31 MARCH 2015ALEXANDER FORBES GROUP HOLDINGS LIMITEDINTEGRATED ANNUAL REPORT

OUR BOARD COMMITTEES

RESPONSIBILITIES OF OUR BOARD COMMITTEES

The objectives and responsibilities of our board committees are detailed in their terms of reference, which can be found on our website. See here.

AUDIT COMMITTEE

The Audit Committee comprises three independent directors, Dr D Konar (chairman), Mr M Collier and Mr B Petersen, who were reappointed by shareholders at the company’s annual general meeting held on 28 October 2014.

The committee met four times during the period under review and meeting attendance is reflected in the table below:

Meeting attendance

 

Meeting dates

Committee member

3 Jun
2014

3 Sept
2014

26 Nov
2014

10 Mar
2015

D Konar (chairman)

M Collier

B Petersen

– Indicates in attendance
– Indicates apologies

The internal and external auditors, management of the operations for which the committee is responsible, the group chief financial officer, the group chief risk officer, the group IT executive and other board members and invitees, as considered appropriate by the committee’s chairman, attend committee meetings. The chairman of the Audit Committee is not the chairman of the board. The committee meets at least four times per year. Additional audit committees have been constituted at subsidiary board level. These committees are mandated to review the operations of the group’s subsidiaries. The group Audit Committee reviews their reports.

ACTIVITIES DURING 2014/15

During the year under review, the committee held four meetings and oversaw the following aspects of its workplan:

  • Reviewed the competence, qualifications, performance, appropriateness, expertise and experience of the group chief financial officer and confirmed his suitability in terms of the Listings Requirements.
  • Ensured application of the combined assurance model to provide a coordinated approach to all assurance activities.
  • Reviewed the annual integrated report and interim reports and results announcements related thereto.
  • Considered and approved going concern, liquidity and goodwill impairment assessments and matters associated therewith.
  • Responsible for overseeing internal audit, including its objectives, resources and the coverage of its plans, reviewed co-ordination with the external audit function and other assurance providers, considered the results of internal audit work performed and the adequacy of management corrective action taken in response to significant internal audit findings.
  • Responsible for overseeing the external audit process and work, nominating the external auditors’ appointment, agreeing the scope of audit and related matters and considered the external auditors’ independence.
  • Received feedback on proceedings at subsidiary audit committee meetings.
  • Ensured that normal risk management and assessment processes were in place, reviewed the company’s significant accounting and financial risks, and steps being taken to mitigate these.
  • Received regulatory reports and considered the solvency and capital position of the group.
  • Received and considered tax status reports.
  • Considered governance and reviewed regular IT governance reports.

The Audit Committee’s report appears here.

NOMINATIONS COMMITTEE

The Nominations Committee is chaired by the board’s lead independent director, Mr M Collier, with additional members comprising Mr H Meyer (independent director) and Mr MS Moloko (the non-executive chairman).

During the year under review, the Nominations Committee held four meetings as scheduled, as well as one special meeting. Meeting attendance is reflected in the table below:

Meeting attendance

 

Meeting dates

Committee member

4 Jun 2014

13 Jun
2014
(special)

3 Sept 2014

26 Nov 2014

10 Mar 2015

M Collier (chairman)

n/a

n/a

MS Moloko

H Meyer

A de Beer

n/a

n/a

n/a

L Hall-Kimm/JC Douin

n/a

n/a

n/a

J van Wyk

n/a

n/a

n/a

– Indicates in attendance
n/a – Indicates not yet a member or resigned

On 27 June 2014, membership of the committee was reconstituted with Mr Collier being appointed chairman of the committee and Messrs Moloko and Meyer continuing as members of the committee. The remaining members of the committee, Messrs A de Beer and J van Wyk and Ms L Hall-Kimm/Mr JC Douin, resigned from the committee on this date.

