Committed to growth for the good of all Namibians...Committed to growth for the good of all Namibians NEDNAMIBIA HOLDINGS LIMITED Annual Report 2005 N ED N AMIBIA H OLDINGS L IMITED

Committed to growth for the good of all Namibians

NEDNAMIBIA HOLDINGS LIMITED

Annual Report 2005

NEDN

AM

IBIA

HO

LDIN

GS

LIM

ITED

Annual Repo

rt 20

05

www.nedbank.com.na


Annual Report 2005

G R A P H I C O R 3 4 0 2 4

Highlights of the year 1

NedNamibia Holdings group structure 2

Profile, vision, mission and values 4

Financial and statistical highlights 5

Board of directors 6

Executive committee 8

Chairman’s report 10

Managing director’s review 13

Social responsibility 18

Value added statement 20

Corporate governance report 21

Annual financial statements 31

c o n t e n t s

www.nedbank.com.na

Nedbank Namibia provides a comprehensive range of domestic

and global services to individual, corporate and international clients

through a growing branch network

NedNamibia 2005 Annual Report 1

HIGHLIGHTS OF THE YEAR

• Net asset value per share up by 55,1% to 473 cents

• Earnings per share up 52,1% to 132 cents

• Loans and advances to customers up 79,6% to N$3,6 billion

• Total assets up 60% to N$4,27 billion

Showing mutual RESPECTand dignity in all our interaction with colleagues,

clients and other stakeholders

Total assets (N$’000)

4 500

4 000

3 500

3 000

2 500

2 000

1 500

1 000

500

002 03 04 0501

4 27

0,0

2 67

0,0

2514

,0

2 33

5,0

1 87

5,0

Net asset value per share (cents)

500

400

300

200

100

002 03 04 0501

473,

2

305,

1

406,

8

339,

3

261,

5

NEDNAMIBIA HOLDINGS GROUP STRUCTURE

2

Nedbank Limited

NedNamibia Holdings Limited

Minority shareholders(previously Nedbank Namibia

shareholders)

Controlling shareholder

Holding company

CBN Nominees

(Proprietary)

Limited*

Safe custodian services* Dormant company

Namclear

(Proprietary) Limited

Clearing service provider Executors and trustees

Namibia Executors

and Trustees


93,73%

6,27%

100% 100%

100%

100% 25% 75%

50% 48,5%

NedPlan Insurance

Brokers Namibia


Insurance broker

NedCapital Namibia


Specialised financial service

NIB Mining

Finance


Special purpose vehiclefor a project finance

transaction

Manco Management

Company

(Proprietary) Limited*

* Dormant company

African Mining

Company Limited*

Mining private equity fund

* Dormant company


pic to come

Always having a clear conscience,

trusting others and displaying TRUST

while promoting and maintaining high ethical

standards. Taking full responsibility for our actions

Nedbank Namibia

Limited

Commercial banking

Coversure Limited

Long-term insurance

NedLoans


(previously Finance in

Education (Proprietary)

Limited)

Microlending administration

Ten Kaiser

Wilhelm Strasse


Property holding Property holding

Walvis Bay Land

Syndicate


100% 100%

80% 50% 50%

PROFILE, VISION, MISSION AND VALUES

4


ProfileNedNamibia Holdings Limited is the

holding company for subsidiaries

offering a wide range of financial

services including commercial banking,

microlending and wealth management.

The principal subsidiary is Nedbank

Namibia Limited (“Nedbank Namibia”).

Nedbank Namibia is a registered

Namibian bank, based in Windhoek.

Well capitalised by international

standards, the bank has assets of

N$4,27 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 Nedbank Namibia an

uniquely competitive force in its market.

NEDBANK NAMIBIA

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 result in value

creation 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.

Values• Respect – showing mutual respect

and dignity in all our interaction

with colleagues, clients and other

stakeholders.

• Trust – always having a clear

conscience, trusting others and

displaying trust while promoting and

maintaining high ethical standards.

Taking full responsibility for our actions

• Teamwork – recognising the need for

joint effort, support and commitment

while always being an integral part of

the team. Always put the team’s

interest before your own.

• Integrity – practice honesty and

fairness at all times.

• Professionalism – continually raise

standards and deliver on time while

satisfying stakeholders in pursuit

of excellence.

• Empathy – we are sensitive to our

shared history and to the needs and

challenges of our people, communities

and environment.


FINANCIAL AND STATISTICAL HIGHLIGHTS

Recognising the need for joint effort,

support and commitment while always being an

integral part of the TEAM. Always put the team’s

interest before your own

Group balance sheet and income statement

Shareholders’ funds (N$’000) 316 234 186 066 70,0Total assets (N$’000) 4 270 639 2 669 879 60,0Net income before risk provision and taxation (N$’000) 122 015 103 553 17,8Net income before taxation (N$’000) 128 994 83 326 54,8Net income after taxation (N$’000) 90 068 59 429 51,6Dividend – normal (N$’000) 32 945 – 100,0Dividend – special – 93 449 (100,0)Issued shares 66 835 60 951 9,7

Return on average shareholders’ funds (%) 35,9 26,6Return on average total assets (%) 2,6 2,2Expenses to total income (%) 56,0 58,8Capital adequacy (%) 12,3 12,2Net asset value per share (cents) 473,2 305,3Earnings per share (cents) 132,0 86,8Dividends per share (cents) 49,3 153,3Number of employees 512 444

2005 2004 % increase

BOARD OF DIRECTORS

6

1 2

3 4 5 6

7 8 9 10


1. Theo J FrankChairmanIndependent non-executive director*BA Law, LLB, Dip in Business Management, Certificate in Tax Law

Senior counsel and former judge of the High Court of Namibia,chairs companies in the fishing and short-term insuranceindustry. He is the chairperson of both NedNamibia Holdings andNedbank Namibia.

2. Craig CloeteActing managing directorExecutive directorBCom (Unisa), Senior Executive Programme (Wits/Harvard BusinessSchool), Advanced Executive Programme (Unisa School for BusinessLeadership), CAIB(SA) and FIB(SA) (Institute of Bankers), AGA(SA),Executive Development Programme (University of Stellenbosch)

Managing director (Acting), has recently replaced MartinShipanga as managing director in an acting capacity whilst thecompany is searching for a suitable replacement. He has beenwith the group for over 25 years, and have worked both locallyand internationally in all the various markets and departments.He attended Harvard Business School not too long ago and ispresently general manager, client service management in thecorporate cluster of Nedbank Limited.

3. Paul C BaloyiNon-executive directorMBA

Managing director of Nedbank Limited’s Africa division, hasover 25 years’ banking experience with particular expertise inorganisational transformation and talent management.

4. Johannes !GawaxabNon-executive directorMBL, MA, BA, BCom

Managing director of Old Mutual Namibia, is also a member ofthe board of the Namibian Stock Exchange. He has extensiveexperience in the financial services industry. In addition to hiscurrent position, Mr !Gawaxab has recently been appointed asmanaging director of Old Mutual’s African operations.

5. Kevin F HudsonNon-executive directorBA LLB

Chief operating officer of Nedbank Limited’s Africa division andhas 17 years’ experience in the financial services industry. He hasparticular expertise in corporate finance, project finance,strategic planning and special projects, covering the corporate,commercial, retail and treasury operations.

6. Sebulon I KankondiIndependent non-executive director*Degree in Business Administration, Senior Management Programme(USB), Marketing Management Programme (UCT), MechanicalEngineering Diploma

Managing director of Namibian Ports Authority, has in-depthknowledge of logistics in southern Africa and internationalmarkets. He is also chairman of Namibia Post.

7. Christopher J PearceIndependent non-executive director*BCom, CA(SA), AMP (Harvard)

Chartered accountant, he has over 30 years’ experience in thebanking industry, and is a former managing director of NedcorInvestment Bank Limited.

8. Rolf H PetersIndependent non-executive director*BCom, BCompt (Hons), CTA, CA(SA), CA(Namibia)

Managing partner of Grant Thornton Neuhaus and has over30 years’ experience in the auditing profession, spanning allsectors of the Namibian economy. He is also advisor to severalforeign investors. He is the past president of the Institute ofChartered Accountants of Namibia and The Public Accountantsand Auditors Board.

9. Martin K ShipangaIndependent non-executive director*BCom, MSc Public Policy and Administration, Leadership andManagement (University of Virginia), Executive DevelopmentProgramme (Harvard University)

Resigned in December 2005 as managing director of NedNamibiaHoldings and Nedbank Namibia and has recently been appointedas vice-president of Smartswitch Namibia (Proprietary) Limited.With over 10 years’ executive management experience in boththe public and private sectors he has a special passion for financeand business development. He also serves on various boards.

10. Mark R WestonNon-executive directorBCA, CA(New Zealand), AME (Harvard)

Chartered accountant by profession, he is chief operating officerof Nedbank Capital. He has extensive experience in investmentbanking and strategic planning, as well as governance andregulatory issues.

* Benchmarked against Bank of Namibia definition of an independent

director.

EXECUTIVE COMMITTEE

1 2

3 4 5 6

7 8

8

1. Craig CloeteActing managing directorBCom (Unisa), Senior Executive Programme (Wits/Harvard BusinessSchool), Advanced Executive Programme (Unisa School for BusinessLeadership), CAIB(SA) and FIB(SA) (Institute of Bankers), AGA(SA),Executive Development Programme (University of Stellenbosch)

2. Elina HaipingeExecutive: Human resources and strategy, has brought to thebank a corporate driven culture coupled with modern and latestmanagement skills in areas of performance managementsystems, organisational behaviour, human resource management,financial resource management, and management controlsystems, corporate restructuring and strategic planning.She served in various committees at the respective companiesshe worked for in a senior capacity.

Elinah has a master’s degree in Corporate Strategy and EconomicPolicy from the School of Management Maastricht, Netherlands.She received honours and fellowship awards from the NetherlandsNational Fellowship Programme and was awarded certificates asthe best manager in the Ministry of Lands and Resettlement aswell as a certificate for the best managed division.

3. Johann JurgensChief financial officer, has 18 years’ banking experience, mostlyin the financial planning division. Johann has been a member ofthe bank’s senior management team since 1991.

4. Chris LeafExecutive: International and treasury, has 21 years’ experiencein the banking industry, mostly in the international division.Chris has been a member of senior management for six years.

5. Rector MuteloExecutive: Marketing and communications, Rector has been inbroadcasting for the past 24 years and holds a master’s degreein management from Boston in the USA. For 18 years he served theNBC in various senior and executive management positions. Rectorwas the general manager for radio services, technical services, andfinally general manager for corporate marketing, communicationand business development of the NBC. He is known to havesuccessfully transformed the following departments of the NBC:radio, technical services, marketing and sales.

6. Abri NelExecutive: Corporate and business (Acting), Abri Nel has workedfor Sanlam in Cape Town for one year before establishing a careerwith Bank Windhoek for over seven years in corporate banking.Abri made a major career move to Nedbank in March last yearand is now heading the corporate and business bankingdepartment in an acting capacity. Abri completed a Bachelor ofEconomics (Honours) specialising in money and banking at theUniversity of the Free State.

7. Annette StruchtemeierExecutive: Credit and risk, has 17 years’ experience in riskmanagement with the bank. She was the first woman appointedto the bank’s senior management team in 1996.

8. Mark VivierExecutive: Retail banking, has 21 years’ experience in the bankingindustry, with particular expertise in strategic development,technological advancements, organisational change managementand system/business re-engineering. He is responsible for retailbanking, microlending operations, business banking andproduct development.


FOREWORD

During the 12 months ending

31 December 2005, the group’s banking

division, Nedbank Namibia, has recorded

promising results. The bank has

significantly increased its market share

and strengthened its position in the

local banking sector. The improvement

in market share to 12,9% underscores

the strategic initiative to become the

nation’s number one choice in banking.

During the review period, the group’s

after-tax profit increased by 51,6% to

N$90,1 million.

NedNamibia Holdings has further

expanded its business operations

by establishing two wholly owned

subsidiaries, Belissima Investments

Seventy Two (Proprietary) Limited (shares

transferred after year-end) and NedPlan

Insurance Brokers Namibia (Proprietary)

Limited. These businesses complement

the group’s primary activities.

Belissima Investments is a property

holding company for a new business

centre being developed in the capital.

The business centre will provide an

appropriate portfolio-diversification

platform for the bank’s product and

service offerings to high net worth,

business and corporate banking clients.

NedPlan Insurance Brokers Namibia will

act as an insurance broker for Nedbank

Namibia.

Syfrets Namibia Limited, a former

wholly owned non-active subsidiary of

NedNamibia Holdings, was sold during

the year to Old Mutual Namibia and BoE

Trust, who entered into a 50/50 joint

venture agreement.

During the review period, Nedbank

Namibia acquired the 20% stake of Lared

Investments (Proprietary) Limited in

NedLoans Namibia (Proprietary) Limited

(previously Finance in Education

(Proprietary) Limited), increasing the

bank’s shareholding in NedLoans from

60% to 80%. The remaining 20% is held

by the Michelle McLean Children Trust.

The NedNamibia Holdings Group,

particularly Nedbank Namibia, will

continue to expand its footprint to

remain competitive in the local market

and to increase its market share.

The board has resolved to issue fully paid

ordinary shares in the company as a

capitalisation award to shareholders,

subject to the approval of shareholders

at the annual general meeting to be held

on Tuesday, 27 June 2006. Shareholders

will be entitled, in respect of all of their

shareholding, to elect to receive new

fully paid ordinary shares, which shares

will be issued only to those shareholders

who elect to receive new fully paid

ordinary shares in respect of all of their

shareholding. Shareholders not electing

to receive new fully paid ordinary shares

in respect of all of their shareholding will

be entitled to receive a cash dividend

alternative of 49,29 cents per ordinary

share. The number of capitalisation

shares to which shareholders are entitled

will be determined in the ratio that

49,29 cents per ordinary share bears to

N$8,98, being the value per ordinary

share which has been determined by the

company’s advisors. This equates to

5 489 new shares for every 100 ordinary

shares held (rounded up or down). More

details on the matter can be found in the

document to shareholders that is

enclosed in the annual report.

During the first quarter of 2005,

minority shareholders in the bank

approved a scheme of arrangement to

exchange their shareholdings in the bank

for shares in NedNamibia Holdings.

This is in line with international norms

for outside shareholders to own shares

at a bank’s holding company level.

The structure of a black economic

empowerment (“BEE”) transaction is at

an advanced stage and should be ready

for implementation during 2006.

CHAIRMAN’S REPORT

An important part of the restructuring

process will be the implementation

of a new performance appraisal system

that supports the group’s growthstrategy

T h e o F r a n k C h a i r m a n

10

In December 2005, the group’s

managing director, Martin Shipanga,

resigned to pursue other interests. Craig

Cloete, a seasoned banking professional,

was appointed acting managing

director until such time that a successor

has been appointed.

GLOBAL TRENDS

The world economy experienced a

further year of strong growth. Good

economic conditions continued for the

third year in a row. Encouragingly, the

expansion was less dependent on

stimulatory policies and became more

balanced, with Europe and Japan

emerging more strongly. However, it was

again the US and China that dominated,

the US on the expenditure and China on

the production side of the equation. The

Chinese economy is now estimated to

be 17% larger than was previously

thought, and growth has averaged

around 10% over the past three years.

India also emerged more clearly as an

economic giant of the future, enticing

more companies in developed nations to

use outsourced services. The US Federal

Reserve continued its policy of

“normalising” interest rate levels, but

both interest rate and inflation levels

remained very low despite strongly

rising oil and commodity prices.

Developing countries had a very

favourable year. Economic growth was

helped by recycled capital surpluses

emanating from surplus oil-producing

nations and China’s growing trade

surplus. Strong portfolio and foreign

direct investment inflows kept the cost

of capital and risk premiums at historical

lows, stimulating fixed investment

activity and production. Most regions

did well, either from increased final

demand in key economies or because of

strong demand for raw materials and

intermediate goods.

Commodity prices – with a few

exceptions – continued on the upward

path started in early 2002. However, the

rise last year was even more impressive

given a relatively firm US dollar. Base

metals did well again as infrastructural

spending in China and strong spending

on consumer durables continued. The oil

price rose to new highs, both on strong

demand conditions as well as supply

concerns.After lagging badly during most

of the commodity upswing, the gold

price finally reacted and moved higher,

joining other precious metals such as

platinum at higher levels. Diamond prices

increased moderately over the year.

Equity markets worldwide performed

well as strong earnings growth and

surplus capital forced reratings. Emerging

markets generally outperformed their

developed market counterparts, with all

regions contributing. However, Eastern

European and Latin American markets

were particularly strong. Europe,

Japan and Canada were among the

outperformers in established markets.

Global prospects for 2006 appear

promising, with a continuation of many

of the trends seen in 2005 likely.

Inflation will remain benign, helped

by low manufacturing costs in the

East and improved competition and

more efficient, large-scale production

processes. A key risk is a further strong

rise in the oil price, but so far this factor

– in contrast to earlier bouts in the 1970s

and 1980s – has had little impact on

either inflation or growth.A further risk is

that monetary authorities worldwide

overestimate the resilience of consumers

and tighten policies too significantly.

A strong move in the US dollar could also

upset the balance in financial markets

and make the international economy

more vulnerable to correction.

LOCAL DEVELOPMENTS

The Namibian economy is currently

estimated to have grown by just over

3% in 2005 following strong growth of


INTEGRITY – practice honesty

and fairness at all times

5,9% in 2004. The economy remains

very exposed to external forces. The

global environment, the climate and

oceanic conditions all play key roles.

Interest rates and the currency are also

largely governed by events in South

Africa due to Namibia’s membership of

the Common Monetary Area. Some of

these were favourable over the past year

but others held growth in check. While

inflation and interest rates were at

record lows and global conditions good,

environmental factors were less

favourable. As a result, primary sector

activity was relatively weak. The

increased marketing of cattle helped

agriculture, but otherwise activity levels

were low; fishing conditions remained

depressed, not only because of

dwindling stocks but also because of

increased fuel costs; and mining output

fell off a very high base in 2004.

Secondary activity was mixed, with

manufacturing held back by reduced

fishing levels and the closure of garment

factories in the face of increased

international competition; but

construction activity remained buoyant,

helped by lower interest rates and retail

activity. Services were generally strong.

The wholesale and retail sector

continues to benefit from lower interest

rates and attractive prices and the

transport and communications sector

has been boosted by a take-off in the

mobile phone industry. However,

tourism has been hit by the strength of

the Namibian dollar and increased

passenger transport costs.

Namibia received its first sovereign risk

rating from Fitch in late 2005. Very

encouragingly, the country was awarded

an investment grade BBB-, a rating

accorded to only two other sub-Saharan

African countries, South Africa and

Botswana.Very low levels of foreign debt

and a stable political environment were

both instrumental.

OUTLOOK

Economic conditions should improve in

2006. Agricultural production will be

helped by good rainfall and mining

output should recover on higher

diamond, uranium and zinc capacity.

However, conditions in the fishing

industry and other exporting industries

are expected to remain tough.

Manufacturing should improve off a low

base, helped by increased zinc refining.

Interest rates and inflation are expected

to remain at lower levels and continue

to support consumer and fixed

investment spending.

