevenue sharing agreements with group companies includes the allocation of revenue from transfer pricing agreements between the group’s legal entities. The service payer makes payment to service sellers for services rendered. All agreements of a revenue sharing nature are presented in the income statement as follows:

The service payer of the agreement recognises, to the extent the charge is less than revenue from the agreement, the charge to the service sellers within the income statement line item revenue sharing agreements with group companies. To the extent that the revenue allocation to service sellers within the group is greater than the related revenue from the agreement, the charge above the related revenue is recognised within other operating expenses

The service seller of the agreements recognises, to the extent the allocation is made out of available revenue of the service payer, the revenue from the service payer within the income statement line item revenue sharing agreements with group companies. To the extent the revenue is not received from the service payer’s available revenue, such revenue is recognised as a fee and commission revenue.

Customer loyalty programmesThe group’s banking operations operate a customer loyalty programme in terms of which it undertakes to provide goods and services to certain customers. The reward credits are accounted for as a separately identifiable component of the fee and commission income transactions of which they form a part. The consideration allocated to the reward credits is measured at the fair value of the reward credit and recognised over the period in which the customer utilises the reward credits.

Expenses relating to the provision of the reward credits are recognised as an operating expense as and when they are incurred.

Investment management and life insurance activitiesRevenue comprises premium income, investment income, and management and service fee income.

Insurance contracts and investment contracts with DPFPremium incomePremiums and annuity considerations on insurance contracts, other than in respect of universally costed policies (policies where insurance risk charges are dependent on the excess of the sum assured over the value of units underlying the contract) and recurring premium pure risk policies (collectively the Lifestyle series) and corporate schemes, are recognised when due in terms of the contract. Premiums receivable in respect of corporate schemes are recognised when there is a reasonable assurance of collection in terms of the policy contract. Premiums in respect of the Lifestyle series of policies are recognised when premiums are received, as failure to pay a premium will result in a reduction of attributable fund value, if available, or else in the lapse of the policy. Premium income on insurance contracts is recognised gross of reinsurance. Premiums are shown before deduction of commission.

Reinsurance premiumsReinsurance premiums are recognised when due for payment, in accordance with the terms of each reinsurance contract.

ClaimsClaims on insurance contracts, which include death, disability, maturity, surrender and annuity payments, are recognised in profit or loss when the group is notified of a claim, based on the estimated liability for compensation owed to policyholders.

Changes in the provision for IBNR claims are also recognised in profit or loss.

Reinsurance recoveries are accounted for in the same period as the related claims.

Acquisition costsAcquisition costs for insurance contracts represent commission and other costs that relate to the securing of new contracts and the renewing of existing contracts. These costs are expensed as incurred.

Investment contracts without DPFAmounts received and claims incurred on investment contractsAmounts received under investment contracts, such as premiums, are recorded as deposits to investment contract liabilities, whereas claims incurred are recorded as deductions from investment contract liabilities.




Service fees on investment management contracts and deferred revenue liability on investment management contractsService fee income on investment management contracts is recognised on an accrual basis as and when the services are rendered.

A DRL is recognised in respect of upfront fees, which are directly attributable to a contract, that are charged for investment management services. The DRL is then released to revenue when the services are provided, over the expected duration of the contract on a straight-line basis.

Regular charges billed in advance are recognised on a straight-line basis over the billing period, which is the period over which the service is rendered. Outstanding fees are accrued as a receivable in terms of the investment management contract.

Deferred acquisition costs in respect of investment contractsCommissions paid and other incremental acquisition costs are incurred when new investment contracts are obtained or existing investment contracts are renewed. These costs are expensed as incurred, unless specifically attributable to an investment contract with an investment management service element. Such costs are deferred and amortised on a straight-line basis over the expected life of the contract (10 to 16 years for linked annuities and five years for other investment contracts), taking into account all decrements, as they represent the right to receive future management fees.

A DAC asset is recognised for all applicable policies with the amortisation being calculated on a portfolio basis.

Investment incomeInvestment income for investment management and life insurance activities comprises mainly rental income from properties, interest, hotel operations sales and dividends. Dividends are recognised when the right to receive payment is established and interest income is recognised using the effective interest method.

Hotel operation’s sales comprise the fair value of the sale of accommodation, food and beverage, other guest facilities and rentals received. Revenue is shown net of VAT, returns, rebates and discounts.

Management fees on assets under managementFee income includes management fees on assets under management and administration fees. Management fees on assets under management are recognised over the period for which the services are rendered, in accordance with the substance of the relevant agreements.

Administration fees received for the administration of medical schemes are recognised when the services are rendered.

22. Segment reportingAn operating segment is a component of the group engaged in business activities, whose operating results are reviewed regularly by management in order to make decisions about resources to be allocated to segments and assessing segment performance. The group’s identification of segments and the measurement of segment results is based on the group’s internal reporting to the chief operating decision maker.

Transactions between segments are priced at market-related rates.

The group’s segmental results are presented by normalising the group’s IFRS results. The normalised adjustments reflect the group’s view of the economics of its black economic empowerment ownership initiative and the group’s share exposures entered into to facilitate client trading activities and for the benefit of Liberty policyholders that are deemed to be treasury shares. To arrive at the normalised results the IFRS results have been adjusted for the following items:

Preference share funding for the group’s Tutuwa transaction that is deducted from equity and reduces the shares in issue in terms of IFRS

Group shares held for the benefit of Liberty policyholders that result in a reduction of the number of shares in issue and the exclusion of fair value adjustments and dividends on these shares. The IFRS requirement causes an accounting mismatch between income from investments and changes in policyholders’ liabilities

The group’s transactions in its own shares to facilitate client trading activities. As part of the normal trading operations, a group subsidiary offers to its clients trading positions of listed shares, including its own shares. In order to hedge the risk on these shares the subsidiary buys or sells short group shares in the market. Although the share exposure on the group’s own shares is deducted from or added to equity and the related fair value movements are reversed in the income statement on consolidation, the client trading position and fair value movements are not eliminated, resulting in an accounting mismatch.

23. Fiduciary activitiesThe group commonly engages in trust or other fiduciary activities that result in the holding or placing of assets on behalf of individuals, trusts, post-employment benefit plans and other institutions. These assets and the income arising directly thereon are excluded from these annual financial statements as they are not assets of the group. However, fee income earned and fee expenses incurred by the group relating to the group’s responsibilities from fiduciary activities are recognised in profit or loss.

24. Comparative figuresWhere necessary, comparative figures within notes have been restated to either conform to changes in presentation in the current year or for the adoption of new IFRS requirements.

317

New standards and interpretations not yet adoptedThe following new or revised standards, amendments and interpretations are not yet effective for the year ended 31 December 2014 and have not been applied in preparing these annual financial statements.

Pronouncements Title Effective date

IFRS 7 (annual improvements)

Financial Instruments: Disclosures – Servicing ContractsThe amendments relate to when an entity transfers a financial asset, and retains the right to a servicing contract for a fee. The entity determines whether it has continuing involvement as a result of the servicing contract for disclosure purposes. The amendment will be applied retrospectively. The impact on the annual financial statements has not yet been fully determined.

Annual periods beginning on or after 1 January 2016

IFRS 9 Financial Instruments Classification and measurement: Financial assetsThis standard will replace the existing standard on the recognition and measurement of financial instruments and requires all financial assets to be classified and measured on the basis of the entity’s business model for managing the financial assets and the contractual cash flow characteristics of the financial assets.

Classification and measurement: Financial liabilitiesAll changes in the fair value of financial liabilities that are designated at fair value through profit or loss due to changes in own credit risk will be required to be recognised within OCI.

ImpairmentThe standard introduces a new impairment model that will require recognition of expected credit losses. The model will apply to financial assets measured at either amortised cost or fair value through OCI, as well as loan commitments when there is present commitment to extend credit (unless these are measured at fair value through profit or loss).

With the exception of purchased or originated credit impaired financial assets, expected credit losses are required to be measured through a loss allowance at an amount equal to either 12-month expected credit losses or full lifetime expected credit losses.

A loss allowance for full lifetime expected credit losses is required for a financial asset if the credit risk of that financial asset has increased significantly since initial recognition, as well as for certain contract assets or trade receivables. For all other financial assets, expected credit losses are measured at an amount equal to 12-month expected credit losses.

Hedge accountingThe revised general hedge accounting requirements are aligned with an entity’s risk management activities, provide additional opportunities to apply hedge accounting and provide various simplifications in achieving hedge accounting.

The standard will be applied retrospectively. The impact on the annual financial statements has not yet been fully determined.






IFRS 10 and IAS 28 (amendments)

Sale or Contribution of Assets between an Investor and its Associate or Joint VentureThe amendments address an IFRS inconsistency in dealing with the sale or contribution of assets between an investor and its associate or joint venture.

The consequence of the amendments is that a full gain or loss is recognised when a transaction involves a business (whether it is housed in a subsidiary or not). A partial gain or loss is recognised when a transaction involves assets that do not constitute a business, even if these assets are housed in a subsidiary.

The amendments will be applied prospectively and are not expected to have a material impact on the group’s financial statements.


IFRS 11 (amendments) Joint Arrangements: Accounting for Acquisitions of Interests in Joint OperationsThe amendment specifies the accounting treatment for acquisitions of interests in joint operations in which the activities of the joint operation constitute a business.

The amendment will be applied prospectively and is not expected to have a material impact on the group’s financial statements.


IFRS 15 Revenue from Contracts with CustomersThis standard will replace the existing revenue standards and their related interpretations. The standard sets out the requirements for recognising revenue that applies to all contracts with customers (except for contracts that are within the scope of the standards on leases, insurance contracts or financial instruments).

The core principle of the standard is that revenue should reflect the consideration the company expects to be entitled to in exchange for the transfer of promised goods or services to the customer.

The standard will be applied retrospectively. The impact on the annual financial statements has not yet been fully determined.


IAS 16 and IAS 41 (amendments)

Agriculture: Bearer PlantsThe amendments to IAS 16 expand the scope paragraph to include bearer plants, which is to be accounted for in the same way as property, plant and equipment. Consequently, IAS 41 was amended to exclude bearer plants from its scope.

The amendments will be applied retrospectively and are not expected to have a material impact on the group’s financial statements.


319


IAS 19 Defined Benefit Plans: Employee ContributionsIAS 19 requires an entity to consider contributions from employees or third parties when accounting for defined benefit plans where such contributions are linked to service.

The amendment requires contributions that are dependent on the number of years of service, to be attributed to periods of service based on the plan’s contribution formula or on a straight line basis.

The amendment permits contributions that are independent of the number of years of service to be recognised as a reduction in service cost in the period in which the related service is rendered instead of attributing the contributions to the periods of service.

The amendment will be applied retrospectively and is not expected to have a material impact on the group’s financial statements.

Annual periods beginning on or after 1 July 2014

IAS 27 (amendments) Equity Method in Separate Financial StatementsThe amendment permits entities preparing separate financial statements to utilise the equity method to account for investments in subsidiaries, joint ventures and associates.

The amendment will be applied retrospectively. The impact on the company’s annual financial statements has not yet been fully determined.


IAS 1 (amendments) Disclosure initiativeThe amendment clarifies that materiality applies to the financial statements as a whole and that the inclusion of immaterial information can inhibit the usefulness of financial disclosures. The amendment further states that professional judgement should be used in determining where and in what order information is presented in the financial disclosures.

The amendment will be applied retrospectively. The impact on the annual financial statements has not yet been fully determined.


Annual improvements 2010 – 2012 cycle 2011 – 2013 cycle

The IASB has issued various amendments and clarifications to existing IFRS, none of which is expected to have a significant impact on the group’s financial statements.

Various effective dates, the earliest being for the group’s 2015 financial year.



AnnexureE

Emoluments and share incentives of directors and prescribed officers

Executive directors’ and prescribed officers’ emoluments 2014

Fixed remuneration Variable remuneration

Cash portion of

packageR’000

Other benefits

R’000

Pension contributions

R’000

Total fixed

remunerationR’000

Cash bonusR’000

DBS:incremental

payments andnotional

dividends

Deferred bonusR’000

EGSR’000

Totalvariable

compensationfor the year

% change in variable

compensation

Total compensation

for the yearR’000

% changein total

compensation

Black-Scholes value of

conditional awards

forfeitedR’000

Executive directors

BJ Kruger 2014 7 352 199 1 209 8 760 5 2751 994 4 9752 11 244 (46) 20 004 (31) (5 377)

2013 6 559 315 1088 7 962 9 4001 344 11 1002 20 844 28 806 (4 758)

SK Tshabalala 2014 7 378 277 1 248 8 903 7 3371 483 8 0382 15 858 (25) 24 761 (14) (3 587)

2013 6 384 274 990 7 648 9 4001 534 11 1002 21 034 28 682 (2 774)

SP Ridley 2014 5 328 289 692 6 309 5 1501 635 6 8502 12 635 (12) 18 944 (6) (3 048)

2013 4 900 286 624 5 810 6 1501 429 7 8502 14 429 20 239 (2 537)

Prescribed officers

JB Hemphill 2014 5 316 154 662 6 132 8 1501 8 1502 16 300 (26) 22 432 (17) (899)

2013 4 657 160 295 5 112 8 3501 4 1502 9 4003 21 900 27 012 (395)

DC Munro 2014 5 355 254 710 6 319 5 6501 1 587 5 8502 13 087 (58) 19 406 (47) (2 243)

2013 4 596 200 641 5 437 15 1501 1 167 14 8502 31 167 36 604 (1 585)

PL Schlebusch 2014 5 342 206 709 6 257 8 6501 806 8 6502 18 106 (15) 24 363 (9)

2013 4 476 199 595 5 270 10 1501 392 10 8502 21 392 26 662

Former executive directors*

JH Maree4 2013 1 119 90 185 1 394 790 658 1 448 2 842 (9 919)

PG Wharton-Hood5 2013 4 558 225 767 5 550 551 551 6 101

1 In order to align incentive payments with the performance period to which they relate, the above variable remuneration relates to the year under review irrespective of when payment is made.

2 The DBS (2012), described on page 295, is an equity-settled share scheme. The final value of the award is dependent on the performance of the group's share price. The deferred award is issued in the following financial year. The deferred award in the table above is the total award relating to the respective performance year. Deferred bonus amounts awarded for the 2013 and 2014 performance years are subject to choice. Participants can elect to have the value of the deferred award, or a part thereof, invested in the EGS rather than the default DBS (2012). To the extent that EGS is selected, a 10% premium of the value of the award is added. Deferred bonus amounts not invested in EGS will be unitised with respect to the group’s closing share price on the date on which the group’s year end financial results are communicated publically. The elections and the number of units have, for the 2013 performance year, been included in the table commencing on page 324, with the elections relating to the 2014 performance year to be disclosed in the group’s 2015 annual financial statements.

3 Awards were made in terms of the Liberty Holdings Group Restricted Share Plan. Refer to page 325.4 Resigned as executive director on 7 March 2013.5 Resigned as executive director from the board on 14 August 2013.* All executive directors were also prescribed officers of the group for 2013 and 2014, and former executive directors until the date of their resignation.

