HBZ Bank Limited SOUTH AFRICA
(A SUBSIDIARY OF HABIB BANK A G ZURICH) ANNUAL REPORT 2005 Isle of Man United Kingdom Canada Switzerland
Egypt UAE
Kenya
South Africa
We dedicate ourselves always “ to consider the customer “ fi rst, give full measure and to deliver more than we promise.
secure technology Contents Hong Kong Bangladesh Egypt Pakistan Five year review 2 Profit Summary 3
Total Assets 3
Kenya Singapore Directorate 4
Executive management 5
Committees 6
Chairman’s review 8
South Africa Risk management review 9
Social investment 13
Corporate governance 14
Directors approval of the Annual Financial Statements 19
Company Secretary Certificate 20
Auditors Report 20
OUR MISSION Report of the directors 21
To provide a specialized range of Balance sheet 22
banking services by understanding Income statement 23 and fulfilling the needs of our Statement of changes in equity 24 niche market via knowledgeable, Cash flow statement 25 experienced and professional staff Notes to the Annual Financial Statements 26 who offer personal, friendly, efficient Capital adequacy statement 47 and secure service. International network 48
List of services 49 FIVE YEAR REVIEW
For the year ended 31 December 2005 R 000’s
2001 2002 2003 2004 2005
PROFITS Profi t before taxation 8.0 15.9 26.6 22.9 29.6
BALANCE SHEET Advances 114.1 157.1 187.8 232.9 327.9 Advances growth % 41.2% 37.7% 19.6% 24.0% 40.8%
Client deposits 300.6 405.8 555.3 687.4 925.0 Deposit growth % 40.8% 35.0% 36.9% 23.8% 34.6%
Total assets 372.2 490.4 650.4 794.1 1,025.6 Total assets growth % 20.3% 31.8% 32.6% 22.1% 29.1%
PERSONNEL Number of employees 57 56 62 71 81 Net contribution per employee 278 283 429 322 365
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2 | HBZ ANNUAL REPORT 2005 PROFIT SUMMARY
29.6 30 28 26.6 26 24 22.9 22 20 18 15.9 16 14 12 R Millions 10 8.0 8 6 4 2 0 2001 2002 2003 2004 2005
Year
TOTAL ASSETS
1050 1 025.6 1000 950 900 850 794.1 800 750 700 650.4 650 600 550 490.4 500 R Millions 450 400 372.2 350 300 250 200 150 100 2001 2002 2003 2004 2005
Year
HBZ ANNUAL REPORT 2005 | 3 DIRECTORATE
NON EXECUTIVE Hendrik F Leenstra (57)
Institute of Bankers SA C.A.I.B. (SA)
Muhammad H Habib (47)# - Chairman Previously Regional Executive – Nedcor Group, KZN
Bus. Admin (USA) now retired
Joint President, Habib Bank AG Zurich Appointed to the board in 2005
Appointed to the board in 1995 EXECUTIVE DIRECTORS
Terrence H Field (74) - Vice Chairman
Institute of Bankers SA C.A.I.B. (SA) Zafar Alam Khan (53)* – Chief Executive Officer
Previously General Manager, First National Bank - Natal, and Executive Vice President now retired B.A.
Appointed to the board in 1995 Appointed to the board in October 2005
M Yakoob Chowdhury (63)^ - Executive Director Chris Harvey (49) - Executive Director – Finance
Chief Executive Vice President, Habib Bank AG Zurich and Senior Vice President
Appointed to the board in 1995 B.Com, Dip Acc
Appointed to the board in July 1998
Reza S Habib (42)**
B.Sc. (USA) * Pakistani ** Canadian
Joint President, Habib Bank AG Zurich ^ British # Swiss
Appointed to the board in 1995
Ramsay L Daly (63)
B.A. LLB
Attorney
Appointed to the board in 1995
Pierre J Neethling (61)
B.Sc & MBA
Previously Managing Director, Smith & Nephew plc,
now retired.
Appointed to the board in 2004
4 | HBZ ANNUAL REPORT 2005 EXECUTIVE MANAGEMENT
Zafar Alam Khan (53) BRANCH NETWORK
B.A. KWA-ZULU NATAL DIVISION: Chief Executive Officer / General Manager
S Rasheed Akhtar (57) (Durban) Chris Harvey (49) MSc B.Com, Dip Acc Senior Vice President Executive Director - Finance
Shujauddin Shaikh (49) (Islamic Banking) CORPORATE B.Com, Dip IBP
2-nd Vice President Sikandar HI Shaikh (59)
B.Sc (Honours) GAUTENG DIVISION Executive Vice President (IT)
Nasir Abbas (52) (Johannesburg) John MCG Rebelo (60) B.Com B.Econ 2-nd Vice President Treasury Manager
M Ali Chaudhry (39) (Lenasia)
B.Com MBA (MIS)
Assistant Vice President
Syed AM Zaidi (42) (Laudium)
B.Com
2-nd Vice President secure knowledge
HBZ ANNUAL REPORT 2005 | 5 COMMITTEES
AUDIT COMMITTEE DIRECTORS AFFAIRS COMMITTEE
Ramsay L Daly (63) - Chairman Muhammad H Habib (47) - Chairman
Director of HBZ Bank Ltd Joint President, Habib Bank AG Zurich Director of HBZ Bank Ltd
Terrence H Field (74)
Director of HBZ Bank Ltd Terrence H Field (74) Director of HBZ Bank Ltd
M Yakoob Chowdhury (63)
Chief Executive V-President, Habib Bank AG Zurich Ramsay L Daly (63)
Director of HBZ Bank Ltd Director of HBZ Bank Ltd
Pierre J Neethling (61) M Yakoob Chowdhury (63)
Director of HBZ Bank Ltd Chief Executive V-President, Habib Bank AG Zurich Director of HBZ Bank Ltd
Hendrik F Leenstra (57)
Director of HBZ Bank Ltd Pierre J Neethling (61) Director of HBZ Bank Ltd
Muhammad H Habib (47)*
Joint President, Habib Bank AG Zurich Hendrik F Leenstra (57)
Director of HBZ Bank Ltd Director of HBZ Bank Ltd
Zafar Alam Khan (53)*
CEO/ General Manager of HBZ Bank Ltd
Chris Harvey (49)*
Executive Director - Finance of HBZ Bank Ltd
Jay Datadin (42)*
Partner of KPMG
* By invitation
6 | HBZ ANNUAL REPORT 2005 RISK COMMITTEE
M Yakoob Chowdhury (63) - Chairman
Chief Executive V-President, Habib Bank AG Zurich
Director of HBZ Bank Ltd
Zafar Alam Khan (53)
CEO/ General Manager of HBZ Bank Ltd
Chris Harvey (49)
Executive Director - Finance of HBZ Bank Ltd
Ramsay L Daly (63)
Director of HBZ Bank Ltd
Pierre J Neethling (61)
Director of HBZ Bank Ltd
Hendrik F Leenstra (57) Director of HBZ Bank Ltd secure facilities
HBZ ANNUAL REPORT 2005 | 7 CHAIRMANS REVIEW
It gives me great pleasure to present HBZ Bank Ltd’s third quarter the Rand oil prices increased significantly to annual report for the year 2005. The year 2005 was the R400 per barrel compared with R266 a year earlier. 10th year of the Bank’s operation in South Africa and we celebrated the completion of a decade by hosting 10th OPERATING PERFORMANCE anniversary functions in Durban and Johannesburg. The HBZ Bank Ltd once again concentrated on internal growth past 10 years have been an interesting time in South Africa and on taking advantage of the positive sentiment in the and by the grace of God the Bank has performed well. economy, which was converted into increased business INTERNATIONAL activity and growth in balance sheet. By the grace of God the assets of the Bank grew by 29.2% to end just above Global expansion continued during 2005 led mainly by the R1 billion. The major growth was in advances in Durban, United States and China, whereas growth in Europe and which grew by 101%, contributing significantly to the Japan remained lackluster. Monetary policy responses in Group growth of 40.8%. The Bank continued its integral industrial countries varied widely, with tightening phases philosophy of high liquidity and achieved a deposit growth in the US, Canada and Europe, unchanged policies of 34.6%. All branches performed well resulting in a profit in Japan and UK, and rate reductions in the Eastern of R29.6 million. European economies. Although oil prices continued to rise, hitting new highs of $70 per barrel in September, core NEW EVENTS inflation remained low. With core inflation under control In November 2005 the Bank relocated its Head Office to and the up trend in headline inflation stabilizing, further the Durban suburb of Westville. The Bank also opened policy responses in major Western economies appear a new branch in the same premises offering Islamic and to be ending. In the US, where rates have been hiked Sharia banking services, a need very strongly demanded for fourteen consecutive months to 4.5 %, the Federal by our niche market. Reserve indication for further rate increases continues. The rate hikes countered the large current account deficits in the US balance of payments, but if the rate stabilizes, HBZ Bank Ltd also migrated smoothly to h-Plus, a new sustained deficits in the US will result in dollar weakness in technologically advanced banking platform. the later half of 2006.
