NVest Holdings Annual Integrated Report 2016

NVest Financial Holdings Limited -

INTEGRATED

ANNUAL

REPORT 2016

“It just proves what hard work, professionalism, dedication, outstanding client centric service and strong integrity can achieve.�

(NVest Financial Holding Limited Prospectus)

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INTEGRATED ANNUAL REPORT 2016 | NVest Financial Holdings Limited (NVFH)

NVest Financial Holdings Limited (NVFH) | INTEGRATED ANNUAL REPORT 2016

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contents Scope of this Report

05

Chairman’s Report

06

Chief Executive Officer’s Report

08

Directors 12

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NVFH: by the numbers…

15

NVFH: Our journey so far…

16

Corporate Governance & Sustainability Report

20

Social and Ethics Committee Report

28

Audit and Risk Committee Report

30

Remuneration Committee Report

34

Directors’ Responsibilities and Approval

36

Group Company Secretary’s Certification

38

Independent Auditor’s Report

40

Consolidated Annual Financial Statements

42

Statement of Financial Position

45

Statement of Comprehensive Income

46

Statement of Changes in Equity

47

Statement of Cash Flows

49

Notes to the Consolidated Annual Financial Statements

59

Analysis of Shareholders

96

General Information

97

Notice of AGM and Proxy

99

INTEGRATED ANNUAL REPORT 2016 | NVest Financial Holdings Limited (NVFH)

Scope of this Integrated Annual Report NVest Financial Holdings Limited (“NVFH” or “the Group”) is pleased to present this, its first Integrated Annual Report (“the Report”), after listing on the Alternative Exchange of the Johannesburg Stock Exchange (“JSE”) on 29 May 2015.

The Report provides a balanced view on both the financial and non-financial performance of the Group over the twelve months ended 29 February 2016 in respect of all our majority and wholly owned subsidiary business operations across South Africa.

The content of this Report is specifically aimed at providing NVFH’s key stakeholders with a holistic view and understanding of the economic, environmental, social and governance initiatives that are material to the long term success and sustainability of the Group.

The Integrated Annual Report and summary financial statements have been compiled in accordance with the integrated reporting principles contained in the Code of Corporate Practices and Conduct set out in the King Report on Corporate Governance for South Africa (“the King Code”). The summary annual financial statements have been prepared by our external auditors, Grant Thornton Cape Inc., and have been approved by the board of directors of the Group.

Given the impact of the listing of NVFH on its business and strategy, the Report contains references to forwardlooking statements in places. These statements are subject to risks and uncertainties which may result in the actual performance being materially different from what has been expressed or implied by such statements.

Stakeholders are thus advised not to place undue reliance on any forward-looking statements. NVFH will not update or revise any forward-looking statements, even if new information becomes available, other than as required in terms of the Listing Requirements of the JSE. An electronic version of the Report is available on the Group website: www.nvestholdings.co.za.

As a valued stakeholder, we welcome your feedback on the Report, which may be used to shape and guide the content and format of future reports. Please direct any feedback to iar@nvestholdings.co.za.

NVest Financial Holdings Limited (NVFH) | INTEGRATED ANNUAL REPORT 2016

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CHAIRMAN’S REPORT Dear Shareholders, The board of directors of NVest Financial Holdings Limited is pleased to present the Group’s first Integrated Annual Report as a listed business for the year ended 29 February 2016.

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INTEGRATED ANNUAL REPORT 2016 | NVest Financial Holdings Limited (NVFH)

The listing of NVFH on the JSE Alternative Exchange on 29 May 2015 was a key milestone within a remarkable journey of progressive growth dating back 30 years. The core business of the Group started in Port Elizabeth in April 1985 and has – through a combination of organic and inorganic growth – evolved into a leading Financial Services Provider with a diversified value proposition to clients.

That leaves me with the important task of congratulating Anthony and his Executive team and staff across the Group for the strong performance and, on behalf of the Board, to extend our gratitude to all the Group’s stakeholders, including shareholders, valued clients, business partners, advisors, management and employees, for their efforts and contributions during the past year.

This growth was the product of astute leadership, a steadfast commitment to investment fundamentals, relentless customer service and good old fashioned values of integrity and continually earning the trust of all stakeholders.

Finally, thank you to my fellow Board members for their commitment and dedicated input into the continued journey of success.

Yours faithfully,

That journey has culminated in a financial services Group as reported in the pages that follow, with total assets under management and administration exceeding R22.5 billion as at 29 February 2016, a staff compliment of 142 and a growing national footprint. The Group has a diverse set of financial services subsidiaries covering asset management, stockbroking, private client advisory, short term insurance, property investment and related services, estate planning, wills and fiduciary services.

_______________________ Jonathan Goldberg Group Chairman 23 May 2016

The 2015 listing was a tremendous success and has provided NVFH with greater profile and a springboard for future growth.

The response to the listing was overwhelmingly positive and contributed significantly to the raising of R324.8 million in capital during the 2016 financial year (R54 million: 2015). The ensuing focus has been, and will continue to be, how best to utilise that capital in the best interests of all stakeholders and in line with the Corporate Vision and Strategy of the Group.

The Board is of the view that, despite the broader backdrop of volatile equity markets and issues of national concern closer to home on service delivery, rising social unrest and sharp devaluations in the Rand, plenty of opportunities exist for acquisitive growth that will unlock significant synergistic value for the Group.

The listing has also been the catalyst for other important, positive developments, notably for management and staff to participate as valued stakeholders in the shareholding of the Group to ensure that there is a broadly distributed vested interest in the future sustainability of the Group.

The Board has embraced NVFH’s new operating landscape as a listed entity, by bedding down sound Corporate Governance forums and a culture of collective ownership across the Group in terms of Risk and Control. The appropriate Board sub committees, also reported more fully in the pages that follow, are maturing into well organised and functioning forums aligned to the Principles of the King Code of Corporate Governance.

Our focus in the year ahead, working closely with senior management, will be to grow the breadth and depth of capability within our ranks, to continue to grow existing business subsidiaries on the same client centric values that have become NVFH’s hallmark, and to actively pursue acquisitive growth opportunities.

This growth was the product of astute leadership, a steadfast commitment to investment fundamentals, relentless customer service and good old fashioned values...

NVest Financial Holdings Limited (NVFH) | INTEGRATED ANNUAL REPORT 2016

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CHIEF EXECUTIVE OFFICER’S REPORT 2015 will go down as a watershed year for the Group following the listing of NVFH on 29 May 2015, the subsequent acquisitions of 100% of the shareholding in NFB Finance Brokers Gauteng Pty Limited and an additional 51% shareholding in NVest Properties Limited.

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INTEGRATED ANNUAL REPORT 2016 | NVest Financial Holdings Limited (NVFH)

I am delighted to report to shareholders on the affairs and performance of NVFH for the financial year ended 29 February 2016.

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2015 will go down as a watershed year for the Group following the listing of NVFH on 29 May 2015, the subsequent acquisitions of 100% of the shareholding in NFB Finance Brokers Gauteng Pty Limited and an additional 51% shareholding in NVest Properties Limited.

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Equally pleasing is the strong underlying financial performance of the Group in our first year as a listed entity which saw the Group’s earnings after tax increase by approximately 72%.

This performance has been achieved in difficult operating conditions characterised by volatile world markets and a turbulent local and international political backdrop, showing the resilience of our operating model and strategy.

Before I provide a synopsis of the year under review, it is worthwhile reflecting briefly on the journey to get to this point and the compilation of this Integrated Annual Report.

• The origins of the Group date back to April 1985 in Port Elizabeth, when NFB was first launched, fundamentally as money market and gilt brokers.

• In July 2008, various of the associated, separately owned companies that were in operation at that time, restructured to become subsidiaries of the NVest Group and NVest was born.

• Over the past 30 years, the Group has steadily grown both organically and through targeted acquisitions - to evolve from a one dimensional client advisory business to a fully-fledged and diversified Financial Services Provider.

• The Group now offers a broad financial services proposition which includes stockbroking, insurance, property investment and related commercial property services and fiduciary and estate planning services to compliment the core business of private client financial advisory and asset management services.

• Assets under management and administration have grown steadily year on year and stand at R22.5 billion as at 29 February 2016. These are primarily private client and retail assets, with recent growth in the corporate and institutional markets.

• The 100% acquisition of NFB Finance Brokers Gauteng Pty Limited in September 2015 was the most recent key acquisitive growth step, which provides the Group with an established and scalable presence in Gauteng.

• The Group now consists of the following wholly owned and majority owned subsidiaries: - - - - - - -

NFB Insurance Brokers (Border) Pty Limited – short term insurance brokerage business (NVFH holds 76.67%) NFB Finance Brokers Port Elizabeth Pty Limited – financial advisory business (NVFH holds 65%) Independent Executor and Trust Pty Limited – fiduciary and estate planning business (NVFH holds 70%) NVest Property Services Pty Limited – commercial property services business (NVFH holds 76%) NFB Finance Brokers Eastern Cape Pty Limited financial advisory business (NVFH holds 100%) NFB Finance Brokers Gauteng Pty Limited - financial advisory business: (NVFH owns 100%) NFB Finance Brokers Western Cape Pty Limited financial advisory business (NVFH holds 100%)

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NVest Properties Limited - property services business: (NVFH owns 96%) NFB Asset Management Pty Limited – asset management business (NVFH holds 100%) NVest Securities Pty Limited - stockbroking business (NVFH holds 100%)

Whilst much has changed over time in terms of the structure and diversity of the underlying businesses, our philosophy of providing exceptional client service, tailored solutions, comprehensive research capabilities and excellent investment fundamentals remain as prominent now as when the first NFB advisory business was started.

RESULTS The Group has produced exceptional earnings growth compared to the 2015 financial year. Group subsidiaries have achieved good organic top line revenue growth. The following headlines summarise this strong performance: • Attributable net profit after taxation increased to R57.9 million (R33.6 million in 2015).

• Revenue increased by 88% to R216.4 million (R114.6 million in 2015).

• Earnings per share increased by 23% to 23.28 cents per share (18.93 cents in 2015).

• Headline earnings per share increased by 16.83% to 18.77 cents per share (16.07 cents in 2015).

• Share capital increased to R324.8 million (2015: R54 million) – through proceeds from the initial listing and the issue of shares during the year under review.

• Assets under management and administration of R22.5 billion as at 29 February 2016.

• Declaration of a final dividend of 4.8 cents per share (4 cents per share in 2015).

The significant revenue growth is due to a combination of strong contributions from existing business subsidiaries coupled with the acquisitions of 100% shareholding in NFB Finance Brokers Gauteng Pty Limited and an additional 51% shareholding in NVest Properties during the year under review.

The growing revenue stream, coupled with the prudent containment of costs, has translated into a profit after tax due to owners of R57.9 million (2015: R33.6 million). The Company has strong cash reserves. The intention is to apply these in acquisitions which will yield a better return than what the funds currently earn on call. The net asset value per share has increased resoundingly to 119.30 cents (2015: 31.28 cents) and the net tangible asset value per share to 92.01 cents (2015: 16.72 cents).

OPERATIONAL REVIEW • All of the NFB Financial Advisory subsidiaries (Eastern Cape, Port Elizabeth, Western Cape and Gauteng) businesses ended the year above budget and have exceeded expectations. Some additional commentary is set out below:

NVest Financial Holdings Limited (NVFH) | INTEGRATED ANNUAL REPORT 2016

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- NFB Finance Brokers Eastern Cape Pty Limited, headquartered in East London, is the primary contributor to revenue, having grown assets under management by some 23% to a current value of R8.8 billion. A major office refurbishment at NFB House, 42 Beach Road, East London is nearing finalisation and will significantly enhance the professional corporate identity of the Group.

- NFB Finance Brokers Gauteng Pty Limited has made a significant contribution to the overall financial performance of the Group since September 2015.

The integration of this business has been relatively seamless and the experience and acumen of the established team in Gauteng is greatly valued.

- NFB Finance Brokers Port Elizabeth Pty Limited, as a relative newcomer to the Group, has grown assets under management steadily to R260 million and continues to progress under the management of Alex Grunewald.

• Despite challenging equity markets, NVest Securities Pty Limited has achieved exceptional growth in assets under management and profitability. The offshore offering has bolstered the overall performance. Investment has been made in strengthening our resources and research capabilities during the year under review and we expect further growth in this arena.

• NFB Insurance Brokers (Border) Pty Limited continues to grow in the competitive short term insurance market and has had a much improved year under the new management of Michelle Wolmarans, having achieved steady growth in gross written premium compared to the prior financial year.

The focus continues to be on exceptional client service and vertical streamlining of front office and back office operations. There are potential headwinds in the possible amendments in legislation regarding binder agreements which generate significant income for this business and this will be monitored carefully as matters unfold.

• NVest Properties Limited is performing to expectations and the investment property portfolio continued to grow through acquisition in the year under review.

• NVest Property Services Pty Limited, a more recent majority owned addition to the Group, is growing gradually and will benefit from their move into the NFB building in East London in February 2016 as synergies are unlocked with the other business operations and client bases.

• Independent Executor and Trust Pty Limited has delivered strong growth in revenue and profit ahead of target and remains a valuable service offering to clients of the Group.

• NFB Asset Management Pty Limited has seen assets under management increase 15% from the end of the 2015 financial year to just under R3bn. It now offers both model portfolio and fund of funds investment solutions both locally and globally. NFB Asset Management continues to increase its distribution footprint by making its solutions available through a wider array of platforms to a group of IFA’s that now extends beyond NFB’s in-house advisory team. Investment research, management, administration and trading capability continues to grow through the development of both in-house and external resources. Given that fee levels are firmly established and that the bulk of internal development work has been completed we anticipate that the scale benefits of this business will shortly come through.

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STRATEGY AND NEW INITIATIVES The Group is actively evaluating acquisitive growth opportunities that will leverage scale and unlock synergies.

Opportunities will be assessed in line with the corporate vision and mission of the Group. In parallel, the focus on growing existing businesses organically through new client acquisition, supported by investment in technology and key strategic appointments to add Group wide value to existing people resources and capabilities, continues.

As each division grows, careful consideration is given to the Group’s cost footprint and the cost-to-income ratio.

The priority is to build a cost-efficient and sustainable business that is scalable going forward. To achieve this end, management is steadfast in its commitment to explore new ways of operating to manage costs effectively without constraining growth.

CORPORATE ACTIONS The Group has invested R89.8 million in new ventures during the 2016 financial year which includes the 100% equity stake acquisition of NFB Finance Brokers Gauteng Pty Limited.

The Group is well placed to grow through strategic acquisitions going forward and has over R132 million in cash available for investment.

PROSPECTS Despite volatile world markets, a turbulent Rand and uncertain political headwinds, the Group is positive about the year ahead. The Board and management believe that the Group is optimally positioned to capitalise on growth opportunities across several of its existing businesses as well as to give proper consideration to the option of diversifying the service offering further through acquisitive growth. The focus for the year ahead will be centred on the following themes: • Enhancing the enterprise wide Risk and Control framework to ensure that an appropriately robust risk management system is embedded across the Group.

• Embedding the new governance structures implemented post listing into mature, value adding forums, • Maintaining a consistent and strong cash flow, and to use this to fund current growth initiatives and to pay dividends consistent with the Dividend Policy.

• Providing exceptional client advice and service to attract new business inflows through investment in technology to improve operational efficiency and capabilities.

• Continuing to focus on top line revenue while paying due regard to operating margins.

INTEGRATED ANNUAL REPORT 2016 | NVest Financial Holdings Limited (NVFH)

SUBSEQUENT EVENTS

• Robert McIntyre resigned as an Executive Director • Travis McClure resigned as an Executive Director

As reported in the Audited Annual Financial Statements there were no subsequent events known to Directors that require reporting on.

CHANGES TO THE BOARD OF DIRECTORS The following changes were made to the Group’s board of directors during the year under review, driven by the need to restructure the Board post listing on 29 May 2015 and the acquisition of NFB Finance Brokers Gauteng Pty Limited: 24th March 2015 Resignations • Michael Sassoon resigned as a Non-Executive Director • Neil Eppel resigned as a Non-Executive Director

APPRECIATION: I would like to express my sincere appreciation to the Board for their sage advice throughout what has been a momentous year, to our shareholders for their trust, to my management team for their unwavering support, to all colleagues and staff across the Group for their hard work and dedication.

Finally, but importantly, to our clients and customers whose continued trust in our abilities is the greatest endorsement of our purpose – to turn knowledge into wealth, for all our stakeholders.

Yours faithfully

1st April 2015 Appointments • John Ross-Smith appointed to the Board as a NonExecutive Director • Jonathan Goldberg appointed to the Board as a NonExecutive Director and Chairperson.

• Philip Bartlett appointed to the Board as an Executive Director • Robert McIntyre appointed to the Board as an Executive Director • Siviwe Kwatsha appointed to the Board as a NonExecutive Director • Travis McClure appointed to the Board as an Executive Director

_______________________________ Anthony Denis Godwin Group Chief Executive Officer 23 May 2016

Resignations • Basil Russell resigned as an Executive Director • Frank Knox resigned as an Executive Director • Quentin Barnard resigned as an Executive Director 14th May 2015 • Frank Knox re-appointed to the Board as Financial Director 1st June 2015 Appointments • Dylan Schemel appointed to the Board as a NonExecutive Director 1st September 2015 Appointments • Michael Estment appointed to the Board as an Executive Director Resignations • Brendan Connellan resigned as an Executive Director • Gavin Ramsay resigned as an Executive Director • Philip Bartlett resigned as an Executive Director

The Group is well placed to grow through strategic acquisitions going forward and has over R132 million in cash available for investment.

NVest Financial Holdings Limited (NVFH) | INTEGRATED ANNUAL REPORT 2016

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DIRECTORS ANTHONY DENIS GODWIN (56) CHIEF EXECUTIVE OFFICER - EXECUTIVE DIRECTOR

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International Capital Markets Qualification (Registered Persons Examination), 2001 National Certificate in Wealth Management, 2005

Anthony has 29 years’ experience within the financial services industry and originally served as Managing Director and a leading financial advisor of NFB Private Wealth Management, the core and original company within the NVest group of companies. Anthony was appointed as Managing Director of NFB Finance Brokers Eastern Cape Proprietary Limited (trading as NFB Private Wealth Management) in 2004 and of the NVest Group in 2008 upon its formation.

Anthony is now the Group Chief Executive Officer of NVest Financial Holdings Limited, giving overall direction and leadership to the group of companies. Anthony also sits on the boards of a number of subsidiary companies within the Group. Anthony is a member of the Financial Planning Institute as well as a member of the Institute of Financial Markets. Anthony is an active member of Rotary and the current president of the East London Golf Club.

FRANK TERENCE KNOX (60) FINANCIAL DIRECTOR - EXECUTIVE DIRECTOR

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Bachelor of Commerce (University of the Transkei), 1985 Bachelor of Accounting Science (Honours) (University of South Africa), 1995 Advanced Certificate in Industrial Relations and Human Resources (Rhodes), 1997

Frank has approximately 30 years’ experience in the accounting and auditing field. Frank was initially employed as Financial Manager of NFB Private Wealth Management and thereafter the NVest Group and was promoted to the position of Group Financial Director in 2012, which position he retains as at the date of this Report. He is a member of the South African Institute of Professional Accountants - Centre of Tax Excellence.

MICHAEL ESTMENT (58) EXECUTIVE DIRECTOR

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B.A. Education (University of Port Elizabeth / NMMU) Postgraduate Diploma in Financial Planning (University of the Free State) CFP® designation (2009).

After graduating from the University of Port Elizabeth, South Africa, with a B.A. degree in 1981, Mike started his career at Barclays Bank where he developed credit facilities for the bank’s key Eastern Cape clients before moving on to running the Treasury Division of a national broking group in 1983. The NFB Group was incorporated in 1985 with Mike as a founding partner. His responsibilities included setting up the Treasury and Asset Management Divisions of the Group. Shortly after the Group opened its Johannesburg offices in 1988, he was asked to move from Port Elizabeth to Johannesburg, to run this key division. Since being promoted to Chief Executive Officer in 1994, his focus has been on employing and developing staff, product development and Group marketing. Subsequent to the listing of NVest Financial Holdings Limited on the JSE Altx, and the acquisition of NFB Finance Brokers Gauteng Pty Ltd Mike is an Executive Director on the Group Board and Chairperson of the NFB Management Committee. Mike is also an active member of the World Presidents’ Organization, which he was first invited to join in October 1997 by YPO, and a member of the Institute of Directors.

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INTEGRATED ANNUAL REPORT 2016 | NVest Financial Holdings Limited (NVFH)

ANDREW VINCENT KENT (55) EXECUTIVE DIRECTOR

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International Capital Markets Qualification (Registered Persons Examination) JSE Traders Exam Passed following UNISA Programme in Investment Analysis and Portfolio Management modules – Investment Background, Investment Analysis, Ethics and Tax Planning for Investments

Andrew has approximately 25 years’ experience within the financial sector, specialising in equity trading and portfolio management. He was one of the major founders of and reasons for the inception of NVest Securities, which has become one of the core business units within the NVest Group of Companies, having shown tremendous growth since its formation. Andrew also sits on the boards of a number of subsidiary companies within the Group. Andrew is a member of the Institute of Financial Markets.

Non-Executive Directors: JONATHAN GOLDBERG (54) INDEPENDENT NON-EXECUTIVE CHAIRMAN

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B.Comm (University of Port Elizabeth), 1983 LL.B (University of Port Elizabeth), 1986 Honours in Business Administration cum laude (University of Stellenbosch), 1988 MBA cum laude (University of Stellenbosch), 1988 – 1989 Numerous managerial and self-study courses - 1989 – 2014

Jonathan is the CEO of Global Business Solutions, a leading national Labour Law, BBBEE and EE consultancy. He is a former accredited commissioner of the Commission for Conciliation, Mediation and Arbitration (CCMA), an IMSEC Arbitration and Mediation panellist, a BUSA representative at NEDLAC and a member of the Tokiso dispute settlement panel. Jonathan, and his associate companies, have numerous investments in diverse businesses and he serves on the board of many companies.

Jonathan is a leader and developer of the Wits Business School’s executive development programme in B-BBEE. Over his career, Jonathan has edited three books, has compiled many publications, delivered several presentations and seminars and advises business and government on a range of different subject matters.

SIVIWE RELEBOHILE KWATSHA (37) INDEPENDENT NON-EXECUTIVE DIRECTOR

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Bachelor of Science (Computer Science) cum laude (Rhodes), 1998 Bachelor of Science with Honours (Computer Science) cum laude (Rhodes), 1999 Certificate in Corporate Governance (UJ), 2014 Currently reading towards an MCom in Information Systems

Siviwe is a senior management consultant with extensive experience and a proven ability to provide real world solutions to high level technical and business problems. Siviwe specializes in Information, Communication and Technology (ICT) security, governance, network and solutions architecture. He started his career 16 years ago when he co-founded Mars Technologies, an ICT company. He helped grow the company to over 50 employees in 4 offices across 3 provinces and eventually sold what had become a very successful business to a large well known group of companies in the Eastern Cape.

He has founded and successfully managed a number of companies in the ICT, consulting and commercial property fields. After being involved in commercial property for a number of years, he founded an ICT consulting business which feeds his twin passions of IT and skills development. The business only employs interns to help bridge the gap between tertiary education, formal employment and/or entrepreneurship. He is reading towards a Masters in Information Systems, with a focus on the IT Risk component of IT Governance.

NVest Financial Holdings Limited (NVFH) | INTEGRATED ANNUAL REPORT 2016

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JOHN PHILIP ROSS-SMITH (70) INDEPENDENT NON-EXECUTIVE DIRECTOR

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Bachelor of Economics (University of Kwa-Zulu Natal), 1977 Diploma in Marketing Management (Damelin College), 1981

John started his career as a Client Service Director at McCann Erikson in 1979. He then moved to Johnson and Johnson (J&J) in 1984 and remained with J&J until 2009. He served as Managing Director their Middle East operation for ten years, their Turkish operation for four years, their Swiss business for 2 years and the for J&J sub-Saharan Africa for a further ten years. When John was positioned as Managing Director of J&J Turkey, he took over an ailing company operating in extremely tough conditions of rampant inflation and currency volatility – he restructured the company, established a new business model and set the company on an aggressive growth path for the next five years.

In addition to running the well-established South African operation, he led the initiative for developing a comprehensive strategy for Sub-Sahara involving the changing of the mindset of the organisation to align to a new regional strategy, analysing and understanding opportunities in new markets and establishing and building strong relationships with local companies – successfully implementing long term growth programmes. John currently consults on leadership development, strategic planning, change planning and company transformation projects. He is highly skilled working with both individuals as well as management teams looking to improve cohesiveness, alignment and interpersonal and management skill.

DYLAN SCHEMEL (33) NON-EXECUTIVE DIRECTOR

•

CA(SA)

Dylan is the Financial Director of the Spargs Group of companies specialising in the retail and property sector in the Eastern Cape. He started his career with First National Bank in December 2000 during his studies. In 2006 Dylan joined OHS Chartered Accountants where he trained and qualified as a Chartered Accountant before joining the Spargs Group in 2011.

Brendan Joseph Connellan (41) Group Company Secretary

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Bachelor of Commerce (Rhodes), 1997 Postgraduate Diploma in Financial Planning (UFS), 2000 Advanced Postgraduate Diploma in Financial Planning (UFS), 2002 International Capital Markets Qualification (SAIFM - Registered Persons Examination), 2001 Certificate in Compliance Management (UCT), 2006 JSE Compliance Officers Exam (SAIFM), 2008

Brendan has 19 years’ industry experience and started his career with NFB Private Wealth Management, now a subsidiary of the NVest Financial Holdings Group of Companies.

Brendan serves as Group Chief Operating Officer and Company Secretary. He is also Money Laundering Reporting Officer and Head of the Employment Equity Committee of various subsidiaries and sits on the boards of a number of subsidiary companies within the Group. Brendan is also Chairperson of an Eastern Cape based NGO that specializes in Early Childhood Development.

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INTEGRATED ANNUAL REPORT 2016 | NVest Financial Holdings Limited (NVFH)

NVFH: BY THE NUMBERS

ONE CORPORATE

VISION

To become the most admired, holistic Financial Services Group in South Africa, renowned for exceptional results, world class customer service and leading edge technology and innovation.

R325

AN INCREASE FROM R54 MILLION

MILLION IN SHARE

CAPITAL SINCE 2015

FOUR GEOGRAPHICAL FOOT PRINT IN

24% GROWTH

10

in net profit after tax from 2014 to 2015

GROUP SUBSIDIARIES

R22.5

PROVINCES ACCROSS SA • • • •

GAUTENG EASTERN CAPE WESTERN CAPE KWAZULU NATAL

23% INCREASE IN

eastern cape

EARNINGS PER SHARE

TO 23.28

CENTS (18.93 CENTS IN 2015)

142

EMPLOYEES ACROSS THE GROUP

NVest Financial Holdings Limited (NVFH) | INTEGRATED ANNUAL REPORT 2016

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NVFH: OUR JOURNEY SO FAR NVFH, a formally private, but now public company, is duly incorporated in accordance with the laws of South Africa.

The NFB Financial Services Group originated in Port Elizabeth in April 1985, fundamentally as money market and gilt brokers.

An NFB office was opened in East London a year later. In the years that followed the business grew to include equity and unit trust investments as well as a subsidiary providing short term insurance services. In July 2008, the various associated, separately owned companies that were in operation at that time restructured to become a subsidiary of the NVest Group of companies and NVFH was officially born.

NVFH then entered into an agreement with Sasfin in terms of which NVFH took over Sasfin’s East London branch and formed a new company, NVest Securities Proprietary Limited (“NVest Securities”) (that housed all of the clients and accounts of the former East London branch of Sasfin), in exchange for a 20% shareholding in the new Group holding company.

individuals that helped build the companies) at that time.

Such directors, as well as later appointed directors being individuals who were identified as being key to the overall management and succession planning of the business and who were offered small stakes in the business, have run the business since that time.

NVFH today is a broad range Financial Services Group, although the core subsidiary companies, NFB Private Wealth Management and NVest Securities are asset management and private wealth businesses, with R22.5 billion of assets under management and administration.

Various shareholders of the previously independent companies (NFB Finance Brokers Eastern Cape Proprietary Limited, NFB Insurance Brokers Proprietary Limited and NFB Finance Brokers Port Elizabeth Proprietary Limited, collectively referred to as “NFB Private Wealth Management”), then did share swaps to become shareholders of NVFH, which in turn became a shareholder of those companies.

As with most private companies, the Shareholders’ Agreement at that time made provision for the shareholders to have director representation on the Board of the Companies and thus the Directors of the Group came to be the shareholders (or Trust appointed Directors who were the

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INTEGRATED ANNUAL REPORT 2016 | NVest Financial Holdings Limited (NVFH)

Group History 1985

NFB Financial Services Group was founded in April 1985 in Port Elizabeth, fundamentally as money market and gilt brokers.

1986

An NFB office was opened in East London.

1987

NFB business operations were extended into equity and unit trust investments due to low interest rates. A further office was opened in Johannesburg.

1990

NFB operations were extended to Frankfurt to take advantage of Eskom bond trading through the Financial Rand.

1994

Fedsure acquired 49% of NFB’s domestic and international business operations.

1995

NFB’s founding M.D. along with the international business, formally separated.

1997

NFB introduced a Short Term Insurance division in East London to cater for the short term insurance needs of our individual and corporate clients.

1998

NFB’s Port Elizabeth division was sold during this year (to be re-opened in 2008). The year also saw the birth of NFB’s Employee Benefits and Healthcare Divisions in East London.

2000

In the 1st quarter of 2000 the NFB Group launched its own wrap fund under the NFB brand. This turned out to be a watershed year both in terms of profit, performance and the level of optimised earnings achieved. NFB Portfolio Management Services (PMS), NFB’s exclusive share portfolio management division, opened its doors in East London. During this year, NFB was selected as one of the top 20 non-listed companies in South Africa.

