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Habib Overseas Bank Limited

INCORPORATED IN SOUTH AFRICA

Annual Report and Audited Consolidated Annual Financial

Statements 2016


CONTENTS Page

Directors' responsibility statement 2

Certificate of the Company Secretary 2

Directors and secretary 3

Chairman's statement 4

Independent auditor's report 5-6

Audit committee report 7

Directors' report 8

ANNUAL FINANCIAL STATEMENTS

- Statements of financial position 9

- Statements of comprehensive income 10

- Statements of changes in equity 11

- Statements of cash flows 12

- Notes to the annual financial statements 13 - 50

supervision of Arshad Ansari (Executive Director) and have been audited in compliance with the

applicable requirements of the Companies Act, 71 of 2008.

(Registration number 1990/004437/06)

AUDITED CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 2016

These financial statements were prepared by Mohamed Chalakta (Manager) under the

1

Habib Overseas Bank LimitedDirectors' responsibility statement

The directors are responsible for the preparation and fair presentation of the consolidated and company

annual financial statements for Habib Overseas Bank Limited (the "Bank"), comprising the Directors'

report, the statements of financial position at 31 December 2016, the statements of comprehensive

income, the statements of changes in equity and the statements of cash flows for the year then ended; the

notes to the annual financial statements, which include a summary of significant accounting policies and

other explanatory notes; in accordance with International Financial Reporting Standards and in the manner

required by the Companies Act 2008 as amended.

The directors’ responsibility includes designing, implementing and maintaining internal control relevant to

the preparation and fair presentation of these financial statements, so as to be free from material

misstatement, whether owing to fraud or error, selecting and applying appropriate accounting policies and

making accounting estimates that are responsible, reasonable and prudent under the circumstances.

The directors’ responsibility also includes ensuring the maintanance of adequate accounting records and

an effective system of risk management.

The directors have made an assessment of the Habib Overseas Bank Group and the Company’s ability to

continue as a going concern and there is no reason to believe that the business will not be a going

concern in the year ahead.

The auditors are responsible for reporting on whether the Group and Company annual financial

statements are fairly presented in accordance with the applicable financial reporting framework. They have

issued their unqualified report on the annual financial statments which is included on page 5 and 6.

The consolidated and company annual financial statements, as identified in the first paragraph, were

approved by the Board of Directors on 30 March 2017 and are signed on its behalf by:

Brian W Smith Manzar A Kazmi

Non - Executive Director Managing Director

CERTIFICATE OF THE COMPANY SECRETARY

In terms of Section 88 (2)(e) of the Companies Act 2008 as amended, I certify that to the best of my

knowledge and belief, Habib Overseas Bank Limited has lodged with the Registrar of Companies for the

year ended 31 December 2016, all such returns as required of a Public Company in terms of the

Companies Act and that all such returns are true, correct and up to date.

Ms Mashooda Khan

Company Secretary

30 March 2017

2

Habib Overseas Bank LimitedDIRECTORS AND SECRETARY

DIRECTORS

Habib Mohamed D Habib

(Chairman)

Asghar D Habib

(Senior Vice Chairman)

Zain Habib

(Vice Chairman)

Ahmed Habib

(Non-executive Director)

S Manzar Abbas Kazmi

(Managing Director)

Arshad Ansari

(Executive Director)

Martin Bramwell

(Independent Non-executive Director)

Brian W Smith

(Independent Non-executive Director)

COMPANY SECRETARY

Ms Mashooda Khan

[email protected]

HEAD OFFICE

N-77 North Mall

Oriental Plaza

Fordsburg 2092

P O Box 62369

Marshalltown, 2107

Tel: (011) 834-7441

Fax: (011) 834-7446

E mail: [email protected]

Web: www.habiboverseas.co.za

ORIENTAL PLAZA BRANCH LENASIA BRANCH LAUDIUM BRANCH

N-77 Oriental Plaza 53 Gemsbok Street 246 Tangerine Street

Fordsburg Lenasia Laudium

P O Box 62369 P O Box 62369 P O Box 14573

Marshalltown 2107 Marshalltown, 2107 Laudium, 0037

Tel: (011) 834-7441/838-3670 Tel: (011) 854-5998 Tel: (012)374-2355/374-6993

Fax: (011) 834-7446/838-3672 Fax: (011) 854-6308 Fax: (012) 374-5561

Telex: 430 073 Telex: 420 032 Telex: 320 088Email:

[email protected]

Email:

[email protected]

Email:

[email protected]

CAPE TOWN BRANCH DURBAN BRANCH

12 Mavis Road 534 Peter Mokaba Ridge

Rylands Durban

P O Box 38382 P O Box 49409

Gatesville, 7766 Qualbert, 4078

Tel: (021) 637-2090/637-2093 Tel: (031) 275-7800

Fax: (021) 637-2099 Fax: (031) 275-7801

Telex: 521033 Telex: 620 040

Email:

[email protected]

Email:

[email protected]

3

mailto:[email protected]://www.habiboverseas.co.za/mailto:[email protected]:[email protected]


CHAIRMAN'S STATEMENT

30 March 2017

Habib Mohamed D Habib

Chairman

Due to dismal performance in the mining and manufacturing sectors, South Africa’s economy grew just 0.3%

in the full year 2016, which represented the weakest pace of growth since 2009. Slow growth in China and

uncertainty in the Euro zone countries contributed to low demand for commodities and consequently softer

pricing of the underlying commodities. This affected South Africa’s export potential and to allow the Republic

to earn mere marginal returns on its commodity export, the primary bulwark of their economy. In the last

quarter of 2016, South Africa barely managed to retain its investment grade rating which was a big challenge

for the Financial Managers in the country. The South African Rand remained generally stable throughout the

year and we expect it to gain further strength during 2017 that would boost the economy and help in reduction

of inflation in the country. Due to high cost of imports from China we have also witnessed a revival of our

manufacturing sector in the country, particularly clothing and garments industry which will create more

employment and country’s resources will be fully utilized.

In August 2016, a Share Purchase Agreement (SPA) was signed between the existing shareholders of the

bank and a consortium of local businessmen for the sale of the 100% shareholding of the Bank. As part of the

approval process for this sale, the South African Competition Commission has already given their approval

however, the approval from the South African Reserve Bank is still pending.

It gives me great pleasure to report a satisfactory performance of the Bank during 2016 despite the sluggish

economic forces at work. By the Grace of God, the bank posted a pre-tax profit of R18.2 million (2015 – R29.1

million). Sluggish economic conditions in the country forced businesses to utilise their reserves and as a result

we witnessed a fall in deposits to R1, 006, 7 million from R1, 170.8 million in 2015. The total advances as on

31 December 2016 stood at R417.1 million as compared to R453.9 million as on 31 December 2015. Capital

Adequacy remained high at 18.67%. (2015 – 18.33%).

