CLIENTELE LIMITED — Annual Report 2022

Sep 27, 2022

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INTEGRATED ANNUAL REPORT 2022

OUR BUSINESS

• 1 Our Purpose, Vision and Values 2 Group Structure 3 Seven Year Statistics 4 Chairman’s Statement 7 Group Managing Director’s Report

GOVERNANCE REPORT

• 12 Corporate Governance 35 Board Report on the Effectiveness of Internal Controls

• 36 Internal Financial Controls sign-off by the Managing Director and Financial Director

• 36 Group Audit Committee Report on the Effectiveness of Internal Financial Controls

• 37 Group Remuneration Report

• 53 Group Social and Ethics Report 58 Group Audit Committee Report

FINANCIAL STATEMENTS

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62 Statement of Group Embedded Value
69 Approval of the Annual Financial Statements
69 Certificate by the Company Secretary
70 Report of the Directors
79 Statement of Actuarial Values of Assets and Liabilities of Clientèle Life
83 Independent Auditors’ Report to the Shareholders of Clientèle Limited
89 Risk Management
97 Insurance and Financial Risk Management
116 Accounting Policies
131 Statements of Financial Position
132 Statements of Comprehensive Income
133 Statements of Changes in Equity
134 Statements of Cash Flows
135 Segment Information
139 Notes to the Annual Financial Statements
171 Notice of Annual General Meeting
177 Definitions and Interpretations
181 Form of Proxy
ibc Corporate Information
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The Integrated Annual Report was prepared under the supervision of Mr. IB Hume (CA(SA); ACMA), the Group Financial Director. The Annual Financial Statements have been audited (refer to the Independent Auditors’ Report to the Shareholders of Clientèle Limited on pages 83 to 88).

OUR BUSINESS GOVERNANCE REPORT FINANCIAL STATEMENTS

Our purpose, vision and values

Our purpose

Safeguarding Your World... with Compassion

Our vision

To be South Africa’s most reliable and valued financial services partner

Our values

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Respect

Treating colleagues, clients and other stakeholders with respect, courtesy and fairness.

Customer excellence

Connecting with our clients in a professional, ethical and focused manner.

Passion

Teamwork

Working effectively with others and utilising individual and combined strengths to succeed.

Integrity Adhering to high moral standards and being honest in all that we do.

Approaching every task with determination, energy and commitment.

Clientèle Limited Integrated Annual Report 2022

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Group Structure

The Group comprises the following operating companies:

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HOLDING
100% 100% 100% 100%
Clientèle Life Clientèle General Clientèle Mobile CBC Rewards
Assurance Insurance Limited (Pty) Ltd (Pty) Ltd
Company Limited
LONG-TERM INSURANCE SHORT-TERM INSURANCE SERVICES REWARDS
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Clientèle Life has the following investments in subsidiaries:

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HOLDING
100% 100% 100%
Clientèle Properties North Clientèle Properties South Clientèle Properties East
Proprietary Limited Proprietary Limited Proprietary Limited
PROPERTIES PROPERTIES PROPERTIES
Clientèle Office Park Clientèle Office Park Clientèle Office Park
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Clientèle General Insurance Limited, CBC Rewards Proprietary Limited and Clientèle Mobile Proprietary Limited do not have any subsidiaries.

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Clientèle Limited Integrated Annual Report 2022

OUR BUSINESS GOVERNANCE REPORT FINANCIAL STATEMENTS

Seven Year Statistics

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Net insurance premiums
R’million
Dividend declared per share
Cents
1,726 1,873 2,076 2,141 2,094 2,169 2,189
2016 2017 2018 2019 2020 2021 2022
100.00 115.00 125.00 131.00 95.00 110.00 120.00
2016 2017 2018 2019 2020 2021 2022
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Embedded Value
R’million
Share price: 30 June
Rands
5,231 5,832 6,322 6,636 5,874 5,806 5,807
2016 2017 2018 2019 2020 2021 2022
14.39 16.10 21.50 15.25 9.08 9.72 11.99
2016 2017 2018 2019 2020 2021 2022
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30 June	2016	2017	2018	2019	2020	2021	2022
Net profit for the year (R’000)	414,721	466,697	490,323	400,937	328,517	392,255	435,469
Earnings per share (cents)	123.98	140.35	146.62	119.65	97.97	116.98	129.87
Headline earnings per share (cents)	124.00	140.29	147.22	120.00	99.18	117.82	131.45
EV per share (cents)	1,576.42	1,745.96	1,888.69	1,979.16	1,751.90	1,731.61	1,731.79
Return on average shareholders’
interests (%)	55	53	48	38	31	37	39
Total distributions declared (R’million)	332	384	419	439	319	369	402
VNB (R’million)**	660	527	448	301	(91)	215	291
RRoEV (%)	23	19	18	8	*	12	13
REVE (R’million)	1,002	939	979	492	*	687	725

* Clientèle normally publishes a REVE figure. As a consequence of COVID-19 and the lockdown, the change in EV for the 2020 financial year was negative and any split between recurring and once-off items would have been spurious due to the inter-relationship of various factors following the shutdown of much of the new business operations for a few months.

• ** VNB for the 2020 financial year includes the once-off COVID-19 impact of negative R159.4 million (uncovered expenses in the last quarter of the year as a consequence of new business being minimal due to COVID-19 lockdown restrictions).

Clientèle Limited Integrated Annual Report 2022

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Chairman’s Statement GAVIN ROUTLEDGE

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Clientèle is celebrating a special anniversary this year – 30 years ago the original founders of Clientèle, Brian Benfield and Bruce Howard formed a small financial services company called Clientèle Financial Services (“CFS”) which commenced selling life and savings policies, as an intermediary, by direct mail. The business grew and flourished and by 1996, the founders were looking to obtain an insurance license to underwrite the policies which CFS was selling. The founders were introduced to Capricorn Ventures, an investment business within the Hollard Group of companies, and so commenced a relationship which led to the formation of Clientèle Life and its listing through the old Crusader Life shell, which listing had been suspended some years before. The pre-listing statement forecast a profit after tax in 1998, the first financial year following the listing, of R2,500,000. A far cry indeed to the Clientèle of today generating a profit after tax in 2022 of over R435 million.

Clientèle has always been a little different, applying a creative approach to the selling of insurance policies. The direct mail channel was supported by advertising on TV and who can forget the original TV advertisements and the presenters, Les Franken, Dorianne Berry, Adrian Steed and Ellen Erasmus who presented the Lasting Dignity Plan and the Classic Saver – the tag line of “Life cover for as little as one Rand a day” is still remembered by many, including those who had never bought a Clientèle Policy. Those early advertisements on TV were later supported by “Infomercials” ten to thirty minute slots which attempted to educate policyholders and potential policyholders about life and funeral insurance and basic financial planning in a very simple way. This was a first in the South African market at the time.

The direct mail approach then evolved into a Telesales channel where viewers of the TV advertisements were encouraged to call a number shown on the advertisement and could then buy a policy over the telephone. This channel grew rapidly and is still a major contributor of policy sales within Clientèle.

Over this period the early presenters, who were the “face” of Clientèle on television, were replaced by our current brand ambassadors, Desmond Dube and Lillian Dube. While Desmond and Lillian share a surname, they are not related. Nonetheless, they are both important members of the Clientèle family and Clientèle is proud to be associated with them.

Another first for Clientèle was the creation of the IFA (Independent Field Advertisers) channel, whereby future clients were introduced to Clientèle by teams of IFAs using network marketing principles. This channel was extremely successful and created the opportunity for IFAs to create their own small businesses. The channel benefitted both Clientèle and the IFAs and over the years has generated almost R3 billion Rand of earnings for the IFAs.

Although Clientèle’s purpose statement – “Safeguarding Your World… with Compassion” was only verbalised many years later, from its inception Clientèle followed this ethos – selling simple and easily understood policies in the most convenient way principally to the lower to middle income market. Long before TCF (Treating Customers Fairly) Clientèle was focused on TCW (Treating Clients Well).

From the outset we at Clientèle focused on people and have sought to treat our employees well and do the right thing by our target market applying our values (Respect, Customer

Clientèle Limited Integrated Annual Report 2022

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OUR BUSINESS GOVERNANCE REPORT FINANCIAL STATEMENTS

Chairman’s Statement continued

Excellence, Passion, Integrity and Teamwork) at all times. We have also sought to treat our shareholders well and until COVID-19 struck, Clientèle was the only company listed on the Johannesburg Stock Exchange that had increased its dividend every year by more than the Consumer Price Index for an unbroken period of 17 years.

As the market environment changed, Clientèle adapted to the changing environment and now sells policies through an Agency network, mass market brokers as well as through Funeral Parlours in addition to the core Telesales and IFA channels. Clientèle also developed a pre-paid legal assistance business (“Clientèle General”) which has a reputation for excellent service and advice. Clientèle General is now making a sizable contribution to the profits of Clientèle.

Clientèle’s greatest asset and strength is its people, in particular the management team who have demonstrated again and again the ability to adapt quickly to risks and market opportunities. Gavin Soll joined Clientèle as Finance Director in 1997 and was appointed as Managing Director on 1 February 1998 and led Clientèle very ably until 30 June 2013. Gavin had already identified that Basil Reekie, previously a consulting actuary to Clientèle, had all the characteristics of an excellent MD for Clientèle and brought Basil into Clientèle in January 2008. When Gavin stepped down, Basil took up the reins at Clientèle as Group Managing Director on 1 July 2013 and, as Gavin expected, excelled in the role. I am proud to have been Chairman of Clientèle during the tenure of two such excellent leaders. The growth and success of Clientèle is largely due to the quality of their leadership.

Turning to the recent past, I am extremely proud of the way the management team has responded to the COVID-19 pandemic and the lockdowns imposed. Clientèle was the first insurer in South Africa to waive waiting periods for both new and existing policies during the COVID-19 period and also the first insurer to commence a Telesales operation during the first lockdown period by housing a large number of Telesales staff in a hotel that could act as a quarantine station. Connectivity was established for these staff in a matter of days linking them to the Clientèle servers as they closed their hotel room doors and the country went in to level 5 Lockdown.

There have been many firsts and other great achievements in the long journey from inception to today and all these achievements need to be celebrated. It must be said however that the last few years have been the most difficult in the life of Clientèle.

Even before the COVID-19 pandemic struck, the South African economy was in a dire state. The years of state capture as well as a lack of clear policies encouraging investment had taken their toll and nothing highlighted this more starkly than the very low growth rate of the economy and the very high levels of unemployment. A toxic mix to be sure.

The advent of COVID-19 aggravated the already bad situation, particularly the steps taken by the government to curb the spread. I have no doubt that in the future when it will

be easier to fully understand the COVID-19 pandemic and the steps taken by governments around the world to combat the spread, it will be apparent that the lockdowns created more damage to lives and livelihoods than the disease itself. A great number of businesses of all sizes closed down and many more people were added to the already very high number of unemployed. Perhaps the groups worst affected were the low and middle income groups as so many of these individuals lost their jobs and the members of these groups typically have weak cash flows and little to no savings. A great many of Clientèle’s policyholders and a large part of Clientèle’s target market come from these groups.

The COVID-19 pandemic accordingly created a difficult dynamic. People were scared and wanted life assurance, funeral policies and health-related policies which created a high demand for policies, however, in many cases, the pandemic had put such strain on cash flows that people were then unable to pay for the premiums on these policies or were unable to keep on paying the premiums when other items were deemed more urgent considering their strained resources.

As if COVID-19 was not enough, the fragile economy was then battered by the July 2021 riots and looting and by floods in KwaZulu Natal. All of these events affected Clientèle negatively. Production was negatively affected by the lockdowns, the July riots, the floods and the weak cash flows of our target market. Collections were negatively impacted by the weak cash flows of our policyholders, instability of the collections environment within the South African banking system and by a growing culture of non-accountability and low financial responsibility.

Each day, South Africans are confronted by examples of high profile people who have committed criminal offences escaping conviction, prosecution and accountability. This is true both in the public and private sectors. This has an inevitable effect on people of all income groups who feel that, if the leaders do not stick to the rules or obey the law, why should they? This results in more insurance fraud and also policyholders having no compunction in disputing valid debit order collections from their bank accounts. This results in them being refunded automatically by their banks for insurance premiums that have come off their bank accounts, and for which they have contracted and have had cover, without their needing to contact Clientèle or any other insurer who holds a valid debit order mandate. In these circumstances Clientèle is given no notice nor the chance to show it has a valid debit order mandate nor talk to the policyholder until after the funds have been removed from Clientèle’s bank account. In many, if not most, of these cases, there is no legitimate dispute by the policyholder, this is just a way of “managing their cash flow”. This phenomenon has been made easier by the banks having a feature on their banking apps that allows the account holder to dispute a debit order at the push of a button and receive an immediate refund of the debit order payment in question.

Clientèle Limited Integrated Annual Report 2022

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Chairman’s Statement continued

In an already fraught economy this phenomenon has negatively affected Clientèle and a great deal of management time has been spent on trying to find an appropriate solution in the interests of both Clientèle and the policyholders.

Clientèle is currently faced with a number of factors over which the management team have no control. COVID-19, the response of government to COVID-19, a weak economy, disputes of valid debit orders and lack of stability in the collections environment. In addition, the war in the Ukraine has caused oil and gas prices to soar and this has caused inflation in most countries in the world, South Africa being no exception. This further negatively impacts affordability in our target market.

Despite these factors, the management team of Clientèle have performed exceptionally. They have focused on aspects in the business which they can control and have concentrated on service, efficiency, caring about and being compassionate to our policyholders. This has resulted in Clientèle being awarded the Gold Award in the Funeral Category and the Silver Award in the Life Category in the City Press Reader’s Choice Awards.

Clientèle has also entered into relationships with two Funeral Parlour intermediaries which, in addition to putting a large number of additional policies on the books, will allow Clientèle to gain an even better understanding of our target market and their needs. While many insurers have commoditised funeral policies, Clientèle believes in differentiation and strives to offer a better service and product that meets the needs of our target market through a deeper understanding of their needs.

Following the lockdowns which have changed the office working environment, Clientèle is seeking a carefully thought out and flexible model to get the best of office and remote working. The management team is also focusing on the challenges of Generation Z employees who are unlike previous generations of employees and are motivated by different objectives and wants. We are striving for a management model that inspires employees not just motivates them.