PERFORMANCE DURING 2014/15

During the year under review, the committee considered the following matters:

  • The appointment of directors, taking into consideration fit and proper reports and the requirements of the board’s terms of reference, and made recommendations to the board in respect of such director appointments.
  • Reviewed and approved updated terms of reference.
  • Reviewed the performance of the independent directors and the renewal of their contracts.
  • Discussed and approved the board chairman’s contract and his move to non-executive chairman.
  • Considered the constitution of the board and committees in terms of King III and JSE Listings Requirements and made recommendations to the board in this regard that were approved.
  • Assessed the independence of the group company secretary.
  • Discussed and approved the chairman’s contract and his move to non-executive chairman.
  • Considered and agreed that a recommendation be made to the board that the Retail subcommittee be discontinued and replaced by a Management Executive Committee.
  • Agreed on the recommended directors for rotation at the annual general meeting.
  • Approved a policy on the procedure for the appointment of directors.
  • Reviewed succession management.
  • Discussed talent management and leadership development.

REMUNERATION COMMITTEE

The Remuneration Committee is chaired by the board’s lead independent director, Mr M Collier, with additional members being Messrs H Meyer (independent director) and MS Moloko (the non-executive board chairman).

During the year under review the Remuneration Committee held five meetings as scheduled, as well as three special meetings. Meeting attendance reflected in the table below:

Meeting attendance

 

Meeting dates

Committee member

23 Apr 2014

4 Jun 2014

21 Jul 2014 (special)

3 Sept 2014

26 Nov 2014

4 Feb 2015 (special)

10 Mar 2015

20 Mar 2015 (special)

M Collier (chairman)

n/a

n/a

MS Moloko

H Meyer

A de Beer

n/a

n/a

n/a

n/a

n/a

n/a

L Hall-Kimm/JC Douin

n/a

n/a

n/a

n/a

n/a

n/a

J van Wyk

n/a

n/a

n/a

n/a

n/a

n/a

– Indicates in attendance
– Indicates apologies
n/a – Indicates not yet a member or resigned

On 27 June 2014, membership of the committee was reconstituted: Mr Collier was appointed chairman of the committee and Mr Moloko continued as a member of the committee, as did Mr Meyer. The remaining members of the committee, Messrs A de Beer and J van Wyk and Ms L Hall-Kimm/Mr JC Douin, resigned from the committee on this date.

PERFORMANCE DURING 2014/15

During the year under review, the Remuneration Committee held four special meetings in addition to its four scheduled meetings and oversaw the following aspects of its workplan:

  • Performed its annual self-assessment and received and considered the report in this regard.
  • Considered and approved long-term incentive plans for the group.
  • Approved the bonus pools available for each main business unit, executive annual bonuses and annual increases.
  • Reviewed performance in terms of the group scorecard.
  • Approved the 2014 long-term incentive and exit transaction incentive plans for participating employees.
  • Considered the independent director fee increase for recommendation to shareholders at the company’s annual general meeting.
  • Considered and agreed the overall payroll increase to be applied for the year.
  • Considered the valuation of the management share trust and made a recommendation in this regard to the board.
  • Approved allocations to the employee share trust.
  • Performed the annual review of its terms of reference and annual work plan and approved same.
  • Considered employees retention mechanisms.
  • Reviewed and commented on the group remuneration philosophy and policy.
  • Considered the results of an independent remuneration review and received feedback on the project items arising therefrom.
  • Approved the group scorecard.

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.

The membership of the Social, Ethics and Transformation Committee was revised in the 2014/15 financial year following the listing of the company on the JSE Limited on 24 July 2014.

The committee is currently chaired by the non-executive chairman of the board, Mr MS Moloko, with additional membership comprising Mr DJ Anderson (non-executive director) and Mr E Chr Kieswetter (group chief executive).

The group chief financial officer, group human resources officer, group chief risk officer and the business unit leaders are permanent invitees to committee meetings. The group company secretary acts as secretary to the committee.

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 Regulations; and
  • other functions that the board assigns it from time to time to assist the board in ensuring that the group remains a good and responsible corporate citizen.

The committee receives reports from other committees and in turn reports on relevant matters within its mandate to the board. One of its members must report to shareholders at the company’s annual general meeting on the functions of the committee.

The committee met three times during the period under review and meeting attendance is reflected in the table below:

Meeting attendance

 

Meeting dates

Committee member

3 June 2014

25 November 2014

9 March 2015

MS Moloko (chairman)

D J Anderson

n/a

n/a

E Chr Kieswetter

n/a

L Hall-Kimm

n/a

n/a

Y Themba

n/a

n/a

N Waithaka

n/a

n/a

– Indicates in attendance
– Indicates apologies
n/a – Indicates not yet a member or resigned

  • Mesdames L Hall-Kimm, Y Themba and Mr RN Waithaka resigned from the committee on the company’s listing on 24 July 2014.
  • Mr DJ Anderson was appointed to the committee with effect from 27 November 2014.
  • Mr E Chr Kieswetter was appointed to the committee following the company’s listing on 24 July 2014.