From a process perspective, 2016 represented a watershed for strengthening of AML, KYC and Compliance

implementation throughout the organisation.

I am obliged to our faithful customers for their patronage over the years who have contributed to the growth of

the bank. I would also like to extend my sincere thanks to my fellow directors, the management team and the

bank staff for their hard work, dedication and support that has led to the bank’s performance over the years.

4


AUDITOR'S REPORT

INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF HABIB OVERSEAS BANK LIMITED

Report on the Financial Statements

Opinion

We have audited the consolidated financial statements of Habib Overseas Bank Limited and its subsidiaries set out on pages 9 to 50,

which comprise the consolidated statement of financial position as at 31 December 2016, and the consolidated statements of profit or

loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for

the year then ended, and the notes to the consolidated financial statements, including a summary of significant accounting policies.

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

Group as at 31 December 2016, and its consolidated financial performance and consolidated cash flows for the year then ended in

accordance with International Financial Reporting Standards (IFRSs) and the requirements of the Companies Act of South Africa.

Basis for Opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are

further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are

independent of the Group in accordance with the Independent Regulatory Board for Auditors Code of Professional Conduct for

Registered Auditors (IRBA Code) and other independence requirements applicable to performing audits of financial statements in South

Africa. We have fulfilled our other ethical responsibilities in accordance with the IRBA Code and in accordance with other ethical

requirements applicable to performing audits in South Africa. The IRBA Code is consistent with the International Ethics Standards Board

for Accountants Code of Ethics for Professional Accountants (Parts A and B). We believe that the audit evidence we have obtained is

Other Information

The directors are responsible for the other information. The other information comprises the Directors’ Report, as required by the

Companies Act of South Africa. The other information does not include the consolidated financial statements and our auditor’s report

thereon.

Our opinion on the consolidated financial statements does not cover the other information and we do not express an audit opinion or any

form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so,

consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in

the audit, or otherwise appears to be materially misstated.

If, based on the work we have performed on the other information that we obtained prior to the date of this auditor’s report, we conclude

that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this

regard.

Responsibilities of the directors for the Consolidated Financial Statements

The directors are responsible for the preparation and fair presentation of the consolidated financial statements in accordance with

International Financial Reporting Standards and the requirements of the Companies Act of South Africa, and for such internal control as

the directors determine is necessary to enable the preparation of consolidated financial statements that are free from material

misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, the directors are responsible for assessing the Group’s ability to continue as a going

concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors

either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.

5


AUDITOR'S REPORT

• Identify and assess the risks of material misstatement of the consolidated financial statements, whether

due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit

evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a

material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve

collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are

appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of

the Group’s internal control. Evaluate the appropriateness of accounting policies used and the

reasonableness of accounting estimates and related disclosures made by the directors.

• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and based

on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that

may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a

material uncertainty exists, we are required to draw attention in our auditor’s report to the related

disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our

opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report.

However, future events or conditions may cause the Group to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the consolidated financial statements, including

the disclosures, and whether the consolidated financial statements represent the underlying transactions

and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business

activities within the Group to express an opinion on the consolidated financial statements. We are

responsible for the direction, supervision and performance of the group audit. We remain solely

responsible for our audit opinion.

Per: J Dziruni

Partner

26 April 2017

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole

are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our

opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in

accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or

error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence

the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism

throughout the audit. We also:

We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and

significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

Deloitte & Touche

Registered Auditor

6


AUDIT COMMITTEE REPORT

Objectives and scope

External audit

The committee has:

Internal audit

Internal financial controls

Annual report

Considerations on King III and Integrated reports

The main issues relevant to the bank include:

On behalf of the Committee

Brian W Smith

Chairman of the audit committee.

30 March 2017

- The committee has also carried out oversight of the internal audit function, discussed the audit plans

of the internal auditors and reviewed their reports on head office and branch audits; and management

responses thereon.

The committee has reviewed the effectiveness of the company's system of internal financial controls,

which includes receiving assurances from management and internal and external audit. Nothing had

come to the attention of the audit committee to indicate that the internal financial controls were not

operating effectively.

Based on its reviews and discussions with management and both internal and external auditors, the

committee has satisfied itself of the effectiveness of internal control and the finance function of the

bank.

The committee has reviewed the annual financial statements for the year ended 31 December 2016

and has recommended the annual report for approval by the Board.

The Board has subsequently approved the annual report which will be presented for discussion at the

annual general meeting.

- Provided oversight of the external audit process by reviewing and discussing the audit plan,

significant accounting and auditing issues that arose during the audit, and management’s responses to

issues raised and the adequacy of the responses.

The audit committee is a Committee appointed by the shareholders. The audit committee comprised

independent non-executive directors BW Smith (Chairman) and M Bramwell as well as non executive

directors Z Habib and A H Habib. The committee has carried out its functions in accordance with its

term of reference specified by the Board and in accordance with the requirments of Section 94(7) (a) to

(i) of the Companies Act 2008.

-To assist the board in discharging its duties relating to the safeguarding of assets and the operation of

adequate systems and control processes.

-To control reporting processes and the preparation of financial statements in compliance with

applicable legal and regulatory requirements and accounting standards.

-To oversee internal and external audit appointments and functions.

-To provide a forum for the governance of risk including control issues.

- To perform duties prescribed by the Companies Act 2008 and the Banks Act.

- Confirmed the continued appointment of Deloitte & Touche as external auditors and Mr Justin Dziruni

as the designated partner, and determined that in our opinion they are independent of the Company

giving due consideration to the provisions of Section 93 of the Companies Act 2008.

- Reviewed and agreed the terms of engagement of Deloitte & Touche.

- Ascertained that no material non-audit services were provided by the external auditors.

- Considered and approved the audit fee payable to the external auditors.

- Performance: The results of the bank’s activities are clearly set out in the annual financial statements

and supporting notes.

- Prospects: The directors are satisfied that the company is a going concern for the foreseeable future,

as stated in the directors' report.

King III proposes that organisations should produce integrated reports. JSE listing requirements require

all JSE listed companies to provide narrative of how each has applied the recommendations of King III.

The approach to unlisted companies, such as ours, is advisory rather than compulsory.

Limited guidance on integrated reporting is currently available, especially considering the nature of the

business conducted by the bank. The approach will evolve as a framework is developed by interested

organisations. Nevertheless, we take cognisance of the issues addressed in King III, and are satisfied

that the main proposals are taken into account and the relevant information presented in sections of

the annual report.