Clientèle is driven to do the best we can for our policyholders, employees and shareholders. We are passionate about service, quality, understanding, loyalty, compassion, caring, convenience and above all simplicity.

Our objective is – A Clientèle product in every home.

NOTABLE EVENTS

• City Press Readers Awards – Gold award for Funeral

• City Press Readers Awards – Silver award for Life

• Concluding agreements with two Funeral Parlour Intermediaries

• Re-appointment of Franco Pretorius as the Telesales

• Executive.

• Launching the Clientèle Perks (stand-alone rewards)

• product

• Launching the Emergivac product

• Installing Solar PV panels across the office park

• Administering 1,810 vaccinations on site in the Office Park

• Further Clientèle App developments

RESULTS

The results are fully dealt with in the Group Managing Director’s Report and I am proud of the achievements of the management team in producing these results in the difficult environment described above.

FUTURE PROSPECTS

Despite the difficult circumstances and the dire state of the economy in South Africa, the demand for Clientèle products remains strong, we have an excellent dynamic and committed management team and Clientèle remains well capitalized with good solvency and liquidity ratios and strong positive cash flows. We value our clients and are valued by them and we feel confident in working towards our objective of A Clientèle Product in Every Home.

APPRECIATION

In February 2022 we welcomed back Franco Pretorius as Telesales Executive. Franco is a former Head of Sales who returned to Clientèle after spending some time in the banking sector in Namibia. I am sure that he will add great value to Clientèle into the future.

We said goodbye to Malcolm Mac Donald who was head of IT and wish him all the best in his future career in Georgia. We also said goodbye to Brendon Pillay (previously Head of Sales) and wish him success on his future path.

Our Group Finance Director, Iain Hume, will be retiring at the end of December 2022. While he will still be with us for several more months I would like to take the opportunity to thank him for the many years of commitment and value creation he has dedicated to Clientèle. Iain has been more than a Finance Director and always has an opinion on critical matters which is worth listening to, often playing Devil’s Advocate to the great value of Clientèle. He will be sorely missed. On his retirement Mike Cownie, the current Finance Director of Clientèle Life, will take up the reins of Group Finance Director. Mike has been with Clientèle for close to 10 years and is a worthy successor to Iain who has already commenced a gradual handover to Mike. I wish them both well on their new paths.

A special word of thanks to Brian Benfield and Bruce Howard, the original founders of Clientèle without whose vision Clientèle would not be where it is today.

Also a special word of thanks to Gavin Soll, the former Group Managing Director of Clientèle for the great value that he added during his tenure as managing Director and to Patrick Enthoven, the founder of the Hollard Group and the first Chairman of Clientèle for his great support and contribution to Clientèle.

I thank all of the management and staff of Clientèle for their effort and commitment which so often goes above and beyond what is expected, even if not always voiced at the time, their commitment is truly appreciated.

Thanks also to the Non-executive Directors on the Board of Clientèle. Clientèle is a company that demands more than a simple review of board packs and attendance at Board meetings, it demands and warrants a level of commitment and passion beyond the normal for Non-executives. You have all delivered on this demand, I commend you all as constituting, in my opinion, one of the strongest Boards in the insurance sector in South Africa.

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Gavin Routledge 19 September 2022

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Clientèle Limited Integrated Annual Report 2022

OUR BUSINESS GOVERNANCE REPORT FINANCIAL STATEMENTS

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Group Managing Director’s Report BASIL REEKIE

THE YEAR IN PERSPECTIVE

It is pleasing to report that despite the challenging investment and operating environment characterised by lockdowns, civil unrest, flooding in KwaZulu-Natal, COVID-19, loadshedding, instability in the collections environment, rising inflation and deteriorating economic conditions, the Group has continued to build on the strong set of results reported last year and is pleased to report improvements in most of its key performance metrics. This has largely been driven by tight cost control and the underwriting of a large number of funeral policies for certain funeral parlour intermediaries during the year. These policies are expected to add meaningful value to the business over time.

Policyholder withdrawals over the course of the year have increased as a result of many factors, including: the depressed economy and the consequent affordability effects, disputes of valid debit orders, including multiple disputes within the RMS environment, suspension of DebiCheck mandates, the closure of the NAEDO system and stability issues in the collections environment. All of these factors are expected to continue to negatively impact debit order collections in the short-term.

Had NAEDO not been closed or had the transition to DebiCheck been smooth, the Group’s results would have been stronger than now reported. Due to the closure of NAEDO, the Group now has less alternatives to fall back on when there are challenges within the premiums collections environment.

Despite the challenges referred to above the Group remains in a sound solvency and liquidity position and continues to generate strong positive cashflows.

Use of the Clientèle App continues to expand following its adoption by clients and agents alike. The Clientèle App serves as a platform for sales capture and basic policy administration as well as an access point for Clientèle Rewards and Clientèle Mobile. Clientèle Rewards is gaining increased traction, which bodes well for the future.

HIGHLIGHTS

Financial

Net insurance premiums for the year increased by 1% to R2.18 billion (2021: R2.17 billion), impacted by production which was negatively affected by the challenging operating environment, as referred to above, and policy withdrawals countered by the funeral parlour business written.

Net insurance benefits and claims of R433.1 million were 2% higher than the R424.5 million in respect of last year.

The Group achieved an investment return for the year of 4.2% (2021: 10.6%) from its investment portfolios in a challenging investment environment.

The explicit COVID-19 risk reserve, including the new funeral parlour business, allows for expected additional COVID-19 policyholder risk claims and, gross of reinsurance, amounts to R81.7 million at year-end (2021: R144.1 million), while the net of reinsurance reserve amounts to R26.2 million (2021: R55.1 million).

Clientèle Limited Integrated Annual Report 2022

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Group Managing Director’s Report continued

Operating expenses (including acquisition expenses) of R1.4 billion (2021: R1.5 billion), were well controlled and were 6% lower than last year.

The above translates into headline earnings for the Group increasing by 12% to R440.8 million (2021: R395.1 million) resulting in a return on average shareholders' interests of 39% (2021: 37%). Diluted headline earnings per share of 131.30 cents (2021: 117.70 cents) were 12% higher than last year.

The Group EV at 30 June 2022 remained constant at R5.8 million, after the payment of the annual dividend of R368.9 million in September 2021, despite the RDR of 13.8% p.a. increasing from 12.1% p.a. at 30 June 2021. REVE of R724.9 million were negatively impacted by withdrawal losses of R217.3 million. Nonetheless REVE were 5.4% higher than the prior year result of R687.5 million.

The VNB for the year on a RDR of 13.8% p.a. amounted to R290.6 million (2021: R215.5 million (RDR of 12.1% p.a.)) an increase of 34.8% over last year despite the increase in the RDR.

The EV and VNB sensitivities are illustrated in the Group

Embedded Value results on page 65.

The new business profit margin (excluding Single Premium investment business) was 10.2% (June 2021: 10.7%). The Present Value of New Business premiums increased due to large volumes of single premium investment business written in the last quarter of the year. The relatively low profit margin on this type of business results in a reduction in the overall New Business profit margin to 7.4%.

The Group follows a conservative accounting practice of eliminating negative reserves. As acquisition costs are expensed upfront, the recovery of these costs and the profits are deferred over the policy life. The present value of this discretionary margin amounts to R2.5 billion (2021: R2.7 billion).

Non-financial

Vision and brand purpose

The foundation to all that we do remains Treating our Clients Well and Treating Employees Well and we will continue to do this while embracing our brand values of Customer Excellence, Respect, Integrity, Passion and Teamwork.

Being at the forefront of the industry, and adjusting our offering to include new and innovative products in the Rewards space has contributed significantly to reinforcing our positive brand with clients and the public at large.

A lot of reflection on the brand and needs of current, past and potential clients gathered by our Client Insights team has equipped us to do better and enhance the brand experience at key client touchpoints.

As a Group we are proud to Treat Employees Well in all circumstances. During the year, our employees were given the opportunity to experience enhancements to our Rewards offering at no cost to themselves, creating a ‘buyers-are-believers’ culture and contributing to our employees’ wellbeing. We continue to interact with our employees through various employee forums and these forums provide a voice for employees to ensure that we are indeed treating them well and with compassion.

Our interaction with other stakeholders during the year has been positive and we continue to have a constructive relationship with key stakeholders.

We are passionate about our brand purpose, to “safeguard your (our clients and employees) world… with compassion”. Clientèle and the brand have remained strong, visible and dependable in an economy which has seen many brand casualties of late and our intention remains to grow the brand for many years to come.

Governance and King IV

During the 2022 reporting period, the Group continued to practice corporate governance at a high level, aimed at adding value to the business as well as facilitating the Group’s sustainability, generating long-term stakeholder value and benefiting other stakeholders.

Management has adopted sound corporate governance principles and appropriate governance structures and policies, and believes it has embedded a business-wide culture of good governance that is aligned to and embodies the Group’s vision and values.

The Group’s approach to corporate governance is to ensure it contributes to improved operational decisionmaking and corporate performance, thereby reducing the business risks. The Group’s aim, therefore, is for the relevant governance policies, structures and processes, which initially may have been brought into existence to ensure compliance with applicable regulations and codes of conduct, to add value and ensure corporate sustainability.

During the 2022 financial year the Group has, in all material respects, voluntarily applied King IV principles and complied with the mandatory corporate governance provisions contained in the JSE Listings Requirements. A narrative of how the Group has applied the King IV principles and complied with the JSE Listings Requirements is set out in the Corporate Governance section of this Integrated Annual Report.

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Clientèle Limited Integrated Annual Report 2022

OUR BUSINESS GOVERNANCE REPORT FINANCIAL STATEMENTS

Group Managing Director’s Report continued

RISK MANAGEMENT

The Board continues to acknowledge and monitor its responsibilities with regard to the management of risk in terms of King IV. The Group Risk Committee is an established Board Committee with a Terms of Reference approved by the Board.

The strategy for managing risk is aligned with the principles of the Insurance Act and related prudential standards. Business objectives, based on a three-year time horizon, are set by the various entities and divisions within the Group. Action plans to achieve these business objectives are then identified so as to support the longer term strategy. Risk events that could threaten the achievement of the business objectives are identified and rated against an impact and likelihood scale, which differs between entities and divisions given their individual materiality level.

Potential risk events are monitored and managed so as to minimise any negative impact on the Group. All risk events are measured against a pre-defined overall risk appetite. The current Group risk appetite comprises three metrics, namely, financial soundness (prudential minimum plus a buffer), free cash flow and REVE. Specific key risks are also measured individually against pre-defined risk tolerance levels.

The risk management process contributes towards the early identification and on-going management of systemic and organisational exposure, in parallel with all Board and Non-Board Committees, which all contribute to a combined assurance model.

Response to COVID-19

The national State of Disaster came to an end at midnight on 4 April 2022, relaxing many of the COVID-19 restrictions. From the 23rd of June 2022, most COVID-19 restrictions, including wearing of masks, were no longer compulsory in the workplace. The COVID-19 Committee was replaced by the Hazardous Biological Agents (HBA) Committee.

Clientèle managed to administer a total of 1,810 vaccinations

onsite to employees.

Although COVID-19 had a significant impact on all businesses, Clientèle has paid all valid claims, remained solvent, and produced a strong set of financial results despite the challenges.

B-BBEE

Our stance on transformation as a company transcends beyond the numbers of the scorecard, as we truly believe in the spirit of inclusivity and sustainable participation in the economy for all South Africans.

Our focus has continued to be on building a workforce that is representative of our country at all levels of the organisation; opening up employment opportunities for unemployed youth through collaborative partnerships with the Insurance SETA and building competencies and growth opportunities through our skills development programmes such as learnerships, staff bursaries and management courses for our employees.

The investment in, and support of our IFA network has played an important role in sustaining small black enterprises throughout the challenging social and economic period of the COVID-19 pandemic. In addition, we are cognisant of the importance of partnering with procurement suppliers that share similar values in terms of empowerment and transformation.

Our Funeral Guide, which aims to provide valuable financial and planning information to consumers during tough times, is part of our socio-economic offering of “Safeguarding Your (our clients) World… with Compassion”.

The Group is continuously looking to improve its B-BBEE contribution status and remains committed to increasing the B-BBEE shareholding in Clientèle over time. The majority of our B-BBEE shares are held directly and indirectly by YTI, a wholly owned subsidiary of the Hollard Foundation Trust, a B-BBEE Trust. YTI’s total shareholding, including the indirect holdings amounts to approximately 11.34%.

Clientèle has continued to provide financial assistance resulting in a net exposure via guarantees of R200 million for the purchase of approximately 8.58% of Clientèle’s issued ordinary shares by YTI.

A preference share funding arrangement was entered into in the 2021 financial year. As part of this funding arrangement, the Clientèle Group acquired preference shares in YTI to the value of R50 million.

Clientèle Limited Integrated Annual Report 2022

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Group Managing Director’s Report continued

CORPORATE SOCIAL INVESTMENTS

The Clientèle Corporate Social Investment portfolio is committed to playing an active role in providing sustainable relief to our communities in South Africa.

For the 2022 year, our CSI initiatives focused on the following pillars:

1. Education

Now in its 13th year, the Clientèle bursary scheme has supported the children of our staff and IFAs with bursaries to enable them to complete tertiary studies. To date, this bursary scheme has sponsored over 60 graduates covering a wide range of disciplines including medicine, accounting science, law and admin management. The bursaries cover all costs relating to the beneficiaries’ studies including tuition, books, meals and accommodation. Of the total students currently on the bursary scheme 94% passed their studies last year.

In addition to the financial support, we provide mentorship engagements between some of Clientèle’s senior management and the students focusing on their overall well-being (including academic guidance, mental and emotional wellness).

1. Community Support and Donations

We recognise the socio-economic challenges that many consumers in South Africa face. We have maintained our support for childhood development and vulnerable youth care by sponsoring the following beneficiaries:

• Sithabile Child and Youth Centre in Benoni; and,

• Ditau Primary School in Soweto.

• Employee Giving and Volunteering

Through the employee giving campaign Clientèle employees have been able to donate funds and give their time to those who are underprivileged.

