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NEDNAMIBIA HOLDINGS LIMITEDAnnual Report 2006

for you

We

CONTENTS

Profile, vision, mission and values 1

NedNamibia Holdings group structure 2

Board of directors 4

Executive committee of Nedbank Namibia 6

Chairman’s report 8

Managing director’s review 10

Value added statement 14

Corporate governance report 15

Directors’ responsibility 26

Report of the independent auditors 27

Statement of actuarial value of

assets and liabilities of Coversure Limited 28

Report of the directors 31

Balance sheets 34

Income statements 35

Statements of changes in equity 36

Cash flow statements 38

Notes to the annual financial statements 39

Notice of the annual general meeting 91

Contact details 92

Proxy form 93

Nedbank Namibia provides a comprehensive range of domesticand global services to individual,corporate and international clients through its growing network of branches

1

ProfileNedNamibia Holdings Limited

(“NedNamibia Holdings” or “the

Company”) is the holding company for

subsidiaries (“the Group”) offering a

wide range of financial services

including commercial banking, micro

lending and wealth management with

total assets of N$4,76 billion. The

principal subsidiary is Nedbank

Namibia Limited (“Nedbank Namibia”

or “the Bank”).

Nedbank Namibia is a registered

Namibian bank, with its head office

based in Windhoek.Well capitalised by

international standards, the Bank has

assets of N$4,24 billion.

Nedbank Namibia provides a

comprehensive range of domestic and

global services to individual, corporate

and international clients through a

growing branch network. The

combination of an intensive

understanding of the Namibian

market and the strong support of

its shareholder makes it an uniquely

competitive force in its market.

VisionWe are committed to be our nation’s

number one choice in banking.

Mission• Provide our existing and potential

clients with innovative banking

solutions that meet their needs.

• Create an environment conducive to

the development and growth of all

employees that will create value for

all our stakeholders.

• Sustainably grow our business

through the expertise and

commitment of our people and

shareholders.

• Commit ourselves to diversity –

our strength is in our people.

ValuesAccountability – To be prepared to

make commitments and be judged

against our commitments, to deliver

on those commitments and to be

responsible for our actions.

Integrity – To be honest, trustworthy,

truthful, consistent and open in all of

our conduct and decisions.

Pushing beyond boundaries – To

recognise our obligation to the entire

organisation – to push beyond the

limits of what is best for us

individually, or as a Group or unit and

strive to break new ground – fuelled

by our passion and commitment.

Respect – To recognise the inherent

worth of every human being and to

treat all people accordingly.

People-centred – We invest in our

people and create empowering

environments through development,

support, mentoring, coaching, valuing

diversity, recognition and reward.

PROFILE, VISION, MISSION AND VALUES

2 NedNamibia 2006 Annual Report

NEDNAMIBIA HOLDINGS GROUPSTRUCTURE

Nedbank Limited

NedNamibia HoldingsLimited

Minorityshareholders

Nedgroup Investment Holdings 101 Limited

NIB Holdings (Namibia)(Proprietary) Limited

Nedbank GroupLimited

Nedbank NamibiaLimited

Commercial banking

Coversure LimitedLong-term insurance

100%

100%

3,39%

100%

90,50%

100%

100%100%100%

100%

6,11%

100% 25% 80%

NedCapital Namibia (Proprietary) Limited

Specialised financial service

Bellissima InvestmentsSeventy Two (Proprietary)

LimitedProperty Holding Company

NedPlan Insurance Brokers Namibia

(Proprietary) LimitedInsurance broker

CBN Nominees(Proprietary)

Limited Safe custodian

services* Dormant company

Ten Kaiser Wilhelm Strasse

(Proprietary) LimitedProperty holding

Walvis Bay Land

Syndicate (Proprietary)

LimitedProperty holding

100% 100% 100%

NIB Mining Finance(Proprietary) LimitedSpecial purpose vehicle for

a project finance transaction

Manco Management Company (Proprietary)

Limited** Dormant company

African MiningCompany Limited*

Mining private equity fund* Dormant company

50% 50%

Namclear(Proprietary)

LimitedClearing service

provider

NedLoans (Proprietary)

LimitedMicrolending

administration

3

NEDNAMIBIA HOLDINGS FOOTPRINT

More branches.More staff.More opportunitiesfor us

for you

Cultural dancers at theinauguration of theNedbank Centre, Oshikango

His Excellency PresidentHifikepunye and the FirstLady Madam PenexupifoPohamba, Her Majesty,queen Martha KlisianNelumbu of OukwanyamaTraditional Authority, and Mrand Ms Shipanga from TuskInvestment (Proprietary)Limited, the developer of theNedbank Centre

Pangwa Gabriel, Her Majestyqueen Martha KlisianNelumbu and Bill Turton –The queen received the firstNedbank Oshikango branchcheque account from themanaging director

BOARD OF DIRECTORS

Theo J FrankChairmanIndependent non-executive director*BA Law, LLB, Dip Bus Man, Cert Tax Law

Senior counsel and former judge of the High Court ofNamibia, chairs companies in the fishing and short-terminsurance industry. He is chairman of both NedNamibiaHoldings and Nedbank Namibia.

William E TurtonManaging directorBTech (Bus Admin), MTech (Bus Admin), EDP (USB), SMDP(Wits), certificated associate and elected fellow of Instituteof Bankers (SA)

William has held numerous positions in the Nedbank Group

over the past 27 years. He was regional manager of the

Group’s business banking division for five years until

becoming managing director of Nedbank Namibia.

Denys DenyaNon-executive director

BACC (Hons), MBA, ACIS, CA(Z)

A thorough knowledge of themerchant banking and finance sectorsin Africa, developed over an 11-yearcareer most recently as managingdirector of MCBA Bank Limited. Denysis presently the managing director ofNedbank Africa division, based inJohannesburg, South Africa.

Johannes !GawaxabNon-executive directorBA, BCom, MA, MBL

Managing director of Old MutualNamibia Limited and member ofthe board of the Namibian StockExchange, with extensive experiencein the financial services industry.Johannes is also managing director ofOld Mutual’s African operations.

Sebulon I KankondiIndependent non-executivedirector*Degree in business administration, SMP(USB), marketing management (UCT),mechanical engineering diploma

Managing director of Namibian PortsAuthority, with in-depth knowledge oflogistics in southern Africa andinternational markets. He is alsochairman of Namibia Post.


5

Christopher J PearceIndependent non-executivedirector*BCom, CA(SA), AMP (Harvard)

Over 30 years’ experience in thebanking industry, former managingdirector of Nedcor Investment BankLimited.

Rolf H PetersIndependent non-executivedirector*BCom, BCompt (Hons), CA(SA),CA(Namibia)

Managing partner of Grant ThorntonNeuhaus with over 30 years’experience in the auditing professionacross all sectors of the Namibianeconomy. Past president of theInstitute of Chartered Accountants ofNamibia and past chairman of thePublic Accountants and Auditors Boardof Namibia.

Martin K ShipangaIndependent non-executivedirector*BCom (Wits), MSc Public Policy andAdministration (ISS), Leadership andManagement (Virginia), EDP (Harvard)

Executive chairman of SmartswitchNamibia (Proprietary) Limited andvice president of Net1 Inc. With over10 years’ executive managementexperience in both the public andprivate sectors, Martin is particularlyinterested in finance and businessdevelopment. Director of variouspublic and private companies.

Heinz M WeilertNon-executive directorBCom, BCom (Hons), CA(SA), MCom,FIISA

Currently divisional director of strategy for Nedbank InvestorServices, Heinz has particularexperience in business developmentand customer value management.

* Benchmarked against Bank of Namibia’s definition of an independent director.

Mark R WestonNon-executive directorBCA, CA(New Zealand), AMP(Harvard)

Managing Director, Specialised Financeof Nedbank Capital. He has extensiveexperience in investment bankingand strategic planning, as well asgovernance and regulatory issues.

EXECUTIVE COMMITTEE OF NEDBANK NAMIBIA

William E TurtonManaging directorA seasoned banking professional, William was appointedmanaging director in July 2006 to head the team managingthe bank. In a career spanning 27 years with the NedbankGroup, William has held a number of challenging positions,most recently in Business Banking.

William has both a BTech and MTech in businessadministration, and has completed a number of executivedevelopment courses with the universities of Witwatersrandand Stellenbosch. He is also a fellow of the Institute ofBankers in South Africa.

George GoldridgeExecutive: Shared ServicesGeorge has nine years’ experience in the banking industrywith in-depth understanding of Nedbank’s operations inAfrica, having headed the technology and support servicesdivisions of Nedbank Swaziland and Lesotho before joiningNedbank Namibia in December 2006. His mandate is toestablish and manage a shared services model for the Bank,which includes centralised operations, technology andelectronic banking.

Elina HaipingeExecutive: Human Resources andStrategy

Elina is spearheading the initiative

to entrench global best practice in

performance management and talent

development within the Bank. She has

a masters degree in corporate strategy

and economic policy from the

School of Management Maastricht,

Netherlands.

Johannes C JurgensChief Financial Officer

Johannes has 19 years’ banking

experience, mostly in the financial

planning division. Johannes holds a

BCompt (Unisa) degree and has been

a member of the Bank’s senior

management team since 1991.

Rector MuteloExecutive: Marketing andCommunications

Rector holds a masters degree inmanagement from Emerson College,Boston, USA. In a lengthy careerwith the Namibian BroadcastingCorporation, Rector was generalmanager for corporate marketing,communication and businessdevelopment. He is spearheading anactive marketing campaign in theBank, in tandem with an expandingbranch network and broadeningcustomer base. Rector has beenseconded to South Africa for aperiod of 12 months training on askills exchange basis with NedbankSouth Africa.


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Abri NelExecutive: Corporate and Business

Abri brings extensive experience in thecorporate banking sector, gained inSouth Africa and Namibia. He holds aBachelor of Economics (Hons)majoring in money and banking fromthe University of the Free State.

Heleena Ries von BergenExecutive: Treasury andInternationalHeleena has nine years’ experience inthe dealing market, most recently asChief Dealer. She has a BCom degreefrom the University of the Free Stateand has completed several courses aspart of her ongoing education anddevelopment.

Mark VivierExecutive: Retail Banking

Mark has 22 years’ experience in thebanking industry, mostly in the retailenvironment. His banking career hasafforded him the opportunity to workin London, Belgium and France onvarious projects and assignments.Mark’s responsibilities for retail bankingoperations include the branch network,micro lending, SMEs, external sales andthe bank brokerage division. He holds aMBA degree (cum laude) from theUniversity of Stellenbosch, an Honoursin Financial Management (University ofCape Town), an Honours in BusinessAdministration (University ofStellenbosch) and a BCom (Unisa). Hehas also completed a number ofDevelopment and Leadership courseswith Nedbank.

André J VenterChief Risk Officer

Responsible for credit risk, internalaudit, operational risk and legalservices and compliance. Over thepast 14 years, André has developedbroad expertise in finance and riskmanagement, particularly in businessbanking and micro lending. He has aBCom – managerial accountingdegree and has completed variousmanagement and leadership coursesin recent years.

for you

TThheeoo FFrraannkk

Our peopleare critical toour success

ForewordIn line with our Group slogan of MAKE

THINGS HAPPEN, a highlight of the

year was the announcement of our

black economic empowerment (“BEE”)

transaction in October.

At that time, the Old Mutual Group

unveiled the largest BEE transaction in

Namibia, which will result in a broad

range of black shareholders acquiring

direct ownership of 12,64% valued at

N$308 million in the listed Old

Mutual plc Group. Collectively, over

250 000 black Namibians are

expected to benefit from this

transaction including employees,

strategic business partners,

distributors, trade union members and

their families, women’s organisations

and church groups. The initiative

incorporates three separate, but

interdependent, BEE transactions for

Group subsidiaries in the country,

namely Old Mutual Namibia,

Nedbank Namibia and Mutual &

Federal Namibia.

Nedbank Group Limited shares to the

equivalent of 11,13% of the value of

NedNamibia Holdings (N$67,4 million)

will be transferred to principally black

shareholders and our own employees.

Our people are critical to our success

and these shares will be used to retain

and incentivise management and staff.

By reserving a significant portion of

shares for the benefit of current and

future black managers and employees,

this transaction will help to transform

and develop a more dynamic and

effective workforce.

The results for the Group are largely

influenced by its principal subsidiary,

Nedbank Namibia. With the BEE

transaction, the new information

technology platform and the

necessary internal structures to

enhance prudent risk management in

place, we are confident that the

Group’s structure is such to ensure

its future competitiveness.

An integral element in becoming the

nation’s first choice in banking is our

role as a responsible corporate citizen.

To update shareholders on

the progress we have made in recent

years, a separate social report is

included with this annual report,

outlining our commitment to

sustainable development and our

focus on entrepreneurship, education

and health. We are confident that we

are making a difference in the lives

of Namibians through sustainable

income-generating opportunities,

enhancing skills in critical disciplines

such as mathematics and science

and in the healthcare area through

education, prevention and treatment.

Global trendsInternational economic conditions

remained very supportive in 2006. On

a purchasing power parity basis, the

global economy expanded by around

5% for the fourth consecutive year.

The United States again drove the

demand side, with consumers

remaining confident despite higher

interest rates, increased debt and a

flagging housing market, while a

further acceleration in the growth of

Chinese manufacturing production

and infrastructural spending remained

the key feature on the output side.

However, growth was more evenly

spread in 2006, with stronger

performance in Europe and Japan and

most emerging market economies

doing well. Global liquidity continued

to build as the current account

surpluses of oil producers, China and

other Asian countries were recycled

back into western capital markets.This

helped support asset prices, with

global equity markets rising by a

significant 18% in US Dollar terms,

according to the Morgan Stanley

capital index. Most of the top-

performing markets were in Asia and

CHAIRMAN’S REPORT


Namibia has done well in maintaining

relatively high growth rates, but the

challenges of diversifying the economy

away from areas that are subject to

volatile conditions and of creating

additional employment opportunities

remain. Ideally projects that use

Namibia’s comparative advantages

should be encouraged, while the general

cost of doing business needs to be

addressed to make the country a viable

competitor for foreign direct

investment.

AppreciationWilliam Turton took over as managing

director of both NedNamibia

Holdings and Nedbank Namibia in

July 2006, replacing Craig Cloete who

did an admirable job in an acting

capacity. William is a seasoned banker

in all aspects of banking and his

mandate from the board is to manage

the Group through its current

expansion and localisation phase,

working closely with a Namibian

deputy managing director.

I wish to thank my fellow board

members and the Group’s

management teams for their

commitment and continued support

during the year.

Theo Frank

Chairman

also had its challenges and less

livestock was brought to market as

farmers rebuilt their herds.

Secondary activity came under

pressure in 2006. Manufacturing

activity linked to farming and fishing

was impeded by developments at the

primary level and construction activity

was hampered by higher materials

costs and higher interest rates.

However, the tertiary sector benefited

from continued strong consumer

spending, with the wholesale and

retail trade and the hotel and

restaurant sectors doing well.

Monetary sector developments move

in line with South Africa’s, given the

one-to-one relationship between the

Namibian Dollar and the Rand. The

Namibian Dollar fell by just over 9%

against the US Dollar after a volatile

year. Emerging market currencies

came under the spotlight in May

when there were heightened

concerns over economies running

current account deficits. Although

Namibia runs a surplus, neighbouring

South Africa’s deficit has grown

strongly in recent years. The South

African Reserve Bank hiked its

repurchase rate from 7% to 9% in an

attempt to cool off consumer credit

and rising import demand. The Bank

of Namibia, raised its repurchase rate

from 8% to 10%.

OutlookGrowth is expected to rise towards

the 5% level in 2007 as mining output

continues to expand, driven by higher

diamond and uranium production.

Increased refining activity of copper

and zinc will also help boost

manufacturing activity. Fishing is

likely to remain depressed given

unfavourable resource trends and this

will impact negatively on both the

primary and secondary sectors of the

economy. The full effect of interest

rate hikes will be felt in 2007. This

could cool consumer spending to

some degree, although interest rates

are probably fairly close to

their peaks.

Europe, with the US and Japan under

performing in relative terms.

Strong economic activity and

increased liquidity boosted

commodity prices to record levels.

The Economist magazine’s all-

commodities index rose by 27% in

US Dollar terms, with the metals index

rising by an even more impressive

48,6% over the year. Although

precious metals such as gold and

platinum rose significantly, base

metals did particularly well, with some

(such as copper and nickel) rising into

unchartered territory. Unfortunately,

despite this generally upbeat

environment, rough diamond prices

eased slightly after a relatively quiet

2005.

The year ahead is expected to see

some consolidation following the

growth of 2006. Global growth is

likely to moderate in response to

tighter monetary policies and the

softening in the US and other housing

markets. However, so far, households

have shown resilience and have also

been helped by some easing in energy

prices. Growth in China will also

remain strong ahead of the 2008

Olympics, with spending on

infrastructure continuing. Although

certain commodity prices could see

corrections after the massive

increases of the past two years, the

overall environment is expected to

remain relatively favourable for

commodity-orientated countries.

Local developmentsNamibia’s economic growth

accelerated to around 4,5% in 2006

from just over 4% in 2005. One of the

key drivers was higher mining output.

New developments in zinc and

uranium helped boost the sector’s

contribution to the economy. Other

areas of primary production remained

depressed. Fishing has been under

pressure for several years, with lower

quotas being imposed in response to

poor oceanic conditions. Higher fuel

prices in 2006 saw further pressure

being placed on this sector.Agriculture

9

for you

WWiilllliiaamm EE TTuurrttoonn

Emerging betterequipped to offerthe services andcontrolsdemanded ofa financialinstitution.

The 12 months to 31 December 2006

certainly reinforced the Group slogan

of make things happen. As the

chairman has noted, our

empowerment transaction broke new

ground in Namibia for both its size

and number of shareholders sharing in

the benefits. We localised our

operations by migrating to a new

technology platform that offers

numerous benefits for our Group, our

people and our customers and we

strengthened internal structures in

line with best practice.

The migration to the new technology

platform was a challenging process,

which impacted on both our employees

and customers. However, we have made

significant progress in addressing the

efficiencies of the system.

At the Old Mutual Group level,

excellent progress was made during

the year in developing a strategy to

capitalise on considerable synergies

between the Group’s long-term,

short-term and financial services

interests in Namibia. Teams from Old

Mutual Namibia, Nedbank Namibia

and Mutual & Federal Namibia

will work together on identified

bancassurance projects to increase

Group revenue and reduce expenses

while enhancing customer service and

increasing market share.

To ensure that the NedNamibia

Group further enhances its prudent

risk management and control

environment and fully complies with

new financial services regulations,

appropriate changes were made to the

Group’s internal structures during the

year. A seasoned professional was

appointed as Chief Risk Officer and

relevant departments consolidated

under this function. In addition, the

consolidation of several support

divisions under the management of

a newly appointed executive will

ensure cost savings by eliminating any

duplicated services and processes,

optimising synergies and enhance the

services provided to our core

operations.

Financial resultsThe review period was characterised by

the significant investment in

converting the Bank’s core services and

systems from South Africa to Namibia-

based. A vital component of this

change was the advent of a new

technology platform, whose numerous

benefits are detailed in the relevant

sections but essentially hinge on

customer service, product development

and regulatory compliance.

During the year under review

Nedbank Namibia incurred significant

additional costs arising from

difficulties experienced during the

conversion to the new technology

platform as well as increased

provisioning due to rising interest

rates and the growth in the Bank’s

term lending book.

Against this background, the Group

recorded a net income before tax of

N$65,7 million compared to N$129

million in 2005. Net income

attributable to ordinary shareholders

was N$38,9 million, with shareholders’

funds at N$366,6 million. Nedbank

Namibia, the major subsidiary of the

Group, has a capital adequacy ratio of

11.7%, which is above the statutory

requirement of 10%.

The cost-to-income ratio increased

from 56% in 2005 to 72% in 2006,

primarily as a result of the costs

incurred with the BEE transaction and

the introduction of the new

technology platform.

MANAGING DIRECTOR’S REVIEW


The electronic banking unit within the

division successfully migrated to its

new internet banking platform during

the year. This entirely web-based

system offers tailored solutions for

corporate and business banking

clients. Services will be further

enhanced in the new year with the

introduction of innovative and

specialised products for electronic

banking clients.

Treasury and internationalDuring the year, the local currency

depreciated against major currencies.

Although rising interest rates reduced

trading activity in the money market,

demand remained steady, especially in

the bond market.

The challenges of the past financial year

also impacted on the performance

of the Treasury division, which

continuously strives to enhance its

services to the Bank’s customers and

strengthen its customer base through

intensified marketing and the

identification of new business

opportunities. The global trade team is

particularly instrumental in these

initiatives. Aided by the move of

Treasury and the dealing room to our

new business centre, a number of

enhancements have already been

introduced with an extended product

range offering.

In the new financial year, the treasury

division expects to expand its product

range and further enhance client

service.

Risk managementIn line with international financial best

practice, the risk management

function was formalised during the

year to ensure that all risks are

identified, evaluated, managed,

monitored and reported. Accordingly,

and guided by an enterprise-wide-risk

framework, the functions of credit risk,

operational risk, legal services and

compliance and internal audit were

centralised under this division with

micro lending business of NedLoans

Namibia, which retains its dominant

position in this sector against increasing

competition.

Progress was made on a feasible

bancassurance strategy and selected

projects identified for further

development. These are expected to

deliver significant opportunities for

cross-selling and cost savings for the

partners – Old Mutual Namibia, Mutual

& Federal Namibia and Nedbank

Namibia.

In the new financial year, the focus will

be on further enhancing customer

service through a range of initiatives,

expanding the branch network.

Corporate and businessbankingIn line with our strategy of expanding

our services, this division was

segmented into corporate and business

banking units.These units focus on large

and mid-sized companies. Experienced

relationship managers are ensuring that

the unique needs of the business-

banking market are met through the

same enhanced service levels enjoyed

by their larger peers in the corporate

market.

Results for the year were acceptable,

with much groundwork completed to

ensure a sustainable framework for the

longer term. The division secured

several key accounts, particularly in the

mining sector. An undoubted highlight

of the year was the development of the

Nedbank Namibia Business Centre,

which commenced operations during

the first quarter of 2007. This

professional corporate service centre

offers several unique features in the

Namibian market, including round-the-

clock deposit-taking and drive-through

banking facilities.

With the appropriate structures in

place, skilled teams will now be able to

capitalise on favourable business

conditions in this market.

NEDBANK NAMIBIA LIMITED

Retail bankingThe retail banking division continued

its focus on operational processes and

core product ranges during the year to

strengthen its position as a broad-

based bank.

A highlight of the year was the

significant expansion of the Bank’s retail

footprint. New branches were opened

in Oshikango in the Ohangwena region,

Maerua Mall in Windhoek and

Kuisebmond in Walvis Bay. The

Oshikango branch was opened by the

Namibian president, His Excellency

Hifikepunye Pohamba at a launch

attended by numerous dignitaries and

business leaders. This branch

incorporates the country’s first drive-

through bank teller and provides a

strategic platform to extend banking

services to local traders with Angola.

Apart from additional convenience for

bank customers, new branches create

jobs and contribute to national skills

development through training. It is

envisaged, over the next two years, to

further expand the Bank’s retail

footprint with an additional drive-

through teller and point-of-sale

facilities with more ATMs in key growth

areas.

Importantly for shareholders, this

network expansion is being rolled out

cost effectively using technology to

enhance services in existing areas as

opposed to the more traditional ‘bricks

and mortar’ approach.

The second, but no less important

feature of the year was the transition to

a new technology platform. In addition

to ensuring compliance with numerous

legislative and statutory requirements,

the enhanced functionality of the new

platform enables the Bank to pass on

savings to customers as we did in July

when we maintained service fees

unchanged for the next 12 months and

reduced other charges.