- Strategy: The nature of the business is stated under the principal activities in the Directors' report.

- Corporate governance: The commitment of the directors and relevant mechanisms, are confirmed in

the Director’s report.- Risk management: The risks and their management are detailed in note 32 to the annual financial

statements.

7


Pitcairns Finance S.A. Luxembourg holds 99.9% of the shares in the Bank.

2016 2015

R R

Net profit after taxation for the year 106,967 203,980

2016 2015

Capital adequacy ratio 18.67% 18.33%

DIRECTORS' REPORT

SHARE CAPITAL

SUBSEQUENT EVENTS

FINANCIAL

The directors have pleasure in presenting the annual financial statements for the year ended 31 December 2016.

GOING CONCERN

Habib Overseas Bank Limited has an authorised share capital of R25, 000,000 and issued and fully paid issued

share capital of 20,000,000 ordinary shares of R1 each.

DIRECTORS AND SECRETARY

PRINCIPAL ACTIVITIES

The capital adequacy ratio is calculated based on the qualifying capital less capitalised software divided by total

risk weighted assets.

The Bank's philosophy relating to the management of off balance sheet items is subject to the same scrutiny and

approval process as on balance sheet items. Contingent exposure is approved and monitored by the Credit

Committee in accordance with the credit policy.

The directors realise that corporate governance constitutes an important component and as such, are committed

to applying the principles necessary to ensure that good governance is practised at all levels across the Bank.

Necessary mechanisms have been put in place to ensure that these practices are being adhered to and applied

fully.

CORPORATE GOVERNANCE

The interest of the Bank in the net profit after taxation of its wholly owned subsidiary N77 Oriental Plaza

(Proprietary) Limited.

CAPITAL ADEQUACY

SUBSIDIARY

HOLDING COMPANY

MANAGEMENT OF OFF BALANCE SHEET ITEMS

The directors are not aware of any other matter or event which is material to the financial affairs of the Group that

has occurred between the balance sheet date and the date of the approval of the financial statements.

At the end of the financial year and at the date of this report, the directors and secretary are as detailed on page 3.

The Bank is a registered banking institution and provides a range of financial products and services to a diverse

customer base which includes individuals, corporates, charitable organisations, clubs, societies and financial

institutions.

Total comprehensive income after taxation of Habib Overseas Bank for the year amounted to R 12,312,468 (2015:

R 22,795,904).

The Habib Overseas Bank Group Financial statements have been prepared on the going concern basis.

8


Statements of financial position

at 31 December 2016

Notes Group Company

2016 2015 2016 2015

R R R R

ASSETS

Non-Current Assets 96,691,587 69,127,439 96,247,335 68,682,152

Property, plant and equipment 3 6,510,281 7,097,850 6,066,028 6,652,562

Investment in subsidiary 4 - - 1 1

Long-Term Loans and advances 5 89,077,487 61,154,327 89,077,487 61,154,327

Deferred tax asset 20 1,103,819 875,262 1,103,819 875,262

Current Assets 1,037,566,301 1,249,481,869 1,037,536,426 1,249,481,869

Cash and cash equivalents 6 515,468,517 650,957,334 515,468,517 650,957,334

Investments and negotiable securities 7 185,654,068 198,315,627 185,654,068 198,315,627

Loans and advances 8 328,018,412 392,755,351 328,018,412 392,755,351

Other assets 9 8,257,897 7,453,557 8,257,897 7,453,557

Receiver of Revenue 27 167,407 - 137,532 -

Total assets 1,134,257,888 1,318,609,308 1,133,783,761 1,318,164,021

EQUITY AND LIABILITIES

Capital and Reserves

Equity attributable to ordinary

shareholders 116,069,774 111,514,351 113,775,710 109,463,242

Share capital 10 20,000,000 20,000,000 20,000,000 20,000,000

Retained earnings 96,069,774 91,514,351 93,775,710 89,463,242

Liabilities 1,018,188,114 1,207,094,957 1,020,008,051 1,208,700,779

Non-Current Liabilities 69,394 69,320 - -

Deferred tax liability 20 69,394 69,320 - -

Current Liabilities 1,018,118,720 1,207,025,637 1,020,008,051 1,208,700,779

Short-term borrowings 6 - 25,125,393 - 25,125,393

Deposits and current accounts 11 1,004,821,241 1,169,058,381 1,006,715,778 1,170,843,493

Other liabilities 12 13,297,479 12,738,277 13,292,273 12,731,893

Receiver of Revenue 27 - 103,586 - -

Total equity and liabilities 1,134,257,888 1,318,609,308 1,133,783,761 1,318,164,021

9


Statements of comprehensive income

for the year ended 31 December 2016

Notes Group Company

2016 2015 2016 2015

R R R R

Revenue

Net Interest Income 60,278,894 51,358,224 60,180,515 51,087,662

Interest and similar income 14 88,584,178 76,555,833 88,584,178 76,555,833

Interest expense and similar charges 14 (28,305,284) (25,197,609) (28,403,663) (25,468,171)

Non-interest income 15 19,314,801 22,317,428 19,242,270 22,235,743

Net interest and non-interest income 79,593,695 73,675,652 79,422,785 73,323,405

Dividend income - - - 8,000,000

Impairment charge on loans and

advances 16 (2,950,155) (1,099,828) (2,950,155) (1,099,828)

Operating expenditure 17 (58,164,726) (51,105,459) (58,187,385) (51,097,779)

Profit before taxation 18,478,814 21,470,365 18,285,245 29,125,798

Taxation 19 (5,923,391) (6,470,481) (5,972,777) (6,329,894)

Profit for the year 12,555,423 14,999,884 12,312,468 22,795,904

Profit attributable to: 12,555,423 14,999,884 12,312,468 22,795,904

- Owners of the Company 12,555,423 14,999,884 12,312,468 22,795,904

- Non-Controlling interest - - - -

12,555,423 14,999,884 12,312,468 22,795,904

- Owners of the Company 12,555,423 14,999,884 12,312,468 22,795,904

- Non-Controlling interest - - - -

Total comprehensive income

attributable to:

10


Statements of changes in equity


Note

Share capital

Retained

Earnings Total

R R R

Group

Balance as at 1 January 2015 20,000,000 82,514,467 102,514,467

Profit for the year - 14,999,884 14,999,884

Dividends declared and paid in 2015 21 - (6,000,000) (6,000,000)