DOMESTIC Mr. Zafar Alam Khan who was earlier in charge of the Gauteng branches took over as CEO of the Bank. I am The local economy proved fairly resilient to the oil price shock sure that Mr. Khan will exceed the expectations of the during 2005 and in fact grew at its highest level in decades. Board, clients and shareholders. Estimated average real economic growth was 4.9 % in 2005, compared to 4.5 % in 2004. 2005 was characterized OUTLOOK by surging oil prices and policy tightening across the globe Despite the constraints in the economy and challenges the in response to higher inflation. However, the South African country faces I remain positive on the growth outlook over Reserve Bank resisted the temptation to hike interest rates, the next few years and expect South Africa to maintain above although it warned of its willingness to do so on several 5.1 % growth. The Rand is expected to move sideways occasions. In comparison interest rates in several major finding some support from the commodities boom and the economies across the globe were hiked in response to the anticipated weaker dollar. Should inflation conditions remain higher inflationary pressures. During the first half of 2005, favorable, there will be no need to increase interest rates. the full effect of rising oil prices was cushioned by the However, the Rand and international oil prices have proven strong Rand exchange rate. However as it softened in the very volatile. These exogenous factors, which are out of the
8 | HBZ ANNUAL REPORT 2005 RISK MANAGEMENT REVIEW
SARB’s control, could prove to be crucial for interest rates RISK MANAGEMENT PHILOSOPHY over the next year. “To keep risks to a minimum through a clear policy of broad diversification in terms of geography and product mix, and During 2006 HBZ Bank Ltd will continue to focus on our by spreading the bank‘s credit and trade financing activities core business and reinforce the conservative approach to over a wide range of customers, with the emphasis on lending. I remain confident this approach will ensure the secured, short-term, self liquidating lending.“ bank continues to make advances and have no doubt that HBZ Bank Ltd has the skilled people, entrepreneurial spirit and strong culture to achieve this. The Bank has always Risk is anything that will cause a desired objective not to been driven by the keen desire to consider the customer be achieved. In fact all actions that the Bank takes have first and give a quality service. an element of risk and the bank recognises that it is an unavoidable consequence of banking to take calculated APPRECIATION business risks with the objective of creating attractive returns from these ventures. Thus HBZ does not seek to I would like to show our appreciation to Mr. Terry Field who avoid risk, but to manage it in a controlled manner and in was involved from the formation of HBZ Bank Ltd and the context of the reward that is being earned. served more than 10 years as Vice Chairman of the Board of Directors and Chairman of the Audit Committee of the Bank. His contribution and wisdom has been invaluable to The importance of the banks risk management process is the growth and soundness of HBZ Bank Ltd. to:
• ensure that all risks are identified, understood, Our business depends on good relationships with our evaluated and quantified, and then clients and their needs are the heart of our business • manage them so as to achieve the desired returns philosophy and actions. I thank them for their outstanding by eliminating, reducing and controlling the impact of support and patronage. Our staff has once again shown adverse occurrences on performance to within their ongoing commitment, dedication and passion without acceptable parameters. which the Bank would not have been able to achieve its objectives, goals and vision. On behalf of the Board I thank you all for your contribution, vigour and determination. I Risk management at HBZ is guided by the following also extend my appreciation to the South African Reserve important principles: Bank for its guidance and support and my fellow board • A strongly defined risk management structure; members for their continued loyalty and wisdom. • Independent review of the risk process;
• Continuous evaluation of the risk appetite of the bank and its management through clearly defined limits; and
• Communication and coordination between the Muhammad H Habib committees, executive management and other role- Chairman players in the risk management framework, without compromising segregation of duties, controls or review.
HBZ ANNUAL REPORT 2005 | 9 RISK MANAGEMENT REVIEW (CONTINUED)
The board enforces a conservative culture with respect to report at each board and audit committee meeting on the its overall appetite for risk and fully endorses and supports effectiveness of the management of the risks it monitors.
efforts at the bank to attain international best practice in The committee is made up of the General Manager, risk management. Financial Director, Risk Manager, an Operations Manager and the various individual risk managers and met as RISK MANAGEMENT FRAMEWORK required during 2005. The board of directors is ultimately responsible for any CREDIT RISK financial loss or reduction in shareholder value suffered by
the bank. It is therefore responsible for the total process Credit risk is the risk of financial loss arising from the of risk management, recognising all the risks to which the possibility that commitments by counterparties are not bank is exposed and ensuring that the proper mandates, honoured either in part or totally. policies, authority levels, risk frameworks, internal controls and systems are in place and functioning effectively. The board acknowledges that credit risk management is critical to the bank and has appointed a Credit Risk The nature and size of HBZ Bank’s operations allows manager to manage the group’s credit risk process. This for a centralised in-depth co-ordinated risk framework manager attends the holding company’s annual credit risk that includes direct senior management and board conference. involvement to determine quantitative and qualitative risk measurement, policies and procedures, control structures, and compliance with regulations. The executive and The fundamental principles that HBZ Bank applies in the non-executive directors are widely represented on the management of credit risk include: various risk management committees and processes. At • a clear definition and in-depth understanding of our every board meeting, the Risk committee reports on the niche client base; effectiveness of the bank’s risk management and control framework. • detailed credit granting procedures including rigorous assessment of the creditworthiness of all parties;
• detailed and documented account opening procedures, In line with international best practice various board know-your-customer and due diligence requirements; committees oversee policy formulation and implementation, and monitor the risk management processes and • an emphasis on diversification of the Banks client base exposures. The main committees are the Board itself, the limiting exposures to certain industries; Risk Committee, the Assets and Liabilities Committee • formation of various high level credit committees all with (ALCO) the Directors Affairs Committee, the Audit clearly defined limits; Committee, the Remuneration Committee and various • detailed credit inspection, quality review and prompt Credit Committees. follow-up by high level management and the ASSETS AND LIABILITIES COMMITTEE independent external and internal auditors; • the prudent assessment of advances into categories An integral element in managing risk is the overall that are in line with standard international practice; management of the assets and liabilities of the bank. The • a high level of executive and non-executive involvement board set up the ALCO Committee, which is made up in decision making and review; of suitable competent persons to monitor the liquidity, interest rate risk and IT risks. This committee presents a • a clear policy on the appropriate provisioning in respect of the estimated loss inherent in the advances book.
10 | HBZ ANNUAL REPORT 2005 To augment the prudent assessment of advances and treasury function. The Bank is extremely conservative, determination of appropriate provisioning, the bank has a with the size allowing for the direct matching of all major credit risk classification system. The provisioning policy is in deposits with inter-bank placements and by keeping line with the requirements of the Accounting Standard AC a large proportion of the funds short-term to cater for 133. unexpected cashflow requirements. This is enhanced through an Asset and Liability Committee (ALCO) and an MARKET RISK ALM process which addresses liquidity risk proactively. As with the management of interest rate risk, the focused Market risk represents the danger of losses occurring due range of products offered by the bank facilitates the to adverse changes in the value of financial instruments management of this risk. caused by fluctuations in interest and foreign currency rates. The major market risk areas that affect the bank are OPERATIONAL RISK elaborated as below. Operational risk is inherent in running a business. The major risks are internal and external fraud, error, incompetence, Interest rate risk is the sensitivity of profit to adverse systems breakdown and inadequate internal control variations in interest rates. The Bank manages within laid procedures. down parameters the difference between rate-sensitive assets less rate-sensitive liabilities by effectively utilising capital and continually matching rate-sensitive assets and The Bank takes active measures to limit potential liabilities over various time horizons and various economic operational losses by: and environmental scenarios. The focused range of products offered by the bank facilitates the management of • Instilling in employees a sound culture, work ethic and this risk. values ethos; • Providing a healthy, safe and secure operating environment for staff, data and information; Currency risk arises from movements in rates of Correct and meaningful staff training; exchange between currencies. The Bank has very little • exposure to this type of risk as it has a very conservative • The preparation and continual upgrading of clear policy of prohibiting foreign exchange speculation and procedure manuals; never having any uncovered forward positions. No long • Regularly rotating and motivating staff; term open positions may be maintained, while short term • Maintaining adequate and effective internal controls; open positions are only maintained on NOSTRO accounts within extremely conservative limits stipulated by the board • Ensuring timeous and accurate processing of for each currency. transactions and monitoring unauthorised ones; • Ensuring appropriate investment in computer LIQUIDITY RISK technology to support operations;
Liquidity risk results from being unable to meet • Ensuring an adequate business continuity process in commitments, repayments and withdrawals timeously and the event of disruption; cost effectively. • Internal and external independent audit checks and internal control reviews;
The bank controls liquidity at source by having strong • Ensuring as an additional counter to potential internal controls at that point, ensuring a wide deposit operational risk that the Bank has extensive insurance base, simplifying the product range and centralizing the cover for any material losses.
HBZ ANNUAL REPORT 2005 | 11 RISK MANAGEMENT REVIEW (CONTINUED)
Significant loss events and incidences are reported to the providing a service that does not comply with proper board immediately they occur. industry standards.
The Bank has a Compliance department appointed to COUNTRY RISK oversee this function. The mandate of the compliance Country risk relates to the danger that the cross-border department includes the following: movement of capital and/or interest could be restricted • Co-ordinating the compliance process at the bank. or completely blocked by a country due to political or economic reasons. • Monitoring and reviewing this process.