2001

April 2001 saw the launch of a new brand identity of the NFB group together with a coordinated effort to raise the group’s profile in the market. In June 2001 Fedsure sold its interest in NFB as a result of Fedsure being acquired by Investec. In its quest to optimise the value-add NFB provides to its clients, NFB PMS launched the NFB Managed Income Portfolio in November 2001. By December 2001 the group had accumulated approximately R3 billion assets under management. Again selected as one of the 20 top non-listed companies in South Africa.

2002

In June 2002, NFB launched a range of risk-profiled funds, actively managed by NFB Asset Management (NFB AM) Division, a new division created for that purpose. Selected as one of the 20 top non-listed companies in South Africa for the third year running.

2003

NFB Portfolio Management Services increased its range of individually structured products by introducing the NFB Dividend Growth Portfolio in November 2003.

2004

By January 2004 assets under management of NFB Portfolio Management Services had grown to R200 million, doubling in less than 2 years. By the end of April 2004 NFB AM had R150m in assets under management. By the middle of August of that year NFB AM had grown assets under management to R200m. In November of 2004 NFB AM was appointed as Asset Managers to its first institutional portfolio. With the appointment, assets under management topped R400m. NFB’s East London division formally separated from the Johannesburg based company NFB Finance Brokers Proprietary Limited to form an East London owned and managed entity, NFB Eastern Cape Proprietary Limited [later to be the foundation of the NVest Group of Companies formed in 2008].

2005

NFB AM assets under management passed the R500m mark. NFB Asset Management Proprietary Limited was also formally incorporated in this year and began trading as a separate entity of the Group as opposed to a division within.

2006

NFB AM assets under management passed the R1billion mark. NFB Portfolio Management Services assets under management exceeded R650 million.

2007

NFB launched its first two registered unit trusts, the NFB Conservative Fund of Funds and the NFB Balanced Fund of Funds in May 2007. NFB’s East London practice was awarded third place in the Celestis South African Best Practice of the Year Award.

2008

The NFB East London operation reached R3 billion in assets under management. NFB launched a third unit trust, the NFB Equity Fund in September 2008. NFB re-established itself in Port Elizabeth and NFB Finance Brokers Port Elizabeth was formed in July 2008. Also in July 2008, the group re-structured to become the NVest Group of Companies, of which NFB was made a subsidiary.

NVest Financial Holdings Limited (NVFH) | INTEGRATED ANNUAL REPORT 2016

17

December 2008 saw NFB East London’s Portfolio Management Services division combining with NVest Securities, an NVest subsidiary company and an approved JSE stock brokerage that originated when NVest purchased the East London branch of Sasfin Securities.

2009

NFB awarded Finalist in the Border Kei Chamber of Business Awards. The 1st of March 2009 saw the acquisition of 70% of Independent Executor and Trust (a small but well established East London based fiduciary services business) into the NVest Group of companies.

2010

April 2010 saw NFB celebrate its 25th Anniversary.

2011

In March 2011 Elite Insurance Consultants was purchased by NFB Insurance Brokers (Border), making it the largest short term insurance brokerage in East London. NVest Properties was formally established and October 2011 saw the Group’s first (private) issue of Commercial Paper by NVest Properties. A range of NFB AM model portfolios was launched on the Investec administrative platform, followed shortly by a limited range of model portfolios on the Glacier administrative platform.

2012

March 2012 saw NFB Insurance Brokers (Border) purchase another brokerage: Kearney Financial Brokers. By March 2012, the Group’s staff complement had grown to 85. In early 2012 NVest Properties was converted to a public company in anticipation of its first public offer of securities.

2013

NVest Securities discretionary assets under management exceeded R3bn for the first time. In December 2013 NFB Port Elizabeth move into new offices in Ascot Office Park, Greenacres. The NFB Global Balanced Fund was launched on the Sanlam Asset Management Ireland platform and distribution agreements were concluded with Old Mutual International and Glacier International.

2014

The total NVFH Group staff complement exceeded 100. NFB Private Wealth Management’s total discretionary assets under management reached R6.5bn. Total NVest Group assets under management reached R14bn (including NFB Eastern Cape, NFB Port Elizabeth, NVest Securities and NFB Asset Management). NFB’s Port Elizabeth operation acquired Alex Grunewald & Associates, effectively doubling the size of that operation and setting the business up for future growth and enhanced performance. New offices (a third building in East London) were built to accommodate NFB Insurance Brokers as a result of company growth. NVest Properties’ property portfolio reached approximately R280m in value. NFB AM bought a stake in Ci Holdings which itself owns 100% of the Ci unit trust management company; by the end of this year the SCI white-label arrangements had transitioned across and NFB AM had R2.1 billion in Ci assets. NVest Securities gained its third fully fledged stock broker.

2015

The Group re-acquired 100% of NFB Finance Brokers Western Cape Proprietary Limited in January and in April 2015 NFB’s Cape Town office established new premises in the CBD of Cape Town subsequent to its existing operations entering into a joint venture with a well-established independent financial advisor who joined NFB. In March, the Group launched its commercial property services company primarily offering property broking and management services. In April, NFB celebrated its 30th anniversary. In May, the Group holding company successfully listed on the Alternative Exchange of the JSE. In September NVest acquired 100% of the share capital of NFB Finance Brokers Gauteng Pty Limited, giving the Group a scalable presence in the business capital of South Africa.

2016

The Group established a presence in Kwa-Zulu Natal by opening NVest Properties Limited offices in Simbithi Office Park.

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INTEGRATED ANNUAL REPORT 2016 | NVest Financial Holdings Limited (NVFH)

NVest Financial Holdings Limited East London Registration No. 2008/015990/06

NFB Finance Brokers - Eastern Cape (Pty) Ltd Percentage Ownership: 100% Reg: 2003/030583/07 | FSP: 16300

NFB Finance Brokers - Gauteng (Pty) Ltd Percentage Ownership: 100% Reg: 1998/024730/07 | FSP: 16216

Horwath Financial Services (Pty) Ltd Percentage Ownership: 33.33% Reg: 2002/008600/07 | FSP: 10889

NFB Finance Brokers - Port Elizabeth (Pty) Ltd Percentage Ownership: 65% Reg: 2005/025001/07 | FSP: 26362

NVest Property Services (Pty) Ltd Percentage Ownership: 76% Reg: 2005/041916/07

NVest Properties Limited Percentage Ownership: 96% Reg: 2010/008681/06

Independent Executor and Trust (Pty) Ltd Percentage Ownership: 70% Reg: 2008/018611/07

NFB Insurance Brokers (Border) (Pty) Ltd Percentage Ownership: 76% Reg: 1996/010593/07 | FSP: 8932

NFB Finance Brokers - Western Cape (Pty) Ltd Percentage Ownership: 100% Reg: 2003/030583/07 | FSP: 16300

NVest Securities (Pty) Ltd Percentage Ownership: 100% Reg: 2008/015192/07 | Member of the JSE Ltd

NFB Asset Management (Pty) Ltd Percentage Ownership: 100% Reg: 2005/042953/07 | FSP: 25962

NVest Securities Nominee Equity (Pty) Ltd NVS Percentage Ownership: 100% Reg: 2008/002786/07 | Nominee Co. Approved nominee co by Registrar of Pension Funds.

Approved nominee co by Registrar of Life Insurance

NVest Securities Nominee Money (Pty) Ltd NVS Percentage Ownership: 100% Reg: 2008/002788/07 | Nominee Co.

NVest Financial Holdings Limited (NVFH) | INTEGRATED ANNUAL REPORT 2016

19

CORPORATE GOVERNANCE & SUSTAINABILITY REPORT INTRODUCTION The Directors are pleased to present the Group’s Corporate Governance and Sustainability report to stakeholders, to endorse the King Code and recognise their responsibility to conduct the affairs of NVFH with integrity and accountability in accordance with generally accepted corporate practices.

This includes timely, relevant and meaningful reporting to its shareholders and other stakeholders, providing a proper and objective perspective of the Groups affairs. It is the Board’s aim to achieve true transparency and to build a trusting relationship with all stakeholders.

The Directors have, accordingly, established procedures and policies appropriate to the NVFH business in keeping with its commitment to best practices in corporate governance.

These procedures and policies will be reviewed by the Directors periodically to keep abreast with the changes in the legislative and regulatory landscape as well as industry best practice.

SUSTAINABLE DEVELOPMENT STRATEGY The implementation of the Corporate Group strategy will be overseen by the Board until such time as it is appropriate to delegate this responsibility to senior management.

CORPORATE GOVERNANCE The Group subscribes to the values of good corporate governance at all levels and is committed to conducting business with discipline, integrity and social responsibility.

In terms of the Listing Requirements of the JSE, the Group is required to report in respect of Chapter 2 of the third King Report on Corporate Governance (“King III”) for its financial year ended 29 February 2016, on the extent to which it has

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complied with the principles as set out in King III. The Board is firmly committed to promoting NVFH’s adherence to all of the Principles as set out in King III. The Code is reviewed regularly and the directors are implementing the principles in a phased manner, focusing initially on the principles set out in Chapter 2. Levels of compliance in terms of Chapter 2 principles of the Code are documented fully in this Report.

The Groups levels of compliance in terms of the balance of the Principles are also documented and accessible on the Group’s website http://nvestholdings.co.za.

The Directors of NVFH have adopted the fundamental Principles of King III, being fairness, accountability, responsibility and transparency.

The formal steps taken by the Directors during the year period under review are as follows:

1.1. Directors The Board The Board of Directors met regularly and have disclosed the number of meetings held in this, the Integrated Annual Report, together with the attendance at such meetings. A formal record has been kept of all conclusions reached by the Board on matters referred to it for discussion. Should the Board require independent professional advice, such advice will be sought by the Board at the Company’s expense.

All Directors have access to the advice and services of Brendan Joseph Connellan, who fulfils the role of Company Secretary. The Board is of the opinion that Brendan has the requisite attributes, experience and qualifications to fulfil his commitments effectively. This assessment is based on the experience, qualifications, competency of the Company Secretary. The appointment or dismissal of the Company Secretary shall be decided by the Board as a whole and not one individual director.

INTEGRATED ANNUAL REPORT 2016 | NVest Financial Holdings Limited (NVFH)

Directors are expected to maintain their independence when deciding on matters relating to strategy, performance, resources and standards of conduct. On first appointment, all directors will be expected to undergo appropriate training as to the Company’s business, strategic plans and objectives, and other relevant laws and regulations. This will be performed on an on-going basis to ensure that Directors remain abreast of changes in regulations and the prevailing commercial environment.

The Board is responsible for relations with stakeholders, as well as being accountable to them for the performance of the Company, and reporting thereon in a timely and transparent manner.

In accordance with JSE Listing Requirements, the Directors are required to attend a 4 day Directors Induction Programme.

All Directors have attended the programme and obtained their certification.

Chairman and Chief Executive Officer The offices of Chairman and Chief Executive Officer are separated with Anthony Denis Godwin appointed as Chief Executive Officer and Jonathan Goldberg as the Independent Non-Executive Chairman.

the Company, but also at issues such as customer satisfaction, market share, environmental performance and other relevant issues. The Chairman ensures that all Directors are briefed adequately prior to Board meetings.

Delegation of duties Directors have the authority to delegate certain of their duties, either externally or internally, in order that they perform their duties fully. The Chief Executive Officer shall review these delegations and report on this to the Board.

Appointments to the Board Any member of the Board can nominate a new appointment to the Board, which will be considered at a Board meeting.

Any nominated director’s expertise and experience are considered by the Board as a whole in a formal and transparent manner, as well as any needs of the Board in considering such appointment. In accordance with the AltX Listing Requirements a Nomination Committee is not required and the size of the Company does not warrant the establishment of a Nomination Committee. The Board will however review the need for such a committee on an annual basis.

The Board includes both Executive and Non-Executive Directors in order to maintain a balance of power and ensure independent unbiased decisions and that no one individual has unfettered powers of decision-making. The Board of Directors of NVest consists of the following directors:

A general meeting of the Directors shall have the power from time to time to appoint anyone as a director, either to fill a vacancy, or as an additional director. The Company’s Memorandum of Incorporation (“MOI”) does not provide for a maximum number of directors, but does provide for shareholders, by way of ordinary resolution, to determine a maximum number of directors from time to time as they deem appropriate.

Any interim appointments will be subject to approval at the Company’s next general or annual general meeting.

Executive Directors

Board meetings

• • • •

The Board retains overall accountability for the day-to-day management and strategic direction of the Group, as well as for attending to relevant legislative, regulatory and prevailing best practice requirements.

Board balance

Anthony Denis Godwin (Chief Executive Officer) Frank Terence Knox (Financial Director) Andrew Vincent Kent Michael Estment

Independent Non-Executive Directors •

• •

Accountability to shareholders remains paramount in Board decisions, and this is balanced against the demands of the regulatory environment in which the Group operates and the concern of its other stakeholders.

Jonathan Goldberg (Independent Non-Executive Chairman) Siviwe Relebohile Kwatsha John Philip Ross-Smith

Three Board meetings were held during the financial year under review:

Non-Executive Directors • Dylan Schemel

4 Jun 2015

16 Nov 2015

15 Feb 2016

Jonathan Goldberg

Present

Present

Present

The Board meets on a regular basis where possible, but at a minimum of every three months. The Directors are briefed properly in respect of special business prior to Board meetings and information is provided timeously to enable them to give full consideration to all the issues being dealt with.

Anthony Denis Godwin

Present

Present

Present

Frank Terence Knox

Present

Present

Present

Furthermore, management supplies the board with the relevant information needed to fulfil its duties. Directors make further enquiries where necessary, and have unrestricted access to all Company information, records, documents and property.

Not only will the Board look at the quantitative performance of

Name of member

Supply of information

Andrew Vincent Kent

Present

Present

Present

Not yet member

Present

Present

Siviwe Relebohile Kwatsha

Present

Present

Present

John Philip Ross-Smith

Present

Present

Present

Dylan Schemel

Present

Present

Present

Michael Estment

NVest Financial Holdings Limited (NVFH) | INTEGRATED ANNUAL REPORT 2016

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4 Jun 2015

16 Nov 2015

15 Feb 2016

G.R. Ramsey*

Present

Resigned

Resigned

P.B. Bartlett*

Present

Resigned

Resigned

B.J. Connellan*

Present

Resigned

Resigned

R.M. McIntyre*

Present

Resigned

Resigned

T.H. McClure*

Present

Resigned

Resigned

Name of member

* These directors resigned from the NVFH Board with effect from 1 September 2015 but remain directors of NVFH’s major subsidiaries.

1.2. Directors’ remuneration Remuneration Policy The Remuneration Policy in place is to remunerate Executive Directors primarily on an incentive basis through bonuses, commission, profit share arrangements and/ or share incentives based on performance, details of which are set out in the integrated annual report. Where monthly remuneration is paid, this is market related. The Remuneration Committee ensures that group remuneration and recruitment is aligned with overall business strategy, with the aim of enabling NVFH to attract and retain personnel who will create long-term value for all stakeholders. The full remuneration report is set out on page 34 of the integrated annual report.

The remuneration committee consists of the following independent non-executive directors: • Jonathan Goldberg (Chairman) • Siviwe Relebohile Kwatsha • John Philip Ross-Smith

1.3. Accountability and audit Incorporation The Company is duly incorporated in South Africa and operates in conformity with its MOI and all laws of South Africa.

Financial reporting The Board is responsible for the Group’s systems of internal financial and operational control, as well as for maintaining an appropriate relationship with the Company’s auditors.

The Board is responsible for presenting a balanced and understandable assessment of the Company’s financial position with respect to all financial and price sensitive reports on the Company.

Internal control The Directors shall conduct an annual review of the Company’s internal controls, and report their findings to shareholders. This review will cover financial, operational and compliance controls, as well as a review of the risk management policies and procedures of the Company.

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Audit and risk committee A combined Audit and Risk Committee has been established, whose primary objective is to provide the Board with additional assurance regarding the efficacy and reliability of the financial information used by the Directors, to assist them in discharging their duties. The committee is required to provide comfort to the board that adequate and appropriate financial and operating controls are in place, that significant business, financial and other risks have been identified and are being suitably managed, that the financial director has the appropriate expertise and experience and that satisfactory standards of governance, reporting and compliance are in operation. The committee sets the principles for recommending the use of the external auditors for non-audit services.

The following independent Non-Executive Directors have been appointed to the combined NVFH Audit and Risk Committee: • Siviwe Relebohile Kwatsha (chairman) • Jonathan Goldberg • John Philip Ross-Smith The Audit and Risk Committee meets a minimum of two times per annum to consider interim and year end results.

However, it is expected to meet at least three times per annum. A detailed report of the Audit and Risk Committee is set out on page 30 of this integrated annual report.

External auditors The external auditors of the Group are Grant Thornton Cape Incorporated and they have performed an independent and objective audit of the Group’s financial statements.

The statements are prepared in terms of the International Financial Reporting Standards (“IFRS”). Interim reports are not audited.

1.4. Company Secretary The Company has appointed Brendan Joseph Connellan to act as the Company Secretary. The Board has considered and satisfied itself on the competence, qualifications and experience of the Company Secretary to fulfil his commitments effectively. The Directors assess the on-going competency of the Company Secretary on an annual basis and in compliance with section 3.84(i) of the JSE Listing Requirements.

Moreover, the Board confirms that there is an arm’s length relationship between itself and the Company Secretary and this position will be assessed on an annual basis. All Directors have access to the advice and services of the Company Secretary, Brendan Joseph Connellan, who has performed this role for the Group for a number of years.

This is also taking into account that Brendan Joseph Connellan has been heading up the Company’s compliance management since its inception as well as that of subsidiary companies for a number of years and is exceptionally well-versed about the Company’s compliance needs with different regulatory bodies. Over the years, he

INTEGRATED ANNUAL REPORT 2016 | NVest Financial Holdings Limited (NVFH)

has successfully advised the Board and staff on requisite compliance matters and ensured that the Company is fully compliant in this regard.

1.5. Financial Director

to the earliest publication of the preliminary report, the abridged report or the provisional report in the case of results for a full period and from the date of the interim period end to the date of the publication of the first and second interim results as the case may be, which periods are known as closed periods.

The Financial Director, Frank Terence Knox, is a full time Group Executive Director. The Audit and Risk Committee has confirmed his experience and expertise at an Audit and Risk Committee meeting and has issued a confirmation thereof to the JSE.

In accordance with the JSE Listing Requirements, no Director or the Company Secretary or their associates shall deal in the securities of the Company during a closed or prohibited period as well as whilst the Company is trading under a cautionary.

1.6. Code of ethics NVFH subscribes to the highest ethical standards and behaviour in the conduct of its business and related activities. All employees of the Group are required to maintain the highest standards in ensuring that business practices are conducted in a manner, which, in all reasonable circumstances, are above reproach. The values have been embodied in a written Code of Ethics which commits directors and employees to the highest standards of ethical behavior.

All Directors and the Company Secretary shall obtain clearance to deal from the Chairman of the Company prior to dealing, and the Company Secretary shall keep a register of such clearances in terms of the JSE Listings Requirements.

The Company Secretary or such person as may be nominated by him from time to time shall keep a record of all dealings by Directors in the securities of the Company.

There have been no dealings in NVest securities by Directors from the date of the new financial year (from 1 March 2016 unti the date of this Report).

Social and Ethics Committee:

1.9. Governance of IT

In compliance with the Act, the following persons have been appointed to the Social and Ethics Committee:

The Board is responsible for IT governance as an integral part of the Group’s governance as a whole. The IT function is not expected to significantly change in the short term.

• •

• •

Siviwe Relebohile Kwatsha (Chairperson) Jonathan Goldberg (Independent Non-Executive Director) Brendan Joseph Connellan (Member) Travis Henry McClure (Member)

The Board intends compiling the required policies and procedures to ensure governance of IT is adhered to in future periods.

A detailed report of the Social and Ethics Committee for the period under review is set out on page 28 of this integrated annual report.

1.7. Relations with shareholders It is the plan of NVFH to meet with its shareholders and investment analysts, and to provide presentations on the Company and its performance on an ongoing basis.

The Board shall ensure that shareholders are supplied with all the necessary information in order that they may make considered use of their votes, and assess the corporate governance of the Company.

1.8. Dealing in securities NVFH has a policy in place governing the dealing in the Company’s securities by Directors, Executives and Senior Management of the Company in line with the JSE Listings Requirements.

The Board has established procedures regarding the legislation which regulates insider trading, whereby there is a closed period from the date of the financial year end

1.10. Employment equity NVFH upholds and supports the objectives of the Employment Equity Act 1998 (Act 53 of 1998). NVFH employment policies are designed to provide equal opportunities, without discrimination, to all employees.

1.11. Promotion of gender diversity In terms of paragraph 3.84(k) of the JSE Listings Requirements, the Board is required to have a policy on the promotion of gender diversity at Board level. At present such a policy has not been established however, the Board recognizes the need for gender diversification and will explore this matter further. Shareholders will be advised of any developments in this regard. During the Board meeting held on 23 May 2016, the Board deliberated on the need to appoint appropriate female directors and has resolved to make this matter a priority.

1.12.

Transfer office

Computershare Investor Services Proprietary Limited acts as Transfer Secretary to the Group.

NVest Financial Holdings Limited (NVFH) | INTEGRATED ANNUAL REPORT 2016

23

1.13.

King III Checklist

A company listed on the AltX is only required to apply or explain its non-compliance in line with Chapter 2 of King III. However, as a well-established group, the Company has elected to assess its compliance with the 75 principles of King III which Register is available on the Company’s website http://nvestholdings.co.za.

The Board endorses the principles contained in the King III Report on Corporate Governance and confirms its commitment to those principles where, in the view of the board, they apply to the business. Compliance is monitored regularly and the Board has undertaken an internal review process in determining compliance.

Where areas of non-compliance or partial compliance have been identified these have been listed on the King III checklist, together with the reasons therefore, as is required by King III. A summary of Chapter 2 principles is set out below:

King III Ref

King III Principle

Comply/ Partially Comply/ Do Not comply

Commentary

Principle 2.1

The Board acts as the focal point for and custodian of corporate governance.

Comply

The Board ensures that the Company applies the governance principles contained in King III and continues to further entrench and strengthen recommended practices through the Group’s governance structures, systems, processes and procedures.

Principle 2.2

The Board appreciates that strategy, risk, performance and sustainability are inseparable.

Comply

The Board, as a whole and through its Committees, approves and monitors the implementation of the strategy and business plan of the Company, sets objectives, reviews key risks and evaluates performance against the background of economic, environmental and social issues relevant to the Company and global economic conditions.

Principle 2.3

The Board provides effective leadership based on an ethical foundation.

Comply

The board is considered the guardian of the values and ethics of the group and has established a board charter to this effect.

Principle 2.4

The Board ensures that the Company is and is seen to be as a responsible corporate citizen.

Comply

The Social and Ethics Committee has been established and reports to the board and shareholders and reflects NVest’s commitment to responsible corporate citizenship.

Principle 2.5

The Board ensures that the Company’s ethics are managed effectively

Comply

The Board is responsible for ensuring that the Company protects, enhances and contributes to the wellbeing of the economy, society and natural environment.

Principle 2.6

The Board has ensured that the Company has an effective and independent audit committee.

Comply

The Board appointed an Audit and Risk Committee during the period under review. Audit and Risk Committee Terms of Reference have been established and approved by the Board. The board considers that it has an effective and independent Audit and Risk Committee comprising three independent non-executive directors. The effectiveness of the Committee will be evaluated annually by the Board.

Principle 2.7

The Board is responsible for the governance of risk.

Comply

The Board is responsible for the governance of risk and the Audit and Risk Committee will assist the Board with this responsibility.

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INTEGRATED ANNUAL REPORT 2016 | NVest Financial Holdings Limited (NVFH)

King III Ref

King III Principle

Comply/ Partially Comply/ Do Not comply

Commentary

Principle 2.8

The Board is responsible for information technology (IT) governance.

Partially Comply

An IT Governance Framework, including processes, procedures and structures, has not yet been adopted by the Board. However, the Company’s Chief Information Officer has been tasked with the mandate of developing, implementing and monitoring an effective IT Governance Framework.

Principle 2.9

The Board ensures that Comply the Company complies with applicable laws and considers adherence to nonbinding rules, codes and standards.

The Audit and Risk Committee, together with the Social and Ethics Committee and Company Secretary, reviews the adequacy and effectiveness of the Group’s procedures on an on-going basis to ensure compliance with all legal and regulatory responsibilities.

Principle 2.11

The Board should appreciate that stakeholder perceptions affect a Company’s reputation.

Comply

The Company engages with its stakeholders on multiple levels and this allows the Company to manage issues effectively and timeously and reduces the likelihood of reputational risks.

Principle 2.12

The Board should ensure the integrity of the Company’s integrated report.

Comply

The Board is responsible for the preparation of the integrated annual report and has accordingly ensured the integrity of the Company’s first Integrated Annual Report for the year ended 29 February 2016.

Principle 2.13

The Board reports on the effectiveness of the Company’s internal controls.

Comply

The Board considers the Company’s internal controls and the report thereon is contained in the Directors’ responsibilities and approval on page 36 of the Integrated Annual Report. The Company currently does not have an internal audit function as it is not deemed necessary by the Audit and Risk Committee due to the size and nature of the Company. The need for this function will be reviewed by the Audit and Risk Committee at every meeting. The Audit and Risk Committee have tasked management with setting up a Risk and Control Framework, which process is currently well under way.

Principle 2.14

The Board and its Directors should act in the best interests of the Company.

Comply

Directors are mindful of their fiduciary duties and their duty to act in accordance with applicable legislation. Records of Directors’ financial interests are kept and updated on an on-going basis. The Board as a whole acts as a steward of the Company and each Director acts with independence of mind in the best interests of the Company and its stakeholders. In its deliberations, decisions and actions, the Board is sensitive to the legitimate interests and expectations of the Company’s stakeholders.

Principle 2.15

The Board will consider business rescue proceedings or other turnaround mechanisms as soon as the company may be financially distressed as defined in the Companies Act, 71 of 2008.

Comply

The Board is aware of the requirements of the Companies Act regarding business rescue. The Company will establish a risk management process that will evaluate controllable and non-controllable risks continuously, as well as threats and opportunities to ensure that the Company is operating optimally and is not in distress. In connection with the issuance of the Interim and Provisional Results management has been requested to table a solvency and liquidity memorandum, the content of which will be considered and confirmed by the Board on a regular basis.

NVest Financial Holdings Limited (NVFH) | INTEGRATED ANNUAL REPORT 2016

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King III Ref

King III Principle

Comply/ Partially Comply/ Do Not comply

Commentary

Principle 2.16

The Board has elected a chairman of the board who is an independent non-Executive Director. The CEO of the company does not also fulfil the role of chairman of the Board.

Comply

The Chairman of NVest is an Independent NonExecutive Director. The roles of the Chairman and Chief Executive Officer are separated and clearly defined.

Principle 2.17

The Board has appointed the Chief Executive Officer and has established a framework for the delegation of authority.

Partially Comply

While retaining overall accountability and subject to matters reserved to itself, the Board has delegated authority to the Chief Executive Officer and other Executive Directors and Prescribed Officers as part of the Executive Committee (“ExCo”) to run the day-to-day affairs of the Company. A delegation of authority framework has been established, but was not approved as at year-end. It is expected that the board will approve the framework at the board meeting to be held in May 2016. Mr Anthony Denis Godwin is appointed as CEO.

Principle 2.18

The Board comprises a balance of power, with a majority of Non-executive Directors. The majority of Non-Executive Directors are independent.

Partially Comply

The board comprised four executive directors and four non-executive directors. The majority of non-executive directors are independent. The Company comes from a position of having been a private company for many years and having a board of eight Executive Directors and three Non-Executive Directors, with all eight of the Executive Directors representing shareholders.

After due consideration and taking into account the principles of good corporate governance as embodied in the King III Code of Governance, the directors of the Company decided that it would be in the best interests of the Company and shareholders for the board composition to be restructured. As such, the number of executive directors on the board was reduced in order to attain a 50% representation on the Board by non-executive directors, with the majority of such non-executive directors being independent.

Principle 2.19

Directors are appointed through a formal process.

Comply

To ensure a transparent process, any new appointment of a Director is considered by the Board as a whole. The selection process involves considering the existing balance of skills and experience on the Board and a continual process of assessing the needs of the Company. Directors are appointed in terms of the Company’s MOI and these interim appointments are confirmed at the next Annual General Meeting.

Principle 2.20

The induction of and ongoing training, as well as the development of Directors is conducted through a formal process.

Comply

New appointees to the Board are familiarised with the Company appropriately through an induction programme and on-going training will be provided if deemed necessary by the board and/or Company Secretary. All Directors have attended the Directors Induction Programme in accordance with the Altx Listing Requirements.

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INTEGRATED ANNUAL REPORT 2016 | NVest Financial Holdings Limited (NVFH)

King III Ref

King III Principle

Comply/ Partially Comply/ Do Not comply

Commentary

Principle 2.21

The Board is assisted by a competent, suitably qualified and experienced Company Secretary.

Comply

The Company Secretary is appointed by the Board in accordance with the Companies Act and the JSE Listings Requirements and is evaluated annually.

The Board is satisfied that the Company Secretary is independent and is properly qualified and experienced to competently carry out the duties and responsibilities of Company Secretary.

Principle 2.22

The evaluation of the Board, its committees and individual Directors is performed every year.

Partially Comply

Review of the performance of the Board as a whole and the Board Committees individually will occur on an annual basis in line with the Board Charter. Owing to the recent restructure of the Company in terms of it becoming a Publically listed entity, it has been decided that the first review will occur in February 2017.

Principle 2.23

The Board delegates certain functions to wellstructured committees without abdicating its own responsibilities.

Comply

The board has delegated certain functions without abdicating its own responsibilities to the following committees: • Audit and Risk committee; • Remuneration committee; and • Social and Ethics Committee.

Principle 2.24

A governance framework has been agreed between the Group and its Subsidiaries’ boards.

Comply

The governance framework between the Company and each of its subsidiaries that are not whollyowned is set out in shareholders’ agreements, where applicable, and related agreements.