Balance as at 31 December 2015 20,000,000 91,514,351 111,514,351




Company





Changes in equity in the current year




11


Statements of cash flows


Group

2016 2015 2016 2015

Notes R R R R

CASH FLOW FROM OPERATING ACTIVITIES

Interest income and other income received 22 105,648,482 93,922,663 105,575,950 93,840,978

Interest paid 23 (28,577,016) (25,101,228) (28,675,395) (25,371,790)

Cash paid to suppliers and employees 24 (55,292,285) (43,554,989) (55,314,799) (43,554,974)

Cash generated from operations

21,779,181 25,266,446 21,585,756 24,914,214

Increase/ (Decrease) in loans and advances 25 34,980,006 (31,306,759) 34,980,006 (31,306,759)

Increase/ (Decrease) in deposits and current accounts 26 (164,237,139) 100,550,985 (164,127,714) 91,494,749

Taxation paid 27 (6,422,866) (6,260,550) (6,338,866) (6,102,082)

Dividends paid 28 (8,000,000) (6,000,000) (8,000,000) (6,000,000)

Net cash (outflow)/inflow from operating activities (121,900,818) 82,250,122 (121,900,818) 73,000,122

CASH FLOW FROM INVESTING ACTIVITIES

Dividend income N-77 - - - 8,000,000

Additions to property and equipment 3 (1,453,941) (2,956,780) (1,453,941) (2,956,780)

Loan repaid - - - 1,250,000

Proceeds of matured treasury bills 12,991,335 1,386,807 12,991,335 1,386,807

Net cash outflow from investing activities 11,537,394 (1,569,973) 11,537,394 7,680,027

NET (DECREASE) INCREASE IN CASH AND CASH

EQUIVALENTS

(110,363,424) 80,680,149 (110,363,424) 80,680,149

CASH AND CASH EQUIVALENTS AT BEGINNING OF

YEAR 6 625,831,941 545,151,792 625,831,941 545,151,792

CASH AND CASH EQUIVALENTS AT END OF YEAR 6 515,468,517 625,831,941 515,468,517 625,831,941

Company

12


Notes to annual financial statements


1 ACCOUNTING

POLICIES 1.1 Basis of Accounting and Seperate Statement of Compliance

1.2 Accounting Standards Issued But Not Yet Effective

Recent accounting developments

1.3 Interest Income and expenses Recognition

1.4 Basis of consolidation

1.5 Business combinations

Acquisitions of subsidiaries and businesses are accounted for using the purchase method. The cost of the

business combination is measured as the aggregate of the fair values (at the date of exchange) of assets given,

liabilities incurred or assumed, and equity instruments issued by the Habib Overseas Bank Group in exchange for

control of the acquiree, plus any costs directly attributable to the business combination. The aquiree’s identifiable

assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 Business

Combinations are recognised at their fair values at the acquisition date, except for non-current assets (or disposal

groups) that are classified as held for sale in accordance with IFRS 5 Non-current assets held for sale and

discounted operations, which are recognised and measured at fair value less costs to sell.

Interest income and expenses are recognised on a time proportion basis, taking account of the principal amounts

outstanding and the effective rate over the period to maturity. Interest income and expenses are recognised on the

statement of comprehensive income for all interest bearing instruments using the effective rate of interest method.

Interest income and expense include the amortisation of any discount or premium or other differences between

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

interest rate basis.

The consolidated financial statements incorporate the financial statements of the Bank and entities controlled by

the Bank (its subsidiaries). Control is achieved where the Bank has the power to govern the financial and

operating policies of an entity so as to obtain benefits from its activities.

The annual financial statements for the year ended 31 December 2016 and the comparative figures are prepared

in accordance with, and comply with the International Financial Reporting Standards (IFRS) and the South African

Companies Act of 2008. The financial statements are presented in South African Rand (ZAR) and are prepared in

accordance with the going concern principle on the historical cost basis , with derivatives at fair-value.

.

There are standards and interpretations in issue that are not yet effective. These include the following standards

and interpretations that could be applicable to the business of the Group and may have an impact on future

financial statements. The impact of the initial application has not been assessed as at the date of authorisation of

the annual financial statements as they will not be early adopted.

IFRS 9 (Financial Instruments ) was issued during 2009 but is only effective for annual periods beginning on or

after 1 January 2018. IFRS 15 ( Revenue from contracts with customers ) was issued during 2014 but is only

effective from annual periods beginning on or after 1 January 2018. IAS 17 (Leases ) was reissued during 2003

but is only effective from annual periods beginning on or after 1 January 2019. The Group will comply with the

applicable standards from their effective dates.

13




(continued)

1 ACCOUNTING POLICIES (CONTINUED)

1.6 Financial instruments

Financial instruments of the Bank are classified as follows:

(i) Financial assets

(a) financial instruments at Fair Value through Profit or Loss (FVTPL).

(b) investments held to maturity (HTM).The Bank classifies Treasury Bills (Negotiable securities) as held-to-maturity.

(c) the Bank has classified the following financial assets as loans and receivables (L&R):

• loans and advances

• accounts receivable

(d) Available for sale (AFS)

Effective interest method

(e) Financial assets at FVTPL

A financial asset is classified as held for trading if:

• It has been acquired principally for the purpose of selling it in the near future, or

• It is a derivative that it is not designated and effective as a hedging instrument.

(f) Held-to-maturity investments

(g) Loans and advances

(h) Impairment of financial assets

14

Financial assets and liabilities are recognised on the balance sheet when the Bank becomes a party to the contractual provisions

of the instrument.

Investments are recognised and de-recognised on trade date where the purchase or sale of an investment is under a contract

whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially

measured at fair value.

The effective interest method is a method of calculating the amortised cost of a financial asset and of interest over the relevant

period. The effective interest rate is the rate that exactly discounts estimated allocated future cash receipts (including all fees on

points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts)

through the expected life of the financial instrument, or, where appropriate, a shorter period. Income is recognised on an effective

interest basis for debt instruments other than those financial assets designated as at FVTPL.

Financial assets are classified as at FVTPL where the financial asset is either held for trading or it is designated as at FVTPL.

Financial assets have been designated as at FVTPL. Financial assets at FVTPL are stated at fair value, with any resultant gain or

loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any dividend or interest earned on

the financial asset. Fair value is determined in the manner described in note 32 Risk Management.

Bills of exchange and debentures with fixed or determined payments and fixed maturity dates that the Group has the positive

intent and ability to hold to maturity are classified as held-to-maturity investments. Held-to-maturity investments are recorded at

amortised cost using the effective interest method less any impairment, with revenue recognised on an effective yield basis.