The employees donated funds to the following worthy causes:

• School shoe drive in the Johannesburg area to

• 385 learners;

• Food parcels during the festive season to the HOMAC (Home of Mother & Child Care Centre) Ennerdale, South West of Johannesburg; and,

• The donation of over 2 000 sanitary packs to assist in alleviating female hygiene challenges for school going girls in Johannesburg.

The Clientèle Funeral Guide will continue to form part of our response to educating and supporting our communities in their time of need.

The demographic reach of the project was as follows:

• 54% of the participants were from rural areas;

• 95% of the participants were Black South Africans (inclusive of Africans, Asians, Coloureds, and Indians);

• • 60% of the participants were young, black females; and,

• 94% of the participants fall within the Living Standard Measure: 1-8 (earnings of R250,000 or less per annum).

The Clientèle Funeral Guide will continue to form part of our response to educating and supporting our communities in their time of need.

BUSINESS SEGMENTS

Long-term Insurance

Clientèle Life's Long-term insurance segment remains the major contributor to the Group’s performance and recorded a 15% increase in net profit for the year to R326.0 million (2021: R282.7 million) despite the impact of the challenging operating environment, policy withdrawals and poor investment returns, as previously referred to. Clientèle Life's total VNB for the year of R233.2 million (2021: R126.9 million), benefitted from the underwriting of the business from funeral parlours referred to above, and increased by 84% over last year. Clientèle Life recorded REVE of R531.7million (2021: R401.5 million), an increase of 32%.

Short-term Insurance

Clientèle General’s net profit for the year of R94.9 million (2021: R90.1 million) increased by 5% on last year, impacted by the challenging operating environment, policy withdrawals and poor investment returns, as previously referred to. Clientèle General’s VNB was R49.5 million (2021: R87.3 million) and it recorded REVE of R182.2 million (2021: R273.8 million) and a Recurring Return on Embedded Value of 13.9% (2021: 22.6%). Management are focusing on returning the business to its growth path through increasing quality production.

CBC Rewards, Clientèle Mobile and Direct Rewards

CBC Rewards, Clientèle Mobile and Direct Rewards reported a combined net profit of R2.0 million for the year (2021: R0.4 million) and VNB of R7.9 million (2021: R1.5 million).

4. Consumer Education

In line with the Group’s purpose of “Safeguarding Your World… with Compassion”, the consumer education initiative expanded its reach in 2022. In partnership with Avo Vision (Financial Literacy Partner) 2,295 participants received training on financial literacy topics such as:

DIVIDENDS

The Board has declared a dividend per ordinary share of 120 cents, an increase of 9.1% over last year’s dividend per ordinary share of 110 cents.

• Budgeting;

• Understanding credit; and,

• Planning a funeral using the Clientèle Funeral guide.

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Group Managing Director’s Report continued

OUTLOOK

Clientèle remains focused on TCW and providing products and services which meet their needs and will continue to improve on the delivery of them to the market conveniently and efficiently. Management continues to successfully navigate the business through the prevailing challenges and takes advantage of the opportunities which present themselves in this environment.

The value adding initiatives for our clients which include Clientèle Rewards, the Clientèle App, and Clientèle Mobile continue to add value to our clients. The challenges within the collections environment together with pressure on disposable income for our customers continues to negatively impact withdrawals and this receives a tremendous amount of management’s focus and efforts. Clientèle will, as usual, continue to focus on increasing production of quality business across all of its distribution channels, including funeral parlours.

Tight control will continue to be kept on expenses and every effort will be made to maintain and improve business efficiencies.

I am comfortable that the ongoing challenges continue to be well managed. Despite the depressed economic environment, the Board remains encouraged by the prospects for growth and value creation over time.

APPRECIATION AND BOARD COMPOSITION

The financial year has been another tough year and was significantly impacted by external events such as COVID-19. Not surprisingly, claim payments have remained high as a consequence of the pandemic. Nonetheless, it has been pleasing to see the pandemic starting to disappear in the rear view mirror and I am looking forward to improved claims experience into the future.

I have been extremely proud of how the executive, management and staff team have handled the challenges and stresses of a depressed economy significantly impacted by the spectre of COVID-19.

Two members of the Executive team left Clientèle during the year in order to pursue other interests. We wish Malcolm MacDonald (previous Group IT Executive) and Brendon Pillay (previous head of Telesales) all of the very best for their future careers. Franco Pretorius, who headed up Telesales at Clientèle from 2010 to 2017, rejoined the Group on 1 February 2022 after 5 years of working in Namibia. We look forward to him adding significant value to the sales environment at Clientèle.

Donny Habana has been appointed to replace Malcolm MacDonald as the new head of IT. Mr. Habana will join Clientèle on 1 October 2022 and I am also looking forward to his input.

Wilna van Zyl (our Company Secretary) tendered her resignation in September 2022. I would like to thank her for her valuable contribution over the past 17 years and wish her well in her future endeavours. Mr. Eben Smit has been appointed as the new Company Secretary. Mr. Smit is currently the Head of Group Legal, a position that he has held since 2018. The Board is satisfied that Mr. Smit has the necessary experience, qualifications and expertise to take up the position of Company Secretary of the Group and I look forward to working with him in this position.

As reported previously, Iain Hume (our long standing Group Financial Director) is retiring with effect from 31 December 2022. The Board unanimously approved the appointment of Michael Cownie as his successor with effect from 1 January 2023. Mr. Cownie has been a member of the executive team at Clientèle for close to a decade and we look forward to his continued involvement in this new role.

The Clientèle Group turns 30 this year and I am proud of our history which has seen us grow from very humble beginnings to the organisation that we are today. The Chairman’s report gives the interested reader a brief summary of our exciting history. The Group has grown from strength to strength during the challenging times that have made up the last three decades. Despite the challenges facing the Group, I remain excited about the opportunities for us to expand our offering, I am particularly excited about the changes that have been made within the Clientèle Rewards space over the year. The launch of Clientèle Perks (a standalone rewards product) a few months ago has seen us attracting a slightly different market and provides us with new clients to whom we can upsell an insurance offering. Furthermore, Clientèle is starting to use our rewards offering in order to genuinely reward loyal service and thus Treat our Clients Well in ways that stretch beyond simply paying relevant insurance claims.

I would like to thank the Chairman of the Board, the Nonexecutive Directors, Excom, the greater management team and each and every member of the Clientèle staff, who have worked tirelessly through another difficult year. As a team, they have done everything in their power to ensure that we Treat Clients Well and safeguard their worlds with compassion.

Finally, I want to thank our IFA business partners, our Agency force and Brokers as well as the teams at our Funeral Parlour intermediaries who have all added meaningfully to Clientèle during the year and we look forward to continuing to work with them into the future.

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Mr. BW Reekie 19 September 2022

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Corporate Governance

1. INTRODUCTION

The King Code of Governance Principles underpins the Group’s corporate governance framework. The Group supports the voluntary principles and leading practices of King IV and applies its recommendations. There is continuous focus to integrate King IV into the Group’s internal controls and policies, as well as the Board’s corporate governance Terms of Reference.

The Board confirms that the Group complied with the Code of Governance Principles as set out in King IV for the 2022 financial year, unless otherwise stated. The Board is confident that the application of these principles will not only ensure that all statutory governance requirements are met but will also ensure a special focus towards the achievement of the following governance outcomes:

• Ethical culture;

• Good performance;

• Effective control; and,

• Legitimacy.

The Board recognises its responsibility to create value in a sustainable manner and conducts its affairs ethically with prudence, transparency, accountability, fairness and being socially responsible, thereby safeguarding the interests of all stakeholders including Government, Regulators, shareholders, policyholders, clients, IFAs, agents, brokers, funeral parlours, employees, suppliers and industry associates.

The following report serves to provide information on the extent of compliance with the principles of sound governance, as provided by King IV, during the 2022 financial year:

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Principle	Application
1 The Board should lead ethically and effectively.	The Board is obligated to act in accordance with the Companies Act (as per the company MOI) and section 76(3) which states that a Director of a Company must exercise the powers and perform the functions of a Director in good faith, for a proper purpose, in the best interests of the Group; and with a degree of care, skill and diligence. The Board’s biennial assessment of the performance of its Committees, Directors and Executives, incorporates a focus on ethical outcomes. The Board’s Terms of Reference also outlines the policies and practices of the Board on matters such as Directors’ dealings in the securities of the Company and declarations of conflicts of interest. The Directors have the necessary competence to discharge their responsibilities and provide strategic direction and control of the Group. Furthermore, the Directors are devoted to ensuring the sustainable success of the Group and therefore attend meetings as required and dedicate sufficient time and effort in preparation for such meetings.
2 The Board should govern the ethics of the organisation in a way that supports the establishment of an ethical culture.	The Board is mandated with the responsibility to review and approve the Group’s policies on values and code of ethics. The Group Social and Ethics Committee assists and guides, as the conscience of the Group, on social and ethical matters and to ensure oversight over the implementation, reporting, training and awareness of the Group’s code of ethics. In order to ensure that the Group’s purpose is achieved it therefore becomes imperative that the Group’s values and code of ethics form an integral part of the Group’s strategy and the implementation thereof. Further details are available in the Group Social and Ethics Report, pages 53 to 57.

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3 The Board should ensure that the organisation is and is seen to be a responsible corporate citizen.	The Board oversees and monitors the consequences of the Group’s activities and outputs and its status as a responsible citizen. Clientèle is diligent with regard to ensuring that compliance with legislation, regulations, standards and adherence to its own policies is monitored on an ongoing basis through various Board and management Committees. The Group Social and Ethics Committee has the responsibility to monitor the overall responsible corporate citizen performance of the Group and delivery of an ethical culture. The responsibilities of this Committee include the review of the workplace, workforce and the impact of Clientèle on the economy, society and the environment.
4 The Board should appreciate that the Group’s core purpose, its risks, opportunities, strategy, business model, performance and sustainable development are all inseparable elements of the value creation process.	The Group has a clearly defined strategy incorporating the associated risks. At the biannual strategy sessions, the Board challenges management on how executing the proposed strategy will create value and also on its dependence and impact on the resources and relationships available. A report back on execution against strategy is part of the Excom agenda, with regular reports to the Board and appropriate Board Committees. Through these regular reports the Board ensures that the Group responds to any consequences of its activities and outputs. The Group Audit and Group Risk Committees assist with the governance of risks. They monitor the effects of the identified risks and the mitigating controls. The responsibility for risk management is detailed in the Group Audit and Group Risk Committees’ Terms of Reference. The Group is aware of the general viability, reliance and effect of its activities on its solvency and liquidity and its going concern status.
5 The Board should ensure that reports issued by the organisation enable stakeholders to make informed assessments of the Group’s performance, and its short, medium and long-term prospects.	The Board oversees the preparation of all reports that are publicly available, ensuring that they present material information in an integrated manner, providing users with a holistic, clear, concise and understandable view of the Group’s performance in terms of sustainable value creation in the economic, social and environmental context within which it operates. Management has been delegated responsibility for the Group’s reporting, following the direction set by the Board. Clientèle produces an Integrated Annual Report as well as supplementary information which, together, contain all the legitimate and reasonable information needs of material stakeholders. The preparation of the Integrated Annual Report and the Preliminary Report are overseen by the Group Audit Committee. The Integrated Annual Report and supporting documentation are published on Clientèle’s website. Printed copies can be requested by stakeholders.

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6 The Board should serve as the focal point and custodian of corporate governance in the Group.	The Board has an approved Terms of Reference which it reviews annually. The Board’s role and responsibilities are articulated in the Terms of Reference. The Board is the focal point and custodian of corporate governance, both in terms of how its role and responsibilities are documented and the way it executes its duties and responsibilities. The Board is supported by various Board Committees, which have delegated responsibility to assist it to fulfil certain specific functions, as well as by the Group Company Secretarial function.
7 The Board should comprise the appropriate balance of knowledge, skills, experience, diversity and independence for it to discharge its governance role and responsibilities, objectively and effectively.	The Board is assisted by the Group Nominations Committee, who considers, annually or after any existing Director exits and before any new Director appointments, the composition, balance of skills, experience, independence, diversity and knowledge of the Board and whether this enables it to effectively discharge its role and responsibilities. The Group Managing Director is a member of this Committee.
8 The Board should ensure that its arrangements for delegation within its own structures promote independent judgment, and assist with balance of power and the effective discharge of its duties.	The Board currently has various standing Committees that assist it in discharging its duties and responsibilities. The Committees include: the Group Audit Committee, Group Risk Committee, Group Investment Committee, Group Remuneration Committee, Group Nominations Committee, Group Actuarial Committee and the Group Social and Ethics Committee. These Committees operate in accordance with written Terms of Reference approved by the Board, which are reviewed at least annually. The Committees are appropriately constituted and members are appointed by the Board, with the exception of the Group Audit Committee, whose members are nominated by the Board and elected by shareholders of the Group. The Group Nominations Committee reviews the composition of Board Committees and makes recommendations to the Board with regard to their composition, taking into account factors such as diversity and skills and the need to create a balanced distribution of power. External advisors, Executive Directors and members of Excom and Senior Management attend Committee meetings by invitation. The Committees play an important role in enhancing the high standards of governance and achieving increased effectiveness within the Group. The Board considers the allocation of roles and associated responsibilities and the composition of membership across Committees holistically. A delegation by the Board of its responsibilities to a Committee will not, by or of itself, constitute a discharge of the Board’s accountability. The Board applies its collective mind to the information, opinions, recommendations, reports and statements presented by the Chairperson of a Committee.