321

Executive directors’ and prescribed officers’ emoluments 2014

Fixed remuneration Variable remuneration

Cash portion of

packageR’000

Other benefits

R’000

Pension contributions

R’000

Total fixed

remunerationR’000

Cash bonusR’000

DBS:incremental

payments andnotional

dividends

Deferred bonusR’000

EGSR’000

Totalvariable

compensationfor the year

% change in variable

compensation

Total compensation

for the yearR’000

% changein total

compensation

Black-Scholes value of

conditional awards

forfeitedR’000

Executive directors

BJ Kruger 2014 7 352 199 1 209 8 760 5 2751 994 4 9752 11 244 (46) 20 004 (31) (5 377)

2013 6 559 315 1088 7 962 9 4001 344 11 1002 20 844 28 806 (4 758)

SK Tshabalala 2014 7 378 277 1 248 8 903 7 3371 483 8 0382 15 858 (25) 24 761 (14) (3 587)

2013 6 384 274 990 7 648 9 4001 534 11 1002 21 034 28 682 (2 774)

SP Ridley 2014 5 328 289 692 6 309 5 1501 635 6 8502 12 635 (12) 18 944 (6) (3 048)

2013 4 900 286 624 5 810 6 1501 429 7 8502 14 429 20 239 (2 537)

Prescribed officers

JB Hemphill 2014 5 316 154 662 6 132 8 1501 8 1502 16 300 (26) 22 432 (17) (899)

2013 4 657 160 295 5 112 8 3501 4 1502 9 4003 21 900 27 012 (395)

DC Munro 2014 5 355 254 710 6 319 5 6501 1 587 5 8502 13 087 (58) 19 406 (47) (2 243)

2013 4 596 200 641 5 437 15 1501 1 167 14 8502 31 167 36 604 (1 585)

PL Schlebusch 2014 5 342 206 709 6 257 8 6501 806 8 6502 18 106 (15) 24 363 (9)

2013 4 476 199 595 5 270 10 1501 392 10 8502 21 392 26 662

Former executive directors*

JH Maree4 2013 1 119 90 185 1 394 790 658 1 448 2 842 (9 919)

PG Wharton-Hood5 2013 4 558 225 767 5 550 551 551 6 101

1 In order to align incentive payments with the performance period to which they relate, the above variable remuneration relates to the year under review irrespective of when payment is made.

2 The DBS (2012), described on page 295, is an equity-settled share scheme. The final value of the award is dependent on the performance of the group's share price. The deferred award is issued in the following financial year. The deferred award in the table above is the total award relating to the respective performance year. Deferred bonus amounts awarded for the 2013 and 2014 performance years are subject to choice. Participants can elect to have the value of the deferred award, or a part thereof, invested in the EGS rather than the default DBS (2012). To the extent that EGS is selected, a 10% premium of the value of the award is added. Deferred bonus amounts not invested in EGS will be unitised with respect to the group’s closing share price on the date on which the group’s year end financial results are communicated publically. The elections and the number of units have, for the 2013 performance year, been included in the table commencing on page 324, with the elections relating to the 2014 performance year to be disclosed in the group’s 2015 annual financial statements.

3 Awards were made in terms of the Liberty Holdings Group Restricted Share Plan. Refer to page 325.4 Resigned as executive director on 7 March 2013.5 Resigned as executive director from the board on 14 August 2013.* All executive directors were also prescribed officers of the group for 2013 and 2014, and former executive directors until the date of their resignation.



Annexure E | Emoluments and share incentives of directors and prescribed officers continued

Non-executive directors’ and prescribed officers’ emoluments 2014

Fixed remuneration

Services as directors of

Standard BankGroupR’000

Standard Bank Group Committee

feesR’000


group subsidiaries

R’000

Other benefits

R’000

Totalcompensation

for the yearR’000

Non-executive directors

MJD Ruck 2014 220 829 1 805 2 854

2013 204 576 1 401 2 181

Adv KD Moroka 2014 220 251 220 691

2013 204 52 204 460

TS Gcabashe 2014 220 378 264 862

2013 204 318 243 765

Lord Smith of Kelvin, KT 2014 811 258 811 1 880

2013 669 230 669 1 568

EM Woods 2014 220 1 044 242 1 506

2013 204 775 282 1 261

TMF Phaswana 2014 5 320 3011 5 621

2013 4 750 3521 5 102

RMW Dunne 2014 220 1 133 285 1 638

2013 204 806 204 1 214

PD Sullivan 2014 811 857 2 237 3 905

2013 643 378 662 1 683

W Wang 2014 211 305 516

2013

BS Tshabalala 2014 176 153 176 505

2013

FA du Plessis 2014 176 213 176 565

2013

AC Parker 2014 176 165 307 648

2013

ANA Peterside con 2014 291 291 582

2013

S Gu 2014 49 30 79

2013

Total 2014 9 121 5 616 6 814 301 21 852

Total 2013 7 082 3 135 3 665 352 14 234

1 Use of motor vehicle.

323

Non-executive directors’ and prescribed officers’ emoluments 2014 continued

Fixed remuneration


Standard BankGroupR’000

Standard Bank Group Committee

feesR’000


group subsidiaries

R’000

Other benefits

R’000

Totalcompensation

for the yearR’000

Former non-executive directors

DDB Band1 2014 91 333 221 645

2013 204 442 379 1 025

AC Nissen1 2014 91 42 90 223

2013 204 91 204 499

K Kalyan2 2014 39 18 39 96

2013 204 91 204 499

Dr Y Liu3 2014 34 34

2013 669 176 845

S Macozoma4 2014 220 842 2 552 3 614

2013 204 626 2 462 3 292

MC Ramaphosa5 2014

2013 85 37 84 206

HL Zhang3 2014 34 15 49

2013 669 318 987

K Yang6 2014 731 396 1 127

2013

Total 2014 1 240 1 646 2 902 5 788

Total 2013 2 239 1 781 3 333 7 353

1 Retired on 29 May 2014.2 Resigned on 03 March 2014.3 Resigned on 16 January 2014.4 Resigned on 31 December 2014.5 Retired on 30 May 2013. 6 Resigned on 10 December 2014.




Share incentives Group share incentive schemeThe GSIS confers rights to employees to acquire ordinary shares at the value of the SBG share price at the date the option is granted.

Standard Bank/Liberty Holdings equity growth schemeThe EGS allocates participation rights to participate in the future growth of the SBG share price. The eventual value of the right is settled by the receipt of SBG shares equivalent to the full value of the participation rights.

Standard Bank/Liberty Holdings Limited deferred bonus schemeEmployees who are awarded a short-term incentive over a certain threshold are subject to a mandatory deferral of a percentage of their incentive into the DBS. The final payment is calculated with reference to the number of units multiplied by the SBG share price at that date.

Deferred bonus scheme (2012)Employees are awarded a deferred bonus, as a mandatory deferral of their short-term incentive or as discretionary award, into the DBS (2012). The deferred bonus is unitised into a number of units with respect to the group's share price on the date of award. The shares are delivered to the employee on the vesting date. Notional dividends on the units are paid to the employees on the vesting date.

Director’s name

Opening balance

1 January

Number of share

incentives allocated

Issue oroffer date

Number of participation

rights forfeited

for theperformance

year

Black-Scholesvalue of

participationrights

forfeited(R)

Number of share

incentives exercised

or accepted during

the year

Issue price (R)/

resultant shares

Difference between issue

price and closing

price on date of

delivery(R)

Balance of share

incentives 31 December

Number of share

incentives as at

31 December 2014

Issuedate

Issue oroffer price

(R)Vesting

categoryExpiry

date

SK Tshabalala2 GSIS

2014 25 000 (25 000) 2 125 000

2013 25 000 25 000

EGS

2014 1 265 164 (68 750) (3 587 451) 1 196 414 50 000 2005/03/10 65,60 B 2015/03/10

2013 1 019 305 302 109 2013/03/07 (56 250) (2 774 438) 115,51 1 265 164 22 500 2006/03/10 79,50 A 2016/03/10

22 500 2006/03/10 79,50 B 2016/03/1025 000 2007/03/07 98,00 A 2017/03/0725 000 2007/03/07 98,00 B 2017/03/07

100 000 2008/03/06 92,00 B 2018/03/0612 5001 2008/03/06 92,00 B 2018/03/0637 5001 2009/03/06 62,39 B 2019/03/0662 5001 2010/03/05 111,94 A 2020/03/0562 5001 2010/03/05 111,94 B 2020/03/05

100 0001 2011/03/04 98,80 A 2021/03/04

100 0001 2011/03/04 98,80 B 2021/03/0461 4711 2012/03/08 108,90 A 2022/03/08

212 834 2012/03/08 108,90 D 2022/03/0870 7421 2013/03/07 115,51 E 2023/03/07

231 367 2013/03/07 115,51 D 2023/03/07

PRP

20153 67 200 2015/03/05

2014 98 500 2014/03/06 126,87 98 500 98 500 2014/03/06 126,87 2017/03/31

Refer to page 330 for the footnotes.

325

Director’s name

Opening balance

1 January

Number of share


Issue oroffer date


rights forfeited

for theperformance

year


participationrights

forfeited(R)

Number of share


or accepted during

the year

Issue price (R)/

resultant shares


price and closing

price on date of

delivery(R)

Balance of share


Number of share

incentives as at

31 December 2014

Issuedate

Issue oroffer price

(R)Vesting

categoryExpiry

date

SK Tshabalala2 GSIS

2014 25 000 (25 000) 2 125 000

2013 25 000 25 000

EGS

2014 1 265 164 (68 750) (3 587 451) 1 196 414 50 000 2005/03/10 65,60 B 2015/03/10

2013 1 019 305 302 109 2013/03/07 (56 250) (2 774 438) 115,51 1 265 164 22 500 2006/03/10 79,50 A 2016/03/10

22 500 2006/03/10 79,50 B 2016/03/1025 000 2007/03/07 98,00 A 2017/03/0725 000 2007/03/07 98,00 B 2017/03/07

100 000 2008/03/06 92,00 B 2018/03/0612 5001 2008/03/06 92,00 B 2018/03/0637 5001 2009/03/06 62,39 B 2019/03/0662 5001 2010/03/05 111,94 A 2020/03/0562 5001 2010/03/05 111,94 B 2020/03/05

100 0001 2011/03/04 98,80 A 2021/03/04

100 0001 2011/03/04 98,80 B 2021/03/0461 4711 2012/03/08 108,90 A 2022/03/08

212 834 2012/03/08 108,90 D 2022/03/0870 7421 2013/03/07 115,51 E 2023/03/07

231 367 2013/03/07 115,51 D 2023/03/07

PRP

20153 67 200 2015/03/05

2014 98 500 2014/03/06 126,87 98 500 98 500 2014/03/06 126,87 2017/03/31


Liberty Holdings Group Restricted Share Plan (long-term plan) Awards are made to selected executives in the format of fully paid up shares in Liberty Holdings Limited which are held in trust subject to vesting conditions (service and performance), and will be forfeited if these conditions are not met during the performance measurement period.

Liberty Holdings group restructured share plan (deferred plan)Annual short-term incentive performance bonus payments in excess of thresholds determined annually by Liberty’s remuneration committee are subject to mandatory deferral. This is achieved by investing the deferred portions of the short-term incentive awards into Liberty Holdings Limited shares, which are held in a trust, subject to vesting conditions.

Performance reward plan The group's PRP is an equity-settled share scheme with a three-year vesting period which is in effect from March 2014, designed to incentivise the group's senior executives, whose roles enable them to contribute to and influence the group's long-term decision-making and performance results. The PRP seeks to promote the achievement of the group's strategic long-term objectives and to align the interests of those executives with overall group performance in both earnings growth and ROE. These are the most important financial metrics to create shareholder value and, therefore aligns the interests of management and shareholders. The awards are subject to the achievement of performance conditions set at award date and that determine the number of shares that ultimately vest. The awards will only vest in future in terms of the rules of the PRP. The shares, subject to meeting the pre-specified conditions, are delivered to the employee on vesting date. Notional dividends accrue during the vesting period and will be payable on vesting date.




Share incentives continued

Director’s name

Opening balance

1 January

Number of share


Issue oroffer date


rights forfeited

for theperformance

year


participationrights

forfeited(R)

Number of share


or accepted during

the year

Issue price (R)/

resultant shares


price and closing

price on date of

delivery(R)

Balance of share


Number of share

incentives as at

31 December 2014

Issuedate

Issue oroffer price

(R)Vesting

categoryExpiry

date

BJ Kruger EGS

2014 1 143 065 316 322 2014/03/06 (100 000) (5 377 019) (150 000) 29 544 4 852 500 909 387 25 0001 2008/03/06 92,00 B 2018/03/06

(300 000) 93 056 15 255 000 50 0001 2009/03/06 62,39 B 2019/03/06

2013 1 186 471 56 594 2013/03/07 (100 000) (4 758 250) 1 143 065 100 0001 2010/03/05 111,94 A 2020/03/05

100 0001 2010/03/05 111,94 B 2020/03/05

100 0001 2011/03/04 98,80 A 2021/03/04

100 0001 2011/03/04 98,80 B 2021/03/04

61 4711 2012/03/08 108,90 A 2022/03/08

56 5941 2013/03/07 115,51 E 2023/03/07

316 322 2014/03/06 126,87 D 2024/03/06

PRP

20153 67 200 2015/03/05

2014 98 500 2014/03/06 126,87 98 500 98 500 2014/03/06 126,87 2017/03/31

SP Ridley EGS

2014 584 328 (57 500) (3 048 086) (50 000) 12 864 2 239 500 476 828 25 000 2006/03/10 79,50 B 2016/03/10

2013 669 383 42 445 2013/03/07 (52 500) (2 537 250) (75 000) 20 358 2 962 500 584 32815 000 2007/03/07 98,00 A 2017/03/07

15 000 2007/03/07 98,00 B 2017/03/07

12 5001 2008/03/06 92,00 B 2018/03/06

30 0001 2009/03/06 62,39 B 2019/03/06

100 0001 2010/03/05 111,94 A 2020/03/05

100 0001 2011/03/04 98,80 A 2021/03/04

100 0001 2011/03/04 98,80 B 2021/03/04

36 8831 2012/03/08 108,90 A 2022/03/08

42 4451 2013/03/07 115,51 E 2023/03/07

PRP

20153 53 700 2015/03/05

2014 63 100 2014/03/06 126,87 63 100 63 100 2014/03/06 126,87 2017/03/31


327


Director’s name

Opening balance

1 January

Number of share


Issue oroffer date


rights forfeited

for theperformance

year


participationrights

forfeited(R)

Number of share


or accepted during

the year

Issue price (R)/

resultant shares


price and closing

price on date of

delivery(R)

Balance of share


Number of share

incentives as at

31 December 2014

Issuedate

Issue oroffer price

(R)Vesting

categoryExpiry

date

BJ Kruger EGS

2014 1 143 065 316 322 2014/03/06 (100 000) (5 377 019) (150 000) 29 544 4 852 500 909 387 25 0001 2008/03/06 92,00 B 2018/03/06

(300 000) 93 056 15 255 000 50 0001 2009/03/06 62,39 B 2019/03/06

2013 1 186 471 56 594 2013/03/07 (100 000) (4 758 250) 1 143 065 100 0001 2010/03/05 111,94 A 2020/03/05

100 0001 2010/03/05 111,94 B 2020/03/05

100 0001 2011/03/04 98,80 A 2021/03/04

100 0001 2011/03/04 98,80 B 2021/03/04

61 4711 2012/03/08 108,90 A 2022/03/08

56 5941 2013/03/07 115,51 E 2023/03/07

316 322 2014/03/06 126,87 D 2024/03/06

PRP

20153 67 200 2015/03/05

2014 98 500 2014/03/06 126,87 98 500 98 500 2014/03/06 126,87 2017/03/31

SP Ridley EGS

2014 584 328 (57 500) (3 048 086) (50 000) 12 864 2 239 500 476 828 25 000 2006/03/10 79,50 B 2016/03/10

2013 669 383 42 445 2013/03/07 (52 500) (2 537 250) (75 000) 20 358 2 962 500 584 32815 000 2007/03/07 98,00 A 2017/03/07