The governance of wholly-owned Subsidiaries is handled by Board and Board Committee resolutions. A delegation of authority framework has been prepared and will be implemented in due course, which will further regulate the governance framework between the Group and its subsidiaries.

Principle 2.25

The Company remunerates its Directors and executives fairly and responsibly.

Comply

A Remuneration Committee comprising three independent non-executive directors has been established to oversee the remuneration of Executive Directors and Senior Executives by taking into account market conditions, expert advice from remuneration specialists and in accordance with the Company’s Remuneration policy. Non-executive Directors’ fees are submitted annually to shareholders for approval at the Annual General Meeting.

Principle 2.26

The Company has disclosed the remuneration of each individual director and prescribed officer

Comply

The remuneration of Directors and Prescribed Officers is included in the Directors’ report of the Integrated Annual Report. Under note 32 of the Annual Financial Statements.

Principle 2.27

The shareholders have approved the Company’s remuneration policy.

Comply

The Company’s Remuneration Policy, approved by the Board, will be tabled for a non-binding advisory vote at each Annual General Meeting of shareholders.

NVest Financial Holdings Limited (NVFH) | INTEGRATED ANNUAL REPORT 2016

27

SOCIAL & ETHICS COMMITTEE REPORT NVFH is a broad range Financial Services Group. NVFH’s core subsidiary companies, NFB Private Wealth Management (Comprising NFB Finance Brokers Eastern Cape Pty Limited, NFB Finance Brokers Gauteng Pty Limited, NFB Insurance Brokers Pty Limited and NFB Finance Brokers Port Elizabeth Pty Limited, and NVest Securities Pty Limited are asset management and private wealth type of businesses, with approximately R22.5 billion assets under administration and management as at 29 February 2016.

Pursuant to the Companies Act, 2008 (No. 71 of 2008) as amended (“the Companies Act”), Section 43(5) of the Companies Regulations and the King III report on corporate governance, a Social and Ethics Committee was established by the NVFH Board in 2015 to consider and monitor the moral and ethical conscience of the Group.

The Social and Ethics Committee (the “Committee”) initially comprised of three members, being Mr Siviwe Kwatsha (Independent Non-executive Director) as Chairman of the Committee, Mr Brendan Connellan (Company Secretary and in his capacity as Chief Operating Officer) and Mr Travis McClure (Subsidiary Director). Mr Jonathan Goldberg (Independent Non-executive Director) attended the meeting of the 16 November 2015 by invitation, and subsequently joined the Committee as a member after board ratification of his appointment to the Committee. Ms. Taryn de Villiers (Group HR Manager), Colette Sutherland (Assistant Company Secretary) as well as other members of the Board attend meetings by invitation.

The responsibilities and functions of the Committee, which are aligned with the Committee’s statutory functions as set out in the Companies Act, formed the basis of the Work Plan for 2015/6. These activities are as follows: (a) To monitor the Group’s activities, having regard to any relevant legislation, other legal requirements or prevailing codes of best practice, with regard to matters relating to: (i) Social and economic development, including the Group’s standing in terms of the goals and purposes of: (aa) (bb)

(cc) (dd)

(ii) Good corporate citizenship, including the Group’s: (aa) (bb)

(cc) The Committee met twice during the period under review and received feedback from management on matters under the Committee’s oversight. The Committee reports on any significant matters to the Board in terms of its mandate.

The meetings are set out below: 16 November 2015

15 February 2016

Present

Present

Jonathan Goldberg

Invitee

Present

Brendan Connellan

Present

Present

Travis McClure

Present

Present

Name of member Siviwe Kwatsha (Chairman)

28

the 10 principles set out in the United Nations Global Compact Principles (UNGCP); the Organisation for Economic Co-operation and Development (“OECD”) recommendations regarding corruption; the Employment Equity Act; and the Broad-Based Black Economic Empowerment Act.

promotion of equality, prevention of unfair discrimination, and reduction of corruption; contribution to development of the communities in which its activities are predominantly conducted or within which its products or services are predominantly marketed; and record of sponsorship, donations and charitable giving.

(iii) The environment, health and public safety, including the impact of the Group’s activities and of its products or services. (iv) Consumer relationships, including the Group’s advertising, public relations and compliance with consumer protection laws; and

(v) Labour and employment, including:

INTEGRATED ANNUAL REPORT 2016 | NVest Financial Holdings Limited (NVFH)

(aa) the Group’s standing in terms of the International Labour Organization Protocol on decent work and working conditions;

(bb) the Group’s employment relationships and its contribution toward the educational development of its employees; (cc) to draw matters within its mandate to the attention of the Board as occasion requires; and (dd) to report, through one of its members, to shareholders at the Group’s annual general meeting on the matters within its mandate.

During the year under review the Committee attended to matters relating to the Work Plan above and reported to the Board accordingly. The monitoring of and conformance to the above will be ongoing within the Group structure.

Furthermore, NVFH implemented formal policies to address the following: 1. Social and Economic Development. NVFH adheres to the principles set out in the UNGCP and the OECD recommendations on corruption. NVFH is committed to complying with the labour law requirements of the Employment Equity Act (No. 55 of 1988).

2. Good Corporate Citizenship. NVFH subscribes to the provisions of the Promotion of Equality and Prevention of Unfair Discrimination Act, (2000). No incidents have been reported.

3. The Environment, Health and Public Safety. NVFH subscribes to and is compliant with the Occupational Health and Safety Act, (No. 85 of 1993). No incidents have been reported during the period.

4. Consumer Relations. NVFH subscribes to and is compliant with the Consumer Protection Act (No. 68 of 2008). No incidents have been reported.

5. Labour and Employment. NVFH supports and adheres to the terms of the International Labour Organisation Protocol.

NVFH is materially compliant with the following Acts; the Basic Conditions of Employment Act No. 75 of 1997, the Labour Relations Act No. 66 of 1995, the Skills and Development Levies Act No. 9 of 1999 and the Unemployment Insurance Act No. 63 of 2001.

_____________________ S Kwatsha Chairman 23 May 2016

NVest Financial Holdings Limited (NVFH) | INTEGRATED ANNUAL REPORT 2016

29

AUDIT & RISK COMMITTEE REPORT The Audit and Risk Committee (“the Committee”) is an independent statutory committee appointed by the shareholders.

We are pleased to present our report for the financial year ended 29 February 2016.

The Audit and Risk Committee (“the Committee”) is an independent statutory committee appointed by the shareholders. Further duties are delegated to the Committee by the board of directors (“the Board”) of NVest Financial Holdings Limited (“the Group”). This report includes both these sets of duties and responsibilities.

Committee Terms of Reference: The Committee has adopted formal terms of reference that have been approved by the Board. The Committee has conducted its affairs in compliance with its terms of reference and has discharged its responsibilities contained therein. The terms of reference are available on the Group’s website, at www.nvestholdings.co.za and are also available on request.

Committee members, meeting attendance and assessment: The Committee is independent and consists of three independent, Non-Executive Directors. It meets at least twice per year as per its terms of reference. The Chief Executive Officer, Finance Director, external auditor and other assurance providers (legal, compliance, risk, health and safety) attend meetings by invitation only.

30

During the year under review, three meetings were held as set out below: 4 Jun 2015

16 Nov 2015

15 Feb 2016

Siviwe Kwatsha (Chairman)

Present

Present

Present

Jonathan Goldberg

Present

Present

Present

John Philip Ross-Smith

Present

Present

Present

Name of member

This is the first year of operating as a listed company. The effectiveness of the Committee and its individual members will be assessed on an annual basis in due course going forward.

Role and responsibilities Statutory duties The Committee’s role and responsibilities include statutory duties pursuant to the Companies Act, 71 of 2008 (“Companies Act”), and further responsibilities assigned to it by the Board. The Committee executed its duties in terms of the requirements of King III and instances where the King III requirements have not been applied have been explained in the Corporate Governance statement, included on page 20 of the Integrated Annual Report (“Integrated Report”), which this report forms part.

INTEGRATED ANNUAL REPORT 2016 | NVest Financial Holdings Limited (NVFH)

External auditor appointment and independence The Committee has satisfied itself that Group’s external auditor, Grant Thornton Cape Incorporated (“Grant Thornton”), is independent of the Group, as set out in section 94(8) of the Companies Act, which includes consideration of previous appointments of the Group’s auditor, the extent of other work undertaken by the auditor 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 Grant Thornton that internal governance processes within Grant Thornton support and demonstrate its claim to independence.

The Committee ensured that the appointment of Grant Thornton complied with the Companies Act and any other legislation relating to the appointment of auditors.

The Committee, in consultation with executive management, agreed to the engagement letter, terms, audit plan and budgeted audit fees for the 2016 financial year. There is a formal procedure that governs the process whereby the Group’s Auditor is considered for non-audit services. The Committee approved the terms for the provision of non-audit services by the external auditor, and approved the nature and extent of non-audit services that the external auditor may provide in terms of the agreed pre-approval policy.

The Committee has nominated, for election at the annual general meeting, Grant Thornton as the external audit firm and Imtiaaz Hashim as the designated auditor responsible for performing the functions of auditor, for the 2016 financial year. The Committee has satisfied itself that Grant Thornton and the designated auditor are accredited as such on the JSE Limited’s list of auditors and their advisors respectively.

Financial statements and accounting practices The Committee has reviewed the accounting policies and the financial statements of the Group and is satisfied that they are appropriate and comply with International Financial Reporting Standards. An audit committee process has been established to receive and deal appropriately with any concerns and complaints relating to the reporting practices of the Group. No matters of significance have been raised in the past financial year.

Internal financial controls The Committee considered the internal financial controls in conjunction with a review of the management report from the auditor, as well as the financial reporting systems. The Board report on the effectiveness of the system of internal controls is included elsewhere in the Integrated Annual Report. The Committee supports the opinion of the Board in this regard.

Whistle blowing The Committee will receive and deal with any concern or complaints, whether from within or outside the Group, relating to the accounting practices of the Group, the content or auditing of the Group’s financial statements, the internal financial controls of the Group and related matters. No formal whistleblowing hotline has been established.

Duties assigned by the Board In addition to the statutory duties of the Committee, as reported above, and in accordance with the provisions of the Companies Act, the Board has determined further functions for the Committee to perform, as set out in the Audit and Risk Committee’s terms of reference. These functions include the following: • Integrated reporting and combined assurance The Committee fulfils an oversight role regarding the Group’s Integrated Annual Report and the reporting process. The Committee considered the Group’s sustainability information as disclosed in the Integrated Report and has assessed its consistency with operational and other information known to Committee members, and for consistency with the annual financial statements.

The Committee is satisfied that the sustainability information is reliable and consistent with the financial results.

The Committee is satisfied that the Group has optimised the assurance coverage obtained from management, and external assurance providers in accordance with an appropriate combined assurance model.

The Committee has, at its meeting held on 23 May 2016, recommended the Integrated Report for approval by the Board.

• Going concern The Committee has reviewed a documented assessment, including key assumptions, prepared by management of the going concern status of the Group and has made recommendation to the Board in accordance therewith. The Board’s statement on the going concern status of the Group, as supported by the Committee, is elsewhere in the Integrated Report.

NVest Financial Holdings Limited (NVFH) | INTEGRATED ANNUAL REPORT 2016

31

• Governance of risk The Committee is further assigned to have oversight of the Group’s risk management function. The Committee fulfils an oversight role regarding financial reporting risks, internal financial controls, fraud risk as it relates to financial reporting and information technology risks as it relates to financial reporting.

• Internal audit During the year under review, the Group did not have an internal audit function. The nature of the business warrants a compliance officer as opposed to an internal audit function. The Committee has satisfied itself that no factors have arisen which have caused the Committee to amend its recommendation that no internal audit function is required for the Group. In addition, the Committee continually assesses the need to establish an internal audit department as the Group’s operations increase and this is a standing agenda item for consideration at each meeting. The Board has taken responsibility to ensure that an effective governance, risk management and internal control environment has been maintained.

During the year under review, the Committee had the opportunity to meet with the external auditors without management being present.

The Committee is satisfied that it complied with its legal, regulatory or other responsibilities.

Evaluation of the expertise and experience of Financial Director and Finance Function The Committee has satisfied itself that the Financial Director has appropriate expertise and experience to discharge the responsibilities of that role.

The Committee has considered, and has satisfied itself of the appropriateness of the expertise and adequacy of resources of the Finance Function and experience of the senior members of management responsible for the Financial Function.

___________________________ S Kwatsha Chairman 23 May 2016

32

INTEGRATED ANNUAL REPORT 2016 | NVest Financial Holdings Limited (NVFH)

“The great thing in this world is not so much where we stand, as in what direction we are moving” Oliver Wendell Holmes

NVest Financial Holdings Limited (NVFH) | INTEGRATED ANNUAL REPORT 2016

33

REMUNERATION COMMITTEE REPORT REMUNERATION COMMITTEE NVFH established a Remuneration Committee (“the Committee”) following the Company’s listing on 29 May 2015.

The Committee is empowered by the board of directors of NVest (“Board”) to set medium and long term remuneration for executive directors and to further assist the Board in ensuring that group remuneration and recruitment is aligned with overall business strategy, with the aim of enabling NVFH to attract and retain personnel who will create long-term value for all stakeholders.

Terms of Reference The Committee’s framework is guided by the Committee’s Terms of Reference which have been approved by the Board. The Terms of Reference are reviewed every twelve to fifteen months to ensure that they are updated with all relevant new legislation and are always aligned with the Group’s strategy.

In accordance with the Committee’s Terms of Reference, it is also responsible for the oversight of all aspects of remuneration and determining the group’s strategy in this regard. The Terms of Reference were approved during the year.

Remuneration policy The remuneration policy in place is to remunerate Executive Directors primarily on an incentive basis, mainly through commission structures, but also by way of bonuses, profit share arrangements and/or share incentives, all of which are based on performance. The incentives are not on a pool basis but rather on an individual performance basis and are self-funding, aligning the interests of the Executive Directors with the interests of the shareholders.

Where monthly remuneration is paid, this is market related.

All increases, after being recommended by the CEO, have to be approved by the Committee.

The Committee is independent and consists of three independent, non-executive directors. It meets at least twice per year as per the Terms of Reference. Executive directors attend meetings by invitation only.

NVFH (in the form of the original company, NFB, with other subsidiaries being added over the years) has been in business for 30 years in 2015 and is very well established in East London, where the bulk of the business operates from and earns its income. This requires a remuneration strategy that attracts and retains individuals with the required skills to make this Group a success. This policy defines general guidelines for the Company’s incentive pay to the Board of Directors and Executive Management.

During the year under review and to the date of this report two meetings were held as set out below:

The policy is submitted for a non-binding advisory vote at the Annual General Meeting of the Company.

Committee members, meeting attendance and assessment

15 Feb 2016

23 May 2016

Jonathan Goldberg (chairman)

Present

Present

Siviwe Kwatsha

Present

Present

John Philip Ross-Smith

Present

Apologies

Name of member

The effectiveness of the Committee and its individual members will be assessed on an annual basis.

34

Executive Directors’ remuneration currently comprise of one or more of the following elements: • • • • • •

Basic salary Additional fees Benefits Bonuses/Commission Share incentives Other benefits

INTEGRATED ANNUAL REPORT 2016 | NVest Financial Holdings Limited (NVFH)

Basic Salary is subject to annual reviews by the Board and dependent on Company performance.

Benefits comprise of fringe benefits, allowances, risk benefits and retirement benefits.

Bonuses will be a discretionary payment and paid annually each year based on performance and incentive arrangements in place from time to time.

Commissions are the main form of remuneration for the Executive Directors and are payable as a result of their sales functions.

These are in line with their agreed remuneration and are calculated according to set formulas.

Share Incentives will be awarded in terms of the Company’s Share Incentive Scheme from time to time. The Company is designing the scheme for retention of staff that are not typically commission or sales oriented but who are equally important to the sustainability of the group and provision of excellent service to the Group’s stakeholders.

Other benefits will be granted at the discretion of the Board. These will include fringe benefits payable to Directors.

Non-executive Directors’ remuneration is payable in the form of a retainer for attendance at various board and committee meetings and work associated therewith.

Additional fees will be payable for additional time spent on the behalf of the Company at market related rates.

Non-executive remuneration is approved by shareholders in general meeting.

Service contracts NVest has entered into normal service contracts with all of its Executive Directors. All Non-executive Directors are subject to retirement by rotation and re-election by NVest shareholders at least once every three years in accordance with the MOI.

Senior management salaries Guaranteed remuneration, on a cost to company basis, is aligned to the 50th percentile in terms of the market information available from time to time. The structure and basis for performance based incentives is recommended by the remuneration committee and approved by the board from time to time, and is aligned with company strategy and current shareholder and management objectives.

All increases, after being recommended by the CEO, have to be approved by the remuneration committee. Once an average overall increase is agreed to by the remuneration committee, the executive committee determines individual application of increases, with variances being due to higher or lower performance ratings based on regular formal reviews.

Non-executive director remuneration Non-executive directors’ fees for the year under review are disclosed in note 32 to the Annual Financial Statements.

In terms of In terms of Section 66(9) of the Companies Act, 71 of 2008, shareholders are required to approve the remuneration of non-executive directors.

A special resolution has been proposed for shareholders to approve the remuneration of Non-executive directors for the period commencing 1 March 2016 to 28 February 2017. These fees are disclosed in special resolution number 3 of the annual general meeting notice, forming part of this report.

_________________________ J Goldberg Chairman 23 May 2016

NVest Financial Holdings Limited (NVFH) | INTEGRATED ANNUAL REPORT 2016

35

DIRECTORS’ RESPONSIBILITIES & APPROVAL The Directors are required in terms of the Companies Act to maintain adequate accounting records and are responsible for the content and integrity of the financial statements and related financial information included in this report. It is their responsibility to ensure that the financial statements fairly present the state of affairs of the Group as at the end of the financial year and the results of its operations and cash flows for the period then ended, in conformity with the International Financial Reporting Standards (“IFRS”), the Financial Reporting Guides issued by the Accounting Practices Committee of the South African Institute of Chartered Accountants, the Companies Act, and the JSE Listing Requirements. The external auditors are engaged to express an independent opinion on the financial statements.

The financial statements are prepared in accordance with IFRS, the Financial Reporting Guides issued by the Accounting Practices Committee of the South African Institute of Chartered Accountants, the Companies Act and the JSE Listing Requirements and are based upon appropriate accounting policies consistently applied and supported by reasonable and prudent judgments and estimates.

The Directors acknowledge that they are ultimately responsible for the system of internal financial control established by the Group and place considerable importance on maintaining a strong control environment. To enable the Directors to meet these responsibilities, the Board sets standards for internal control aimed at reducing the risk of error or loss in a cost effective manner. The standards include the proper delegation of responsibilities within a clearly defined framework, effective accounting procedures and adequate segregation of duties to ensure an acceptable level of risk. These controls are monitored throughout the Group and all employees are required to maintain the highest ethical standards in ensuring the Group’s business is conducted in a manner that in all reasonable circumstances is above reproach. The focus of risk management in the Group is on identifying, assessing, managing and monitoring all known forms of risk across the Group.

While operating risk cannot be fully eliminated, the Group endeavors to minimise it by ensuring that appropriate infrastructure, controls, systems and ethical behaviour are applied and managed within predetermined procedures and constraints.

The Directors are of the opinion, based on the information and explanations given by management that the system of internal control provides reasonable assurance that the financial records may be relied on for the preparation of the financial statements. However, any system of internal financial control can provide only reasonable, and not absolute, assurance against material misstatement or loss. The Directors have reviewed the Group’s cash flow forecast and, in the light of this review and the current financial position, they are satisfied that the Group has or has access to adequate resources to continue in operational existence for the foreseeable future.

The external auditors are responsible for independently reviewing and reporting on the Group’s financial statements. The financial statements have been examined by the Group’s external auditors and their report is presented on pages 40 to 41.

The financial statements set out on pages 42 to 95, which have been prepared on the going concern basis, were approved by the Board on 23 May 2016 and were signed on its behalf by:

___________________________ ____________________________ Anthony Denis Godwin Frank Terence Knox Chief Executive Officer Financial Director 23 May 2016 23 May 2016

36

INTEGRATED ANNUAL REPORT 2016 | NVest Financial Holdings Limited (NVFH)

FINANCIAL STATEMENTS The financial statements have been prepared by NVFH’s Group Financial Director: Frank Knox.

The consolidated and company financial statements have been audited in compliance with the applicable requirements of the Companies Act 71 of 2008 and the JSE Limited Listings Requirements The above financial statements and group financial statements were approved by the board of directors of NVFH on 16 May 2016 and are signed on its behalf.

___________________________ ____________________________ Anthony Denis Godwin Frank Terence Knox Chief Executive Officer Financial Director 23 May 2016 23 May 2016

NVest Financial Holdings Limited (NVFH) | INTEGRATED ANNUAL REPORT 2016

37 39

GROUP COMPANY SECRETARY’S CERTIFICATION In my capacity as Company Secretary, I hereby confirm in terms of Section 88(2)(e) of the Companies Act, that for financial year ended 29 February 2016, the Group has lodged with the Companies and Intellectual Property Commission all such returns as required of a public company in terms of the Companies Act and that all such returns are true, correct and up to date.

____________________________ Brendan Connellan Company Secretary 23 May 2016

38

INTEGRATED ANNUAL REPORT 2016 | NVest Financial Holdings Limited (NVFH)

“It is not the ship so much as the skillful sailing that assures the prosperous voyage” George William Curtis

NVest Financial Holdings Limited (NVFH) | INTEGRATED ANNUAL REPORT 2016

39

INDEPENDENT AUDITOR’S REPORT

40

INTEGRATED ANNUAL REPORT 2016 | NVest Financial Holdings Limited (NVFH)

NVest Financial Holdings Limited (NVFH) | INTEGRATED ANNUAL REPORT 2016

41

Consolidated Annual Financial Statements 1. Review of financial results and activities The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards and its interpretations issued by the International Accounting Standards Board (IASB) and in the manner required by the Companies Act, 71 of 2008 and the JSE Listing Requirements, SAICA Financial Reporting Guide as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council. The accounting policies have been applied consistently compared to the prior year except where stated otherwise.

Full details of the financial position, results of operations and cash flows of the group are set out in these consolidated financial statements.

2. Share capital 2016 Authorised

2015

Number of shares

Ordinary shares 2016 Issued Ordinary shares

1 000 000 000

1 000 000 000

2016

2015

2015

Stated capital 324 779 200 53 982 677

Number of shares 302 741 722 178 897 362

Refer to note 15 of the consolidated financial statements for detail of the movement in authorised and issued share capital.

The Group did not have any restrictive funding arrangements during the year under review.

3. Dividends The company’s dividend policy is to consider an interim and a final dividend in respect of each financial year. At its discretion, the directors may consider a special dividend, where appropriate. Depending on the perceived need to retain funds for expansion or operating purposes, the directors may decide against the declaration of a dividend.

Dividends were declared to shareholders to the amounts of R 9 700 000 in July 2015 (R 12 000 000 in April 2014) and R13 623 377 in December 2015 (R 14 500 000 in October 2014) respectively. A special dividend in the amount of R 59 099 036 was declared to the shareholder, SASFIN Financial Services (Pty) Ltd, in February 2015 as part of the share repurchase agreement. Refer to note 15 and 16 for more information on this agreement.

The Board has declared a final gross dividend of 4.8 cents per share for the year ended 29 February 2016.

4. Directorate The directors in office during the year or to the date of this report are as follows: Directors

Office

Designation

Changes

Q. Barnard

Director

Executive

Resigned 01 April 2015

P.B. Bartlett

Director

Executive

Appointed 01 April 2015, resigned 01 September 2015

42

INTEGRATED ANNUAL REPORT 2016 | NVest Financial Holdings Limited (NVFH)

Directors

Office

Designation

Changes

B.J. Connellan

Director

Executive

Resigned 01 September 2015

N.N. Eppel

Director

Non-executive

Resigned 24 March 2015 Executive

A.D. Godwin

Chief Executive Officer

Executive

J. Goldberg

Chairperson

Non-executive Independent

A.V. Kent

Director

Executive

F.T. Knox

Chief Financial Officer

Executive

S.R. Kwatsha

Audit Committee Chairman

Non-executive Independent

Appointed 01 April 2015

R.M. McIntyre

Director

Executive

Appointed 01 April 2015, resigned 01 September 2015

T.H. McClure

Director

Executive

Appointed 01 April 2015, resigned 01 September 2015

G.R. Ramsay

Director

Non-executive

Resigned 01 September 2015

J.P. Ross-Smith

Director

Non-executive Independent

Appointed 01 April 2015

B.A. Russell

Director

Non-executive Independent

Resigned 01 April 2015

M.E.E. Sassoon

Director

Non-executive Independent

Resigned 24 March 2015

D.L. Schemel

Director

Non-executive Independent

Appointed 01 June 2015

M. Estment

Director

Executive

Appointed 01 September 2015

Appointed 01 April 2015

5. Directors’ interests in shares As at 29 February 2016, the directors of the company held direct and indirect interest in 60% (2015: 93%) of its issued ordinary shares.

Number of shares Directors Q. Barnard P.B. Bartlett B.J. Connellan A.D. Godwin J. Goldberg A.V. Kent

2016 Direct

2015 Direct

2016 Indirect

2015 Indirect

367 000

-

-

-

-

-

4 642 879

4 642 879

10 705 475

10 705 475

-

-

-

-

75 680 000

76 680 000

217 543

-

-

-

-

-

14 200 000

14 200 000

F.T. Knox

500 000

-

-

-

S.R. Kwatsha

100 000

-

-

-

T.H. McClure

-

-

4 642 879

4 642 879

11 590 382

10 380 244

-

-

-

-

42 000 000

42 245 000

R.M. McIntyre G.R. Ramsay J.P. Ross-Smith B.A. Russell D.L. Schemel M. Estment

100 000

-

-

-

3 550 005

3 550 005

-

-

100 000

-

-

-

99 999

-

14 275 801

-

27 330 404

24 635 724

155 441 559

142 410 758

The register of interests of directors and others in shares of the company is available to the shareholders on request.

There have been no changes in beneficial interests that occurred between the end of the reporting period and the date of this report.

6. Directors’ interests in contracts During the financial year, no contracts were entered into which directors or officers of the group had an interest and which significantly affected the business of the group.

NVest Financial Holdings Limited (NVFH) | INTEGRATED ANNUAL REPORT 2016

43

7. Share incentive scheme Refer to note 39 of the consolidated financial statements for details of the group share incentive scheme.

8. Interests in subsidiaries, associates and joint arrangements Details of material interests in subsidiary companies, associates and joint arrangements are presented in the consolidated financial statements in notes 6, 7 and 8.

The group acquired an additional 50% interest in NVest Properties Ltd during the current year for R 27 974 223. This value represents the fair value of 13 514 069 ordinary shares issued as part of the consideration for the business combination and was determined with reference to the closing market prices of the shares as traded on the JSE on the effective acquisition date of 1 June 2015. NVest Properties Ltd operates in the property industry. Refer to Note 30 for more detail on this transaction.

Subsequent to the above acquisition, on 25 June 2015, the group acquired a further 1% interest in NVest Properties Ltd from a minority shareholder for a consideration of R 1 550 000, increasing ownership interest from 95% to 96%. Refer to Note 6 for more detail on this transaction.

The company acquired the remaining 50% of the joint venture in NFB Asset Management (Pty) Ltd when the company acquired a 100% interest in NFB Gauteng (Pty) Ltd during the current year for a consideration of R 62 700 000. Both these companies also operate in the financial services industry. Refer to Note 30 for more detail on this transactions.

9. Events after the reporting period The directors are not aware of any material event which occurred after the reporting date and up to the date of this report.

10. Going concern The directors believe that the group has adequate financial resources to continue in operation for the foreseeable future and accordingly the consolidated financial statements have been prepared on a going concern basis. The directors have satisfied themselves that the group is in a sound financial position and that it has access to sufficient borrowing facilities to meet its foreseeable cash requirements. The directors are not aware of any new material changes that may adversely impact the group. The directors are also not aware of any material non-compliance with statutory or regulatory requirements or of any pending changes to legislation which may affect the group.

11. Auditors Grant Thornton Cape Inc. continued in office as auditors for the company and its subsidiaries for 2016.

At the AGM, the shareholders will be requested to reappoint Grant Thornton Cape Inc. as the independent external auditors of the company and to confirm Mr I. Hashim as the designated lead audit partner for the 2017 financial year.

12. Secretary The company secretary is Mr B.J. Connellan.

Business address 42 Beach Road Nahoon East London 5241

13. Date of authorisation for issue of financial statements The consolidated financial statements have been authorised for issue by the directors on 26 May 2016. No authority was given to anyone to amend the consolidated financial statements after the date of issue.

