Barclays Bank of Botswana Limited Bank of Botswana Annual Repo… · 2014 was a redefiningmoment...

Barclays Bank of Botswana Limited

Bringing Paperless Connectivity To Banking

Annual Report 2014

Barclays has been operating in Botswana for more than 60 years. It is one of the leading banks in the country, employing over 1,200 people and serving over 150,000 customers.

Our people are proud to work for Barclays.

Increase customer convenience by offering more services through electronic Channels.

Offer our customers and clients a range of alternative products such as Foreign exchange and facilitate insurance products to meet their lifestyle needs and requirements.

Become the ‘Go-To’ bank for Corporate, Public Sector and SME clients.

Help our customers and clients create wealth through housing financing and be the financier of choice for customers’ vehicle and asset financing needs.

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Key priorities for our strategy

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Barclays offers personal banking, credit cards, and corporate banking products. Our customers and clients benefit from the strength of the Barclays Group and are able to access investment banking and wealth management services.

To be the ‘Go To’ bank in Botswana; this means that every person who has banking needs should think Barclays.

Our Goal

Helping people achieve their ambitions in the right way. Our Purpose

Our values are the behaviours that shape our culture and are what we will be known for in the eyes of our customers and the communities in which we operate.

These values are:

Our Values

Respect We respect and value those we work with, and the contribution that they make

Service We put our clients and customers at the centre of what we do

Integrity We act fairly, ethically and openly in all we do

Excellence We use our energy, skills and resources to deliver the best sustainable results

RISESStewardship We are passionate about leaving things better than we found them

33 young Batswana have been sponsored for their Masters degree programme under Barclays F.G. Mogae Scholarship Fund

88% of colleagues volunteered their time and skills reaching over 12,000 children and youth

Award for significant contribution in the implementation of Vision 2016 goals

Best Domestic Cash Management House 2014 - Euromoney

Accolades

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ConsumerOur consumer business serves customers across a network of 41 branches, which is the largest branch network in Botswana, and 112 ATMs. Barclays Bank of Botswana also serves customers through a full suite of digital channels and offers high net worth clients bespoke Premier Banking services.

Corporate Banking and Business BankingCorporate provides banking services and solutions to businesses, financial institutions, Government and parastatals. Our corporate products include lending, risk management, cash and liquidity management, trade finance, and asset financing.

TreasuryIn addition to asset and liability management, capital, funding and liquidity management for the Bank, Barclays Bank of Botswana Treasury offers risk management and Foreign exchange services to our clients.

Barclays Bank of Botswana has 3 business units:

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Our One Africa Strategy

Our growth strategy is based on a unique competitive advantage - we are an African bank that is fully global, fully regional and fully local.

• Localandregionalbanksthrough ouraccesstoglobaltechnologies andproducts,andabilityto connectourcustomersand clientsseamlesslytoglobal markets

Beyond our strategy and medium-term goals, we recognise that with the pace of change, the environment in which we operate will be very different in the future.

We dedicate our efforts to shaping our strategy for building the future ‘Go-To’ bank.

• Globalbanksbyoperatingabank withdeepAfricaninsightsfrom ourlocaloperations

By focusing on... Delivering on our medium-term (2015-2016) targets…

While planning for the bank of the future…

We continue on our journey to distinguish ourselves from...

2014 2015 - 2016

Our Retail and Business Banking turnaroundRegain our leading market position in South Africa and drive the build-out across the continent; in particular: improve service offerings and customer experience; extend appropriate levels of credit; introduce innovative products; and improve access.

Investing in Corporate Banking growthInvest in our people and systems to allow us to develop our expertise and product portfolio, in particular: Foreign exchange, corporate debt, trade finance and cash management services.

Growing Wealth, Investment Management and InsuranceRealise the synergies from the combined Wealth, Investment Management and Insurance business and build on this platform to expand into new African markets.

Developing and investing in talent and our peopleDeliver on our diversity agenda across the Group to make Barclays Africa a pan-African employer of choice and develop and invest in our employees to enhance the leadership skills across the Group.

A return on equity in the range of 18% - 20%

Top three revenue position in our five key

markets (Botswana, Ghana, Kenya, South Africa and Zambia)

A cost-to-income ratio in the low 50s

A revenue share of 20 - 25% from outside

South Africa

Barclays Africa

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Chairman’s Statement

Iampleasedtointroduceour2014annualreportwhichprovidesanoverviewofourperformanceandtheactionswearetakingtostrengthenthesustainabilityofourbusiness.

2014 was a redefining moment for Barclays Bank of Botswana.We entered it with a clear focus to turn around our businessperformance.Inaworldwherebankingisincreasinglydigital,ourstrategywastodeliverinnovativetransactionalbankingsolutionswhilecontinuingwithresponsiblelendingtoourcustomersandclients.Despitewhatcontinuedtobechallengingmacroeconomicconditions,coupledwithmargincompressionduetoalowinterestrateregime,Iamproudtosaythatwedeliveredonourstrategyand reported good growth in our operating profit and earningspershare.Weachievedthisthroughtheconsistentapplicationofourstrategyandalsomadesignificantprogress intransformingthebusinesstostrengthenourfuturegrowthpotential.

Strong governance is integral to the long-term success of theBankandtheBoardiscommittedtoensuringthatthebusinesscontinuestobegovernedandmanagedwithopenness,honestyand transparency. Our Governance Report in the latter part ofthisreportsetsouttheapproachwetookandhighlightsthekeyfocusareasoftheBoardin2014.Inmy2013report,Ialludedtothe changes in the Board composition, which included the onboardingofthenewManagingDirector,ReinettevanderMerwe.I continue to be impressed by the strength and diversity ofthe Board. We have a very strong balance of skills, knowledge,experience and diversity among our Directors. Critical to thesuccessofthebusinessisensuringwemaintainthisbreadthandbalanceofskillstosuitboththeexistingshapeofthebusinessandtosupportourfuturegrowth.Equallyimportant,isensuringthattheBoardhasabsolutelytherightprocessesinplacetomaintainefficiencyandeffectiveness,andthatitcontinuestohelptosettheagendaforthebusinesstosucceedbothintheshortandlongterm.Thiswillremainapriorityin2015andbeyond.

“Our goal is to be the ‘Go-To’ bank for our customers and clients. Customer service is central to our strategy and is equally critical in retaining existing and acquiring new customers and clients.”

Chairman’s Statement Managing Director’s Review Country Management CommitteeReviews

Rizwan DesaiChairman

Return On Equity improved to 23.2%

P100 million dividend approved by Board

Best Domestic Cash Management House 2014 - Euromoney


Continued focus on customer serviceOurgoalistobethe‘Go-To’bankforourcustomersandclients.Customer service is central to our strategy and is equallycritical in retaining existing and acquiring new customers andclients. We are cognisant of the fact that today’s customer ismore discerning and demands better and convenient serviceas a basic right. Businesses have to pay particular attention toever-changing customer needs and expectations. This calls foralignment of business operations with the expectations of thecustomer. Insomecases,thiswillcallforsignificantcapitalandhuman investment. In 2014, we witnessed our customers andclients becoming more sophisticated as evidenced by complextransactions that we facilitated for our customers who wereexpanding their businesses into the region. Our business isconstantlyevolvingtoadapttochanges inclientandcustomerbehaviour,technology,regulationandthecompetitivelandscape.Ourabilitytosupportcustomersandclientshingesonourabilityto reach themthroughchannels thataremostconvenientanduseful to them. Underpinning our purpose and our customerservice philosophy are our values; Respect, Integrity, Service,Excellence and Stewardship (RISES), which are a primaryintegratorofourbusinessguidingourdecisionsandbehaviours.We measure our performance against our strategy and valuesthroughourbalancedscorecardwiththefollowingcomponents(Customer,Colleague,Citizenship,ConductandCompany).

CustomerSustainable success in banking is founded upon meetingthe expectations of the market. Fundamentally, this meansdeliveringtransparentandfairoutcomestoourcustomers.Thissynchroniseswithourgoal,whichistohelppeopleachievetheirambitions–intherightway.

WiththebenefitofbeingpartofthewiderGroup,wehavethecapabilitytoprovideinternationalcapitalmarketsaccessforourlocalclients.Increasinguseoftechnologyischangingthewayinwhichcustomerschoosetodotheirbanking.Theenhancementof customer experience through our services and productsthereforeremainsatoppriority.Iampleasedtosaythat,in2014,wemadesignificantinvestmentsininnovativeprojectstodeliversolutionsandtechnologiesthatenrichthecustomerexperience.These included cutting edge technologies such as intelligentATMs, paperless banking for cheque and cash transactions toimprove turnaround time and remote account opening whereaccountscanbeopenedremotelyatcustomerpremises.Wealsoopenedamodern3-in-1BranchatAirportJunctioninGaborone.

WeareawareoftheGovernment’seffortstodiversifytheeconomythrough agriculture and other sectors. To this end, we haveestablished an Agri-business unit within our business bankingdepartment. Our strategic thrust here is to finance groundbreakingagriculturedeals. Inourquesttohelpfarmersachievetheir ambitions in the right way, we partnered with a numberof farmers associations. We will continue combining our globalproductknowledgewithregionalexpertiseandourextensiveandwellestablishedlocalpresencetoserveourcustomersandclientsevenbetter.

Ourbusinessisconstantlyevolvingtoadapttochangesinclientandcustomerbehaviour,technology,regulationandthecompetitivelandscape.

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CitizenshipBeing a responsible corporate citizen is an integral part ofdeliveringonourstrategy. It isnotonly reflected inourculture,but also in our approach to governance and our efforts to betransparent in and accountable for everything that we do. Ourcommitmenttoservethelocalcommunitiesinwhichweoperateisstrongerthanever,asdemonstratedbyourcontinuedeffortstowards sustainable development. We were recently awardedtheVision2016awardinrecognitionofourcontributiontowardsattainmentoftheGovernment’sVision2016goals.

Financial inclusion is a strategic imperative in delivering ourcitizenship agenda. In 2014, over 80% of our colleagues tookpart in colleague volunteering, providing money management/financial literacy to schools and communities at large. Throughvarious projects that the Bank funds, we touched the lives ofover 7,000 youth by imparting employability, enterprise andmoney management skills. 63% of these were trained onentrepreneurship skills. 2014 key highlights included our abilityto combine youth development and conservation through ourpartnershipwiththeKalahariConservationSociety.

ConductWe aim to proactively develop and foster a culture of healthyborrowing. This is done through customer education initiativesand product specific support. We continued to be responsiblein our lending as we reviewed our lending framework in theRetailbank, implementingstricteraffordabilityassessmentsandmonitoredourperformancethroughmetricssuchasthe“treatingcustomers fairly” outcome index. This was achieved throughrationalisingourdebtserviceratiotoensurethatweweregivingthe right loan amounts to the right customer segments. Wecontinuetostrengthenmeasurestocountermoney laundering,fraud,briberyandcorruption.Welaunchedarevisedanti-moneylaundering, sanctions and anti-bribery and corruption trainingtoallourcolleagues. Integraltoconduct isethicsmanagement.We continue to build the capacity of management to lead theway in driving high standards of ethics. We remain ever awareandvigilantthatweneedtoraiseawarenessandeducateallouremployeesontherightbehaviours.

CompanyEffective engagement with shareholders is an important partof my role as Chairman. In this respect, I was pleased to meetanumberofshareholdersatlastyear’sAnnualGeneralMeeting(AGM),andlookforwardtoonceagainmeetingmanyofyouatthis year’s AGM. I am also, of course, available throughout theyear to meet our larger shareholders on an individual basis. Inaddition, I attended our investor presentations during the yearto listen to shareholders’ questions and hear our managementteam’sresponses.

ColleagueInvestinginourpeople is,withoutadoubt,themost importantinvestment that we make for the future of our business. Thetraining, development and especially the safety, health andwellbeing of all our employees is vital to the success andsustainabilityofBarclays.IampleasedtoreportthatthroughtheOneAfricastrategywesentsomeofourcolleaguesonjobswapstoSouthAfrica,Mozambique,Tanzania,Zimbabwe,Zambia,theUnited Kingdom and the United States. We have also enrolleda number of colleagues on the Barclays Pan Africa Graduateprogramme.Overtheyears,asIhaveengagedwithmanyofouremployees,Ihavecontinuedtobedeeplyimpressedbytheskills,dedicationandenergyofourpeople,andtheirrelentlessfocusondeliveringourstrategy.OnbehalfoftheBoard,Iwouldthereforelike toextendmysincere thankstoourcolleagues inBotswanawhohaveworkedtirelesslytoputourcustomersattheheartofeverythingtheydowithprideanddedication.

The One Africa strategy has also provided opportunities notonly forcolleaguesbutforExecutiveandNon-ExecutiveBoardsmembers to interact and share ideas. Botswana was privilegedto host the 2014 Barclays Africa Chairmen’s conference whichattracted Chairmen and Managing Directors from the BarclaysAfricacountriesandwasahugesuccess.

IamexcitedbyourmoveintoanewHeadOffice,whichboastsawellnesscentreforcolleaguesandenergyandwaterconservationtechnologies.ThiswillseeBarclaysreducingitscarbonfootprintandoverallimpactontheenvironment.


Investinginourpeopleis,withoutadoubt,themostimportantinvestmentthatwemakeforthefutureofourbusiness.


Taking into account our strong capital position and earningsperformance, I ampleased tosay that theBoardhasapprovedadividendpayoutofP100million,subjecttoregulatoryapproval.

Looking aheadAlthoughwehavemetourkeycommitmentsfortheperiod,weremainfocusedonourjourneytobethe‘Go-To’bankinBotswana.Wewillcontinuetomakestrongprogresstowardsachievingourlong-termgoalsandindeliveringhightechnologyproductsandservices to our customers. Despite the economic headwinds,we believe that the key enablers of our strategy, together withour ongoing investment in technology and product innovation,willsupportthecontinuedgrowthofBarclaysBankofBotswanaLimited in the years ahead. We will focus on refurbishing ourbranchestoimprovethecustomerexperience.Wewillcontinuetoalignoursegmentvaluepropositionstoourcustomers’needs,focusingonmining,tourism,publicsectorandSMEstodriveourcorporateandbusinessbankingportfolios.

AsBarclaysweareuniquelypositionedto- Helpcorporateandprivatebankingclients;- Supportthepublicsector,forexample,theGovernment’s EconomicDiversificationprogramme;- Drivegrowthofkeysectorssuchasmining,Tourismand Agricultureand;- HelpourRetailcustomersinBotswana.

2015will thereforebeanotheryearwhereweredefinebanking.Welookforwardtoit.A Word of ThanksOverthelastyearwehavecreatedfurthervalueforourcustomersandshareholdersinchallengingconditions.Iwouldliketothankourcolleaguesforalltheirhardwork.IwouldalsoliketothankmyfellowBoardMembersfortheirunparalleledsupport.IthasbeenaprivilegetocontinuetoserveasChairmanoftheBoardandIamconfidentthattheBank’scontinuedfocuson transformingthebusinesswilldrivesustainablegrowth.

WecontinuedtoberesponsibleinourlendingaswereviewedourlendingframeworkintheRetailbank,implementingstricteraffordabilityassessments;andmonitoredourperformancethroughmetricssuchasTreatingCustomersFairlyoutcomeindex.


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Managing Director’s Review

Strategic ContextInmyreportlastyear,Ihighlightedthatwelaidoutourfive-yearstrategyandembarkedonajourneytotransformthebusiness.Iampleasedto report thatour2014performancedemonstratesthe substantial progress we have made in taking this strategyforward.Ourgoodperformancecanbeattributedtothesupportwereceivedfromvariousquarters,notablyourcustomers,clients,stakeholdersandcolleagues.Iwouldliketothankeveryonewhocontributed to these excellent results which demonstrate thegreattalentandprofessionalismthatisembeddedintheBank.

Our transformation programme has three components:Turnaround, Return to Acceptable Numbers and SustainableForward Momentum. 2014 was the year in which our strategyreally started to work. Our performance shows that we haveturnedthecornerandourstrategy implementation ison track.This required focus on a number of strategic areas: findingefficientandconvenientwaysofservingourcustomers;improvingthe efficiency of the operating processes; providing relevantsolutionstoourcustomers;developingourpeopleandbuildingthebrand.Aswecontinuetoexecuteourstrategy,myprioritywillbetodrivethedeliveryof thisvision intheyearstocome.Ourstrategiccommitmentswere:Tobeinthetopthreebyrevenueinourmarket;aCost-to-Incomeratiointhelower50s;anddeliveryofReturn-on-Equity (ROE)ofbetween18%and20%.Wehavesurpassedsomeofthesecommitments;weareplacedsecondbyrevenueinourmarketandachievedanROEof23.2%.

Economic ContextThe economic environment was stable with GDP growthestimatedat4.4%in2014.ThiswasdrivenlargelybyTransportandCommunication;Trade,HotelsandRestaurants;andMining,which contributed 7.4%, 7.1%, and 4.5% respectively. HeadlineinflationremainedwithintheCentralBank’sobjectiverangeof3–6%duringtheperiodunderreview.The2015outlookremainspositive as GDP is expected to continue growing, though at aslowerpacewithagrowthestimateof4.9%onthebackofalowinflationary environment benefiting largely from weak domesticdemandandareductioninfuelprices.

“Our results demonstrate the great talent and professionalism that is embedded in the Bank - a great strength for us in taking the business forward.”


Reinette van der MerweManaging Director

Profit Before Tax up 5.6%

12.8% growth in Net Fee and Commission Income

1,200 colleagues


Business ReviewOurgoalistobecomethe‘Go-To’bankforourcustomers,clientsandcolleagues.Our2014financialperformancewasdeliveredinanoperatingenvironmentcharacterisedbyarelativelylowinterestrate regime, diminishing disposable incomes as householddebtballooned, increasedcompetition,and lowdepositgrowthwhencomparedtocreditgrowth.Despitethesechallenges,ourstrategicimperativescontinuedtobeourguidingprinciplesaswesoughttogrowthebusiness.

Our strategic priorities were: to grow our Corporate and SMEbusinesswhileinvestinginourpeopleandleadership;selectivelygrowtheRetailBankingsecured lendingportfolio;andoptimiseour balance sheet, while ensuring that we continually invest inthebusiness.

With this as our goal, our Profit Before Tax increased by 5.6%.Wealso increasedReturnOnEquityaswereturnedtopostingacceptable numbers. Net fee and commission income roseduringtheyearby12.8%.Theseachievementswereattainedastransactionalactivityincreasedduetogreaterfocusonengagingand involving our customers, coupled with higher insurancecommissions.

Retail BankingKey highlights in the Retail Business were Asset growth andgrowth inNon-Interest income.AssetgrowthcamefromLoansandAdvancesunderpinnedbystronggrowthinMortgages.AsaresultRetailAssetgrowthwas9.6%.

In my 2013 report, I mentioned our commitment to improvingour incomemixaswellascustomerservicethroughourdigitaloffering and improving our overall customer experience. I amdelightedtosaythatwerolledoutnewproductinnovationssuchasCash-Send,cashdepositsatsomeofourintelligentATMs;andRemote Account Opening. We also successfully transitioned toPaperlessBankingacrossallourbranches.

Corporate and Investment Banking A 17.5% growth in Loans and Advances to customers resultedin Corporate and Investment Banking (CIB) increasing itscontribution to the overall business performance. Driving thissolid performance has been lending to support our regionallyoutbound Botswana corporates. We laid a solid foundationthrough segmenting our business and aligning the customervalue propositions to these segments. Our wide footprint andchannelstrategyplayedtoouradvantageaswesawtransactionalactivitygrowby25%,leadingtoareductionininterestexpenseof23%,ultimatelyresultinginanincomegrowthof39%inCIB.

Balanced Score CardOur balanced scorecard is supported by the 5C’s – Customer,Colleague,Citizenship,ConductandCompany.

Customer Weremainresoluteinpursuanceofourgoaltobecomethe‘Go-To’bankforourcustomersandclientsacrossallsegments.Webelievethatourcustomer-centricapproachcanonlystrengthenourrelationshipswithcustomers.Ourinnovativecradle-to-graveapproach ensures that we understand the needs of each andeverycustomer– individualandcorporate;andcanprovidetherelevantfinancialsolutionsforeachoftheirlifestages.

A17.5%growthinLoansandAdvancestocustomersresultedinCorporateandInvestmentBanking(CIB)increasingitscontributiontotheoverallbusinessperformance.

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Infulfilmentofourcustomerphilosophy,our2014investmentswerefocusedondeliveringcustomer-centricbankinginnovations.Wesimplifiedourbankingprocesses,makingusmoreaccessibleandeasytodobusinesswith.Welaunchedanumberoftechnologicaland digital innovations. Among these were financial inclusionbankingsolutionssuchasCash-Send,amoneytransferserviceavailableonourintelligentATMsandmobilephoneswhichenablecustomerstosendmoneytoanyone,includingtheunbanked.Ourcustomershavebeenquick to takeadvantageof thiseasyandconvenientservicetosendmoneytotheirfamiliesinremotepartsof the country where Barclays is the only bank. In addition, welaunchedaCashDepositserviceonATMs.Fortheconvenienceofnew-to-bankcustomersandcustomersincreasingtheirproductholding,wewerethefirstbankthatenabledcustomerstoopencurrentandsavingsaccountsremotelyusingiPads,removingtheinconvenienceofhavingtocomeintoourbankinghallstoopenanaccount.Towardstheendoftheyearunderreview,wealsorolledoutPaperlessBankingbyeliminatinguseofcashwithdrawalandcashdepositslipsacrossourbranches.Thisnotonlyprovidesanimproved customer experience, but it also further reduces ourcarbonfootprint.

All these innovationswereproofpointsofourpurpose: ‘helpingpeople achieve their ambitions in the right way.’ We launchedthe ‘Prosper’ campaign which gave customers an opportunitytoreflectonwhattheword‘prosper’reallymeanstothem,thusgivingusfeedbackonthingsthatmattertothemandhowwe,asabank,canhelpthemachievetheirambitions intherightway.Wearegratefulforthefeedbackthatwereceivedaswecontinuetorolloutmorecustomer-centricproductsandservices.

ColleagueIwouldliketopaytributetomycolleagueswhoarethefoundationofourbusiness–ourmostimportantassetaswerelyonthemtoserviceourcustomersandclientseffectively.Maintainingandnurturingourpeopleisacorefocusandiscentraltoourfuturesuccess.

We adopted a Human Resource (HR) strategy anchored bythreepillars:People,CultureandLeadership.Ourapproachistoposition leadershipattheforefrontofourHRstrategy,ensuringthat we make Barclays a great place to work for and that ourpeopleareproudlyBarclays.Wecontinuedwithourrecruitmentdrive, filling critical vacancies and up-skilling talent through jobswapsandtheprovisionoftechnicaltraininginspecialisedareasofthebusiness.WehavealsomadeaconcertedefforttoattractyoungtalenttotheBank,astheyarethefutureofourbusiness.

In linewithourOneAfricastrategy,wewereproudtohosttheBarclays Pan African Graduate Summit which attracted over200 graduates from the 12 African countries in which Barclayshasapresence. Inadditionto learning,theeventallowedustoshowcaseBotswanatotherestofAfrica.

Wealsodevelopedaleadershipandcolleaguecurriculumforallstaffandleaders,whichwebelievewillenableustoretaintalentandcreatearobustsuccessionplanningprogramme.

We worked hard at improving the diversity of our work forcewhileensuringweremainthebankofchoiceforthebesttalentinBotswana.Onestrategy istooffercolleaguesanopportunitytogrowandgainexperience theywouldnotbeable to receivein their current role, and job swaps to countries like Zambia,Mozambique, South Africa, Tanzania and the USA offer suchopportunities.In2014wesentseveralofourtalentedcolleaguesonjobswapstothosecountriesandwewillcontinuethispracticeinthefuture.

CitizenshipBarclays Bank of Botswana continues to be a developmentalpartner in Botswana through our Citizenship agenda and weconstantly look for innovativeways toserveourcommunities. IamproudthatthisworkwasrecognisedbyGovernmentwhichawarded us the Vision 2016 Long Term Vision award for oureffortsinsustainabledevelopment.

ThroughourCitizenshipagenda,weactivelymanageourimpactonthecommunitiesweserveandourenvironment.Forexample,we developed an innovative approach to extending financialliteracy to villages and the investing public at large through aradioprogramme“MadiMajwana”,whichalsoincludedaseriesof road shows to areas that are under-serviced. We partnered


PaperlessBankingnotonlyprovidesanimprovedcustomerexperience,butalsofurtherreducesourcarbonfootprint.


with the Kalahari Conservation Society to launch the YouthDevelopment and Rhino Conservation Project which not onlycreates employment opportunities for the youth, but alsoempowerscommunitiestoprotectwildlifeandgenerateincomeinasustainablemanner.Asaresult,theyareabletoincreaseandbettermanagetheirincomes.

In the third quarter of the review period, we moved into ournew “green” Head Office, which incorporates environmentalconservationtechnologiesaimedatreducingourcarbonfootprintandthuscontainsourimpactontheenvironment.

We have also been contributing to economic growth throughstrategicpartnerships.WepartneredwithUSAIDonaUS$15millioncreditguaranteeschemefortheunderservedsmallbusinesses.IntheAgriculturesector,wepartneredwithSandveldt,GhanziandPandamatengafarmersinourefforttosupporttheGovernment’sEconomic Diversification programme. We will continue to forgesuchpartnershipsin2015aswesupportcapacitybuildingefforts.

ThroughtheBarclaysF.GMogaeScholarshipFund,wecontinuetoprovidescholarshipstoyoungBatswanapursuingstudiesthatwillallowthemtocontributetowardssustainabledevelopment.During the year under review, 10 schools benefited from oursponsorshipoftheBarclaysKabelanoCharitysoccertournamentwhereeachoftheschoolswalkedawaywithP50,000.

Conduct The way we do business is anchored in our values: Respect,Integrity, Service, Excellence and Stewardship (RISES). Wecommittoserveallourstakeholdersinamannerthatreflectsallour values. We are determined to be a values-led organisation.Wewanttoberecognisednotjustforwhatweachieve,butthewayinwhichwegoaboutourdailybusinessandwhetherwehelppeopleachievetheirambitionsintherightway.

CompanyAs a company, we remain committed to delivering acceptablereturnstoourshareholders.Barclaysremainswellcapitalisedwitha capital adequacy ratio of 18.4%. This strong capital positionsupportsouranticipatedgrowthacrossallbusinesssegments.

Looking AheadLookingahead,wewillcontinuetobuildonthesolidfoundationwelaidin2014.Werecognisethattherearelikelytobeshort-termeconomicchallenges,butthefundamentalsforlong-termgrowthinBotswanaremainstrong.

Wewillcontinuetorefineourstrategy,byforexampleoptimisingourbalancesheet. WearefocusedonRevenuegrowthdespitethechallengingandverycompetitiveenvironment inwhichweoperate.

Ourfuturefinancialperformancewillhingeonhoweffectivelywegrowourtoplinerevenue.Oursuccesswilldependon:

• CorporateandBusinessBanking:Wewillkeepimprovingourbusinessbypickingupthepaceingrowingthesebusinesses.We will also continue to add value to our clients who areexpandingacrossAfricabyfollowingthemintomarketswherewecanleverageourcompetitiveadvantageofbeingonebankin Africa. Our main priority, however, will be to consistentlyprovidemorevaluetoallourclients.

• GrowRetaillendingbook:WewillcontinuetogrowRetailBanklendingwithaskewtowardssecuredlendingonthebackoftheratecutof100bpsthatwasannouncedinFebruary2015.Wewillcontinuetodiversifyourrevenuestreamsinresponsetomargincompressiononlendingproducts.

• Investments: We will continue to invest for the futurethrough the launch of more innovative products, leveragingnew technologies to drive non-interest revenue, enhancingcustomer convenience, as well as improve our operationalefficiencies.Theinvestmentswehavemadeandcontinuetomakearegearedtowardsthis.

• CustomerService:AsBarclays,wehaveanextremelystrongbrand and a solid and growing customer and client base inthelocalmarket.Wearedeterminedtoimproveservicetoourcustomersandclients.

AppreciationIamexcitedaboutthefutureandtheopportunitiesthatlieahead.IwouldliketothankmyBoardandColleaguesfortheircontinuedsupportandunwaveringdedicationtoourCustomersandClients.Finally I wish to thank all our Customers and Clients for theirsupport.Mypurposeistocontinuetoimproveourservicetoyou.


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LipalesaMakepewasappointedFinanceDirectorforBarclaysBankofBotswanainFebruary2012,havingjoinedtheBankasFinancialController in2005. She is a Chartered Certified AccountantbyprofessionandisanAssociatememberoftheBotswana Institute of Chartered Accountants(BICA) and a Fellow Chartered CertifiedAccountant (FCCA). Prior to joining the Bank,shehasheldseniorpositionsatCapitalSecurities(Pty)LtdandKPMG.LipalesahasservedontheBoardofTrusteesfortheBarclaysPensionFund,CapitalSecuritiesandhasbeenChairmanoftheBotswanaStockExchange.Shecurrentlysitsonthe Boards of Southview Pty Ltd and SechabaBreweriesLimited.

Lipalesa MakepeFinance Director

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Jeffrey joined Barclays in June 2010 aftercompleting an MBA programme in the UnitedStates. He assumed the Botswana Chief RiskOfficerpositiononaninterimbasisinMarch2014andwasappointedtotheroleinFebruary2015.PriortojoiningtheBarclaysBankBotswanateam,hewasAssociateCreditDirectorsupportingtheAfrican Corporate Credit Function from Barclayshead office in London. His credit experienceincludesassignmentsinGhanaandMozambiqueas interim Corporate Credit Director and ChiefRiskOfficerrespectively.

Jeffrey DavisChief Risk Officer

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Reinette was appointed Managing Director ofBarclays Bank of Botswana in 2013. She hasmore than 20 years’ experience in the bankingindustry, having started her career at FirstNational Bank South Africa on an ExecutiveTraineeProgramme.ShelaterjoinedtheInternalAuditteamwhereshewaspromotedtoHeadofInternalAudit.In2007,shejoinedAbsaandhelda number of key roles including: Head of AuditRetailandCommercial,ChiefInternalAuditor,andChiefofStaffatAbsaPrivateBank.PriortojoiningBarclays Bank Botswana, she was Chief InternalAudit Executive for Barclays Africa, responsibleforinternalauditorsacrossAfrica.

She isaCharteredAccountantCA(SA)withanM.Com in Business Management. She is alsoa qualified CFP (Certified Financial Planner).ReinettewasamemberoftheIAEPBoard(InternalAudit–UniversityofPretoria,SouthAfrica)anda non-executive member of the HSRC (HumanSciences Research Council) Audit Committeein 2014. She has worked with the University ofPretoria,GIBSBusinessSchool(SouthAfrica)andErasmusUniversity(Amsterdam)onanMPhilforChiefInternalAuditors.


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Country Management

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Lesley joinedBarclays in2003asHeadofCashManagementandhasheldvariousrolesatlocaland Regional level. She was appointed InterimCorporate Director inNovember2013.She isaseasoned banker, with 23 years of experiencegained from working for reputable internationalbanks.SheholdsaBachelorofCommercefromUniversity of Botswana. Lesley has successfullycompleted the Executive DevelopmentProgramme with the University of StellenboschBusiness School where she was awarded theDirectors Award for Best Student 2011 for herclass.Shehasalsocompletedvariousleadershipprogrammeswithrenownedinstitutions.

Lesley BradleyCorporate and Investment Banking

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Racheal Mushaike is Head of Marketing andCorporate Relations. She holds a Masters inBusiness Leadership from University of SouthAfricaandhasextensiveexperienceinmarketing,communications, strategy and corporatetransformation. She has held various positionsat Stanbic Bank, UBA, and Standard CharteredBank, including the roles of Regional Head ofMarketing,DivisionalHeadofRetailProductSalesas well as Head of Product Marketing Strategy.Rachealhasworkedinvariousmarketsacrossthecontinent, includingSouthernAfrica,EastAfricaandWestAfrica.

Racheal MushaikeHead of Marketing and Corporate Relations

9

Kgotso joined Barclays in November 2012. Priorto that, he had worked for two years for FirstNationalBankand forStandardCharteredBankfor seven years where his last role was Headof Global Markets and Co-Head of WholesaleBankinginTanzania.Hehasextensiveexperiencein the Treasury environment, having workedin the back office, middle office and the frontoffice in different geographies. Kgotso has heldvariouspositions inTreasuryFrontOffice-fromCorporate Dealer, Head of Assets and LiabilitiesManagement,HeadofRatesandCreditTradingandultimatelyasHeadofGlobalMarkets.Kgotsoholds a BCom degree from the University ofMelbourneandiscurrentlypursuinganExecutiveMaster in Positive Leadership and Strategy.He has completed several different internalleadershipprogrammesthroughouthiscareer.

Kgotso BannalotlheTreasurer and Head of Markets

6

Brighton joined Barclays Bank of Botswana asConsumer Banking Director in 2014. He hasmorethan16yearsexperienceinRetailbankingat middle and senior management roles withfocusonretaillendingproducts-personalloans,mortgages,vehicleloansandcreditcards-creditrisk and credit operations. He has extensiveknowledgeoftheAfricanmarketshavingworkedin 4 other countries, namely: Zimbabwe, SouthAfrica,KenyaandNigeria.PriortojoiningBarclaysBankofBotswana,hewasHeadofRetailLendingforBarclaysAfrica.HehasanEconomicshonoursdegreefromtheUniversityofZimbabwe.

Brighton BandaConsumer Banking Director

7

Titose is the Head of Compliance. Titose holdsa BA in Humanities from the University ofBotswana and Msc in Strategic ManagementfromUniversityofDerbyintheUnitedKingdom.TitosehasextensiveexperienceinOrganisationalStrategic alignment, Risk Management,Performance and Financial ManagementChange as well as People Management. Shepreviously held several senior positions atStandardCharteredBankincludingClusterHeadof Operational Risk - Southern Africa, Head ofOperational Risk and Head of Marketing andBranchManagement.

Titose MusaHead of Compliance

10

Kealeboga joined Barclays Bank Botswana as aLegalAdvisorin2012andwasappointedinterimHead of Legal in October 2013. Between 2000and2006hewasinprivatepracticespecialisingin commercial and civil litigation, corporate andlabour law. Whilst in private practice, he alsotaughtBankingLaw,CompanyLawandContractLawattheUniversityofBotswana.PriortojoiningBarclaysBankBotswana,hespent6yearsintheUnitedKingdomwhereatvarioustimes;hewasa Senior Lecturer in Law (Commercial Law) ata London University as well as an InternationalLawyer(Finance)atanInternationalCommercialLaw firm in London. He was admitted as aSolicitor of the Supreme Court of Englandand Wales in 2009. He holds an LLM from theUniversity Of Cambridge, UK and a DPhil fromOxfordUniversity,UK.

Kealeboga N. BojosiInterim Head of Legal

11

Ediretse Ramahobo is Acting Chief OperationsOfficer. He joined Barclays in 2013 as DeputyChief Operating Officer responsible forPerformance Improvement and the Transformagenda in line with One Africa strategy. Hehas worked extensively in the Consumer andOperations shops at Standard Chartered Bankover the last 13 years. He is a member of theBankofBotswanaNationalPaymentsTaskForce(NPTF)andtheBankersAssociationofBotswana(BAB) Technical Committee, which he alsochairedforthelast2½yearsupuntilDecember2013, driving key projects such as the ChequeTruncationand ImagingSystem(CITS)and theSADC Integrated Regional Electronic SettlementSystem (SIRESS) cross-border paymentsinitiative.WhilstatStandardChartered,Ediretseserved as the Chief Information Officer for the5 ½ years, looking after the Operations andTechnologyteams.Hehaspreviouslymanagedkey technology projects, including regionalimplementations, management of outsourcedand right-shored vendors and functions bothin Africa and abroad, bank-wide transformationagendasaswellasendtoendbankingoperationsmanagement.HeholdsaBADegreeinAccounts&EconomicsfromtheUniversityofBotswana.

Ediretse RamahoboActing Chief Operating Officer

8

Richard joined Barclays in November 2012 asHuman Resources Director. He has experienceinbothCorporateAffairsandHumanResourcesManagement. From 1998-2004 he workedwith the United Nations Secretariat in NewYork and has held positions of Deputy Chief ofCivilian Personnel Affairs at the United NationsPeacekeeping Mission in the DemocraticRepublic of Congo and Coordinator ofRecruitmentintheDepartmentofPeacekeepingOperations. Richard joined Botswana LifeInsuranceLimitedasAssistantGeneralManagerfor Human Resources, in 2005. He had stintsat Diamond Trading Company, BotswanaTelecommunications Corporation in 2009-2011 as Group General Manager CorporateAffairs and Stanbic Bank Botswana as Headof Human Resources respectively. He holds aBachelorofArtsDegreeinEconomicsandPublicAdministration, Diploma in Human ResourcesManagement, Associate Diploma in Bankingand MSc in Human Resources Management &LabourRelations.