• Providing a central point for advice, consultation and non-compliance reporting. HBZ Bank has very little exposure at present to this risk. However as a proactive Bank, HBZ has a strategy • Facilitating compliance education and awareness to minimise this risk should this type of risk become of workshops and seminars to entrench a culture of concern. A central committee decides on the risk profiles compliance at the bank.
of each country; continually revises these profiles and • Setting entity wide policy and standards for determines their provision ratings. In deciding risk profiles compliance. of the countries the ratings of international credit rating • Providing specific focus on regulatory and reputational agencies and others and the opinions of local banks are risk as defined above. sought.
COMPLIANCE RISK When new acts, regulatory requirements and codes of conduct are introduced compliance addresses these by Compliance risk is the risk that the procedures providing training and advice on these issues, developing implemented by the bank to ensure compliance to relevant policies and procedures affecting regulatory issues and statutory, regulatory, supervisory and internal control regularly monitoring adherence to these policies and requirements are not adhered to, or are inefficient and procedures. Education and practical workshops form an ineffective. important part of this process. With the continued local and international focus on anti money laundering, compliance As the numbers of statutory regulations and directives at the bank continues with its extensive training program from Central Banks increase there is a continual need to for all employees to ensure that they are aware of their monitor the bank’s adherence to these laws. The bank regulatory obligations. identifies Compliance Risk as a separate risk within its risk management framework. Compliance risk consists of two The Compliance personnel are members of the risk areas: Compliance Institute of South Africa.
Regulatory risk arises when the bank does not comply with applicable laws and regulations or supervisory requirements.
Reputational risk is the negative publicity the bank would be exposed to if there were a contravention of applicable statutory, regulatory and supervisory requirements or
12 | HBZ ANNUAL REPORT 2005 SOCIAL INVESTMENT
HBZ Bank recognises the need to provide support for The Plan monitored by the Forum commits the bank and various external social causes while balancing this with a employees to various training projects that include: focused internal staff development program. • focused on-the-job training; EXTERNAL SOCIAL INVESTMENT • external training; and
It is vital to ensure lasting employment and self-enrichment • providing access to tertiary, college and university that people are properly educated and have a cultural education. heritage to provide substance to their lives. It is with this in mind that HBZ has over the years invested in a wide range All staff have access to this plan and are entitled to benefit of welfare initiatives. Principle amongst them has been from the plan. During 2005 all the goals and objectives of projects and programmes that have provided educational the plan were achieved. To encourage continuity of the and cultural development. Preschools, primary and high plan the bank has set aside a separate budget to give full schools have all benefited from regular contributions. measure to the Workplace Skills Plan. Cultural events are also well supported by the bank. EMPLOYMENT EQUITY INTERNAL SOCIAL INVESTMENT The Bank’s Employment Equity Plan submitted to the In the current environment it is paramount to the success Department of Labour is continually monitored and of any business that internal empowerment programmes updated to ensure it meets the changing needs of the for staff are in place. The Bank is conscious of this fact Bank and its employees. and has implemented internal employment equity, training and skills development initiatives. These initiatives focus on providing all employees with an environment that is free As a member of an international bank group, HBZ is from any form of discrimination while ensuring opportunities proactive and has for a number of years had a sound exist to obtain the necessary skills for career expansion. employment equity process. The Bank is currently training and recruiting staff from the previously disadvantaged SKILLS DEVELOPMENT groups to ensure employment equity at the Bank remains ahead of the plan. The Bank has a Skills Development Facilitator who is registered with the BANKSETA Training Authority. A Workplace Forum comprising of equal numbers of staff and management meets to monitor and enhance the Bank’s Workplace Skills Plan.
EMPLOYEE SUMMARY
MALE FEMALE
Occupational Categories African Coloured Indian White Total African Coloured Indian White Total Total
Senior managers 21 2 23 8 8 31 Professionals 1 1 1 Clerks 4 12 16 1 22 2 25 41 Service workers 3 3 5 5 8
Total 7 33 3 43 6 30 2 38 81
HBZ ANNUAL REPORT 2005 | 13 CORPORATE GOVERNANCE
In essence corporate governance is the formal and expertise that enable them to bring objectivity and maintenance of the necessary balance between independent judgement to the board deliberations and entrepreneurial thrust and prudential restraint, within the decisions. All board members have a clear understanding boundaries of sound business practices and regulation. of their role in corporate governance and are not subject HBZ considers this formal maintenance of the balance to to undue influence from management or outside concerns. be fundamental to the sound operation of the bank. The Both the Chairman and Vice Chairman are non-executive importance of this can be seen in the fact that the Bank members. The roles of the Chairman and the CEO are has had an entrenched corporate governance culture separate with responsibilities clearly defined. emphasizing the need to conduct its affairs in accordance with the highest standards of corporate governance prior The Board meets regularly and retains full and effective to this becoming law. control over the Bank operations and monitors executive management. Additional board meetings, apart from The directors endorse the South African King II “Code of those planned, are convened as circumstances dictate. Corporate Practices and Conduct” and are satisfied that Where directors are unable to attend a meeting personally, the bank has in all material aspects consistently been in teleconferencing is made available to include them in the conformance with the provisions and spirit of King II. In proceedings and allow them to participate in the decisions supporting the code, the directors recognise the need to and conclusions reached. The Board is supplied with conduct the enterprise with integrity and in accordance full and timely information with a typical board agenda with generally accepted corporate practices. The directors including: realize that while compliance with form is important, greater emphasis is placed on the substance of governance. • A report from the CEO. • A discussion on the Management accounts.
• Reports from the Audit committee. The corporate governance framework at the bank ensures that the board plays a leading role in the strategic guidance • Reports from the Risk committee.
of the bank and the effective monitoring of management • Reports from the Directors Affairs committee. in discharging their accountability to our shareholder and • Reports from the Compliance officer. responsibilities to stakeholders through meaningful and effective disclosure. • Reports on large exposures. • Reports on significant regulatory issues
The salient features of the bank’s corporate governance policy are built on the characteristics of accountability, The board annually meets with management for a number discipline, fairness, independence, responsibility, of days to debate and agree on the proposed strategy transparency and social integrity. The banks’ good and to consider long-term issues facing the bank, prior to corporate governance revolves around the following formulation of the annual financial budgets. All directors are significant practices and processes. regularly kept abreast of statutory, regulatory, accounting, non-financial and industry developments that may affect BOARD OF DIRECTORS the bank. Furthermore all directors have full access to
During 2005 the bank increased the HBZ Board to nine the advice of management, the company secretary and directors, seven of whom are non-executive directors and independent professionals as well as unrestricted access two executive directors. Non-executive directors comprise to all relevant documentation required to discharge their individuals of high caliber with diverse backgrounds duties. One-third of directors retire by rotation annually.
14 | HBZ ANNUAL REPORT 2005 The board is supported by various internal committees COMPANY SECRETARY and functions in executing its responsibilities. These are elaborated on below. Details of the directorate are listed on The company secretary of HBZ is suitably qualified and page 4 of this annual report. experienced and was appointed by the board in 1995. The company secretary is responsible for the duties as DIRECTORS’ AFFAIRS COMMITTEE stipulated in section 268G of the Companies Act. The board recognizes the pivotal role the secretary plays in the The directors’ affairs committee, established by the Board corporate governance process and is thus empowered by of Directors has a written charter that clearly sets out its them to ensure these duties are properly fulfilled. responsibility, authority and functions. The committee including the Chairman consists of non-executive directors. At least two meetings are held annually with the CEO and In addition to his statutory duties the company secretary is financial director invited to attend when necessary. required to:
• Provide the directors of the company with guidance on how their responsibilities should be properly discharged The committee’s primary responsibilities are: in the best interests of the bank.
• To assist the board of directors in its determination and • Induct new directors appointed to the board. evaluation of the adequacy, efficiency and • Assist the Chairman and Vice Chairman in determining appropriateness of the corporate governance structure the annual board plan. and practices of the bank; • Ensure that the directors are aware of legislation • To establish and maintain a board directorship relevant to the bank. continuity program including planning for successors, regularly reviewing the skills and experience of the board, and an annual self-assessment of the board as All directors have access to the advice and services of a whole and of the contribution of each individual the company secretary whose appointment is a matter for director; the board as a whole. The contact details of the company
• To assist the board in the nomination of successors to secretary are provided in the director’s report. key management positions and ensure that a RISK COMMITTEE management succession plan is in place;
• To assist the board in determining whether the services The board acknowledges that risk management is critical of any director should be terminated; and to the bank and its responsibility for the entire process of risk management, as well as forming an opinion on the • Assist the board in ensuring that the bank is at all times effectiveness of the process. in compliance with all applicable laws, regulation and codes of conduct and practices. The Board of Directors established the Risk committee with a written charter that clearly sets out its responsibility, Details of the directors affairs committee are listed on authority and functions. The committee is made up of both page 6 of this annual report. non-executive and executive directors with the Chairman always a non-executive director. At least three meetings are held annually.
HBZ ANNUAL REPORT 2005 | 15 CORPORATE GOVERNANCE (CONTINUED)
The committee’s primary responsibilities are: have unrestricted access to this committee. In addition the Chairman has the right to call in any other employee who is • To assist the board in its evaluation of the adequacy able to assist the committee on an ad hoc basis. and efficiency of the risk policies, procedures, practices and controls; The committee’s primary responsibilities are: • To assist in the identification of concentration risks to
which the bank is exposed; • To review and assess the internal controls of the bank.