Trade receivables, loans and advances that have fixed or determinable payments that are not quoted in an active market are

classified as loans and advances. Loans and advances are measured at amortised cost using the effective interest method, less

any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the

recognition of interest would be immaterial.

Financial assets, other then those at FVTPL, are assessed for indicators of impairment at each balance sheet date. Financial

assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial

recognition of the financial assets, the estimated future cash flows of the financial asset have been impacted.




(continued)


1.6 Financial instruments (continued)

(i) De-recognition of financial assets

(ii) Financial liabilities and equity instruments issued by the Group

Classification as debt or equity

Equity instruments

Financial liabilities

Financial liabilities are classified as either financial liabilities at FVTPL or other financial liabilities.

The Bank has classified the following as financial liabilities:

(a) Financial liabilities at FVTPL,

(b) Foreign currency financial liabilities; and

(c) Other liabilities.

(a) Financial liabilities at FVTPL

A financial liability is classified as held for trading if:

• It has been incurred principally for the purpose of repurchasing in the near future, or

•

• It is a derivative that is not designated and effective as a hedging instrument.

(b) Foreign currencies

(c) Other financial liabilities

15

Financial liabilities at FVTPL are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or

loss recognised in profit or loss incorporates any interest paid on the financial liability.

Transactions in foreign currencies are recorded at the rates of exchange ruling at the transaction date. Monetary assets and

liabilities that are denominated in foreign currencies are translated at the rates prevailing on the balance sheet date. Non-

monetary assets and liabilities at fair value, denominated in foreign currencies are translated at the rates prevailing at the date

when the fair value was determined. Gains and losses arising from exchange are included in other comprehensive income for

the year in the statement of comprehensive income, and the exchange differences arising on non-monetary assets and liabilities

where fair value is recognised directly to equity. In order to hedge its exposure to certain foreign exchange risks, the Group enters

into forward contracts.

Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Other financial

liabilities are subsequently measured at amortised cost using the effective interest method. The effective interest method is a

method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The

effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial

liability, or, where appropriate, a shorter period.

It is a part of an identified portfolio of financial instruments that the Group manages together and has a recent actual pattern of

profit taking, or

The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or it transfers

the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither

transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group

recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains

substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the

financial asset and also recognises a collateralised borrowing for the proceeds received.

Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the

contractual arrangement.

An equity instrument is any contract that evidences the residual interest in the assets of an entity after deducting all of its

liabilities. Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.

Financial liabilities are classified as at FVTPL where the financial liability is either held for trading or is designated as at FVTPL.




(continued)


1.6 Financial instruments (continued)

(d) De-recognition of financial liabilities

1.7 Impairment of tangible and intangible assets excluding goodwill

1.8 Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

(a) Current tax

(b) Deferred income tax

(c) Current and deferred tax for the period

1.9 Impairments of loans and advances

16

Advances which are deemed uncollectible are written-off against the specific impairments. Loans previously written-off which

subsequently become fully performing are re-incorporated into the advances portfolio and recoveries are recognised in the

statement of comprehensive Income. Both specific and portfolio impairments raised during the year less the recoveries of

advances previously written-off, are charged to the statement of comprehensive income.

The Bank reviews the carrying amounts of its advances to determine whether there is any indication that those advances have

suffered an impairment loss. Where it is not possible to estimate the recoverable amount of an individual advance, the Bank

estimates the recoverable amount on a portfolio basis for a group of similar financial assets.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash – generating unit) is increased to the

revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that

would have been determined had no impairment loss been recognised immediately in profit or loss, unless the relevant asset is

carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

The tax currently payable is based on taxable income for the year. Taxable profit differs from profit as reported in the consolidated

income statement because it excludes items of income or expense that are taxable or deductible in future years and it further

excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have

been enacted or substantively enacted by the balance sheet date.

Deferred income tax is provided, using the balance sheet liability method, for all the temporary differences arising between the tax

values of assets and liabilities and their carrying values for financial reporting purposes. Current enacted tax rates are used to

determine deferred income tax. Deferred tax assets relating to the carry forward of unused tax losses are recognised to the extent

that it is probable that future taxable income will be available against which the unused tax losses can be utilised.

Current and deferred tax are recognised as an expense or income in profit or loss, except when they relate to items credited or

debited directly to equity, in which case the tax is also recognised directly in equity.

Specific impairments are made against identified doubtful advances. Portfolio impairments are maintained to cover potential

losses which, although not specifically identified, may be present in the advances portfolio.

The Group derecognises financial liabilities when, and only when, the Group obligations are discharged, cancelled or they expire.

At each balance sheet date, the Group reviews the carrying amounts of its tangible assets to determine whether there is any

indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is

estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable

amount of an individual asset, the Group estimates the recoverable amount of the cash - generating unit to which the asset

belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual

cash - generating units, or otherwise they are allocated to the smallest group of cash - generating units for which a reasonable

and consistent allocation basis can be identified.




(continued)


1.10 Property, plant and equipment

The following straight-line rates are in use:

- Furniture and office equipment - 10% - 20%

- Motor vehicles - 20%

1.11 Provisions

1.12 Post employment benefits

1.13 Lease property

• The Bank only holds lease properties under operating leases arrangements.

• Lease payments are expensed on the straight-line basis over the term of the lease.

1.14 Areas of judgement and estimation

(a) Classification of financial assets

(b) Residual values of property and equipment

(c) Fair value of derivatives and other financial instruments

17

The derivative financial instruments are classified as held-for-trading with fair value movements recognised through profit and

loss. The carrying amount of the derivatives is R2,132,481 (2015: R955,946) as disclosed in Note 2. The derivative instruments

are valued at forward exchange rates.

The Group reviews the estimated residual values of property and equipment at the end of each annual reporting period.

The Group uses their judgement in selecting an appropriate valuation technique for financial instruments not quoted in an active

market. Valuation techniques commonly used by market practitioners are applied. For derivative financial instruments,

assumptions are made based on quoted market rates adjusted for specific features of the instrument. Other financial instruments

are valued using a discounted cash flow analysis based on assumptions supported, where possible, by observable market prices

or rates.

The Group considers land and buildings to be owner occupied and they are depreciated on the straight-line basis.

Furniture and equipment are stated at cost less accumulated depreciation and any recognised impairment losses. Depreciation

is provided for on the straight line basis to write off the cost of fixed assets to their residual values over their expected useful lives.

Properties and equipment acquired during the year are depreciated from the date when they are available for use to their residual

values.

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable

that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the

amount of the obligation can be made.

The Bank provides benefits through a provident fund to employees. The provisions for retirement and survivors benefits are

recognised in the statement of comprehensive income when they accrue for payment.