The same technology platform

supported continued growth in the

11

direct reporting lines to board

subcommittees. These consolidated

resources will improve the

management of strong credit growth

and a more stringent regulatory

environment.

The benefits of a focused risk

management division were reflected

during the year in the successful anti-

money laundering campaign, which

raised awareness on current practices

and equipped staff to deal with this

issue appropriately.

In the new year, the division will

continue to be strengthened with a

number of new initiatives to be

implemented. Anticipated short-term

benefits include managing the quality

of business, enhancing customer service

through rapid, qualified credit decisions

and accelerated development of

tailored product ranges.

Shared servicesDuring the year, the process of

integrating support functions into a

co-ordinated shared services division

was initiated. Upon completion in the

first half of 2007, the division will

incorporate central operations,

procurement, information technology

and electronic banking. This will

streamline back-office functions to

increase efficiency, productivity and

cost savings.

Information technologyThis year saw the migration to a new

operating platform, which when

fully implemented offers significant

benefits to the Bank and its customers

including enhanced flexibility, business

information systems and client

interfaces. While change on this scale

is never without its challenges, the

process was completed for all major

divisions.

Marketing andcommunicationsIn a competitive market, the Bank

has embarked on a visible and focused

marketing campaign in print and

electronic media to strengthen the

Bank’s corporate identity, promote its

comprehensive range of services

through its expanding branch network.

Given the spectrum of bank clients,

a focused initiative is under way to

engage with targeted communities

at a variety of levels – from

disseminating information about

products and competitive rates to

all clients to economic reviews for

corporate clients and interaction with

the public sector.

In tandem, and acknowledging their

role as the Bank’s foremost

ambassadors, an intensive education

campaign is being rolled out to all its

employees to optimise their product

knowledge and enhance service to

customers.

Human resourcesThe focus for much of the year was on

transferring human resources systems

to the new operating platform.

Enhanced technology has enabled

the Bank to initiate sophisticated

profiling and performance

management disciplines to underpin

personal development and job

satisfaction as well as to attract the

desired calibre of employee. Following

the project phase in 2006, the full

benefits will be evident after

implementation during 2007. The new

technology platform has enabled the

division to further improve internal

and external reporting and to provide

valuable business information and

planning services.

The implementation of the Group’s

black economic empowerment

transaction was well received among

participating employees for its

objectives of acknowledging loyal

service, attracting new members to

enhance our team and retaining

talented employees. The employee

share schemes amounted to

N$13 million. Of the staff employed

by the NedNamibia Holdings Group

at that time, 87% benefited from the

broad-based scheme and 5% from

the black management scheme.

As at 31 December 2006, the Group

employed 589 permanent and 52 non-

permanent employees. Benefiting from

its long-standing policy of employment

equity, the Bank has achieved its

demographic targets in several sectors.

Of the full staff complement 78% are

black and 67% are women. At

managerial level, achieving our target is

more challenging and several focused

initiatives are under way in 2007 to

make meaningful and measurable

progress.

As part of our commitment to

addressing the shortage of skills in the

banking sector, our employees

are encouraged and supported in

advanced related studies and

70 candidates at tertiary level entered

our students-in-training programme in

2007. Concurrently the Group’s

external bursary programme is being

reviewed to ensure identified needs are

addressed.

In June 2006, Nedbank Namibia and

Old Mutual Namibia launched a

sophisticated training centre as part

of their commitment to

continuously enhance the skills of

their employees and create a culture

of lifelong learning. While designed

to accommodate the needs of the

Bank and Old Mutual, the fully-

equipped centre will also be available

for third-party training requirements.

MANAGING DIRECTOR’S REVIEW continued


The co-location in the Nedbank

Business Centre of NedCapital with key

elements of Nedbank Namibia,

including corporate and business

banking, treasury and international

early in 2007 will further strengthen

Nedbank’s corporate and investment

banking offering in the Namibian

market.

AppreciationIt has been a challenging year for our

employees and clients, but we have

weathered this year and emerged

stronger and better equipped to offer

the services and controls demanded of

a financial institution. Thank you for

your ongoing support and loyalty.

Together, we will continue to build a

bigger, better Bank for the benefit of

all stakeholders.

OutlookThe first half of the new financial year

will be a period of consolidation as the

Group and in particular its primary

subsidiary, Nedbank Namibia,

manages all the changes introduced. A

primary focus area will be to continue

to improve our service to all our

clients.

William Edward Turton

Managing Director

entities. It has pioneered a number of

debt and equity funding initiatives for

the Group and has recently ventured

into the Angolan market where

various projects are being undertaken.

In 2006, NedCapital drove a number

of major debt origination, funding and

advisory initiatives under the

Nedbank Namibia brand, some in

cooperation with Old Mutual Namibia

and other local or regional financing

institutions. This has enabled Nedbank

to operate on a new level in the

Namibian corporate market and

increasingly in the capital-intensive,

large-project sectors, including public

infrastructure. Significant funding

and capital-raising mandates have

been secured in the energy,

telecommunications, mining and

fisheries sectors, while the Group is

short-listed for additional mandates in

these and other sectors.

NedCapital played a strong role in the

Old Mutual Group BEE transaction in

Namibia and has secured a number of

new corporate finance advisory

mandates, some with a BEE

component.

NedCapital also continued to provide

management services to its wholly-

owned subsidiary, NIB Mining Finance

(Proprietary) Limited and acquired

100% of the shares in Manco

Management Company (Proprietary)

Limited and African Mining Company

Limited, all special purpose companies

established for funding and

management of particular specialised

financing initiatives. It also continued

to provide management services to

NIB Holdings Namibia (Proprietary)

Limited, a subsidiary of Nedbank

Limited and its associate special

purpose vehicle,Woodlands Investment

Company (Proprietary) Limited.

NedLoans Namibia(Proprietary) LimitedNedLoans Namibia (Proprietary)

Limited (“NedLoans”), an 80%-held

subsidiary of the Bank, is currently the

country’s market leader in the

increasingly competitive micro lending

sector. Building on awareness created

in the prior year following the change

of name from Finance in Education

(Proprietary) Limited, NedLoans

continued to educate its target market

about responsible borrowing.

The transition to an enhanced

technology platform gives NedLoans

an important advantage in an industry

where operational efficiency supports

affordable rates for customers. The

new platform has also enhanced

productivity and turnaround times.

In 2007, the existing branch network

of NedLoans will be reviewed and

integrated, where feasible, into the

Bank network – offering customers

a single source of convenient and

comprehensive range of services.

NedCapital Namibia(Proprietary) LimitedAfter becoming a wholly-owned

subsidiary of NedNamibia Holdings

Limited in 2005, the year saw an

improved alignment and synergies

with both Nedbank Namibia and

Old Mutual Namibia. NedCapital

Namibia (Proprietary) Limited

(“NedCapital”) continued to derive

significant technical support from the

Nedbank Group, through its

investment banking unit, as well as

administrative support from Nedbank

Namibia.

NedCapital provides specialist

financing and corporate advisory

services to the Namibian public and

private sectors, corporate and BEE

13

for the year ended 31 December 2006

2006 2005

N$'000 % N$'000 %

Value added

Value added is the wealth created by NedNamibia

Holdings Limited Group through the provision of services

to clients

Interest income and non-interest revenue 589 728 484 698

Interest paid and other expenditure 416 703 270 706

173 025 213 992

VVaalluuee aallllooccaatteedd

EEmmppllooyyeeeess

Salaries, wages and other benefits 96 484 56% 73 575 35%

GGoovveerrnnmmeenntt

Taxation 25 530 15% 38 926 18%

SShhaarreehhoollddeerrss

Dividends 0 0% 32 945 15%

RReetteennttiioonnss ffoorr eexxppaannssiioonn aanndd ggrroowwtthh 51 011 29% 68 546 32%

Retained income 38 893 55 280

Depreciation 12 118 13 266

117733 002255 110000%% 221133 999922 110000%%

VALUE ADDED STATEMENT


Value added – 2006

Employees 56%

Shareholders 0%

Government 15%

Retentions for expansionand growth 29%

Value added – 2005

Employees 35%

Shareholders 15%

Government 18%

Retentions for expansionand growth 32%

CORPORATE GOVERNANCE REPORT

15

This corporate governance report

covers mainly the governance

structures of Nedbank Namibia, being

the main operational entity within the

Group.

Corporate governance andrisk monitoringCorporate governance can be defined

as the system by which corporations

are directed and controlled. Good

corporate governance seeks to protect

shareholders’ interests by balancing

entrepreneurial leadership with

transparency and control

mechanisms, without compromising

value creation and efficient decision-

making. The board of directors

continues to advocate an integrated

approach to corporate governance

and recognises that good governance

practices form an integral part of

developing and sustaining any

successful business.

Financial statementsThe directors are responsible for the

annual financial statements, which are

prepared in accordance with and

comply with International Financial

Reporting Standards adopted by the

International Accounting Standards

Board (“IASB”), and interpretations

issued by the international financial

reporting interpretations committee

of the IASB and the Namibian

Companies Act. The accounting

policies used are consistently applied,

appropriate and supported by

reasonable and prudent judgements

and estimates. The directors are

responsible for ensuring that the

financial statements fairly present the

state of affairs of the Group at the

financial year-end and the results of

its operations for the year under

review. The external auditors are

responsible for independently

Good corporategovernance protectsshareholders’interests.

for you

reviewing and reporting on the fair

presentation of these financial

statements.

Board of directorsThe NedNamibia Holdings board

comprises one executive and nine

non-executive directors, five of whom

are independent non-executive

directors in terms of the Banking

Institutions Act. The board is chaired

by an independent non-executive

director. There is a clear distinction

between the roles of the chairman of

the board and the managing director,

who is in charge of day-to-day

operations and executive management.

The Nedbank Namibia board mirrors

the composition of the NedNamibia

Holdings board, but separate meetings

are held to retain full and effective

control over the Group and the Bank.

Both boards meet quarterly.

Additional meetings may be held

when necessary.

In appointing directors, emphasis is

placed on retaining the balance of

skills, knowledge and experience

necessary for achieving strategic

objectives. The non-executive directors

are actively involved in board

deliberations and discussions and bring

independent judgement to the board.

The diversity and demographics of the

board are presently being addressed to

provide an appropriate mix.

The board has its own charter. The

primary objectives of this charter are

to ensure that:

• all board members are aware of their

duties and responsibilities as

members of the board;

• applicable legislation and regulations

affecting directors’ conduct are

clearly understood; and

• sound principles of corporate

governance are applied in all dealings

on behalf of the Group.

The board is responsible to

shareholders for setting the direction

of the Group by establishing

objectives, strategies and key policies.

It monitors the implementation of its

strategies and policies through a

structured reporting approach,

accepts accountability and recognises

its responsibility for relationships with

various stakeholders.

Board appointmentBoard appointments are conducted

in a formal and transparent manner

by the board as a whole, assisted by

the Directors’ Affairs committee and

approved by the shareholders.

In general, directors are given no

fixed term of appointment. With the

exception of the managing director,

who is subject to standard conditions of

appointment, all directors retire by

rotation and, if eligible for re-election,

submit their names for election at the

annual general meeting. The retirement

age for the managing director is 65,

while a non-executive director is

required to retire at age 70.

Board effectivenessA full assessment of the effectiveness

of the board and board committees

took place in 2006 to ensure

constant refinement of the governance

structure and responsibilities. Short-

comings are currently being addressed.

Company secretaryAll directors have access to the advice

and services of the company

secretary. The company secretary

plays a vital role in the assessment

process of the board and board

committees as well as board training.

CORPORATE GOVERNANCE REPORT (continued)


ATTENDANCE OF BOARD AND BOARD COMMITTEE MEETINGS FOR THEFINANCIAL YEAR ENDED 31 DECEMBER 2006

NedNamibia Holdings LimitedResignation/new

Board of directors Attendance appointment dates

Meetings held: 5

Attendance:

Frank TJ (chairman) 5

Cloete C (acting managing director) 3 Appointed 01/01/2006

Resigned 30/06/2006

Baloyi PC 2 Resigned 30/06/2006

Denya D 1 Appointed 31/10/2006

!Gawaxab J 4

Hudson KF 2 Resigned 02/05/2006

Kankondi SI 4

Pearce CJ 5

Peters RH 5

Shipanga MK 5

Turton WE (managing director) 2 Appointed 01/07/2006

Weilert HM 3 Appointed 23/05/2006

Weston MR 4

Nedbank Namibia LimitedRemuneration,

nomination,

equity and skills

Board of directors Board Audit committee Risk committee retention committee

Meetings held: 6 4 4 4

Attendance:

Frank TJ (chairman) 6 3 4

Baloyi PC 1 (res 30/06/2006) 2 (res 30/06/2006) 2 (res 30/06/2006) 2 (res 30/06/2006)

Cloete C (acting 3 (app 01/01/2006) 2 2 2

managing director)* (res 30/06/2006)

Denya D 1 (app 31/10/2006)

!Gawaxab J 5 3

Hudson KF 2 (res 02/05/2006) 2 (res 02/05/2006) 2 (res 02/05/2006) 2 (res 02/05/2006)

Kankondi SI 5 4

Pearce CJ 6 4 4

Peters RH 6 4 4

Shipanga MK 6

Turton WE (managing

director)* 2 (app 01/07/2006)

Weilert HM 4 (app 23/05/2006) 1 (app 23/05/2006) 1 (app 23/05/2006) 1 (app 23/05/2006)

Weston MR 4

res = resigned

app = appointed

* attended board committee meetings by invitation

NedNamibia Holdings Limited

DIRECTORS’ INTEREST IN THE COMPANY AT 31 DECEMBER 2006

Beneficial: Shares held in 2006 Shares held in 2005

Direct:

TJ Frank 10 549 10 000

MK Shipanga nil nil

Indirect:

RH Peters 297 720 282 228

MK Shipanga 209 290 198 400

Non-beneficial

Direct:

CJ Pearce 100 100

RH Peters 422 400

Nedbank Namibia LimitedAt 31 December 2006, no shares were held by directors in the Bank.

Directors’ feesDirectors’ and board committee fees are paid quarterly to local non-executive

directors only and quarterly amounts payable are rounded up to the nearest

N$500.

17

NedNamibia HoldingsFees paid for 2006 financial year to individualdirectorsName of director N$ paid per annum

TJ Frank (chairman) 24 000PC Baloyi nilC Cloete (acting managing director) nilD Denya nilKF Hudson nilJ !Gawaxab 16 000SI Kankondi 16 000CJ Pearce nilRH Peters 16 000MK Shipanga 16 000WE Turton (managing director) nilHM Weilert nilMR Weston nil

Nedbank NamibiaBoard committees are categorised as A and B committees.The following directors’ and board committee fees werepaid for the financial year 2006:

ANNUAL DIRECTORS’ AND BOARD COMMITTEEREMUNERATION

Chairman Members(fees per annum) (fees per annum)

Directors’ fees N$104 000 N$52 000

A Committee fees N$65 000 N$32 500• Audit committee• Risk committeeB Committee fees N$56 000 N$28 000• Remuneration,

nomination, equity and skills retention committee

N$1 000 per hour

Nedbank Namibia Fees paid for 2006 financial year to individualdirectorsName of director N$ paid per annum

TJ Frank (chairman) 187 000PC Baloyi nilC Cloete (acting managing director) *nilD Denya nilKF Hudson nilJ !Gawaxab 86 000SI Kankondi 80 000CJ Pearce nilRH Peters 164 000MK Shipanga 52 000WE Turton (managing director) 407 499,96 (salary)HM Weilert nilMR Weston nil

*Salary was paid by Nedbank Limited, South Africa

Directors’ qualificationsBoard members have the following academic qualifications:

Names Academic qualification

Frank Theo J BA Law; LLB; Dip Bus Man; Cert TaxLaw

Turton William E BTech (Bus Admin); MTech (BusAdmin); EDP (USB); SDP (Wits);certificated associate and electedfellow of Institute of Bankers (SA)

Denya Denys BACC (Hons); MBA (University ofZimbabwe); ACIS; CA(Z)

!Gawaxab Johannes MBL; MA; BA; BCom

Kankondi Sebulon I BA; Sen Man Prog (USB); MarketManager Prog (UCT); Mech Eng Dip

Pearce Christopher J BCom; CA(SA); AMP (Harvard)

Peters Rolf H BCom; BCompt (Hons); CA(SA);CA(Namibia)



Fees for time spentby directors on Bank-related matters thatfall outside the normalcourse of board/board committeebusiness/preparation

Audit committeeThe Audit committee currently comprises five non-

executive directors, the chairman being an independent

non-executive director. The internal and external auditors

have unrestricted access to the chairman of the Audit

committee. The committee’s primary objective is to ensure

that an effective internal control, risk management and

compliance environment is created and maintained

throughout the Group and that the necessary respect for

these disciplines and structures is demonstrated and

stimulated in the Group. It meets periodically, at least four

times a year, to review the annual financial statements and

accounting policies, interim results, the effectiveness of

management information and assurances provided by

management, internal and external auditors on other

systems of internal control, including the internal audit

function, and to assess the external auditors’ reports.

All non-audit services rendered by the external auditors are

approved by the mandated level of authority and ratified

by the audit committee.

Internal auditThe objective of the internal audit function is to assist the

managing director and Audit committee in the effective

discharge of their responsibilities by performing an

independent appraisal activity of the Bank’s management

controls. The Bank’s chief internal auditor has a direct

reporting line to the chairman of the Audit committee. By

virtue of its mandate, any material or significant control

weakness is brought to the attention of the managing

director and Audit committee for consideration and the

necessary remedial action.

Internal controlFor the board to discharge its responsibilities to ensure the

accuracy and integrity of the financial statements,

management has developed and continues to maintain

adequate accounting records and effective systems of

internal controls. The board has ultimate responsibility for

systems of internal control and reviews their operation

primarily through the Audit committee and various other

risk-monitoring committees.

As part of the systems of internal control, the internal audit

function conducts operational, financial and specific audits

and coordinates audit coverage with the external auditors.

Directors’ qualifications (continued)

Names Academic qualification

Shipanga Martin K BCom (Wits); MSC Public Policy

and Administration (ISS);

Leadership and Management

(Virginia); EDP (Harvard)

Weilert Heinz M BCom; BCom(Hons); CA(SA);

MCom; FIISA

Weston Mark R BCA; CA(New Zealand); AMP

(Harvard)

Declaration of outside interestsDirectors disclose their outside interests quarterly to the

board via the Directors’ Affairs committee.

Board committeesBoard committees fulfil an essential role in assisting the

board in performing its duties.

During 2006, the transformation committee was dissolved

and a Directors’ Affairs committee established to attend to

Directors’ Affairs. Due to the size of the Bank, this was

previously handled by the remuneration, nomination,

equity and skills retention committee.

The current board committees are:

• Audit committee

• Risk committee

• Remuneration, nomination, equity and skills retention

committee, and

• Directors’ Affairs committee

Each board committee has formal written terms of

reference that ensure effective delegation in respect of

certain of the board’s responsibilities.

The board is responsible for determining the composition

of the respective board committees.

With the exception of the Directors’ Affairs committee,

which meets at least annually, all board committees meet

quarterly. The audit committee has a dual reporting line, ie

one into the Nedbank Namibia board, reporting all matters

relating to the Bank and its subsidiaries, and the other into

the NedNamibia Holdings board, reporting all matters

relating to the Group. All other board committees report to

the Nedbank Namibia board.

19

The internal controls include risk-based systems of internal accountingand administrative controls, designedto provide reasonable, but notabsolute assurance that assets aresafeguarded and transactions areexecuted and recorded in accordancewith generally accepted businesspractices and the Bank’s policies andprocedures. These internal controls arebased on established and writtenpolicies and procedures and areimplemented by trained, skilled staff,with an appropriate segregation ofduties. They are monitored bymanagement and include acomprehensive budgeting andreporting system, operating withinstrict deadlines and an appropriatecontrol framework, developed inaccordance with the Bank’s activities.Internal control issues are regularlydiscussed with the managing directorand at board level.

During the year under review,management and the board continuedto identify operational control areasand implemented suitable processesand technology to further enhance thisimportant component of theoperations of the business.

To enhance its enterprise-wide-riskframework and aligning tointernational best practice, the Bankhas appointed a Chief Risk Officer,whose primary function is to monitorthe risk environment of the Bank,including credit risk, operational risk,legal and compliance. The Chief RiskOfficer has a dual reporting line to theManaging Director of the Bank and theChief Risk Officer of Nedbank Africarespectively.

Risk committeeThe Risk committee is a supportingcommittee of the board and itsprimary objective is to assist the boardof directors in overseeing andmonitoring:

• the management of risk, including

operational risk, to ensure the overall

effectiveness of the process of

corporate governance;

• all aspects of credit management,

including the quality of the Bank’s

loan portfolio;

• key risks managed by the asset and

liability (Alco) process;

• technology risk;

• compliance with regulatory

requirements; and

• other risks brought to the attention

of the committee.

Risk monitoringRisk management in the financial

services industry is a fundamentally

important process in ensuring

profitability, growth and long-

term sustainability. The board

acknowledges its responsibility for the

entire process of risk management

and the Risk committee assists the

board in reviewing the risk

management process and any

significant risks facing the Bank.

In the normal course of business

operations, the Group (particularly the

Bank) is exposed to the following risks:

• credit risk

• interest rate risk

• liquidity risk

• solvency risk

• trading/currency risk

• market risk

• information technology risk

• accounting and taxation risk

• operational risk

• reputational risk

• people risk

These risks are managed through

a comprehensive enterprise-wide-

risk management framework,

encompassing infrastructure, policies

and methods that support active and

effective control.

Operational riskcommittee (Orco)Orco forms part of the Bank’s

enterprise-wide-risk governance

structure and focuses on creating

awareness and identifying, assessing,

managing and monitoring all risks in

the Bank. The committee has a dual

reporting line; one into the Risk

committee and the other into the

Nedbank Africa divisional Orco. The

managing director is the chairman

of Orco.

DEFINITIONS OF MOST

SIGNIFICANT RISKS

Credit riskCredit risk is the risk of financial lossresulting from failure of a debtor forany reason to fully honour its financialor contractual obligations. The creditdepartment assesses all exposures andmonitors the implementation of theBank’s credit policy to ensure that theextension, control and maintenance ofcredit, as well as the process ofproviding for and writing off baddebts, are executed in a proper wayand within laid-down policy.

The Credit committee approves allthird-party risks, including sovereignand counterparty risks, within aprescribed limit, as delegated by theboard of directors. All credit exposuresabove the authorised limits of theCredit committee are referred to theNedbank Africa credit committee forapproval.

Interest rate riskInterest rate risk is defined as theexposure of the Bank’s net interestincome to adverse movementsin interest rates and arises as aresult of mismatches in the termcharacteristics of assets and liabilities.

Interest rate risk is assessed throughtraditional gap analysis techniques.Gap analysis measures the volumes ofassets and liabilities subject to



Operational riskOperational risk is the risk of direct

or indirect loss resulting from

inadequate or failed internal

processes, people and systems or from

external events. Effective operational

risk management enhances and

protects shareholder value, specifically

against unexpected or unwanted

events. The management of

operational risk is based on a system

of internal controls. This system

includes a documented organisational

structure, with policies, procedures

and reasonable segregation of duties

that are communicated throughout

the Bank.

The corporate governance framework

for operational risk management

includes monitoring bodies such as the

Audit committee, Internal Audit

department, Risk committee as well as

the Operational Risk committee.

Operational risk is reported to the

board of directors via the Risk

committee. Line management is

responsible for the day-to-day

management of individual operational

risks and holds collective responsibility

for all aspects of risk management,

including operational risk.