Richard Bulayani MalikongwaHead of HR

5

12

Financial Director’s Review

Overview of 2014Weregisteredgoodperformancein2014andthiswasachievedagainst a challenging environment, not least of which are theevolving market liquidity conditions and reducing interest rateenvironment.Deliveringgrowthagainstthisbackdropmeantwehad to make solid progress in our focus areas to outweigh theimpactofthesechallenges.Earningspersharegrewby15.8%andProfitBeforeTaxincreasedby5.6%toP424.8million.Thelargestdriverofourearningsgrowthwaslowerimpairmentcharge.

Statement of Comprehensive Income Improving our revenue trajectory continues to be a key priority,inparticulargrowingcontributionofnon-interestincometototalincome.In2014,netinterestincomegrew1.8%,reflectiveofanenvironment of lower interest rates and reduced liquidity. Netfee and commission income increased by 12.8% due to highertransactionalvolumesandincreasedcontributionfrominsurancecommissionincome.Netotherincomedeclinedby13.1%,mainlyduetolowergainsininvestments,aswedisposedofourequityinvestmentinVisasharesduringtheyear.However,theincomeintreasurysalesandmarketmakingactivitiesincreasedby23.7%duetoincreasedtransactionalactivity.

Our credit impairment charge improved significantly by 24.2%to P150.4 million. This was a result of credit strategy changes,whichsoughttoimprovetheperformanceofnewbookings;andimprovedcollectionsexecutiononourConsumerportfolio. Ourcreditlossratioimprovedto1.8%from2.7%.ThecreditlossratiofortheConsumerbookimprovedto2.2%from3.1%,withnon-performingloansratiofallinginthereportingperiodto5.9%from6.3%.Non-performingloansimpairmentcoverageratioimprovedto80.0%from76.1%.Wecontinueto invest inourcolleaguesandreducesenior levelvacancies.Asaresult,staffcosts increasedby15.1%toP374.8million. We continue to focus on strategic investments as westrivetomanageoverallcost.Ourcostcontainmentinitiativesarebearingfruit,withadministrationandgeneralexpensesdecliningby6.1%.Underlyingadministrationandgeneralcosts,excludingthe once-offs, increased by 1.1%. We re-negotiated contractswithourmajorsuppliersandre-engineeredourinternaloperatingprocessestocontaincosts.Asaresult,cashintransitexpensesand travel and accommodation declined by 29.7% and 14.4%respectively. This resulted in a cost to income ratio of 55.0%reflectingourflattotalincome.

“We continue to focus on strategic investments as we strive to manage overall cost.”

ReviewsBusiness


Earnings Per Share up 15.8%

Loans and Advances to Customers up 10.8%

Capital Adequacy Ratio of 18.4%

Financial Director’s Review Retail Banking TreasuryCorporate, Investment & Business Banking Risk ReviewCitizenship Report Human Resources Review Board of Directors Corporate Governance


Statement of Financial PositionWe continued to grow solidly in various targeted areas. LoansandAdvances tocustomers increasedby10.8%toP8.1billion,with Retail loans growing by 9.6% on the back of our securedlendingandtermloans;andCorporateloansincreasingby17.5%.We focused on foreign currency lending which is not impactedbymargincompressioninthelocalmarket,aswesupportedourregionallyoutboundBotswanacorporates.

This growth was supported by senior debt issuances from ourrecentlylistedP2billionMediumTermNoteProgrammetomatchtenure of our longer dated assets, increased deposits to banksand P60.3 million increase in balances with related companies.ThiswasoffsetbyP317.3millionlowerdepositsduetocustomers,as we focused on driving core balances, resulting in a 19.3%declineinourinterestexpense.Weweredeliberateinmanagingourcostoffundingandreducingwholesalefundingtoarequiredminimum.

Ourshareholders’equityincreasedby11.2%toP1.5billion,withRoEimprovingto23.2%.

CapitalTotal risk-weightedassetsgrewby11.2%toP7.9billion, largelydue to growth in loans and advances. We remain capitalgenerative,asretainedearningsincreasedourCoreEquityTier1ratioto18.1%.Ourtotalcapitaladequacyratiowas18.4%whichwas comfortably above the minimum supervisory limit of 15%andissufficienttosupportourgrowthplans.

Key Figures:

Earningspersharefromcontinuingoperations(thebe)

Revenue(P’m)

Costtoincomeratio(%)

Dividendpershare(thebe)

Feeincometototalrevenue(%)

31.4

23.5

1,271

21

53

51.9

23.5

1,312

21

47

41.5

23.5

1,277

23

55

201420132012

Returnonequity(RoE)(%)

Loansandadvancestocustomers(P’m)

Depositstocustomers(P’m)

19.5

7,337

9,282

32.9

6,297

9,166

23.2

8,133

8,964

In2014,netinterestincomegrew1.8%,reflectiveofanenvironmentoflowerinterestratesandreducedliquidity.Netfeeandcommissionincomeincreasedby12.8%duetohighertransactionalvolumesandincreasedcontributionfrominsurancecommissionincome.

14

Corporate, Investment & Business Banking

2014wasanexcitingyearforourCorporatebusinessaswere-definedourapproachinthewaywedobusinessinthismarket.We developed compelling solutions that were aligned to theneeds of our customers and clients, contributing positively totheirgrowth.WecontinuetoseethebenefitsoftheOneAfricastrategywhichgaveusacompetitiveadvantageaswesupportedour customers and clients to expand into regional markets.Throughourrobustcashmanagementservice,wewereawardedthe‘BestCashManagerinBotswanain2014’byEuromoneyCashManagement Survey, an honour which we are truly proud of.Duringtheyearunderreview,wefocusedonre-segmentingourbusiness into three main segments, Corporate and InvestmentBanking (CIB), Business Banking and Enterprise Banking. Thisallowed us to provide bespoke solutions and services to meetthespecificneedsofourcustomers,particularlythosefromthePublic Sector, Financial Institutions, Global Corporates, LargeLocal Corporates, and Global Development Organisations. WeredefinedourapproachtoBusinessbankingforSMEsacrossthecountry.

Thisapproachhasenabledustoprovidetailor-madesolutionstoclients,widenouroutreachandprovidepersonalisedservicethusdeliveringtherightfocusandcollaborationacrosstheBank.Wewereabletoimproveouroperationalefficienciesandincreaseourvisibilityinthemarket.

The CIB One Africa strategy focuses on creating a platform forclients to tap into different markets. This created an increaseddemand for capital in2014,asourclientsexpanded intoAfricaandinvariablychoseusastheirpreferredfinancialpartner.

We deliberately adopted an asset led strategy to repositionourselves.Thisdeliveredastrong17.5%growthinassetsacrossmultiple structures, unchartered industries, currencies andjurisdictions.

This was achieved by the closure of the following majortransactions:

• AUSD20mforDiamondSightholderfinancing.• LeveragedtheOneAfricastrategytopartlyfinanceP80m oftheP250mforaNon-BankingFinancialInstitutionto assistinitsLocalandRegionalexpansion.• FinancedequivalentP450mtoLocalLargeCorporatesfor theirregionalexpansions.

The CIB One Africa strategy focuses on creating a platform for clients to tap into different markets. This created an increased demand for capital in 2014, as our clients expanded into Africa and invariably chose us as their preferred partner.

ReviewsBusiness

Whilepartneringwithourclientstooptimisetheirworkingcapital,theyvotedusBestDomesticCashManagementHouse.



Ourwideanddiversegeographicalfootprintandchannelstrategyplayed to our advantage as we saw transactional activity growby 25%, leading to reduction in interest expense of 23%. Thisultimatelyresultedinanincomegrowthof39%inCIB.In line with our people strategy and in order to optimally serveourcustomersandclients,werecruitedanddeployedresourcesthroughoutourvariouscoveragepoints.Toensureefficiency inour delivery, we continuously invest in training our people andattachingthemintoothermarketstobuildcapabilitiesandgainexpertisetotakethebusinesstogreaterheights.

We have taken a holistic approach to serving our clientele. Wechosetounderstandtheirneedsandtookaseamlessapproach,developingend-to-endsolutions.

In 2013 we embarked on a rigorous journey to appreciate ourcustomersneedsfortheSMEsegment.Followingtheirfeedback,we strengthened our Local Business offering, to meet thechanging needs of the fast-growing small and medium sizedenterprises segment in Botswana, while supporting our brandpurpose of making people achieve their ambitions in the rightway.

InFebruary2014,welaunchedthenewSMEbankingpropositionfor our Enterprise Banking customers. As a bank, we remaincommitted to continually provide ground-breaking and tailoredbankingsolutionsforourcustomers.

To underscore this customer value proposition we establisheda strong team of qualified personnel who manage our SMErelationships in the different sectors of the economy includingamongst others; commercial agriculture, tourism, BusinessServices,oil&energy,mining&surveying,wholesale&retailtradeaswellastheentirevaluechaininthesesectors.

We will continue to leverage on our One Africa approach tooffer our customers access to expertise from the differentmarkets across Africa who have been successful in deliveringthis proposition which in addition includes access to skilledand qualified Enterprise Relationship Managers and EnterpriseportfolioBankerswhoserveasdedicatedpointsofcontactacrossthecountry.

Looking AheadIn2015,wewillcontinuetofocusonMining,GlobalCorporatesandLocalCorporateswith the intentiontocontinuetosupporttheir regional expansions, and to partner with Public Sectorfor transactional banking solutions and long term Projectdevelopments. We will foster strategic partnerships to help usunderscoreourcritical role insupportingGovernmentgrowthenationaleconomy.

Harnessingthedigitalspacetoofferconveniencetoourclientsremainstopofouragenda.

Wewillcontinuetoreviewourinternalprocessesandsystemstoimproveturnaroundtimesandenhanceourservicedelivery.We take pride in our people and we will continue to recruit,developandretaintalent.

As Botswana’s development partner, we will continue aligningourselves to Government strategies to diversify the economy,createsustainableenterprisesanddriveemploymentcreation.

Ourwideanddiversegeographicalfootprintandchannelstrategyplayedtoouradvantageaswesawtransactionalactivitygrowby25%,leadingtoreductionininterestexpenseof23%.Thisultimatelyresultedinanincomegrowthof39%inCIB.

16

Retail Banking

RetailBanking’sturnaroundgainedmomentumin2014withyear-on-year balance sheet growth of 9.5% driven by Schemes andMortgagelending.Thefullimpactofthe200basispointsratecuteffectedin2013wasfeltin2014asthebusinessregistereda5%declineonNetInterestIncome(NII)duetomargincompression.Operatingconditionswerechallenging,characterisedbysluggishgrowthinconsumerdisposableincomes,intensecompetitionandliquiditypressureinthelastquarterof2014.

In line with our investment strategy and fully cognisant thatour customers’ needs are evolving, we launched a number ofinnovativelifestyleimprovingproducts.Theseinclude

Improvements on our personal loan offering:• Increased maximum loan ticket size from P250k to P475k,

makingBarclayspersonalloanoneofthemostcompetitiveinthemarket

• Rationalisedloanamountsin linewithcustomeraffordabilitytoavoidoverindebtedness

• Tenor(repaymentperiod)extendedto72monthsforselectedcustomersegments

Customer education campaign:• Creditcardusagecampaignlaunchedduringthelastquarter

of2014• Customerfinancialliteracyprogrammeforschemecustomers• Fraudawarenesscampaign

Improvements in operational efficiencies:• Part automation of the credit card loan application process,

furtherimprovingcustomerturnaroundtimesandenhancingcustomerexperience

Additional benefits on gold and platinum credit cards:• We negotiated discounts of up to 30% for different items

ranging from restaurants and accommodation to retailclothingandtransport

Launched Barclays Direct proposition:• Unlike the conventional scheme arrangement where

deductionfor loanrepayments isdonebytheemployer,thispropositionallowstheemployertopaytheemployeessalariesintoBarclaysaccountswheretheloandeductionwillbemade,therebyrelievingtheemployeroftheburdenofadministeringtheschemeonbehalfoftheBank.

One of our strategic priorities is to increase customer convenience by offering more services though digital channels.

ReviewsBusiness Financial Director’s Review Retail Banking TreasuryCorporate, Investment & Business Banking

Risk ReviewCitizenship Report Human Resources Review Board of Directors Corporate Governance


Oneofourstrategicprioritiesistoincreasecustomerconvenienceby offering more services through digital channels. Key toexecutingthestrategywasthedeliveryof:

ATM Enhancements• Cash-Sendmoney transfer– thishasenabledcustomers to

sendcashtoanyone(includingnon-Barclayscustomers)andreceive cash using Barclays ATMs. Through this service weareable toextendbankingservices to theunbankedasourcustomersarenowabletosendcashtothissegment.

• CashDeposit–throughcashacceptingATMscustomerscandepositcashwithinstantcreditintotheiraccounts.

Mobile Banking Enhancements• CashSend–thisallowsBarclays’customerstosendcashto

anyone(includingnonBarclays’customers)andreceivecashusingBarclaysMobileBanking–‘HelloMoney’

• Purchase of prepaid electricity – customers can purchaseprepaidelectricityanytime,anywhere.

Internet Banking Enhancements• Payment of Barclaycard using Internet Banking provides

customerswithanadditionalchannel topay for theircreditcardattheirownconveniencewithouthavingtowaitforthebranchtoopen.

Remote Account Opening (RAO) of Current and Savings Accounts using iPad • Thisgivesourcustomersthefreedomtohavetheiraccounts

openedwhereverismostconvenientforthem.

SMS Alert Enhancements TheSMSAlertssystemwasenhancedtosendan instantSMSAlertimmediatelywhenthecustomerperformsatransactiononanATMorPointofSale.ThemainobjectiveofthisenhancementistoenableourcustomerskeeptrackoftheirspendingbyreceivingtheSMSalertinstantlyeverytimetheytransact.Thisalsohelpscustomersmitigatefraudulenttransactions.

Paperless BankingIn line with our goal to become the ‘Go-To’ bank, we rolledout Paperless Banking to improve the customer experienceand turnaround times. This innovation has made the lives ofour customers easier as they no longer need to complete anytransaction slips when making over the counter deposits orwithdrawals.

Digital EaglesWeintroducednewstaffrolesinthebranchestoassistcustomerssignupforthedigitalchannels.Thesewetermed‘DigitalEagles’.They form an important part of our colleague franchise as wework towards building a “digitally-savvy” banking workforce.Thiswillhelpustosignificantlyimproveourcustomers’bankingexperience.

These innovations are testaments to our commitment toproviding convenient solutions for our customers and enablingthemtodobankinganywhere.

18

Treasury

In2014,alargepartofourbalancesheetfocuswastoensurethatwefinalisedtheBank’spreparations fordealingwith twomajorevolving market changes: the impeding introduction of Basel IIand theevolving liquidity landscapeasbankingbalancesheetsmovedtowardsbeingfullylent.OurgoalwastoensurethattheBank remains sufficiently liquid, well capitalised and ready toexecuteourbusinessplans.

For liquidity and balance sheet management, we introducedseveral innovative wholesale deposit products that diversifiedour funding base and lengthened the duration and tenor ofour liability book. These included Floating Rate Notes and StepUpRateNotes.WesuccessfullylistedaP2billionMediumTermNoteProgrammeontheBotswanaStockExchangeanddebutedthe programme with two senior note issuances that were fullysubscribedforatotalofP200million.

Treasury revenue was impacted by balance sheet growth of10.8% which reduced funding available for investment intomarketinstruments.Thiswasapositivedevelopment,asthesefunds were employed to support productive economic activity.We sought to optimise the balance sheet through growth ofcore transactional accounts and reduced reliance on wholesaledeposits.

Our markets business consists of trading (which takesproprietarypositionsonbehalfoftheBankinordertoprofitfrommovements inunderlying instruments)andsaleswhichassistswith solutions delivery to our Corporate, Investment, BusinessEnterpriseBanking, and Retail clients.The business focusedonacquiringnewclientsinordertoimprovetheconcentrationontheCorporateportfolioandalsotodeepenrelationshipswithaviewtocapturingalargerwalletshare.Wemadegreatstridesinclientacquisitionandunderlyingbusinessgrowth.WerolledoutmoreforeigncurrencydispensingATMsinordertoimprovecustomereaseofaccesstoourcurrencysalesbusiness.

Looking AheadIn 2015, our focus will be on leveraging our improved clientacquisitiontocapturegreaterwalletshareandgrowthebusinessrevenuesthroughbothsalesandtrading.Ourjourneytobethe‘Go-To’ Treasury and Markets team in Botswana is progressingwellandwillbeenhancedbythelaunchofmoreretailinnovations,and other product enhancements that are designed to takecognisanceofourclients’changingneedsanddelivercompellingvalue.

On the balance sheet side, we look forward to finalising theimplementation of Basel II and further optimising our balancesheetastheliquiditylandscapechanges.

We successfully listed a P2 billion Medium Term Note Programme on the Botswana Stock Exchange and debuted the programme with two senior note issuances that were fully subscribed for a total of P200 million.




In2015,ourfocuswillbeonleveragingourimprovedclientacquisitiontocapturegreaterwalletshareandgrowthebusinessrevenuesthroughbothsalesandtrading.

20

Citizenship Report

Our Citizenship Agenda has three main pillars:1. Contributing to Growth2. The way we do Business3. Supporting our Communities

Our strategic emphasis was on sustainable development byprovidingyoungpeople(ages10-35)withtheskillstheyrequiretoliveeconomicallyactivelives.Oureffortsandinvestmentshavetherefore focused on providing enterprise, employability andmoneymanagementskills.

Supporting our Communities MadiMajwana–StoriesfromYourPocketWelaunchedtheMadiMajwanadramaproductionaboutmoneyand its impact on people on International Literacy Day (8thSeptember).Theradiodrama,whichwasdevelopedinpartnershipwith Maitisong Theatre, (with an investment of P912,000)featured on three radio stations reaching over 200,000 peoplecountrywide. It ran eight weeks generating lively debates anddiscussionsaboutmoneyanditsimpactonourlives.Maitisongalsotooktheproductiononaroadshowreachingcommunitiesin12townsandvillagesacrossthecountry.Boththeradioanddramaproductionnotonlyentertainedthepublic,theyprovidedanopportunityforwide-rangingandhonestdiscussionsonthesubjectofmoney.

YouthDevelopmentandRhinoConservationOur Youth Development and Rhino Conservation Project waslaunchedinpartnershipwithKalahariConservationSocietyinJuly2014bythePermanentSecretaryoftheMinistryofEnvironment,WildlifeandTourism.ThispartnershipprovidesuswithauniqueopportunitytoaddresstwocriticalareasofconcernforBotswana:

• youthunemploymentanditsassociatedsocialills• environmentalsustainability,mainlyrhinoconservation.

This project skillfully addresses these two issues by providingthetrainingforyouth living inthenorthernpartofthecountry,particularly those living close to game reserves where someanimals,includingrhino,arethreatenedwithextinction.

This initiative is aimed at encouraging these young peopleto become aware of conservation issues and to becomeactivists focusedonpreserving theirenvironment for theirownsustenance. The training equips them to work with the skilledrangers toprotect thewildlife.We investedP812,500and625youthwillbenefitfromthisprogramme.

Inanefforttomobilisethecommunitiestoparticipateinwildlifemanagement, specifically rhino conservation, Barclays will belaunching a rhino-branded debit card. This aims to encourage

We had another exciting year in the execution of our Citizenship Agenda which included the launch of three innovative projects. We also partnered with the United States Embassy to launch the USAID Credit Guarantee Scheme as part of our contribution to the growth of the SME sector in Botswana which we believe will help to grow the Botswana economy.




customerstobecome involved inyouthdevelopmentandrhinoconservation.Thefundsgeneratedfromthisinitiativewillbeusedtotrainmoreyouthandprotecttherhinopopulation.

YouthEducationandEmpowermentProgrammeYouth economic welfare is the focus of our partnership withProjectConcernInternationalandtheUnitedNationsAgencyforAIDS.ThisprojectisbeingimplementedinNgamilandEast.Themain goal of the project is to provide employment and incomegenerating opportunities for young people and reduce theirvulnerability to social ills including HIV. Implementation of theproject began in November 2014 and it will reach a minimumof 750 youth. It will provide them with job shadowing andemploymentopportunitiesintheprivatesector.

Existing PartnershipsSteppingStonesInternationalandtheAflateenProgrammeAflateenisanexcitingprogrammeforschool-goingchildrenthatprovidessocialandfinancialliteracyskills.Itfocusesonprovidingchildren who recognise the value of enterprise and are alsoconcernedaboutthoselessfortunatewithskillsandvaluesthatwillpromote theirgrowthanddevelopment.Theprogramme isbeingrolledoutasapilotfor10schoolsacrossBotswanaandover200childrenhavebeenenrolled.

Baylor’sTeenClub WecontinuetoworkwiththeyouthatBaylor’sTeenClub,focusingour intervention on employability skills. Through our support,Baylor’s reached over 900 youth including adolescents, youngadultsand teenmothers infivecentres: Mochudi,Mahalapye,Maun,KasaneandGaborone.

BakgatlaBolokangMatshelo–EveProjectOur partnership with Bakgatla Bolokang Matshelo has focusedon providing employability and enterprise skills to youth in theBakgatladistrict.Throughthisprogramme,45youngpeoplehavebeenabsorbed into jobs invarioussectors. Inaddition,25havebeentrainedinenterpriseskillsandofthese13havesubmittedtheirbusinessplanswhicharebeingassessedbytheUniversityofBotswanaBusinessClinic.

Brothers-For-AllBrothers-for-All isaprojectdevelopedby ‘Mothers-For-All’ inanattempttomanagethegrowingissueofgender-basedviolenceinthetownofSelebiPhikwe.Theinnovativeproject–afirstforBotswana-mobilisedyoungmenwhoarevulnerableandout-of-schoolandtrainedthemtoproduceartefactsincludingjewelleryfromcowwastesuchashorns.19youngmenreceivedtrainingandwithinthefirstfivemonthsofoperation,theygeneratedoverP20,000.

ProjectConcernInternational–GROWProjectGrass Roots Growing Our Wealth (GROW) is an innovativedevelopment model that seeks to uplift impoverished andmarginalisedwomenandmen,providing themwithadignifiedandrespectfulwaytogeneratealivingforthemselvesandtheirfamilies.Since thestartof theprogramme in2012,GROWhasmobilised1,453womenandmenintoformingeconomicallyandsociallyactivegroups. ThemajoritybeganwithnothingbuttodatehavemanagedtosaveP145,728ofwhichloansamountingtoP71,447havebeendisbursedamongthemselves.Duringthisreporting period, 105 individual and 51 group businesses havebeenestablished.

Barclays-F.G.MogaeScholarshipFundTheFundisinitsseventhyearandhassofarenabled30youngpeopletopursuetheirMaster’sdegreesinvariousfields.In2014,fourpost-graduatestudentsweregivenscholarships.Scholarshiprecipients’fieldsofstudyhaveincludedbusinessstudies,watermanagement, law, mathematics and environmental studiesamong others. Our graduates have found employment withentities such as BIDPA, United Nations and the University ofBotswana,tonameafew.

OurpartnershipwithBakgatlaBolokangMatshelohasfocusedonprovidingemployabilityandenterpriseskillstoyouthintheBakgatladistrict.Throughthisprogramme,45youngpeoplehavebeenabsorbedintojobsinvarioussectors.

22

Colleague VolunteeringOurcolleaguesarethebackboneofourcommunity investmentprogramme,providingmuchneededskillsandeducation intheareasofbusinessmanagementandfinancialliteracy.

In 2014, 88% of colleagues volunteered their time and skillsreaching over 12,000 children and youth. The majority of theyoungpeopleparticipatedinskillsdevelopmentsessionsincludingfinancial literacy and entrepreneurial skills development. Our‘UnlockingYouthPotential’campaignwhichseekstolinkyoungaspiringentrepreneurstoactivebusinesspeopleandprovideanoverviewofwhatitmeanstorunabusinessremainspopularandreachedover1,000youthin2014.

The‘Make-A-DifferenceDay’campaignwhichtakesplaceisthehighlight of our colleague volunteering programme. This yearall business units across Barclays participated, with colleaguesvolunteeringwithintheirrespectivecommunities.OverP500,000wasspentinthisperiodaloneandover60projectsimplemented.

Contributing to GrowthIn July 2014, Barclays Bank of Botswana launched the USAIDCredit Guarantee Scheme in partnership with the UnitedStatesEmbassy.Thecollaborationwill allowsmall andmediumenterprises(SMEs)inBotswanatoaccessuptoUSD$15millioninloans.Thisisanimportantprogrammeasitwillenabletheseenterprisestoaccesscapitaltogrowtheirbusinessesandcreatemorejobs.



GrassRootsGrowingOurWealth(GROW)isaninnovativedevelopmentmodelthatseekstoupliftimpoverishedandmarginalisedwomenandmen,providingthemwithadignifiedandrespectfulwaytogeneratealivingforthemselvesandtheirfamilies.Sincethestartoftheprogrammein2012,GROWhasmobilised1,453womenandmenintoformingeconomicallyandsociallyactivegroups.


P812,500YouthDevelopmentandRhinoConservationKalahari Conservation Society

P1,241,307YouthEducationandEmpowermentProgramProject Concern International

P140,000YouthDevelopmentSir Ketumile Masire Foundation

P920,000MadiMajwanaMaitisong Theatre

Notable Community Investments Made in 2014

24

Risk Review

TheBoardisresponsibleforapprovingthecountryriskappetite–thelevelofrisktheBankchoosestotakeinpursuitofitsbusinessobjectives. The Board of Directors Credit Committee (BoDCC),a sub-committee of the Board, monitors the Bank’s risk profileagainsttheagreedappetite.ThecountryExecutiveteampresentsa risk report to theBoardonaquarterlybasis. Thisprovidesarichgovernancestructureinwhichtoevaluateriskappetitesandmanagement’sperformanceagainstthoseappetites.

The Chief Risk Officer (CRO) is a member of the ExecutiveCommittee and has overall day-to-day accountability for riskmanagement under delegated authority from the ManagingDirector. The CRO is responsible for monitoring the Bank’s riskprofile relative to the established risk appetite. Reporting tothe CRO are risk-type heads for retail credit, corporate creditand operational risk. The risk-type heads are responsible forestablishing a Group-wide framework for oversight of the risksandcontrolsoftheirrespectiverisktypes.Inaddition,risk-typeteamsliaisewitheachbusinessheadaspartofthemanagementandmonitoringprocesses.

Retail CreditThere has been marked improvement in the quality of ourConsumer Lending book in 2014 as careful balancing of ourportfolio mix of Secured and Unsecured scheme productscontinued. Both our Unsecured Personal Instalment Loanand Unsecured Scheme Loan book performance improvedsignificantly during the year, a reflection of the success of thePortfolioRiskManagementactivitiesundertakenduringtheyear.Investments made in prior years in underwriting capability andManagement Information (MI) systems continue to bear fruitand provide a solid base for ongoing modernizing of the riskmanagementfunction.

Ourcreditriskcontrolenvironmentremainsstrong.OurCollectionsandRecoveriesenvironmentisrobustandsignificantinvestmentwas made in process improvement in order to provide simple,efficient and appropriate collections strategy execution. Ourcreditanalyticsenvironment remainsstrong,providingastrongbaseforcontinuedimprovementincreditapprovalefficiencyanddecisionaccuracy.

The Bank’s risk management function is satisfied that itsimpairmentraisingpracticesareresponsibleandaccurate.

Asa leadingbankengaged incomprehensivebankingservices,Barclays Bank of Botswana offers a full suite of consumer andcommercialbankingsolutionstoourcustomersandclients.TheBank’sriskfunctionisresponsibleforthemanagementofcreditandoperationalriskthatarisesthroughdailybankingoperationsincluding the identification, analysis and mitigation of this riskwithin the Bank’s set risk appetite. Risk management policies,models and systems are reviewed regularly to reflect changingmarketconditions.

Risk management policies, models and systems are reviewed regularly to reflect changing market conditions.




Corporate CreditThe riskprofileof thecorporateassetportfolio remainshealthyonthebackofqualitycreditfacilitiesandrobustmonitoringandcontrol.Anumberoftransactionswerebookedduringthereviewperiodintheareasofmining,wholesaleandretailtradeaswellasfinancial intermediation,ascorporateassetgrowthcontinuestobeoneoftheBank’sstrategicpriorities.

Aspecialisedcorporateriskmanagementteam(BarclaysBusinessSupport & Corporate Recoveries) is responsible for reviewingand identifying early indicators of any potential counterparty indistress,andtakingappropriateaction.Thisteamworkscloselywiththeclient,supportingthemindevelopingandimplementinga turnaround strategy to improve business performance. Thisearly engagement model not only provides great hands-onsupport for our customers but has helped maintain corporateimpairmentsatstablelevelsthroughouttheyear.

Operational Risk ManagementIn 2014, we continued to transform the operational riskmanagementcapabilitieswithintheBank. Weachievedseveralimportantmilestonesinour journeytobuildandsustainatrulyworld class control environment. Investment in operationalrisk within the Group remains sound, a commitment that isconsistently evident within Barclays Bank of Botswana. Themost significant development in the review period was theintroduction of the Enterprise Risk Management Framework,whichseekstopromotehowrisksareevaluated,monitoredandrespondedtowithinthebank.TheOperationalRiskteamaimstopromoteefficient,speedy,accurate,andrepeatableprocesses.The transformation process will continue into 2015 where newtechnology and new processes will join the recently deployedEnterprise Risk Management Framework control philosophy tofurtherenhanceourgoalofbeingthe‘Go-To’bankforcustomersandclients.

26

Human Resources Review

Our colleagues underpin everything we do in our journey tobecomethe‘Go-To’bankandtoremaintheemployerofchoiceinBotswana.Toenableourcolleaguestobefit-for-Barclays’purposeandtodevelopcurrentstaffandattractfuturetalentandleaders,Barclayshastakenastrategicdecisiontofocusonthreecriticalpillars:People,LeadershipandCulture.

People“OurpeopleareproudtoworkforBarclays”isastrategicprioritythatBarclaysBankofBotswanaiscommittedtoasitencouragesbusiness performance. Barclays endeavours to ensure that theemployees are proud to work for the Bank by enabling themto operate in an environment that enables them to reach theirpotential.

LeadershipLeadershiphasalwaysbeenanimportantbusinesspriority.Ourgoalistodevelopouremployeesandequipthemwithleadershipskills at all levels. This is being done through aggressive talentmanagementprogrammesalignedtothebusinessstrategy.Theseinclude exposing colleagues to other markets such as SouthAfricaandZambiathroughtheBarclaysOneAfricastrategy.Thisstrategyprovidescolleagueswithagoodopportunitytoacceleratetheirgrowthandstrengthentheirleadershipcapabilities.

In developing talent, we target young talent to ensure the sustainability of our business. In this regard, we have been able to attract young talent through the Pan African Graduate programme, a dedicated management development programme for new graduates and early career professionals that cuts across all African countries.




In developing talent, we target young people to ensure thesustainability of our business. In this regard, we have beenable to attract young talent through the Pan African Graduateprogramme,adedicatedmanagementdevelopmentprogrammefornewgraduatesandearlycareerprofessionalsthatcutsacrossallAfricancountries. Intheyearunderreview,Botswanahosted211colleaguesinthePanAfricanprogrammefromthe11AfricancountriesinwhichBarclayshasapresence.Furthermore,Barclayshas developed a leadership and colleague curriculum for all itsstaff and leaders. These programmes include the developmentofcentresofexcellenceacrossfunctionsandtheirincorporationintoexistingtrainingandskillsdevelopmentprogrammeswithastrong focus on succession planning and the retention of highperformers.

CultureAspartofourjourneytobethe‘GoTo’bank,Barclaysre-launcheditsvaluesandpurposein2012.Thisenabledcolleaguestohaveadistinctiveculturewithacommonpurposethroughtheclearsetofvalues.Livingthevaluesandadheringtothemonadailybasisenhances not only colleague experience but, most importantly,customerexperience.

The goals, purpose and values have been well communicatedto all colleagues to help them understand what performancemeansinBarclays.

Performancemanagementfocusesonwhatneedstobedeliveredand most importantly, on how it needs to be delivered. In thereview period, the focus was to encourage frequent, honest,highqualityperformanceconversationsbetweenmanagersandteams.Thiscontinuestobeembeddedaspartofthecultureandwill create high performance conditions for our people and ourBank.

Another key element of the culture is the issue of continuousengagementwithcolleagues.TheBankhasintroducedanumberof forums where senior management engages with colleaguesfromteamleveltofunctionallevel.

It is best practise to gather, collect, and measure confidentialfeedbackfromacrossourbusinesstobetterunderstandwhatwedowell,wherewecanimproveandhowweshouldsetprioritiestohelppeopleachievetheirambitionsintherightwayanddeliverworld-class customer experience. The business embarked onthe annual employee opinion survey in which there was 72%colleagueparticipation,andwhichwasgearedtowardsmeasuringsustainableengagement.Theresultshaveprovideddirectionandfocusoneffortstomotivate,enableandenergisecolleagues.

As part of effective engagement, the Bank continues to makegreat strides in our relationship with the Botswana BankEmployees Union (BOBEU). Management has devised acommunicationstrategythatsharesimportantinformationwithBOBEU, establishes regular union and management meetingsand communicates all changes clearly and unambiguouslyso as to minimise conflict between the two bodies. Barclays’culture is toensure theequalityofall colleaguesand theBankhas demonstrated this commitment through its diversity andinclusion strategy. Through its talent management programmeand working with the Barclays Women’s Networking Forum,theBankhasstrivedtowardsadvancingwomenintoseniorandleadershiproles.

Toenableourcolleaguestobefit-for-Barclays’purposeandtodevelopcurrentstaffandattractfuturetalentandleaders,Barclayshastakenastrategicdecisiontofocusonthreecriticalpillars:People,LeadershipandCulture.

28

ReviewsBusiness

Board of Directors

1

2

3

4

5

6

Indep

endentNon

-ExecutiveDirecto

r

Managing DirectorFinanceDirector



ChairmanofBoardofDirectors.Rizwan joined the Board in 2002. He wasappointed Board Chairman in 2009. He isa Partner in the law firm Collins Newman& Co. and Director of a number of propertydevelopment and investment companies.Rizwan also chairs the Board’s Credit Sub-CommitteeandNominations&RemunerationSub-Committee. He specialises in corporateand banking law. He holds LLB (Hons) andDIP.L.P qualifications from the University ofEdinburgh and an LLM from Harvard LawSchool.

Rizwan DesaiIndependent Non-Executive Director

1

LawrencejoinedtheBoardin2005andistheChairman of the Audit Committee. He is anaccountant and a member of the BotswanaInstituteofAccountants.HeistheManagingDirectorofNsenya(Pty)Ltdandalsomanagesa firm of accountants. Lawrence has servedon a number of Boards including BotswanaMeat Commission, Sefalana Holdings Co.Ltd,BotswanaHousingCorporation,BankofBotswanaandBotswanaSavingsBank.

Lawrence MaikaIndependent Non-Executive Director

4

Lipalesa was appointed Finance Director atBarclaysBankofBotswanainFebruary2012,havingjoinedtheBankasFinancialControllerin 2005. She is a Chartered CertifiedAccountant, an Associate member of theBotswanaInstituteofCharteredAccountants(BICA), and a Fellow Chartered CertifiedAccountant(FCCA).PriortojoiningtheBank,sheheldseniorpositionsatCapitalSecurities(Pty)LtdandKPMG.LipalesahasservedontheBoardofTrusteesfortheBarclaysPensionFund, Capital Securities and as Chairman oftheBotswanaStockExchange.ShecurrentlysitsontheBoardsofSouthviewPtyLtdandSechabaBreweriesLimited.


3

Kenneth joinedtheBoard in2009.He is theChief Executive Officer at EOH Consulting,a leading management consultancy inBotswana. He has more than 21 year’sexperience in various industries and sectorsincluding:Government,Telecommunications,Information Technology, Financial Services,HealthInsuranceandTaxAdministration.

Kenneth isanexpert in ICTdeploymentandbusiness strategy development, having ledconsultancies in both public and privatesectors in countries such as Botswana,Namibia, Tanzania, USA and South Africa.Hehaspublishedseveralthought leadershiparticles on technology, strategy and talentmanagementinthelocalmedia.KennethisacertifiedBalancedScorecardPractitionerandhasfacilitatedtheannualPalladiumBalancedScorecardBootCampinBotswanaandSouthAfrica.

He holds an MSc in Information Systemsfrom Pace University, USA and a Bachelorof Business Administration from BrockUniversity, Canada. Kenneth currently sitson the Advisory Board of the University ofStellenbosch(ExecutiveDevelopment)andisamemberofPalladium’sExecutionPremiumCommunity(XPC).

Kenneth MolosiIndependent Non-Executive Director

6

ReinettewasappointedManagingDirectorofBarclaysBankofBotswana in2013.Shehasmorethan20yearsexperienceinthebankingindustry, having started her career at FirstNational Bank South Africa on an ExecutiveTrainee Programme. She later joined theInternalAuditteamwhereshewaspromotedtoHeadofInternalAudit.In2007,shejoinedAbsaandheldanumberofkeyrolesincluding:Head of Audit Retail and Commercial, ChiefInternal Auditor, and Chief of Staff at AbsaPrivate Bank. Prior to joining Barclays BankBotswana, she was Chief Internal AuditExecutive for Barclays Africa, responsible forinternalauditorsacrossAfrica.