• To assist in developing a risk mitigation strategy; • To ensure that the necessary respect for the internal • To assist in ensuring that a formal risk assessment is control structure is demonstrated by management.
undertaken at least annually; • To ensure that the internal audit process of the bank is • To assist in identifying and regularly monitoring all key effective and in terms of the committees requirements.
risks and key performance indicators; • To oversee the bank’s external audit process including • To facilitate and promote communication between the the scope, fees and audit findings.
board and executive officers of the bank; Details of the audit committee are listed on page 6 of this • To ensure the establishment of an independent risk annual report. management function including the training of members of the board in the different risk areas; and CREDIT COMMITTEES
• To introduce measures that will enhance the adequacy Credit committees comprising senior management as and efficiency of the risk management policies, well as executive and non-executive directors operate procedures, practices and controls applied. at various levels within the Bank. These committees, operating within clearly defined exposure limits and rules stipulated by the Board, review and approve all exposures Management is accountable for designing, implementing to clients and potential clients. and monitoring the process of risk management and integrating it with the day-to-day activities of the group. A comprehensive Risk Management framework is in One of the primary risks in the management of credit is place that formalises the management of risk. This and concentration risk. A large concentrated exposure to a the application and reporting on risk are detailed in the single party or closely related group of borrowers could separate Risk Management section of this annual report. place the profitability of the bank in jeopardy should Details of the risk committee are listed on page 7 of this recoverability of the exposure become doubtful. The annual report. board realizing the importance of this has itself taken the responsibility of approving and reviewing all large AUDIT COMMITTEE exposures.
The audit committee, established by the Board of Directors REMUNERATION COMMITTEE has a written charter that clearly sets out its responsibility, authority and functions. The committee including the The Bank’s remuneration committee comprises non- Chairman consists of non-executive directors. At least executive directors and members of the holding company’s three meetings are held annually with the CEO, financial executive management. They meet annually to determine director, compliance officer, internal and external auditors salary structures and staff policies that ensure the invited to attend when necessary. The compliance officer, directors, executive management and staff are rewarded internal and external auditors of the bank and the banking fairly for their individual contributions to the bank’s overall supervision department of the South African Reserve Bank performance.
16 | HBZ ANNUAL REPORT 2005 COMPLIANCE Internal controls are based on established policies and procedures, implemented by appropriately trained and Compliance risk is defined as the risk that the procedures skilled personnel whose functions have been properly implemented by the bank to ensure compliance to relevant segregated. In this process internal controls are designed statutory, regulatory, supervisory and internal control to ensure the cost does not exceed the benefit. requirements are not adhered to, or are inefficient and ineffective. The bank has an independent compliance function responsible for assisting management in this Processes are in place to monitor the effectiveness of regard. The compliance department has implemented internal controls, to identify material breakdowns and to and developed effective processes to address compliance ensure that corrective action is taken. These ongoing issues within the bank and has unrestricted access to processes were in place throughout the year under review. the Chairman of the Audit Committee and Chairman of INTERNAL AUDIT the Board. The role of the compliance department is elaborated on in the Risk Management section of this The Bank’s independent internal audit function exists to assist annual report. management in discharging their responsibility effectively. This department has senior suitably qualified and experienced staff INTERNAL CONTROL whose functions comply with international standards. The directors of the Bank are responsible for ensuring that the Bank maintains accounting records and implements The scope of the internal audit function is to review the: effective systems of control. Management is responsible for the implementation and maintenance of these controls. • reliability and integrity of financial and operating information,
The directors report that the bank’s internal controls are • systems of internal controls, designed to provide assurance regarding the: • means of safeguarding assets,
• efficient management of the bank’s resources, • integrity, accuracy and reliability of the accounting records, • compliance with applicable laws and regulations and
• accountability for the safeguarding and verification of • effective conduct of its operations. assets,
• detection and prevention of risks associated with fraud, Internal audit operates independently from Executive potential liability, loss and material misstatement, Management and has unrestricted access to the chairman • effectiveness and efficiency of operations, of the Audit Committee, all other staff and information needed by them in the execution of their duties. • compliance with applicable laws and regulations.
CODE OF ETHICS
The internal controls within the bank concentrate on critical HBZ Bank has a strong culture of entrenched values that risk areas. These risk areas are identified by operational commit it to the highest standards of integrity, behavior management, confirmed and monitored by the board and ethics in dealing with all its stakeholders. These values of directors, reviewed annually by the external auditors, apply to all personnel at the Bank, with personnel expected and closely monitored and subject to independent and at all times to observe their ethical obligation in such a unimpaired review by the internal auditors. way as to carry on business through fair commercial competitive practices.
HBZ ANNUAL REPORT 2005 | 17 CORPORATE GOVERNANCE (CONTINUED)
In particular staff are expected: • A policy of open, honest two-way communication has been adopted allowing for a free exchange of positive • not to place themselves in a position where their ideas within the work place. personal interests conflict with their duties to the bank • HBZ maintains a policy of non-discrimination towards and to their clients; all employees, and is committed to providing • to carry out their duties with due care and skill; employment in an equitable manner to members of all • to exhibit loyalty and dedication in all matters pertaining communities.
to the bank; • The Bank endorses the philosophy of affirmative action • to be prudent in the use of information acquired in the as an integral part of its business plan with a number of course of their duties and to respect the confidentiality initiatives within the Bank currently in process. of client information; and • HBZ has an ongoing workplace forum comprising • not to discriminate on the basis of race, religion or employees and management of the bank that gender. continually monitors and upgrades its Workplace Skills Plan and Employment Equity Plan, which focuses and REGULATION AND SUPERVISION commits the bank to skills development and continued equity in the workplace. The Bank is subject to external regulation and supervision by various statutory bodies and regulators. The Bank strives to achieve open and active communication with these bodies specifically the Supervision and Exchange Control Departments of the South African Reserve Bank. Where appropriate the Bank participates in discussion groups with the various regulators to ensure that knowledge and insight is gained to maintain sound internal controls to operate within the regulatory framework. secure EMPLOYEE PARTICIPATION AND SKILLS assets The Bank recognizes the importance of employee participation in the maintenance of standards and general well being of the company as ultimately our success depends on our employees working together in the interests of our clients.
The following principles underlie the bank’s employment equity and skills enhancement policy:
• HBZ is committed to nurturing the employee relationship by continued development of innovative reward and incentive programs that focus on long- and short-term operational and strategic goals.
• The empowerment of employees is enhanced through emphasis on teamwork, training and a philosophy of internal promotion.
18 | HBZ ANNUAL REPORT 2005 DIRECTORS APPROVAL OF THE ANNUAL FINANCIAL STATEMENTS
RESPONSIBILITY FOR THE ANNUAL FINANCIAL GOING CONCERN STATEMENTS The financial statements in this report are prepared on the The board of directors is responsible for monitoring the going concern basis. Based on enquiries made and their preparation and the reliability of the financial statements, knowledge of the bank the directors are of the opinion that the underlying accounting policies and the integrity of all adequate resources exist to support the bank on the going information included in the annual financial statements. The concern basis over the next year. The external auditors independent auditors are required to report whether the concur with this statement by the directors. annual financial statements fairly present the operations and financial position of the company. FINANCIAL STATEMENTS
The financial statements and the directors’ report The financial statements set out in this report have appearing on pages 21 to 46 were approved by the board been prepared in accordance with the provisions of the of directors on 3 March 2006 and are signed on its behalf Companies Act and the Banks Act and comply with South by: African Statements of Generally Accepted Accounting Practice and practices prevailing in the banking industry.
In discharging their responsibility to ensure the financial Muhammad H. Habib statements fairly present the state of the affairs of the Chairman company, the directors are supported by an ongoing process for identifying, evaluating and managing the significant risks faced by the bank and rely on the systems of internal controls, the risk management procedures adopted and information supplied by the internal and external auditors. Terrence H. Field
The directors are of the opinion that: Vice-chairman
• Appropriate accounting policies have been consistently applied;
• Proper accounting records have been maintained;
• Internal control systems are adequate to the extent that no material breakdown in the operation of these systems occurred during the year under review; and
• The financial statements fairly present the financial position of the company as at the 31 December 2005.
HBZ ANNUAL REPORT 2005 | 19 COMPANY SECRETARY CERTIFICATE
In terms of Section 268G(d) of the Companies Act of 1973, as amended, I hereby certify to the best of my knowledge and belief, that the company has lodged with the Registrar of Companies all such returns as are required of the company in terms of the Act and that all such returns are true, correct and up to date.
Chris Harvey
Company Secretary
Durban
19 April 2006
AUDITORS REPORT
We have audited the annual financial statements of HBZ In our opinion, the financial statements present fairly, in all Bank Limited set out on pages 21 to 46 for the year ended material respects, the financial position of the company as 31 December 2005. These financial statements are the of 31 December 2005, and of the results of its operations responsibility of the Bank’s directors. Our responsibility is and cash flows for the year then ended in accordance to express an opinion on these financial statements based with South African Statements of Generally Accepted on our audit. Accounting Practice, and in the manner required by the Banks Act and the South African Companies Act.
