The directors endorse and, during the period under review, have principally applied the code of corporate practices and conduct as set out in the King Report on corporate governance which was issued in South Africa in 1994. By supporting the code, the directors have recognised the need to conduct the affairs of the bank with integrity and in accordance with generally accepted corporate practices. Specifically, the directors report on the following matters:
   
  Financial statements
 
  The directors are responsible for the preparation of the annual financial statements in accordance with generally accepted accounting practice. The accounting policies used were consistently applied, appropriate and supported by reasonable and prudent judgement and estimates. The directors need to ensure that the financial statements fairly present the state of affairs of the bank as at the financial year end and the results for the year under review. The external auditors are responsible for independently reviewing and reporting on the fair presentation of these financial statements.
   
  Board of directors
 
   
 
The nine non-executive and two executive directors have a wide range of different skills and experience that they bring to bear for the benefit of the bank. In appointing directors, emphasis is placed on retaining the balance of skills necessary for achieving the bank's strategic objectives.
 
The board is responsible to the shareholders for setting the direction of the bank through the establishment of objectives, strategies and key policies. It monitors the implementation of its strategies and policies through a structured approach to reporting and accountability and recognises it is responsible for relationships with its various stakeholders.
 
The non-executive directors are actively involved in, and bring independent judgement to, board deliberations and discussions. The chairman has significantly more involvement in the group than other non-executive directors. The level of involvement is considered necessary for the provision of adequate guidance and input, but does not constitute the exercise of executive of powers.
 
The board meets regularly and retains full and effective control over the bank. To assist the board in the discharge of its responsibilities, an audit committee has been established. All directors have access to the advice and services of the company secretary.
 
All directors retire on a rotational basis and, if eligible for re-election, submit their names for election at the annual general meeting. The appointment of new directors is approved by the board as a whole.
   
  Audit committee
 
   
  The audit committee has written terms of reference that have been confirmed by the board of directors. It comprises three non-executive directors. Internal audit as well as the external auditors have unrestricted access to the chairman of the committee. It meets periodically, at least four times a year, to review the annual financial statements and accounting policies, interim results, the effectiveness of management information and assurances provided by management, internal and external auditors on other systems of internal controls, including the internal audit function, and to assess the external auditors' reports. The audit committee reports its findings to the board of directors.
   
  Internal audit
 
   
  The objective of the internal audit function is to assist the managing directorate and the audit committee on the effective discharge of their responsibilities by performing an independent appraisal activity of the bank's management controls, with the full co-operation of the managing directorate and the board of directors. By virtue of its mandate, any material or significant control weakness that may be identified from time to time is brought to the attention of the managing directorate and the audit committee for consideration and the necessary remedial action.
   
   
  Internal control
 
   
 
For the board to discharge its responsibilities to ensure the accuracy and integrity of the financial statements, management has developed and continues to maintain adequate accounting records and effective systems of internal controls. The board has ultimate responsibility for the systems of internal controls and reviews their operation primarily through the audit committee and various other risk-monitoring committees.
 
As part of the systems of internal controls, the internal audit function conducts operational, financial and specific audits and co-ordinates audit coverage with the external auditors.
 
The internal controls include risk-based systems of internal accounting and administrative controls, designed to provide reasonable, but not absolute, assurance that assets are safeguarded and that transactions are executed and recorded in accordance with generally accepted business practices and the bank's policies and procedures. These internal controls are based on established and written policies and procedures and are implemented by trained, skilled staff with an appropriate segregation of duties, are monitored by management and include a comprehensive budgeting and reporting system, operating with strict deadlines and an appropriate control framework that has been developed in accordance with the bank's activities. Internal control issues are regularly discussed with the managing directorate and at board level.
 
Nothing has come to the attention of the directors to indicate that any material breakdown in the functioning of these controls, procedures and systems has occurred during the year under review. The independent auditors concur with the above statements by the directors.
   
  Going concern
 
   
  The directors have no reason to doubt that the bank has adequate resources to continue in operational existence for the foreseeable future. The going concern basis in preparing annual financial statements is therefore considered appropriate. The independent auditors concur with this statement by the directors.
   
  Affirmative action
 
   
  The bank's affirmative action policy has been in place for several years. It is a carefully planned, managed and monitored process, incorporating proactive strategies aimed at transforming the employment environment within the bank. These mechanisms provide for the recruitment, development and promotion of competent individuals, especially those from previously disadvantaged groups, for such persons to gain access to opportunities based on their suitability, while also ensuring the maintenance of core standards within the organisation.
   
  Code of ethics
 
   
  The bank is committed to a policy of fair dealing and integrity in the conduct of its business. To this end, the bank has adopted a code of ethics, governing, among others, the bank's conduct regarding its relationships with clients, competitors, suppliers, employees, shareholders and the community. All directors, managers and employees are required to maintain the highest ethical standards in ensuring that the bank's business practices are conducted in a manner which, under all reasonable circumstances, is beyond reproach.
   
 
   
 
  Günter Z Steffens
 
Chairman of the board of directors
   
 
Stephanus C du Plessis Udo H Reinhold
Deputy managing director
Managing director
   
  Windhoek, 28 March 2000
   
 
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