She isaCharteredAccountantCA(SA)withan M.Com in Business Management. Sheis also a qualified CFP (Certified FinancialPlanner).ReinettewasamemberoftheIAEPBoard(InternalAudit–UniversityofPretoria,South Africa) and a non-executive memberof the HSRC (Human Sciences ResearchCouncil) Audit Committee in 2014. She hasworked with the University of Pretoria, GIBSBusinessSchool(SouthAfrica)andErasmusUniversity(Amsterdam)onanMPhilforChiefInternalAuditors.


2

Alfred joined Barclays Bank of Botswana in2009.HeistheManagingDirectorofLazareKaplan Botswana (Pty) Ltd., a subsidiary ofLazareKaplan International Inc.ofNewYork.He holds a Bachelor of Arts degree withHonours fromtheUniversityofEssex,UK.AForeignPolicySpecialistandcareerdiplomat,Alfredbeganhiscareerin1978andhasheldappointmentsasBotswana’sAmbassador todifferentmissionsaroundtheworld,includingtheUnitedNations.

Ambassador Alfred DubeIndependent Non-Executive Director

5

30

Corporate Governance

ReviewsBusiness

The Bank has, therefore, adopted the Bank of Botswanaguidelineswhichseek toprovideguidanceon theprovisionsofSections22,23and29-32oftheBankingAct,CAP46:04aswellas the implementation and enhancement of good corporategovernance standards in the Botswana banking market. Inaddition, the Bank adheres to the Barclays Bank PLC internalcorporategovernanceguidelineswhichaddressthecompositionof the Board, its responsibilities, how these responsibilities aremetandtheselectionproceduresfornewDirectors.

InaccordancewiththerequirementsoftheBankingActasreadwith the Bank of Botswana Guidelines and Internal Control, aswellastheGuidanceforDirectorsontheCombinedCodeissuedbytheInstituteofCharteredAccountantsinEnglandandWales,the Board ensures that management identifies measures andmonitorsavarietyofrisksthroughvariouscontrolmechanisms.The risks and the measures related thereto are explained frompages95to119inthisdocument.

The Board is committed to improving its corporate governancepractices. The Board and its various committees are makingcontinuous strides to ensure that Barclays is an exemplaryorganisation in thefieldofcorporategovernance,bypromotinggreater openness and transparency, rather than just followingprescriptiveregulations.

The Board Primary role ThemainfocusoftheBoardisontheBank’sbusinesspoliciesandstrategies.Operatingwithinacorporategovernance frameworkensuresthattheBoard:

• RemainsaccountabletotheBankanditsshareholders• EffectivelymonitorstheBank’smanagement• ContinuesitscommitmenttoachievingtheBank’sagreed strategiesObjectivesThemainobjectivesoftheBoardareto:• Ensure Barclays Bank of Botswana complies with applicable

lawsandregulations.• Discuss, agree and regularly review the Bank’s business

strategiesso that they remain in linewith thoseofBarclaysAfricaand,wherenecessary,recommendadjustmentsfortheBanktokeepupwithlocalmarketconsiderations.

• Monitor business performance and be responsible toshareholders for creating and delivering sustainableshareholdervalue,throughsoundbusinessmanagement.

• Establish and embed the Barclays Africa corporatemanagement model and behaviours, which underpin theachievementofBarclaysAfrica’sobjectives.

• Agree to proposals which fall within the discretion of theBoard.

• Executeotherimportantcontrolfunctions.• EnhancetheBarclaysbrandandpromoteitexternally.

The Board comprises a Non-Executive Chairman, three Non-Executive Directors and two Executive Directors, the ManagingDirector and the Finance Director. Brief biographical details ofthese Directors are set out on page 29 of this document. TheBoardapprovestherolesandresponsibilitiesoftheChairmanandManagingDirector.Therolesareseparate,welldocumentedandunderstood.

Barclays Bank of Botswana is committed to business integrity and professionalism in all its activities. As part of this commitment, the Board supports the highest standards of corporate governance and the development of best practices.

AquorumconsistsoffourDirectorsandtheBoardmeetsatleastquarterly.During2014,theBoardheldeightmeetings.



Attendance registerAt every Annual General Meeting, one third of theDirectors(roundeddown)retiresandoffersthemselvesforre-election.Inpractice,thiscauseseveryDirectortostandforre-electionatleasteverythreeyears.

A quorum consists of four Directors and the Boardmeetsatleastquarterly.During2014,theBoardheldeightmeetingsasscheduled.

Directors’ Remuneration (BWP)

Director Board AuditCommittee

Rizwan Desai 850,000 946,25090,000 6,250

200,000 322,50045,000

200,000 360,000160,000

200,000 390,00080,000 65,000 45,000

2, 253,733 2, 253,733

1,741,833 1,741,833

77,500AlfredDube

Reinette van der Merwe

LawrenceMaika

KennethMolosi

LipalesaMakepe

CreditCommittee

RemunerationCommittee

PensionFund

Human ResourcesCommittee

ExecutiveRemuneration Total

Director Board AuditCommittee

Rizwan Desai 8/8 3/3

-

-

-

-

-

6/8

8/8

2/3

3/3

2/2

1/2

2/2

-

8/8 7/7

-

7/7

-

8/8

8/8

7/7

7/7

AlfredDube


LawrenceMaika

KennethMolosi

LipalesaMakepe

CreditCommittee

Human ResourcesCommittee

AlfredDube


KennethMolosi

32

ReviewsBusiness

The Country Management Committee (CMC) is responsible totheBoardfor implementingstrategiesandpoliciesapprovedbytheBoard, formulatingand implementingoperationaldecisions,andrunningtheBankbasedontheirknowledgeandexperience.Non-Executive Directors challenge, monitor and approve thestrategies and policies recommended by the CMC. ExecutiveDirectorshaveannualperformancecontractsagainstwhichtheyaremeasuredandmanaged.TheBoardmeetsregularlyandhasaformalscheduleofmattersreservedforit.MeetingsoftheBoardarestructuredtoallowandencourageopendiscussionandfreedebate. This ensures that Non-Executive Directors are able tochallenge Executive Directors effectively. When necessary, theChairman meets privately with Non-Executive Directors to briefthemandtoaddressanyconcernstheymayhave.

Audit CommitteeThe Board appoints a minimum of three members, who areDirectors without any executive responsibility, to the AuditCommittee. During the year there were two Non-ExecutiveDirectors on the committee, one of whom is the Chairman ofthecommittee. In linewithcorporategovernancebestpractice,aNon-ExecutiveDirectorotherthantheChairmanoftheBoardhasbeenappointedtochairtheCommitteeandthispositionisaccordinglyheldbyLawrenceMaika.TheAuditCommitteemeetsquarterly.

The Audit Committee has written terms of reference that havebeen approved by the Board and are in compliance with theBankingAct,Cap46:04.TheexternalandinternalauditorshavefreeaccesstotheChairmanoftheCommittee.Meetingsareheld

at least four times a year. The function of the committee is toassist theBoard indischarging itsdutiesunder theCompaniesAct, Banking Act and common law. In particular, it monitorsfinancialcontrols,accountingsystemsandshareholderreporting.Italsoassessesthemanagementoffinancialrisks.TheBankingAct imposes additional responsibilities on the Board of theBank.This isespecially truewith regard toannual reportingonthefunctioningoftheBank’ssystemof internalcontrolsanditscontinuing viability as a going concern. The Audit CommitteeassiststheBoardindischargingtheseresponsibilities.

Credit Committee The Board Credit Committee includes the Managing Director,twoNon-ExecutiveBoardmembersand theCommercialCreditDirector. It is chaired by the Board Chairman, Rizwan Desai.The Credit Committee meets quarterly. The main purposes ofthe Committee are to approve the Bank’s credit policy; reviewand approve credit limits within Banking Act requirements;review portfolio management information; set sector caps; andreview information on significant non-performing accounts inthe Bank’s credit portfolio. While some of the functions of theCreditCommitteeincludestatutoryBoardduties,theambitofitstermsofreferencearewiderandincludearealpartnershipwithriskexecutivestoensurethehealthoftheBank’s lendingbook.MeetingsoftheCreditCommitteeareroutinelyheldonaquarterlybasis,althoughadhocmeetingsforapprovaloffacilitiescanbeconvenedonanurgentbasisormaybeheldbyteleconference,inlinewiththetermsofreference.

Human Resources Committee This Committee has emerged from the fusion of the HumanResources Committee and the Remuneration and NominationsCommittee.DuringtheyeartheCommitteewasmadeupoffourmembers,twoofwhomwereNon-ExecutiveDirectors.Theothertwo were representatives of the Barclays Executive in the formof the Head of Human Resources and the Managing Director.ThisCommitteemeetsthreetimesayear.TheCommittee’smainpurpose is to provide oversight over the recruitment, staffing,successionaswellasperformanceandcompensationofexecutivemanagementandreviewingofbespokeincentiveproposals.TheCommitteeisalsotaskedwithreviewingthelevelofexpertiseandskillattheexecutiveandBoardlevelsandmakingsuggestionsforachievingthebestoverallskillscoverage,whetherbyupskillingorrecruitment.Inaddition,itiswithintheCommittee’smandateto consider the overall strategy and approach to any issuesor projects of significant consequence to the Bank’s HumanResources.Themandateof theCommitteedoesnotextend today-to-daymanagementactivities.



Country Management Committee (CMC) TheCMCactsastheoperationalmanagementforumresponsiblefor delivering Barclays Bank of Botswana’s operating plan andresults.

The objectives of the CMC are to ensure: • Thatbusinessisconductedincompliancewiththecountry’s

legislationandregulations.• The effective implementation of Barclays Africa policies and

governancearrangementsacrossalllinesandfunctionsofthebusiness.

• The integrity of the operational, control, compliance andgovernanceframeworkoftheBankasapartofBarclaysAfrica.

• Theefficientimplementationofbusinessplans.• Thatperformanceismaximisedacrossalllinesandfunctions

ofthebusiness.• TheenhancementoftheBarclaysBrand.

The CMC consists of: • ManagingDirector(asChairman)• FinanceDirector• Treasurer• CorporateDirector• RetailDirector• ChiefOperatingOfficer• HeadofCompliance• HeadofMarketing&CorporateRelations• HumanResourcesDirector• HeadofLegal• ChiefRiskOfficer

Country Asset and Liability Management Committee (ALCO) ThemainpurposeoftheCountryALCOistoachievesustainableand stable profits within a framework of acceptable financialrisks and controls. The ALCO meets at least once a month.It undertakes to maximise the value generated from activelymanagingtheBank’sbalancesheetanditsfinancialriskswithinagreedriskparameters.Therefore,itispredominantlyfocusedonforecastingandscenariomodelling.

The objectives of the Country ALCO are to manage: • Fundingandinvestmentofthebalancesheet;• Liquidityandcashflow;• Exposuretointerestandexchangeratemovements;• Capitalpositionanddividendflow;• Assetandliabilitymargins;• Compliancewithallinternalandregulatorylimitsandratios fortheaboveactivities.

Membership of Country ALCO comprises: • ManagingDirector(asChairman)• FinanceDirector• RetailDirector• CommercialDirector• Treasurer• RetailCreditDirector• CommercialCreditDirector• HeadofCards• ChiefOperatingOfficer

Risk and Control Committee The duties and responsibilities of this management committee are to: • ProvideassurancetomanagementinrespectoftheBank’srisk

andcontrol frameworkby reviewingandchallenging reportsfrommanagement,internalandexternalauditandregulatorsinrespectoftheBank’sbusinessactivities;

• Oversee implementationandembeddingof thepoliciesandcontrols,andconfirmthatcontrolstandardsaredefinedandadequateforachievingregulatorycompliance;

• Oversee the monitoring of legal and regulatory changes intheexternalenvironmentandcompliancewithrelevantlaws,regulationsandthedirectivesofstateauthorities;

• Monitorandtakeactionwhererequiredinrelationtochangesintheinternalandexternalriskenvironment;

• Oversee management of the Country Business risk profile,riskeventmanagementthroughreviewofkeyindicators,riskevents,specificriskissues,themesandconcentrations.

The Risk and Control Committee members include:• ManagingDirector(asChairman)• FinanceDirector• CorporateDirector• ChiefOperatingOfficer• RetailDirector• HeadofCompliance• HeadofLegal• HeadofGovernance,OperationalRisk&ControlRigour• HumanResourcesDirector• RetailCreditDirector• Treasurer• HeadofOperationalRisk• ChiefRiskOfficer

Theinternalauditorsattendthemeetingstoprovideindependentperspective and to challenge the members of the committee,wherenecessary.

34

ReviewsBusiness

Remunerations and Promotions Committee (RPC) The duties and responsibilities of this management committee are to: • Approvesalaryincreases,bonuses,longtermincentivesand outofcycleawards,allsubjecttoGroupapproval;• ApprovebonuspotfundingrequestsinlinewithBoard RemunerationCommitteedecisions;• ApprovecustomisedrewardschemessubjecttoGroup governance;• Monitorcompliancewithlegalandregulatoryrequirements astheyapplytoappointmentsandrewards;• Provideoversightofappointmentsandcompensation,and reviewallappointmentstotheCMCanddirectreportstothe ManagingDirector;• Reviewandrecommendproposedplacementsontothe CMC.

Membership of the Remunerations and Promotions Committee includes: • ManagingDirector(asChairman)• FinanceDirector• HumanResourcesDirector• HeadofCompliance

Operations Committee (OPCO) The duties and responsibilities of this management committee are to: • Provideoversightofallkeyoperationalissuesfacingthe Bank(includingITandotheroperationalprojects)and toensuretimely,robustdeliveryofoperationalandIT investmentswithinbudget;• EnsuretheeffectivenessofoperationalandITcapabilityand resourcemanagementacrosstheBank;• Providemanagementoversightandreviewofalloperational andITprojectsandensurethatprojectsaremanaged accordingtoPrince2principlesandwithintimescalesand budget;• ReviewGroup,GlobalRetailBanking(GRB)andBarclays AfricaoperationsandITprojectsintendedfor,orimpacting uponthecountry;• ProvideoversightofsourcingandensurethatAlliances ReviewBusinessContinuityManagementissues areescalatedandreportedtotheManagingDirector, CountryManagementCommitteeandBarclaysAfrica ChiefOperatingOfficerwhereresolutionatOpCoisnot possible.

The committee comprises: • ChiefOperatingOfficer(asChairman)• FinanceDirector• RetailDirector• HeadofCards• CommercialDirector• HumanResourcesDirector• HeadofTechnology• HeadofConsumerOperations• HeadofWholesale• HeadofBranchOperations• HeadofInternalControl• HeadofSourcingBrand and Reputation Committee (B&RC)The duties and responsibilities of the Committee are to: • ProtectandenhancethebrandandreputationofBarclays;• SupportBarclaysinitseffortstobealeadingcompanyinthe fieldofCorporateSocialResponsibility;• EnsurethattheBanktreatscustomersinaccordancewith its‘TreatingCustomersFairly’principles;• Identifythereputationalhotspotsinthebusiness,together withtheadequacyofmitigatingactionsandescalate asappropriatetotheBarclaysAfricaBrandandReputation Committee;• Agreeandmonitortheimplementationofthecustomer agendainthebusinessfortreatingcustomersFairly, CustomerServiceandCustomerComplaints;• Confirmandmonitortheimplementationofthe ExternalCorporateAffairsplan,andtheCommunityand Environmentalstrategy;• Approvecommunityprojectsforimplementation.

Composition and quorum • ManagingDirector(asChairman)• FinanceDirector• ChiefOperatingOfficer• HeadofLegal• CorporateDirector• HeadofMarketingandCorporateRelations• RetailDirector• HeadofCompliance• HumanResourcesDirector• Treasurer• ChiefRiskOfficer



Control Environment Forum (CEF)Theoverallpurposeoftheforumistoensurethecomprehensiveand effective review, challenge and raising of potential controlissues across Barclays Bank of Botswana Ltd as an importantinputtowardstheRiskandControlCommittee(R&CC)meeting.

Thedutiesandresponsibilitiesoftheforumareto:• Reviewcurrentcontrolissuesacrossthebusinessfor thematicissuesandremediation;• Raiseandescalateanynewissues;• Recommenddeepdivetopics;• ReviewandratethecurrentescalationlevelofBAcontrol issues,andrecommendtheescalationortransferofissues whereappropriate.

AttendeesofthecommitteeareatthediscretionoftheBarclaysAfricaHeadofOperationalRiskandControlRigour (ORCR)butwill,asaminimuminclude:• ManagingDirector(asChairman)• ChiefOperationsOfficer• FinanceDirector• HeadofTechnology• HeadofCompliance• ChiefRiskOfficer• Permanentattendees• HeadofInternalAudit(independentchallenger)• SubjectMatterExperts(byinvitation)

36

Barclays Bank of Botswana Limited

FOR THE YEAR ENDED 31 DECEMBER 2014ANNUAL FINANCIAL STATEMENTS

Barclays Bank of Botswana Annual Financial Statements 2014

37

Directors’ Report For the year ended 31 December 2014

1 Share capital DetailsoftheBank’ssharecapitalaregiveninnote31tothe financialstatements. 2 Financial results Theannexedfinancialstatementsadequatelydisclosethe resultsoftheBank’soperationsfortheyear. 3 Directorate ThefollowingweredirectorsoftheBankduringtheperiod tothedateofthisreport: Rizwan Desai (Independentnon-executive) Chairman

Reinette van Der Merwe (Executive) ManagingDirector Lipalesa Makepe (Executive) FinanceDirector Lawrence Maika (Independentnon-executive) Kenneth Molosi (Independentnon-executive) Alfred Dube (Independentnon-executive)

4 Independent auditors PricewaterhouseCoopers Plot50371

FairgroundsOfficeParkGaborone

5 Company secretary Kealeboga Bojosi5thFloor,Building4PrimePlazaPlot74358CentralBusinessDistrictGaborone POBox478GaboroneBotswana

6 Transfer secretaries Transaction Management Services (Proprietary) Limited

Unit206,SecondFloor,Plot64516P.O.Box1583,AADShowgroundsClose,FairgroundsGaborone

7 Registered office 5thFloor,Building4PrimePlazaPlot74358CentralBusinessDistrictGaborone

POBox478GaboroneBotswana

8 Company registrationRegistrationNumber1732

The Directors have pleasure in submitting their report to shareholders together with the audited financial statements for the year ended 31 December 2014.

38

Statement of Directors’ ResponsibilityFor the year ended 31 December 2014

Financial Statements

ThedirectorsofBarclaysBankofBotswanaLimited(“theBank”)areresponsiblefortheannualfinancialstatementsandallotherinformationpresentedtherewith.Theirresponsibilityincludesthemaintenanceoftrueandfairfinancialrecordsandthepreparationof annual financial statements in accordance with InternationalFinancial Reporting Standards and in the manner required bytheCompaniesActofBotswana(CompaniesAct,2003)andtheBotswanaBankingAct(CAP46:04). TheBankmaintainssystemsofinternalcontrolwhicharedesignedtoprovidereasonableassurancethattherecordsaccuratelyreflectitstransactionsandtoprovideprotectionagainstseriousmisuseor loss of the Banks assets. The directors are also responsibleforthedesign, implementation,maintenanceandmonitoringofthese systems of internal financial control. Nothing has cometo theattentionof thedirectors to indicate thatany significantbreakdown in the functioning of these systems has occurredduringtheyearunderreview.

Thegoingconcernbasishasbeenadoptedinpreparingtheannualfinancialstatements.Thedirectorshavenoreasontobelievethatthe Bank will not be a going concern in the foreseeable futurebasedonforecastsandavailablecashresources. Our external auditors conduct an examination of the financialstatements in conformity with International Standards onAuditing,whichincludetestsoftransactionsandselectivetestsofinternalaccountingcontrols.Regularmeetingsareheldbetweenmanagementandourexternalauditorstoreviewmattersrelatingtointernalcontrolsandfinancialreporting.TheexternalauditorshaveunrestrictedaccesstotheBoardofDirectorsandtheBoardAuditCommittee. The Board of Directors have reviewed and approved theaccompanyingfinancialstatements,setoutonpages41to119,forissueon19thMarch2015.


Reinette van der MerweManagingDirector

Lawrence MaikaChairmanoftheBoardAuditCommittee


39

Corporate Governance StatementFor the year ended 31 December 2014

TheBankiscommittedtorobustcorporategovernancepracticesandapplyingthehigheststandardsofbusinessintegrityinallitsactivities. Corporate governance has been a major focal point in recentyearsandseveraltraininginitiativeswereundertakentoimprovetheprocess. Corporate governance is the system according to whichcompaniesaremanagedandcontrolled.Asalistedcompany,theBank follows the United Kingdom Listing Authority’s CombinedCode,PrinciplesofGoodGovernanceandCodeofBestPractice,publishedinJune1998toimplementtheproposalsoftheHampelCommittee. TheBankiscommittedtobusinessintegrityandprofessionalismin all its activities. As part of this commitment, the Boardsupportsthehigheststandardsofcorporategovernanceandthedevelopmentofbestpractice.TheBarclaysGrouphasadoptedits

own internal corporategovernanceguidelines.Theseguidelinesaddress the composition of the Board, its responsibilities, howtheseresponsibilitiesaremetanddetailstheselectionproceduresfornewdirectors. InaccordancewiththerequirementsofInternalControl:Guidance for Directors on the Combined Code, issued by the Institute ofCharteredAccountantsinEnglandandWales,theBoardensuresthatmanagementidentifies,measuresandmonitorsavarietyofrisks through various control mechanisms. These risks and themeasuresrelatedtheretoareexplainedintheannualreport.The Board is most committed to improve its corporategovernancepractices.TheBoardandthevariouscommitteesaremakingcontinuousstridestodisplaytheBankasanexemplaryorganisation in the field of corporate governance by promotinggreateropennessandtransparency.


Reinette van der MerweManagingDirector

Lawrence MaikaChairmanoftheBoardAuditCommittee

40

Independent Auditor’s Report to the members of Barclays Bank Botswana LimitedReport on the Financial StatementsWe have audited the group annual financial statements andannualfinancialstatementsofBarclaysBankofBotswanaLimited(the “Bank”), which comprise the consolidated and separatestatements of financial position as at 31 December 2014, theconsolidatedandseparatestatementsofcomprehensiveincome,changesinequityandcashflowsfortheyearthenended,andasummaryofsignificantaccountingpoliciesandotherexplanatorynotesassetoutonpages41to119.

Directors’ Responsibility for the Financial StatementsThe Bank’s directors are responsible for the preparation of thegroupandBankannualfinancialstatementsthatgiveatrueandfair view in accordance with International Financial ReportingStandardsandforsuchinternalcontrolasthedirectorsdetermineis necessary to enable the preparation of financial statementsthatarefreefrommaterialmisstatement,whetherduetofraudorerror.

Auditor’s ResponsibilityOur responsibility is to express an opinion on these financialstatements based on our audit. We conducted our audit inaccordance with International Standards on Auditing. Thosestandards require that we comply with ethical requirementsandplanandperformtheaudittoobtainreasonableassurancewhether the financial statements are free from materialmisstatement.

Anauditinvolvesperformingprocedurestoobtainauditevidenceabouttheamountsanddisclosures inthefinancialstatements.The procedures selected depend on the auditor’s judgement,includingtheassessmentoftherisksofmaterialmisstatementofthefinancialstatements,whetherduetofraudorerror.Inmakingthose risk assessments, the auditor considers internal controlrelevant to the entity’s preparation of financial statements thatgiveatrueandfairviewinordertodesignauditproceduresthatareappropriateinthecircumstances,butnotforthepurposeofexpressinganopinionontheeffectivenessoftheentity’sinternalcontrol.Anauditalsoincludesevaluatingtheappropriatenessofaccountingpoliciesusedandthereasonablenessofaccountingestimatesmadebymanagement,aswellasevaluatingtheoverallpresentationofthefinancialstatements.

Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideabasisforourauditopinion.

OpinionInouropinion,thefinancialstatementsgiveatrueandfairviewof the consolidated and separate financial position of BarclaysBank of Botswana Limited as at 31 December 2014, and ofits consolidated and separate financial performance and itsconsolidatedandseparatecashflowsfortheyearthenendedinaccordancewithInternationalFinancialReportingStandards.

PricewaterhouseCoopersIndividualPracticingmember:SheyanEdirisingheMembershipnumber:20030048

19 March 2015Gaborone


41

Statements of Comprehensive IncomeFor the year ended 31 December 2014

Theaccompanyingnotesformanintegralpartofthefinancialstatements

Consolidated Company

2014 2013 2014 2013

in thousands of pula Notes Restated Interestincome 3 1,088,815 1,152,199 1,088,815 1,152,199Interestexpense 3 (197,913) (245,200) (197,913) (245,200)Netinterestincome 890,902 906,999 890,902 906,999 Feeandcommissionincome 4 318,581 280,791 263,242 231,548Feeandcommissionexpense 4 (13,414) (10,231) (13,414) (10,231)Netfeeandcommissionincome 305,167 270,560 249,828 221,317 Nettradingandinvestmentincome 5 79,110 90,902 79,110 90,902Otheroperatingincome 6 1,987 2,721 1,987 87,721Netotherincome 81,097 93,623 81,097 178,623 Totalincome 1,277,166 1,271,182 1,221,827 1,306,939Impairmentchargesandothercreditprovisions 7 (150,436) (198,420) (150,436) (198,420)Netincome 1,126,730 1,072,762 1,071,391 1,108,519 Staffcosts 8 (374,886) (325,646) (373,605) (304,655)Administrationandgeneralexpenses 9 (284,823) (303,139) (243,799) (281,836)Depreciationofpropertyandequipment 24 (27,440) (23,372) (27,440) (23,372)Amortisationofintangibleassets 23 (14,745) (18,228) (14,745) (18,228)Operatingexpenses (701,894) (670,385) (659,589) (628,091) Profitbeforeincometax 424,836 402,377 411,802 480,428Incometaxexpense 10 (88,963) (112,375) (92,164) (109,564)Total profit for the year 335,873 290,002 319,638 370,864 Othercomprehensiveincome Itemsthatwillnotbereclassifiedtoprofitandloss Movementinretirementbenefitobligations 25 17,649 (22,059) 17,649 (22,059)Total comprehensive income for the year 353,522 267,943 337,287 348,805 Earnings per share Basicanddilutedearningspersharefromcontinuingoperations(thebe) 2 39.41 34.03 37.51 43.52

42

Statements of Financial PositionAt 31 December 2014


2014 2013 2014 2013

in thousands of pula Notes Restated

Assets Cash 11 297,388 227,941 297,388 227,941BalanceswiththeBankofBotswana 12 788,834 797,339 788,834 797,339Financialinstruments 13 1,406,704 1,805,160 1,406,704 1,805,160Tradingportfolioassets 14 20,201 254 20,201 254Balanceswithrelatedcompanies 15 562,482 823,828 562,482 839,256Loansandadvancestobanks 16 578,056 381,923 578,056 381,923Derivativefinancialinstruments 17 6,264 18,423 6,264 18,423Financialassetsdesignatedatfairvalue 18 - 69,235 - 69,235Loansandadvancestocustomers 19 8,132,722 7,336,721 8,132,722 7,336,721Otherassets 20 238,231 82,347 238,231 82,347Currenttaxassets 21 19,529 40,802 - 15,208Deferredtaxassets 22 11,941 - 6,326 -Intangibleassets 23 22,673 34,895 22,673 34,895Propertyandequipment 24 159,955 99,749 159,955 99,749Retirementbenefitfund 25 3,580 - 3,580 -Total assets 12,248,560 11,718,617 12,223,416 11,708,451 Liabilities Depositsfrombanks 26 687,256 7,636 687,256 7,636Balanceswithrelatedcompanies 15 248,997 188,667 250,220 188,667Derivativefinancialinstruments 17 13,921 28,446 13,921 28,446Depositsduetocustomers 27 8,964,400 9,281,683 8,964,400 9,281,683Otherliabilities 28 187,797 268,267 160,247 240,683Provisions 29 46,119 34,572 46,119 34,572Currenttaxliabilities 21 51,551 - 51,551 -Deferredtaxliabilities 22 - 16,463 - 16,463Debtsecuritiesinissue 30 522,863 503,121 522,863 503,121Retirementbenefitfund 25 - 17,646 - 17,646Total liabilities 10,722,904 10,346,501 10,696,577 10,318,917 Shareholders’ equity Statedcapital 31 17,108 17,108 17,108 17,108Retainedearnings 1,420,635 1,287,429 1,421,818 1,304,847Otherreserves 31 87,913 67,579 87,913 67,579Total equity attributable to equity holders 1,525,656 1,372,116 1,526,839 1,389,534 Total liabilities and equity 12,248,560 11,718,617 12,223,416 11,708,451



43

Statements of Cash FlowsFor the year ended 31 December 2014


2014 2013 2014 2013

in thousands of pula Notes Restated Reconciliation of profit before tax to net cash flows from operating activities Profitbeforetax 424,836 402,377 411,802 480,428Netinterestincome (890,902) (906,999) (890,902) (906,999) Adjustment for non-cash items:- Allowanceforimpairment 19 150,436 198,420 150,436 198,420Depreciationofpropertyandequipment 24 27,440 23,372 27,440 23,372Amortisationofintangibles 23 14,745 18,228 14,745 18,228Netincreaseinfinancialassetsdesignatedatfairvalue (230) (27,909) (230) (27,909)Netincrease/(decrease)inotherprovisionsincludingpensions 24,195 (11,122) 24,195 (11,122)Profitondisposalofpropertyandequipment (934) (1,835) (934) (1,835) Changes in operating assets and liabilities (Decrease)/increaseindeposits (317,283) 115,267 (317,283) 115,267(Decrease)/increaseinotherliabilities (80,470) 55,826 (80,436) 49,996Increaseinadvancestocustomers (946,437) (1,238,168) (946,437) (1,238,168)Increaseinderivativefinancialinstruments (2,366) (6,112) (2,366) (6,112)(Increase)/decreaseinstatutoryreservewithBankofBotswana (31,445) 67,693 (31,445) 67,693Decreaseinbalanceswithrelatedcompanies 321,676 618,502 338,327 533,935(Increase)/decreaseintradingportfolioassets (19,947) 4,604 (19,947) 4,604(Increase)/decreaseinotherassets (155,884) 92,725 (155,884) 92,725Interestreceived 1,088,815 1,152,199 1,088,815 1,152,199Interestpaid (197,913) (245,200) (197,913) (245,200)Taxpaidnetofrefunds (49,521) (96,352) (53,172) (84,006)Net cash flows (utilised in)/generated from operating activities (641,189) 215,516 (641,189) 215,516Purchaseofpropertyandequipment (87,707) (26,057) (87,707) (26,057)Purchaseofintangibles 520 (3,905) 520 (3,905)Proceedsondisposalofvisashares 69,465 - 69,465 -Proceedsonsaleofpropertyandequipment 995 2,449 995 2,449Net cash utilised in investing activities (16,727) (27,513) (16,727) (27,513)Dividendspaid (200,002) (215,501) (200,002) (215,501)Issuanceofdebtsecurities 312,472 - 312,472 -Redemptionofdebtsecurities (307,000) - (307,000) -Net cash utilised in financing activities (194,530) (215,501) (194,530) (215,501)Net decrease in cash and cash equivalents (852,446) (27,498) (852,446) (27,498)Cashandcashequivalentsatbeginningoftheyear 2,431,278 2,458,776 2,431,278 2,458,776Cash and cash equivalents at end of the year 1,578,832 2,431,278 1,578,832 2,431,278 Cash and cash equivalents comprise: Cash 297,388 227,941 297,388 227,941CurrentaccountwithBankofBotswana (10,985) 28,965 (10,985) 28,965Balanceswithotherbanks 578,056 381,923 578,056 381,923BankofBotswanaCertificates 1,401,629 1,800,085 1,401,629 1,800,085Depositsfromotherbanks (687,256) (7,636) (687,256) (7,636) 1,578,832 2,431,278 1,578,832 2,431,278


44

Statements of Changes in Equity For the year ended 31 December 2014

Consolidated

Stated Share General Other Retained Total

capital capital risk reserves earnings equity

in thousands of pula reserve reserve

Balance at 1 January 2013 as previously stated 17,108 2,060 60,923 4,602 1,256,741 1,341,434Prioryearrestatement - - - - (21,754) (21,754)Balanceat1January2013restated 17,108 2,060 60,923 4,602 1,234,987 1,319,680Profitfortheperiod - - - - 290,002 290,002Othercomprehensiveincome - - - - (22,059) (22,059)Totalcomprehensiveincomefortheyear - - - - 267,943 267,943Prioryeardividendspaid - - - - (115,501) (115,501)Interimdividendpaid - - - - (100,000) (100,000)Contributionmadebyparent - - - (6) - (6)Totaltransactionswithowners - - - (6) (215,501) (215,507)Balanceat31December2013 17,108 2,060 60,923 4,596 1,287,429 1,372,116 Balance at 1 January 2014 17,108 2,060 60,923 4,596 1,287,429 1,372,116Profitfortheperiod - - - - 335,873 335,873Othercomprehensiveincome - - - - 17,649 17,649Totalcomprehensiveincomefortheyear - - - - 353,522 353,522Prioryeardividendspaid - - - - (100,001) (100,001)Interimdividendpaid - - - - (100,001) (100,001)Transfers - - 20,314 - (20,314) -Contributionmadebyparent - - - 20 - 20Totaltransactionswithowners - - 20,314 20 (220,316) (199,982)Balanceat31December2014 17,108 2,060 81,237 4,616 1,420,635 1,525,656



45

Statements of Changes in Equity (continued) For the year ended 31 December 2014

Company

Stated Share General Other Retained Total

capital capital risk reserves earnings equity

in thousands of pula reserve reserve

Balance at 1 January 2013 17,108 2,060 60,923 4,602 1,171,543 1,256,236Profitfortheperiod - - - - 370,864 370,864Othercomprehensiveincome - - - - (22,059) (22,059)Totalcomprehensiveincomefortheyear - - - - 348,805 348,805Prioryeardividendspaid - - - - (115,501) (115,501)Interimdividendpaid - - - - (100,000) (100,000)Contributionmadebyparent - - - (6) - (6)Totaltransactionswithowners - - - (6) (215,501) (215,507)Balanceat31December2013 17,108 2,060 60,923 4,596 1,304,847 1,389,534 Balance at 1 January 2014 17,108 2,060 60,923 4,596 1,304,847 1,389,534Profitfortheperiod - - - - 319,638 319,638Othercomprehensiveincome - - - - 17,649 17,649Totalcomprehensiveincomefortheyear - - - - 337,287 337,287Prioryeardividendspaid - - - - (100,001) (100,001)Interimdividendpaid - - - - (100,001) (100,001)Transfers - - 20,314 - (20,314) -Contributionmadebyparent - - - 20 - 20Totaltransactionswithowners - - 20,314 20 (220,316) (199,982)Balanceat31December2014 17,108 2,060 81,237 4,616 1,421,818 1,526,839


46

For the year ended 31 December 2014

General Information and nature of activities Barclays Bank of Botswana Limited (“the Bank”) is a publiclimited company listed on the Botswana Stock Exchange anddomiciled in Botswana. The address of the Bank’s registeredoffice is 5th Floor, Building 4, Prime Plaza, Plot 74358, CentralBusinessDistrict,Gaborone,Botswana.TheconsolidatedfinancialstatementsoftheBankasatandfortheyearended31December2014 comprise the Bank and its subsidiaries (together referredtoas“theBank”/’’theGroup’’).TheBankprimarilyisinvolvedincorporatebanking, retail banking, and in treasuryproductsandservices. The Bank’s holding company is Barclays Africa Group Limited,whichhasaprimarylistingontheJohannesburgStockExchangeand is incorporatedanddomiciled inSouthAfricaandprovidesretail,business,corporate,investmentbanking,financialservicesandwealthmanagementproductsandservices.Theaddressoftheregisteredofficeoftheholdingcompanyis7thFloor,BarclaysTowersWest,15TroyeStreet,Johannesburg,2001. The Bank’s ultimate holding company is Barclays Bank PLC, acompany registered and domiciled in the United Kingdom. Theaddressofitsregisteredofficeis1ChurchillPlace,CanaryWharf,London,UnitedKingdom.

(a) Basis of preparation Theconsolidatedandseparatefinancialstatements havebeenpreparedinaccordancewithInternational FinancialReportingStandards(“IFRS”)andinterpretations issuedbytheIFRSInterpretationsCommittee,as publishedbytheInternationalAccountingStandards Board(“IASB”),therequirementsoftheCompaniesAct andBSEListingsRequirements.Theprincipalaccounting policiesappliedinthepreparationoftheconsolidated andseparatefinancialstatementsaresetoutbelow.These policieshavebeenconsistentlyapplied.Theconsolidated andseparatefinancialstatementshavebeenprepared underthehistoricalcostconventionmodifiedtoinclude thefairvaluationofparticularfinancialinstrumentstothe extentrequiredorpermittedunderIFRSassetoutinthe relevantaccountingpolicies. Functional and presentation currency The consolidated and separate financial statements

are presented in Pula, which is the Bank’s functionaland presentation currency. Except as indicated, financialinformation presented in Pula has been rounded to thenearestthousand.

