Governance report 2017 - The Vault...Alexander Forbes Group Holdings Limited | FY2017 Governance...

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Governance report 2017

Alexander Forbes Group Holdings Limited | FY2017 Governance Report

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Contents

GOVERNING OUR BUSINESS............................................................................................................ 3

OUR BOARD OF DIRECTORS............................................................................................................ 3 Board charter ........................................................................................................................................ 3 Board composition ................................................................................................................................ 4 Meeting attendance .............................................................................................................................. 9 Key focus areas in 2017 ....................................................................................................................... 9 Training ................................................................................................................................................. 9 Evaluation ........................................................................................................................................... 10

GOVERNANCE STRUCTURES......................................................................................................... 11 Nominations committee ...................................................................................................................... 12 Remuneration committee .................................................................................................................... 13 Group capital oversight committee ..................................................................................................... 14 Acquisitions committee ....................................................................................................................... 15 Executive committee ........................................................................................................................... 16 Audit committee report ........................................................................................................................ 17 Social, ethics and transformation committee report ........................................................................... 21

KING III ............................................................................................................................................... 24

IT GOVERNANCE .............................................................................................................................. 24

CONDUCTING ETHICAL BUSINESS ............................................................................................... 25

REMUNERATION ............................................................................................................................... 26 Remuneration philosophy ................................................................................................................... 26 Remuneration principles ..................................................................................................................... 26 Remuneration structure ...................................................................................................................... 27 Remuneration of non-executive directors ........................................................................................... 31

MANAGING RISK .............................................................................................................................. 33 Risk governance and management .................................................................................................... 33 Risk appetite ....................................................................................................................................... 34 Own Risk and Solvency Assessment ................................................................................................. 34 Key business risks .............................................................................................................................. 35

COMPLYING WITH AND ADAPTING TO THE REGULATORY AND LEGISLATIVE ENVIRONMENT ............................................................................................................................................................ 37

Appendix 1: King III compliance ............................................................................................... 42

Appendix 2: Code of Ethics and Ethics Policy .......................................................................... 45

Appendix 3: Board Charter ....................................................................................................... 47

Appendix 4: Nominations Committee Terms of Reference ...................................................... 58

Appendix 5: Remuneration Committee Terms of Reference.................................................... 63

Appendix 6: Group capital oversight committee Terms of Reference ...................................... 68

Appendix 7: Acquisitions Committee Terms of Reference ....................................................... 71

Appendix 8: Audit Committee Charter (Terms of Reference)................................................... 74

Appendix 9: SET Committee Terms of Reference ................................................................... 88


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GOVERNING OUR BUSINESS

At its core, Alexander Forbes helps people to attain peace of mind by securing their financial well-being, now and in the future. We do this by helping them to create, grow and protect their wealth through expert advice backed by leading financial products.

Good corporate governance is key to achieving this. It facilitates effective and prudent management that can deliver the long-term success of the company. Alexander Forbes believes that the application of the principles of good governance as contained in the King Code of Governance Principles and the King Report on Governance 2009 (King III), are a cornerstone of the Alexander Forbes business.

To ensure that our operations are executed in accordance with these principles, we have established a management system that includes a compliance framework, code of ethics, as well as policies and protocols to govern processes and operations.

The governance framework is applicable to all of the group’s subsidiaries and is supported by policies and procedures.

In preparing for the implementation of King IV, Alexander Forbes has commenced training and has commissioned a gap analysis of the King IV requirements. The gap analysis will include testing the relevant policies and statutory documents against the principles of King IV and workshops will be held to review the reports arising from the gap analysis.

OUR BOARD OF DIRECTORS

Alexander Forbes has a unitary board. Its primary mission is to effectively represent and promote the interests of the company’s shareholders and relevant stakeholders by ensuring that the approved strategy is effectively delivered.

The board is responsible for ensuring that the group’s operations, processes and activities are underpinned by a strong system of governance that is fully integrated into all aspects of its business. It remains accountable for the ongoing sustainability of the group.

During the year under review, the subsidiary board and audit committee meeting processes were streamlined with the following objectives:

focusing board members’ time and focus on strategic matters and directing discussions to issues of importance;

reducing duplication of information and reporting, while continuing to comply with regulatory reporting requirements;

refining and creating a more efficient process while still ensuring board and committee members remain fully informed and perform their duties appropriately.

Board charter

The purpose of the board charter is to regulate how the board conducts business in accordance with the principles of good corporate governance. It sets out the specific individual and collective roles and responsibilities. The board charter contains a policy evidencing a clear balance of power and authority at board level to ensure that no one director has unfettered powers of decision making. The charter requires the board to provide leadership and vision to the company in a way that will enhance shareholder value and ensure the group’s long-term organisational health. The full charter is available in Appendix 3.


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Board composition

At the date of issue of this report, the company’s board of directors consisted of ten members. Of these, five were independent directors, three non-executive directors and two executive directors.

The board is made up of individuals with a range of skills and experience, collectively suitable to carry out the board’s responsibilities. They are involved in all material business decisions, enabling them to contribute to the strategic and general guidance of management and the business. Prior to their appointment, directors undergo an assessment in terms of the group’s fit and proper process. All new directors are introduced to the group through a comprehensive induction programme. The directors have access to management whenever required.

Diversity

Research shows that gender influences how we perceive people around us, what behaviour we expect and how we ourselves behave. Diversity is about recognising those differences and ensuring that the organisation benefits by having those perspectives brought to the decision-making table through a representation of various people.

Alexander Forbes supports the principles and aims of diversity and we have adopted a policy for to promote gender diversity at board level. Voluntary targets set by the board in the policy adopted on 25 November 2016 are as follows:

That 30% of the board should comprise of women in a period of three years of adoption of this policy; and

That the current composition would increase in year 1 from 10% to 18%.

It has been agreed that the nominations committee monitors the gender composition of both the board and executive team and make recommendations to the board. The group chief executive and group chief human resources officer review and report on the gender composition throughout the wider organisation and policy in this regard is incorporated in the group’s employment equity policy.

Board changes

Mr AA Darfoor was appointed to the board and as group chief executive on 1 September 2016. On the same date, Mr MS Moloko reverted to his role as non-executive chairman. Mr D Viljoen, having not made himself available for consideration of the role of group chief executive, resumed his role as group chief financial officer, having served as both interim group chief executive and group chief financial officer for the intervening period.

With the announcement of the resignation of the group chief financial officer on 3 February 2017 which was effective 30 April 2017, it was agreed that Mr Bruce Bydawell would assume the position of acting group chief financial officer.

The biographies listed in this report reflect the group’s directorships at the time of publishing.

Non-executive directors

Matthews Sello Moloko (Non-executive chairman)

Appointed: 3 December 2007

Qualifications: BSc (Hons), PGCE, AMP (Wharton)

Committee responsibilities: Chairman of the social, ethics and transformation committee; member of the remuneration committee

Mr Moloko is the executive chairman, founder and a shareholder of Thesele Group, a diversified investment holding company.

Mr Moloko began his career in the employee benefits industry in 1989. He later joined the investment management industry as an analyst at Brait Asset Managers and became deputy CEO in April 1997. In 1999 he joined Old Mutual Asset Managers (OMAM) as a senior portfolio manager, and


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subsequently became executive director in charge of OMAM’s portfolio management and risk management activities in 2001. In 2003, he took over the reigns as CEO of OMAM, a post he left at the end of 2004 to pursue his own business interests. During his tenure at Old Mutual, he served on various boards of the Old Mutual companies both locally and globally.

He serves on the Nelson Mandela Foundation where he chairs the investment committee and serves on several other boards as an independent non-executive director including Stor-Age Property REIT Limited, Sibanye Gold Limited and Gen Re. Mr Moloko has received recognition for his achievements in financial services from the Black Business Executive Circle and Association of Black Securities & Investment Professionals (ABSIP).

William Simon O’Regan

Appointed: 31 July 2014

Qualifications: BusSci (Hons), fellow of the Faculty of Actuaries (UK) and fellow of the Institute of Actuaries (Australia)

Committee responsibilities: Member of the remuneration and nominations committees

Mr O’Regan is the President – North America region for Mercer, covering the US and Canada. Prior to this role, he led the EuroPac region for Mercer, covering Europe and Pacific (Australia/New Zealand).

Mr O’Regan’s global career has covered a wide range of financial services areas, including life and health insurance, pensions and investments. He was educated in South Africa, and spent eight years working for a number of life insurance companies in Ireland, Zimbabwe and the UK. Mr O’Regan then joined Mercer in London in 1988 and transferred to Melbourne, Australia in 1989. He was head of the Melbourne office from 1993 to 1996.

In 1996 he left Mercer to join Vanguard, helping to establish their funds management business in Australia. Mr O’Regan returned to Mercer in 1999, leading Mercer in Australia from 2000 to 2004, a period during which the Australian pensions market changed its character completely and Mercer was able to establish a market-leading position in bundled and packaged pension provision, including bundled investments.

From 2005 to 2009, Mr O’Regan was based in London, UK as CEO of Mercer UK and Mercer’s Europe region head. He led Mercer’s global Retirement business from 2009 to 2012, and led the EuroPac region from 2012 to June 2015. In July 2015, Mr O’Regan was appointed to his current role.

David John Anderson

Appointed: 10 October 2014

Qualifications: Dip All, Dip SM, FASFA, FAIM, ANZIIF (fellow) CIP, AAMI CPM, MAICD

Committee responsibilities: Member of the social, ethics and transformation committee; member of the group capital oversight committee

Mr Anderson is the President for Mercer's Growth Markets Region. His role spans the firm across our Health, Wealth and Career businesses. Through colleagues and offices in 35 cities and 22 countries we serve clients and customers in 84 countries across Asia, the Middle East, Turkey, Africa and Latin America. Accelerating profitable growth through the Growth Markets is one of Mercer’s four strategic priorities globally.

Mr Anderson is also a Non-executive Director of Alexander Forbes Group Holdings Limited - a Johannesburg listed financial services company in which Mercer has made a strategic investment. His career experience includes advising organisations and foreign governments on investment and retirement savings matters and leading businesses in life insurance, financial services and


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professional services in Australia, New Zealand, the South Pacific, Asia and recently Africa, the Middle East and Latin America.

Mr Anderson has qualifications in marketing, insurance, superannuation and management. He is a Certified Insurance Professional, a Certified Practicing Marketer, a Fellow of the Association of Superannuation Funds of Australia, a Fellow of the Australian Institute of Management, a Fellow of the Australian and New Zealand Institute of Insurance and Finance, an Associate of the Australian Marketing Institute and a Member of the Australian Institute of Company Directors.

Independent directors

Mark Derrick Collier

Appointed: 1 August 2011

Qualifications: HND/BA Business Studies, Dip M, M Inst

Committee responsibilities: Lead independent director; chairman of the remuneration and nominations committees; member of the audit committee

Mr Collier is a business leader with an extensive international track record in developing and building financial services businesses both as a corporate executive, non-executive, senior adviser and as an entrepreneur in leading global companies.

His career spans 30 years in the retail and institutional sectors of the securities, asset management, wealth management, retail banking, pensions and financial services industries, leading businesses as a CEO at both Fidelity Investments and Charles Schwab Inc. in North America and Europe. Today Mr Collier is a non-executive director with both publicly quoted and privately held companies in India, Nigeria, South Africa and Indonesia. He is also a Senior Adviser to a leading emerging markets private equity firm and a FinTech entrepreneur.

Deenadayalen Konar

Appointed: 1 February 2008

Qualifications: BCom, PG Dip in Acc, CA(SA), MAS (Illinois, USA), Cert in Tax Law, D.Com, CRMA

Committee responsibilities: Chairman of the audit committee

Dr Konar is a chartered accountant and was previously executive director of the Independent Development Trust where he was, amongst other activities, responsible for internal audit and the investments portfolios. Prior to that, he was professor and head of the department of accountancy at the University of Durban-Westville. He also lectured to graduate students at various South African Universities.

He is member of the King Committee on Corporate Governance, the Corporate Governance Forum, the SA Institute of Directors and the USA National Association of Corporate Directors (NACD). Dr Konar is also an independent non-executive director of Sappi, Lonmin plc, Deputy Chairman of Steinhoff International Holdings, and Chairman of EXXARO Resources.

Dr Konar is the past chair of the Ministerial Panel for the Review of Accountants and Auditors in South Africa, leading to the publication of the Auditing Profession Act, 2005, part co-chair of the Independent Oversight Panel of the World Bank (2009 – 2010) and the past chairman and member of the External Audit Committee of the International Monetary Fund in Washington (2004 – 2007), as well as a member of the 2010 Safeguards Panel of the IMF, and a past ad hoc panel member of the Ethics Panel of the United Nations Ethics Committee.


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Busisiwe Jacqueline “Totsie” Memela-Khambula

Appointed: 1 July 2015

Qualifications: BA (Social Science), Masters in Public Administration

Committee responsibilities: Member of the social, ethics and transformation committee; member of the remuneration and nominations committees

Ms Memela is a senior executive, leader, value creator and turnaround strategist, who seeks to utilise her skills in enhancing shareholder value. She has up till May 2017 served as the chief executive officer of the Women’s Development Business Trust WDB), a leading organization in pro-poor microfinance for women. She joins Academic Apartnerships (AP South Africa; LLC) as head of strategy for Africa in mid-June 2017. She is an experienced CEO, banker and senior business strategist with 26 years’ operations and management experience in the banking, financial services, non-profit and postal services sectors.

Ms Memela holds a Bachelor of Arts degree in Social Science from the University of Swaziland and a Master’s degree in Public Administration from the University of Zimbabwe. She has completed a range of executive programmes at Wits Business School, the Rand Afrikaans University (now the University of Johannesburg), the Graduate School of Management and Urban Policy in New York, as well as Wits/Harvard Business School.

Ms Memela was a fellow with the International Women’s Forum and she is currently a member of the South African chapter of the International Women’s Forum (IWFSA). She was nominated for the Duke and Graduate School of Business Fellowship programme focusing on Ethical Leadership for Emerging Leaders from both South Africa and USA. She serves as President of Girl Guides South Africa.

Ms Memela has been extensively involved in community and professional organisations and forums Including the International Partnerships for Microbiocides, (IPM) - a research-orientated NGO on HIV/AIDS; the World University Services (Zimbabwe) as vice chairman; the Strauss Commission (Presidential Commission of Inquiry into Rural Financial Services) as a commissioner and as a Committee member for the Standing Committee for the Revision of the Bank Act. Ms Memela mentors young leaders both in her private capacity and in support of the IWFSA.

Hilgard Pieter Meyer

Appointed: 9 June 2011

Qualifications: BCom, FASSA, AMP (Oxford)

Committee responsibilities: chairman of the capital oversight committee; member of the remuneration and nominations committees

Mr Meyer is an actuary with extensive management experience gained over 30 years in a broad range of sectors in the financial services industry including long-term and short-term insurance, pensions, asset management and banking.

Mr Meyer is the managing partner of Nodus Investment Managers, a private equity fund manager he co-founded in 2010. He retired as the Managing Director of the Momentum Group in 2005, a position he held for nine years. Before that, he had exposure to a wide range of actuarial and management positions in the Momentum Group which he joined in 1988. He also worked for Volkskas Pension Services (from 1985 to 1987) and Old Mutual (from 1983 to 1985). His career exposed him to a wide range of technical and management positions, including insurance and investment product development, corporate actuarial, insurance sales and marketing, private banking and trust services, investment banking and fund management.

Mr Meyer is a non-executive director of a number of companies and a fellow of the Actuarial Society of South Africa (FASSA).


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Raboijane Moses Kgosana

Appointed: 21 April 2015

Qualifications: BCompt, BCompt (Hons), CA(SA)

Committee responsibilities: Member of the audit committee, the group capital oversight committee and the social, ethics & transformation committee and sits on the boards of Alexander Forbes subsidiary companies.

Mr Kgosana manages his own investment property holding company, Peduco Properties Investments Proprietary Limited. He has over 34 years of experience in internal and external audit, financial management and administration, as well as business and management consultancy. His extensive industry credentials are based on experience in various industries, including financial institutions, industrial, telecommunications, mining, technology and consumer markets.

Prior to 2015, Mr Kgosana served as the chief executive and senior partner of KPMG South Africa, chairman of KPMG Africa and as a member of the KPMG International Board. He is an independent non-executive director at Famous Brands Ltd, Imperial Holdings Limited, Massmart Holdings Limited, Transaction Capital Limited and AECI Limited. He also serves on the boards of Phembani Group and MOGS Proprietary Limited.

Executive directors

Andrew Atta Darfoor (group chief executive)

Appointed: 1 September 2016

Qualifications: BSc (Ec), MBA, ACMA, CGMA

Mr Darfoor is an experienced financial services leader with over 20 years’ experience in leading and managing business transformations across a number of diverse regions including North America, Europe, Middle East/Africa and Asia.

Prior to Sun Life Financial, Mr Darfoor held a number of senior leadership roles at Old Mutual plc (including President & Chief Executive Officer of Old Mutual Bermuda and Regional Financial Director of Old Mutual North America). Before joining Old Mutual, Mr Darfoor held roles at Credit Suisse AG (Director, Business Development for Emerging Markets), UBS AG (Associate) and Ernst & Young (Business Consulting).

Mr Darfoor has also attended executive management programs at Harvard and Insead business schools in the US and France respectively. Andrew also holds the following professional qualifications and affiliations: Chartered Accountant (UK): ACMA, CGMA, Associate Member of the Association of MBAs, Associate of the Securities & Investment Institute (UK), Alumni Advisory Board at the Cranfield School of Management and Chairman of the Young Presidents Organization/Manhattan.

In 2016, Mr Darfoor was recognised for his achievements in business and awarded the Dean’s Award for Excellence by his alma mater, Cranfield School of Management.

Bruce Patrick Bydawell (acting group chief financial officer)

Appointed: 30 April 2017

Qualifications: B.Com, CA (SA), CFA

Mr Bydawell was first employed within the Alexander Forbes group in August 1998. He started as a financial management in Investment Solutions and has since moved to the position of financial director. Prior to joining Alexander Forbes, Mr Bydawell spent a number of years at Deloitte completing his articles in Johannesburg, as well as spending two and a half years with Deloitte in the USA.

Mr Bydawell has also fulfilled various financial management and reporting roles in Lifecare Clinics, President Medical Investments, CoidLink and Deutsche Bank. He is currently registered with the South


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African Institute of Chartered Accountants (South Africa) and Chartered Financial Analysts, CFA Institute, London, UK

Meeting attendance

The board met seven times during the financial year under review, with an average attendance of 87%. Meeting attendance is reflected in the table below.

Board member

Meeting dates

10 Jun 2016

26 Aug 2016

25 Nov 2016

15 Dec 2016 **

24 Dec 2016 **

22 Jan 2017 **

9 Mar 2017

MS Moloko (chairman)

AA Darfoor n/a *

M Collier (lead independent)

DJ Anderson X

D Konar X

H Meyer X

WS O’Regan X

DM Viljoen X X

RM Kgosana X X

BJ Memela X ** Special board meeting

In attendance X Apologies n/a Not yet a member at the time

* Attended the meeting of 26 August 2016 by invitation (appointed to the board 1 September 2016)

Key focus areas in 2017

The board maintains an annual work plan in which it addresses regular items for the year and plans for additional specific matters to be attended to according to the schedule. This includes governance and committee reports, strategic reviews and detailed reports from the group chief executive and group chief financial officer.

The board’s focus areas in 2017 included:

reviewing and approving the group’s revised strategy, which culminated in Ambition 2022; conducting the annual JSE compliance review, the annual review of the board’s terms of

reference and work plan and the annual review of the group authorities matrix; approving the integrated annual report, annual financial statements, notice of annual general

meeting, solvency and liquidity reports, interim report and dividend declarations recognising and discussed the shortfall in gender representation on the board, and adopting

a gender diversity policy; reviewing and approving the board committees’ terms of reference; receiving and considering feedback on the board assessment report; reviewing and approving the transaction with African Rainbow Capital, the disposal of LCP,

and other acquisitions and disposals; adopting an acquisitions policy and establishing an acquisitions sub-committee; receiving a briefing on B-BBEE: the Financial Sector Charter codes and the DTI codes; agreeing a capital allocation strategy; and reviewing and approving the annual budget and Ambition 2022 group strategy.

Training

Training was provided to the board as follows during the period under review:

JSE listings requirements (at all board meetings); Directors’ and officers’ insurance programme (at the board meeting of 10 June 2016); ORSA submission to the Financial Services Board (at the board meeting of 22 November

2016); and King IV (at the board meeting of 26 May 2017).


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Evaluation

An independent board evaluation was performed during the period November 2016 to February 2017, the results of which reflected that:

All the necessary structures and processes for an effective board are established and functioning;

The board has competent directors with relevant experience and diverse skills; and The board has satisfactorily fulfilled its role and responsibilities, and has fully discharged its

accountability to the company and its shareholders and other stakeholders.

Company secretary

The company secretary for the year under review was Ms Janice Eva Salvado (B.Com, LLB). She has more than 20 years of experience in the company secretarial field and has served in her role with the group for the past 13 years. At a meeting of the board held on 8 June 2017, the board assessed Ms Salvado’s competence, qualifications, experience, suitability and performance during the financial year, as well as her arm’s length relationships. The board concluded that she was suitably qualified to continue to act as group company secretary.


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GOVERNANCE STRUCTURES

The board committee structure is designed to assist the board of the company in performing its duties and responsibilities. Although the board delegates certain functions to these committees, it retains ultimate responsibility for their activities.

The board has six standing committees:

Nominations committee Remuneration committee Group capital oversight committee Audit committee Social, ethics and transformation committee Acquisitions committee (established 19 January 2017)

Each board committee is governed by formal written terms of reference that are reviewed annually and, at a minimum, effectively delegate certain of the board’s responsibilities. The full terms of reference for each committee are available in appendices 4 – 9.

The committees are empowered to seek outside or other professional advice, as the members consider necessary, to carry out their duties. The board continually assesses the need for additional committees to assist it in carrying out its duties and meeting its statutory and legislative requirements.


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Nominations committee

The nominations committee reviews the board structures, size and composition and makes recommendations to the boards with regards to any adjustments that are deemed necessary in order for the board to execute its duties effectively. Its terms of reference are available in appendix 4.

The nominations committee is chaired by the board’s lead independent director, Mr M Collier, with additional members comprising Mr H Meyer (independent director), Ms BJ Memela (independent director), Mr WS O’Regan (non-executive director) and Mr MS Moloko.