The internal controls in place are

designed to provide assurance

that transactions, records and

management information are

complete, valid and accurate and that

business objectives will be achieved.

Internal audit independently and

continuously monitors the adequacy,

appropriateness and effectiveness of

these internal controls and reports its

findings to management and the

Audit committee.

Reputational riskReputational risk can be defined as therisk that an activity, action or stancetaken by the Group or its officials will

due to interest rate movements is also

monitored by dealers to remain within

approved limits.

Market riskMarket risk is the risk of a potential

decrease in shareholder value as a

result of adverse changes in the

market value of assets and liabilities.

Market risk associated with trading

activities is the risk of loss occurring as

a result of trading in the capital,

interest rate, foreign exchange, equity

and/or commodity markets.

Information technologyriskInformation technology risk results

from system malfunction and

unavailability, security breaches and

inadequate systems investment,

development, implementation,

support and capacity.

Accounting and taxationriskAccounting risk is the risk that the

integrity of the financial statements

and related information cannot be

upheld and that the internal financial

controls of accounting and

administration do not provide

reasonable assurance that assets are

safeguarded and that transactions are

executed and recorded in accordance

with generally accepted business

practices and approved policies and

procedures.

Taxation risk is the risk that effective

tax planning, coordination and

strategy, compliance with tax laws and

regulations, proactive identification

and management of taxation risks are

not enforced or a poor relationship

with revenue authorities exists,

resulting in financial loss due to

excessive tax liabilities, penalties or

reputational damage to the Group.

repricing in a given period. For thispurpose, assets and liabilities areclassified according to theircontractual repricing characteristics.Through the use of balance sheetstress testing and net interest incomescenarios, the impact of interest ratemovements and risk concentrationscan be identified and measured.Strategies are then developed formitigating such risks.

Liquidity riskLiquidity risk is defined as the potential

inability of the Bank to raise funds at

market-related prices to meet

commitments as they fall due or to

satisfy client demands for funds. By

monitoring the maturity profile of the

current balance sheet as well as its

expected future structure, Alco is

proactively monitoring this risk and is

able to manage any potential

mismatches in accordance with best

banking practice.

Solvency riskSolvency risk is defined as the inability

of the Bank to honour its debts in full.

The board and management, as well

as banking regulators, monitor this risk

through the assessment of the Bank’s

capital adequacy. The internal

requirements of the Bank are

substantially more conservative than

those imposed by the regulatory

authorities.

Trading-/currency riskThe potential change to the value of

financial instruments denominated in

foreign currencies due to exchange

rate movements is referred to as

currency risk. Foreign exchange

dealers constantly monitor exchange

rate movements and operate within

pre-approved limits based on their

knowledge, expertise and experience.

The risk of money market/capital

market instruments being repriced

21

impair its image in the community,the long-term trust placed in theorganisation by its stakeholders andthis will result in the loss of businessand/or threatened legal action.

People riskPeople risk can be defined as possibleinadequacies in human capital. Thismay stem from lack of adequateskills or knowledge, lack of clearconsequences of not meetingperformance standards, lack ofalignment with strategy or a rewardsystem that fails to motivate properly.

Policies for the development of humancapital are in place to ensure that therequired skills and experienceare developed, consistently andmethodically retained and enhancedto create value for the company.

Credit Risk Monitoringcommittee (monitoringCRAM)The Credit Risk Monitoring committeesupports the Risk committee inexecuting its responsibility. Thecommittee affords the opportunityto monitor the efficiency of credit riskand operational issues impacting oncredit risk in depth, with reference toaccounts and units contributing onthe 80/20 contribution principle tocredit risk. The committee also servesas a forum to improve operationalcredit risk processes and procedures inthe Bank. The monitoring CRAM ispresently chaired by the Chief RiskOfficer of Nedbank Africa and has adual reporting line into theAfrica Credit committee and Riskcommittee, respectively.

Asset and liabilitymanagementAsset and liability managementencompasses financial riskmanagement and the profitenhancement programmes of theBank.

The primary objective of the asset and

liability committee (“Alco”) is to

monitor that sufficient levels of

liquidity are maintained at all times.

The committee strives to ensure that

acceptable levels of interest rate-;

currency- and trading risks are

identified, understood and effectively

managed, while achieving the

strategic and financial objectives of

the Bank.

The committee meets monthly or

more frequently should changing

interest rates require and reports to

the Bank’s board of directors through

the Risk committee.

Governance andcompliance functionIn line with best practice and to

ensure proper monitoring of corporate

governance and compliance in the

Bank, the legal- and compliance

functions have been divided into two

separate units, both reporting into the

Chief Risk Officer.

The Nedbank Namibia board of

directors has committed itself to best-

practice governance processes and

demonstrated its commitment

through the establishment of a

corporate governance and compliance

division, with the primary function to

assist the board of directors and, in

particular, the managing director, to

realise their commitment to give

reasonable assurance that the

business of the Bank is run with

integrity, complies with all legal and

regulatory requirements and

statements of international practice

and is conducted in accordance with

the highest ethical standards.

Accordingly, the function is regarded

as an essential part of the structure of

internal control needed to manage

regulatory and reputational risk.

An essential key to the successful

implementation of the function is

monitoring its compliance with

regulatory and statutory requirements.

In the discharge of its duties, the

governance and compliance function

is accountable to the board of

directors through the Orco and Risk

committees. Annual assessments on

the adequacy and effectiveness of the

Bank’s processes for controlling its

activities and managing its

compliance risks are submitted to the

latter. Significant issues related to

processes for controlling the activities

of the Bank, including potential

improvements to those processes and

information concerning the resolution

of such issues, is also provided to

these committees monthly or

quarterly. The governance and

compliance function also provides to

these committees information on the

status and results of the annual

operational compliance plan and the

sufficiency of the function resources.

The function co-ordinates with,

and provide oversight of, other

control and monitoring functions

(risk management, legal, ethics,

environmental).

Going concernThe directors have no reason to doubt

that the Group has adequate

resources to continue in operational

existence for the foreseeable future.

The going concern basis in preparing

annual financial statements is

therefore considered appropriate.

The new Basel CapitalAccord (Basel II)The new Basel II regulations aim to

improve the safety and soundness of

the financial system by aligning

capital adequacy assessment much



Distribution committeeThe primary objective of the

distribution committee is to manage

the Bank’s footprint in terms of where

it wants to be and to review where it

currently is, including geomapping,

leases and lease renewals.

Pricing committeeThe primary objective of the Pricing

committee is to assist Exco in

discharging its responsibility to ensure

that the Bank’s pricing of the various

components of non-interest revenue

are set in an objective, disciplined and

coordinated manner and that it is

properly implemented in terms of

systems changes, communication to

clients and timing and appropriately

aligned to the Bank’s strategy and

budget imperatives. The committee is

accountable to Exco.

Social investmentcommitteeThe Social Investment committee

comprises five members. Its primary

objective is to manage the Bank’s

corporate social investment initiatives

aimed at building sustainable

development in the fields of

entrepreneurship, education and

health. The committee reports via

Exco to the board of directors.

Employment equityThe Bank has adopted an affirmative

action policy to achieve employment

equity in the workplace and enhance

competitiveness. It is a carefully

planned, managed and monitored

process, incorporating strategies

aimed at transforming the

employment environment in the

Bank. These mechanisms provide for

the recruitment, development and

promotion of competent individuals,

especially those from previously

guidelines provided by the equity

commissioner as well as affirmative

action initiatives to support superior

business performance.

The committee comprises four non-

executive directors, one of whom is

the chairman. The managing director

is not a member of the committee,

but attends all meetings.

Directors’ affairscommitteeThe primary objective of the

committee is to deal with directors’

affairs, ie the composition of the

board, nomination of new directors,

directors’ fees, board evaluation, board

training, etc. The committee has no

decision-making powers but makes

recommendations to the board. It

comprises four non-executive

directors, one of whom is the

chairman.

MANAGEMENT COMMITTEES

Executive committee(Exco)The Executive committee comprises

nine members and its primary

objective is to assist the managing

director in managing the business of

the Bank. The committee is headed by

the managing director. The Bank’s

board of directors appoints the

members of Exco in conjunction with

the managing director.

Operational committee(Opco)Opco has been established to create a

forum at which operational issues can

be discussed. Important operational

matters are channelled to Exco for

decision-making. The managing

director is the chairman of Opco,

which meets monthly.

more closely with the underlying risks

(and introducing a capital charge for

operational risk) in the banking

industry, providing a thorough

supervisory review process and

enhancing market discipline through

significantly increased risk disclosure.

Nedbank Namibia will follow the

standardised approach for

implementing Basel II, to be finalised

in 2007. The effective date will be

1 January 2008.

Schedule of delegatedauthorities (SODA)A schedule of delegated authorities,

setting out the mandates, powers and

authority levels that apply to the

various decision-making bodies and

officers who are responsible for

governance and management of the

Bank, is in place.

The board subscribes to the ‘four-eye’

principle of management, in terms of

which no individual officer of the Bank

(including the managing director)

acting alone is empowered to bind the

Bank in relation to material matters.

Remuneration, nomination,equity and skills retentioncommitteeThis committee operates in terms of a

mandate approved by the board and

its primary objectives are to ensure

that:

• an environment is created and a

human resources philosophy

maintained that attract, retain,

motivate and reward staff to

successfully implement the Bank’s

strategy and achieve the Group’s

objectives; and

• a competitive human resources

strategy is developed and

implemented to comply with

23

disadvantaged groups, to allow them

access to opportunities based on their

suitability, while maintaining core

standards in the organisation.

A management committee has been

established to deal with employment

equity matters.

Code of ethicsThe Group is committed to

organisational integrity and high

standards of ethical behaviour in its

dealings with all stakeholders. Failure

to maintain ethical standards may

result in disciplinary action. The board

is confident that high ethical

standards are maintained in the Group

and that business is conducted in a

manner which, under all reasonable

circumstances, is beyond reproach.

Insider tradingA policy for the prevention of insider

trading is in place, whereby directors,

management and staff with access to

confidential financial information are

prohibited from trading in

NedNamibia Holdings shares for a

prescribed period immediately

preceding the publication of the

interim and year-end financial results.

Conflicts of interestA policy for conflicts of interest has

been introduced in the Bank and all

staff have disclosed their outside

interests and signed a declaration

confirming they have read and

understood the contents of the policy

and agree to be bound by its terms.

A structured process is in place to

consider and approve staff’s outside

interests.

GOVERNANCE STRUCTURES IN

OTHER OPERATING SUBSIDIARIES

NedLoansNedLoans, an 80% subsidiary of

Nedbank Namibia, has established a

management committee to deal with

operational issues. The committee

meets monthly and the managing

director of NedLoans is the chairman.

The committee has a dual reporting

line – one into the NedLoans board

of directors and a dotted reporting

line into the Bank’s Operational

committee. NedLoans’ internal

control-, risk management- and

compliance environments are

monitored by the Bank’s Audit-and Risk

committees, which in turn report to the

Bank’s board of directors.

NedCapitalNedCapital has also established a

management committee, chaired by its

managing director. The committee

primarily focuses on operational issues

and reports into the NedCapital board.

The NedNamibia Holdings Audit

committee monitors NedCapital’s

internal control-, risk management-

and compliance environments and

reports to the NedNamibia Holdings

board of directors.

Governance structures in the Group of

companies are subject to constant

review and enhancement.



KS AltmannC AspellingW BoerWS BurgerF EliphasP GabrielM GousP GouwsE HaihamboN HamunyelaC KatjitaeDB KautaN Klazen

R KrugerG LambrechtsM LisseM MeiringU RapschR ReedD SmitH van WykJ von KunowM von RheinD WaltherE Wiss

M GousJC JurgensWG NelH Ries von BergenAJ VenterMJ Vivier

Y CampherJ DamonN HaywardH LindnerWG NelWE TurtonAJ VenterMJ VivierE Wiss

WS BurgerI HoebelH HoffmannM LisseR MuteloWG NelN HamunyelaS WylieH Ries von BergenR Kruger

WS BurgerG GoldridgeM GousM LisseR MuteloWG NelR ReedH Ries von BergenAJ VenterMJ Vivier

WE TurtonEST HaipingeR MuteloAJ Venter

M GousE HaipingeR MuteloA NelH Ries von BergenA VenterM Vivier

D DenyaJ !GawaxabCJ PearceHM Weilert

25

CORPORATE GOVERNANCE STRUCTUREas at 28 February 2007

NedNamibia Holdings LimitedBoard of Directors

Chair: TJ Frank

Nedbank Namibia Limited Board of Directors

Chair: TJ Frank

Credit riskmonitoringcommittee

Chair: A Sorgdrager

Nedbank Namibia Limitedexecutive committee (Exco)

Chair: WE Turton

Operational riskcommittee (Orco)

Chair: WE Turton

Audit committee Chair: RH Peters

Remuneration, nomination,equity and skills retention

committee Chair: TJ Frank

Directors’ Affairscommittee

Chair: TJ Frank

Risk committeeChair: CJ Pearce

Distributioncommittee

Chair: MJ Vivier

Pricingcommittee

Chair: JC Jurgens

Social investmentcommittee

Chair: JC Jurgens

Productcommittee

Chair: G Goldridge

Credit committeeChair:

A Struchtemeier

Asset and liabilitycommittee (Alco)

Chair: WE Turton

NedLoans (Proprietary) Limitedmanagement committee

Chair: N Hamunyela

NedLoans (Proprietary)Limited

Board of DirectorsChair: WE Turton

Operationalcommittee (Opco)

Chair: WE Turton

A BotesG BrinkP GabrielO HeymansC KatjitaeDB KautaN KlazenR Kruger

M LisseB MattheeM MeiringR ReedA RoosteeJ van RensburgH van WykS Wylie

Compliance committeeChair: M Gous

D DenyaJ !GawaxabSI KankondiCJ PearceRH Peters

MK ShipangaWE TurtonHM WeilertMR Weston

D DenyaJ !GawaxabSI KankondiCJ PearceRH Peters

MK ShipangaWE TurtonHM WeilertMR Weston

C AspellingM GousP GouwsN HamunyelaS HanschenA HoltzhausenJ JacobsL LabuschagneM LisseHA MattheeWG NelA StruchtemeierWE TurtonAJ VenterMJ VivierE Wiss

WS BurgerG GoldridgeM GousEST HaipingeJC JurgensM LisseM Meiring

R MuteloWG NelH Ries von BergenAJ VenterMJ Vivier

C AspellingB AluteniA de NeckerE HaipingeE HattinghI HausesJ JacobsDB KautaM Lisse

M MbambaM MeiringJ NanyeniWG NelU RapschJ van RensburgAJ VenterMJ Vivier

AJ VenterMD McLeanN HamunyelaD Botes (alternatemember toMs MD McLean)

G GoldridgeEST HaipingeJC JurgensR MuteloWG NelH Ries von BergenAJ VenterMJ Vivier

D DenyaTJ FrankRH PetersHM Weilert

SI KankondiHM WeilertD Denya (alternativemember to Mr Weilert)

D DenyaSI KankondiHM Weilert

The directors are responsible for the integrity and fair presentation of the annual financial statements and relatedinformation included in this annual report. The annual financial statements presented on pages 31 to 90 have been preparedin accordance with and comply with International Financial Reporting Standards adopted by the International AccountingStandards Board (“IASB”), and interpretations issued by the International Financial Reporting Interpretations Committee ofthe IASB and the Namibian Companies Act and include amounts based on judgements and estimates made by management.The directors have also prepared the other information included in the annual report and are responsible for both itsaccuracy and its consistency with the annual financial statements.

To enable the board to discharge its responsibilities, management has developed and continues to maintain a system ofinternal financial control. The board has ultimate responsibility for this system of internal control and reviews theeffectiveness of its operation primarily through the Audit and Risk committees and other risk monitoring functions.

The internal financial controls include risk-based systems of accounting and administrative controls designed to providereasonable, but not absolute assurance that assets are safeguarded and that transactions are executed and recorded inaccordance with generally accepted business practices and the Group’s written policies and procedures. These controls areimplemented by trained, skilled staff with clearly defined lines of accountability and an appropriate segregation of duties.The controls are monitored by management and include a comprehensive budgeting and reporting system operating within strict deadlines and an appropriate control framework. As part of the system of internal financial control, Nedbank Namibia’s internal audit function conducts operational, financial and specific audits and coordinates audit coverage with theexternal auditors.

As a consequence of Nedbank Namibia’s conversion to the new technology platform, certain controls did not functionas designed, resulting in significant additional costs for the Group. The areas affected were the timely reconciliation ofclearing accounts and the collection of arrears resulting in the need for additional provisioning and credit impairment.The directors are satisfied that subsequent to the identification of the control weaknesses appropriate measures have beenintroduced to address these deficiencies.

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

The going concern basis has been adopted in preparing the financial statements. The directors have no reason to believe thatthe Group or any company within the Group will not be a going concern in the foreseeable future, based on forecasts andavailable cash resources. These annual financial statements support the viability of the company and the Group.

The audit report of the independent auditors is presented on page 27.

The annual financial statements were approved and authorised for issue by the board of directors on 22 March 2007 andare signed on its behalf by:

TJ Frank WE TurtonChairman Managing director


Directors’ responsibilityfor the year ended 31 December 2006

27

Report of the independent auditors to the members ofNedNamibia Holdings Limited

We have audited the annual financial statements and group annual financial statements of NedNamibia Holdings Limited,

which comprise the report of the directors, the balance sheet and the consolidated balance sheet as at 31 December 2006,

and the income statement and the consolidated income statement, the statement of changes in equity and

the consolidated statement of changes in equity, and cash flow statement and the consolidated cash flow statement for the

year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 31 to 90.

DIRECTORS’ RESPONSIBILITY FOR THE FINANCIAL STATEMENTS

The company’s directors are responsible for the preparation and fair presentation of these financial statements in accordance

with International Financial Reporting Standards and in the manner required by the Companies Act of Namibia. This

responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair

presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and

applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

AUDITOR’S RESPONSIBILITY

Our 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 plan and perform the audit to obtain

reasonable assurance about whether the financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial

statements. The procedures selected depend on the auditor’s 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 auditor

considers 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 principles

used and reasonableness of accounting estimates made by the directors, as well as evaluating the overall financial

statements presentation.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OPINION

In our opinion, the financial statements present fairly, in all material respects, the financial position of the company and the

group at 31 December 2006 and their financial performance and their cash flows for the year then ended in accordance with

International Financial Reporting Standards and in the manner required by the Companies Act of Namibia.

Deloitte & Touche

Registered Accountants and Auditors

Chartered Accountants (Namibia)

Per DJ Cilliers

Partner

Windhoek

30 May 2007

2006 2005

Notes N$’000 N$’000

Assets 2 7 912 7 797

Total assets per balance sheet 7 912 7 797

Liabilities 3,4 2 894 2 236

Actuarial value of policy liabilities 889 2 148

Current liabilities 2 005 88

Excess of assets over liabilities 5 018 5 561

Analysis of change in excess assets:

Excess assets as at end of reporting year 5 018 5 561

Excess assets as at beginning of reporting year 5 561 5 348

Change in excess assets over the reporting year 6 (543) 213

This change is due to the following factors:

Investment return on excess assets 431 390

Operating profit/(loss) 1 097 (106)

Change in valuation methods or assumptions 5 – –

Taxation (71) (71)

Total earnings 1 457 213

Capital raised – –

Dividends paid 2 000 –

Total change in excess assets (543) 213

Reconciliation to reported earnings:

Total earnings as per the above table 1 457 213

Less: Surplus in life fund – –

Reported earnings in annual financial statements 1 457 213

1. Financial soundness basis/valuation principlesThe assets and liabilities of Coversure Limited have been calculated in accordance with the Actuarial Society of SouthAfrica’s guidelines and in particular PGN103 and PGN104. However, no capital adequacy requirement was calculatedas this is not required in terms of Namibian law. The financial soundness valuation, stipulated in PGN104, is a grosspremium method of valuation.

The liability has been based on cash flow projections, on a per policy basis, using the assumptions contained in note3 below.

Statement of actuarial value of assets and liabilities ofCoversure Limited for the year ended 31 December 2006


29

2. Valuation of assets All assets have been taken at balance sheet values as described in the notes to the financial statements.

3. Valuation of policy liabilities The valuation of the policy liabilities was conducted on a basis consistent with the valuation of the assets.

The assumptions are based on best estimates of the expected experience. The main assumptions, before allowingfor prescribed margins (see note 4 below), were as follows:

Investment return 7,25% per annum

Mortality SA85/90 Heavy (ULT) + 50% of Aids extra mortality (High risk group males with two year progression)

Permanent disability CSI skilled lives x 1,25

Dread disease CSI 1997 dread disease x 1,25

Temporary disability CMIR 12 inception rates (four week deferred period) x 0.5, 6months payment on average

Retrenchment 5% inception rate, six months payment on average

Withdrawals Year 1 = 15%Year 2 = 10%Year 3+ = 5%

NAMFISA levy 0,15% of outstanding liability

Taxation 40% investment income is taxed at 35%. All investment incomeassumed to be taxable.

• Negative reserves were eliminated such that no policy was treated as an asset – this is required in terms of Namibianlaw. However, there were no such negative reserves.

• An incurred but not reported reserve of 2/12ths of the annual expected claims was established.• We were advised that the company will be closed to new business and therefore a separate expense reserve was

established based on the expected future expenses and remaining policy term. An expense inflation assumption of5% per annum was used.

4. Prescribed marginsFirst tier margins have been allowed for as outlined in the Actuarial Society of South Africa’s guidance note – PGN104. There were no second tier margins.

5. Changes in valuation basisThere were no changes to the valuation assumptions since the previous valuation.

6. Report by the statutory actuaryI hereby certify that:

• the valuation of Coversure Limited as at 31 December 2006, the results of which are summarised above, has beenconducted in accordance with, and this statutory actuary’s report has been produced in accordance with, applicableActuarial Society of South Africa Professional Guidance Notes;

• I have accepted that the annual financial statements comply with the requirements of the Companies Act andInsurance Act;

• my statutory actuary’s report, read together with the annual financial statements, fairly presents the financialposition of the company; and

• the company was financially sound as at the valuation date, and in my opinion is likely to remain financially soundfor the foreseeable future.

RD WilliamsStatutory Actuary

Fellow of the Institute of ActuariesFellow of the Actuarial Society of South Africa

29 January 2007


Statement of actuarial value of assets and liabilities ofCoversure Limited (continued)for the year ended 31 December 2006

31

The directors have pleasure in submitting their report together with the annual financial statements of NedNamibiaHoldings Limited and its subsidiaries (“the Group”) for the year ended 31 December 2006.

NATURE OF THE BUSINESSNedNamibia Holdings is a registered holding company that, through its subsidiaries, provides a wide range of financialservices, including corporate and retail banking, property and asset finance, private banking, micro lending and foreignexchange and securities trading. The Group’s head office is in Windhoek and its operations are confined to Namibia.

HOLDING COMPANYThe holding company of NedNamibia Holdings is Nedbank Limited, a South African incorporated company and its ultimatecontrolling shareholder is Old Mutual plc, incorporated in England and Wales.

Subsequent to the capitalisation award in terms of which shareholders were entitled, in respect of all of their shareholding,to elect to participate in the capitalisation award instead of a cash dividend, Nedbank Limited’s shareholding in the companyincreased from 93,73% to 93,89%. The balance of the issued share capital, 6,11%, is owned by minority shareholders.

The Group structure of NedNamibia Holdings is set out on page 2 of this report.

RESULTS FOR THE YEARThe financial results of the Company and the Group are fully set out in the annual financial statements.