Use of estimates and judgements Thepreparationoffinancialstatementsrequiresmanagement

tomakejudgements,estimatesandassumptionsthataffectthe application of accounting policies and the reportedamountsofassets, liabilities, incomeandexpenses.Actualresultsmaydifferfromtheseestimates.

Estimates and underlying assumptions are reviewed onan on-going basis. Revisions to accounting estimates arerecognisedintheperiodinwhichtheestimateisrevisedandinanyfutureperiodsaffected.

In particular, information about significant areas ofestimation,uncertaintyandcritical judgements inapplyingaccounting policies that have the most significant effectontheamountsrecognised inthefinancialstatementsaredescribedinpage60.

(b) Summary of significant accounting policies Theprincipalaccountingpoliciesappliedinthepresentation

of these financial statements are presented below. Exceptas described below, the accounting policies applied areconsistentwiththoseappliedintheprioryear.

A number of new standards and amendments to existing

standards have been issued but are not yet effective forthereportingperiodandhavenotbeenappliedinpreparingtheseannualfinancialstatements.

New standards effective for the current reporting period

Amendments to IAS 32 – Financial Instruments: Presentation The IASB has issued amendments to the applicationguidance in IAS 32, ‘Financial instruments: Presentation’,thatclarifysomeoftherequirementsforoffsettingfinancialassetsandfinancial liabilitieson thestatementoffinancialposition. However, the clarified offsetting requirements foramounts presented in the statement of financial positioncontinuetobedifferentfromUSGAAP.

Amendments to IFRS 10, consolidated financial statements’, IFRS 12 and IAS 27 for investment entities Theamendmentsmeanthatmanyfundsandsimilarentitieswillbeexemptfromconsolidatingmostoftheirsubsidiaries.Insteadtheywillmeasurethematfairvaluethroughprofitorloss.Theamendmentsgiveanexceptiontoentitiesthatmeet an ‘investment entity’ definition and which display

Accounting Policies


47


particularcharacteristics.Changeshavealsobeenmade inIFRS 12 to introduce disclosures that an investment entityneedstomake. IASB issues narrow-scope amendments to IAS 36, ‘Impairment of assets’ These amendments address the disclosure of informationabout the recoverable amount of impaired assets if thatamountisbasedonfairvaluelesscostofdisposal. Amendment to IAS 39 on novation of derivatives The IASB has amended IAS 39 to provide relief fromdiscontinuinghedgeaccountingwhennovationofahedginginstrumenttoaCCPmeetsspecifiedcriteria.SimilarreliefwillbeincludedinIFRS9,‘FinancialInstruments’.

New standards and interpretations issued but not effective for the current period. A number of new standards and amendments to existingstandards have been issued but are not yet effective forthereportingperiodandhavenotbeenappliedinpreparingtheseannualfinancialstatements: IFRS 9 Financial Instruments (“IFRS 9”) The new accounting standard that represents a packageof reformtofinancial instrumentaccountingwas issued inJuly2014.IFRS9replacesthepreviousstandardonfinancialinstruments, IAS39andencompassesrequirements inthefollowingareas:

• Classificationandmeasurement:Financialassetsare classifiedbyreferencetothebusinessmodelwithinwhich theyareheldandtheircontractualcashflow characteristics.Financialliabilitiesareclassifiedina similarmannertounderIAS39,howeverthereare differencesintherequirementsapplyingtothe recognitionofanentity’sowncreditrisk.

• Impairment:IFRS9introducesan‘expectedcreditloss’ modelforthemeasurementoftheimpairmentoffinancial assets,thereforeitisnolongernecessaryforacredit eventtohaveoccurredbeforeacreditlossisrecognised.

• Hedgeaccounting:IFRS9introducesanewhedge accountingmodelthatisdesignedtobemoreclosely alignedwithhowanentityundertakesriskmanagement activitieswhenhedgingfinancialandnon-financialrisk exposures.

• Derecognition:Therequirementsforthederecognition

of financial assets and liabilities are carried forward fromIAS39. IFRS9 is applicable to reportingperiodsbeginningon or after 1 January 2018. The standard is required to beretrospectively applied, but comparative information is notcompulsory.TheBankiscurrentlyintheprocessofassessingIFRS9’s full impact,and the relateddisclosures,whichwillneedtobeprovidedonfirst-timeadoptionofIFRS9.”

IFRS 15 Revenue from Contracts with Customers (“IFRS 15”)

IFRS15providesasingle,principlesbasedfive-stepmodeltobeappliedtoallcontractswithcustomers.Thefivestepsinthemodelareasfollows:

• Identifythecontractwiththecustomer • Identifytheperformanceobligationsinthecontract • Determinethetransactionprice • Allocatethetransactionpricetotheperformance

obligationsinthecontracts • Recogniserevenuewhen(oras)theentitysatisfiesa

performanceobligation. Guidance isprovidedontopicssuchasthepointatwhich

revenueisrecognised,accountingforvariableconsideration,costsoffulfillingandobtainingacontractandvariousrelatedmatters.Newdisclosuresaboutrevenuearealsointroduced.IFRS 15 is applicable to reporting periods beginning on orafter1January2017.Achoiceofmodifiedorfullretrospectiveapplicationisallowed.TheBankisintheprocessofassessingtheimpact.

IAS 19 (amendments)

IAS19clarifiestherequirementsforhowcontributionsfromemployeesorthirdpartiesthatare linkedtoserviceshouldbe attributed to periods of service. In addition, it permitsa practical expedient if the amount of the contribution isindependentofthenumberofyearsofanemployee’sservice.Theamendmentsarerequiredtobeappliedretrospectivelyandwillfirstbeapplicabletoreportingperiodsbeginningonorafter1July2014.TheBankisintheprocessofassessingtheimpact.

IFRS 11 (amendments) IFRS11requiresanacquirerofaninterestinajointoperationin which the activity constitutes a business, to apply theaccounting principles and disclosures provided by IFRS 3whenaccountingfortheacquisition.Theamendmentsarerequiredtobeappliedprospectivelyandwillfirstbeapplicableto reporting periods beginning on or after 1 January 2016.TheBankisintheprocessofassessingtheimpact.

Accounting Policies (continued)

48


(b) Summary of significant accounting policies (continued)

New standards effective for the current reporting period (continued)

IAS 27 and IAS 28 (amendments) IAS27andIAS28allowanentitytousetheequitymethod

to account for investments in subsidiaries, joint venturesand associates in its separate financial statements. Theseamendmentsarerequiredtobeappliedretrospectivelyandwillfirstbeapplicabletoreportingperiodsbeginningonorafter1January2016.TheBankisintheprocessofassessingtheimpact.

IFRS 10 and IAS 28 (amendments) IFRS10andIAS28clarifythatinatransactioninvolvinganassociateorjointventure,theextentofgainorlossrecogniseddepends on whether the assets sold or contributedconstituteabusiness.Theamendmentsarerequiredtobeappliedprospectivelyandwillfirstbeapplicabletoreportingperiodsbeginningonorafter1January2016.TheBankisintheprocessofassessingtheimpact.

Annual improvements Annualimprovementsforthe2012–2014cyclewereissuedin September 2014. These improvements affect variousstandardsandareeffectiveforperiodsbeginningonorafter1January2016.TheBankisintheprocessofassessingtheimpact.

Significant accounting policies The accounting policies set out below have been appliedconsistentlytoallperiodspresentedinthesefinancialstatements,andhavebeenappliedconsistentlybytheBankentities,unlessotherwisestated.

(a) Basis of consolidation (i) Subsidiaries

Subsidiariesareentitiescontrolledby theBankoverwhichthegrouphascontrol.TheBankcontrolsanentitywhentheBank is exposed to, or has rights to variable returns fromits involvementwiththeentityandhastheabilitytoaffectthosereturnsthroughitspowerovertheentity.Thefinancialstatementsofsubsidiariesare included intheconsolidatedfinancialstatementsfromthedatethatcontrolistransferredto the group. They are deconsolidated from the date thatcontrolceases.

Acquisition of subsidiaries Theacquisitionmethodofaccountingisusedtoaccountfor

thepurchaseofsubsidiaries.Theconsideration transferredfor the acquisition of a subsidiary is measured at the fairvalue of the assets given, equity instruments issued andliabilitiesincurredorassumed.Theconsiderationtransferredincludes the fair value of any asset or liability resultingfrom a contingent consideration arrangement. Acquisitionrelated costs are expensed as incurred. The excess of theconsideration paid in an acquisition over the Bank’s shareof the fair value of the identifiable net assets acquired isrecorded as goodwill. A gain on acquisition is recognisedinprofitor loss if there isanexcessof theBank’sshareofthefairvalueoftheidentifiablenetassetsacquiredoverthecostoftheconsiderationpaid.Intra-grouptransactionsandbalances are eliminated on consolidation and consistentaccounting policies are used throughout the Group forthe purposes of the consolidation. Changes in ownershipinterests in subsidiaries are accounted for as equitytransactions if they occur after control has already beenobtainedandtheydonotresultinlossofcontrol.

Transactions eliminated on consolidation

Intra-groupbalancesandanyunrealisedincomeandexpensesarising from intra-group transactions, are eliminated inpreparingtheconsolidatedfinancialstatements.Unrealisedlossesareeliminatedinthesamewayasunrealisedgains,butonlytotheextentthatthereisnoevidenceof impairment.TheaccountingpoliciesforsubsidiariesareconsistentwiththepoliciesadoptedbytheBank.

AlistingoftheBank’ssubsidiariesissetoutinnote34tothefinancialstatements.

In the individual financial statements, investments insubsidiariesarestatedatcostlessimpairment,ifany.

(b) Foreign currency (i) Foreign currency transactions

Functional currency and presentation currency Items included in the financial statements of each of theGroup’s entities are measured using the currency of theprimaryeconomicenvironmentinwhichtheentityoperates(“the functionalcurrency“).Theconsolidatedandseparatefinancial statements are presented in Pula, which is theBank’sfunctionalandpresentationcurrency.

(ii) Transactions and balances Foreign currency transactions are translated into thefunctional currency using the exchange rates prevailing at



49


the dates of the transactions. Foreign exchange gains andlossesresultingfromthesettlementofsuchtransactionsandfromthetranslationatyear-endexchangeratesofmonetaryassets and liabilities denominated in foreign currencies arerecognisedintheprofitorloss.

(c) Interest income and expense

Interestincomeandexpenseonallinstrumentsmeasuredatamortisedcostarerecognisedintheprofitorlossusingtheeffectiveinterestmethod.

Theeffectiveinterestratemethodisamethodofcalculatingtheamortisedcostofafinancialassetorafinancialliabilityand of allocating the interest income or expense over therelevant period. The effective interest rate is the rate thatexactlydiscountsestimatedfuturecashpaymentsorreceiptsthroughtheexpectedlifeofthefinancialinstrumentor,whenappropriate,ashorterperiodtothenetcarryingamountofthe financial asset or financial liability. When calculatingthe effective interest rate, the Bank estimates cash flowsconsideringallcontractualtermsofthefinancialinstrument,but does not consider future credit losses. The calculationincludes all fees paid or received between parties to thecontractthatareanintegralpartoftheeffectiveinterestrate,transactioncostsandallotherpremiumsordiscounts.

Whenafinancialassetoragroupofsimilarfinancialassetshas been written down as a result of an impairment loss,interest income is recognised using the rate of interestused to discount the future cash flows for the purpose ofmeasuringtheimpairmentloss.

Interestincomeandexpenseisrecognisedaspartofoperatingcashflowsinthestatementofcashflows.

(d) Trading income

InaccordancewithIAS39,tradingpositionsareheldatfairvalueandtheresultinggainsandlossesareincludedinprofitor loss, together with interest and dividends arising fromlongandshortpositionsandfundingcostsrelatingtotradingactivities. Income arises from both the sale and purchaseof trading positions, margins which are achieved throughmarket-making and customer business and from changesinfairvaluecausedbymovementsininterestandexchangerates,equitypricesandothermarketvariables.Owncreditgains/lossesarisefromthefairvaluationoffinancialliabilitiesdesignatedatfairvaluethroughprofitorloss.Gainsorlosseson assets or liabilities reported in the trading portfolio are

includedinprofitorlossunder“nettradingandinvestmentincome” together with interest and dividends arising fromlong and short positions and funding costs relating totradingactivities.Gainsand lossesonderivatives linked toinvestment contracts are recognised in “net trading andinvestmentincome”.

(e) Fees and commission Fees and commission income

TheBankappliesIAS18.FeesandcommissionschargedforservicesprovidedorreceivedbytheGrouparerecognisedastheservicesareprovided,forexampleoncompletionofanunderlyingtransaction.

(f ) Tax The Group applies IAS 12 Income Taxes (“IAS 12”) in

accountingfortaxesonincome.

Current tax Income tax payable on taxable profits (“current tax”) isrecognisedasanexpense in the reportingperiod inwhichthe profits arise. Withholding taxes are also treated asincometaxes.Incometaxrecoverableontaxallowablelossesisrecognisedasacurrenttaxassetonlytotheextentthatitis regardedas recoverablebyoffsetagainst taxableprofitsarising in thecurrentorprior reportingperiod.Current taxis measured using tax rates and tax laws that have beenenactedorsubstantivelyenactedatthereportingdate. Deferred tax

Deferredtaxisprovidedinfull,usingtheliabilitymethod,ontemporarydifferencesarisingfromthedifferencesbetweenthe tax bases of assets and liabilities and their carryingamountsintheconsolidatedfinancialstatements.Deferredtax is determined using tax rates and legislation enactedor substantively enacted by the reporting date which areexpectedtoapplywhenthedeferredtaxassetisrealisedorthedeferredtax liability issettled.Deferredtaxassetsandliabilitiesareonlyoffsetwhenthere isbotha legal righttoset-offandanintentiontosettleonanetbasis.


50


Significant accounting policies (continued)

(f ) Tax (continued)

Value added tax (“VAT”) Revenues, expenses and assets are recognised net of theamountofVAT,except:

• wheretheVATincurredonapurchaseofassetsor servicesisnotrecoverablefromthetaxationauthority,in whichcasetheVATisrecognisedaspartoftheasset; and

• receivablesandpayablesthatarestatedwiththe amountofVATincluded.

Non-recoverableVATonoperatingexpenditure isdisclosedseparately in operating expenditure in the statement ofcomprehensiveincome.

The net amount of VAT recoverable from, or payable to,the taxation authority is included as part of receivables orpayablesinthestatementoffinancialposition.

Withholding tax Dividendsaretaxedat7.5%inthehandsofthereciepientsofthedividends.

(g) Financial instruments

TheGroupapplies IAS39fortherecognition,classificationandmeasurementandderecognitionoffinancialassetsandfinancialliabilities,fortheimpairmentoffinancialassetsandforhedgeaccounting.TheGrouprecognisesfinancialassetsand liabilitieswhen itbecomesapartytothetermsofthecontract,whichisthetradedateorthesettlementdate.

Financial instrument at fair value through profit and loss Financial instruments classified as held for trading In accordance with IAS 39, all assets and liabilities held

for trading purposes are held at fair value with gains andlossesfromchangesinfairvaluetakentotheprofitor losscomponent of the statement of comprehensive income in“gainsandlossesfrombankingandtradingactivities”.

Financial instruments designated at fair value through profit or loss

In accordance with IAS 39, financial assets and financialliabilities may be designated at fair value, with gains andlossestakentothestatementofcomprehensive income in“gainsand losses frombankingand tradingactivities”and

“gains and losses from investment activities” dependingonthenatureoftheinstrument.TheGrouphastheabilityto make the fair value designation when holding theinstrumentsat fair value reducesanaccountingmismatch(causedbyanoffsetting liabilityorassetbeingheldat fairvalue), is managed by the Group on the basis of its fairvalue, or includes terms that have substantive derivativecharacteristics.

Derivatives Derivativeinstrumentsarecontractswhosevalueisderivedfromoneormoreunderlyingfinancialinstrumentsorindicesdefined in the contract. They include swaps, forward rateagreements, futures, options and combinations of theseinstruments and primarily affect the Group’s net interestincome,nettradingincome,netfeeandcommissionincomeandderivativeassetsandliabilities.

Notionalamountsofthecontractsarenotrecordedonthestatementoffinancialposition.ChangesinthefairvalueofderivativesusedtoeconomicallyhedgetheGroup’sinterestratearerecognised in“net interest income” intheprofitorlosscomponentofthestatementofcomprehensiveincome.

Available-for-sale financial assets Available-for-sale financial assets include both debt andequityinstrumentsnormallyheldforanindefiniteperiod,butthatmaybesoldinresponsetoliquidityneedsorchangesininterestrates,exchangeratesorothereconomicconditions.Thecategoryalso includes longer-datedgovernmentstockheldforregulatory liquidassetpurposes,aswellascertaininvestmentsincorporatebonds.

Subsequenttoinitialrecognition,thefairvalueadjustmentswhich represent gains and losses, net of applicable taxes,are reported in other comprehensive income until suchinvestmentsaresoldorotherwisedisposedof,oruntilsuchinvestmentsaredetermined tobe impaired,atwhich timethe cumulative gain or loss previously recognised in othercomprehensive income is recognised in the profit or losscomponent of the statement of comprehensive income.However,interestonavailable-for-salefinancialinstrumentscalculated using the effective interest rate method isrecognisedintheprofitorlosscomponentofthestatementofcomprehensiveincome.

If impairmentisassessedtohaveoccurred,thecumulativegainorlossthathaspreviouslybeenrecogniseddirectlyinOCIisreclassifiedfromOCIandisrecognisedintheprofitorlosscomponentofothercomprehensive income. Inthecaseof



51


debtinstrumentsclassifiedasavailable-for-sale,impairmentisassessedbasedonthesamecriteriaasallotherfinancialassets. If, in a subsequent period, the fair value of a debtinstrument increases and the increase can be objectivelyrelatedtoaneventoccurringaftertheimpairmentlosswasrecognisedintheprofitorlosscomponentofthestatementof comprehensive income, the impairment loss shall bereversed,withtheamountofthereversalrecognisedintheprofitorlosscomponentofthestatementofcomprehensiveincome. Reversals of impairment of equity instrumentsare not recognised in the profit or loss component of thestatement of comprehensive income. Increases in the fairvalueofequityinstrumentsafterimpairmentarerecogniseddirectlyinothercomprehensiveincome.

Loans and advances to customers Loans and advances to customers and banks, customeraccountsandcertaindebtsecuritiesareheldatamortisedcost. That is, the initial fair value (which is normally theamount advanced) is adjusted for premiums, discounts,repayments and the amortisation of coupon, fees andexpenses to represent the effective interest rate of theasset.

Financial liabilities Mostfinancial liabilitiesareheldatamortisedcost.That is,theinitialfairvalue(whichisnormallytheamountborrowed)isadjustedforrepaymentsandtheamortisationofcoupon,feesandexpensestorepresenttheeffectiveinterestrateoftheliability.

Impairment of financial assets

Financial assets held at amortised cost In accordance with IAS 39, the Group assesses at each

reporting date whether there is objective evidence thatfinancial assets at amortised cost will not be recovered infull and, wherever necessary, recognises an impairmentloss in the profit or loss component of the statement ofcomprehensiveincome.

Animpairmentlossisrecognisedifthereisobjectiveevidenceofimpairmentasaresultofeventsthathaveoccurredandthese have adversely impacted the estimated future cashflowsfromtheassets.Theseeventsinclude:

• becomingawareofsignificantfinancialdifficultyofthe issuerorobligor; • abreachofcontract,suchasadefaultordelinquencyin interestorprincipalpayments;

• theGroup,foreconomicorlegalreasonsrelatingtothe borrower’sfinancialdifficulty,grantsaconcessionthatit wouldnototherwiseconsider;

• itbecomesprobablethattheborrowerwillenter bankruptcyorotherfinancialreorganisation; • thedisappearanceofanactivemarketforthatfinancial assetbecauseoffinancialdifficulties;and

• observabledataataportfoliolevelindicatingthatthere isameasurabledecreaseintheestimatedfuturecash flows,althoughthedecreasecannotyetbeascribedto individualfinancialassetsintheportfolio–suchasadverse

changesinthepaymentstatusofborrowersinthe portfolioornationalorlocaleconomicconditionsthat correlatewithdefaultsontheassetsintheportfolio.

Impairment assessments are conducted individually forsignificant assets, which comprise all wholesale customerloans and larger retail business loans, and collectively forsmaller loans and for portfolio level risks, such as countryorsectoralrisks.Forthepurposesoftheassessment,loanswithsimilarcreditriskcharacteristicsaregroupedtogether,generally on the basis of their product type, industry,geographical location, collateral type, past due status andother factors relevant to the evaluation of expected futurecashflows.

The impairment assessment includes estimating theexpectedfuturecashflowsfromtheasset,orthegroupofassets,whicharethendiscountedusingtheoriginaleffectiveinterestratecalculatedfortheasset.Ifthisislowerthanthecarrying value of the asset or the portfolio, an impairmentallowanceisraised.

If,inasubsequentreportingperiod,theamountoftheimpairmentlossdecreasesandthedecreasecanberelatedobjectively toaneventoccurringafter the impairmentwasrecognised, the previously recognised impairment loss isreversedbyadjustingtheallowanceaccount.Theamountofthereversalisrecognisedintheprofitorlosscomponentofthestatementofcomprehensiveincome.

Followingimpairment,interestincomecontinuestoberecognisedattheoriginaleffectiveinterestrateontherestatedcarryingamount,representingtheunwindofthediscountoftheexpectedcashflows,includingtheprincipaldueonnon-accrualloans.UncollectableloansarewrittenoffagainsttherelatedallowanceforloanimpairmentoncompletionoftheGroup’sinternalprocessesandallrecoverableamountshavebeencollected.Subsequentrecoveriesofamountspreviously


52



Impairment of financial assets (continued) writtenoffarecreditedtotheprofitorlosscomponentofthe

statementofcomprehensiveincome.

(g) Financial instruments Identified impairment

Impairment allowances are calculated on an individualbasisandallrelevantconsiderationsthathaveabearingonthe expected future cash flows of that instrument beingassessedaretakenintoaccount,forexample,thebusinessprospects for thecustomer, the fair valueof collateral, theGroup’spositionrelativetootherclaimants,thereliabilityofcustomerinformationandthelikelycostanddurationoftheworkout process. Subjective judgements are made in thisprocessbymanagement.

Furthermore, judgements change with time as newinformation becomes available or as workout strategiesevolve,resultinginrevisionstotheimpairmentallowanceasindividualdecisionsaretakencasebycase.

Onceafinancialassetoragroupofsimilarfinancialassetshavebeenwrittendownasa resultofan impairment loss,interest income is thereafter recognised using the rateof interest used to discount the future cash flows for thepurposeofmeasuringtheimpairmentloss.

Assetsthatareindividuallyassessedforimpairmentandforwhichanimpairmentlossisorcontinuestoberecognised,arenotincludedinacollectiveassessmentofimpairment.

Unidentified impairment An impairment allowance is recognised when observable

data indicates there is a measurable decrease in theestimatedfuturecashflowsfromagroupoffinancialassetssincetheoriginal recognitionofthoseassets,eventhoughthe decrease cannot yet be identified for the individualassetsinthegroup.Thepurposeofcollectiveassessmentofimpairmentistotestforlatentlossesonaportfolioofloansthathavenotbeenindividuallyevidenced.

In cases where the collective impairment of a portfoliocannot be individually evidenced, the Group sets out toprovethatariskconditionhastakenplacethatwillresultinanimpairmentofassets(basedonhistoricexperience),butthelosseswillonlybeidentifiableatanindividualborrowerlevelatafuturedate.

Theemergenceperiodconceptisappliedtoensurethatonlyimpairments that exist at the reporting date are captured.Theemergenceperiodisdefinedasthetimelapsebetweentheoccurrenceofatriggereventandtheimpairmentbeingidentifiedatanindividualaccountlevel. Theprobabilityofdefault foreachexposureclass isbasedon historical default experience, scaled for the emergenceperiod relevant to the exposure class. This probability ofdefault is then applied to the total population for whichspecificimpairmentshavenotbeenrecognised.

The resulting figure represents an estimation of theimpairmentthatoccurredduringtheemergenceperiodandthereforehasnotspecificallybeenidentifiedbytheGroupatthereportingdate.

The impairment allowance also takes into account theexpectedseverityoflossatdefault,ortheloss-givendefault(“LGD”), which is the amount outstanding when defaultoccurs that isnot subsequently recovered.Recoveryvariesbyproductanddepends,forexample,onthelevelofsecurityheldinrelationtoeachloan,andtheGroup’spositionrelativetootherclaimants.TheLGDestimatesarebasedonhistoricaldefaultexperience.

Historicallossexperienceisadjustedonthebasisofcurrentobservable data to reflect the effects of current conditionsthat do not affect the period on which historical lossexperienceisbasedandtoremovetheeffectsofconditionsinthehistoricalperiodthatdonotcurrentlyexist.

Subordinated debt SubordinateddebtismeasuredatamortisedcostusingtheeffectiveinterestratemethodunderIAS39.

Offsetting of financial assets and financial liabilities InaccordancewithIAS32,theGroupreportsfinancialassets

and financial liabilities on a net basis on the statement offinancial position only if there is a legally enforceable righttosetofftherecognisedamountsandthere is intentiontosettleonanetbasis,or to realise theassetandsettle theliabilitysimultaneously.

Derecognition of financial assets Full derecognition only occurs when the rights to receive

cashflowsfromtheassethavebeendischarged,cancelledorhaveexpired,ortheGrouptransfersbothitscontractualright to receive cash flows from the financial assets (orretainsthecontractualrightstoreceivethecashflows,butassumes a contractual obligation to pay the cash flows to



53


another party without material delay or reinvestment) andsubstantiallyalltherisksandrewardsofownership,includingcredit risk,prepaymentriskand interest raterisk.Whenanassetistransferred,insomecircumstances,theGroupmayretainaninterestinit(continuinginvolvement)requiringtheGroup to repurchase it in certain circumstances for otherthanitsfairvalueonthatdate.

Derecognition of financial liabilities Afinancialliabilityisderecognisedwhentheobligationunder

the liability is discharged, cancelled or expires. Where anexisting financial liability is replaced by another from thesame party on substantially different terms, or the termsofanexistingliabilityaresubstantiallymodified(takingintoaccountbothquantitativeandqualitativefactors),suchanexchange or modification is treated as a derecognition ofthe original liability and the recognition of a new liability,and the difference in the respective carrying amounts isrecognisedintheprofitorlosscomponentofthestatementofcomprehensiveincome.

Wherethetermsofanexistingliabilityarenotsubstantiallymodified, the liability is not derecognised. Costs incurredon such transactions are treated as an adjustment to thecarryingamountofthe liabilityandareamortisedovertheremainingtermofthemodifiedliability.

Fair value Allfinancial instrumentsareinitiallyrecognisedatfairvalueon the date of initial recognition and, depending on theclassification of the asset, may continue to be held at fairvalueeitherthroughprofitorlossorOCI.Thefairvalueofafinancialinstrumentisthepricethatwouldbereceivedtosellanassetorpaidtotransferaliabilityinanorderlytransactionbetweenmarketparticipantsatthemeasurementdate.

Whereverpossible, fairvalue isdeterminedby referencetoaquotedmarketpriceforthatinstrument.FormanyoftheGroup’sfinancialassetsandliabilities,especiallyderivatives,quoted prices are not available, and valuation models areusedtoestimatefairvalue.

The models calculate the expected cash flows under the

terms of each specific contract and then discount thesevaluesback toapresentvalue.Thesemodelsuseas theirbasis independently sourced market parameters including,for example, interest rate yield curves, equities andcommoditiesprices,optionvolatilitiesandcurrencyrates.

On initial recognition, it is presumed that the transaction

priceisthefairvalueunlessthereisobservableinformationavailable in an active market to the contrary. The bestevidenceofan instrument’s fair valueon initial recognitionis typically the transaction price. However, if fair value canbeevidencedbycomparisonwithotherobservablecurrentmarket transactions in the same instrument, or is basedon a valuation technique whose inputs include only datafrom observable markets then the instrument should berecognised at the fair value derived from such observablemarketdata.

Variousfactorsinfluencetheavailabilityofobservableinputsand these may vary from product to product and changeover time. Factors include the depth of activity in therelevantmarket,thetypeofproduct,whethertheproductisnewandnotwidelytradedinthemarketplace,thematurityof market modelling and the nature of the transaction(bespokeorgeneric).Totheextentthatvaluationisbasedonmodelsorinputsthatarenotobservableinthemarket,thedeterminationoffairvaluecanbemoresubjective,dependentonthesignificanceoftheunobservableinputtotheoverallvaluation.Unobservableinputsaredeterminedbasedonthebestinformationavailable,forexamplebyreferencetosimilarassets,similarmaturitiesorotheranalyticaltechniques.

Hedge accounting The Group applies hedge accounting to represent, to the

maximum possible extent permitted under accountingstandards,theeconomiceffectsofitsinterestandcurrencyriskmanagementstrategies.Derivativesareusedtohedgeinterestrate,exchangerate,commodity,andequityexposuresandexposurestocertainindicessuchashousepriceindicesandretailpriceindicesrelatedtonon-tradingpositions.

Wherederivativesareheld for riskmanagementpurposes,and when transactions meet the required criteria fordocumentationandhedgeeffectiveness,theGroupappliesfair value hedge accounting, cash flow hedge accounting,or hedging of a net investment in a foreign operation, asappropriatetotherisksbeinghedged.

Fair value hedge accounting Changes in fair value of derivatives that qualify and aredesignatedasfairvaluehedgesarerecordedintheprofitorlosscomponentofthestatementofcomprehensiveincome,togetherwithchangesinthefairvalueofthehedgedassetor liability thatareattributabletothehedgedrisk.Thefairvaluechangesadjustthecarryingvalueofthehedgedassetorliabilityheldatamortisedcost.


54



(g) Financial instruments (continued)

Fair value hedge accounting (continued)

Ifhedgerelationshipsnolongermeetthecriteriaforhedgeaccounting,hedgeaccountingisdiscontinued.Forfairvaluehedgesofinterestraterisk,thefairvalueadjustmenttothehedgeditemisamortisedtoprofitorlossoverthereportingperiodtomaturityofthepreviouslydesignated

hedge relationship using the effective interest method. If

thehedgeditemissoldorrepaid,theunamortisedfairvalueadjustmentisrecognisedimmediatelyintheprofitandlosscomponentofthestatementofcomprehensiveincome.

Cash flow hedge accounting Forqualifyingcashflowhedges,thefairvaluegainorlossonthehedginginstrumentassociatedwiththeeffectiveportionofthecashflowhedgeisrecognisedinitiallyinOCI,andthenrecycled to the profit or loss component of the statementofcomprehensiveincomeinthereportingperiodswhenthehedgeditemwillaffectprofitorloss.

Any ineffective portion of the gain or loss on the hedginginstrumentisrecognisedintheprofitorlosscomponentofthestatementofcomprehensiveincomeimmediately.

When a hedging instrument expires or is sold, or when ahedge no longer meets the criteria for hedge accounting,any cumulative gain or loss existing in equity at that timeremainsinequityandisrecognisedwhenthehedgeditemisultimatelyrecognisedintheprofitorlosscomponentofthestatementofcomprehensiveincome.

Whenaforecasttransactionisnolongerexpectedtooccur,thecumulativegainorlossthatwasrecognisedinequityisimmediately transferred to theprofitor losscomponentofthestatementofcomprehensiveincome.

(h) Cash and cash equivalents Forthepurposesofthestatementofcashflows,cashand

cash equivalents comprise of cash in hand, balances withBankofBotswana,balanceswithotherbanksnetofdepositsfromotherbanksandBankofBotswanaCertificates.Cashand cash equivalents excludes the Statutory Reserve heldwiththeBankofBotswanabecauseitisilliquid.

(i) Property and equipment

Property and equipment are stated in the statementof financial position at historical cost less accumulateddepreciationandprovisionsforimpairment,ifany.

Depreciationisprovidedonthedepreciableamountofitemsofpropertyandequipmentonastraight-linebasisovertheirestimatedusefullives.Thedepreciableamountisthegrosscarryingamount,lesstheestimatedresidualvalueattheendofitseconomiclife.

Subsequentcostsareincludedintheasset’scarryingamountor are recognised as a separate asset, as appropriate, onlywhenitisprobablethatfutureeconomicbenefitsassociatedwiththeitemwillflowtotheBankandthecostoftheitemcanbemeasuredreliably.Allotherrepairsandmaintenancecosts are charged to the profit or loss during the financialperiodinwhichtheyareincurred.

Freeholdlandisnotdepreciated.Depreciationonotherassetsiscalculatedusingthestraight-linemethodtoallocatetheircosttotheirestimatedresidualvaluesovertheirestimatedusefullives,asfollows:

Theestimateduseful livesforthecurrentandcomparativeperiodsareasfollows:

• Leaseholdproperty-Theshorterofunexpiredperiodof theleasesoritsusefullife

• Freeholdproperty-50years • Rentedpropertyimprovements-Shorterofthe

unexpiredperiodoftheleaseoritsusefullife • Officeequipment,computers,ATMsandpointofsale

devices-3-7years • Motorvehicles-5years • Furnitureandfittings-5years

Theassets’residualvaluesandusefullivesarereviewed,and

adjusted if appropriate, at each reporting date. Gains andlossesondisposalofpropertyandequipmentaredeterminedbycomparingproceedswiththecarryingamount.Theseareincludedinthestatementofcomprehensiveincome.

At each financial reporting date, property and equipmentisassessed for indicationsof impairment. If indicationsarepresent, theseassetsaresubject toan impairment review.The impairment review comprises a comparison of thecarryingamountof theassetwith its recoverableamount,thehigheroftheasset’sfairvaluelesscostofdisposalanditsvalueinuse.Fairvaluelesscostofdisposaliscalculated



55


by reference to the amount at which the asset could bedisposedof inabindingsaleagreement inanarms-lengthtransaction evidenced by an active market or recenttransactionsforsimilarassets.Valueinuseiscalculatedbydiscountingtheexpectedfuturecashflowsobtainableasaresultoftheasset’scontinueduse,includingthoseresultingfrom itsultimatedisposal,atamarket-baseddiscount rateonapre-taxbasis.

Thecarryingvaluesofpropertyandequipmentare

writtendownbytheamountofanyimpairmentandthislossisrecognisedinthestatementofcomprehensiveincomein the period in which it occurs. A previously recognisedimpairmentlossrelatingtoafixedassetmaybereversedinpart or in full when a change in circumstances leads to achangeintheestimatesusedtodeterminethefixedasset’srecoverableamount.Thecarryingamountofthefixedassetwillonlybeincreaseduptotheamountthatitwouldhavebeenhadtheoriginalimpairmentnotbeenrecognised.

(j) Intangible assets - software Computer software

Computersoftware isstatedatcost, lessamortisationandprovisionsforimpairment,ifany.

Theidentifiableanddirectlyassociatedexternalandinternalcosts of acquiring software are capitalised where thesoftwareiscontrolledbytheBank,andwhereitisprobablethatfutureeconomicbenefitsthatexceeditscostwillflowfromitsuseovermorethanoneyear.Costsassociatedwithmaintainingsoftwarearerecognisedintheprofitor lossasanexpensewhenincurred.Capitalisedcomputersoftwareisamortisedoverthreetofiveyearsonastraightlinebasis.

(k) Lease agreements

(i) Where the Bank is the lessor Finance leases

Assets leased to customers under agreements, whichtransfersubstantiallyalltherisks,andrewardsofownership,withorwithoutultimatelegaltitle,areclassifiedasfinanceleases.Whenassetsareheldsubjecttoafinancelease,thepresentvalueoftheminimumleasepayments,discountedattherateof interest implicit inthe lease, isrecognisedasa receivable. The difference between the total paymentsreceivable under the lease and the present value of thereceivableisrecognisedasunearnedfinanceincome,whichisallocatedtotherespectiveaccountingperiodsunderthepre-taxnetinvestmentmethodtoreflectaconstantperiodic

rateofreturn.

Operating leases Assetsleasedtocustomersunderagreements,whichdonottransfersubstantiallyalltherisksandrewardsofownership,are classified as operating leases. The leased assets areincluded within property and equipment on the Bank’sstatementoffinancialpositionanddepreciationisprovidedonthedepreciableamountoftheseassetsonasystematicbasisovertheirestimatedusefullives.

Leaseincomeisrecognisedonastraightlinebasisovertheperiodoftheleaseunlessanothersystematicbasisismoreappropriate.

(ii) Where the Bank is the lessee

Finance leases The Bank classifies leases as property and equipment

where itassumessubstantiallyall thebenefitsandrisksofownershipasfinanceleases.

Financeleasesarecapitalisedasassetsatthefairvalueoftheleasedassetattheinceptionofthelease,or,iflower,attheestimatedpresentvalueof theunderlying leasepayments.TheBankallocateseachleasepaymentbetweentheliabilityandfinancechargestoachieveaconstantrateofinterestonthebalanceoutstanding.

The interest component of the finance charge is charged

totheprofitorlossovertheleaseperiod.Thepropertyandequipment acquired are depreciated over the shorter ofusefullifeorleaseperiod.