15 000 2007/03/07 98,00 B 2017/03/07

12 5001 2008/03/06 92,00 B 2018/03/06

30 0001 2009/03/06 62,39 B 2019/03/06

100 0001 2010/03/05 111,94 A 2020/03/05

100 0001 2011/03/04 98,80 A 2021/03/04

100 0001 2011/03/04 98,80 B 2021/03/04

36 8831 2012/03/08 108,90 A 2022/03/08

42 4451 2013/03/07 115,51 E 2023/03/07

PRP

20153 53 700 2015/03/05

2014 63 100 2014/03/06 126,87 63 100 63 100 2014/03/06 126,87 2017/03/31






Director’s name

Opening balance

1 January

Number of share


Issue oroffer date


rights forfeited

for theperformance

year


participationrights

forfeited(R)

Number of share


or accepted during

the year

Issue price (R)/

resultant shares


price and closing

price on date of

delivery(R)

Balance of share


Number of share

incentives as at

31 December 2014

Issuedate

Issue oroffer price

(R)Vesting

categoryExpiry

date

JB Hemphill

EGS (SBG)

2014 231 250 (18 750) (898 941) (6 250) 1 273 238 625 125 000 12 5001 2009/03/06 62,39 B 2019/03/06

(25 000) 10 299 1 915 750 18 7501 2010/03/05 111,94 A 2020/03/05(56 250) 9 193 1 408 500 75 0001 2010/03/05 111,94 B 2020/03/05

2013 237 500 (6 250) (395 312) 231 250 6 2501 2011/03/04 98,80 A 2021/03/04 12 5001 2011/03/04 98,80 B 2021/03/04

EGS (Liberty Holdings)

2014 720 000 (40 000) 20 416 2 932 000 100 000 60 000 2010/02/23 69,00 2020/02/23 (60 000) 24 793 3 265 200 40 000 2011/02/24 74,70 2013/02/24 (120 000) 46 137 6 174 000 (80 000) 32 021 4 679 200 (100 000) 39 346 6 655 000 (180 000) 59 272 11 286 000 (40 000) 11 809 2 280 000

2013 720 000 720 000

Phantom EGS

2014 4 877 (4 877) 283 305

2013 4 877 4 877

PRP

20153 67 200 2015/03/05

2014 78 800 2014/03/06 126,87 78 800 78 800 2014/03/06 126,87 2017/03/31

DC Munro EGS

2014 865 661 105 797 2014/03/06 (43 750) (2 243 196) 126,87 927 708 50 000 2005/03/10 65,60 B 2015/03/10

2013 765 221 131 690 2013/03/07 (31 250) (1 584 875) 115,51 865 661 250 000 2006/03/10 79,50 B 2016/03/10

23 750 2007/03/07 98,00 A 2017/03/0723 750 2007/03/07 98,00 B 2017/03/07

6 2501 2008/03/06 92,00 B 2018/03/0650 000 2008/03/06 92,00 B 2018/03/0625 0001 2009/03/06 62,39 B 2019/03/0650 000 2010/03/05 111,94 A 2020/03/0550 000 2010/03/05 111,94 B 2020/03/0550 0001 2011/03/04 98,80 A 2021/03/0450 0001 2011/03/04 98,80 B 2021/03/0461 4711 2012/03/08 108,90 A 2022/03/0860 948 2013/03/07 115,51 D 2023/03/0770 7421 2013/03/07 115,51 E 2023/03/07

105 797 2014/03/06 126,87 D 2024/03/06

PRP

20153 94 000 2015/03/05

2014 78 800 2014/03/06 126,87 78 800 78 800 2014/03/06 126,87 2017/03/31


329


Director’s name

Opening balance

1 January

Number of share


Issue oroffer date


rights forfeited

for theperformance

year


participationrights

forfeited(R)

Number of share


or accepted during

the year

Issue price (R)/

resultant shares


price and closing

price on date of

delivery(R)

Balance of share


Number of share

incentives as at

31 December 2014

Issuedate

Issue oroffer price

(R)Vesting

categoryExpiry

date

JB Hemphill

EGS (SBG)

2014 231 250 (18 750) (898 941) (6 250) 1 273 238 625 125 000 12 5001 2009/03/06 62,39 B 2019/03/06

(25 000) 10 299 1 915 750 18 7501 2010/03/05 111,94 A 2020/03/05(56 250) 9 193 1 408 500 75 0001 2010/03/05 111,94 B 2020/03/05

2013 237 500 (6 250) (395 312) 231 250 6 2501 2011/03/04 98,80 A 2021/03/04 12 5001 2011/03/04 98,80 B 2021/03/04

EGS (Liberty Holdings)

2014 720 000 (40 000) 20 416 2 932 000 100 000 60 000 2010/02/23 69,00 2020/02/23 (60 000) 24 793 3 265 200 40 000 2011/02/24 74,70 2013/02/24 (120 000) 46 137 6 174 000 (80 000) 32 021 4 679 200 (100 000) 39 346 6 655 000 (180 000) 59 272 11 286 000 (40 000) 11 809 2 280 000

2013 720 000 720 000

Phantom EGS

2014 4 877 (4 877) 283 305

2013 4 877 4 877

PRP

20153 67 200 2015/03/05

2014 78 800 2014/03/06 126,87 78 800 78 800 2014/03/06 126,87 2017/03/31

DC Munro EGS

2014 865 661 105 797 2014/03/06 (43 750) (2 243 196) 126,87 927 708 50 000 2005/03/10 65,60 B 2015/03/10

2013 765 221 131 690 2013/03/07 (31 250) (1 584 875) 115,51 865 661 250 000 2006/03/10 79,50 B 2016/03/10

23 750 2007/03/07 98,00 A 2017/03/0723 750 2007/03/07 98,00 B 2017/03/07

6 2501 2008/03/06 92,00 B 2018/03/0650 000 2008/03/06 92,00 B 2018/03/0625 0001 2009/03/06 62,39 B 2019/03/0650 000 2010/03/05 111,94 A 2020/03/0550 000 2010/03/05 111,94 B 2020/03/0550 0001 2011/03/04 98,80 A 2021/03/0450 0001 2011/03/04 98,80 B 2021/03/0461 4711 2012/03/08 108,90 A 2022/03/0860 948 2013/03/07 115,51 D 2023/03/0770 7421 2013/03/07 115,51 E 2023/03/07

105 797 2014/03/06 126,87 D 2024/03/06

PRP

20153 94 000 2015/03/05

2014 78 800 2014/03/06 126,87 78 800 78 800 2014/03/06 126,87 2017/03/31






Director’s name

Opening balance

1 January

Number of share


Issue oroffer date


rights forfeited

for theperformance

year


participationrights

forfeited(R)

Number of share


or accepted during

the year

Issue price (R)/

resultant shares


price and closing

price on date of

delivery(R)

Balance of share


Number of share

incentives as at

31 December 2014

Issuedate

Issue oroffer price

(R)Vesting

categoryExpiry

date

PL Schlebusch EGS

2014 467 852 (37 500) 14 129 2 910 375 430 352 20 000 2007/03/07 98,00 A 2017/03/07

2013 411 258 56 594 2013/03/07 115,51 467 852 20 000 2007/03/07 98,00 B 2017/03/07

9 375 2008/03/06 92,00 A 2018/03/06

37 500 2008/03/06 92,00 B 2018/03/06

25 000 2008/03/06 92,00 B 2018/03/06

25 000 2009/03/06 62,39 B 2019/03/06

50 000 2010/03/05 111,94 A 2020/03/05

50 000 2010/03/05 111,94 B 2020/03/05

50 0001 2011/03/04 98,80 A 2021/03/04

50 0001 2011/03/04 98,80 B 2021/03/04

36 8831 2012/03/08 108,90 A 2022/03/08

56 5941 2013/03/07 115,51 E 2023/03/07

PRP

20153 67 200 2015/03/05

2014 78 800 2014/03/06 126,87 78 800 78 800 2014/03/06 126,87 2017/03/31

1 Conditional awards.2 As at 31 December 2014, SK Tshabalala has a right to 698 339 (2013: 698 339) shares as a beneficiary of the Tutuwa Manager's Trusts. At 31 December 2014, the debt per share

was R52,39 (2013: R48,21). Rights are subject to settlement of funding and transaction costs. Subsequent to 31 December 2014, SK Tshabalala disposed of 279 525 shares in order to settle employees' tax and associated funding and transaction costs arising on the lifting of the final restrictions imposed in terms of the group’s black economic empowerment initiative (Tutuwa). Pre-approval for this transaction was obtained from the JSE.

3 PRP units allocated in 2015 have been determined using the closing SBG share price of R148,90 on 4 March 2015. The actual number of PRP units will, in terms of the scheme’s rules, be determined with reference to the closing SBG share price on 5 March 2015. The actual number of units will be updated in the group’s 2015 annual financial statements.

331


Director’s name

Opening balance

1 January

Number of share


Issue oroffer date


rights forfeited

for theperformance

year


participationrights

forfeited(R)

Number of share


or accepted during

the year

Issue price (R)/

resultant shares


price and closing

price on date of

delivery(R)

Balance of share


Number of share

incentives as at

31 December 2014

Issuedate

Issue oroffer price

(R)Vesting

categoryExpiry

date

PL Schlebusch EGS

2014 467 852 (37 500) 14 129 2 910 375 430 352 20 000 2007/03/07 98,00 A 2017/03/07

2013 411 258 56 594 2013/03/07 115,51 467 852 20 000 2007/03/07 98,00 B 2017/03/07

9 375 2008/03/06 92,00 A 2018/03/06

37 500 2008/03/06 92,00 B 2018/03/06

25 000 2008/03/06 92,00 B 2018/03/06

25 000 2009/03/06 62,39 B 2019/03/06

50 000 2010/03/05 111,94 A 2020/03/05

50 000 2010/03/05 111,94 B 2020/03/05

50 0001 2011/03/04 98,80 A 2021/03/04

50 0001 2011/03/04 98,80 B 2021/03/04

36 8831 2012/03/08 108,90 A 2022/03/08

56 5941 2013/03/07 115,51 E 2023/03/07

PRP

20153 67 200 2015/03/05

2014 78 800 2014/03/06 126,87 78 800 78 800 2014/03/06 126,87 2017/03/31

1 Conditional awards.2 As at 31 December 2014, SK Tshabalala has a right to 698 339 (2013: 698 339) shares as a beneficiary of the Tutuwa Manager's Trusts. At 31 December 2014, the debt per share

was R52,39 (2013: R48,21). Rights are subject to settlement of funding and transaction costs. Subsequent to 31 December 2014, SK Tshabalala disposed of 279 525 shares in order to settle employees' tax and associated funding and transaction costs arising on the lifting of the final restrictions imposed in terms of the group’s black economic empowerment initiative (Tutuwa). Pre-approval for this transaction was obtained from the JSE.

3 PRP units allocated in 2015 have been determined using the closing SBG share price of R148,90 on 4 March 2015. The actual number of PRP units will, in terms of the scheme’s rules, be determined with reference to the closing SBG share price on 5 March 2015. The actual number of units will be updated in the group’s 2015 annual financial statements.




Deferred bonus schemeThe table below reflects bonus awards for the 2014 and prior financial years. The awards will only vest in future in terms of the rules of the DBS (2012). The deferred bonus awards for the 2014 performance year are only issued in the 2015 financial year.

Performanceyear

Issuedate

Amountdeferred

(R)

Award price

(R)Units

awardedExpiry date/final

vesting date

Balance of units

1 January

Number of unitsexercised during

the year

Shareprice

(R)

Value of unitsexercised

(R)

Balanceof units

31 December

SK Tshabalala 2009 2010/03/051 1 930 000 111,94 17 241 2014/11/30 10 344 10 344 140,10 1 449 194 2013 2014/03/062 11 100 000 126,87 87 492 2017/09/30 87 4922014 2015/03/054 8 037 500 2018/09/30

BJ Kruger3 2009 2010/03/051 1 075 000 111,94 9 603 2014/11/30 5 761 5 761 139,00 800 779 2010 2011/03/041 2 310 000 98,80 23 381 2015/11/30 23 381 9 353 139,00 1 300 067#

14 028 139,00 1 949 892 2011 2012/03/082 9 762 558 108,90 89 647 2015/09/30 59 765 29 882 131,23 3 921 415 29 8832012 2013/03/072 5 100 000 115,51 44 153 2016/09/30 44 153 14 717 131,23 1 931 312 29 4362014 2015/03/054 4 975 000 2018/09/30

SP Ridley 2009 2010/03/051 817 500 111,94 7 303 2014/11/30 4 381 4 381 138,10 605 016 2010 2011/03/041 552 875 98,80 5 596 2015/11/30 5 596 2 239 139,00 311 221# 3 3572011 2012/03/082 5 600 074 108,90 51 424 2015/09/30 34 283 17 141 131,23 2 249 413 17 1422012 2013/03/072 4 700 000 115,51 40 690 2016/09/30 40 690 13 563 131,23 1 779 872 27 1272013 2014/03/062 7 850 000 126,87 61 875 2017/09/30 61 8752014 2015/03/054 6 850 000 2018/09/30

JB Hemphill 2010 2011/02/255 1 150 000 74,70 15 395 2015/11/30 15 395 6 158 125,47 772 644# 9 237 131,90 1 218 360

2011 2012/03/016 2 714 000 87,90 30 874 2015/09/01 20 584 10 292 130,58 1 343 929 10 2922011 2012/03/017 6 000 000 87,90 68 260 2016/03/01 68 260 22 753 122,58 45 5072012 2013/03/016 3 850 000 121,02 31 813 2016/09/01 31 813 10 604 130,58 1 384 670 21 2092012 2013/03/017 7 000 000 121,02 57 842 2017/03/01 57 842 57 8422013 2014/03/016 4 150 000 123,39 33 634 2017/09/01 33 6342013 2014/03/017 9 400 000 123,39 76 182 2018/03/01 76 1822014 2015/03/054 8 150 000 2018/09/30

DC Munro3 2009 2010/03/051 2 936 500 111,94 26 233 2014/11/30 15 739 15 739 138,10 2 173 556 2010 2011/03/041 3 850 000 98,80 38 968 2015/11/30 38 968 15 588 139,00 2 166 732# 23 3802011 2012/03/082 10 334 000 108,90 94 895 2015/09/30 63 264 31 631 131,23 4 150 936 31 6332012 2013/03/072 5 887 500 115,51 50 970 2016/09/30 50 970 16 990 131,23 2 229 598 33 9802013 2014/03/06 11 137 500 126,87 87 787 2017/09/30 87 7872014 2015/03/054 5 850 000 2018/09/30

PL Schlebusch 2009 2010/03/051 990 000 111,94 8 844 2014/11/30 5 306 5 306 139,00 737 534 2010 2011/03/041 1 962 000 98,80 19 858 2015/11/30 19 858 7 944 139,00 1 104 216# 11 9142011 2012/03/082 5 850 000 108,90 53 720 2015/09/30 35 814 17 906 131,23 2 349 804 17 9082012 2013/03/072 6 225 000 115,51 53 892 2016/09/30 53 892 17 964 131,23 2 357 416 35 9282013 2014/03/062 10 850 000 126,87 85 521 2017/09/30 85 5212014 2015/03/054 8 650 000 2018/09/30

1 Units are granted in DBS and vest after three years from date of award. 2 Units are granted in DBS (2012) and vest in three equal tranches at 18, 30 and 42 months from date of award.3 BJ Kruger and DC Munro elected to have the value of their 2013 performance year award or part thereof (as applicable), invested in the EGS rather than the default DBS. Regarding

the 2014 performance year, DBS has accordingly been updated.4 Deferred bonus amounts awarded in March 2015 are still subject to choice. Participants can elect to have the value of the deferred award, or a part thereof, invested in the EGS

rather than the default DBS. To the extent that EGS is selected, a 10% premium of the value of the award is added. Deferred bonus amounts not invested in EGS will be unitised with respect to the group's closing share price on 5 March 2015. This award will be updated in the group's 2015 annual financial statements to reflect the choices made and units/rights awarded.