The net income after taxation for the Group for the year amounted to N$40,2 million, compared with N$90 million for theprevious year. Total assets of the Group increased by 11,38% from N$4 270,6 million to N$4 756,8 million.

SHARE CAPITALAs a result of the capitalisation award, the Company’s issued share capital increased from 66 834 526 ordinary shares to70 381 644 ordinary shares, 63 697 450 of which are held by Nedbank Limited, 2 385 632 by NIB Holdings (Namibia)(Proprietary) Limited (a wholly owned subsidiary of Nedgroup Investment Holdings 101 Limited) and 4 298 562 by minorityshareholders.

The unissued share capital of the Company comprises 9 618 356 ordinary shares, with a nominal value of 25 cents each. Theshareholders have placed the unissued share capital under the control of the directors until the next annual general meeting.

SPECIAL RESOLUTIONDuring the 2006 financial year, a special resolution was passed by the board of directors and subsequently the shareholders,whereby the following article was added to the existing Articles of Association under the heading “Capitalisation of Assets”:

“The directors shall be entitled to grant to the shareholders the right to elect to receive scrip dividends in lieu of cashdividends or a cash dividend in lieu of capitalisation or bonus shares”.

The reason for/effect of the additionThe reason and effect is to provide in the Articles of Association for and to give effect to the capitalisation award with a cashdividend alternative.

DIVIDENDSConsistent with the Bank’s strategy to extent its branch network and to finance its growth, the board of directors took adecision not to pay dividends for the year under review.

ACCOUNTING TREATMENT OF LOANS AND ADVANCESThe accounting treatment of loans and advances disclosed in the annual financial statements complies with InternationalFinancial Reporting Standards. The impairment determined in compliance with the requirements of BID-2 (Determinationson the Classification of Loans and the Suspension of Interest on Non-performing Loans and the Provisions for Bad andDoubtful Debts) issued pursuant to Section 71(3) of the Banking Institutions Act, 1998 is recorded in the returns to the Bankof Namibia. The balance of impairment recorded in the annual financial statements agrees to the balance of impairment,determined in compliance with BID-2.

Report of directorsfor the year ended 31 December 2006


BOARD OF DIRECTORS AND SECRETARYFor the period 1 January 2006 to 30 June 2006, Mr Craig Cloete, an expatriate from Nedbank Limited, acted as ManagingDirector of both, the Company and the Bank. Mr Cloete was succeeded by Mr William Turton, who was appointed asManaging Director of NedNamibia Holdings and Nedbank Namibia until such time that an appropriate successor has beenappointed.

Messrs Paul Baloyi and Kevin Hudson resigned as directors on 30 June 2006 and 2 May 2006 respectively. Messrs HeinzWeilert and Denys Denya were appointed as members of the board on 23 May 2006 and 31 October 2006 respectively.

The following directors who retired by rotation in terms of the Articles of Association, were reappointed as directors on27 June 2006.

Messrs: Paul C BaloyiMark R WestonRolf H Peters

The following newly appointed directors who retired by rotation in terms of the Articles of Association, were duly appointedby the shareholders on 27 June 2006.

Messrs: Craig CloeteHeinz M Weilert

The Company’s board of directors currently comprises the following members:Frank Theo J (Chairman)Denya Denys *!Gawaxab JohannesKankondi Sebulon IPearce Christopher J **Peters Rolf H ***Shipanga Martin KTurton William E (Managing Director) **Weilert Heinz M **Weston Mark R ****

* Zimbabwean** South African*** German**** New Zealander

The board conveys its appreciation to Messrs Cloete, Baloyi and Hudson for the valuable services rendered during their termsof office.

SECRETARY AND REGISTERED OFFICEThe secretary of the Company is Mrs Mechthild Meiring, whose business address as well as that of the registered office is12-20 Dr Frans Indongo Street, Windhoek. The postal address of the registered office is PO Box 1, Windhoek and thecompany’s registration number is 91/075.

TRANSFER SECRETARIESTransfer Secretaries (Proprietary) Limited are the Company’s transfer secretaries and their business address is Shop 8,Kaiserkrone Centre, Post Street Mall, Windhoek, Namibia, PO Box 2401, Windhoek, Namibia.

Report of directors (continued)for the year ended 31 December 2006

33

INTEREST OF DIRECTORS IN THE CAPITAL OF THE COMPANYThe directors’ interest in the capital of the company is set out on page 17 of the report.

SUBSIDIARIESNedNamibia Holdings Limited has the following directly held subsidiaries:

Name of subsidiary Type of business Issued share capital Proportion held

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

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

Coversure Limited Long-term insurance 4 000 000 ordinary shares 100%

NedPlan Insurance Brokers Namibia(Proprietary) Limited Insurance broker 100 ordinary shares 100%

Bellissima Investments Seventy Two (Proprietary) Limited Property holding company 100 ordinary shares 100%

Bellissima Investments Seventy Two (Proprietary) Limited, a 100% subsidiary of NedNamibia Holdings, was acquiredwith the purpose of serving as a property holding company for a new business centre that is currently being developed toserve as a platform for Nedbank Namibia’s product and service offerings to its high-net-worth, business banking andcorporate banking clients. The new business centre was opened during March 2007.

Namibia Executors and Trustees (Proprietary) Limited – Nedbank Namibia has sold its 75% stake in Namibia Executorsand Trustees to Keller and Neuhaus Trust, who subsequently became the sole shareholder. The Bank’s estate and trustbusiness will be moved from Namibia Executors and Trustees to Old Mutual Namibia/BOE Trust as soon as Old MutualNamibia’s trust business is operational and a service level agreement in place.

More details on direct and indirect subsidiaries of the Group are set out in note 10 of this report.

POST-BALANCE-SHEET EVENTSTo simplify its shareholding structures in Namibia into a unitary structure, Nedbank Group Limited is proposing a schemeof arrangement between NedNamibia Holdings and its minority shareholders in terms of which Nedbank Group Limitedintends to acquire all the shares held by the minority shareholders and ultimately all the shares in NedNamibia Holdingsheld by Nedbank Limited and NIB Holdings (Namibia) (Proprietary) Limited. If implemented, the effect of the scheme willbe that the minorities will exchange or relinquish their NedNamibia Holdings shares for either Nedbank Group Limitedshares or for cash. Scheme participants will be able to trade freely in their Nedbank Group Limited shares on theJohannesburg Stock Exchange (“JSE”) and/or Namibian Stock Exchange (“NSX”) following the dual listing of Nedbank GroupLimited on the NSX.

APPRECIATIONThe board of directors extends its sincere appreciation to all the employees and esteemed clients of the Group and theCompany for their loyalty and continued support.

Its appreciation is also extended to the Ministry of Finance, the Bank of Namibia, the local authorities, the Namibia FinancialInstitutions Supervisory Authority (“Namfisa”) and our attorneys and auditors for their assistance and co-operation.

Balance sheetsat 31 December 2006

Group Company

2006 2005 2006 2005

Notes N$’000 N$’000 N$’000 N$’000

AssetsCash and balances with central bank 4 173 156 80 528 – –Government and public sector securities 5 285 349 145 646 – –Derivative financial instruments 6 1 062 3 576 – –Other short-term securities 7 – 100 795 – –Due from other banks 8 276 285 102 300 – –Loans and advances to customers 9 3 708 392 3 623 267 – –Investment in subsidiaries, associates and listed investments 10 20 501 3 133 133 642 96 697Goodwill 11 27 623 27 623 – –Property and equipment 12 61 840 50 025 – –Computer software and development cost 13 13 040 9 513 – –Non-current assets classified as held for sale 14 21 369 – – –Other assets 15 168 168 124 233 2 000 –

Total assets 4 756 785 4 270 639 135 642 96 697

LiabilitiesDue to other banks 16 259 772 853 987 8 035 1 531Other deposits 17 544 559 356 973 – –Derivative financial instruments 6 690 4 699 – –Due to customers 18 3 383 123 2 646 043 – –Long-term subordinated debt instruments 19 1 320 1 153 – –Policyholder liabilities under insurance contracts 20 889 2 148 – –Deferred taxation 21 63 000 57 564 – –Provision for post-retirement medical benefits 22 5 073 4 939 – –Other liabilities 23 127 182 26 899 136 12

Total liabilities 4 385 608 3 954 405 8 171 1 543

Shareholders’ equityShare capital 24 17 595 16 709 17 595 16 709Share premium 24 99 536 68 568 99 536 68 568Revaluation reserve 25 11 688 12 006 – –Share-based payment reserve 26 16 735 – – –Retained income 221 050 214 784 10 340 9 877

Shareholders’ interest 366 604 312 067 127 471 95 154

Minority interest 4 573 4 167 – –

Total shareholders’ equity and minority interest 371 177 316 234 127 471 95 154

Total equity and liabilities 4 756 785 4 270 639 135 642 96 697


Income statementsfor the year ended 31 December 2006

Group Company

2006 2005 2006 2005

Notes N$’000 N$’000 N$’000 N$’000

35

Interest income 27 494 570 399 886 – –Interest expense 27 251 007 207 590 730 –

Net interest income 243 563 192 296 (730) –Non-interest income 28 95 158 84 812 34 957 –

Total income 338 721 277 108 34 227 –Impairment of advances 29 28 823 (6 979) – –

Net income 309 898 284 087 34 227 –Expenses 30 215 623 155 093 819 239BEE transaction expenses 31 28 592 – – –

Net income before taxation 65 683 128 994 33 408 (239)Taxation 32 25 530 38 926 – –

Net income for the year 40 153 90 068 33 408 (239)

Attributable to:Outside shareholders in subsidiaries 1 260 1 843Equity holders of the parent 38 893 88 225 33 408 (239)

40 153 90 068 33 408 (239)

Earnings per share (cents) 34 57.03 132.01

Diluted earnings per share (cents) 34 57.03 132.01

Statements of changes in equityfor the year ended 31 December 2006

Share Share Generalcapital premium risk reserve

Notes N$’000 N$’000 N$’000

GroupBalance at 1 January 2005 15 238 16 537 9 361Issue of shares 1 471 53 370Cost of issue of shares (1 339)Net income for the yearOther movementsRelease of revaluation reserveDecrease in general risk reserve (9 361)

Balance at 31 December 2005 16 709 68 568 –

Net income for the yearOther movementsCapitalisation award 33 886 30 968Share-based payment reserve movement 26Release of revaluation reserve 25


CompanyBalance at 1 January 2005 15 238 16 537 –Issue of shares 1 471 53 370Cost of issue of shares (1 339)Net income for the year


Net income for the yearCapitalisation award 33 886 30 968



37

Share-based TotalRevaluation payment Retained shareholders’ Minority

reserve reserve income interest interest TotalN$’000 N$’000 N$’000 N$’000 N$’000 N$’000

12 324 – 116 880 170 340 15 726 186 06654 841 – 54 841(1 339) – (1 339)

88 225 88 225 1 843 90 068(13 402) (13 402)

(318) 318 – – –9 361 – – –

12 006 – 214 784 312 067 4 167 316 234

38 893 38 893 1 260 40 153(854) (854)

(32 945) (1 091) – (1 091)16 735 16 735 – 16 735

(318) 318 – – –

11 688 16 735 221 050 366 604 4 573 371 177

– – 10 116 41 891 – 41 89154 841 – 54 841(1 339) – (1 339)

(239) (239) (239)

– – 9 877 95 154 – 95 154

33 408 33 408 – 33 408(32 945) (1 091) – (1 091)

– – 10 340 127 471 – 127 471

Cash flow statementsfor the year ended 31 December 2006

Group Company

2006 2005 2006 2005

Notes N$’000 N$’000 N$’000 N$’000


Cash generated/(utilised) by operating activities 35.1 368 974 (77 206) 4 000 (31 080)

Cash received from customers 35.2 568 894 481 023 12 –Cash paid to customers 35.3 (244 276) (184 902) (730) –Cash paid to employees and suppliers (116 541) (141 176) (819) (239)Dividends received 4 476 – 2 000 93 449Dividends paid 35.4 (1 909) (134 153) (1 091) (126 022)Taxation paid 35.5 (29 807) (29 126) – –Recoveries of loans previously written off 29.1 10 634 9 276 – –Cash movements in advances and other accounts (145 107) (1 075 740) (2 000) 201Cash movements in operating liabilities 35.6 322 610 997 592 6 628 1 531

Cash flow (to)/from investment activities (102 361) 94 587 (4 000) –

Investment in property, equipment, computer software and development costs (45 054) (9 664) – –Proceeds on sale of property and equipment 230 43 – –Acquisition of subsidiary 10.1 (4 000) – (4 000) –Outflow on disposal of subsidiary 35.7 (92) – – –Consideration paid for minority interest 10.1 – (2 250) – –Acquisition of investments (16 436) 708 – –(Purchase)/proceeds of non-dealing securities 35.8 (37 009) 105 750 – –

Cash flow to financing activitiesMovement in share premium (share issue) – (1 339) – (1 339)

Cash and short-term funds generated 266 613 16 042 – (32 419)Cash and short-term funds at beginning of the year 182 828 166 786 – 32 419

Cash and short-term funds at end of the year 35.9 449 441 182 828 – –

1. BASIS OF PREPARATIONThe consolidated financial statements of NedNamibia Holdings Limited and its subsidiaries are prepared inaccordance with and comply with International Financial Reporting Standards (“IFRS”) adopted by the InternationalAccounting Standards Board (“IASB”), and interpretations issued by the International Financial ReportingInterpretations Committee (“IFRIC”) of the IASB and the requirements of the Namibian Companies Act and theNamibian Banks Act.

The financial statements are presented in Namibian Dollars (“N$”) and are rounded to the nearest thousandNamibian Dollars. The financial statements are prepared on the historical cost basis except that the followingassets and liabilities are stated at their fair value:• derivative financial instruments;• financial assets and financial liabilities classified as held for trading;• financial assets and financial liabilities designated at fair value through profit or loss;• financial assets classified as available-for-sale; and• owner-occupied properties.

Non-current assets and disposal groups held for sale are stated at the lower of their carrying amount and fair valueless costs to sell.

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

In the preparation of the consolidated financial statements the Group has recorded various assets and liabilities on thepresumption that the Group is an ongoing business and as such, certain key sources of estimation have been assumed:

Credit impairmentThe Group applies an incurred loss approach to impairment. Impairment losses are incurred only if there is objectiveevidence of impairment as a result of one or more past events that have occurred since initial recognition. Thisnecessitates the establishment of “impairment triggers” on the occurrence of which an impairment loss is recognised.

Credit impairment is based on discounted estimated future cash flows on an asset or group of assets, where suchobjective evidence of impairment exists. The discount rate used to calculate the recoverable amount excludesconsideration of any anticipated future credit losses.

The Group has also raised an impairment for incurred but not reported (“IBNR”) losses. The purpose of the IBNRreserve is to allow for latent losses on a portfolio of loans and advances that have not yet been individually evidenced.Generally, a period of time will elapse between the incurrence of an impairment event and objective evidence of theimpairment becoming evident, which is known as the “emergence period”. The IBNR reserve is based on theprobability that loans that are ostensibly performing at the calculation date are impaired, and objective evidence ofthat impairment becomes evident during the emergence period.

The implementation of these principles is at a divisional level and will be specific to the nature of their individual loanportfolios and the loan loss data available to that division.

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Notes to the annual financial statementsfor the year ended 31 December 2006

2. RECENT AMENDMENTSChanges in International Accounting Standards (“IAS”) and IFRS

The following table contains effective dates of IFRSs and recently revised IASs, which have not been early adopted bythe Group and that might affect future financial periods:

Effective for annual periodsNew International Financial Reporting Standards Issued/revised beginning on or after

IFRS 7 Financial Instruments: Disclosures 2005 1 January 2007IFRS 8 Operating Segments 2006 1 January 2009

Amendments to International Accounting StandardsIAS 1 Capital Disclosures 2005 1 January 2007

Amendments to Financial Reporting StandardsIFRS 4 Insurance Contracts 2005 1 January 2007

New International Financial Reporting Interpretations Committee InterpretationsIFRIC 7 Applying the Restatement Approach under IAS 29,

Financial Reporting in Hyperinflationary Economies 2005 1 March 2006IFRIC 8 Scope of IFRS 2 2006 1 May 2006IFRIC 9 Reassessment of Embedded Derivatives 2006 1 June 2006IFRIC 10 Interim Financial Reporting and Impairment 2006 1 November 2006IFRIC 12 Service Concession Arrangements 2006 1 January 2008

A reliable estimate of the impact of the adoption of the recent amendments for the Group cannot yet be determined.Directors anticipate that the adoption of the recent standards and interpretations will have no material impact on thefinancial statements in future periods, except for disclosure to the annual financial statements.

Early adopted IFRICThe Group has elected to adopt IFRIC 11, which is detailed in the table below, in advance of its effective date of1 March 2007. The impact of the new interpretation has been to account for share-based transactions in accordancewith the requirements of IFRS 2: Share-based Payment as provided for in these financial statements.

New International Financial Reporting Interpretations Effective for annual periodsCommittee Interpretations Issued/revised beginning on or after

IFRIC 11 IFRS 2 – Group and Treasury Share Transactions 2006 1 March 2007

3. SIGNIFICANT ACCOUNTING POLICIES3.1 Basis of consolidation

The consolidated annual financial statements incorporate the annual financial statements of the Company andentities controlled by the Company. Control is achieved where the Group has the power to govern the financial andoperating policies of an entity so as to obtain benefits from its activities. The Group considers the existence and effectof potential voting rights that are currently exercisable or convertible when assessing whether it has control. Entitiesin which the Group holds half or less of the voting rights, but are controlled by the Group by retaining the majorityof risks or benefits, are also included in the consolidated financial statements.

The Group consolidated financial statements include the assets, liabilities and results of NedNamibia HoldingsLimited and its subsidiaries. The results of subsidiaries acquired or disposed of during the year are included in theconsolidated income statement from the effective date of acquisition or up to the effective date of disposal, asappropriate.

Where necessary, adjustments are made to the annual financial statements of subsidiaries to bring their accountingpolicies into line with those of the Group.


Notes to the annual financial statements (continued)for the year ended 31 December 2006

3. SIGNIFICANT ACCOUNTING POLICIES (continued)

3.1 Basis of consolidation (continued)All intra-group transactions, balances, and profits and losses arising from intra-group transactions, are eliminated inthe preparation of the Group consolidated annual financial statements. Unrealised losses are not eliminated to theextent that they provide evidence of impairment.

Minority interests in the net assets of consolidated subsidiaries are identified separately from the Group’s equitytherein. Minority interests consist of the amount of those interests at the date of the original business combinationand the minority’s share of changes in the equity since the date of the combination. Losses applicable to the minorityin excess of the minority’s interest in the subsidiary’s equity are allocated against the interest of the Group except tothe extent that the minority has a binding obligation and is able to make an additional investment to cover the losses.

3.1.1 Investment in associateAn associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interestin a joint venture. Significant influence is the power to participate in the financial and operating policy decisions ofthe investee, but is not control or joint control over those policies.

The results and assets and liabilities of associates are incorporated in these financial statements using the equitymethod of accounting. Under the equity method, investments in associates are carried in the consolidated balancesheet at the cost as adjusted for post-acquisition changes in the Group’s share of the net assets of the associate, lessany impairment in the value of individual investments. Losses of an associate in excess of the Group’s interest in thatassociate are not recognised.

Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets, liabilitiesand contingent liabilities of the associate recognised at the date of acquisition is recognised as goodwill. The goodwillis included within the carrying amount of the investment and is assessed for impairment as part of the investment.Any excess of the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities overthe cost of acquisition, after reassessment, is recognised immediately in profit or loss.

Where a Group entity transacts with an associate of the Group, unrealised profits and losses are eliminated to theextent of the Group’s interest in the relevant associate.

3.1.2 GoodwillAll business combinations are accounted for by applying the purchase method. At acquisition date, the Grouprecognises the fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities that satisfy therecognition criteria at their respective fair values. The cost of a business combination is the fair value of purchaseconsideration due at date of acquisition plus any directly attributable transaction costs. Any contingent purchaseconsideration is recognised to the extent that it is probable and can be measured reliably. Any excess between thecost of the business combination and the Group’s interest in the net fair value of the identifiable assets, liabilities andcontingent liabilities acquired, is recognised as goodwill in the balance sheet. Goodwill is adjusted for any subsequentremeasurement of contingent purchase consideration.

For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units expected tobenefit the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested forimpairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverableamount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated firstto reduce the carrying amount of any goodwill allocated to the unit and then to the assets of the unit pro rata on thebasis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed ina subsequent period.

On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the profit or losson disposal.

The Group’s policy for goodwill arising on the acquisition of an associate is described under “Investment in associates”above.

41


3.2 Financial instrumentsFinancial instruments as reflected on the balance sheet include all assets and liabilities, including derivativeinstruments, but exclude investments in subsidiaries, associate company, employee benefit plans, property andequipment, deferred taxation, taxation payable, intangible assets and leases. Financial Instruments are accountedfor under IAS 32: Financial Instruments: Disclosure and Presentation (“IAS 32”) and IAS 39: Financial Instruments:Recognition and Measurement (“IAS 39”).

(i) Initial recognitionFinancial assets are recognised on the balance sheet when the Group becomes a party to the contractual provisionsof a financial instrument. All purchases of financial assets that require delivery within the time frame established byregulation or market convention (“regular way” purchases) are recognised at trade date, which is the date on whichthe Group commits to purchase the asset. Financial liabilities are recognised on trade date, which is when the Groupbecomes a party to the contractual provisions of the financial instruments.

(ii) Initial measurementFinancial instruments are initially recognised at fair value plus, in the case of a financial asset or liability not at fairvalue through profit and loss, transaction cost that are incremental to the Group and directly attributable to theacquisition or issue of the financial asset or financial liability.

(iii) Subsequent measurementSubsequent to initial measurement, financial instruments are either measured at fair value or amortised cost,depending on their classification:• Financial assets and financial liabilities at fair value through profit or loss.

Financial instruments at fair value through profit or loss consist of trading instruments and instruments that theGroup has elected, on initial recognition date, to designate as fair value through profit or loss.

Trading instruments are financial assets or financial liabilities that were acquired or incurred principally for thepurpose of sale or repurchase in the near term, form part of a portfolio with a recent pattern of short-term profit-taking or are derivatives that do not form part of a designated and effective hedging relationship. The Group’sderivative transactions include foreign exchange contracts, forward rate agreements, currency and interest rateswaps.

• Financial assets and financial liabilities that the Group has elected, on initial recognition date, to designate as at fairvalue through profit or loss are those that meet any one of the following criteria:– where the fair value through profit or loss designation eliminates or significantly reduces a measurement or

recognition inconsistency that would otherwise arise from using different bases to measure and recognise thegains and losses on financial assets and financial liabilities; or

– the instrument forms part of a group of financial instruments that is managed, evaluated and reported on usinga fair value basis in accordance with a documented risk management or investment strategy; or

– the financial instrument contains an embedded derivative, which significantly modifies the cash flows of thehost contract or where the embedded derivative would clearly require separation.

Financial assets and financial liabilities at fair value through profit or loss are measured at fair value, with fair valuegains and losses (excluding impairment losses, interest income and interest expense calculated on the amortisedcost basis relating to those interest-bearing instruments that have been designated as at fair value through profitor loss) reported in non-interest revenue as they arise. Impairment losses calculated on the amortised cost basisare recognised in the income statement in impairment losses on loans and advances. Interest income and interestexpense calculated on the amortised cost basis are reported in interest income and expense.




3.2 Financial instruments (continued)(iii) Subsequent measurement (continued)• Non-trading financial liabilities

All financial liabilities, other than those at fair value through profit and loss, are classified as non-trading financialliabilities and are measured at amortised cost.