Operating leases Assetsleasedtocustomersunderagreements,whichdonottransfersubstantiallyalltherisksandrewardsofownership,areclassifiedasoperatingleases.Thetotalpaymentsmadeunderoperatingleasesarechargedtotheprofitorlossonastraight-linebasisovertheperiodofthelease.

When an operating lease is terminated before the leaseperiodhasexpired,anypaymentrequiredtobemadetothelessorbywayofpenaltyisrecognisedasanexpenseintheperiodinwhichterminationtakesplace.

(l) Provisions ProvisionsarerecognisedwhentheBankhasapresent

legalorconstructiveobligationasaresultofpastevents,itisprobablethatanoutflowofresourcesembodyingeconomicbenefitswillberequiredtosettletheobligationandareliable


56

Accounting Policies (continued)For the year ended 31 December 2014


(l) Provisions (continued) estimateoftheamountoftheobligationcanbemade.

A provision for onerous contracts is recognised when the

expectedbenefitstobederivedbytheBankfromacontractarelowerthantheunavoidablecostofmeetingitsobligationsunderthecontract.Theprovisionismeasuredatthepresentvalueof the lowerof theexpectedcostof terminating thecontractand theexpectednetcostofcontinuingwith thecontract.Beforeaprovisionisestablished,theBank

recognises any impairment loss on the assets associatedwiththatcontract.

Provision is made for the anticipated cost of restructuring,including redundancy costs when an obligation exists. AnobligationexistswhentheBankhasadetailedformalplanforrestructuringabusinessandhasraisedvalidexpectationsinthoseaffectedbytherestructuringbystartingtoimplementtheplanorannouncingitsmainfeatures.

Contingent liabilities are possible obligations whoseexistencewillbeconfirmedonlybyuncertainfutureeventsorpresentobligationswherethetransferofeconomicbenefitisuncertainorcannotbereliablymeasured.

Contingent liabilities are not recognised but are disclosedunlesstheyareremote.

(m) Financial guarantees Financialguaranteecontractsarecontractsthatrequirethe

issuertomakespecifiedpaymentstoreimbursetheholderfora loss it incursbecauseaspecifieddebtorfailstomakepayments when due in accordance with the terms of thedebtinstrument.

Financialguaranteesare initially recognised in thefinancialstatements at fair value on the date that the guaranteewasgiven.Otherthanwherethefairvalueoptionisappliedsubsequent to initial recognition, the Group’s liabilitiesunder such guarantees are measured at the higher ofthe initial measurement, less amortisation calculated torecognise intheprofitor losscomponentofthestatementofcomprehensive income,any fee incomeearnedovertheperiod, and the best estimate of the expenditure requiredto settle any financial obligation arising as a result of theguaranteesatthereportingdate.

Any increase in the liability relating to guarantees isrecognisedintheprofitorlosscomponentofthestatementof comprehensive income. Any liability remaining isrecognisedintheprofitorlosscomponentofthestatementofcomprehensiveincomewhentheguaranteeisdischarged,cancelledorexpires.

(n) Issued debt and equity securities TheCroupapplies IAS32todeterminewhether funding is

either a financial liability (debt) or equity. Issued financialinstrumentsor theircomponentsareclassifiedas liabilitiesifthecontractualarrangementresultsintheGrouphavingapresentobligationtoeitherdelivercashoranotherfinancialasset,oravariablenumberofequityshares, to theholderofthe instrument, if this isnotthecase,the instrument isgenerallyanequityinstrument.

Whereissuedfinancialinstrumentscontainbothliabilityandequitycomponents,theseareaccountedforseparately.Thefairvalueofthedebtisestimatedfirstandthebalanceoftheproceedsisincludedwithinequity.

(o) Employee benefits

(i) Pension obligations

A defined benefit obligation arises when a pension plandefinesanamountofpensionbenefitthatanemployeewillreceiveonretirementwithreferencetooneormorefactorsunrelatedtoplancontributionssuchasage,yearsofserviceandcompensation.Adefinedcontributionplanisapensionplan under which the Bank has no legal or constructiveobligations to pay further contributions if the fund doesnotholdsufficientassetstopayallemployeesthebenefitsrelatingtoemployeeserviceinthecurrentandpriorperiods.

Theliabilityrecognisedinthestatementoffinancialpositionin respect of defined benefit pension plan obligations isthe present value of the defined benefit obligation at thereportingdatelessthefairvalueofplanassets,togetherwithadjustmentsforunrecognisedactuarialgainsor lossesandpastservicecosts.

All actuarial gains and losses are recognised immediatelythrough Other comprehensive income in order for the netdefined benefit scheme asset or liability recognised in thestatement of financial position to reflect the full value ofthe plan surplus or deficit, taking into account the assetceiling.Remeasurementscompriseexperienceadjustments


57


(differences between previous actuarial assumptions andwhat has actually occurred) and the effects of changes inactuarialassumptions.Interestiscalculatedbyapplyingthediscountratetothenetdefinedbenefitliabilityorasset.

Gainsand lossesoncurtailmentsarerecognisedwhenthe

curtailment occurs, which may be when a demonstrablecommitment to a reduction in benefits, or reduction ineligible employees, occurs. The gain or loss comprises anychange in the present value of the obligation and the fairvalueoftheassets.

Where a scheme’s assets and its unrecognised actuariallosses exceed its obligation, an asset is recognised to theextent that it does not exceed the present value of futurecontributionholidaysorrefundsofcontributions.

The defined benefit plan obligation is calculated annuallyby independent actuaries using the projected unit creditmethod.Thepresentvalueofthedefinedbenefitobligationis determined by discounting the estimated future cashoutflows using interest rates of government bonds thataredenominatedinBotswanaPula,andthathavetermstomaturity approximating the terms of the related pensionliability.

AdefinedcontributionplanisaplanwheretheBank’sobligation are limited to the contributions payable. Fordefinedcontributionplanobligations, thecontributionsarerecognised as employee benefit expenses when they aredue. Prepaid contributions are recognised as an asset tothe extent that a cash refund or a reduction in the futurepaymentsisavailable.

Certain of the Bank’s employees are members of theholdingcompany’sdefinedcontributionpensionplan.Thesecontributions are recognised as employee benefit expensewhentheyaredue.

(ii) Termination benefits Terminationbenefitsarerecognisedasanexpensewhenthe

Bankisdemonstrablycommitted,withoutrealisticpossibilityof withdrawal, to a formal detailed plan to terminateemploymentbeforethenormalretirementdate.Terminationbenefits for voluntary redundancies are recognised if theBankhasmadeanofferencouragingvoluntaryredundancy,itisprobablethattheofferwillbeaccepted,andthenumberofacceptancescanbeestimatedreliably.

(iii) Short-term benefits

Short-termemployeebenefitobligationsaremeasuredonanundiscountedbasisandareexpensedastherelatedserviceisprovided.

Aprovisionisrecognisedfortheamountexpectedtobepaidunder short-term cash bonus or profit-sharing plans if theBankhasapresentlegalorconstructiveobligationtopaythisamountasaresultofpastserviceprovidedbytheemployeeandtheobligationcanbeestimatedreliably.

Employees on contract receive terminal gratuities inaccordancewiththeircontractsofemployment.Anaccrualismadefortheestimatedliabilitytowardssuchemployeesuptothereportingdate.Allotheremployeesaremembersof the Bank’s pension scheme and do not qualify for suchterminalgratuities.

Short-term employee benefits, such as paid absences areaccounted for on an accrual basis over the period whichemployeeshaveprovidedservicesintheyear.

(iv) Share-based payment transactions TheGroupoperatesequity-settledandcash-settledshare-

based payment plans. The Group operates equity-settledandcash-settledshare-basedpaymentplans.

Employee services settled in equity instruments Thecostoftheemployeeservicesreceivedinrespectofthe

sharesorshareoptionsgrantedisrecognisedintheprofitorlosscomponentofthestatementofcomprehensiveincomeover the period that employees provide services, generallytheperiodinwhichtheawardisgrantedornotifiedandthevestingdateofthesharesoroptions.Theoverallcostoftheawardiscalculatedusingthenumberofsharesandoptionsexpectedtovestandthefairvalueofthesharesoroptionsatthedateofgrant.

The number of shares and options expected to vest takesinto account the likelihood that performance and serviceconditionsincludedinthetermsoftheawardswillbemet.Failure to meet the non-vesting condition is treated as acancellation,resultinginanaccelerationofrecognitionofthecostoftheemployeeservices.

The fair value of shares is the market price ruling on thegrantdate,insomecasesadjustedtoreflectrestrictionsontransferability.Thefairvalueofoptionsgrantedisdeterminedusingoptionpricingmodelstoestimatethenumbersof

58



(o) Employee benefits (continued)

(iv) Share-based payment transactions (continued)

Employee services settled in equity instruments (continued)

shares likely to vest. These take into account the exerciseprice of the option, the current share price, the risk-freeinterestrate,theexpectedvolatilityofthesharepriceover

thelifeoftheoptionandotherrelevantfactors. Marketconditionsthatmustbemetinorderfortheaward

tovestarealso reflected in the fair valueof theaward, asareanyothernon-vestingconditions,suchascontinuingtomakepaymentsintoashare-basedsavingsscheme.

Employee services settled in cash Thefairvalueoftheamountpayabletoemployeesinterms

of a cash-settled share-based payment is recognised asan expense, with a corresponding increase in liabilities,overthevestingperiod.The liability is remeasuredateachreportingdateandatsettlementdate.Anychanges in thefairvalueof the liabilityare recognisedasstaffcost in theprofitorlosscomponentofthestatementofcomprehensiveincome.Noamountisrecognisedforservicesreceivediftheawardsgranteddonotvestbecauseofafailuretosatisfyavestingcondition.

(q) Earnings per share Thecalculationofbasicearningspershareisbasedonthe

profitattributabletoordinaryequityholdersoftheBankandthenumberofbasicweightedaveragenumberofordinaryshares excluding treasury shares held in employee benefittrusts or held for trading. When calculating the dilutedearningspershare,theweightedaveragenumberofsharesin issue is adjusted for the effects of all dilutive potentialordinarysharesheld.

(r) Segment reporting Business segments are distinguishable components of the

Bank that provide products or services that are subjectto risks and rewards that are different to those of otherbusiness segments. Business segments are reported in amanner consistent with internal reporting provided to thechief operating decision-maker, which has been identifiedas the Country Management Committee. Bank costs areallocatedtosegmentsonareasonableandconsistentbasis.TransactionsbetweensegmentsaregenerallyaccountedforinaccordancewithBankpoliciesas if thesegmentwerea

stand-alonebusinesswithintra-segmentrevenueandcostsbeingeliminatedinHeadoffice.

(s) Acceptances Acceptances comprise undertakings by the Bank to pay

bills of exchange drawn on customers. The Bank expectsmost acceptances to be settled simultaneously withthe reimbursement from the customer. Acceptancesare accounted for as off-statement of financial positiontransactions and are disclosed as contingent liabilities andcommitments.

(t) Collateral and netting Collateral

The Bank obtains collateral in respect of loans receivablewherethisisconsideredappropriate.Thecollateralnormallytakes the form of a lien over the customer’s assets andgives the Bank a claim on these assets for both existingandfutureassets.

Collateralreceivedintheformofsecuritiesisnotrecordedonthestatementoffinancialposition.Collateralreceivedintheformofcashisrecordedonthestatementoffinancialpositionwith a corresponding liability. These items are assigned todeposits received from Bank or other counterparties. Anyinterestpayableorreceivablearising isrecordedas interestexpenseor interest income respectivelyexcept for fundingcostsrelatingtotradingactivitieswhicharerecordedinnettradingincome.

Netting Financialassetsandliabilitiesareoff-setandthenetamountreportedinthestatementoffinancialpositionif,andonlyif,thereisalegallyenforceablerighttoset-offtherecognisedamountsandthereisanintentiontosettleonanetbasis,ortorealiseanassetandsettletheliabilitysimultaneously.

(u) Repossessed properties

Incertaincircumstances,property isrepossessedfollowingthe foreclosure on loans that are in default. Repossessedproperties are measured at the lower of carrying amountand fair value lesscosts tosell and reportedwithin ‘Otherassets’.


59


(v) Non-current assets held for sale Non-current assets (or disposal groups comprising assets

and liabilities) that are expected to be recovered primarilythrough sale rather than through continuing use, areclassifiedasheld-for-sale.Thisconditionisregardedasmet

only when the sale is highly probable and the asset ordisposalgroupisavailablefor immediatesale in itspresentcondition. Management must be committed to the sale,which should be expected to qualify for recognition as acompletedsalewithinoneyearfromthedateofclassification.Immediatelybeforeclassificationasheldforsale,theassets(or components of a disposal group) are remeasured inaccordancewiththeGroup’saccountingpolicies.Thereafterthe assets (or disposal group) are measured at the loweroftheircarryingamountor fairvalue, lesscosttosell.Anyimpairment loss on a disposal group is allocated to assetsand liabilities on a pro rata basis, except that no loss isallocatedtofinancialassets,deferredtaxassets,investmentproperties, insurance assets and employee benefit assets,which continue to be measured in accordance with theGroup’saccountingpolicies.

Impairment losses on initial classification as held for saleand subsequent gains or losses on remeasurement arerecognised in profit or loss. Gains are not recognised inexcessofanycumulative impairment lossuntilfinallysold.Property,equipmentandintangibleassets,onceclassifiedasheldforsale,arenotdepreciatedoramortised.

60

Use of Estimates and Judgements For the year ended 31 December 2014

The Bank makes estimates and assumptions that affect thereportedamountsofassetsandliabilitieswithinthenextfinancialyear. Estimates and judgements are continually evaluated andare based on historical experience and other factors, includingexpectationsoffutureeventsthatarebelievedtobereasonableunderthecircumstances. Key sources of estimation uncertainty Impairment losses on loans and advances The Bank reviews its loan portfolios to assess for impairmentonamonthlybasis. Indeterminingwhetheran impairment lossshouldberecorded,theBankmakesjudgementsastowhetherthereisanyobservabledataindicatingthatthereisameasurabledecrease in theestimated futurecashflows fromaportfolioofloans before the decrease can be identified with an individualloan in that portfolio. This evidence may include observabledata indicating that there has been an adverse change in thepayment status of borrowers in a group, or national or local

economic conditions that correlate with defaults on assets inthegroup.Managementusesestimatesbasedonhistoricallossexperience forassetswithsimilarcredit riskcharacteristicsandobjectiveevidenceofimpairmentsimilartothoseintheportfoliowhen scheduling its future cash flows. The methodology andassumptionsusedforestimatingboththeamountandtimingoffuturecashflowsarereviewedregularlytoreduceanydifferencesbetweenlossestimatesandactuallossexperience(probabilityofdefault). Theprobabilityofdefaultisbasedona12monthoutcomeperiodfor mortgages and 3 month outcome period for all other retailloans.

Theprojectedfuturecashflowsoftheloanswhichreflectobjectiveevidenceofdefaultarecalculatedonamonthlybasisaccordingtotherecoverycurve.Recoverycurvesarecalculatedbyobservingmovementsinactualbalancesoveraperiodoftime.

Existing Impact on changes in Impact on changes in impairment Loss Given Default Probability of defaultin thousands of pula allowance

(+) 5% (-) 5% (+) 10% (-) 10% Identified 355,138 16,547 (18,784) 34,213 (36,450)Unidentified 18,280 881 (881) 1,761 (1,761)Total 373,418 17,428 (19,665 ) 35,974 (38,211 )

Thetablebelowsummarisesthesensitivityanalysisonimpairmentlosses:

The above sensitivity assumes a change in the variable underconsiderationonlywithallothervariablesbeingconstant. Roll Rates are defined as the probability that an account hasmissed1,2or3monthsloanrepaymentsgoingdownintodefaultoradefaulteventoccurring. Recoveryrateexperienceistheaveragepercentageofthebalanceoutstandingthataclassifiedaccountisexpectedtoberecoveredoveraspecifiedamountoftime.Therecoveryrateexperienceisdependentonthenatureofsecurityanddurationoftheoriginalloangranted. Thevalueofsecurityiscalculatedusingthevaluationsasatthereportingdate.Whererecentvaluationisnotheld,eitherexternaldatamaybeusedtovalidatethedifference,i.e.movementsinthePrice Indicesor justificationshouldbeprovidedtodemonstratethat thevalueused is still anaccurate reflectionof thecurrent

valueofthesecurityheldascollateral. Basis for determining fair values of investments Thefairvaluesofquotedinvestmentsinactivemarketsarebasedoncurrentbidprices.Ifthemarketforafinancialassetisnotactive,the Bank establishes fair value by using valuation techniques.These include the use of recent arm’s length transactions,discountedcashflowanalysis, optionpricingmodelsandothervaluationtechniquescommonlyusedbymarketparticipants. Provision for commission refund Commission earned from the principal in respect of creditinsurance policies secured are refundable in the case of earlysettlements or cancelation of policies by the Bank’s customers.Managementthereforehavetoemployjudgementsincomingupwithestimatesoftheproportionofthefeesthatmayfallinthiscategory.


61

Segment ReportingFor the year ended 31 December 2014

OperatingsegmentsarereportedinamannerconsistentwiththeinternalreportingprovidedtotheCountryManagementCommittee(‘’CMC’’).TheCMC,which is responsible forallocating resourcesandassessingperformanceof theoperatingsegments,hasbeenidentifiedasthechiefoperatingdecisionmaker.Alltransactionsbetweenbusinesssegmentswhichincludeintra-segmentrevenueandcostsareeliminatedatHeadOffice.Incomeandexpensesdirectlyassociatedwitheachsegmentareincludedindeterminingbusinesssegmentperformance.

TheBank’soperationsaresituatedinBotswanawithalargenumberofRetailandCorporatecustomers.TheBankdoesnotrelyonanyonecustomer.

Business segmentsTheBankcomprisesthefollowingmainbusinesssegments:

Corporate Banking Includesloans,depositsandothertransactionsandbalanceswithcorporatecustomers. Retail Banking Includesloans,depositsandothertransactionsandbalanceswithretailcustomers. Treasury UndertakestheBank’sfundingandcentralisedtreasuryriskmanagementactivitiesthrough borrowings,issuesofdebtsecurities,investinginliquidassetssuchasshort-termplacements andcorporateandgovernmentdebtsecurities. Barclaycard Includesallcreditcardbusinessactivities. Shared Services TheBankalsohasaheadofficeandbackofficethatmanagescertainoperationaland administrativefunctions.Wherecostsarenotdirectlyattributabletobusinesssegments, thesecostsareallocatedtothe‘sharedservices’segment.

62

Segment Reporting (continued) For the year ended 31 December 2014

Business Segments Consolidated

in thousands of pula Retail Corporate Treasury Barclaycard Shared Consolidated

2014 - Group banking banking services

Interest income Grossinterestincome 773,225 97,906 94,618 123,066 - 1,088,815Inter-segmentrevenue (91,071) 147,089 (36,510) (19,508) - -Totalsegmentrevenue 682,154 244,995 58,108 103,558 - 1,088,815Interest expense Externalinterestexpense (36,620) (105,523) (55,770) - - (197,913)Totalinterestexpense (36,620) (105,523) (55,770) - - (197,913)Other income Noninterestincome 169,545 74,359 76,261 66,099 - 386,264Totalsegmentincome 815,079 213,831 78,599 169,657 - 1,277,166 Impairment charges and other credit provisions (132,292) 302 - (18,446) - (150,436) Totalnetincome 682,787 214,133 78,599 151,211 - 1,126,730 Operating expenses Staffcosts (149,611) (25,135) (8,207) (5,859) (186,074) (374,886)Propertycosts (19,426) (39) (7) (25) (22,050) (41,547)Equipmentcosts (9,423) (221) (1,257) (4,375) (19,696) (34,972)Othercosts (60,478) (30,262) (6,269) (6,949) (53,963) (157,921)Recharges (13,866) (7,553) (4,689) - (24,275) (50,383)Depreciationandamortisation - - - - (42,185) (42,185)Totaloperatingexpenses (252,804) (63,210) (20,429) (17,208) (348,243) (701,894) Profitbeforeincometax 429,983 150,923 58,170 134,003 (348,243) 424,836 Incometaxexpense (94,596) (33,203) (12,797) (29,481) 81,114 (88,963) Profit for the year 335,387 117,720 45,373 104,522 (267,129) 335,873 Statement of financial position Loansandadvancestocustomers 6,046,535 1,741,652 - 344,535 - 8,132,722FinancialInstruments - - 1,406,704 - - 1,406,704BalanceswiththeBankofBotswana - - 788,834 - - 788,834Loansandadvancestobanks - - 578,056 - - 578,056Balanceswithrelatedcompanies - - 562,482 - - 562,482Others - - - - 779,762 779,762Total assets 6,046,535 1,741,652 3,336,076 344,535 779,762 12,248,560 Depositsduetocustomers 3,657,218 5,307,182 - - - 8,964,400Debtsecuritiesinissue - - 522,863 - - 522,863Depositsfrombanks - - 687,256 - - 687,256Others - - - - 548,385 548,385Total liabilities 3,657,218 5,307,182 1,210,119 - 548,385 10,722,904


63

Segment Reporting (continued) For the year ended 31 December 2014

Business Segments Consolidated

in thousands of pula Retail Corporate Treasury Barclaycard Shared Consolidated

2013 - Restated banking banking services

Interest income Grossinterestincome 823,180 76,040 131,066 121,913 - 1,152,199Inter-segmentrevenue (131,904) 154,142 (4,295) (17,943) - -Totalsegmentrevenue 691,276 230,182 126,771 103,970 - 1,152,199Interest expense Externalinterestexpense (83,064) (137,638) (24,498) - - (245,200)Totalinterestexpense (83,064) (137,638) (24,498) - - (245,200)Other income Noninterestincome 174,815 61,275 62,971 65,122 - 364,183Totalsegmentincome 783,027 153,819 165,244 169,092 - 1,271,182 Impairment charges and other credit provisions (193,275) 1,168 - (6,313) - (198,420) Totalnetincome 589,752 154,987 165,244 162,779 - 1,072,762 Operating expenses Staffcosts (126,855) (17,807) (7,422) (4,885) (168,677) (325,646)Propertycosts (17,887) (26) (8) (33) (15,966) (33,920)Equipmentcosts (9,107) (241) (2,268) (6,006) (17,914) (35,536)Othercosts (61,503) (6,969) (4,993) (5,469) (104,934) (183,868)Recharges (393) - - (612) (48,810) (49,815)Depreciationandamortisation - - - - (41,600) (41,600)Totaloperatingexpenses (215,745) (25,043) (14,691) (17,005) (397,901) (670,385) Profitbeforeincometax 374,007 129,944 150,553 145,774 (397,901) 402,377 Incometaxexpense (82,282) (28,588) (33,122) (32,070) 63,687 (112,375) Profit for the year 291,725 101,356 117,431 113,704 (334,214) 290,002 Statement of financial position Loansandadvancestocustomers 5,517,072 1,482,196 - 337,453 - 7,336,721FinancialInstruments - - 1,805,160 - - 1,805,160BalanceswiththeBankofBotswana - - 797,339 - - 797,339Loansandadvancestobanks - - 381,923 - - 381,923Balanceswithrelatedcompanies - - 823,828 - - 823,828Others - - 69,235 - 504,411 573,646Total assets 5,517,072 1,482,196 3,877,485 337,453 504,411 11,718,617 Depositsduetocustomers 4,025,836 5,255,847 - - - 9,281,683Debtsecuritiesinissue - - 503,121 - - 503,121Depositsfrombanks - - 7,636 - - 7,636Others - - - - 554,061 554,061Total liabilities 4,025,836 5,255,847 510,757 - 554,061 10,346,501

64

Notes to the Financial StatementsFor the year ended 31 December 2014

1 Financial assets and liabilities

Accounting classifications and fair values ThetablebelowsetsouttheBank’sclassificationofeachclassoffinancialassetsandliabilities.Thisclassificationisconsistentfor

bothconsolidatedandcompany.

Group Fair value Financial Total Fair value

through profit instruments at carrying

in thousands of pula Notes or loss amortised cost amount

31 December 2014 Cash (a) - 297,388 297,388 297,388BalanceswiththeBankofBotswana (c) - 788,834 788,834 788,834Financialinstruments (b) 1,406,704 - 1,406,704 1,406,704Tradingportfolioassets 20,201 - 20,201 20,201Balanceswithrelatedcompanies (c) - 562,482 562,482 562,482Loansandadvancestobanks (c) - 578,056 578,056 578,056Derivativefinancialinstruments (b) 6,264 - 6,264 6,264Financialassetsdesignatedatfairvalue (b) - - - -Loansandadvancestocustomers (c) - 8,132,722 8,132,722 8,132,722Otherassets - 238,231 238,231 238,231 1,433,169 10,597,713 12,030,882 12,030,882

Depositsfrombanks (c) - 687,256 687,256 687,256Balanceswithrelatedcompanies (c) - 248,997 248,997 248,997Derivativefinancialinstruments (b) 13,921 - 13,921 13,921Depositsduetocustomers (d) - 8,964,400 8,964,400 8,964,400Debtsecuritiesinissue (e) - 522,863 522,863 522,863Otherliabilities - 187,797 187,797 187,797 13,921 10,611,313 10,625,234 10,625,234


65

Notes to the Financial StatementsFor the year ended 31 December 2014

1 Financial assets and liabilities (continued)

Accounting classifications and fair values (continued) ThetablebelowsetsouttheBank’sclassificationofeachclassoffinancialassetsandliabilities.Thisclassificationisconsistentfor

bothconsolidatedandcompany.

Group Fair value Financial Total Fair value

through profit instruments at carrying

in thousands of pula Notes or loss amortised cost amount

31 December 2013 Cash (a) - 227,941 227,941 227,941BalanceswiththeBankofBotswana (c) - 797,339 797,339 797,339Financialinstruments (b) 1,805,160 - 1,805,160 1,805,160Tradingportfolioassets 254 - 254 254Balanceswithrelatedcompanies (c) - 823,828 823,828 823,828Loansandadvancestobanks (c) - 381,923 381,923 381,923Derivativefinancialinstruments (b) 18,423 - 18,423 18,423Financialassetsdesignatedatfairvalue (b) 69,235 - 69,235 69,235Loansandadvancestocustomers (c) - 7,336,721 7,336,721 7,336,721Otherassets - 82,347 82,347 82,347 1,893,072 9,650,099 11,543,171 11,543,171 Depositsfrombanks (c) - 7,636 7,636 7,636Balanceswithrelatedcompanies (c) - 188,667 188,667 188,667Derivativefinancialinstruments (b) 28,446 - 28,446 28,446Depositsduetocustomers (d) - 9,281,683 9,281,683 9,281,683Debtsecuritiesinissue (e) - 503,121 503,121 503,121Otherliabilities - 268,267 268,267 268,267 28,446 10,249,374 10,277,820 10,277,820

66


Notes (a)Fair value approximates carrying value due to the minimal credit losses and short-term nature of the financial assets and

liabilities. (b)Financialinstrumentsatfairvalueareeitherpricedwithreferencetoaquotedmarketpriceforthatinstrumentorbyusinga

valuationmodel.Wherethefairvalueiscalculatedusingavaluationmodel,themethodologyistocalculatetheexpectedcashflowsunderthetermsofeachspecificcontractandthendiscountthesevaluesbacktopresentvalue.Theexpectedcashflowsforeachcontractaredeterminedeitherdirectlybyreferencetoactualcashflowsimplicitinobservablemarketpricesorthroughmodellingcashflowsusingappropriatefinancial-marketspricingmodels.Whereverpossiblethesemodelsuseastheirbasisobservablemarketpricesandratesincluding,forexample, interestrateyieldcurves,equitiesandcommoditiesprices,optionvolatilitiesandcurrencyrates.

(c)Thefairvalueforloansandadvances,andotherlendingisestimatedusingdiscountedcashflows,applyingeithermarketrates

wherepracticableor,wherethecounterpartyisabank,ratescurrentlyofferedbyotherfinancialinstitutionsforplacingswithsimilarcharacteristics. Incertaincasesthefairvalueapproximatescarryingvaluebecausetheinstrumentsareshort-terminnatureorrepricedfrequently.

(d)Fair values of deposit liabilities payable on demand (interest free, interest bearing and savings deposits) approximate their

carryingvalue.Thefairvalueofallotherdepositsandotherborrowings(includingrepurchaseagreementsandcashcollateralonsecuritieslent)isestimatedusingdiscountedcashflows,applyingeithermarketrates,wherepracticable,orratescurrentlyofferedbytheBankfordepositsofsimilarremainingmaturities.

(e)Fairvaluesofshort-termdebtsecurities in issueareapproximatelyequaltotheircarryingamount.Fairvaluesofotherdebt

securitiesinissuearebasedonquotedpriceswhereavailable,orwheretheseareunavailable,areestimatedusingothervaluationtechniques.

Gains and losses on the financial assets Thetablebelowsummarisesthegainsandlossesonfinancialassetsandliabillities


in thousands of pula 2014 2013 2014 2013

Otherfinancialassetsatfairvaluethroughprofitandloss 52,463 106,392 52,463 106,392Financialincomefromloansandreceivables 1,036,352 1,044,648 1,036,352 1,044,648Netforeignexchangegains 78,880 62,993 78,880 62,993Total 1,167,695 1,214,033 1,167,695 1,214,033 Financialexpensesfromfinancialliabilitiesatamortisedcost 195,045 244,041 195,045 244,041Ineffectivenessonfairvaluehedges (463) (192) (463) (192)Total 194,582 243,849 194,582 243,849

Notes to the Financial Statements (continued)For the year ended 31 December 2014


67

Notes to the Financial Statements (continued)

1 Financial assets and liabilities (continued) Valuation methodology

Thetablebelowshowsthefinancialassetsandliabilitiesthatarerecognisedandmeasuredatfairvalue. 31 December 2014

Valuations Valuations Valuations Total

quoted in an based on based on

active market observable unobservable

in thousands of pula inputs inputs

Level 1 Level 2 Level 3

Tradingportfolioassets 20,201 - - 20,201Treasurybillsandothereligiblebills 1,401,629 - - 1,401,629Debtsecurities - 80 - 80Financialassetsdesignatedatfairvalue - - - -Derivativefinancialinstruments - 6,264 - 6,264Equitysecurities - - 4,995 4,995Total assets 1,421,830 6,344 4,995 1,433,169 Derivativefinancialliabilities - 13,921 - 13,921Total liabilities - 13,921 - 13,921

31 December 2013

Valuations Valuations Valuations Total

quoted in an based on based on

active market observable unobservable

in thousands of pula inputs inputs

Level 1 Level 2 Level 3

Tradingsecurities 254 - - 254Treasurybillsandothereligiblebills 1,800,085 - - 1,800,085Debtsecurities - 80 - 80Financialassetsdesignatedatfairvalue - 69,235 - 69,235Derivativefinancialinstruments - 18,423 - 18,423Equitysecurities - - 4,995 4,995Total assets 1,800,339 87,738 4,995 1,893,072 Derivativefinancialliabilities - 28,446 - 28,446Total liabilities - 28,446 - 28,446


68



Valuation methodology (continued) Adescriptionof thenatureof thetechniquesusedtocalculatevaluationsbasedonobservable inputsandvaluationsbasedonunobservableinputsissetoutbelow. Level 1 Financial instruments forwhichtheirvaluationsaredeterminedby referencetounadjustedquotedprices for identicalassetsorliabilitiesinactivemarketswherethequotedpriceisreadilyavailableandthepricerepresentsactualandregularlyoccurringmarkettransactionsonanarm’slengthbasis.

Level 2 Thefairvalueoffinancialinstrumentsthatarenottradedinanactivemarketisdeterminedbyusingvaluationtechniques.Thesevaluationtechniquesmaximisetheuseofobservablemarketdatawhereitisavailableandrelyaslittleaspossibleonentityspecificestimates.Ifallsignificantinputsrequiredtofairvalueaninstrumentareobservable,theinstrumentisincludedinlevel2. Ifoneormoreofthesignificantinputsisnotbasedonobservablemarketdata,theinstrumentisincludedinLevel3. Specificvaluationtechniquesusedtovaluefinancialinstrumentsinclude; - Quotedmarketpricesordealerquotesforsimilarinstruments; - Thefairvalueofinterestrateswapsiscalculatedasthepresentvalueoftheestimatedfuturecashflowsbasedonobservable yieldcurves; - Thefairvalueofforwardforeignexchangecontractsisdeterminedusingforwardexchangeratesatthestatementoffinancial positiondate,withtheresultingvaluediscountedbacktopresentvalue; -Othertechniques,suchasdiscountedcashflowanalysis,areusedtodeterminefairvaluefortheremainingfinancial instruments.

Level 3 Financial instrumentsareclassifiedasLevel3 if theirvaluation incorporatessignificant inputsthatarenotbasedonobservablemarketdata(unobservableinputs).Suchinputsaregenerallydeterminedbasedonobservableinputsofasimilarnature,historicalobservationsontheleveloftheinputorotheranalyticaltechniques.

Note;Theonlyfinancial instrumentscategorisedunder level3 relatesto investment inacommercialpropertyentity.Therewasnodisclosureofchanges in level3 instrumentsforthecurrentreportingperiod.Managementbelievesthecarryingvalueoftheinvestmentapproximatesthefairvalue.

Transfers between the levels Therewerenotransfersbetweenlevel1,level2andlevel3duringtheyear.



69

Consolidated 31 December 2014 Carrying Fair value Valuations Valuations Valuations Total value quoted in an based on based on active market observable unobservable in thousands of pula inputs inputs Level1 Level2 Level3 Cash 297,388 297,388 297,388 - - 297,388 BalanceswiththeBankofBotswana 788,834 788,834 (10,985) 799,819 - 788,834 Balanceswithrelatedcompanies 562,482 562,482 - 562,482 - 562,482 Loansandadvancestobanks 578,056 578,056 578,056 - - 578,056 Loansandadvancestocustomers 8,132,722 8,132,722 - - 8,132,722 8,132,722 Otherassets 238,231 238,231 - - 238,231 238,231 Total assets 10,597,713 10,597,713 864,459 1,362,301 8,370,953 10,597,713 Depositsfrombanks 687,256 687,256 - - 687,256 687,256 Balanceswithrelatedcompanies 248,997 248,997 - - 248,997 248,997 Depositsduetocustomers 8,964,400 8,964,400 - - 8,964,400 8,964,400 Otherliabilities 187,797 187,797 - - 187,797 187,797 Debtsecuritiesinissue 522,863 522,863 - - 522,863 522,863 Total liabilities 10,611,313 10,611,313 - - 10,611,31310,611,313

Consolidated 31 December 2013 Carrying Fair value Valuations Valuations Valuations Total value quoted in an based on based on active market observable unobservable in thousands of pula inputs inputs Level1 Level2 Level3 Cash 227,941 227,941 227,941 - - 227,941 BalanceswiththeBankofBotswana 797,339 797,339 28,965 768,374 - 797,339 Balanceswithrelatedcompanies 823,828 823,828 - 823,828 - 823,828 Loansandadvancestobanks 381,923 381,923 381,923 - - 381,923 Loansandadvancestocustomers 7,336,721 7,336,721 - - 7,336,721 7,336,721 Otherassets 82,347 82,347 - - 82,347 82,347 Total assets 9,650,099 9,650,099 638,829 1,592,202 7,419,068 9,650,099 Depositsfrombanks 7,636 7,636 - - 7,636 7,636 Balanceswithrelatedcompanies 188,667 188,667 - - 188,667 188,667 Depositsduetocustomers 9,281,683 9,281,683 - - 9,281,683 9,281,683 Otherliabilities 268,267 268,267 - - 268,267 268,267 Debtsecuritiesinissue 503,121 503,121 - - 503,121 503,121 Total liabilities 10,249,374 10,249,374 - - 10,249,37410,249,374


1 Financial assets and liabilities (continued) Assets and liabilities not held at fair valueThetablebelowsummarisesthecarryingamountsandfairvalueofthoseassetsandliabilitiesnotheldatfairvalue.


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3 Net interest income


in thousands of pula 2014 2013 2014 2013 Loansandadvancestobanks 4,594 8,885 4,594 8,885BankofBotswanacertificates 50,509 107,039 50,509 107,039Relatedcompanies 2,794 13,786 2,794 13,786Loansandadvancestocustomers 1,012,308 1,005,855 1,012,308 1,005,855Leases 13,788 16,122 13,788 16,122Short-termfundsandothermarketplacements 65 512 65 512Derivativefinancialinstruments 4,757 - 4,757 -Interestincome 1,088,815 1,152,199 1,088,815 1,152,199 Depositsfrombanks 3,610 5,838 3,610 5,838Depositsfromcustomers 183,969 228,120 183,969 228,120Debtsecuritiesinissue 7,466 6,668 7,466 6,668Relatedcompanies - 3,415 - 3,415Derivativefinancialinstruments 2,868 1,159 2,868 1,159Interestexpense 197,913 245,200 197,913 245,200Netinterestincome 890,902 906,999 890,902 906,999


2 Basic and diluted earnings per share

Basicearningspershareiscalculatedbydividingthenetprofitattributabletoshareholdersbytheweightedaveragenumberofordinarysharesinissueduringtheyear.