The Namibian economic landscape

remains very encouraging and

challenging since economical growth

leads to diversification of economic

activities. The setbacks seen in these

endeavours in 2005 illustrate the

difficulty of creating self-sustaining

businesses in areas where no present

natural competitive advantage exists.

However, efforts to find longer-term

solutions to reducing the country’s

vulnerability to exogenous forces need

to continue, not only in the public but

also in the private sector.

APPRECIATION

On behalf of the board, I thank Martin

Shipanga, our former managing director,

for his contribution and the dedicated

and enthusiastic way in which he

performed his duties as managing

director of both NedNamibia Holdings

and Nedbank Namibia.

To my fellow board members and every

one associated with Nedbank Namibia,

thank you for your unstinting

commitment and support. It has been a

year characterised by challenging events

but, nonetheless, a year in which we

recorded growth at all levels.

Theo Frank

Chairman

CHAIRMAN’S REPORT continued

12


MANAGING DIRECTOR’S REVIEW

Our strong group slogan “Make Things

Happen” is embedding the concept of

listening, understanding and delivering

effective and efficient services to our

valued clients

C r a i g C l o e t e A c t i n g m a n a g i n gd i r e c t o r

FOREWORD

The financial year 2005 presented

exciting opportunities and challenges. It

is equally true as reflected in the

chairman’s report, that both interest

rate and inflation levels remained at

lower levels despite strongly rising oil

and commodity prices. The review

period again demonstrates that the

Namibian economy is fairly driven by

bank credit; hence the increase of almost

37% in total vehicle sales in July 2005,

a year-on-year comparison.

The government of Namibia adopted a

culture of fiscal discipline, which can be

embraced by the nation at all levels. The

annual growth in public debt was at 14%

mid-year compared to 28% at the same

time in 2004, which has had a positive

impact on the government’s budget

deficit. As a result, institutions that were

highly dependent on government ex-

penditures (ie transportation, service

providers, etc) had to employ diversified

strategies as alternatives for revenue

generation.

Our strong group slogan “Make Things

Happen” is embedding the concept of

listening, understanding and delivering

effective and efficient services to our

valued clients. Innovative researching

efforts to continuously improve our

product offerings were initiated in

pursuit of institutional growth and

within the scope of satisfying

our clients’ financial needs.

We have committed ourselves to be “the

nation’s number one choice in banking”.

Reported highlights for the year indicate

that we are making progress towards

this goal – with the support of our

customers, new and existing, and all

our people.

FINANCIAL RESULTS

NedNamibia Holdings Limited recorded

good results during the year, reflecting

the quality of business undertaken and

the continuing trend of earnings growth.

Net income before tax increased

by 54,8% from N$83,3 million to

N$128,9 million. Net income attributable

to ordinary shareholders increased by

66,7% to N$88,2 million. Given sustained

strength in the domestic currency and

low interest rates, group performance for

the year was exceptional. Shareholders’

funds increased to N$316 million.

Nedbank Namibia Limited, a major

subsidiary of NedNamibia Holdings

Limited, has a capital adequacy ratio of

12,3%, which is above the statutory

requirement of 10%.

Expenses increased by only 4,8%

mostly due to a number of cost-saving

exercises undertaken during the year.

The cost-to-income ratio was reduced

to 56%, in line with industry averages

for southern Africa.

Impairment remains adequate and

the charge to the income statement

decreased by N$27,2 million. The

decrease reflects an N$18 million release

due to the effect of adopting IFRS as

well as recoveries of N$9,0 million.

The decrease in the impairment charge is

due to more reliable local statistical

information available, enabling us to

calculate impairments more accurately.

Previously, impairments was based on

statistical information sourced from

Nedbank Limited.

RETAIL BANKING

Following an aggressive focus on

operational processes and core product

ranges, the retail banking division

recorded exceptional results for the year

under review, exceeding all internal

targets and increasing market share in

the bank’s key revenue areas: overdraft

facilities, home loans and asset-based

finance. Effective communication and

teamwork at all levels ensured a

coordinated approach to meeting the

bank’s strategic objectives.

14

In a very competitive market, the

division’s marketing initiatives resulted

in a most commendable increase in its

contribution to the bank’s overall results.

Although the results for the year

were supported by competitive fee

adjustments from August 2005, the

division’s performance in the first

months of the new financial year augurs

well for the sustainability of this trend.

To ensure seamless control of the strong

growth in advances, risk management

and internal audit processes were

further enhanced during the year.

The transition to an enhanced

technology platform was incrementally

implemented during the review period.

Rigorous testing was successfully

completed at selected branches, and the

division is well on track to the final

switchover expected by the second

quarter of 2006.

Growth in the microlending business

of NedLoans Namibia (formerly Finance

in Education), while strong, was

deliberately slowed to accommodate

the implementation of the new

technology system to streamline

administration processes and enhance

customer service.

In the new financial year, attention will be

on the final stages of the technology

conversion, further enhancing customer

service standards through development

and training and capitalising on the

opportunities presented by Nedbank

Namibia’s relationships with its parent and

other leading financial services groups.

CORPORATE AND BUSINESS BANKING

The year under review was one of

restructuring and consolidation for the

corporate and business banking area.

During the year and in line with our

strategy of building a better bank for all

Namibians, Nedbank Namibia took the

strategic decision to further segment its

corporate market by including a business

banking division to focus on the mid-

market, ie between corporate and retail.

Experienced relationship managers will

ensure that the unique requirements

and needs of this market are met and

that clients enjoy the same superior

service levels as their larger peers. As a

result, the existing corporate division

has been restructured and experienced

personnel were redeployed to establish

the new business-banking unit.

Results for the year were excellent and

the division secured several key

accounts, ranging from banking services

for leading public and private

enterprises, to asset-based finance

agreements and sizeable funding

structures for local authorities and

infrastructural development. Ambitious

targets for growth in assets and

liabilities were therefore met by

December 2005, despite the continuing

pressure on Namibian export-related

industries and subdued interest rate

environment with their concomitant

pressure on the bank’s margins. The

lower interest rate environment has,

however, stimulated the investment

market, resulting in greater demand for

consumer credit.

The electronic banking unit within the

division continues to build on its

innovative product range, with strong

demand for the leased-line services

introduced in the prior year. The pilot

project introduced in 2004 using

sophisticated technology for telephone/

internet credit approval is meeting the

demand for niche products in specialised

markets.

In the new financial year, the division

will concentrate on establishing

the business banking centre and

strengthening its team with experienced

banking professionals to reinforce its

position in specialised but competitive

segments of the industry.

TREASURY AND INTERNATIONAL

Treasury operations continued to be

affected by a strong currency and

difficult economic environment, which

impacted negatively on Namibian

export-driven industries. Trading in

money market instruments, on the other

hand, produced good results for the year,

capitalising on prevailing economic

conditions in a declining interest rate

environment.

The international business unit, or global

trade, offers advisory services to

customers using foreign currency

accounts, short-term trade finance

products, revolving trade finance, letters

of credit and specialised international

finance products. Through our global

network of correspondent bank

relationships, we have positioned

ourselves globally to enhance our

proficiency in world markets and

develop the capacity to provide

meaningful services to our customers.

For the year under review, the treasury

division continued to enhance the

delivery of services to the bank’s

customers and strengthened its

customer base through intensified

marketing and identification of new

business initiatives. The global trade

team was especially instrumental in

MANAGING DIRECTOR’S REVIEW continued


these efforts aided by the strong

support of an established international

operational unit.

NEDLOANS NAMIBIA

NedLoans Namibia (Proprietary) Limited

(“NedLoans”) is a subsidiary of Nedbank

Namibia Limited and the company is

currently the market leader in

microlending.

The company has recorded growth,

especially during the last quarter of the

year, after the rebranding exercise (from

Finance in Education (Proprietary)

Limited to NedLoans Namibia

(Proprietary) Limited. NedLoans used

the name change as an opportunity to

differentiate itself from its competitors

by not only informing the target

audience about the change, but also

developing a range of communications

around a central education theme of

responsible borrowing.

The focus in the next financial year

will be on improving service levels to

our customers by building staff capacity

and improving IT systems. The business

will also continue to consolidate the

new brand and to add value to Nedbank

Namibia by exploring operational

synergies.

NEDCAPITAL NAMIBIA

NedCapital Namibia (Proprietary)

Limited became a wholly owned

subsidiary of NedNamibia Holdings

Limited on 1 January 2005. Operational

and technical support, however,

continued to be provided by Nedbank

Capital South Africa for the specialised

financial services function provided to

the Namibian market.

Considerable synergies have been

developed with Nedbank Namibia’s

corporate banking activities and a

number of significant joint client

relationships and projects have been

secured. NedCapital Namibia provides

specialised project and corporate

finance to Namibia’s public and private

sectors, with emphasis on the mining,

energy, infrastructure and financial

services sectors. Black economic

empowerment (“BEE”) became a major

component of the company’s activities

during the year. Considerable ground-

work has been completed with a view

to financing a number of large

infrastructures, energy and mining

projects. The expertise developed in

BEE financing awaits progress on the

implementation of a policy framework

in Namibia.

The company also continued to provide

management services to its subsidiary,

NIB Mining Finance and to Woodlands

Investment Company, two special

purpose financing and investment

vehicles established in Namibia in

2003 and 2004 respectively.

In the next financial year, NedCapital

Namibia will co-locate with Nedbank’s

corporate and business banking division

within the new business centre to

achieve even greater synergies with

Nedbank Namibia. A strong professional

team will be established in concert

with corporate and business banking,

with technical support sourced from

Nedbank Capital South Africa in terms of

a service level agreement.

NedNamibia Holdings is proud to report

that, after a year of consolidation and

restructuring, the company is well

positioned to resume a strong position

in the specialised financing niche and

within Namibian capital markets.

CORPORATE SUPPORT DEPARTMENTS

Credit management Credit risk exposes the bank to financial

losses resulting from the failure of

debtors to honour their obligations.

Nedbank Namibia’s credit management

division, which is responsible for the

PROFESSIONALISM – continually raise standards

and deliver on time while satisfying stakeholders in

pursuit of excellence

MANAGING DIRECTOR’S REVIEW continued

16

extension, control and maintenance of

credit, has been structured in line with

the bank’s key business areas to provide

appropriate services in the specialised

fields of retail, corporate and business

banking. In support of the bank’s vision,

and to underpin rapid growth in

advances, the division manages credit

risk by considering business and revenue

targets versus tolerance for risk.

In line with best practice in the

international banking industry arena, a

credit committee was established during

the year, which assesses all credit risks

above a predetermined level.

Following the increasing focus on

operational risks, a formal process has

been instituted to identify measures,

monitor and manage all risks resulting

from inadequate or failed processes,

external factors/environment, people,

systems and internal factors. The

operational risk committee meets at

least quarterly to address all risks

highlighted by the business and a

dedicated risk officer has been

appointed to facilitate and support

effective operational risk management.

Information technologyDuring the first half of 2006, Nedbank

Namibia will be implementing a new

banking system, called Globus. Globus is

an integrated, multicurrency system

which provides more flexibility, client-

specific banking solutions and enhanced

risk management. In addition, the system

will ensure that Nedbank Namibia

complies with the Bank of Namibia’s

national payment system requirements.

Internal controls (group audit)The group’s internal audit function

conforms to accepted international

standards of corporate governance,

through the use of the control and risk

self-assessment (“CRSA”) system, which

is an early warning system. The CRSA

system is a dynamic process that is

constantly refined and enhanced, and

enjoys the full support of management

and the board of directors.

To support the restructuring of Nedbank

Namibia, the internal audit function has

expanded its audit scope for 2005 to

include assessing the ability of business

units to meet their new strategic

objectives. Processes and procedures will

again be reviewed in line with new

structures, for appropriateness,

adequacy and effectiveness.

The internal audit division conducted

scheduled and unscheduled audits

during the year. To address and support

the rapid development of the bank in all

operational areas, a significant increase

in unscheduled audits is planned to

heighten awareness, improve discipline

and processes and to ensure a higher

level of adherence to internal controls.

A proactive forensic audit and

investigations unit focuses on crime-

related and non-operational losses

within the bank, working closely with

external security parties. This unit also

enhances fraud awareness among staff

and contributes to significant savings by

preventing possible losses.

Human resourcesTo support our aim of becoming the

premier bank in Namibia, we need to

attract and retain high-level skills while

balancing our staff complement to

reflect our country’s demographic

composition. Concurrently, our human

resources’ function is, to provide the

bank with the right calibre of employee

and enhance the quality at the

workplace through sound, innovative

human resource practices.

To fulfil its redefined responsibilities, as

supported by appropriate administration

infrastructure, the department has been

segmented with human resources

support managing all aspects of the

relationship between the bank and

potential or existing employees,

including all policies and practices that

support and maintain an effective

workforce so that Nedbank Namibia’s

overall goals are met. Finding suitable

candidates is, however, a challenging

task in a small and competitive market;

the department therefore continues to

develop and review policies with the aim

of updating and maintaining relevant

and workable guidelines and procedures.

As at 31 December 2005, Nedbank

Namibia had 455 permanent and 24 non-

permanent employees. In line with its

long-standing and proactive policy of

equal equity distribution levels through

employment equity, the bank has

exceeded targets for women employees.

The bank is committed to building a fully

representative workforce and attention

will be given to areas where re-

presentation is currently below target.

The second segment is the centre of

excellence, responsible for the training

and development of employees to

ensure effective organisational develop-

ment. It also manages statutory

requirements, employee wellness and

labour relations.

The training unit within the centre

of excellence provides coordinating,

managing and administrative services to

ensure staff members are empowered

and equipped with the necessary skills,

knowledge and abilities through relevant


and appropriate training institutions and

programmes, including tailormade

courses.

In addition, the bank provides financial

assistance and support within the

confines of available financial resources

and in compliance with its study

loan policy. Assistance is offered to

employees to improve their academic

qualifications.

Marketing and communicationsClient service is an integral part of our

daily activities at Nedbank. The

introduction of tailored products was

well received during the year, including

108% home loans, nurses and teachers’

accounts, learners’ youth savings

accounts, public sector offerings and

many others.

One of the most effective campaigns of

the year was launched to boost our

vehicle sales growth for 2005, offering

interest rate-free agreements for two

consecutive years and other incentives.

Selected investment products have

grown significantly since the

introduction of reduced minimum

deposit requirements. With the system

migration in 2006, branch networks will

be further improved to deliver service

excellence to clients.

Focused campaigns dealing with anti-

money laundering, fraud prevention and

other bank related initiatives were

intensified through printed and

electronic material.

Corporate social investmentand conservation Nedbank Namibia has a long history of

responsible corporate citizenship in

Namibia. The bank has a focused

approach to corporate social invest-

ment, supporting projects aimed at

building sustainable development in the

fields of entrepreneurship, education

and health. In the past, the bank’s Social

Investment Fund and its Conservation

fund “Go Green” have supported

different projects. During the year,

the bank secured the participation of

its controlling shareholder, Nedbank

Limited through its own Nedbank

Foundation, to support a project

championed by the first lady of

Namibia, Madam Penexupifo Pohamba.

OEWONA focuses on families affected

by HIV/Aids – helping bereaved spouses

and orphans rebuild their lives in

sustainable ways after losing loved ones.

Nedbank Namibia continues to support

projects and communities throughout

the country, particularly those close to

our ever-increasing branch network.

During the year, activities supported

included new hospital wards at

Onandjokwe, multipurpose community

centres in Walvis Bay and the Ongwediva

infrastructure in the informal economy.

The bank is also a strong and ongoing

supporter of educational initiatives

aimed at developing entrepreneurship in

the SME sector.

Nedbank Namibia’s non-profit Go Green

Fund was established in 2001 with

N$50 000 donated by the bank.

Additional funds were raised by the sale

of specific Go Green products, initially

home loans – a concept quickly endorsed

by Namibian citizens. At the end of 2005,

the fund pledged almost N$500 000

(or over N$1,2 million since inception)

towards conservation. The fund is ably

administered by the Namibian Nature

Foundation and focused on supporting

individuals working towards a more

sustainable future.

Given the reliance of the Namibian

economy on natural resources, we

believe conservation has a critical role in

developing growing economic industries

such as tourism, which contributes

significantly to Namibian gross domestic

product. The Nedbank Go Green Fund

demonstrates the importance of

effective public/private partnerships in

socio-economic development and the

conservation of biological diversity in our

country by fostering initiatives that

promote sustainable and collective

development within all levels of society.

APPRECIATION

Our clients and employees deserve a

round of applause. Collectively, we will

continue to build a bigger, better bank

for the good of all Namibians. We have

experienced growth together and,

through enhanced systems and

processes, our competitive presence will

remain significant countrywide.

On behalf of the board, I thank every

one of you who enabled us to realise our

business goals for 2005.

Craig Cloete

Acting managing director

SOCIAL RESPONSIBILITY

18

1

2 3

4 5

6 7

8


1. National youth service projectNedbank Namibia sponsored N$50 000,00 to the nationalyouth project based in Grootfontein (Berg Aukas). The moneywas used to purchase tools, equipment and machineryrequired for agricultural training and crop production.

2. Go-Green award ceremonyThe 2005 Go-Green beneficiaries received certificates ofappreciation for the quality work towards the environment.To date, more than N$1,2 million has been injected in variousconservation projects.

3. OEWONANedbank Namibia donated N$1 million to the Organisationfor the Empowerment of Widows/Widowers and Orphans ofHIV and Aids in Namibia. The First Lady of the Republicof Namibia is the patron and founder member of theorganisation. Mr Tom Boardman, chairman of NedbankLimited, also witnessed the event.

4 & 5. Onandjokwe Nedbank WardA special ward was erected at Onandjokwe hospital inOndangwa, northern region of Namibia, to help accommodatemore patients. The ward is also known as the Nedbank Ward.

6. Enkondopeko – Strengthening mathematicsThe Enkondopeko mathematics project received a financialboost of N$77 000,00. The objective of the project is toimprove the teaching skills and subject knowledge ofteachers in the Kavongo region. The project is supportedby both Nedbank and Old Mutual Namibia.

7. Walvis Bay Multi-purpose CentreThe Walvis Bay Multi-purpose Centre received a generousdonation of computers from Nedbank Namibia. The centrelocated in Kiusebmund offers computer training and internetservices to the local community in Walvis Bay.

8. Nedbank/Unam Zeri Mushroom projectThe Zeri Mushroom project develops and promotesmushroom farming/production in Namibia, especially withinless privileged communities. The project supports foodsecurity, provides for a more balanced diet and createsincome-generating opportunities.

EMPATHY – we are sensitive to our shared history

and to the needs and challenges of our people,

communities and environment

20

2005 2004N$’000 % N$’000 %

Value addedValue added is the wealth created by NedNamibia Holdings Limited Group through the provision of services to clients

Interest income and non-interest revenue 484 698 365 136Interest paid and other expenditure 270 706 208 987

213 992 156 149

Value allocatedEmployeesSalaries, wages and other benefits 73 575 35 70 334 45

GovernmentTaxation 38 926 19 23 897 15

ShareholdersDividends 32 945* 13 52 899* 34

Retentions for expansion and growth 68 546 33 9 019 6

Retained income 55 280 –Depreciation and amortisation 13 266 9 019

213 992 100 156 149 100

* Total dividend for the year 32 945 127 768Declared out of retained income – (74 869)

32 945 52 899

VALUE ADDED STATEMENT

Value added – 2005

Employees 35%

Shareholders 13%

Government 19%

Retentions for expansionand growth 33%

Value added – 2004

Employees 45%

Shareholders 34%

Government 15%

Retentions for expansionand growth 6%

This corporate governance report

covers mainly the governance structures

of Nedbank Namibia, being the

main operational entity within the

NedNamibia Holdings group.