The committee held five meetings during the year under review, with full meeting attendance. Meeting attendance is reflected in the table below.

Committee member

Meeting dates

11 May 2016 ** 9 Jun 2016 25 Aug 2016 24 Nov 2016 8 Mar 2017

M Collier (chairman)

MS Moloko

H Meyer

BJ Memela

WS O’Regan / DJ Anderson

** Special meeting In attendance

Key focus areas in 2017

During the year under review, the committee considered the following matters in accordance with its work plan and terms of reference:

oversaw the identification and procedure for the appointment of suitable directors to the board, taking into consideration fit and proper procedures and the requirements of the board and committee’s terms of reference;

having overseen the process and interviewed candidates, made recommendations to the board for the group chief executive appointment;

received reports on talent and succession management; considered the directors retiring by rotation at the 26 August 2016 AGM, in terms of their skills,

expertise and contribution and agreed that the chairman report to the board that a recommendation be made to shareholders that the directors be re-elected;

considered and evaluated each of the board members on an individual basis as per the guidance given by King III;

assessed and confirmed the effectiveness of the chairman’s leadership; assessed and confirmed the competence and independence of the group company secretary; received feedback on the committee’s self-assessment report; received updates on executive recruitments; adopted a gender diversity policy for recommendation to the board for approval; amended the committee’s terms of reference whereby the committee annually reviewed

executive performance in terms of execution of strategy; and discussed diversity issues in business, the importance of awareness and training.


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Remuneration committee The role of the remuneration committee is to assist the board to ensure that:

The company has a remuneration policy and philosophy that is aligned with its long term business strategy, its business objectives, its risk appetite and values;

The remuneration policy and philosophy is appropriately applied throughout the company and its subsidiaries;

The company remunerates directors and members of the group executive committees fairly and responsibly; and

The disclosure of remuneration is accurate, complete and transparent. Its terms of reference are available in Appendix 5. The remuneration committee is chaired by the board’s lead independent director, Mr M Collier, with additional members being Mr H Meyer (independent director), Ms BJ Memela (independent director), Mr WS O’Regan (non-executive director) and Mr MS Moloko*** (non-executive director and chairman of the board). During the year under review the remuneration committee held six meetings, with 92% attendance. Meeting attendance is reflected in the table below.

Committee member

Meeting dates

11 May 2016 **

9 Jun 2016 23 Jun 2016 **

25 Aug 2016

24 Nov 2016

8 Mar 2017

M Collier (chairman)

MS Moloko***

H Meyer X

BJ Memela

WS O’Regan/ DJ Anderson

X

** Special meeting In attendance

X Apologies *** Mr Moloko served as executive director and chairman of the board from 8 February 2016 until the appointment of the group chief

executive on 1 September 2016, when he reverted to the position of non-executive director and chairman of the board, and a member of the Remuneration committee.

Key focus areas in 2017 During the year under review, the remuneration committee held two special meetings in addition to its four scheduled meetings and oversaw the following aspects of its work plan:

considered and approved the basis of short term incentive bonus pools available for allocation and related performance measures to be applied;

approved ex gratia payments for the interim group chief executive and executive chairman for temporary additional services performed;

considered the implications of an executive benchmarking review; received updates on projects aligning the group’s employee grading and proficiency levels; considered and agreed the overall payroll increase to be applied for the year; considered and approved the non-executive director fee increase for recommendation to

shareholders at the company’s annual general meeting; performed its annual self-assessment and received and considered the report in this regard; approved the allocation framework and measures for the third tranche allocations for the long-

term incentive plan; discussed and reviewed the group executives’ performance scorecards and approved their

increases, bonuses and long-term incentive plan awards for the year ended 31 March 2016; approved the package to be offered to the prospective group chief executive; reviewed the group scorecard for 2017/2018; approved the proposed extension of the employees’ retirement age; performed the annual review of its terms of reference and annual work plan and approved

same; revisited the retrenchment policy and guide; considered retention and restraint mechanisms; and approved the 2017 bonus pool funding.


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Group capital oversight committee The group capital oversight committee’s role is to monitor and oversee the capital management of the Alexander Forbes group, so as to assist the board in discharging its fiduciary duty to clients, investors, creditors and to the regulator. Its terms of reference are available in Appendix 6. The group capital oversight committee is chaired by an independent chairman, Mr H Meyer, with additional members being Mr RM Kgosana (independent director), Mr D Anderson (independent director) and DM Viljoen (group chief financial officer). Mr DM Viljoen resigned as a member of the committee on resigning from the board on 30 April 2017. The objective of the committee is to monitor and direct the capital and capital adequacy risk profile of the group. During the year under review the committee held four meetings, with attendance averaging 94%. Meeting attendance reflected in the table below.

Committee member

Meeting dates

9 June 2016 19 Aug 2016 26 Nov 2016 2 March 2017

H Meyer (chairman)

D Anderson

DM Viljoen

RM Kgosana X

In attendance X Apologies

Key focus areas for 2017

During the year under review, the committee made the following progress in terms of its work plan:

reviewed its terms of reference and annual work plan; reviewed solvency and liquidity assessments as well as consolidated dashboards for the group

and identified subsidiaries; considered dividend recommendations and capital allocation in terms of solvency and financial

soundness; oversaw capital adequacy and management of insured entities; considered the group’s capital structure and balance sheet management; received and considered the group’s own risk solvency assessment (ORSA) and consolidated

supervision reports, staying abreast of FSB developments in this regard; received updates on stress and scenario testing; and received feedback from the SAM steering committee.


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Acquisitions committee The acquisitions committee was established on 19 January 2017. The objective of the committee is to review and, if appropriate, recommend acquisitions and disposals to the board. Its terms of reference are available in Appendix 7. The committee is chaired by Mr MS Moloko (an independent director), with additional members being Mr M Collier, Dr D Konar, Mr WS O’Regan, Mr H Meyer (all independent directors), and Mr AA Darfoor (group chief executive). During the year under review the committee held three meetings. Meeting attendance is reflected in the table below.

Committee member Meeting dates

19 January 2017 28 April 2017 25 May 2017

Mr MS Moloko (chairman) X

Mr M Collier X

Dr D Konar

Mr WS O’Regan

Mr H Meyer X X

Mr AA Darfoor

In attendance X Apologies


During the year under review, the committee has:

considered business acquisitions and disposals, and considered details presented by management thereon; and

guided the process of acquisitions and disposals and, where appropriate, made recommendations to the board for its further consideration.


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Executive committee

The executive committee assumes accountability and responsibility for developing and implementing the group strategy, which focuses on customers, people and operations.

In 2017, the group executive committee met on a weekly basis with a primary focus on reviewing the state of the business. Reports are received from the group chief executive and group chief financial officer at each meeting, as well as any items for discussion deemed to be of group wide or strategic importance.

As at the date of this report, the committee comprised:

Andrew Darfoor (Group Chief Executive; acting Chief Executive Officer, Institutional Clients)

Tenure with the company: 1 September 2016

Thabo Mashaba (Group Chief Human Resources Officer)

Tenure with the company: 1 April 2012

Vishnu Naicker (Group Chief Risk Officer; Managing Director Alexander Forbes Group Services)


Stephen Price (Group Chief Operating Officer)

Tenure with the company: 13 July 1999

Sugendhree Reddy (Chief Executive Officer, Retail Clients)

Tenure with the company: 1 August 2015

Lynn Stevens (Group Chief Marketing Officer)


Bernhard Schluep (Chief Executive Officer, Emerging Markets)


Bruce Bydawell (acting Group Chief Financial Officer)


Changes in structure and membership

Due to a restructure of the committee Mr G Stobard, Mr B Eliot and Ms J Salvado ceased to be members with effect from 14 September 2016

Mr G Stobart resigned with effect 1 November 2016 Mr Edwards resigned with effect from 31 March 2017 Due to a change in duties, Mr L Pillay ceased to be a member of the committee with effect

from 1 April 2017 Mr Schluep was appointed as chief executive officer of emerging markets with effect from 1

April 2017 Mr Msibi resigned with effect from 30 April 2017 Mr Viljoen resigned with effect from 30 April 2017

Mr Bydawell has been appointed as acting group chief financial officer with effect from 30 April 2017


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Audit committee report

The audit committee is pleased to present its report for the financial year ended 31 March 2017. The audit committee is an independent statutory committee appointed by the shareholders. In compliance with the King III Report and Section 61 of the Companies Act, 2008, the shareholders of the company appointed independent directors as its audit committee in the previous financial year. The board of directors delegates duties to the audit committee. This report includes those duties and responsibilities.

Terms of reference

The audit committee has adopted formal terms of reference, which are reviewed and updated as necessary on an annual basis (or more frequently if required) by both the audit committee and the board. The committee has conducted its affairs in accordance with its terms of reference and has discharged its responsibilities contained therein. These terms of reference are available in Appendix 8.

Composition and function

The audit committee comprises three independent members. In accordance with King III, the audit committee members are appointed annually by the shareholders. The chairman of the board, certain non-executive board members, the group chief executive, the group chief financial officer, the group chief risk officer, the group IT executive, external auditors, internal auditors and other assurance providers attend meetings by invitation. The audit committee undergoes an annual self-assessment.

Roles and responsibilities

The audit committee is satisfied that it complied with its legal, regulatory and other responsibilities during the financial year ended 31 March 2017. The audit committee’s primary objective is to assist the board with its responsibilities for the management of risk, safeguarding of assets, oversight over financial control and reporting internal controls, shareholder reporting and corporate governance, particularly relating to legislative and regulatory compliance. The audit committee’s roles and responsibilities include statutory and regulatory duties as per the Companies Act, 2008 and according to King III on Governance for South Africa 2009. In addition, the board has assigned certain other duties to the audit committee, embodied in its terms of reference. The board reviews these duties and terms of reference on an annual basis.

Meeting attendance

Four meetings were held during the year, which were fully attended as follows.

Committee member Meeting dates

8 Jun 2016 25 Aug 2016 24 Nov 2016 8 Mar 2017

D Konar (chairman)

M Collier

RM Kgosana In attendance

The integrated annual report

The audit committee is responsible for overseeing the group’s integrated annual report and the reporting process. The seventh integrated annual report has been reviewed by the audit committee. It focuses not only on the group’s financial performance, but also economic, social and environmental performance. It also sets out how the business has engaged with stakeholders, addressed its material issues and governed its business.

Financial statements and accounting practices

The audit committee has reviewed the annual financial statements for the year ended 31 March 2017, and submits that it presents a balanced view of the group’s performance for the period under review and that it complies with International Financial Reporting Standards.


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External auditor appointment and independence

The audit committee has satisfied itself that the external auditor is independent of the group, as set out in section 94(8) of the Companies Act, 2008, which includes consideration of previous appointments of the auditor, the extent of other work the auditor has undertaken for the group and compliance with criteria relating to independence or conflicts of interest as prescribed by the Independent Regulatory Board for Auditors. Requisite assurance was sought and provided by the auditor that internal governance processes within the audit firm support and demonstrate its independence. The committee ensured that the appointment of the auditor complied with the Companies Act, 2008 and any other applicable legislation relating to the appointment of auditors. The committee, in consultation with management, agreed to the engagement letter, terms, audit plan as well as scope of work performed and budgeted audit fees for the 2017/18 year. A formal procedure has been adopted to govern the process whereby the external auditor may be considered for performing non-audit services. The committee has nominated, for election at the annual general meeting, PricewaterhouseCoopers Inc. as the external audit firm and Mr R Hariparsad as the designated auditor responsible for performing the functions of auditor for the 2017/18 year.

The audit committee has satisfied itself that the audit firm and designated auditor are accredited as such on the JSE list of auditors and their advisers.

Internal controls

The audit committee considers significant control deficiencies raised by management and the internal and external auditors and reports its findings to the board. Where weaknesses are identified, the audit committee ensures that management takes appropriate action. Based on assurance obtained throughout the year, the audit committee confirms that the internal controls are working optimally and

that there are no known material deficiencies to report on for the past financial year.

Whistle blowing

During the year, the audit committee reviewed the whistle-blowing programme and reports resulting from the programme. We have ensured that, where appropriate, management made independent investigations and took appropriate follow-up action. The audit committee receives reports of any complaints, whether from within or outside the group, relating to the accounting practices and internal audit of the group, the content or auditing of the group’s financial statements, the internal financial controls of the group and related matters.

Combined assurance

The audit committee is satisfied that the group has optimised the assurance coverage obtained from management, internal and external assurance providers, in accordance with an appropriate approved combined assurance model.

Going concern

The audit committee has reviewed a documented assessment, including key assumptions prepared by management, of the going concern status of the group and has made a recommendation to the board in accordance therewith. The board’s statement on the going concern status of the group, as supported by the audit committee, appears in the directors’ responsibility for financial reporting section of the integrated annual report.

Governance of risk

The audit committee fulfils a dual function, being both an audit committee and a risk committee. Internal audit performs a full assessment of the risk management as a function and framework on an ongoing basis.


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Internal audit

The audit committee is responsible for ensuring that the group’s internal audit function is independent and has the necessary resources, standing and authority within the group to enable it to perform its duties. Furthermore, the audit committee oversees cooperation between the internal and external auditors, and serves as a link between the board of directors and these functions. The audit committee approved the internal audit charter and the internal audit function’s annual audit plan during the year under review.

The internal audit function reports to the relevant divisional audit committees with responsibility for reviewing and providing assurance on the adequacy of the internal control environment across all of the group’s operations. The head of group internal audit is responsible for regularly reporting the findings of the internal audit work against the agreed internal audit plan to the audit committee. The head of group internal audit has direct access to the group audit committee, primarily through its chairman. During the year, the committee met with the external auditors and with the head of group internal audit without management being present.

Evaluation of the expertise and experience of the group chief financial officer (GCFO) and the finance function

The audit committee has satisfied itself that the GCFO has appropriate expertise and experience to execute his designated functions. The audit committee has considered and has satisfied itself of the appropriateness of the expertise, experience and adequacy of resources of the finance function.

Internal financial controls

Based on the review of the design, implementation and effectiveness of the group's system of internal financial controls conducted by the Internal audit function during the year under review, and reports made by the independent external auditors on the results of their audit and management reports, the committee is satisfied that the company’s system of internal financial controls is effective and forms a basis for the preparation of reliable financial statements. No findings have come to the attention of the committee to indicate that any material breakdown in internal controls has occurred during the past financial year.

Consolidated and separate annual financial statements

Having reviewed the audited consolidated and separate annual financial statements of the group, particularly to ensure that disclosure was adequate and that fair presentation had been achieved, the committee recommended the approval of the consolidated and separate annual financial statements to the board.

Subsequent events

There have been no material changes in the affairs or financial position of the company and its subsidiaries since 31 March 2017.

Matters for consideration at annual general meeting

Election of committee members

The Audit Committee is a statutory committee elected by the shareholders and in terms of section 94(2) of the Companies Act, read with Chapter 3 of King III, the shareholders of a public company must elect the members of an Audit Committee at each Annual General Meeting. In terms of Regulation 42 the Companies Regulations, at least one-third of the members of the Company’s Audit Committee at any particular time must have academic qualifications, or experience in economics, law, corporate governance, finance, accounting, commerce, industry, public affairs or human resource management.


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Appointment of independent external auditors

In terms of section 90(1) read with section 61(8) of the Companies Act (which requires that shareholders approve the appointment of the independent external auditors on an annual basis) the committee will in due course, prior to the next annual general meeting, consider and make recommendations to the board, which in turn will make recommendations to the shareholder(s) relative to the appointment of the company’s independent registered auditors for the year ending 31 March 2017.

Dr Len Konar Chairman of the Audit Committee Sandton 8 June 2017


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Social, ethics and transformation committee report

In accordance with the Companies Act and the Companies Regulations, the board took a decision on 24 November 2011 to incorporate a Social and Ethics Committee (the Committee) into its existing Transformation Committee to form a newly constituted Social, Ethics and Transformation Committee.

Terms of reference

The committee operates under formal terms of reference which requires it to meet at least twice a year to fulfil:

the functions assigned to it under the Companies Act Regulations; and other functions that the board assigns it, including the fulfilment of the key objectives of

transformation and strategies aligned therewith, as well as overseeing and monitoring activities in relation to social and economic development, good corporate citizenship, corporate social responsibility, ethical behaviour and managing environmental impact; consumer relations and labour and employment development.

These terms of reference are available in Appendix 9.

Composition

The non-executive chairman of the board, Mr MS Moloko, currently chairs the committee with additional membership comprising Mr DJ Anderson (non-executive director), Mr RM Kgosana (independent director) and Ms BJ Memela (independent director).

The group chief executive, group chief financial officer, group human resources officer, group chief risk officer, group transformation manager, and the business unit leaders are permanent invitees to committee meetings.

Roles and responsibilities

The objectives and responsibilities of the committee, which are aligned with the committee’s statutory functions as set out in the Companies Act and Companies Regulations, form the basis of the annual work plan that the committee has adopted. The specific activities that the committee is required to monitor, with reference in particular to adherence to relevant legislation, regulation and codes of best practice, include:

Social and economic development, including the group’s standing relative to the 10 Principles of the UN Global Compact, the Organisation for Economic Cooperation and Development (OECD) recommendations regarding the combating of corruption,

Transformation progress and the group’s development in terms of its goals relating to South Africa’s Employment Equity Act and Broad-Based Black Economic Empowerment Act, preferential procurement and skills development;

Good corporate citizenship, including the group’s positioning and efforts in promoting equality, preventing unfair discrimination and combating corruption, the group’s contribution to the development of communities in which it operates and the group’s record of sponsorships, donations and charitable giving;

The environment, health and public safety, including the impacts of the group’s activities on the environment and society;

Consumer relationships, including the group’s advertising, public relations and compliance with consumer protection laws;

Labour and employment, including the group’s standing relative to the International Labour Organisation (ILO) protocol on decent work and working conditions, and the group’s employment relationships and contribution to the educational development of its employees; and

Generally, the monitoring of the social, ethics, economic, governance, employment and environmental activities of the group.

The objectives that support Alexander Forbes’ sustainability policy include the promotion of environmental health and public safety and good corporate citizenship, including the promotion of equality, the prevention of unfair discrimination and the reduction of corruption.

The committee relies on executives and management to implement its strategies and initiatives. It is authorised to investigate any activity within its terms of reference and seek any information that it requires from any employee of the group. The committee may liaise with other board committees as


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it sees fit and reports on relevant matters within its mandate to the board. One of its members must report on the committee’s functions to shareholders at the company’s annual general meeting.

This report, which describes how the committee has discharged its responsibilities in respect of the financial year ended 31 March 2017, will be presented to shareholders at the annual general meeting to be held on 7 September 2017.

Meeting attendance

During the year under review the committee held four meetings, with meeting attendance averaging 100%. Meeting attendance is reflected in the table below.

In attendance


During the year under review, the committee oversaw the following aspects of its work plan (at business unit and group levels):

Ethics

The group’s commitment to the highest ethical standards is set out in the code of ethics and ethics policy, available as Appendix 2 below. Alexander Forbes is a member of the Ethics Institute of South Africa.

Our ethics hotline and whistle-blowing programme is operated by independent service provider and our code of ethics and ethics policy are accessible to all employees on the company’s intranet. For more information on our approach to ethics, please see ‘Conducting ethical business’ below.

Transformation

Our employment equity strategies and policies enshrine our commitment to the implementation of employment equity across the group. Our various transformation structures, including employment equity forums, continue to provide input into the implementation and management of employment equity initiatives in the group. Reports on the business’ B-BBEE verification by an independent rating agency were received and transformation progress reports were reviewed.

A skills audit report was presented to the committee with progress on initiatives and development programmes noted. Challenges include the ability to leverage training spend, fees charged by agencies to place disabled candidates are high and there was a deficiency in the system that allowed for employees to disclose their disability.

Improvements to procurement for B-BBEE compliance purposes were presented to the committee.

The committee monitored the results of the employee employment equity surveys. The pillars of transformation were given considerable discussion time at each meeting of the committee.

Committee member

Meeting dates

9 June 2016 25 Aug 2016 24 Nov 2016 8 March 2017

MS Moloko (chairman)

D Anderson

BJ Memela

RM Kgosana


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Health and safety

The group continues with its endeavours to improve its health and safety practices and regular reports are reviewed by the committee on the status of occupational health and safety.

A revised business continuity management (BCM) programme structure was presented to the committee during the year under review.

The committee also received regular updates on anti-money laundering monitoring initiatives, and occupational health and safety initiatives.

Socio and economic responsibilities

In line with our strategic intent to be welcomed in the communities in which we operate, Alexander Forbes strives to support the advancement of all communities, with emphasis on previously disadvantaged communities, where its operations are located. Our corporate social investment policy entrenches this philosophy. Sustainable community development is achieved, among others, through investing in community-related projects, employment, procurement and supply chain development.

During the year under review, the committee amended its policy regarding funding of political parties. Donations and sponsorships continue to be monitored by the committee as part of its mandate.

Sustainability

The committee reviewed the environmental impact of the group’s offices and its practices during the year under review. A financial services group’s direct environmental impact is limited. However, the group focuses on minimising its footprint and paying attention to its financial sustainability.

Labour The committee continues to review reports on labour and employee relationships, working conditions and educational development of employees. No adverse matters have been brought to the attention of the committee.

Consumer relationships

The committee received regular reports on Treating Clients Fairly (TCF), and consumer relationship reports. Consumer education interactions take place with clients and in broader-based group events such as ‘Hot Topic’ seminars which address industry-wide issues.

Fraud and other additional matters

Fraud and fraud risk reports were reviewed on a quarterly basis and each of the businesses provided a detailed report.

The committee performed an annual review of its effectiveness, and no concerns were highlighted.

Conclusion

The committee has fulfilled its mandate in terms of the Companies Act and terms of reference over the past financial year.

MS Moloko Chairman Sandton 8 June 2017


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KING III

Alexander Forbes subscribes to the King III principles and the table in Appendix 1 gives our overall status of compliance. All of the King III principles are applied or partially applied by Alexander Forbes and the board is satisfied with the extent of the group’s compliance with King III and the JSE listing requirements.

IT GOVERNANCE

Alexander Forbes’ IT governance strategy ensures that risk management is operationally entrenched and included in the performance scorecards of IT managers and senior employees across group IT.

IT is represented at a board and audit committee level by the group IT director, who is also a member of the operations and technology cluster. Furthermore, senior IT executives are included in working groups tasked with embedding regulatory requirements – such as POPI, SAM and TCF – throughout the organisation.