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Corporate Governance continued

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9 The Board should ensure that the evaluation of its own performance and that of its Committees, its Chair and its individual members, support continued improvement in its performance and effectiveness.	An assessment of the performance of the Chairman, Board, Board Committees and Directors’ self-evaluation is conducted biennially. Having regard to the results of the performance evaluations, no significant issues were raised and the contribution, value and participation of the Board and Board sub-committees was considered satisfactory and positive.
10 The Board should ensure that the appointment of, and delegation to management contributes to role clarity and the effective exercise of authority and responsibilities.	The Board formally confirms the appointment of the Group Managing Director on an annual basis and ensures that the role of the Group Managing Director is formalised and his performance evaluated against specified criteria. The Board has established Committees to which certain responsibilities and authorities are delegated.
11 The Board should govern risk in a way that supports the organisation in setting and achieving strategic objectives.	The Board understands and takes accountability for all risks that potentially affect the achievement of its strategic objectives and has delegated the responsibility for overseeing the adequacy and effectiveness of the risk management process to the Group Audit and Group Risk Committees. The Group Audit and Group Risk Committees delegate to management the responsibility to continuously identify, assess, mitigate and manage risks within the existing operating environment. Mitigating controls are in place to address these risks, which are monitored on a continuous basis. Three Independent Non-executive Directors are members of both the Group Audit and Group Risk Committees, thus ensuring that there is co-ordination in respect of the evaluation and reporting of risks.
12 The Board should govern technology and information in a way that supports the organisation in setting and achieving its strategic objectives.	Excom has an established Group IT Steering Committee to assist in its IT Governance responsibilities. The IT governance framework and IT Policy framework supports effective and efficient management and decision-making around the utilisation of IT resources to facilitate the achievement of the Group’s objectives and the management of IT-related risk. The Group IT Steering Committee has a Terms of Reference (approved by the Board), policies, decision-making structures, an accountability framework, IT reporting and an IT risk and controls framework, to guide their activities.

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Corporate Governance continued

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13 The Board should govern compliance with applicable laws and adopt non-binding rules, codes and standards in a way that supports the Group being ethical and a good corporate citizen.	The Board and its Committees and sub-committees ensure the adherence and monitoring of the compliance with applicable laws, regulations, codes and standards. The Board makes use of external attorneys and external experts and advisors to review complex regulatory matters. A Group Compliance function is established within the Group and forms an integral part of the Group’s regulatory and operational risk management process. The Group Audit Committee and the Board receive reports on compliance with applicable laws, rules, codes and standards at quarterly meetings. A suitably qualified Group Compliance Officer is appointed and the Group has an established Group Compliance Department. Compliance is achieved through integration with business/ organisational processes, ethics and culture.
14 The Board should ensure that the Group remunerates fairly, responsibly and transparently so as to promote the achievement of strategic objectives and positive outcomes in the short, medium and long-term.	The Board has established a Group Remuneration Committee, consisting of Non-executive Directors, the majority of whom are Independent, who assist the Board in setting and administering a fair, equitable and responsible remuneration policy. The Group Remuneration Committee has an independent role, operating as an overseer, maker of decisions on remuneration and maker of recommendations to the shareholders for their consideration and final approval. The Group Remuneration Committee works according to a Terms of Reference. The Group Remuneration Committee does not assume the functions of management, which remain the responsibility of the Executive Directors, officers and other members of senior management. The role of the Group Remuneration Committee is to assist the Board in ensuring that: • The Group remunerates Directors, officers, members of senior management and staff fairly and responsibly; and, • The disclosure of remuneration is accurate, complete and transparent. The detailed Group Remuneration Report setting out the Policy and implementation thereof, is set out on pages 37 to 52.

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Corporate Governance continued

Principle Application The Board should ensure that Combined assurance 15 assurance services and functions The Board has delegated to the Group Audit Committee oversight enable an effective control of, among others, the effectiveness of the Company’s assurance environment, and that these support services, with particular focus on combined assurance, including the integrity of information for internal External Audit, Internal Audit and the finance function as well as decision-making; and, of the the integrity of the Integrated Annual Report and the Annual organisation’s external reports. Financial Statements and, to the extent delegated by the Board, other external reports issued by the Group. The Group Audit Committee also considers annually, and satisfies itself of, the appropriateness of the expertise and experience of the Financial Director and the finance function.

Assurance of external reports

With the assistance of independent assurers, such as the External Auditor, GIA, the Head of the Actuarial Function and the External Actuaries, the Group Audit Committee reviews and evaluates the Integrated Annual Report and the Annual Financial Statements, prior to recommendation to the Board for approval. The Integrated Annual Report and complementary reports provide a consolidated review of the sustainability of the Group including the Group’s financial, economic, social and environmental performance on matters material to the Group’s strategy and the key stakeholders.

Internal audit

The Group Audit Committee has been delegated the responsibility for overseeing that assurance services are performed in terms of the GIA Terms of Reference. The Group has a GIA function and its role and responsibilities are set out in an Internal Audit Terms of Reference which requires, inter alia, the performance of riskbased internal audits in terms of an internal audit plan approved by the Group Audit Committee.

GIA submits formal reports to the Group Audit Committee quarterly. The Integrated Annual Report includes the Group Audit and Group Risk Committees’ confirmation of having received GIA’s written assessment of the effectiveness of the Group’s governance, risk management and control processes, including the effectiveness of the Group’s systems of internal financial controls.

		and Group Risk Committees’ confirmation of having received GIA’s written assessment of the effectiveness of the Group’s governance, risk management and control processes, including the effectiveness of the Group’s systems of internal financial controls.
16	In the execution of its governance role	The Board appreciates that close relationships with stakeholders
	and responsibilities, the Board should	should be maintained and that Stakeholder perceptions affect the
	adopt a Stakeholder-inclusive	Group’s reputation. The Board has identified relevant stakeholders
	approach that balances the needs,	and has formalised the Stakeholder relationships processes with
	interests and expectations of material	management.
	stakeholders in the best interests of the organisation over time.	The Board takes account of the legitimate interests and expectations of all of its Stakeholders in decision-making in the best interests of
		the Group.
		The Board has adopted communication guidelines that support a
		responsible Stakeholder communication programme.

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Corporate Governance continued

1.1 Corporate Governance Framework

The Board applies corporate governance practices as prescribed by, among others, the Companies Act, Regulators (including GOI standards), Listings Requirements as well as those contained in the Clientèle MOI.

Corporate governance is standardised across the Group to ensure that Clientèle’s standards for corporate governance are implemented and monitored consistently across the Group’s operations.

As a responsible corporate citizen, a holistic approach to the application of the governance principles contained in King IV has been adopted.

Clientèle’s Non-executive Directors acknowledge the need for their independence, while recognising the importance of good communication and close co-operation with Excom.

1.2 Stakeholder Communication

The Group has defined its stakeholders as entities and individuals that are significantly affected by its activities and those which have the ability to significantly impact the Group’s ability to implement strategies and achieve objectives. The Group has identified its stakeholders as Government and Regulators, shareholders, clients (including insurance policyholders, Rewards and Mobile clients), IFAs, brokers, funeral parlours, banks, agents, employees, suppliers and industry associates.

The Group interacts with some of the significant stakeholders as follows:

1.2.1 Government and Regulators

Clientèle and the insurance subsidiaries within the Group are subject to the oversight of the FSCA and the PA. Clientèle is licensed as a controlling company of an Insurance Group in terms of section 23 of the Insurance Act.

Compliance with the relevant regulations regarding financial services is regarded as being of the utmost importance. The Group works closely with the Regulators to protect its stakeholders’ interests, avoid reputational damage and prevent or mitigate the potential negative impact of either new, or changes to existing regulations.

1.2.2 Shareholders

Clientèle distributes information to shareholders and investment analysts through SENS and the print media, as well as disclosure on the website. Disclosures are based on the principles of transparency and substance over form.

Shareholders are notified timeously of the AGM and its agenda where voting takes place by way of a ballot. Results of the voting are published immediately after the meeting through a SENS announcement.

1.2.3 Clients (including Policyholders)

Clientèle interacts with clients in various ways, always ensuring compliance with POPIA:

• A policy document and welcome letter is sent to every insurance policyholder who takes up a policy;

• Rewards and Mobile clients will receive a welcome SMS and/or e-mail containing a link to their relevant contract terms and conditions;

• A well-established and well-trained call centre deals with client queries;

• Clients are also able to access important information and update certain details via the self-service portal and the Clientèle App;

• SMS, e-mail and in-App communication is widely used to keep clients up to date on their particular interactions with the Group;

• Walk-in centres assist clients who prefer face-to-face contact in dealing with their queries. Funeral Parlour intermediated clients are also able to visit the relevant Funeral Parlour branches, to attend to their queries; and,

• Agency kiosks are located in various shopping centres across South Africa where a prospective client can take out a policy or contract.

The Group subscribes to the principles of TCF to ensure that:

• Clients can be confident that they are dealing with a Group where the fair treatment of clients is central to the corporate culture;

• Products marketed and sold are designed to meet the needs of identified consumer groups and are targeted accordingly;

• Products are easy to understand. The wording of policies and contracts are continuously reviewed to ensure the wording is simple, clear and easy to follow;

• There is a focus on client-centricity to ensure that clients get the after-sales service that they expect;

• The Group always deals with clients with compassion; and,

• There is a continuous focus on the claims process and complaints management to ensure that clients receive empathetic professional and timely claims service.

The TCW initiative, which goes beyond TCF, combined with the Group’s values, are integral to achieving the Clientèle purpose of “Safeguarding your world… with compassion.”

Also refer to the Group Social and Ethics Report on pages 53 to 57.

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Corporate Governance continued

2. BOARD OF DIRECTORS

Clientèle’s Board is the focal point of the Group’s corporate governance structure and has the ultimate responsibility of overseeing the performance of the Group.

2.1 Role

The Directors have a fiduciary duty to act in good faith, with due diligence and care, and in the best interests of the Group and its stakeholders. They are the guardians of the values and ethics of the Group.

In exercising control of the Group, the Directors are empowered to delegate responsibilities. This is in line with the Group’s decentralised management philosophy and is done through the Boards of the subsidiaries and their respective Managing Directors, various Board Committees and Excom.

Directors have full and unrestricted access to management, Group information and property. They are entitled to seek independent professional advice in support of their duties at the Group’s expense. Non-executive Directors may meet separately with management without the attendance of Executive Directors.

2.2 Function of the Board

The Board is committed to business integrity, transparency and professionalism in all its activities to ensure that all the entities within the Group are managed ethically and responsibly to enhance the value and sustainability of its businesses for the benefit of all stakeholders.

In order to enhance Board leadership and ensure a balance of power and authority, the Board adopts a strong oversight role that provides the necessary checks and balances between the Board and management.

The Board is responsible for ensuring that there is clear strategic direction and that appropriate management structures are in place. These structures, some of which are described in this corporate governance section, are designed to provide a reasonable level of assurance as to the proper control and conduct of the Group’s affairs.

The Board meets at least four times a year under the Chairmanship of Mr. GQ Routledge. Additional meetings are arranged when necessary.

2.3 Composition of the Board

The Board of Clientèle, with input from the Group Nominations Committee, continuously spends time reviewing the size and composition of the various Boards within the Group and is of the opinion that the value of executive knowledge and experience within the Boards is well balanced alongside the value of Non-executive Director knowledge and experience. The Group will continue to review the composition and effectiveness of the Boards to ensure that they remain effective and relevant to the Group. The Board of Clientèle consists of a majority of Nonexecutive Directors, of which the majority of Non-executive Directors are Independent.

The Board ensures that there is an appropriate balance of power and authority on the Board, so that no one individual or block of individuals can dominate the Board’s decision-making.

The Board members have been assessed and found to be fit and proper as required by the PA Prudential Standard GOI4.

In terms of the MOI of the Company, the Directors shall have the power to appoint any person as a Director, either to fill a casual vacancy or as an addition to the Board. Any such appointment will require ratification at the next AGM. This power has been delegated to the Group Nominations Committee.

Each year, at least one-third of Clientèle’s Directors retire and may be reappointed by the shareholders at the AGM. Subject to the provisions of the MOI, a majority of Directors may remove a Director at a Directors’ meeting before the expiration of his period of office.

Employment contracts are in place with all Executive and Non-executive Directors, setting out their responsibilities. These contracts are open-ended with no set expiry date.

The mandatory retirement age for Non-executive Directors is 75, at which time the Director shall vacate office at the end of the financial year in which that Director turns 75, unless the Board, in its discretion, decides otherwise.

Clientèle supports the principles and aims of race and gender diversity at Board level. The race and gender targets for the Board have been reviewed to ensure that future appointments are aligned with the Group’s policy on gender and race diversity and the B-BBEE codes.

The Group believes in the strength of a diverse Board of Directors. The Board, through the Group Nominations Committee, is committed to harnessing the broad wealth of experience, knowledge and skill of the members. The Group Nominations Committee reviews and assesses the Board composition on behalf of the Board and recommends the appointment of new Directors.

The appointment of new Directors and overall Board composition takes into consideration aspects such as business and industry knowledge, gender, age and race, cultural background, among other things. The Group Nominations Committee also oversees the achievement of the long-term voluntary targets that have been set.

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Corporate Governance continued

For the 30 June 2022 year, the Board had the following representation:

• 17% female representation. The female Directors also serve as Board members of the Subsidiaries of the Group.

• 36% black representation. The black Directors also serve as Board members of the Subsidiaries of the Group.

The Group Nominations Committee will review Board composition on an annual basis and make recommendations on the appointment of new Directors as and when required.

2.4 Subsidiary Boards

Clientèle has wholly-owned operating subsidiaries (refer to the Group Structure on page 2).

The Boards of Clientèle Life and Clientèle General are subject to the oversight of the FSCA and the PA.

2.5 Responsibilities Include:

• Establishing the strategy of the Group;

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

• Satisfying itself that the strategy does not give rise to risks that have not been thoroughly assessed by management;

• Assisting in identifying key performance and risk areas;

• Ensuring that the strategy will result in sustainable outcomes; and,

• Considering sustainability as a business opportunity that guides strategy formulation;

• Guiding and supporting Excom in the execution of the strategy;

• Acting as the focal point for, and custodian of, corporate governance by managing its relationships with management, the shareholders and other stakeholders of the Group along sound corporate governance principles;

• Overseeing the ORSA process;

• Providing effective leadership on an ethical foundation;

• Ensuring that ethical behaviour is conducted throughout the Group;

• Ensuring that the Group is, and is seen to be, a responsible corporate citizen by having regard to not only the financial aspects of the business of the Group but also the impact that business operations have on the environment and the society within which it operates;

• Ensuring that the Group has an effective and independent Audit Committee;

• Being responsible for the governance of risk;

• Being responsible for IT governance;

• Being responsible for environmental impact assessments and measures;

• Ensuring that the Group complies with applicable laws and considers adherence to non-binding rules and standards;

• Ensuring that there is an effective risk-based GIA function;

• Appreciating that stakeholders’ perceptions affect the Group’s reputation;

• Ensuring the integrity of the Group’s Integrated Annual Report;

• Acting in the best interests of the Group by ensuring that individual Directors:

• Adhere to legal standards of conduct;

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

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

• Deal in securities only in accordance with legislation and the policy adopted by the Board.