CORPORATE GOVERNANCE AND RISK

MONITORING

Corporate governance can be defined as

the system in terms of which

corporations are directed and controlled.

The board of directors recognises that

good governance practices form an

integral part of developing and

sustaining any successful business and

is committed to good governance

processes in all operations.

During the period under review the

directors principally applied the code of

corporate practices and conduct, as set

out in the King II Report on Corporate

Governance. By adhering to the code,

the directors recognise the need for

conducting the affairs of the group with

integrity and in accordance with

generally accepted corporate practices.

FINANCIAL STATEMENTS

The 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 reviewing and reporting

on the fair presentation of these

financial statements.

BOARD OF DIRECTORS

The NedNamibia Holdings board

comprises one executive and nine non-

executive directors, five of whom are,

in terms of the Banking Institutions

Act, independent non-executive directors.

The board is chaired by an independent

non-executive director and this function

remains separate from that of the

managing director. The composition of

the bank’s board of directors complies

with Banking Institutions Act

requirements.

The Nedbank Namibia board has

the same composition, but separate

meetings are held to retain full and

effective control over the group and the

bank. Both boards meet quarterly, but an

additional board meeting is held by the

bank’s board for budget planning

purposes. 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 will be addressed through

the implementation of black economic

empowerment in the group.

The board has its own charter. The

primary objective of the board charter is

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

through the establishment of 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 APPOINTMENT AND

EVALUATION

Board appointments are conducted in a

formal and transparent manner by the

board as a whole, assisted by the

remuneration, nomination, equity and

skills retention committee.

In general, directors are given no fixed

term of appointment. With the

exception of the managing director, who

is subject to short-term notice periods,

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.


CORPORATE GOVERNANCE REPORT

A full assessment of the effectiveness

of the board and board committees,

as well as an evaluation of individual

board members, has taken place during

2005 to elicit feedback from board

members, which ensures constant

refinement of the governance structure

and responsibilities. Areas of concern

are currently being addressed.

COMPANY SECRETARY AND

DIRECTOR DEVELOPMENT

All directors have access to the advice

and services of the company secretary.

The company secretary and other

experts on board effectiveness,

corporate governance and banking

inform new directors of their duties and

responsibilities by way of an induction

course that is run annually.

Last year’s induction course was

combined with a team-building exercise

and was attended by both board and

executive committee members.

CORPORATE GOVERNANCE REPORT continued

22

ATTENDANCE OF BOARD AND BOARD COMMITTEE MEETINGS FOR THE FINANCIAL YEAR ENDING 31 DECEMBER 2005

NedNamibia Holdings Limited Board of directors Attendance Resignation/new appointment dates

Meetings held: 4

Attendance:Frank TJ (Chairman) 4 appointed 11/02/2005Baloyi PC 3 appointed 11/02/2005!Gawaxab J 3 appointed 11/02/2005Hudson KF 2Kankondi SI 3 appointed 11/02/2005Pearce CJ 4Peters RH 3 appointed 11/02/2005Nkuhlu MC 0 resigned 11/02/2005Shipanga MK 4Weston MR 2

Nedbank Namibia LimitedRemuneration,nomination, equity and skills retention

Board of directors Board Audit committee Risk committee committee

Meetings held: 5 (including budget board meeting) 4 4 4

Attendance:Frank TJ (Chairman) 4 1 (app 27/07/2005) 3Baloyi PC 3 (app 25/02/2005) 2 (app 27/07/2005) 4 (app 27/07/2005) 3 (app 27/07/2005)!Gawaxab J 5 1 (app 27/07/2005)Hudson KF 3 3 3 2Kankondi SI 4 0 (app 27/07/2005)Pearce CJ 5 4 4Peters RH 4 4 4Nkuhlu MC 0 (res 25/02/2005)Shipanga MK* 5 4 4 4Tjingaete F 1 (res 19/05/2005) 2 (res 19/05/2005)Weston MR 3

res = resigned

app = appointed

* Attended board committee meetings by invitation.

Note: Transformation committee: While no formal transformation committee meetings were held in the bank during the past financial year, committee

members attended various meetings on group level to attend to black economic empowerment (“BEE”).

DIRECTORS’ INTEREST IN THE

COMPANY AT 31 DECEMBER 2005

NedNamibia Holdings LimitedAs a result of the successful imple-

mentation of the scheme of

arrangement in February 2005 the

minority shareholders exchanged their

ordinary shares in Nedbank Namibia

for ordinary shares in NedNamibia

Holdings at a one-to-one ratio. This

resulted in the directors’ interest in

shares in the holding company being

as follows:

Directors’ interest in the company at 31 December 2005

Beneficial Shares held in 2005 Shares held in 2004

Direct

TJ Frank 10 000 10 000

MK Shipanga Nil 198 400

Indirect

RH Peters 282 228 243 667

MK Shipanga 198 400 Nil

Non-beneficial

Direct

CJ Pearce 100 100

RH Peters 400 100

Nedbank Namibia LimitedAt 31 December 2005 no shares were held by directors in the bank.

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

NedNamibia Holdings The following directors’ fees were paid for the 2005 financial year:

Chairman N$22 500 per annum

Members N$15 000 per annum

Fees paid for 2005 financial year to individual directors (NedNamibia Holdings)

Name of director N$ paid per annum

TJ Frank (Chairman) 21 500

PC Baloyi Nil

KF Hudson Nil

J !Gawaxab 14 500

SI Kankondi 14 500

CJ Pearce Nil

RH Peters 14 500

MK Shipanga (Managing director) Nil*

MR Weston Nil

* Salary was paid by Nedbank Namibia.


Nedbank Namibia Board committees are categorised as A and B committees.

The following directors’ and board committee fees were paid for the financial year 2005:

Annual directors’ and board committee remuneration

Chairman Members

(fees per annum) (fees per annum)

Directors’ fees N$104 000,00 N$52 000,00

A committee fees N$65 000,00 N$32 500,00

* Audit committee

* Risk committee

B committee fees N$56 000,00 N$28 000,00

* Remuneration, nomination, equity

and skills retention committee

Transformation committee N$1 000 per hour

Fees paid for 2005 financial year to individual directors (Nedbank Namibia)

Name of director N$ paid per annum

TJ Frank (Chairman) 149 000

PC Baloyi Nil

KF Hudson Nil

J !Gawaxab 66 000

SI Kankondi 64 000

CJ Pearce Nil

RH Peters 256 500

MK Shipanga (Managing director) 1 518 448*

F Tjingaete 35 500

MR Weston Nil

* Salary


24


Board committeesThe board committee structure was

revised during 2005 to ensure that it can

best assist the board in the discharge of

its duties and responsibilities.

The combined audit, risk and compliance

committee (“ARC”) was separated into

individual audit and risk committees,

the latter having replaced the loan

review committee.

The current committees are:

– Audit committee;

– Risk committee;

– Remuneration, nomination, equity and

skills retention committee; and

– Transformation committee.

Each board committee has formal

written terms of reference that ensure

effective delegation in respect of certain

of the board’s responsibilities.

With the exception of the

transformation committee, all board

committees meet quarterly. The

transformation committee meets when

necessary. All board committees report

to the Nedbank Namibia board.

The board is responsible for determining

the composition of the respective board

committees.

Audit committee The 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 monitor that an effective

internal control, risk management and

compliance environment is created and

maintained throughout the bank and

that the necessary respect for these

disciplines and structures is demon-

strated and stimulated in the bank. 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 audit The objective of the internal audit

function is to assist the managing

director and the audit committee in

the effective discharge of their

responsibilities by performing an

independent appraisal activity of the

bank’s management controls. The bank’s

head of the internal audit department

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 the audit committee

for consideration and the necessary

remedial action.

Internal control For 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 the

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.

The internal controls include risk-based

systems of internal accounting and

administrative controls, designed to

provide reasonable, but not absolute,

assurance that assets are safeguarded

and that transactions are executed and

recorded in accordance with generally

accepted business practices and the

bank’s policies and procedures. These

internal controls are based on

established and written policies and

procedures and are implemented by

trained, skilled staff, with an appropriate

segregation of duties, are monitored

by management and include a

comprehensive budgeting and reporting

system, operating within strict deadlines

and an appropriate control framework

that has been developed in accordance

with the bank’s activities. Internal

control issues are regularly discussed

with the managing director and at

board level.

During the year under review,

management and the board continued

to identify operational control areas and

implemented suitable processes and

technology to further enhance this

important component of the operations

of the business.

Risk committeeThe risk committee is a supporting

committee of the board and its primary

objective is to assist the board of

directors in overseeing and monitoring:

• the management of risk, including

operational risk, thereby ensuring 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 require-

ments; 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, and in particular

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; and

• 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.

DEFINITIONS OF MOST SIGNIFICANT

RISKS

Credit riskCredit risk is the risk of financial loss

resulting from failure of a debtor for any

reason to fully honour its financial or

contractual obligations. The credit

department assesses all exposures and

monitors the implementation of the

bank’s credit policy to ensure that the

extension, control and maintenance of

credit, as well as the process of providing

for and writing off of bad debts, are

executed in a proper way and within

laid-down policy.

The credit committee approves all third-

party risks, including sovereign and

counterparty risks, within a prescribed

limit, as delegated by the board of

directors. All credit exposures in excess

of the authorised limits of the credit

committee are referred to the Nedbank

Africa credit committee for approval.

Interest rate riskInterest rate risk can be defined as the

exposure of the bank’s net interest

income to adverse movements in

interest rates and arises as a result of

mismatches in the term characteristics

of assets and liabilities.

Interest rate risk is assessed through

the use of traditional gap analysis

techniques. Gap analysis measures the

volumes of assets and liabilities subject

to repricing within a given period. For

this purpose assets and liabilities are

classified according to their contractual

repricing characteristics.Through the use

of balance sheet, stress testing and net

interest income scenarios, the impact of

interest rate movements and risk

concentrations can be measured and

identified. Strategies are then developed

for mitigating such risks.

Liquidity risk Liquidity 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 require-

ments 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 monitor

exchange rate movements on an

ongoing basis and operate within pre-

approved limits, based on their

knowledge, expertise and experience.

The risk of money market/capital market

instruments being repriced due to

interest rate movements are also


26

monitored by dealers to remain within

approved limits.

Market riskMarket risk is the risk of a potential

decrease in shareholders’ 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 technology riskInformation technology risk is the risk

resulting from system malfunction and

unavailability, security breaches and

inadequate systems investment,

development, implementation, support

and capacity.

Accounting and taxation riskAccounting 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.

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, the internal audit

department, the risk committee as well

as the operational risk committee

(“Orco”). 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. This internal control

system is supported by a control risk

self-assessment methodology, which

enables line management to integrate

control responsibilities with each job

function and to ensure that supervisory

controls are effectively applied.

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 the

risk that an activity, action or stance

taken by the NedNamibia Holdings

group or its officials will impair its image

in the community, the long-term trust

placed in the organisation by its

stakeholders and this will result in

the loss of business and/or threaten

legal action.

People riskPeople risk can be defined as possible

inadequacies in human capital. This may

stem from lack of adequate skills or

knowledge, lack of clear consequences of

not meeting performance standards, lack

of alignment with strategy or a reward

system that fails to motivate properly.

Policies for the development of human

capital are in place to ensure that the

required skills and experience are

developed, consistently and methodically

retained and enhanced to create value for

the company.

Asset and liability managementAsset and liability management

encompasses financial risk management

and the profit enhancement programmes

of the bank.

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

further strives to ensure that acceptable

levels of financial risk, excluding credit

and operational risk, 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 it to do so, and reports to

the bank’s board of directors through

the risk committee.

Governance and compliancefunction The Nedbank Namibia board of directors

has committed itself to best practice

governance processes and demonstrated

its commitment through the

appointment of a dedicated compliance

officer, with the primary function to

assist the board 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 the

monitoring of 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 the risk

committees. Annual assessments on the

adequacy and effectiveness of the bank’s

processes for controlling its activities and

managing its compliance risks, is

submitted to the latter. Significant issues

related to the 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 the said committees on a

monthly and/or quarterly basis. The

governance and compliance function

further 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 further co-

ordinates with, and provide oversight

of, other control and monitoring

functions (risk management, legal, ethics,

environmental).

Going concern The 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 Capital Accord(“Basel II”) The new Basel II regulations aim to

improve the safety and soundness of the

financial system by aligning capital

adequacy assessment much 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 the

implementation of Basel II.

Basel II is a long-term project, the

implementation of which has to be

finalised by 2007.

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, has been

implemented.

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 retentioncommitteeThe remuneration, nomination, equity

and skills retention 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;

• a competitive human resources

strategy is developed and imple-

mented, to comply with the guidelines

provided by the equity commissioner

as well as affirmative action

initiatives, to support superior business

performance; and

• a balanced board structure is established

and maintained to ensure proper and

effective functioning of the board.


28

The remuneration, nomination, equity

and skills retention 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.

Transformation committeeThe transformation committee

comprises five members and is chaired

by an independent non-executive

director. Its primary objective is to

monitor and manage the restructuring,

group rationalisation and black economic

empowerment processes in the group.

Executive committee (“Exco”)The executive committee comprises

eight members and its primary objective

is to assist the managing director in

managing the business of the bank. The

committee is a management committee

and is headed by the managing director.

The bank’s board of directors appoints

the members of the Exco in co-operation

with the managing director.

Operational committee (“Opco”)The Opco has been established to create

a forum at which operational issues can

be discussed. Important operational

matters are channelled to the Exco for

decision making. The managing director

is the chairman of the Opco, which

meets monthly.

Distribution committee The primary objective of the recently

established 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 geo-

mapping, leases and lease renewals.

Employment equity The 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 within the bank. These

mechanisms provide for the

recruitment, development and

promotion of competent individuals,

especially those from previously

disadvantaged groups, to allow them to

gain access to opportunities based on

their suitability, while ensuring the

maintenance of core standards within

the organisation.

Code of ethics The NedNamibia Holdings group is

committed to organisational integrity

and high standards of ethical behaviour

in its dealings with all the group’s

stakeholders. Failure to maintain ethical

standards may result in disciplinary

action. The board of directors is

confident that high ethical standards are

maintained in the group and that

business is conducted in a manner

which, under all reasonable circum-

stances, 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.


NedNamibia Holdings LimitedBoard of directors

Chair: TJ Frank

PC BaloyiC CloeteJ !GawaxabKF HudsonSI KankondiCJ PearceRH PetersMK ShipangaMR Weston

Nedbank Namibia LimitedBoard of directors

Chair: TJ Frank

PC BaloyiC CloeteJ !GawaxabKF HudsonSI KankondiCJ PearceRH PetersMK ShipangaMR Weston

Nedbank Namibia LimitedExecutive committee (Exco)

Chair: C Cloete

EST HaipingeJC JurgensC Leaf R MuteloWG Nel (acting)A StruchtemeierMJ Vivier

Operational riskcommittee (Orco)

Chair: C Cloete

WS BurgerH EksteenM GousEST HaipingeA JoshiJC JurgensC Leaf M LisseH MattheeM MeiringR MuteloWG NelA StruchtemeierMJ Vivier

KS AltmanWS BurgerH EksteenM GousEST HaipingeA JoshiJC JurgensC Leaf M LisseM MeiringR MuteloWG NelA StruchtemeierMJ Vivier

JC JurgensC Leaf WG NelH Ries von BergenA StruchtemeierMJ Vivier

L BiermannY CampherWG NelA StruchtemeierMJ VivierE WissK Wittmann

H EksteenM GousI HoebelH HoffmannA JoshiM LisseH MattheeR MuteloWG Nel

WS BurgerH EksteenM GousA JoshiC Leaf M LisseH MattheeR MuteloWG NelR ReedMJ Vivier

PC BaloyiTJ FrankJ !GawaxabKF Hudson

PC BaloyiTJ FrankKF HudsonRH Peters

Operationalcommittee (Opco)Chair: C Cloete

Asset and liabilitycommittee (Alco)Chair: C Cloete

Credit committeeChair: C Cloete

Distributioncommittee

Chair: MJ Vivier

Pricing committeeChair: JC Jurgens

PC BaloyiJ !GawaxabKF HudsonCJ Pearce

TJ FrankKF HudsonSI Kankondi

Risk committeeChair: CJ Pearce

Audit committeeChair: RH Peters

Remuneration,nomination, equity and skills retention

committeeChair: PC Baloyi

Transformationcommittee

Chair: RH Peters

CORPORATE GOVERNANCE STRUCTURE AS AT 31 MARCH 2006


30


Annual financial statements

Directors’ responsibility 32

Report of the independent auditors 33

Statement of actuarial value of

assets and liabilities of Coversure Limited 34

Report of the directors 36

Balance sheets 38

Income statements 39

Statements of changes in equity 40

Cash flow statements 41

Notes to the annual financial statements 42

Notice of the annual general meeting 83

Contact details 84

Proxy form 85

c o n t e n t s

www.nedbank.com.na


Directors’ responsibilityfor the year ended 31 December 2005

The directors are responsible for the integrity and fair presentation of the annual financial statements and related informationincluded in this annual report. The annual financial statements presented on pages 34 to 82 have been prepared in accordance withand comply with International Financial Reporting Standards adopted by the International Accounting Standards Board, andinterpretations issued by the International Financial Reporting Interpretations Committee of the IASB and the Namibian CompaniesAct and include amounts based on judgements and estimates made by management. The directors have also prepared the otherinformation included in the annual report and are responsible for both its accuracy and its consistency with the annualfinancial statements.

For the board to discharge its responsibilities, management has developed and continues to maintain a system of internal financialcontrol. The board has ultimate responsibility for this system of internal control and reviews the effectiveness of its operationprimarily 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 provide reasonable,but not absolute, assurance that assets are safeguarded and that transactions are executed and recorded in accordance with generallyaccepted business practices and the bank’s written policies and procedures. These controls are implemented by trained, skilled staff,with clearly defined lines of accountability and an appropriate segregation of duties. The controls are monitored by management andinclude a comprehensive budgeting and reporting system operating within strict deadlines and an appropriate control framework. Aspart of the system of internal financial control, the bank’s internal audit function conducts operational, financial and specific auditsand coordinates audit coverage with the external auditors.

The annual financial statements have been audited by the independent auditors, Deloitte & Touche, who were given unrestrictedaccess to all financial records and related data, including minutes of all meetings of shareholders, the board of directors andcommittees of the board. The directors believe that all representations made to the independent auditors during the audit are validand appropriate.

The going-concern basis has been adopted in preparing the financial statements. The directors have no reason to believe that thegroup or any company within the group will not be a going concern in the foreseeable future, based on forecasts and available cashresources. These annual financial statements support the viability of the company and the group.

The audit report of the independent auditors is presented on page 33.

The annual financial statements were approved and authorised for issue by the board of directors on 2 May 2006 and are signed onits behalf by:

TJ Frank C CloeteChairman Acting managing director

32

To the members of NedNamibia Holdings Limited

We have audited the annual financial statements and group annual financial statements of NedNamibia Holdings Limited set out onpages 34 to 82 for the year ended 31 December 2005. These financial statements are the responsibility of the company’s directors.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 performthe audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includesassessing the accounting principles used and significant estimates made by management as well as evaluating the overall financialstatement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements present fairly, in all material respects, the financial position of the company and the groupat 31 December 2005, and the results of its operations and cash flows for the year then ended in accordance with InternationalFinancial Reporting Standards and in the manner required by the Companies Act of Namibia.