44

INTEGRATED ANNUAL REPORT 2016 | NVest Financial Holdings Limited (NVFH)

Statement of Financial Position as at 29 February 2016 Company Figures in Rand

Notes

Group

2016

2015

2016

2015

1 960 320

Assets Non-Current Assets Property, plant and equipment

3

761 352

563 785

34 307 962

Investment property

4

-

-

297 200 000

-

Goodwill

5

-

-

82 604 170

25 874 090

Investments in subsidiaries

6

114 402 327

22 177 939

-

-

Investments in joint ventures

7

-

60

-

60 22 624 206

Investments in associates

8

-

45

100

Loans to related parties

9

91 240 754

12 320 049

-

62 175

Deferred tax

10

106 652

94 850

-

543 414

Other financial assets

11

-

-

295 000

200 000

206 511 085

35 156 728

414 407 232

51 264 265

320 161

Current Assets Loans to related parties

9

1 659 591

1 683 957

-

Other financial assets

11

-

-

9 511 790

-

Loans to shareholders

12

-

24 025 484

694 991

25 249 101

Trade and other receivables

13

193 262

351 354

12 319 220

7 603 105 -

Operating lease smoothing asset

-

-

7 439 232

Current tax receivable

-

-

845 349

-

88 971 231

20 562 811

132 368 716

48 548 897

Cash and cash equivalents

14

90 824 084

46 623 606

163 179 298

81 721 264

297 335 169

81 780 334

577 586 530

132 985 529

324 779 200

53 982 677

324 779 200

53 982 677

-

-

1 452 097

-

(Accumulated loss) / Retained earnings

(28 588 040)

(35 718 503)

34 925 319

1 611 574

Equity Attributable to Equity Holders of Parent

296 191 160

18 264 174

361 156 616

55 594 251

-

-

5 055 211

1 383 763

296 191 160

18 264 174

366 211 827

56 978 014

-

-

10 976 015

-

Total Assets Equity and Liabilities Equity Share capital

15

Reserves

Non-controlling interest

Liabilities Non-Current Liabilities Deferred tax

10

Other financial liabilities

16

-

-

157 141 541

-

-

-

168 117 556

-

Current Liabilities Loan from related party

9

Current tax payable

-

-

116 667

-

59 316

12 308

-

404 897

Other financial liabilities

16

-

62 541 938

15 400 000

62 541 938

Trade and other payables

17

990 043

938 914

27 164 359

12 353 279

-

-

527 091

94 650

23 000

576 121

180 310

1 144 009

63 516 160

43 257 147

76 007 515

1 144 009

63 516 160

211 374 703

76 007 515

297 335 169

81 780 334

577 586 530

132 985 529

Operating lease smoothing liability Provisions Total Liabilities Total Equity and Liabilities

18

NVest Financial Holdings Limited (NVFH) | INTEGRATED ANNUAL REPORT 2016

45

Statement of Profit Loss & Other Comprehensive Income Company Figures in Rand

Notes

Revenue Cost of sales

2016

2015

19

1 974 120

1 732 561

216 443 442

114 642 325

20

-

-

(67 469 044)

(30 812 790)

1 974 120

1 732 561

148 974 398

83 829 535

Gross profit Other income

Group

21

Operating expenses

2016

2015

5 526 134

5 241 571

2 752 347

2 205 943

(10 441 754)

(7 444 503)

(81 537 263)

(51 162 113)

Operating (loss) profit

22

(2 941 500)

(470 371)

70 189 482

34 873 365

Investment revenue

23

35 871 640

38 635 397

12 439 831

2 918 392

Fair value adjustments

24

-

-

12 665 171

-

-

-

1 440 949

7 859 335

25

(858 893)

(5 214)

(16 820 681)

(5 214)

32 071 247

38 159 812

79 914 752

45 645 878

(1 617 407)

17 881

(20 427 253)

(10 279 092)

30 453 840

38 177 693

59 487 499

35 366 786

Gains and losses on property revaluation

-

-

1 859 329

-

Income tax relating to items that will not be reclassified

-

-

(346 728)

-

Other comprehensive income for the year net of taxation

-

-

1 512 601

-

30 453 840

38 177 693

61 000 100

35 366 786

30 453 840

38 177 693

57 949 279

33 637 889

-

-

1 538 220

1 728 897

30 453 840

38 177 693

59 487 499

35 366 786

30 453 840

38 177 693

59 401 376

33 637 889

-

-

1 598 724

1 728 897

30 453 840

38 177 693

61 000 100

35 366 786

-

248 935 830

177 726 744

Income from equity accounted investments Finance costs Profit before taxation Taxation

26

Profit for the year Other comprehensive income: Items that will not be reclassified to profit or loss:

Total comprehensive income for the year Profit attributable to: Equity holders of the parent Non-controlling interest

Total comprehensive income attributable to: Equity holders of the parent Non-controlling interest

Per share information Average number of shares Weighted average number of shares Earnings per share

38

Earnings per share (c)

-

-

23.28

18.93

Headline earnings per share (c)

-

-

18.77

16.07

Net asset value per share (c)

-

-

119.30

31.28

Net tangible asset value per share (c)

-

-

92.01

16.72

Net asset value per share

46

INTEGRATED ANNUAL REPORT 2016 | NVest Financial Holdings Limited (NVFH)

Statement of Changes in Equity Figures in Rand

Stated Capital

Share Premium

Total share capital

Revaluation reserve

Retained earnings

Total attributable to equity holders of the parent

Noncontrolling interest

Total equity

Company Balance at 01 March 2014

500

18 120 038

18 120 538

-

10 302 840

28 423 378

-

28 423 378

Profit for the year

-

-

-

-

38 177 693

38 177 693

-

38 177 693

Total comprehensive income for the year

-

-

-

-

38 177 693

38 177 693

-

38 177 693

Issue of shares

39 305 041

-

39 305 041

-

-

39 305 041

-

39 305 041

Transfer share premium to share capital

14 677 231

(14 677 231)

-

-

-

-

-

-

(95)

(3 442 807)

(3 442 902)

-

-

(3 442 902)

-

(3 442 902)

-

-

-

-

(84 199 036)

(84 199 036)

-

(84 199 036)

Total contributions by and distributions to owners of company recognised directly in equity

53 982 177

(18 120 038)

35 862 139

-

(84 199 036)

(48 336 897)

-

(48 336 897)

Balance at 01 March 2015

53 982 677

-

53 982 677

-

(35 718 503)

18 264 174

-

18 264 174

Profit for the year

-

-

-

-

30 453 840

30 453 840

-

30 453 840

Total comprehensive income for the year

-

-

-

-

30 453 840

30 453 840

-

30 453 840

180 122 300

-

180 122 300

-

-

-

-

-

-

-

-

-

(23 323 377)

(23 323 377)

-

(23 323 377)

Business combinations

90 674 223

-

90 674 223

-

-

90 674 223

-

90 674 223

Total contributions by and distributions to owners of company recognised directly in equity

270 796 523

-

270 796 523

-

(23 323 377)

247 473 146

-

247 473 146

Balance at 29 February 2016

324 779 200

-

324 779 200

-

(28 588 040)

296 191 160

-

296 191 160

15

15

15

Share repurchase Dividends

Issue of shares Dividends

Notes

NVest Financial Holdings Limited (NVFH) | INTEGRATED ANNUAL REPORT 2016

47

Statement of Changes in Equity Figures in Rand

Stated Capital

Share Premium

Total share capital

Revaluation reserve

Retained earnings

Total attributable to equity holders of the parent

500

18 120 038

18 120 538

-

57 307 014

75 427 552

3 633 741

79 061 293

-

-

-

-

33 637 889

33 637 889

1 728 897

35 366 786

Noncontrolling interest

Total equity

Group Balance at 01 March 2014 Profit for the year Total comprehensive income for the year Issue of shares Share repurchase

-

-

-

-

33 637 889

33 637 889

1 728 897

35 366 786

39 305 041

-

39 305 041

-

-

39 305 041

140

39 305 181

(95)

(3 442 807)

(3 442 902)

-

-

(3 442 902)

-

(3 442 902)

Acquisition from non-controlling interest

-

-

-

-

(5 121 153)

(5 121 153)

(2 292 155)

(7 413 308)

Transfer share premium to share capital

14 677 231

(14 677 231)

-

-

-

-

-

-

Dividends

-

-

-

-

(84 199 036)

(84 199 036)

(1 700 000)

(85 899 036)

Changes in ownership interest - control not lost

-

-

(13 140)

(13 140)

13 140

-

-

-

Total contributions by and distributions to owners of company recognised directly in equity

53 982 177

(18 120 038)

35 862 139

-

(89 333 329)

(53 471 190)

(3 978 875)

(57 450 065)

Balance at 01 March 2015

53 982 677

-

53 982 677

-

1 611 574

55 594 251

1 383 763

56 978 014

Profit for the year

-

-

-

-

57 949 279

57 949 279

1 538 220

59 487 499

Other comprehensive income

-

-

-

1 452 097

-

1 452 097

60 504

1 512 601

Total comprehensive income for the year

-

-

-

1 452 097

57 949 279

59 401 376

1 598 724

61 000 100

180 122 300

-

180 122 300

-

-

180 122 300

-

180 122 300

-

-

-

-

(1 009 819)

(1 009 819)

(540 207)

(1 550 026)

Issue of shares Acquisition from non-controlling interest Dividends

-

-

-

-

(23 625 715)

(23 625 715)

-

(23 625 715)

90 674 223

-

90 674 223

-

-

90 674 223

2 612 931

93 287 154

Total contributions by and distributions to owners of company recognised directly in equity

270 796 523

-

270 796 523

-

(24 635 534)

246 160 989

2 072 724

248 233 713

Balance at 29 February 2016

324 779 200

-

324 779 200

1 452 097

34 925 319

361 156 616

5 055 211

366 211 827

15

15

15

Business combinations

Notes

48

INTEGRATED ANNUAL REPORT 2016 | NVest Financial Holdings Limited (NVFH)

Statement of Cash Flows Company Figures in Rand

Notes

Group

2016

2015

2016

2015

(2 445 242)

(3 529 058)

63 172 023

23 282 449

Cash flows from operating activities Cash (used in) generated from operations

27

Interest received Dividends received Finance costs Tax paid

28

Net cash from operating activities

9 575 961

1 173 498

11 674 765

2 756 493

26 295 679

37 461 899

765 066

161 899

(858 893)

(5 214)

(16 820 681)

(5 214)

(1 582 201)

(245 419)

(20 442 941)

(10 828 711)

30 985 304

34 855 706

38 348 232

15 366 916

Cash flows used in investing activities Purchase of property, plant and equipment

3

(412 954)

(501 774)

(29 539 627)

(1 250 659)

Disposal of property, plant and equipment

3

-

-

43 352

6 315

Purchase of investment property

4

-

-

(74 799)

-

Net cash acquired in business combinations

30

Advancements of loans to related parties Repayment of loans to related parties Proceeds from other financial assets Additional investments in current subsidiaries Net cash used in investing activities

-

-

5 424 113

-

(21 651 615)

(14 004 006)

-

(65 309)

10 352 038

7 293 591

947 325

114 925

-

-

3 490 163

-

(1 550 000)

(7 413 468)

(1 550 000)

(7 413 468)

(13 262 531)

(14 625 657)

(21 259 473)

(8 608 196)

Cash flows from (used in) financing activities Proceeds from share issues

112 525 478

39 305 041

112 525 478

39 305 041

Proceeds from other financial liabilities

15

-

-

27 391 386

-

(Advances to)/Repayment of loans to shareholders

24 025 484

(24 025 484)

24 554 111

(23 892 270)

-

-

(11 572 262)

-

(85 865 315)

(21 657 098)

(86 167 653)

(21 657 098)

-

-

-

(1 700 000)

Net cash from (used in) financing activities

50 685 647

(6 377 541)

66 731 060

(7 944 327)

Total cash movement for the year

68 408 420

13 852 508

83 819 819

(1 185 607)

Proceeds from/(Repayment of) loans from shareholders Dividends paid

29

Dividends paid to minority shareholders

Cash at the beginning of the year Total cash at end of the year

14

20 562 811

6 710 303

48 548 897

49 734 504

88 971 231

20 562 811

132 368 716

48 548 897

NVest Financial Holdings Limited (NVFH) | INTEGRATED ANNUAL REPORT 2016

49

Accounting Policies 1.

Presentation of consolidated financial statements

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards and its interpretations issued by the International Accounting Standards Board (IASB) and in the manner required by the Companies Act, 71 of 2008 and the JSE Listing Requirements, SAICA Financial Reporting Guide as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council. The consolidated financial statements have been prepared on the historical cost basis, and incorporate the principal accounting policies set out below. They are presented in South African Rands.

These accounting policies are consistent with the previous period, except for the adoption of new standards and interpretations which became effective in the current year.

1.1 Consolidation Basis of consolidation The consolidated financial statements incorporate the consolidated financial statements of the group and all investees which are controlled by the group.

The group has control of an investee when it has power over the investee; it is exposed to or has rights to variable returns from involvement with the investee; and it has the ability to use its power over the investee to affect the amount of the investor’s returns.

The results of subsidiaries are included in the consolidated financial statements from the effective date that control is obtained to the effective date that control ceases.

Adjustments are made when necessary to the consolidated financial statements of subsidiaries to bring their accounting policies in line with those of the group.

All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.

Non-controlling interests in the net assets of consolidated subsidiaries are identified and recognised separately from the group’s interest therein, and are recognised within equity. Losses of subsidiaries attributable to non-controlling interests are allocated to the non-controlling interest even if this results in a debit balance being recognised for non-controlling interest.

Transactions which result in changes in ownership levels, where the group has control of the subsidiary both before and after the transaction are regarded as equity transaction and are recognised directly in the statement of changes in equity.

The difference between the fair value of consideration paid or received and the movement in non-controlling interest for such transactions is recognised in equity attributable to the owners of the parent.

Business combinations The group accounts for business combinations using the acquisition method of accounting. The cost of the business combination is measured as the aggregate of the fair values of assets given, liabilities incurred or assumed and equity instruments issued.

Costs directly attributable to the business combination are expensed as incurred, except the costs to issue debt which are amortised as part of the effective interest and costs to issue equity which are included in equity.

The acquiree’s identifiable assets, liabilities and contingent liabilities which meet the recognition conditions of IFRS 3 Business combinations are recognised at their fair values at acquisition date, except for non-current assets (or disposal group) that are classified as held-for-sale in accordance with IFRS 5 Non-current assets held-for-sale and discontinued operations, which are recognised at fair value less costs to sell.

An investment in associate is accounted for using the equity method, except when the investment is classified as held-forsale in accordance with IFRS 5 Non-current assets held-for-sale and discontinued operations. Under the equity method, investments in associates are carried in the consolidated statement of financial position at cost adjusted for post acquisition changes in the group’s share of net assets of the associate, less any impairment losses.

Losses in an associate in excess of the group’s interest in that associate are recognised only to the extent that the group has incurred a legal or constructive obligation to make payments on behalf of the associate.

50

INTEGRATED ANNUAL REPORT 2016 | NVest Financial Holdings Limited (NVFH)

Accounting Policies- continued Any goodwill on acquisition of an associate is included in the carrying amount of the investment, however, a gain on acquisition is recognised immediately in profit or loss.

Profits or losses on transactions between the group and an associate are eliminated to the extent of the group’s interest therein.

When the group reduces its level of significant influence or loses significant influence, the group proportionately reclassifies the related items which were previously accumulated in equity through other comprehensive income to profit or loss as a reclassification adjustment. In such cases, if an investment remains, that investment is measured to fair value, with the fair value adjustment being recognised in profit or loss as part of the gain or loss on disposal.

Joint ventures An interest in a joint venture is accounted for using the equity method, except when the investment is classified as held-for-sale in accordance with IFRS 5 Non-current assets held-for-sale and discontinued operations. Under the equity method, interests in joint ventures are carried in the consolidated statement of financial position at cost adjusted for post acquisition changes in the company’s share of net assets of the joint venture, less any impairment losses. Profits or losses on transactions between the company and a joint venture are eliminated to the extent of the company’s interest therein.

When the company loses joint control, the group proportionately reclassifies the related items which were previously accumulated in equity through other comprehensive income to profit or loss as a reclassification adjustment. In such cases, if an investment remains, that investment is measured to fair value, with the fair value adjustment being recognised in profit or loss as part of the gain or loss on disposal.

1.2

Significant judgements and sources of estimation uncertainty

In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the amounts represented in the consolidated financial statements and related disclosures. Use of available information and the application of judgement is inherent in the formation of estimates. Actual results in the future could differ from these estimates which may be material to the consolidated financial statements. Significant judgements include: Trade receivables and Loans and receivables The group assesses its trade receivables and loans and receivables for impairment at the end of each reporting period. In determining whether an impairment loss should be recorded in profit or loss, the group makes judgements as to whether there is observable data indicating a measurable decrease in the estimated future cash flows from a financial asset.

The impairment for trade receivables and loans and receivables is calculated on a portfolio basis, based on historical loss ratios, adjusted for national and industry-specific economic conditions and other indicators present at the reporting date that correlate with defaults on the portfolio. These annual loss ratios are applied to loan balances in the portfolio and scaled to the estimated loss emergence period.

Fair value estimation The fair value of financial instruments that are not traded in an active market (for example, over the counter derivatives) is determined by using valuation techniques. The group uses a variety of methods and makes assumptions that are based on market conditions existing at the end of each reporting period. Quoted market prices or dealer quotes for similar instruments are used for long-term debt. Other techniques, such as estimated discounted cash flows, are used to determine fair value for the remaining financial instruments. The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows. The fair value of forward foreign exchange contracts is determined using quoted forward exchange rates at the end of the reporting period.

The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values.

The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the group for similar financial instruments.

Impairment testing The recoverable amounts of cash-generating units and individual assets have been determined based on the higher of valuein-use calculations and fair values less costs to sell. These calculations require the use of estimates and assumptions.

It is reasonably possible that the assumption may change which may then impact our estimations and may then require a material adjustment to the carrying value of goodwill and tangible assets.

The group reviews and tests the carrying value of assets when events or changes in circumstances suggest that the carrying amount may not be recoverable. In addition, goodwill is tested on an annual basis for impairment. Assets are grouped at the

NVest Financial Holdings Limited (NVFH) | INTEGRATED ANNUAL REPORT 2016

51

Accounting Policies- continued lowest level for which identifiable cash flows are largely independent of cash flows of other assets and liabilities. If there are indications that impairment may have occurred, estimates are prepared of expected future cash flows for each group of assets.

Expected future cash flows used to determine the value in use of goodwill and tangible assets are inherently uncertain and could materially change over time. They are significantly affected by a number of factors, together with economic factors.

Provisions Provisions were raised and management determined an estimate based on the information available. Additional disclosure of these estimates of provisions are included in note 18 - Provisions.

1.3 Investment property Investment property is initially recognised at cost. Transaction costs are included in the initial measurement.

Costs include costs incurred initially and costs incurred subsequently to add to, or to replace a part of, or service a property. If a replacement part is recognised in the carrying amount of the investment property, the carrying amount of the replaced part is derecognised.

Fair value Subsequent to initial measurement investment property is measured at fair value.

A gain or loss arising from a change in fair value is included in net profit or loss for the period in which it arises.

If the fair value of investment property under construction is not determinable, it is measured at cost until the earlier of the date it becomes determinable or construction is complete.

1.4 Property, plant and equipment Property, plant and equipment are tangible assets which the group holds for its own use or for rental to others and which are expected to be used for more than one year.

Item

Depreciation method

Average useful life

Buildings

Fair value

50 years

Airconditioners

Straight line

6 years

Furniture and fixtures

Straight line

6-10 years

Motor vehicles

Straight line

8 years

Office equipment

Straight line

5 years

IT equipment

Straight line

3 to 4 years

Computer software

Straight line

3 years

Leasehold improvements

Straight line

6 years

The residual value, useful life and depreciation method of each asset are reviewed at the end of each reporting period. If the expectations differ from previous estimates, the change is accounted for as a change in accounting estimate.

The depreciation charge for each period is recognised in profit or loss unless it is included in the carrying amount of another asset.

The gain or loss arising from the derecognition of an item of property, plant and equipment is included in profit or loss when the item is derecognised. The gain or loss arising from the derecognition of an item of property, plant and equipment is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item.

Assets which the (company/group) holds for rentals to others and subsequently routinely sell as part of the ordinary course of activities, are transferred to inventories when the rentals end and the assets are available-for-sale. These assets are not accounted for as non-current assets held for sale. Proceeds from sales of these assets are recognised as revenue. All cash flows on these assets are included in cash flows from operating activities in the cash flow statement.

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INTEGRATED ANNUAL REPORT 2016 | NVest Financial Holdings Limited (NVFH)

Accounting Policies- continued 1.5 Goodwill Goodwill is initially measured at cost, being the excess of the cost of the business combination over company’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities.

Subsequently goodwill, acquired in a business combination is carried at cost less any accumulated impairment. Goodwill is assessed at each statements of financial position date for impairment.

The excess of the company’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of the business combination is immediately recognised in the statements of comprehensive income.

Internally generated goodwill is not recognised as an asset.

1.6 Investments in subsidiaries Company consolidated financial statements In the company’s separate consolidated financial statements, investments in subsidiaries are carried at cost less any accumulated impairment.

The cost of an investment in a subsidiary is the aggregate of: • the fair value, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the company; plus • any costs directly attributable to the purchase of the subsidiary.

An adjustment to the cost of a business combination contingent on future events is included in the cost of the combination if the adjustment is probable and can be measured reliably.

1.7

Joint arrangements

Company consolidated financial statements Joint ventures An investment in a joint venture is carried at cost less any accumulated impairment.

1.8 Investments in associates Company consolidated financial statements An investment in an associate is carried at cost less any accumulated impairment.

1.9 Financial instruments Classification The group classifies financial assets and financial liabilities into the following categories: • Financial assets at fair value through profit or loss - held for trading • Held-to-maturity investment • Loans and receivables • Financial liabilities measured at amortised cost Classification depends on the purpose for which the financial instruments were obtained / incurred and takes place at initial recognition. Classification is re-assessed on an annual basis, except for derivatives and financial assets designated as at fair value through profit or loss, which shall not be classified out of the fair value through profit or loss category.

Initial recognition and measurement Financial instruments are recognised initially when the group becomes a party to the contractual provisions of the instruments.

The group classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the contractual arrangement.

NVest Financial Holdings Limited (NVFH) | INTEGRATED ANNUAL REPORT 2016

53

Accounting Policies- continued Financial instruments are measured initially at fair value, except for equity investments for which a fair value is not determinable, which are measured at cost and are classified as available-for-sale financial assets.

For financial instruments which are not at fair value through profit or loss, transaction costs are included in the initial measurement of the instrument.

Transaction costs on financial instruments at fair value through profit or loss are recognised in profit or loss.

Subsequent measurement Financial instruments at fair value through profit or loss are subsequently measured at fair value, with gains and losses arising from changes in fair value being included in profit or loss for the period.

Net gains or losses on the financial instruments at fair value through profit or loss include dividends and interest.

Loans and receivables are subsequently measured at amortised cost, using the effective interest method, less accumulated impairment losses.

Held-to-maturity investments are subsequently measured at amortised cost, using the effective interest method, less accumulated impairment losses.

Financial liabilities at amortised cost are subsequently measured at amortised cost, using the effective interest method.

Derecognition Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the group has transferred substantially all risks and rewards of ownership.

Impairment of financial assets At each reporting date the group assesses all financial assets, other than those at fair value through profit or loss, to determine whether there is objective evidence that a financial asset or group of financial assets has been impaired.

For amounts due to the group, significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy and default of payments are all considered indicators of impairment.

In the case of equity securities classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is considered an indicator of impairment. If any such evidence exists for available-for-sale financial assets, the cumulative loss - measured as the difference between the acquisition cost and current fair value, less any impairment loss on that financial asset previously recognised in profit or loss - is removed from equity as a reclassification adjustment to other comprehensive income and recognised in profit or loss.

Impairment losses are recognised in profit or loss.

Impairment losses are reversed when an increase in the financial asset’s recoverable amount can be related objectively to an event occurring after the impairment was recognised, subject to the restriction that the carrying amount of the financial asset at the date that the impairment is reversed shall not exceed what the carrying amount would have been had the impairment not been recognised.

Reversals of impairment losses are recognised in profit or loss except for equity investments classified as available-for-sale.

Impairment losses are also not subsequently reversed for available-for-sale equity investments which are held at cost because fair value was not determinable.

Where financial assets are impaired through use of an allowance account, the amount of the loss is recognised in profit or loss within operating expenses. When such assets are written off, the write off is made against the relevant allowance account.

Subsequent recoveries of amounts previously written off are credited against operating expenses.

Financial instruments consist of: Loans to (from) related parties These include loans to and from holding companies, fellow subsidiaries, subsidiaries, joint ventures, associates and other related entities and are recognised initially at fair value plus direct transaction costs.

Loans to related parties are classified as loans and receivables.

54

INTEGRATED ANNUAL REPORT 2016 | NVest Financial Holdings Limited (NVFH)

Accounting Policies- continued Loans from related parties are classified as financial liabilities measured at amortised cost.

Loans to shareholders, directors, managers and employees These financial assets are classified as loans and receivables.

Trade and other receivables Trade receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost using the effective interest rate method. Appropriate allowances for estimated irrecoverable amounts are recognised in profit or loss when there is objective evidence that the asset is impaired. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 30 days overdue) are considered indicators that the trade receivable is impaired. The allowance recognised is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition.

The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in profit or loss within operating expenses. When a trade receivable is uncollectable, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited against operating expenses in profit or loss.

Trade and other receivables are classified as loans and receivables.

Trade and other payables Trade payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method.

Cash and cash equivalents Cash and cash equivalents comprise cash on hand and demand deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These are initially and subsequently recorded at fair value.

Borrowings Borrowings are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method. Any difference between the proceeds (net of transaction costs) and the settlement or redemption of borrowings is recognised over the term of the borrowings in accordance with the group’s accounting policy for borrowing costs.

Held to maturity These financial assets are initially measured at fair value plus direct transaction costs.

At subsequent reporting dates these are measured at amortised cost using the effective interest rate method, less any impairment loss recognised to reflect irrecoverable amounts. An impairment loss is recognised in profit or loss when there is objective evidence that the asset is impaired, and is measured as the difference between the investment’s carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition.

Impairment losses are reversed in subsequent periods when an increase in the investment’s recoverable amount can be related objectively to an event occurring after the impairment was recognised, subject to the restriction that the carrying amount of the investment at the date the impairment is reversed shall not exceed what the amortised cost would have been had the impairment not been recognised.

Financial assets that the group has the positive intention and ability to hold to maturity are classified as held to maturity.

1.10 Tax Current tax assets and liabilities Current tax for current and prior periods is, to the extent unpaid, recognised as a liability. If the amount already paid in respect of current and prior periods exceeds the amount due for those periods, the excess is recognised as an asset.

Current tax liabilities (assets) for the current and prior periods are measured at the amount expected to be paid to (recovered from) the tax authorities, using the tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

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55

Accounting Policies- continued Deferred tax assets and liabilities A deferred tax asset is recognised for the carry forward of unused tax losses and unused STC credits to the extent that it is probable that future taxable profit will be available against which the unused tax losses and unused STC credits can be utilised.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

Tax expenses Current and deferred taxes are recognised as income or an expense and included in profit or loss for the period, except to the extent that the tax arises from: • a transaction or event which is recognised, in the same or a different period, to other comprehensive income, or • a business combination.

Current tax and deferred taxes are charged or credited to other comprehensive income if the tax relates to items that are credited or charged, in the same or a different period, to other comprehensive income.

Current tax and deferred taxes are charged or credited directly to equity if the tax relates to items that are credited or charged, in the same or a different period, directly in equity.

1.11 Leases A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership.

Operating leases - lessor Operating lease income is recognised as an income on a straight-line basis over the lease term.

Initial direct costs incurred in negotiating and arranging operating leases are added to the carrying amount of the leased asset and recognised as an expense over the lease term on the same basis as the lease income.

Income for leases is disclosed under revenue in profit or loss.

Operating leases - lessee Operating lease payments are recognised as an expense on a straight-line basis over the lease term. The difference between the amounts recognised as an expense and the contractual payments are recognised as an operating lease asset. This liability is not discounted.

Any contingent rents are expensed in the period they are incurred.

1.12 Impairment of assets The group assesses at each end of the reporting period whether there is any indication that an asset may be impaired. If any such indication exists, the group estimates the recoverable amount of the asset.

Irrespective of whether there is any indication of impairment, the group also: • tests goodwill acquired in a business combination for impairment annually.

If there is any indication that an asset may be impaired, the recoverable amount is estimated for the individual asset. If it is not possible to estimate the recoverable amount of the individual asset, the recoverable amount of the cash-generating unit to which the asset belongs is determined.

The recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs to sell and its value in use.

If the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. That reduction is an impairment loss.

An impairment loss of assets carried at cost less any accumulated depreciation or amortisation is recognised immediately in profit or loss. Any impairment loss of a revalued asset is treated as a revaluation decrease.

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INTEGRATED ANNUAL REPORT 2016 | NVest Financial Holdings Limited (NVFH)

Accounting Policies - continued An entity assesses at each reporting date whether there is any indication that an impairment loss recognised in prior periods for assets other than goodwill may no longer exist or may have decreased. If any such indication exists, the recoverable amounts of those assets are estimated.

The increased carrying amount of an asset other than goodwill attributable to a reversal of an impairment loss does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior periods.

A reversal of an impairment loss of assets carried at cost less accumulated depreciation or amortisation other than goodwill is recognised immediately in profit or loss. Any reversal of an impairment loss of a revalued asset is treated as a revaluation increase.

1.13 Share capital and equity An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.

1.14 Share based payments Goods or services received or acquired in a share-based payment transaction are recognised when the goods or the services are received. A corresponding increase in equity is recognised if the goods or services were received in an equity-settled share-based payment transaction or a liability if the goods or services were acquired in a cash-settled share-based payment transaction.

When the goods or services received or acquired in a share-based payment transaction do not qualify for recognition as assets, they are recognised as expenses.

For equity-settled share-based payment transactions the goods or services received and the corresponding increase in equity are measured, directly, at the fair value of the goods or services received provided that the fair value can be estimated reliably.

If the fair value of the goods or services received cannot be estimated reliably, or if the services received are employee services, their value and the corresponding increase in equity, are measured, indirectly, by reference to the fair value of the equity instruments granted.

Vesting conditions which are not market related (i.e. service conditions and non-market related performance conditions) are not taken into consideration when determining the fair value of the equity instruments granted. Instead, vesting conditions which are not market related shall be taken into account by adjusting the number of equity instruments included in the measurement of the transaction amount so that, ultimately, the amount recognised for goods or services received as consideration for the equity instruments granted shall be based on the number of equity instruments that eventually vest. Market conditions, such as a target share price, are taken into account when estimating the fair value of the equity instruments granted. The number of equity instruments are not adjusted to reflect equity instruments which are not expected to vest or do not vest because the market condition is not achieved.

If the share based payments vest immediately the services received are recognised in full.

1.15 Employee benefits Short-term employee benefits The cost of short-term employee benefits, (those payable within 12 months after the service is rendered, such as paid vacation leave and sick leave, bonuses, and non-monetary benefits such as medical care), are recognised in the period in which the service is rendered and are not discounted.