The directors have reviewed the Group's held-to-maturity financial assets in light of its capital maintenance and liquidity

requirements and have confirmed the Group's positive intention and ability to hold those assets to maturity. The carrying amount

of the held-to-maturity financial assets is R185.7 million (2015: R198.3 million) as disclosed in note 7.




(continued)

2 STATEMENT OF FINANCIAL POSITION - CLASSIFICATION OF FINANCIAL INSTRUMENTS

2016

Held-for-

trading

Held-to-maturity

investments

Loans and

receivables

Non-financial

assets and

liabilities

Group R R R R R

ASSETS

Non-Current Assets 96,691,587 - - 89,077,487 7,614,100

Property, plant and equipment 6,510,281 - - - 6,510,281

Long-term loans and advances 89,077,487 - - 89,077,487 -

Deferred tax asset 1,103,819 - - - 1,103,819

Current Assets 1,037,566,301 2,132,481 185,654,068 849,612,345 167,407

Cash and cash equivalents 515,468,517 - - 515,468,517 -

* Investment in negotiable securities 185,654,068 - 185,654,068 - -

Loans and advances to customers 328,018,412 - - 328,018,412 -

Derivative financial instruments

(Forward exchange contracts)2,132,481 2,132,481 - - -

Other assets 6,125,416 - - 6,125,416 -

Receiver of Revenue 167,407 - - - 167,407

- -

Total assets 1,134,257,888 2,132,481 185,654,068 938,689,832 7,781,507


Equity

Ordinary share capital 20,000,000 - - - 20,000,000

Reserves 96,069,774 - - - 96,069,774

Total ordinary equity 116,069,774 - - - 116,069,774

Total Liabilities 1,018,188,114 2,104,421 - 1,016,014,299 69,394

Non-Current Liabilities 69,394 - - - 69,394

Deferred tax liability 69,394 - - - 69,394

Current Liabilities 1,018,118,720 2,104,421 - 1,016,014,299 -

Amount owed to depositors 1,004,821,241 - - 1,004,821,241 -



Other liabilities 11,193,058 - - 11,193,058 -

Receiver of Revenue - - - - -

Total equity and liabilities 1,134,257,888 2,104,421 - 1,016,014,299 116,139,168

*The investment in negotiable securities' fair value is R 187,590,000 which is obtained from the South African Multiple Option Settlement

(Samos) system at the market price. No impairment was recognised on the investment, since they will be held-to-maturity.

18




(continued)

2 STATEMENT OF FINANCIAL POSITION - CLASSIFICATION OF FINANCIAL INSTRUMENTS (CONTINUED)

2015

Held-for-

trading

Held-to-

maturity

investments

Loans and

receivables

Non-financial

assets and

liabilities

Group R R R R R

ASSETS




Deferred tax asset 875,262 - - - 875,262

Current Assets 1,249,481,869 955,946 198,315,627 1,050,210,296 -



Loans and advances to customers 392,755,351 - 392,755,351


(Forward exchange contracts)955,946 955,946 - - -

Other assets 6,497,611 - - 6,497,611 -

Total assets 1,318,609,308 955,946 198,315,627 1,111,364,623 7,973,112


Equity


Reserves 91,514,351 - - - 91,514,351


Total Liabilities 1,207,094,957 1,029,213 - 1,205,892,838 172,906

Non-current Liabilities 69,320 69,320

Deferred tax liability 69,320 - - - 69,320

Current Liabilities 1,207,025,637 1,029,213 - 1,205,892,838 103,586

Short-term borrowings 25,125,393 - - 25,125,393 -



(Forward exchange contracts)1,029,213 1,029,213

- - -


Receiver of Revenue 103,586 103,586


* The investment in negotiable securities fair value is R188,734,100 which is obtained from the South African Multiple

Option Settlement (Samos) system at the market price. No impairment was recognised on the investment, since they will

be held-to-maturity.

19




(continued)


2016

Held-for-

trading

Held-to-maturity

investments

Loans and

receivables

Non-financial assets

and liabilities

Company R R R R R

ASSETS



Investment in subsidiary 1 - - - 1


Deferred tax asset 1,103,819 - - - 1,103,819

Current Assets 1,037,536,426 2,132,481 185,654,068 849,612,345 137,532






Other assets 6,125,416 - - 6,125,416 -

Receiver of Revenue 137,532 - - - 137,532

Total assets 1,133,783,761 2,132,481 185,654,068 938,689,832 7,307,380


Equity


Reserves 93,775,710 - - - 93,775,710


Total Liabilities 1,020,008,051 2,104,421 - 1,017,903,630 -

Non-Current Liabilities - - - - -

Deferred tax liability - - - - -


Short-term borrowings - - - - -






*

The investment in negotiable securities' fair value is R 187,590,000 which is obtained from the South African Multiple Option Settlement

(Samos) system at the market price. No impairment was recognised on the investment, since they will be held-to-maturity.

20




(continued)


2015

Held-for-

trading

Held-to-

maturity

investments

Loans and

receivables

Non-financial

assets and

liabilities

Company R R R R R

ASSETS



Investment in subsidiary 1 - - - 1


Deferred tax asset 875,262 - - - 875,262

Current Assets 1,249,481,869 955,946 198,315,627 1,050,210,296 -





(Forward exchange contracts)

955,946 955,946 - - -

Other assets 6,497,611 - - 6,497,611 -

Receiver of Revenue - - - - -

Total assets 1,318,164,021 955,946 198,315,627 1,111,364,623 7,527,825


Equity


Reserves 89,463,242 - - - 89,463,242


Total Liabilities 1,208,700,779 1,029,213 - 1,207,671,566 -

Non-Current Liabilities


Short-term borrowings 25,125,393 - - 25,125,393 -



(Forward exchange contracts)

1,029,213 1,029,213 - - -



* The investment in negotiable securities fair value is R188,734,100 which is obtained from the South African Multiple Option

Settlement (Samos) system at the market price. No impairment was recognised on the investment, since they will be held-to-

maturity.