Deloitte & ToucheRegistered Accountants and AuditorsChartered Accountants (Namibia)

Windhoek29 May 2006


Report of the independent auditorsfor the year ended 31 December 2005

Statement of actuarial value of assets and liabilities ofCoversure Limitedfor the year ended 31 December 2005

2005 2004Notes N$’000 N$’000

Assets 2 7 797 8 221

Total assets per balance sheet 7 797 8 221Liabilities 3, 4 2 236 2 873

Actuarial value of policy liabilities 2 148 2 148Current liabilities 88 725

Excess of assets over liabilities 5 561 5 348

Analysis of change in excess assetsExcess assets as at the end of the reporting period 5 561 5 348Excess assets as at the beginning of the reporting period 5 348 3 919

Change in excess assets over the reporting period 6 213 1 429

This change is due to the following factors:Investment return on excess assets 390 207Operating (loss)/profit (106) 1 254Change in valuation methods or assumptions 5 – –Taxation (71) (32)

Total earnings 213 1 429

Capital raised – –Dividends paid – –

Total change in excess assets 213 1 429

Reconciliation to reported earnings:Total earnings as per the above table 213 1 429Less: Surplus in Life Fund – –

Reported earnings in annual financial statements 213 1 429

1. Financial soundness basis/valuation principlesThe assets and liabilities of Coversure Limited have been calculated in accordance with the Actuarial Society of South Africa’sguidelines and in particular PGN103 (2002) and PGN104 (2001). 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 gross premiummethod of valuation.

The liability has been based on cash flow projections, on a per-policy basis, using the assumptions contained in note 3 below.

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

34

3. Valuation of policy liabilitiesThe 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 allowing forprescribed 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 CMIR12 inception rates (four week deferred period)x 0,5, six months payment on average

Retrenchment 5% inception rate, six months payment on average

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

NAMFISA levy 1% of gross premiums0,15% of outstanding liability

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

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

• An incurred but not reported reserve of 2/12 months 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 establishedbased on the expected future expenses and remaining policy term. An expense inflation assumption of 4,55% per annumwas used.

4. Prescribed marginsFirst-tier margins have been allowed for as outlined in the Actuarial Society of South Africa’s guidance note – PGN104 (2001).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 2005, 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 of Coversure Limited comply with the requirements of the CompaniesAct and Insurance Act;

• my statutory actuary’s report, read together with the annual financial statements of Coversure Limited fairly presentsthe financial position of the company; and

• Coversure Limited 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 Actuaries Fellow of the Actuarial Society of South Africa

2 May 2006


Report of the directorsfor the year ended 31 December 2005

36

The directors have pleasure in submitting their report together with the annual financial statements of the group and the companyfor the year ended 31 December 2005.

Nature of the businessNedNamibia Holdings Limited (“NedNamibia Holdings”or the “company”) is a registered holding company that, through its subsidiaries,provides a wide range of financial services, including corporate and retail banking, property and asset finance, private banking, microlendingand foreign exchange 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 successful implementation of the scheme of arrangement on 11 February 2005, Nedbank Limited’s shareholdingin the company decreased from 100% to 93,73%. The balance of the issued share capital, ie 6,27%, is owned by minorityshareholders (previously shareholders of Nedbank Namibia Limited).

The group structure of NedNamibia Holdings is set out on page 2 and 3 of this report.

Results for the year The financial results of the company and the group are fully set out in the annual financial statements.

The net income after taxation for the 12 months amounted to N$90 million, compared to N$59,4 million for the previous year. Totalassets of the group increased by 60% from N$2 669,9 million to N$4 270,6 million.

Share capitalThe company’s issued share capital comprises 66 834 526 ordinary shares, 60 382 551 of which are held by Nedbank Limited,2 261 498 by NIB (Holdings) Namibia Limited (a wholly owned subsidiary of Nedgroup Investment Holdings 101 Limited) and4 190 477 by minority shareholders (previously Nedbank Namibia shareholders).

The unissued share capital of the company comprises 13 165 474 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.

Capitalisation award with a cash dividend alternativeThe board resolved to issue fully paid ordinary shares in the company as a capitalisation award to shareholders, subject to theapproval of shareholders at the annual general meeting to be held on Tuesday, 27 June 2006. Shareholders will be entitled, in respectof all of their shareholding, to elect to receive new fully paid ordinary shares, which shares will be issued only to those shareholderswho elect on or before 12:00, Friday, 21 July 2006, to receive new fully paid ordinary shares in respect of all of their shareholding.Shareholders not electing to receive new fully paid ordinary shares in respect of all of their shareholding will be entitled to receive acash dividend alternative of 49,29 cents per ordinary share (“the cash dividend alternative”).

The number of capitalisation shares to which shareholders are entitled will be determined in the ratio that 49,29 cents per ordinaryshare bears to N$8,98, being the value per ordinary share which has been determined by the company’s advisors. This equates to5,489 new shares for every 100 ordinary shares held. No fractions will be issued, accordingly, where a shareholder’s entitlement tonew ordinary shares calculated in accordance with the above formula gives rise to a fraction of a new ordinary share. Such fractionwill be rounded up to the nearest whole number where the fraction is greater than or equal to 0,5 and rounded down to the nearestwhole number where the fraction is less than 0,5.

Shareholders wishing to receive the cash dividend alternatives do not have to take any action.

The respective dates for the capitalisation award election and the cash dividend alternative are spelled out in the document toshareholders that is enclosed in the annual report.

Accounting treatment of loans and advances The accounting treatment of loans and advances disclosed in the annual financial statements complies with the requirements of BID-2 of the Bank of Namibia. BID-2 (Determinations on the Classification of Loans and the Suspension of Interest on Non-performingLoans and the Provisions for Bad and Doubtful Debts) was issued pursuant to section 71(3) of the Banking Institutions Act, 1998.

Board of directors and secretaryMr Martin K Shipanga resigned as managing director of both the company and the bank with effect from 31 December 2005. Heremains a non-executive director on the boards of both companies. Mr Craig Cloete, an expatriate from Nedbank Limited, will beacting as managing director of NedNamibia Holdings and Nedbank Namibia until such time that a successor has been appointed.

Mr Christopher J Pearce, who was the only director who retired by rotation in terms of the articles of association, was reappointedas a director on 24 June 2005.

The company’s board of directors comprises the following members:

Frank TJ (Adv) Chairman Appointed 11/02/2005 Kankondi SI Appointed 11/02/2005Baloyi P* Appointed 11/02/2005 Pearce CJ* Cloete C* Appointed 01/01/2006 Peters RH*** Appointed 11/02/2005Hudson KF* Shipanga MK !Gawaxab J Appointed 11/02/2005 Weston MR**

* South African ** New Zealander *** German

The board conveys its appreciation to Mr Shipanga for the valuable services he rendered during his term as managing director.

Secretary and registered officeThe secretary of the company is Mrs Mechthild Meiring, whose business address as well as that of the registered office is 12 – 20 Dr Frans Indongo Street, Windhoek. The postal address of the registered office is PO Box 1, Windhoek, and the company’sregistration number is 91/075.

Transfer secretariesTransfer Secretaries (Proprietary) Limited are the company’s transfer secretaries and their business address is Shop 8, KaiserkroneCentre, Post Street Mall, Windhoek, Namibia, PO Box 2401, Windhoek, Namibia.

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 64 093 969 ordinary shares 100%

NedCapital Namibia (Proprietary) Limited (previously NIB Namibia) 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%

NedPlan Insurance Brokers Namibia (Proprietary) Limited, a new wholly owned subsidiary of NedNamibia Holdings, was incorporatedin May 2005, with the purpose of acting as an insurance broker. Nedbank Namibia has entered into agreements with three financialplanners, who will render financial services to clients. These services will include:• financial planning; • portfolio management;• investment advice; • offshore investment consulting;• retirement planning; • healthcare consulting; and• portfolio review and advice; • employee benefit consulting.• life insurance;

Syfrets Namibia Limited, a dormant company and wholly owned subsidiary of NedNamibia Holdings Limited, has been identified asan appropriate vehicle for Old Mutual Namibia to commence its own estate and trust services operation. The company was sold toOld Mutual Namibia and BoE Trust, who entered into a 50/50 joint venture agreement. Nedbank Namibia intends to utilise thetestamentary services of Old Mutual Namibia as soon as an agreement is finalised between the two parties.

Through the acquisition of Lared Investment (Proprietary) Limited’s 20% shareholding in NedLoans (Proprietary) Limited (previouslyFinance in Education (Proprietary) Limited), Nedbank Namibia increased its shareholding in that company from 60% to 80%.

More details on direct and indirect subsidiaries of the group are set out in note 9 of this report.

Post-balance sheet eventsBelissima Investments Seventy Two (Proprietary) Limited, a 100% owned subsidiary of NedNamibia Holdings was acquired with thepurpose of serving as a property holding company for a new business centre that is currently being developed to serve as a platformfor the bank’s product and service offerings to its high-net-worth business banking and corporate banking clients. The centre will beopened in September 2006.

AppreciationThe board of directors extends its sincere appreciation to all the employees and esteemed clients of the group and the company fortheir loyalty and continued support.

Its appreciation is also extended to the Ministry of Finance, the Bank of Namibia, the local authorities and our attorneys and auditorsfor their assistance and cooperation.


GROUP COMPANY

Restated Restated2005 2004 2005 2004

Notes N$’000 N$’000 N$’000 N$’000

Balance sheetsat 31 December 2005

38

AssetsCash and balances with central bank 4 80 528 74 945 – –Government and public sector securities 5 145 646 350 492 – –Other short-term securities 6 100 795 – – –Due from other banks 7 102 300 91 841 – 32 419Loans and advances to customers 8 3 623 267 2 017 318 – –Investments in subsidiaries and associates 9 3 133 988 96 697 41 856Goodwill 10 27 623 – – –Property and equipment 11 50 025 51 108 – –Computer software and development cost 12 9 513 10 157 – –Other assets 13 127 809 73 030 – 93 650

Total assets 4 270 639 2 669 879 96 697 167 925

LiabilitiesDue to other banks 14 853 987 247 274 1 531 –Other deposits 15 356 973 95 506 – –Due to customers 16 2 646 043 1 916 458 – –Long-term subordinated debt instruments 17 1 153 991 – –Policyholder liabilities under insurance contracts 18 2 148 2 148 – –Deferred taxation 19 57 564 55 126 – –Provision for post-retirement medical benefits 20 4 939 12 343 – –Other liabilities 21 31 598 153 967 12 126 034

Total liabilities 3 954 405 2 483 813 1 543 126 034

Shareholders’ equityShare capital 22 16 709 15 238 16 709 15 238Share premium 22 68 568 16 537 68 568 16 537General risk reserve 23 – 9 361 – –Revaluation reserve 12 006 12 324 – –Retained income 214 784 116 880 9 877 10 116

Shareholders’ interest 312 067 170 340 95 154 41 891Minority interest 4 167 15 726 – –

Total shareholders’ equity and minority interest 316 234 186 066 95 154 41 891

Total equity and liabilities 4 270 639 2 669 879 96 697 167 925

GROUP COMPANY


Notes N$’000 N$’000 N$’000 N$’000

Interest income 24 399 886 285 728 – –Interest expense 24 207 590 113 668 – –

Net interest income 192 296 172 060 – –Non-interest income 25 84 812 79 408 – 131 788

Total income 277 108 251 468 – 131 788Impairment of advances 26 (6 979) 20 227 – –

Net income 284 087 231 241 – 131 788Expenses 27 155 093 147 915 239 13

Net income before taxation 128 994 83 326 (239) 131 775Taxation 28 38 926 23 897 – –

Net income for the year 90 068 59 429 (239) 131 775

Attributable to:Outside shareholders in subsidiaries 1 843 6 530Equity holders of the parent 88 225 52 899 (239) 131 775

90 068 59 429 (239) 131 775

Earnings per share (cents) 22 132,01 86,79

Income statementsfor the year ended 31 December 2005


General Re- Share-Share Share risk valuation Retained holders’ Minority

capital premium reserve reserve income interest interest TotalNotes N$’000 N$’000 N$’000 N$’000 N$’000 N$’000 N$’000 N$’000

GroupBalance at 31 December 2003 10 570 21 205 – – 199 273 231 048 17 134 248 182Effect of adoptingIFRS net of taxationIncrease in impairment 2.3 – – – – (5 051) (5 051) (353) (5 404)Revaluation of property 2.3 – – – 9 749 – 9 749 883 10 632Adjustment in treatment of staff loans 2.3 – – – – 6 591 6 591 – 6 591

Restated balance at 1 January 2004 10 570 21 205 – 9 749 200 813 242 337 17 664 260 001Net income attributable to shareholders as restated 2.1 – – – 2 872 52 899 55 771 6 530 62 301

Net income attributable to shareholders as previously reported – – – – 56 905 56 905 5 653 62 558Effect of adopting IFRS net of taxation:– Property and equipment – – – 2 872 (852) 2 020 (263) 1 757– Increase in impairment – – – – (3 756) (3 756) 1 140 (2 616)Adjustment in treatment of staff loans – – – – 602 602 – 602

Other movements – – – – – – (8 468) (8 468)Capitalisation of issue of shares 4 668 (4 668)Release of revaluation reserve – – – (297) 297 – – –Increase in general risk reserve – – 9 361 – (9 361) – – –Dividends 29 – – – – (127 768) (127 768) – (127 768)

Restated balance at 31 December 2004 15 238 16 537 9 361 12 324 116 880 170 340 15 726 186 066Net income attributable to shareholders – – – – 88 225 88 225 1 843 90 068Other movements – – – – – – (13 402) (13 402)Issue of share capital 1 471 53 370 – – – 54 841 – 54 841Cost of issue of share capital – (1 339) – – – (1 339) – (1 339)Release of revaluation reserve – – – (318) 318 – – –Decrease in general risk reserve – – (9 361) – 9 361 – – –

Balance at 31 December 2005 16 709 68 568 – 12 006 214 784 312 067 4 167 316 234

CompanyBalance at 31 December 2003 10 570 21 205 – – 6 109 37 884 – 37 884Capitalisation of issue of shares 4 668 (4 668) – – – – – –Net income attributable to ordinary shareholders – – – – 131 775 131 775 – 131 775Dividends 29 – – – – (127 768) (127 768) – (127 768)

Balance at 31 December 2004 15 238 16 537 – – 10 116 41 891 – 41 891Issue of shares 1 471 53 370 – – – 54 841 – 54 841Cost of issue of shares – (1 339) – – – (1 339) – (1 339)Net income attributable to ordinary shareholders – – – – (239) (239) – (239)

Balance at 31 December 2005 16 709 68 568 – – 9 877 95 154 – 95 154

Statements of changes in equityfor the year ended 31 December 2005

40

GROUP COMPANY


Notes N$’000 N$’000 N$’000 N$’000

Cash (utilised by)/generated from operating activities 30.1 (77 206) (113 358) (31 080) 36 379

Cash received from customers 30.2 481 023 345 545 – –Cash paid to customers 30.3 (184 902) (90 574) – –Cash paid to employees and suppliers (141 176) (135 993) (239) (12)Dividends received – 287 93 449 38 338Dividends paid 30.4 (134 153) (5 443) (126 022) (1 746)Taxation paid 30.5 (29 126) (27 965) – –Recoveries of loans previously written off 9 276 3 094 – –Cash movements in advances and other accounts (1 075 740) (248 717) 201 (201)Cash movements in operating liabilities 30.6 997 592 46 408 1 531 –

Cash flow from/(to) investment activities 94 587 (47 293) – (4 000)

Investment in property and equipment (9 664) (13 980) – –Proceeds on sale of property and equipment 43 855 – –Proceeds from acquisition of subsidiary 30.9 – 6 174 – –Consideration paid for minority interest 10.1 (2 250) – – –Acquisition of other investments 708 – – (4 000)Proceeds from non-dealing securities – (421) – –Purchase of non-dealing securities 30.7 105 750 (39 921) – –

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

Cash and short-term funds generated/(utilised) 16 042 (160 651) (32 419) 32 379Cash and short-term funds at the beginning of the year 166 786 327 437 32 419 40

Cash and short-term funds at the end of the year 30.8 182 828 166 786 – 32 419

Cash flow statementsfor the year ended 31 December 2005


1. Basis of preparationThe group’s consolidated financial statements are prepared in accordance with and comply with International Financial

Reporting Standards (“IFRS”) adopted by the International Accounting Standards Board (“IASB”), and interpretations issued

by the International Financial Reporting Interpretations Committee (“IFRIC”) of the IASB and the requirements of the

Namibian Companies Act and the Namibian Banks Act.

The effect the transition to IFRS had on the reported financial position, financial performance and cash flows of the group

is provided in note 2.

The financial statements are prepared on the historical cost basis except that the following assets 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;

• investment property; and

• owner-occupied properties.

Non-current assets and disposal groups held-for-sale are stated at the lower of their carrying amount and fair value less

costs to sell.

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

statements and in preparing an opening IFRS balance sheet at 1 January 2004 for the purposes of the transition to IFRS.

In the preparation of the financial statements, NedNamibia Holdings Limited and its subsidiaries (“the group”) have recorded

various assets and liabilities on the presumption that the group is an ongoing business and as such, certain key sources of

estimation have been assumed:

Credit impairmentThe group adopted an incurred loss approach to impairment. Impairment losses are incurred only if there is objective

evidence of impairment as a result of one or more past events that have occurred since initial recognition. This necessitates

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 such objective

evidence of impairment exists. The discount rate used to calculate the recoverable amount excludes consideration of any

anticipated future credit losses.

The group has also created a provision for incurred but not reported (“IBNR”) losses. The purpose of the IBNR reserve 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 the impairment becoming

evident, which is known as the “emergence period”. The IBNR reserve is based on the probability that loans which are

ostensibly performing at the calculation date are impaired, and objective evidence of that impairment becomes noticeable

during the emergence period.

The implementation of these principles are at divisional level and will be specific to the nature of their individual loan

portfolios and the loan loss data available to that division.

Notes to the annual financial statementsfor the year ended 31 December 2005

42

Recent amendmentsChanges in International Accounting Standards (“IAS”) and IFRS.

The following table contains effective dates of the IFRSs and the recently revised IASs, which have not been early adopted

by the group and that might affect future financial periods:

Issued/New International Financial Reporting Standards revised Effective date

IFRS 4: Insurance contracts – Amendment for financial Annual periods beginning on

guarantee contracts 2005 or after 1 January 2006.

IFRS 6: Exploration for and evaluation of mineral resources 2005 Annual periods beginning on

or after 1 January 2006.

IFRS 7: Financial Instrument: Disclosures 2005 Annual periods beginning on


New International Accounting StandardsIAS 1: Presentation of Financial Statements – Added Annual periods beginning on

disclosure about an entity’s capital 2005 or after 1 January 2007.

IAS 19: Employment Benefits – Actuarial gains and losses, Annual periods beginning on

group plans and disclosure 2004 or after 1 January 2006.