Our IT governance framework is based on a combination of local and international frameworks, including:

King III

Information Technology Infrastructure Library (ITIL v3)

Control objectives for information and related technology (COBIT)

This ensures local relevance as well as alignment with best practice. The framework is supported by a series of policies and procedures that enable the group to ensure compliance with our framework’s demanding standards. In 2017, Alexander Forbes continued its transition to COBIT 5, the latest

iteration of the framework released by ISACA, an internationalIT governance association. This

involved mapping our internal processes and addressing identified gaps in terms of the new framework. This approach has been approved by the audit committee and board.

Management monitors compliance with the IT governance framework on an ongoing basis. Disaster recovery and business continuity systems and procedures all conform to the highest international standards and protocols and are regularly tested. No material control or governance deficiencies were identified during the year under review.

On a functional level, the group IT executive committee oversees the implementation of the IT governance framework, its work also includes monitoring of IT performance and service and project delivery. The group IT director reports to the board (which is ultimately responsible for IT governance in conjunction with the group audit committee) on matters including IT risk, governance and compliance, cyber security as well as progress of any relevant strategic projects.


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CONDUCTING ETHICAL BUSINESS

Conducting business ethically and protecting against fraud and corruption is an important component of preserving the trust of our key stakeholders.

Our board social and ethics committee is ultimately accountable for the group’s ethics programme, while implementation is overseen by the group chief risk officer. Our crime prevention strategy continues to be monitored and enforced by the internal audit function. Alexander Forbes is committed to supporting ethical business in South Africa and is a member of the Ethics Institute of South Africa.

The group’s commitment to the highest ethical standards is set out in the code of ethics and the ethics policy, which provides clear expectations for responsible conduct and practices. The code is accessible to all employees on the company’s intranet. By year-end, 2 300 employees had signed a commitment to the code through our internal e-learning platform. The ethics policy is available in full in Appendix 2.

In 2017, we published an internal ethics awareness training video on the intranet. This training is based on the code of ethics, the ethics policy, ethics risk analysis, and case studies. No employees were disciplined or dismissed due to non-compliance with anti-corruption policy/policies during the year.

Any business that conducts financial transactions is inherently vulnerable to exploitative behaviour including attempts of fraud, corruption and conflicts of interest and unfortunately Alexander Forbes is no exception. Within the group, Financial Services Holdings have the greatest exposure to fraud and corruption, and the bulk of these issues relate to pension fund benefit-related fraud by third parties. During the year the group experienced 29 instances of crime (2016: 20), mostly relating to theft of assets, such as employee laptops.

The group’s total crime exposure in 2017 was R810 785 (2016: R 2 004 838) of which none was estimated to be prevented (2016: R 684 000). Incurred losses totalled R2 984 530* (2016: R1 320 838). R2.3 million of the incurred losses related to the settlement of an external fraud matter, and was covered by the group’s Errors and Omissions insurance.

During 2017, Alexander Forbes focused on acting to close various gaps highlighted in its 2016 financial crimes assessment. This included increasing and centralising the group’s forensic capacity. Another financial crimes assessment will be conducted in the coming year.

Our independently managed whistle-blowing programme remains an effective safeguard, enabling concerned individuals to anonymously report conflicts of interest, fraud and corruption. We ensure that where appropriate, management makes independent investigations and takes appropriate follow-up action on such reports.

In 2017, the line received seven allegations regarding fraud or corruption (the same as in 2016) which were all investigated. In each case the complaint was reviewed and appropriate corrective action was taken. A further 16 reports were made regarding ethical matters, such as diversity, discrimination, or misuse of company resources (2016: six).

During the year, advancements in technology and data analytics helped to further strengthen our controls and systems, enabling the group to identify potential cases of fraud before they occur. All fraud-related losses are covered by the group’s insurance policies. Once again, the group paid no fines, penalties or settlements in relation to corruption.


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REMUNERATION

Remuneration philosophy

The Alexander Forbes remuneration philosophy seeks to enable the business to attract, motivate and retain talented high-performing people. The group aims to create a reward structure that is aligned with the organisation’s values, incentivises the right behaviours and outputs, and is structured in such a way that the policy will not result in any unfair outcomes for customers.

Our approach is articulated and guided by our remuneration policy, which applies to Alexander Forbes Group Holdings Limited and all subsidiary operating entities. The policy is based on best practice and good governance principles and is overseen by the group board of directors who delegates oversight to the remuneration committee. Operational implementation is the responsibility of the group executive committee and the human resources function.

Alexander Forbes strives to comply with the remuneration guidelines of King III to the fullest extent possible and is cognisant of the remuneration-related guidance provided by legislative and regulatory regimes in all jurisdictions in which it operates.

Remuneration principles

All remuneration practices at Alexander Forbes must be hallmarked by:

Simplicity (by being no more complex than is required to be fit for purpose)

Consistency

Transparency (as appropriate at given hierarchical levels)

Predictability

Certainty

Remuneration is regularly measured against peer companies to ensure that it is both fair and effective. In addition, Alexander Forbes is committed to the concept of total reward, which recognises that reward is multifaceted and comprised of financial and non-financial components.

Our policy is informed by nine principles:

Long-term interest: Overall remuneration policy and practice must be in line with the group’s business and risk strategy, profile, objectives, values, risk management practices, client interests and long-term entity-wide interest and performance.

Risk management: The remuneration policy applies to the group as a whole in a proportionate and risk-based way and contains specific arrangements that take into account the roles of the different levels of employees that involve significant risk.

Transparency: There is a clear, transparent and effective governance structure for remuneration, including the definition of the remuneration policy and its oversight.

Appropriate mix of short-term and long-term pay: There is a balance between fixed and variable pay, with the fixed pay representing a sufficiently high portion of the total remuneration to prevent employees from becoming overly dependent on variable pay, unless in situations where the market dictates otherwise.

Treating Customers Fairly: Performance scorecards and incentives are structured to reward employees at all levels without any unfair outcomes for customers. Customers’ interests and company interests are treated with equal importance.


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Defining performance: Performance is based on both financial and non-financial measures and includes measures for current and future risks.

Internal and external disclosure: The remuneration policy is transparent internally and adequately disclosed externally where required.

Legislative compliance: The policy will be guided by legislative and regulatory regimes in all jurisdictions in which it operates.

Approvals and decision making: The remuneration committee has a mandate to approve all changes to the remuneration policy, including the long-term incentive scheme (LTIs) and its rules, yearly bonus pot determination for the group and divisions as well as the group exco members’ individual awards (short-term incentives). The group chief executive has a mandate to approve remuneration and rewards for all executives reporting to the group exco members.

Remuneration structure

Our remuneration policy provides for a mix of fixed (or guaranteed) and variable pay. This mix is aligned with market best practice where a large proportion of executives’ remuneration is variable but is managed within defined levels.

The components of the remuneration mix are, broadly:

Guaranteed pay – aligned with market levels and provides the individual with appropriate security and reward in terms of salary and benefits;

Short-term incentives (STIs) – aligned to operational, financial and other non-financial annual targets that seek to drive operational wins in the short to medium term; and

Long-term incentives (LTIs) – primarily a performance- driven LTI plan whereby awards are subject to appropriately stretching performance conditions and may be settled in company shares or in cash.

All remuneration practices must directly and simultaneously achieve both short-term results and long-term sustainability, without achieving one at the cost of the other. Alexander Forbes doesn’t support highly leveraged incentive schemes as they may result in excessive cost or risk to the company.

Guaranteed pay

Guaranteed pay reflects employees’ role and position and is payable for undertaking expected day-to-day responsibilities. Alexander Forbes also provides standard market-related benefits. These include (but are not limited to) retirement funding, medical aid, and other benefits including death, disability and funeral cover. The remuneration committee periodically scrutinises all benefits, including retirement funds, benefits in kind and other financial arrangements, to make sure they are justified, correctly valued and suitably disclosed.

Guaranteed pay is structured as a total cost-to-company (TCTC) package and is typically benchmarked against the 50th percentile of the financial services market to create the opportunity for exceptional performers to earn up to the 75th percentile in total through STIs. This is subject to the individual’s performance, the group’s performance and the available funds in the bonus pool. In 2016, the group changed its job evaluation system from the Alexander Forbes grading system to the ‘levels of work’ framework, in order to have a clearly defined and commonly understood framework that promotes career progression and appropriate industry remuneration benchmarks.


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Executive directors have permanent employment contracts with the group. Although these contracts do not provide for a restraint of trade, they do carry three-month termination periods, with the group retaining the right to terminate a contract in the event of poor performance or misconduct.

Executive Committee members and some senior managers are subject to performance assessments by the group chief executive. Reviews are based on their contribution to achieving the group’s strategy as well as other key stakeholder objectives such as the sustainability of operations. The remuneration committee reviews and approves salary reviews for executive committee members to ensure that total compensation is both fair and appropriately benchmarked. The committee also reviews and sets the group chief executive’s annual compensation.

The guaranteed pay for the 2017 and 2016 financial years for the executive directors of the group board are detailed below. The bonus for the 2017 year reflects the amount accrued and approved by the remuneration committee for the year ended 31 March 2017 and paid in June 2017.

2017 (R’000) Salary Bonus Benefits and allowances

Retirement fund contribution

Total

AA Darfoor (group chief executive)**

3 589 3 930 1 068 28 8 615

DM Viljoen (group chief financial officer)***

3 949 - 97 637 4 683

D Msibi* (managing director)***

2 534 - 58 408 3 000

P Edwards* (managing director)

2 711 - 406 369 3 486

S Reddy* (chief executive officer, retail clients)

2 672 2 541 106 329 5 648

S Price*(group chief operating officer)

2 316 2 247 54 298 4 915

V Naicker*(group chief risk officer)

2 549 2 345 52 267 5 213

Total for the year 20 320 11 063 1 841 2 336 35 560

2016 (R’000) Salary Bonus Benefits and

allowances Retirement fund

contribution Total

E Chr Kieswetter (group chief executive)

5 153 - 166 540 5 859

DM Viljoen (group chief financial officer)

3 608 5 200 121 583 9 512

D Msibi* (managing director) 2 503 2 000 69 403 4 975

P Edwards* (managing director)***

2 581 2 700 99 462 5 842

S Reddy* (chief executive officer: retail clients) (8 months)

1 781 2 100 19 219 4 119

Total for the year 15 626 12 000 474 2 207 30 307

* Prescribed officers. ** Mr AA Darfoor assumed the role of group chief executive from 1 September 2016. *** Mr Viljoen and Mr Msibi stepped down from their roles on 30 April 2017. Mr P Edwards resigned as managing director on 31 March

2017.


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Salary Bonus

Benefits and allowances

Retirement fund contributions

Total

2017 (£)

G Stobart* (managing director) 220 315 157 - 692

Total for the year (R’000) 4 180 5 985 2 983 - 13 148

2016 (£)

G Stobart* (managing director) 255 210 8 49 522

Total for the year (R’000) 5 304 4 452 159 1 015 10 930

* Prescribed officer

Short-term incentives (STIs)

To support our pay for performance approach, STIs are linked to the performance management system outputs, which in turn align individual performance to our strategic intent.

Alexander Forbes’s STI scheme aims to reward performance for meeting short-term organisational targets. This means that a direct link is established between performance management and rewards. Objectives and measures are therefore derived from the overall annual strategic objectives and cascaded through group, divisional and individual scorecards to ensure that everyone is working toward the same overarching objectives in their own relevant way. Individual and corporate performance targets, both financial and sustainability-related, are tailored to the needs of the business and reviewed regularly to ensure they remain appropriate.

The primary risk from a short-term incentive perspective lies in the measurement of performance and the resulting quantum of the incentive. This is determined subject to the following considerations:

Determination and size of the incentive pool – The incentive pool is self-funded through a share of the net operating profit. The size of the incentive pool is dependent on a year-on-year increase of the required profitability.

Incentive capping – Level 1 to 3 employees are generally offered a 13th cheque equal to one month’s pensionable salary while some employees from Level 3 to 5 are eligible to receive up to 200% of their on-target bonus as their incentive. This is moderated subject to availability of the overall pool.

Performance measurement – Incentives are dependent on performance measured over a 12-month period. Performance is measured according to personal and divisional measures. The divisional scorecard is evenly split between financial and non-financial measures but scorecards for individuals may have a different weighting. Performance measures are based on audited financial results of the company and the measures are independently verified by the group programme and project office and reviewed annually. Internal audit may also be required to independently verify reported results against scorecard measures when required.

Bonus deferral – Bonus deferrals are applicable for divisional managing directors and any other identified roles. Deferral percentages will vary from time to time and will be determined depending on the needs of the organisation. Such deferral and/or claw-back provisions as may be deemed appropriate may be approved by the remuneration committee from time to time.


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The STI allocations of all executive committee members are based on achievement of their personal performance objectives for the year. Reaching certain predetermined performance scores will indicate their potential awards. These are approved or moderated up or down by the remuneration committee as deemed necessary.

The solvency assessment and management (SAM) system requires a substantial portion of variable pay (40%–60%) to be subject to deferral. The long-term incentive plans incentivise management to consider the longer-term future of the company aligned to shareholder interest.

Long-term incentive (LTI) plan

The LTI plan is governed by rules as approved by the remuneration committee. The chairman and other non-executive directors are not eligible to receive long-term incentives geared to share price or corporate performance, as such incentives align their interests too closely with executives and may be seen to impair their objectivity.

The Alexander Forbes conditional share plan applies to executive directors, senior managers and other key executives and managers of the company. The incentives are offered over a period of three or more years and are designed to align performance with achieving the group’s long-term objectives; act as a retention mechanism for senior executives; and drive a culture of continuous and sustained growth and improvement within Alexander Forbes.

To align shareholders’ and executives’ interests, the vesting of conditional shares will be conditional on achieving performance conditions measured over a period appropriate to the strategic objectives of the company. Such performance measures are linked to factors enhancing shareholder value and require strong levels of overall corporate performance, measured against an appropriately defined peer group or other relevant benchmarks.

Conditional shares are awarded on a sliding scale at a level that is appropriate relative to guaranteed pay. Awards with high potential value may only be linked to commensurately high levels of performance. Full awards require significant value creation.

The number of conditional shares awarded under the LTI plan during the financial year was as follows:

‘000 shares**

2016 tranche 2015 tranche 2014 tranche

Vesting date: 22/07/2019



AA Darfoor (group chief executive) 1 350 - -

S Reddy* (chief executive officer, retail clients) 475 472 -

S Price* (group chief operating officer) 450 450 250

V Naicker (group chief risk officer) 450 304 300

Total for the year 2 725 1 226 550

* Prescribed officers ** Mr DM Viljoen, Mr D Msibi and Mr P Edwards stepped down from their roles and have forfeited all current and past tranche allocations.

The LTI plan awards are determined following market benchmarks, as a function of the executive’s cost to company (CTC). This is also moderated by the remuneration committee to reach a final award.

Employee share ownership includes the forfeitable share plan (FSP) and the employee share ownership plan (ESOP), and is designed to enhance the ownership of the company and support its employees’ financial wellbeing. The FSP holds approximately 0.2% of the group’s issued share capital.

Through the ESOP, our South African employees hold approximately 2.9% of the group’s issued share capital. Seventy percent of distributions by ESOP accrue to black women employees. To date, each employee (that has been with the group since July 2014) has been awarded 1 400 shares. These have a vesting period of three years and help to align employee interests with the company.


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The total number of AFH shares held by management at year end are as follows:

‘000 shares 2017 2016

DM Viljoen (group chief financial officer) 2 272 2 272

D Msibi* (managing director) 255 255

P Edwards* (managing director) - 288

G Stobart* (managing director) 950 1 524

RM Kgosana (independent non-executive director) 20 20

Total for the year 3 497 4 359

* Prescribed officers

Remuneration of non-executive directors

Independent directors receive letters of appointment that include a notice period of three months. Executive directors do not receive such letters as they are shareholder representatives.

Our aim is to compensate our independent non-executive directors fairly and at a level that is appropriate to attract the desired talent and expertise. The remuneration of non-executive directors consists of directors’ fees based on board and board committee participation. To compensate for additional responsibility, the chairmen of the board and committees are compensated at levels higher than other members. Different levels of remuneration are also paid in respect of the different board committees based on the complexity and amount of preparation and level of responsibility required.

We periodically undertake benchmarking to ensure that the remuneration of non-executive directors is appropriately aligned to the market. Each year the remuneration committee receives recommendations from the group chief executive and the chairman concerning the remuneration of non-executive directors, who are paid fixed fees. All directors’ fees are approved annually in advance by shareholders in general meeting.

The independent directors’ fees approved by shareholders in the year reviewed are shown in the table below. The next non-executive directors’ increase in fees will be subject to approval at the annual general meeting of shareholders as detailed in the notice of that meeting.

Group board

Subsidiary boards

Group audit

committee

Subsidiary audit

committee

Remuneration and nominations

committees

Social, ethics and

transformation committee

2017

Chairperson 1 826 654 282 333 494 077 282 333 211 743 105 881

Member 494 077 141 166 211 743 141 166 105 881 56 472

2016

Chairperson 1 773 450 274 110 479 686 274 110 205 576 102 797

Member 479 686 137 054 205 576 137 054 102 797 54 827

Non-executive directors are paid by other companies in the Alexander Forbes Group and independent non-executive directors are paid fees by the company and other companies within the Alexander Forbes Group. Directors’ fees consist of a combination of standard fees plus additional fees for committee or sub-committee membership over and above the standard working programme. Actual payments to non-executive directors are shown in the table below.


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Independent non-executive directors (R 000) 2017 2016

M Collier 2 000 1 463

D Konar 2 536 2 138

RM Kgosana 1 100 718

H Meyer 788 776

T. Memela-Kambula 900 380

M Moloko (chairman)* 4 271 1 893

B Petersen (resigned in the 2016 financial year) - 385

Total for the year 11 595 7 753

*Mr Moloko was retained as the executive chairman for an interim period during the current and previous financial year. An additional fee was approved by the remuneration committee for this executive role which was terminated on 1 September 2016.


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MANAGING RISK

Risk governance and management

Risk management at Alexander Forbes is about protecting our ability to create value, and ensuring we preserve that value for our stakeholders. In doing so, we pursue opportunities while minimising potential negative consequences. Sound risk management is an important enabler of our strategic intent, enhancing our ability to perform against our stated objectives.

The board of directors holds ultimate accountability for risk management; however senior management is responsible for developing and implementing the risk strategy. This includes acting as the custodian of policies and procedures for risk mitigation, and ensuring compliance. The individuals heading various business units, lines or subsidiaries are held accountable for the risks they take.

Risk management is built into decision-making structures and processes at both the operational and top management levels. Independent parties (those who do not approve or take risk) review decisions around risk mitigation strategies within the constraints of the group’s risk appetite measures. These reviews include stress tests to key variables and systemic shocks. Contingency plans are in place for unexpected or worst-case scenarios.

The group manages risk along three lines of defence:

The first line of defence is centred on day-to-day management’s responsibility and accountability for managing risks. Management’s role, through various operational committees, is to provide oversight including strategy implementation, performance measurement, risk management, company controls and governance processes.

The second line of defence comprises our formal enterprise risk management (ERM) framework, including our policies and minimum standards. Objective oversight provided by risk and independent audit committees, continuously challenges risk management in terms of its performance and reporting.

The third line of defence comes from the oversight and assurance provided by internal audit and external audit on the adequacy and effectiveness of risk management governance and internal control.


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During the year under review, we made two significant improvements to our risk management structures. The first was the centralisation of the second line of defence. All risk and compliance officers no longer report via divisional management, but directly to group risk management. This ensures that our risk and compliance officers are independent and more easily able to elevate risks to the board. The impact of this restructuring of reporting lines has been a better understanding of the risk profile across the group and greater oversight of the risk profiles of each division. The regulator (the Financial Services Board) was consulted on the change and had no objections.

The second improvement was the implementation of a combined assurance model. We had developed the framework in previous years and in 2017 we began its implementation. The combined assurance plan better links the group’s risk profile to our strategy, control and assurance profile.

Risk appetite

Alexander Forbes’ risk appetite – the amount of risk we are willing to accept in pursuit of our objectives – defines parameters within which we can operate. Our risk appetite therefore serves a valuable reference point for important business decisions and setting strategies. Our risk appetite has been broadly defined around four key risk measures, with thresholds and metrics agreed at a group level:

Capital: The group will hold the larger of the economic capital requirement and the regulatory capital requirement.

Earnings: The group’s earnings at risk will not exceed 20% of the earnings projected over a 12-month forward-looking period.

Operational: The group will pursue a commercial balance between the costs of mitigating actions and the expected future financial and non-financial losses that may arise from the occurrence of operational risk events.

Liquidity: The group’s liquidity requirements for each relevant business/entity will be based on the best operational cash flow estimates over a 12-month forward-looking period, taking into account any minimum regulatory capital requirements that may apply.

During the year, these measures remained unchanged from previous years. However, we migrated to a new risk management system in order to improve the way the group tracks and reports on risk. The new system tracks a newly defined set of key risk indicators, flagging any material deviations and enabling us to identify and mitigate emerging risks more timeously. It also enables greater flexibility in setting tolerance thresholds according to changing circumstances and objectives.

Own Risk and Solvency Assessment

The Financial Services Board (FSB) require all insurance companies and insurance groups to complete and Own Risk and Solvency Assessment as part of the Comprehensive Parallel Run (CPR) of the proposed new insurance regulations, Solvency Assessment and Management (SAM) regime.

The ORSA process aims to investigate the adequacy of insurers and insurance groups’ risk management and assess the current and future solvency under normal and severe stress scenarios.

Process

The Alexander Forbes Group Holdings defines its strategy over the business planning period through a rigorous budgeting process. The results of the exercise form the basis of the ORSA analysis of future projected solvency. Furthermore, these results undergo stress testing to determine the robustness of the business and its various contributing entities and determine the maturity of its risk management practices. Lastly, the ORSA process and risk management responsibilities are monitored and embedded through the ongoing and recurring ORSA process.


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Key results

The Alexander Forbes group ORSA was conducted at group level and completed and submitted to the FSB in November 2016. They key findings of the ORSA are summarised below:

The group’s risk management and governance practices reflect its ability to manage and contain risks in relation to meeting its strategic objectives and is sufficiently robust;

The group (and its insurance entities) are expected to remain solvent over the business planning period; and

The group solvency is expected to remain above target solvency levels in the event of severe stressed events and maintain its ability to generate dividends.