The expected cost of compensated absences is recognised as an expense as the employees render services that increase their entitlement or, in the case of non-accumulating absences, when the absence occurs.

The expected cost of profit sharing and bonus payments is recognised as an expense when there is a legal or constructive obligation to make such payments as a result of past performance.

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57

Accounting Policies - continued 1.16 Provisions and contingencies Provisions are recognised when: • the group has a present obligation as a result of a past event; • it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and • a reliable estimate can be made of the obligation.

The amount of a provision is the present value of the expenditure expected to be required to settle the obligation.

Where some or all of the expenditure required to settle a provision is expected to be reimbursed by another party, the reimbursement shall be recognised when, and only when, it is virtually certain that reimbursement will be received if the entity settles the obligation. The reimbursement shall be treated as a separate asset. The amount recognised for the reimbursement shall not exceed the amount of the provision.

Provisions are not recognised for future operating losses.

If an entity has a contract that is onerous, the present obligation under the contract shall be recognised and measured as a provision.

1.17 Revenue Revenue is measured at the fair value of the consideration received or receivable and represents the amounts receivable for services provided in the normal course of business, net of trade discounts and volume rebates, and value added tax.

Brokerage income is recognised when the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer.

Underwriting fees are recognised as revenue when the underwriting cycle is complete. Interest is recognised, in profit or loss, using the effective interest rate method.

Dividends are recognised, in profit or loss, when the company’s right to receive payment has been established.

1.18 Cost of sales The related cost of providing services recognised as revenue in the current period is included in cost of sales.

1.19 Borrowing costs Borrowing costs are recognised as an expense in the period in which they are incurred.

1.20 Earnings per share Earnings per share is calculated on the weighted average number of shares in issue, net of treasury shares, in respect of the year and is based on profit attributable to ordinary shareholders. Headline earnings per share is calculated in terms of the requirements set out in Circular 02/2015 issued by JSE.

1.21 Segmental reporting IFRS 8 requires operating segments to be identified on the basis of internal reports that are regularly reviewed by the chief operating decision maker (considered to be the Executive Board).

Management currently identifies five operating segments, being operations in RSA divided into insurance broking, wealth management, administration of estates and trusts, property services and other. Each operating segment is monitored separately and strategic decisions are made on the basis of segment operating results.

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INTEGRATED ANNUAL REPORT 2016 | NVest Financial Holdings Limited (NVFH)

Notes to the Consolidated Financial Statements 2. New Standards and Interpretations 2.1 Standards and interpretations effective and adopted in the current year In the current year, the group has adopted the following standards and interpretations that are effective for the current financial year and that are relevant to its operations: Amendment to IFRS 2: Share-based Payment: Annual improvements project Amended the definitions of “vesting conditions” and “market conditions” and added definitions for “performance condition” and “service condition.”

The effective date of the amendment is for years beginning on or after 01 July 2014.

The group has adopted the amendment for the first time in the 2016 consolidated financial statements. The impact of the amendment is not material.

Amendment to IFRS 3: Business Combinations: Annual improvements project The amendment clarifies that contingent consideration in a business combination which meets the definition of a financial instrument shall be classified as a financial liability or equity. It further stipulates that contingent consideration which is required to be measured at fair value shall be done so by recognising changes in fair value through profit or loss. Reference to measuring contingent consideration to fair value through other comprehensive income has been deleted.

The effective date of the amendment is for years beginning on or after 01 July 2014.

The group has adopted the amendment for the first time in the 2016 consolidated financial statements. The impact of the amendment is not material.

Amendment to IFRS 8: Operating Segments: Annual improvements project Management are now required to disclose the judgements made in applying the aggregation criteria. This includes a brief description of the operating segments that have been aggregated in this way and the economic indicators that have been assessed in determining that the aggregated operating segments share similar economic characteristics.

The effective date of the amendment is for years beginning on or after 01 July 2014.

The group has adopted the amendment for the first time in the 2016 consolidated financial statements. The impact of the amendment is not material.

Amendment to IAS 16: Property, Plant and Equipment: Annual improvements project The amendment adjusts the option to proportionately restate accumulated depreciation when an item of property, plant and equipment is revalued. Instead, the gross carrying amount is to be adjusted in a manner consistent with the revaluation of the carrying amount. The accumulated depreciation is then adjusted as the difference between the gross and net carrying amount.

The effective date of the amendment is for years beginning on or after 01 July 2014.

The group has adopted the amendment for the first time in the 2016 consolidated financial statements. The impact of the amendment is not material.

Amendment to IAS 24: Related Party Disclosures: Annual improvements project The definition of a related party has been amended to include an entity, or any member of a group of which it is a part, which provides key management personnel services to the reporting entity or to the parent of the reporting entity (“management entity”). Disclosure is required of payments made to the management entity for these services but not of payments made by the management entity to its directors or employees.

The effective date of the amendment is for years beginning on or after 01 July 2014.

The group has adopted the amendment for the first time in the 2016 consolidated financial statements.

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59

Notes to the Consolidated Financial Statements - continued 2.

New Standards and Interpretations (continued)

The impact of the amendment is not material.

Amendment to IFRS 3: Business Combinations: Annual improvements project The amendment to the scope exclusions removes reference to the formation of joint ventures. It now excludes from the scope, the formation of a joint arrangement in the financial statements of the joint arrangement itself.

The effective date of the amendment is for years beginning on or after 01 July 2014.

The group has adopted the amendment for the first time in the 2016 consolidated financial statements. The impact of the amendment is not material.

Amendment to IFRS 13: Fair Value Measurement: Annual improvements project The amendment clarifies that references to financial assets and financial liabilities in paragraphs 48-51 and 53-56 should be read as applying to all contracts within the scope of, and accounted for in accordance with, IAS 39 or IFRS 9, regardless of whether they meet the definitions of financial assets or financial liabilities in IAS 32 Financial Instruments: Presentation.

The effective date of the amendment is for years beginning on or after 01 July 2014.

The group has adopted the amendment for the first time in the 2016 consolidated financial statements.

The adoption of this amendment has not had a material impact on the results of the group, but has resulted in more disclosure than would have previously been provided in the consolidated financial statements.

Amendment to IAS 40: Investment Property: Annual improvements project The amendment requires an entity to determine whether the acquisition of investment property is the acquisition of an asset or a business combination, in which case the provisions of IFRS 3 Business Combinations applies.

The effective date of the amendment is for years beginning on or after 01 July 2014.

The group has adopted the amendment for the first time in the 2016 consolidated financial statements. The impact of the amendment is not material.

2.2 Standards and interpretations not yet effective The group has chosen not to early adopt the following standards and interpretations, which have been published and are mandatory for the group’s accounting periods beginning on or after 01 March 2016 or later periods: IFRS 9 Financial Instruments This new standard is the result of a three phase project to replace IAS 39 Financial Instruments: Recognition and Measurement.

The effective date has not yet been established as the project is currently incomplete. The IASB has communicated that the effective date will not be before years beginning on or after 01 January 2018. IFRS 9 may be early adopted. If IFRS 9 is early adopted, the new hedging requirements may be excluded until the effective date.

The group expects to adopt the standard for the first time in the first annual financial period after the effective date.

The adoption of this standard is not expected to impact on the results of the group, but may result in more disclosure than is currently provided in the consolidated financial statements.

Amendments to IAS 16 and IAS 38: Clarification of Acceptable Methods of Depreciation and Amortisation The amendment clarifies that a depreciation or amortisation method that is based on revenue that is generated by an activity that includes the use of the asset is not an appropriate method. This requirement can be rebutted for intangible assets in very specific circumstances as set out in the amendments to IAS 38.

The effective date of the amendment is for years beginning on or after 01 January 2016.

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INTEGRATED ANNUAL REPORT 2016 | NVest Financial Holdings Limited (NVFH)

Notes to the Consolidated Financial Statements - continued 2.

New Standards and Interpretations (continued)

The group expects to adopt the amendment for the first time in the 2017 consolidated financial statements.

It is unlikely that the amendment will have a material impact on the group’s consolidated financial statements.

IFRS 15 Revenue from Contracts with Customers IFRS 15 supersedes IAS 11 Construction contracts; IAS 18 Revenue; IFRIC 13 Customer Loyalty Programmes; IFRIC 15 Agreements for the construction of Real Estate; IFRIC 18 Transfers of Assets from Customers and SIC 31 Revenue - Barter Transactions Involving Advertising Services.

The core principle of IFRS 15 is that an entity recognises revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity recognises revenue in accordance with that core principle by applying the following steps: • • • • •

Identify the contract(s) with a customer Identify the performance obligations in the contract Determine the transaction price Allocate the transaction price to the performance obligations in the contract Recognise revenue when (or as) the entity satisfies a performance obligation.

IFRS 15 also includes extensive new disclosure requirements.

The effective date of the standard is for years beginning on or after 01 January 2018.

The group expects to adopt the standard for the first time in the 2019 consolidated financial statements. The impact of this standard is currently being assessed.

NVest Financial Holdings Limited (NVFH) | INTEGRATED ANNUAL REPORT 2016

61

Notes to the Consolidated Financial Statements - continued Company Figures in Rand

Group

2016

2015

2016

2015

Accumulated depreciation

Carrying Value

-

3. Property, plant and equipment Company

Capital - Work in progress Computer software IT equipment Office equipment

2016

2015

Cost of revaluation

Accumulated depreciation

Carrying Value

Cost of revaluation

342 744

-

342 744

-

-

80 582

(46 555)

34 027

43 202

(23 954)

19 248

520 879

(241 975)

278 904

501 084

(72 765)

428 319

210 445

(104 768)

105 677

197 411

(81 193)

116 218

1 154 650

(393 298)

761 352

741 697

(177 912)

563 785

Cost of revaluation

Accumulated depreciation

Carrying Value

Cost of revaluation

Accumulated depreciation

Carrying Value

29 560 873

-

29 560 873

-

-

-

342 744

-

342 744

-

-

-

Computer software

1 242 594

(1 142 592)

100 002

740 502

(686 712)

53 790

Furniture and fixtures

2 958 168

(1 504 964)

1 453 204

1 810 653

(843 241)

967 412

IT equipment

Total Group

Land & Buildings Capital - Work in progress

2016

2015

3 626 085

(2 622 378)

1 003 707

2 199 583

(1 596 372)

603 211

Leasehold improvements

338 804

(24 021)

314 783

55 379

(10 862)

44 517

Motor vehicles

194 621

(94 559)

100 062

-

-

-

1 805 845

(1 024 997)

780 848

1 076 697

(785 307)

291 390

747 812

(96 073)

651 739

-

-

-

40 817 546

(6 509 584)

34 307 962

5 882 814

(3 922 494)

1 960 320

Opening balance

Additions

Depreciation

Closing balance

342 744

Office equipment Plant and machinery Total

Reconciliation of property, plant and equipment - Company - 2016

Capital - Work in progress Computer software IT equipment Office equipment

-

342 744

-

19 248

37 381

(22 602)

34 027

428 319

19 795

(169 210)

278 904

116 218

13 034

(23 575)

105 677

563 785

412 954

(215 387)

761 352

Opening balance

Additions

Depreciation

Closing balance

Reconciliation of property, plant and equipment - Company - 2015

Computer software

17 287

18 797

(16 836)

19 248

IT equipment

13 277

482 977

(67 935)

428 319

Office equipment

62

138 571

-

(22 353)

116 218

169 135

501 774

(107 124)

563 785

INTEGRATED ANNUAL REPORT 2016 | NVest Financial Holdings Limited (NVFH)

Notes to the Consolidated Financial Statements - continued Company Figures in Rand 3.

Group

2016

2015

2016

2015

Disposals

Revaluations

Depreciation

Closing balance

Property, plant and equipment - continued

Reconciliation of property, plant and equipment - Group - 2016 Additions through business combinations

Opening balance

Additions

Land & Buildings

-

27 701 544

-

-

1 859 329

-

29 560 873

Capital - Work in progress

-

342 744

-

-

-

-

342 744

Computer software

53 790

74 524

32 454

-

-

(60 767)

100 001

Furniture and fixtures

967 412

423 129

356 654

(43 437)

-

(250 554)

1 453 204

IT equipment

603 211

228 374

602 355

(26 326)

-

(403 907)

1 003 707

44 517

283 425

-

-

-

(13 159)

314 783

-

-

121 957

-

-

(21 895)

100 062

291 391

450 883

184 494

(6 890)

-

(139 030)

780 848

-

35 004

704 891

-

-

(88 156)

651 739

1 960 321

29 539 627

2 002 805

(76 653)

1 859 329

(977 468)

34 307 961

Depreciation

Closing balance

Leasehold improvements Motor vehicles Office equipment Airconditioners

Reconciliation of property, plant and equipment - Group - 2015

Opening balance

Additions

Additions through business combinations

Disposals

Computer software

44 721

53 614

-

-

(44 545)

53 790

Furniture and fixtures

702 716

438 260

-

-

(173 564)

967 412

IT equipment

130 229

656 826

5 735

(1 984)

(187 595)

603 211

36 355

17 338

-

-

(9 176)

44 517

316 151

78 886

-

-

(103 646)

291 391

1 230 172

1 244 924

5 735

(1 984)

(518 526)

1 960 321

Leasehold improvements Office equipment

Property, plant and equipment encumbered as security The following assets have been encumbered as security for the secured long-term borrowings Note 16: Land and buildings

-

-

16 521 870

-

Erf 11104 East London (NFB House) is provided as security for the loan used to purchase the property.

Details of properties Erf 11104 East London (NFB House) - Purchase price

-

-

14 040 671

-

- Revaluation since purchase

-

-

1 859 329

-

- Capitalised expenditure

-

-

621 870

-

-

-

16 521 870

-

Erf 76307 East London (Sherpa House) - Purchase price

-

-

13 000 000

-

- Revaluation since purchase

-

-

-

-

- Capitalised expenditure

-

-

39 003

-

-

-

13 039 003

-

Registers with details containing the information required by Regulation 25(3) of the Companies Regulations, 2011 are available for inspection by shareholders or their duly authorised representatives at the registered office of the company.

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63

Notes to the Consolidated Financial Statements - continued Company Figures in Rand

2016

Group

2015

2016

2015

Carrying Value

-

4. Investment property Group

Investment property

2016

2015

Valuation

Accumulated impairment loss

Carrying Value

Valuation

Accumulated impairment loss

297 200 000

-

297 200 000

-

-

Opening balance

Additions

Additions through business combinations

Fair value adjustments

Total

-

74 799

284 585 269

12 539 932

297 200 000

Reconciliation of investment property - Group - 2016

Investment property

Pledged as security The following properties have been pledged as security by means of mortgage bonds (refer to note 16): Erf 387 Butterworth

-

-

13 300 000

-

Erf 11031 & 11010 Cape Town

-

-

23 850 000

-

Erf 169827 Cape Town

-

-

21 100 000

-

Erf 28971 Cape Town

-

-

21 200 000

-

Erf 11034 & 11036 Durban

-

-

15 500 000

-

Erf 5991 East London

-

-

32 900 000

-

Erf 5992 East London

-

-

18 500 000

-

Erf 10015 East London

-

-

41 350 000

-

Erf 65432 East London

-

-

13 200 000

-

Erf 90 Mthatha

-

-

10 300 000

-

Erf 3197 & 3198 Port Elizabeth

-

-

19 450 000

-

Erf 2785 & 2786 Pretoria

-

-

17 300 000

-

Erf 8245 Queenstown

-

-

40 150 000

-

-

-

288 100 000

-

The fair value of the following investment property was determined using the discounted cash flow method: Erf 387, 388, 389, & 394 Butterworth

-

-

13 300 000

-

Erf 11032, 11008, 11031 & 11010 Cape Town

-

-

23 850 000

-

Erf 28971 Cape Town

-

-

21 200 000

-

Erf 169827 Cape Town

-

-

21 100 000

-

Erf 11034 & 11036 Durban

-

-

15 500 000

-

B208 Simbithi Durban

-

-

1 800 000

-

Erf 5991 East London

-

-

32 900 000

-

Erf 5992 East London

-

-

18 500 000

-

Erf 10015 East London

-

-

41 350 000

-

Erf 33342 East London

-

-

7 300 000

-

Erf 65432 East London

-

-

13 200 000

-

Erf 90 Mthatha

-

-

10 300 000

-

Erf 3197 & 3198 Port Elizabeth

-

-

19 450 000

-

Erf 2785 & 2786 Pretoria

-

-

17 300 000

-

Erf 8245 Queenstown

-

-

40 150 000

-

-

-

297 200 000

-

A register containing the information required by Regulation 25(3) of the Companies Regulations, 2011 is available for inspection at the registered office of the company.

64

INTEGRATED ANNUAL REPORT 2016 | NVest Financial Holdings Limited (NVFH)

Notes to the Consolidated Financial Statements - continued Company Figures in Rand 4.

2016

2015

Group 2016

2015

Investment property - continued

Details of valuation It is the policy of the group to obtain an independent valuation of all the investment property within a three year rolling period. More than one independent valuer may be used to provide the valuation.

The effective date of the revaluations was 29 February 2016. Revaluations were performed by an independent valuer, Ms Sonette Stander (National Certificate: Real Estate (NQF5) and ACSCL), of Kei Commercial. Kei Commercial is not connected to the group and have recent experience in location and category of the investment properties being valued.

The valuation was based on the use of properties by market participants that would maximise the value of the asset or the group of assets within which the asset will be used.

The significant inputs and assumptions in respect of the valuation process are developed in close consultation with management. The valuation process and fair value changes are reviewed by the group audit committee and the board of directors at each reporting date. The directors confirm that there have been no material changes to the assumptions applied by the registered valuers.

For investment property, totaling R 212 889 003 (2015: R 281 600 000), where external valuations were not obtained, the valuation was based on discounted cash flows. The following assumptions were used: Discount rates of between 9.5% and 12.75% were used depending on the type of building and the location thereof. The average discount rate came to 10%. A 12 month forecast was used, based on contractual increases ranging between 7%10%. The average increase is 8%. Property B208 Simbithi Durban was valued on a per square meterage basis, based on recent sales within the same office park. The value of this property equates to a 7% discount rate. Recent sales in this office park yielded a discount rate of between 6%-7%.

The directors have used discount rates, comparable with the discount rates used by Rode Valuations. As one of South Africa’s largest valuation firms, Rode annually values property portfolios which include shopping centres, agricultural property, residential, commercial and industrial property. Rode also undertakes municipal property valuations, as well as specialised valuations such as hotels, hospitals, bare dominions, airports etc. The discount rates take into account the location and type of property. Changes in discount rates attributable to changes in market conditions can have a significant impact on property valuations. A 25 basis point increase in the average discount rate to 10.25%, will decrease the value of investment property by R 7.4 million. A 25 basis point decrease in the capitalisation rate to 9.75%, will increase the value of investment property by R 8.8 million.

The valuations were determined using discounted cash flow projections, based on significant unobservable inputs. These inputs include: Future rental cash flows: Based on the location, type and quality of the properties and supported by the terms of any existing lease or other contracts or external evidence such as current market rents for similar properties.

Discount rates: Reflecting current market assessments of the uncertainty in the amount and timing of cash flows.

Vacancy rates: Based on current and expected future market conditions after expiry of any current leases.

Maintenance costs: Including necessary investments to maintain functionality of the property for its expected useful life.

Capitalisation rates: Based on location size and quality of the properties and taking into account market data at the valuation date.

Amounts recognised in profit and loss for the year Rental income from investment property

-

-

44 848 626

-

Direct operating expenses from rental generating property

-

-

(17 306 430)

-

-

-

27 542 196

-

NVest Financial Holdings Limited (NVFH) | INTEGRATED ANNUAL REPORT 2016

65

Notes to the Consolidated Financial Statements - continued Company Figures in Rand

2016

Group

2015

2016

2015

Carrying Value

25 874 090

5. Goodwill Group

Goodwill

2016

2015

Cost

Accumulated impairment

Carrying Value

Cost

Accumulated impairment

82 604 170

-

82 604 170

25 874 090

-

The group classifies the various companies within the group as separate cash generating units. The value of the cash generating unit’s to which goodwill has been allocated has been determined based on a comparable market priceearnings ratio of companies that are listed on the JSE in similar industries in that of which NVest Financial Holdings Ltd operates, to assess whether there are any indications of impairment of the goodwill relating to these cash generating units.

A price-earnings ratio of 7 was applied for this assessment and represents the average price-earnings ratio of these listed companies as identified, reduced by a discount of 30%, as NVest Financial Holdings Ltd is a smaller capitalised and less matured entity as the comparable listed companies. Based on this valuation, the recoverable amounts of the cash generating units were determined to be higher than the relevant portion of goodwill and therefore no impairment was necessary.

If a price-earnings ratio of 6.3 was applied for this assessment, which represents a 10% decrease in the determined priceearnings ratio used, the recoverable amounts of the cash generating units, were still higher than the relevant portion of goodwill.

Reconciliation of goodwill - Group - 2016 Opening balance

Independent Executor and Trust (Pty) Ltd NFB Finance Brokers Eastern Cape (Pty) Ltd

NFB Insurance Brokers (Border) (Pty) Ltd

-

-

1 029 071

18 249 826

-

-

18 249 826 54 036 408

-

54 036 408

-

32 811

-

-

32 811

3 029 540

-

-

3 029 540

-

2 393 697

-

2 393 697

130 648

-

300 000

430 623

NVest Properties Ltd NVest Property Services (Pty) Ltd (previously Beach Road Administrators (Pty) Ltd) NVest Securities (Pty) Ltd

Total

1 029 071

NFB Finance Brokers Gauteng (Pty) Ltd NFB Finance Brokers Western Cape (Pty) Ltd

Additions Additions through through merger business of business combinations operations

3 402 194

-

-

3 402 194

25 874 090

56 430 105

300 000

82 604 170

Opening balance

Additions through business combinations

Total

1 029 071

-

1 029 071

18 249 826

-

18 249 826

-

32 811

32 811

3 029 540

-

3 029 540

Reconciliation of goodwill - Group - 2015

Independent Executor and Trust (Pty) Ltd NFB Finance Brokers Eastern Cape (Pty) Ltd NFB Finance Brokers Western Cape (Pty) Ltd NFB Insurance Brokers (Border) (Pty) Ltd NVest Property Services (Pty) Ltd (previously Beach Road Administrators (Pty) Ltd) NVest Securities (Pty) Ltd

66

INTEGRATED ANNUAL REPORT 2016 | NVest Financial Holdings Limited (NVFH)

130 648

-

130 648

3 402 194

-

3 402 194

25 841 279

32 811

25 874 090

Notes to the Consolidated Financial Statements - continued Company Figures in Rand

2016

2015

Group 2016

2015

6. Interests in subsidiaries including consolidated structured entities The following table lists the entities which are controlled directly or indirectly by the company, and the carrying amounts of the investments in the company’s separate financial statements.

Group Name of company Independent Executor and Trust (Pty) Ltd

% holding 2016

% holding 2015

Carrying amount 2016

Carrying amount 2015 84

70.00 %

70.00 %

84

NFB Asset Management (Pty) Ltd

100.00 %

50.00 %

120

-

NFB Finance Brokers Eastern Cape (Pty) Ltd

100.00 %

100.00 %

17 263 691

17 263 691

NFB Finance Brokers Gauteng (Pty) Ltd

100.00 %

-%

62 700 000

-

NFB Finance Brokers Port Elizabeth (Pty) Ltd

65.00 %

65.00 %

260

260

NFB Finance Brokers Western Cape (Pty) Ltd

100.00 %

100.00 %

20 074

20 074

NFB Insurance Brokers (Border) (Pty) Ltd

76.67 %

76.67 %

2 282 974

2 282 974

NVest Properties Ltd

96.00 %

45.00 %

29 524 268

-

NVest Property Services (Pty) Ltd (previously Beach Road Administrators (Pty) Ltd)

76.00 %

68.00 %

2 420

2 420

100.00 %

100.00 %

NVest Securities (Pty) Ltd

2 608 436

2 608 436

114 402 327

22 177 939

Changes in ownership interest which did not result in loss of control The following schedule represents the impact of changes in ownership interest of subsidiaries where control was not lost, on the equity attributable to owners of the group: Purchase of 1 share in NVest Properties Ltd from noncontrolling interest, increasing ownership interest from 95% to 96%

-

-

1 020 656

-

Transfer of 8 shares in NVest Property Services (Pty) Ltd (previously Beach Road Administrators (Pty) Ltd), increasing ownership interest from 68% to 76%

-

-

(10 837)

-

Issue of 300 ordinary shares by subsidiary NFB Finance Brokers Port Elizabeth (Pty) Ltd, reducing ownership interest from 100% to 65%

-

-

-

(13 140)

-

-

1 009 819

(13 140)

NVest Financial Holdings Limited (NVFH) | INTEGRATED ANNUAL REPORT 2016

67

Notes to the Consolidated Financial Statements - continued Company Figures in Rand

7.

2016

2015

Group 2016

2015

Joint arrangements

Joint ventures The following table lists all of the joint ventures in the group. The company is directly held by NVest Financial Holdings Ltd and share the same reporting date.

Group Name of company

Held by

NFB Asset Management (Pty) Ltd

NVest Financial Holdings Ltd

% ownership interest 2016

% ownership interest 2016

Carrying amount 2016

Carrying amount 2015

-%

50.00 %

-

60

The percentage ownership interest is equal to the percentage voting rights.

The percentage ownership changed in the current year when NVest Financial Holdings Ltd purchased shares from the other party to the joint venture, NFB Finance Brokers Gauteng (Pty) Ltd, on 1 September 2015, increasing its ownership interest from 50% to 100%. It has therefore been consolidated at year end.

8. Investments in associates The following table lists all of the associates in the group. The company is directly held by NVest Financial Holdings Ltd and share the same reporting date.

Company Name of company

Held by

NVest Properties Ltd

NVest Financial Holdings Ltd

% ownership interest 2016

% ownership interest 2016

Carrying amount 2016

Carrying amount 2015

-%

45.00 %

-

45

-

45

Group Name of company

Held by

NVest Properties Ltd

NVest Financial Holdings Ltd

Horwath Financial Services SA (Pty) Ltd

NFB Finance Brokers Gauteng (Pty) Ltd

% ownership interest 2016

% ownership interest 2016

Carrying amount 2016

Carrying amount 2015

-%

45.00 %

-

22 624 206

33.33 %

-%

100

-

100

22 624 206

The percentage ownership changed in the current year when NVest Financial Holdings Ltd purchased shares from the other shareholders of NVest Properties Ltd, on 1 June 2015 and 25 June 2015 respectively, increasing its ownership interest from 45% to 95% to 96%. It has therefore been consolidated at year end.

68

INTEGRATED ANNUAL REPORT 2016 | NVest Financial Holdings Limited (NVFH)

Notes to the Consolidated Financial Statements - continued Company Figures in Rand

Group

2016

2015

2016

2015

106 659

7 107 875

-

-

9. Loan to (from) related parties Subsidiaries NFB Finance Brokers Eastern Cape (Pty) Ltd The loan is unsecured, bears interest at the SARS official rate, and is not repayable in the next financial year.

NVest Property Services (Pty) Ltd Independent Executor and Trust (Pty) Ltd NFB Finance Brokers Port Elizabeth (Pty) Ltd NFB Finance Brokers Western Cape (Pty) Ltd NFB Insurance Brokers (Border) (Pty) Ltd NVest Securities (Pty) Ltd

116 850

-

-

-

1 050 000

1 050 158

-

-

102 382

200 210

-

-

2 917

46 148

-

-

387 441

387 440

-

-

2 000 000

2 000 000

-

-

45 105

3 148 194

-

-

89 088 990

-

-

-

92 900 344

13 940 025

-

-

-

2 508

-

704

-

-

-

320 161

The above loans are unsecured, bear no interest, and is repayable in the next financial year.

NVest Securities (Pty) Ltd NVest Properties Ltd The above loans are unsecured, bear interest at the Nedbank Corporate Saver rate adjusted to the SARS rate, and have no specified terms of repayment.

Associates NVest Properties Ltd The loan was unsecured, bore no interest, and was repaid in the current year.

Joint ventures NFB Asset Management (Pty) Ltd The loan related to the profit share payable from this joint venture. The loan was unsecured, bore no interest, and was repaid in the current year.

NVest Financial Holdings Limited (NVFH) | INTEGRATED ANNUAL REPORT 2016

69

Notes to the Consolidated Financial Statements - continued Company Figures in Rand

Group

2016

2015

2016

2015

Beach Road Nahoon Trust

-

2 850

-

2 850

Nahoon Trustees (Pty) Ltd

-

8 492

-

8 492

NFB Capital (Pty) Ltd

-

9 268

-

9 268

NFB Debentures 22 (Pty) Ltd

-

2 808

-

2 808

NFB Finance (Pty) Ltd

-

7 374

-

7 374

NFB Private Wealth Equity (Pty) Ltd

-

8 108

-

8 108

NFB Property Investments (Pty) Ltd

-

6 540

-

6 540

NVest International Corporate Bond Investment (Pty) Ltd

-

8 777

-

8 777

NVest Securities Investment Tranche 2 Ltd

-

7 255

-

7 255

-

-

(116 667)

-

9.

Loan to (from) related parties - continued

Entities under common management

The loans were unsecured, bore no interest, and were repaid in the current year.

Batting Properties Trust The loan is unsecured, bears no interest, and has no specified terms of repayment.

Non-current assets Current assets

-

16 032

(116 667)

16 032

-

61 472

(116 667)

61 472

91 240 754

12 320 049

-

62 175

1 704 694

1 683 957

-

320 161

-

-

(116 667)

-

92 945 448

14 004 006

(116 667)

382 336

(121 032)

Current liabilities

Fair value of loans to and from related parties The carrying amount of loans to and from related parties approximates its fair value.

Loans to related parties As of 29 February 2016, none of the loans to related parties were impaired.

Currencies The carrying amount of loans to and from related parties are denominated in Rand.