• Held-to-maturity financial assetsHeld-to-maturity financial assets are non-derivative financial assets with fixed or determinable payments andfixed maturity that the Group has the intent and ability to hold to maturity, other than those that meet thedefinition of loans and receivables or those that were designated as at fair value through profit or loss or available-for-sale. Held-to-maturity financial assets are measured at amortised cost, with interest income recognised in theincome statement.

• Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments that are not quotedin an active market, other than those classified by the Group as at fair value through profit or loss or available-for-sale. Financial assets classified as loans and receivables are carried at amortised cost, with interest revenuerecognised in the income statement.

• Available-for-saleFinancial assets are classified as available-for-sale where the intention, origination and designation of theinstrument do not fall within the ambit of the other financial asset classifications. Available-for-sale instrumentsare typically assets that are held for a longer period and in respect of which short-term fluctuations in value donot affect the Group’s hold or sell decision.

Available-for-sale financial assets are measured at fair value, with fair value gains and losses recognised directly inequity along with the associated deferred taxation. Any foreign currency translation gains and losses or interestrevenue, measured on an effective-yield basis, are recognised in the income statement as they arise. Whenavailable-for-sale equity instruments are determined to be impaired to the extent that the fair value declinesbelow its original cost, the resultant losses are recognised in profit or loss.

(iv) Embedded derivativesAn embedded derivative arises when derivatives are a component of a financial instrument in such a way that the cashflows in respect of the instrument vary in a similar way to those in respect of a standalone derivative.

Where the value of embedded derivatives can be reliably measured, embedded derivatives are accounted forseparately at their fair value.

Certain derivatives embedded in other financial and non-financial instruments, such as the conversion option in aconvertible bond, are treated as separate derivatives and recognised as such on a standalone basis, when their risksand characteristics are not closely related to those of the host contract and the host contract is not carried at fairvalue with unrealised gains and losses reported in profit or loss.

If it is not possible to determine the fair value of the embedded derivative, the entire hybrid instrument is categorisedas fair value through profit or loss and measured at fair value.

(v) Measurement basis of financial instruments• Amortised cost

Amortised cost financial assets and financial liabilities are measured at fair value on initial recognition, plus orminus the cumulative amortisation using the effective interest rate method of any difference between that initialamount and the maturity amount, less any cumulative impairment losses.

43


3.2 Financial instruments (continued)(v) Measurement basis of financial instruments (continued)• Fair value

Direct and incremental transaction costs are included in the initial fair value of financial assets and financialliabilities, other than those at fair value through profit or loss. The best evidence of the fair value of a financialasset or financial liability at initial recognition is the transaction price, unless the fair value of the instrument isevidenced by comparison with other current observable market transactions in the same instrument or based ona valuation technique whose variables include market observable data.

Where quoted market prices are available, such market data is used to determine the fair value of financial assetsand financial liabilities that are measured at fair value. The bid price is used to measure financial assets held andthe offer price is used to measure the fair value of financial liabilities. Mid-market prices are used to measure fairvalue only to the extent that the Group has assets and liabilities offsetting risk positions (refer to note 3.2 (viii)).

If quoted bid prices are unavailable, the fair value of the financial asset is estimated using pricing models ordiscounted cash flow techniques. Where discounted cash flow techniques are used, estimated future cash flowsare based on management’s best estimates and the discount rate used is a market-related rate at the balancesheet date for an instrument with similar terms and conditions. Where pricing models are used, inputs are basedon market-related measures at the balance sheet date.

The fair value of a financial liability with a demand feature is not less that the amount payable on demand,discounted from the first date on which the amount could be required to be paid. In cases where the fair value offinancial liabilities cannot be reliably determined, these liabilities are recorded at the amount due.

Investments in equity instruments that do not have a quoted market price in an active market and whose fairvalue cannot be reliably measured, and derivatives that are linked to and have to be settled by delivery of suchunquoted equity instruments, are not measured at fair value but at cost. Fair value is considered reliably measuredif:– the variability in the range of reasonable fair value estimates is not significant for that instrument, or– the probabilities of the various estimates within the range can be reasonably assessed and used in estimating

fair value.

(vi) DerecognitionAll financial assets and financial liabilities are derecognised on trade date, which is when the Group commits to sellinga financial asset or redeeming a financial liability.The Group derecognises a financial asset when and only when:– The contractual rights to the cash flows arising from the financial assets have expired or been forfeited by the Group;

or– It transfers the financial asset including substantially all the risks and rewards of ownership of the asset; or– It transfers the financial asset, neither retaining nor transferring substantially all the risks and rewards of ownership

of the asset, but no longer retains control of the asset.

A financial liability is derecognised when and only when the liability is extinguished, that is, when the obligationspecified in the contract is discharged, cancelled or has expired.

The difference between the carrying amount of a financial liability (or part thereof) extinguished or transferred toanother party and the consideration paid, including any non-cash assets transferred or liabilities assumed, isrecognised in profit or loss for the period.

The difference between the carrying amount of a financial asset (or part thereof) derecognised and the considerationreceived, including any non-cash assets received or liabilities extinguished, is recognised in profit or loss for the year.




3.2 Financial instruments (continued)(vii) Impairment of financial assetsThe Group assesses at each balance sheet date whether there is objective evidence that a financial asset or group offinancial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses areincurred if, and only if, there is objective evidence of impairment as a result of one or more events that occurred afterthe initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimatedfuture cash flows of the financial asset or group of financial assets that can be reliably estimated. Objective evidencethat a financial asset or group of assets is impaired includes observable data that comes to the attention of the Groupabout the following loss events:– significant financial difficulty of the issuer or obligor;– a breach of contract, such as a default or delinquency in interest or principal payments;– the Group, for economic or legal reasons relating to the borrower’s financial difficulty, a concession that the lender

would not otherwise consider;– it becoming probable that the borrower will enter bankruptcy or other financial reorganisation;– the disappearance of an active market for that financial asset because of financial difficulties; or– observable data indicating that there is a measurable decrease in the estimated future cash flows from a group of

financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with theindividual financial assets in the group, including:

• adverse changes in the payment status of borrowers in the Group; or• national or local economic conditions that correlate with defaults on the assets in the Group.

• Assets carried at amortised costIf there is objective evidence that an impairment loss on loans and receivables or held-to-maturity investmentscarried at amortised cost has been incurred, the amount of the loss is measured as the difference between theasset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses thathave not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount ofthe asset is reduced through the use of an allowance account and the amount of the loss is recognised in profitor loss.

The Group first assesses whether objective evidence of impairment exists individually for financial assets that areindividually significant, and individually or collectively for financial assets that are not individually significant. Ifthe Group determines that no objective evidence of impairment exists for an individually assessed financial asset,whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristicsand collectively assesses them for impairment.

If, in a subsequent year, the amount of the impairment loss decreases and the decrease can be related objectivelyto an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating),the previously recognised impairment loss is reversed by adjusting the allowance account. The reversal does notresult in a carrying amount of the financial asset that exceeds what the amortised cost would have been had theimpairment not been recognised at the date on which the impairment is reversed. The amount of the reversal isrecognised in profit or loss for the period.

• Financial assets carried at costIf there is objective evidence that an impairment loss has been incurred on an unquoted equity instrument thatis not carried at fair value, because its fair value cannot be reliably measured, or on a derivative asset that is linkedto and has to be settled by delivery of such an unquoted equity instrument, the amount of the impairment lossis measured at the difference between the carrying amount of the financial asset and the present value ofestimated future cash flows discounted at the current market rate of return for a similar financial asset. Suchimpairment losses are not reversed.

45


3.2 Financial instruments (continued)(vii) Impairment of financial assets (continued)• Available-for-sale financial assets

When a decline in the fair value of an available-for-sale financial asset has been recognised directly in equity andthere is objective evidence that the asset is impaired, the cumulative loss that has been recognised directly inequity is removed from equity and recognised in profit or loss even though the financial asset has not beenderecognised. The amount of the cumulative loss that is removed from equity and recognised in profit or loss isthe difference between the acquisition cost (net of any principal repayment and amortisation) and current fairvalue, less any impairment loss on that financial asset previously recognised in profit or loss. Impairment lossesrecognised in profit and loss for an investment in an equity instrument classified as available-for-sale are notreversed through profit or loss.

If, in a subsequent period, the fair value of a debt instrument classified as available-for-sale increases and theincrease can be objectively related to an event occurring after the impairment loss was recognised in profit andloss, the impairment loss is reversed, with the amount of the reversal recognised in profit or loss for the period.

(viii) Offsetting financial instruments and related incomeFinancial assets and liabilities are offset and the net amount reported in the balance sheet only when there is a legallyenforceable right to set off and there is intention to settle on a net basis or to realise the asset and settle the liabilitysimultaneously.

Income and expense items are offset only to the extent that their related instruments have been offset in the balancesheet.

3.3 Instalment transactionsInstalment credit agreements are regarded as financing transactions and the total instalments, less unearned financecharges, are included in advances and other accounts. Finance charges are computed at the commencement of thecontractual periods and are recognised in income in proportion to the net cash investment capital balancesoutstanding. Unearned finance charges are carried forward as deferred income and deducted from advances.

3.4 Property and equipment3.4.1 Owned assets

Owner-occupied property is stated at revalued amounts, being fair value at the date of revaluation less subsequentaccumulated depreciation and accumulated impairment losses. An external valuation is performed every three yearson a rotation basis. Internal valuations are done annually.

Equipment, principally computer equipment, motor vehicles, fixtures and furniture, are stated at cost less accumulateddepreciation and impairment losses.

Certain items of property and equipment that had been revalued to fair value on 1 January 2004, the date of transitionto IFRSs, are measured on the basis of deemed cost, being the revalued amount at the date of that revaluation.

3.4.2 Subsequent expenditureSubsequent expenditure is capitalised when it is measurable and will result in probable future economic benefits.Expenditure incurred to replace a component of an item of owner-occupied property or equipment is capitalised tothe cost of the item of owner-occupied property and equipment and the part replaced is derecognised. All otherexpenditure is recognised in profit or loss as an expense when incurred.

3.4.3 Revaluation of owner-occupied propertyOwner-occupied properties are stated at fair value. External valuations are obtained once every three years on acyclical basis. In the event of a material change in market conditions between the valuation date and balance sheetdate an internal valuation is performed and adjustments made to reflect any material changes in value.




3.4 Property and equipment (continued)

3.4.3 Revaluation of owner-occupied property (continued)

The valuation methodology adopted is dependent on the nature of the property. Income generating assets are valuedusing discounted cash flows. Vacant land, land holdings and residential flats are valued according to sales ofcomparable properties. Near vacant properties are valued at land value less the estimated cost of demolition.

When an individual property is revalued, any increase in its carrying amount (as a result of the revaluation) istransferred to a revaluation reserve, except to the extent that it reverses a revaluation decrease of the same propertypreviously recognised as an expense in profit or loss.

When the value of an individual property is decreased as a result of a revaluation, the decrease is charged against anyrelated credit balance in the revaluation reserve in respect of that property. However, to the extent that it exceedsany surplus, it is recognised as an expense in profit or loss.

Where properties reclassified during the year from property and equipment to investment properties any revaluationgain arising is initially recognised in profit or loss to the extent of previous charged impairment losses. Any residualexcess is taken to the revaluation reserve. Revaluation deficits are recognised in the revaluation reserve to the extentof previously recognised gains and any residual deficit is accounted for in profit or loss.

Investment properties that are reclassified to owner occupied property are revalued at the date of transfer, with anydifference being taken to profit or loss.

3.4.4 DerecognitionOn derecognition of an owner-occupied property, or equipment, any gain or loss on disposal, determined as thedifference between the net disposal proceeds and the carrying amount of the asset, is recognised in profit or loss inthe period of the derecognition. In the case of owner-occupied property, any surplus in the revaluation reserve inrespect of the individual property is transferred directly to retained income.

3.4.5 DepreciationDepreciation is charged to profit or loss on a straight-line basis over the estimated useful lives of items of owner-occupied property, furniture and fittings and equipment that are accounted for separately. Useful lives and residualvalues are assessed on an annual basis.

In the case of owner-occupied property, on revaluation any accumulated depreciation at the date of the revaluationis eliminated against the gross carrying amount of the property concerned and the net amount restated to therevalued amount. Subsequent depreciation charges are adjusted based on the revalued amount for each property. Anydifference between the depreciation charge on the revalued amount and that which would have been charged underhistoric cost is transferred net of any related deferred tax, between the revaluation reserve and retained earnings asthe property is utilised.

Land is not depreciated.The maximum estimated useful lives are as follows:

YearsFreehold land and buildings 50Leasehold land and buildings 20Furniture, fittings and equipment 10Computer equipment 5

47


3.5 Impairment of assetsIn addition to financial instruments and goodwill, the Group assesses all assets for indications of an impairment lossor the reversal of a previously recognised impairment at each balance sheet date. Should there be indications ofimpairment, the assets’ recoverable amounts are estimated. These impairments (where the carrying value of the assetexceeds its recoverable amount) or the reversal of a previously recognised impairment are recognised in profit or lossfor the year.

Intangible assets not yet available for use are tested annually for impairment.

The recoverable amount of an asset is the higher of its fair value less cost to sell and its value in use. The fair valueless cost to sell is determined by ascertaining the current market value of an asset and deducting any costs related tothe realisation of the asset.

In assessing value-in-use, the expected future cash flows from the asset are discounted to their present value using apre-tax discount rate that reflects current market assessments of the time value of money and the risks specific tothe asset. An asset whose cash flows are largely dependent on those of other assets, the recoverable amount isdetermined for the cash-generating unit to which the asset belongs.

A previously recognised impairment loss will be reversed if the recoverable amount increases as a result of a changein the estimates used previously to determine the recoverable amount, but not to an amount higher than the carryingamount that would have been determined, net of depreciation or amortisation, had no impairment loss beenrecognised in prior periods.

3.6 Operating leasesLeases where the lessor retains the risk and rewards of ownership of the underlying asset are classified as operatingleases. Payments made on the operating leases are recognised in the income statement on a straight-line basis overthe period of the lease.

3.7 TaxationIncome taxation on the profit or loss for the year comprises current and deferred taxation. Income taxation isrecognised in profit or loss except to the extent that it relates to items recognised directly to equity, in which case itis recognised in equity.

3.7.1 Deferred taxationDeferred taxation is provided using the balance sheet liability method, based on temporary differences. Temporarydifferences are differences between the carrying amounts of assets and liabilities for financial reporting purposes andtheir tax base.The amount of deferred taxation provided is based on the expected manner of realisation or settlementof the carrying amount of assets and liabilities using taxation rates enacted or substantively enacted at the balancesheet date.

Deferred taxation is charged to profit or loss except to the extent that it relates to a transaction that is recogniseddirectly in equity, or a business combination that is an acquisition. The effect on deferred taxation of any changes intaxation rates is recognised in profit or loss, except to the extent that it relates to items previously charged or crediteddirectly to equity.

A deferred taxation asset is recognised to the extent that it is probable that future taxable income will be available,against which the unutilised tax losses and deductible temporary differences can be used. Deferred taxation assets arereduced to the extent that it is no longer probable that the related taxation benefits will be realised.

Deferred taxation liabilities are recognised for taxable temporary differences arising on investments in subsidiaries andassociates, except where the Group is able to control the reversal of the temporary difference and it is probable thatthe temporary difference will not reverse in the foreseeable future.




3.7. Taxation (continued)

3.7.2 Direct and indirect taxationDirect taxation is the expected taxation payable on the taxable income for the year, as adjusted for items which arenot taxable or disallowed, using taxation rates enacted or substantively enacted in Namibia at the balance sheet date,and any adjustment to taxation payable in respect of previous years.

Indirect taxation includes Value Added Taxation paid to central government and has been expensed in the incomestatement, as part of the taxation charge.

3.8 Foreign currenciesTransactions in foreign currencies are converted into the functional currency at the rate of exchange ruling at the dateof the transaction.

Monetary assets and liabilities in foreign currencies are translated into the functional currency of the Group at ratesof exchange ruling at the balance sheet date.

Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated intothe functional currency of the Group at foreign exchange rates ruling at the date fair value is determined. Non-monetary assets and liabilities denominated in foreign currencies, which are stated at cost, are converted into thefunctional currency of the Group at the rate of exchange ruling at the date of the initial recognition and are notsubsequently retranslated.

Exchange gains and losses on the translation and settlement during the year of foreign currency monetary assets andliabilities are recognised in the income statement.

Exchange differences for non-monetary items, for example equity instruments, are recognised in equity when thechanges in the fair value of the non-monetary item is recognised in equity, and in profit or loss if the changes in fairvalue of the non-monetary item is recognised in profit or loss.

Non-monetary assets and liabilities denominated in foreign currencies that are stated at cost are recorded in thefunctional currency at the rate of exchange at the date of the initial recognition and are not subsequently retranslated.

3.9 Discounting transactionsAcceptances, promissory notes and other bills drawn by customers and discounted, as well as amounts rediscounted,are included under advances.

3.10 Properties in possessionUnsold properties in possession are stated at the lower of the net outstanding amount at date of purchase and netrealisable value.

3.11 Pension plans and other post-retirement benefitsA defined contribution plan has been established for eligible employees of the Group, with assets held in separatetrustee-administered funds.

Defined contribution planContributions in respect of defined contribution schemes are recognised as an expense in profit or loss as incurred.

Post-retirement medical benefitsCertain entities within the Group provide post-retirement medical benefits to eligible employees. Non-pension post-retirement benefits are accounted for according to their nature, either as defined contribution or defined benefit plans.The expected costs of post-retirement benefits are accrued over the period of employment and are determined byindependent qualified actuaries. Actuarial gains and losses and service costs are immediately realised in the profit andloss when incurred or received.

49


3.12 ProvisionsProvisions are recognised when the Group has a present legal or constructive obligation as a result of past events, forwhich it is probable that an outflow of economic benefits will occur and where a reliable estimate can be made ofthe amount of obligation.

3.13 Contingent liabilitiesThe Group discloses a contingent liability where:– It is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence

or non-occurrence of one or more uncertain future events not wholly within the control of the enterprise, or– It is not probable that an outflow of resources will be required to settle an obligation, or– The amount of the obligation cannot be measured with sufficient reliability.

3.14 Borrowing costsInterest expense is recognised in profit or loss using the effective interest method taking into account the expectedtiming and amount of cash flows. Interest expense includes the amortisation of any discount or premium or otherdifferences between the initial carrying amount of an interest-bearing instrument and its amount at maturity calculatedon an effective interest rate basis. All borrowing costs are expensed in the period in which they are incurred.

Alternatively, borrowing cost directly attributable to the acquisition, construction or production of qualifying assets,which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are addedto the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

3.15 Computer software and development costExpenditure on research activities, undertaken with the prospect of gaining technical knowledge are recognised in theincome statement as an expense incurred.

Expenditure on computer software and other development activities, whereby set procedures and processes areapplied to a project for the production of new or substantially improved products and processes, is capitalised if thecomputer software and other development products or processes are technically and commercially feasible and theGroup has sufficient resources to complete development. The expenditure capitalised includes cost of materials, anddirectly attributable staff and other costs. Computer development expenditure is amortised only once the relevantsoftware has been commissioned. Capitalised software is stated at cost, less accumulated amortisation andimpairment losses. Computer development expenditure, which has not yet been commissioned, is stated at cost lessimpairment losses.

Amortisation on computer software and development costs is charged to the income statement on a straight-linebasis over the estimated useful lives of these assets, not exceeding five years.

Subsequent expenditure relating to computer software is capitalised when it is probable that future economic benefitsfrom the use of assets will increase beyond its original assessed standard of performance. All other subsequentexpenditure is recognised as an expense in the period in which it is incurred. Surpluses or deficits on the disposal ofcomputer software are recognised in the income statement. The surplus or deficit is the difference between the netdisposal proceeds and the carrying amount of the asset.

3.16 Revenue recognitionRevenue relates to the Group’s banking activities and comprises net income from funds, dividends from investments,fees and commissions from banking and related transactions, and net income from exchange dealings.

Revenue is shown net of value added tax.

Interest income is recognised in profit or loss using the effective interest method taking into account the expectedtiming and amount of cash flows. Interest income includes the amortisation of any discount or premium or otherdifferences between the initial carrying amount of an interest-bearing instrument and its amount at maturitycalculated on an effective interest rate basis.




3.16 Revenue recognition (continued)

Dividend income from investments is recognised when the shareholders’ rights to receive payment have beenestablished.

Fees and commissions, other than those relating to investment management contracts, are generally recognised onan accrual basis when the service has been provided, such as loan syndication fees. Loan origination fees for loans thatare probable of being drawn down, are deferred (together with related direct costs) and recognised as an adjustmentto the effective interest rate on the advance. Commission and fees arising from negotiating, or participating in thenegotiation of a transaction for a third party, such as the acquisition of loans, shares or other securities or the purchaseor sale of businesses, are recognised on completion of the underlying transaction, unless it forms an integral part ofthe effective interest rate of the underlying financial instruments.

Foreign exchange gains and losses on monetary items arising from foreign currency transactions that have not beensettled at the balance sheet date are recognised in income in the year in which the exchange rate movement occurred.

Revenue other than interest, fees and commission, which includes exchange and securities trading income, dividendsfrom investments and net gains on the sale of investment banking assets, is recognised in profit or loss when theamount of revenue from the transaction or service can be measured reliably, it is probable that the economic benefitsof the transaction or service will flow to the Group and the costs associated with the transaction or service can bemeasured reliably.

Rental income from investment properties is recognised on a straight-line basis over the term of the relevant lease.

3.17 Share-based paymentsEquity-settled share-based payment transactionsThe services received in an equity-settled share-based payment transaction with employees are measured at the fairvalue of the equity instruments granted. The fair value of those equity instruments is measured at grant date.

If the equity instruments granted vest immediately and the employee is not required to complete a specified periodof service before becoming unconditionally entitled to those instruments, the services received are recognised in fullon grant date in profit or loss for the period, with a corresponding increase in equity.

Where the equity instruments do not vest until the employee has completed a specified period of service, it isassumed that the services rendered by the employee, as consideration for those equity instruments, will be receivedin the future, during the vesting period. These services are accounted for in profit or loss as they are rendered duringthe vesting period, with a corresponding increase in equity. Share-based payment expenses are adjusted for non-market related performance conditions.

Cash-settled share-based payment transactions with employeesThe services received in cash-settled share-based payment transactions with employees and the liability to pay forthose services, are recognised at fair value as the employee renders services. Until the liability is settled, the fair valueof the liability is remeasured at each reporting date and at the date of settlement, with any changes in fair valuerecognised in profit or loss for the period.Where the equity instruments do not vest until the employee has completeda specified period of service, it is assumed that the services rendered by the employee, as consideration for thoseequity instruments, will be received in the future, during the vesting period. These services are accounted for in profitor loss as they are rendered during the vesting period, with a corresponding increase in the liability. Share-basedpayment expenses are adjusted for non-market related performance conditions.

Measurement of fair value of equity instruments grantedThe equity instruments granted by Nedbank Group Limited are measured at fair value at measurement date usingstandard option pricing valuation models. The valuation technique is consistent with generally acceptable valuationmethodologies for pricing financial instruments, and incorporates all factors and assumptions that knowledgeable,willing market participants would consider in setting the price of the equity instruments.

51


3.17 Share-based payments (continued)

Share-based payments with persons or entities other than employeesThe transactions in which equity instruments are issued to historically disadvantaged individuals and organisations inNamibia are accounted for as share-based payments. Where Nedbank Group Limited has issued such shares andexpects to receive services in return for equity instruments, the share-based payments charge is spread over the relatingvesting (ie service) period of these instruments. In instances where such goods and services could not be identified thecost has been expensed with immediate effect. The valuation techniques are consistent with those mentioned above.