5 Units are granted in Liberty Holdings DBS and vest after three years from date of award.6 Units are granted in Liberty Holdings DBS and vest in three equal tranches at 18, 30 and 42 months from date of award.7 Units are granted in Liberty Holdings LTIP and vest in three equal tranches at 2, 3 and 4 years from date of award.# The units were exercised to settle taxes due on vesting date.

333

Deferred bonus schemeThe table below reflects bonus awards for the 2014 and prior financial years. The awards will only vest in future in terms of the rules of the DBS (2012). The deferred bonus awards for the 2014 performance year are only issued in the 2015 financial year.

Performanceyear

Issuedate

Amountdeferred

(R)

Award price

(R)Units

awardedExpiry date/final

vesting date

Balance of units

1 January

Number of unitsexercised during

the year

Shareprice

(R)

Value of unitsexercised

(R)

Balanceof units

31 December

SK Tshabalala 2009 2010/03/051 1 930 000 111,94 17 241 2014/11/30 10 344 10 344 140,10 1 449 194 2013 2014/03/062 11 100 000 126,87 87 492 2017/09/30 87 4922014 2015/03/054 8 037 500 2018/09/30

BJ Kruger3 2009 2010/03/051 1 075 000 111,94 9 603 2014/11/30 5 761 5 761 139,00 800 779 2010 2011/03/041 2 310 000 98,80 23 381 2015/11/30 23 381 9 353 139,00 1 300 067#

14 028 139,00 1 949 892 2011 2012/03/082 9 762 558 108,90 89 647 2015/09/30 59 765 29 882 131,23 3 921 415 29 8832012 2013/03/072 5 100 000 115,51 44 153 2016/09/30 44 153 14 717 131,23 1 931 312 29 4362014 2015/03/054 4 975 000 2018/09/30

SP Ridley 2009 2010/03/051 817 500 111,94 7 303 2014/11/30 4 381 4 381 138,10 605 016 2010 2011/03/041 552 875 98,80 5 596 2015/11/30 5 596 2 239 139,00 311 221# 3 3572011 2012/03/082 5 600 074 108,90 51 424 2015/09/30 34 283 17 141 131,23 2 249 413 17 1422012 2013/03/072 4 700 000 115,51 40 690 2016/09/30 40 690 13 563 131,23 1 779 872 27 1272013 2014/03/062 7 850 000 126,87 61 875 2017/09/30 61 8752014 2015/03/054 6 850 000 2018/09/30

JB Hemphill 2010 2011/02/255 1 150 000 74,70 15 395 2015/11/30 15 395 6 158 125,47 772 644# 9 237 131,90 1 218 360

2011 2012/03/016 2 714 000 87,90 30 874 2015/09/01 20 584 10 292 130,58 1 343 929 10 2922011 2012/03/017 6 000 000 87,90 68 260 2016/03/01 68 260 22 753 122,58 45 5072012 2013/03/016 3 850 000 121,02 31 813 2016/09/01 31 813 10 604 130,58 1 384 670 21 2092012 2013/03/017 7 000 000 121,02 57 842 2017/03/01 57 842 57 8422013 2014/03/016 4 150 000 123,39 33 634 2017/09/01 33 6342013 2014/03/017 9 400 000 123,39 76 182 2018/03/01 76 1822014 2015/03/054 8 150 000 2018/09/30

DC Munro3 2009 2010/03/051 2 936 500 111,94 26 233 2014/11/30 15 739 15 739 138,10 2 173 556 2010 2011/03/041 3 850 000 98,80 38 968 2015/11/30 38 968 15 588 139,00 2 166 732# 23 3802011 2012/03/082 10 334 000 108,90 94 895 2015/09/30 63 264 31 631 131,23 4 150 936 31 6332012 2013/03/072 5 887 500 115,51 50 970 2016/09/30 50 970 16 990 131,23 2 229 598 33 9802013 2014/03/06 11 137 500 126,87 87 787 2017/09/30 87 7872014 2015/03/054 5 850 000 2018/09/30

PL Schlebusch 2009 2010/03/051 990 000 111,94 8 844 2014/11/30 5 306 5 306 139,00 737 534 2010 2011/03/041 1 962 000 98,80 19 858 2015/11/30 19 858 7 944 139,00 1 104 216# 11 9142011 2012/03/082 5 850 000 108,90 53 720 2015/09/30 35 814 17 906 131,23 2 349 804 17 9082012 2013/03/072 6 225 000 115,51 53 892 2016/09/30 53 892 17 964 131,23 2 357 416 35 9282013 2014/03/062 10 850 000 126,87 85 521 2017/09/30 85 5212014 2015/03/054 8 650 000 2018/09/30

1 Units are granted in DBS and vest after three years from date of award. 2 Units are granted in DBS (2012) and vest in three equal tranches at 18, 30 and 42 months from date of award.3 BJ Kruger and DC Munro elected to have the value of their 2013 performance year award or part thereof (as applicable), invested in the EGS rather than the default DBS. Regarding

the 2014 performance year, DBS has accordingly been updated.4 Deferred bonus amounts awarded in March 2015 are still subject to choice. Participants can elect to have the value of the deferred award, or a part thereof, invested in the EGS

rather than the default DBS. To the extent that EGS is selected, a 10% premium of the value of the award is added. Deferred bonus amounts not invested in EGS will be unitised with respect to the group's closing share price on 5 March 2015. This award will be updated in the group's 2015 annual financial statements to reflect the choices made and units/rights awarded.

5 Units are granted in Liberty Holdings DBS and vest after three years from date of award.6 Units are granted in Liberty Holdings DBS and vest in three equal tranches at 18, 30 and 42 months from date of award.7 Units are granted in Liberty Holdings LTIP and vest in three equal tranches at 2, 3 and 4 years from date of award.# The units were exercised to settle taxes due on vesting date.



AnnexureF

Six-year review

Consolidated normalised statement of financial position

2014USDm*

2014GBPm*

2014EURm*

CAGR**%

2014Rm

20131

Rm2012

Rm2011

Rm2010

Rm2009

Rm

AssetsBanking activities 133 990 86 030 110 654 6 1 550 261 1 357 857 1 274 234 1 258 033 1 107 986 1 077 637

Cash and balances with central banks 5 558 3 568 4 590 17 64 302 53 310 61 985 31 907 28 675 24 983Financial investments, trading and pledged assets 19 561 12 560 16 154 5 226 323 163 989 220 670 193 770 178 567 171 972Loans and advances 80 341 51 584 66 349 4 929 544 840 819 813 892 803 811 713 025 723 507Current and deferred taxation assets 152 98 125 5 1 758 1 590 1 261 1 700 1 492 1 329Derivative and other assets 6 032 3 873 4 982 (10) 69 791 78 337 145 325 167 005 160 437 134 025Non-current assets held for sale 19 011 12 206 15 700 219 958 183 284 960 34 085Interest in associates and joint ventures 301 193 248 (3) 3 480 4 560 2 810 1 881 4 388 4 265Goodwill and other intangible assets 1 798 1 155 1 485 18 20 807 17 610 13 928 11 449 8 965 7 827Property and equipment 1 236 793 1 021 7 14 298 14 358 13 403 12 425 12 437 9 729

Liberty 30 809 19 780 25 442 8 356 445 335 826 290 567 255 714 229 535 220 151

Total assets 164 799 105 810 136 096 7 1 906 706 1 693 683 1 564 801 1 513 747 1 337 521 1 297 788

Equity and liabilitiesEquity 14 293 9 176 11 803 8 165 367 155 372 135 267 122 485 108 210 104 498

Equity attributable to ordinary shareholders 12 065 7 746 9 963 8 139 588 130 865 114 619 102 982 90 755 87 454Preference share capital and premium 476 305 393 5 503 5 503 5 503 5 503 5 503 5 503Non-controlling interests 1 752 1 125 1 447 10 20 276 19 004 15 145 14 000 11 952 11 541

Liabilities 150 506 96 634 124 293 7 1 741 339 1 538 311 1 429 534 1 391 262 1 229 311 1 193 290

Banking activities 121 806 78 207 100 591 6 1 409 282 1 224 696 1 158 442 1 152 870 1 015 119 987 151

Deposit and current accounts 91 969 59 050 75 951 6 1 064 076 934 811 924 885 881 949 787 151 761 436Derivative and other liabilities 7 725 4 960 6 379 (7) 89 375 91 914 153 579 178 590 166 480 138 509Trading liabilities 3 979 2 555 3 286 (4) 46 033 36 988 45 373 38 164 36 586 58 230Current and deferred taxation liabilities 401 257 331 1 4 638 4 383 4 491 2 862 3 137 4 374Non-current liabilities held for sale 15 736 10 104 12 996 182 069 134 504 27 939Subordinated debt 1 996 1 281 1 648 (1) 23 091 22 096 30 114 23 366 21 765 24 602

Liberty 28 700 18 427 23 702 8 332 057 313 615 271 092 238 392 214 192 206 139

Total equity and liabilities 164 799 105 810 136 096 7 1 906 706 1 693 683 1 564 801 1 513 747 1 337 521 1 297 788

1 In 2013, the group reported its GMOA business as part of its continuing operations. For 2014 financial reporting purposes, GMOA's financial results have been disclosed as a discontinued operation with its assets and liabilities disclosed separately as non-current assets/liabilities held for sale.

* The foreign denominated results above have been derived from the group’s audited ZAR results by using the closing exchange rates. The foreign denominated results above have not been audited and have been presented for illustrative purposes only. This illustration would not be equivalent to that which would have resulted had the group presented its results in a currency other than ZAR in terms of IAS 21 The Effects of Changes in Foreign Exchange Rates.

** Compound annual growth rate.

Exchange rates utilised to convert the 31 December 2014 statement of financial position:USD – 11,57 (2013: 10,49)GBP – 18,02 (2013: 17,36)EUR – 14,01 (2013: 14,44)

335

Consolidated normalised statement of financial position

2014USDm*

2014GBPm*

2014EURm*

CAGR**%

2014Rm

20131

Rm2012

Rm2011

Rm2010

Rm2009

Rm

AssetsBanking activities 133 990 86 030 110 654 6 1 550 261 1 357 857 1 274 234 1 258 033 1 107 986 1 077 637

Cash and balances with central banks 5 558 3 568 4 590 17 64 302 53 310 61 985 31 907 28 675 24 983Financial investments, trading and pledged assets 19 561 12 560 16 154 5 226 323 163 989 220 670 193 770 178 567 171 972Loans and advances 80 341 51 584 66 349 4 929 544 840 819 813 892 803 811 713 025 723 507Current and deferred taxation assets 152 98 125 5 1 758 1 590 1 261 1 700 1 492 1 329Derivative and other assets 6 032 3 873 4 982 (10) 69 791 78 337 145 325 167 005 160 437 134 025Non-current assets held for sale 19 011 12 206 15 700 219 958 183 284 960 34 085Interest in associates and joint ventures 301 193 248 (3) 3 480 4 560 2 810 1 881 4 388 4 265Goodwill and other intangible assets 1 798 1 155 1 485 18 20 807 17 610 13 928 11 449 8 965 7 827Property and equipment 1 236 793 1 021 7 14 298 14 358 13 403 12 425 12 437 9 729

Liberty 30 809 19 780 25 442 8 356 445 335 826 290 567 255 714 229 535 220 151

Total assets 164 799 105 810 136 096 7 1 906 706 1 693 683 1 564 801 1 513 747 1 337 521 1 297 788

Equity and liabilitiesEquity 14 293 9 176 11 803 8 165 367 155 372 135 267 122 485 108 210 104 498

Equity attributable to ordinary shareholders 12 065 7 746 9 963 8 139 588 130 865 114 619 102 982 90 755 87 454Preference share capital and premium 476 305 393 5 503 5 503 5 503 5 503 5 503 5 503Non-controlling interests 1 752 1 125 1 447 10 20 276 19 004 15 145 14 000 11 952 11 541

Liabilities 150 506 96 634 124 293 7 1 741 339 1 538 311 1 429 534 1 391 262 1 229 311 1 193 290

Banking activities 121 806 78 207 100 591 6 1 409 282 1 224 696 1 158 442 1 152 870 1 015 119 987 151

Deposit and current accounts 91 969 59 050 75 951 6 1 064 076 934 811 924 885 881 949 787 151 761 436Derivative and other liabilities 7 725 4 960 6 379 (7) 89 375 91 914 153 579 178 590 166 480 138 509Trading liabilities 3 979 2 555 3 286 (4) 46 033 36 988 45 373 38 164 36 586 58 230Current and deferred taxation liabilities 401 257 331 1 4 638 4 383 4 491 2 862 3 137 4 374Non-current liabilities held for sale 15 736 10 104 12 996 182 069 134 504 27 939Subordinated debt 1 996 1 281 1 648 (1) 23 091 22 096 30 114 23 366 21 765 24 602

Liberty 28 700 18 427 23 702 8 332 057 313 615 271 092 238 392 214 192 206 139

Total equity and liabilities 164 799 105 810 136 096 7 1 906 706 1 693 683 1 564 801 1 513 747 1 337 521 1 297 788


* The foreign denominated results above have been derived from the group’s audited ZAR results by using the closing exchange rates. The foreign denominated results above have not been audited and have been presented for illustrative purposes only. This illustration would not be equivalent to that which would have resulted had the group presented its results in a currency other than ZAR in terms of IAS 21 The Effects of Changes in Foreign Exchange Rates.