Further developments

The ORSA revealed focus areas to be targeted in the foreseeable future, including:

Improved linkage of strategic aims and risk metrics to further enable risk-based decision-making;

Enhanced efficiency and consistency in the ORSA process through the centralization of risk and capital functionality; and

Continuing embedding of the ORSA in the business.

Key business risks

Alexander Forbes identifies and classifies its key risks according to a three-level system. Key risks are identified and ranked by our group risk division in terms of our risk management strategy and in consultation with subsidiary and group management. The table below summarises the actions undertaken during the year to mitigate our top level one risks.

Level 1 Risk Description 2016/17 actions 2017/18 plans

Business Risk Risk of generating inadequate profits

Establishment of the OPTEC cluster with centralised oversight of the group's digitisation and future IT strategy

Started the journey to understanding better capital allocation across the group whilst understanding the more granular profit and loss impacts of business lines

Continue the enhancement of group capital deployment with a key focus on growth and granular profit and loss analysis

Further enhancing group view of product and service level profitability in order to make even better business decisions

Credit risk The risk that a counterparty becomes unable to meet its financial obligations to the group

Reviewed and implemented the existing credit risk policy, including revisions to counterparty limits as well as application of relevant rating agency ratings including S&P, Moody's and Fitch

Started to work on better understanding the group's spreading exposure whilst enhancing mitigating actions

Independent review of credit risk policy and limits

Put in place specific measures to mitigate risk of concentration risk where spreading requirements are met, but the group’s exposure can be further mitigated


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Level 1 Risk Description 2016/17 actions 2017/18 plans

Market risk Loss due to factors affecting the overall performance of financial markets

Continued to enhance improvement of reporting of the group's market risk exposure to the group capital committee

Completed further refinements to the relevant underwriting models and asset-liability matching models

Effective monitoring and understanding of the sensitivity of market risk metrics and trends relative to various risk parameters

Further enhancements of the group's use of macro-economic movements and their influence on the group's performance

Underwriting Risk

Loss on underwriting activity, whether from factors within or beyond our control

Continuously monitor and refresh pricing models in line with industry needs and competitor analysis.

Review reinsurance arrangements, associated risk concentrations and internal risk appetite

Continue to assess internal risk appetite for taking on more underwriting risk

Continue to work with underwriting partners to ensure continuous quality of underwriting activity, assessments and accurate application of treaties

Strategic Risk Loss arising from the pursuit of an unsuccessful business plan

Good progress was made in integrating risk identification and review into the business planning cycles

Divisional risk officers now all have a 'seat at the table' at the time of budgeting and planning to ensure challenge and oversight of risks to strategy

Further develop the integration of risk and business planning cycles

Further develop the group's stress testing and scenario analysis process to support risk-taking assumptions in the strategic planning process

Operational risk (incorporating regulatory risk)

The risk of loss resulting from inadequate or failed internal processes, people or systems, or from external events which gives rise to breaches or loss events

Completed assessments of major operational risks across the group to support the group's Own Risk and Solvency Assessment submission

Conducted off-site testing of the group's business continuity programme

Continued the implementation of the group's risk-based anti-money laundering programme

Refinement of group's regulatory compliance approach and methodologies

Develop a group-wide focus on operational risk through centralised resource.

Identify and prioritise key components of the group's operational risk framework for further enhancements

Roll out standardised approach to breach reporting across the group

Centralising the compliance function in the group which will promote standardisation of methodologies

These key risks, actions and plans, have been interrogated, approved and continuously monitored by the group audit committee. Risks are continuously shifting and we must therefore remain vigilant to ensure we identify and mitigate emerging risks before they hinder our ability to meet our objectives. Doing business inherently involves taking risks. Proactively managing risks allows Alexander Forbes to secure sustainable performance as targeted in its corporate strategy. Alexander Forbes operates a risk management framework that allows management to tolerate risks in a controlled manner, which is an essential element of its corporate governance and strategy development. Our top ten risks for the year under review are mapped on the heat map below, illustrating the likelihood of their occurrence, the potential impact to the business and the their timeframe (short-, medium- and long-term).


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COMPLYING WITH AND ADAPTING TO THE REGULATORY AND LEGISLATIVE ENVIRONMENT

The financial services sector is regulated in South Africa by the Financial Services Board (FSB), which enacts regulation in order to ensure fair and consistent standards. These cover financial products and services as well as customer interaction. As a responsible financial services company, we comply with relevant regulation as well as broader legislation that is relevant to the countries in which we operate. Our commitment to compliance extends beyond South Africa, and we remain abreast of local and international legislation regulating our business in the countries in which we operate.

The board and senior management has formally endorsed the establishment of the compliance function, at a group level as well as within each entity. The function’s primary role is to assist the board and management in running the organisation with integrity, ensuring that it complies with all relevant regulatory and best practice requirements and is conducted in accordance with the highest ethical standards. The appointed compliance officers are responsible for the effective implementation of the function and for facilitating compliance throughout the business via awareness creation, independent monitoring, reporting and the provision of practical solutions or recommendations.

The compliance team within Alexander Forbes is made up of a group compliance officer and group anti-money laundering (AML) officer who are responsible for co-ordinating, implementing and reporting on group wide compliance policies, procedures and standards as well as providing assurance to the group and subsidiary audit committees on the status of compliance and AML within the group. Each division has a head of compliance who is responsible for providing assurance to the relevant divisional boards, audit committees and management committees on the status of compliance within their area of oversight.

Alexander Forbes, as with other financial institutions, has a great deal of draft and new legislation and regulation to manage. In addition to our existing compliance, legal and business functions that are required for this purpose, we are appointing a group legislation and regulatory specialist to oversee implementation across the group.

In addition to implementation, the new and draft legislation, regulations and regulatory environment require a well thought through response to ensure that our strategies are achieved, whilst ensuring compliance. Importantly, we are focused on maximising the effect of this necessary compliance through our strategies. We also expect, over the next few years, that our modernised IT operating environment will facilitate a more effective manner of legislative and regulatory compliance.


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South African legislation

Legislation / Regulation (draft or new)

Brief description

Financial Sector Regulation Bill 2016 and Levies Bill

Implementation of this Bill is aimed for April 2017 but it will be phased in over a few years. This Bill provides for Phase 1 of the Twin Peaks model of financial regulation for financial institutions. A prudential authority will be established to provide prudential regulation and a market conduct authority to provide market conduct regulation of financial institutions. We have a good understanding of the requirements of the Bill and the attendant Levies Bill.

Conduct of Financial Institutions Bill (“COFI”)

COFI forms the basis of Phase 2 of the Twin Peaks model of financial regulation. In Phase 2, existing sectoral legislation will be reviewed, amended and ultimately replaced with COFI to ensure comprehensive governance of financial institutions. The aim is to table COFI in parliament in 2018.

Retail Distribution Review (“RDR”)

A status update on RDR was published by the FSB in December 2016. The 2016 update deals with the status of RDR Phase 1 regulatory instruments and the current FSB thinking on Phases 2 and 3. Phase 1 regulatory instruments include:

General Code of Conduct for Authorised Financial Services Providers (“FSP’s”) and Representatives issued under FAIS;

Determination of FIT and Proper Requirements for FSP’s under FAIS;

Financial Advisory and Intermediary Services Regulation issued under FAIS;

Regulations issued under the Long-term and Short-term Insurance Acts; and

Policyholder Protection Rules under the Long-term and Short-term Insurance Acts.

Insurance Bill This Bill consolidates the long-term and short-term prudential regulatory framework for long-term and short-term insurers and forms part of the Twin Peaks model. An implementation date in the second half of 2017 is proposed. The Bill deals with inter alia:

financial soundness and over-sight through higher prudential standards, insurance group supervision and stronger reinsurance arrangements

micro-insurance strengthening of governance, risk management and internal

control for insurers; and alignment with international standards.

Amendments are also being made to the Regulations and the Policyholder Protection Rules. This Bill will work together with the Taxation Laws Amendment Bill, which also gives effect to the Insurance Bill. This Bill will impact on the long-term and short-term insurers in our business. We have provided our comment on the Bill and we are required to understand the impact the Bill will have on our business and make the necessary adjustments to ensure compliance and cohesion with strategy.

Regulations to the Long-term and Short-term Insurance Act (“LTIA” and “STIA”)

Deals with: maximum commission payable (demarcation) commission when short-term policies or contracts

are accident and health related conduct of business returns; and RDR proposals.

Policyholder Protection Rules under the Long-term and Short-term Insurance Acts

These will be amended first through the LTIA and STIA and then through the Insurance Act and COFI. Includes inter alia: provisions relating to fair treatment of policyholders, product line design, cooling off rights, policy loans to cessions, advertising, record-keeping, complaints and claims management etc.


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Insurance Act Demarcation Regulations

Specifies which types of health and accident policies/ contracts (under the STIA and LTIA) are regulated under the STIA/LTIA and thus excluded from the Medical Schemes Act.

Conduct of Business Returns (Insurance) and Conduct of Business Returns (FAIS)

Bi-annual Conduct of Business Returns to the FSB from Short-term Insurers, Long-term Insurers and FAIS regulated entities.

FAIS amendments (plus amendments to the FAIS regulations)

These proposed amendments inter alia include provisions about: inclusion within the definition of financial products for structured

deposits and hedge fund collective investment schemes a definition of, and requirements for, automated advice class of business training, product specific training and

assessment and providers of training classification of financial products to provide for proportionate

competency requirements; and principle-based requirements for Continuous Professional

Development.

Financial Intelligence Centre Amendment Bill

The Financial Intelligence Centre Amendment Bill, 2016 (“the FIC Bill”), which was first introduced in 2015, introduces the adoption of a Risk Based Approach (“RBA”) in regards to compliance with client identification and verification requirements, which will replace the current rule-based approach applicable in terms of the Financial Intelligence Centre Act (“FICA”). In other words, the current “Know Your Client” (“KYC”) requirements in terms of FICA are now being replaced by “Customer Due Diligence” requirements introduced by the FIC Bill. A Risk Based Approach requires a financial institution registered as an accountable institution to identify, assess, and understand its AML and CTF risks. The effective implementation and application of the risk-based approach is largely dependent on an accountable institution's AML and CTF risk management and compliance programme

Retirement funds draft legislation and regulations

These include: Revised default regulations on: (a) default investment portfolios,

(b) default preservation, (c) fund annuity strategy: opt-in consent required (in and out of fund annuities allowed), (d) umbrella fund specific requirements;

Pension Funds Omnibus Amendment; Conditions for investments in hedge funds Revised Regulations 37, 38 and 39; Regulation 28 notice; and Financial soundness notice

Protection of Personal Information Act (“POPI”)

POPI is a comprehensive set of privacy and data protection requirements that apply to any organisation that collect or processes personal information (PI) about data subjects. POPI aims to protect the constitutional right to privacy of personal information. The compliance conditions associated with POPI are not yet in effect and we will have one year from the effective date(s) to reach compliance. Where companies process PI, they are required to adhere to POPI’s principles, including the stipulation that PI may only be collected and used for a specific purpose. They must also ensure that adequate security safeguards are in place to protect PI and that they comply with requirements related to special PI, children’s PI, unsolicited electronic communications, trans-border flows of PI and account numbers. Alexander Forbes continues to make good progress in preparing for the requirements of POPI. Plans are being implemented both at a group level and at a divisional level to ensure compliance with this important piece of legislation.


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Emerging markets legislation

Legislation / Regulation (draft or new)

Brief description

Botswana Retirement Fund Act No 27 of 2014

The Act was first passed into law in 2015. The commencement date has now been announced as 01 April 2017. The Act provides for the licensing, regulations and administration of all retirement funds, including pension and provident funds. Requirements also include provisions relating to housing loans (flagging), maintenance and divorce order, including spouse interest calculations.

Ugandan Retirement Benefits Sector Liberalisation Bill

The Bill was first tabled before parliament in 2011. The Bill was also tabled again at the end of November 2016 and is due for further discussions. The Bill seeks to break the National Social Security Fund (NSSF) monopoly over mandatory contributions, provide for fair competition among licensed retirement benefits schemes and to, inter alia, convert the public service pension scheme into a contributory scheme.

Namibian Investment Promotion Act 9 of 2016

The Act was passed into law on 31 August 2016. The Act will become effective on a date to be determined by the Minister of Trade and Industry. The purpose of the Act include to provide for the promotion of sustainable economic development and growth through the mobilisation and attraction of foreign and domestic investment to enhance economic development, reduce unemployment, accelerate growth and diversify the economy. The Act also seeks provide for reservation of certain economic sectors and business activities to certain categories of investors.

Financial Services Adjudicator Bill 2014 (Namibia)

This Bill seeks to establish an office to deal with complaints relating to financial services, to provide for the objects of the office, to provide for the appointment of the adjudicator and powers and duties of the adjudicator and to provide for incidental matters. the following financial services providers are specifically included in the application of the Bill: banking institutions; financial institutions and financial intermediaries under the Financial Institutions and Markets Act 2014; amongst others.

Namibia National Reinsurance Corporation Act 22 of 1998

Enforcement of the provisions of section 38 of the Namibia National Reinsurance Corporation Act with effect from 01 January 2017. Section 38 specifies the compulsory reinsurance session to the Corporation by registered insurers and reinsurers. Section 39 (1) requires every registered insurer and registered reinsurer to cede in reinsurance to the corporation a percentage of the value of each policy issued or renewed in Namibia by the registered insurer or registered reinsurer on or after the commencement of this Act. NamibRE has implemented cession ratio changes from 7.5% to 10% of the portion of each policy retained for net account. This ratio is applicable from 1 January 2016 to 31 December 2016.

Namibian New Equitable Economic Empowerment Framework (NEEEF)

The aim of NEEEF is to provide a clear overarching policy framework into which all other policies will slot. The NEEEF will supersede all other transformation and empowerment policies of government as well as provide the framework within which all private sector initiatives, past and future will be expected to conform to. The NEEEF seeks to promote transformation in business through five empowerment pillars:

Ownership Management Control and Employment Equity Human Resources and Skills Development Entrepreneurship Development.


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Namibian Financial Institutions and Markets Bill, 2012

The Bill seeks to consolidate and harmonise the laws regulating the financial institutions and financial markets in Namibia. The Bill provides for matters such as the registration of non-banking financial institutions, registration which requires a test for fit and proper of key persons and prohibits operations of unregistered entities.


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Appendix 1: King III compliance

King III Principle Applied / Explained

Explanation

Chapter 1 : Ethical leadership and corporate citizenship

Principle 1.1 The board should provide effective leadership based on an ethical foundation

Applied

Principle 1.2 The board should ensure that the company is and is seen to be a responsible corporate citizen

Applied

Principle 1.3 The board should ensure that the company’s ethics are managed effectively

Applied

Chapter 2 : Board and directors

Principle 2.1 The board should act as the focal point for and custodian of corporate governance

Applied

Principle 2.2 The board should appreciate that strategy, risk, performance and sustainability are inseparable

Applied

Principle 2.3 The board should provide effective leadership based on an ethical foundation

Applied

Principle 2.4 The board should ensure that the company is and is seen to be a responsible corporate citizen

Applied

Principle 2.5 The board should ensure that the company’s ethics are managed effectively

Applied

Principle 2.6 The board should ensure that the company has an effective and independent audit committee

Applied

Principle 2.7 The board should be responsible for the governance of risk Applied

Principle 2.8 The board should be responsible for information technology (IT) governance

Applied

Principle 2.9 The board should ensure that the company complies with applicable laws and considers adherence to non-binding rules, codes and standards

Applied

Principle 2.10 The board should ensure that there is an effective risk-based internal audit

Applied

Principle 2.11 The board should appreciate that stakeholders’ perceptions affect the company’s reputation

Applied

Principle 2.12 The board should ensure the integrity of the company’s integrated report

Applied

Principle 2.13 The board should report on the effectiveness of the company’s system of internal controls

Applied

Principle 2.14 The board and its directors should act in the best interests of the company

Applied

Principle 2.15 The board should consider business rescue proceedings or other turnaround mechanisms as soon as the company is financially distressed as defined in the Act

Applied

Principle 2.16 The board should elect a chairman of the board who is an independent non-executive director. The CEO of the company should not also fulfil the role of chairman of the board.

Applied

Principle 2.17 The board should appoint the chief executive officer and establish a framework for the delegation of authority

Applied

Principle 2.18 The board should comprise a balance of power, with a majority of non-executive directors. The majority of non-executive directors should be independent

Applied

Principle 2.19 Directors should be appointed through a formal process Applied

Principle 2.20 The induction of and ongoing training and development of directors should be conducted through formal processes

Applied

Principle 2.21 The board should be assisted by a competent, suitably qualified and experienced company secretary

Applied

Principle 2.22 The evaluation of the board, its committees and the individual directors should be performed every year

Applied

Principle 2.23 The board should delegate certain functions to well-structured committees but without abdicating its own responsibilities

Applied

Principle 2.24 A governance framework should be agreed between the group and its subsidiary boards

Applied

Principle 2.25 Companies should remunerate directors and executives fairly and responsibly

Applied


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Explanation

Principle 2.26 Companies should disclose the remuneration of each individual director and certain senior executives

Applied

Principle 2.27 Shareholders should approve the company’s remuneration policy

Applied

Chapter 3: Audit Committee

Principle 3.1 The board should ensure that the company has an effective and independent audit committee

Applied

Principle 3.2 Audit committee members should be suitably skilled and experienced independent non-executive directors

Applied

Principle 3.3 The audit committee should be chaired by an independent non-executive director

Applied

Principle 3.4 The audit committee should oversee integrated reporting Applied

Principle 3.5 The audit committee should ensure that a combined assurance model is applied to provide a coordinated approach to all assurance activities

Applied

Principle 3.6 The audit committee should satisfy itself of the expertise, resources and experience of the company’s finance function

Applied

Principle 3.7 The audit committee should be responsible for overseeing of internal audit

Applied

Principle 3.8 The audit committee should be an integral component of the risk management process

Applied

Principle 3.9 The audit committee is responsible for recommending the appointment of the external auditor and overseeing the external audit process

Applied

Principle 3.10 The audit committee should report to the board and shareholders on how it has discharged its duties

Applied

Chapter 4: The governance of risk

Principle 4.1 The board should be responsible for the governance of risk. Applied

Principle 4.2 The board should determine the levels of risk tolerance Applied

Principle 4.3 The risk committee or audit committee should assist the board in carrying out its risk responsibilities

Applied

Principle 4.4 The board should delegate to management the responsibility to design, implement and monitor the risk management plan

Applied

Principle 4.5 The board should ensure that risk assessments are performed on a continual basis

Applied

Principle 4.6 The board should ensure that frameworks and methodologies are implemented to increase the probability of anticipating unpredictable risks

Applied

Principle 4.7 The board should ensure that management considers and implements appropriate risk responses

Applied

Principle 4.8 The board should ensure continual risk monitoring by management

Applied

Principle 4.9 The board should receive assurance regarding the effectiveness of the risk management process

Applied

Principle 4.10 The board should ensure that there are processes in place enabling complete, timely, relevant, accurate and accessible risk disclosure to stakeholders

Applied

Chapter 5: The governance of information technology (IT)

Principle 5.1 The board should be responsible for information technology (IT) governance

Applied

Principle 5.2 IT should be aligned with the performance and sustainability objectives of the company

Applied

Principle 5.3 The board should delegate to management the responsibility for the implementation of an IT governance framework

Applied

Principle 5.4 The board should monitor and evaluate significant IT investments and expenditure

Applied

Principle 5.5 IT should form an integral part of the company’s risk management

Applied

Principle 5.6 The board should ensure that information assets are managed effectively

Applied

Principle 5.7 A risk committee and audit committee should assist the board in carrying out its IT responsibilities

Applied

Chapter 6: Compliance with laws, codes, rules and standards


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Explanation

Principle 6.1 The board should ensure that the company complies with applicable laws and considers adherence to nonbinding rules codes and standards

Applied

Principle 6.2 The board and each individual director should have a working understanding of the effect of the applicable laws, rules, codes and standards on the company and its business

Applied

Principle 6.3 Compliance risk should form an integral part of the company’s risk management process

Applied

Principle 6.4 The board should delegate to management the implementation of an effective compliance framework and processes

Applied

Chapter 7: Internal Audit Applied

Principle 7.1 The board should ensure that there is an effective risk based internal audit

Applied

Principle 7.2 Internal audit should follow a risk based approach to its plan Applied

Principle 7.3 Internal audit should provide a written assessment of the effectiveness of the company’s system of internal controls and risk management

Applied

Principle 7.4 The audit committee should be responsible for overseeing internal audit

Applied

Principle 7.5 Internal audit should be strategically positioned to achieve its objectives

Applied

Chapter 8: Governing stakeholder relationships

Principle 8.1 The board should appreciate that stakeholders’ perceptions affect a company’s reputation

Applied

Principle 8.2 The board should delegate to management to proactively deal with stakeholder relationships

Applied

Principle 8.3 The board should strive to achieve the appropriate balance between its various stakeholder groupings, in the best interests of the company

Applied

Principle 8.4 Companies should ensure the equitable treatment of shareholders

Applied

Principle 8.5 Transparent and effective communication with stakeholders is essential for building and maintaining their trust and confidence

Applied

Principle 8.6 The board should ensure that disputes are resolved as effectively, efficiently and expeditiously as possible

Applied

Chapter 9: Integrated reporting and disclosure

Principle 9.1 The board should ensure the integrity of the company’s integrated report

Applied

Principle 9.2 Sustainability reporting and disclosure should be integrated with the company’s financial reporting

Partially applied

Needs Improvement

Principle 9.3 Sustainability reporting and disclosure should be independently assured

Applied

Compliance statement

The board is satisfied with the extent of the group’s compliance with King III and the JSE listing requirements.


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Appendix 2: Code of Ethics and Ethics Policy

1. Preamble

Ethics can be defined as a set of moral principles or guidelines. Business ethics are used to govern employee behaviour, regulate moral decisions and professional conduct.

One of Alexander Forbes’ greatest assets is its reputation, yet it is also an extremely fragile asset that can be destroyed by just one employee’s lapse in judgment. It is vital that we maintain the highest level of legal and ethical conduct in all our business dealings in order to preserve Alexander Forbes’ integrity.

Alexander Forbes and all its employees are committed to the principles contained in its Ethics Policy. Ethics Policies and Codes of Ethics may be adopted in the group’s operations in the different territories and/or operations, as appropriate, provided they are in keeping with the spirit of the principles contained herein.