• Commencing business rescue proceedings as soon as the Group is financially distressed;

• Electing a Chairman of the Board on an annual basis who is an Independent Non-executive Director;

• Appointing and evaluating, on an annual basis, the performance of the Group Financial Director; and,

• Appointing and evaluating the performance of the Group Managing Director on an annual basis.

The Board is mandated to discharge its duties by ensuring that it has fulfilled its responsibilities as set out above.

2.6 Independence of the Board

By adhering to a number of key principles, the Board’s independence from Excom is ensured:

• The Board has twelve Directors (including one Alternate Director), eight of whom are Non-executive of which five are Independent Non-executive Directors. Included in the twelve Directors is Mr. GK Chadwick, the Alternate Director to Dr. ADT Enthoven;

• The Board has considered the independence of the Non-executive Directors and has held discussions with them and is of the opinion that they are Independent in their actions, judgment and conduct: They have also been found Independent in fact and in perception by the Board;

• Clientèle has an Independent Non-executive Chairman;

• The roles of Group Chairman and Group Managing Director are separate; and,

• Independent Non-executive Directors’ remuneration is not tied to the Group’s financial performance.

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Corporate Governance continued

Dr. ADT Enthoven and Mr. PG Nkadimeng, both Non-executive Directors, are not independent due to their involvement with Friedshelf 1577 Proprietary Limited, the Parent Company of the Group. Mr. Chadwick, the Alternate Director for Dr. Enthoven, is also not independent and will represent Dr. Enthoven at meetings which Dr. Enthoven can't attend. Mr. Chadwick has the same responsibilities and duties as any other appointed Director of the Company.

The details of the Directors are provided on pages 73 to 77.

2.7 Criteria for Independence

A Non-executive Director is classified as Independent if the following criteria are met. The Director:

• Is NOT a significant provider of financial capital, or ongoing funding to the Company; nor is he/she an officer, employee or a representative of such provider of financial capital or funding;

• Does NOT participate in a share-based incentive scheme offered by the Company;

• Does NOT own securities in the Company, the value of which is material to the personal wealth of the Director;

• Has NOT been in the employ of the Company as an Executive Manager during the preceding three financial years, nor is he/she a related party to such Executive Manager;

• Has NOT been the designated External Auditor responsible for performing the statutory audit for the Company, or a key member of the audit team of the External Audit firm, during the preceding three financial years;

• Is NOT a significant or ongoing professional advisor to the Company, other than as a member of the Board;

• Is NOT a member of the Board or Excom of a significant customer of, or supplier to, the Company;

• Is NOT a member of the Board or Excom of another organisation which is a related party to the Company; and,

• Is NOT entitled to remuneration contingent on the performance of the Company.

It is further important to note that an Independent Non-executive Director should be Independent in fact and in the perception of a reasonably informed outsider.

2.8 Group Chairman

Mr. Gavin Quentin Routledge is the Chairman of the Board of Clientèle, Clientèle Life and Clientèle General.

Mr. Routledge has declared himself to be Independent and has also been found to be Independent by the Board, when applying the definition as supplied above. Clientèle believes that an Independent Chairman fosters the activities of a thoughtful and dynamic Board and, in turn, leads to a more proactive and effective Board of Directors.

The roles and responsibilities of the Chairman are, inter alia, as follows:

• Providing leadership and governance of the Board so as to create the conditions for the Board’s and individual Director’s effectiveness, and ensuring that all key and appropriate issues are discussed by the Board in a timely manner;

• Promoting effective relationships and open communication, and creating an environment that allows constructive debates and challenges, both inside and outside the boardroom, between Non-executive Directors and management;

• Ensuring that the Board as a whole plays a full and constructive part in the development and determination of the Group’s strategies and policies, and that Board decisions taken are in the Group’s best interests and fairly reflecting the Board’s consensus;

• Ensuring that the strategies and policies agreed by the Board are effectively implemented by management;

• Setting, in consultation with the Group Managing Director and Company Secretary, the Board meeting schedule and agenda to take full account of the important issues facing the Group and the concerns of all Directors, and ensuring that adequate time is available for thorough discussion of critical and strategic issues;

• Ensuring that the Board is properly briefed on issues arising at Board meetings and receives, in a timely manner, adequate information which must be accurate, clear, complete and reliable, to fulfil its duties, such as reports on the Group’s performance, the issues, challenges and opportunities facing the Group, and matters reserved for it to make decisions on;

• Ensuring that there is effective communication with shareholders and other stakeholders, and that each Director develops and maintains an understanding of the stakeholders’ views; and,

• Establishing good corporate governance practices and procedures and promoting the highest standards of integrity and corporate governance throughout the Group and particularly at Board level.

Mr. Routledge is a member of the Group Audit Committee, and is also a member of the Group Risk, Group Investment, Group Remuneration and Group Nominations Committees. The Board is of the opinion that Mr. Routledge’s contribution to the Group Audit Committee is invaluable to the Group.

Mr. Routledge was appointed as Chairman of the Board of Clientèle on 31 January 2008. Mr. Routledge’s notice period is six months.

Mr. Routledge is allowed to hold outside professional positions and commitments and discloses these positions to the Group Nominations Committee on an annual basis and whenever there have been significant changes in outside appointments and commitments.

The Board is of the opinion that there is no need for a Lead Independent Director due to the size of the Company and the Group, as well as the size and structure of the Board Committees.

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Corporate Governance continued

2.9 Group Managing Director

Mr. Basil William Reekie is the Managing Director of Clientèle. Mr. Reekie’s notice period is six months.

Mr. Reekie is a Fellow of the ASSA and has no other professional commitments. A succession plan is in place for the position of Group Managing Director.

2.10 Executive Directors

There were no payments made relating to the sign-on or termination of employment to any Executive Directors.

2.11 Group Company Secretary

Mrs. W van Zyl was appointed as Group Company Secretary on 1 July 2006 and is a qualified Chartered Accountant. The Group Company Secretary provides support and guidance to the Board on matters relating to governance across the Group. She assists the Board as a whole, and Directors individually, with detailed guidance as to how their responsibilities should be properly discharged in the best interests of the Group. She facilitates, where necessary, induction and training for Directors and assists the Group Managing Director in determining the annual meeting timetable.

The Board, on a biennial basis, assesses the competence, qualifications and experience of the Group Company Secretary, as required in terms of the Listings Requirements and has agreed that she is sufficiently qualified, competent and experienced to hold her position as Group Company Secretary. This assessment is done through a questionnaire completed by every Board member.

The Group Company Secretary is not a Director. Therefore, the Board is satisfied that the Group Company Secretary maintains an arm’s length relationship with the Executive team, the Board and individual Directors in terms of the Listings Requirements.

Mrs. van Zyl has resigned as Company Secretary, effective 31 October 2022. Mr. E. Smit was appointed Company Secretary effective 1 November 2022. Mr. Smit is currently the Head of Group Legal, a position that he has held since 2018. Mr. Smit is an admitted non-practicing attorney and holds an LLB qualification, amongst other qualifications. The Board is satisfied that Mr. Smit has the necessary experience, qualifications and expertise to take up the position of Company Secretary.

The Group Company Secretary is also the secretary to the majority of the Board Committees.

2.12 Directors’ Interests

The shareholding of Directors appear on page 52 in the Group Remuneration Report.

• 2.13 Share Dealing by Directors and Senior Personnel

• Clientèle has implemented a code relating to share dealing by Directors and all personnel who, by virtue of the key positions they hold, have comprehensive knowledge of the Group’s affairs. The code imposes closed periods to prohibit dealing in Clientèle securities before the announcement of mid-year and year-end financial results or in any other period considered price sensitive, in compliance with the requirements of the Financial Markets Act, 2012, and the Listings Requirements in respect of dealings by Directors. The Group Company Secretary undertakes the administration required to ensure compliance with this code under the direction of the Chairman.

A pre-approval policy and process for all dealings in Clientèle shares by Directors and selected key employees is followed. This policy is reviewed annually.

2.14 Political Party Support

The Group does not support, financially or otherwise, any individual political party.

3. SHAREHOLDER AND BOARD COMMITTEES

The Board and Non-Board Committees (referred to in the Corporate Governance Report on pages 23 to 29):

• Have an independent role, operating as an overseer and maker of recommendations to the Board, Group Excom and Shareholders for consideration and approval;

• Have members who are deemed to have sufficient qualifications and experience to fulfil the duties required in terms of the responsibility of the Committees;

• Act in terms of the delegated authority of the Board, Group Excom and Shareholders as recorded in its respective Terms of References;

• May call upon the Chairpersons of other Boards, Board Committees, Excom Committees, any of the Executive Directors, applicable officers or the Group Company Secretary to provide information to it;

• Have reasonable access to the Group’s records, facilities and any other resources necessary to discharge its duties and responsibilities;

• Have the right to obtain independent outside professional advice to assist with the execution of its duties, at the Group’s cost, subject to a Board approved process; and,

• Take responsibility for risk management. The Chairperson of each Committee is responsible to ensure that risk management is conducted in line with the scope and objectives of the Committee and ensure that both a risk register is maintained and that internal controls are implemented and actions are taken to mitigate risks and that the register is kept and updated on a regular basis. In addition to this, all risk incidents are reported to the Group Risk Function in a timeous manner.

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3.1 Group Audit Committee

Refer to the Group Audit Committee Report on pages 58 to 61.

3.2 Group Actuarial Committee

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Number
Members Number of meetings held attended
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Members	Number of meetings held	Number of meetings held	Number attended
BW Reekie (Chairperson)	5		5
IB Hume			5
RD Williams			5
B Frodsham			5
JL Potgieter			5
H Louw			5
N Hoosen			4
Appointed by: • Group Audit Committee and the Board Authority: • Group Audit Committee and the Board Other: • External Auditors and the Chairman of the Group Audit Committee attend the interim and year-end Group Actuarial Committee meetings • External Independent Actuaries have a standing invitation to attend all meetings		Assessment: • At least every second year • Satisfactory rating in September 2021 Conclusion: Satisfied that the Committee has fulfilled its responsibilities in accordance with the Terms of Reference for the reporting period.
2022 KEY FOCUS AREAS During the year, various issues were addressed, including: • Highlighting any policyholder reasonable benefit expectation issues, having specific regard to TCF and TCW; • Reviewing and amending the format and content of actuarial reports; • Reviewing the ALM position, cash flow management and capital requirements of the Group; • Liaising with the External Actuaries and the External Auditor; • Reviewing and approving the quarterly actuarial liability calculations; • Considering and recommending to the Group Audit Committee and the Board the approval of bi-annual formal Actuarial Valuation and EV reports of the Head of the Actuarial Function; • Annually reviewing the independence of the Head of the Actuarial Function; • Reviewing and approving the monthly unit price calculation; • Reviewing and discussing, annually, potential threats to the External Actuaries’ independence; • Reviewing the appropriateness of the experience, expertise and adequacy of the resources of the Actuarial Department and the Actuarial function; • Reviewing the impacts of regulatory and industry changes on the Actuarial Valuation and EV; • Reviewing findings relating to data accuracy and data integrity; • Reserving and pricing assessments for funeral parlour business; • Advising as to the viability of any proposed client underwriting; • Reviewing and monitoring relevant items from an internal capital management and planning process point of view; and, • Significant additional focus was placed on the effect of the challenges within the payments environment, COVID-19 and the National Lockdowns and the resultant effects on our clients and the economic, investment and business environment, as well as the appropriate actuarial assumptions. The Committee is expected to make use of appointed experts who specifically include the External Actuaries, to assist it in carrying out its responsibilities. Refer to the Statement of Group EV on pages 62 to 68 and the Statement of Actuarial Values of Assets and Liabilities of Clientèle Life on pages 79 to 82.

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Corporate Governance continued

3.3 Group Risk Committee

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Number
Members Number of meetings held attended
----- End of picture text -----

Members	Number of meetings held	Number of meetings held	Number attended
BA Stott (Chairperson)	4		4
BW Reekie			4
IB Hume			4
GQ Routledge			4
RD Williams			4
Appointed by: • The Board Authority: • The Board Other: • The Chief Risk Officer, Mr. JL Potgieter, the risk officers, the External Auditors and the CAE attend all meetings as invitees • Refer to pages 73 to 77 for members’ qualifications and experience • The composition and responsibilities of this Committee are aligned to the Prudential Standard GOI 2 – Governance of Insurers		Assessment: • At least every second year • Satisfactory rating in September 2021 Conclusion: Satisfied that the Committee has fulfilled its responsibilities in accordance with the Terms of Reference for the reporting period.
2022 KEY FOCUS AREAS During the year, various issues were addressed, including: • Assisting the Board in ensuring that there are processes in place enabling: – complete; – timely; – relevant; – accurate; and, – accessible disclosure on risks to stakeholders; • Disclosure of risks to stakeholders; • Providing assurance relating to the effectiveness of the risk management process; • Implementing and monitoring the risk management plan; • Performing continuous risk assessments, including consideration of new and emerging risks; • Ensuring frameworks and methodologies are implemented to increase the probability of anticipating emerging risks; • Ensuring that management considers and implements appropriate risk responses; • Ensuring continuous risk monitoring by management; • Annual review and approval of the Business Continuity policy and plan; • Approving updated risk appetite and risk tolerance statements and risk rating scales; • Receiving and considering feedback on compliance with SAM; • Approval of “shock” scenarios for ORSA; • Reviewing and approval of ORSA on an annual basis; • Reviewing of the annual socio-economic environmental report and impacts on the Group; • Reviewing and approving of capital management policies; and, • Reviewing and discussing the presentation on global and local economic conditions as presented by external experts. Refer to the Risk Management and Insurance and Financial Risk Management sections on pages 89 to 115 for more detail.