10. Deferred tax Deferred tax liability Accelerated capital allowances for tax purposes

(28 423)

(30 383)

(226 135)

-

-

(2 082 985)

-

(19 517)

(12 774)

(62 162)

(23 407)

-

-

(9 656 725)

-

Provision for lease smoothing (asset) Prepaid expenses Investment property revaluation Investment revaluation Total deferred tax liability

70

-

-

(23 379)

-

(47 940)

(43 157)

(12 051 386)

(144 439)

INTEGRATED ANNUAL REPORT 2016 | NVest Financial Holdings Limited (NVFH)

Notes to the Consolidated Financial Statements - continued Company Figures in Rand 10.

2016

Group

2015

2016

2015

Deferred tax - continued

Deferred tax asset Provision for audit fees

26 502

6 440

149 548

90 925

128 090

131 567

824 789

409 375

Provision for lease smoothing (liability)

-

-

-

173 971

Income received in advance

-

-

38 753

-

Tax losses available for set off against future taxable income

-

-

62 281

13 582

Total deferred tax asset

154 592

138 007

1 075 371

687 853

Deferred tax liability

(47 940)

(43 157)

(12 051 386)

(144 439)

Deferred tax asset

154 592

138 007

1 075 371

687 853

Total net deferred tax asset (liability)

106 652

94 850

(10 976 015)

543 414

94 850

88 802

543 414

425 033

1 961

1 962

(6 400)

(5 825)

-

-

(2 688 560)

-

(Originating) / reversing temporary difference on prepaid expenses

(6 744)

6 904

11 533

5 292

(Originating) / reversing temporary difference on operating lease asset

-

-

(395 961)

121 307

(Originating) / reversing temporary difference movement on revaluation of investments

-

-

(23 379)

-

Originating / (reversing) temporary difference movement on income received in advance

-

-

(130 206)

-

Originating / (reversing) temporary difference on provision for payroll benefits

(3 477)

(9 258)

2 450

(80 158)

Originating / (reversing) temporary difference movement on provision for audit fees

20 062

6 440

51 834

60 273

Originating / (reversing) temporary difference movement on assessed loss

-

-

57 177

(1 850)

Temporary difference on tangible fixed assets

-

-

(99 940)

15 432

Temporary difference on fair value adjustment on investment property

-

-

(6 968 165)

-

Temporary difference on prepaid expenses

-

-

(28 000)

267

Temporary difference on operating lease asset

-

-

(1 834 609)

-

Temporary difference on income received in advance

-

-

168 959

-

Temporary difference on provision for payroll benefits

-

-

355 718

3 643

Provision for employee benefits

Reconciliation of deferred tax asset (liability) At beginning of the year (Originating) / reversing temporary difference movement on tangible fixed assets (Originating) / reversing temporary difference movement on revaluation of investment property

Obtained through business combinations:

Temporary difference on provision for audit fees

-

-

8 120

-

106 652

94 850

(10 976 015)

543 414

NVest Financial Holdings Limited (NVFH) | INTEGRATED ANNUAL REPORT 2016

71

Notes to the Consolidated Financial Statements - continued Company Figures in Rand

Group

2016

2015

2016

2015

Unit trusts - Sanlam Collective Investment Surplus Fund

-

-

5 386 551

-

Unit trusts - Investec

-

-

4 125 239

-

Unit trusts - Various (Equity Funds)

-

-

9 000

-

Fercurius (Pty) Ltd

-

-

150 000

-

-

9 670 790

-

-

-

136 000

-

-

-

-

200 000

-

-

9 806 790

200 000

At fair value through profit or loss - held for trading

-

-

159 000

-

Held to maturity

-

-

136 000

-

Loans and receivables

-

-

-

200 000

-

-

295 000

200 000

11. Other financial assets At fair value through profit or loss - held for trading

The carrying amount of investment in this company is measured at cost because it is impracticable to determine their fair values without undue cost or effort.

Held to maturity Cadiz Asset Management - Social Responsibility Investment Initial investment of R90 030 on 27 February 2013. Maturity date of 31 January 2018 with an option to renew for a minimum of 5 years.

Loans and receivables RNE Financial Services (Pty) Ltd The loan was unsecured, bore no interest, and was settled in the current financial period.

Total other financial assets Non-current assets

Current assets At fair value through profit or loss - held for trading

-

-

9 511 790

-

-

-

9 806 790

200 000

Fair value information Financial assets at fair value through profit or loss are recognised at fair value, which is therefore equal to their carrying amounts.

The following classes of financial assets at fair value through profit or loss are measured to fair value using quoted market prices: Sanlam Collective Investment Surplus Fund Investec Unit Trust Fund Other Unit Trust Funds

• • •

72

INTEGRATED ANNUAL REPORT 2016 | NVest Financial Holdings Limited (NVFH)

Notes to the Consolidated Financial Statements - continued Company Figures in Rand

2016

Group

2015

2016

2015

11. Other financial assets - continued Fair value hierarchy of financial assets at fair value through profit or loss For financial assets recognised at fair value, disclosure is required of a fair value hierarchy which reflects the significance of the inputs used to make the measurements.

Level 1 represents those assets which are measured using unadjusted quoted prices for identical assets.

Level 2 applies inputs other than quoted prices that are observable for the assets either directly (as prices) or indirectly (derived from prices).

Level 3 applies inputs which are not based on observable market data.

Level 1 Unit trusts

-

-

9 520 790

-

Level 3 Fercurius (Pty) Ltd

-

-

150 000

-

-

-

9 670 790

-

Currencies Financial assets at fair value through profit or loss are denominated in Rand.

Held to maturity investments impaired As of 29 February 2016, none held to maturity investments were past due or impaired and provided for.

Currencies Held to maturity financial assets are denominated in Rand.

Fair values of loans and receivables The carrying amount of loans and receivables approximates its fair value.

Loans and receivables impaired As of 29 February 2016, none of the loans and receivables were impaired and provided for.

Currencies The carrying amounts of loans and receivables are denominated in Rand.

NVest Financial Holdings Limited (NVFH) | INTEGRATED ANNUAL REPORT 2016

73

Notes to the Consolidated Financial Statements - continued Company Figures in Rand

Group

2016

2015

2016

2015

P.B. Bartlett

-

118 915

-

755 242

B.J. Connellan

-

488 505

-

488 505

T.H. McClure

-

2 408 709

-

2 747 816

R.M. McIntyre

-

1 744 539

-

1 744 539

S.C. Pope

-

-

247 406

248 184

The Rayner Sparg Trust

-

18 350 245

-

18 350 245

B.A. Russell

-

914 571

-

914 571

M. Wolmarans

-

-

447 585

-

-

24 025 484

694 991

25 249 102

12. Loans to (from) shareholders

The prior year loans were unsecured, bore interest at the prime rate less 0.25% and were settled before the date of adoption of the prior year financial statements.

The current year loans are unsecured, bears interest at the official SARS rate and is considered short term in nature.

Fair value of loans to and from shareholders The carrying amount of loans to and from shareholders approximates its fair value.

Loans to shareholders impaired As of 29 February 2016, none of the loans to shareholders were impaired and provided for.

Currencies The carrying amount of loans to and from shareholders are denominated in Rand.

13. Trade and other receivables Deposits Interest receivable Prepayments

-

-

568 432

101 794

116 959

59 167

271 456

189 871

69 705

45 621

493 970

149 174

Staff loans

-

71 566

41 477

100 121

Sundry debtors

-

175 000

2 707 816

2 664 465 4 397 680

Trade receivables

-

-

8 236 069

6 598

-

-

-

193 262

351 354

12 319 220

7 603 105

Unclaimed commissions

Fair value of trade and other receivables The carrying amounts of trade and other receivables approximates its fair value.

Trade and other receivables impaired As of 29 February 2016, no trade and other receivables were past due or impaired and provided for.

Currencies The carrying amount of trade and other receivables are denominated in Rand.

74

INTEGRATED ANNUAL REPORT 2016 | NVest Financial Holdings Limited (NVFH)

Notes to the Consolidated Financial Statements - continued Company Figures in Rand

Group

2016

2015

2016

2015

-

-

9 328

3 406

14. Cash and cash equivalents Cash and cash equivalents consist of: Cash on hand Bank balances

The total amount of undrawn facilities available for future operating activities and commitments

88 971 231

20 562 811

132 359 388

48 545 491

88 971 231

20 562 811

132 368 716

48 548 897

200 000

100 000

200 000

100 000

Credit quality of cash at bank and short term deposits, excluding cash on hand All cash at bank and short term deposits, excluding cash on hand, are held by major, reputable institutions.

Credit rating Investec - BBB-

66 962 335

Standard Bank - BBBNedbank - BBB-

-

68 018 342

127 485

-

-

2 949 432

2 027 813

22 008 896

20 562 811

61 391 614

46 390 193

88 971 231

20 562 811

132 359 388

48 545 491

1 000 000 000

1 000 000 000

1 000 000 000

1 000 000 000

15. Share capital Authorised 1 000 000 000 Ordinary shares with no par value

The 10 000 authorised shares in the company were increased to a total authorised shares of 1 000 000 000 during the 2015 financial year.

Reconciliation of number of shares issued: 178 879 362

500

178 879 362

500

Share repurchase

Reported as at 01 March

-

(95)

-

(95)

Share conversion

-

143 774 595

-

143 774 595

1 000 000 ordinary shares at R1.90 on 31 August 2015

1 000 000

-

1 000 000

-

23 856 569 ordinary shares at R3.35 on 19 June 2015

23 856 569

-

23 856 569

-

Issue of shares - ordinary shares

26 250 000

35 104 362

26 250 000

35 104 362

Acquisition of 50% of NVest Properties Ltd

13 514 069

-

13 514 069

-

Acquisition of NFB Finance Brokers Gauteng (Pty) Ltd

33 000 000

-

33 000 000

-

Purchase of loan account

26 241 722

-

26 241 722

-

302 741 722

178 879 362

302 741 722

178 879 362

General authority issue of shares for cash:

Special authoruty issue of shares (non-cash):

NVest Financial Holdings Limited (NVFH) | INTEGRATED ANNUAL REPORT 2016

75

Notes to the Consolidated Financial Statements - continued Company Figures in Rand

2016

Group

2015

2016

2015

15. Share capital - continued Reconciliation of stated capital: Reported as at 01 March

53 982 677

500

53 982 677

500

Share repurchase

-

(95)

-

(95)

Share conversion

-

14 677 231

-

14 677 231

1 000 000 ordinary shares at R1.90 on 31 August 2015

1 900 000

-

1 900 000

-

23 856 569 ordinary shares at R3.35 on 19 June 2015

79 919 506

-

79 919 506

-

Issue of shares - ordinary shares

24 825 972

39 305 041

24 825 972

39 305 041

Acquisition of 50% of NVest Properties Ltd

27 974 223

-

27 974 223

-

Acquisition of NFB Finance Brokers Gauteng (Pty) Ltd

62 700 000

-

62 700 000

-

Purchase of loan account

73 476 822

-

73 476 822

-

324 779 200

53 982 677

324 779 200

53 982 677

General authority issue of shares for cash:

Special authority issue of shares (non-cash):

In the 2015 financial year, before the effective listing date of the company on the JSE, 95 shares of the shareholder, SASFIN Financial Services (Pty) Ltd, were repurchased by the company at a total value of R 62 541 938. The amount as reflected in Note 16 represents this amount.

After the repurchase, the shares of the remaining shareholders were converted at a rate of 355 000 shares for each previous share held.

The holding company issued 8 620 126 shares to minority shareholders, valued at 86c per share (representing the estimated market value per share at date of issue) in order to increase its holdings in NVest Securities (Pty) Ltd, NFB Finance Brokers Eastern Cape (Pty) Ltd and NFB Insurance Brokers (Border) (Pty) Ltd. The total value of this share based payment was R 7 413 308.

The holding company further issued 26 241 722 shares for a total consideration of R 31 891 733.

In the 2016 financial year, the loan from Rayner Sparg Trust to NVest Properties Ltd was converted to 26 241 722 ordinary shares on the acquisition date of this subsidiary (effective date 1 June 2015). The total proceeds entailed a loan account totaling R 67 596 822 and a cash amount receivable amounting to R 5 880 000. The total value of the issue of these shares were therefore R 73 476 822.

Refer to Note 30 for more detail on the current year issue of shares with respect to the business combinations that were entered into.

Unissued ordinary shares are under the control of the directors in terms of a resolution of members passed at the last annual general meeting. This authority remains in force until the next annual general meeting.

Issued Ordinary shares

324 779 200

53 982 677

324 779 200

53 982 677

There are no special rights, preference nor restrictions on the distribution and capital repayments of shares, save is provided for in the NVest Financial Holdings Ltd Share Incentive Scheme.

20 500 000 of the unissued ordinary shares are specifically reserved for the NVest Financial Holdings Ltd Share Incentive Scheme of which no options have been issued nor grated since inception of the scheme.

76

INTEGRATED ANNUAL REPORT 2016 | NVest Financial Holdings Limited (NVFH)

Notes to the Consolidated Financial Statements - continued Company Figures in Rand

Group

2016

2015

2016

2015

-

-

10 000 000

-

-

-

5 400 000

-

-

-

9 000 000

-

-

-

4 300 000

-

-

-

5 000 000

-

-

-

35 080 000

-

-

-

68 780 000

-

-

-

-

62 541 938

-

-

3 100 703

-

16. Other financial liabilities Commercial notes - Held at amortised cost Series 1 These commercial notes are unsecured and issued at a nominal value of R 1 000 000 each and has a maturity date of October 2016. Interest is raised at 8% per annum, payable monthly and escalating annually by 5%.

Series 2 These commercial notes are unsecured and issued at a nominal value of R 1 000 000 each and has a maturity date of January 2017. Interest is raised at 8% per annum, payable monthly and escalating annually by 5%.

Series 3 These commercial notes are unsecured and issued at a nominal value of R 1 000 000 each and has a maturity date of May 2017. Interest is raised at 8% per annum, payable monthly and escalating annually by 5%.

Series 4 These commercial notes are unsecured and issued at a nominal value of R 1 000 000 each and has a maturity date of July 2017. Interest is raised at 8% per annum, payable monthly and escalating annually by 5%.

Series 5 These commercial notes are unsecured and issued at a nominal value of R 1 000 000 each and has a maturity date of July 2017. Interest is raised at 8% per annum, payable monthly and escalating annually by 5%.

Public offer (03/10/2012 - 31/12/2012) Issued with a minimum nominal value of R 100 000 each on 1 January 2013 with a redemption date of 5 years and 1 day from issue date. The commercial notes bear interest at 7.5% per annum, escalating annually by 5%.

Other - Held at amortised cost SASFIN Financial Services (Pty) Ltd The loan is secured, bearing interest at 9.25% per annum and is repayable by 1 June 2015. The loan relates to a share buyback. Refer to note 15.

Erf 387, 389 & 394 Butterworth

NVest Financial Holdings Limited (NVFH) | INTEGRATED ANNUAL REPORT 2016

77

Notes to the Consolidated Financial Statements - continued Company Figures in Rand

Group

2016

2015

2016

2015

-

-

8 490 931

-

-

-

7 643 862

-

-

-

2 798 328

-

-

-

5 673 744

-

-

-

10 885 540

-

-

-

2 366 737

-

-

-

6 994 608

-

-

-

4 903 905

-

-

-

6 733 673

-

-

-

8 967 747

-

Loan term of 10 years, bears interest at 0.60% below the prime lending rate and is subject to monthly instalments of R 57 495.

The fixed property is pledged as security over the bond.

16. Other financial liabilities - continued Erf 11032, 11008, 11031 & 11010 Cape Town Loan term of 10 years, bears interest at 0.70% below the prime lending rate and is subject to monthly instalments of R 128 647.

The fixed property is pledged as security over the bond.

Erf 28971 Cape Town Loan term of 10 years, bears interest at 0.70% below the prime lending rate and is subject to monthly instalments of R 115 814.17. The fixed property is pledged as security over the bond.

Erf 11034 & 11036 Durban Loan term of 10 years, bears interest at 0.60% below prime lending rate and is subject to monthly instalments of R 53 588.

The fixed property is pledged as security over the bond.

Erf 5992 East London Loan term of 9 years, bears interest at 0.60% below the prime lending rate and is subject to monthly instalments of R 90 165.

The fixed property is pledged as security over the bond.

Erf 10015 Mdantsane, East London Loan term of 10 years, bears interest at 0.60% below the prime lending rate and is subject to monthly instalments of R 192 009.

The fixed property is pledged as security over the bond.

Erf 90 Mthatha Loan term of 10 years, bears interest at 0.60% below the prime lending rate and is subject to monthly instalments of R43 434.80.

The fixed property is pledged as security over the bond.

Erf 3197 & 3198 Port Elizabeth Loan term of 10 years, bears interest at 0.70% below the prime lending rate and is subject to monthly instalments of R109 153.

The fixed property is pledged as security over the bond.

Erf 2785 & 2786 Pretoria Loan term of 10 years, bears interest at 0.60% below the prime lending rate and is subject to monthly instalments of R64 120.26.

The fixed property is pledged as security over the bond.

Erf 8245 Queenstown Loan term of 10 years, bears interest at 0.60% below the prime lending rate and is subject to monthly instalments of R 127 547.

The fixed property is pledged as security over the bond.

Erf 169827 Cape Town Loan term of 10 years, bears interest at 0.70% below the prime lending rate and is subject to monthly instalments of R 132 146.

The fixed property is pledged as security over the bond.

78

INTEGRATED ANNUAL REPORT 2016 | NVest Financial Holdings Limited (NVFH)

Notes to the Consolidated Financial Statements - continued Company Figures in Rand

Group

2016

2015

2016

2015

-

-

5 795 391

-

-

-

13 116 538

-

-

-

11 289 834

-

-

-

4 000 000

-

-

62 541 938

1 000 000

-

-

62 541 938

103 761 541

62 541 938

-

62 541 938

172 541 541

62 541 938

At amortised cost - Commercial notes

-

-

53 380 000

-

At amortised cost - Other

-

-

103 761 541

-

-

-

157 141 541

-

16. Other financial liabilities - continued Erf 65432 East London Loan term of 10 years, bears interest at 0.70% below the prime lending rate and is subject to monthly instalments of R 82 665.

The fixed property is pledged as security over the bond.

Erf 5991 East London Loan term of 10 years, bears interest at 0.70% below the prime lending rate and is subject to monthly instalments of R 184 744.

The fixed property is pledged as security over the bond.

Erf 11104 East London Loan term of 10 years, bears interest at 0.70% below the prime lending rate and is subject to monthly instalments of R 147 873.

The fixed property is pledged as security over the bond.

Nedbank cash loan 1 Loan term of 5 years, bears interest at 0.60% below the prime lending rate and is subject to interest only monthly instalments of R 30 668. The capital amount is due on 27 May 2020. Erf 8245 Queenstown is pledged as security over the bond.

Nedbank cash loan 2 Loan term of 5 years, bears interest at 0.60% below the prime lending rate and is subject to interest only monthly instalments of R 7 667. The capital amount is due on 27 May 2020. Erf 8245 Queenstown is pledged as security over the bond.

Non-current liabilities

Current liabilities At amortised cost - Other

-

62 541 938

15 400 000

62 541 938

-

62 541 938

172 541 541

62 541 938

17. Trade and other payables Accrued bonus

84 385

63 179

1 291 448

517 139

Accrued expenses

480 938

406 358

19 728 074

9 015 186

Accrued leave pay

373 079

406 703

1 719 588

1 123 039

Dividends Withholding Taxes

-

-

283 815

31 813

Sundry creditors

-

-

1 324 461

1 551

Value Added Taxes

51 641

62 674

2 816 973

1 664 551

990 043

938 914

27 164 359

12 353 279

NVest Financial Holdings Limited (NVFH) | INTEGRATED ANNUAL REPORT 2016

79

Notes to the Consolidated Financial Statements - continued Company Figures in Rand

2016

Group

2015

2016

2015

Opening balance

Additions

Reversed during the year

Total

23 000

94 650

(23 000)

94 650

Opening balance

Additions

Reversed during the year

Total

24 000

23 000

(24 000)

23 000

Opening balance

Additions

Reversed during the year

Total

180 310

576 121

(180 310)

576 121

Opening balance

Additions

Reversed during the year

Total

181 210

180 310

(181 210)

180 310

113 984 111

17. Trade and other payables - continued Fair value of trade and other payables The carrying amount of trade and other payables approximates its fair value.

Currencies The carrying amounts of trade and other payables are denominated in Rand.

18. Provisions Reconciliation of provisions - Company - 2016

Provision for audit fees Reconciliation of provisions - Company - 2015

Provision for audit fees Reconciliation of provisions - Group - 2016

Provision for audit fees Reconciliation of provisions - Group - 2015

Provision for audit fees

19. Revenue Rendering of services Rental Income

34 080

14 230

182 541 409

1 940 040

1 718 331

25 918 246

42 839

-

-

736 176

615 376

Commission received (Call) Rental recoveries

-

-

7 247 611

-

1 974 120

1 732 561

216 443 442

114 642 326

-

-

67 469 044

30 812 790

20. Cost of sales Rendering of services Cost of services

80

INTEGRATED ANNUAL REPORT 2016 | NVest Financial Holdings Limited (NVFH)

Notes to the Consolidated Financial Statements - continued Company Figures in Rand

Group

2016

2015

2016

2015

5 494 933

5 217 197

199 465

359 645

1 408

1 820

142 418

1 820

-

-

-

4 331 1 543 314

21. Other income Administration and management fees received Call dealing profit Profit and loss on sale of assets and liabilities Profit share from joint venture Recoveries Other income

-

-

1 807 661

29 794

-

-

-

-

22 555

602 804

296 833

5 526 135

5 241 572

2 752 348

2 205 943

26 295 679

37 461 899

-

-

139 422

132 357

-

-

26 435 101

37 594 256

-

-

1 940 907

1 816 942

2 638 023

3 188 385

-

-

37 223

11 188

22. Operating (loss) profit Operating (loss) profit for the year is stated after accounting for the following: Income from subsidiaries Dividends Interest

Operating lease charges Premises - Contractual amounts Equipment - Contractual amounts Lease rentals on operating lease - Contractual amounts

(Loss)/Profit on sale of property, plant and equipment

-

-

107 627

-

1 940 907

1 816 942

2 782 873

3 199 573

-

-

(33 301)

4 331

215 387

107 124

977 468

518 526

6 608 383

5 309 539

49 048 013

35 858 539

-

-

509 984

463 317

Associates - Local

-

-

-

109 010

Joint ventures - Local

-

-

765 066

52 889

26 295 679

37 461 899

-

-

26 295 679

37 461 899

765 066

161 899

Bank

5 036 587

1 041 141

7 140 788

2 658 005

Commercial Notes

4 399 952

-

4 399 952

-

Depreciation on property, plant and equipment Employee costs Research costs

23. Investment revenue Dividend revenue

Subsidiaries - Local

Interest revenue

SARS Interest Related parties Trade receivables

-

-

1 173

-

139 422

132 357

34 907

98 194

-

-

97 945

294

9 575 961

1 173 498

11 674 765

2 756 493

35 871 640

38 635 397

12 439 831

2 918 392

NVest Financial Holdings Limited (NVFH) | INTEGRATED ANNUAL REPORT 2016

81

Notes to the Consolidated Financial Statements - continued Company Figures in Rand

Group

2016

2015

2016

2015

Investment property (Fair value model)

-

-

12 539 932

-

Other financial assets

-

-

125 239

-

-

-

12 665 171

-

857 977

-

5 687 372

-

31

-

11 095 905

-

885

5 214

37 404

5 214

858 893

5 214

16 820 681

5 214

1 629 209

202 924

17 814 188

10 598 019

24. Fair value adjustments

25. Finance costs Related parties Trading interest - property Late payment of tax

26. Taxation Major components of the tax expense (income) Current Local income tax - current period Local income tax - recognised in current tax for prior periods

-

(214 757)

-

(214 757)

1 629 209

(11 833)

17 814 188

10 383 262

(11 802)

(6 048)

2 613 065

(104 170)

1 617 407

(17 881)

20 427 253

10 279 092

28.00 %

28.00 %

28.00 %

28.00 %

Tax losses carried forward

-%

-%

-%

0.02 %

Tax loss used

-%

-%

(0.02)%

-%

Capital gains tax effect of revaluation

-%

-%

(1.48)%

-%

Deferred Originating and reversing temporary differences

Reconciliation of the tax expense Reconciliation between applicable tax rate and average effective tax rate.

Applicable tax rate

Prior year temporary differences not raised

-%

-%

(0.19)%

(0.13)%

(22.96)%

(27.49)%

(0.27)%

(0.10)%

Non-deductible expenses (fines, penalties, donations)

-%

-%

0.03 %

0.02 %

Prior year over provision

-%

(0.56)%

-%

(0.47)%

Relating to equity accounting investments

-%

-%

(0.50)%

(4.82)%

5.04 %

(0.05)%

25.57 %

22.52 %

-

-

-

6 699

Exempt dividend income

Deductible temporary differences, unused tax losses and unused tax credits for which no deferred tax asset has been recognised.

82

INTEGRATED ANNUAL REPORT 2016 | NVest Financial Holdings Limited (NVFH)

Notes to the Consolidated Financial Statements - continued Company Figures in Rand

Group

2016

2015

2016

2015

32 071 247

38 159 812

79 914 752

45 645 878

215 387

107 124

977 468

518 526

Net (loss) profit on disposal of property, plant and equipment

-

-

33 301

(4 331)

Income from equity accounted investments

-

-

(1 440 949)

(7 859 335)

(26 295 679)

(37 461 899)

(765 066)

(161 899)

(9 575 961)

(1 173 498)

(11 674 765)

(2 756 493)

858 893

5 214

16 820 681

5 214

Fair value adjustments

-

-

(12 665 171)

-

Movements in operating lease assets and accruals

-

-

(1 289 535)

433 239

27. Cash (used in) generated from operations Profit before taxation Adjustments for: Depreciation and amortisation

Dividends received Interest received - investment Finance costs

Movements in provisions

71 650

(1 000)

289 799

(900)

Share buy-back cancellation of shares directly through equity

-

(3 442 902)

-

(3 442 902)

Other non-cash items

-

-

(13 035)

1 074

158 093

(18 419)

(2 297 090)

(529 842)

51 128

296 510

(4 718 367)

(8 565 780)

(2 445 242)

(3 529 058)

63 172 023

23 282 449

(12 308)

(269 560)

(404 897)

(850 346)

(1 629 209)

11 833

(17 814 188)

(10 383 262)

Changes in working capital: Trade and other receivables Trade and other payables

28. Tax paid Balance at beginning of the year Current tax for the year recognised in profit or loss Adjustment in respect of businesses acquired during the year Balance at end of the year

-

-

(1 378 507)

-

59 316

12 308

(845 349)

404 897

(1 582 201)

(245 419)

(20 442 941)

(10 828 711)

29. Dividends paid Balance at beginning of the year

(62 541 938)

-

(62 541 938)

-

Dividends

(23 323 377)

(84 199 036)

(23 625 715)

(84 199 036)

Balance at end of the year

-

62 541 938

-

62 541 938

(85 865 315)

(21 657 098)

(86 167 653)

(21 657 098)

Dividends are partly from capital profits.

Dividends payable at 28 February 2015 related to the special dividend that was declared to the shareholder, SASFIN Financial Services (Pty) Ltd, in February 2015 as part of the share repurchase agreement and is included in the loan with this shareholder as disclosed in Note 16.

NVest Financial Holdings Limited (NVFH) | INTEGRATED ANNUAL REPORT 2016

83

Notes to the Consolidated Financial Statements - continued Company Figures in Rand

2016

2015

Group 2016

2015

30. Business combinations NVest Properties Ltd On 01 June 2015 the group acquired an additional 50% of the voting equity interest of NVest Properties Ltd which resulted in the group obtaining control over NVest Properties Ltd. This was in addition to an existing interest of 45% which was already held. NVest Properties Ltd is principally involved in the property industry.

The numbers disclosed in this note are provisional numbers, as the financial year end falls within the IFRS 3 measurement period of 12 months from the effective date of the transaction, the group is still in the process of identifying and valuing all the assets acquired and liabilities assumed as part of the purchase price allocation. These numbers are therefore subject to change. Provisionally goodwill of R 2 393 697 was raised depending on the outcome of the aforesaid purchase price allocation, but at current represents largely the synergies and economies of scale expected from combining the operations of the entities.

Fair value of assets acquired and liabilities assumed Investment property

-

-

284 585 269

-

Property, plant and equipment

-

-

818 433

-

Operating lease asset

-

-

6 676 788

-

Loans to group companies

-

-

3 921

-

Trade and other receivables

-

-

1 344 315

-

Cash and cash equivalents

-

-

2 727 677

-

Other financial liabilities

-

-

(212 519 778)

-

Deferred tax

-

-

(8 596 803)

-

Loan from related party

-

-

(11 000 000)

-

Current tax payable

-

-

(415 667)

-

Trade and other payables

-

-

(11 365 544)

-

Total identifiable net assets

-

-

52 258 611

-

Non-controlling interest

-

-

(2 612 931)

-

Fair value of equity interest held before the business combination

-

-

(24 065 154)

-

Goodwill

-

-

2 393 697

-

-

-

27 974 223

-

Non-controlling interest Non-controlling interest, which is a present ownership interest, and entitle their holders to a proportionate share of the entity's net assets in the event of liquidation, is measured at the present ownership interests proportionate share of the acquiree's identifiable net assets. There are no other components of non-controlling interests.

Acquisition date fair value of consideration paid Cash

-

-

(2 727 677)

-

Equity - 13 514 069 ordinary shares in the holding company at R2.07 per share

-

-

27 974 223

-

-

-

25 246 546

-

Equity issued as part of consideration paid The fair value of 13 514 069 ordinary shares issued as part of the consideration for the business combination was determined with reference to the closing market prices of the shares as traded on the JSE on the effective acquisition date of 1 June 2015.

84

INTEGRATED ANNUAL REPORT 2016 | NVest Financial Holdings Limited (NVFH)

Notes to the Consolidated Financial Statements - continued Company Figures in Rand

2016

2015

Group 2016

2015

30. Business combinations - continued Fair value of equity interest held before the acquisition The measurement to fair value of the equity interest held in NVest Properties Ltd immediately prior to the acquisition, resulted in a gain of R 1 440 949 which has been included in income from equity accounted investments in the statement of comprehensive income.