21




(continued)

NON-CURRENT ASSETS

3 PROPERTY, PLANT AND EQUIPMENT

Group

Cost

Land and

buildings

Motor vehicles Furniture and

Office

equipment

Total

R R R R

Balance as at 1 January 2015 1,000,000 3,629,286 13,405,371 18,034,657

Additions - 1,700,084 1,256,696 2,956,780 Disposals - (420,541) (33,661) (454,202)

Balance as at 1 January 2016 1,000,000 4,908,829 14,628,406 20,537,235

Additions - 278,350 1,175,591 1,453,941

Disposals - (1,320,011) (1,290,982) (2,610,993)

Balance as at 31 December 2016 1,000,000 3,867,168 14,513,015 19,380,183

Accumulated Depreciation

Land and

buildings


Office

equipment

Total

R R R R

Balance as at 1 January 2015 (559,891) (3,306,131) (8,049,103) (11,915,125)

Depreciation expense - (288,351) (1,526,510) (1,814,861)

Disposals - 274,984 15,617 290,601

Balance as at 1 January 2016 (559,891) (3,319,498) (9,559,996) (13,439,385)

Depreciation expense - (437,822) (1,603,689) (2,041,511)

Disposals - 1,320,011 1,290,983 2,610,994

Balance as at 31 December 2016 (559,891) (2,437,309) (9,872,702) (12,869,902)

Carrying amount

As at 31 December 2015 440,109 1,589,331 5,068,410 7,097,850

As at 31 December 2016 440,109 1,429,859 4,640,313 6,510,281

Properties

Johannesburg Property

22

Premises acquired on 16 July 1998 being section No 46 as shown on sectional plan No SS31 / 85 in the building known as Oriental Plaza, Fordsburg,

Johannesburg, in extent 678 square meters and an undivided share in the common property in the land and buildings as apportioned in accordance

with the participation quota of the said section. The municipal valuation of the property is R3,730,000 (2015: R3,730,000).




(continued)

NON-CURRENT ASSETS

3 PROPERTY, PLANT AND EQUIPMENT

Company

Cost


Office

equipment

Total

R R R


Additions 1,700,084 1,256,696 2,956,780

Disposals (420,541) (33,661) (454,202)


Additions 278,350 1,175,591 1,453,941

Disposals (1,320,011) (1,290,982) (2,610,993)


Accumulated Depreciation


Office

equipment

Total

R R R

Balance as at 1 January 2015 (3,306,131) (7,805,576) (11,111,707)

Depreciation expense (288,351) (1,525,216) (1,813,567)

Disposals 274,984 15,617 290,601

Balance as at 1 January 2016 (3,319,498) (9,315,175) (12,634,673)

Depreciation expense (437,822) (1,602,654) (2,040,476)

Disposals 1,320,011 1,290,983 2,610,994

Balance as at 31 December 2016 (2,437,309) (9,626,846) (12,064,155)

Carrying amount

Company

As at 31 December 2015 1,589,331 5,063,231 6,652,562


2016 2015Holding R R

4 INVESTMENT IN SUBSIDIARY

N77 Oriental Plaza (Proprietary) Limited - share at cost 100% 1 1

1 1

23




(continued)

Group Company

2016 2015 2016 2015

R R R R

NON-CURRENT ASSETS

5 LONG-TERM LOANS AND ADVANCES

- Loans to customers 89,077,487 61,154,327 89,077,487 61,154,327

Net maturity analyses

Maturing after 1 year 89,077,487 61,154,327 89,077,487 61,154,327

Sectoral analyses

Companies and Close Corporations 84,127,880 58,020,428 84,127,880 58,020,428

Unincorporated businesses 2,269,879 231,003 2,269,879 231,003

Individuals 2,679,728 2,902,896 2,679,728 2,902,896

89,077,487 61,154,327 89,077,487 61,154,327

Sectoral distribution

Manufacturing 595,400 1,300,000 595,400 1,300,000

Wholesale and retail trade, repair of specified items, hotel 65,374,062 53,642,760 65,374,062 53,642,760

Transport. storage and communication - 2,470,669 - 2,470,669

Financial intermediation and insurance - 838,002 - 838,002

Real estate 14,410,922 - 14,410,922 -

Business services 6,017,375 - 6,017,375 -

Individuals 2,679,728 2,902,896 2,679,728 2,902,896

89,077,487 61,154,327 89,077,487 61,154,327

CURRENT ASSETS

6 CASH AND CASH EQUIVALENTS (AND SHORT-TERM BORROWINGS)

Coin and bank notes 5,419,481 6,013,032 5,419,481 6,013,032

Money at call and short-term notice with banks 478,538,169 618,811,676 478,538,169 618,811,676

Balances with central bank 31,510,867 26,132,626 31,510,867 26,132,626

515,468,517 650,957,334 515,468,517 650,957,334

Short-term borrowings - (25,125,393) - (25,125,393)

Net cash and cash equivalents 515,468,517 625,831,941 515,468,517 625,831,941


Maturing within 1 month 398,268,517 284,831,941 398,268,517 284,831,941

Maturing after 1 month but within 3 months 80,000,000 279,600,000 80,000,000 279,600,000

Maturing after 3 months but within 1 year 37,200,000 61,400,000 37,200,000 61,400,000

Net cash and cash equivalents 515,468,517 625,831,941 515,468,517 625,831,941

The short-term borrowing relates to the foreign advances lending.

The Cash threshold held with the South Afican Reserve Bank is 2.5% of the bank's total average liabilities.

The cash placed with banks within a maturity of 3 months can be recalled at any point in time under a stress situation.

7 INVESTMENTS AND NEGOTIABLE SECURITIES

Treasury Bills

Maturing within 1 year 185,654,068 198,315,627 185,654,068 198,315,627

Total investment in Treasury Bills 185,654,068 198,315,627 185,654,068 198,315,627

Market valuation of total investments 187,590,000 188,734,100 187,590,000 188,734,100

No impairments were recognised as treasury bills are held-to-maturity

24




(continued)

Group Company

2016 2015 2016 2015

R R R R

CURRENT ASSETS

8 LOANS AND ADVANCES

Advances to customers and bills discounted 424,210,743 458,739,524 424,210,743 458,739,524

Less: Long-term loans and advances (89,077,487) (61,154,327) (89,077,487) (61,154,327)

Less: Impairment of loans and advances (note 16) (7,114,844) (4,829,846) (7,114,844) (4,829,846)

Advances to customers and bills discounted net of impairments 328,018,412 392,755,351 328,018,412 392,755,351


Maturing within 1 month (overdrafts - payable on demand) 298,757,285 370,856,449 298,757,285 370,856,449



328,018,412 392,755,351 328,018,412 392,755,351

Sectoral analyses

Companies and Close Corporations 298,650,862 356,977,359 298,650,862 356,977,359

Unincorporated businesses 23,925,046 34,320,245 23,925,046 34,320,245

Individuals 1,991,009 787,348 1,991,009 787,348

Non-profit institutions 3,451,495 670,399 3,451,495 670,399

328,018,412 392,755,351 328,018,412 392,755,351

Sectoral distribution

Manufacturing 105,612,103 117,501,420 105,612,103 117,501,420

Electricity, gas and water supply - 7,182,507 - 7,182,507

Wholesale and retail trade, repair of specified items, hotel 152,909,781 188,846,749 152,909,781 188,846,749