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Corporate Governance continued

3.4 Group Investment Committee

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Number
Members Number of meetings held attended
----- End of picture text -----

Members	Number of meetings held	Number of meetings held	Number attended
IB Hume (Chairperson)	5		5
BW Reekie			5
GQ Routledge			5
BA Stott			5
N Hoosen			4
H Louw			4
JL Potgieter			4
MG Cownie (appointed as a member on 22 February 2022)			5 (2 as member)
Appointed by: • The Board Authority: • The Board • The Group Audit Committee on taxation matters Other: • The Group Investment Committee reports to the Group Audit Committee on matters relating to taxation • Includes 1 ad-hoc meeting with the Investment managers		Assessment: • At least every second year • Satisfactory rating in September 2021 Conclusion: Satisfied that the Committee has fulfilled its responsibilities in accordance with the Terms of Reference for the reporting period.
2022 KEY FOCUS AREAS During the year, various issues were addressed, including: • ALM, in conjunction with the investment manager and the Group Actuarial Committee; • Overseeing investment decisions to ensure that they are made in the best interests of policyholders (with regard to policyholder reasonable expectations); • Overseeing the appropriate mix of shareholder investments on behalf of the Board; • Ensuring that there are processes in place to: – continuously monitor and review the performance of existing investments; – report on the performance of existing investments, as and when necessary; • Ensuring that there are processes in place to monitor the Group’s tax matters by: – Ensuring tax implications of new and existing insurance and investment products are identified and understood; – Reviewing processes implemented to ensure the Group follows the most effective tax route; – Ensuring that all tax returns are submitted timeously; – Ensuring that all SARS queries have been dealt with by persons with appropriate responsibility and expertise; – Ensuring that management keeps current with tax legislation; and, – Reporting to Group Audit Committee and Board on any significant tax matters. • Monitoring the performance of the investment manager; and, • Reviewing credit risk related to the Group’s investment assets to ensure an optimum balance between risk and return.

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Corporate Governance continued

3.5 Group Remuneration Committee

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Number
Members Number of meetings held attended
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BA Stott (Chairperson)	3	3	3
GQ Routledge			3
ADT Enthoven			3
Appointed by: • The Board Authority: • The Board • Shareholders by a non-binding advisory endorsement of the remuneration policy Other: • The Group Managing Director attends all meetings by invitation • Refer to pages 73 to 74 for members’ qualifications and experience • The composition and responsibilities of this Committee are aligned to the Prudential Standard GOI 2 – Governance of Insurers		Assessment: • At least every second year • Satisfactory rating in September 2021 Conclusion: Satisfied that the Committee has fulfilled its responsibilities in accordance with the Terms of Reference for the reporting period.
2022 KEY FOCUS AREAS • The Group Remuneration Committee assists the Board in ensuring that: – The Group remunerates Directors and Executives fairly and responsibly; – The levels of increases given to staff and management are appropriately reviewed; and, – The disclosure of remuneration is accurate, complete and transparent. • Overseeing the remuneration policy and ensuring that it promotes the achievement of strategic objectives and Group targets; • Reviewing the outcomes of implementation of the remuneration policy in terms of achievement of set objectives; • Benchmarking Executive remuneration; • Ensuring the mix of fixed and variable pay meets the Group’s strategic objectives and needs; • Satisfying itself as to the accuracy of performance measures that govern vesting and payment of incentives and bonuses; • Ensuring that all benefits are justified and correctly valued; • Considering and evaluating the performance of the Group Managing Director, other Executive Directors, heads of control functions and Executives in determining remuneration; • Regularly reviewing Incentive Schemes to ensure continued contribution to shareholder value in addition to ensuring that these are administered in terms of the rules; • Considering the appropriateness of early vesting of BRs at the end of employment and effecting relevant changes, at their discretion, in line with legislation, standards and requirements; • Reviewing the performance of Non-executive Directors; • Reviewing the performance of Executives; and, • Advising on the remuneration of Non-executive Directors. More detail in Group Remuneration Report on pages 37 to 52.

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3.6 Group Social and Ethics Committee

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Number
Members Number of meetings held attended
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Members	Number of meetings held	Number of meetings held	Number attended
PR Gwangwa (Chairperson)	4		3
BW Reekie			4
RDT Tabane			4
LED Hlatshwayo (appointed as a member on 2 August 2021)			4
RD Williams (appointed as a member on 2 August 2021)			4
Appointed by: • The Board Authority: • The Board • Report to shareholders through the Integrated Annual Report • Refer to pages 73 to 74 for members’ qualifications and experience		Assessment: • At least every second year • Satisfactory rating in September 2021 Conclusion: Satisfied that the Committee has fulfilled its responsibilities in accordance with the Terms of Reference for the reporting period.
2022 KEY FOCUS AREAS • Social and economic development, including the Group’s standing in terms of goals and purpose relating to: – The ten United Nations Global Compact Principles; – The OECD recommendations regarding corruption; – The B-BBEE Act; and, – The Employment Equity Act. • Good corporate citizenship, including the Group’s: – 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/services are predominantly marketed; – Record of sponsorship, donations and charitable givings; and, – Impact on the environment, health and public safety, including the impact of the Group’s activities and its products/services. • Consumer relationships, including the Group’s advertising, public relations and compliance with consumer protection laws; • Labour and employment, including: – the Group’s standing in terms of the International Labour Organisation Protocol on decent work and working conditions; and, – The Group’s employment relationships, and its contribution towards the educational development of its employees. • Monitoring that the Group conducts its activities in an ethical manner; • Drawing matters within its mandate to the attention of the Board, as the occasion requires; and, • Attending the AGM to report, through a member, to the shareholders on the matters within its mandate, if required. Refer to the Group Social and Ethics Report on pages 53 to 57.

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Corporate Governance continued

3.7 Group Nominations Committee

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Number
Members Number of meetings held attended
----- End of picture text -----

Members	Number of meetings held	Number of meetings held	Number attended
BA Stott (Chairperson)	3		3
GQ Routledge			3
ADT Enthoven			3
BW Reekie			3
Appointed by: • The Board Authority: • The Board • Report to shareholders through the Integrated Annual Report • Refer to pages 73 to 74 for members’ qualifications and experience		Assessment: • Every second year • Satisfactory rating in September 2021 Conclusion: Satisfied that the Committee has fulfilled its responsibilities in accordance with the Terms of Reference for the reporting period.
2022 KEY FOCUS AREAS • Ensuring that the process of nomination, election and appointment of members of the Board is formal, appropriate and transparent; • Ensuring that any candidate for election as a Non-executive Director has sufficient time available to fulfill the responsibilities as a member of the Board by requesting details of professional commitments and a statement to the effect that the candidate has sufficient time available to fulfill such responsibilities; • Ensuring that a process is in place for receipt of a declaration in respect of all relevant financial, economic and other interests held by each Director and any related parties on an annual basis; • Ensuring that formal succession plans for the Board, Managing Directors and senior management are developed and implemented; • Recommending to the Board the continuation (or not) in service of any Director who has reached the age of 75; • Considering, annually, the eligibility for re-election of those Directors who retire by rotation and recommend or advise otherwise such retiring Directors’ re-appointments by shareholders at the AGM taking into account the results of their performance evaluation; • Considering, annually, the independence of the Non-executive Directors. A separate annual review is required for Independent Directors serving for longer than nine years, to ensure: – the member exercises objective judgment; and, – there is no interest, position, association or relationship which, when judged from the perspective of a reasonable and informed third party, is likely to influence unduly or cause bias in decision-making. • Overseeing the formal induction programme for new Directors including the development and implementation of continuing professional development programmes for Directors and mentorship of Directors where required; • Ensuring that Directors receive regular briefings on changes in risks, laws and the environment in which the company operates; • Co-ordinating the annual independence assessment of Directors, peer reviews, and assessment of the qualifications and competence of the Group Company Secretary; • Ensuring the implementation of action plans emanating from the annual evaluations where required; • Considering and recommending to the Board, for approval, policies relating to the Committee’s mandate as set out in the Terms of Reference; • Recording, and approval of, any delegation to an individual member or members (including nature and extent of delegation, decision-making authority, duration of delegation and delegate’s reporting responsibilities); • Agreeing with the Group Managing Director (who is a member of this Committee) whether any additional professional positions may be taken up by the Group Managing Director; • On an annual basis, discussing the need for a Lead Independent Director; and, • Ensuring that there are adequate policies and procedures relating to the appointment, dismissal and succession of senior management and Heads of Control Functions.

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4. NON-BOARD COMMITTEES

The following, inter alia , are Non-board Committees in place as at 30 June 2022:

• Group Excom;

• Group IT Steering Committee;

• Group Product Committee;

• Group Internal Controls Committee;

• Group Internal Financial Controls Committee;

• Group Negative Production Committee;

• Group Client Services Committee;

• Group Marketing Committee;

• Group Provident Fund Committee;

• Group IFRS 17 Committee;

• Group Digital Committee;

• Group Communication Committee;

• Group Data Governance Committee;

• Group Internal Arbitration Committee;

• Group Script Committee; and,

• Group Hazardous Biological Agents Committee (replacing the COVID-19 Committee).

Board and Non-Board Committees have formal Terms of Reference, which are reviewed on an annual basis.

The Terms of Reference of the Committees are available on request from the new Group Company Secretary on 011 320 3015 or companysecretary@clientèle.co.za.

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5. ATTENDANCE AND MEMBERSHIP OF SHAREHOLDER, BOARD AND BOARD COMMITTEE MEETINGS

5.1 Members of Clientèle Board and Committees as at 30 June 2022

ENDANCE AND MEMBERSHIP OF SHAREHOLDER, BOARD BOARD COMMITTEE MEETINGS Members of Clientèle Board and Committees as at 30 June 2022	ENDANCE AND MEMBERSHIP OF SHAREHOLDER, BOARD BOARD COMMITTEE MEETINGS Members of Clientèle Board and Committees as at 30 June 2022	ENDANCE AND MEMBERSHIP OF SHAREHOLDER, BOARD BOARD COMMITTEE MEETINGS Members of Clientèle Board and Committees as at 30 June 2022	ENDANCE AND MEMBERSHIP OF SHAREHOLDER, BOARD BOARD COMMITTEE MEETINGS Members of Clientèle Board and Committees as at 30 June 2022	ENDANCE AND MEMBERSHIP OF SHAREHOLDER, BOARD BOARD COMMITTEE MEETINGS Members of Clientèle Board and Committees as at 30 June 2022	ENDANCE AND MEMBERSHIP OF SHAREHOLDER, BOARD BOARD COMMITTEE MEETINGS Members of Clientèle Board and Committees as at 30 June 2022	ENDANCE AND MEMBERSHIP OF SHAREHOLDER, BOARD BOARD COMMITTEE MEETINGS Members of Clientèle Board and Committees as at 30 June 2022	ENDANCE AND MEMBERSHIP OF SHAREHOLDER, BOARD BOARD COMMITTEE MEETINGS Members of Clientèle Board and Committees as at 30 June 2022	ENDANCE AND MEMBERSHIP OF SHAREHOLDER, BOARD BOARD COMMITTEE MEETINGS Members of Clientèle Board and Committees as at 30 June 2022	ENDANCE AND MEMBERSHIP OF SHAREHOLDER, BOARD BOARD COMMITTEE MEETINGS Members of Clientèle Board and Committees as at 30 June 2022	ENDANCE AND MEMBERSHIP OF SHAREHOLDER, BOARD BOARD COMMITTEE MEETINGS Members of Clientèle Board and Committees as at 30 June 2022
Directors and members Description Note Clientèle Board Group Audit Group Actuarial Group Remu- neration Group Social & Ethics Group Risk Group Invest- ment Group Nomi- nations
DIRECTORS
GQ Routledge	Chairperson, Independent Non-executive Director		ü	ü		ü		ü	ü	ü
BW Reekie	Group Managing Director	1	ü	I	ü	I	ü	ü	ü	ü
ADT Enthoven	Non-executive Director		ü			ü				ü
IB Hume	Group Financial Director	2	ü	I	ü			ü	ü
BA Stott	Independent Non-executive Director	3	ü	ü	I	ü		ü	ü	ü
PR Gwangwa	Independent Non-executive Director	4	ü				ü
RD Williams	Independent Non-executive Director	5	ü	ü	ü		ü	ü
PG Nkadimeng	Non-executive Director		ü
LED Hlatshwayo	Independent Non-executive Director	5	ü	ü			ü
GK Chadwick	Alternate Non-executive Director		ü
H Louw	Executive Director		ü	I	ü		I	I	ü
RDT Tabane	Executive Director		ü	I			ü	I
GROUP EXCOM
JL Potgieter	Head of the Actuarial Function and Chief Risk Officer		I	I	ü		I	I	ü
B Frodsham	Operations Executive		ü	I	ü			I
MD Mac Donald	GroupIT Executive	6	I	I	I			I
LA Botha	Group Marketing and AdvertisingExecutive		I		I		I
BK Pillay	Group Telesales Executive	7	I	I	I		I	I
JWF Pretorius	Group Telesales Executive	8	I	I	I			I
N Hoosen	GroupExecutive		I	I	ü			I	ü

( ü = member, I = invitee)

1 Chairperson of Group Actuarial Committee.

2 Chairperson of Group Investment Committee.

3 Chairperson of Group Audit, Group Risk, Group Remuneration and Group Nominations Committees.

4 Chairperson of Group Social and Ethics Committee.

5 Appointed as a member of the Group Social and Ethics Committee on 2 August 2021.

6 Resigned as an Executive on 31 December 2021.

7 Resigned as an Executive on 31 December 2021.

8 Appointed as an Executive on 1 February 2022.

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5.2 Attendance at Clientèle Board and Committee Meetings

Attendance at Clientèle Board and Committee Meetings	Attendance at Clientèle Board and Committee Meetings	Attendance at Clientèle Board and Committee Meetings	Attendance at Clientèle Board and Committee Meetings	Attendance at Clientèle Board and Committee Meetings	Attendance at Clientèle Board and Committee Meetings	Attendance at Clientèle Board and Committee Meetings	Attendance at Clientèle Board and Committee Meetings	Attendance at Clientèle Board and Committee Meetings
Directors and members Clientèle Board Group Audit Group Actuarial Group Remu- neration Group Social & Ethics Group Risk Group Invest- ment4 Group Nomi- nations
Meetings held	4	6	5	3	4	4	5	3
DIRECTORS
GQ Routledge	3	5		3		4	5	3
BW Reekie	4	6	5	3	4	4	5	3
ADT Enthoven	3			3				3
IB Hume	3	6	5			4	5
BA Stott	4	6	2	3		4	5	3
PR Gwangwa	4				3
RD Williams	4	6	5		4	4
PG Nkadimeng	2
LED Hlatshwayo	4	6			4
GK Chadwick	3
H Louw	4	6	5		4	4	4
RDT Tabane	4	5			4	4
GROUP EXCOM
JL Potgieter	3	6	5		3	4	4
B Frodsham	2	2/4	5			4
MD Mac Donald1	2/2	3/3	1/2			2/2
LA Botha	4		1		3
JWF Pretorius2	1/2	0/3	2/3			2/2
BK Pillay3	1/2	2/3	1/2		2/2	2/2
N Hoosen	4	5	4			4	3

1 Resigned as an Executive on 31 December 2021.

2 Appointed as an Executive on 1 February 2022.

3 Resigned as an Executive on 31 December 2021.

4 Includes one ad hoc meeting with Investment Managers.

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Corporate Governance continued

6. INTERNAL FINANCIAL AND OPERATING CONTROLS

The Board acknowledges its responsibility for ensuring that the Group implements and monitors the effectiveness of systems of internal financial and operating controls. These systems are designed to guard against material misstatement and loss.