IAS 39: Financial Instruments: Recognition and Measurement Annual periods beginning on

– Amendment for hedges of forecast intragroup transactions 2004 or after 1 January 2006.

IAS 39: Financial Instruments: Recognition and Measurement 2005 Annual periods beginning on

– Amendment for fair value option or after 1 January 2006.

IAS 39: Financial Instruments: Recognition and Measurement Annual periods beginning on

– Amendment for financial guarantee contracts 2005 or after 1 January 2006.

New International Financial Reporting Interpretations Committee InterpretationsIFRIC 4: Determining whether an arrangement contains a lease 2004 Annual periods beginning on


IFRIC 5: Rights to interests arising from decommissioning,

restoration and environmental rehabilitation funds 2004 Annual periods beginning on


IFRIC 6: Liabilities arising from participating in a specific market Annual periods beginning on

– Waste electrical and electronic equipment 2005 or after 1 December 2005.

IFRIC 7: Applying the restatement approach under IAS 29: Annual periods beginning on

Financial Reporting in Hyperinflationary Economies 2005 or after 1 March 2006.

IFRIC 8: Scope of IFRS 2: Share-based Payments 2006 Annual periods beginning on

or after 1 May 2006.

IFRIC 9: Reassessment of Embedded Derivatives 2006 Annual periods beginning on

or after 1 June 2006.

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 the

amounts presented in the financial statements in future periods.


2. Restatement of comparatives due to IFRS and change in accounting policyRestatement of financial information for the year ended 31 December 2004 under IFRSIn order to explain how the reported performance and financial position of the group are impacted by IFRS, the group hasrestated information previously published under Namibian Statements of Generally Accepted Accounting Practices (“GAAP”)to the equivalent basis under IFRS. This restatement follows the guidelines set out in IFRS 1: First-time Adoption ofInternational Financial Reporting Standards (“IFRS 1”).

The adoption of IFRS has resulted in certain income statement adjustments that may not be repeated in futurereporting periods.

It is important to note that this financial information has been prepared in accordance with IFRS effective 31 December 2005.These are subject to ongoing review and possible amendment by interpretive guidance from the International AccountingStandards Board (“IASB”) and may therefore be subject to change.

Transitional arrangementsThe date of transition to IFRS for the group is 1 January 2004 and therefore, as required by IFRS 1, the group’s opening balancesheet at 1 January 2004 has been restated to reflect all the existing IFRSs expected to be applicable at 31 December 2005.However, IFRS 1 allows a number of exemptions to this retrospective application principle upon adoption of IFRS. The grouphas utilised the following transitional arrangements on a consistent basis with its ultimate holding company, Old Mutual plc:– Business combinations: The group has elected not to retrospectively apply the requirements of IFRS 3: Business

Combinations (“IFRS 3”) for business combinations that occurred prior to 31 March 2004 and consequently no adjustmenthas been made for historical business combinations.

– Property and equipment: The group has elected to measure individual items of property at fair value at the date oftransition to IFRS, hence fair value is deemed to be cost at that date.

The group has not taken advantage of the exemption within IFRS 1 that allows comparative information presented in the firstyear of adoption of IFRS not to comply with IAS 32, Financial Instruments: Disclosure and Presentation (“IAS 32”) and IAS 39,Financial Instruments: Recognition and Measurement (“IAS 39”). Where estimates have previously been made underNamibian GAAP, consistent estimates (after adjustments to reflect any difference in accounting policies) have been made forthe same date on transition to IFRS.

2.1 Reconciliation of restated net income attributable to ordinary shareholders

Pre-taxation Taxation Attributable Minorityeffect effect net income interest

Notes N$’000 N$’000 N$’000 N$’000

GroupNet income attributable to ordinary shareholders for the year ended 31 December 2004 88 087 25 529 62 558 5 653– Credit impairment 2.4 A (6 183) (2 164) (4 019) (263)– Property and equipment 2.4 B 496 208 288 1 140– Staff loans 2.4 C 926 324 602 –

Restated net income for the year ended 31 December 2004 reported under IFRS 83 326 23 897 59 429 6 530

Notes to the annual financial statementsfor the year ended 31 December 2005 continued

44

2.2 Reconciliation of restated assets, liabilities and equity

MinorityAssets Liabilities Equity interest

Notes N$’000 N$’000 N$’000 N$’000

GroupBalances as at 31 December 2004 2 652 960 2 478 456 160 185 14 319Adjustments for:– Credit impairment 2.4 A (14 497) (5 074) (8 807) (616)– Property and equipment 2.4 B 20 350 6 558 11 769 2 023– Staff loans 2.4 C 11 066 3 873 7 193 –

Balances as reported under IFRS 2 669 879 2 483 813 170 340 15 726

2.3 Reconciliation of restated statement of changes in equity

Share Share General Revaluation Retainedcapital premium risk reserve reserve income Total

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

GroupAs at 1 January 2004As previously reported 10 570 21 205 – – 199 273 231 048Adjustments for:Credit impairment 2.4 A (5 051) (5 051)Property and equipment 2.4 B – – – 9 749 – 9 749Staff loans 2.4 C – – – – 6 591 6 591

As reported under IFRS as at 1 January 2004 10 570 21 205 – 9 749 200 813 242 337

As at 31 December 2004As previously reported 15 238 16 537 9 361 – 119 049 160 185Adjustments for:Credit impairment 2.4 A (8 807) (8 807)Property and equipment 2.4 B – – – 12 324 (555) 11 769

– Revaluation of property 12 621 12 621– Release of revaluation reserve (297) 297 –– Release of deferred taxation (186) (186)– Additional depreciation (666) (666)

Staff loans 2.4 C – – – – 7 193 7 193

As reported under IFRS as at 31 December 2004 15 238 16 537 9 361 12 324 116 880 170 340


2. Restatement of comparatives due to IFRS and change in accounting policy (continued)2.4 Material adjustments

The basis of the material adjustments, net of the associated taxation impact, as shown in the tables for reconciliation ofrestated profit attributable to ordinary shareholders and reconciliation of restated statement of changes in shareholders’equity are noted below:

Note A: Credit impairment (IFRS)Previously the group calculated its impairment losses on loans and advances on an “expected loss” basis. Credit impairmentswere calculated using historical data and trends. The discount rate used to calculate the recoverable amount included anallowance for a credit spread.

Under IFRS the group has moved to an “incurred loss” basis. Impairment losses are incurred only if there is objective evidenceof impairment as a result of one or more past events that have occurred since initial recognition. IFRS also allows for thecreation of a credit impairment for incurred but not reported (“IBNR”) losses in order to provide for latent losses in a portfolioof loans that have not yet been individually evidenced. The discount rate used to calculate the recoverable amount nowexcludes any allowance for a credit spread.

Note B: Property and equipment (IFRS)Previously property and equipment were measured at cost less accumulated depreciation and impairment losses. Under IFRS,equipment (principally computer equipment, motor vehicles, fixtures and furniture) is still stated at cost less accumulateddepreciation and impairment losses.

Owner-occupied property has been recognised at revalued amounts, being the fair value at the date of revaluation lesssubsequent accumulated depreciation and accumulated impairment losses. Increases in valuation of the properties are takento a revaluation reserve. This revaluation reserve is amortised over the remaining useful life of the property.

Land is not depreciated.

Investment properties are stated at revalued amounts, being fair value at the date of revaluation less accumulatedimpairment losses. Increases or decreases in valuation are recognised in the income statement and investment properties arenot depreciated.

Note C: Staff loans (change in accounting policy)Staff loans advanced at a below market interest rate is fair valued on initial recognition in accordance with the requirementsof IAS39 Financial Instruments: Recognition and Measurement. These fair value adjustments were accounted for directly inthe income statement.

During the current year the Group changed the basis of accounting relating to the before mentioned staff loans. In accordancewith IAS19 Employee Benefits all long-term employee benefits must be attributed to the periods when the service is rendered.The benefit received by employees accrues over more than one financial year and accordingly the benefit must be accountedunder IAS19. Accordingly the fair value adjustment determined in accordance with IAS39 on initial recognition is recorded asdeferred compensation on the balance sheet and realised in the income statement over the shorter of the term of the loan orthe period the employee is in employment.

This restatement has been applied retrospectively.

3. Significant accounting policies3.1 Basis of consolidation

The consolidated annual financial statements incorporate the annual financial statements of the company and entitiescontrolled by the company. Control is achieved where the company has the power to govern the financial and operatingpolicies of an entity so as to obtain benefits from its activities. The group considers the existence and effect of potentialvoting rights that are currently exercisable or convertible when assessing whether it has control. Entities in which thecompany holds half or less of the voting rights, but are controlled by the group by retaining the majority of risks or benefits,are also included in the consolidated accounts.

The group financial statements include the assets, liabilities and results of NedNamibia Holdings Limited and its subsidiaries.The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement fromthe effective date of acquisition or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the annual financial statements of subsidiaries to bring their accounting policiesinto line with those used by other members of the group.


46

All intragroup transactions, balances, and profits and losses arising from intragroup transactions, are eliminated in thepreparation of the group annual financial statements. Unrealised losses are not eliminated to the extent that they provideevidence of impairment.

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

3.1.1 Business combinationsThe acquisition of subsidiaries is accounted for using the purchase method. The cost of the acquisition is measured at theaggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instrumentsissued by the group in exchange for control of the acquiree, plus costs directly attributable to the business combination.

The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3are recognised at their fair values at the acquisition date, except for non-current assets that are classified as held for sale inaccordance with IFRS 5, Non-current assets held for sale and discontinued operations, which are recognised and measured atfair value less costs to sell.

The interest of the minority shareholders in the acquiree is initially measured at the minority’s portion of the net fair valueof the assets, liabilities and contingent liabilities recognised.

3.1.2 Investment in associatesAn associate is an entity over which the group has significant influence and that is neither a subsidiary nor an interest in ajoint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee,but is not control or joint control over those policies.

The results and assets and liabilities of associates are incorporated in these financial statements using the equity method ofaccounting. Under the equity method, investments in associates are carried in the consolidated balance sheet at the cost asadjusted for post-acquisition changes in the group’s share of the net assets of the associate, less any impairment in the valueof individual investments. Losses of an associate in excess of the group’s interest in that associate are not recognised.

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

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

3.1.3 GoodwillAll business combinations are accounted for by applying the purchase method. At acquisition date, the group recognises thefair value of the acquiree’s identifiable assets, liabilities and contingent liabilities that satisfy the recognition criteria at theirrespective fair values. The cost of a business combination is the fair value of purchase consideration due at date of acquisitionplus any directly attributable transaction costs. Any contingent purchase consideration is recognised to the extent that it isprobable and can be measured reliably. Any excess between the cost of the business combination and the group’s interest inthe net fair value of the identifiable assets, liabilities and contingent liabilities acquired, is recognised as goodwill in the balancesheet. Goodwill is adjusted for any subsequent remeasurement of contingent purchase consideration.

For the purpose of impairment testing, goodwill is allocated to each of the group’s cash-generating units expected to benefitthe synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairmentannually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carryingamount of any goodwill allocated to the unit and then to the assets of the unit pro rata on the basis of the carrying amountof each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.

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

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


3. Significant accounting policies (continued)3.2 Financial instruments

Financial instruments as reflected on the balance sheet include all assets and liabilities, including derivative instruments, butexclude investments in subsidiaries, associate company, employee benefit plans, property and equipment, deferred taxation,taxation payable, intangible assets and goodwill. IAS 39 requires all financial instruments to be classified into one of fourcategories.

• Loans and receivables and non-trading liabilitiesThe group has classified the bulk of its financial assets and liabilities as “loans” and “non-trading liabilities”, which arecarried at amortised cost.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in anactive market, other than those classified by the group as at fair value through profit or loss or available-for-sale. Directand incremental transaction costs are included in the fair value of loans and receivables on initial recognition and areamortised over the duration of the financial asset.

The fair value of a financial liability with a demand feature is not less than the amount payable on demand, discountedfrom the first date that the amount could be required to be paid.

All other non-trading financial liabilities are classified as “Other” and are recognised initially at cost, less direct andincremental transaction costs.

• Held-for-tradingIAS 39 requires certain financial instruments to be measured at their fair value. This includes all derivatives andinstruments held for trading purposes. Trading instruments (whether assets or liabilities) are those that the groupprincipally holds for the purpose of short-term profit taking. All trading derivatives in a net receivable position (in themoney), as well as options purchased, are reported as trading assets. All trading derivatives in a net payable position (outof the money), as well as options written, are reported as trading liabilities.

• Held-to-maturityHeld-to-maturity investments are financial assets with fixed or determinable payments and fixed maturity that the grouphas the intent and ability to hold to maturity, other than those that upon initial recognition were designated as held-for-trading or available-for-sale, or that meet the definition of loans and receivables. Such investments are measured atamortised cost using the effective interest rate method, less any impairment.

• Available-for-saleFinancial assets are classified as available-for-sale where the intention, origination and designation of the instrument donot fall within the ambit of the other financial asset classifications. Available-for-sale instruments are typically assets thatare held for a longer period and in respect of which short-term fluctuations in value do not affect the group’s hold or selldecision.The group recognises fair-value gains and losses on these investments directly in equity along with the associateddeferred taxation. However, when available-for-sale equity instruments are determined to be impaired to the extent thatthe fair value declines below its original cost, the resultant losses are recognised in profit or loss.

• Recognition and derecognitionWhen financial assets and financial liabilities are measured with reference to an active market, the fair value of financialassets are determined based on the bid price and financial liabilities are determined based on the offer price. Whenfinancial assets and financial liabilities are off-set, the fair value is determined based on the bid-offer spread.

The group recognises financial assets on the date it becomes a party to the contractual provisions to purchase the assets andapplies trade date accounting for “regular way” purchases and sales.

A financial liability is recognised when and only when the group becomes a party to the contractual provisions of thefinancial instrument.

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.


48

A financial liability is derecognised when and only when the liability is extinguished, that is, when the obligation specified inthe contract is discharged, cancelled or has expired.

The difference between the carrying amount of a financial liability (or part thereof) extinguished or transferred to anotherparty and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit orloss 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 period.

Embedded derivativesAn embedded derivative arises when derivatives are a component of a financial instrument in such a way that the cash flowsin 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 for separately attheir fair value.

Certain derivatives embedded in other financial and non-financial instruments, such as the conversion option in a convertiblebond, are treated as separate derivatives and recognised as such on a standalone basis, when their risks and characteristicsare not closely related to those of the host contract and the host contract is not carried at fair value with unrealised gainsand losses reported in profit or loss.

Derivative financial instrumentsDerivative financial instruments, including foreign exchange contracts, interest rate futures, forward rate agreements, currencyand interest rate swaps, currency and interest rate options (both written and purchased) and other derivative financialinstruments, are initially recognised in the balance sheet at fair value on contract date and subsequently remeasured at fair value.Fair values are obtained from quoted market prices, discounted cash flow models and options pricing models as appropriate. Allderivatives are carried as assets when their fair value is positive and as liabilities when their fair value is negative.

Changes in the fair value of derivatives not designated as hedges for hedge accounting purposes are included ininvestment income.

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 balance sheet.

Financial instruments carried at fair value through profit or lossFinancial instruments carried at fair value through profit or loss comprise trading securities, investment contracts and thosesecurities that the group has elected to designate at fair value through profit or loss.

Trading securities are those that were either acquired for generating a profit from short-term fluctuations in price or dealer’smargin, or are securities included in a portfolio in which a pattern of short-term profit taking exists, as well as derivatives.

Financial assets carried at fair value through profit or loss are initially recognised at fair value and subsequently re-measuredat fair value based on quoted bid prices. If quoted bid prices are unavailable the fair value of the financial asset is estimatedusing pricing models or discounted cash flow techniques. Where discounted cash flow techniques are used, estimated futurecash flows are 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 based on market-related measures at the balance sheet date.

All related realised and unrealised gains and losses are included in investment income. Interest earned whilst holding tradingsecurities is reported as interest income. Dividends received are included in dividend income.

All purchases and sales of financial assets carried at fair value through profit or loss that require delivery within the timeframe established by regulation or market convention (“regular way” purchases and sales) are recognised at trade date, whichis the date that the group commits to purchase or sell the asset, otherwise such transactions are treated as derivatives untilsettlement occurs.


3. Significant accounting policies (continued)3.2 Financial instruments (continued)

Other financial assets – Available-for-sale financial assets

Available-for-sale financial assets are subsequently re-measured at fair value based on quoted bid prices. If quoted bid prices

are unavailable the fair value of the financial asset is estimated using valuation techniques, which would include recent arm’s

length transactions pricing models or discounted cash flow techniques. Where discounted cash flow techniques are used,

estimated future cash flows are based on management’s best estimates and the discount rate used is a market-related rate

at the balance sheet date for an instrument with similar terms and conditions. Where pricing models are used, inputs are

based on market-related measures at the balance sheet date.

Unrealised gains and losses arising from changes in the fair value of financial assets classified as available-for-sale are

recognised in equity. When available-for-sale financial assets are disposed of or impaired, the related accumulated fair value

adjustments are included in profit or loss as gains and losses from available-for-sale financial assets or as an

impairment charge.

Held-to-maturity investments are carried at amortised cost using the effective interest method, less any impairment

write-downs.

Interest earned whilst holding investment securities (including those classified as available-for-sale) is reported as interest

income, within investment income. Dividends receivable are included separately in dividend income, within investment

income, when a dividend is declared.

Impairment of financial assets

A specific impairment is created when there is objective evidence that amounts due will not be able to be collected. The

amount of the impairment is the difference between the carrying amount and the recoverable amount, calculated as the

present value of expected future cash flows, including amounts recoverable from guarantees and collateral, discounted based

on the ruling effective interest rate.

A further portfolio impairment is created when there is objective evidence that components of the loan portfolio contain

probable losses at balance sheet date, which will only be identified in the future, or where there is insufficient data reliably to

determine whether such losses exist. The probable losses are estimated, based upon historical patterns of losses in each

component, the credit ratings allocated to the borrowers and the current economic climate in which the borrower operates.

When a loan is uncollectable, it is written off against the related impairment. Subsequent recoveries are credited to the

income statement. The group writes off advances once all reasonable attempts at collection have been made and there is no

realistic prospect of recovering outstanding amounts.

Statutory and other regulatory loan reserve requirements that exceed the specific and portfolio impairment amounts are

dealt with in a general risk reserve as an appropriation of retained earnings.

In quantifying the provisions for loans and advances and the general risk reserve, the requirements of BID-2 of the Bank of

Namibia have been complied with. BID-2 (Determinations on the Classification of Loans and the Suspension of Interest on

Non-Performing Loans and the Provisions for Bad and Doubtful Debts) has been issued pursuant to section 71(3) of the

Banking Institutions Act, 1998.

Assets carried at amortised cost

The group assesses at each balance sheet date whether there is objective evidence that a financial asset or group of financial

assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred if, and only if,

there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the


50

asset (a “loss event“) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset

or group of financial assets that can be reliably estimated. Objective evidence that a financial asset or group of assets is

impaired includes observable data that comes to the attention of the group about the following loss events:

(i) significant financial difficulty of the issuer or obligor;

(ii) a breach of contract, such as a default or delinquency in interest or principal payments;

(iii) the group granting to the borrower, for economic or legal reasons relating to the borrower’s financial difficulty, a

concession that the lender would not otherwise consider;

(iv) it becoming probable that the borrower will enter bankruptcy or other financial reorganisation;

(v) the disappearance of an active market for that financial asset because of financial difficulties; or

(vi) observable data indicating that there is a measurable decrease in the estimated future cash flows from a group of

financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the

individual financial assets in the group, including:

– adverse changes in the payment status of borrowers in the group; or

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

The group first assesses whether objective evidence of impairment exists individually for financial assets that are individually

significant, and individually or collectively for financial assets that are not individually significant. If the group determines

that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it

includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for

impairment. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be

recognised are not included in a collective assessment of impairment.