2014 2013 2014 2013

Restated Totalprofitfortheyearattributabletoequityholdersofthebank(P’000) 335,873 290,002 319,638 370,864 Weightedaveragenumberofordinarysharesinissue(thousands) 852,161 852,161 852,161 852,161 Earningspersharefromcontinuingoperations(thebe) 39.41 34.03 37.51 43.52

Therewerenopotentiallydilutivesharesat31December2014.



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4 Net fee and commission income


2014 2013 2014 2013in thousands of pula Restated

Fee and commission income Riskrelatedservices 80,974 56,100 25,635 6,857Nonriskrelatedservices 237,607 224,691 237,607 224,691Totalfeeandcommissionincome 318,581 280,791 263,242 231,548 Inter-banktransactionfees 13,414 10,231 13,414 10,231Feeandcommissionexpense 13,414 10,231 13,414 10,231Netfeeandcommissionincome 305,167 270,560 249,828 221,317

5 Net trading and investment income


in thousands of pula 2014 2013 2014 2013 Restated

Exchangegain 2,620 1,358 2,620 1,358Netmovementfromfinancialinstrumentsdesignatedatfairvalue 230 27,909 230 27,909Treasurysalesactivities 60,664 46,435 60,664 46,435Marketmakingactivities 15,596 15,200 15,596 15,200Nettradingincome 79,110 90,902 79,110 90,902

6 Other operating income



Rentalincome 1,053 886 1,053 886Dividendincome - - - 85,000Profitonsaleofpropertyandequipment 934 1,835 934 1,835Otheroperatingincome 1,987 2,721 1,987 87,721

7 Impairment charges and other credit provisions



Impairmentchargesonloansandadvances -Netincreaseinimpairments 150,681 206,028 150,681 206,028-Recoveries (68) (7,449) (68) (7,449)Impairmentchargesonloansandadvances 150,613 198,579 150,613 198,579Provisionforundrawncommittedfacilitiesandguaranteesprovided (177) (159) (177) (159)Impairmentchargesandothercreditprovisions 150,436 198,420 150,436 198,420


72

8 Staff costs



Salariesandaccruedincentivepayments 292,496 249,462 291,215 228,471Pensioncost-definedbenefitplan 1,401 258 1,401 258Pensioncost-definedcontributionplan 30,354 28,372 30,354 28,372Leavepayprovision 5,450 3,142 5,450 3,142Allowances 28,552 30,100 28,552 30,100Staffwelfare 1,858 1,847 1,858 1,847Healthinsurance 14,775 12,465 14,775 12,465Staffcosts 374,886 325,646 373,605 304,655 TheaveragenumberofpersonsemployedbytheBankduringtheyearwas1238(2013:1299).

9 Administration and general expenses



Advertising 25,837 22,256 24,108 20,574Auditorsremuneration 5,582 4,986 5,580 4,609Cashintransitexpenses 18,783 26,724 13,544 24,704Directorsfees-nonexecutive 2,147 890 2,147 823Donations 3,954 6,977 3,936 6,450Equipmentcosts-operatingleaserentals 16,020 18,925 15,650 17,495Equipmentcosts-other 18,952 16,611 15,214 15,356Legalandprofessionalfees 35,662 27,101 33,634 25,053Propertycosts-operatingleaserentals 31,961 25,403 26,093 23,483Propertycosts-other 9,586 8,517 6,948 7,873Othercosts-rechargedbyrelatedcompanies 50,383 49,815 44,312 46,049Othercosts-general 4,279 13,570 2,239 12,544Othercosts-feerefunds - 21,286 - 21,286Softwarelicensingandotherinformationtechnology 2,264 3,335 2,246 3,083Stationaryandpostage 31,452 28,593 25,743 26,431Telephone 19,644 18,434 15,055 17,041Travelandaccommodation 8,317 9,716 7,350 8,982Administrativeandgeneralexpenses 284,823 303,139 243,799 281,836



73

10 Income tax expense



Tax charge Companytax 122,345 88,446 119,931 85,635Originationandreversaloftemporarydifferences (33,382) 17,458 (27,767) 17,458Withholdingtax - 6,375 - 6,375Prioryearoverprovision - 96 - 96Taxcharge 88,963 112,375 92,164 109,564

ThetaxontheGroup’sprofitbeforetaxdiffersfromthetheoreticalamountthatwouldariseusingtheweightedaveragetaxrateapplicabletotheprofitsoftheconsolidatedentitiesasfollows:

11 Cash



-Pula 278,300 213,417 278,300 213,417-Foreigncurrency 19,088 14,524 19,088 14,524Total 297,388 227,941 297,388 227,941 Thecarryingvalueofthecashapproximatesthefairvalue.

Tax on Capital Gains Therearenocapitallossesavailablefortaxpurposesforset-offinthenextyear(2013:Nil)againstanytaxablecapitalgainsarising.


2014 2013 2014 2013in thousands of pula Restated

Profitbeforeincometax 424,836 402,377 411,802 480,428 Incometaxusingthedomesticcorporatetaxrateof22%(2013:22%) 93,463 88,523 90,596 105,694Netdeductible/(non-deductible)expenses 1,568 17,381 1,568 (2,601)Deferredtaxassetnotrecognisedinprioryear (6,068) - - -Withholdingtax - 6,375 - 6,375Prioryearoverprovision - 96 - 96Tax for the year per the statement of comprehensive income 88,963 112,375 92,164 109,564Effective tax rate 21% 28% 22% 23%


74


12 Balances with the Bank of Botswana



BalanceswiththeBankofBotswana -Statutoryreserve 799,819 768,374 799,819 768,374-Currentaccount (10,985) 28,965 (10,985) 28,965Total 788,834 797,339 788,834 797,339 ThestatutoryreservewiththeBankofBotswanaiscalculatedat10%oftheaveragelocalcurrencycustomerdeposits.Thestatutoryreserve isnotavailableforuse intheday-to-dayoperationsoftheBankandisnon-interestbearing.Thecarryingvalueofthesebalancesapproximatesthefairvalue.

13 Financial instruments



Debtsecurities 80 80 80 80Treasurybillsandothereligiblebills 1,401,629 1,800,085 1,401,629 1,800,085Equitysecurities 4,995 4,995 4,995 4,995Financial instruments 1,406,704 1,805,160 1,406,704 1,805,160



Debentures-privateschools 75 75 75 75Debentures-sportsclubs 5 5 5 5Debt securities 80 80 80 80 BankofBotswanacertificates 1,088,300 1,740,296 1,088,300 1,740,296Treasurybillsandbonds 313,329 59,789 313,329 59,789Treasury bills and other eligible bills 1,401,629 1,800,085 1,401,629 1,800,085 InvestmentinBarclaysHouse(Pty)Ltd 4,995 4,995 4,995 4,995Equity securities 4,995 4,995 4,995 4,995 Financial instruments 1,406,704 1,805,160 1,406,704 1,805,160



75


13 Financial instruments (continued)



MovementinfinancialinstrumentsAt the beginning of the year 1,805,160 2,369,268 1,805,160 2,369,268Netmovementfortheyear (398,456) (564,108) (398,456) (564,108)At end of the year 1,406,704 1,805,160 1,406,704 1,805,160

14 Trading portfolio assets



Treasuryandothereligiblebills Balanceatbeginningoftheyear 254 4,858 254 4,858Netmovementduringtheyear 19,947 (4,604) 19,947 (4,604)Balance at end of the year 20,201 254 20,201 254

15 Balances with related companies



Amounts due from : BarclaysPLC 239,143 747,132 239,143 747,132OtherBarclaysPLCgroupcompanies 247 698 247 698BarclaysInsuranceServices(Pty)Ltd - - - 15,428ABSA(asubsidiaryofBarclaysPLC) 323,092 75,998 323,092 75,998Total 562,482 823,828 562,482 839,256 Amounts due to : BarclaysPLC 88,238 64,762 88,238 64,762OtherBarclaysPLCgroupcompanies 16,720 1,827 16,720 1,827BarclaysInsuranceServices(Pty)Ltd - - 1,223 -ABSA(asubsidiaryofBarclaysPLC) 144,039 122,078 144,039 122,078Total 248,997 188,667 250,220 188,667

TheBankhasanequitystakeinanunquotedpropertycompanyBarclaysHouse(Pty)Ltd.Thisinvestmentisstatedatcost.TheDirectorsbelievethatthedifferencebetweenthefairvalueandthecarryingvalueisnotmaterialfortheusersofthesefinancialstatements. BankofBotswanaCertificatesandTreasurybillsaredesignatedatfairvaluethroughprofitorlossoninitialrecognition.Duetotheirshortmaturityperiods,theircarryingvalueapproximatetotheirrelativefairvalues.BankofBotswanacertificatesamountingtoP800millionhavebeenpledgedascollateralfortheuseofthesecuredintradaytradingfacilitieswithBankofBotswana.


76

15 Balances with related companies (continued)

TheBankprovidesandutilisesservicesofitsholdingcompanyandassociates,providingandreceivingloans,overdrafts,interestandnon-interestbearingdepositsandcurrentaccountstotheseentitiesaswellasotherservices.Thecarryingvalueofthesebalancesapproximatethefairvalue. Thetablebelowsummarisesthetransactionsconductedwiththerelatedpartiesaboveandtheapplicableinterestrateschargeable.

Details Terms Vostros normalcommercialterms Nostros normalcommercialterms Recharges repayableonpresentationofinvoice Othercosts repayableonpresentationofinvoice


16 Loans and advances to banks



Repayable: ondemand 578,056 381,923 578,056 381,923Loans and advances to banks 578,056 381,923 578,056 381,923 Thecarryingamountofthebalanceapproximatesitsfairvalue.

17 Derivative financial instruments



Assets Forwardforeignexchangecontracts 6,264 18,423 6,264 18,423Netderivativeassetsheldforriskmanagement 6,264 18,423 6,264 18,423 Liabilities Interestrateswap 13,921 28,446 13,921 28,446Forwardforeignexchangecontracts - - - -Derivativeliabilitiesheldforriskmanagement 13,921 28,446 13,921 28,446 Fairvaluehedgesofinterestraterisk (13,921) (28,446) (13,921) (28,446)Otherderivativesheldforriskmanagement 6,264 18,423 6,264 18,423Netderivativesheldforriskmanagement (7,657) (10,023) (7,657) (10,023) Notionalcontractamount 324,683 158,611 324,683 158,611

TheBankhasaninterestrateswaptohedgeagainstitsexposuretochangesinthefairvalueoftheUSDloangrantedtooneofitscorporatecustomers.Thisinterestrateswaphasbeendesignatedforhedgeaccounting.

Therechargesandothercostsareunsecured,interestfreeandarerepayableondemand.



77

18 Financial assets designated at fair value



Equity securities - 35,766 class ‘C’ Visa Inc. shares Balanceatbeginningoftheyear 69,235 41,326 69,235 41,326Fairvaluegain/(loss)fortheyear 230 27,909 230 27,909Disposalduringtheyear (69,465) - (69,465) -Balance at end of the year - 69,235 - 69,235

Equitysecuritiesaredesignatedatfairvaluethroughprofitorlossatinceptionastheyaremanagedandtheirperformanceisevaluatedonafairvaluebasis.




Maturity analysisMaturingwithinoneyear 591,482 1,163,741 591,482 1,163,741Maturingafteroneyearwithinfiveyears 4,075,973 3,154,900 4,075,973 3,154,900Maturingafterfiveyears 3,838,686 3,399,040 3,838,686 3,399,040Total gross loans 8,506,141 7,717,681 8,506,141 7,717,681

19 Loans and advances to customers

Consolidated & Company Consolidated & Company

2014 2013

Gross Impairment Carrying Gross Impairment Carrying

in thousands of pula allowance amount allowance amount

Overdrafts 172,401 (9,772) 162,629 107,259 (7,548) 99,711Mortgages 1,822,349 (32,669) 1,789,680 1,238,552 (26,196) 1,212,356Termloans 4,527,264 (213,789) 4,313,475 4,312,828 (259,264) 4,053,564Creditcardreceivables 410,032 (47,037) 362,995 365,411 (27,958) 337,453Schemeloans 1,422,170 (62,047) 1,360,123 1,536,874 (46,564) 1,490,310Financeleaseinstalments 151,925 (8,105) 143,820 156,757 (13,430) 143,327Total 8,506,141 (373,419) 8,132,722 7,717,681 (380,960) 7,336,721

GrossloanswithvariableratesareP3,637,854(2013:P3,046,729)andfixedratesareP4,868,287(2013:P4,670,952)


78


19 Loans and advances to customers (continued)



Sector analysis of loans and advancesPrivateindividuals 6,651,053 6,235,485 6,651,053 6,235,485Miningcompanies 166,220 222,434 166,220 222,434Parastatals 6,493 234,617 6,493 234,617Business 1,682,375 1,025,145 1,682,375 1,025,145Grossloansandadvancestocustomers 8,506,141 7,717,681 8,506,141 7,717,681Impairmentallowance (373,419) (380,960) (373,419) (380,960)Total 8,132,722 7,336,721 8,132,722 7,336,721

Loansadvancestocustomersincludefinanceleasereceivables.



Finance lease instalmentsLessthanoneyear 21,193 23,482 21,193 23,482Betweenoneandfiveyears 141,271 144,929 149,681 144,929Morethanfiveyears 15,033 16,270 6,623 16,270Grossinvestmentsinfinanceleasesreceivable 177,497 184,681 177,497 184,681Unearnedfutureincomeonfinanceleases (25,572) (27,924) (25,572) (27,924)Netinvestmentinfinanceleases 151,925 156,757 151,925 156,757 Maturityanalysisofnetinvestmentinfinanceleases Lessthanoneyear 20,859 23,136 20,859 23,136Betweenoneandfiveyears 125,628 120,616 125,628 120,616Morethanfiveyears 5,438 13,005 5,438 13,005Netinvestmentinfinanceleases 151,925 156,757 151,925 156,757

TheBankenteredintoleasingarrangementsinrespectofmotorvehicles,machineryandequipment.AlloftheleasesaredenominatedinPula.Theaveragetermofthefinanceleasesenteredintoisfiveyears.Underthetermsoftheleasearrangements,nocontingentrentalsarepayable.TheaccumulatedallowanceforuncollectableleasepaymentsreceivableincludedintheallowanceforimpairmentatthereportingdateisP8.1m(2013:P13.4m).



79


19 Loans and advances to customers (continued)

Consolidated and Company

Identified Unidentified

in thousands of pula Note Impairment Impairment Total

Movement in Impairment AllowanceBalanceat1January2014 358,300 22,660 380,960Increasedimpairment 163,263 17,269 180,532Impairmentnolongerrequired (8,202) (21,649) (29,851)Netincreaseinimpairments 155,061 (4,380) 150,681Amountswritten-off (158,223) - (158,223)Balanceat31December2014 355,138 18,280 373,418 2014 Charge to the statement of comprehensive income Netincreaseinimpairments 155,061 (4,380) 150,681Provisions (177) - (177)Amountsrecoveredpreviouslywritten-off (68) - (68)Netchargetothestatementofcomprehensiveincome 7 154,816 (4,380) 150,436


Identified Unidentified

in thousands of pula Note Impairment Impairment Total

Movement in Impairment AllowanceBalanceat1January2013 354,852 12,023 366,875Increasedimpairment 206,789 12,323 219,112Impairmentnolongerrequired (11,398) (1,686) (13,084)Netincreaseinimpairments 195,391 10,637 206,028Amountswritten-off (191,943) - (191,943)Balanceat31December2013 358,300 22,660 380,960 2013 Charge to the statement of comprehensive income Netincreaseinimpairments 195,391 10,637 206,028Provisions (159) - (159)Amountsrecoveredpreviouslywritten-off (7,449) - (7,449)Netchargetothestatementofcomprehensiveincome 7 187,783 10,637 198,420


80

20 Other assets



Accountsreceivableandprepayments 1,584 5,723 1,584 5,723Clearingandotherassets 236,647 76,624 236,647 76,624Other assets 238,231 82,347 238,231 82,347 Thecarryingamountofthebalanceapproximatesitsfairvalue.

21 Current tax assets/(liabilities)



Openingnetbalance 40,802 39,367 15,208 23,308Chargefortheyear (122,345) (94,917) (119,931) (92,106)Taxpaidnetofrefunds 49,521 96,352 53,172 84,006Closingnetcurrenttax (32,022) 40,802 (51,551) 15,208 Currenttaxassets 19,529 40,802 - 15,208Currenttaxliabilities (51,551) - (51,551) -

22 Deferred tax assets and liabilities



Recognised deferred tax assets/(liabilities)Openingbalance (16,463) (5,227) (16,463) (5,227)Acceleratedtaxdepreciation-fixedassets 12,590 (8,157) 12,590 (8,157)Acceleratedtaxdepreciation-leasedassets 2,576 (3,400) 2,576 (3,400)Loanimpairment - (10,408) - (10,408)Retirementbenefitasset/(liability) (4,978) 6,222 (4,978) 6,222Other 18,216 4,507 12,601 4,507Deferredtaxliabilities 11,941 (16,463) 6,326 (16,463)



81


22 Deferred tax assets and liabilities (continued)

Movements in temporary differences during the year

Consolidated

Recognised Recognised

in statement of in other

in thousands of pula Opening comprehensive comprehesive Closing

2014 balance income income balance

Acceleratedtaxdepreciation-fixedassets 3,616 12,590 - 16,206Acceleratedtaxdepreciation-leasedassets (17,312) 2,576 - (14,736)Other (2,767) 18,216 (4,978) 10,471Nettaxassets/(liabilities) (16,463) 33,382 (4,978) 11,941

Consolidated & Company





Acceleratedtaxdepreciation-fixedassets 11,773 (8,157) - 3,616Acceleratedtaxdepreciation-leasedassets (13,912) (3,400) - (17,312)Loanimpairment 10,408 (10,408) - -Other (13,496) 4,507 6,222 (2,767)Nettaxassets/(liabilities) (5,227) (17,458) 6,222 (16,463)

Company





Acceleratedtaxdepreciation-fixedassets 3,616 12,590 - 16,206Acceleratedtaxdepreciation-leasedassets (17,312) 2,576 - (14,736)Other (2,767) 12,601 (4,978) 4,856Nettaxassets/(liabilities) (16,463) 27,767 (4,978) 6,326


82


23 Intangible assets


Internally generated Other software Total

in thousands of pula software

CostAt1January2014 59,555 21,368 80,923Additions - 520 520Transfersfrompropertyandequipment 2,003 - 2,003At 31 December 2014 61,558 21,888 83,446

Accumulated amortisation At1January2014 25,171 20,857 46,028Amortisationcharge 14,553 192 14,745At 31 December 2014 39,724 21,049 60,773Net book value 21,834 839 22,673


Internally generated Other software Total

in thousands of pula software

CostAt1January2013 55,650 21,368 77,018Additions 3,905 - 3,905At 31 December 2013 59,555 21,368 80,923

Accumulated amortisation At1January2013 7,167 20,633 27,800Amortisationcharge 18,004 224 18,228At 31 December 2013 25,171 20,857 46,028Net book value 34,384 511 34,895



83

24 Property and equipment


2014

Property at Motor Computers Furniture Work in Total

cost vehicles at and and fittings progress

cost equipment at cost

in thousands of pula at cost Cost Balanceat1January 145,518 13,519 131,244 48,792 2,992 342,065Acquisitions 27,185 - 20,498 3,177 38,850 89,710Transferstointangibles - - - - (2,003) (2,003)Disposals - (1,034) (10,413) (7,825) - (19,272)Balanceat31December 172,703 12,485 141,329 44,144 39,839 410,500 Accumulated depreciation Balanceat1January 100,559 8,903 102,939 29,915 - 242,316Depreciationfortheperiod 11,396 2,039 10,933 3,072 - 27,440Disposal - (1,034) (10,413) (7,764) - (19,211)Balanceat31December 111,955 9,908 103,459 25,223 - 250,545 Net book value 60,748 2,577 37,870 18,921 39,839 159,955



2013

Property at Motor Computers Furniture Work in Total

cost vehicles at and and fittings progress

cost equipment at cost

in thousands of pula at cost Cost Balanceat1January 146,635 12,921 115,242 42,204 156 317,158Acquisitions 33 598 16,002 6,588 2,836 26,057Disposals (1,150) - - - - (1,150)Balanceat31December 145,518 13,519 131,244 48,792 2,992 342,065 Accumulated depreciation Balanceat1January 94,019 6,717 93,817 24,927 - 219,480Depreciationfortheperiod 7,076 2,186 9,122 4,988 - 23,372Disposal (536) - - - - (536)Balanceat31December 100,559 8,903 102,939 29,915 - 242,316 Net book value 44,959 4,616 28,305 18,877 2,992 99,749


84


25 Retirement benefit fund

Inthepast,theBankoperatedadefinedbenefitpensionplanforitsemployees(the“Fund”).TheBankhassincediscontinuedthisFundandcurrentlytherearenoactiveemployeeswithinthisFund.TheFund’sassetsaremanagedexternallybyreputableassetmanagers.TheresponsibilityforgovernanceoftheFund,includinginvestmentdecisionslieswiththeboardoftrustees.TheboardoftrusteescompriserepresentativesoftheBankandtheFund’sparticipantsinaccordancewiththeFundrules. TheboardoftrusteesoftheFundhavesoughtrelevantregulatoryapprovals,andare intheprocessofwindingupthisFundbygetting the deferred members within this Fund to transfer relevant member credits to their new employers’ pension plans orpurchaseannuitiesfromotherserviceprovidersinthemarket.Thisprocessisexpectedtobeconcludedin2015.

TheplanassetsincludesP4.5m(2013:P4.1m)ofinvestmentinthecompany’sownequitiesandbonds.

The amounts recognised in the statement of financial position are as follows:

Plan assets consist of the following

Movement in the liability for defined benefit obligations



Presentvalueoffundedobligations Definedbenefitaccounts (159,717) (163,881) (159,717) (163,881)Fairvalueofplanassets 163,297 146,235 163,297 146,235Presentvalueofunfundedobligations 3,580 (17,646) 3,580 (17,646)Recognisedasset/(liability)ofdefinedbenefitobligations 3,580 (17,646) 3,580 (17,646)



Equitysecurities 82,274 38,021 82,274 38,021PropertyoccupiedbytheBank - 21,935 - 21,935Cash 2,064 83,354 2,064 83,354Corporateandotherbonds 64,752 2,925 64,752 2,925Realestate 14,207 - 14,207 -Totalplanassetsatmarketvalue 163,297 146,235 163,297 146,235



Liabilityfordefinedbenefitobligationsat1January 163,881 481,924 163,881 481,924Settlement - (351,832) - (351,832)Benefitspaid (9,077) (8,877) (9,077) (8,877)Currentservicecosts 261 252 261 252Expensespaid (498) (234) (498) (234)Netinterestcostondefinedbenefitobligations 10,346 10,062 10,346 10,062Actuarial(gains)/lossesrecognisedthroughothercomprehensiveincome (5,196) 32,586 (5,196) 32,586Liabilityfordefinedbenefitobligationsat31December 159,717 163,881 159,717 163,881



85


25 Retirement benefit fund (continued)

Movement in plan assets

Expenses recognised in statement of comprehensive income

Remeasurement gain / loss recognised through other comprehensive income

Actuarial assumptionsPrincipalassumptionsatthereportingdate(expressedinweightedaverages)



Fairvalueofplanassetsat1January 146,235 492,817 146,235 492,817Settlement - (351,832) - (351,832)Expensespaid (498) (234) (498) (234)Netinterestcostonplanassets 9,206 10,056 9,206 10,056Benefitspaidbytheplan (9,077) (8,877) (9,077) (8,877)Actuariallossesrecognisedthroughothercomprehensiveincome 17,431 4,305 17,431 4,305Fairvalueofplanassetsat31December 163,297 146,235 163,297 146,235



Currentservicecosts 261 252 261 252Netinterestondefinedbenefitobligations 10,346 10,062 10,346 10,062Netinterestcostonassets (9,206) (10,056) (9,206) (10,056) 1,401 258 1,401 258 Actualreturnonplanassets 17,431 4,305 17,431 4,305



Actuarialgainonassets 17,431 4,305 17,431 4,305Actuarialgain/(loss)onliabilitiesduetoexperience 5,196 (7,077) 5,196 (7,077)Actuariallossonliabilitiesduetoassumptions - (25,509) - (25,509)Deferredincometaxrecognised (4,978) 6,222 (4,978) 6,222Totalrecognisedthroughothercomprehensiveincome 17,649 (22,059) 17,649 (22,059)



Discountrateat31December 6.5% 6.5% 6.5% 6.5%Expectedreturnonplanassetsat1January 6.5% 6.5% 6.5% 6.5%Futurepensionincreases 5.0% 5.0% 5.0% 5.0%


86

25 Retirement benefit fund (continued)


Sensitivity analysis

Historical information

Theeffectsofcertainchangestothefinancialanddemographicdataisanalysedbelow

in thousands of pula 2014Basis Discountrate Discountrate Inflation -1.0% +0.5% +0.5%DefinedBenefitObligations-DBdeferredpensioners 8,106 9,847 7,384 8,951DefinedBenefitObligations-Pensionsinpayment 151,611 170,477 143,451 161,056DefinedBenefitObligations-Total 159,717 180,324 150,835 170,007

in thousands of pula 2014 2013 2012 2011 2010Presentvalueofdefinedbenefitobligation (159,717) (163,881) (481,924) (464,987) (414,642)Fairvalueofplanassets 163,297 146,235 492,817 493,964 468,771Surplusintheplan 3,580 (17,646) 10,893 28,977 54,129

26 Deposits from banks



Unsecuredandpayableondemand 687,256 7,636 687,256 7,636Total 687,256 7,636 687,256 7,636

27 Deposits due to customers



Interestbearingdeposits 6,892,557 7,521,708 6,892,557 7,521,708Non-interestbearingdeposits 2,071,843 1,759,975 2,071,843 1,759,975Total 8,964,400 9,281,683 8,964,400 9,281,683

Maturity analysis Ondemand 6,665,438 7,311,094 6,665,438 7,311,094Maturingwithinoneyear 2,232,186 1,475,127 2,232,186 1,475,127Maturingafteroneyearbutwithinfiveyears 66,776 495,462 66,776 495,462Total 8,964,400 9,281,683 8,964,400 9,281,683



87


27 Deposits due to customers (continued)

28 Other liabilities



Category analysis of deposits -Pula 1,612,194 2,134,358 1,612,194 2,134,358-Foreigncurrency 467,472 379,061 467,472 379,061Currentaccounts 2,079,666 2,513,419 2,079,666 2,513,419-Pula 4,077,186 4,275,181 4,077,186 4,275,181-Foreigncurrency 522,537 522,517 522,537 522,517Savingsaccounts 4,599,723 4,797,698 4,599,723 4,797,698-Pula 2,134,743 1,949,469 2,134,743 1,949,469-Foreigncurrency 150,268 21,097 150,268 21,097Termdeposits 2,285,011 1,970,566 2,285,011 1,970,566Total 8,964,400 9,281,683 8,964,400 9,281,683



Creditorsandaccruals 96,117 85,446 94,891 85,446Clearingandotherliabilities 91,680 182,821 65,356 155,237Total 187,797 268,267 160,247 240,683



Sector analysis of deposits Privateindividuals 3,277,094 4,025,836 3,277,094 4,025,836Otherfinancialinstitutions 994,333 1,553,445 994,333 1,553,445Parastatals 525,533 276,146 525,533 276,146Business 3,198,582 2,329,458 3,198,582 2,329,458LocalGovernment 921,685 1,013,922 921,685 1,013,922CentralGovernment 47,173 82,876 47,173 82,876Total 8,964,400 9,281,683 8,964,400 9,281,683

DepositswithvariableratesareP6,647,419(2013:P7,311,117)andfixedratesareP2,316,981(2013:P1,970,566).


88


29 Provisions


Sundry Fees Total

in thousands of pula provisions Refundable

At1stJanuary2014 13,286 21,286 34,572Additions 26,324 - 26,324Amountsutilised (4,165) (10,612) (14,777)At31December2014 35,445 10,674 46,119


Sundry Fees Total

in thousands of pula provisions Refundable

At1stJanuary2013 10,693 - 10,693Additions 2,593 21,286 23,879Amountsutilised - - -At31December2013 13,286 21,286 34,572

SundryprovisionscompriseofprovisionforleavepayandprovisionforBarclaysInsuranceServices(Pty)Limitedcommissionsrefundable. FeesrefundablerelatestoaprovisionraisedasaresultofOptionalIssuerfeeschargedtocustomersinprioryears.Aprovisionwasrecognisedintheprioryearandtherepaymentsweremadeduringtheyeartoaffectedcustomers.

30 Debt securities in issue



Debt securities issued at amortised cost Floatingratedebtsecurities 112,472 102,270 112,472 102,270Medium-termnotes 410,391 400,851 410,391 400,851Total 522,863 503,121 522,863 503,121

Floating rate notes Duringtheyear,theBankprivatelyplacedfloatingratenotesamountingtoP101million(redeemableon26November2015)andP11million(redeemableon16September2015).ThefloatingratenotesamountingtoP100millionwereredeemedon30thOctober2014. Medium term notes In2004,theBankestablishedandlistedadomesticMediumTermNoteProgrammeontheBotswanaStockExchange.Undertheprogramme,Bankissuednotesforsuchperiodsandonsuchtermsasagreedwiththeinvestors. Duringtheyear,theBanklistedanotherdomesticMediumTermNoteProgrammeontheBotswanaStockExchangeforuptoP2billionwhichcomprisesofP90millionsubordinateddebt.Inthecurrentreportingperiod,theBankhasissuedP200millionofseniorunsubordinateddebtnoteofvariousmaturitiesandinterestratestomatchthetenorofitslongtermassetbook.



89


31 Capital and reserves



Stated capital Ordinarysharesissuedandfullypaid 852,161,250sharesatnoparvalue 17,108 17,108 17,108 17,108

Allissuedsharesarefullypaid.



Reserves Sharecapitalreserve 2,060 2,060 2,060 2,060Generalriskreserve 81,237 60,923 81,237 60,923Otherreserves 4,616 4,596 4,616 4,596Otherreserves 87,913 67,579 87,913 67,579 Retainedearnings 1,420,635 1,287,429 1,421,818 1,304,847 Totalreserves 1,508,548 1,355,008 1,509,731 1,372,426

Allreservesareshownnetofdeferredtaxwhereapplicable.

30 Debt securities in issue (continued)

In Issue

Issuancedate Amount Interest Interest Redemption Stock (P‘000) Rate% basis date codeFriday,June09,2006 15,000 10.25% Fixed 22/02/2016 BB010Friday,June09,2006 85,000 10.75% Fixed 05/04/2016 BB011Friday,May09,2008 90,000 11.00% Fixed 09/05/2015 BB013Friday,October31,2014 43,600 5.65% Floating 31/10/2019 BBB015Friday,October31,2014 156,400 8.00% Fixed 31/10/2019 BBB016Totaldebtsecuritiesinissue 390,000


Share capital reserve ThesharecapitalreserveisacontingencyreservesetasidebytheBank. General risk reserve AgeneralriskreservehasbeencreatedinaccordancewiththerequirementsoftheBank’sregulator,theBankofBotswana.Thisreserverepresents1%oftheBank’sloansandadvancesnetofimpairmentprovision.

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31 Capital and reserves (continued)

Undistributed profits Undistributedprofitsareretainedintherevenuereserve. Other reserves OtherreservescompriseoftheIncentiveSharePlanscheme(IncentiveShares).IncentiveSharesaregrantedtoparticipantsintheformofaprovisionalallocationofBarclaysPLCshareswhichvestuponachievingcontinuedserviceafterthreeyears.Participantsdonotpaytoreceiveanawardortoreceiveareleaseofshares.

32 Prior year restatement

BarclaysInsuranceServices(Pty)Limited(“BIS”),awhollyownedsubsidiaryofBarclaysBankBotswanaLimited,earnscommissionon all insurance policies sold on behalf of its principal. In terms of the agency agreement, BIS is obliged to contribute towardscommission refunds as a result of policy surrenders. Accordingly, in terms of International Accounting Standards 37, Provisions,ContingentLiabilitiesandContingentAssets(“IAS37”),thecompanyisrequiredtorecogniseaprovisioninrespectofcommissionsrefundable.Inthepast,managementhasnotrecognisedaliabilityforcommissionsrefundableinaccordancewithIAS37.Basedontheinformationthathasbeenavailable,anassessmentmadeduringtheyearindicatedtheliabilitytobematerialtothegroupfinancialstatements,requiringarestatementofthepreviouslyreportedresults,astheomissiontorecognisetheliabilityinthepastconstitutesanerrorasdefinedbyInternationalAccountingStandards8,Accountingpolicies,ChangesinAccountingEstimatesandErrors.Theimpactoftheerroronthegroupfinancialstatementsisasfollows:

Asreflectedabove,theeffectoftheerroronthestatementoffinancialpositionasof31December2012isP21.754millionunderstatedliabilitiesandanequaloverstatementoutofretainedearnings.Theerrorisnotconsideredtobematerialforthe2012financialperiodandthereforethestatementoffinancialpositionasof31December2012hasnotbeenpresentedinthesefinancialstatementsasrequiredbyInternationalAccountingStandards1,Presentationoffinancialstatements.Allinformationrelevanttotheerrorandtheeffectoftheerroronthe2012financialperiodhasbeenpresentedinthisnote.

Restated-auditedyearended31December

in thousands of pula 2013 2012 2011Statement of comprehensive income Feeandcommissionincome-aspreviouslystated 286,621 284,903 285,243Feeandcommissionincome-restated 280,791 272,260 276,132Effectonprofitfromcontinuingoperations (5,830) (12,643) (9,111) Statement of financial position Otherliabilities-original 240,683 214,566 168,158Otherliabilities-restated 268,267 236,320 177,269Effectofrestatementonretainedearnings 27,584 21,754 9,111 Retainedearnings-original 1,315,013 1,256,741 1,356,416Retainedearnings-restated 1,287,429 1,234,987 1,347,305Effectofrestatementonretainedearnings (27,584) (21,754) (9,111)



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Thetermsofthecurrentplansareasfollows: Incentive Share Plan (ISP) IncentivesharesaregrantedtoparticipantsintheformofprovisionalallocationofBarclaysPLCshareswhichvestuponachievingcontinuedserviceafterthreeyears.Participantsdonotpaytoreceiveanawardortoreceiveareleaseofshares. Share Value Plan (SVP) SVPawardsaregrantedtoparticipantsintheformofaconditionalrighttoreceiveBarclaysPLCshareswhichvestoveraperiodofthreeyearsinequalannualtranches.Participantsdonotpaytoreceiveanawardortoreceiveareleaseofshares.ThegrantormayalsomakeadividendequivalentpaymenttoparticipantsonvestingofaSVPaward.SVPawardsarealsomadetoeligibleemployeesforrecruitmentpurposesunderschedule1totheSVP.Allawardsaresubjecttopotentialforfeitureincertainleaverscenarios.

Thetermsandconditionsoftheaboveshare-basedpaymentarrangementsdictatethatawardsbesettledimmediatelyonvestingandthereforetherearenoawardswhichhavevestedbuthavenotyetbeensettledatanygiventime.Furthermoretheawardsoutstandingintheafore-mentionedschemeshavenoexerciseprice.

Weightedaveragecontractuallifeofawardsoutstanding

Equity settled share based paymentsThenetcharge/(release)fortheyeararisingfromequitysettledsharebasedpaymentschemes

Cash settled share based payments Duringtheyear,certainemployeeswereawardedpaymentsunderthecashsettledsharebasedpaymentschemes.Thenumberofsharesawardedisasfollows;

Opening Granted Forfeited Closing

in thousands of pula balance balanceSVP - 2,470 - 2,470SVPCliff - 20,259 (7,779) 12,480

2014SVP 1.7SVPCliff 2.2

33 Share based payments



IncentiveSharePlan - - -ShareValuePlan 20 (6) 20 (6)Totalsharebasedpayments 20 (6) 20 (6)


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33 Share based payments (continued)

Thetermsofthesecashsettledschemesareasfollows; Barclays Africa Group Limited Share Value Plan TheShareValuePlan(“SVP”)isacash-settledshare-basedpaymentarrangement.TheSVPawards(andanyassociatednotionaldividends)areawardedatnocosttotheparticipants.Theawardsvestinequaltranchesafterone,twoandthreeyears,witheachtranchesubjecttoitsownindependentnon-market-relatedperformancecondition.TheamountthatispaidtotheparticipantsisequaltothemarketvalueofanumberofBarclaysAfricaGroupLimitedordinaryshares,asdeterminedonthevestingdate,totheextentthatthenon-market-relatedconditionsattachedtotheawardsaremet.IftheGroupfailstomeettheminimumperformancecriteria,theawardsmadeinthattrancheareforfeitedintotal.Dividendsaccumulateandarereinvestedovertheperiod. Barclays Africa Limited Retention Plan TheShareValueRetentionPlan(“SVPCliff”)isacash-settledshare-basedpaymentarrangement.TheSVPCliffawards(andanyassociatednotionaldividends)areawardedatnocosttotheparticipants.Theawardsvestafterthreeyears, subjectto itsownindependentnon-marketrelatedperformancecondition.TheamountthatispaidtotheparticipantsisequaltothemarketvalueofanumberofBarclaysAfricaGroupLimited’sordinaryshares,asdeterminedonthevestingdate,totheextentthatthenon-marketrelatedconditionsattachedtotheawardsaremet.IftheGroupfailstomeettheminimumperformancecriteria,theawardsmadeinthattrancheareforfeitedintotal.Dividendsaccumulateandarereinvestedoverthevestingperiod.