The identification of risks and the detailed design, implementation and monitoring of adequate systems of internal, financial and operating controls are delegated to Group Excom by the Board. The Group Audit Committee reviews these matters.

The Group ICC and Group IFCC assist the Board, the Group Audit Committee, Excom and management in this regard. The Group ICC and IFCC also work closely with the Group Managing Director and the Group Financial Director on attesting to an adequate internal financial control environment in compliance with the JSE Listings Requirements' section 3.84(k). Even effective systems of internal, financial and operating controls, no matter how well designed, have inherent limitations, including the possibility of circumventing or overriding such controls. Such systems can therefore not be expected to provide absolute assurance. Effective systems of internal, financial and operating controls, therefore, aim to provide reasonable assurance as to the reliability of financial information and, in particular, of the Annual Financial Statements.

Moreover, changes in the business and operating environment could have an impact on the effectiveness of such controls which, accordingly, are reviewed and reassessed regularly.

The Group maintains internal, financial and operating controls that are designed to provide reasonable assurance regarding:

• The safeguarding of assets against unauthorised use or dispossession;

• Compliance with applicable laws and regulations;

• The maintenance of proper accounting records and the integrity and reliability of financial information; and,

• Detection and minimisation of fraud, potential liability, loss and material misstatements.

GIA assists in providing the Board and Excom with monitoring mechanisms for identifying risks and assessing controls appropriate to managing such risks.

The Board has not been made aware of any issue that would constitute a material breakdown in the functioning of these controls up to the date of this report. The Board Report on the Effectiveness of Internal Controls is set out on page 35.

7. COMPLIANCE

The primary role of the Group Compliance function is to minimise regulatory risk by assisting management to comply with statutory, regulatory and supervisory requirements. The Compliance function facilitates the monitoring of and the management of compliance through the analysis of statutory and regulatory requirements and the implementation of the required systems, processes and procedures.

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Corporate Governance continued

8. GROUP INTERNAL AUDIT

GIA performs reviews of the Group’s operations and internal controls and operates with the full authority of the Board and has direct access to the Chairman of the Group Audit Committee. GIA is also the custodians of Combined Assurance.

GIA reports functionally to the Group Audit Committee and administratively to the Group Financial Director.

GIA assists in providing the Board and Excom with monitoring mechanisms for identifying risks and assessing controls appropriate to managing such risks.

GIA is charged with examining and evaluating the effectiveness of the Group’s operational activities, the attendant business risks and the systems of internal financial and operating controls, with major weaknesses being brought to the attention of the Group Audit Committee, the External Auditors and members of senior management for their consideration and remedial action. The work of GIA is focused on the areas of greatest risk within the Group as determined by a risk assessment process. The output from the process is summarised in the Annual Audit Plan, which is approved by the Group Audit Committee.

9. ETHICAL LEADERSHIP AND CORPORATE CITIZENSHIP

The Group subscribes to the highest levels of professionalism and integrity in conducting its business and dealings with stakeholders. The Group's employees and representatives are expected to act in a manner that inspires trust and confidence from the general public.

The Group places a high value on integrity, honesty and trust. Reference and criminal checks are carried out on certain job applicants and their qualifications are verified before offers of employment are made. The principle of ‘zero tolerance’ of fraud and corruption will continue to be applied to employees, IFAs, professional presenters, brokers and agents. All employees are required to report all incidences of suspected or actual fraudulent events or other financial irregularities for investigation. The induction training of new employees includes modules dealing with the code of ethics, compliance therewith and the Group’s stance on internal fraud. Existing policies on the reporting of breaches of the code of ethics ensures confidentiality and protection to persons making reports, as outlined by the Protected Disclosure Act, Act 26 of 2000 and POPIA. Internal disciplinary procedures are fully compliant with the Labour Relations Act, Act 66 of 1995.

Mr. Reekie signed the BLSA Integrity Pledge on behalf of the Group in 2017. The Pledge holds the Group accountable to play a part in preventing and defeating corruption, to reaffirm honesty, respect for the rule of law, transparency and putting South Africa first. The Pledge is binding on the Group and its Directors and Officers.

10. GROUP ANNUAL FINANCIAL STATEMENTS

The Directors are responsible for the preparation of the consolidated and separate Annual Financial Statements of the Group, which have been prepared in accordance with IFRS. The Group Annual Financial Statements have been prepared from the accounting records and the use of appropriate policies supported by reasonable and prudent judgments and estimates and fairly present the state of affairs of the Group. The External Auditors are responsible for auditing and reporting on these Group Annual Financial Statements. The Group Annual Financial Statements have been audited in accordance with International Standards on Auditing. The Group’s External Auditors also provide tax and JSE sponsor services. Details of the External Auditor’s remuneration for audit and other services are provided in Note 33 on page 161 to the Group Annual Financial Statements. The Group is satisfied with the Independence of the External Auditors.

The Directors are of the opinion that the Group is financially sound and operates as a going concern. The Group Annual Financial Statements have, accordingly, been prepared on this basis.

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Corporate Governance continued

11. INTERNAL AND EXTERNAL ACTUARIES

Clientèle Life and Clientèle General

The Head of the Actuarial Function, Mr. JL Potgieter is responsible for assisting the Board in actuarial matters and performing the Actuarial Valuation of the Assets and Liabilities of Clientèle Life (refer to pages 79 to 82) and Clientèle General. Mr. Potgieter attends all Clientèle Life and Clientèle General Board meetings.

Clientèle Group

The annual EV is also reviewed and certified externally by QED Actuaries and Consultants. Mr. JL Potgieter assists the Board in reviewing the EV of the Group.

Mr. Potgieter attends the Group Audit Committee meetings, the Group Risk Committee meetings, the Group Actuarial Committee meetings, the Group Investment Committee meeting and the Clientèle Board meetings.

QED Actuaries and Consultants has a standing invitation to attend all Group Actuarial Committee meetings.

12. THE GOVERNANCE OF INFORMATION TECHNOLOGY

The Board is satisfied that the correct processes are in place to ensure complete, timely, relevant, accurate and accessible IT reporting.

The Group IT Steering Committee oversees the functions of IT and data governance.

The Board and Group Audit Committee have formally accepted the overall responsibility for IT and it was formally assigned to the Board. IT governance is an item on the Board agenda.

The Board is regularly informed about the Group’s IT function, its objectives, projects, financial information, risks and human capital management.

The Board provides appropriate leadership and direction to ensure that IT supports the achievement of the Group’s strategic objectives.

13. ENVIRONMENTAL IMPACT

The Group is aware of the impact of its business on the environment and continues to find ways of reducing the Group's carbon footprint.

Significant progress has been made in the areas of water harvesting and solar power solutions. New initiatives will continue to be embarked upon to ensure that the Group remains an ethical corporate citizen in this regard.

Also Refer to the Group Social and Ethics Report on pages 53 to 57.

34 Clientèle Limited Integrated Annual Report 2022

OUR BUSINESS GOVERNANCE REPORT FINANCIAL STATEMENTS

Board Report on the Effectiveness of Internal Controls

The Board is accountable for ensuring effective controls. Management is charged with the responsibility of establishing an effective internal control environment, which is developed and maintained on an on-going basis to provide reasonable assurance to the Board regarding:

• Integrity and reliability of the Group Annual Financial Statements;

• Safeguarding of assets;

• Economic and efficient use of resources;

• Compliance with applicable legislation and regulations;

• Detection and minimisation of fraud, potential liability, loss and material misstatement; and,

• Implementing and maintaining controls and security over the Clientèle website.

Internal controls are established not only over financial matters, but also operational, compliance and sustainability matters. Controls are the means by which management seeks to mitigate risks to an acceptable level of exposure.

The Board has mandated an initiative to design and embed an appropriate integrated framework that systematically evaluates and continuously improves controls across the Group.

GIA reviews the internal control systems and reports findings and recommendations for improvement to management and the Group Audit Committee. GIA provides a written assessment of the effectiveness of the Group’s systems of internal control and risk management.

The Group Audit Committee monitors and evaluates the duties and responsibilities of management and of Internal and External Audit to ensure that all major issues reported have been satisfactorily resolved.

Based on the processes as mentioned above, nothing has come to the attention of the Board that caused it to believe that the Group’s system of internal controls and risk management is not effective and that the internal controls do not form a sound basis for the preparation of Group Annual Financial Statements that are free from material misstatement.

The Board’s opinion is supported by the Group Audit Committee.

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Mr. GQ Routledge Chairman of the Board

19 September 2022

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35

Internal Financial Controls sign-off by Managing Director and Financial Director

Each of the Directors, whose names are stated below, hereby confirm that:

1. The Group Annual Financial Statements, set out on pages 89 to 170, fairly present in all material respects the financial position, financial performance and cash flows of the issuer in terms of IFRS;

2. To the best of our knowledge and belief, no facts have been omitted or untrue statements made that would make the Group Annual Financial Statements false or misleading;

3. Internal financial controls have been put in place to ensure that material information relating to the issuer and its consolidated subsidiaries have been provided to effectively prepare the Group Annual Financial Statements of the issuer;

4. The internal financial controls are adequate and effective and can be relied upon in compiling the Group Annual Financial Statements, having fulfilled our role and function as Executive Directors with primary responsibility for implementation and execution of controls;

5. Where we are not satisfied, we have disclosed to the Group Audit Committee and the Auditors any deficiencies in design and operational effectiveness of the internal financial controls, and have taken steps to remedy the deficiencies; and,

6. We are not aware of any fraud involving Directors.

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Mr. BW Reekie Mr. IB Hume Group Managing Director Group Financial Director

19 September 2022

Group Audit Committee Report on the Effectiveness of Internal Financial Controls

The Group Audit Committee is pleased to present its report for the financial year ended 30 June 2022. Based on the review of the Group’s system of internal financial controls and risk management, including the:

• Design;

• Implementation; and,

• Effectiveness

conducted by GIA during the 2022 year and considering:

• Information and explanations given by management;

• Discussions with the External Auditor on the results of their audit; and,

• Discussions at Group Risk Committee meetings, attended by the CAE,

nothing has come to the attention of the Group Audit Committee that caused it to believe that the Group’s system of internal financial controls and risk management are not effective and that the internal financial controls do not form a sound basis for the preparation of reliable Group Annual Financial Statements.

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Mr. BA Stott Chairman of the Group Audit Committee

19 September 2022

36 Clientèle Limited Integrated Annual Report 2022

OUR BUSINESS GOVERNANCE REPORT FINANCIAL STATEMENTS

Group Remuneration Report

The Board is pleased to present the Group’s Remuneration Report for the year ended 30 June 2022. The Group Remuneration Report is a three-part report, as prescribed by King IV:

• Part 1 is a summary of background information necessary to give perspective to parts 2 and 3;

• Part 2 sets out the Group’s remuneration policy; and,

• Part 3 details the implementation of the policy in the 2022 financial year.

PART 1: BACKGROUND STATEMENT

The Group Remuneration Report is compiled in accordance with the recommendations on remuneration contained in King IV and complies with the requirements of the Companies Act and Prudential Standard GOI 2 – Governance of Insurers, issued by the PA.

At the AGM, shareholders are being requested to consider and approve, via non-binding advisory endorsements the Group’s remuneration policy (Part 2 of this Group Remuneration Report) and the implementation of the policy in the 2022 year (Part 3 of this Group Remuneration Report).

The shareholder non-binding advisory endorsements and explanatory note are set out on page 173 in the Notice of the AGM. Shareholders are requested to offer their support by voting in favour of these non-binding advisory endorsements at the AGM.

The Group’s business strategy, as set by the Board, informs the Group’s Executive and employee remuneration policy. The end-goal is to achieve the Group’s growth objectives by retaining skilled key talent and attracting new talent to deliver on these growth objectives.

The remuneration policy is based on the principle of both Group and Individual performance driven remuneration, which is fair and reasonable for all staff and aligned to shareholder value creation. The remuneration policy followed by the Group is in line with the policy applicable to prior years.

The Group strives constantly to attract new talent and to retain existing talent to deliver on the Group’s growth objectives. This is a difficult task in the context of regulation and competition for scarce skilled and talented people which requires a careful balance between advancement opportunities, guaranteed remuneration and incentivisation. The Group Remuneration Committee seeks to do this through industry benchmarking, stakeholder engagement and innovative thinking.

The Group’s remuneration policy strongly aligns to shareholders interests and intends to maintain its focus on balancing the Group’s long-term growth objectives with generating a sustainable, healthy return on investment for shareholders.

The Group strives to achieve outstanding results by expecting the highest performance from employees and for having reward systems in place that recognise commitment and contribution in the highest possible way. The highly motivated environment in which the Group operates is built on this principle, which lies at the core of the Group’s long-term success.