Exchange rates utilised to convert the 31 December 2014 statement of financial position:USD – 11,57 (2013: 10,49)GBP – 18,02 (2013: 17,36)EUR – 14,01 (2013: 14,44)



Annexure F | Six-year review continued

Consolidated normalised income statement

2014USDm*

2014GBPm*

2014EURm*

CAGR**%

2014Rm

20131

Rm2012

Rm2011

Rm2010

Rm2009

Rm

Income from banking activitiesNet interest income 4 175 2 535 3 145 7 45 256 39 248 34 233 29 027 27 028 29 438Non-interest revenue 3 597 2 184 2 708 5 38 984 34 257 34 474 29 724 28 720 29 906

Net fee and commission revenue 2 422 1 471 1 824 7 26 250 23 184 21 319 19 782 17 883 17 395Trading revenue 850 516 640 (1) 9 216 7 757 8 868 7 895 8 032 10 032Other revenue 325 197 244 6 3 518 3 316 4 287 2 047 2 805 2 479

Total income 7 772 4 719 5 853 6 84 240 73 505 68 707 58 751 55 748 59 344Credit impairment charges 831 504 626 (4) 9 009 9 158 8 800 6 436 7 394 11 719

Net specific credit impairment charges 835 507 629 (4) 9 056 9 049 9 040 5 849 8 032 11 433Portfolio credit impairment charges/(reversal) (4) (3) (3) (47) 109 (240) 587 (638) 286

Income after credit impairment charges 6 941 4 215 5 227 8 75 231 64 347 59 907 52 315 48 354 47 625Revenue sharing agreements with discontinued operation (16) (10) (12) (171) (142)Income after revenue sharing agreements with discontinued operation 6 925 4 205 5 215 75 060 64 205 59 907 52 315 48 354 47 625Operating expenses 4 324 2 625 3 258 7 46 871 42 055 40 826 34 725 34 579 30 757

Staff costs 2 303 1 398 1 735 7 24 961 23 087 22 265 19 141 18 440 16 636Restructuring costs 758 781Other operating expenses 2 021 1 227 1 523 8 21 910 18 968 17 803 15 584 15 358 14 121

Net income before goodwill and gains and losses on disposal of subsidiaries 2 601 1 580 1 957 9 28 189 22 150 19 081 17 590 13 775 16 868Goodwill impairment/(gain) (32) 4 777 61 30 42 (Gain)/loss on disposal and liquidation of subsidiaries (112) (68) (84) (1 212) (64) 86

Net income before associates and joint ventures 2 713 1 648 2 041 10 29 397 22 214 18 218 17 529 13 745 16 826Share of profit/(loss) from associates and joint ventures 61 37 46 665 673 675 257 572 (53)

Net income before indirect taxation 2 774 1 685 2 087 10 30 062 22 887 18 893 17 786 14 317 16 773Indirect taxation 161 98 121 7 1 747 1 514 1 412 1 085 947 1 191

Profit before direct taxation 2 613 1 587 1 966 10 28 315 21 373 17 481 16 701 13 370 15 582Direct taxation 565 343 425 10 6 122 4 596 4 333 4 312 3 040 3 534

Profit for the year from continuing operations 2 048 1 244 1 541 11 22 193 16 777 13 148 12 389 10 330 12 048Loss for the year from discontinued operation (373) (227) (281) (4 048) (1 022) 2 435 641 428 430

Profit for the year 1 675 1 017 1 260 6 18 145 15 755 15 583 13 030 10 758 12 478Attributable to non-controlling interests and preference shareholders 204 124 154 14 2 212 1 494 1 212 1 033 993 1 031

Continuing operations 204 124 154 16 2 212 1 494 985 873 913 925Discontinued operation 227 160 80 106

Banking activities profit attributable to ordinary shareholders 1 471 893 1 106 6 15 933 14 261 14 371 11 997 9 765 11 447

LibertyProfit for the year 400 243 301 54 4 336 4 532 4 180 2 942 2 704 320Attributable to non-controlling interests 201 122 151 44 2 178 2 379 2 151 1 514 1 381 248

Liberty profit attributable to ordinary shareholders 199 121 150 76 2 158 2 153 2 029 1 428 1 323 72

Attributable to group ordinary shareholders 1 670 1 014 1 256 8 18 091 16 414 16 400 13 425 11 088 11 519

Headline earnings 1 598 970 1 204 7 17 323 17 194 14 918 13 599 11 283 11 718


* The foreign denominated results above have been derived from the group’s audited ZAR results by using the average exchange rates. The foreign denominated results above have not been audited and have been presented for illustrative purposes only. This illustration would not be equivalent to that which would have resulted had the group presented its results in a currency other than ZAR in terms of IAS 21 The Effects of Changes in Foreign Exchange Rates.


Exchange rates utilised to convert the 31 December 2014 income statement:ZAR exchange rates – (average) USD – 10,84 (2013: 9,64)GBP – 17,85 (2013: 15,09) EUR – 14,39 (2013: 12,81)

337

Consolidated normalised income statement

2014USDm*

2014GBPm*

2014EURm*

CAGR**%

2014Rm

20131

Rm2012

Rm2011

Rm2010

Rm2009

Rm

Income from banking activitiesNet interest income 4 175 2 535 3 145 7 45 256 39 248 34 233 29 027 27 028 29 438Non-interest revenue 3 597 2 184 2 708 5 38 984 34 257 34 474 29 724 28 720 29 906

Net fee and commission revenue 2 422 1 471 1 824 7 26 250 23 184 21 319 19 782 17 883 17 395Trading revenue 850 516 640 (1) 9 216 7 757 8 868 7 895 8 032 10 032Other revenue 325 197 244 6 3 518 3 316 4 287 2 047 2 805 2 479

Total income 7 772 4 719 5 853 6 84 240 73 505 68 707 58 751 55 748 59 344Credit impairment charges 831 504 626 (4) 9 009 9 158 8 800 6 436 7 394 11 719

Net specific credit impairment charges 835 507 629 (4) 9 056 9 049 9 040 5 849 8 032 11 433Portfolio credit impairment charges/(reversal) (4) (3) (3) (47) 109 (240) 587 (638) 286

Income after credit impairment charges 6 941 4 215 5 227 8 75 231 64 347 59 907 52 315 48 354 47 625Revenue sharing agreements with discontinued operation (16) (10) (12) (171) (142)Income after revenue sharing agreements with discontinued operation 6 925 4 205 5 215 75 060 64 205 59 907 52 315 48 354 47 625Operating expenses 4 324 2 625 3 258 7 46 871 42 055 40 826 34 725 34 579 30 757

Staff costs 2 303 1 398 1 735 7 24 961 23 087 22 265 19 141 18 440 16 636Restructuring costs 758 781Other operating expenses 2 021 1 227 1 523 8 21 910 18 968 17 803 15 584 15 358 14 121

Net income before goodwill and gains and losses on disposal of subsidiaries 2 601 1 580 1 957 9 28 189 22 150 19 081 17 590 13 775 16 868Goodwill impairment/(gain) (32) 4 777 61 30 42 (Gain)/loss on disposal and liquidation of subsidiaries (112) (68) (84) (1 212) (64) 86

Net income before associates and joint ventures 2 713 1 648 2 041 10 29 397 22 214 18 218 17 529 13 745 16 826Share of profit/(loss) from associates and joint ventures 61 37 46 665 673 675 257 572 (53)

Net income before indirect taxation 2 774 1 685 2 087 10 30 062 22 887 18 893 17 786 14 317 16 773Indirect taxation 161 98 121 7 1 747 1 514 1 412 1 085 947 1 191

Profit before direct taxation 2 613 1 587 1 966 10 28 315 21 373 17 481 16 701 13 370 15 582Direct taxation 565 343 425 10 6 122 4 596 4 333 4 312 3 040 3 534

Profit for the year from continuing operations 2 048 1 244 1 541 11 22 193 16 777 13 148 12 389 10 330 12 048Loss for the year from discontinued operation (373) (227) (281) (4 048) (1 022) 2 435 641 428 430

Profit for the year 1 675 1 017 1 260 6 18 145 15 755 15 583 13 030 10 758 12 478Attributable to non-controlling interests and preference shareholders 204 124 154 14 2 212 1 494 1 212 1 033 993 1 031

Continuing operations 204 124 154 16 2 212 1 494 985 873 913 925Discontinued operation 227 160 80 106

Banking activities profit attributable to ordinary shareholders 1 471 893 1 106 6 15 933 14 261 14 371 11 997 9 765 11 447

LibertyProfit for the year 400 243 301 54 4 336 4 532 4 180 2 942 2 704 320Attributable to non-controlling interests 201 122 151 44 2 178 2 379 2 151 1 514 1 381 248

Liberty profit attributable to ordinary shareholders 199 121 150 76 2 158 2 153 2 029 1 428 1 323 72

Attributable to group ordinary shareholders 1 670 1 014 1 256 8 18 091 16 414 16 400 13 425 11 088 11 519

Headline earnings 1 598 970 1 204 7 17 323 17 194 14 918 13 599 11 283 11 718


* The foreign denominated results above have been derived from the group’s audited ZAR results by using the average exchange rates. The foreign denominated results above have not been audited and have been presented for illustrative purposes only. This illustration would not be equivalent to that which would have resulted had the group presented its results in a currency other than ZAR in terms of IAS 21 The Effects of Changes in Foreign Exchange Rates.


Exchange rates utilised to convert the 31 December 2014 income statement:ZAR exchange rates – (average) USD – 10,84 (2013: 9,64)GBP – 17,85 (2013: 15,09) EUR – 14,39 (2013: 12,81)




Share statistics and market indicators – normalised

CAGR% 2014 20131 2012 2011 2010 2009

Share statisticsDividend cover times (2) 1,8 2,0 2,1 2,0 1,9 2,0Dividend yield % 2 4.2 4.1 3.8 4.3 3.6 3.8Earnings yield % 7.5 8.2 7.9 8.7 6.7 7.4Price-earnings ratio times 13,4 12,2 12,7 11,5 15,0 13,5Price-to-book times (1) 1,7 1,6 1,7 1,5 1,9 1,8Number of shares traded millions (10) 798 1 012,2 938,2 959,4 1 169,9 1 490,0Turnover in shares traded % (11) 49 63 59 61 74 96Market capitalisation Rm 7 232 203 209 381 190 937 156 889 170 471 158 942

Market indicators at 31 DecemberStandard Bank Group Limited share price – high for the year cents 6 14 930 13 054 12 030 11 000 11 800 10 500– low for the year cents 12 11 416 10 316 9 876 8 775 10 075 5 915– closing cents 6 14 348 12 942 11 888 9 875 10 755 10 200Prime overdraft rate (closing) % (2) 9.25 8.50 8.50 9.00 9.00 10.50JSE All Share Index – (closing) 10 49 771 46 256 39 250 31 986 32 119 27 666JSE Banks Index – (closing) 12 72 998 57 745 53 362 41 178 40 985 36 675ZAR exchange rates – (closing)– USD 8 11,57 10,49 8,48 8,09 6,64 7,37– GBP 7 18,02 17,36 13,71 12,48 10,29 11,88– EUR 5 14,01 14,44 11,18 10,46 8,87 10,61ZAR exchange rates – (average)– USD 4 10,84 9,64 8,21 7,25 7,32 8,42– GBP 5 17,85 15,09 13,01 11,62 11,30 13,09– EUR 4 14,39 12,81 10,55 10,08 9,71 11,67


339

Share statistics and market indicators – normalised

CAGR% 2014 20131 2012 2011 2010 2009

Share statisticsDividend cover times (2) 1,8 2,0 2,1 2,0 1,9 2,0Dividend yield % 2 4.2 4.1 3.8 4.3 3.6 3.8Earnings yield % 7.5 8.2 7.9 8.7 6.7 7.4Price-earnings ratio times 13,4 12,2 12,7 11,5 15,0 13,5Price-to-book times (1) 1,7 1,6 1,7 1,5 1,9 1,8Number of shares traded millions (10) 798 1 012,2 938,2 959,4 1 169,9 1 490,0Turnover in shares traded % (11) 49 63 59 61 74 96Market capitalisation Rm 7 232 203 209 381 190 937 156 889 170 471 158 942

Market indicators at 31 DecemberStandard Bank Group Limited share price – high for the year cents 6 14 930 13 054 12 030 11 000 11 800 10 500– low for the year cents 12 11 416 10 316 9 876 8 775 10 075 5 915– closing cents 6 14 348 12 942 11 888 9 875 10 755 10 200Prime overdraft rate (closing) % (2) 9.25 8.50 8.50 9.00 9.00 10.50JSE All Share Index – (closing) 10 49 771 46 256 39 250 31 986 32 119 27 666JSE Banks Index – (closing) 12 72 998 57 745 53 362 41 178 40 985 36 675ZAR exchange rates – (closing)– USD 8 11,57 10,49 8,48 8,09 6,64 7,37– GBP 7 18,02 17,36 13,71 12,48 10,29 11,88– EUR 5 14,01 14,44 11,18 10,46 8,87 10,61ZAR exchange rates – (average)– USD 4 10,84 9,64 8,21 7,25 7,32 8,42– GBP 5 17,85 15,09 13,01 11,62 11,30 13,09– EUR 4 14,39 12,81 10,55 10,08 9,71 11,67





Capital adequacy, employee and other relevant statistics

CAGR% 2014 2013 2012 2011 2010 2009

Capital adequacy1

Risk-weighted assets Rm 7 915 213 841 272 841 835 710 725 620 064 599 822Tier I capital2 Rm 9 117 970 110 834 94 420 85 547 79 996 71 354Total capital2 Rm 8 141 963 136 084 120 173 101 978 94 805 90 712Tier I capital to risk-weighted assets2 % 1 12.9 13.2 11.2 12.0 12.9 11.9 Total capital to risk-weighted assets2 % 15.5 16.2 14.3 14.3 15.3 15.1

Employee statisticsNumber of employeesBanking activities (1) 42 642 42 221 42 736 45 904 48 125 45 937Group (1) 49 259 48 808 49 017 51 656 53 351 51 411Employee turnover rate % 1 10.5 13.2 10.2 11.6 10.1 10.0Normalised headline earnings per employee (6) 355 635 354 871 302 508 265 140 205 506 253 521

Points of representationATMs and ANAs 4 7 065 7 861 7 841 6 770 6 473 5 580Banking branches and service centres 3 1 233 1 283 1 249 1 217 1 159 1 012

Social investment and environmentCorporate social investment spend3 Rm 115,0 104,0 106,4 119,5 139,7 104,4 Carbon footprint (metric tons CO2)4 12 309 017 392 159 412 089 180 403 177 289 154 538

1 In accordance with Basel III principles relating to the treatment of insurance entities, insurance operations are excluded from the capital base of the banking group and its related risk-weighted assets. Capital in insurance operations in excess of statutory minimum requirements is not recognised in group capital.

2 Capital includes unappropriated profits. 3 Excludes the rest of Africa. 4 South African banking activities only.

341

Capital adequacy, employee and other relevant statistics

CAGR% 2014 2013 2012 2011 2010 2009

Capital adequacy1

Risk-weighted assets Rm 7 915 213 841 272 841 835 710 725 620 064 599 822Tier I capital2 Rm 9 117 970 110 834 94 420 85 547 79 996 71 354Total capital2 Rm 8 141 963 136 084 120 173 101 978 94 805 90 712Tier I capital to risk-weighted assets2 % 1 12.9 13.2 11.2 12.0 12.9 11.9 Total capital to risk-weighted assets2 % 15.5 16.2 14.3 14.3 15.3 15.1

Employee statisticsNumber of employeesBanking activities (1) 42 642 42 221 42 736 45 904 48 125 45 937Group (1) 49 259 48 808 49 017 51 656 53 351 51 411Employee turnover rate % 1 10.5 13.2 10.2 11.6 10.1 10.0Normalised headline earnings per employee (6) 355 635 354 871 302 508 265 140 205 506 253 521

Points of representationATMs and ANAs 4 7 065 7 861 7 841 6 770 6 473 5 580Banking branches and service centres 3 1 233 1 283 1 249 1 217 1 159 1 012

Social investment and environmentCorporate social investment spend3 Rm 115,0 104,0 106,4 119,5 139,7 104,4 Carbon footprint (metric tons CO2)4 12 309 017 392 159 412 089 180 403 177 289 154 538

1 In accordance with Basel III principles relating to the treatment of insurance entities, insurance operations are excluded from the capital base of the banking group and its related risk-weighted assets. Capital in insurance operations in excess of statutory minimum requirements is not recognised in group capital.