34 Related Parties

BarclaysAfricaGroupLimited(‘’BAGL’’)owns67.82%oftheordinarysharesoftheBank.TherestarewidelyheldontheBotswanaStockExchange.TheGroup’sultimateholdingcompanyisBarclaysBankPLC.

Significant subsidiaries TheBankhasa100%ownedsubsidiary,BarclaysInsuranceServices(Pty)Limited,whichisaninsuranceagent. Transactions with key management personnel IAS24RelatedPartyDisclosures(“IAS24”),requirestheidentificationofkeymanagementpersonnel,whoareindividualsresponsibleforplanning,directingandcontrollingtheactivitiesof theentity, includingdirectors.Keymanagementpersonnelaredefinedasexecutiveandnon-executivedirectorsandmembersof theExecutiveCommittee (“Exco”).Anumberofbankingand insurancetransactionsareentered intowithkeymanagementpersonnel in thenormalcourseofbusiness,under termsthatarenomorefavourable than those arranged with other employees. These include loans, deposits and foreign currency transactions. Theoutstandingbalancesatthereportingdatewithrelatedpartiesandrelatedpartytransactionsconductedduringthereportingperiodareasfollows:

in thousands of pula 2014 2013

Key management personnel compensation Post-employmentbenefitcontributions 1,599 1,300Salariesandothershort-termbenefits 16,453 13,918Total 18,052 15,218




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Loansincludemortgages,assetfinancetransactions,overdraftsandothercreditfacilities.LoanstokeymanagementpersonnelareprovidedonthesametermsandconditionsasloanstoemployeesoftheGroup,includinginterestratesandcollateralrequirements.Noloanstokeymanagementpersonnelorentitiescontrolledbykeymanagementpersonnelwerewrittenoffasirrecoverable.

Therewerenobaddebtexpensesandprovisionsforbaddebtsthatrelatedtobalancesandtransactionswiththeparentcompany,fellowsubsidiaries,associatesandjointventuresoftheparentcompany.

Transactions with key management personnel

Transactions with the holding company, Barclays Africa Group Limited and the ultimate holding company Barclays Bank PLC.

34 Related Parties (continued)


Loans Balanceatthebeginningofthereportingperiod 12,961 12,262Loansissuedandinterestearned 3,583 699Loansrepaid (4,723) -Balanceattheendofthereportingperiod 11,821 12,961Interest income 575 699Deposits Balanceatthebeginningofthereportingperiod 3,293 2,132Netdepositsreceived 1,885 1,161Balanceattheendofthereportingperiod 5,178 3,293Interestexpense 69 62Guarantees - -


2014 2013

in thousands of pula BAGL group Barclays PLC BAGL group Barclays PLC

Interestandsimilarincome 1,912 882 13,503 283Interestexpenseandsimilarcharges - - 6 3,409Operatingexpenditure 27,105 23,278 23,059 26,756Dividendspaid 135,648 - - 146,160


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35 Contingent liabilities and commitments

Thefollowingtablessummarisethenominalprincipalamountofcontingentliabilitiesandcommitmentswithoff-statementoffinancialpositionrisk.



Undrawncommitmentstocustomers 848,695 805,278 848,695 805,278Performanceandbidbonds 178,447 166,937 178,447 166,937Total 1,027,142 972,215 1,027,142 972,215



Lessthanoneyear 24,935 16,535 24,935 16,535Betweenoneandfiveyears 81,498 29,325 81,498 29,325Totalfuturecashflows 106,433 45,860 106,433 45,860Amountalreadyaccruedinthestatementoffinancialposition (5,967) (1,975) (5,967) (1,975)Totalfutureoperatingleaseexpenses 100,466 43,885 100,466 43,885

Theoperatingleasecommitmentscompriseanumberofseparateoperatingleasesinrelationtopropertyandequipment,noneofwhichisindividuallysignificanttotheGroup.Leasesarenegotiatedforanaveragetermofthreetofiveyears.

Undrawn commitments to customers Commitmentstolendareagreementstolendfundstocustomers,subjecttocertainconditions.Suchcommitmentsaregenerallymadeforafixedperiod.TheBankmaywithdrawfromitscontractualobligationfortheundrawnportionoftheagreedfacility.Shorttermcommitmentsarethosewhichhaveanoriginalmaturityoflessthanayearandmaybeunconditionallycancelledatanytime. Performance and bid bonds Thesearetransaction-relatedcontingencieswheretheBankguaranteesatransactionorperformance.Theygenerallyattracta50%riskweightingunlessthenatureofthecounterpartyallowsotherwise. Letters of credit Letters of credit commit the Bank to make payments to third parties to facilitate trade. These are short term, self-liquidatingcontingentliabilitiesarisingfromthemovementofgoods. Commitments At31December2014thecommitmentsforcapitalexpenditureundercontractamountedtoP10.8m(2013:P6.3m).

Operating lease payments due



95

Risk ManagementFor the year ended 31 December 2014

Credit risk Introduction CreditriskistheriskthattheBank’scustomers,clientsorcounterpartieswillnotbeableorwillingtopayinterest,repaycapitalorotherwisetofulfiltheircontractualobligationsunderloanagreementsorothercreditfacilities.CreditriskalsoarisesthroughthedowngradingofcounterpartieswhosecreditinstrumentstheBankmaybeholding,causingthevalueofthoseassetstofall.Furthermore,creditriskismanifestedassectorriskwheredifficultiesexperiencedbythesectorinwhichtheexposureisdomiciledmayimpedepaymentorreducethevalueoftheasset.SettlementriskisanotherspecialformofcreditriskwhichisthepossibilitythattheBankmaypayacounterparty–forexample,abankinaforeignexchangetransaction–andfailtoreceivethecorrespondingsettlementinreturn. Loansandadvancestocustomersprovidetheprinciplesourceofcreditrisktothebankalthoughitcanbeexposedtootherformsofcreditriskthrough,forexample,loanstobanks,loancommitmentsanddebtsecurities.TheBanksriskmanagementpoliciesandprocessesidentifyandanalyserisk,setappropriateriskappetitelimitsandcontrolsandmonitortherisksandadherencetolimitsbymeansofreliableandtimelydata.Oneparticularareaofreviewisconcentrationrisk. Barclays risk management strategy TheBank’sCreditRiskobjectivesare: – Supportingtheachievementofsustainableassetandrevenuegrowthinlinewithourriskappetite; – Simplifyriskmanagementprocesses; – Investinginskillsandexperience; – Operatingsoundcreditgrantingprocesses; – Monitoringcreditdiligently; – Usingappropriatemodelstoassistdecisionmaking; – Continuallyimprovingcollectionandrecovery;and – optimisingthecontrolenvironment Performance Retail Credit Risk:

Growth: Overallloansandadvancesgrewby9.6%year-on-year.Thisgrowthisprimarilydrivenbymortgagesandtermloans.Portfolio Performance: New business quality continues to improve across the portfolio due to improvements in credit policy andcuttingoffofriskysegments.Loanlossrate(“LLR”)hasimprovedfrom313bpsto218bps.NonperformingLoans(NPL)impairmentcoveragehasreducedby5.1%.OverallstabilisationofportfoliosduetoclosermonitoringbyRiskandimprovementsinCollectionsandRecoveries.

Impairment:Fullyear2014impairmentchargeclosedatP150m,anotedimprovementfromP198min2013. Wholesale credit risk: Growth:Portfolioexperiencedanimpressivegrowthduringthereportingperiod,andremainedwithinagreedappetitelevels.Growthinthewholesaleportfoliowaslargelyattributabletotransactionsonthecorporateandinvestmentbankingbook.

Portfolio Performance:Performancewaswellinlinewithexpectations.Loanlossrates(“LLR”)measuresimprovedacrossthewholesaleclientbase.Whiletherewasanincreaseinexposureofaccountsintheearlywarninglist(“EWL”),theloanrepaymentscontinuetobehonouredandthereisnoriskofimpairmentonthenames.

Impairment: impairmentnumbersaresteadilyondeclinedueto lowloanlossrates,adequatesecurityandonthebasisofreducingloans.Theimpairmentreleasesnotedduringthereportingperiodwereasaresultofheightenedmanagementattentionandactiveclientengagementofaccountsonthewholesaleportfolio.

96

Risk management processes TheBank’sapproachistoprovidedirectionon:understandingtheprincipalriskstoachievingBankstrategy;establishingriskappetite;andestablishingandcommunicatingtheriskmanagementframework.Theprocessisthenbrokendownintofivesteps:identify,assess,control, reportandmanage/challenge.Eachofthesesteps isbrokendownfurther, toestablishend-to-endactivitieswithintheriskmanagementprocessandtheinfrastructureneededtosupportit.

Assigning responsibilities ResponsibilityforriskmanagementresidesatalllevelswithintheBank,fromtheBoardandtheExecutiveCommitteedownthroughtheorganisationtoeachbusinessmanagerandriskspecialist.Barclaysdistributestheseresponsibilitiessothatrisk/returndecisionsaretakenatthemostappropriatelevel;ascloseaspossibletothebusiness,andsubjecttorobustandeffectivereviewandchallenge.Theresponsibilitiesforeffectivereviewandchallengesresidewithseniormanagers,riskoversightcommittees,BarclaysInternalAudit,theindependentBankRiskfunction,theBoardRiskCommitteeand,ultimately,theBoard. TheBoardofDirectors’mainfocusisonthebusinesspoliciesandstrategiesoftheBankaswellasresponsibilityfortheestablishmentandoversightoftheBank’sriskmanagementframework.TheBoardhasestablishedtheAuditCommitteetomonitorfinancialcontrols,accountingsystemsandshareholderreporting.TheCountryAssetandLiabilityManagementCommittee’s(“ALCO”)mainpurposeistoachievesustainableandstableprofitswithinaframeworkofacceptablefinancial risksandcontrols.TheGovernanceandControlCommittee is responsible for establishing and/or operation of the governance and control framework. The Country ManagementCommittee(“CMC”)actsastheoperationalmanagementforumresponsiblefordeliveringtheBank’soperatingplanandresults.CertainBoardcommitteeshavebothexecutiveandnon-executivemembersandreportregularlytotheBoardofDirectorsontheiractivities.AllothercommitteeshaveexecutiveDirectorsandseniormanagementmembersandreportviatheCMCtotheBoardofDirectors. TheBank’sriskmanagementpoliciesareestablishedtoidentifyandanalysetherisksfacedbytheBank,tosetappropriaterisklimitsandcontrols,andtomonitorrisksandadherencetolimits.Riskmanagementpoliciesandsystemsarereviewedregularlytoreflectchangesinmarketconditions,productsandservicesoffered.TheBank,throughitstrainingandmanagementstandardsandprocedures,aimstodevelopadisciplinedandconstructivecontrolenvironment,inwhichallemployeesunderstandtheirrolesandobligations.TheBank’sAuditCommitteeisresponsibleformonitoringcompliancewiththeBank’sriskmanagementpoliciesandprocedures,andforreviewingtheadequacyoftheriskmanagementframeworkinrelationtotherisksfacedbytheBank.TheBankAuditCommitteeis

Steps Activity

Identify –Establishtheprocessforidentifyingandunderstandingbusiness-levelrisks.

Assess –Agreeandimplementmeasurementandreportingstandardsandmethodologies.

Control –Establishkeycontrolprocessesandpractices,includinglimitstructures,impairmentallowance criteriaandreportingrequirements. –Monitortheoperationofthecontrolsandadherencetoriskdirectionandlimits. –Provideearlywarningofcontrolorappetitebreaches. –Ensurethatriskmanagementpracticesandconditionsareappropriateforthebusiness environment

Report –Interpretandreportonriskexposures,concentrationsandrisk-takingoutcomes. –InterpretandreportonsensitivitiesandKeyRiskIndicators. –Communicatewithexternalparties.

Manageandchallenges –ReviewandchallengeallaspectsoftheBank’sriskprofile. –Assessnewrisk-returnopportunities. –AdviseonoptimisingtheBank’sriskprofile. –Reviewandchallengeriskmanagementpractices.”

Risk Management (continued)For the year ended 31 December 2014


97

assistedinthesefunctionsbyInternalAudit.InternalAuditundertakesbothregularandad-hocreviewsofriskmanagementcontrolsandprocedures,theresultsofwhicharereportedtotheAuditCommittee. RiskmanagementresponsibilitiesarelaidoutinthePrincipalRisksPolicy,whichcoversthecategoriesofriskinwhichBarclayshasitsmostsignificantactualorpotentialriskexposures. The Principal Risks Framework: – createsclearownershipandaccountability; – ensurestheBank’smostsignificantriskexposuresareunderstoodandmanagedinaccordancewithagreedriskappetite(for financialrisks)andrisktolerances(fornon-financialrisks);and – ensuresregularreportingofbothriskexposuresandtheoperatingeffectivenessofcontrols. EachPrincipalRiskcomprises individualKeyRiskTypes.The fourPrincipalRisksare:Credit,Market,LiquidityandOperational,eachownedbyaseniorindividualwithintheBankRiskfunctionknownasthePrincipalRiskOwner.ThefirstthreePrincipalRisksarerisksthatBarclaysactivelyseekstomanageandhavedirectincomeimplications.ThefourthPrincipalRiskrelatestooperationalrisks,exposurewhicharisesdirectlyfromundertakingbusinessprocessesinsupportofBarclaysactivities,whichtheBankseekstominimise. ThefivestepsrequiredbythePrincipalRisksPolicyare:Identify,Assess,Control,Report,andManageandChallenge.

EachKeyRiskisownedbyaseniorindividualknownastheKeyRiskOwnerwhoisresponsibleforproposingariskappetitestatementandmanagingtheriskinlinewiththePrincipalRisksPolicy.Thisincludesthedocumentation,communicationandmaintenanceofariskcontrolframeworkwhichmakesclear,foreverybusinessacrossthebank,themandatedcontrolrequirementsinmanagingexposurestothatKeyRisk.These control requirements are given further specification, according to the business unit or risk type, to provide a complete andappropriate system of internal control. Business Unit function heads are responsible for obtaining on-going assurance that the keycontrolstheyhaveputinplacetomanagetheriskstotheirbusinessobjectivesareoperatingeffectively. Management of credit risk TheCreditriskdepartmentisresponsibleforportfoliomanagementandriskconcentrationissues,sectorexposure,productriskandcreditgrading.Thecredit riskdepartment is responsible for sanctioning largecredit exposures toall customersandcounterpartiesarisingfromlending,tradingactivities,derivativeinstrumentsandsettlementrisks. TheBankalsousesacorporategradingstructurewhichshowstheborrower’sprobabilityofdefault.This, togetherwithsimilar riskcalibrationofcategoriesofpersonalsector lending, isusedtoestimateannual levelsof futurecredit lossesfromtheoverall lendingportfolio,averagedacrosstheeconomiccycle(termedrisktendency).Suchrisktendencyestimatesassist inportfoliomanagementdecisions,suchasexposurelimitstoanysinglecounterpartyorborrower,desiredaggregateexposurelevelstoindividualsectorsandpricingpolicy.Overtime,italsoprovidesaguidetochangesintheunderlyingcreditqualityofthelendingportfolio. Allloansandadvancesarecategorisedaseither -neitherpastduenorindividuallyimpaired -pastduebutnotindividuallyimpaired;or -individuallyimpaired;or Creditriskloanscompriseloansandadvancestobanksandcustomers90daysoverdueormoreand180daysormoreoncardsandthosesubjecttoindividualimpairment.Thecoverageratioiscalculatedbyreferencetothetotalimpairmentallowanceandthecarryingvalue(beforeimpairment)ofcreditriskloans.

Risk Management (continued)For the year ended 31 December 2014

98

Credit risk (continued)

Thefollowingtablebelowdemonstratesimpairmentallowancesagainstfinancialassetsthathavebeenindividuallyimpairedandthosesubjecttocollectiveimpairment;

(i) Maximum exposure to credit risk

Risk Management (continued)

As at 31 December 2014 Neither past Past due due nor but not Total individually individually Individually Impairment carrying Impaired Coverage

in thousands of pula impaired impaired impaired Total allowance value loans ratio

BalanceswithBankofBotswana 788,834 - - 788,834 - 788,834 - -FinancialInstruments 1,406,704 - -1,406,704 - 1,406,704 - -Tradingportfolioassets 20,201 - - 20,201 - 20,201 - -Balanceswithrelatedcompanies 562,482 - - 562,482 - 562,482 - -Loansandadvancestobanks 578,056 - - 578,056 - 578,056 - -Derivativefinancialinstruments 6,264 - - 6,264 - 6,264 - -Loansandadvancestocustomers 7,926,763 578,741 634 8,506,138 (373,419) 8,132,719 400,002 93%Otherassets 238,231 - - 238,231 - 238,231 - -Currenttaxassets 19,529 - - 19,529 - - - -Deferredtaxassets 11,941 - - 11,941 - - - -Retirementbenefitfund 3,580 - - 3,580 - - - -Total 11,562,585 578,741 634 12,141,960 (373,419 ) 11,733,491 400,002 93%

As at 31 December 2013 Neither past Past due due nor but not Total individually individually Individually Impairment carrying Impaired Coverage

in thousands of pula impaired impaired impaired Total allowance value loans ratio

BalanceswithBankofBotswana 797,339 - - 797,339 - 797,339 - -FinancialInstruments 1,805,160 - -1,805,160 - 1,805,160 - -Tradingportfolioassets 254 - - 254 - 254 - -Balanceswithrelatedcompanies 823,828 - - 823,828 823,828 - -Loansandadvancestobanks 381,923 - - 381,923 - 381,923 - -Derivativefinancialinstruments 18,423 - - 18,423 18,423 Loansandadvancestocustomers 6,968,876 748,571 234 7,717,681 (380,960) 7,336,721 371,028 103%Otherassets 82,347 - - 82,347 - 82,347 - -Currenttaxassets 40,802 - - 40,802 - 40,802 - -Total 10,918,952 748,571 234 11,667,757 (380,960 ) 11,286,797 371,028 103%



99



ii) Maximum exposure to credit risk before collateral held or other credit enhancements Thefollowingtablepresentsthemaximumexposureat31December2013and2012tocreditriskofbalancesheetandoffbalancesheetfinancialinstruments,beforetakingaccountofanycollateralheldorothercreditenhancementsafterallowanceforimpairmentandnettingwhereappropriate.

Forfinancialassetsrecognisedonthebalancesheet,theexposuretocreditriskequalstheircarryingamount.Forfinancialguaranteesgranted,theexposureisthemaximumcommittedfacilitiesbeforeanycollateral.


Financial Assets recognised on the statement of financial position: BalanceswithBankofBotswana 788,834 797,339

Loansandadvancestobanks 578,056 381,923 Loansandadvancestocustomers: Overdrafts 162,629 99,711Mortgages 1,789,680 1,212,356Termloans 4,313,475 4,053,564Creditcard 362,995 337,453Schemeloans 1,360,123 1,490,310Leaseinstalments 143,820 143,327Totalloansandadvancestocustomers 8,132,722 7,336,721 Availableforsalefinancialinstruments–Treasuryandothereligiblebills 1,401,629 1,800,085–Equitysecurities 4,995 4,995–Debtsecurities 80 80Totalavailableforsalefinancialinstruments 1,406,704 1,805,160 Derivativefinancialassets 6,264 18,423 Balanceswithrelatedcompanies 562,482 823,828Tradingportfolioassets 20,201 254Otherassets 238,231 82,347Currenttaxassets 19,529 40,802Deferredtaxassets 11,941 -Retirementbenefitassets 3,580 -Total financial assets recognised on the statement of financial position 11,768,544 11,286,797


100


(iii) Credit exposures relating to off-statement of financial position items Forfinancialguarantees,themaximumexposuretocreditriskisthemaximumamounttheBankwouldhavetopayiftheguaranteewascalledupon.Forloancommitmentsandothercredit-relatedcommitmentsthatareirrevocableoverthelifeoftherespectivefacilities,themaximumexposuretocreditriskisthefullamountofthecommittedfacilities.

(iv) Credit mitigation Thefinancialeffectandformsofcollateralandcreditenhancementsforeachclassoffinancialinstrumentgivingrisetocreditriskaredisclosedinthetabletofollow.TheaccountingpolicyonhowthecollateralimpactstheimpairmentprovisionstobecarriedagainstthefinancialassetbalanceisdescribedfurtherintheBank’sfinancialstatementsaccountingpolicies.(ReferNote19)

TheBankoff-setsassetandliabilityamountsinthestatementoffinancialpositionwheretheabilityandintentiontonetsettleexistsandtheBankhasalegallyenforceablerighttodoso.Amountsdisclosedinthemaximumexposurecategoryarestatednetofthese.Thepercentagecollateralreportediscalculatedbydeterminingthevaluesofavailableunderlyingcollateral,limitedtothecarryingvalueoftherelatedcreditexposurewherealoanispossiblyover-collateralised,anddividingthisvaluebythemaximumexposure,asreported.Thepercentagereportediscalculatedindependentlyofotherformsofcollateralandtheassessmentofimpairmentlossesonloansandadvances. The Bank may also obtain collateral in the form of floating charges over receivables and inventory of corporate and other businesscustomers.Thevalueofthiscollateralvariesfromperiodtoperioddependingonthelevelofreceivablesandinventory.Itisimpracticaltoprovideanestimateoftheamount(fairvalueornominalvalue)ofthiscollateralandthevalueofthiscollateralisnotreported.



Items not recognised on the Statement of Financial Position: Guaranteesandlettersofcreditpledgedascollateralsecurity(Refertonote35) 178,447 166,937Undrawncommitments(Refertonote35) 848,695 805,278Total Items not recognised on the statement of financial position 1,027,142 972,215 Total maximum exposure as at 31 December 2014 12,795,686 12,259,012



101

Collateral includes: -Guaranteesand/orlettersofcreditfromthirdparties; -Physicalcollateralincludinghighlyliquidsecuritiesheldunderreverserepoagreementsandfixedchargesoverproperty;-Cashcollateral.


2014 in thousands of pula Analysis of credit risk exposure mitigation and collateral Gross Guarantees Physical Cash Other Unsecured maximum Credit collateral collateral exposure Insurance and credit derivatives

On-statement of financial position exposure BalanceswithBankofBotswana 788,834 - - - - 788,834FinancialInstruments 1,406,704 - - -535,000 871,704Tradingportfolioassets 20,201 - - - - 20,201Balanceswithrelatedcompanies 562,482 - - - - 562,482Loansandadvancestobanks 578,056 - - - - 578,056Derivativefinancialinstruments 6,264 - - - - 6,264Loansandadvancestocustomers 8,132,722 69,586 1,363,875 2,237 -6,697,024Otherassets 238,231 - - - - 317,231Currenttaxassets 19,529 - - - - 19,529Retirementbenefitassets 64,752 - - - - 64,752Total exposures subject to credit risk 11,817,775 69,586 1,363,875 2,237 535,000 9,926,077

2013 in thousands of pula Analysis of credit risk exposure mitigation and collateral Gross Guarantees Physical Cash Other Unsecured maximum Credit collateral collateral exposure Insurance and credit derivatives

On-statement of financial position exposure BalanceswithBankofBotswana 797,339 - - - - 797,339FinancialInstruments 1,805,160 - - -713,000 1,092,160Tradingportfolioassets 254 - - - - 254Balanceswithrelatedcompanies 823,828 - - - - 823,828Loansandadvancestobanks 381,923 - - - - 381,923Derivativefinancialinstruments 18,423 - - - - 18,423Loansandadvancestocustomers 7,336,721 68,321 1,849,612 2,137 -5,416,651Otherassets 82,347 - - - - 82,347Currenttaxassets 40,802 - - - - 40,802Retirementbenefitassets 2,925 - - - - 2,925Total exposures subject to credit risk 11,289,722 68,321 1,849,612 2,137 713,000 8,656,652


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(v) Concentrations of credit risk Concentrationofcreditriskexistswhenanumberofcounterpartiesarelocatedinageographicalregion,and/orareengagedinsimilaractivitiesand/orhavesimilareconomiccharacteristics such that theirability tomeetcontractualobligations is similarlyaffectedbychangesineconomicorotherconditions.

in thousands of pula 2013 Geographical concentration of risk Botswana South Africa SADC UK Europe Total BalanceswithBankofBotswana 797,339 - - - - 797,339FinancialInstruments 1,805,160 - - - -1,805,160Tradingportfolioassets 254 - - - - 254Balanceswithrelatedcompanies - 80,678 6 743,144 - 823,828Loansandadvancestobanks 381,923 - - - - 381,923Derivativefinancialinstruments 18,423 - - - - 18,423Loansandadvancestocustomers 7,336,721 - - - -7,336,721Otherassets 82,347 - - - - 82,347Currenttaxassets 40,802 - - - - 40,802Retirementbenefitassets 2,925 - - - - 2,925Total exposures subject to credit risk 10,465,894 80,678 6 743,144 -11,289,722 Off-statement of financial position exposure GuaranteesandBonds 166,937 - - - - 166,937Commitments 805,278 - - - - 805,278Total exposures subject to credit risk 972,215 - - - - 972,215

in thousands of pula 2014 Geographical concentration of risk Botswana South Africa SADC UK Europe Total BalanceswithBankofBotswana 788,834 - - - - 788,834FinancialInstruments 1,406,704 - - - -1,406,704Tradingportfolioassets 20,201 20,201Balanceswithrelatedcompanies - 331,974 130 228,404 1,974 562,482Loansandadvancestobanks 578,056 - - - - 578,056Derivativefinancialinstruments 6,264 - - - - 6,264Loansandadvancestocustomers 8,132,722 - - - -8,132,722Otherassets 238,231 - - - - 238,231Currenttaxassets 19,529 - - - - 19,529Retirementbenefitassets 64,752 - - - - 64,752Total exposures subject to credit risk 11,255,293 331,974 130 228,404 1,97411,817,775 Off-statement of financial position exposure GuaranteesandBonds 178,447 - - - - 178,447Commitments 848,695 - - - - 848,695Total exposures subject to credit risk 1,027,142 - - - -1,027,142



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vi) Collateral and other credit enhancements held Financialassetsthatarepastdueorindividuallyassessedasimpairedareatleastpartiallycollateralisedorsubjecttootherformsofcreditenhancementasdescribedabove.Theeffectsofsucharrangementsaretakenintoaccountinthecalculationoftheimpairmentallowanceheldagainstthem. The description and fair value of collateral and other credit enhancements held in respect of financial assets that are past due orindividuallyassessedasimpairedwasasfollows:

Enforcement of collateral

ThecarryingvalueofassetsheldbytheBankasat31stDecember2014asaresultoftheenforcementofcollateralwasasfollows:

Assetssubjecttocollateralisationandcreditenhancementincludecorporatelendingandresidentialmortgageloans.Formostformsofsecurity,thecollateralgivenisvaluedonlyonoriginationorinthecourseofenforcementactions.Inthecaseofcorporatelendingsecuritymaybeintheformoffloatingchargeswherethevalueofthecollateralvarieswiththelevelofassets,suchasinventoryandreceivables,heldbythecustomer.

TheBankdoesnotuseassetsobtainedinitsoperations.Assetsobtainedarenormallysold,generallyatauction,orrealisedinanorderlymannerforthemaximumbenefitoftheBank,theborrowerandtheborrower’sothercreditorsinaccordancewiththerelevantinsolvencyregulations.

in thousands of pula 2014 Fair Value 2013 Fair Value

Natureofassets –Residentialproperty 48,158 83,081–Othercreditenhancements - -Total 48,158 83,081

in thousands of pula 2014 Fair Value 2013 Fair Value

Natureofassets–Mortgages 3,582 1,319–VAF 296 1,045Total 3,878 2,364


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(b) Credit risk (continued)

(vii) Credit quality of financial assets neither past due nor impaired Thequalityoffinancialassetssubjecttocreditrisk,thatwereneitherpastduenorimpaired,basedontheBank’sinternalcreditratings,wasasfollows;

Forthepurposesoftheanalysisofcreditquality,thefollowinginternalmeasuresofcreditqualityhavebeenused:

Financialstatementdescriptionscanbesummarisedasfollows:Strong–thereisaveryhighlikelihoodoftheassetbeingrecoveredinfull.Satisfactory–whilstthereisahighlikelihoodthattheassetwillberecoveredandtherefore,ofnocauseforconcerntotheBank,theassetmaynotbecollateralised,ormayrelatetoretailfacilities,suchascreditcardbalancesandunsecuredloans,whichhavebeenclassifiedassatisfactory,regardlessofthefactthattheoutputofinternalgradingmodelsmayhaveindicatedahigherclassification.Atthelowerendofthisgradetherearecustomersthatarebeingmorecarefullymonitored,forexample,corporatecustomerswhichareindicatingsomeevidenceofsomedeterioration,mortgageswithahighloantovalueratio,andunsecuredretailloansoperatingoutsidenormalproductguidelines.Higher risk–thereisconcernovertheobligor’sabilitytomakepaymentswhendue.However,thesehavenotyetconvertedtoactualdelinquency.Theremayalsobedoubtsovervalueofcollateralorsecurityprovided.However,theborrowerorcounterpartyiscontinuingtomakepaymentswhendueandisexpectedtosettlealloutstandingamountsofprincipalandinterest.

RetailLending Wholesale Default probabiltyof lending GradeFinancialstatementsdescription default probabiltyof defaultStrong 0.0-0.60% 0.0-0.05% 1-3 0.05-0.15% 4-5 0.15-0.30% 6-8 0.30-0.60% 9-11Satisfactory 0.60-10.00% 0.60-2.15% 12-14 2.15-11.35% 15-19Higherrisk 10.00%+ 11.35%+ 20-21



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(vii) Credit quality of financial assets neither past due nor impaired (continued)

2014

in thousands of pula Strong Satisfactory Higher Risk Total Balances with Bank of Botswana 788,834 - - 788,834 Loans and advances to banks 578,056 - - 578,056 Loans and advances to customers: Overdrafts 51,457 2,683 14,446 68,586Mortgages - 1,602,956 79,248 1,682,204Termloans 2,389,147 962,239 684,869 4,036,255Creditcardreceivables 366,290 8,866 55,950 431,106Schemeloans 1,482,951 - 84,341 1,567,292Leaseinstalments 129,882 3,767 7,671 141,320Total loans and advances to customers 4,419,727 2,580,511 926,525 7,926,763 Available for sale financial instruments: Treasurybillsandothereligiblebills 1,401,629 - - 1,401,629Equitysecurities 4,995 - - 4,995Debtsecurities 80 - - 80Total available for sale financial instruments 1,406,704 - - 1,406,704 Derivative financial instruments 6,264 - - 6,264 Balanceswithrelatedcompanies 562,482 - - 562,482Otherassets 238,231 - - 238,231 Total financial assets subject to credit riskneither past due nor impaired 8,000,298 2,580,511 926,525 11,507,334


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(viii) Credit quality of financial assets neither past due nor impaired

Thequalityoffinancialassetssubjecttocreditrisk,thatwereneitherpastduenorimpaired,basedontheBank’sinternalcreditratings,wasasfollows;

2013

inthousandsofpula Strong Satisfactory Higher Risk Total Cash and Balances with Bank of Botswana 797,339 - - 797,339 Loans and advances to banks 381,923 - - 381,923 Loans and advances to customers: Overdrafts 12,331 10,509 12,988 35,828Mortgages 336,107 811,120 74,980 1,222,207Termloans 2,045,486 1,318,699 574,975 3,939,160Creditcardreceivables 267,962 7,196 47,895 323,053Schemeloans 1,245,777 554 77,661 1,323,992Leaseinstalments 102,069 6,716 15,851 124,636Total loans and advances to customers 4,009,732 2,154,794 804,350 6,968,876 Available for sale financial instruments: Treasurybillsandothereligiblebills 1,800,085 - - 1,800,085Equitysecurities 4,995 - - 4,995Debtsecurities 80 - - 80Total available for sale financial instruments 1,805,160 - - 1,805,160 Derivative financial instruments 18,423 - - 18,423 Balanceswithrelatedcompanies 823,828 - - 823,828Otherassets 151,836 - - 151,836 Total financial assets subject to credit riskneither past due nor impaired 7,988,241 2,154,794 804,350 10,947,385

(ix) Financial assets renegotiated CertainoftheBank’sfinancialassetswouldhavebeenpastdueiftheirtermshadnotbeenrenegotiated. Restructuringactivitiesincludeextendedpaymentarrangements,approvedexternalmanagementplans,modificationanddeferralofpayments.Followingrestructuring,apreviouslyoverduecustomeraccountisresettoanormalstatusandmanagedtogetherwithothersimilaraccounts. Restructuring policies and practices are based on indicators or criteria which, in the judgment of local management, indicate thatpaymentwillmostlikelycontinue.Thesepoliciesarekeptundercontinuousreview.Restructuringismostcommonlyappliedtotermloans,inparticularcustomerfinanceloans.At31stDecember2014,therewerenosuchassets.



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(x) Financial assets that are past due but not individually impaired

(xi) Impaired financial assets Thiscategorycomprises loanswherean individual impairmentallowancehasbeen raised.Thiscategoryalsocomprises retail loanswhichareintheRecovery/LegalBook,i.e.charged-offandsonormallymorethan90dayspastdueonloansand180daysoncards.Financialassetsassessedasimpairedareasfollows:

2013

in thousands of pula Past due 1 Past due 1-2 Past due 2-3 Past due >3 Total month months months months

Loans and advances to customers: Overdrafts 2,877 396 416 7,935 11,624Mortgages 51,262 9,249 7,257 29,974 97,742Termloans 185,052 36,247 29,210 241,975 492,484Creditcardreceivables 8,349 3,281 2,687 35,346 49,663Schemeloans 13,888 8,493 6,407 48,868 77,656Leaseinstalments 3,729 1,333 658 13,682 19,402Total loans and advances to customers 265,157 58,999 46,635 377,780 748,571 As at 31st December 265,157 58,999 46,635 377,780 748,571

2014

in thousands of pula Past due 1 Past due 1-2 Past due 2-3 Past due >3 Total month months months months

Loans and advances to customers: Overdrafts 3,261 732 104 11,123 15,220Mortgages 16,668 7,323 7,071 39,730 70,792Termloans 47,513 23,935 15,408 246,299 333,155Creditcardreceivables 9,664 5,944 3,589 45,543 64,740Schemeloans 15,545 8,049 3,977 55,568 83,139Leaseinstalments 3,549 1,579 737 5,830 11,695Total loans and advances to customers 96,200 47,562 30,886 404,093 578,741 As at 31st December 96,200 47,562 30,886 404,093 578,741

Original Impairment Revised Original Impairment Revised carrying allowance carrying allowance amount amount amount amount Loans and advances to customers: Termloans 634 (634) - 234 (234) -Total loans and advances to customers 634 (634) - 234 (234) - Total financial assets individually assessed as impaired 634 (634) - 234 (234) -Financial assets collectively assessed as impaired 399,368 (319,106) 80,262 370,794 (299,833) 70,961 Total impaired financial assets 400,002 (319,741) 80,262 371,028 (300,067) 70,961



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(xi) Impaired financial assets (continued)

Financialassetsincludingassessedasimpairedisasfollows:

(c) Liquidity risk

Exposure to liquidity risk

Introduction Liquidity riskistheriskthattheBankisunabletomeetitspaymentobligationswhentheyfalldueandtoreplacefundswhentheyarewithdrawn.Theconsequencesofthismaybethefailuretomeetobligationstorepaydepositorsandtofulfilcommitmentstolend.Liquidityrisk,moregenerally,istheriskthattheBankwillbeunabletocontinueoperatingasagoingconcernduetoalackoffunding.Liquidityriskisinherentinallbankingoperations.Confidenceintheorganisation,andhenceliquidity,canbeaffectedbyarangeofinstitutionspecificandmarket-wideevents including,butnot limitedto,marketrumours,creditevents,paymentsystemdisruptions,systemicshocks,terroristattacksandevennaturaldisasters.Theappropriateandefficientmanagementofliquidityriskbybanksisofutmostimportanceinmaintainingconfidenceinthefinancialmarketsandinensuringthatbankspursuesustainablebusinessmodels. Strategy TheBank’sliquidityriskmanagementobjectivesare: - growinganddiversifyingthefundingbasetosupportassetgrowthandotherstrategicinitiatives;

2013

in thousands of pula At beginning of Amounts Recoveries Amounts Balance at year written of charged to 31st December profit

Loans and advances to customers: Overdrafts - - - - -Termloans 234 - - - 234Leaseinstalments - - - - -Total loans and advances to customers 234 - - - 234 Total impairment allowance 234 - - - 234

2014

in thousands of pula At beginning of Amounts Recoveries Amounts Balance at year written of charged to 31st December profit

Loans and advances to customers: Overdrafts - - - - -Termloans 234 (234) - 634 634Leaseinstalments - - - - -Total loans and advances to customers 234 (234) - 634 634 Total impairment allowance 234 (234) - 634 634



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(c) Liquidity risk (continued)

Exposure to liquidity risk (continued)

Strategy (continued)

- lengtheningtheBank’sfundingprofileinordertoimprovekeyliquiditymetrics,therebyreducingtheBank’sliquidityriskexposure;- managingtheweightedaveragecostoffunding. Approach TheBank’sliquidityriskpositionismanagedinlinewiththeboard-approvedliquidityriskappetite.TreasuryisresponsibleforimplementingtheliquidityriskframeworkandpolicyandforensuringthatliquidityriskisadequatelymanagedacrosstheBank.TreasuryalsomonitorsandmanagestheBank’sliquiditypositiontoensurefullregulatorycomplianceinrespectofliquidityriskmanagementandreporting.Aspartofthisprocess,Treasurytakesthecontractualandbusiness-as-usualliquiditypositions,aswellasthestresstestedliquiditypositionintoconsideration. Business-as-usual liquidity managementBusiness-as-usualliquidityriskmanagementreferstothemanagementofthecashinflowsandoutflowsofthebankintheordinarycourseofbusiness.Thebusiness-as-usualenvironmenttendstodisplayfairlyhighprobability,lowseverityliquidityeventsandinvolvesbalancingtheBank’sday-to-daycashneeds.Treasury’sapproachtomanagingbusiness-as-usualliquidityfocusesonthefollowingkeyareas: - managingnetanticipatedcashflows(betweenassetsandliabilities) - activedailymanagementofthefundingandliquidityprofile,takingtheboard-approvedliquidityriskmetricsintoconsideration. ThesemetricsweredesignedtoensurecompliancewiththeBank’sbusiness-as-usualliquidityrisktoleranceandtopositionthe Banktodealwithstressedliquidityevents; - maintainingaportfolioofhighlyliquidassetsasabufferagainstanyunforeseeninterruptiontocashflow; - participatinginlocalmoneyandcapitalmarketstosupporttheday-to-dayfundingrequirementssuchasrefinancingmaturities, meetingcustomerwithdrawalsandsupportinggrowthinadvances. - monitoringandmanagingliquiditycosts;and - conductinganon-goingassessmentofthevariousfundingsourcesinordertogrowanddiversifytheBank’sfundingbaseand achieveanoptimalfundingprofile.