2. Purpose

It is a core value of Alexander Forbes to act with uncompromising honesty and integrity. This policy provides guidance to all employees and stakeholders (as defined) of Alexander Forbes and its subsidiaries. Our values are Simplicity, Expert Innovative Solutions, Relationships, the Value of Trust and Enriching People’s lives. All employees conducting business on behalf of Alexander Forbes, regardless of their role, are expected to consistently demonstrate our values and ethics in the workplace in their behaviour as per the Code of Ethics.

3. A Guide To Ethical Decision Making

An objective of this policy and Code of Ethics is to provide a practical guide to decision making. Practical decision making often requires balancing competing interests, particularly when dealing with unforeseen circumstances. This requires balancing interests of key stakeholders when making decisions in accordance with our values. No particular value or stakeholder necessarily takes precedence over another and competing interests should be holistically and in the context of all the values and stakeholder interests in order to obtain the most appropriate outcome.

Where there is any question regarding the ethics associated with a contemplated decision or action, every employee should follow the guidelines below:

1. Is this decision / action legal?

2. Are you acting in terms of the conditions of your employment contract?

3. Does this decision / action comply with our policies and procedures?

4. Is this decision / action consistent with our values and behaviours?

5. Does this decision / action feel right?

6. Would you be happy if your manager, supervisor or colleagues knew about this decision / action?

7. Would you be happy to have this decision / action published on the front page of the newspaper?

If the answer to all these questions is an unqualified “yes”, then it is likely that the particular decision or action is in accordance with our values and behaviours.

In the event of uncertainty as to the most appropriate course of action, it is recommended that guidance be obtained from senior managers or compliance officers.

It is important to note that the Code of Ethics is not intended to comprise an exhaustive list of what constitutes ethical conduct.


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Should there be uncertainty as to whether a decision would be ethical or not, you could seek advise from the Alexander Forbes Ethics office via their email address - [email protected]

4. Reporting unethical behaviour

Any transgressions with the provisions of this Policy or the Code should be reported either to senior management or in terms of the protected reporting procedure that was established by means of Whistleblowers, whereby an employee’s identity will remain anonymous. The details for Whistleblowers appear below:

• South Africa and Namibia: Call the 24-hour toll-free number 0800 006 656 Other outside South Africa: Call +27 31 308 0653

(Telephone calls are answered by specially trained operators who will not require you to reveal your identity) or;

• Fax to: (031) 717 5125 or;

• Via internet: www.whistleblowing.co.za

• E-mail to: [email protected] or

• Write to: Whistleblowers (Proprietary) Limited

P.O. Box 51006

Musgrave

South Africa

4062

(The group’s Whistleblower Policy and Procedure introduced a mechanism to facilitate the reporting of any unlawful or irregular activity and ensures that those employees reporting such activity are not prejudiced in any manner for making the disclosure.)

5. Approval and review of policy

The Code of Ethics Policy has been considered and approved by the Group Executive and Social and Ethics and Transformation Committees of Alexander Forbes Holdings Limited.

The Group Chief Risk Officer will periodically assess whether the purpose, authority, and responsibility, as defined in this policy, continue to be adequate to enable the Group to accomplish its objectives.

The policy must be updated at least once a year but more frequently as circumstances may necessitate. It must be approved by the Group Chief Risk Officer and endorsed by the Group Executive Committee.

The various Audit Committees across the Group will have oversight over the prevention, detection and response activities within Alexander Forbes.


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Appendix 3: Board Charter

1. Constitution

The Board of directors (the Board) of Alexander Forbes Group Holdings Limited acknowledges the need for a charter as recommended in the Code of Governance Principles as contained in the King Report on Governance for South Africa 2009 (King III). This charter is subject to the provisions of the Companies Act 71 of 2008, as amended (the Act), the Company’s memorandum of incorporation (MoI) and any other applicable law or regulatory provision. If there are any conflicts between this charter and the Company’s MoI, the MoI will prevail.

2. Purpose The purpose of this charter is to set out the Board’s roles and responsibilities as well as the requirements for its composition and meeting procedures.

3. Role

3.1. The Board assumes ultimate accountability and responsibility for the performance and affairs of the Company and, in doing so, effectively represents and promotes the legitimate interests of the Company and its shareholders. The Board, at all times, will retain full and effective control over the Company and will direct and supervise the business and affairs of the Company. The Board does, however, not assume the functions of management, which remain the responsibility of the executive directors, prescribed officers and other members of senior management.

3.2. The Board is committed to ensuring good corporate governance throughout the Company in line with the requirements of King III and the code of governance principles. Accordingly, the Board will:

Act as the focal point for, and custodian of, corporate governance by managing its relationship with management, shareholders and other stakeholders of the Company along sound corporate governance principles. The Board will be expected to:

Acquire a working knowledge and understanding of the Company’s business and the laws, regulations and processes that govern its activities;

Be able to make sound business decisions and recommendations;

Exercise judgement independently; and

Exercise stewardship at all times and uphold the highest degree of ethics in all forms of conduct.

Acknowledge that strategy, risk, performance and sustainability are inseparable and give effect to this by:

Contributing to and approving the strategy;

Satisfying itself that the strategy and business plans do not give rise to risks that have not been thoroughly assessed by management;

Identifying key performance and risk areas;

Ensuring that the strategy will result in sustainable outcomes; and

Considering sustainability as a business opportunity that guides strategy formulation.

Ensure the Company is and is seen to be a responsible corporate citizen by considering the financial aspects of its business and the impact business operations have on the environment and communities within which it operates.

Ensure the Company has an effective and independent audit Committee.

Ensure there is an effective risk-based internal audit function.

Be responsible for the governance of risk and information technology.

Ensure the Company complies with applicable laws and considers adhering to non-binding rules and standards.

Acknowledge that stakeholders’ perceptions affect the Company’s reputation.


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Ensure the integrity of the Company’s integrated report.

Act in the best interests of the Company by ensuring individual directors:

Are permitted to take independent advice in connection with their duties following an agreed procedure;

Disclose real or perceived conflicts to the Board and deal with them accordingly; and

Deal in securities only in line with the policy adopted by the Board.

Start business-rescue proceedings as soon as the Company is financially distressed.

Elect a Chairman who is an independent non-executive director.

Where the Chairman is not an independent non-executive director, elect a lead independent director.

Appoint and annually evaluate the performance of the Group Chief Executive.

3.3. The Board will comply with all relevant legislation and be required to maintain strict confidentiality of all information relating to the business of the Company, except to the extent that disclosure is required by law.

3.4. The Board will have unrestricted access to all company information, records, documents and property. The Group Company Secretary will assist the Board by providing any required information or document.

3.5. The Board, in carrying out its tasks, may obtain such outside or other independent professional advice as it considers necessary to carry out its duties, through following an approved process.

4. Membership

4.1. The Board will comprise not less than 4 and not more than 20 directors, appointed in accordance with the requirements of the Company’s MoI.

4.2. The size of the Board will be sufficiently large to ensure a wide range of skills, knowledge and experience without compromising common purpose, involvement, participation and a sense of responsibility among the members necessary to meet the Company's strategic objectives.

4.3. The Board must comprise a balance of executive and non-executive directors, with a majority of non-executive directors. Ideally, the majority of non-executive directors, in turn, must be independent (in accordance with King III).

4.4. As a minimum, two executive directors will be appointed to the Board, namely the Group Chief Executive and the Group Chief Financial Officer.

4.5. The office of the Chairman and Group Chief Executive will be separate. There will at all times be a clearly-defined division of responsibilities in both offices to ensure a balance of authority and power. Where the Chairman is not an independent non-executive director, a lead independent director shall be appointed.

4.6. Directors are appointed through a formal and transparent process and the Remuneration and Nominations Committee is responsible for identifying suitable candidates as directors, to be proposed to shareholders for approval. In accordance with the Amended and Restated Relationship Agreement entered into on or about 20 June 2014, Mercer Africa Limited is permitted to nominate non-executive directors for appointment, which nominations shall be considered by the Remuneration and Nominations Committee and the normal appointment process followed.


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4.7. On appointment, new directors will undergo an induction programme to facilitate their understanding of the business environment and markets in which the Company operates. This programme will be facilitated by the Group Company Secretary and will include, inter alia, information and guidance on:

Group structure and business objectives,

Financial performance of the business,

Reciprocal expectations,

Familiarisation through site visits and consultation with senior management, and

Corporate policies and procedures and information on directors’ roles and responsibilities in terms of legislation, regulatory requirements and best practice.

All directors will undergo continuing professional development and will be required to attend regular briefings on changes in legislation, governance and the business environment.

4.8. The directors will be individuals of calibre and credibility, with the necessary skills and experience. In this regard, the Remuneration and Nominations Committee will ensure continuity of directorships and will undertake succession planning.

4.9. The period of office of directors will be as follows:

New directors, appointed in casual vacancies during the year, will hold office only until the next annual general meeting at which they will retire and be available for re-election.

At least one third of the directors will be subject to retirement by rotation and re-election by shareholders at every annual general meeting, consistent with the MoI.

The termination of service of any executive director for whatever reason will result in the resignation of that director from the Board.

4.10. The retirement age for an executive director will be 60 years and for a non-executive director 70 years. The Board will be entitled to re-elect a non-executive director who has passed the age of 70, provided that the Remuneration and Nominations Committee recommends re-election, the appointment is requested/approved by a majority of the directors and the director consents to the appointment on an annual basis.

4.11. To ensure continuity of experience and knowledge, the Company has adopted a process of staggered continuity and re-election of directors, in terms of the MoI.

5. Meetings

5.1. Quorum

The quorum necessary for transacting business will be a majority of directors (50% + 1) present in person, or linked by telephone or video conference facilities.

A duly convened meeting of the Board at which a quorum is present will be competent to exercise all or any of the authorities, powers and discretions vested in or exercisable by the Board.

5.2. Attendance

Professional advisors, officers or members of staff whose input may be required may be invited to the meetings, at the discretion of the Chairman.

No invitee will have a vote at meetings of the Board or form part of the quorum for Board meetings.

The Chairman must excuse from the meeting or from any item on the agenda any directors/attendees present who may have or may be considered by the Board to have a conflict of interest.


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If the appointed Chairman, deputy Chairman and lead independent director are absent from a meeting, the members present will elect one of the members present to act as Chairman.

Members will be evaluated on their attendance records and their preparation for and contributions at meetings.

5.3. Frequency

The Board will hold sufficient scheduled meetings to discharge all its duties as set out in this charter, subject to a minimum of four meetings per year.

Additional meetings will be held as necessary at the instance of a director.

Disclosure of the number of meetings held in the year and attendance of each director will be recorded in the annual report.

Directors will use their best endeavours to attend meetings and prepare thoroughly.

Directors are expected to participate fully, frankly and constructively in discussions and other activities and to bring the benefit of their particular knowledge, skills and abilities to the table.

Directors who are unable to attend will advise the Group Company Secretary in advance, with reasons.

5.4. Agenda

The Chairman may meet with the Group Chief Executive and Group Chief Financial Officer and/or Group Company Secretary prior to a meeting to discuss important issues and agree the agenda.

The Board must establish an annual work plan for each year to ensure all relevant matters are addressed in the agendas of meetings planned for the year.

The annual plan must ensure proper coverage of matters laid out in this charter. More critical matters will be attended to each year while other matters may be dealt with by rotation over a three-year period. The number, timing and length of meetings as well as agendas are to be determined in line with the annual plan.

Unless under exceptional circumstances, members and other invitees will be notified at least five working days in advance of a meeting and such notification will include the venue, time, date and agenda items to be discussed.

5.5. Annual general meeting

The Chairman of the Board will attend the annual general meeting of the Company’s shareholders to chair the meeting and answer any questions on the Board’s activities.

5.6. Minutes

The Group Company Secretary, or in the absence of the Group Company Secretary, the person to whom this function has been delegated, will be the secretary of the Board.

The minutes must be completed as soon as possible and an action report circulated to members not later than 30 days after the meeting. The minutes must be formally approved by the Board at its next scheduled meeting.

The Group Company Secretary will attend and minute all meetings and record the proceedings and decisions taken, the details of which will remain confidential, except to the extent that disclosure is required by law or regulation. The approved minutes of the meetings will be circulated to the Board and other relevant personnel as directed by the Board.


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5.7. Proceedings

To support quality decision-making, directors will be informed in an efficient and timely manner prior to meetings and, as far as possible, be provided with sufficient information to prepare adequately on all agenda points to be discussed.

Questions arising at any meeting will be decided by a majority of votes. In the event of equal votes, the Chairman will have a second or casting vote.

A resolution adopted by written consent (given in person or by electronic communication) of a majority of Board members will be as valid and effective as if it had been passed at a duly convened meeting of the Board, provided that each director had received notice of the matter to be decided.

6. Duties and Responsibilities of the Board Without detracting from the generality of the role of the Board described in paragraph 3, the Board is responsible for the following specific activities, which should be carried out in accordance with the Act, the Listings Requirements of the JSE Limited (Listings Requirements) and King III:

6.1. Strategic

Formulating, approving and monitoring the strategy, goals, business plans and annual budgets, and approving any subsequent material changes in strategic direction or material deviations in business plans.

Considering and approving any material departure from strategic objectives and policies, including significant realignment of businesses which the group operates or is invested in.

Considering and approving any major transactions outside the ordinary course of the Company's business.

Evaluating all key assumptions and business indicators on which the Company's strategic objectives and policies are based.

Considering and reviewing all important group-wide policies regulating the Company's relations with its primary stakeholders and significant issues arising from these relationships, including, but not limited to, risk management and compliance, investment decisions and others falling within the ambit of the different Board Committees’ responsibilities.

6.2. Financial

Approving the annual financial statements, ensuring these fairly present the Company’s financial and non-financial position, contain proper disclosures and conform to the law. These should present a balanced and understandable assessment of the Company’s position and prospects, and should also report on corporate governance and risk management.

Explaining, in the annual report, the Board’s responsibility for preparing the accounts and ensuring it contains a statement by the external auditors about their reporting responsibilities.

Making a statement in the annual report on the Board’s terms of reference and activities, processes used in discharging its responsibility, membership of, and number of Board meetings, and attendance of directors over the year.

Reviewing and recording the facts and assumptions on which the Board relies to conclude that the Company will continue as a going concern in the coming financial year.

Approving the adoption of any significant change or departure in the accounting policies and practices of the Company.

Approving any material loan facilities from any financial institution or other body.

Approving the grant of financial assistance to any related or inter-related parties.

Recommending to shareholders any increase, reduction or alteration to the share capital of the Company and the allotment, issue or other disposal of shares of the Company (except for shares allotted under any share incentive scheme).


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Considering and, if appropriate, declaring or recommending the payment of dividends and any other distributions to shareholders, as deemed necessary and appropriate.

6.3. Human capital

Appointments to the Board, duly assisted by the Nominations Committee, including the appointment of the Chairman, Deputy Chairman, lead independent director, Group Chief Executive, executive directors, independent directors and non-executive directors, as well as the appointment of the Group Company Secretary. In making such appointments, the Board will first ensure the integrity, qualifications and skills of proposed individuals by receiving a CV from their sponsor, interviewing and/or otherwise reference checking, to ensure the person has not been disqualified from being a director.

Ensuring director orientation and induction processes are in place.

Recommending directors’ fee increases for shareholders’ approval.

Approving any share incentive scheme, applicable rules and any amendment to such rules as recommended by the Remuneration Committee for submission to shareholders.

Ensuring succession plans are in place for the Board as a whole through the Nominations Committee.

6.4. Infrastructure, technology and systems

Ensuring existing technology and systems are adequate to run the business properly and enable it to compete through the efficient use of its assets, processes and resources.

Ensuring key risk areas and key performance indicators of the business are identified and maintained, with particular attention to technology and systems.

Ensuring the Company’s property, plant and equipment are appropriate to the needs of the business.

6.5. Corporate governance, risk management, internal control and ethics

The Board will be responsible for ensuring that an adequate and effective process of corporate governance is established and maintained, and that King III principles are applied or, alternatively, where the requirements of King III are not applied, indicating the reason and explaining other processes implemented by the Company to address aspects of the requirement.

In particular, the Board will be responsible for:

Establishing formal and transparent arrangements for maintaining a relationship with external and internal auditors, ensuring timely and accurate disclosure to the Board of any information of material importance.

Developing clear definitions of levels of materiality or sensitivity to determine the scope and delegation of authority and ensuring it reserves specific powers and authority for itself. Delegated authority should be in accordance with the delegation of authority policy and framework, as amended from time to time.

On a regular basis (as determined by the Board), undertake performance/ effectiveness assessments of individual directors, the Chairman, Group Chief Executive, the Board as a whole and Board Committees.

Managing potential conflicts of interest between management and the Board. A director must be recused from the meeting when such matters are discussed and therefore may also not vote, although he/she would be counted for quorum purposes.

Ensuring a register of declarations of interest is kept, and updated regularly.

Ensuring an effective enterprise-wide risk management framework is implemented and maintained to identify risks, measure their impact and proactively manage and monitor these.

Ensuring senior executives are managing risk in an appropriate and informed manner.


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Developing and implementing a code of ethics outlining the values, ethics and beliefs that guide the behaviour of the Board and defining the ethical standards applicable to the Board and to all who deal with it.

Monitoring the social responsibilities of the Board to:

promote fair and equitable employment practices;

be sensitive and conscious to gender interests and concerns;

promote and be sensitive to preserving and protecting the natural environment;

promote and protect the rights of vulnerable groups; and

enhance and promote the rights and participation of related communities.

6.6. Regulatory, statutory and administrative

Directors, both executive and non-executive, carry full fiduciary responsibility and owe a duty of care and skill to the Company in terms of the Act and will, with the assistance of the Group Company Secretary, ensure full compliance with the Act.

Directors must ensure that the Company complies with all relevant laws, regulations and codes of business practice by implementing a robust compliance programme.

6.7. Board Committees

The Board delegates certain functions to dedicated Committees but without abdicating its own responsibilities.

Delegation is formal by way of terms of reference, which the Board will review and approve annually.

The Board will, as a minimum, establish an Audit Committee; a Social, Ethics and Transformation Committee; a Remuneration Committee and a Nominations Committee. It is noted that the Board has also established a Group Capital Oversight Committee.

The Chairman of each Committee will report back to the Board regularly, immediately after the Committee's latest meeting, in line with the general principle of transparency and full disclosure.

6.8. The Board's relationship with the Company’s stakeholders

The Board is ultimately responsible for determining the Company’s interactions with its material stakeholders and for overseeing the development of a formal stakeholder engagement plan.

To this end, the Board will familiarise itself with issues of concern to its material stakeholders.

The Board will regularly evaluate economic, political, social, legal and regulatory issues, as well as any other relevant external matters that may influence or affect the development of the business or the interests of shareholders and, if appropriate, obtain independent expert advice.

6.9. Integrated reporting

The Board will ensure the integrity of the Company’s integrated report. The Board should report to shareholders and other stakeholders on the Company’s economic, social and environmental performance. The Board should include commentary on the Company’s financial results to enhance the clarity and balance of reporting.

7. Individual Roles and Responsibilities

7.1. Chairman The Chairman:

Will be a non-executive director.

Is responsible for representing the Board to shareholders and indirectly to other stakeholders relating to performance.


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Is responsible for ensuring the integrity and effectiveness of the governance process of the Board.

Must, in collaboration with the Group Company Secretary, ensure the contents and order of the agenda are correct;

Is responsible for maintaining regular dialogue with the Group Chief Executive over all operational matters and will consult with the remainder of the Board promptly on any matter that gives him cause for major concern.

Will act as facilitator at Board meetings to ensure that no director, whether executive or non-executive, dominates discussion, that appropriate discussion takes place and that the relevant opinion among members is forthcoming and discussions result in logical and understandable outcomes.

Will play a crucial role in ensuring the Board is properly led.

7.2. Group Chief Executive The Group Chief Executive is responsible for:

Ensuring the Company achieves the strategic and financial objectives approved by the Board.

Monitoring and managing the day-to-day operational requirements and administration of the Company.

Developing and recommending business plans, policies and objectives for consideration by the Board and taking into consideration business, economic and political trends that may affect the operations of the Company.

Submitting reports, financial statements and consolidated budgets for consideration by the Board.

Implementing all approved plans, policies and programmes.

Overseeing the financial management of the Company including financial planning, cash flow and management reporting.

Involving himself in group affairs via the Executive Committee.

Acting as Chairman of the Executive Committee.

Not causing or permitting any practice, activity or decision by or within the Company that is contrary to commonly accepted good business practice, good corporate governance or professional ethics.

7.3. Lead Independent Director

Where the Company has appointed a lead independent director, he must:

Chair all meetings where the Chairman has a conflict of interest in respect of a specific matter.

Without undermining the office of the Chairman, provide leadership and advice at any board meeting or meeting of the shareholders of the Company where the Chairman has a conflict of interest.

If the Company does not have a deputy Chairman, chair board meetings which deal with the Chairman’s performance appraisal or succession.

Be aware that his role is to provide support to the Chairman and the Board of directors.

Preside at all meetings of the independent directors and call meetings of the independent directors where necessary.

Serve as principal liaison between the independent directors and the Chairman.


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7.4. Group Company Secretary

The Group Company Secretary or, in the absence of the Group Company Secretary, the person to whom the function has been delegated, will be the secretary of the Board.

The Board will recognise the pivotal role to be played by the Group Company Secretary in achieving good corporate governance and empower this individual accordingly.

The Group Company Secretary is accountable to the Board to:

guide the directors collectively and individually on their duties, responsibilities and powers;

make directors aware of any law relevant to the Company; report any failure on the part of the Company or a director to comply with the MoI

or the Act; ensure board procedures are followed and reviewed regularly; ensure applicable rules and regulations for conducting the affairs of the Board are

complied with; facilitate a programme for the induction and ongoing development of directors; maintain statutory records in accordance with legal requirements; guide the Board on how its responsibilities should be properly discharged in the

best interest of the organisation; keep abreast of, and inform, the Board of current and new developments regarding

corporate governance thinking and practice; and fulfil all other functions assigned to the position by the Act and by any other

legislation. 7.5. Individual directors

Non-executive directors may meet separately with management, without executive directors present.

Directors act jointly when discharging their duties and no individual director has authority to act on behalf of the organisation unless specifically authorised or requested by the Board.

Directors are jointly and severally accountable for board decisions and actions.

Directors have to declare and avoid conflicts of interest with the Company and must account for any advantages gained in discharging their duties on behalf of the group.

Directors who have a real or prospective interest in any of the businesses of the organisation should declare this interest at a board meeting as soon as they become aware of such specific interest.