2 Capital includes unappropriated profits. 3 Excludes the rest of Africa. 4 South African banking activities only.




Results and ratios – normalised

CAGR%

2014Rm

20131

Rm2012

Rm2011

Rm2010

Rm2009

Rm

Standard Bank GroupShare statisticsNumber of ordinary shares listed on JSE (millions) Weighted average 1 1 618,6 1 614,7 1 595,6 1 587,1 1 576,1 1 548,2End of period 1 1 618,4 1 617,8 1 606,1 1 588,7 1 585,0 1 558,3Share statistics per ordinary share Basic earnings cents 7 1 117,7 1 016,6 1 027,8 845,9 703,5 744,0

Continuing operations cents 11 1 367,8 1 079,8 889,4 815,6 681,4 723,1Discontinued operation cents (250,1) (63,2) 138,4 30,3 22,1 20,9

Headline earnings cents 6 1 070,3 1 064,9 934,9 856,9 715,9 756,9


Dividend cents 7 589,0 533,0 455,0 425,0 386,0 386,0Net asset value cents 7 8 625,0 8 089,0 7 136,3 6 482,0 5 725,7 5 612,3ROE % (1) 12.9 14.1 14.0 14.3 12.5 13.6Normalised headline earnings per business unit Personal & Business Banking Rm 17 9 834 8 401 7 343 5 872 4 364 3 866Corporate & Investment Banking Rm (6) 4 983 6 500 4 419 5 521 5 252 7 156Central and other Rm (9) 348 82 1 166 778 274 624Liberty Rm 76 2 158 2 211 1 990 1 428 1 393 72

Rm 17 323 17 194 14 918 13 599 11 283 11 718

Banking activities normalisedSelected returns and ratiosHeadline earnings contribution Rm 5 15 165 14 983 12 928 12 171 9 890 11 646

Continuing operations Rm 9 18 910 15 402 12 255 11 714 9 561 11 327Discontinued operation Rm (3 745) (419) 673 457 329 319

ROE % (3) 12.3 13.2 13.2 13.8 11.8 14.5Continuing operationsNet interest margin % 4 3.80 3.67 3.09 2.92 2.87 3.06Non-interest income to total income % (1) 46.3 46.6 50.2 50.6 51.5 50.4Cost-to-income ratio % 1 54.5 56.8 58.9 58.8 61.4 51.9Credit loss ratio % (7) 1.00 1.12 1.08 0.87 1.04 1.57Effective taxation rate % (1) 26.2 26.7 30.4 30.3 27.8 28.2


343

Results and ratios – normalised

CAGR%

2014Rm

20131

Rm2012

Rm2011

Rm2010

Rm2009

Rm

Standard Bank GroupShare statisticsNumber of ordinary shares listed on JSE (millions) Weighted average 1 1 618,6 1 614,7 1 595,6 1 587,1 1 576,1 1 548,2End of period 1 1 618,4 1 617,8 1 606,1 1 588,7 1 585,0 1 558,3Share statistics per ordinary share Basic earnings cents 7 1 117,7 1 016,6 1 027,8 845,9 703,5 744,0




Dividend cents 7 589,0 533,0 455,0 425,0 386,0 386,0Net asset value cents 7 8 625,0 8 089,0 7 136,3 6 482,0 5 725,7 5 612,3ROE % (1) 12.9 14.1 14.0 14.3 12.5 13.6Normalised headline earnings per business unit Personal & Business Banking Rm 17 9 834 8 401 7 343 5 872 4 364 3 866Corporate & Investment Banking Rm (6) 4 983 6 500 4 419 5 521 5 252 7 156Central and other Rm (9) 348 82 1 166 778 274 624Liberty Rm 76 2 158 2 211 1 990 1 428 1 393 72

Rm 17 323 17 194 14 918 13 599 11 283 11 718

Banking activities normalisedSelected returns and ratiosHeadline earnings contribution Rm 5 15 165 14 983 12 928 12 171 9 890 11 646

Continuing operations Rm 9 18 910 15 402 12 255 11 714 9 561 11 327Discontinued operation Rm (3 745) (419) 673 457 329 319






Results and ratios – IFRS

CAGR%

2014Rm

2013Rm

2012Rm

2011Rm

2010Rm

2009Rm

Standard Bank GroupShare statisticsNumber of ordinary shares in issue in terms of IFRS (millions)Weighted average 1 1 584,7 1 566,7 1 521,5 1 510,4 1 492,0 1 459,3End of period 1 1 577,8 1 584,4 1 535,9 1 514,1 1 505,1 1 474,3Share statistics per ordinary share (cents) Basic earnings cents 7 1 129,9 1 034,4 1 054,6 875,7 722,1 757,5

Continuing operations cents 11 1 385,3 1 099,6 1 015,8 843,9 698,8 735,3Discontinued operation cents (255,4) (65,2) 38,8 31,8 23,3 22,2


Continuing operations cents 10 1 317,7 1 110,9 1 019,3 857,0 713,2 749,2Discontinued operation cents (236,3) (26,7) (62,1) 30,2 22,0 21,9

Dividend 8 598,0 533,0 455,0 425,0 386,0 386,0Net asset value cents 7 8 682,0 8 137,6 7 232,5 6 568,3 5 785,2 5 698,9ROE % (1) 13.0 14.2 14.2 14.6 12.7 13.7

Personal & Business Banking Rm 17 9 834 8 358 7 343 5 872 4 364 3 866Corporate & Investment Banking Rm (6) 4 983 6 591 4 419 5 521 5 252 7 156Central and other Rm (11) 306 (84) 970 572 135 607Liberty Rm 2 014 2 121 1 832 1 435 1 218 (376)

Total IFRS headline earnings Rm 17 137 16 986 14 564 13 400 10 969 11 253

Banking activities IFRSSelected returns and ratiosHeadline earnings contribution Rm 5 15 123 14 865 12 732 11 965 9 751 11 629

Continuing operations Rm 9 18 868 15 284 13 677 11 508 9 422 11 310Discontinued operation Rm (3 745) (419) (945) 457 329 319


345

Results and ratios – IFRS

CAGR%

2014Rm

2013Rm

2012Rm

2011Rm

2010Rm

2009Rm

Standard Bank GroupShare statisticsNumber of ordinary shares in issue in terms of IFRS (millions)Weighted average 1 1 584,7 1 566,7 1 521,5 1 510,4 1 492,0 1 459,3End of period 1 1 577,8 1 584,4 1 535,9 1 514,1 1 505,1 1 474,3Share statistics per ordinary share (cents) Basic earnings cents 7 1 129,9 1 034,4 1 054,6 875,7 722,1 757,5

Continuing operations cents 11 1 385,3 1 099,6 1 015,8 843,9 698,8 735,3Discontinued operation cents (255,4) (65,2) 38,8 31,8 23,3 22,2


Continuing operations cents 10 1 317,7 1 110,9 1 019,3 857,0 713,2 749,2Discontinued operation cents (236,3) (26,7) (62,1) 30,2 22,0 21,9

Dividend 8 598,0 533,0 455,0 425,0 386,0 386,0Net asset value cents 7 8 682,0 8 137,6 7 232,5 6 568,3 5 785,2 5 698,9ROE % (1) 13.0 14.2 14.2 14.6 12.7 13.7

Personal & Business Banking Rm 17 9 834 8 358 7 343 5 872 4 364 3 866Corporate & Investment Banking Rm (6) 4 983 6 591 4 419 5 521 5 252 7 156Central and other Rm (11) 306 (84) 970 572 135 607Liberty Rm 2 014 2 121 1 832 1 435 1 218 (376)

Total IFRS headline earnings Rm 17 137 16 986 14 564 13 400 10 969 11 253

Banking activities IFRSSelected returns and ratiosHeadline earnings contribution Rm 5 15 123 14 865 12 732 11 965 9 751 11 629

Continuing operations Rm 9 18 868 15 284 13 677 11 508 9 422 11 310Discontinued operation Rm (3 745) (419) (945) 457 329 319




AnnexureG

Segmental statement of financial position

Personal &

Business Banking

Corporate &

Investment Banking

Central and

other Banking activities Liberty1

Normalised

Standard Bank Group

IFRS

adjustments

IFRS

Standard Bank Group

Change%

2014Rm

2013Rm

Change%

2014Rm

2013Rm

Change%

2014Rm

2013Rm

Change%

2014Rm

2013Rm

Change%

2014Rm

2013Rm

Change%

2014Rm

2013Rm

2014Rm

2013Rm

Change%

2014Rm

2013Rm

AssetsCash and balances with central banks 40 6 656 4 766 27 45 317 35 732 (4) 12 329 12 812 21 64 302 53 310 21 64 302 53 310 21 64 302 53 310

Financial investments, trading and pledged assets >100 13 136 5 798 34 215 709 160 848 5 (2 522) (2 657) 38 226 323 163 989 6 313 381 294 584 18 539 704 458 573 (2 558) (1 555) 18 537 146 457 018

Loans and advances 6 575 313 541 062 18 408 738 346 453 (17) (54 507) (46 696) 11 929 544 840 819 11 929 544 840 819 (1 303) (1 199) 11 928 241 839 620

Loans and advances to banks 13 45 981 40 678 22 114 871 94 178 (12) (44 632) (39 952) 22 116 220 94 904 22 116 220 94 904 22 116 220 94 904

Loans and advances to customers 6 529 332 500 384 16 293 867 252 275 (46) (9 875) (6 744) 9 813 324 745 915 9 813 324 745 915 (1 303) (1 199) 9 812 021 744 716

Investment property (1) 27 022 27 299 (1) 27 022 27 299 (1) 27 022 27 299

Derivative and other assets 33 7 422 5 597 (16) 61 833 73 297 >100 2 294 1 033 (10) 71 549 79 927 21 12 988 10 707 (7) 84 537 90 634 (7) 84 537 90 634

Non-current assets held for sale 20 219 958 183 284 20 219 958 183 284 20 219 958 183 284 20 219 958 183 284

Interest in associates and joint ventures (58) 866 2 055 (1) 625 631 6 1 989 1 874 (24) 3 480 4 560 4 247 237 (22) 3 727 4 797 (22) 3 727 4 797

Goodwill and other intangible assets 27 11 853 9 350 9 970 894 8 7 984 7 366 18 20 807 17 610 (23) 368 475 17 21 175 18 085 17 21 175 18 085

Property and equipment 6 6 053 5 724 (24) 913 1 204 (1) 7 332 7 430 14 298 14 358 (3) 2 439 2 524 (1) 16 737 16 882 (1) 16 737 16 882

Total assets 8 621 299 574 352 19 954 063 802 343 (33) (25 101) (18 838) 14 1 550 261 1 357 857 6 356 445 335 826 13 1 906 706 1 693 683 (3 861) (2 754) 13 1 902 845 1 690 929

Equity and liabilitiesEquity 19 58 393 49 000 13 54 004 47 731 (22) 28 582 36 430 6 140 979 133 161 10 24 388 22 211 6 165 367 155 372 (3 733) (2 724) 6 161 634 152 648

Equity attributable to ordinary shareholders 18 56 238 47 829 12 49 941 44 638 (21) 22 442 28 399 6 128 621 120 866 10 10 967 9 999 7 139 588 130 865 (2 603) (1 929) 6 136 985 128 936

Preference share capital and premium 5 503 5 503 5 503 5 503 5 503 5 503 5 503 5 503

Non-controlling interest 84 2 155 1 171 31 4 063 3 093 (75) 637 2 528 1 6 855 6 792 10 13 421 12 212 7 20 276 19 004 (1 130) (795) 5 19 146 18 209

Liabilities 7 562 906 525 352 19 900 059 754 612 3 (53 683) (55 268) 15 1 409 282 1 224 696 6 332 057 313 615 13 1 741 339 1 538 311 (128) (30) 13 1 741 211 1 538 281

Deposit and current accounts 14 418 694 367 647 14 662 249 580 966 (22) (16 867) (13 802) 14 1 064 076 934 811 (29) (16 864) (13 073) 14 1 047 212 921 738 14 1 047 212 921 738

Deposits from banks 19 1 633 1 374 52 105 539 69 371 (>100) (9 566) (2 095) 42 97 606 68 650 42 97 606 68 650 42 97 606 68 650

Deposits from customers 14 417 061 366 273 9 556 710 511 595 38 (7 301) (11 707) 12 966 470 866 161 (29) (16 864) (13 073) 11 949 606 853 088 11 949 606 853 088

Interdivisional funding (10) 132 586 147 645 3 (142 333) (147 068) >100 9 747 (577)

Derivative, trading and other liabilities 6 4 956 4 656 6 191 178 180 931 (7) (56 088) (52 302) 5 140 046 133 285 (2) 58 975 60 324 3 199 021 193 609 (128) (30) 3 198 893 193 579

Non-current liabilities held for sale 35 182 069 134 504 35 182 069 134 504 35 182 069 134 504 35 182 069 134 504

Policyholder liabilities 9 287 516 263 944 9 287 516 263 944 9 287 516 263 944 Subordinated debt 23 6 670 5 404 31 6 896 5 279 (17) 9 525 11 413 5 23 091 22 096 0 2 430 2 420 4 25 521 24 516 4 25 521 24 516

Total equity and liabilities 8 621 299 574 352 19 954 063 802 343 (33) (25 101) (18 838) 14 1 550 261 1 357 857 6 356 445 335 826 13 1 906 706 1 693 683 (3 861) (2 754) 13 1 902 845 1 690 929

Average assets – banking activities excluding

trading derivatives 596 848 544 901 626 095 534 440 (30 588) (11 310) 1 192 355 1 068 031 1 192 355 1 068 031 (977) (1 503) 1 191 378 1 066 528

Average loans and advances (gross) 580 840 530 717 373 597 327 252 (56 309) (38 029) 898 128 819 940 898 128 819 940 (1 148) (1 676) 896 980 818 264

Average ordinary shareholders' equity 54 106 45 104 49 058 46 172 20 601 21 988 123 765 113 264 10 310 8 963 134 075 122 227 (2 005) (2 356) 132 070 119 871

1 Includes elimination of balances between Liberty and banking activities.

347

Personal &

Business Banking

Corporate &

Investment Banking

Central and

other Banking activities Liberty1

Normalised

Standard Bank Group

IFRS

adjustments

IFRS

Standard Bank Group

Change%

2014Rm

2013Rm

Change%

2014Rm

2013Rm

Change%

2014Rm

2013Rm

Change%

2014Rm

2013Rm

Change%

2014Rm

2013Rm

Change%

2014Rm

2013Rm

2014Rm

2013Rm

Change%

2014Rm

2013Rm

AssetsCash and balances with central banks 40 6 656 4 766 27 45 317 35 732 (4) 12 329 12 812 21 64 302 53 310 21 64 302 53 310 21 64 302 53 310

Financial investments, trading and pledged assets >100 13 136 5 798 34 215 709 160 848 5 (2 522) (2 657) 38 226 323 163 989 6 313 381 294 584 18 539 704 458 573 (2 558) (1 555) 18 537 146 457 018

Loans and advances 6 575 313 541 062 18 408 738 346 453 (17) (54 507) (46 696) 11 929 544 840 819 11 929 544 840 819 (1 303) (1 199) 11 928 241 839 620

Loans and advances to banks 13 45 981 40 678 22 114 871 94 178 (12) (44 632) (39 952) 22 116 220 94 904 22 116 220 94 904 22 116 220 94 904

Loans and advances to customers 6 529 332 500 384 16 293 867 252 275 (46) (9 875) (6 744) 9 813 324 745 915 9 813 324 745 915 (1 303) (1 199) 9 812 021 744 716

Investment property (1) 27 022 27 299 (1) 27 022 27 299 (1) 27 022 27 299

Derivative and other assets 33 7 422 5 597 (16) 61 833 73 297 >100 2 294 1 033 (10) 71 549 79 927 21 12 988 10 707 (7) 84 537 90 634 (7) 84 537 90 634

Non-current assets held for sale 20 219 958 183 284 20 219 958 183 284 20 219 958 183 284 20 219 958 183 284