Key risk metrics used in business -as -usual liquidity management

Risk metric Purpose of metric Short-,medium-andlong-term Providesameasureofthecontractualtermofthefundingused.Forexample,fundingratios thelong-termfundingratioshowstheproportionoftotalfundingthathasa remainingcontractualterminexcessofsixmonths. Interbankfundingratio Providesanindicationoftheextenttowhichrelianceisplacedonfunding fromotherbanks. Short-termmaturitycashflow Providesameasureoftheextenttowhichcashflowmismatchesoccurinthemismatches(atacontractualand shortterm(i.e.lessthanonemonth).behaviourallevel) Cashoutflowlimits Measuresexpectedcashoutflowsagainstpredeterminedlimits. Concentrationofdeposits Providesameasureoftheextenttowhichrelianceisplacedonfundingfrom certaincustomersormarketsectors.


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(c) Liquidity risk (continued)

Exposure to liquidity risk (continued)

Stress liquidity risk managementStress liquidity riskmanagement refers to themanagementof liquidity riskduringtimesofunexpectedoutflowsarising fromBankspecificorsystemicstressevents.TreasuryregularlyperformsliquidityscenarioanalysesandstressteststoassesstheadequacyoftheBank’sstressfundingsources,liquiditybuffersandcontingencyfundingstrategiesintheeventofsuchastressedscenario.Scenarioanalysisandstresstestingencompassesarangeofrealisticadverseeventswhich,whileremote,couldhaveamaterialimpactontheliquidityoftheBank’soperations.

Throughscenarioanalysisandstresstesting,theBankaimstomanageandmitigateliquidityriskby:- determining,evaluatingandtestingtheimpactofadverseliquidityscenarios;- identifyingappropriaterapidandeffectiveresponsestoacrisis;and- settingliquiditylimits,sourcesofstressfundingandliquiditybuffersaswellasformulatingafundingstrategydesignedtominimise liquidityrisk.

TheBank’soverallobjectiveistoensurethatduringaliquiditystressevent,theBank’sstressfundingsourcesandliquiditybuffersexceedtheestimatedstressfundingrequirementsforaperiodofatleast30days.Stresstestingandscenarioanalysisareusedtoevaluatetheefficiencyofidentifiedsourcesofstressfundingalongacontinuumofriskscenariosandtoformulateandtestcontingencyplans.Adetailedcontingentfundingandliquidityplanhasbeendesignedtoprotectdepositors,creditorsandshareholdersduringadverseliquidityconditions.Theplanincludesearlywarningindicatorsandsetsoutthecrisisresponsestrategyaddressingsourcesofstressfunding,strategiesforcrisisavoidance/minimisationandtheinternalandexternalcommunicationstrategy.Liquiditysimulationexercisesareconductedregularlytotesttherobustnessoftheplanandtoensurethatkeystakeholdersremainuptodateonliquiditymatters. ThekeymeasureusedbytheBankformanagingliquidityriskistheratioofnetliquidassetstodepositsfromcustomers.Tomonitorthepercentageoflong-termassetsmaturingafter1yearasapercentageoftotal liabilities,amediumtermmismatchratioforbothforeigncurrencyandlocalcurrencyisperformedindividually.Netliquidassetsareconsideredasincludingcashandcashequivalentsandinvestmentgradedebtsecuritiesforwhichthereisanactiveandliquidmarketlessanydepositsfrombanks,debtsecuritiesissued,otherborrowingsandcommitmentsmaturingwithinthenextmonth.Asimilar,butnotidentical,calculationisusedtomeasuretheBank’scompliancewiththeliquiditylimitestablishedbytheBank’sleadregulator,theBankofBotswana.Primaryreserveheldis5%ofnetlocalcurrencydepositsandliquidassetratiois10%ofnetlocalcurrencydeposits.DetailsofthereportedBankratioofnetliquidassetstodepositsandcustomersatthereportingdateandduringthereportingperiodwereasfollows:



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Thetablebelowshowstheresidualcontractualmaturitiesoffinancialliabilities.Thefinancialliabilitiesarereflectedatanundiscountedfuturecashflowsbasedoncontractualobligations.

Less than 1 - 3 3 - 12 1 - 5 Over 5

in thousands of pula 1 month months months years years Total At 31 December 2014 Liabilities Depositsfrombanks 687,256 - - - - 687,256Balanceswithrelatedcompanies 172,952 76,045 - - - 248,997Derivativefinancialinstruments 324,683 - - - - 324,683Depositsduetocustomers 7,431,753 779,616 733,261 77,486 - 9,022,116Otherliabilities 187,797 - - - - 187,797Provisions 46,119 - - - - 46,119Currenttaxliabilities 51,551 - - - - 51,551Debtsecuritiesinissue 7,548 769 244,765 362,891 - 615,973Undrawnloancommitments 848,695 - - - - 848,695

Total liabilities 9,758,354 856,430 978,026 440,377 -12,033,187

At 31 December 2013 Liabilities Depositsfrombanks 7,636 - - - - 7,636Depositsduetocustomers 7,330,570 338,441 1,350,923 521,820 - 9,541,754Derivativefinancialinstruments - 28,446 - - - 28,446Balanceswithrelatedcompanies 118,548 70,119 - - - 188,667Otherliabilities 268,267 - - - - 268,267Provisions 34,572 - - - - 34,572Deferredtaxliabilities 16,463 - - - - 16,463Debtsecuritiesinissue - 5,338 339,001 210,963 - 555,301Undrawnloancommitments 805,278 - - - - 805,278 Total liabilities 8,581,334 442,344 1,689,924 732,783 -11,446,384


Ratio of medium term mismatch:


2014 2013 2014 2013

At 31 December Foreigncurrency 22.35% 21.89% 22.35% 21.89%Localcurrency 45.56% 44.11% 45.56% 44.11%Average for the period Foreigncurrency 25.97% 22.35% 25.97% 22.35%Localcurrency 44.24% 36.88% 44.24% 36.88%Maximum for the period Foreigncurrency 29.42% 26.96% 29.42% 26.96%Localcurrency 46.14% 44.11% 46.14% 44.11%Minimum for the period Foreigncurrency 43.30% 18.82% 43.30% 18.82%Localcurrency 19.58% 31.70% 19.58% 31.70%

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(d) Market risk

TheBanktakesonexposuretomarketrisk.Marketriskarisesfromopenpositionsininterestrate,currencyandequityproducts,allofwhichareexposedtogeneralandspecificmarketmovements.TheBankappliesthevalueatriskmethodologytoestimatethemarketriskofpositionsheldandthemaximumlossesexpected,baseduponanumberofassumptionsforvariouschangesinmarketconditions.TheBoardofDirectorssetslimitsonthevalueofriskthatmaybeaccepted,whichismonitoreddaily. Management of market risksOverall authority for market risk is vested with the Bank’s Assets and Liabilities Committee (‘’ALCO’’). ALCO is responsible for thedevelopmentofdetailedriskmanagementpolicies(subjecttoreviewandapprovalbyBankMarketRisk)andfortheday-to-dayreviewoftheirimplementation. Market risk measurement Thetechniquesusedtomeasureandcontrolmarketriskinclude:•Dailyvalueatrisk•Stresstests•Stoploss

Daily value at risk (Dvar) Dvarisanestimateofthepotentiallosswhichmightarisefromunfavourablemarketmovements,ifthecurrentpositionsweretobeheldunchangedforonebusinessday.Dvariscalculatedusingthehistoricalsimulationmethodwithahistoricalsampleoftwoyears. In 2010, the confidence level was changed from 98% to 95% as an increasing incidence of significant market movements madetheexistingmeasuremorevolatileandlesseffectiveforriskmanagementpurposes.Switchingto95%madeDvarmorestableandconsequentlyimprovedmanagement,transparencyandcontrolofthemarketriskprofile. Stress tests Stresstestsprovideanindicationofthepotentialsizeofthelossesthatcouldariseinextremeconditions.Ifthepotentiallossesexceedthetriggerlimit,thepositionscapturedbythestresstestarereviewedbyALCO.Stop loss Astoplosspolicyhasbeeninstitutedincorporatinga‘managementtriggerlevel’atUSD100,000.Ifthistriggerlevelisreachedthenallopenpositionsmustbeclosedimmediatelysoastoprotectthebankagainstanyfurtherexchangeratelosses.



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Thehigh(andlow)Dvarfiguresreportedforeachcategorydidnotnecessarilyoccuronthesamedayasthehigh(andlow)Dvarreportedasawhole. ThemanagementofinterestrateriskagainstinterestrategaplimitsissupplementedbymonitoringthesensitivityoftheBank’sfinancialassetsandliabilitiestovariousstandardandnon-standardinterestratescenarios.Standardscenariosthatareconsideredonamonthlybasisincludea100basispoint(bps)parallelfallorriseinallyieldcurvesworldwideanda50bpsriseorfallinthegreaterthan12-monthportionofallyieldcurves.AnanalysisoftheBank’ssensitivityshowinganincreaseordecreaseinprofitstoanincreaseordecreaseinmarketinterestrates(assumingnoasymmetricalmovementinyieldcurvesandaconstantstatementoffinancialposition)isasfollows:

Analysis of trading market risk exposures ThetablebelowshowstheDvarstatisticsfor2013

12 months to 31 December 2014

in thousands of pula Average High Low

Interestraterisk 32,232 39,980 18,678Foreigncurrencyrisk 480 959 79 32,712 40,939 18,756

12 months to 31 December 2013

in thousands of pula Average High Low

Interestraterisk 20,946 32,247 2,472Foreigncurrencyrisk 231 1,081 29

21,177 33,328 2,501


100 bp parallel 100 bp parallel 50 bp increase 50 bp decrease

in thousands of pula increase decrease after 1 year after 1 year

2014 At31December (6,031) 6,031 (3,016) 3,016Averagefortheperiod (11,010) 11,010 (5,505) 5,505 (16,083) 16,083 (8,041) 8,0412013 At31December (11,703) 11,703 (5,851) 5,851Averagefortheperiod (9,322) 9,322 (4,661) 4,661Maximumfortheperiod (12,288) 12,288 (6,144) 6,144Minimumfortheperiod (5,473) 5,473 (2,737) 2,737

Overallnon-tradinginterestrateriskpositionsaremanagedbyTreasury,whichusesinvestmentsecurities,advancestobanks,depositsfrombanksandderivativeinstrumentstomanagetheoverallpositionarisingfromtheBank’snon-tradingactivities.


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(e) Interest rate risk Fairvalueinterestrateriskistheriskthatthevalueofafinancialinstrumentwillfluctuatebecauseofchangesinmarketinterestrates.TheBanktakesonexposuretotheeffectsoffluctuationsintheprevailinglevelsofmarketinterestratesonbothitsfairvalueandcashflowrisks. Interestmarginsmay increaseasaresultofsuchchangesbutmayreduceorcreate losses intheeventthatunexpectedmovementsarise.TheBoardsetslimitsonthelevelofmismatchofinterestratere-pricingthatmaybeundertaken,whichismonitoredbytheTreasurydivisionatleastmonthlythroughALCO.

Interest rates Interest rates Interest rates Average Low* High*

Assets: Loans and advances to banks: BWP 3.12% 4.20% 3.05%USD 0.12% 0.02% 0.08%ZAR 4.50% 4.50% 4.50%Bank of Botswana certificates 14day 3.04% 3.08% 2.97%91day 3.24% 3.45% 3.17%Loans and advances: Corporate 9.58% 36.00% 6.00%Retail 19.75% 49.00% 0.00%Staff 6.55% 40.00% 0.00%Balances with related companies: USD 0.16% 0.18% 0.16%ZAR 5.45% 5.62% 5.40%

Liabilities: Deposits due to customers: Corporate 4.40% 10.35% 0.38%Retail 4.40% 10.00% 0.50%Staff 4.28% 5.20% 4.00%Deposits from banks: BWP 3.24% 8.00% 3.05%USD 0.09% 0.12% 0.05%Balances with related companies USD 0.26% 0.26% 0.26% Mediumtermnotes 6.83% 8.00% 5.65%Floatingratenotes 6.38% 6.75% 6.00%

*Rangeofinterestratesforeachclassofasset/liability



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(e) Interest rate risk

Exposure to interest rate risk – non-trading portfolios

Theprincipalrisktowhichnon-tradingportfoliosareexposedistheriskoflossfromfluctuationsinthefuturecashflowsorfairvaluesoffinancialinstrumentbecauseofachangeinmarketinterestrates.Interestrateriskismanagedprincipallythroughmonitoringinterestrategapsandbyhavingpre-approvedlimitsforrepricingbands.TheALCOisthemonitoringbodyforcompliancewiththeselimitsandisassistedbyRiskManagementinitsday-to-daymonitoringactivities.AsummaryoftheBank’sinterestrategappositiononnon-tradingportfoliosisasfollows:

Non- Less than 1 - 3 3 - 12 1 - 5 Over 5 interest

in thousands of pula 1 month months months years years bearing Total

At 31 December 2013 Assets Cash - - - - - 297,388 297,388BalanceswiththeBankofBotswana - - - - - 788,834 788,834Financialinstruments 944,990 461,714 - - - -1,406,704Tradingportfolioassets 20,201 - - - - - 20,201Balanceswithrelatedcompanies 562,482 - - - - - 562,482Loansandadvancestobanks 578,056 - - - - - 578,056Derivativefinancialinstruments - - - - - 6,264 6,264Financialassetsdesignatedatfairvalue - - - - - - -Loansandadvancestocustomers 453,436 127,572 93,564 4,075,048 3,383,103 - 8,132,722Otherassets - - - - - 238,231 238,231Currenttaxassets - - - - - 19,529 19,529Deferredtaxassets - - - - - 11,941 11,941Intangibleassets - - - - - 22,673 22,673Propertyandequipment - - - - - 159,955 159,955Retirementbenefitfund - - - - - 3,580 3,580Total assets 2,559,165 589,286 93,564 4,075,048 3,383,103 1,548,39512,248,560 Liabilities Depositsfrombanks 687,256 - - - - - 687,256Balanceswithrelatedcompanies 125,423 - 47,528 76,046 - - 248,997Derivativefinancialinstruments - - - - - 13,921 13,921Depositsduetocustomers 5,358,215 779,616 733,261 77,486 - 2,071,843 9,020,421Otherliabilities - - - - - 187,797 187,797Provisions - - - - - 46,119 46,119Currenttaxliabilities - - - - - 51,551 51,551Deferredtaxliabilities - - - - - 11,941 11,941Debtsecuritiesinissue - - 222,863 300,000 - - 522,863Retirementbenefitliabilities - - - - - - -Total liabilities 6,170,894 779,6161,003,652 453,532 - 2,383,17210,790,866 Total interest sensitivity gap (3,611,729) (190,330) (910,088) 3,621,516 3,383,103 (834,777) 1,457,694


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(e) Interest rate risk (continued)

Exposure to interest rate risk – non-trading portfolios (continued)

Non- Less than 1 - 3 3 - 12 1 - 5 Over 5 interest

in thousands of pula 1 month months months years years bearing Total

At 31 December 2013 Assets Cash - - - - - 227,941 227,941BalanceswiththeBankofBotswana 28,965 - - - - 768,374 797,339Financialinstruments - - - - - 18,423 18,423Tradingportfolioassets - - - - - 69,235 69,235Balanceswithrelatedcompanies - - - - - 82,347 82,347Loansandadvancestobanks 822,698 1,130 - - - - 823,828Derivativefinancialinstruments 254 - - - - - 254Financialassetsdesignatedatfairvalue 1,240,122 560,043 - - - 4,995 1,805,160Loansandadvancestocustomers 256,567 272,267 634,907 3,154,900 3,399,040 - 7,717,681Otherassets 381,923 - - - - - 381,923Currenttaxassets - - - - - 99,749 99,749Intangibleassets - - - - - 34,895 34,895Propertyandequipment - - - - - 40,802 40,802Total assets 2,730,529 833,440 634,907 3,154,900 3,399,040 1,346,76112,099,577 Liabilities Depositsfrombanks 7,636 - - - - - 7,636Balanceswithrelatedcompanies 188,667 - - - - - 188,667Derivativefinancialinstruments - - - - - 28,446 28,446Depositsduetocustomers 7,311,094 299,4891,175,638 495,462 - -9,281,683Otherliabilities - - - - - 240,683 240,683Provisions - - - - - 34,572 34,572Debtsecuritiesinissue - - 313,121 190,000 - - 503,121Deferredtaxliabilities - - - - - 16,463 16,463Retirementbenefitliabilities - - - - 17,646 - 17,646Total liabilities 7,507,397 299,4891,488,759 685,462 17,646 320,164 10,318,917 Total interest sensitivity gap (4,776,868) 533,951 (853,852) 2,469,438 3,381,394 1,026,597 1,780,660



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(f ) Hedge accounting

TheBankusesinterestrateswapsandforeignexchangecontractstohedgeitsexposuretochangesinexchangeratesandinterestrates.TheBankhasenteredintoahedgingrelationshipwithBarclaysPLC.

TheobjectiveofthishedgingrelationshipistohedgetheriskofmovementsintheUSDLiborindex.TheBankhasissuedafixedrateforeigncurrencyloantooneofitsCorporateclientsandthisexposesittothemovementsintheUSDLiborindex.ThereareotherinherentrisksthattheBankisexposedtoasaresultofthisloan,likeforeignexchangeratemovements,thatarenothedgedinthisrelationship.ThehedginginstrumentisapayfixedratereceivevariableinterestrateswapwithBarclaysPLC. Duringtheyear,P463,784(2013:P192,111)wasrecognisedinthestatementofcomprehensiveincomeashedgeineffectiveness. Thefairvalueofthehedgeasat31December2014isasfollows;

(g) Foreign currency risk

TheBanktakesonexposuretoeffectsoffluctuationsintheprevailingforeigncurrencyexchangeratesonitsfinancialpositionandcashflows.AsaresultoftheBank’snetexposuretostatementoffinancialpositionassetsandliabilitiesdenominatedinforeigncurrencyattheyearend,foreignexchangetranslationgains/(losses)fortheperiodwouldhavebeenP12millionnetexposureinPulabasedonspecificvolatilitiesperforeigncurrenciestowhichthestatementoffinancialpositionwasexposedat31December2014. TreasurymanagesforeignexchangeexposuresinlinewithALCOandBarclaysBankmarketriskguidelines.Typically,allcurrenciesotherthanUSDollararefullymatchedwithopentradingpositionsbeingtakenontheUSDollaruptoamaximumopenpositionatUS$19millionatanytime. TheBankconductsitsforeigncurrencyoperationsinaccordancewithguidelinesperiodicallyreceivedfromitsregulatorBankofBotswana.ThecurrentintradaylimitissetatUS$19millionandtheovernightlimitisUS$17million.Theselimitswereadheredtothroughouttheyear. ThemaximumlimitallowedbytheBankofBotswanafortheoverallforeignexchangeriskpositionis30%ofthebank’sunimpairedcapital.ForUSD,ZAR,GBPandEUR,theprescribedlimitis15%ofunimpairedcapital,percurrency.Forallothercurrencies,theprescribedlimitisrestrictedtonomorethan5%ofunimpairedcapitalpercurrency.Nobankmayexceeditsintra-dayoverallforeignexchangepositionbymorethan5%oftheoveralllimit,withoutpriorapprovaloftheBankofBotswana.Theoverallforeignexchangeexposureshallbethegreaterofthesumofthedomesticcurrencyequivalentofallnetshortorlongpositionsincurrenciesinwhichthebankhasaposition.

Thebankassessesthehedginginstrumentseffectivenessinoff-settingtheexposuretochangesinthehedgeditems’fairvaluebyundertakingbothprospectiveandretrospectivetestingeverythreemonths.Thetestisconsideredtobepassediftheratiosarewithin80%to125%.

in thousands of pula 2014 2013 Fairvalueofinterestrateswapassets 11,689 11,218Fairvalueofinterestrateswapliabilities (11,648) (11,184)Netfairvalueofinterestraterisk 42 34 Notionalamount 71,811 70,470


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(h) Operational risks

OperationalriskistheriskofdirectorindirectlossarisingfromawidevarietyofcausesassociatedwiththeBank’sprocesses,personnel,technologyandinfrastructure,andfromexternalfactorsotherthancredit,marketandliquidityriskssuchasthosearisingfromlegalandregulatoryrequirementsandgenerallyacceptedstandardsofcorporatebehaviour.OperationalrisksarisefromalloftheBank’soperationsandarefacedbyallbusinessentities. TheBank’sobjectiveistomanageoperationalrisksoastobalancetheavoidanceoffinanciallossesanddamagetotheBank’sreputationwithoverallcosteffectivenessandtoavoidcontrolproceduresthatrestrictinitiativeandcreativity. Theprimaryresponsibilityforthedevelopmentandimplementationofcontrolstoaddressoperationalriskisassignedtoseniormanagementwithin each business unit. This responsibility is supported by the development of overall Group standards for the management ofoperationalriskinthefollowingareas:requirementsforappropriatesegregationofduties,includingtheindependentauthorisationoftransactions• requirementsforthereconciliationandmonitoringoftransactions• compliancewithregulatoryandotherlegalrequirements• documentationofcontrolsandprocedures• requirementsfortheperiodicassessmentofoperationalrisksfaced,andtheadequacyofcontrolsandprocedurestoaddressthe risksidentified• requirementsforthereportingofoperationallossesandproposedremedialaction• developmentofcontingencyplans• trainingandprofessionaldevelopment• ethicalandbusinessstandards• riskmitigation,includinginsurancewherethisiseffective.” CompliancewithGroupstandardsissupportedbyaprogrammeofperiodicreviewsundertakenbyInternalAudit.TheresultsofInternalAuditreviewsarediscussedwiththemanagementofthebusinessunittowhichtheyrelate,withsummariessubmittedtotheAuditCommitteeandseniormanagementoftheBank. TheBank’soperationalriskismonitoredbytheRiskandControlCommitteeandtheAuditCommittee.

(i) Capital management Capital ratios CapitaladequacyandtheuseofregulatorycapitalaremonitoredbytheBank,applyingtechniquesbasedontheguidelinesdevelopedbytheBaselCommitteeonBankingRegulationsandSupervisoryPractices(BaselCommittee)andEuropeanCommunityDirectives,asimplementedbytheBankofBotswanaforsupervisorypurposes. Thesetechniquesincludetheriskassetratio,whichtheBankofBotswanaregardsasakeysupervisorytool.TheBankofBotswanahassettheindividualminimumratiorequirementsforbanksinBotswanaat15%whichisabovetheBaselCommitteeminimumguidelineof8%.Theratiocalculationinvolvestheapplicationofdesignatedriskweightingstoreflectanestimateofcredit,marketandotherriskassociatedwithbroadcategoriesoftransactionsandcounterparties. Theconceptofriskweighting,asappliedtobankingactivities,assumesthatsuchactivitiesgenerallyincludesomeriskofloss.Forriskweightingpurposes,commercial lendingaretakenasabenchmarktowhichariskweightingof100%isascribed.Othertransactionsconsideredtogeneratelowerlevelsofriskthancommerciallendingmayqualifyforreducedweightings.Off-statementoffinancialpositionitemsareconvertedtocreditriskequivalentsbyapplyingcreditconversionfactorslaiddownbytheBaselCommittee,asimplementedby



119


theBankofBotswana.Theresultantamountsarethenriskweightedaccordingtothenatureofthecounterparty. Regulatoryguidelinesdefinetwotiersofcapitalresources:Tier1(core)capital,comprisingmainlyshareholders’funds, isthehighesttier.Tier2capitalincludesperpetual,mediumandlongtermsubordinateddebt,generalprovisionsforbadanddoubtfuldebtsaswellaspropertyandequipmentrevaluationreserves.BothtierscanbeusedtomeettradingandbankingactivityrequirementsalthoughTier2capital,includedintheriskassetratiocalculation,maynotexceedTier1capital. The Bank and its individually regulated operations have complied with all externally imposed capital requirements throughout theperiod. TherehavebeennomaterialchangesintheBank’smanagementofcapitalduringtheperiod. TheBank’sregulatorycapitalpositionat31Decemberwasasfollows:



Core capital Statedcapital 8,522 8,522 8,522 8,522Sharepremium 8,586 8,586 8,586 8,586Sharecapitalreserve 2,060 2,060 2,060 2,060Generalriskreserve 81,237 60,923 81,237 60,923Retainedearnings 1,320,635 1,187,429 1,321,818 1,204,847Total core capital (Tier 1) 1,421,040 1,267,520 1,422,223 1,284,938 Secondary capital Subordinatedredeemabledebt 6,500 40,667 6,500 40,667Unencumberedgeneralprovisions 18,280 22,659 18,280 22,659Total secondary capital (Tier 2) 24,780 63,326 24,780 63,326 Total regulatory capital 1,445,820 1,330,846 1,447,003 1,348,264 Risk weighted assets Totalriskweightedassets 7,865,659 7,074,437 7,865,659 7,074,437 Tier1(orcore)capitalratio(BaselCommitteeguide:minimum4%) 18.1% 17.9% 18.1% 18.2%Riskassetratio(BaselCommitteeguide:minimum8%) 18.4% 18.8% 18.4% 19.1%BankofBotswanapreferredminimumriskassetratio 15.0% 15.0% 15.0% 15.0%


120

Shareholders Information

2014 2013

BARCLAYSAFRICAGROUPLIMITED 577,964,146 67.82% 577,964,146 67.82%FNBBWNOMS(PTY)LTDRE:IAMBPOPFP10001031 34,789,430 4.08% 34,679,470 4.07%FNBNOMSBW(PTY)LTDRE:BIFMBPOPFACTIVEMEMBER 34,316,418 4.03% 34,316,418 4.03%FNBNOMSBW(PTY)LTDRE:FAMBPOPF1-10001028 28,849,222 3.39% 28,930,291 3.39%STANBICNOMINEESRE:BIFM 24,945,341 2.93% 24,884,816 2.92%MOTORVEHICLEACCIDENTFUND 23,736,440 2.79% 23,736,440 2.79%FNBNOMINEES(PTY)LTDRE:SIMSBPOPF10001009 13,022,383 1.53% 13,022,383 1.53%FNBNOMSBW(PTY)LTDRE:BIFMBPOPLFWP10001027 9,904,181 1.16% 9,904,181 1.16%SCBN{PTY}LTDRE:IAM203/001 8,270,009 0.97% 8,270,009 0.97%SCBN(PTY)LTDRE:BIFMDPF 7,701,549 0.90% 6,831,984 0.80%FNBNOMINEES(PTY)LTDRE:AGRAYBPOPF10001010 7,233,133 0.85% 4,276,398 0.78%FNBNOMSBW(PTY)LTDRE:FAMBPOPF3-10001030 6,641,015 0.78% 6,641,015 0.50%SCBN(PTY)LTDRE:IAM030/30 4,102,598 0.48% 3,753,266 0.44%STANBICNOMINEESBOTSWANARE:IBMF 3,219,729 0.38% 3,559,470 0.42%FNBNOMINEESBOTSWANA(PTY)LTDRE:SIMSBBDCSPF 2,308,318 0.27% 2,308,318 0.35%BOTSWANAMEDICALAIDSOCIETY 1,590,000 0.19% 1,590,000 0.28%SCBN(PTY)LTDRE:IAM030/40 1,574,918 0.18% 1,469,200 0.27%SCBN(PTY)LTDRE:JPMBW000001037-2 1,433,487 0.17% 1,573,487 0.19%SCBN(PTY)LTDRE:IAM3292505 1,358,446 0.16% 1,358,446 0.18%STANBICNOMINEESRE:BIFMBLAF 1,335,331 0.16% 1,335,331 0.17%SCBN(PTY)LTDRE:SSB001/81 1,308,506 0.15% 1,308,506 0.16%SCBN(PTY)LTDRE:IAM030/27 1,172,769 0.14% - 0.16%FNBNOMINEES(PTY)LTDRE:CFMBPOPF10001011 - 0.00% 2,956,735 0.15%SCBN(PTY)LTDRE:SSB001/77 - 0.00% 2,425,925 0.00%Other 55,383,881 6.50% 55,065,015 6.46%TOTAL 852,161,250 100% 852,161,250 100%



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Value Added StatementFor the year ended 31 December 2014

Consolidated

2014 2013

Valuecreated Incomefromservices 1,473,092 1,519,491Costofservices (197,913) (245,200)Valuecreatedbyoperations 1,275,179 1,274,291Non-operatingincome 1,987 2,721Operatingexpenditureexcludingstaffcostsanddepreciation (435,259) (501,559)Totalvaluecreated 841,907 775,453 Valuedistributed Employees-salariesandbenefits 374,886 325,646Shareholders-dividends 200,002 215,501Government-taxation 88,963 112,375Totalvaluedistributed 663,851 653,522 Valueretained Retainedincome 133,206 58,272Depreciationandamortisation 42,185 41,600Totalvalueretained 175,391 99,872 Totalvaluedistributedandretained 839,242 753,394

122

Notes


123

Notice to ShareholdersAnnual General Meeting of the Members of Barclays Bank of Botswana Limited

Noticeisherebygiventhatthetwenty-ninthAnnualGeneralMeetingofshareholdersofBarclaysBankofBotswanaLimitedwillbeheldatLansmoreHotel,GaboroneonThursday25thJune2015at12:00hrsforthefollowingpurpose:

1. Toreceive,approveandadoptthefinancialstatementsfortheyearended31December2014togetherwiththedirectors’ andindependentauditor’sreportsthereon.

2. ToelectdirectorsintheplaceofKennethMolosiandAlfredDubewhoretirebyrotationinaccordance withSection20.10oftheConstitutionand,whobeingeligible,offerthemselvesforre-election.

3. Tofixtheremunerationofthedirectorsfortheensuingyear.

4. Toapprovetheremunerationoftheauditorsfortheyearended31December2014.

5. Toappointauditorsfortheensuingyear.

6. Toapprove,byspecialresolution,anysubstantialgiftsmadebytheCompany,detailsofwhichareavailableattheCompany’s registeredofficeforperusal.

Intheeventthatyouwishtonominateanyperson(s)asdirectorsorauditorsotherthanoneofthedirectorsretiringorincumbentauditors,youmustdelivertotheCompanySecretary,notlessthansevennormorethan14cleardaysbeforethedateofthemeeting,anominationsignedbyamemberqualifiedtoattendandvoteatthemeetingwithnoticebythenominatedpersonsthattheyarewillingtobeelectedasdirectorsorauditors,asthecasemaybe.

ProxiesAmemberentitledtoattendandvoteatabovementionedmeetingisentitledtoappointaproxytoattend,speakandtovoteinhis/herstead.Aproxyneednotalsobeamember.AproxyformisavailableattheendoftheAnnualReport.FurtherproxyformsareavailableattheofficeoftheCompanySecretaryatBarclaysBankofBotswanaLimited,HeadOffice,Plot74358,BuildingFour,PrimePlaza,CBD,Gaborone.Completedproxyformsmustbedepositedtherenotlessthan48hoursbeforethemeeting.

BY ORDER OF THE BOARD

Mr G HowardCompanySecretary

124

Proxy Form

Please complete in block letters.

I/We

of

beingashareholderofBarclaysBankofBotswanaLimited,herebyappoint

orfailinghim/her

orfailinghim/her

asmy/ourproxytovoteforme/usonmy/ourbehalfattheTWENTY-NINTHANNUALGENERALMEETINGofthecompanytobeheldattheLansmoreonThursday25thJune2015at12:00hrs.

Aswitnessmyhandthisdayof2015

SIGNATURE

WITNESS

NOTE:

1. Eachshareholderentitledtoattendandvoteatthismeetingisentitledtoappointoneormoreproxiestoactinthealternative toattend,voteandspeakinhisstead.Aproxyneednotbeashareholderofthecompany.

2. Anyalterationorcorrectionmadetothisformofproxy(includingthedeletionofalternatives)mustbeinitialledbythe signatory/signatories.

3. ThisformofproxyshouldbesignedandreturnedsoastoreachtheRegisteredOfficeoftheCompany (5thFloor,BarclaysBankofBotswana,Plot74358,BuildingFour,PrimePlaza,CBD,Gaborone)nolaterthan48hoursbeforethe meeting.

Airport Junction Branch Airport Junction MallPlot 70665, Unit 63Gaborone

Bobonong Express Branch Plot 430,Bobonong

Broadhurst BranchPlot 4748, Kubu RoadGaborone

Carbo Prestige and Premier Plot 54518, Carbo Centre, Riverwalk Mall Gaborone

Galabgwe Branch Plot 16142, Galabgwe MallFrancistown

Francistown BranchPlot 494/5, Blue Jacket StreetFrancistown

Blue Jacket Prestige Plot 494/5, Blue Jacket StreetFrancistown

Gaborone Station Branch Plot 14, Gaborone StationGaborone

Gaborone Industrial Branch Plot 17952/3, Lithuli Road Gaborone

Galo Prestige Plot 1471/2, Galo MallFrancistown

Game City BranchGame City Mall,Gaborone

Ghanzi Branch Plot 29, The MallGhanzi

Gumare Express Branch Plot 76, Delta Shopping ComplexGumare

Jwaneng BranchPlot 5477, Choppies MallJwaneng

Kasane Branch Plot 2208, Shop 8Kasane

Mall Branch Plot 1103/07, Gaborone

Mahalapye Branch Plot 61, Mahalapye

Molepolole BranchPlot 136, Mafenyatlala MallMolepolole

Palapye Branch Plot 47, Palapye

Mochudi Branch Plot 76, Mochudi

Kanye Branch Plot 89, Kanye

Letlhakane Branch Plot 3577, Millenium Tower BuildingLetlhakane

Lobatse Branch Plot 4649, Jacaranda Street, Hill Side MallLobatse

Maun Branch Plot D4/66,Maun

Masunga Express Branch Plot 1107, Masunga MallMasunga

Mogoditshane Express Branch Plot 1462, Mogoditshane

Moshupa Express Branch Plot 1016, Moshupa

Tsabong Branch Plot 545, Tsabong MallTsabong

Orapa Branch Plot 18/98, Orapa

Personal Prestige Plot 1188, Debswana House, Main MallGaborone

Phakalane Mowana Prestige Plot 63724, Mowana Mall, PhakalaneGaborone

Ramotswa Express BranchPlot 861-3 & 2990, Score MallRamotswa

Botshabelo ExpressPlot 2935, BotshabeloSelibe Phikwe

Selibe Phikwe BranchPlot 2579/ 81,Selibe Phikwe

Selibe Phikwe PrestigePlot 2579/ 81,Selibe Phikwe

Serowe Branch Plot 40/5,Serowe

Shakawe Express Branch Plot 186, Drotsky’s MallShakwe

Sowa Express Branch Plot 1012,Sowa

Tlokweng Express Branch Plot 5778, Tlokweng

Tutume Branch Itachi Complex, Tutume

Nata Express BranchCaltex Filing Station, Nata

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