3.18 Cash and cash equivalentsCash and cash equivalents comprise balances with less than 90 days maturity from the date of acquisition including:cash and balances with central banks, treasury bills and other eligible bills, amounts due from other banks and tradingsecurities.

3.19 Share capitalShare capital issued by the Group is recorded at the proceeds received, net of direct issue cost.

Ordinary and preference share capital is classified as equity if it is non-redeemable by the shareholder and anydividends are discretionary. An equity instrument is a residual interest in the assets of an entity after deducting all ofits liabilities.

Dividends are recognised as distributions within equity in the period in which they are approved by the shareholders.Dividends for the year that are declared after the balance sheet date are dealt with in the subsequent events note.

3.20 Non-current assets held for saleNon-current assets and disposal groups are classified as held for sale if their carrying amount will be recoveredprincipally through the sale transaction rather than through continuing use. This condition is regarded as met onlywhen the sale is highly probable and the asset (or disposal group) is available for immediate sale in its presentcondition. Management must be committed to the sale, which should be expected to qualify as a complete sale withinone year from the date of classification. Non-current assets (and disposal groups) classified as held for sale aremeasured at the lower of their previous carrying amount and fair value less costs to sell.

3.21 Policyholders’ fundThe policyholders’ fund represents net revenue from life business for the current year as a reserve against future claims.

The policyholders’ fund provision has been computed using a gross premium valuation method. Provision has beenmade in accordance with the Financial Soundness Valuation basis as set out in the guidelines issued by the ActuarialSociety of South Africa in Prudential Guidance Note (PGN) 104 (2001). Under this guideline, provisions are valuedusing realistic expectations of future experience.

3.22 Policyholder insurance contractsProfessional Guidance Notes (“PGNs”) issued by the Actuarial Society of South Africa (ASSA”)

Coversure Limited is licensed as a long-term insurer in Namibia in accordance with the Long-Term Insurance Actof 1998 as amended (“LTIA”). The LTIA requires the determination of assets, liabilities and capital adequacyrequirements for statutory purposes in accordance with PGNs issued by ASSA.

In terms of IFRS 4: Insurance Contracts, defined insurance liabilities are allowed to be measured under existing localpractice. The Group has adopted the PGNs to determine the liability in respect of insurance contracts issued inNamibia. The following PGNs are of relevance to the determination of policyholder liabilities:




3.22 Policyholder insurance contracts (continued)

PGN 102: Life offices – HIV/AidsPGN 103: Report by the statutory actuary in the annual financial statements of South African Long-term

InsurersPGN 104: Life offices – Valuation of long-term insurers PGN 105: Recommended Aids extra mortality basesPGN 106: Actuaries and long-term insurance in South AfricaPGN 110: Reserving for minimum investment return guarantees

Insurance contracts classificationThe Group issues contracts that transfer insurance risk.

An insurance contract is a contract under which the Group (“insurer”) accepts significant insurance risk from thepolicyholder by agreeing to compensate the policyholder if a specified uncertain future event (“the insured event”)adversely affects the policyholder.

Insurance contracts measurementThese contracts are valued in terms of the Financial Soundness Valuation (“FSV”) basis, on a gross premium valuationmethodology, described in PGN 104 and the liability is reflected as Policyholders’ liabilities under insurance contracts.

The liability is based on assumptions of the best estimate of future experience, plus compulsory margins for prudentliabilities as required in terms of PGN 104.

The liability assumptions are reviewed annually. Any changes in assumptions and/or other changes to the liabilitycalculation are reflected in the income statement as they occur.

Outstanding claims provisionProvision is made in the policyholders’ liabilities under insurance contracts for the estimated cost of claimsoutstanding at the end of the year.

Liability adequacy testAt each balance sheet date, liability adequacy tests are performed to ensure the adequacy of the insurance contractliabilities net of related intangible present value of acquired in-force business assets. The liability is calculated in terms ofthe FSV basis described in PGN 104. The FSV basis meets the minimum requirement of liability adequacy test.

Acquisition costsAcquisition costs for insurance contracts represent commission that relate to the securing of new contracts.

The FSV method for valuing insurance contracts makes explicit allowance for the deferral of acquisition costs andhence no explicit deferred acquisition cost asset is recognised in the balance sheet for insurance contracts.

53


Group Company

2006 2005 2006 2005

N$’000 N$’000 N$’000 N$’000

4. Cash and balances with central bankBank notes and coins 37 973 35 061 – –Balances with central bank 135 183 45 467 – –

173 156 80 528 – –

5. Government and public sector securities5.1 Investment portfolio: Held-for-trading

Treasury bills 147 900 113 341 – –Government registered stock 137 449 32 305 – –

285 349 145 646 – –

5.2 Maturity structureOne year or less 204 454 113 341 – –Three years or less but over one year 5 541 32 305 – –Over three years 75 354 – – –

285 349 145 646 – –

5.3 ValuationUnlisted– Book value 287 528 144 991 – –– Market/directors’ valuation 285 349 145 646 – –Total book value 287 528 144 991 – –Total market/directors’ value 285 349 145 646 – –

Treasury bills with a maturity value of N$150 million (2005: N$114 million) and government stock with a maturityvalue of N$128 million (2005: N$27 million) have been encumbered to secure the current account with the centralbank.

6. Derivative financial instrumentsThese transactions have been entered into in the normal course of business and no material losses are anticipatedother than those for which provision has been made in the income statement. There are no commitments orcontingent commitments under derivative instruments that are settled otherwise than with cash. The principal typesof derivative contracts into which the Group enters are described below.

SwapsThese are over-the-counter (‘OTC’) agreements between two parties to exchange periodic payments of interest,or payment for the change in value of a commodity, or related index, over a set period based on notional principalamounts. The Group enters into swap transactions in several markets. Interest rate swaps exchange fixed rates forfloating rates of interest based on notional amounts. Basis swaps exchange floating or fixed interest calculated usingdifferent bases. Cross currency swaps are the exchange of interest based on notional values of different currencies.

ForwardsForward contracts are OTC agreements and are principally dealt in by the Group in interest rates as forward rateagreements and in currency as forward foreign exchange contracts.

Risk monitoringDetails of the Group’s risk management structure, policies and methods are noted on pages 20 to 22 and the interestrate risk analysis is detailed on page 89.


Group Company

2006 2005 2006 2005

N$’000 N$’000 N$’000 N$’000

55

6. Derivative financial instruments (continued)

6.1 Total carrying amount of derivative financial instrumentsGross carrying amount of assets 1 062 3 576 – –Gross carrying amount of liabilities (690) (4 699) – –

Net carrying amount 372 (1 123) – –

A detailed breakdown of the carrying amount, notional principal and fair value of the various types of derivativefinancial instruments held by the Group is presented in the following tables.

6.2 Notional principal of derivative financial instrumentsThis represents the gross notional amounts of all outstanding contracts at year-end for the Group. This gross notionalamount is the sum of the absolute amount of all purchases and sales of derivative instruments. The notional amountsdo not represent amounts exchanged by the parties and therefore represent only the measure of involvement by the Group in derivative contracts and not its exposure to market or credit risks arising from suchcontracts. The amounts actually exchanged are calculated on the basis of the notional amounts and other terms of thederivative, which relate to interest rates, exchange rates, securities’ prices or financial and other indices.

Notional Positive Negative Notional Positive Negativeprincipal value value principal value value

2006 2006 2006 2005 2005 2005N$’000 N$’000 N$’000 N$’000 N$’000 N$’000

GroupExchange rate contractsForwards 13 731 209 297 82 348 1 021 1 023Spot 15 591 91 22 – – –Currency swap – – – 17 700 2 555 2 552

29 322 300 319 100 048 3 576 3 575

Interest rate contractsInterest rate swaps 22 974 762 371 25 690 – 1 124

52 296 1 062 690 125 738 3 576 4 699

6.3 Carrying amount of derivative financial instrumentsThe amounts disclosed represent the value of all derivative instruments held at 31 December 2006. The fair value of aderivative financial instrument is the amount as which it could be exchanged in a current transaction between willingparties, other than a forced liquidation or sale. Fair values are obtained from quoted market prices, discounted cashflow models and market-accepted option-pricing models.

6. Derivative financial instruments (continued)

6.4 Analysis of derivative financial instrumentsGroupPositive fair value of derivatives2006Maturity analysisUnder one year 300 – 300One to five years – 762 762Over five years – – –

300 762 1 062

2005Maturity analysisUnder one year 3 576 – 3 576One to five years – – –Over five years – – –

3 576 – 3 576

GroupNegative fair value of derivatives2006Maturity analysisUnder one year 319 – 319One to five years – 371 371Over five years – – –

319 371 690

2005Maturity analysisUnder one year 3 575 715 4 290One to five years – 409 409Over five years – – –

3 575 1 124 4 699

GroupNotional principal of derivatives2006Maturity analysisUnder one year 29 322 – 29 322One to five years – 22 974 22 974Over five years – – –

29 322 22 974 52 296

2005Maturity analysisUnder one year 100 048 7 690 107 738One to five years – 18 000 18 000Over five years – – –

100 048 25 690 125 738


Exchange Interest rate

rate contracts contracts Total

N$’000 N$’000 N$’000


Group Company

2006 2005 2006 2005

N$’000 N$’000 N$’000 N$’000

57

7. Other short-term securitiesNegotiable certificates of deposit – 100 795 – –

7.1 Maturity structure

One year or less – 100 795 – –

8. Due from other banksPlacements with other banks 276 285 102 300 – –

9. Loans and advances to customers9.1 Category analysis

Home loans 1 232 040 995 879 – –Other loans and overdrafts 1 556 890 1 837 116 – –Preference share finance 46 200 40 500 – –Leases and instalment debtors 887 639 750 585 – –Less: Unearned finance charges on leases and instalment debtors (225 032) (187 035) – –Microloans 298 708 253 211 – –

3 796 445 3 690 256 – –Impairment of advances (note 29) (88 053) (66 989) – –

3 708 392 3 623 267 – –

9.2 Sectoral analysisIndividuals 2 001 735 1 388 715 – –Manufacturing 88 766 127 739 – –Wholesale and trade 146 961 145 373 – –Retailers, catering and accommodation 183 248 45 586 – –Agriculture, hunting, forestry and fishing 184 096 541 054 – –Mining and quarrying 462 469 655 447 – –Financial services, insurances and real estates 396 132 121 610 – –Government and public sector 11 281 140 058 – –Building and property development 64 326 285 826 – –Transport, storage and communication 41 082 117 613 – –Other services 216 349 121 235 – –

3 796 445 3 690 256 – –

9.3 Maturity structureRepayable on demand or at short-term notice 1 058 243 80 376 – –Three months or less but not repayable on demand or at short-term notice 465 522 2 792 – –One year or less but over three months 864 696 1 914 814 – –Five years or less but over one year 909 608 846 310 – –Over five years 498 376 845 964 – –

3 796 445 3 690 256 – –

9.4 Geographical analysisNamibia 3 796 445 3 690 256 – –


Group Company

2006 2005 2006 2005

N$’000 N$’000 N$’000 N$’000


9. Loans and advances to customers (continued)

9.5 Non-performing advances9.5.1 Category analysis (included

under note 9.1)Home loans 34 842 19 011 – –Other loans and overdrafts 12 953 29 766 – –Other loans and overdrafts to subsidiary companies – – – –Preference share finance – – – –Leases and instalment debtors 44 697 13 112 – –Less: Unearned finance charges on leases and instalment debtors – – – –Microloans 20 084 14 256 – –

112 576 76 145 – –

9.5.2 Sectoral analysis (included under note 9.2)Individuals 96 970 65 271 – –Manufacturing 152 – – –Wholesale and trade 2 245 477 – –Retailers, catering and accommodation 522 – – –Agriculture, hunting, forestry and fishing 298 4 572 – –Mining and quarrying 140 19 – –Financial services, insurances and real estates 1 765 1 896 – –Government and public sector – 288 – –Building and property development 8 583 3 284 – –Transport, storage and communication 1 901 114 – –Other services – 224 – –

112 576 76 145 – –

59

10. Investment in subsidiaries, associates and listed investmentsInvestment in subsidiary companies

– Carrying value at beginning of the year 96 697 41 856– Acquisition of additional investment

in subsidiary 10.1 4 000 54 841– Capitalisation award 32 945 –– Repayment of preference shares – –

– Carrying value at end of the year 133 642 96 697Investment in associates

– Carrying value at beginning of the year 3 133 988 – –– Increase in loans to associates – 2 145 – –

– Carrying value at end of the year 3 133 3 133 – –Listed investments 17 368 – – –

20 501 3 133 133 642 96 697

Market/directors’ valuation 20 501 3 133 133 642 96 697

Group Company

2006 2005 2006 2005

Notes N$’000 N$’000 N$’000 N$’000


Issued ordinaryshare capital and

Nature of business proportion held2006 2005 2006 2005’000 ’000 % %

10. Investment in subsidiaries,associates and listed investments (continued)

CompanySubsidiary companiesBellissima Investments Seventy-Two (Proprietary) Limited Property company – – 100 –Coversure (Proprietary) Limited Insurance company 4 000 4 000 100 100Nedbank Namibia Limited Banking company 67 759 64 094 100 100NedCapital (Proprietary) Limited Financing company 8 8 100 100Nedplan Insurance Brokers Namibia(Proprietary) Limited Insurance company – – 100 100

GroupSubsidiary companiesCBN Nominees (Proprietary) Limited Dormant company – – 100 100NedLoans (Proprietary) Limited Administration

company – – 80 80Namibia Executors and Trustees (Proprietary) Limited Trustee company – 1 – 75Ten Kaiser Wilhelm Strasse (Proprietary) Limited Property company– Ordinary shares 582 582 50 50Walvis Bay Land Syndicate (Proprietary) Limited Property company– Ordinary shares 3 000 3 000 50 50– Variable rate cumulative

redeemable preference shares 161 876 100 100


The directors value the investments in the subsidiary companies at cost.The Group have control over financial and operational decision in both Ten Kaiser Wilhelm Strasse (Proprietary) Limited and Walvisbay Land Syndicate (Proprietary) Limited by means of majority representation on the board of directors of these companies.

The shares previously held in Namibia Executors and Trustees (Proprietary) Limited have been sold for a consideration amount of N$81 668. The profit made on the sale of the 750 shares is disclosed under non-interest income note 28.

The ordinary dividend declared and paid by Nedbank Namibia in 2006 was a capitalisation award to the sole shareholder, NedNamibia Holdings. NedNamibia Holdings was entitled to receive a cash dividend of 51,40 cents per ordinary share (“the cash dividend alternative”). The number of capitalisation shares to which NedNamibia Holdings was entitled were determined in the ratio that 51,40 cents per ordinary share bears to N$8,99, being the value per ordinary share which has been determined by the Group’s advisors. This equates to 5,717 new shares for every 100 ordinary shares held. The total number of shares awarded to NedNamibia Holdings amounted to 3 664 627.

61

AggregateIndebtedness to profits after tax

Shares at cost subsidiary of subsidiary2006 2005 2006 2005 2006 2005

N$’000 N$’000 N$’000 N$’000 N$’000 N$’000

4 000 – – – – –4 000 4 000 – – 199 212

125 634 92 689 – – 35 714 88 5438 8 – – 3 442 1 524

– – – – 7 27

133 642 96 697 – – 39 362 90 306

– – – – – –

2 250 2 250 – (534) 3 756 3 869

– 1 – – – 107

291 291 – – 307 296

1 500 1 500 – – 710 241

161 876 – – – –

4 202 4 918 – (534) 4 773 4 513


Issued ordinaryshare capital and

Nature of business proportion held2006 2005 2006 2005’000 ’000 % %

10. Investment in subsidiaries,associates and listed investments (continued)

AssociateNamclear (Proprietary) Limited Clearing agent 4 4 25 25

Due to the unavailability ofaudited annual financialstatements for the year ended31 December 2006 for Namclear(Proprietary) Limited no balancesheet or income statementinformation have been provided.Indebtedness does not includeloans and advances paid in thenormal course of business. Theseamounts were included inadvances.

Nature of business Issued ordinary shares and proportion held2006 2005 2006 2005’000 ’000 % %

Listed investmentsNedbank Group Limited Banking 172 – 0,02 –

The shares in Nedbank Group Limited are held by the BEE trusts, which are consolidated on Group level.


63

Indebtednessby

Shares at cost associates2006 2005 2006 2005

N$’000 N$’000 N$’000 N$’000

1 1 3 132 3 132

Shares at cost Fair value of shares2006 2005 2006 2005

N$’000 N$’000 N$’000 N$’000

17 368 – 17 368 –



10. Investment in subsidiaries, associates and listed investments (continued)10.1 Acquisition of additional investment in subsidiary

2006On 15 December 2005 NedNamibia Holdings acquired 100% of Bellissima Investments Seventy-Two (Proprietary) Limited for a consideration of N$4 000 000.

Fair value of assets acquiredProperty and equipment 44 000000Fair value of liabilities acquired ––

Net assets acquired 44 000000Goodwill acquired ––

Consideration paid: in cash 44 000000Consideration paid: issue of share capital ––Consideration paid: utilisation of share premium ––

44 000000

2005A scheme of arrangement was executed effective 1 January 2005, in terms of which the former outside shareholdersof Nedbank Namibia was acquired by NedNamibia Holdings in exchange for shares in NedNamibia Holdings. Theconsideration in shares and share premium amounted to N$35 618 000.

Effective 1 January 2005 NedNamibia Holdings acquired 100% of NedCapital (formerly: NIB Namibia (Proprietary)Limited) for an amount of N$19 223 000.

Effective 31 October 2005 Nedbank Namibia, a subsidiary of NedNamibia Holdings, acquired an additional 20% (20shares) of the shares of NedLoans for an amount of N$2 250 000.

NedbankNedCapital Namibia NedLoans Total

Notes N$’000 N$’000 N$’000 N$’000

Fair value of assets acquired 716 515 2 652 589 5 535 3 374 639

Cash and short-term funds 675 74 945 1 300 76 920Government and public sector securities – 350 295 – 350 295Other short-term funds 125 877 91 841 2 390 220 108Advances and other debtors 589 687 2 093 617 840 2 684 144Investments in subsidiaries and associates – 988 – 988Property and equipment 62 40 903 895 41 860Taxation 214 – 110 324

Fair value of liabilities acquired 698 864 2 483 467 1 655 3 183 986

Deposits, current accounts and other creditors 136 534 2 432 707 1 570 2 570 811Long-term subordinated debt instruments 562 313 991 – 563 304Deferred taxation liabilities 17 49 769 85 49 871

Revaluation of property (net of deferred taxation) – 3 170 – 3 170

17 651 172 292 3 880 193 823Less: minority interest – 3 484 776 4 260Less: percentage share previous acquired – 157 767 2 328 160 095

Net assets acquired 17 651 11 041 776 29 468Goodwill acquired 11 1 572 24 577 1 474 27 623

Consideration paid: in cash – – 2 250 2 250Consideration paid: issue of share capital 424 1 047 – 1 471Consideration paid: utilisation of share premium 18 799 34 571 – 53 370

19 223 35 618 2 250 57 091

Bellissima InvestmentsSeventy-Two

(Proprietary) LimitedN$’000

11. GoodwillCarrying amount at beginning of year 27 623 – – –Arising on acquisitions – 27 623 – –Carrying amount at end of year 27 623 27 623 – –

– Cost 27 623 27 623 – –– Impairment losses – – – –

FurnitureFreehold Freehold Leasehold fittings and Computer

land buildings buildings equipment hardware TotalN$’000 N$’000 N$’000 N$’000 N$’000 N$’000

12. Property and equipmentGroup2006Carrying amount at 1 January 2006 1 809 34 336 – 12 106 1 774 50 025

– at cost/valuation 1 809 37 640 1 500 32 596 21 632 95 177– accumulated depreciation – (3 304) (1 500) (20 490) (19 858) (45 152)

Additions at cost – 844 – 11 670 5 342 17 856Disposals at net book value – – – (225) – (225)

Disposals at cost – – – (569) – (569)Accumulated depreciation of disposals – – – 344 – 344

Depreciation for the year – (884) – (3 307) (1 625) (5 816)

Carrying amount at 31 December 2006 1 809 34 296 – 20 244 5 491 61 840


2005Carrying amount at 31 December 2004 1 809 35 133 123 9 820 4 223 51 108


Additions at cost – – – 4 511 3 935 8 446Additions from acquisitionof subsidiary – – – 59 4 63

Cost – – – 96 42 138Accumulated depreciation – – – (37) (38) (75)

Disposals at net book value – – – (15) – (15)

Disposals at cost – – – (43) – (43)Accumulated depreciation of disposals – – – 28 – 28

Depreciation for the year – (797) (123) (2 269) (6 388) (9 577)

Carrying amount at 31 December 2005 1 809 34 336 – 12 106 1 774 50 025


Information regarding land and buildings required in terms of the Companies Act is available for inspection, byshareholders or their duly authorised agents, at the Companies’ registered office.

The revaluation of the property was performed on 1 January 2004 by and independent valuer namely, John Lofty –Eaton (National diploma: property valuation – Unisa, Member: SA Institute of Valuers and sworn appraiser).

The revaluation has been done based on reference to market evidence of recent transactions for similar properties.The valuation conforms to International Valuation Standards.

Group Company

2006 2005 2006 2005

N$’000 N$’000 N$’000 N$’000

65


Development Computer

cost software Total

N$’000 N$’000 N$’000


13. Computer software and development costGroup2006Carrying amount at 1 January 2006 1 827 7 686 9 513

– at cost 1 827 17 202 19 029– accumulated amortisation – (9 516) (9 516)

Additions at cost – 9 274 9 274Development cost incurred 555 – 555Transfers to computer software (2 186) 2 186 –Amortisation for the year – (6 302) (6 302)

Carrying amount at 31 December 2006 196 12 844 13 040

– at cost 196 28 662 28 858– accumulated amortisation – (15 818) (15 818)

2005Carrying amount at 1 January 2005 – 10 157 10 157

– at cost – 15 984 15 984– accumulated amortisation – (5 827) (5 827)

Additions at cost – 1 218 1 218Development cost incurred 1 827 – 1 827Amortisation for the year – (3 689) (3 689)

Carrying amount at 31 December 2005 1 827 7 686 9 513

– at cost 1 827 17 202 19 029– accumulated amortisation – (9 516) (9 516)

Group Company2006 2005 2006 2005

N$’000 N$’000 N$’000 N$’000

14. Non-current assets classified as held for saleLand held for sale(i) 4 000 – – –Building held for sale(i) 17 369 – – –

21 369 – – –

(i) The Group intends to dispose of the land and the building in the next 12 months. The primary business of theGroup is not to invest in property and a business decision has been taken to dispose of this property. A searchis under way for a buyer and it is anticipated that the disposal will be completed by 31 December 2007.No impairment loss was recognised on the reclassification of the land as held for sale.

Group Company

2006 2005 2006 2005

N$’000 N$’000 N$’000 N$’000

67

15. Other assetsRemittances in transit 16 188 45 374 – –Zero coupon bonds 65 266 56 429 – –Sundry debtors and other accounts 60 542 11 013 – –Deferred staff compensation 15 853 11 149 – –Dividends receivable – – 2 000 –Taxation 10 319 268 – –

168 168 124 233 2 000 –

16. Due to other banksDeposits and borrowings from other banks 259 772 853 987 8 035 1 531

17. Other depositsNegotiable certificates of deposit 544 559 356 973 – –

18. Due to customers18.1 Category analysis

Current accounts 825 816 829 081 – –Savings accounts 138 991 127 381 – –Other deposits and loan accounts 2 360 487 1 628 276 – –Foreign currency liabilities 57 829 61 305 – –

3 383 123 2 646 043 – –

Generally, foreign currency liabilities are either matched by advances to clients or covered against exchange rate fluctuations.