We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we With the written consent of the shareholders, we have plan and perform the audit to obtain reasonable assurance performed certain accounting and secretarial duties. about whether the financial statements are free of material misstatement. An audit includes examining, on a test KPMG Inc basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing Registered Accountants and Auditors the accounting principles used and significant estimates Chartered Accountants (SA) made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
per J Datadin
Director
19 April 2006
20 | HBZ ANNUAL REPORT 2005 REPORT OF THE DIRECTORS
The Board of Directors takes pleasure in presenting the POST BALANCE SHEET EVENTS
Annual Financial Statements of the bank for the year ended There were no material post balance sheet events. 31 December 2005. DIRECTORS AND SECRETARY HOLDING COMPANY Details of the directors are reflected on page 4 of this HBZ Bank Limited is a wholly owned subsidiary of Habib report. Bank AG Zurich, which is incorporated in Switzerland.
NATURE OF BUSINESS In accordance with the Company’s articles of association, HBZ Bank Limited is a registered bank, which in line with Section 85, Messrs M Habib, MY Chowdhury and RL Daly its holding company, Habib Bank AG Zurich’s business retired by rotation, but being eligible, offer themselves for strategy, specialises in trade finance and retail banking. re-election at the forthcoming annual general meeting. Mr Nisar Chowdhari and Mr Terry Field resigned from the FINANCIAL RESULTS board with effect from the 31 July 2005 and 31 December The results of the company are set out in the 2005 respectively. Mr Henk Leenstra and Mr Zafar Khan accompanying financial statements and notes. were appointed to the board on the 1 July 2005 and 1 October 2005 respectively. The secretary of the company AUTHORISED AND ISSUED SHARE CAPITAL is Mr C Harvey whose business and postal address is No additional shares were authorised or issued during the 135 Jan Hofmeyr Road, Westville, 3630, PO Box 1536, year. Wandsbeck, 3631.
DIVIDENDS AND GENERAL RESERVE DIRECTORS’ EMOLUMENTS
The Directors have proposed that the following Directors’ emoluments in respect of the company’s appropriations be made in 2005/2006: directors are disclosed in note 24 to the annual financial statements.
GENERAL RESERVE 2006 2005
Transfer proposed 2006 / 2005 R 8,000,000 R 7,000,000
DIVIDEND
Proposed dividend for distribution in 2006 / 2005 R 9,300,000 R 5,700,000
Secondary taxation on companies R 1,162,500 R 712,500
Muhammad H. Habib Terrence H. Field
Chairman Vice-chairman
19 April 2006 19 April 2006
HBZ ANNUAL REPORT 2005 | 21 BALANCE SHEET
For the year ended 31 December 2005
Notes 2005 2004 R R ASSETS
Cash and short-term funds 1 492 523 536 443 450 098 Investment securities 2 187 006 289 92 266 401 Other assets 3 4 336 087 15 535 152 Deferred tax 4 309 826 422 455 Advances 5 327 926 356 232 894 888 Property and equipment 7 13 499 349 9 580 234
1025 601 443 794 149 228
EQUITY AND LIABILITIES
Capital and reserves Ordinary share capital 8 10 000 000 10 000 000 Share premium 40 000 000 40 000 000 Regulatory reserve 9 6 029 982 4 461 506 General reserve 17 000 000 10 000 000 Retained earnings 17 895 439 12 705 296 Total shareholders’ funds 90 925 421 77 166 802
LIABILITIES
Deposits and other accounts 10 924 974 346 687 387 149 Other liabilities 11 9 701 676 29 595 277
1025 601 443 794 149 228
22 | HBZ ANNUAL REPORT 2005 INCOME STATEMENT
For the year ended 31 December 2005
Notes 2005 2004 R R
Interest received 72 305 230 53 163 204 Interest paid (28 405 547) (16 526 632) Net interest income 43 899 683 36 636 572
Provision for bad and doubtful advances 6.3 (170 183) (1 733 449) 43 729 500 34 903 123
Other income 12 25 237 078 23 516 495 68 966 578 58 419 618
Operating expenses 13 (39 402 103) (35 557 674) Profit before taxation 29 564 475 22 861 944
Taxation 14.1 (10 105 856) (8 586 301) Net income attributable to shareholders 19 458 619 14 275 643
Dividends per share (cents) 57.00 77.00
Earnings per share (cents) 18 194.59 142.76
Earnings and headline earnings per share (cents) 18 194.58 142.26
HBZ ANNUAL REPORT 2005 | 23 STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2005
Notes Ordinary Share Regulatory General Retained Total share capital premium reserve reserve earnings
R R R R R R
Balance at 31 Dec 2003 10,000,000 40,000,000 4,016,676 2,000,000 14,574,483 70,591,159
Net profit for the year 0 0 0 0 14,275,643 14,275,643
Transfer to regulatory reserve 0 0 444,830 0 (444,830) 0
Ordinary dividends 15 0 0 0 0 (7,700,000) (7 700 000)
Transfer to general reserve 0 0 0 8,000,000 (8,000,000) 0
Balance at 31 Dec 2004 10,000,000 40,000,000 4,461,506 10,000,000 12,705,296 77,166,802
Net profit for the year 0 0 0 0 19,458,619 19,458,619
Transfer to regulatory reserve 0 0 1,568,476 0 (1,568,476) 0
Ordinary dividends 15 0 0 0 0 (5,700,000) (5,700,000)
Transfer to general reserve 0 0 0 7,000,000 (7,000,000) 0
Balance at 31 Dec 2005 10,000,000 40,000,000 6,029,982 17,000,000 17,895,439 90,925,421
24 | HBZ ANNUAL REPORT 2005 CASH FLOW STATEMENT
For the year ended 31 December 2005
Notes 2005 2004 R R
Cash receipts from customers 16.1 97 542 308 76 679 699 Cash paid to customers, employees and suppliers 16.2 (67 504 668) (51 039 225) Cash available from operating activities 16.3 30 037 640 25 640 474 Taxation paid 16.4 (10 109 005) (15 608 165) Dividends paid (5 700 000) (7 700 000) Net cash inflow from operating activities 14 228 635 2 332 309 Changes in operating activities Increase in income-earning funds and other assets 16.5 (178 242 163) (66 450 949) Increase in deposits and other creditors 16.6 217 693 596 143 847 997 Net increase in operating funds 39 451 433 77 397 048 Cash utilised in investing activities Capital expenditure on property and equipment (4 623 521) (7 031 305) Proceeds on disposal of property and equipment 16 891 306 540 Net cash utilised in investing activities (4 606 630) (6 724 765) Increase in cash and cash equivalents 49 073 438 73 004 592 Cash and short-term assets at the beginning of year 443 450 098 370 445 506 Cash and short-term assets at end of year 492 523 536 443 450 098
HBZ ANNUAL REPORT 2005 | 25 NOTES TO THE ANNUAL FINANCIAL STATEMENTS
For the year ended 31 December 2005
SIGNIFICANT ACCOUNTING POLICIES (c) DERIVATIVE FINANCIAL INSTRUMENTS
HBZ Bank Limited is a company domiciled in the Republic The Bank uses derivative financial instruments to hedge of South Africa. The financial statements were authorised its exposure to foreign exchange arising from operational for issue by the Directors on 3rd March 2006. activities. The Bank holds and issues derivative financial instruments for trading purposes. (a) STATEMENT OF COMPLIANCE
The financial statements have been prepared in Derivative financial instruments are recognised initially at accordance with Statements of Generally Accepted cost. Subsequent to initial recognition, derivative financial Accounting Standards (SA GAAP) and its interpretations instruments are stated at fair value. The gain or loss on adopted by the International Accounting Standards Board remeasurement to fair value is recognised immediately in (IASB). profit or loss.
(b) BASIS OF PREPARATION (d) PROPERTY AND EQUIPMENT
The financial statements are presented in South African (i) Owned assets Rands. They are prepared on the historical cost basis, except for derivative financial instruments, which are stated Items of property and equipment are stated at cost less at their fair value. accumulated depreciation.
The preparation of financial statements in conformity with Where parts of an item of property and equipment have SA GAAP requires management to make judgements, different useful lives, they are accounted for as separate estimates and assumptions that affect the application of items of property and equipment. policies and reported amounts of assets and liabilities, (ii) Subsequent costs income and expenses. The estimates and associated
assumptions are based on historical experience and The Bank recognises in the carrying amount of an item of various other factors that are believed to be reasonable property and equipment the cost of replacing part of such under the circumstances, the results of which form the an item when that cost is incurred if it is probable that the basis of making the judgements about carrying values of future economic benefits embodied in the item will flow to assets and liabilities that are not readily apparent from other the Bank and the cost of the item can be measured reliably. sources. Actual results may differ from these estimates. All other costs are recognised in the income statement as an expense as incurred.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
The accounting policies set out below have been applied consistently to all periods presented in these financial statements.
26 | HBZ ANNUAL REPORT 2005 (iii) Depreciation (ii) Other trade and other receivables
Depreciation is charged to the income statement on Trade and other receivables are stated at their cost less a straight-line basis over the estimated useful lives of impairment losses (see accounting policy h). each part of an item of property and equipment. The depreciation rates are as follows: (g) CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash balances, short • Leasehold improvements 20% per annum notice and call deposits.