Revenue and profit or loss of NVest Properties Ltd Revenue of R 26 782 445 and profit of R 15 733 620 of NVest Properties Ltd have been included in the group's results since the date of acquisition. The proforma revenue and profit of NVest Properties Ltd to be included in the group's results if the acquisition was on 1 March 2015 would have been R 44 848 625 and R 18 935 728 respectively.

NFB Finance Brokers Gauteng (Pty) Ltd On 01 September 2015 the group acquired 100% of the voting equity interest of NFB Finance Brokers Gauteng (Pty) Ltd which resulted in the group obtaining control over NFB Finance Brokers Gauteng (Pty) Ltd. NFB Finance Brokers Gauteng (Pty) Ltd is principally involved in the financial services industry. As a result of the acquisition, the group is expecting to continue to grow to be a leading provider of financial and wealth management products and services in those markets. It is also expecting to reduce costs through economies of scale.

The numbers disclosed in this note are provisional numbers, as the financial year end falls within the IFRS 3 measurement period of 12 months from the effective date of the transaction, the group is still in the process of identifying and valuing all the assets acquired and liabilities assumed as part of the purchase price allocation. These numbers are therefore subject to change. Provisionally goodwill of R 54 036 408 was raised depending on the outcome of the aforesaid purchase price allocation, but at current represents largely the synergies and economies of scale expected from combining the operations of the entities.

Fair value of assets acquired and liabilities assumed Property, plant and equipment

-

-

1 184 372

-

Investments in joint ventures

-

-

60

-

Other financial assets

-

-

12 941 053

-

Deferred tax

-

-

198 886

-

Loans to group companies

-

-

444 401

-

Trade and other receivables

-

-

469 847

-

Cash and cash equivalents

-

-

2 306 807

-

Provisions

-

-

(85 846)

-

Current tax payable

-

-

(962 840)

-

Trade and other payables

-

-

(7 833 148)

-

Total identifiable net assets

-

-

8 663 592

-

Goodwill

-

-

54 036 408

-

-

-

62 700 000

-

Cash

-

-

(2 306 807)

-

Equity - 33 000 000 ordinary shares in the holding company at R1.90 per share

-

-

62 700 000

-

-

-

60 393 193

-

Acquisition date fair value of consideration paid

NVest Financial Holdings Limited (NVFH) | INTEGRATED ANNUAL REPORT 2016

85

Notes to the Consolidated Financial Statements - continued Company Figures in Rand

2016

2015

Group 2016

2015

30. Business combinations - continued Equity issued as part of consideration paid The fair value of 33 000 000 ordinary shares issued as part of the consideration for the business combination was determined based on the fair value of NFB Finance Brokers Gauteng (Pty) Ltd, with reference to a comparable priceearnings ratio for a similar company trading in the same industry and with a similar risk profile.

The purchase was concluded at a value of R62.7 million, which equated to a price-earnings value of 8.3 for NFB Finance Brokers Gauteng (Pty) Ltd. The acquisition of NFB Finance Brokers Gauteng (Pty) Ltd has increased the trading and the current price-earnings value of NVest Financial Holdings Ltd which was trading in the approximate price-earnings ratio range of 20 at the reporting period and issue date of these financial statements. There was therefore sufficient headroom in the cash generating unit to support the raising of the goodwill.

Revenue and profit and loss of NFB Finance Brokers Gauteng (Pty) Ltd Revenue of R 24 306 242 and profit of R 3 038 286 of NFB Finance Brokers Gauteng (Pty) Ltd have been included in the group’s results since the date of acquisition. The proforma revenue and profit of NFB Finance Brokers Gauteng (Pty) Ltd to be included in the group’s results if the acquisition was on 1 March 2015 would have been R 55 169 458 and R 8 241 427 respectively.

NFB Asset Management (Pty) Ltd On 01 September 2015 the group acquired 50% of the voting equity interest of NFB Asset Management (Pty) Ltd which resulted in the group obtaining control over NFB Asset Management (Pty) Ltd. This was in addition to an existing interest of 50% which was already held. NFB Asset Management (Pty) Ltd is principally involved in the financial services industry. As a result of the acquisition, the company is expecting to continue to grow to be a leading provider of financial and wealth management products and services in those markets. It is also expecting to reduce costs through economies of scale Fair value of assets acquired and liabilities assumed Investments in associates

-

-

150 000

-

Other financial assets

-

Trade and other receivables

-

-

6 000

-

-

604 875

Cash and cash equivalents

-

-

-

389 629

-

Other financial liabilities

-

-

(227 201)

-

Provisions

-

-

(20 166)

-

Loans from related parties

-

-

(572 262)

-

Trade and other payables

-

-

(330 755)

-

Total identifiable net assets

-

-

120

-

Fair value of equity interest held before the business combination

-

-

(120)

-

-

-

-

-

Acquisition date fair value of consideration paid Cash

-

-

(389 629)

-

-

-

(389 629)

-

Revenue and profit or loss of NFB Asset Management (Pty) Ltd Revenue of R 3 290 074 and profit of R 386 716 of NFB Asset Management (Pty) Ltd have been included in the group's results since the date of acquisition. The proforma revenue and profit of NFB Asset Management (Pty) Ltd to be included in the group's results if the acquisition was on 1 March 2015 would have been of R 6 646 916 and of R 385 630 respectively.

86

INTEGRATED ANNUAL REPORT 2016 | NVest Financial Holdings Limited (NVFH)

Notes to the Consolidated Financial Statements - continued Company Figures in Rand

Group

2016

2015

2016

2015

480 707

17 530

1 048 340

366 131

31. Auditors' remuneration Fees

32. Directors' emoluments Board of directors 2016

Q. Barnard P.B. Bartlett B.J. Connellan A.D. Godwin J. Goldberg

Emoluments

Annual bonus

Fringe benefits

Allowances received

Commission

Retirement benefits

Risk benefits

Total

477 943

326 704

10 658

72 641

-

77 082

24 555

989 583

-

-

24 051

-

2 353 258

221 600

28 787

2 627 696

817 914

429 480

28 783

129 180

4 637

132 593

27 813

1 570 400

1 527 790

38 685

68 387

120 000

4 958 894

243 600

52 769

7 010 125

75 000

-

1 147

-

-

-

-

76 147

A.V. Kent

478 704

-

78 007

130 676

2 568 656

360 007

44 865

3 660 915

F.T. Knox

1 485 118

812 152

388 688

59 141

80 037

17 718

99 100

28 282

S.R. Kwatsha

75 000

-

1 147

-

-

-

-

76 147

T.H. McClure

-

-

60 297

-

2 485 377

117 600

31 667

2 694 941

R.M. McIntyre

-

-

64 551

5 019

6 379 969

162 000

39 856

6 651 395

847 128

-

96 983

120 000

6 646 419

240 000

33 919

7 984 449

75 000

-

1 147

-

-

-

-

76 147

B.A. Russell

-

-

63 149

-

176 798

18 648

-

258 595

M. Estment

240 000

-

185 570

-

6 836 962

-

-

7 262 532

5 426 631

1 183 557

743 018

657 553

32 428 688

1 672 230

312 513

42 424 190

Emoluments

Annual bonus

Fringe benefits

Allowances received

Commission

Retirement benefits

Risk benefits

Total

448 776

43 082

-

68 208

146 449

106 232

-

812 747

G.R. Ramsay J.P. Ross-Smith

2015

Q. Barnard P.B. Bartlett

-

-

-

-

1 632 390

174 020

29 792

1 836 202

219 936

73 894

12 052

-

887 054

124 143

28 108

1 345 187

1 264 997

36 324

48 076

173 793

3 761 239

243 600

44 303

5 572 332

A.V. Kent

478 704

-

51 452

120 000

3 380 084

360 007

47 314

4 437 561

F.T. Knox

596 448

272 014

39 902

68 208

9 559

93 052

28 654

1 107 837

T.H. McClure

-

-

31 180

-

2 393 441

117 600

32 928

2 575 149

R.M. McIntyre

-

-

-

-

4 560 471

144 000

44 288

4 748 759

G.R. Ramsay

643 576

-

48 076

156 273

5 484 428

240 000

36 553

6 608 906

B.A. Russell

155 400

-

-

-

3 728

111 076

-

270 204

3 807 837

425 314

230 738

586 482

22 258 843

1 713 730

291 940

29 314 884

B.J. Connellan A.D. Godwin

The directors’ emoluments were paid by the respective group company where the director is primarily employed.

NVest Financial Holdings Limited (NVFH) | INTEGRATED ANNUAL REPORT 2016

87

Notes to the Consolidated Financial Statements - continued Company Figures in Rand

2016

2015

Group 2016

2015

33. Related parties Relationships Subsidiaries

Refer to note 6

Joint ventures

Refer to note 7

Associates

Refer to note 8

Entities under common management

Beach Road Nahoon Trust Nahoon Trustees (Pty) Ltd NFB Capital (Pty) Ltd NFB Debentures 22 (Pty) Ltd NFB Finance (Pty) Ltd NFB Private Wealth Equity (Pty) Ltd NFB Property Investment (Pty) Ltd NVest International Corporate Bond Investment (Pty) Ltd NVest Securities Investment Tranche 2 Ltd Sherpa House 61 (Pty) Ltd

Shareholders

P.B. Bartlett B.J. Connellan R.M. McIntyre T.H. McClure The Rayner Sparg Trust S.C. Pope B.A. Russell M. Wolmarans

Minority shareholders

88 88

Batting Properties Trust

INTEGRATED ANNUAL REPORT 2016 | NVest Financial Holdings Limited (NVFH)

Notes to the Consolidated Financial Statements - continued Company Figures in Rand

2016

2015

P.B. Bartlett

-

Batting Properties Trust

-

Beach Road Nahoon Trust B.J. Connellan

Group 2016

2015

118 915

-

755 242

-

(116 667)

-

-

2 850

-

2 850

-

488 505

-

488 505

33. Related parties - continued Related party balances Loan accounts - Owing (to) by related parties

Independent Executor and Trust (Pty) Ltd

1 050 000

1 050 158

-

-

T.H. McClure

-

2 408 709

-

2 747 816

R.M. McIntyre

-

1 744 539

-

1 744 539

Nahoon Trustees (Pty) Ltd

-

8 492

-

8 492

NFB Asset Management (Pty) Ltd

-

-

-

320 161

NFB Capital (Pty) Ltd

-

9 268

-

9 268

NFB Debentures 22 (Pty) Ltd

-

2 808

-

2 808

NFB Finance (Pty) Ltd

-

7 374

-

7 374

NFB Finance Brokers Eastern Cape (Pty) Ltd

106 659

7 107 875

-

-

NFB Finance Brokers Port Elizabeth (Pty) Ltd

102 382

200 210

-

-

2 917

46 148

-

-

432 545

387 440

-

-

NFB Private Wealth Equity (Pty) Ltd

-

8 108

-

8 108

NFB Property Investment (Pty) Ltd

-

6 540

-

6 540

NVest International Corporate Bond Investments (Pty) Ltd

-

8 777

-

8 777

89 088 990

2 508

-

704

116 850

-

-

-

2 000 000

5 148 194

-

-

NVest Securities Investment Tranche 2 Ltd

-

7 255

-

7 255

S.C. Pope

-

-

247 406

248 183

B.A. Russell

-

914 571

-

914 571

The Rayner Sparg Trust

-

18 350 245

-

18 350 245

M. Wolmarans

-

-

447 585

-

92 900 343

38 029 489

578 324

25 631 438

P.B. Bartlett

-

-

(4 354)

(50 750)

T.H. McClure

-

-

(3 763)

(30 998)

R.M. McIntyre

-

-

-

(84 522)

S.C. Pope

-

-

(17 222)

(16 446)

The Rayner Sparg Trust

-

-

395 665

(385 244)

(136 684)

(132 357)

-

-

-

-

(14 947)

-

(136 684)

(132 357)

355 379

(567 960)

(1 543 314)

NFB Finance Brokers Western Cape (Pty) Ltd NFB Insurance Brokers (Border) (Pty) Ltd

NVest Properties Ltd NVest Property Services (Pty) Ltd NVest Securities (Pty) Ltd

Related party transactions Interest paid to (received from) related parties

NVest Securities (Pty) Ltd M. Wolmarans

Commission paid to (received from) related parties NFB Asset Management (Pty) Ltd NFB Insurance Brokers (Border) (Pty) Ltd NVest Properties Ltd

-

-

-

(26 600)

(14 230)

-

-

-

-

-

(261 733)

(26 600)

(14 230)

-

(1 805 047)

NVest Financial Holdings Limited (NVFH) | INTEGRATED ANNUAL REPORT 2016

89

Notes to the Consolidated Financial Statements - continued Company Figures in Rand

Group

2016

2015

2016

2015

(1 419 003)

(1 144 915)

-

-

-

(101 265)

-

-

(57 649)

(42 839)

-

(42 839)

(463 388)

(429 312)

-

-

33. Related parties - continued Rent paid to (received from) related parties NFB Finance Brokers Eastern Cape (Pty) Ltd NFB Insurance Brokers (Border) (Pty) Ltd NVest Properties Ltd NVest Securities (Pty) Ltd Sherpa House 61 (Pty) Ltd

-

-

825 107

711 479

(1 940 040)

(1 718 331)

825 107

668 640

Administration fees paid to (received from) related parties Independent Executor and Trust (Pty) Ltd

(214 859)

(185 745)

-

-

NFB Finance Brokers Eastern Cape (Pty) Ltd

(3 310 389)

(3 108 347)

-

-

NFB Finance Brokers Port Elizabeth (Pty) Ltd

(153 821)

(144 433)

-

-

NFB Insurance Brokers (Border) (Pty) Ltd

(605 279)

(522 328)

-

-

NVest Properties Ltd

(255 600)

(359 645)

-

(359 645)

NVest Property Services (Pty) Ltd NVest Securities (Pty) Ltd

(34 080)

-

-

-

(954 985)

(896 700)

-

-

(5 529 013)

(5 217 198)

-

(359 645)

Dividends paid to (received from) related parties Independent Executor and Trust (Pty) Ltd NFB Asset Management (Pty) Ltd NFB Finance Brokers Eastern Cape (Pty) Ltd NFB Finance Brokers Gauteng (Pty) Ltd

-

(700 000)

-

-

(89 020)

(109 010)

-

(109 010)

(11 500 000)

(20 775 000)

-

-

(3 500 000)

-

-

(52 889)

NFB Finance Brokers Western Cape (Pty) Ltd NVest Securities (Pty) Ltd

-

(52 889)

-

(11 100 000)

(15 825 000)

-

-

(26 189 020)

(37 461 899)

-

(161 899)

-

-

1 693 230

-

Compensation to directors and other key management Short-term employee benefits

34. Financial assets by category The accounting policies for financial instruments have been applied to the line items below. The carrying amounts of the financial assets in each category are as follows: Company - 2016

Loans and receivables

Total

Cash and cash equivalents

88 971 231

88 971 231

Loans to related parties

92 900 343

92 900 343

Trade and other receivables

Company - 2015

123 557

123 557

181 995 131

181 995 131

Loans and receivables

Total

Cash and cash equivalents

20 562 811

20 562 811

Loans to related parties

14 004 006

14 004 006

Loans to shareholders

24 025 484

24 025 484

305 733

305 733

58 898 034

58 898 034

Trade and other receivables

90

INTEGRATED ANNUAL REPORT 2016 | NVest Financial Holdings Limited (NVFH)

Notes to the Consolidated Financial Statements - continued Company Figures in Rand

Group

2016

2015

2016

2015

Loans and receivables

Fair value through profit or loss - held for trading

Held to maturity investments

Total

132 368 716

-

-

132 368 716

34. Financial assets by category- continued Group - 2016

Cash and cash equivalents Loans to shareholders

694 991

-

-

694 991

Other financial assets

-

9 670 790

136 000

9 806 790

Trade and other receivables

Group - 2015

11 825 250

-

-

11 825 250

144 888 957

9 670 790

136 000

154 695 747

Loans and receivables

Total

48 548 897

48 548 897

382 336

382 336

Loans to shareholders

25 249 102

25 249 102

Other financial assets

200 000

200 000

7 453 931

7 453 931

81 834 266

81 834 266

Cash and cash equivalents Loans to related parties

Trade and other receivables

35. Financial liabilities by category The accounting policies for financial instruments have been applied to the line items below. The carrying amounts of the financial liabilities in each category are as follows: Company 2016

Trade and other payables Company 2015

Other financial liabilities Trade and other payables

Financial liabilities at amortised cost

Total

(565 323)

(565 323)

Financial liabilities at amortised cost

Total

(62 541 938)

(62 541 938)

(469 537)

(469 537)

(63 011 475)

(63 011 475)

NVest Financial Holdings Limited (NVFH) | INTEGRATED ANNUAL REPORT 2016

91

Notes to the Consolidated Financial Statements - continued Company Figures in Rand

2016

2015

Group 2016

2015

Financial liabilities at amortised cost

Total

35. Financial liabilities by category - continued Group 2016

Loans from group companies Other financial liabilities Trade and other payables

(116 667)

(116 667)

(172 541 543)

(172 541 543)

(22 627 798)

(22 627 798)

(195 286 008)

(195 286 008)

Group 2015

Financial liabilities at amortised cost

Total

Other financial liabilities

(62 541 938)

(62 541 938)

(9 565 689)

(9 565 689)

(72 107 627)

(72 107 627)

Trade and other payables

36. Risk management Capital risk management The group’s objectives when managing capital are to safeguard the group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

The capital structure of the group consists of debt, which includes the borrowings disclosed in notes 9, 12 & 16 cash and cash equivalents disclosed in note 14, and equity as disclosed in the statement of financial position.

In order to maintain or adjust the capital structure, the group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

The directors review the management accounts of the group on a monthly basis and discusses the progress with local management. There were no changes in the group’s approach to capital management during the year.

There are no externally imposed capital requirements.

There have been no changes to what the entity manages as capital, the strategy for capital maintenance or externally imposed capital requirements from the previous year.

Financial risk management The group’s activities can expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk), credit risk and liquidity risk.

The group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the group’s financial performance. The directors provide written principles for overall risk management, as well as written policies covering specific areas, such as, interest rate risk, credit risk, use of derivative financial instruments and investment of excess liquidity.

92

INTEGRATED ANNUAL REPORT 2016 | NVest Financial Holdings Limited (NVFH)

Notes to the Consolidated Financial Statements - continued Company Figures in Rand

2016

2015

Group 2016

2015

36. Risk Management - continued Credit risk Credit risk is managed on a group basis.

Credit risk consists mainly of cash deposits, cash equivalents and trade debtors. The company only deposits cash with major banks with high quality credit standing and limits exposure to any one counter-party.

Trade receivables comprise a widespread customer base. Risk control assesses the credit quality of the customer, taking into account its financial position, past experience and other factors.

No credit limits were exceeded during the reporting period, and management does not expect any losses from nonperformance by these counterparties.

Financial assets exposed to credit risk at year end were as follows: Financial instrument

Company 2016

Company 2015

Group 2016

Group 2015

Cash and cash equivalents

88 971 231

20 562 811

132 368 716

48 548 897

-

200 000

9 656 790

200 000

123 557

305 733

11 825 250

7 453 931

-

24 025 484

694 991

25 249 102

92 900 345

14 004 006

-

382 336

Other financial assets Trade and other receivables Loans to shareholders Loans to related parties Liquidity risk

The group’s risk to liquidity is a result of the funds available to cover future commitments. The group manages liquidity risk through an ongoing review of future commitments and credit facilities.

Cash flow forecasts are prepared and the need for borrowing facilities are assessed.

The table below analyses the group’s financial liabilities into relevant maturity groupings based on the remaining period at the statement of financial position to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant.

Company At 29 February 2016

Less than 1 year

Trade and other payables

(565 323)

At 28 February 2015 Loans from shareholders

(62 541 938)

Trade and other payables

(469 537)

Group Less than 1 year

Between 2 and 5 years

Other financial liabilities

(15 600 000)

(156 941 543)

Trade and other payables

(22 627 798)

-

(116 667)

-

At 29 February 2016

Loan from related party

At 28 February 2015 Other financial liabilities Trade and other payables

Less than 1 year (62 541 938) (9 565 689)

NVest Financial Holdings Limited (NVFH) | INTEGRATED ANNUAL REPORT 2016

93

Notes to the Consolidated Financial Statements - continued Company Figures in Rand

2016

2015

Group 2016

2015

36. Risk Management - continued Interest rate risk As the group has no significant interest-bearing assets, the group’s income and operating cash flows are substantially independent of changes in market interest rates.

The group’s interest rate risk arises mainly from cash and cash equivalents.

At 29 February 2016, if interest rates on Rand-denominated borrowings had been 1.00% higher or lower with all other variables held constant, post-tax profit for the year would have been R 212 889 003 39 149 (2015: R413 395) lower or higher, mainly as a result of higher or lower interest income on bank balances.

Foreign exchange risk The company is not exposed to foreign exchange risk.

37. Segmental reporting The following information relates to segment financial information of the group:

2016

Revenue

Profit before tax

Assets

Liabilities

Segments: Insurance broking Wealth management Administration of estates and trusts Property services Other Inter company eliminations

2015

13 375 030

2 311 125

8 451 418

2 044 678

165 001 045

50 163 307

64 738 078

27 899 998

4 263 972

1 798 718

3 227 048

1 206 774

35 390 248

20 178 076

344 099 773

275 713 439

1 974 120

32 071 246

297 335 169

1 144 009

(3 560 973)

(26 607 720)

(140 264 956)

(96 634 195)

216 443 442

79 914 752

577 586 530

211 374 703

Revenue

Profit before tax

Assets

Liabilities

Segments: Insurance broking Wealth management

11 764 360

1 626 040

6 589 453

1 846 685

113 972 706

35 169 386

42 593 865

24 281 391

Administration of estates and trusts

2 152 306

111 588

1 991 481

1 266 739

Other

1 732 561

38 159 201

81 919 056

63 519 325

(14 979 608)

(29 420 337)

(108 326)

(14 906 625)

114 642 325

45 645 878

132 985 529

76 007 515

Inter company eliminations

The segment defined by “Other” includes the holding company, minor operating segments and investment in associates. All the operating segments of the group fall into a single geography, being South Africa.

94

INTEGRATED ANNUAL REPORT 2016 | NVest Financial Holdings Limited (NVFH)

Notes to the Consolidated Financial Statements - continued Company Figures in Rand

2016

Group

2015

2016

Net

Gross

2015

38. Earnings per share Reconciliation of basic to headline earnings: 2016 Gross Earnings attributable to equity holders of the parent Re-measurements included in equity accounted earnings of associates Fair value adjustment of investment property

2015 57 949 279

Net 33 637 889

(1 440 949)

(1 037 483)

(5 595 578)

(5 073 376)

(12 539 932)

(10 201 486)

-

-

Fair value adjustment of property, plant and equipment

-

-

-

-

Fair value adjustment of other financial assets

-

-

-

-

33 301

23 977

(4 331)

(3 106)

Profit/Loss on sale of fixed assets

46 734 287

28 561 407

Earnings per share as presented on the Statement of Profit or Loss and Other Comprehensive Income is based on the weighted average number of 248 935 830 ordinary shares in issue (2015: 177 726 744).

There are no dilutive instruments.

39. Equity-settled share-based payments NVest Financial Holdings Ltd operate the NVest Financial Holdings Ltd Share Incentive Scheme (‘the Scheme”). The purpose of the Scheme is to attract, motivate, reward and retain participants who are able to influence the performance of the Group, on a basis which aligns their interests with those of the Company’s shareholders.

The NVest Financial Holdings Ltd Board is responsible for the operation and administration of the Scheme, and subject to applicable Laws has discretion to decide whether and on what basis the Scheme shall be operated, which may include but not be limited to the delegation of the administration of the Scheme to a Compliance Officer or any third party appointed by the Board, but excluding any executive director of the Company.

Subject to the provisions of the Scheme, any Applicable Laws and to the approval of the Board, the Board shall be entitled to make and establish such rules and regulations, and to amend the same from time to time, as they may deem necessary or expedient for the proper implementation and administration of the Scheme.

The Scheme confers the right to participants to acquire option shares for a combined maximum of 20 500 000 ordinary shares, with no single participant exceeding a holding of 5 000 000 shares.

The Board, in its sole discretion, shall determine the number of option shares to be granted to eligible employees, the option price per share, the option and vesting dates and any conditions attaching to the option.

No options have been granted since inception of the scheme.

NVest Financial Holdings Limited (NVFH) | INTEGRATED ANNUAL REPORT 2016

95

ANALYSIS OF SHAREHOLDERS NVFH shareholder spread as at 29 February 2016 is set out below:

Type of shareholders

Number of Shareholders

Number of Shares

Percentage holding

328

256 978 600

84,88

5

120 000

0,04

Individuals Close Corporations Nominees, Companies, Financial Institutions, Trusts and other

1 001

45 643 122

15,08

Total

1 332

302 741 722

100,00

Number of Shareholders

Number of Shares

Percentage Holding%

1 030

9 281 396

3,07

171

3 209 282

1,06

85

4 569 190

1,51

Size of Shareholding 1 – 10 000 (Yellow highlight) 10 001 – 25 000 (Grey highlight) 25 001 – 100 000 100 001 – 500 000

21

5 159 231

1,70

500 001 and over

27

280 522 623

92,66

1 332

302 741 722

100,00

Number of shareholders

Number of Shares

Percentage Holding%

- GODWIN TRUST (Associate of director of NVest)

1

75 680 000

25,00

- THE RAYNER SPARG TRUST

1

76 300 221

25,20

- THE GAVIN RAMSAY FAMILY TRUST (Associate of director of a subsidiary)

1

42 000 000

13,87

- DIRECTORS OF NVEST (held in own name and via Trust)

9

29 593 343

9,78

24

48 034 627

15,87

- ASSOCIATES OF DIRECTORS OF NVEST AND SUBSIDIARIES

4

1 391 975

0,46

- RESTRICTED EMPLOYEES

2

250 000

0,08

Total

Public vs. non-public NON-PUBLIC

- DIRECTORS OF SUBSIDIARY COMPANIES (Held in own name and via Trust)

PUBLIC

1 290

29 491 556

9,74

Total

1 332

302 741 722

100,00

Number of shareholders

Number of Shares

Percentage Holding%

- MICHAEL ESTMENT FAMILY TRUST

1

14 275 801

4,72

- THE GAVIN RAMSAY FAMILY TRUST

1

42 000 000

13,87

- THE ANDREW AND HEATHER KENT TRUST

1

14 200 000

4,69

- GODWIN TRUST

1

75 680 000

25,00

- THE RAYNER SPARG TRUST

1

76 300 221

25,20

Total

5

222 456 022

73,48

Shareholders holding more than 4%

The information above is based on the NVFH share register as at 26 February 2016 and 302 741 722 total number of shares in issue.

96

INTEGRATED ANNUAL REPORT 2016 | NVest Financial Holdings Limited (NVFH)

GENERAL INFORMATION Company Name

NVest Financial Holdings Limited

Date and place of incorporation

3 July 2008 – Republic of South Africa

Company Registration Number

2008/015990/06

Nature of business and principal activities

Financial Services

Directors

Jonathan Goldberg - Chairman – Independent Non-Executive Director Siviwe Relebohile Kwatsha - Independent Non-Executive Director John Philip Ross-Smith - Independent Non-Executive Director Dylan Schemel - Non-Executive Director Anthony Denis Godwin - Group CEO – Executive Director Frank Terence Knox - Group Finance Director – Executive Director Andrew Vincent Kent - Executive Director Michael Estment - Executive Director

Registered office NFB House,

42 Beach Road Nahoon

East London, 5241 Business address NFB House,

42 Beach Road Nahoon

East London, 5241 Postal address

PO Box 8132 Nahoon, 5210 East London

Bankers

Nedbank Limited (Registration Number 1951/000009/06) 71 Oxford Street East London, 5201

Stockbroker

NVest Securities Proprietary Limited (Registration Number 2008/015192/07) (Member of the JSE Limited) Financial Services Board Licence No: 44699 NFB House 42 Beach Road Nahoon, 5241

Auditors Grant Thornton Cape Inc.

Chartered Accountants SA

(Registration Number 2010/016204/21)

6th Floor,

119 Hertzhog Boulevard Foreshore,

Cape Town, 8001

(PO Box 2275, Cape Town, 8001)

NVest NVest Financial Financial Holdings Holdings Limited Limited (NVFH) (NVFH) || INTEGRATED INTEGRATED ANNUAL ANNUAL REPORT REPORT 2016 2016

97

GENERAL INFORMATION CONTINUED...

Attorney Cooper Conroy Bell and Richards Inc.

(Registration Number 1983/013472/21)

26 Pearce Street Berea

East London

Eastern Cape Secretary Brendan Joseph Connellan

NFB House, 42 Beach Road Nahoon

East London, 5241 Designated Advisor Arbor Capital Sponsors Proprietary Limited

(Registration number 2006/033725/07)

Ground Floor,

One Health Building Woodmead

North Office Park

54 Maxwell Drive

Woodmead, 2157 Transfer Secretaries

98

Computershare Investor Services Proprietary Limited Registration Number 2004/003647/07) 70 Marshall Street Johannesburg, 2001 (PO Box 61051 Marshalltown, 2107)

INTEGRATED ANNUAL REPORT 2016 | NVest Financial Holdings Limited (NVFH)

NOTICE OF AGM AND PROXY NVEST FINANCIAL HOLDINGS LIMITED (Incorporated in the Republic of South Africa) (Registration number 2008/015990/06) (“NVest” or “the Company”) DIRECTORS Anthony Godwin (CEO)*

Jonathan Goldberg (Chairman)**

Frank Knox (CFO)*

Siviwe Kwatsha **

Andrew Kent *

John Ross-Smith**

Michael Estment* Executive*

Independent non-executive**

Dylan Schemel*** Non-executive***

Notice is hereby given that the annual general meeting of shareholders of the Company will be held at 13:00 on Monday 15 August 2016 at 42 Beach Road, East London to consider, and if deemed fit, to pass, with or without modifications, the resolutions set out below.