18.2 Sectoral analysisGovernment and quasi government 168 697 59 628 – –Insurance and pension funds 418 876 59 388 – –Companies and close corporations 1 065 181 1 366 078 – –Individuals and other 1 730 369 1 160 949 – –

3 383 123 2 646 043 – –

18.3 Maturity structureRepayable on demand 2 472 591 321 552 – –Three months or less but not repayable on demand 342 764 1 579 676 – –One year or less but over three months 267 613 594 672 – –Five years or less but over one year 300 155 150 143 – –

3 383 123 2 646 043 – –

18.4 Geographical analysisNamibia 3 083 843 2 445 141 – –South Africa 299 280 200 902 – –

3 383 123 2 646 043 – –


Group Company

2006 2005 2006 2005

N$’000 N$’000 N$’000 N$’000


19. Long-term subordinated debt instrumentsUnsecured, subordinated debentures, at issue price as adjusted for amortised discount and the portion of the coupon payments in excess of the effectiveinterest expense 1 320 1 153 – –

The debentures were issued at a discount on 15 September 1995 and are redeemable at their nominal value of N$40 million on 15 September 2030. Interest was payable on these debentures on a six-monthly basis at the rate of 17% per annum on nominal value until 15 September 2000.

Prior to 2001, these coupon payments werepartially charged against income and partiallyagainst the capital value of the debentures. For theyears 2001 to 2030 the effective interest expenseis capitalised. The coupon holders are entitled, inthe event of interest default, to put the couponcovering such interest payments to NedcorLimited.

In the unlikely event of redemption prior to 15 September 2030 a contingent liability exists of N$27,4 million (2005: N$26,6 million).

20. Policyholder liabilities under insurance contractsBalance at beginning of the year 2 148 2 148 – –Amounts recognised in income (1 259) – – –

Balance at the end of the year 889 2 148 – –

An independent valuation was performed on the policyholder liability by QED Actuaries and Consultants as at 31 December 2006.

21. Deferred taxationThe movement on the deferred tax account is as follows:Balance at beginning of the year 57 564 55 126 – –Movements during the year– Prior year adjustments 836 763 – –– Temporary differences 4 600 1 675 – –

Balance at end of the year 63 000 57 564 – –

The balance comprises:Capital allowances 14 219 12 236 – –Credit impairment (9 687) (6 522) – –Debentures 13 538 13 596 – –Prepaid expenses 15 908 13 188 – –Suspensive sales 30 855 29 288 – –Others (1 833) (4 222) – –

63 000 57 564 – –

Group Company

2006 2005 2006 2005

N$’000 N$’000 N$’000 N$’000

69

22. Provision for post-retirement medical benefitsThe Group subsidises 50% of the medical aidcontribution of all employees who joined NedbankNamibia between 1 April 2000 and 31 January2003. The subsidy does not apply to anyemployees who joint Nedbank Namibia Limitedon or after 1 February 2003. Provisions are madefor these costs. The charge for the year is includedin the staff costs expense in the income statement.

Valuation method and assumptions:

The actuarial valuation method used to value theliabilities is the Projected Unit Credit Methodprescribed by IAS 19 Employee Benefits. Futurebenefits valued are projected using specificactuarial assumptions and the liability for in-service members is accrued over expected workinglifetime. The actuarial valuation is obtained onceevery two years on a cyclical basis. The mostrecent valuation was obtained for the year ended31 December 2005.

The most significant assumptions used are:

Expected return on plan assets 8% per annum

Discount rate 8% per annum

Health care cost inflation 6,25% per annum

Reconciliation of net liability in the balance sheet:Balance at beginning of the year 4 939 12 343 – –Interest cost 391 641 – –Current service cost 123 638 – –Benefits paid (223) (225) – –Actuarial gain (157) (8 458) – –

Balance at end of the year 5 073 4 939 – –

An independent actuarial valuation has been performed by QED Actuaries and Consultants on 31 December 2005.


Group Company

2006 2005 2006 2005

N$’000 N$’000 N$’000 N$’000


23. Other liabilitiesCreditors and other accounts 89 774 15 395 136 12Taxation 1 538 1 200 – –BEE – managerial cost 6 892 – – –Managerial fees 17 625 – – –Deferred revenue 463 – – –Bonus provision 7 595 7 105 – –

– opening balance 7 105 2 001 – –– utilised (9 517) (1 900) – –– charge to income statement 10 007 7 004 – –

Fraud and self-insurance provision 25 499 – –

– opening balance 499 1 046 – –– utilised (2 058) (847) – –– charge to income statement 1 584 300 – –

Leave pay accrual 3 270 2 700 – –

– opening balance 2 700 2 375 – –– utilised (318) – – –– unutilised amounts reversed (2 382) (2 375) – –– charge to income statement 3 270 2 700 – –

127 182 26 899 136 12

Group Company2006 2005 2006 2005

24. Share capital and share premiumAs at 31 DecemberNumber of issued shares at the beginning of the year 66 834 526 66 834 526 66 834 526 66 834 526Number of shares issued during the year (note 33) 3 547 118 – 3 547 118 –

Number of issued shares at the end of the year 70 381 644 66 834 526 70 381 644 66 834 526

Group Company2006 2005 2006 2005

N$’000 N$’000 N$’000 N$’000

Ordinary shares 17 595 16 709 17 595 16 709Share premium 99 536 68 568 99 536 68 568

Total 117 131 85 277 117 131 85 277

The total number of authorised shares at year-end was 80 000 000 (2005: 80 000 000) ordinary shares of 25 cents(2005: 25 cents) each. All issued shares are fully paid.Subject to the restrictions of the Companies Act, the unissued shares are under the control of the directors until theforthcoming annual general meeting.

Group Company

2006 2005 2006 2005

N$’000 N$’000 N$’000 N$’000

71

25. Revaluation reserveBalance at the beginning of the year 12 006 12 324 – –Movement during the year (318) (318) – –

Balance at the end of the year 11 688 12 006 – –

The revaluation reserve arises on the revaluation of land and buildings.

26. Share-based payment reserveBalance at the beginning of the year – – – –Movement during the year 16 735 – – –

Balance at the end of the year 16 735 – – –

The share-based payment reserve, is a contribution from the parent and equals the amount at which the services from the employees are measured that arises from the grants of share options and restrictedshares issued to employees under the BEE schemes detailed in note 39.

27. Net interest incomeInterest Home loans 125 371 79 254 – –Other loans and overdrafts 195 373 180 484 – –Lease and instalment debtors 75 906 51 936 – –Microloans 67 427 53 763 – –Government and public sector securities 5 164 9 406 – –Short-term funds and securities 25 329 25 043 – –

Total interest and discount income 494 570 399 886 – –Interest expenseDeposit and loan accounts 111 078 77 447 – –Current and savings accounts 53 017 46 481 730 –Negotiable certificates of deposit 36 060 23 643 – –Other liabilities 50 683 59 857 – –Long-term debt instruments 169 162 – –

Total interest expense 251 007 207 590 730 –

Net interest income 243 563 192 296 (730) –


Group Company

2006 2005 2006 2005

N$’000 N$’000 N$’000 N$’000


28. Non-interest incomeCommission and fees 54 772 48 360 – –Premium income – (26)Dividends 4 476 3 670 34 945 –Exchange earnings 17 696 16 725 – –

Exchange commission 8 658 7 342 – –Foreign exchange profit 9 038 9 383 – –

Profit on sale of property and equipment 5 28 – –Sundry trading gains 4 892 4 531 – –Fair value adjustments (530) – – –

– Financial Instruments (1 462) – – –– Listed investments 932 – – –

Loss on sale of investment in subsidiary (26) – – –Transfer to policyholder liabilities under insurance contracts 1 259 – – –Other income 12 614 11 524 12 –

95 158 84 812 34 957 –

29. Impairment of advances29.1 Movements

Balance at beginning of the year 66 989 88 963 – –Debts recovered 10 634 9 276 – –Debts written off (18 393) (24 271) – –Income statement charge 28 823 (6 979) – –

– specific impairment 28 964 (10 187) – –– portfolio impairment (141) 3 208 – –

Balance at end of the year (note 9) 88 053 66 989 – –

29.2 AnalysisSpecific impairment 51 153 32 814 – –Portfolio impairment 36 900 34 175 – –

88 053 66 989 – –

29.3 Impairments of advances by categorySpecific impairmentsHome loans 3 603 5 351 – –Other loans and overdrafts 7 078 9 276 – –Lease and instalment debtors 29 070 5 418 – –Microloans 11 402 12 769 – –

Impairment at end of year 51 153 32 814 – –

Portfolio impairmentsHome loans 3 305 7 225 – –Other loans and overdrafts 11 165 11 910 – –Lease and instalment debtors 7 272 5 652 – –Microloans 15 158 9 388 – –

Impairment at end of year 36 900 34 175 – –

In 2006 a change in accounting estimate resulted in an additional N$5,4 million portfolio impairment in respect ofmicroloans. In accordance with the Group’s accounting policies the Group also raises impairment for incurred but notreported (“IBNR”) losses. Due to more accurate information which have became available in the current year for thecalculation of the IBNR losses, the estimate of the impairment was changed.

Group Company

2006 2005 2006 2005

N$’000 N$’000 N$’000 N$’000

73

29. Impairment of advances (continued)29.4 Sectoral analysis

Specific impairmentsIndividuals 48 768 26 972 – –Manufacturing 41 – – –Wholesale and trade 286 368 – –Retailers, catering and accommodation 37 – – –Agriculture, forestry and fishing 388 4 822 – –Mining and quarrying 53 10 – –Financial services, insurance and real estate 58 76 – –Government and public sector – – – –Building and property development 1 193 258 – –Transport, storage and communication 329 35 – –Other services – 273 – –

51 153 32 814 – –

Portfolio impairmentsIndividuals 23 293 22 388 – –Manufacturing 887 – – –Wholesale and trade 1 467 3 260 – –Retailers, catering and accommodation 1 832 – – –Agriculture, forestry and fishing 1 360 4 675 – –Mining and quarrying 119 134 – –Financial services, insurance and real estate 3 942 883 – –Government and public sector – 452 – –Building and property development 631 1 600 – –Transport, storage and communication 407 48 – –Other services 2 962 735 – –

36 900 34 175 – –

30. ExpensesExpenses include the following items which are separately disclosable:Auditors’ remuneration– Audit fees – current year 1 853 948 – –

– prior year 2 103 637 126 –– Other services 152 454 – –Post-retirement medical aid benefit– Interest cost 391 641 – –– Current service cost 123 638 – –– Actuarial gain (157) (8 458)Depreciation 5 816 9 577 – –Amortisation of computer software 6 302 3 689 – –Staff costs 96 484 73 575 311 –Operating lease charges– Fixed property 5 274 5 132 – –– Other 1 746 1 420 – –Remuneration other than to employees for:– Managerial services 17 625 3 155 – –– Technical services – 2 011 – –Directors’ fees paid by the Group– For services as directors 663 553 84 47– Managerial services 407 1 518 – –Key management– Basic salary and other benefits 3 036 2 556 – –– Employer pension contribution 262 246 – –– Employer medical aid contribution 93 117 – –Other expenses 73 450 56 684 298 192

215 623 155 093 819 239


Group Company

2006 2005 2006 2005

N$’000 N$’000 N$’000 N$’000


31. BEE transaction expenses– BEE share-based payment expenses 21 700 – – –– Consultation fees 6 892 – – –

28 592 – – –

32. Taxation32.1 Charge for the year

Taxation on incomeNormal – current year 19 330 36 917 – –Normal – prior year (836) (3 199) – –Deferred – current 4 600 1 675 – –Deferred – prior 836 763 – –

23 930 36 156 – –

Other taxationValue-added tax charge in respect of current expenditure net of input credits 1 600 2 770 – –

Total taxation 25 530 38 926 – –

32.2 Reconciliation of rate of taxation % % % %Namibian normal rate of taxation 35,0 35,0 35,0 35,0Reduction in rate for the year: (12,3) (6,9) (36,6) –

– Non-taxable income (5,4) (1,6) (36,6) 0,0– Prior year (1,4) (2,5) 0,0 0,0– Other permanent differences (5,5) (2,8) 0,0 0,0

Increase in rate for the year: 16,2 2,1 1,6 (35,0)

– Value-added tax charge in respect of current expenditure net of input credits 2,4 2,1 0,0 0,0

– Non-deductible expenses 13,8 – 1,6 (35,0)

Effective rate of taxation 38,9 30,2 – –

33. Dividends N$’000 N$’000 N$’000 N$’000Ordinary dividend of 49,29 cents per ordinaryshare (cash dividend alternative) 32 945 – 32 945 –

The ordinary dividend was a capitalisation award. Each shareholder was entitled to receive a cash dividend of49,29 cents per ordinary share (‘the cash dividend alternative’). The number of capitalisation shares to whichthe shareholders were entitled to was determined in the ratio that 49,29 cents per ordinary share bearsto N$8,98, being the value per ordinary share which has been determined by the Group’s advisors. This equatesto 5 489 new shares for every 100 ordinary shares held.

Please refer to the directors’ report for additional information regarding the dividend.

Group

2006 2005

Cents per share Cents per share

75

34. Earnings per shareBasic earnings per share 57,03 132,01

Diluted earnings per share 57,03 132,01

Basic earnings per shareGroup

2006 2005N$’000 N$’000

Earnings used in the calculation of basic earnings per share 38 893 88 225

Group2006 2005’000 ’000

Weighted average number of ordinary shares for the purpose of basic earnings per share 68 195 66 835

Diluted earnings per shareThe earnings and the weighted average number of ordinaryshares used in the calculation of all diluted earnings per sharemeasures are the same as those for the equivalent basicearnings per shares measures, as outlined above.

Group Company2006 2005 2006 2005

N$’000 N$’000 N$’000 N$’000

35. Cash flow information35.1 Reconciliation of net income before taxation

to cash generated/(utilised) by operating activitiesNet income before taxation 65 683 128 994 33 408 (239)Adjustments for non-cash items: 26 073 11 539 (32 945) –

– Interest accrued on non-dealing securities – (795) – –– Discount on government stock amortised (1 869) (904) – –– Dividends – – (32 945) –– Profit on disposal of fixed property

and equipment (5) (28) – –– Fair value adjustment on listed investment (932) – – –– Loss on sale of investment 26 – – –– Share-based payment reserve movement 16 735 – – –– Depreciation 5 816 9 577 – –– Computer software amortisation 6 302 3 689 – –

Other adjustments (21 836) (170 479) (1 091) (126 022)

– Movement in long-term subordinated debt instruments 167 162 – –

– Current income tax charge (20 094) (36 488) – –– Dividends (1 909) (134 153) (1 091) (126 022)

Movement in operating assets 299 054 (47 260) 4 628 95 181

– Deposit, current and other accounts 426 107 1 020 769 4 628 1 531– Advances and other accounts (127 053) (1 068 029) – 93 650

Cash flow from/(to) operating activities 368 974 (77 206) 4 000 (31 080)


Group Company

2006 2005 2006 2005

N$’000 N$’000 N$’000 N$’000


35. Cash flow information (continued)

35.2 Cash received from customersInterest received 479 124 396 446 – –Commission and fees received 59 059 63 746 – –Other income received 30 711 20 831 12 –

568 894 481 023 12 –

35.3 Cash paid to customersInterest paid on deposits (244 276) (184 902) (730) –

(244 276) (184 902) (730) –

35.4 Dividends paidAmounts outstanding – beginning of year – (132 560) – (126 022)Dividend declared (1 091) – (1 091) –Dividend to outside shareholders (818) (1 593) – –Amounts outstanding – end of year – – – –

(1 909) (134 153) (1 091) (126 022)

The capitalisation award in respect of the dividend declared, N$31 854 000, is not reflected in the cash flow statement. 3 547 118 shares were issued in this regard (note 24).

35.5 Taxation paidAmounts (outstanding)/prepaid – beginning of year (932) 6 430 – –Charge to income statement (18 494) (33 718) – –Amounts (prepaid)/outstanding – end of year (8 781) 932 – –VAT output tax (1 600) (2 770) – –

(29 807) (29 126) – –

35.6 Cash movements in operating liabilitiesCurrent accounts (3 265) 193 582 6 504 1 531Savings deposits 11 610 20 500 – –Other deposits and loan accounts 130 155 533 913 124 –Foreign currency accounts (3 476) 103 – –Negotiable certificates of deposit 187 586 249 494 – –

322 610 997 592 6 628 1 531

35.7 Outflow on disposal of subsidiaryAssets 3 – – –Liabilities (34) – – –

(31) – – –Cash 173 – – –

142 – – –Minority (35) – – –

Total book value 107 – – –Loss on sale of investment (26) – – –

Cash flow from acquisition 81 – – –Bank balances (173) – – –

Total cash flow (92) – – –

Group Company

2006 2005 2006 2005

N$’000 N$’000 N$’000 N$’000

77

35. Cash flow information (continued)

35.8 (Purchase)/proceeds of non-dealing securitiesOther short-term securities 66 236 (91 513) – –Government and public sector securities (103 245) 197 263 – –

(37 009) 105 750 – –

35.9 Cash and short-term fundsFor the purpose of the cash flow statement,cash and short-term funds comprises the following balances with less than 90 days maturity:Bank notes and coins (note 4) 37 973 35 061 – –Balances with central bank (note 4) 135 183 45 467 – –Due from other banks (note 8) 276 285 102 300 – –

449 441 182 828 – –

36. Commitments36.1 Capital expenditure

Not yet contracted– Property and equipment 28 979 18 107 – –– Intangible assets 2 164 – – –

31 143 18 107 – –

Funds to meet capital expenditure will be provided from internal resources.

36.2 Bond commitmentsBonds granted, not yet paid out 2 055 67 980 – –

36.3 Undrawn facilitiesOriginal term of maturity of one year or less 408 711 21 829 – –Interest and foreign exchange rate related items including swaps, options and futures 1 762 – – –

410 473 21 829 – –

36.4 Operating leasesCompanies in the Group have entered into leases over fixed property and other equipment for various periods. The charges will increase in future in line with negotiated escalations and expansions.

The future minimum lease payments in respect ofoperating leases are as follows:

Premises2006 – 4 086 – –2007 6 514 3 240 – –2008 5 460 2 265 – –2009 4 751 2 175 – –2010 2 756 856 – –2011 1 990 1 281 – –Thereafter 709 – – –

22 180 13 903 – –


Group Company

2006 2005 2006 2005

N$’000 N$’000 N$’000 N$’000


37. Pension fundAll eligible employees are members of the NedbankNamibia Pension Fund, a defined contribution plan,which has been registered in Namibia in accordancewith the requirements of the Pension Fund Act.

The fund is governed by the Pension Fund Act, 1956,which requires an actuarial valuation every threeyears. The findings of independent consulting actuaries, based on their appraisal of the fund duringJanuary 2006, confirmed that the fund was financially sound.

The total value of contributions to the pension fund during the year amounted to:Number of members 597 502 – –Employer contributions 6 095 5 187 – –Employee contributions 3 996 3 430 – –

38. Contingent liabilitiesConfirmed letters of credit 1 825 571 – –Liabilities under guarantees 175 350 163 450 – –Legal actions against the Group 803 11 715 – –

177 978 175 736 – –

The major legal actions filed against the Group are detailed below:

A plea has been served and filed against Nedbank Namibia by the NAMCO group in respect for damages suffered byTFDS Offshore AS. The contingent liability was originally estimated at N$10 774 574. Nedbank Namibia would havebeen held accountable for their share of the participation agreement of 1,95%. Final settlement occurred in February2007 determined at US$85 000 translated at a rate of 7,3843, totalling N$627 666. Nedbank Namibia was only heldaccountable for N$12 220.

An ex-employee lodged a complaint of unfair dismissal with the District Labour Court of Oshikati. The relief claimedamounts to N$680 000.

39. Share-based paymentsShares and share options are granted to employees as part of their remuneration package for services rendered, andin terms of the BEE scheme to clients and partners as an incentive to retain business and develop growth within theGroup. The following are share and share options schemes that have been in place during the year. The BEE schemeswill be treated as equity settled.

As the Group cannot estimate reliably the fair value of services received nor the value of additional business received,the Group rebuts the presumption that such services and business can be measured reliably and, as such, measurestheir fair value by reference to the fair value of the options or shares granted. The fair value of such options and sharesis measured at the grant date utilising the Black-Scholes model.

79

39. Share-based payments (continued)

39.1 Description of arrangementsVesting Maximum

Scheme Trust Description requirements term

Black Economic Empowerment schemes – Business partners and affinity groups

No dealing in the sharesduring the 10-year notional funding period.



The trust shall hold thescheme shares linkedto the respectivebeneficiary beneficiariesuntil the exercise date.

10 years

10 years

10 years

10 years

Each SPV was issued anequal number ofrestricted shares atR2,53 per share withnotional funding over aperiod of 10 years. Thebeneficial ownership ofthe shares resideswith the participants,including the voting anddividend rights.

Each SPV was issued anequal number ofrestricted shares atR1 per share withnotional funding over aperiod of 10 years. Thebeneficial ownership ofthe shares resideswith the participants,including the voting anddividend rights.

Each SPV was issued anequal number ofrestricted shares atR1 per share withnotional funding over aperiod of 10 years. Thebeneficial ownership ofthe shares resideswith the participants,including the voting anddividend rights.

Restricted shares weregranted to certain blackemployees. The beneficialthe respective beneficiaryownership of the sharesfor the benefit of theparticipation alloca-tions,beneficiaries untilthe resides with theparticipants, including thevoting and dividendrights.

Central Consortium SPVThree Investments (Pty)Ltd, Coastal ConsortiumSPV Three Investments(Pty) Ltd and NorthernEmpowerment SPV Three Investments (Pty)Ltd

Southern ConsortiumSPV Three InvestmentsInvestments (Pty) LtdEastern Consortium SPVThree Investments (Pty)Ltd

The Old Mutualand Nedbank NamibiaEducation Trust

NedNamibia HoldingsDiscretionary Trust

Black Business PartnerScheme (BBP)

Affinity Group Scheme(AG)

Benefit scheme inrespect of highereducation (Education)

NedNamibiaDiscretionary scheme




39.1 Description of arrangements (continued)

Vesting MaximumScheme Trust Description requirements term

Restricted shares grantedto all qualifyingemployees who do notparticipate in any othershare incentive schemeoperating in the Group.The beneficial ownershipof the shares resides withthe participants,includingthe voting and dividendrights. However, theparticipants are notentitled to deal in theshares for a period of fiveyears.

Restricted shares andremain in service forgranted to certain black employees on middle andsenior management level.The beneficial ownershipof the shares resides withthe participants, includingthe voting and dividendrights.

Restricted shares grantedto all qualifying employeeswho do not participate inany other share incentivescheme operating in theGroup. The beneficialownership of the sharesresides with theparticipants, including thevoting and dividendrights.

Restricted shares andoptions awarded to alleligible employees topromote the continuedgrowth of NedNamibiaHoldings Limited and toattract and retain suitablyskilled and competentpersonnel. The beneficialownership of the sharesresides with theparticipants, including thevoting and dividendrights.

Nedbank Namibia Broad-based Employee Trust

Ofifiya Black Managementshare options were Trust

Ofifiya Broad-based Employee Trust

NedNamibia HoldingsLong-term IncentiveScheme (LTIP)

Broad-based Employee Scheme

Black economic empowerment schemes – employeesBlack Management Scheme (Black management)

Broad-based employee scheme (broad-based)

NedNamibia Holdings Long-term Incentive Scheme (LTIP)

N/A

Participants must remainin service for four, fiveand six years, after eachof which 1/3 ofthe shares becomeunrestricted and 1/3 ofthe options vest.