On first appointment and once every year, or at any time when circumstances change, all directors will, in good faith, disclose to the Board for recording any business or other interest that is likely to create a potential conflict of interest, including:

all business interests, direct or indirect in any other company, partnership or business venture;

membership to trade, business or other economic companies; shareholding, share options and/or other interests in the Company; any direct or indirect interest in any transaction with the Company; and any gifts, monies, commissions, benefits or other favours extended or received

from any party because of any business dealings with the organisation.

In addition to the generality of the required disclosures above, directors will at the start of each meeting, in accordance with the Act, where a director has a personal financial interest in a matter to be considered at the meeting or knows that a related person has a personal financial interest in the matter, immediately disclose this interest to the Board and will:

disclose any material insights in the matter and may, on request of the Board, disclose any observations or pertinent insights in the matter;

leave the meeting for the duration of deliberations on the matter; be counted for quorum purposes, but not for voting purposes; and not execute any document relating to the matter, unless the Board specifically


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requests or directs the director to do so.

If a director acquires any personal financial interests post approval or conclusion of an agreement, he/she must promptly disclose the nature and extent of the interest and material circumstances relating to the acquisition.

When a director resigns or is removed from office before the expiry of his/her term, he/she will disclose to the external auditors and the Board the reasons for resignation or removal.

7.6. Appointment on other boards (must be read in conjunction with the Conflicts of Interest policy)

Any director will be at liberty to accept appointment on other boards, provided that such appointment does not give rise to any conflict of interest with the Company or contracting his time to such an extent that he is unable to participate effectively as a director of the Company, and has been approved by the Board.

8. Reporting

The Board will report in accordance with the disclosure requirements included in the Act, the Listings Requirements and King III.

The Chairman or, in his absence, another director, will attend the annual general meeting of the Company's shareholders to answer questions on matters falling within the ambit of the Board's terms of reference.

9. Access

Any director, partner of the external auditors, head of internal audit, head of risk or any member of a Committee may bring to the notice of the Chairman, Group Chief Executive or Group Chief Financial Officer any material matter which he/she deems appropriate.

10. Evaluation

Evaluation of the Board, Committees and individual directors, including the Chairman, will be performed at least annually. This evaluation process will be twofold, namely to review the governance system and processes supporting effective leadership and, secondly, against predetermined criteria to assess both group and individual performance.

11. Remuneration

The remuneration of directors will be reviewed by the Remuneration and Nominations Committee, and they will be paid according to the MoI and the approval of shareholders by special resolution.

Executive directors will not be compensated for their services.

Non-executive directors will not be eligible to receive share or related incentives.

Remuneration of newly appointed board members will be payable in the month of first attendance as members.

12. Amendment of Charter

This charter will be reviewed by the Board annually to ensure it remains relevant to the business objectives of the Company. The review process will be initiated by the Group Company Secretary in consultation with the Chairman.

Approved by the Board of Alexander Forbes Group Holdings Limited on 26 November 2015.


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Board work plan

Item

Meetings

Ad Hoc Mar Jun Aug Nov

Approval of minutes of previous meetings.

Matters arising from minutes and other: Items to be listed and usually covered by papers

Group Chief Executive Report

Group Chief Financial Officer Report

Reports on Strategic Projects

Corporate Actions

Report back on board’s self-assessment review

Budget approval for the forthcoming financial year

JSE Compliance Review

Approve annual financial statements for the current financial year and consider of final dividend

Approval of the year end results announcement

Approval of the Notice of AGM, IAR and related items

Business Unit Presentations (alternatively at quarterly board dinners)

Annual Review of Group Authorities Matrix

Annual Review of Board Committees’ Terms of Reference

Board reviews its effectiveness (annual evaluation).

Annual review of the Board Charter.

Approval of interim results announcement and consideration of interim dividend

Approval of Sponsor Renewal / Annual Fee


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Appendix 4: Nominations Committee Terms of Reference

1. Introduction

a. It is recorded that the Nominations Committee is established as a Committee of the board of directors of Alexander Forbes Group Holdings Limited (“Holdings”) and its subsidiaries (“the Group”);

b. These terms of reference are subject to the provisions of the Companies Act, the Group’s Memoranda of Incorporation, the JSE Listings requirements, the King Code on Corporate Governance (“King III”), and any other applicable law or regulatory provision.

c. The purpose of these terms of reference is to set out the Committee’s role and responsibilities as well as the requirements for its composition and meeting procedures.

2. Membership

a. The Nominations Committee (“Committee”) shall consist of not less than three non-executive directors appointed by the board of directors of Holdings (“the Board”), the majority of who shall be independent directors.

b. The Committee Chairman shall be independent and shall be appointed by the Board.

c. The Committee may invite members of the Board and management of the group to attend meetings as invitees.

d. The Committee shall nominate a Committee Secretary, for the time being the Company Secretary of the board.

3. Role

a. The Committee has an independent role, operating as an overseer and a maker of recommendations to the board for its consideration and final approval, as well as delegated the authority of the board as recorded in these terms of reference.

b. The Committee does not assume the functions of management, which remain the responsibility of the executive directors, officers and other members of senior management.

c. The Committee shall regularly review the board structures, size and composition and make recommendations to the boards with regards to any adjustments that are deemed necessary in order for the boards to execute their duties effectively.

d. The Committee will have due regard to the principles of governance and codes of best practice.

Appointment of New Directors

a. The Committee shall ensure that a formal process for the appointment of directors is established, including: o Identification of suitable members to the board, o Performance of reference and background checks of candidates prior to nomination, o Formalising the appointment of directors through an agreement between the Company

and the director.


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b. The Committee shall make recommendations to the Board on the appointment of new

executive, non-executive and independent directors, including making recommendations on the composition of boards in the Group generally and the balance between executive, non-executive and independent directors appointed to the boards.

c. The Committee shall be responsible for identifying, evaluating and nominating suitable candidates for appointment to subsidiary boards and recommending, for the approval of the relevant board, to fill board vacancies as and when they arise.

In making any recommendations to boards on new appointments, the Committee must consider:

o the needs of the board, in terms of disciplines, skills, experiences and any other characteristics required at that time,

o the general character requirements for the role of Director, including independence, integrity, tough-mindedness and respect for the values and principles of the Group,

o affirmative action and employment equity requirements,

o the composition of the board, including executive directors, non-executive directors and independent directors,

o the programme of retirement and succession of directors.

d. The Committee shall present a list of candidates to the Board at any time candidates are sought. The committee must ensure that all candidates are available, willing and suitable.

e. All potential candidates are to be considered in accordance with the Fit and Proper Policy for

Directors.

f. The appointment of independent, non-executive and executive directors to subsidiary boards is delegated by resolution of the Committee to the Group Chief Executive, subject to the approval of the Group Chairman. However, reports as to such appointments must be received by the Committee at the next scheduled meeting for noting.

Continuity, succession and rotation

a. The Committee shall put in place plans for succession, in particular for the Group Chairman, Group Chief Executive and Senior Management.

b. The Committee shall make recommendations to the board for the continuation (or not) in

service of any director that has reached or exceeded the age of 70. This will be followed for the applicable director/s on an annual basis.

c. The Committee shall recommend directors that are retiring by rotation, for re-election, if evaluation of such directors deems this to be appropriate.

d. The appointment and dismissal of the Group Chief Executive’s direct reports are to be referred to the Committee for approval. However, the appointment and dismissal of executive directors to the Board of Alexander Forbes Group Holdings Ltd are to be recommended by the Committee but approved by the Board.

Performance and development

a. The Committee shall consider the performance of the directors and take steps to remove directors who do not make an appropriate contribution.


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b. Following the Committee’s discussion of individual directors’ performance, feedback will be provided to directors on a one-on-one basis by the Group Chairman. In the case of the Group Chairman’s performance, feedback will be provided by the Lead Independent Director.

c. The Committee shall ensure that inexperienced directors are developed through a mentorship programme.

4. Meetings

a. The Committee must hold sufficient scheduled meetings to discharge all duties as set out in these terms

of reference, subject to a minimum of at least two meetings being held per annum.

b. Further meetings in addition to those scheduled may be called at the instance of the Board or its Chairman, at the request of a Committee member or the Group Chief Executive.

c. The notice of each meeting of the Committee, confirming the venue, time and date and enclosing an agenda of items to be discussed, shall be forwarded to each member of the Committee and invited attendees at least one week prior to the date of the meeting.

d. The quorum for decisions of the Committee shall be at least two members present. Individuals in attendance at Committee meetings by invitation may participate in discussions but do not form part of the quorum for Committee meetings.

e. The Committee shall normally invite the Group Chief Executive, Group Chief Financial Officer

and Group Human Resources Executive to attend meetings as invitees and to make proposals as necessary. Additional invitations may be extended to other members of senior management, assurance providers, professional advisers and board members at the Committee’s instance.

f. Committee members must attend all scheduled meetings of the Committee, including meetings called on an ad hoc basis for special matters, unless prior apology with reasons, has been submitted to the Chairman or Company Secretary.

5. Proceedings

a. Unless varied by these terms of reference, meetings and proceedings of the Committee will be governed by the Company’s Memorandum of Incorporation regulating the meetings and proceedings of directors and committees.

b. The Committee Secretary shall take minutes of meetings. Any director may, provided that there is no conflict of interest and with the consent of the Chairman, obtain copies of the Committee’s minutes.

c. No Committee attendee shall participate in or be present for any discussion or decision in respect of their own appointment.

6. Remuneration

Committee members will be remunerated as approved in advance by shareholders in general meeting, on recommendation of the Board.


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7. General

a. The Committee, in carrying out its tasks under these terms of reference, may obtain such outside or other independent professional advice as it considers necessary to carry out its duties.

b. The Committee must establish an annual work plan for each year to ensure that all relevant matters are covered by the agendas of the meetings planned for the year. The annual plan must ensure proper coverage of the matters laid out in these terms of reference: the more critical matters will need to be attended to each year while other matters may be dealt with on a rotation basis over a three-year period. The number, timing and length of meetings and the agendas are to be determined in accordance with the annual plan.

c. These terms of reference shall be reviewed on an annual basis and may from time to time be amended, as required, subject to the approval of the board.

d. The Committee shall be subject to an annual review of its performance.

e. The Group Chief Executive may communicate any decisions that impact on subsidiary boards to that relevant board.

ADOPTED BY THE NOMINATIONS COMMITTEE AT ITS MEETING OF 25 AUGUST 2016

APPROVED BY THE ALEXANDER FORBES GROUP HOLDINGS LTD BOARD AT ITS MEETING HELD ON 26 AUGUST 2016 Nominations committee work plan

Item

Meeting

Mar Jun Sep Nov Special

Approval of minutes of previous meetings

Matters arising from minutes

Approve workplan for the ensuing year.

Committee reviews its effectiveness - annual evaluation.

Report back on the Committee’s self-assessment

Evaluation of Non-Executive and independent directors

Recommendation of Re-election of Directors

Annual Review of Terms of Reference

Talent Review

Review Succession Plans


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Item

Meeting


Review and recommendation of board and committee

appointments

Ad Hoc

Consider the appointment and dismissal of the Group Chief

Executive’s direct reports.

Ad Hoc

Ratify executive appointments made by the Group Chief

Executive and Chairman at subsidiary boards for the past

quarter.

Ad Hoc


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Appendix 5: Remuneration Committee Terms of Reference

1. Introduction

a. It is recorded that the Remuneration Committee is established as a Committee of the board of directors of Alexander Forbes Group Holdings Limited (“Holdings”) and its subsidiaries (“the Group”);

b. These terms of reference are subject to the provisions of the Companies Act, the Group’s Memoranda of Incorporation, the JSE Listings requirements, the King Code on Corporate Governance (“King III”), and any other applicable law or regulatory provision.

c. The purpose of these terms of reference is to set out the Committee’s role and responsibilities as well as the requirements for its composition and meeting procedures.

2. Membership

a. The Remuneration Committee (“Committee”) shall consist of not less than three non-executive directors appointed by the board of directors of Holdings(“the Board”), the majority of whom shall be independent directors.

b. The Committee Chairman shall be independent and shall be appointed by the board. The Chairman of the Board shall not be the Chairman of the Remuneration Committee.

c. The Committee may invite members of the board and management of the group to attend meetings as invitees.

d. The Committee shall nominate a Committee Secretary, for the time being the Company Secretary of the board.

3. Role & Objectives

a. The Committee has an independent role, operating as an overseer and a maker of recommendations to the board for its consideration and final approval, as well as delegated the authority of the board as recorded in these terms of reference.

b. The Committee does not assume the functions of management, which remain the responsibility of the Holdings executive directors, officers and other members of senior management.

c. The Committee will have due regard to the principles of governance and codes of best practice;

d. The role of the Committee is to assist the board to ensure that: o The Company has a remuneration policy and philosophy that is aligned with its long term

business strategy, its business objectives, its risk appetite and values. o The remuneration policy and philosophy is appropriately applied throughout the Company

and its subsidiaries. o The Company remunerates directors and members of the Group Executive Committees

(“Group Executives”) fairly and responsibly; and o The disclosure of remuneration is accurate, complete and transparent.

4. Responsibilities

a. The Committee shall oversee the setting and administering of remuneration at all levels in the Group;


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b. The Committee is to determine, agree and develop the Company’s general policy on Group

Executive remuneration for approval by the board;

c. The Committee shall ensure that the mix of fixed and variable pay, in cash, shares and other elements, meets the Group’s needs and strategic objectives;

d. The Committee has the delegated authority of the board to carry out the responsibilities referred

to in these terms of reference:

o determine specific remuneration packages for Group Executives, including but not limited to basic salary, benefits in kind, any annual bonuses, performance-based incentives, share incentives, pensions and other benefits; and

o determine any criteria necessary to measure the performance of Holdings executive directors in discharging their functions and responsibilities.

(The delegation of authority to the Committee does not change the ultimate responsibility of the board for remuneration)

e. The Committee will endeavour to give the Group Executives every encouragement to enhance

the Company’s performance and to ensure that they are fairly, but responsibly, rewarded for their individual contributions and performance;

f. The Committee will review the terms and conditions of Group Executives’ employment, taking

into account information from comparable groups where relevant;

g. The Committee shall consider the results of the evaluation of the Group Chief Executive and other Group Executives in determining remuneration;

h. The Committee will be kept informed of relevant information for other senior managers in the

Group;

i. The Committee shall regularly review incentive schemes to ensure continued contribution to shareholder value and that these are administered in terms of the rules;

j. For reasons of conflict of interest, the Committee will not determine the remuneration or terms

of any consultancy agreement of any non-executive director, although it may make recommendations to the Board if requested;

k. Where shares or share options are to be offered to non-executive directors, shareholders must

approve this offer in a general meeting prior to the allocation being implemented;

l. The Committee will co-ordinate its activities with the chairperson of the board and the chief executive as well as consult them in formulating the Committee’s remuneration policy and when determining specific remuneration packages;

m. The Committee should review the performance of individual directors at the same time as

reviewing independent non-executive remuneration and make recommendations in respect of independent non-executive fees each year;

n. The Committee is responsible for establishing the selection criteria, selecting, appointing and setting the terms of reference for any remuneration consultants who advise the Committee;

o. The Committee will ensure that the remuneration report is put to a non-binding advisory vote

at the annual general meeting of shareholders;


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p. The Committee reviews and recommends to the Board the format of the disclosure of Directors’

remuneration to be made in the Company’s Integrated Annual Report;

q. The Committee will ensure that all benefits, including retirement benefits and other financial arrangements, are justifiably and correctly valued.

5. Meetings

a. The Committee must hold sufficient scheduled meetings to discharge all duties as set out in these terms of reference, subject to a minimum of at least two meetings being held per annum;

b. Further meetings in addition to those scheduled may be called at the instance of the Board or its Chairman, at the request of a Committee member or the Group Chief Executive;

c. The notice of each meeting of the Committee, confirming the venue, time and date and enclosing an agenda of items to be discussed, shall be forwarded to each member of the Committee and invited attendees at least one week prior to the date of the meeting;

d. The quorum for decisions of the Committee shall be at least two members present. Individuals in attendance at Committee meetings by invitation may participate in discussions but do not form part of the quorum for Committee meetings;

e. The Committee shall normally invite the Group Chief Executive, Group Chief Financial Officer and Group Human Resources Executive to attend meetings as invitees and to make proposals as necessary. Additional invitations may be extended to other members of senior management, assurance providers, professional advisers and board members at the Committee’s instance;

f. Independent Non-Executive Directors of Holdings that are not Committee members shall have a standing invitation to attend Committee meetings as invitees; and

g. Committee members must attend all scheduled meetings of the Committee, including meetings called on an ad hoc basis for special matters, unless prior apology with reasons, has been submitted to the Chairman or Company Secretary.

6. Proceedings

a. Unless varied by these terms of reference, meetings and proceedings of the Committee will be governed by the Company’s Memorandum of Incorporation regulating the meetings and proceedings of directors and committees;

b. The Committee Secretary shall take minutes of meetings. Any director may, provided that there is no conflict of interest and with the consent of the Chairman, obtain copies of the Committee’s minutes;

c. No Committee member or attendee shall participate in or be present for any discussion or decision in respect of their own remuneration.

7. Remuneration

a. Committee members will be remunerated as approved in advance by shareholders in general meeting;


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8. General

a. The Group Chief Executive shall be responsible for reporting back to the subsidiary boards on the proceedings of the Remuneration Committee as they apply to each subsidiary.

b. The Committee, in carrying out its tasks under these terms of reference, may obtain such outside or other professional advice as it considers necessary to carry out its duties.

c. The Committee must establish an annual work plan for each year to ensure that all relevant matters are covered by the agendas of the meetings planned for the year. The annual plan must ensure proper coverage of the matters laid out in these terms of reference: the more critical matters will need to be attended to each year while other matters may be dealt with on a rotation basis over a three-year period. The number, timing and length of meetings and the agendas are to be determined in accordance with the annual plan.

d. These terms of reference shall be reviewed on an annual basis and may from time to time be amended, as required, subject to the approval of the board.

e. The Committee shall be subject to an annual review of its performance.

ADOPTED BY THE REMUNERATION COMMITTEE AT ITS MEETING OF 25 AUGUST 2016 APPROVED BY THE ALEXANDER FORBES GROUP HOLDINGS LIMITED BOARD AT ITS MEETING HELD ON 26 AUGUST 2016


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Remuneration committee work plan

Item Meeting




Approve workplan for the ensuing year.

Committee reviews its effectiveness - annual evaluation.

Report back on the Committee’s self-assessment

Overall Payroll Increase

Review and Recommendation of Independent & Non-Executive Directors’ Fees

Approval of Group Chief Executive, Group and Divisional Exco’s Annual Salary Reviews

Review of post retirement benefits, including defined benefit fund and post retirement medical obligation.

Annual Review of Terms of Reference

Long-term incentive plan (LTIP) Scheme Update

Approval of Group Performance Contract

Approval of Group Chief Executive’s Performance Contract

Bonus Pool Determination Special: April

Bonus Approvals Special: Last last week of

May


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Appendix 6: Group capital oversight committee Terms of Reference

1. Introduction

The objective of the Group Capital Oversight Committee (“GCOC”) is to monitor and direct the Alexander Forbes Holdings and its subsidiaries (“the AF Group”) capital and risk profile. The committee will operate under the delegated authority from the Alexander Forbes Holdings Board (“the Board”) as a second line of defence committee responsible for providing independent and objective oversight of economic and regulatory capital management and liquidity of the AF Group.

2. Purpose

2.1 To monitor and oversee the capital management of the AF Group, so as to assist the Board in discharging its fiduciary duty to clients, investors, creditors and to the regulator. The following specific areas are to be covered:

a. The solvency and financial soundness of the Group (on a consolidated basis) as well as individual insurance and other regulated entities at a solo level;

b. The optimal allocation of capital; c. Ensuring appropriate liquidity positions and meeting regulatory liquidity requirements; d. To establish appropriate solvency and capital levels through stress and scenario testing; e. Review and approve the company’s capital management policies and procedures. f. Provide input to the board from a solvency and capital adequacy perspective with regard to

dividend policy and payment.

3. Composition

3.1 The Committee shall comprise of the following members: 3.1.1 Two non-executive members of the Board, 3.1.2 The Group CFO 3.1.3 A maximum of two additional members

3.2. The GCOC shall be chaired by an Independent member of the Board of Directors. 3.3. Other attendees or subject matter experts may be invited from time to time.

4. Powers

1.1. The GCOC is authorised, at the cost of AF, to obtain outside legal or independent professional advice

and to secure the attendance of outsiders with relevant experience and expertise if it considers this necessary.

1.2. The GCOC is authorised to seek any information it requires to fulfill the responsibilities set out in this

charter from any employee of AF or from any other source. It is entitled to meet with employees and third parties without the presence of management.

1.3. The GCOC shall at all times, have free and unfettered access to personnel, records, senior management, the internal auditor, the heads of all risk management functions and the external auditor to discuss matters or gather information in relation to capital matters.

1.4. A GCOC member is entitled to rely on information, or professional or expert advice given or prepared by an employee whom the member believes on reasonable grounds to be reliable and competent in relation to matters concerned, or a professional advisor or expert in relation to matters that the member


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believes on reasonable grounds to be within the person's professional or expert competence, provided both the following requirements are met: 1.4.1. The reliance was made in good faith. 1.4.2. The reliance was made after making an independent assessment of the information or advice,

having regard to the member's knowledge of AF and the complexity and structure and operations of AF.

1.5. The GCOC may form and delegate authority to sub-GCOCs, comprised of one or more members of

the GCOC. Any such sub-GCOC shall have a reporting responsibility to the GCOC, subject to the terms of its delegated authority.

5. Meetings

5.1 The GCOC shall meet as required but should meet at least quarterly. A quorum shall comprise of two members, one of whom shall be an independent non-executive.

5.2 An agenda will be prepared for each meeting and distributed to all members in advance of the meeting.

Minutes of meetings will be prepared and circulated to all GCOC members. The minutes will be included in the papers for the next GCOC meeting for approval by the GCOC and signing by the Chair and included in the papers to the first Board Meeting after the GCOC sat. A designate will be the secretary of the GCOC.

6. Responsibilities

6.1 Solvency and financial soundness

6.1.1 Reviewing outputs from the key financial process (for example asset versus liability management reports, economic capital reports, business plans etc.) and noting the impact on the structural exposure, capital, funding and liquidity position of the business.