If there is objective evidence that an impairment loss on loans and receivables or held-to-maturity investments carried at

amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount

and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted

at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced through the use of an

allowance account and the amount of the loss is recognised in the income statement. If a loan or held-to-maturity

investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest

rate determined under the contract. As a practical expedient, the group may measure impairment on the basis of an

instrument’s fair value using an observable market price. The calculation of the present value of the estimated future cash

flows of a collateralised financial asset reflects the cash flows that may result from foreclosure less costs for obtaining and

selling the collateral, whether or not foreclosure is probable.

For the purposes of a collective evaluation of impairment, financial assets are grouped on the basis of similar credit risk

characteristics (ie, on the basis of the group’s grading process that considers asset type, industry, geographical location,

collateral type, past-due status and other relevant factors). Those characteristics are relevant to the estimation of future cash

flows for groups of such assets by being indicative of the debtors’ ability to pay all amounts due according to the contractual

terms of the assets being evaluated.

Future cash flows in a group of financial assets that are collectively evaluated for impairment are estimated on the basis of

the contractual cash flows of the assets in the group and historical loss experience for assets with credit risk characteristics

similar to those in the group. Historical loss experience is adjusted on the basis of current observable data to reflect the

effects of current conditions that did not affect the year on which the historical loss experience is based and to remove the

effects of conditions in the historical year that do not exist currently.

Estimates of changes in future cash flows for groups of assets should reflect and be directionally consistent with changes in

related observable data from year to year (for example, changes in unemployment rates, property prices, payment status, or

other factors indicative of changes in the probability of losses in the group and their magnitude). The methodology and

assumptions used for estimating future cash flows are reviewed regularly by the group to reduce any differences between

loss estimates and actual loss experience.


3. Significant accounting policies (continued)3.2 Financial instruments (continued)

When a loan is uncollectible, it is written off against the related provision for loan impairment. Such loans are written off

after all the necessary procedures have been completed and the amount of the loss has been determined. Subsequent

recoveries of amounts previously written off decrease the amount of the provision for loan impairment in the income

statement. If, in a subsequent year, the amount of the impairment loss decreases and the decrease can be related objectively

to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the

previously recognised impairment loss is reversed by adjusting the allowance account. The amount of the reversal is

recognised in the income statement.

Assets carried at fair value

The group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of

financial assets is impaired. In the case of equity investments classified as available-for-sale, a significant or prolonged decline

in the fair value of the security below its cost is considered in determining whether the assets are impaired. If any such

evidence exists for available-for-sale financial assets, the cumulative loss – measured as the difference between the

acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or

loss – is removed from equity and recognised in the income statement. Impairment losses recognised in the income

statement on equity instruments are not reversed through the income statement. If, in a subsequent year, the fair value of a

debt instrument classified as available for sale increases and the increase can be objectively related to an event occurring

after the impairment loss was recognised in profit or loss, the impairment loss is reversed through the profit or loss.

3.3 Instalment transactionsInstalment credit agreements are regarded as financing transactions and the total instalments, less unearned finance charges,

are included in advances and other accounts. Finance charges are pre-computed at the commencement of the contractual

periods and are recognised in income in proportion to the net cash investment capital balances outstanding. 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 subsequent

accumulated depreciation and accumulated impairment losses. An external valuation is performed every three years on a

rotation basis. Internal valuations are done annually.

Equipment, principally computer equipment, motor vehicles, fixtures and furniture, are stated at cost less accumulated

depreciation and impairment losses.

Certain items of property and equipment that had been revalued to fair value on 1 January 2004, the date of transition to

IFRS, are measured on the basis of deemed cost, being the revalued amount at the date of that revaluation.

3.4.2 Subsequent expenditure

Subsequent 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 to the cost of the item

of owner-occupied property and equipment and the party replaced is derecognised. All other expenditure is recognised in

profit or loss as an expense when incurred.

3.4.3 Revaluation of owner-occupied property

Owner-occupied properties are stated at fair value. External valuations are obtained every three years on a cyclical basis.

In the event of a material change in market conditions between the valuation date and balance sheet date an internal

valuation is performed and adjustments made to reflect any material changes in value.


52


The valuation methodology adopted is dependent upon the nature of the property. Income generating assets are valued using

discounted cash flows.Vacant land, land holdings and residential flats are valued according to sales of comparable properties.

Near vacant properties are valued at land value less the estimated cost of demolition.

Surpluses and deficits arising from changes in fair value are recognised in profit or loss.

For properties reclassified during the year from property and equipment to investment properties any revaluation gain arising

is initially recognised in profit or loss to the extent of previously charged impairment losses. Any residual excess is taken to

the revaluation reserve. Revaluation deficits are recognised in the revaluation reserve to the extent of previously recognised

gains and any residual deficit is accounted for in profit or loss.

Investment properties that are reclassified to owner-occupied property are revalued at the date of transfer, with any

difference being taken to profit or loss.

When an individual property is revalued, any increase in its carrying amount (as a result of the revaluation) is transferred to

a revaluation reserve, except to the extent that it reverses a revaluation decrease of the same property previously 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 any related

credit balance in the revaluation reserve in respect of that property. However, to the extent that it exceeds any surplus, it is

recognised as an expense in profit or loss.

3.4.4 Derecognition

On derecognition of an owner-occupied property, or equipment, any gain or loss on disposal, determined as the difference

between the net disposal proceeds and the carrying amount of the asset, is recognised in profit or loss in the period of the

derecognition. In the case of owner-occupied property, any surplus in the revaluation reserve in respect of the individual

property is transferred directly to retained income.

3.4.5 Depreciation

Depreciation is charged to profit or loss on a straight-line basis over the estimated useful lives of items of owner-occupied

property, and equipment that are accounted for separately. Useful lives and residual values are assessed on an annual basis.

In the case of owner-occupied property, on revaluation any accumulated depreciation at the date of the revaluation is

eliminated against the gross carrying amount of the property concerned and the net amount restated to the revalued

amount. Subsequent depreciation charges are adjusted based on the revalued amount for each property. Any difference

between the depreciation charge on the revalued amount and that which would have been charged under historic cost is

transferred net of any related deferred tax, between the revaluation reserve and retained earnings as the property is utilised.

Land is not depreciated.

The maximum estimated useful lives are as follows:

Years

Freehold land and buildings 50

Leasehold land and buildings 10

Furniture, fittings and equipment 4 – 8

Computer equipment 4

3. Significant accounting policies (continued)3.5 Impairment of assets

The group assesses all assets (other than goodwill and financial instruments) for indications of an impairment loss or the

reversal of a previously recognised impairment at each balance sheet date. Should there be indications of impairment, the

assets’ recoverable amounts are estimated. These impairments (where the carrying value of the asset exceeds its recoverable

amount) or the reversal of a previously recognised impairment are recognised in profit or loss for the period.

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

An impairment loss is recognised in profit or loss whenever the carrying amount of an asset exceeds its recoverable amount.

The recoverable amount of an asset is the higher of its fair value less cost to sell and its value in use. The fair value less cost

to sell is determined by ascertaining the current market value of an asset and deducting any costs related to the realisation

of the asset.

In assessing value-in-use, the expected future cash flows from the asset are discounted to their present value using a pre-tax

discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an

asset whose cash flows are largely dependent on those of other assets, the recoverable amount is determined for the cash

generating unit to which the asset belongs.

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

estimates used previously to determine the recoverable amount, but not to an amount higher than the carrying amount that

would have been determined, net of depreciation or amortisation, had no impairment loss been recognised in prior periods.

3.6 Operating leasesLeases where the lessor retains the risk and rewards of ownership of the underlying asset are classified as operating leases.

Payments made on the operating leases are recognised in the income statement on a straight-line basis over the period of

the lease.

3.7 TaxationIncome taxation on the profit or loss for the year comprises direct and deferred taxation. Income taxation is recognised in profit

or loss except to the extent that it relates to items recognised directly to equity, in which case it is recognised in equity.

3.7.1 Deferred taxation

Deferred taxation is provided using the balance sheet liability method, based on temporary differences.Temporary differences

are differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax base. The

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

of assets and liabilities using taxation rates enacted or substantively enacted at the balance sheet date.

Deferred taxation is charged to profit or loss except to the extent that it relates to a transaction that is recognised directly

in equity, or a business combination that is an acquisition. The effect on deferred taxation of any changes in taxation rates is

recognised in profit or loss, except to the extent that it relates to items previously charged or credited directly 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 are reduced 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 and

associates, except where the group is able to control the reversal of the temporary difference and it is probable that the

temporary difference will not reverse in the foreseeable future.


54


3.7.2 Direct and indirect taxation

Direct taxation is the expected taxation payable on the taxable income for the year, as adjusted for items which are not

taxable or disallowed, using taxation rates enacted or substantively enacted in Namibia at the 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 income statement,

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 date of the

transaction.

Monetary assets and liabilities in foreign currencies are translated into the functional currency of the group at rates of

exchange ruling at the balance sheet date.

Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated into the

functional currency of the group at foreign exchange rates ruling at the transaction date. Non-monetary assets and liabilities

denominated in foreign currencies, that are stated at cost, are converted into the functional currency of the group at the rate

of exchange ruling at the date of the initial recognition and are not subsequently retranslated.

Exchange gains and losses on the translation and settlement during the period of foreign currency monetary assets and

liabilities are recognised in the income statement.

Exchange differences for non-monetary items, for example equity instruments, are recognised in equity when the changes in

the fair value of the non-monetary item is recognised in equity, and in profit or loss if the changes in fair value 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 into the functional

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 net realisable value.

3.11 Pension fundContributions in respect of defined contribution schemes are recognised as an expense in profit or loss as incurred.

3.12 ProvisionsProvisions are recognised when the group has a present legal or constructive obligation as a result of past events, for which it is

probable that an outflow of economic benefits will occur and where a reliable estimate can be made of the amount of obligation.

3.12.1 Post-retirement medical benefits

Certain 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 by independent qualified actuaries.

Actuarial gains and losses and service costs are immediately realised in the profit and loss when incurred or received.

3. Significant accounting policies (continued)3.12 Provisions (continued)3.12.2 Contingent liabilities

The group discloses a contingent liability where:

– It is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non-

occurrence of one or more uncertain future events not wholly within the control of the enterprise; or

– It is not probable that an outflow of resources will be required to settle an obligation; or

– The amount of the obligation cannot be measured with sufficient reliability.

3.13 Computer software and development costExpenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge are

recognised in the income statement as an expense incurred.

Expenditure on computer software and other development activities, whereby set procedures and processes are applied to a

project for the production of new or substantially improved products and processes, is capitalised if the computer software

and other development products or processes are technically and commercially feasible and the group has sufficient

resources to complete development.The expenditure capitalised includes cost to materials, and directly attributable staff and

other costs. Computer development expenditure is amortised only once the relevant software has been commissioned.

Capitalised software is stated at cost, less accumulated amortisation and impairment losses. Computer development

expenditure, which has not yet been commissioned, is stated at cost less impairment losses.

Amortisation on computer software and development costs is charged to the income statement on a straight-line basis 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 benefits from

the use of assets will increase beyond its original assessed standard of performance. All other subsequent expenditure is

recognised as an expense in the period in which it is incurred. Surpluses or deficits on the disposal of computer software are

recognised in the income statement. The surplus or deficit is the difference between the net disposal proceeds and the

carrying amount of the asset.

3.14 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 expected timing

and amount of cash flows. Interest income include the amortisation of any discount or premium or other differences between

the initial carrying amount of an interest-bearing instrument and its amount at maturity calculated on an effective interest

rate basis.

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

Fees and commissions, other than those relating to investment management contracts, are generally recognised on an accrual

basis when the service has been provided, such as loan syndication fees. Loan origination fees for loans that are probable of

being drawn down, are deferred (together with related direct costs) and recognised as an adjustment to the effective interest

rate on the advance. Commission and fees arising from negotiating, or participating in the negotiation of a transaction for a

third party, such as the acquisition of loans, shares or other securities or the purchase or sale of businesses, are recognised

on completion of the underlying transaction, unless it forms an integral part of the effective interest rate of the underlying

financial instruments.


56


Foreign exchange gains and losses on monetary items arising from foreign currency transactions that have not been settled at

the balance sheet date are recognised in income in the period in which the exchange rate movement occurred. The premium

or discount on forward exchange contracts is amortised to income over the term of the forward exchange contract.

Revenue other than interest, fees and commission, which includes exchange and securities trading income, dividends

from investments and net gains on the sale of investment banking assets, is recognised in profit or loss when the amount of

revenue from the transaction or service can be measured reliably, it is probable that the economic benefits of the transaction

or service will flow to the group and the costs associated with the transaction or service can be measured reliably.

3.15 Borrowing costsAll borrowing costs are expensed in the period in which they are incurred. Interest expense is recognised in profit or loss using

the effective interest method taking into account the expected timing and amount of cash flows. Interest expense include

the amortisation of any discount or premium or other differences between the initial carrying amount of an interest-bearing

instrument and its amount at maturity calculated on an effective interest rate basis.

3.16 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 trading securities.

GROUP COMPANY

2005 2004 2005 2004

N$’000 N$’000 N$’000 N$’000

4. Cash and balances with central bankBank notes and coins 35 061 29 276 – –

Balances with central bank 45 467 45 669 – –

80 528 74 945 – –

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

Treasury bills 113 341 121 828 – –

Government registered stock 32 305 228 664 – –

145 646 350 492 – –

5.2 Maturity structureOne year or less 113 341 148 100 – –

Three years or less but over one year 32 305 202 392 – –

Over three years – – – –

145 646 350 492 – –

5.3 ValuationUnlisted

– Book value 144 991 350 492 – –

– Directors’ valuation 145 646 350 492 – –

Total book value 144 991 350 492 – –

Total market/directors’ value 145 646 350 492 – –

Treasury bills with a maturity value of N$114 million (2004: N$55 million) and government stock with a maturity value of

N$27 million (2004: N$Nil) have been encumbered to secure the current account with the central bank.

6. Other short-term securitiesNegotiable certificate of deposits 100 795 – – –

6.1 Maturity structureOne year or less 100 795 – – –

7. Due from other banksPlacements with other banks 102 300 91 841 – 32 419

8. Loans and advances to customers8.1 Category analysis

Home loans 995 879 619 692 – –

Other loans and overdrafts 1 837 116 948 590 – –

Preference share finance 40 500 30 000 – –

Leases and instalment debtors 750 585 356 942 – –

Less: Unearned finance charges on leases

and instalment debtors (187 035) (60 252) – –

Microloans 253 211 211 309 – –

3 690 256 2 106 281 – –

Impairment of advances (note 26) (66 989) (88 963) – –

3 623 267 2 017 318 – –

8.2 Sectoral analysisIndividuals 1 388 715 1 164 811 – –

Manufacturing 127 739 37 434 – –

Wholesale and trade 145 373 117 200 – –

Retailers, catering and accommodation 45 586 22 026 – –

Agriculture, hunting, forestry and fishing 541 054 226 070 – –

Mining and quarrying 655 447 92 804 – –

Financial services, insurances and real estates 121 610 179 344 – –

Government and public sector 140 058 175 324 – –

Building and property development 285 826 10 970 – –

Transport, storage and communication 117 613 69 234 – –

Other services 121 235 11 064 – –

3 690 256 2 106 281 – –

8.3 Maturity structureRepayable on demand or at short-term notice 80 376 54 940 – –

Three months or less but not repayable on demand or

at short-term notice 2 792 2 489 – –

One year or less but over three months 1 914 814 958 242 – –

Five years or less but over one year 846 310 496 774 – –

Over five years 845 964 593 836 – –

3 690 256 2 106 281 – –

GROUP COMPANY

2005 2004 2005 2004N$’000 N$’000 N$’000 N$’000


58

GROUP COMPANY

2005 2004 2005 2004Note N$’000 N$’000 N$’000 N$’000


8. Loans and advances to customers (continued)8.4 Geographical analysis

Namibia 3 690 256 2 106 281 – –

8.5 Non-performing advances8.5.1 Category analysis (included under note 8.1)

Home loans 19 011 10 757 – –

Other loans and overdrafts 29 766 35 716 – –

Other loans and overdrafts to subsidiary companies – – – –

Preference share finance – – – –

Leases and instalment debtors 13 112 6 885 – –

Less: Unearned finance charges on leases

and instalment debtors – – – –

Microloans 14 256 27 033 – –

76 145 80 391 – –

8.5.2 Sectoral analysis (included under note 8.2)

Individuals 65 271 75 323 – –

Manufacturing – 76 – –

Wholesale and trade 477 179 – –

Retailers, catering and accommodation – 17 – –

Agriculture, hunting, forestry and fishing 4 572 954 – –

Mining and quarrying 19 8 – –

Financial services, insurances and real estates 1 896 66 – –

Government and public sector 288 163 – –

Building and property development 3 284 3 116 – –

Transport, storage and communication 114 37 – –

Other services 224 452 – –

76 145 80 391 – –

9. Investments in subsidiaries and associatesInvestment in subsidiary companies

– Carrying value at the beginning of the year 41 856 37 856

– Acquisition of additional investment in subsidiary 10.1 54 841 4 000

– Carrying value at the end of the year 96 697 41 856

Investment in associates

– Carrying value at the beginning of the year 988 – – –

– Increase in loans to associates 2 145 988 – –

– Carrying value at the end of the year 3 133 988 – –

3 133 988 96 697 41 856

Directors’ valuation 3 133 988 96 697 41 856


60

9. Investments in subsidiaries and associates (continued)

Issued ordinaryshare capital andproportion held

Nature of 2005 2004 2005 2004Subsidiary companies business ’000 ’000 % %

CompanyNedbank Namibia Limited Banking 64 094 64 094 100 93,46NedCapital (Proprietary) Limited Financing 8 – 100 –Coversure (Proprietary) Limited Insurance 4 000 4 000 100 100NedPlan Insurance Brokers (Proprietary) Limited Insurance – – 100 –

GroupCBN Nominees Dormant (Proprietary) Limited company – – 100 100

NedLoans (Proprietary) Limited (formerly known as Finance in Education Administration(Proprietary Limited) company – – 80 60

Namibia Executors and Trustee Trustees (Proprietary) Limited company 1 1 75 75

Ten Kaiser Wilhelm Strasse Property (Proprietary) Limited company– Ordinary shares 582 582 50 50

Walvis Bay Land Syndicate Property (Proprietary) Limited company– Ordinary shares 3 000 3 000 50 50– Variable rate cumulative

redeemable preference shares 876 1 443 100 100

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

AssociateNamclear (Proprietary) Limited Clearing agent 4 4 25 25

Indebtedness does not include loans and advances paid in the normal course of business. These amounts were included in advances.