Interest in associates and joint ventures (58) 866 2 055 (1) 625 631 6 1 989 1 874 (24) 3 480 4 560 4 247 237 (22) 3 727 4 797 (22) 3 727 4 797

Goodwill and other intangible assets 27 11 853 9 350 9 970 894 8 7 984 7 366 18 20 807 17 610 (23) 368 475 17 21 175 18 085 17 21 175 18 085

Property and equipment 6 6 053 5 724 (24) 913 1 204 (1) 7 332 7 430 14 298 14 358 (3) 2 439 2 524 (1) 16 737 16 882 (1) 16 737 16 882

Total assets 8 621 299 574 352 19 954 063 802 343 (33) (25 101) (18 838) 14 1 550 261 1 357 857 6 356 445 335 826 13 1 906 706 1 693 683 (3 861) (2 754) 13 1 902 845 1 690 929

Equity and liabilitiesEquity 19 58 393 49 000 13 54 004 47 731 (22) 28 582 36 430 6 140 979 133 161 10 24 388 22 211 6 165 367 155 372 (3 733) (2 724) 6 161 634 152 648

Equity attributable to ordinary shareholders 18 56 238 47 829 12 49 941 44 638 (21) 22 442 28 399 6 128 621 120 866 10 10 967 9 999 7 139 588 130 865 (2 603) (1 929) 6 136 985 128 936

Preference share capital and premium 5 503 5 503 5 503 5 503 5 503 5 503 5 503 5 503

Non-controlling interest 84 2 155 1 171 31 4 063 3 093 (75) 637 2 528 1 6 855 6 792 10 13 421 12 212 7 20 276 19 004 (1 130) (795) 5 19 146 18 209

Liabilities 7 562 906 525 352 19 900 059 754 612 3 (53 683) (55 268) 15 1 409 282 1 224 696 6 332 057 313 615 13 1 741 339 1 538 311 (128) (30) 13 1 741 211 1 538 281

Deposit and current accounts 14 418 694 367 647 14 662 249 580 966 (22) (16 867) (13 802) 14 1 064 076 934 811 (29) (16 864) (13 073) 14 1 047 212 921 738 14 1 047 212 921 738

Deposits from banks 19 1 633 1 374 52 105 539 69 371 (>100) (9 566) (2 095) 42 97 606 68 650 42 97 606 68 650 42 97 606 68 650

Deposits from customers 14 417 061 366 273 9 556 710 511 595 38 (7 301) (11 707) 12 966 470 866 161 (29) (16 864) (13 073) 11 949 606 853 088 11 949 606 853 088

Interdivisional funding (10) 132 586 147 645 3 (142 333) (147 068) >100 9 747 (577)

Derivative, trading and other liabilities 6 4 956 4 656 6 191 178 180 931 (7) (56 088) (52 302) 5 140 046 133 285 (2) 58 975 60 324 3 199 021 193 609 (128) (30) 3 198 893 193 579

Non-current liabilities held for sale 35 182 069 134 504 35 182 069 134 504 35 182 069 134 504 35 182 069 134 504

Policyholder liabilities 9 287 516 263 944 9 287 516 263 944 9 287 516 263 944 Subordinated debt 23 6 670 5 404 31 6 896 5 279 (17) 9 525 11 413 5 23 091 22 096 0 2 430 2 420 4 25 521 24 516 4 25 521 24 516

Total equity and liabilities 8 621 299 574 352 19 954 063 802 343 (33) (25 101) (18 838) 14 1 550 261 1 357 857 6 356 445 335 826 13 1 906 706 1 693 683 (3 861) (2 754) 13 1 902 845 1 690 929

Average assets – banking activities excluding

trading derivatives 596 848 544 901 626 095 534 440 (30 588) (11 310) 1 192 355 1 068 031 1 192 355 1 068 031 (977) (1 503) 1 191 378 1 066 528

Average loans and advances (gross) 580 840 530 717 373 597 327 252 (56 309) (38 029) 898 128 819 940 898 128 819 940 (1 148) (1 676) 896 980 818 264

Average ordinary shareholders' equity 54 106 45 104 49 058 46 172 20 601 21 988 123 765 113 264 10 310 8 963 134 075 122 227 (2 005) (2 356) 132 070 119 871

1 Includes elimination of balances between Liberty and banking activities.



AnnexureH

Banking activities average statement of financial position (normalised)

2014 2014 2013

Tradingbook

Rm

Non-interestearning

Rm

Interestearning

Rm

Totalaveragebalance

RmInterest1

RmAverage rate

%

Tradingbook

Rm

Non-interestearning

Rm

Interestearning

Rm

Totalaveragebalance

RmInterest1

RmAverage rate

%

Assets

Cash and balances with central banks2 396 14 400 17 418 32 214 398 12 198 16 042 28 638Trading assets 46 322 21 351 67 673 29 871 13 526 43 397Financial investments 135 047 135 047 8 644 6.40 112 210 112 210 7 036 6.27Net loans and advances 13 272 864 744 878 016 74 086 8.44 10 880 791 073 801 953 64 336 8.02

Loans and advances to banks 3 410 106 500 109 910 2 672 2.43 3 423 78 153 81 576 2 278 2.79Loans and advances to customers 9 862 778 356 788 218 71 414 9.06 7 457 730 907 738 364 62 058 8.40

Mortgage loans 310 955 310 955 26 534 8.53 304 473 304 473 23 909 7.85Instalment sale and finance leases 73 556 73 556 7 401 10.06 70 157 70 157 6 727 9.59Card debtors 29 562 29 562 4 068 13.76 26 670 26 670 3 499 13.12Overdrafts and other demand loans 9 862 58 640 68 502 7 577 11.06 7 457 52 197 59 654 6 301 10.56Term loans 256 649 256 649 21 733 8.47 231 600 231 600 17 962 7.76Commercial property finance 48 994 48 994 4 101 8.37 45 810 45 810 3 660 7.99

Gross loans and advances 13 272 884 856 898 128 74 086 8.25 10 880 809 060 819 940 64 336 7.85Credit impairments for loans and advances (20 112) (20 112) (17 987) (17 987)

Investment property 3 711 3 711 5 636 5 636Other assets 19 370 17 314 36 684 17 958 22 874 40 832Interest in associates and joint ventures 5 536 5 536 5 085 5 085Goodwill and other intangible assets 18 049 18 049 14 906 14 906Property and equipment 15 425 15 425 15 374 15 374

Total average assets and interest excluding trading derivative assets 79 360 95 786 1 017 209 1 192 355 82 730 6.94 59 107 89 599 919 325 1068 031 71 372 6.68Trading derivative assets 63 995 63 995 72 876 72 876

Total average assets and interest 143 355 95 786 1 017 209 1 256 350 82 730 6.58 131 983 89 599 919 325 1 140 907 71 372 6.26

Equity and liabilitiesEquity 1 817 121 948 123 765 2 344 110 920 113 264Liabilities 81 435 37 892 943 790 1 063 117 37 474 3.52 61 649 42 860 849 281 953 790 32 124 3.37

Trading liabilities 44 527 44 527 40 217 40 217Deposit and current accounts 29 338 923 248 952 586 35 623 3.74 13 442 828 339 841 781 30 276 3.60

Deposits from banks 721 78 441 79 162 1 372 1.73 858 59 406 60 264 1 053 1.75Deposits from customers 28 617 844 807 873 424 34 251 3.92 12 584 768 933 781 517 29 223 3.74

Current accounts 174 639 174 639 455 0.26 152 597 152 597 344 0.23Cash management deposits 108 568 108 568 4 677 4.31 96 367 96 367 3 493 3.62Call deposits 28 617 185 622 214 239 8 588 4.01 12 584 165 902 178 486 6 639 3.72Savings accounts 19 125 19 125 322 1.68 19 372 19 372 297 1.53Term deposits 255 131 255 131 13 590 5.33 235 302 235 302 12 594 5.35Negotiable certificates of deposit 101 722 101 722 6 619 6.51 99 393 99 393 5 856 5.89

Other liabilities 6 743 37 892 44 635 7 102 42 860 49 962Subordinated bonds 827 20 542 21 369 1 851 8.66 888 20 942 21 830 1 848 8.47

Total average equity, liabilities and interest excluding trading derivative liabilities 83 252 159 840 943 790 1 186 882 37 474 3.16 63 993 153 780 849 281 1 067 054 32 124 3.01Trading derivative liabilities 69 468 69 468 73 853 73 853

Total average equity, liabilities and interest 152 720 159 840 943 790 1 256 350 37 474 2.98 137 846 153 780 849 281 1 140 907 32 124 2.82

Margin on total average assets excluding trading derivatives 79 360 95 786 1 017 209 1 192 355 45 256 3.80 59 107 89 599 919 325 1 068 031 39 248 3.67Margin on total average loans and advances 13 272 864 744 878 016 45 256 5.15 10 880 791 073 801 953 39 248 4.89Margin on average interest-earning assets 1 017 209 1 017 209 49 496 4.87 919 325 919 325 42 946 4.671 Interest received and paid on trading derivative instruments has been netted with interest received on derivative asset instruments used for hedging purposes allocated

to the instrument being hedged thus the interest split between assets and liabilities will not equate to interest income and interest expense as per the income statement.2 Included within interest-earning cash and balances with central banks is the SARB interest-free deposit, as well as other prudential assets. This is utilised to meet liquidity

requirements and is reflected in the margin as part of interest earning assets to reflect the cost of liquidity.

349

2014 2014 2013

Tradingbook

Rm

Non-interestearning

Rm

Interestearning

Rm

Totalaveragebalance

RmInterest1

RmAverage rate

%

Tradingbook

Rm

Non-interestearning

Rm

Interestearning

Rm

Totalaveragebalance

RmInterest1

RmAverage rate

%

Assets

Cash and balances with central banks2 396 14 400 17 418 32 214 398 12 198 16 042 28 638Trading assets 46 322 21 351 67 673 29 871 13 526 43 397Financial investments 135 047 135 047 8 644 6.40 112 210 112 210 7 036 6.27Net loans and advances 13 272 864 744 878 016 74 086 8.44 10 880 791 073 801 953 64 336 8.02

Loans and advances to banks 3 410 106 500 109 910 2 672 2.43 3 423 78 153 81 576 2 278 2.79Loans and advances to customers 9 862 778 356 788 218 71 414 9.06 7 457 730 907 738 364 62 058 8.40

Mortgage loans 310 955 310 955 26 534 8.53 304 473 304 473 23 909 7.85Instalment sale and finance leases 73 556 73 556 7 401 10.06 70 157 70 157 6 727 9.59Card debtors 29 562 29 562 4 068 13.76 26 670 26 670 3 499 13.12Overdrafts and other demand loans 9 862 58 640 68 502 7 577 11.06 7 457 52 197 59 654 6 301 10.56Term loans 256 649 256 649 21 733 8.47 231 600 231 600 17 962 7.76Commercial property finance 48 994 48 994 4 101 8.37 45 810 45 810 3 660 7.99

Gross loans and advances 13 272 884 856 898 128 74 086 8.25 10 880 809 060 819 940 64 336 7.85Credit impairments for loans and advances (20 112) (20 112) (17 987) (17 987)

Investment property 3 711 3 711 5 636 5 636Other assets 19 370 17 314 36 684 17 958 22 874 40 832Interest in associates and joint ventures 5 536 5 536 5 085 5 085Goodwill and other intangible assets 18 049 18 049 14 906 14 906Property and equipment 15 425 15 425 15 374 15 374

Total average assets and interest excluding trading derivative assets 79 360 95 786 1 017 209 1 192 355 82 730 6.94 59 107 89 599 919 325 1068 031 71 372 6.68Trading derivative assets 63 995 63 995 72 876 72 876

Total average assets and interest 143 355 95 786 1 017 209 1 256 350 82 730 6.58 131 983 89 599 919 325 1 140 907 71 372 6.26

Equity and liabilitiesEquity 1 817 121 948 123 765 2 344 110 920 113 264Liabilities 81 435 37 892 943 790 1 063 117 37 474 3.52 61 649 42 860 849 281 953 790 32 124 3.37

Trading liabilities 44 527 44 527 40 217 40 217Deposit and current accounts 29 338 923 248 952 586 35 623 3.74 13 442 828 339 841 781 30 276 3.60

Deposits from banks 721 78 441 79 162 1 372 1.73 858 59 406 60 264 1 053 1.75Deposits from customers 28 617 844 807 873 424 34 251 3.92 12 584 768 933 781 517 29 223 3.74

Current accounts 174 639 174 639 455 0.26 152 597 152 597 344 0.23Cash management deposits 108 568 108 568 4 677 4.31 96 367 96 367 3 493 3.62Call deposits 28 617 185 622 214 239 8 588 4.01 12 584 165 902 178 486 6 639 3.72Savings accounts 19 125 19 125 322 1.68 19 372 19 372 297 1.53Term deposits 255 131 255 131 13 590 5.33 235 302 235 302 12 594 5.35Negotiable certificates of deposit 101 722 101 722 6 619 6.51 99 393 99 393 5 856 5.89

Other liabilities 6 743 37 892 44 635 7 102 42 860 49 962Subordinated bonds 827 20 542 21 369 1 851 8.66 888 20 942 21 830 1 848 8.47

Total average equity, liabilities and interest excluding trading derivative liabilities 83 252 159 840 943 790 1 186 882 37 474 3.16 63 993 153 780 849 281 1 067 054 32 124 3.01Trading derivative liabilities 69 468 69 468 73 853 73 853

Total average equity, liabilities and interest 152 720 159 840 943 790 1 256 350 37 474 2.98 137 846 153 780 849 281 1 140 907 32 124 2.82

Margin on total average assets excluding trading derivatives 79 360 95 786 1 017 209 1 192 355 45 256 3.80 59 107 89 599 919 325 1 068 031 39 248 3.67Margin on total average loans and advances 13 272 864 744 878 016 45 256 5.15 10 880 791 073 801 953 39 248 4.89Margin on average interest-earning assets 1 017 209 1 017 209 49 496 4.87 919 325 919 325 42 946 4.671 Interest received and paid on trading derivative instruments has been netted with interest received on derivative asset instruments used for hedging purposes allocated

to the instrument being hedged thus the interest split between assets and liabilities will not equate to interest income and interest expense as per the income statement.2 Included within interest-earning cash and balances with central banks is the SARB interest-free deposit, as well as other prudential assets. This is utilised to meet liquidity

requirements and is reflected in the margin as part of interest earning assets to reflect the cost of liquidity.



2014Rbn

2013Rbn

Third-party assets under management and funds under administrationMembers of the group provide discretionary and non-discretionary investment management services to institutional and private investors. Commissions and fees earned in respect of trust and management activities performed are included in profit or loss. Assets managed and funds administered on behalf of third parties include:

Banking activitiesAsset managementTrusts and estates 76 69Unit trusts/collective investments 6 5Portfolio management 151 127Other 18 13

251 214

Fund administrationTrusts and estates 9Unit trusts/collective investments 55 30Portfolio management 38 51Other 69 93

162 183

Geographical areaAfrica 317 307International 96 90

413 397

LibertyAsset management 53 47

Segregated funds 49 43Properties 4 4

Wealth management – funds under administration 281 276

Single manager unit trust 120 91Institutional marketing 45 53Linked and structured life products 64 84Multi-manager 11 10Rest of Africa 41 38

Total Liberty 334 323

Total assets under management and funds under administration 747 720

Included in the balances above are funds for which the fund value is determined using directors’ valuations.

AnnexureI

Third-party funds under management

351

Financial and other definitions

Standard Bank Group

Basic earnings per share (cents)

Earnings attributable to ordinary shareholders divided by the weighted average number of ordinary shares in issue.