6.1.2 Reviewing pricing and experience monitoring reports in respect of regulated entities. 6.1.3 Reviewing and approving proposed transactions such as dividend payments, the

increase/reduction in issued share capital, and considering the impact on capital and liquidity profile relative to risk appetite/tolerance;

6.1.4 Review and approving the group dividend policy.

6.2 Capital allocation

6.2.1 Reviewing and approving the approach, methodology and models used to calculate internal and regulatory capital requirements. This involves having an understanding of internal models employed by subsidiaries.

6.2.2 Reviewing the optimal capital structure proposed by management, with consideration of the available regulatory capital instruments, cost of capital, timing and size of expected capital requirements and current and future economic climate;

6.2.3 Reviewing any significant changes to the capital structure of the company; 6.2.4 Reviewing reports as to the current and projected capital adequacy of the Group and its

subsidiaries; 6.2.5 Reviewing available capital supply with consideration of the fungibility of capital within the

group, giving special consideration to the transferability of capital between subsidiaries that are in different legal jurisdictions;

6.2.6 Monitoring and providing oversight and challenge of balance sheet, investment and hedging strategies;

6.2.7 Reviewing the allocation of capital to subsidiaries / risk types / products, projects / ventures etc., with the objective of supporting business objectives, meeting minimum regulatory requirements and optimising current and future risk adjusted returns.


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6.3 Liquidity requirements

6.3.1 Oversight and monitoring of the Group liquidity profile and understand the ability to withstand a liquidity shock;

6.3.2 Review and approve the target allocation of liquid assets, with the aim of maximising returns subject to internal and regulatory liquidity requirements. The committee should monitor the execution relative to these targets;

6.3.3 Ensure the establishment of suitable liquidity management functions at both the Group and subsidiary levels. The former shall act as the reference point for all issues relating to risk, capital and liquidity management within the Group.

6.3.4 Reviewing the Group’s capital and liquidity position and the adequacy thereof; 6.3.5 Review management and Capital Management Committee’s reports which evidence the

effectiveness of the Group's capital and liquidity management functions and compliance with the relevant frameworks/policies by management;

6.4 Stress and scenario testing

6.4.1 Reviewing and approving suitable stress scenarios recommended to the committee for purposes of strategic planning and other regular stress testing processes (in terms of range, impact and parameterisation of scenarios selected);

6.4.2 Reviewing and approving, as required, stress and scenario testing results, ensuring that the impact of the stress and scenario tests on the current and projected future capital and liquidity position is understood and that information is used to inform decisions;

6.4.3 Reviewing and approving / recommending to the Board for approval, the management actions recommended to the committee based on the outcomes of the stress testing results.

6.4.4 Monitoring and oversight of the effectiveness and completeness of the stress and scenario testing process.

6.5 Review and approve the company’s capital management policies and procedures

Review and approve the capital management policies and procedures for both individual group companies and consolidated policies to ensure that they are in line with current regulations.

7. Other responsibilities

7.1 The GCOC may initiate reviews, as needed to fulfill the GCOC’s responsibilities in this charter. 7.2 The board may delegate other responsibilities to this GCOC from time to time.

ADOPTED BY THE GROUP CAPITAL OVERSIGHT COMMITTEE AT ITS MEETING OF 19 AUGUST 2016

APPROVED BY THE ALEXANDER FORBES GROUP HOLDINGS LIMITED BOARD AT ITS MEETING HELD ON 26 AUGUST 2016


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Appendix 7: Acquisitions Committee Terms of Reference

1. Introduction

The Acquisitions Sub-Committee (“the Committee”) is constituted as an ad hoc a sub-committee of the Board of Alexander Forbes Group Holdings Limited for the purposes of reviewing and if appropriate, recommending acquisitions and disposals to the board, as appropriate. The Committee is designed to make recommendations to the Board and act within the powers designated by the Board, notably to consider, guide and maintain proper oversight and governance in respect of proposed acquisitions and/or disposals.

2. Purpose

The purpose of these terms of reference is to set out the Committee’s roles and responsibilities as well as the requirements for its composition and meeting procedures.

3. Composition

3.1. The Committee shall consist of not less than three members appointed by the board of directors of Alexander Forbes Group Holdings Limited (“the Board”), comprising the Group Chief Executive, and a majority of non-executive directors of the Board..

3.2. The Chairman of the Board shall as far as appropriate be the Committee Chairman. If the Chairman is not present at a meeting, the members of the Committee shall appoint a chairman by majority vote of the Committee.

3.3. All Committee members are required to be members of the Board.

3.4. The Committee members shall collectively have sufficient skills and experience to fulfil their duties.

3.5. Any member of the Committee may be removed by majority vote of the Board, with or without cause.

3.6. The Group Company Secretary or his/her appointee shall be the committee secretary.

4. Objectives and duties

The Committee is tasked by the Board with the following: 4.1. The Committee is to review acquisitions and disposals, including business acquisitions, share

acquisitions and disposals, as well as team hires, fee sharing arrangements, joint ventures and start-up operations (collectively “transactions”), within the limitations of the Group Authority Limits Matrix, as approved by the board from time to time.

4.2. The Committee’s authority is limited to guiding the acquisition process and makes recommendations to the Board as to its view, having considered the details presented by management.

4.3. The Committee acts within the powers given to it by the Board from time to time.

4.4. The Committee’s deliberations shall take into account the Group Acquisitions Policy, as amended from time to time.

4.5. Should the Committee consider a transaction that potentially or certainly will present a conflict with the Marsh & McLennan Companies (“MMC”), including but not limited to the Mercer group of companies (“Mercer”), any Mercer representative or employee on the committee or normally in attendance at committee meetings shall be recused from such discussions and not have sight of any


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related documents. Should any other board member represented on the committee be similarly conflicted, the same governance principles will apply.

5. Authority

The Committee is authorised by the Board to:

a. Issue instructions as fall within its authority and delegate any of its authority as it deems appropriate; b. Investigate, monitor and report to the board on any activity within its terms of reference; c. Seek any information that it requires from any employee of the Group; d. Obtain outside legal or professional advice at the Company’s expense; e. Liaise with other Board Committees in respect of related responsibilities; and f. Review its Terms of Reference and propose changes where appropriate.

The Board may, on an ad hoc basis or through a formal documented process, mandate the Committee to fulfil any additional functions that it deems appropriate. It is noted that the executive management of the Company shall be primarily responsible for identifying appropriate opportunities for the Committee’s consideration. The Committee shall assist and advise executive management on such opportunities and all aspects of other material transactions not in the ordinary course of business, and matters related thereto.

6. Reporting

a. The Committee reports to the Board on all issues within its Terms of Reference

b. Minutes of the Committee’s meetings are available to board members on request.

7. Meetings

7.1. Meetings of the Committee will be held as frequently as the Committee deems appropriate. However, the Committee shall meet as least twice each year at a time preceding a quarterly board meeting. Further meetings may be called by the chairman of the Committee. The Chairman or a member of the Committee may request a meeting and, if agreed to by the chairman of the Committee, a meeting will be called;

7.2. The notice of each meeting of the Committee, confirming the venue, time and date, shall be forwarded to each member of the Committee prior to the date of the meeting;

7.3. Supporting documents shall be circulated to the Committee members and other invitees prior to each meeting.

7.4. The quorum for decisions of the Committee shall be at least three members present. Individuals in attendance at Committee meetings by invitation may participate in discussions but do not form part of the quorum for the Committee meetings and accordingly may not vote on any matter.

8. Proceedings

8.1 Unless varied by these terms of reference, meetings and proceedings of the Committee will be governed by the Company’s memorandum of incorporation regulating the meetings and proceedings of directors and committees.

8.2 The committee secretary shall ensure that meetings are minuted. The minutes must be formally

approved by the Committee at its next scheduled meeting.


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8.3 Minutes of the meeting, signed by the Chairman, are sufficient evidence that the matters referred to therein have been fully discussed and agreed, whether by way of a formal meeting or otherwise.

9. General

9.1. The Committee, in carrying out its tasks under these terms of reference, may obtain such outside or other independent professional advice as it considers necessary to carry out its duties, at the Company’s expense.

9.2. The Board will ensure that the Committee has access to professional advice both inside and outside the company in order for it to perform its duties.

9.3. These terms of reference may from time to time be amended, as required, subject to the approval of the Board.


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Appendix 8: Audit Committee Charter (Terms of Reference)

1. Purpose

1.1 This mandate shall apply to the Alexander Forbes Group Holdings Limited Audit Committee as well as to Audit Committees established for Alexander Forbes Group Companies, Divisions or Regions.

1.2 The Audit Committee (“Committee”) is a statutory committee of Alexander Forbes Group

Holdings Limited in respect of its statutory duties in terms of section 94(7) of the Companies Act, 2008, and a committee of the board of directors in respect of all other duties assigned to it by the Board.

1.3 The Committee is accountable to the Board and to Stakeholders. 1.4 The Committee does not relieve the directors of any of their responsibilities, but assists them to

fulfil those responsibilities. 1.5 The Committee assists the Board in discharging its duties relating to the oversight of the

following:

Risk management, control and governance. The quality and integrity of the Company’s reporting practices and controls and the

integrated reporting (including financial statements) of the Company. The external auditor’s qualifications, independence and performance. The performance of the internal audit function. The company’s process for monitoring compliance with laws and regulations and the code of ethics.

2. Committee membership (constitution)

2.1 The Audit Committee must be appointed at each Annual General meeting. 2.2 The membership of the Committee will comprise a minimum of three and maximum of five

independent non-executive directors of Alexander Forbes. A quorum will be two members of the Committee.

2.3 The Chairman of the Committee will be an independent non-executive director of the Company

and will be appointed by the Board. The Chairman of the Board shall not be eligible to be appointed as Chairman of the Committee.

2.4 The members of the Committee must collectively have sufficient skills and experience to fulfil their

duties including an understanding of the following: integrated reporting (which includes financial reporting), internal financial controls, external and internal audit processes, corporate law, risk management, sustainability issues, financial services, short and long-term insurance practices, information technology governance, and governance processes within the company. 2.4.1 At least one-third of the members of the Audit Committee at any particular time must

have academic qualifications, or experience, in economics, law, corporate governance, finance, accounting, commerce, industry, public affairs or human resource management.

2.4.2 The majority of the members are to be financially literate, and at least one member should have significant, recent and relevant financial experience (“Financial Expert”). The Committee members must keep up-to-date with developments affecting the required skill-set.


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2.4.3 The Board or Nomination and Governance Committee shall, from time to time, review

and recommend revision (when appropriate) of the composition of the Committee.

2.4.4 Members of the Committee should be provided with appropriate and timely training, both in the form of induction and on an on-going basis.

2.5 The Board shall have the power at any time to remove any members from the Committee and to fill any vacancies created by such removal. The board must appoint a person to fill any vacancy on the Audit Committee within 40 business days after the vacancy arises.

2.6 The Secretary of the Company shall be the Secretary of the Committee. 2.7 In order to enable the Alexander Forbes Audit Committee’s functions to be effectively performed,

subsidiary Audit Committees for certain Alexander Forbes Group Companies, Divisions or Regions may be established. The membership of the relevant Committee will normally include one or more executive directors of Alexander Forbes and where practical at least one independent non-executive director of the Alexander Forbes Group Company, Division or Region concerned. An independent non-executive director should act as Chairman of the Committee, failing which, an executive director of Alexander Forbes should act as Chairman of the Committee.

3. Responsibilities and duties of the audit committee

3.1 Combined Assurance and Internal Control

The Committee will ensure that a combined assurance model is applied to provide a coordinated approach to all assurance activities, and in particular the Committee should:

ensure that the combined assurance received is appropriate and that the significant risks

facing the company are adequately addressed via suitable mitigating controls; and monitor the relationship between the external assurance providers and the company; provide an effective counterbalance to executive management, thereby upholding the

independence of internal and external assurance providers, to enhance effectiveness.

The Committee will:

3.1.1 review the documented annual report by management of the design, implementation and effectiveness of internal financial controls. The nature and extent of the annual review of financial controls by management, including internal audit, should be determined by the Audit Committee. The committee should consider whether management has adequate capacity to perform the review.

3.1.1.1 based on the findings of the financial review conducted by management,

consider the appropriateness and effectiveness of the Company’s systems of internal control, including internal financial control, management information systems and business risk management. This should include providing guidance that ensures that internal financial controls are embedded in the business processes, evolve over time, are risk based, and cost effective.

3.1.1.2 Conclude and report to the board annually on the effectiveness of the

company’s internal financial controls, based on the information provided by management and all other sources of assurance.


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3.1.1.3 Material control inadequacies should be included in the report to the board and these should be included in the board’s report disclosed in the integrated report.

3.1.2 in particular, review the appropriateness and effectiveness of policies and procedures

for:

identifying business risks and controlling their impact on the Company; preventing or detecting fraud; ensuring that the Company complies with relevant international regulatory and

legal requirements.

3.1.3 review the appropriateness of the company’s risk management programme in identifying and managing significant risks;

3.1.4 review the Company’s statement on internal control systems prior to endorsement by the Board.

3.1.5 review major issues as to the adequacy of the Company’s internal controls and any special steps adopted in light of material or potentially significant control deficiencies.

3.2 Internal Audit

The Committee will be responsible for overseeing of internal audit, and in particular the Committee will:

3.2.1 review and approve the internal audit charter; 3.2.2 consider whether the objectives, organisation, resources and staffing plans, financial

budgets, audit plans and standing of the internal audit function provide adequate support to enable the Committee to meet its objectives;

3.2.3 satisfy itself that the internal audit coverage plans and approach are informed by and

addresses the strategy and risks of the company; 3.2.4 review and approve any required changes to internal audit scope or access to required

information; 3.2.5 review the co-operation and co-ordination between the internal and external audit

functions, and other assurance providers, as well as risk management and compliance functions to ensure completeness of coverage, effective use of resources, and avoid duplication, as well as deal with any issues of material or significant dispute or concern;

3.2.6 consider the appointment, performance assessment, dismissal or re-assignment of the

head of the internal audit; 3.2.7 ensure that the head of internal audit reports functionally to and has unrestricted access

to the Chairman of the Committee; 3.2.8 consider the results of work performed by, and the conclusions of the internal audit

function. 3.2.9 review the adequacy of management’s corrective action taken in response to significant

internal audit findings, and any significant differences of opinion between management and the internal audit function;


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3.2.10 assess and evaluate the independence and effectiveness of the internal auditor

function, in accordance with its mandate; ensure that the internal audit function is subject to an independent quality review, as and when the Committee determines it is appropriate. The Committee should report to the board on the assessment from internal audit on the adequacy of internal controls.

3.3 External Audit

The Committee is responsible for recommending the appointment of the external auditor and to oversee the external audit process and in this regard the Committee shall:

3.3.1 be directly responsible for nominating for appointment, terms of engagement, retention,

compensation, resignation or dismissal of, the external auditors, as well as oversight of the work of the external auditors. The external auditors shall report directly to the Committee and the Chairman shall sign the engagement letter on an annual basis. If the external auditors resign, the Committee should investigate the issues giving rise to such resignation and consider whether any action is required;

3.3.2 ensure that the appointment of the auditor complies with relevant legislation (including

the Companies Act, and the Auditing Professions Act 2005); 3.3.3 discuss and review with the external auditors before the audit commences, the nature

and scope of the audit, the impact of regulatory changes and related audit requirements, and the auditors’ quality control procedures. Consider whether any significant ventures, investments or operations are not subject to external audit, and the impact thereof;

3.3.4 develop and recommend to the board the Company’s policy in relation to the provision

of non-audit services by the external auditor and ensure compliance with this policy with regard to consultancy, advisory, or any other work undertaken by the auditor; pre-approve any proposed contract with external audit for the provision of non-audit services to the company.

3.3.5 develop and recommend to the board the Company’s policy regarding rotation of

external audit partners; 3.3.6 set clear hiring policies for employees or former employees of the external auditor; 3.3.7 consider any material problems, reservations and observations, or any potentially

contentious accounting treatments or judgements, or significant unusual transactions, or going concern issues arising from the external audit; identify key matters arising in the current year’s management letter, consider management’s responses and satisfy itself that issues are being dealt with properly;

3.3.8 assist with the resolution of any differences of opinion between the external auditors

and management; 3.3.9 obtain external auditors assurance that adequate accounting records are being

maintained; 3.3.10 to review and monitor the external auditors’ credibility, independence and objectivity

and the effectiveness of the audit process, taking into consideration relevant professional and regulatory requirements, and their audit and non-audit fees. The Committee should assess annually the qualification, expertise and resources of the external auditors, including the lead and engagement partners and obtain a report on


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the audit firm’s own internal quality control procedures. The Audit Committee should obtain written confirmation of the external auditor’s independence and report on the independence of the External Auditor in the annual financial statements.

3.3.11 to ensure co-ordination where more than one audit firm is involved; 3.3.12 to review and monitor the content of the audit report in relation to the key audit matters.

3.4 Integrated Reporting

The Audit Committee should oversee integrated reporting and should have regard to all factors and risks that may impact on the integrity of the integrated report. With due consideration of matters raised either by internal or external assurance providers:

3.4.1 examine and review the annual financial statements, the interim reports, the

accompanying reports to shareholders, the preliminary announcement of results, shareholders’ circulars, prospectuses and any other announcement regarding the Company’s results or other financial information to be made public, prior to submission and approval by the Board focusing particularly on:

major issues regarding accounting principles and financial statement

presentation; the implementation of new systems; tax and litigation matters involving uncertainty; any significant changes in the selection or application of accounting principles; major judgemental areas; the basis on which the Company has been determined as a going concern, capital

adequacy; internal control; compliance with accounting standards, local and international compliance with

stock exchange and legal requirements; the effect of major adjustments processed at year-end; including

significant adjustments resulting from the audit compliance with the financial conditions of loan covenants;

Any finance/off-balance sheet structures or changes to existing finance/off balance sheet structures, from an accounting treatment, risk and control perspective.

significant transactions not directly related to the Company’s normal business; review of forward looking statements, to ensure these statements provide a

proper appreciation of the key drivers that will enable the company to achieve these forward statements;

to review interim results and summarised financial information, in line with IAS 34, the standard on Interim Reporting.

3.4.2 review the annual (integrated) report and accounts taken as a whole to ensure they

present a balanced and understandable assessment of the position, performance and prospects of the Company; review the quality of information produced to ensure reliability and integrity;

3.4.3 Ensure that sustainability issues are appropriately reported; The Audit Committee

should review the disclosure of sustainability issues in the integrated report to ensure that it is complete, timely and reliable and does not conflict with the financial information. The Audit Committee should recommend to the board to engage an external assurance


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provider on material sustainability issues (if considered appropriate) and if done, should consider the independence of this external assurance provider.

3.4.4 review the external auditors proposed audit opinion and schedule of unadjusted errors;

review analyses prepared by management/external auditor setting forth significant financial reporting issues and judgements made in connection with the preparation of the financial statements, including the effects of alternative accounting methods on the financial statements;

3.4.5 to discuss and resolve any significant problems or reservations arising from the interim

and final audits and any matters the auditors wish to discuss (in the absence of management, where necessary);

3.4.6 to review measures to enhance the credibility and objectivity of the financial statements

as well as any evidence that comes to its attention that brings into question any previously published financial information and to consider actions that could be taken by the board to publicly correct any material misinformation.

3.4.7 meet to review and discuss the annual audited financial statements and interim financial

statements with management and the independent auditor, including reviewing the Company’s specific disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations”;

3.4.8 review the expertise, resources as well as experience and suitability of the company’s

finance function, and disclose the results of the review in the integrated report and make any recommendations for change to the board.

3.4.9 The Audit Committee should provide a summary of its role and details of its composition,

number of meetings and activities, in the integrated report. The report should:

describe how the Audit Committee carried out its functions; and state whether the Audit Committee is satisfied that the external auditor was

independent. Comment as appropriate on the financial statements, accounting practices, and

internal financial controls, including disclosure controls, of the company.

3.4.10 The Audit Committee should recommend the integrated report for approval by the board.

3.5 Risk Management

Risk management is an integral component of the Audit Committee oversight process. In relation to risk management, the Audit Committee is:

3.5.1 Responsible for the oversight of the development and implementation of a policy and a

plan for a systematic, disciplined approach to evaluate and improve the effectiveness of risk management processes within the company.

To ensure that:

3.5.1.1 Systematic documented, formal risk assessments are performed using a top-

down approach that considers the risks affecting the various income streams of the company, the critical dependencies of the business, the sustainability and the legitimate interests and expectations of stakeholders.


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3.5.1.2 Risk Management is integrated into the day-to-day activities of the company.

3.5.1.3 Frameworks and methodologies are implemented to increase the probability of anticipating unpredictable risks.

3.5.1.4 Management’s risk response provides for the identification and exploitation of opportunities to improve the performance of the company.

3.5.1.5 Effective and continual monitoring of risk management takes place.

3.5.1.6 There are processes in place enabling complete, timely, relevant, accurate and accessible risk disclosure to stakeholders.

3.5.2 discuss the Company’s major financial and accounting risk exposures and the steps

management has undertaken to mitigate them. The Audit Committee should specifically have oversight of financial reporting risks; internal financial controls; fraud risks as they relate to financial reporting; and IT risks as they relate to financial reporting.

3.5.3 To review the annual report from Group Internal Audit on the effectiveness of the risk

management.

3.6 Taxation

To receive and review any status reports from the General Manager Tax and consider any significant issues as may be required.

3.7 Governance

Together with external and internal audit, to review developments in corporate

governance and best practice and consider their impact and implications for the Alexander Forbes Group processes and structures.

To consider the disclosure about the role of the Audit Committee to be included in the annual report.

To evaluate and monitor the regulatory governance requirements and code of business conduct within the Group.

To ensure that the principles of the King Report on Corporate Governance as set out in the Code of Corporate Practices and Conduct are being embedded within the Group; and

To be available to advise the Chairman of the Board on any questions relating to the financial affairs and internal controls (including financial, operating and compliance controls and risk management) of the Group.

To consider and report on other topics, as may be required by the Board.

3.8 IT Governance

In its oversight of IT, the Audit Committee:

3.8.1 should consider IT as it relates to financial reporting and the going concern of the company as well as IT risk management, related controls and IT governance and should specifically oversee: IT risks and controls, business continuity and data recovery, IT security and data privacy;

3.8.2 should consider the use of technology to improve internal control and audit coverage

and efficiency: 3.8.3 may need to rely on advice from outside or inside the company on IT matters, and


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3.8.4 should be provided with regular information from the IT Steering Committee, IT

management and internal and external assurance providers regarding significant IT risk and control matters.