Due to the unavailability of audited financial statements for 31 December 2005 of Namclear (Proprietary) Limited, no balance sheet andincome statement information is provided.


Aggregate profitsIndebtedness after tax

Share at cost (to)/by subsidiary of subsidiary2005 2004 2005 2004 2005 2004

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

92 689 37 856 – – 88 543 58 246

8 – – – 1 524 –

4 000 4 000 – – 212 1 348

– – – – 27 –

96 697 41 856 – – 89 869 55 997

– – – – – –

2 250 – (534) (1 127) 3 869 4 071

1 1 – – 107 16

291 291 – – 296 594

1 500 1 500 – – 241 1 887

876 1 443 – – – –

4 918 3 235 (534) (1 127) 4 513 6 568

– – 3 133 988 – –

GROUP COMPANY

2005 2004 2005 2004N$’000 N$’000 N$’000 N$’000


62

10. GoodwillCarrying amount at the beginning of the year – – – –Arising on acquisitions 27 623 152 – –Carrying amount at the end of the year 27 623 – – –

– cost 27 623 152 – –– impairment losses – (152) – –

10. 1 Acquisition of investment in subsidiaries2005A scheme of arrangement was executed effective 1 January 2005, in terms of which the former outside shareholders ofNedbank Namibia Limited was acquired by NedNamibia Holdings Limited in exchange for shares in NedNamibia HoldingsLimited. The consideration in shares and share premium amounted to N$35 618 000.

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

Effective 31 October 2005 Nedbank Namibia Limited, a subsidiary of NedNamibia Holdings Limited, acquired an additional20% (20 shares) of the shares of NedLoans (Proprietary) Limited for an amount of N$2 250 000.

NedCapitalNamibia Nedbank NedLoans

(Proprietary) Namibia (Proprietary)Limited Limited Limited TotalN$’000 N$’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 – 74 945 1 300 76 920Government and public sector securities – 350 295 – 350 295Other short-term funds 126 552 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 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

The goodwill acquired was determined based on the dividend yield for the acquisition of the investment obtained in subsidiaries.


FurnitureFreehold Leasehold fittings and Computer

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

11. Property and equipmentGroup2005Carrying amount at 31 December 2004 1 809 35 133 123 9 820 4 223 51 108

– at cost 1 809 37 640 1 500 28 032 17 655 86 636– accumulated depreciation – (2 507) (1 377) (18 212) (13 432) (35 528)

Additions at cost – – – 4 511 3 935 8 446Additions from acquisition of 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


FurnitureFreehold Leasehold fittings and Computer

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

11. Property and equipment (continued)Group (continued)2004Carrying amount at 31 December 2003 359 10 289 404 10 168 4 865 26 085

– at cost 359 12 015 1 500 25 934 16 035 55 843– accumulated depreciation – (1 726) (1 096) (15 766) (11 170) (29 758)

Effect of adopting IFRS 1 450 18 900 – – – 20 350

Valuation of property 1 450 18 404 – – – 19 854Depreciation adjustment – 496 – – – 496

Additions at cost – – – 2 533 1 934 4 467Additions from acquisition of subsidiary – 7 401 – – 7 7 408Disposals at net book value – (180) – (435) (321) (936)

Disposals at cost – (180) – (635) (331) (1 146)Accumulated depreciation of disposals – – – 200 10 210

Depreciation for the year – (1 277) (281) (2 446) (2 262) (6 266)

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


Information regarding land and buildings required in terms of the Companies Act is available for inspection, by shareholdersor their duly authorised agents, at the registered office of NedNamibia Holdings Limited.

The revaluation of the property was performed on 1 January 2004 by an independent valuer, namely, John Lofty – Eaton(National diploma: property valuation – Unisa, Member: Southern Africa 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 internal valuation standards.


64


Development Computercost software Total

N$’000 N$’000 N$’000

12. Computer software and development costGroup2005Carrying 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 depreciation – (9 516) (9 516)

2004Carrying amount at 1 January 2004 – 3 893 3 893

– at cost – 6 471 6 471– accumulated depreciation – (2 578) (2 578)

Additions at cost – 9 513 9 513Amortisation for the year – (3 249) (3 249)

Carrying amount at 31 December 2004 – 10 157 10 157

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

GROUP COMPANY

2005 2004 2005 2004N$’000 N$’000 N$’000 N$’000

13. Other assetsRemittances in transit 45 374 1 321 – –Zero coupon bonds 56 429 49 004 – –Sundry debtors and other accounts 14 589 5 209 – 201Deferred staff compensation 11 149 11 066 – –Dividends receivable – – – 93 449Taxation 268 6 430 – –

127 809 73 030 – 93 650

GROUP COMPANY

2005 2004 2005 2004N$’000 N$’000 N$’000 N$’000

14. Due to other banksDeposits and borrowings from other banks 853 987 247 274 1 531 –

15. Other depositsNegotiable certificates of deposits 356 973 95 506 – –

16. Due to customers16.1 Category analysis

Current accounts 829 081 634 828 – –Savings accounts 127 381 106 671 – –Other deposits and loan accounts 1 628 276 1 113 744 – –Foreign currency liabilities 61 305 61 215 – –

2 646 043 1 916 458 – –

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

16.2 Sectoral analysisGovernment and quasi government 59 628 288 842 – –Insurance and pension funds 59 388 343 723 – –Companies and close corporations 1 366 078 734 931 – –Individuals 1 160 949 548 962 – –

2 646 043 1 916 458 – –

16.3 Maturity structureRepayable on demand 321 552 1 565 068 – –Three months or less but not repayable on demand 1 579 676 173 975 – –One year or less but over three months 594 672 166 856 – –Five years or less but over one year 150 143 10 559 – –

2 646 043 1 916 458 – –

16.4 Geographical analysisNamibia 2 445 141 1 906 193 – –South Africa 200 902 7 999 – –Europe – 2 266 – –

2 646 043 1 916 458 – –


66


GROUP COMPANY

2005 2004 2005 2004N$’000 N$’000 N$’000 N$’000

17. 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 effective interest expense 1 153 991 – –

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.

These coupon payments were partially charged against income and partially against the capital value of the debentures. For the years 2001 to 2030 the effective interest expense is capitalised. The coupon holders are entitled, in the event of interest default, to put the coupon covering such interest payments to Nedcor Limited.

In the unlikely event of redemption prior to 15 September 2030 a contingent liability of N$26,6 million (2004: N$26,3 million) would arise.

18. Policyholder liabilities under insurance contractsBalance at the beginning of the year 2 148 2 148 – –Amounts recognised in income – – – –

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

19. Deferred taxationThe movement on the deferred tax account is as follows:Balance at the beginning of the year 55 126 38 722 – –Movements during the year– Effect of adopting IFRS and change in accounting policy – 1 808 – –– Prior year adjustments 763 3 549 – –– Temporary differences 1 675 11 047 – –


The balance comprises:Capital allowances 12 236 8 002 – –Provisions (6 522) (3 897) – –Debentures 13 596 13 653 – –Prepayments 13 188 12 362 – –Suspensive sales 29 288 23 855 – –Other (4 222) 1 151 – –

57 564 55 126 – –

GROUP COMPANY

2005 2004 2005 2004N$’000 N$’000 N$’000 N$’000

20. Provision for post-retirement medical benefitsThe company subsidises 50% of the medical aid contribution of all employees who joined Nedbank Namibia between 1 April 2000 and 31 January 2003.The subsidy does not apply to any employees who joined the company on or after 1 February 2003. Provisions are made for these costs. The charge for the year is included in the staff costs expense in the income statement.

Valuation method and assumptions:The actuarial valuation method used to value the liabilities is the Projected Unit Credit Method prescribed by IAS 19 Employee Benefits. Future benefits valued are projected using specific actuarial assumptions and the liability for in-service members is accrued over expected working lifetime. The actuarial valuation is obtained once every two years on a cyclical basis. The most recent valuation was obtained for the year ended 31 December 2005.

The most significant assumptions used are:Discount rate 8% per annumHealthcare cost inflation 6,25% per annum.

Reconciliation of net liability in the balance sheet:Balance at the beginning of the year 12 343 4 994 – –Interest cost 641 600 – –Current service cost 638 251 – –Benefits paid (225) (108) – –Actuarial loss (8 458) 6 606 – –


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

21. Other liabilitiesCreditors and other accounts 20 094 15 985 12 12Taxation 1 200 – – –Dividend payable – 132 560 – 126 022Bonus provision 7 105 2 001 – –

– opening balance 2 001 2 520 – –– utilised (1 900) (2 556) – –– charged to income statement 7 004 2 037 – –

Fraud and self-insurance provision 499 1 046 – –

– opening balance 1 046 1 211 – –– utilised (847) (1 429) – –– charged to income statement 300 1 264 – –

Leave pay provision 2 700 2 375 – –

– opening balance 2 375 1 990 – –– charged to income statement 325 385 – –

31 598 153 967 12 126 034


68


GROUP COMPANY

2005 2004 2005 2004

22. Issued capital and share premiumAs at 31 DecemberNumber of shares 66 834 526 60 951 193 66 834 526 60 951 193

N$’000 N$’000 N$’000 N$’000

Ordinary shares 16 709 15 238 16 709 15 238Share premium 68 568 16 537 68 568 16 537

Total 85 277 31 775 85 277 31 775

The total number of authorised shares at year-end was80 000 000 (2004: 80 000 000) ordinary shares of 25 cents (2004: 25 cents) each. All issued shares are fully paid.

The weighted average shares used for the earnings per share calculation amounts to 66 834 526 (2004: 60 951 193).

Subject to the restrictions of the Companies Act, the unissued shares are under the control of the directors until the forthcoming annual general meeting.

23. General risk reserveAdditional reserve created to comply with the requirements of BID-2 of the Bank of Namibia regarding the general risk provision – 9 361 – –

24. Net interest incomeInterest and discount incomeCash and short-term funds 34 297 43 935 – –Loans and advances 365 589 241 793 – –

399 886 285 728 – –

Interest expenseBanks and customers 207 590 113 668 – –

192 296 172 060 – –

25. Non-interest incomeCommission and fees 48 360 36 289 – –Premium income (26) 4 419 – –Dividends 3 670 287 – 131 788Exchange earnings 16 725 19 867 – –

Exchange commission 7 342 8 135 – –Foreign exchange profit 9 383 11 732 – –

Profit/(loss) on sale of property and equipment 28 (81) – –Sundry trading gains 4 531 6 848 – –Other income 11 524 11 779 – –

84 812 79 408 – 131 788

GROUP COMPANY

2005 2004 2005 2004N$’000 N$’000 N$’000 N$’000

26. Impairment of advances26.1 Movements

Balance at the beginning of the year 88 963 126 681 – –Effect of adopting IFRS – 8 314 – –

88 963 134 995 – –Debts recovered 9 276 3 094 – –Debts written off (24 271) (69 353) – –Income statement charge (6 979) 20 227 – –

– specific impairment (10 187) 5 289 – –– portfolio impairment 3 208 8 755 – –– effect of adopting IFRS – 6 183 – –

Balance at the end of the year (note 8) 66 989 88 963 – –

26.2 AnalysisSpecific impairment 32 814 57 996 – –Portfolio impairment 34 175 30 967 – –

66 989 88 963 – –

26.3 Impairments of advances by categorySpecific impairmentsHome loans 5 351 8 927 – –Other loans and overdrafts 9 276 7 898 – –Leases and instalment debtors 5 418 3 636 – –Microloans 12 769 37 535 – –

Impairment at the end of the year 32 814 57 996 – –

Portfolio impairmentsHome loans 7 225 4 752 – –Other loans and overdrafts 11 910 9 189 – –Leases and instalment debtors 5 652 2 192 – –Microloans 9 388 14 834 – –

Impairment at the end of the year 34 175 30 967 – –

26.4 Sectoral analysisSpecific impairmentsIndividuals 26 972 47 649 – –Manufacturing – 336 – –Wholesale and trade 368 111 – –Retailers, catering and accommodation – 76 – –Agriculture, forestry and fishing 4 822 4 192 – –Mining and quarrying 10 37 – –Financial services, insurance and real estate 76 10 – –Government and public sector – 54 – –Building and property development 258 5 339 – –Transport, storage and communication 35 142 – –Other services 273 50 – –

32 814 57 996 – –


70


GROUP COMPANY

2005 2004 2005 2004N$’000 N$’000 N$’000 N$’000

26. Impairment of advances (continued)26.4 Sectoral analysis (continued)

Portfolio impairmentsIndividuals 22 388 27 471 – –Manufacturing – 55 – –Wholesale and trade 3 260 67 – –Retailers, catering and accommodation – 46 – –Agriculture, forestry and fishing 4 675 740 – –Mining and quarrying 134 22 – –Financial services, insurance and real estate 883 6 – –Government and public sector 452 32 – –Building and property development 1 600 2 412 – –Transport, storage and communication 48 86 – –Other services 735 30 – –

34 175 30 967 – –

27. ExpensesExpenses include the following items which are separately disclosable:Auditors’ remuneration– Audit fees – current year 948 800 – –– Audit fees – prior year 637 583 – –– Other services 454 459 – –

Depreciation 9 577 6 266 – –Amortisation of computer software 3 689 3 249 – –Amortisation of goodwill – 152 – –

Staff costs 73 575 70 334 – –

Transfer to policyholder liabilities under insurance contracts – 2 148 – –

Operating lease charges– Fixed property 5 132 3 781 – –– Other 1 420 2 077 – –

Remuneration other than to employees for:– Managerial services 3 155 2 106 – –– Technical services 2 011 5 833 – –

Directors’ fees paid by the company– For services as directors 553 932 47 –– Managerial services 1 518 850 – –

Key management– Basic salary and other benefits 2 556 – – –– Employer pension contribution 246 – – –– Employer medical aid contribution 117 – – –

Other expenses 49 505 48 345 192 13

155 093 147 915 239 13


72

GROUP COMPANY

2005 2004 2005 2004N$’000 N$’000 N$’000 N$’000

28. Taxation28.1 Charge for the year

Taxation on incomeNormal – current year 36 917 13 818 – –Normal – prior year (3 199) 124 – –Deferred – current 1 675 11 047 – –Effect of adopting IFRS and change in accounting policy – (1 632) – –Deferred – prior 763 – – –

36 156 23 357 – –

Other taxationValue-added tax charge in respect of current expenditure net of input credits 2 770 540 – –

Total taxation 38 926 23 897 – –

28.2 Reconciliation of rate of taxation % % % %Namibian normal rate of taxation 35,0 35,0 35,0 35,0

Reduction in rate for the year: (6,9) (7,1) (35,0) (35,0)

– Non-taxable income (1,6) (1,7) (35,0) (35,0)– Prior year (2,5) 0,2 – –– Other permanent differences (2,8) (5,6) – –

Increase in rate for the year: 2,1 0,8 – –

– Value-added tax charge in respect of current expenditure net of input credits 2,1 0,8 – –

Effective rate of taxation 30,2 28,7 – –

N$’000 N$’000 N$’000 N$’000

29. DividendsOrdinary dividend of nil (2004: N$3,24 per share paid on 30 June 2004) – 34 319 – 34 319

A special dividend of nil (2004: N$2,2 per share was declared on 15 December 2004) – 93 449 – 93 449

– 127 768 – 127 768

The directors have proposed the payment of an ordinary dividend of 49,3 cents per ordinary share for confirmation at theforthcoming annual general meeting. The total dividend amounts to N$32,9 million.

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


GROUP COMPANY

2005 2004 2005 2004N$’000 N$’000 N$’000 N$’000

30. Cash flow information30.1 Reconciliation of net income before taxation to cash

(utilised by)/generated from operating activities

Net income before taxation 128 994 83 326 (239) 131 775Adjustments for non-cash items: 11 539 2 546 – –

– Interest accrued on non-dealing securities (795) – – –– Discount on government stock amortised (904) (7 202) – –– (Profit)/loss on disposal of fixed property and equipment (28) 81 – –– Goodwill amortisation – 152 – –– Depreciation 9 577 6 266 – –– Computer software amortisation 3 689 3 249 – –

Other adjustments (170 479) (14 097) (126 022) (1 746)

– Movement in long-term subordinated debt instruments 162 141 – –– Current income tax charge (36 488) (14 482) – –– Transitional IFRS adjustment – 5 687 – –– Dividends (134 153) (5 443) (126 022) (1 746)

Movement in operating assets (47 260) (185 133) 95 181 (93 650)

– Deposit, current and other accounts 1 020 769 72 111 1 531 –– Advances and other accounts (1 068 029) (257 244) 93 650 (93 650)

Cash flow from operating activities (77 206) (113 358) (31 080) 36 379

30.2 Cash received from customersInterest received 396 446 277 555 – –Commission and fees received 63 746 52 706 – –Other income received 20 831 15 284 – –

481 023 345 545 – –

30.3 Cash paid to customersInterest paid on deposits (184 902) (90 574) – –

(184 902) (90 574) – –

30.4 Dividend paidAmounts outstanding – beginning of the year (132 560) – (126 022) –Charge to income statement – (127 768) – (127 768)Dividend to outside shareholders (1 593) (10 235) – –Amounts outstanding – end of the year – 132 560 – 126 022

(134 153) (5 443) (126 022) (1 746)


74

GROUP COMPANY

2005 2004 2005 2004N$’000 N$’000 N$’000 N$’000

30. Cash flow information (continued)30.5 Taxation paid

Amounts prepaid/(outstanding) – beginning of the year 6 430 (7 053) – –Charge to income statement (33 718) (13 942) – –Amounts outstanding/(prepaid) – end of the year 932 (6 430) – –VAT output tax (2 770) (540) – –

(29 126) (27 965) – –

30.6 Cash movements in operating liabilitiesCurrent accounts 193 582 65 606 1 531 –Savings deposits 20 500 15 146 – –Other deposits and loan accounts 533 913 13 007 – –Foreign currency accounts 103 (17 897) – –Negotiable certificates of deposit 249 494 (29 454) – –

997 592 46 408 1 531 –

30.7 Purchase of non-dealing securitiesOther short-term securities (91 513) 104 481 – –Government and public sector securities 197 263 (144 402) – –

105 750 (39 921) – –

30.8 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) 35 061 29 276 – –Balances with central bank (note 4) 45 467 45 669 – –Due from other banks (note 7) 102 300 91 841 – 32 419

182 828 166 786 – 32 419

30.9 Proceeds from acquisition of subsidiaryAssets acquired:Property and equipment 62 7 408 – –Accounts receivable 716 453 3 016 – –Cash and short-term funds – 6 174 – –

716 515 16 598 – –Liabilities acquired:Creditors and accruals 698 864 3 410 – –

698 864 3 410 – –

Net asset value acquired 17 651 13 188 – –Goodwill 1 572 – – –Post-acquisition profit – (4 177) – –Outside shareholders’ interest – (1 776) – –

19 223 7 235 – –Consideration for subsidiary (19 223) (7 235) – –Cash and short-term funds – 6 174 – –

Cash flow from acquisition of subsidiary – 6 174 – –


GROUP COMPANY

2005 2004 2005 2004N$’000 N$’000 N$’000 N$’000

31. Commitments31.1 Capital expenditure

Not yet contracted 18 107 12 389 – –

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

31.2 Bond commitmentsBonds granted, not yet paid out 67 980 27 115 – –

31.3 Undrawn facilitiesOriginal term of maturity of one year or less 21 829 152 284 – –Original term of maturity of more than one year – 72 504 – –

21 829 224 788 – –

31.4 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.