Board Standard Bank Group board of directors.

CAGR (%) Compound annual growth rate.

Capital adequacy ratio (%)

Capital as a percentage of risk-weighted assets.

Diluted earnings per ordinary share (cents)

Earnings attributable to ordinary shareholders divided by the weighted average number of shares, adjusted for potential dilutive ordinary shares resulting from share-based payments and related hedges.

Dividend cover (times) Headline earnings per share divided by dividend per share.

Dividend per share (cents)

Total dividends to ordinary shareholders in respect of the year. Dividend is calculated using the cash component of any distribution where an election to receive scrip was available.

Dividend yield (%) Dividend per share as a percentage of the closing share price.

Earnings yield (%) Headline earnings as a percentage of the closing share price.

Headline earnings (Rm) Determined, in terms of the circular issued by the South Africa Institute of Chartered Accountants at the request of the JSE, by excluding from reported earnings-specific separately identifiable remeasurements net of related tax and non-controlling interests.

Headline earnings per ordinary share (cents)

Headline earnings divided by the weighted average number of ordinary shares in issue.

Net asset value (Rm) Equity attributable to ordinary shareholders.




Financial and other definitions | continued

Net asset value per share (cents)

Net asset value divided by the number of ordinary shares in issue at year end.

Profit attributable to ordinary shareholders (Rm)

Profit for the year attributable to ordinary shareholders, calculated as profit for the year less dividends on non-redeemable, non-cumulative, non-participating preference shares declared before year end, less non-controlling interests.

Profit for the year (Rm) Income statement profit attributable to ordinary shareholders, non-controlling interests and preference shareholders for the year.

Return on equity (ROE) (%)

Headline earnings as a percentage of monthly average ordinary shareholders’ funds.

Shares in issue (number)

Number of ordinary shares in issue as listed on the exchange operated by the JSE.

SBG or the group Standard Bank Group.

Turnover in shares traded (%)

Number of shares traded during the year as a percentage of the weighted average number of shares.

Weighted average number of shares (number)

The weighted average number of ordinary shares in issue during the year as listed on the JSE.

Banking activities

Cost-to-income ratio (%)

Operating expenses as a percentage of total income, including share of profit from associates and joint ventures and gains of the disposal of subsidiaries.

Credit loss ratio (%) Total impairment charges on loans and advances per the income statement as a percentage of average daily and monthly gross loans and advances.

Effective tax rate (%) Direct and indirect taxation as a percentage of income before taxation.

Gross specific impairment coverage ratio (%)

Balance sheet impairments for non-performing specifically impaired loans as a percentage of specifically impaired loans.

Net interest margin (%) Net interest income as a percentage of daily and monthly average total assets, excluding derivative assets.

Non-interest revenue to total income (%)

Non-interest revenue as a percentage of total income.

Portfolio credit impairments (Rm)

Impairment for latent losses inherent in groups of loans and advances that have not yet been specifically impaired.

Return on equity (ROE) (%)

Headline earnings as a percentage of monthly average ordinary shareholders’ funds. Liberty’s headline earnings and capital are excluded.

Risk-weighted assets (Rm)

Determined by applying prescribed risk weightings to on- and off-balance sheet exposures according to the relative credit risk of the counterparty.

Specific credit impairments (Rm)

Impairment for loans and advances that have been classified as non-performing and specifically impaired, net of the present value of estimated recoveries.

353

Other definitions

Additional increment To enhance the retention component of the DBS, additional increments of the deferred award become payable at vesting and one year thereafter. This feature was replaced by notional dividends for awards in respect of the 2011 and future financial years.

Black African, Coloured, Indian and South African Chinese people (who fall within the ambit of the definition of black people in the relevant legislation as determined by court ruling).

Black economic empowerment (BEE)

Socioeconomic term concerning formalised initiatives and programmes to enable historically disadvantaged black individuals and groups to participate gainfully and equitably in the mainstream economy.

CPI (%) A South African index of prices used to measure the change in the cost of basic goods and services.

Deferred acquisition costs The direct and indirect costs incurred during the financial period arising from the writing or renewing of investment contracts without discretionary participation features (DPF), which are deferred to the extent that these costs are recoverable out of future premiums.

Deferred revenue liability (DRL) Initial and other front-end fees received for the rendering of future investment management services relat-ing to investment contracts without DPF, which are deferred and recognised as revenue when the related services are rendered.

Discretionary participation fea-tures (DPF)

A contractual right given to a policyholder to receive, as a supplement to guaranteed benefits, additional benefits that are:

likely to be a significant portion of the total contractual benefits whose amount or timing is contractually at the discretion of the issuer, and that are contractually based on the:

performance of a specified pool of contracts or a specified type of contract realised and/or unrealised investment returns on a specified pool of assets held by the issuer, or profit or loss of the company, fund or other entity that issues the contract.

Exposure at default (EAD) Counterparty’s expected exposure to the group at the time a default occurs.

Financial soundness valuation (FSV)

The valuation methodology used to value insurance contracts and investment contracts with DPF as described in Professional Guidance Note (PGN) 104 issued by the Actuarial Society of South Africa.

International Financial Reporting Standards (IFRS)

International Financial Reporting Standards issued by the International Accounting Standards Board (IASB).

Loss given default (LGD) Amount of a counterparty’s obligation to the group that is not expected to be recovered after default and is expressed as a percentage of the EAD.

Normalised results The financial results and ratios restated on an economic substance basis to reflect the group’s view of the economic and legal substance of certain defined arrangements – refer to pages 70 to 72 of the annual integrated report.

Probability of default (PD) Probability of a counterparty not making full and timely repayment of credit obligations over a specific time horizon.

Reinsurance Insurance or investment risk that is ceded to another insurer in return for premiums. The ultimate obligation to the policyholder remains with the entity who issued the original insurance contract.

Risk appetite An expression of the maximum level of residual risk that the group is prepared to accept in order to deliver its business objectives.

Structured entity (SE) An entity created to accomplish a narrow and well-defined objective.

Tutuwa initiative The Tutuwa initiative is the group’s black economic empowerment ownership initiative entered into in terms of the Financial Sector Charter.



Acronyms and abbreviations

A

ABL African Bank Limited

AGM Annual general meeting

AIRB Advanced internal ratings-based

ALBI All Bond Index

ALCO Asset and liability committee

AMA Advanced measurement approach

ANA Automated notes acceptor

APN Advisory practice note

AOA Angolan kwanza

ASSA Actuarial Society of South Africa

ATM Automated teller machine

B

Banks Act South African Banks Act 94 of 1990

BASA Banking Association of South Africa

Basel Basel Capital Accord

BCBS Basel Committee on Banking Supervision

BCM Business continuity management

BEE Black economic empowerment

BG1 Blue Granite Investments No. 1 (RF) Limited




Blue Banner

Blue Banner Securitisation Vehicle RC1 Proprietary Limited

Board Standard Bank Group Board of Directors

BoBC Bank of Botswana certificate

BSI Banco Standard de Investimentos S.A.

bps Basis point

BTC Blue Titanium Conduit (RF) Limited

BWP Botswana Pula

C

CAR Capital adequacy requirements

CCI Consumer credit insurance

CCP Central counterparty

CDM Clean Development Mechanism

CDS Credit default swaps

CET I Common equity tier I

CGT Capital gains taxation

CGU Cash-generating unit

CIB Corporate & Investment Banking

CLR Credit loss ratio

CoE Cost of equity

Companies Act/ the Act

South African Companies Act 71 of 2008

CPI Consumer price index

CR Country risk grade

CRD Capital requirements directive

CRO Chief risk officer

CRR Capital requirements regulation

CSDP Central Securities Depository Participant

CSI Corporate social investment

CTO Chief technology officer

The code The group’s code of ethics

The company

Standard Bank Group Limited

D

DAC Deferred acquisition cost

DBS Deferred bonus scheme

DPF Discretionary participation feature

DRC Democratic Republic of Congo

DRL Deferred revenue liability

D-SIB Domestic systemically important banks

355

E

EAD Exposure at default

EGS Equity growth scheme

ERC Group equity risk committee

ETF Exchange traded fund

EUR Euro

Exco Group executive committee

F

FCTR Foreign currency translation reserve

FDI Foreign direct investment

FIC Fixed income and currencies

FICC Fixed income, currency and commodity

FIRB Foundation internal ratings-based

FMI Fan Milk International

FSB Financial Services Board

FSV Financial Soundness Valuation

FTSE Financial Times Stock Exchange

FTT Financial transaction tax

G

G20 Group of Twenty

GAC Group audit committee

GBP British pound sterling

GBCSA Green Building Counsel of South Africa

GBRC Group business risk committee

GCCO Group chief compliance officer

GCROC Group control and risk oversight committee

GDP Gross domestic product

GFCC Group financial crime control

GHS Ghanaian cedi

GIA Group internal audit

GMOA Global markets outside Africa

GPFV Gross positive fair value of derivatives

G

GRCMC Group risk and capital management committee

GROC Group risk oversight committee

G-SIB Global systemically important banks

GSIS Group share incentive scheme

GSTRAC Group risk appetite and stress testing committee

The group Standard Bank Group

H

HQLA High quality liquid assets

I

IAS International accounting standards

IASB International Accounting Standards Board

IBNR Incurred but not reported

ICAAP Internal capital adequacy assessment process

ICAS Independent Counselling and Advisory Services

ICBC Industrial and Commercial Bank of China Limited

ICR Individual capital requirement

IFC International Finance Corporation

IFRS International Financial Reporting Standards

IMF International Monetary Fund

Inbursa Grupo Financiero Inbursa SAB

Income Tax Act South African Income Tax Act 58 of 1962

IOR Integrated operational risk

IRB Internal ratings-based

IRRBB Interest rate risk in the banking book

IPS EP Integrated Processing Solutions Electronic Payments Proprietary Limited

ISDA International swaps and derivatives

IT Information technology



Acronyms and abbreviations | continued

J

JIBAR Johannesburg interbank agreed rate

JSE JSE Limited, the licensed securities exchange in Johannesburg

K

KES Kenyan shilling

KFI Key financial indicator

King Code The Code of Corporate Practices and Conduct set out in the King Report on Corporate Governance for South Africa 2009

L

LCR Liquidity coverage ratio

LGD Loss given default

LibFin Liberty Financial Solutions

Liberty Liberty Holdings Limited and its subsidiaries

LIBOR London interbank offer rate

M

MAR Market abuse regulation

MOI Memorandum of Incorporation

MSCI An index created by Morgan Stanley Capital International (MSCI) which is designed to measure equity market performance in global emerging markets

N

NAD Namibian dollar

NAV Net asset value

NCD Negotiable certificates of deposit

NCR National Credit Regulator

NGN Nigerian naira

NPL % Non-performing loans percentage

NSFR Net stable funding ratio

NSX Namibian Stock Exchange

NT National Treasury

O

OCI Other comprehensive income

OHS Occupational health and safety

Oltio Oltio Holding Proprietary Limited

OTB Out of the Blue Originator Proprietary Limited

OTC Over the counter

P

PBB Personal & Business Banking

PD Probability of default

PGN Professional guidance note

PIC Public Investment Corporation

PoPI Protection of personal information

Prime The prime interest rate

PRP Performance reward plan

PVIF Present value of in-force

Q

QRRE Qualifying retail revolving exposure

Quanto Quanto stock unit scheme

357

R

R South African rand

Rbn Billions of rand

RAPM Risk-adjusted performance measurement

RAS Risk appetite statement

RCS RCS Investment Holdings Proprietary Limited

RCCM Risk compliance and capital management

RDR Retail distribution review

REIPPP Programme

Renewable Energy Independent Power ProducerProcurement Programme

Remco Remuneration committee

Retail SA Liberty’s retail business in South Africa

Rm Millions of rand

ROE Return on equity

ROU Right of use

RUR Rating under review

RWE Rating watch evolving

RY Real yield

S

SAHL South African Home Loans Proprietary Limited

SAICA The South African Institute of Chartered Accountants

SAM Solvency assessment management

SAP Standard of Actuarial Practice

SARB The South African Reserve Bank

SB Sovereign risk grade transfer and convertibility

SB-Debtors SB-Debtors Discounting No. 1 Proprietary Limited

SBG Standard Bank Group

SBLH Standard Bank London Holdings Limited

SBGRF Standard Bank Group Retirement Fund

SBSA The Standard Bank of South Africa Limited

SB Plc Standard Bank Plc

SCMB Standard Corporate and Merchant Bank

SE Structured entity

SIH Standard International Holdings

SIL Standard Insurance Limited

Siyakha Siyakha Fund (RF) Limited

S

SME Small and medium enterprises

SOFP Statement of financial position

STRATE Strate Limited – Central Securities Depository for electronic settlement of financial instruments in South Africa

SVaR Stressed value-at-risk

T

T-Bill Treasury bill

Tabistone Tabistone 06 (RF) Limited

TCF Treating customers fairly

TCM Treasury and capital management

Tier I Primary capital

Tier II Secondary capital

Tier III Tertiary capital

TPS Transactional products and services

Tutuwa Black economic empowerment ownership initiative

Tutuwa 1 Tutuwa Strategic Holdings 1 Proprietary Limited

Tutuwa 2 Tutuwa Strategic Holdings 2 Proprietary Limited

TZS Tanzanian shilling

U

UGX Ugandan shilling

UK United Kingdom

US United States of America

USD United States dollar

V

VaR Value-at-risk

VAT Value Added Tax

W

WA Weighted average

Z

ZAR South African rand



Online

Head: Investor relationsDavid KinseyTel: +27 11 631 3931

Group secretaryZola StephenTel: +27 11 631 9106

Chief financial officerSimon RidleyTel: +27 11 636 3756

Registered address9th Floor, Standard Bank Centre5 Simmonds StreetJohannesburg 2001PO Box 7725Johannesburg 2000

Contact detailsTel: +27 11 636 9111Fax: +27 11 636 4207

DisclaimerThis document contains certain statements that are ’forward-looking’ with respect to certain of the group’s plans, goals and expectations relating to its future performance, results, strategies and objectives. Words such as “may”, “could”, “will”, “expect”, “intend”, “estimate”, “anticipate”, “aim”, “outlook”, “believe”, “plan”, “seek”, “predict” or similar expressions typically identify forward-looking statements. These forward-looking statements are not statements of fact or guarantees of future performance, results, strategies and objectives, and by their nature, involve risk and uncertainty because they relate to future events and circumstances which are difficult to predict and are beyond the group’s control, including but not limited to, domestic and global economic business conditions, market-related risks such as fluctuations in interest rates and exchange rates, the policies and actions of regulatory authorities (including changes related to capital and solvency requirements), the impact of competition, inflation, deflation, the timing impact and other uncertainties of future acquisitions or combinations within relevant industries, as well as the impact of changes in domestic and global legislation and regulations in the jurisdictions in which the group and its affiliates operate. The group’s actual future performance, results, strategies and objectives may differ materially from the plans, goals and expectations expressed or implied in the forward-looking statements. The group makes no representations or warranty, express or implied, that these forward-looking statements will be achieved and undue reliance should not be placed on such statements. The group undertakes no obligation to update the historical information or forward-looking statements in this document and does not assume responsibility for any loss or damage arising as a result of the reliance by any party thereon.

Website: www.standardbank.com

Please direct all annual report queries and comments to: [email protected] direct all customer-related queries and comments to: [email protected] direct all investor relations queries and comments to: [email protected]

Contact details

Standard Bank Group LimitedRegistration No. 1969/017128/06 Incorporated in the Republic of South Africa

www.standardbank.com

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