• Furniture 15% per annum (h) IMPAIRMENT • Computer and office machines 25% per annum The carrying amounts of the Bank’s assets are reviewed at • Motor vehicles 20% per annum each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the The residual value, if not insignificant, is reassessed asset’s recoverable amount is estimated (see accounting annually. policy (h) (i)).
The Bank has estimated residual value on buildings and An impairment loss is recognised whenever the carrying found that it is greater than cost. Depreciation has therefore amount of an asset or its cash-generating unit exceeds its not been raised on these assets. recoverable amount. Impairment losses are recognised in the income statement. (e) INVESTMENTS Impairment losses are recognised in respect of cash- (i) Investments in debt and equity securities generating units to reduce the carrying amount of other assets in the unit on a pro rata basis. The Bank has the positive intent and ability to hold government bonds to maturity, and they are therefore (i) Calculation of recoverable amount stated at amortised cost less impairment losses (see The recoverable amount of the Bank’s investments in accounting policy h). held-to-maturity securities is calculated as the present (f) TRADE AND OTHER RECEIVABLES value of estimated future cash flows, discounted at the original effective interest rate (i.e. the effective interest rate (i) Advances and deposits computed at initial recognition of these financial assets). Receivables with a short duration are not discounted. These financial instruments are classified as loans and receivables. Subsequent to initial measurement, they are measured at amortized cost calculated using the effective The recoverable amount of other assets is the greater of interest method. their net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.
HBZ ANNUAL REPORT 2005 | 27 NOTES TO THE ANNUAL FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2005
(ii) Reversals of impairment (i) INTEREST-BEARING BORROWINGS
An impairment loss in respect of a receivable carried at Interest-bearing borrowings are recognised initially at fair amortised cost is reversed if the subsequent increase in value less attributable transaction costs. recoverable amount can be related objectively to an event occurring after the impairment loss was recognised. (j) EMPLOYEE BENEFITS
(i) Defined contribution plans In respect of other assets, an impairment loss is reversed Obligations for contributions to defined contribution if there has been a change in the estimates used to pension plans are recognised as an expense in the income determine the recoverable amount. statement as incurred.
(k) PROVISIONS An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying A provision is recognised in the balance sheet when the amount that would have been determined, net of Bank has a present legal or constructive obligation as a depreciation or amortisation, if no impairment loss had result of a past event, and it is probable that an outflow of been recognised. economic benefits will be required to settle the obligation.
(iii) Specific impairment (l) TRADE AND OTHER PAYABLES
The Bank creates a specific impairment against advances Trade and other payables are stated at cost. when there is objective evidence that it will not be able to collect all amounts due. The amount of such impairment (m) INTEREST INCOME is the difference between the carrying amount and the recoverable amount, calculated as the present value of (i) Interest income expected future cash flows, including amounts recoverable Interest income is recognised in the income statement as it from guarantees and collateral, discounted at the effective accrues, using the effective interest method. interest rate at the inception of the advance. (ii) Interest paid (iv) Portfolio impairment Interest paid comprises interest payable on borrowings. The Bank creates a portfolio impairment against advances where there is objective evidence that the advances (n) EXPENSES portfolio contains probable losses at the balance sheet date, which will only be identified in the future, or where (i) Operating lease payments there is insufficient data to reliably determine whether such Payments made under operating leases are recognised in losses exist. The estimated probable losses are based the income statement on a straight-line basis over the term on historical information and take into account historical of the lease. Lease incentives received are recognised in patterns of losses and the current economic climate in the income statement as an integral part of the total lease which the borrowers operate. expense.
28 | HBZ ANNUAL REPORT 2005 (o) INCOME TAX (p) CONTINGENCIES AND COMMITMENTS
Income tax on the profit or loss for the year comprises Transactions are classified as contingencies where the current and deferred tax. Income tax is recognised in Bank’s obligations depend on uncertain future events and the income statement except to the extent that it relates principally consist of third party obligations underwritten by to items recognised directly in equity, in which case it is banking operations. recognised in equity.
Items are classified as commitments where the Bank Current tax is the expected tax payable on the taxable commits itself to future transactions or if the items will income for the year, using tax rates enacted or substantially result in the acquisition of assets. enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition of assets or liabilities that affect neither accounting nor taxable profit. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
Additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay the related dividend.
HBZ ANNUAL REPORT 2005 | 29 NOTES TO THE ANNUAL FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2005
2005 2004 R R 1. CASH AND SHORT-TERM FUNDS
Balances with other Banks 492 523 536 443 450 098
Maturity analysis On demand to one month 447 948 536 416 748 523 One month to six months 44 425 000 25 951 575 Greater than six months 150 000 750 000 492 523 536 443 450 098
2. INVESTMENT SECURITIES
Interest bearing Government bonds 187 006 289 92 266 401 Treasury bills 0 0 187 006 289 92 266 401 Maturity analysis
On demand to one month 0 0 One month to six months 89 980 247 24 159 254 Greater than six months 97 026 042 68 107 147 187 006 289 92 266 401
3. OTHER ASSETS
Forward exchange contracts 2 206 518 10 617 309 Taxation overpaid 235 815 120 037 Other assets 1 893 754 4 797 806 4 336 087 15 535 152
30 | HBZ ANNUAL REPORT 2005 2005 2004 R R 4. DEFERRED TAXATION
Tax effect of timing differences between tax and book values of -provisions for doubtful advances (102 981) 87 022 -other accruals and provisions 429 120 168 128 -fixed asset allowances (16 313) 167 305 Deferred taxation asset 309 826 422 455
Deferred taxation reconciliation
Balance at beginning of year 422 455 243 815 Reduction in tax rate (14 082) 0 Income statement charge (98 547) 178 640 Balance at end of year 309 826 422 455
5. ADVANCES
Overdrafts 189 468 315 137 996 780 Loans 122 380 842 91 761 493 Staff loans 741 860 885 374 Commercial loans 90 826 598 73 694 233 Trust receipts 30 812 384 17 181 886 Bills receivable 3 500 000 1 122 000 Foreign bills purchased 14 791 788 4 443 554 330 140 945 235 323 827 Specific impairment (1 446 503) (1 724 752) Portfolio impairment (768 086) (704 187) 327 926 356 232 894 888 Maturity analysis On demand to one month 214 500 065 151 675 069 One month to six months 57 960 476 23 634 764 Greater than six months 55 465 815 57 585 055 327 926 356 232 894 888 Interest rates range between 5.25% and 13.5%
HBZ ANNUAL REPORT 2005 | 31 NOTES TO THE ANNUAL FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2005
2005 2004 R R 6. IMPAIRMENT OF ADVANCES
6.1 Specific impairment
Balance at beginning of year 1 724 752 433 127 Amounts written off, net of recoveries and other transfers 100 043 1 291 625 Write-offs (378,292) 0 Balance at end of year 1 446 503 1 724 752
6.2 Portfolio impairment
Balance at beginning of year 704 187 259 966 Amounts written off, net of recoveries and other transfers 71 655 444 221 Write-offs (7,756) 0 Balance at end of year 768 086 704 187
6.3 Income statement charge
Provisions raised during the year -Specific provision 100 043 1 291 625 -General provision 71 655 444 221 171 698 1 735 846 -Write-offs 0 0 -Recoveries (1 515) (2 397) 170 183 1 733 449
32 | HBZ ANNUAL REPORT 2005 7. PROPERTY AND EQUIPMENT Accumulated Net carrying Cost depreciation value R R R 2005 Buildings 8 408 751 0 8 408 751 Furniture & fittings 4 383 981 (2 747 864) 1 636 117 Office equipment 2 400 252 (1 367 357) 1 032 895 Motor vehicles 1 386 032 (708 749) 677 283 Computers 4 710 875 (2 966 572) 1 744 303 21 289 891 (7 790 542) 13 499 349
Accumulated Net carrying Cost depreciation value R R R 2004 Buildings 6 904 595 (546 732) 6 357 863 Furniture & fittings 3 689 863 (2 427 063) 1 262 800 Office equipment 1 594 418 (1 192 106) 402 312 Motor vehicles 1 254 029 (470 330) 783 699 Computers 3 239 856 (2 466 296) 773 560 16 682 761 (7 102 527) 9 580 234
Opening Closing carrying carrying value Additions Disposals Depreciation value R R R R R 2005 movements Buildings 6 357 863 1 504 156 546 732 8,408,751 Furniture & Fittings 1 262 800 694 118 (320 801) 1,636,117 Office equipment 402 312 805 834 (175 251) 1,032,895 Motor vehicles 783 699 132 003 (238 419) 677,283 Computers 773 560 1 487 410 (16 144) (500 523) 1,744,303 9 580 234 4 623 521 (16 144) (688 262) 13 499 349
HBZ ANNUAL REPORT 2005 | 33 NOTES TO THE ANNUAL FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2005
Opening Closing carrying carrying value Additions Disposals Depreciation value R R R R R 2004 movements Buildings 1,663,908 4 801 227 0 (107 272) 6,357,863 Furniture & Fittings 684,008 944 404 (1 477) (364 135) 1,262,800 Office equipment 149,040 344 465 (7 117) (84 076) 402,312 Motor vehicles 767,457 487 255 (248 757) (222 256) 783,699 Computers 633,741 453 954 0 (314 135) 773,560 3,898,154 7,031,305 (257,351) (1,091,874) 9,580,234
Buildings comprise the following:
1. Erf no. 1246, Jan Hofmeyr Road, Westville. 2. 39 Rooikoppies, 23 Leander Crescent, Westville. 3. Section numbers 15 and 28, Cedar Ridge, Jan Hofmeyr Road, Westville. 4. Section 11, Arbor Glade, Musgrave, Durban 5. Section 22, Berkley Close, Johannesburg 6. Section 4, The Patio, Linden, Standerton.