Transport. storage and communication 137,000 1,046,295 137,000 1,046,295

Financial intermediation and insurance 12,221,100 13,199,289 12,221,100 13,199,289

Real estate 24,194,101 30,560,191 24,194,101 30,560,191

Business services 16,605,103 2,268,693 16,605,103 2,268,693

Community, social and personal services 1,040,123 23,880,231 1,040,123 23,880,231

Individuals 1,991,009 787,348 1,991,009 787,348

Other 13,308,092 7,482,628 13,308,092 7,482,628

328,018,412 392,755,351 328,018,412 392,755,351

Geographical distribution

The loans and advances relate to customers who are SA residents

9 OTHER ASSETS

Accrued interest 3,441,300 4,430,211 3,441,300 4,430,211

Other accounts receivable 4,816,597 3,023,346 4,816,597 3,023,346

8,257,897 7,453,557 8,257,897 7,453,557

The carrying amounts of these assets approximates their fair value.

The fair value of derivative instruments (FEC) are recognised in other assets.25




(continued)

Group Company

2016 2015 2016 2015

R R R R

10 SHARE CAPITAL

Authorised

25,000,000 ordinary shares of R 1 each 25,000,000 25,000,000 25,000,000 25,000,000

Issued

20,000,000 ordinary shares of R 1 each 20,000,000 20,000,000 20,000,000 20,000,000

CURRENT LIABILITIES

11 DEPOSITS AND CURRENT ACCOUNTS

Current and call accounts 698,090,467 781,715,981 699,985,004 783,501,093

Savings accounts 73,973,230 85,536,697 73,973,230 85,536,697

Time deposit accounts 232,757,544 301,805,703 232,757,544 301,805,703

1,004,821,241 1,169,058,381 1,006,715,778 1,170,843,493

Maturity analyses

Maturing within 1 month 931,799,000 1,073,984,096 933,693,537 1,075,769,208



Maturing after 1 year 301,500 1,251,500 301,500 1,251,500

1,004,821,241 1,169,058,381 1,006,715,778 1,170,843,493

12 OTHER LIABILITIES

Accrued interest 1,304,744 1,576,477 1,304,744 1,576,477

Accrued expenses 8,172,373 6,367,995 8,172,373 6,367,995

Other accounts payable 3,820,362 4,793,805 3,815,156 4,787,421

13,297,479 12,738,277 13,292,273 12,731,893

The carrying amounts of these liabilities approximates their fair value.

The fair value of derivative instruments (FEC) are recognised in other liabilities.

13 CONTINGENT LIABILITIES

Letters of guarantee 41,046,688 37,415,136 41,046,688 37,415,136

Letters of credit 16,317,221 10,117,986 16,317,221 10,117,986

Acceptances - 1,420,494 - 1,420,494

57,363,909 48,953,616 57,363,909 48,953,616

26




(continued)

Group Company2016 2015 2016 2015

R R R R

14 INTEREST INCOME AND EXPENSE

Interest and similar income comprises interest on

Loans and advances 43,782,179 36,160,798 43,782,179 36,160,798

Balances with banks 31,646,126 28,362,340 31,646,126 28,362,340

Investments and negotiable securities 13,155,873 12,032,695 13,155,873 12,032,695

88,584,178 76,555,833 88,584,178 76,555,833

Interest expense and similar charges comprises interest on

Current and time deposit accounts (28,017,708) (24,484,581) (28,116,087) (24,755,143)

Savings accounts (224,169) (162,609) (224,169) (162,609)

Balances with banks (63,407) (550,419) (63,407) (550,419)

(28,305,284) (25,197,609) (28,403,663) (25,468,171)

15 NON-INTEREST INCOME

Commission and foreign exchange earnings 7,936,065 8,821,430 7,936,065 8,821,430

Fee based income 9,323,438 10,682,033 9,323,438 10,682,033

Other income 2,055,298 2,813,965 1,982,767 2,732,280

19,314,801 22,317,428 19,242,270 22,235,743

16 IMPAIRMENT CHARGE ON LOANS AND ADVANCES

Balance at beginning of year 4,829,846 3,730,018 4,829,846 3,730,018

Specific/General impairment raised during the year 1,833,773 850,056 1,833,773 850,056

Interest suspense raised during the year 1,116,382 249,772 1,116,382 249,772

Charge to income statement 2,950,155 1,099,828 2,950,155 1,099,828

Advances written off against specific provisions (665,157) - (665,157) -

Balance at end of year 7,114,844 4,829,846 7,114,844 4,829,846

Comprising :

Specific impairment (including interest suspended) (4,764,844) (3,079,790) (4,764,844) (3,079,790)

Portfolio impairment reserve (2,350,000) (1,750,056) (2,350,000) (1,750,056)

Balance at end of year (7,114,844) (4,829,846) (7,114,844) (4,829,846)

27

Included in commission and foreign exchange earnings is an amount of R28,059 (2015: R73,267 loss) being the profit on derivative financial

instruments (forward exchange contracts) at 31 December 2016 and an amount of R55,221 (2015: R8,664) being the exchange rate differences on

foreign exchange transactions.




(continued)

Group Company2016 2015 2016 2015

R R R R

17 OPERATING EXPENDITURE

Operating expenses include the following items:

Staff Costs (28,953,009) (20,994,818) (28,953,009) (20,994,818)

- Staff cost (28,953,009) (20,994,818) (28,953,009) (20,994,818)

Provident Fund Contributions (1,264,310) (1,151,400) (1,264,310) (1,151,400)

Current service costs (1,264,310) (1,151,400) (1,264,310) (1,151,400)

Auditors' remuneration (1,036,000) (945,061) (1,036,000) (945,061)

- Audit fee (1,036,000) (945,061) (1,036,000) (945,061)

Depreciation (2,041,511) (1,814,861) (2,040,476) (1,813,567)

Motor vehicles (437,822) (288,351) (437,822) (288,351)

Furniture and office equipment (1,603,689) (1,526,510) (1,602,654) (1,525,216)

Operating leases (3,652,622) (3,627,050) (4,072,622) (4,047,050)

Rental - banks premises (2,110,477) (1,940,651) (2,530,477) (2,360,651)

Rental - staff accommodation (1,542,145) (1,686,399) (1,542,145) (1,686,399)

- Loss on disposal of assets - (163,601) - (163,601)

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habib overseas bank limited...annual financial statements for habib€overseas bank limited (the...

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