No dealing in the sharesduring the restrictedperiod of five years.

Participants must remainin service of NedNamibiaHoldings Limited or anyone of its subsidiaries toqualify as a eligibleemployee.

Five years

Seven years

Five years

Three years

Share-based Share-based payments

payments expenses liability/reserve

2006 2005 2006 2005

N$’000 N$’000 N$’000 N$’000

81


39.2 Effect on profit and financial positionBlack Economic Empowerment schemesBlack Business Partners (BBP) 8 997 – 8 997 –Affinity Groups (AG) 3 299 – 3 299 –Education 4 398 – 4 398 –Discretionary – – – –LTIP – – – –Black management 41 – 41 –Broad-based 4 965 – – –

21 700 – 16 735 –

2006 2006 2005 2005Number of Weighted average Number of Weighted average

instruments exercise price instruments exercise price

39.3 Black economic empowerment schemesBlack Business Partner SchemeOutstanding at beginning of the year – – – –Granted 199 929 278,98 – –Forfeited – – – –Exercised – – – –Expired – – – –

Outstanding at end of year 199 929 278,98 –

Exercisable at end of year – – – –Weighted average share price for options exercised (N$) – – – –

Affinity Group SchemeOutstanding at beginning of the year – – – –Granted 74 048 282,47 – –Forfeited – – – –Exercised – – – –Expired – – – –



Education SchemeOutstanding at beginning of the year – – – –Granted 98 730 282,47 – –Forfeited – – – –Exercised – – – –Expired – – – –




2006 2006 2005 2005Number of Weighted average Number of Weighted average

instruments exercise price instruments exercise price



39.3 Black economic empowerment schemes (continued)

Discretionary SchemeOutstanding at beginning of the year – – – –Granted – 282,58 – –Forfeited – – – –Exercised – – – –Expired – – – –

Outstanding at end of year – 282,58 –


LTIP SchemeOutstanding at beginning of the year – – – –Granted – 101,29 – –Forfeited – – – –Exercised – – – –Expired – – – –

Outstanding at end of year – 101,29 –


Black Management SchemeOutstanding at beginning of the year – – – –Granted 75 400 77,92 – –Forfeited – – – –Exercised – – – –Expired – – – –



Broad-based SchemeOutstanding at beginning of the year – – – –Granted 39 816 – – –Forfeited – – – –Exercised – – – –Expired – – – –

Outstanding at end of year 39 816 – – –


2006 2006 2005 2005Weighted average Weighted average

remaining remainingNumber of contractual Number of contractual

instruments (years) instruments (years)

83


39.4 Instruments outstanding at the end of the year by exercise priceBlack Business Partner Scheme278,98 199 929 10,00 – –

199 929 10,00 –

Affinity Group Scheme282,47 74 048 10,00 – –

74 048 10,00 – –

Education Scheme282,47 98 730 10,00 – –

98 730 10,00 – –

Discretionary Scheme282,58 – 10,00 – –

– 10,00 – –

LTIP Scheme101,29 – 4,00 – –

– 4,00 – –

Black Management Scheme0,00 17 396 5,00 – –101,29 58 004 7,00 – –

75 400 6,50 – –

Broad-based Scheme0,00 39 816 – – –

39 816 – – –


39.5 Instruments granted during the year2006Weighted average fair value per instrument granted (N$) 45,00 44,55 44,55 44,55 41,50 59,76 124,70The weighted average fair value has been calculated using the Black-Scholes option pricing model, using the followinginputs and assumptions:Number of instruments granted 199 929 74 048 98 730 – – 75 400 39 816Weighted average share price (N$) 124,00 124,00 124,00 124,00 124,00 124,70 124,70Weighted average exercise price (N$) 278,98 282,47 282,47 282,58 101,29 77,92 –Weighted average expectedvolatility (%) * 29,00 29,00 29,00 29,00 29,00 27,90 –

Weighted average life (years) 10,00 10,00 10,00 10,00 4,00 5,80 –Weighted average expected dividends (%) ** – – – – 4,08 3,70 –Weighted average risk-free interest rate (%) 8,10 8,10 8,10 8,10 8,43 8,27 –Number of participants 3 2 1 – – 29 504Weighted average vesting period (years) 10,00 10,00 10,00 10,00 4,00 5,00 –Possibility of ceasing employmentbefore vesting (%) – – – – – 5 –Expectation of meeting performance criteria (%) – – – – – – –

* Volatility is determined using expected volatility for all shares listed on the JSE.** The dividend yield used for the grants made in 2006 has been based on forecast dividends.

40. Related party disclosure40.1 Parent company

Nedbank Namibia Limited’s majority shareholder is NedNamibia Holdings Limited (100%) (2005: 100%), which is inturn owned by Nedbank Limited incorporated in South Africa. The ultimate holding company is Old Mutual Plc.The subsidiaries and associates of these companies are also seen as related companies.


Black Business Affinity Discre- Black Broad-Partner Scheme Group Education tionary LTIP Manage- based

(BBP) (AG) Scheme Scheme Scheme ment Scheme


85

40. Related party disclosure (continued)

40.2 Identity of related parties with whom transactions have occurredSubsidiaries and the associate of the group are identified in note 10. All of these entities are related parties.

Group Company

Transaction 2006 2005 2006 2005

Relationship type N$’000 N$’000 N$’000 N$’000

40.3 Related party transactions and balancesThe following related party transactions have been entered into:Interest incomeRelated partyNedbank Limited Holding company Product balance 8 827 7 538 – –Nedbank London branch Fellow subsidiary Product balance 387 – – –NIB Holdings (Namibia) (Proprietary) Limited Fellow subsidiary Product balance 13 – – –Old Mutual Namibia Limited Fellow subsidiary Product balance – 3 – –

Other incomeNedbank Namibia Limited Subsidiary Dividends – – 32 945 –NIB Holdings (Namibia) (Proprietary) Limited Fellow subsidiary Other fees – 518 – –Old Mutual Namibia Limited Fellow subsidiary Other fees 180 – – –Old Mutual Namibia Limited Fellow subsidiary Commissions 2 067 1 544 – –Coversure Limited Subsidiary Dividends – – 2 000 –

Interest expenseNedbank Africa division Holding company Product balance – 72 – –Nedbank Namibia Limited Subsidiary Product balance – – 730 –Nedbank Namibia Pension Fund Pension fund Product Balance 138 49 – –Nedbank Limited Holding company Product balance 9 198 46 261 – –Nedbank Lesotho Fellow subsidiary Product balance 1 775 12 729 – –Nedcor Investments Limited Holding company Product balance 2 801 2 755 – –Old Mutual Namibia Limited Fellow subsidiary Product balance 16 645 2 630 – –Woodlands Investments (Proprietary) Limited Fellow subsidiary Product balance 4 412 1 357 – –


Group Company

Transaction 2006 2005 2006 2005



40. Related party disclosure(continued)

40.3 Related party transactions and balances (continued)

ExpensesBastion ZA (Proprietary) IT ProcessingLimited Fellow subsidiary charges – 1 768 – –Nedbank Namibia Pension Pension Fund Pension fund contributions 6 095 5 080 – –Nedbank Limited Holding company Management

fee 17 625 3 154 – –NedCapital (Proprietary) Fellow StructureLimited Subsidiary fee – – – 288NIB Holdings (Namibia) Leases (Proprietary) Limited Fellow subsidiary and rentals – 136 – –Transactions with Services asdirectors (note 30) Directors directors 663 553 84 47Transactions with directors (note 30) Directors Other services 407 1 518 – –Transactions with key management (note 30) Key management Staff cost 3 391 2 919 – –

Loans from related partyNedbank London branch Fellow subsidiary Bank accounts 22 – – –Nedbank Namibia Pension Fund Pension fund Bank accounts 3 938 8 614 – –Nedbank Treasury (Derivative instruments Derivativeincluded under note 6) Holding company instruments 114 409 – –NIB Holdings (Namibia) (Proprietary) Limited Fellow subsidiary Bank accounts 92 152 – –NIB Holdings (Namibia)(Proprietary) Limited Fellow subsidiary Loan 587 617 – –Nedbank Lesotho Fellow subsidiary Product balance – 103 063 – –Old Mutual Namibia Limited Fellow subsidiary Product balance 191 674 185 496 – –Nedcor Investments Limited Holding company Product balance 14 339 16 210 – –Nedbank Limited Holding company Bank accounts 15 075 651 582 – –Nedbank Limited Holding company Product balance – 17 139 – –

Internal Nedbank Limited Holding company settlement 2 513 633 889 – –

Structured Nedbank Limited Holding company loans 299 280 376 128 – –Nedbank Namibia Limited Subsidiary Bank accounts – – 8 035 1 531Nedbank Namibia Limited Subsidiary Sundry debtor – – 136 –Transactions with directors Directors Product balance 414 – – –Transactions with key management Key management Product balance – 138 – –Woodlands Investments (Proprietary) Limited Fellow subsidiary Bank accounts 73 505 47 622 – –

Group Company

Transaction 2006 2005 2006 2005


87

40. Related party disclosure(continued)

40.3 Related party transactions and balances (continued)

Loans to related partyDividends

Coversure Limited Subsidiary receivable – – 2 000 –Nedbank London branch Fellow subsidiary Product balance – 22 – –Nedbank Limited Holding company Product balance 74 166 56 567 – –Nedbank Treasury (Derivative instruments Derivative included under note 6) Holding company instruments 1 030 – – –Old Mutual Namibia Limited Fellow subsidiary Product balance – 40 – –Transactions withdirectors Directors Mortgage bonds 3 487 4 264 – –Transactions with directors Directors Product balance 8 030 4 409 – –Transactions with key management Key management Mortgage bonds 3 308 3 233 – –Transactions with key management Key management Product balance 940 569 – –


N$ ZAR EUR US$ GBP Other TotalN$’000 N$’000 N$’000 N$’000 N$’000 N$’000 N$’000


41. Currency profileGroupAssetsCash and balances with central bank 170 033 – 560 2 344 148 71 173 156Government and public sector securities 285 349 – – – – – 285 349Derivative financial instruments 1 062 – – – – – 1 062Other short-term securities – – – – – – –Due from other banks 249 554 – 131 26 600 – – 276 285Loans and advances to customers 3 701 102 – 1 846 5 443 1 – 3 708 392Investment in subsidiaries,associates and listed investments 20 501 – – – – – 20 501Goodwill 27 623 – – – – – 27 623Property and equipment 61 840 – – – – – 61 840Computer software and development cost 13 040 – – – – – 13 040Non-current assets classified as held for sale 21 369 – – – – – 21 369Other assets 167 673 – 378 62 53 2 168 168

Total assets 4 719 146 – 2 915 34 449 202 73 4 756 785

GroupLiabilitiesDue to other banks 259 772 – – – – – 259 772Other deposits 544 559 – – – – – 544 559Derivative financial instruments 690 – – – – – 690Due to customers 3 325 294 – 12 236 42 545 556 2 492 3 383 123Long-term subordinated debt instruments 1 320 – – – – – 1 320Policyholder liabilities under insurance contracts 889 – – – – – 889Deferred taxation 63 000 – – – – – 63 000Provision for post-retirement medical benefits 5 073 – – – – – 5 073Other liabilities 127 182 – – – – – 127 182

Total liabilities 4 327 779 – 12 236 42 545 556 2 492 4 385 608

Shareholders’ equityShare capital 17 595 – – – – – 17 595Share premium 99 536 – – – – – 99 536Revaluation reserve 11 688 – – – – – 11 688Share-based payment reserve 16 735 – – – – – 16 735Retained income 221 050 – – – – – 221 050

Shareholders’ interest 366 604 – – – – – 366 604

Minority interest 4 573 – – – – – 4 573

Total shareholders’ equity and minority interest 371 177 – – – – – 371 177

Total equity and liabilities 4 698 956 – 12 236 42 545 556 2 492 4 756 785

Net balance sheet position 20 190 – (9 321) (8 096) (354) (2 419) –

Off balance sheet net notional position – – – – –

Rates of exchange 1,0000 9,2176 7,0000 13,7312

Up to 3 – 6 6 – 12 1 – 5 Over 5 Non-interest3 months months months years years sensitive Total

N$’000 N$’000 N$’000 N$’000 N$’000 N$’000 N$’000

89

42. Interest rate risk analysisAssetsCash and balances with central bank – – – – – 173 156 173 156Government and public sector securities 23 978 66 762 113 714 78 319 2 576 – 285 349Derivative financial instruments 300 – – 762 – – 1 062Other short-term securities – – – – – – –Due from other banks 227 380 – – – – 48 905 276 285Loans and advances to customers 3 698 090 – – – – 10 302 3 708 392Investment in subsidiaries,associates and listed investments – – – – – 20 501 20 501Goodwill – – – – – 27 623 27 623Property and equipment – – – – – 61 840 61 840Computer software and development cost – – – – – 13 040 13 040Non-current assets classified as held for sale – – – – – 21 369 21 369Other assets – – – – – 168 168 168 168

Total assets 3 949 748 66 762 113 714 79 081 2 576 544 904 4 756 785

LiabilitiesDue to other banks 153 659 534 440 1 438 – 103 701 259 772Other deposits 169 621 298 894 76 044 – – – 544 559Derivative financial instruments 319 – – 371 – – 690Due to customers 3 115 222 213 700 53 913 288 – – 3 383 123Long-term subordinated debt instruments – – – – 1 320 – 1 320Policyholder liabilities under insurance contracts 889 889Deferred taxation – – – – – 63 000 63 000Provision for post-retirementmedical benefits – – – – – 5 073 5 073Other liabilities – – – – – 127 182 127 182

Total liabilities 3 438 821 513 128 130 397 2 097 1 320 299 845 4 385 608

Shareholders’ equityShare capital – – – – – 17 595 17 595Share premium – – – – – 99 536 99 536Revaluation reserve – – – – – 11 688 11 688Share-based payment reserve – – – – – 16 735 16 735Retained income – – – – – 221 050 221 050

Shareholders’ interest – – – – – 366 604 366 604

Minority interest – – – – – 4 573 4 573

Total shareholders’ equity and minority interest – – – – – 371 177 371 177

Total equity and liabilities 3 438 821 513 128 130 397 2 097 1 320 671 022 4 756 785

On balance sheet Interest sensitivity gap 510 927 (446 366) (16 683) 76 984 1 256 (126 118) –

Accumulative on balance sheet interest sensitivity gap 510 927 64 561 47 878 124 862 126 118 –


Up to 3 – 6 6 – 12 1 – 5 Over 53 months months months years years Equity Total

N$’000 N$’000 N$’000 N$’000 N$’000 N$’000 N$’000


43. Liquidity riskAssetsCash and balances withcentral bank 173 156 – – – – – 173 156Government and public sector securities 23 978 66 762 113 714 78 319 2 576 – 285 349Derivative financial instruments 300 – – 762 1 062Other short-term securities – – – – – – –Due from other banks 276 285 – – – – – 276 285Loans and advancesto customers 1 435 712 266 332 598 364 909 608 498 376 – 3 708 392Investment in subsidiaries,associates and listed investments – – – – 20 501 – 20 501Goodwill – – – – 27 623 – 27 623Property and equipment – – – – 61 840 – 61 840Computer software and development cost – – – – 13 040 – 13 040Non-current assets classified as held for sale 21 369 21 369Other assets 99 738 – – 68 430 – – 168 168

Total assets 2 009 169 333 094 733 447 1 057 119 623 956 – 4 756 785

LiabilitiesDue to other banks 257 360 534 440 1 438 – – 259 772Other deposits 169 621 298 894 76 044 – – – 544 559Derivative financial instruments 319 – – 371 690Due to customers 2 815 942 213 700 53 913 299 568 – – 3 383 123Long-term subordinated debt instruments – – – – 1 320 – 1 320Policyholder liabilities under insurance contracts – – – – 889 889Deferred taxation – – – 63 000 – – 63 000Provision for post-retirement medical benefits – – – – 5 073 – 5 073Other liabilities 124 135 – 3 047 – – – 127 182

Total liabilities 3 367 377 513 128 133 444 364 377 7 282 – 4 385 608

Shareholders’ equityShare capital – – – – – 17 595 17 595Share premium – – – – – 99 536 99 536Revaluation reserve – – – – – 11 688 11 688Share-based payment reserve – – – – – 16 735 16 735Retained income – – – – – 221 050 221 050

Shareholders’ interest – – – – – 366 604 366 604

Minority interest – – – – – 4 573 4 573

Total shareholders’ equity and minority interest – – – – – 371 177 371 177

Total equity and liabilities 3 367 377 513 128 133 444 364 377 7 282 371 177 4 756 785

Net liquidity gap (1 358 208) (180 034) 600 003 692 742 616 674 (371 177) –

Accumulative net liquidity gap (1 358 208)(1 538 242) (938 239) (245 497) (371 177)

44. Risk monitoringDetails of the group’s risk monitoring structure policies and methods are noted on pages 20 – 22.

Notice is hereby given that the 15th annual general meeting of the company will be held in the boardroom of NedbankNamibia Limited, 5th Floor, 12-20 Dr Frans Indongo Street, Windhoek, at 09:00 on 29 June 2007 for the following purposes:

To consider and resolve the following matters:

1. To receive and consider the annual financial statements for the year ended 31 December 2006, together with the reportof the auditors.

2. To determine the directors’ remuneration.

3. To approve the actions undertaken and discharged by the directors during the year under review.

4. To re-appoint Deloitte & Touche as auditors for the new financial year.

5. To authorise the directors to determine the remuneration of the auditors.

6. To elect directors in accordance with the provisions of the Articles of Association of the company. The following directorsretire by rotation at this meeting and, being eligible, offer themselves for re-election:Mr Theo J FrankMr Sebulon I KankondiMr Martin K Shipanga

7. To elect the following newly appointed directors who retire in terms of the Articles of Association of the company at thismeeting, but being eligible, offer themselves for re-election:Mr Denys DenyaMr William E Turton

8. To place the unissued ordinary shares under the control of the directors.

9. To transact such other business as may be transacted at an annual general meeting.

A member entitled to attend and to vote at the meeting is entitled to appoint a proxy to attend and speak and, on a poll, tovote in his stead.A proxy need not be a shareholder of NedNamibia Holdings Limited. Proxies must be lodged at NedNamibiaHoldings’ registered office at least 48 hours before the commencement of the meeting. Saturdays, Sundays and publicholidays are not taken into account in determining the 48 hours.

By order of the board

M MeiringCompany SecretaryWindhoek, 1 April 2007

91

Notice of the annual general meeting


Contact details

Nedbank Namibia LimitedHEAD OFFICE12-20 Dr Frans Indongo StreetPO Box 1 Windhoek NamibiaTel (061) 295 9111 Fax (061) 295 2120Email: [email protected]

Windhoek Main Branch12-20 Dr Frans Indongo StreetPO Box 1 WindhoekTel (061) 295 9111 Fax (061) 295 2258

Windhoek WernhilShop 36 Wernhil ParkMandume Ndemufayo AvenuePO Box 1 WindhoekTel (061) 295 2159 Fax (061) 295 2267

Windhoek Northern Industrial12 Ruhr StreetPO Box 1 WindhoekTel (061) 26 1894 Fax (061) 26 2242

Windhoek HidasFirst Floor Hidas CentreNelson Mandela AvenueKlein WindhoekPO Box 1 WindhoekTel (061) 295 2203/4Fax (061) 295 2205

Windhoek SouthBismarck StreetPO Box 1 WindhoekTel (061) 295 2223 Fax (061) 295 2224

Windhoek Maerua MallShop 38/39 Maerua MallRobert Mugabe AvenuePO Box 1 WindhoekTel (061) 295 2680 Fax (061) 295 2681

Windhoek Independence AvenueCarl List House27 Independence AvenuePO Box 1 WindhoekTel (061) 295 9111 Fax (061) 295 2269

Nedbank Business Centre55 Rehobother RoadSnyman Circle, AusspannplatzPO Box 1 WindhoekTel (061) 295 2237Fax (061) 295 2046

LüderitzBismarck StreetPrivate Bag 2031 LüderitzTel (063) 20 2577/20 2923 Fax (063) 20 2566

Windhoek KatuturaIndependence CentreIndependence Avenue, KatuturaPO Box 1, WindhoekTel (061) 295 2777 Fax (061) 295 2757

Swakopmund10 Sam Nujoma AvenuePO Box 1471 SwakopmundTel (064) 41 4311Fax (064) 41 4300

Walvis BayCnr Sam Nujoma Avenue and 11th RoadPO Box 590 Walvis BayTel (064) 21 6111 Fax (064) 21 6100

Kuisebmond Walvis BayShop 3 The King’s MallC/O 21st Avenue and Nathaniel Maxuilili Street KuisebmondPO Box 590 Walvis BayTel (064) 21 6180 Fax (064) 21 6181

KeetmanshoopCnr Fifth Avenue and Mittel StreetPO Box 166 KeetmanshoopTel (063) 22 3354/5 Fax (063) 22 3814

OshakatiGame CentreOkatana RoadPO Box 1604 OshakatiTel (065) 22 0062/22 0073 Fax (065) 22 0089

OndangwaMain Road Erf 1231PO Box 2374 OndangwaTel (065) 24 1796/24 1798 Fax (065) 24 3706

OshikangoMain Road Erf 104PO Box 2374 OndangwaTel (065) 26 5091Fax (065) 26 5094

NedCapital Namibia(Proprietary) Limited55 Rehobother RoadSnymann Circle, AusspannplatzPO Box 25576, WindhoekTel (061) 227950/249816Fax (061) 259701

NedLoans (Proprietary)Limited1st Floor, Zanlumor BuildingPost Street MallPO Box 3140, WindhoekTel (061) 299 4200/299 4201Fax (061) 299 4205

www.nedbank.com.na

This proxy form, duly dated and signed, must be returned to reach the registered office of the company at least 48 hoursbefore the commencement of the meeting. Saturdays, Sundays and public holidays are not taken into account in determiningthe 48 hours.

NedNamibia Holdings LimitedPO Box 1, Windhoek, NamibiaCompany registration number 91/075

I/We ––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– (name in full)of ––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– (address)being a shareholder of –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– (shares)of the abovementioned company, hereby appoint ––––––––––––––––––––––––––––––––––––––––––––––––––– (name)residing at ––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– (address)or failing him, the chairman of the meeting as my proxy to speak, vote and act on my behalf at the 15th annual generalmeeting of the company to be held on 29 June 2007 and at any adjournment thereof, in particular to votefor/against/abstain* the resolutions contained in the notice of the meeting.

For* Against* Abstain*

Resolution number 1Adoption of annual financial statements for the year ended 31 December 2006

Resolution number 2Determination of directors’ remuneration

Resolution number 3Approval of actions undertaken and discharged by the directors during the year under review

Resolution number 4Re-appointment of Deloitte & Touche as auditors

Resolution number 5Authorisation of directors to determine auditors’ remuneration

Resolution number 6Election of directorsTheo J FrankSebulon I KankondiMartin K Shipanga

Resolution number 7Appointment of directorsDenys DenyaWilliam E Turton

Resolution number 8Placement of unissued shares under control of directors

* Insert an X in the appropriate spaces above to indicate how you wish your votes to be cast. Where this is not done, theproxy will be used in favour of the resolutions.

Signed at –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––on the –––––––––––––––––––––––––––––––– day of –––––––––––––––––––––––––––––––––––––––––––––––– 2007

Signature/shareholder –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Proxy formfor the 15th annual general meeting

www.nedbank.com.na

Documents

Annual Report 2006 We - Nedbank › content › dam › nedbank › site... · MBA degree (cum laude) from the University of Stellenbosch, an Honours in Financial Management (University