Electronic Participation in the Annual General Meeting Please note that the Company intends to make provisions for shareholders of the Company, or their proxies, to participate in the annual general meeting by way of electronic communication. Should you wish to participate in the annual general meeting by way of electronic communication, you will need to contact the Company at bconnellan@nvestholdings.co.za by not later than 13:00 on Thursday, 11 August 2016, so that the Company can provide for a teleconference dial-in facility. Please ensure that if you are participating in the meeting via teleconference that the voting proxies be sent through to the transfer secretaries, namely Computershare Investor Services Proprietary Limited, 70 Marshall Street, Johannesburg, 2001 (PO Box 61051 Marshalltown, 2107) by no later than 13:00 on Thursday, 11 August 2016. No changes to voting instructions after this time and date can be accepted unless the Chairman of the meeting is satisfied as to the identification of the electronic participant.

The board of directors of the Company has determined that the record date for the purpose of determining which shareholders of the Company are entitled to receive notice of this annual general meeting is Friday, 24 June 2016 and the record date for purposes of determining which shareholders of the Company are entitled to participate in and vote at the annual general meeting is Friday, 5 August 2016. Accordingly, only shareholders who are registered in the register of members of the Company on Friday, 5 August 2016 will be entitled to participate in and vote at the annual general meeting.

1. Ordinary resolution number 1 – Annual financial statements “RESOLVED THAT the annual financial statements of the Company and its subsidiaries for the period ended 29 February 2016, together with the reports of the directors, auditor, audit committee, remuneration committee and social and ethics committee, be received, considered and adopted.”

Explanatory Note: The annual financial statements are required to be approved in terms of the Companies Act, 2008 (No 71 of 2008) (“the Act”).

The minimum percentage of voting rights that is required for ordinary resolution 1 to be adopted is 50% (fifty percent) of the voting rights plus 1 (one) vote to be cast on this resolution.

NVest Financial Holdings Limited (NVFH) | INTEGRATED ANNUAL REPORT 2016

99

2. Ordinary resolution number 2 – Reappointment and remuneration of auditors “RESOLVED THAT the re-appointment of Grant Thornton Cape Inc. as the auditors of the Company, with Mr Imtiaaz Hashim as designated auditor at partner status, be and is hereby approved and that the directors be and are hereby authorised to determine the remuneration of the auditors.”

Explanatory Note: Grant Thornton Cape Inc. has indicated their willingness to be reappointed as the Company’s auditors until the next annual general meeting. The Company’s Audit Committee has satisfied itself as to the independence of Grant Thornton Cape Inc. The Audit Committee has the power in terms of the Act to approve the remuneration of the external auditors.

The remuneration and non-audit fees paid to the auditors during the year ended 28 February 2016 are contained in note 31 of the annual financial statements.

The minimum percentage of voting rights that is required for this resolution to be adopted is 50% (fifty percent) of the voting rights plus 1 (one) vote to be cast in favour of the resolution.

3. Ordinary resolution number 3 – Appointment of director - Michael Estment “RESOLVED THAT the appointment of Michael Estment as executive director of the Company be and is hereby approved.”

4. Ordinary resolution number 4 – Director retirement and re-election – Siviwe Kwatsha “RESOLVED THAT Siviwe Kwatsha, which director retires in terms of the Company’s memorandum of incorporation (“MOI”) and, being eligible, offers himself for re-election as a director of the Company be and is hereby approved.”

Siviwe Kwatsha’s curriculum vitae is set out in page 13 of this integrated annual report to which this notice is attached.

Explanatory note for ordinary resolutions 3 to 4: In accordance with the MOI of the Company, one-third of the directors or any interim appointed directors are required to retire at each annual general meeting and may offer themselves for re-election. In terms of the MOI of the Company the executive directors, during the period of their service contract, are not taken into account when determining which directors are to retire by rotation.

The minimum percentage of voting rights that is required for each of ordinary resolutions 2 to 3 to be adopted is 50% (fifty percent) of the voting rights plus 1 (one) vote to be cast on each resolution.

5. Ordinary resolution number 5 – Reappointment of Audit and Risk Committee member – Jonathan Goldberg “RESOLVED THAT Jonathan Goldberg be and is hereby reappointed as member of the Audit and Risk Committee.”

100

6. Ordinary resolution number 6 – Reappointment of Audit and Risk Committee member – Siviwe Relebohile Kwatsha “RESOLVED THAT Siviwe Relebohile Kwatsha be and is hereby approved to be re-appointed as a member and chairman of the Audit and Risk Committee.”

7. Ordinary resolution number 7 – Approval of Remuneration Policy “RESOLVED THAT the Remuneration Policy, a summary of which has been tabled below, be and is hereby approved.”

Remuneration Policy Summary: The remuneration policy in place is to remunerate executive directors primarily on an incentive basis through bonuses, commission, profit share arrangements and/or share incentives based on performance, details of which are set out on page 22 of the integrated annual report forming part of this notice. Where monthly remuneration is paid, this is market related. Full details of the Remuneration policy are set out in the Remuneration Report on page 34 of the integrated annual report.

Explanatory Note: Chapter 2 of King III dealing with boards and directors requires companies to every year table their remuneration policy to shareholders for a non-binding advisory vote at the annual general meeting. This vote enables shareholders to express their views on the remuneration policy adopted and on their implementation.

This ordinary resolution is of an advisory nature only and failure to pass this resolution will therefore not have any legal consequences relating to existing arrangements. However, the board will take the outcome of the vote into consideration when considering the Company’s remuneration policy.

The minimum percentage of voting rights that is required for this ordinary resolution to be adopted is 50% (fifty percent) of the voting rights plus 1 (one) vote to be cast on the resolution.

8. Special resolution number 1 – General authority to allot and issue shares for cash “Resolved that, subject to the provisions of the Act, the Listings Requirements of the JSE and the company’s memorandum of incorporation, as a general authority valid until the next annual general meeting of the company and provided that it shall not extend past 15 months from the date of this annual general meeting, the authorised but unissued ordinary shares of the company be and are hereby placed under the control of the directors who are hereby authorised to allot, issue, grant options over or otherwise deal with or dispose of these shares to such persons at such times and on such terms and conditions and for such consideration whether payable in cash or otherwise, as the directors may think fit, provided that: -

the shares which are the subject of the issue for cash must be of a class already in issue, or where this is not the case, must be limited to such equity securities or rights that are convertible into a class already in issue;

INTEGRATED ANNUAL REPORT 2016 | NVest Financial Holdings Limited (NVFH)

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this authority shall not endure beyond the next annual general meeting of the company nor shall it endure beyond 15 months from the date of this meeting; the shares must be issued only to public shareholders (as defined in the Listings Requirements of the JSE) and not to related parties (as defined in the Listings Requirements of the JSE); upon any issue of shares which, together with prior issues during any financial year, will constitute 5% or more of the number of shares of the class in issue, the Company shall by way of an announcement on Stock Exchange News Service (“SENS”), give full details thereof, including the effect on the net asset value of the company and earnings per share; the number of ordinary shares issued for cash shall not, in the current financial year, in aggregate, exceed 50% or 151,370,861 of the Company’s issued ordinary shares (including securities which are compulsorily convertible into shares of that class); and the maximum discount at which shares may be issued is 10% of the weighted average traded price of the company’s shares over the 30 business days prior to the date that the price of the issue is determined or agreed by the directors of the Company.”

Explanatory Note: This ordinary resolution is required in terms of the Listings Requirements of the JSE in order for shareholders to place the authority to issue shares for cash under the control of the directors. The controlling shareholder and the designated advisor are permitted to vote on this resolution in respect of any shares held by them in accordance with the recent amendments to the JSE Listings Requirements.

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- -

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A special resolution is required in terms of the Companies Act to issue more than 30% of new shares. Accordingly, this resolution is proposed as a special resolution.

In order for this resolution to be adopted, it must be approved by 75% of the voting rights exercised on the resolution by shareholders present or represented by proxy at the annual general meeting and entitled to exercise voting rights on the resolution is required.

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9. Special resolution number 2: General authority to acquire (repurchase) shares

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“RESOLVED THAT, subject to the approval of 75% of the shareholders present in person and by proxy, and entitled to vote at the annual general meeting, the Company and/or any subsidiary of the Company is hereby authorised, by way of a general authority, from time to time, to acquire ordinary shares in the share capital of the Company from any person in accordance with the requirements of the MOI, the Act and the JSE Listings Requirements, provided that:

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-

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any such acquisition of ordinary shares shall be effected through the order book operated by the JSE trading system and done without any prior understanding or arrangement with the counterparty; this general authority shall be valid until the earlier of the Company’s next annual general meeting or the variation or revocation of such general authority by

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special resolution at any subsequent general meeting of the Company, provided that it shall not extend beyond 15 months from the date of passing of this special resolution number 1; an announcement will be published as soon as the Company or any of its subsidiaries have acquired ordinary shares constituting, on a cumulative basis, 3% of the number of ordinary shares in issue and for each 3% in aggregate of the initial number acquired thereafter, in compliance with paragraph 11.27 of the JSE Listings Requirements; acquisitions of shares in aggregate in any one financial year may not exceed 5% of the Company’s ordinary issued share capital, as the case may be, as at the date of passing of this special resolution number 1; ordinary shares may not be acquired at a price greater than 10% above the weighted average of the market value at which such ordinary shares are traded on the JSE as determined over the five business days immediately preceding the date of acquisition of such ordinary; the Company has been given authority by its memorandum of incorporation; the board of directors authorises the acquisition and that the Company passed the solvency and liquidity test, as set out in Section 4 of the Act, and that since the solvency and liquidity test was performed there have been no material changes to the financial position of the Company; in terms of section 48 (2)(b) of the Act, the board of a subsidiary Company may determine that it will acquire shares of its holding company, but (i) not more than 10%, in aggregate, of the number of issued shares of any class of shares of a Company may be held by, or for the benefit of, all of the subsidiaries of that Company, taken together; and (ii) no voting rights attached to those shares may be exercised while the shares are held by the subsidiary, and it remains a subsidiary of the Company whose shares it holds; in terms of section 48 (8)(b) of the Act, the repurchase of any shares is subject to the requirements of sections 114 and 115 if, considered alone, or together with other transactions in an integrated series of transactions, it involves the acquisition by the Company of more than 5% of the issued shares of any particular class of the Company’s shares; at any point in time, the Company and/or its subsidiaries may only appoint one agent to effect any such acquisition; the Company and/or its subsidiaries undertake that they will not enter the market to so acquire the Company’s shares until the Company’s designated advisor has provided written confirmation to the JSE regarding the adequacy of the Company’s working capital in accordance with Schedule 12 of the Listings Requirements of the JSE; and the Company and/or its subsidiaries may not acquire any shares during a prohibited period, as defined in the Listings Requirements of the JSE unless a repurchase programme is in place, where dates and quantities of shares to be traded during the prohibited period are fixed and full details of the programme have been disclosed in an announcement over the SENS prior to the commencement of the prohibited period.

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Explanatory Note: The reason for and effect of this special resolution is to grant the Company and its subsidiaries a general authority to facilitate the acquisition by the Company and/or its subsidiaries of the Company’s own shares, which general authority shall be valid until the earlier of the next annual general meeting of the Company or the variation or revocation of such general authority by special resolution at any subsequent general meeting of the Company, provided that this general authority shall not extend beyond 15 months from the date of the passing of this special resolution number 1.

Any decision by the directors, after considering the effect of an acquisition of up to 5% of the Company’s issued ordinary, as the case may be, to use the general authority to acquire shares of the Company will be taken with regard to the prevailing market conditions and other factors and provided that, after such acquisition, the directors are of the opinion that: - -

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the Company and its subsidiaries will be able to pay their debts in the ordinary course of business; recognised and measured in accordance with the accounting policies used in the latest audited annual group financial statements, the assets of the Company and its subsidiaries will exceed the liabilities of the Company and its subsidiaries; the share capital and reserves of the Company and its subsidiaries will be adequate for the purposes of the business of the Company and its subsidiaries; and the working capital of the Company and its subsidiaries will be adequate for the purposes of the business of the Company and its subsidiaries, for the period of 12 months after the date of the notice of the annual general meeting. The Company will ensure that its designated advisor will provide the necessary letter on the adequacy of the working capital in terms of the Listings Requirements of the JSE, prior to the commencement of any purchase of the Company’s shares on the open market.

The JSE Listings Requirements require, in terms of section 11.26, the following disclosures, which appear in this annual report: - -

Major shareholders – refer to page 96 of this Integrated Annual Report.

Share capital of the Company – refer to page 75 of this Integrated Annual Report.

Litigation statement In terms of paragraph 11.26 of the JSE Listings Requirements, the directors, whose names appear on pages 12 - 14 of this integrated annual report, are not aware of any legal or arbitration proceedings that are pending or threatened, that may have or had in the recent past, being at least the previous 12 months, a material effect on NVest’s financial position.

Directors’ responsibility statement The directors, whose names appear on pages 12 - 14 of this integrated annual report, collectively and individually accept full responsibility for the accuracy of the information pertaining to this special resolution and certify that, to the best of their knowledge and belief, there are no facts that have been

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omitted which would make any statements false or misleading, and that all reasonable enquiries to ascertain such facts have been made and that this special resolution contains all information required by law and the JSE Listings Requirements.

Material changes Other than the facts and developments reported on in this integrated annual report, there have been no material changes in the financial or trading position of the Company and its subsidiaries since the date of signature of the audit report and up to the date of the notice of annual general meeting. The directors have no specific intention, at present, for the Company or its subsidiaries to acquire any of the Company’s shares but consider that such a general authority should be put in place should an opportunity present itself to do so during the year, which is in the best interests of the Company and its shareholders.

The directors are of the opinion that it would be in the best interests of the Company to extend such general authority and thereby allow the Company or any of its subsidiaries to be in a position to acquire the shares issued by the Company through the order book of the JSE, should the market conditions, tax dispensation and price justify such an action.

The minimum percentage of voting rights that is required for this special resolution to be adopted is 75% (seventy-five percent) of the voting rights plus 1 (one) vote to be cast on this resolution.

10. Special resolution number 3 – NonExecutive Directors’ remuneration “RESOLVED THAT the approval of the remuneration payable to the independent non-executive directors: for the financial year commencing 1 March 2016 until 15 August 2016 as follows: Member

Fee (R)

Company Chairperson

R37 500.00

Audit and Risk Committee Chairperson

R35 417.00

Other Independent non-executive directors

R31 250.00

and for the period commencing 15 August 2016 until the date of the annual general meeting of shareholders of the Company to be held in 2017 as follows: Member

Fee (R)

All Independent non-executive directors

R75 000.00

Additional amount payable to Company Chairperson

R15 000.00

Additional amount payable to Audit and Risk Committee Chairperson

R10 000.00

Additional amount payable to Social and Ethics Committee Chairperson

R0

Additional amount payable to Remuneration Committee Chairperson

R0

and that, should a period of more than 12 months’ elapse between 15 August 2016 and the annual general meeting of shareholders of the Company to be held in 2017, the directors

INTEGRATED ANNUAL REPORT 2016 | NVest Financial Holdings Limited (NVFH)

are authorized to pay the relevant independent nonexecutive directors on a pro rata basis for the relevant period.

The above is subject to individual independent non-executive directors remaining as directors until said dates, failing which they will only be entitled to a pro rata portion of the amount for the relevant period.

Explanatory Note: In terms of Section 66(9) of the Act, shareholders are required to approve the remuneration of directors.

The minimum percentage of voting rights that is required for this special resolution to be adopted is 75% (seventy-five percent) of the voting rights plus 1 (one) vote to be cast on this resolution.

11. Special resolution number 4 – General authority to enter into funding agreements, provide loans or other financial assistance “RESOLVED that in terms of Section 45 of the Act, as amended, the Company be and is hereby granted a general approval authorising that the board authorise the company to provide direct or indirect financial assistance to a director or prescribed officer of the company or of a related or interrelated company, or to a related or inter-related company or corporation, or to a member of a related or inter-related corporation, or to a person related to any such company, corporation, director, prescribed officer or member, subject to subsections (3) and (4) of Section 45 of the Companies Act. Explanatory note: Section 45 of the Companies Act provides, among other things, that, except to the extent that the memorandum of incorporation of a company provides otherwise, the board may authorise the company to provide direct or indirect financial assistance (which includes lending money, guaranteeing a loan or other obligation and securing any debt or obligation) to a related or inter-related company or corporation, including a subsidiary of the company incorporated in or outside of the Republic of South Africa, provided that such authorisation shall be made pursuant to a special resolution of the shareholders adopted within the previous two years, which approved such assistance either for the specific recipient or generally for a category of potential recipients and the specific recipient falls within that category. In order for this resolution to be adopted, the support of at least 75% of the voting rights exercised on the resolution by shareholders present or represented by proxy at the AGM and entitled to exercise voting rights on the resolution is required

Computershare Investor Services Proprietary Limited, 70 Marshall Street, Johannesburg, 2001 (PO Box 61051 Marshalltown, 2107) by no later than 13:00 on Thursday, 11 August 2016.

Dematerialised shareholders, other than those with “own name” registration If you hold dematerialised shares in NVest through a Central Securities Depository Participant (“CSDP”) or broker and do not have an “own name” registration, you must timeously advise your CSDP or broker of your intention to attend and vote at the annual general meeting or be represented by proxy thereat in order for your CSDP or broker to provide you with the necessary authorisation to do so, or should you not wish to attend the annual general meeting in person, you must timeously provide your CSDP or broker with your voting instruction in order for the CSDP or broker to vote in accordance with your instruction at the annual general meeting.

Each shareholder, whether present in person or represented by proxy, is entitled to attend and vote at the annual general meeting. On a show of hands every shareholder who is present in person or by proxy shall have one vote, and, on a poll, every shareholder present in person or by proxy shall have one vote for each share held by him/her.

A form of proxy (white) which sets out the relevant instructions for use is attached for those members who wish to be represented at the annual general meeting of members.

Duly completed forms of proxy must be lodged with the transfer secretaries of the Company to be received by not later 13:00 on Thursday, 11 August 2016.

By order of the Board

_________________________ Brendan Connellan Company Secretary 23 May 2016

Voting and Proxies Certificated shareholders and dematerialised shareholders with “own name” registration.

If you are unable to attend the annual general meeting to be held at 13:00 on Monday 15 August 2016 at 42 Beach Road, East London and wish to be represented thereat, you should complete and return the attached form of proxy in accordance with the instructions contained therein and lodge it with, or post it to, the transfer secretaries, namely

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NVEST FINANCIAL HOLDINGS LIMITED (Incorporated in the Republic of South Africa) (Registration number 2008/015990/06) (“NVest” or “the Company”)

FORM OF PROXY (for use by certificated and own name dematerialised shareholders only) For use by certificated and “own name” registered dematerialised shareholders of the Company (“shareholders”) at the annual general meeting of NVest to be held at 13:00 on Monday 15 August 2016 at 42 Beach Road, East London.

I/We (please print) ______________________________________________________________________________________________________ of (address) ____________________________________________________________________________________________________________ being the holder/s of _______________________________________ ordinary shares of no par value in NVest, appoint (see note 1): 1.

_________________________________________________________ or failing him,

2.

_________________________________________________________ or failing him,

3.

the chairperson of the annual general meeting,

as my/our proxy to act for me/us and on my/our behalf at the annual general meeting which will be held for the purpose of considering, and if deemed fit, passing, with or without modification, the resolutions to be proposed thereat and at any adjournment thereof; and to vote for and/or against the resolutions and/or abstain from voting in respect of the ordinary shares registered in my/our name/s, in accordance with the following instructions (see note 2): Number of votes For Ordinary Resolution Number 1 – Adoption of annual financial statements Ordinary Resolution Number 2 – Re-appointment and remuneration of auditors Ordinary Resolution Number 3 – Appointment of director - Michael Estment Ordinary Resolution Number 4 – Director retirement and re-election – Siviwe Kwatsha Ordinary Resolution Number 5 – Re-appointment of Audit and Risk Committee member – Jonathan Goldberg Ordinary Resolution Number 6 – Re-appointment of Audit and Risk Committee member and Chairperson – Siviwe Kwatsha Ordinary Resolution Number 7 – Approval of Remuneration Policy Special Resolution Number 1 – General authority to allot and issue shares for cash Special Resolution Number 2 – General authority to acquire (repurchase) shares Special Resolution Number 3 – Independent Non-Executive Directors’ remuneration Special Resolution Number 4 – General authority to enter into funding agreements, provide loans or other financial assistance

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Against

Abstain

Signed at ____________________________________ on _____________________________________ 2016

Signature ____________________________________

Assisted by me (where applicable) __________________________________________________________

Name ________________________________________ Capacity ___________________________________

Signature ____________________________________

1. Certificated shareholders and dematerialised shareholders with “own name” registration

If you are a certificated shareholder or have dematerialised your shares with “own name” registration and you are unable to attend the annual general meeting of NVest shareholders to be held at 13:00 on Monday 15 August 2016 at 42 Beach Road, East London and wish to be represented thereat, you must complete and return this form of proxy in accordance with the instructions contained herein and lodge it with, or post it to, the transfer secretaries, namely Computershare Investor Services Proprietary Limited, 70 Marshall Street, Johannesburg, 2001 (PO Box 61051 Marshalltown, 2107) by no later than 13:00 on Thursday, 11 August 2016.

2. Dematerialised shareholders other than those with “own name” registration

If you hold dematerialised shares in NVest through a CSDP or broker other than with an “own name” registration, you must timeously advise your CSDP or broker of your intention to attend and vote at the annual general meeting or be represented by proxy thereat, in order for your CSDP or broker to provide you with the necessary authorisation to do so, or should you not wish to attend the annual general meeting in person, you must timeously provide your CSDP or broker with your voting instruction in order for the CSDP or broker to vote in accordance with your instruction at the annual general meeting.

NOTES 1.

This form is for use by certificated shareholders and dematerialised shareholders with “own-name” registration whose shares are registered in their own names on the record date and who wish to appoint another person to represent them at the meeting. If duly authorised, companies and other corporate bodies who are shareholders having shares registered in their own names may appoint a proxy using this form, or may appoint a representative in accordance with the last paragraph below.

Other shareholders should not use this form. All beneficial holders who have dematerialised their shares through a Central Securities Depository Participant (“CSDP”) or broker, and do not have their shares registered in their own name, must provide the CSDP or broker with their voting instructions. Alternatively, if they wish to attend the meeting in person, they should request the CSDP or broker to provide them with a letter of representation in terms of the custody agreement entered into between the beneficial owner and the CSDP or broker.

2.

This proxy form will not be effective at the meeting unless received at the registered office of the Company at 42 Beach Road, East London, Republic of South Africa, not later than 13:00 on Thursday, 11 August 2016.

3.

This proxy shall apply to all the ordinary shares registered in the name of shareholders at the record date unless a lesser number of shares are inserted.

4.

A shareholder may appoint one person as his proxy by inserting the name of such proxy in the space provided. Any such proxy need not be a shareholder of the Company. If the name of the proxy is not inserted, the chairman of the meeting will be appointed as proxy. If more than one name is inserted, then the person whose name appears first on the form of proxy and who is present at the meeting will be entitled to act as proxy to the exclusion of any persons whose names follow. The proxy appointed in this proxy form may delegate the authority given to him in this proxy by delivering to the Company, in the manner required by these instructions, a further proxy form which has been completed in a manner consistent with the authority given to the proxy of this proxy form.

5.

Unless revoked, the appointment of proxy in terms of this proxy form remains valid until the end of the meeting even if the meeting or a part thereof is postponed or adjourned.

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6. If 6.1 a shareholder does not indicate on this instrument that the proxy is to vote in favour of or against or to abstain from voting on any resolution; or 6.2 the shareholder gives contrary instructions in relation to any matter; or 6.3 any additional resolution/s which are properly put before the meeting; or 6.4 any resolution listed in the proxy form is modified or amended,

the proxy shall be entitled to vote or abstain from voting, as he thinks fit, in relation to that resolution or matter. If, however, the shareholder has provided further written instructions which accompany this form and which indicate how the proxy should vote or abstain from voting in any of the circumstances referred to in 6.1 to 6.4, then the proxy shall comply with those instructions.

7.

If this proxy is signed by a person (signatory) on behalf of the shareholder, whether in terms of a power of attorney or otherwise, then this proxy form will not be effective unless: 7.1 it is accompanied by a certified copy of the authority given by the shareholder to the signatory; or 7.2 the Company has already received a certified copy of that authority.

8.

The chairman of the meeting may, at his discretion, accept or reject any proxy form or other written appointment of a proxy which is received by the chairman prior to the time when the meeting deals with a resolution or matter to which the appointment of the proxy relates, even if that appointment of a proxy has not been completed and/or received in accordance with these instructions. However, the chairman shall not accept any such appointment of a proxy unless the chairman is satisfied that it reflects the intention of the shareholder appointing the proxy.

9.

Any alterations made in this form of proxy must be initialled by the authorised signatory/ies.

10. This proxy form is revoked if the shareholder who granted the proxy: 10.1 delivers a copy of the revocation instrument to the Company and to the proxy or proxies concerned, so that it is received by the Company by not later than 13:00 on Thursday, 11 August 2016; or 10.2 appoints a later, inconsistent appointment of proxy for the meeting; or 10.3 attends the meeting in person.

11. If duly authorised, companies and other corporate bodies who are shareholders of the Company having shares registered in their own name may, instead of completing this proxy form, appoint a representative to represent them and exercise all of their rights at the meeting by giving written notice of the appointment of that representative. This notice will not be effective at the meeting unless it is accompanied by a duly certified copy of the resolution/s or other authorities in terms of which that representative is appointed and is received at the Company’s registered office at 42 Beach Road, East London, not later than 13:00 on Thursday, 11 August 2016.

Summary of rights established by section 58 of the Companies Act, 71 of 2008 (“Companies Act”), as required in terms of subsection 58(8)(b)(i) 1.

A shareholder may at any time appoint any individual, including a non-shareholder of the Company, as a proxy to participate in, speak and vote at a shareholders’ meeting on his or her behalf (section 58(1)(a)), or to give or withhold consent on behalf of the shareholder to a decision in terms of section 60 (shareholders acting other than at a meeting) (section 58(1)(b)).

2.

A proxy appointment must be in writing, dated and signed by the shareholder, and remains valid for one year after the date on which it was signed or any longer or shorter period expressly set out in the appointment, unless it is revoked in terms of paragraph 6.3 or expires earlier in terms of paragraph 10.4 below (section 58(2)).

3.

A shareholder may appoint two or more persons concurrently as proxies and may appoint more than one proxy to exercise voting rights attached to different securities held by the shareholder (section 58(3)(a)).

4.

A proxy may delegate his or her authority to act on behalf of the shareholder to another person, subject to any restriction set out in the instrument appointing the proxy (“proxy instrument”) (section 58(3)(b)).

5.

A copy of the proxy instrument must be delivered to the Company, or to any other person acting on behalf of the Company, before the proxy exercises any rights of the shareholder at a shareholders’ meeting (section 58(3)(c)) and in terms of the memorandum of incorporation (“MOI”) of the Company at least 48 hours before the meeting commences.

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6.

Irrespective of the form of instrument used to appoint a proxy: 6.1 the appointment is suspended at any time and to the extent that the shareholder chooses to act directly and in person in the exercise of any rights as a shareholder (section 58)4) (a)); 6.2 the appointment is revocable unless the proxy appointment expressly states otherwise (section 58(4)(b)); and 6.3 if the appointment is revocable, a shareholder may revoke the proxy appointment by cancelling it in writing or by making a later, inconsistent appointment of a proxy, and delivering a copy of the revocation instrument to the proxy and to the Company (section 58(4)(c)).

7.

The revocation of a proxy appointment constitutes a complete and final cancellation of the proxy’s authority to act on behalf of the shareholder as of the later of the date stated in the revocation instrument, if any, or the date on which the revocation instrument was delivered as contemplated in paragraph 6.3 above (section 58(5)).

8.

If the proxy instrument has been delivered to a Company, as long as that appointment remains in effect, any notice required by the Companies Act or the Company’s MOI to be delivered by the Company to the shareholder must be delivered by the Company to the shareholder (section 58(6)(a)), or the proxy or proxies, if the shareholder has directed the Company to do so in writing and paid any reasonable fee charged by the Company for doing so (section 58(6)(b)).

9.

A proxy is entitled to exercise, or abstain from exercising, any voting right of the shareholder without direction, except to the extent that the MOI or proxy instrument provides otherwise (section 58(7)).

10. If a Company issues an invitation to shareholders to appoint one or more persons named by the Company as a proxy, or supplies a form of proxy instrument: 10.1 the invitation must be sent to every shareholder entitled to notice of the meeting at which the proxy is intended to be exercised (section 58(8)(a)); 10.2 the invitation or form of proxy instrument supplied by the Company must: 10.1.1

10.1.2

10.1.3

bear a reasonably prominent summary of the rights established in section 58 of the Companies Act (section 58(8)(b)(i)); contain adequate blank space, immediately preceding the name(s) of any person(s) named in it, to enable a shareholder to write the name, and if desired, an alternative name of a proxy chosen by the shareholder (section 58(8)(b)(ii)); and provide adequate space for the shareholder to indicate whether the appointed proxy is to vote in favour of or against any resolution(s) to be put at the meeting, or is to abstain from voting (section 58(8)(b)(iii));

10.3 the Company must not require that the proxy appointment be made irrevocable (section 58(8)(c)), and, 10.4 the proxy appointment remains valid only until the end of the meeting at which it was intended to be used, subject to paragraph 7 above (section 58(8)(d)).

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“Steadfast, serene, unmoveable, the same year after year, through all the silent night. Burns on forevermore that quenchless flame, shines on that inextinguishable light!”

Henry Wadsworth Longfellow

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NVest Financial Holdings Limited NFB House, 42 Beach Road, Nahoon, East London, 5241 T: +27 43 735 2000 F: +27 43 735 2001 E: info@nvestholdings.co.za W: www.nvestholdings.co.za

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