GROUP COMPANY

2005 2004 2005 2004N$’000 N$’000 N$’000 N$’000

The future minimum lease payments in respect of operating leases are as follows:Premises2005 – 5 419 – –2006 4 086 3 394 – –2007 3 240 2 735 – –2008 2 265 2 157 – –2009 2 175 1 468 – –2010 856 – – –Thereafter 1 281 867 – –

13 903 16 040 – –

2005 other equipment – 1 961 – –

32. Pension fundAll eligible employees are members of the Nedbank Namibia Pension Fund, a defined contribution plan, which has beenregistered in Namibia in accordance with the requirements of the Pension Fund Act.

The fund is governed by the Pension Fund Act, 1956 which requires an actuarial valuation every three years. The findings ofindependent consulting actuaries, based on their appraisal of the fund during January 2005 confirmed that the fund wasfinancially sound.


76

GROUP COMPANY

2005 2004 2005 2004N$’000 N$’000 N$’000 N$’000

32. Pension fund (continued)The total value of contributions to the pension fund during the year amounted to:Number of members 502 449 – –Employer contributions 5 187 4 386 – –Employee contributions 3 430 2 801 – –

33. Contingent liabilitiesConfirmed letters of credit 571 937 – –Liabilities under guarantees 163 450 143 827 – –Legal actions against the group/company 11 715 11 541 – –

175 736 156 305 – –

A subsidiary of the company, namely NedLoans (Proprietary) Limited, is involved in a legal dispute with Channel Life, whichis being heard in the courts. The outcome of the court case is uncertain and the potential liability of the company, should thecourt not decide in its favour, could amount to N$777 875 plus interest of N$163 247. As a result of the uncertainty aroundthe outcome of the case no provision has been made for this result.

A plea has been served and filed against Nedbank Namibia Limited by the NAMCO group in respect for damages suffered byTFDS Offshore AS. The contingent liability is estimated at N$10 774 574. Nedbank Namibia Limited will only be heldaccountable for their share of the participation agreement of 1,9469%. As a result of the uncertainty around the outcome ofthe case no provision has been made for this result.

34. Related-party disclosure34.1 Parent company

NedNamibia Holdings Limited’s majority shareholder is Nedbank Limited (93,73%) (2004: 100%) incorporated in SouthAfrica. The ultimate holding company is Old Mutual Plc. The subsidiaries and associates of these companies are also seen asrelated companies.

34.2 Identity of related parties with whom transactions have occurredSubsidiaries and the associate of the group are identified in note 9. All of these entities are related parties.


34. Related-party disclosure (continued)34.3 Related-party transactions and balances

The following related-party transactions have been entered into:

GROUP COMPANY

2005 2004 2005 2004Related party Relationship Transaction type N$’000 N$’000 N$’000 N$’000

Interest incomeNedbank Limited Holding company Product balance 2 388 2 066 – –Nedbank Limited Holding company Product balance 5 150 4 731 – –Nedbank London Plc Fellow subsidiary Product balance – – – –NIB Holdings (Namibia)(Proprietary) Limited Fellow subsidiary Product balance – 163 – –Old Mutual Namibia Limited Fellow subsidiary Product balance 3 – – –

Other incomeNamibia Executors and Trustees (Proprietary) Limited Subsidiary Dividends – – – –NedLoans (Proprietary) Limited Subsidiary Dividends – – – –NIB Holdings (Namibia) (Proprietary) Limited Other fees 518 – – –Walvis Bay Land Syndicate Preference share (Proprietary) Limited Associate company dividends – – – –

Interest expenseCoversure Limited Fellow subsidiary Product balance – – – –Nedbank Africa division Holding company Product balance 72 – – –Nedbank Namibia Pension Fund Pension fund Product balance 49 31 – –Nedbank Limited Holding company Product balance 36 791 – – –Nedbank Limited Holding company Product balance 6 556 5 715 – –Nedbank Limited Holding company Product balance 2 914 – – –Nedbank Lesotho Fellow subsidiary Product balance 12 729 1 083 – –Nedcor Investments Limited Holding company Product balance 2 755 2 013 – –NedCapital (Proprietary) Limited Fellow subsidiary Product balance – 2 013 – –NedCapital (Proprietary) Limited Fellow subsidiary Product balance – 163 – –NIB Holdings (Namibia) (Proprietary) Limited Product balance 136 – – –Old Mutual Namibia Limited Fellow subsidiary Product balance 2 630 1 279 – –Woodlands Investments (Proprietary) Limited Fellow subsidiary Product balance 1 357 – – –

ExpensesBastion ZA (Proprietary) Limited Fellow subsidiary IT processing charges 1 768 3 919 – –BV Investments Owned by director

– Dr F Tjingaete Commission – 165Namclear (Proprietary) Limited Associate company ACB charges – – – –Nedbank Namibia Pension Fund Pension fund Pension contributions 5 080 4 386 – –Nedbank Limited Holding company Management fee 3 154 2 105 – –Nedbank Limited Holding company Directors’ fee – 353 – –Nedbank Limited Holding company I T host charges – 1 914 – –NedLoans (Proprietary) Limited Subsidiary Rent – – – –NedLoans (Proprietary) Limited Subsidiary Administration fee – – – –NedCapital (Proprietary) Limited Fellow subsidiary Structure fees – – 288 –


78

34. Related-party disclosure (continued)34.3 Related-party transactions and balances (continued)

GROUP COMPANY


Expenses (continued)NedPlan Insurance Brokers (Proprietary) Limited Fellow subsidiary Commission – – – –NIB Holdings (Namibia) (Proprietary) Limited Leases and rentals 136 – – –Ten Kaiser Wilhelm Strasse (Proprietary) Limited Associate company Rent – – – –Transactions with directors (note 27) Directors Services as directors 553 932 47 –Transactions with directors (note 27) Directors Other services 1 518 850 – –Transactions with key management (note 27) Key management Staff cost 2 919 – – –Walvis Bay Land Syndicate (Proprietary) Limited Associate company Rent – – – –

Loans from related party

Coversure Limited Fellow subsidiary Bank accounts – – – –Nedbank Namibia Pension Fund Pension fund Bank accounts 8 614 2 789 – –Nedbank Limited Holding company Structured loan 782 – – –Nedbank Limited Holding company Structured loan 3 644 – – –Nedbank Limited Holding company Structured loan 152 777 – – –Nedbank Limited Holding company Structured loan 218 925 – – –Nedbank Namibia Limited Subsidiary Bank accounts – – 1 531 –NedNamibia Holdings Limited Holding company Bank accounts – – – –NedCapital (Proprietary) Limited Fellow subsidiary Product balance – 28 132 – –NedCapital (Proprietary) Limited Fellow subsidiary Product balance – 1 827 – –NIB Holdings (Namibia) (Proprietary) Limited Fellow subsidiary Bank accounts 152 – – –NIB Holdings (Namibia) (Proprietary) Limited Fellow subsidiary Loan 617 – – –NIB Mining Finance (Proprietary) Limited Fellow subsidiary Bank accounts – – – –Nedbank Lesotho Fellow subsidiary Product balance 103 063 100 947 – –Old Mutual Namibia Limited Fellow subsidiary Product balance 185 508 52 724 – –Nedcor Investments Limited Holding company Product balance 16 210 18 739 – –Nedbank Africa division Holding company Bank accounts 26 291 – – –Nedbank Limited Holding company Bank accounts 625 291 107 751 – –Nedbank Limited Holding company Product balance 17 139 19 837 – –NedLoans (Proprietary) Limited Subsidiary Product balance – – – –NedLoans (Proprietary) Limited Subsidiary Sundry creditor – – – –NedPlan Insurance Brokers (Proprietary) Limited Fellow subsidiary Bank accounts – – – –Ten Kaiser Wilhelm Strasse (Proprietary) Limited Subsidiary Product balance – – – –


34. Related-party disclosure (continued)34.3 Related-party transactions and balances (continued)

GROUP COMPANY


Loans from related party(continued)Transactions with key management Key management Product balance 138 – – –Namibia Executors and Trustees (Proprietary) Limited Subsidiary Product balance – – – –Woodlands Investments (Proprietary) Limited Fellow subsidiary Bank accounts 47 622 – – –

Loans to related partyNedbank London Plc Fellow subsidiary Product balance 22 22 742 – –Nedbank Limited Holding company Product balance 18 812 16 236 – –Nedbank Limited Holding company Product balance 37 755 32 767 – –Nedbank Namibia Limited Subsidiary Bank accounts – – – 32 419NedNamibia Holdings Limited Holding company Bank accounts – – – –NIB Holdings (Namibia) (Proprietary) Limited Fellow subsidiary Bank accounts – 1 491 – –Old Mutual Namibia Limited Fellow subsidiary Product balance 40 – – –Walvis Bay Land Syndicate (Proprietary) Limited Fellow subsidiary Product balance – – – –NedLoans (Proprietary) Limited Subsidiary Sundry debtor – – – –Transactions with directors Directors Mortgage bond 4 264 3 970 – –Transactions with directors Directors Product balance 4 409 – – –Transactions with key management Key management Mortgage bond 3 233 – – –Transactions with key management Key management Product balance 163 – – –Transactions with key management Key management Product balance 119 – – –Transactions with key management Key management Product balance 287 – – –


80

GROUP

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

35. Currency profileAssetsCash and balances with central bank 77 432 536 2 466 94 80 528Government and public sector securities 145 646 145 646Other short-term securities 100 795 100 795Due from other banks 100 952 2 1 346 102 300Loans and advances to customers 3 575 656 804 14 153 31 187 1 467 3 623 267Investment in subsidiary and associates 3 133 3 133Goodwill 27 623 27 623Property and equipment 50 025 50 025Computer software and development cost 9 513 9 513Other assets 127 772 1 9 25 2 127 809

Total assets 4 218 547 805 14 700 35 024 1 563 4 270 639

LiabilitiesDue to other banks 795 088 17 483 37 670 3 746 853 987Other deposits 356 973 356 973Due to customers 2 646 043 2 646 043Long-term subordinated debt instruments 1 153 1 153Policyholder liabilities under insurance contracts 2 148 2 148Deferred taxation 57 564 57 564Post-retirement medical benefits 4 939 4 939Other liabilities 31 598 31 598

Total liabilities 3 895 506 – 17 483 37 670 3 746 3 954 405

Shareholders’ equityShare capital 16 709 16 709Share premium 68 568 68 568General risk reserve – –Revaluation reserve 12 006 12 006Retained income 214 784 214 784

Shareholders’ interest 312 067 312 067Minority interest 4 167 4 167

Total shareholders’ equity and minority interest 316 234 – – – – 316 234

Total equity and liabilities 4 211 740 – 17 483 37 670 3 746 4 270 639

Net balance sheet position 6 807 805 (2 783) (2 646) (2 183) –

Off balance sheet net notional position – – – – – –

Rates of exchange 1,000 7,489 6,330


GROUPNon-

3 months 6 months 1 year interest<3 months <6 months <1 year <5 years >5 years sensitive Total

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

36. Interest rate risk analysisAssetsCash and balances with central bank 80 528 80 528Government and public sector securities 14 131 32 822 66 388 31 401 904 145 646Other short-term securities 100 795 100 795Due from other banks 102 300 102 300Loans and advances to customers 3 613 255 10 012 3 623 267Investment in subsidiary and associates 3 133 3 133Goodwill 27 623 27 623Property and equipment 50 025 50 025Computer software and development cost 9 513 9 513Other assets 56 429 71 380 127 809

Total assets 3 830 481 32 822 66 388 87 830 – 253 118 4 270 639

LiabilitiesDue to other banks 853 987 853 987Other deposits 271 242 84 720 1 011 356 973Due to customers 2 473 096 61 434 109 524 143 1 846 2 646 043Long-term subordinated debt instruments 1 153 1 153Policyholder liabilities under insurance contracts 2 148 2 148Deferred taxation 57 564 57 564Post-retirement medical benefits 4 939 4 939Other liabilities 31 598 31 598

Total liabilities 3 598 325 146 154 110 535 143 1 153 98 095 3 954 405



Total shareholders’ equity and minority interest 316 234 316 234

Total equity and liabilities 3 598 325 146 154 110 535 143 1 153 414 329 4 270 639

On balance sheet interest sensitivity gap 232 156 (113 332) (44 147) 87 687 (1 153) (161 211) –

Accumulative on balance sheet interest sensitivity gap 232 156 118 824 74 677 162 364 161 211 –


82

GROUPUp to 3 – 6 6 – 12 1 – 5 Over

3 months months months years 5 years Equity TotalN$’000 N$’000 N$’000 N$’000 N$’000 N$’000 N$’000

37. Liquidity riskAssetsCash and balances with central bank 80 528 80 528Government and public sector securities 113 341 32 305 145 646Other short-term securities 100 795 100 795Due from other banks 102 300 102 300Loans and advances to customers 83 168 798 290 1 049 535 846 310 845 964 3 623 267Investment in subsidiary and associates 3 133 3 133Goodwill 27 623 27 623Property and equipment 50 025 50 025Computer software and development cost 9 513 9 513Other assets 59 917 762 67 130 127 809

Total assets 540 049 798 290 1 050 297 878 615 1 003 388 – 4 270 639

LiabilitiesDue to other banks 853 987 853 987Other deposits 271 242 84 720 1 011 356 973Due to customers 1 901 228 61 434 533 238 150 143 2 646 043Long-term subordinated debt instruments 1 153 1 153Policyholder liabilities under insurance contracts 2 148 2 148Deferred taxation 57 564 57 564Post-retirement medical benefits 4 939 4 939Other liabilities 28 898 2 700 31 598

Total liabilities 3 055 355 146 154 536 949 207 707 8 240 – 3 954 405



Total shareholders’ equity and minority interest 316 234 316 234

Total equity and liabilities 3 055 355 146 154 536 949 207 707 8 240 316 234 4 270 639

Net liquidity gap (2 515 306) 652 136 513 348 670 908 995 148 (316 234) –

Accumulative net liquidity gap (2 515 306) (1 863 170) (1 349 822) (678 914) 316 234 –

38. Risk monitoringDetails of the group’s risk monitoring structure, policies and methods are noted on pages 26 – 27.


Notice of the annual general meeting

Notice is hereby given that the 14th annual general meeting of the company will be held in the boardroom of Nedbank NamibiaLimited, 5th floor, 12-20 Dr Frans Indongo Street, Windhoek, at 16:00 on 27 June 2006 for the following purposes:

Section ATo approve the following special resolution:1. Amendment to company’s existing articles of association

That the following article (to be numbered Article 116) be added to the company’s existing articles of association under theexisting heading “capitalisation of assets”:“116. The directors shall be entitled to grant to the shareholders the right to elect to receive scrip dividends in lieu of cash

dividends or a cash dividend in lieu of capitalisation or bonus shares.”

Reason for amendmentThe reason for the amendment is to provide in the articles of association for the envisaged capitalisation award with a cash dividendalternative.

Effect of amendmentThe effect of the amendment will be to enable the company to give effect to the envisaged capitalisation award with a cash dividendalternative.

Section BTo consider and resolve the following matters:1. To receive and consider the annual financial statements for the year ended 31 December 2005, together with the report of the

auditors.2. To ratify the board’s resolution to issue fully paid ordinary shares in the company as a capitalisation award to shareholders, who

will be entitled to elect on or before 12:00, Friday, 21 July 2006, to receive new fully paid ordinary shares in respect of all of theirshareholding. Shareholders not electing to receive new fully paid ordinary shares in respect of all of their shareholding will beentitled to receive a cash dividend alternative of 49,29 cents per ordinary share (“the cash dividend alternative”).

The number of capitalisation shares to which shareholders are entitled will be determined in the ratio that 49,29 cents perordinary share bears to N$8,98, being the value per ordinary share which has been determined by the company’s advisors. Thisequates to 5,489 new shares for every 100 ordinary shares held. The payment date for the cash dividend or alternatively theissuing of new shares (depending on the election made by shareholders) will be on or before 14 August 2006.

3. To determine the directors’ remuneration.4. To approve the actions undertaken and discharged by the directors during the year under review.5. To re-appoint Deloitte & Touche as auditors for the new financial year.6. To authorise the directors to determine the remuneration of the auditors.7. To elect directors in accordance with the provisions of the articles of association of the company. The following directors retire

by rotation at this meeting and, being eligible, offer themselves for re-election:Mr Paul C BaloyiMr Mark R WestonMr Rolf H Peters

8. 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 Craig CloeteMr Heinz M Weilert

9. To place the unissued ordinary shares under the control of the directors.10. 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, to vote inhis stead. A proxy needs not be a shareholder of NedNamibia Holdings Limited. Proxies must be lodged at NedNamibia Holdings’registered office at least 48 hours before the commencement of the meeting. Saturdays, Sundays and public holidays are not takeninto account in determining the 48 hours.

By order of the board

M MeiringCompany secretaryWindhoek, 2 May 2006

HEAD OFFICE12-20 Dr Frans Indongo StreetPO Box 1 Windhoek NamibiaTel (061) 295 9111 Fax (061) 295 2120E-mail: [email protected]

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

Windhoek WernhilShop 121 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 SouthBismarck Street PO Box 1WindhoekTel (061) 295 2223 Fax (061) 295 2224

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

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

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

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

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

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

OndangwaErf 1231 Main Street PO Box 2374 OndangwaTel (065) 241 796/241798 Fax (065) 243706

Katutura Cnr Independence Avenue and Rabbi StreetPick ’n Pay Shopping Centre PO Box 1 WindhoekTel (061) 295 2777 Fax (061) 295 2757

www.nedbank.com.na

Contact detailsNedbank Namibia Limited footprints

84

Proxy form


NedNamibia Holdings Limitedfor the 14th annual general meeting

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

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

I/We (name in full)

of

(address)

being the shareholder/s 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 14th annual general meeting ofthe company to be held on 27 June 2006 and at any adjournment thereof, in particular to vote for/against* the resolutions containedin the notice of the meeting.

For Against

Section A

Resolution No 1

Section B

Resolution No 1

Resolution No 2

Resolution No 3

Resolution No 4

Resolution No 5

Resolution No 6

Resolution No 7

Resolution No 8

Resolution No 9

* Please indicate by an “X” either “for” or “against”. Where this is not done, the proxy will be used in favour of the resolutions.

Signed at

on the day of 2006

Signature/shareholder


Annual Report 2005

G R A P H I C O R 3 4 0 2 4

Highlights of the year 1

NedNamibia Holdings group structure 2

Profile, vision, mission and values 4

Financial and statistical highlights 5

Board of directors 6

Executive committee 8

Chairman’s report 10

Managing director’s review 13

Social responsibility 18

Value added statement 20

Corporate governance report 21

Annual financial statements 31

c o n t e n t s

www.nedbank.com.na

Nedbank Namibia provides a comprehensive range of domestic

and global services to individual, corporate and international clients

through a growing branch network

Committed to growth for the good of all Namibians


Annual Report 2005

NEDN

AM

IBIA

HO

LDIN

GS

LIM

ITED

Annual Repo

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www.nedbank.com.na

Documents

Committed to growth for the good of all Namibians...Committed to growth for the good of all Namibians NEDNAMIBIA HOLDINGS LIMITED Annual Report 2005 N ED N AMIBIA H OLDINGS L IMITED