2005 2004 R R 8. ORDINARY SHARE CAPITAL
Authorised 10 000 000 Ordinary shares of R1 each 10,000,000 10,000,000 Issued 10 000 000 Ordinary shares of R1 each 10,000,000 10,000,000
34 | HBZ ANNUAL REPORT 2005 2005 2004
R R
9. NON-DISTRIBUTABLE RESERVES
Regulatory reserve 6 029 982 4 461 506
Due to the requirements of Regulation 28 of the Banks Act of 1990, that specifies the minimum general and specific provisions to be held, a Regulatory Reserve has been created, by re-allocating distributable reserves to non-distributable reserves.
General reserve 17 000 000 10 000 000
The reserve has been created specifically for the retention of capital.
10. DEPOSITS AND OTHER ACCOUNTS
Deposits and loans from banks 56 522 245 4 013 915 Demand deposits 361 369 733 344 092 503 Savings deposits 60 858 513 50 713 209 Fixed deposits 144 586 545 75 788 373 Notice deposits 301 637 310 212 779 149 924 974 346 687 387 149
Maturity analysis On demand to one month 887 975 138 628 377 328 One month to six months 32 715 632 57 508 780 Greater than six months 4 283 576 1 501 041 924 974 346 687 387 149
11. OTHER LIABILITIES
Creditors and other accounts payable 7 495 158 18 977 968 Forward exchange contracts 2 206 518 10 617 309 9 701 676 29 595 277
HBZ ANNUAL REPORT 2005 | 35 NOTES TO THE ANNUAL FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2005
2005 2004 R R 12. OTHER INCOME
Commissions and fees 25 237 078 23 516 495
13. OPERATING EXPENSES
Operating expenses include : Directors emoluments (see note 24) 2 437 132 2 283 862 -for services as directors 853 500 670 000 -for other services 1 583 632 1 613 862 Auditors remuneration 407 950 340 957 -audit 382 940 273 200 -for other services 23 410 25 200 -underprovision prior year 1 600 42 557 Depreciation 688 262 1 091 875 Profit on sale of fixed assets 747 49 191 Management fee 7 176 771 6 702 984 Retirement benefit costs 1 384 842 1 259 674 Operating leases 1 633 186 1 195 699 -premises 1 350 323 1 056 942 -equipment 282 863 138 757 Staff costs 12 645 500 10 776 035
The management fee is paid to Habib Bank AG Zurich, the bank’s holding company.
36 | HBZ ANNUAL REPORT 2005 2005 2004 R R 14. TAXATION
14.1 South African normal taxation
Current 8 162 573 6 709 277 Deferred 112 629 (178 640) Secondary taxation on companies 712 500 962 500 8 987 702 7 493 137 Other taxation -unclaimable value added tax 922 635 901 089 -skills development levy 31 275 65 217 -regional services council levy 164 244 126 858 1 118 154 1 093 164
Total taxation 10 105 856 8 586 301
14.4 Reconciliation of tax charge
SA Normal taxation 29.00% 30.00% Standard rate affected by : - non-deductable expenses (1.00%) 0 - secondary taxation on companies 2.40% 4.42% Effective rate - taxation on income 30.40% 34.42%
Effective rate - total taxation 34.18% 37.56%
14.3 Secondary tax on companies
A contingent liability exists for the payment of STC on future distributions of retained earnings to shareholders of R 1 988 382 (2004: R 1 411 670). This has been calculated based on the reserves at the end of the year at the current rate of STC taxation of 12.5%.
HBZ ANNUAL REPORT 2005 | 37 NOTES TO THE ANNUAL FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2005
2005 2004 R R 15. ORDINARY DIVIDENDS
Final dividend of 57 cents per share (2004: 77 cents per share) 5 700 000 7 700 000
16. CASH FLOW INFORMATION
16.1 Cash receipts from customers
Interest income 72 305 230 53 163 204 Other income 25 237 078 23 516 495 97 542 308 76 679 699
16.2 Cash paid to customers, employees and suppliers
Interest expenses (28 405 547) (16 526 632) Other payments (39 099 121) (34 512 593) (67 504 668) (51 039 225)
16.3 Cash available from operating activities
Net income before tax 29 564 475 22 861 944 Adjusted for non-cash items -Specific debt provision (278 249) 1 291 625 -General debt provision 63 899 444 221 -Depreciation 688 262 1 091 875 -Profit on disposal of property and equipment (747) (49 191) 30 037 640 25 640 474
16.4 Taxation paid
Amounts over / (unpaid) at beginning of year 120 037 (6 723 187) Income statement charge (9 993 227) (8 764 941) Amounts (over)/ unpaid at end of year (235 815) (120 037) (10 109 005) (15 608 165)
38 | HBZ ANNUAL REPORT 2005 2005 2004
R R
16.5 Increase in income-earning funds and other assets
Loans and advances (94 817 118) (46 830 167)
Government securities and money market assets (94 739 888) (13 456 179)
Other assets 11 314 843 (6 164 603) (178 242 163) (66 450 949)
16.6 Increase in deposits and other liabilities
Deposits 237 587 197 132 115 335 Creditors and other liabilities (19 893 601) 11 732 662 217 693 596 143 847 997
17. CONTINGENT LIABILITIES
Letters of credit 86 978 034 53 589 058 Guarantees issued on behalf of customers 79 731 847 50 995 017 166 709 881 104 584 075
18. EARNINGS AND HEADLINE EARNINGS PER SHARE
The calculation of earnings per ordinary share is based on net income attributable to ordinary shareholders of R19 458 619 (2004 : R14 275 643) and a weighted average of 10 000 000 (2004 : 10 000 000) ordinary shares in issue during the year. The calculation of headline earnings per ordinary share is based on headline earnings of R19 457 872 (2004 : R14 226 452) and a weighted average of 10 000 000 (2004: 10 000 000) ordinary shares in issue during the year.
19. PRINCIPAL FOREIGN CURRENCY CONVERSION RATES
One South African rand equals Swiss franc 0.208 0.201 United States dollar 0.158 0.176 Pound sterling 0.092 0.092
HBZ ANNUAL REPORT 2005 | 39 NOTES TO THE ANNUAL FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2005
2005 2004 R R 20. FINANCIAL INSTRUMENTS
20.1 Credit risk management
Significant credit exposures at 31 December 2005 are:
Advances 327 926 356 232 894 888 Contingent liabilities 166 709 881 104 584 075 494 636 237 337 478 963
Credit risk is managed by the Bank by ensuring that advances are made to reputable customers and exposures are reviewed on a regular basis by management.
20.2 Currency risk management
The Bank did not have any significant foreign currency exposure at 31 December 2005.
20.3 Derivative instruments
Nominal value of forward exchange contracts sold to customers 131,412,110 125,908,340 Nominal value of forward exchange contracts sold to banks 475,645 4,543,815
Nominal value of forward exchange contracts purchased from customers 475,250 4,533,110 Nominal value of forward exchange contracts purchased from banks 131,091,357 125,561,421
40 | HBZ ANNUAL REPORT 2005 Greater than On demand 1-6 months 6 months Total R R R R 20.4 Liquidity risk management
Assets Investment securities 0 89 980 247 97 026 042 187 006 289 Advances 214 500 065 57 960 476 55 465 815 327 926 356 Other assets 4 105 154 0 230 933 4 336 087 Cash and short term funds 447 948 536 44 425 000 150 000 492 523 536 666 553 755 192 365 723 152 872 790 1011 792 268
Liabilities Deposits and other accounts (887 975 138) (32 715 632) (4 283 576) (924 974 346) Other liabilities (5 305 373) (3 399 603) ( 996 700) (9 701 676) (893 280 511) (36 115 235) (5 280 276) (934 676 022)
Net liquidity gap (226 726 756) 156 250 488 147 592 514 77 116 246
20.5 Interest rate risk management
The Bank is exposed to interest rate cash flow risk on its cash and short-term funds, investment securities, advances and deposits and other accounts. The Bank is exposed to floating and fixed rates as follows:
Total book Short- Medium-term Long-term value term 0 - 31 32 - 91 92 - 181 182 - 365 Other Total days days days days R’000 R’000 R’000 R’000 R’000 R’000 Fixed rate items Assets 410,461 174,805 135,470 3,010 150 97,026 410,461 Liabilities (149,645) (110,623) (33,129) (1,610) (4,283) 0 (149,645) 260,816 64,182 102,341 1,400 (4,133) 97,026 260,816 Variable items Assets 580,015 580,015 580,015 Liabilities (395,105) (395,105) (395,105) 184,910 184,910 0 0 0 0 184,910
Net repricing gap 445,726 249,092 102,341 1,400 (4,133) 97,026 445,726
HBZ ANNUAL REPORT 2005 | 41 NOTES TO THE ANNUAL FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2005
20.6 Sensitivity analysis
In managing interest rate risk the Bank aims to reduce the impact of short-term fluctuations on the bank’s earnings. Over the longer term however, permanent changes in interest rates would have an impact on earnings. It is estimated that a general increase or decrease of 1% in the interest rate would increase or decrease the bank’s profit by R268 000 for the year ended 31 December 2005. (2004: R250 000).