This report, which describes how the committee has discharged its responsibilities in respect of the financial year ended 31 March 2015, will be presented to shareholders at the annual general meeting to be held on 30 July 2015.

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 an annual workplan 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, and South Africa’s Employment Equity Act and Broad-Based Black Economic Empowerment Act;
  • 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.

PERFORMANCE DURING 2014/15

During the year under review, the committee oversaw the following aspects of its workplan (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. Alexander Forbes is a member of the Ethics Institute of South Africa and an ethics hotline is operated by independent service providers.

This year the committee directed a review of the group’s ethics policy, which resulted in a number of concrete outcomes, including the adoption and publication of a separate ethics code and policy. Refresher training for all employees, the inclusion of expanded ethics elements in our induction training and specialised training for directors on legislative and regulatory ethical implications and expectations were scheduled for the new year.

A member of the group executive is responsible for the implementation and success of a wide-ranging ethics programme.

The whistle-blower line received seven allegations which were all investigated. In total, 24 allegations of fraud and/or corruption were reported. Gross losses related to fraud and corruption amounted to R512 015, of which the largest single amount was R393 000. Of this, R170 000 was recovered. Total value of fraud prevented was in the order of R40 000.

One case of conflict of interest was substantiated and an employee of AFI dismissed.

There were no reported instances of discrimination reported in the year.

Labour
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. During the year under review, particular attention was given to the revised Broad-Based Black Economic Empowerment Codes of Good Practice and related developments in the Financial Sector Charter. Reports on the business’ B-BBEE verification by an independent rating agency were received and transformation progress reports were reviewed.

Skills development remains an area of focus and the various skills development programmes that have been implemented are reported on more fully here.

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. Particular focus has been given to the safe evacuation of employee in crisis situations. There was ongoing training and awareness-raising of employees around health and safety requirements; and our crisis management plan and evacuation procedures were reviewed.

Socio-economic development
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.

Sustainability
In considering a financial services group’s sustainability, direct environmental impact is limited. However, the group focuses on minimising its footprint and paying attention to its financial sustainability. Environmental practices were reviewed by the committee during the year under review. These matters are elaborated upon here.

Additional matters
The committee received regular updates on the group-wide treating customers fairly project implementation. The committee also reviewed and endorsed the responsible investing initiative spearheaded by Investment Solutions. The committee monitored the group and business unit’s social, ethics and transformation reports and reviewed the results of the annual employee employment equity survey.

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

Sello Moloko

Chairman

Sandton
30 June 2015

GROUP CAPITAL OVERSIGHT COMMITTEE

The group Capital Oversight Committee is chaired by an independent chairman, Mr H Meyer, with additional members, Mr D Anderson (non-executive director), Messrs E Chr Kieswetter and DM Viljoen (group chief executive and group chief financial officer, respectively).

The objective of the group Capital Oversight Committee is to monitor and direct the capital and capital adequacy risk profile of the group.

The committee convened its first meeting on 26 November 2014.

 

Meeting dates

Committee member

24 Nov
2014

9 Mar 2015

H Meyer (chairman)

D Anderson

E Chr Kieswetter

DM Viljoen

– Indicates in attendance
– Indicates apologies

Progress made in 2014/15

During the year under review, the committee held two meetings and:

  • adopted terms of reference and an annual work plan;
  • agreed additional training requirements for the committee, which were effected;
  • oversaw the development of a capital management policy;
  • reviewed solvency and liquidity assessments for the group and identified subsidiaries;
  • considered insured subsidiaries’ capital adequacy requirements and capital management;
  • reviewed the group’s projected capital and solvency position based on business planning and risk profiling;
  • considered the group’s capital structure and balance sheet management;
  • discussed updates in respect of consolidated supervision;
  • received feedback from the SAM Steering Committee;
  • approved a group capital optimisation plan;
  • considered the implications of the declaration of a dividend by the group in view of regulatory capital requirements; and
  • received an update on progress regarding the development of a policy for stress and scenario testing.