3.9 Sustainability

The Audit Committee is charged with:

3.9.1 General oversight and reporting of sustainability which has been delegated by the board to

it. The Audit Committee should assist the board by reviewing the integrated report to ensure that the information contained in it is reliable and that it does not contradict the financial aspects of the report.

3.9.2 overseeing the provision of assurance over sustainability issues.

3.10 Ethics, Compliance, and Whistleblowing

The Committee will be responsible for monitoring the ethical conduct of the Company, its executives and senior officials, by:

3.10.1 reviewing any statements on ethical standards or requirements for the Company and

assisting in developing such standards and requirements. Periodically, review the Company’s code of ethics to ensure that it is relevant and up-to-date. Review the process for communicating the code of ethics to company personnel.

3.10.2 reviewing the procedures in place to ensure that the Company:

is in compliance with the requirements of the Memorandum of Incorporation; is in compliance with the law and regulations of any other applicable statute and of

controlling bodies; will identify any violations of ethical conduct; is addressing environmental and social issues.

3.10.3 Receive and deal appropriately with any concerns or complaints, whether from within

or outside the company, or on its own initiative relating to:

The accounting practices of the company; The content or auditing of the company’s financial statements; The internal financial controls of the company; Internal Audit; or Any related matter.

3.10.4 reviewing significant cases of employee conflicts of interest, misconduct or fraud, or any

other unethical activity by employees or the Company. 3.10.5 recommending on any potential conflict of interest or questionable situations of a

material nature. 3.10.6 To review arrangements by which staff and other stakeholders of the Alexander Forbes

Group may, in confidence, raise concerns about possible improprieties in matters of financial reporting or other matters, with a view to ensuring that arrangements are in place for the proportionate and independent investigation of such matters and for appropriate follow-up action.


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To consider the major findings of internal investigations and management’s response thereto.

3.10.7 To review the effectiveness of the system for monitoring compliance with laws and

regulations (including the management’s semi-annual letters of representation) and the results of management’s investigation and follow-up.

3.10.8 Findings of any examinations by regulatory agencies, or internal or external audits. 3.10.9 To review any legal and compliance matters, including tax compliance, litigation,

disputes, and claims.

4. Reporting and accountability

4.1 The Committee has an independent role with accountability to both the board and the shareholders.

4.2 The Committee will not assume the functions of management, which remain the responsibility of

the executive directors, company officials and other members of senior management. 4.3 The Chairman of the Committee shall account and report to the Board for its activities, findings

and conclusions and make recommendations to the Board concerning matters arising from the above responsibilities.

4.4 The Audit Committee must report to the shareholders on its statutory duties: how its duties were

carried out; if the committee is satisfied with the independence of the external auditor; the committee’s view on the financial statements and the accounting practices; and whether the internal financial controls are effective. To this end, the Chairman (or, in his absence, an alternate member) of the Committee shall attend the Annual General Meeting to answer questions concerning matters falling within the ambit of the Committee.

4.5 The Committee has decision-making authority with regard to its statutory duties in terms of the

Companies Act and is accountable in this respect to both the board and shareholders. On all responsibilities delegated to it by the board outside of its statutory duties, the Committee will make recommendations for approval by the board.

5. Meetings and proceedings

5.1 Unless varied by this mandate, meetings and proceedings of the Committee will be governed by the Company’s Memorandum of Incorporation regulating the meetings and proceedings of directors and committees and the requisite listings requirements (JSE Limited, etc.).

5.2 Meetings of the Committee will be held as frequently as the Committee considers appropriate,

but it will normally meet not less than four times a year. Further meetings may be called by the Board or any member thereof, including members of the Committee, the external auditors, and the head of internal audit.

5.3 The Group Companies, Divisional or Regional Audit Committee meetings will be held at least

twice a year. 5.4 The following persons will normally be in attendance at Committee Meetings:

the Group Chairman the Group Chief Executive the Group Chief Financial Officer


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the Group Risk and Compliance Executive the Group IT Executive the Head of Internal Audit the Head of Group Tax the Group Company Secretary

representatives from the external auditors invitations to attend Committee meetings will be extended to any other Board Members,

senior executives and professional advisers as deemed appropriate by the Committee.

The Committee or its Chairman should meet annually, or as requested, with the external auditors, the Head of Internal Audit and management in separate sessions to discuss any matters that the Committee or these groups believe should be discussed privately with the Committee.

5.5 The Chairman of the Audit Committee should participate in setting and agreeing the agenda of

the committee. 5.6 Reasonable notice of meetings and the agenda shall be given to the members of the Committee,

the Chairman of the Board, and all attendees to make proposals as necessary. 5.7 Only members shall have a vote at meetings of the Committee. 5.8 Minutes of meetings shall be taken by the Committee Secretary and shall be reviewed and

approved by the members of the Committee. The minutes of all meetings of the Committee, or summaries thereof, shall be submitted to the Board. The minutes of all meetings of Group Companies, Divisional or Regional Audit Committees are to be included in the papers of the Alexander Forbes Audit Committee meetings.

5.9 From time to time, the Chairman of the Committee will attend meetings of the Group

Company/Subsidiary/Divisional Audit Committees.

5.10 The Secretary shall circulate the minutes of meetings of the Committee to all members of the Board and the Chairman of the Committee shall report on the Committee’s proceedings and findings to the next meeting of the Board of the Company.


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6. Authority of the committee

The Committee in carrying out its tasks under this mandate:

6.1 is authorised to investigate any activity within its mandate; 6.2 may consult with and seek any information it requires from any employees and all employees

shall be required to co-operate with any request made by the Committee in the course of its duties, in accordance with agreed upon protocols;

6.3 may obtain such internal, external or other independent professional advice and to secure the

attendance of outsiders with relevant experience and expertise, if it considers this necessary, to carry out its duties;

6.4 The Committee may form, and delegate authority to, subcommittees and may delegate authority

to one or more designated members of the Committee.

7. Annual review of the charter and performance

7.1 The Audit Committee reviews and reassesses the adequacy of this mandate annually and recommends any proposed changes to the Board for approval.

7.2 The Committee shall evaluate and report to the Board on the Committee’s operating effectiveness

and performance and compliance with the Mandate at least annually by way of a self-assessment. This report is to be submitted to the board and to stakeholders in the integrated report.

8. Fees

8.1 Committee members not holding executive office in the organisation or wider Group, shall be remunerated for their services on the Committee as determined by the Group Remuneration Committee and confirmed by the Group’s shareholders annually.

8.2 The Board shall decide on the value of fees to be paid, which shall be subject to review, by the

Board, from time to time.

Annexure of Definitions: Independent Director An independent director is defined as a non-executive director who: expresses opinions, exercises judgement and makes decisions impartially; meets the requirements for independence and / or membership of the Audit Committee in terms of the SA

Companies Act, 71 of 2008 and King III Chapters 2 and 3. the board affirmatively determines that the director has no material relationship with the Company; does not receive remuneration contingent upon the performance of the company. is not a professional advisor to the Company or the group other than in a director capacity; and does not

accept any consulting, advisory, or other compensatory fee from the Company; is not affiliated with or employed by a present or former internal or external auditor or legal advisor of the

Company; is not a representative of a shareowner who has the ability to control or significantly influence management

or the Board; does not have a significant direct or indirect interest in the company (which exceeds 5% of the group’s

total number of shares in issue or is material to his personal wealth)


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has not been a prescribed officer or full-time employee of the Company or any other related or inter-related company in any of the preceding three financial years;

has not been involved in day-to-day management of the company’s business at any time during the previous financial year.

is not a material supplier to, or customer of the Company or group; has no significant contractual relationship with the Company or group; such that a reasonable and informed third party would conclude in the circumstances that the integrity, impartiality or objectivity of that director is compromised by that relationship.

is free from any business or other relationship which could be seen to materially interfere with the individual’s capacity to act in an independent manner;

is not a member of the immediate family of any person who falls within any of the criteria set out above. Financial Expert A financial expert is defined as a person with the following attributes:

an understanding of generally accepted accounting principles and financial statements; the ability to assess the general application of generally accepted accounting principles in connection

with the accounting for estimates, accruals and reserves; experience preparing, auditing, analysing or evaluating financial statements that present a breadth

and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the Company’s financial statements, or experience actively supervising one or more persons engaged in such activities;

an understanding of internal controls and procedures for financial reporting; and an understanding of Audit Committee functions.

The financial expert must have acquired the attributes through one or more of the following means:

education and experience as a principal financial officer, principal accounting officer, controller, public accountant or auditor or experience in one or more positions that involve the performance of similar functions;

experience in actively supervising a person holding one of the foregoing positions; experience in overseeing or assessing the performance of companies or public accountants with

respect to the preparation, auditing or evaluation of financial statements; or other relevant experience. ADOPTED BY GROUP AUDIT COMMITTEE AT ITS MEETING OF 25 AUGUST 2016

APPROVED BY THE ALEXANDER FORBES GROUP HOLDINGS LIMITED


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Audit Committee agenda

Ref to mandate

(G)roup (S)ubsidiary

Meetings Ad Hoc Mar Jun Aug Nov

ADMINISTRATION AND GENERAL

5.8 Approval of minutes of previous meetings.

5.8 Review reports and minutes from Subsidiary Audit Committees.

Matters arising from minutes and other: Items to be listed and usually covered by papers

7.2 Review the committee’s mandate, reassess the adequacy of this mandate, and recommend any proposed changes to the board.

5.5 Approve agenda for the ensuing year.

7.1

Audit Committee reviews its effectiveness (annual evaluation).

3.4.10 Prepare Audit Committee annual report.

FINANCIAL AND INTEGRATED REPORTS AND SYSTEMS

3.4.1

Review the quality of financial information produced to ensure reliability and integrity. Examine, review and recommend Board approval of the quarterly and annual financial statements, and integrated report.

3.4.1 Consider the impact of the implementation of new systems.

3.4.1 Review and minute the basis on which the Company has been determined as a going concern.

3.4.1 Review changes in accounting policies and practices.

3.4.1 Review and consider major judgmental areas.

3.4.5 Review the impact of significant adjustments resulting from the audit.

3.4.1 Review compliance with conditions of loan covenants.

RISK MANAGEMENT AND INTERNAL CONTROL

3.5

Review report on Group Risk Management activities.

3.1 Review report on Group Internal Control activities.

3.1.4 Review company’s statement on internal control activities.

INTERNAL AUDIT AND COMBINED ASSURANCE

3.2.1 Review and approve the internal audit charter.

3.2.2 Review and approve internal audit plan, scope of work, and sufficiency of budget/resources.

3.2.4 Review and approve any required changes to internal audit scope or access to required information.

3.2.8 3.2.9

Review the results of audit work performed and the adequacy of management’s corrective action taken.

3.2.10 Assess the performance of the internal audit function.

G

3.10.1 Review report on significant frauds and ethics violations.

G/S

3.1 Review combined assurance model. G/S

EXTERNAL AUDIT

3.3.1 Nominate an external Auditor for the ensuing financial year.

G


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Ref to mandate

(G)roup (S)ubsidiary

Meetings Ad Hoc Mar Jun Aug Nov

3.3.1 Review and approve the audit fees and terms of engagement.

G/S

3.3.4 Review and pre-approve all non-audit services; G/S

3.3.7 3.4.4 3.4.5

Review external audit opinion, current year’s management letter and management’s responses. Review and monitor the content of the audit report in relation to the key audit matters.

G/S

3.3.10 Evaluate the performance and effectiveness of the external auditors.

G/S

OTHER MATTERS

3.10.9 Review report of pending legal and regulatory proceedings.

G/S

3.6 Review report on taxation matters. G/S

3.8 Review reports on IT Governance matters. G

3.9 Review the provision of assurance over sustainability issues and reporting.

G

3.10.3 Review and deal with concerns or complaints relating to accounting practices, internal control, auditing or related matters.

G


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Appendix 9: SET Committee Terms of Reference

1. Introduction

The Social, Ethics and Transformation Committee (“the Committee”) is constituted as a committee of the Board of Alexander Forbes Group Holdings Limited in terms of section 72(4) of the Companies Act 71 of 2008 read with Regulation 43 of the Companies Regulations, 2011. The Board is committed to transformation and recognises the role Alexander Forbes has to play as a Corporate Citizen of South Africa in contributing to a social and ethical environment as well as in eliminating unfair discrimination in the workplace and to create an enabling environment for growth of previously disadvantages groups. Through the Committee, the Board wants to engender the spirit of transformation through sustainable programmes, where leadership is held accountable to infuse transformation into the day to day activities of business. The Board recognises that transformation is a key business objective and accordingly, strategies are required to ensure the successful transformation of the group, including equity ownership, board representation, management, employment equity, skills and enterprise development, preferential procurement, social development and other industry driven initiatives. The Board aims to engender reasonable and adequate ethics through sustainable programmes, where leadership is held accountable to constantly infuse good ethics into the day to day activities of business. The Committee assists the Group in overseeing and monitoring its activities in relation to social and economic development, good corporate citizenship, corporate social responsibility, ethical behaviour and managing environmental impact; consumer relations and labour and employment development. The Committee does not perform any management functions or assume any management responsibilities. However, it will report to the shareholders at the Company’s annual general meeting on matters within its mandate. These terms of reference are subject to the provisions of the Companies Act, the Company’s Memorandum of Incorporation and other applicable laws and regulatory provisions.

2. Purpose

The purpose of these terms of reference is to set out the Committee’s roles and responsibilities as well as the requirements for its composition and meeting procedures.

3. Composition

3.1. The Committee shall consist of not less than three members appointed by the board of directors of Alexander Forbes Group Holdings Limited (“the Board”). The Committee members shall collectively have sufficient skills and experience to fulfil their duties.

3.2. Any member of the Committee may be removed from the Committee, with or without cause, by a majority vote of the Board.

3.3. Committee members may appoint alternate members to act in their stead when they are not available.

3.4. The Chairman of the Board shall as far as appropriate be the Committee Chairman. If the Chairman is not present at a meeting, the members of the Committee shall appoint a chairman by majority vote of the Committee.

3.5. Members of senior management, including the Group Chief Executive, the Group Chief Financial Officer, the Group HR Executive, the Group Risk Officer, Group Transformation Manager and the


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heads of the group’s main business units in South Africa, shall be invited to meetings of the Committee, as well as any other attendees as deemed appropriate by the Chairman.

3.6. The Group Company Secretary or his/her appointee shall be the committee secretary.

4. Objectives and duties

The Committee is tasked by the Board with the following: 4.1 Transformation

a. Ensuring that transformation is taking place in the business by reviewing and monitoring equity ownership,

board representation, management, employment equity, skills and enterprise development, preferential procurement, social development and other industry driven initiatives;

b. Providing input into transformation initiatives and policies in the Group; c. Approving all transformation plans and ensuring there is a disciplined, co-ordinated and sustainable

approach to transformation; d. Monitoring progress against these plans and holding management responsible, in accordance with

various performance measures, for success or failure to implement the plans; e. Ensuring compliance with Broad-Based Black Economic Empowerment and related legislation; f. Reviewing results of any surveys undertaken and management’s response to transformation initiatives; g. Reviewing and approving the Transformation Report included in the Company’s integrated annual report;

and h. Ensuring effective communication on transformation issues between the board, management and various

stakeholders. The Committee will monitor the activities of the Company having regard to the legal requirements and best practice on matters of: 4.2 Social and Economic Development, including:

a. Monitoring the Company’s standing on social and economic development in terms of the goals and

purposes of:

the ten United Nations Global Compact Principles, the Organisation for Economic Cooperation and Development (“OECD”) recommendations

regarding corruption, the Employment Equity Act, and the Broad-Based Black Economic Empowerment Act.

b. Endorsing the Company’s Corporate Social Investment initiatives, including sponsorships and donations,

and annually reviewing same.


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4.3 Ethics

Ensuring that the Group builds and sustains an ethical culture through: Endorsing the Group’s Code of Ethics and submitting same to the Board of Directors for approval. Ensuring that the Code of Ethics is integrated into the operations throughout the Group and ensuring that

the Group takes measures to achieve adherence to these standards of ethics in all aspects of the business. Assessing, monitoring and reporting the ethical performance of the Group, as appropriate. Endorsing an Ethics Management Training Programme, and reviewing the performance of the

Programme. Reviewing the results of periodic employee attitude surveys. Identifying ethical risks and opportunities.

4.4 Environment, Health, Public Safety, Consumer Relationships & Labour

Monitoring the Company’s activities on matters of: The environment, health and public safety, including the impact of the Company’s activities and of its

products or services. Consumer relationships, including the Company’s advertising, public relations and compliance with

consumer protection laws. Labour and Employment Relationships, including the Company’s standing in terms of the International

Labour Organisation Protocol on decent work and working conditions, and the Company’s employment relationships and its contribution toward the educational development of its employees.

4.5 Good Corporate Citizenship

a. Reviewing the Company’s practices to ensure that they are consistent with good corporate citizenship,

including the promotion of equality, the prevention of unfair discrimination, developing our communities, reducing corruption and recording sponsorships, donations and charitable giving;

b. Providing recommendations on any potential conflict of interest or questionable situations of a material nature.

5. Authority

The Committee is authorised by the Board to: Investigate any activity within its terms of reference and bring it to the Board’s attention should the occasion

require it; Seek any information that it requires from any employee of the Group; Obtain outside legal or professional advice at the Company’s expense; Liaise with other Board Committees in respect of related responsibilities; and Review its Terms of Reference and propose changes where appropriate. It is noted that the Committee relies on the executives and senior management to implement its strategies and initiatives.

6. Reporting

c. The Committee reports to the Board on all issues within its Terms of Reference, including initiatives and scorecards.

d. Minutes of the Committee’s meetings are available to board members on request.


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7. Meetings

e. Meetings of the Committee will be held as the Committee deems appropriate. However, the Committee shall meet as least twice each year. Further meetings may be called by the chairman of the Committee. A member of the Committee may request a meeting and, if agreed to by the chairman of the Committee, a meeting will be called;

f. The notice of each meeting of the Committee, confirming the venue, time and date, shall be forwarded

to each member of the Committee at least ten working days prior to the date of the meeting, unless the members agree to a special meeting being called at shorter notice;

g. A detailed agenda, together with supporting documents, shall be circulated to the Committee members and other invitees at least five working days prior to each meeting.

h. The quorum for decisions of the Committee shall be at least two members present. Individuals in attendance at Committee meetings by invitation may participate in discussions but do not form part of the quorum for the Committee meetings and accordingly may not vote on any matter.

8. Proceedings

a. Unless varied by these terms of reference, meetings and proceedings of the Committee will be governed by the Company’s memorandum of incorporation regulating the meetings and proceedings of directors and committees.

b. The Committee shall establish an annual work plan for each year to ensure that all relevant matters

are covered by the agendas of the meetings planned for the year.

c. The committee secretary shall ensure that meetings are minuted. The minutes are to be completed within ten working days of the meeting and circulated for review. The minutes must be formally approved by the Committee at its next scheduled meeting.

d. Minutes of the meeting, signed by the Chairman, are sufficient evidence that the matters referred to therein have been fully discussed and agreed, whether by way of a formal meeting or otherwise.

9. General

a. The Committee, in carrying out its tasks under these terms of reference, may obtain such outside or other independent professional advice as it considers necessary to carry out its duties, at the Company’s expense.

b. The Board will ensure that the Committee has access to professional advice both inside and outside

the company in order for it to perform its duties.

c. These terms of reference may from time to time be amended, as required, subject to the approval of the Board.

ADOPTED BY THE SOCIAL, ETHICS & TRANSFORMATION COMMITTEE AT ITS MEETING OF 25 AUGUST 2016

APPROVED BY THE ALEXANDER FORBES GROUP HOLDINGS LIMITED BOARD AT ITS MEETING HELD ON 26 AUGUST 2016


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SET Committee Work Plan

Item

Meeting

Mar

Jun

Sep

Nov

2.2 Ad Hoc

Committee Administration and General



Approve work plan for the ensuing year.

Committee reviews its effectiveness – (annual evaluation). Approve report for IAR.

Review the Company's practices to ensure that they are consistent with good corporate citizenship and social, environmental, and ethical issues are addressed.

Recommending on any potential conflict of interest or questionable situations of a material nature.

Transformation responsibilities

Monitor the Company's standing to social and economic development in terms of goals and purposes particularly in respect of:

i. The Employment Equity Act

ii. Preferential procurement

iii. Social and Economic Development

iv. Broad-Based Black Economic Empowerment Act

v. Skills development.

Review targets for the Company in South Africa in respect of the above processes;

Advise the Board on specific strategies for transformation;

Consider and review progress against set goals and targets in relation to all aspects of the Group’s transformation strategy.

Review the skills audit report to understand if the company is experiencing any skill shortages and what plans are in place to address the shortage.

Reviewing and approving the Transformation Report included in the Annual Integrated Report


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Item

Meeting

Mar

Jun

Sep

Nov

Ad

Hoc

Social & Economic Responsibilities

To monitor the Company's standing to social and economic

development in terms of the goals and purposes of:

i. The principles set out in the United Global Compact Principles;

ii. The OECD recommendations regarding corruption Endorse the Company's Corporate Social Investment programmes,

including sponsorships, donations and charitable giving.

Review annually the Company's Corporate Social Investment

programmes, including sponsorships, donations and charitable

giving.

Ethics responsibilities

Endorsing the Company's Code of Ethics (including core values)

and submits same to the Board of Directors for approval.

Endorse the ethics management training program;

Review performance of the ethics management training program;

Review results of periodic employee attitude surveys, and

Identify ethics risks and opportunities

Environment, Health, Public Safety, Consumer Relationships &

Labour

• Monitoring the Company's activities on environment, health and

public safety, including the impact of the Company's activities

and of its products or services.

• Consumer relationships, including the Company's advertising,

public relations and compliance with consumer protection laws.

Labour and Employment Relationships, including the Company's

standing in terms of the International Labour Organisation Protocol

on decent work and working conditions, and the Company's

employment relationships and its contribution toward the educational

development of its employees.

Ad Hoc

Drawing matters within its mandate to the attention of the Board as

the occasion requires;

Review the terms of reference and propose changes when

appropriate;

Reporting, through one its members to the Board on matters within

its mandate, and

Reporting, through one of its members, to the shareholders of the

company's annual general meeting on the matters within its

mandate.

Governance report 2017 - The Vault...Alexander Forbes Group Holdings Limited | FY2017 Governance...

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