20.7 Fair values
The fair values together with the carrying amounts shown in the balance sheet are as follows:
Government bonds Carrying Carrying value Fair value value Fair value 2005 2005 2004 2004 R R R R
187 006 289 188 443 102 92 265 401 94 645 142 Net gain / (loss) 1 436 813 2 379 741
Effective interest rates vary between 7.6% and 11.3%.
Advances and deposits
The fair value of these financial instruments cannot be reliably measured as they are unquoted.
21. RETIREMENT BENEFIT COSTS
All full-time permanent employees are members of the Old Mutual Orion Provident Fund, which is a defined contribution fund, and is governed by the Pension Funds Act of 1956. Membership of this fund has been compulsory since the incorporation of the Bank in November 1995.
42 | HBZ ANNUAL REPORT 2005 22. OPERATING LEASE COMMITMENTS
Buildings Equipment Total R R R 2005 Not later than 1 year 961 017 316 282 1,277,299 Between 1 and 5 years 2 264 679 1 546 559 3,811,238 Later than 5 years 892 223 892,223 4,117,919 1,862,841 5,980,760
2004 Not later than 1 year 986,516 175,092 1,161,608 Between 1 and 5 years 2,322,200 906,943 3,229,143 Later than 5 years 340,105 0 340,105 3,648,821 1,082,035 4,730,856
23. RELATED PARTIES
23.1 Identity of related parties
The holding company of HBZ Bank Limited is Habib Bank AG Zurich, incorporated in Switzerland which holds 100% (2004 : 100%) of the company’s ordinary shares.
The directors are listed under the section entitled Directorate.
All related party transactions were made on terms equivalent to those that prevail in an arm’s length transaction.
HBZ ANNUAL REPORT 2005 | 43 NOTES TO THE ANNUAL FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2005
2005 2004 R R 23.2 Material related party transactions
Material transactions with the company
Dividends paid to the holding company - see the directors’ report Directors’ emoluments - see note 24
Material transactions with the group
Receivables due from group companies: - Zurich 747 4 508 - UK 297 447 316 664 - Hong Kong 3 382 929 - Canada 4 211 3 608 305 787 325 709 These receivables all relate to short-term receivables with no fixed terms of repayments.
Payables due to group companies: - Zurich (358 088) (335 927) - UK (55 836 333) (1 271 411) - Kenya (100 123) (219 596) - Isle of Man (1 415) (100 359) (56 295 959) (1 927 293) These payable balances related to short-term payables with no fixed terms of repayment.
Interest and charges received from group companies: - UK 661 16 287
Interest and charges paid to group companies: - Zurich 32,913 654 - UK 3,294,645 106,569 - Kenya 4,465 0 - Isle of Man 56 0 - Canada 0 23 3,332,079 107,246
44 | HBZ ANNUAL REPORT 2005 24. DIRECTORS’ REMUNERATION
Executive Non-executive Total 2005 2004 2005 2004 2005 2004 R R R R R R Directors’ emoluments 1,657,132 1,683,862 780,000 600,000 2,437,132 2,283,862 - For services as directors of the company 73,500 70,000 780,000 600,000 853,500 670,000 - For other services 1,583,632 1,613,862 0 0 1,583,632 1,613,862
Pensions to directors 0 0 0 0 0 0 - For services as directors of the company 0 0 0 0
Total directors’ remuneration (see note 13) 1,657,132 1,683,862 780,000 600,000 2,437,132 2,283,862
The directors do not have service contracts with HBZ Bank.
25. LOANS TO DIRECTORS
Staff Loans C Harvey N Chowdhari Z Khan (Financial Director) (Former General (General Manager) Manager)
Balance 1 January 2005 26,629 36,106 40,000 Advance 67,971 93,144 0 Interest charged 4,528 3,102 346 Repayment (37,200) (44,267) (40,346) Balance 31 December 2005 61,928 88,085 0
HBZ ANNUAL REPORT 2005 | 45 NOTES TO THE ANNUAL FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2005
26. EFFECT OF STANDARDS ISSUED BUT NOT YET EFFECTIVE
IFRS 7 - Financial instruments
The disclosures provided in respect of financial instruments in the financial statements of the Bank for the period ending 31 December 2007, as well as comparative information, will be compliant with IFRS 7. The disclosure requirements of IFRS 7 require additional disclosure compared to that required in terms of existing IFRS in respect of the following:
· Credit risk; · Market risk; · Liquidity risk; and · Capital objecties and policies.
The adoption of IFRS 7 will not have an impact on the accounting policies adopted for financial instruments.
46 | HBZ ANNUAL REPORT 2005 CAPITAL ADEQUACY STATEMENT
For the year ended 31 December 2005
Relocation of assets secured Risk Risk Off-balance by pledge of weighted Credit risk weightings Assets items deposits assets Credit risk exposure 2005 2005 2005 2005 2005 2004 R’000 R’000 R’000 R’000 R’000 R’000
0% 196 590 86 978 64 759 348 327 0 0 5% 0 0 0 10% 0 0 0 20% 350 295 0 350 295 70059 54 426 50% 146 240 146 240 73120 0 100% 391 336 80 290 ( 64 759) 406 867 406 867 305 968 0 0 0 938 221 313 508 0 1 251 729 550 046 360 394
Counterparty risk exposure 365 278 Large exposure risk 0 5021 550 411 365 693
Risk weighted capital requirement - 10% 55 041 36 569
Qualifying share capital and unimpaired reserve funds 72 193 63 331
Qualifying share capital and unimpaired reserve funds as a percentage of risk weighted assets 13% 17%
Note: The assets and off balance sheet items indicated in this statement are the average for the quarter ended 31 Decemebr 2005, as per regulation 23 of the Banks Act of 1990.
HBZ ANNUAL REPORT 2005 | 47 INTERNATIONAL NETWORK
1. UNITED ARAB EMIRATES Habib Bank AG Zurich 8 Branches 5 in Dubai, 2 in AbuDhabi, Sharjah
2. UNITED KINGDOM Habib Bank AG Zurich 9 Branches 5 in London, Manchester, Glasgow, Leicester, Birmingham
3. PAKISTAN Habib Bank AG Zurich 22 Branches 16 in Karachi, 4 in Lahore, Faisalabad, Rawalpindi
4. KENYA Habib Bank AG Zurich 4 Branches 3 in Nairobi, Mombasa
5. SWITZERLAND Habib Bank AG Zurich 2 Branches 2 in Zurich
6. SOUTH AFRICA HBZ Bank (Pty) Ltd 5 Branches 2 in Durban, Johannesburg, Lenasia, Laudium
7. ISLE OF MAN Habib European Bank Ltd 1 Branch Douglas
8. CANADA Habib Canadian Bank 1 Branch Mississauga (Greater Toronto Area)
9. HONG KONG HBZ Finance Ltd 5 Branches 5 in Hong Kong
10. SINGAPORE HBZ Int Exchange Co 1 Branch Singapore
11. EGYPT Habib Bank AG Zurich Representative Office Cairo
12. BANGLADESH Habib Bank AG Zurich Representative Office Dhaka
48 | HBZ ANNUAL REPORT 2005 LIST OF SERVICES
With the benefi t of decades of experience in understanding and satisfying the varied fi nancial needs of customers spread across the globe, the Group has developed a wide spectrum of quality products and services throughout its global network of branches, subsidiaries and affi liates.
THE RANGE OF SERVICES PRESENTLY AVAILABLE OTHER SERVICES AVAILABLE THROUGH THE GLOBAL NETWORK IN SOUTH AFRICA INCLUDE: INCLUDE: • Savings Accounts Personal and Private Banking Services: • Current Accounts • International Portfolio Management • Term Deposit Accounts • Financial Advisory Services • Overdraft Facilities • Trustee Services • Commercial Loans • Credit Cards • Bill Discounting • Travellers Cheques • Letters of Guarantee • Safe Deposit Lockers and Custodial Services • Foreign Exchange Corporate Banking Services: • Foreign Drafts • Overdraft Facilities • Import and Export Letter of Credit • Commercial Loans • Documentary Collections • Foreign Exchange Dealings • Trade Finance • Trade Finance • Travellers Cheques • Import and Export Letter of Credit
• Bills Discounting
• Global Remittances
• Bullion and Silver Dealing
• Dealings in Securities, Bonds and Stocks
• T Treasuryreasury ServicesServices
secure service
HBZ ANNUAL REPORT 2005 | 49 6493 Photography by Dave Dancer, Lock collection courtesy of Tim Simpkin - A.A. Locksmith & Grinding Specialists, Design by www.growgraphics.co.za HBZ Bank Limited (A SUBSIDIARY OF HABIB BANK A G ZURICH)