Our remuneration philosophy is founded on enduring principles, which we seek to apply consistently each year. Our policy aims to promote a culture that supports innovation, enterprise and the execution of Group strategy and that aligns the interests of the majority of staff whilst attaining profitable (and sustainable) long-term growth for the benefit of all stakeholders. Inherent to this philosophy is the linkage between pay and short-term and long-term performance (both at an individual and corporate level).

The Group does not differentiate in remuneration between gender and race and all employees are remunerated equally in accordance with their position and performance.

Definitions used (see Definitions and Interpretations on pages 177 to 180)

Definitions used (see Definitions and Interpretations on pages 177 to 180)	Definitions used (see Definitions and Interpretations on pages 177 to 180)
“AGM”	Annual General Meeting
“the Board”	The Directors of Clientèle
“BR Scheme”	The Clientèle Limited Bonus Rights Scheme, approved by shareholders at the AGM on 30 October 2012.
“BR”	Bonus Right
“Clientèle Group” or “the Group”	Clientèle and its subsidiaries
“Clientèle General”	Clientèle General Insurance Limited
“Clientèle Life”	Clientèle Life Assurance Company Limited
“Clientèle” or “the Company”	Clientèle Limited
“Companies Act”	The Companies Act, Act 71 of 2008, including the Regulations
“CTC”	Cost to Company
“EV”	Embedded Value
‘‘EV Scheme”	The Embedded Value Scheme of Clientèle, a medium-term incentive scheme, in which Excom and members of management participate. Participation is based on individual performance linked to, and dependent upon, growth in Clientèle's EV over time
“Excom”	The Executive Committee of the Clientèle Group, including Life Excom and General Excom
“Executive”	Member of Excom
“General Excom”	The Executive Committee of Clientèle General Insurance
“Group Excom”	The Executive Committee of Clientèle
“Goodwill Scheme”	A management incentive scheme based on the Scheme Goodwill created
“Life Excom”	The Executive Committee of Clientèle Life
“REVE”	Recurring Embedded Value Earnings
“Scheme Goodwill”	The amount derived by applying a multiple of 5 to one year’s VNB at the end of each financial year
“VNB”	Value of New Business

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Group Remuneration Report continued

PART 2: REMUNERATION PHILOSOPHY AND POLICY

1. DEFINITION OF REMUNERATION

Remuneration includes:

• a) fees paid to Directors for services rendered by them to or on behalf of the Group, including any amount paid to a person in respect of the person’s accepting the office of Director; and,

• b) salary, bonuses and performance-related payments;

In addition to the above, in terms of Section 30(6) of the Companies Act, the following needs to be disclosed for Directors:

• c) expense allowances, to the extent that the Director is not required to account for the allowance;

• d) contributions paid under any pension scheme;

• e) the value of any option or right given directly or indirectly to a Director, past Director or future Director, or person related to any of them, as contemplated in section 42;

• f) financial assistance to a Director, past Director or future Director, or person related to any of them, for the subscription of options or securities, or the purchase of securities, as contemplated in section 44; and,

• g) with respect to any loan or other financial assistance by the Group to a Director, past Director or future Director, or a person related to any of them, or any loan made by a third party to any

• i) any interest deferred, waived or forgiven; or

• ii) the difference in value between:

• aa) the interest that would reasonably be charged in comparable circumstances at fair market rates in an arm’s length transaction; and,

• bb) the interest actually charged to the borrower, if less.

2. SCOPE OF THE REMUNERATION POLICY

The remuneration policy applies to all Clientèle staff, including Directors, Managing Executives and Heads of Control Functions.

The Group Remuneration Committee ensures that:

• Excessive or inappropriate risk-taking is not induced and aligns remuneration with the long-term interests of the Group and its stakeholders;

• Where remuneration includes both fixed and variable components, the mix of fixed and variable pay meets the Group needs and strategic objectives;

• The remuneration policy is consistent with the Clientèle business and risk management strategy and performance;

• Specific consideration is given to the Remuneration of Control Function Heads to ensure that the level and split between Guaranteed Earnings and Bonus earnings is appropriate;

• The policy provides for a clear, transparent and effective management structure around remuneration; and,

• In defining an individual’s performance, financial and non-financial performance is considered.

3. GOVERNANCE AND THE GROUP REMUNERATION COMMITTEE

Role and Constitution of the Group Remuneration Committee

The Group Remuneration Committee has an independent role, operating as an overseer, maker of decisions on remuneration and maker of recommendations to the shareholders for their consideration. The Group Remuneration Committee Terms of Reference, which is approved by the Board, requires that the Group Remuneration Committee comprise of a minimum of three Group Non-executive Directors, the majority of whom must be Independent Nonexecutive Directors.

The Group Remuneration Committee does not assume the functions of management, which remain the responsibility of the Executive Directors, officers and other members of senior management.

The role of the Group Remuneration Committee is to assist the Board in ensuring that:

• The Group remunerates Directors, officers, members of senior management and staff fairly and responsibly;

• The disclosure of remuneration is accurate, complete and transparent; and,

• There is no discrimination in remuneration based on gender and race.

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Group Remuneration Report continued

4. REMUNERATION MATRIX AS AT 30 JUNE 2022

The following matrix outlines the type of remuneration that employees can participate in:

			Short-term
	Number of	Basic	Bonus	BR	EV	Goodwill
Category	employees	Salary	Incentives	Scheme	Scheme	Scheme
Group Excom	9	X	X		X	X
Balance of Excom	14	X	X	X	X
Management and specialists
(“management”)	439	X	X	X	X
Staff	1,623	X	X	X
Total	2,085

5. CORE PRINCIPLES OF REMUNERATION

5.1 Monthly Remuneration (Basic Salary)

Clientèle operates on a CTC basis as a contractual condition of employment.

CTC packages are determined by the specific job function, level of qualification and/or experience required, job responsibility, market need and within set departmental parameters. Provident Fund and Medical Aid contributions (where relevant) are deducted from this CTC. All Clientèle employees become members of the Provident Fund within 3 months of joining the company and are then covered by the Company’s Group life and capital disability policy. Employees have the option of joining the Company’s medical aid.

Annual benchmarks of Clientèle’s packages, against industry standards, are undertaken and every effort is made to ensure that market-related packages are offered to employees.

Clientèle does not make use of an external job-grading system, however job grading based on the Group’s requirements and structure takes place based on an internally developed system. Clientèle’s grading system is simple and relatively easily comparable to formal systems.

The grading system is based on the job level and job family classification method. The Group’s employees are categorised according to employment levels from staff level up to senior manager level. Each employment level has a set of job requirements according to the defined job family (e.g. sales, finance, administration, legal), skill, knowledge and, in certain cases, qualifications, which all determine where employees are placed on the salary band.

Clientèle’s salary system provides base income and the opportunity to earn additional remuneration through incentives (see 5.2).

Promotions are based on individual performance relative to the job requirements and expectations.

5.2 Short-term Bonus Incentives

Incentives are given, based on employee performance compared against pre-determined, and agreed upon, key measurement factors. Incentives are determined based on the specific function and requirement of each department.

Clientèle’s incentive system is based on the key assumption that employees expect that incentives earned from Clientèle will correlate with their relative level of performance. This means that expectations are set in terms of reward and compensation if certain levels of performance are achieved. These expectations will determine goals and expected levels of performance for the future.

Staff rewards include merit increases (monthly CTC and incentive/bonus earnings), promotions and intrinsic rewards (including recognition amongst peers, awards and praise).

Due to Clientèle’s incentive structure, employees do not receive a 13th cheque. The rationale behind this is that a 13th cheque rewards all employees equally (performers and non-performers) whilst incentive payments reward employees for their individual output and contribution.

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Group Remuneration Report continued

5.3 Application of core principles (Basic Salary and Short-term Bonus Incentives)

5.3.1 Staff

The main purpose of staff incentivisation is to relate a portion of employees’ pay to performance. Performance incentive payments increase directly in line with performance:

• The core principles underlying Clientèle’s approach to staff incentivisation are based on the assumption that behaviour that is rewarded is more likely to be repeated and behaviour that is not rewarded is less likely to be repeated. Employees are likely to be more highly motivated if they perceive that there is a direct relationship between their level of performance and the financial reward received;

• It also links Group objectives with employee output;

• It is department specific and amounts are determined by pay-level, responsibility, work environment, job pressure, market trends, level of sophistication, Group targets and objectives and motivational impact;

• The minimum salary payable to staff who can earn a significant portion of their earnings via incentives is set at R4,500 per month. In all cases, we would expect such staff to be able to earn R6,500 or more by meeting the basic requirements of their job description;

• The minimum salary payable to staff who cannot earn significant extras via additional incentives paid is set at R6,702 per month;

• Incentives are not guaranteed;

• Incentives are awarded based on proper and consistent evaluation and measurements that are equitable and measurable; and,

• Incentives are intended to reward above average performance and work-related achievements.

5.3.2 Management

• Annual (or semi-annual) performance bonuses for management (junior to senior) and technically or academically qualified staff are awarded;

• The core principle of Clientèle’s policy on management remuneration is ensuring that Clientèle’s key staff are rewarded in the top quartile for equivalent manager positions. Bonuses paid to management staff are highly attractive and lucrative. These are largely based on individual key performance criteria with a portion based on the achievement of Group Profit and REVE targets; and,

• Care is taken to ensure that added benefits are linked to the overall remuneration packages of management, these include participation in the BR Scheme, access to company vacation houses and generous leave allocations.

Core principles for management incentivisation include:

• Motivate, attract, reward and retain key staff;

• Link Group objectives with managerial output;

• Provide the opportunity for key management to earn bonus pay-outs based on outputs within their control;

• Position specific amounts are determined by pay level, responsibility, work environment, job pressure, market trends, level of sophistication, Group targets and objectives and motivational impact;

• ‘Paying for the person’ and not necessarily for the position can play a role especially where specific skills and experience are required;

• Blanket rules are not applied when setting bonus amount criteria but are determined by critical Group needs, skill sets required, market trends and job level. Clear guidelines are provided in this regard;

• It relies on proper and consistent evaluation and measurement which is equitable and measurable;

• Performance is assessed on both financial and non-financial criteria;

• It is intended to reward above average performance and work-related achievements. It is not intended for merely ‘doing the job’ or mediocrity; and,

• Individual members of management may participate in the EV Scheme Incentive pool, from time to time, based on outstanding performance.

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Group Remuneration Report continued

5.4 BR Scheme

The BR Scheme exists for the purpose of retaining, motivating and rewarding all employees (excluding Group Excom, who participate in the Goodwill Scheme) as they are able to influence the performance of Clientèle on a basis which aligns the interest of the participants with those of Clientèle and its shareholders (For additional detail on the Scheme refer to Note 14 on pages 147 to 149 of the Integrated Annual Report).

As at 30 June 2022, a total of 55,961,854 BRs have been issued to 5,325 participants. Up to date, 14,903,377 BRs have been exercised, resulting in the issue of 4,299,371 Clientèle shares to participants, to the value of R73 million. As at 30 June 2022, a total of 26,494,712 BRs have been cancelled.

Salient features:

• The aggregate number of ordinary shares that may be allotted and issued to Bonus Participants under the BR Scheme will not exceed 32,350,000 ordinary shares less that number of ordinary shares issued to participants under the previous SAR Scheme. The allocation may be increased by ordinary resolution of the members of Clientèle;

• The maximum aggregate number of BRs which may be allocated to any one participant under the BR Scheme will be 647,000, namely 2% of the total number of BRs available under the BR Scheme and the SARs available under the SAR Scheme:

• Notwithstanding that a Bonus Participant has been invited to participate in the BR Scheme, no rights will vest in the Bonus Participant until such time as BRs are exercised;

• No amount will be payable by a Bonus Participant in order to participate in the BR Scheme.

• At any time after:

• 3 years from the Invitation Date, up to 20% of the BRs may be exercised by a Bonus Participant;

• 4 years from the Invitation Date, up to 50% of the BRs may be exercised by a Bonus Participant; and,

• 5 years from the Invitation Date, up to 100% of the BRs may be exercised by a Bonus Participant, or on such earlier date or dates as may be agreed to or determined by the Directors in their discretion, provided that BRs may not be exercised during a closed period or any other period during which dealings in securities of the Company are prohibited;

• BRs not exercised within 7 years from the Invitation Date will be forfeited, except for any BRs allocated during the period 1 November 2013 to 31 December 2015, where the period was extended to 10 years from the Invitation Date;

• A BR Participant will be entitled to sell shares which he has acquired pursuant to the Exercise of a BR only after the vesting date, which is after the implementation in full of the transaction arising from the Exercise of the BR. The Bonus Participant will first be obliged to offer his shares in terms of the pre-emptive rights provisions of the BR Scheme and failing acceptance thereof, will be entitled to sell the relevant shares to a third party;

• The Board may amend the BRs Scheme, provided that no amendments affecting any of the following matters shall operate unless sanctioned by the shareholders in a general meeting:

• the eligibility of Bonus Participants under the BR Scheme;

• the maximum number of BRs which may be acquired by a single participant under the BR Scheme;

• the total number of BRs which may be granted in terms of the BR Scheme;

• the total number of shares which may be allotted and issued by the Company in terms of the BR Scheme;

• – the basis for determining the Initial Price;

• the basis for determining the Terminal Price; and,

• any other matter as may be prescribed by the Listings Requirements;

• The Company ensures compliance with all applicable laws including, but without limitation, the Listings Requirements;

• When BRs are due to be settled, the value of each BR is the difference between the volume weighted average price that the ordinary shares in Clientèle traded on the JSE during the thirty trading days immediately preceding the invitation date and the volume weighted average price that the ordinary shares in Clientèle traded on the JSE during the thirty trading days immediately preceding the exercise date less one and a half cents (“the terminal price”), as determined by the rules of the Scheme;

• The Board, in its discretion, may settle BRs either:

• By means of the allotment and issue of new shares to the participant;

• By way of a cash payment; or,

• By way of a combination of the aforegoing methods;

• It is not the intention that cash payments will be made. Only in exceptional circumstances, as considered by the Board in its discretion, will a cash payment be made to a BR participant; and,

• In determining the allocation of BRs, the following performance measures are used:

• Underperformers – No allocation

• Low performers

• No allocation

• Average performers – A minimal allocation per category

• Good performers – An average allocation per category

• Excellent performers – The maximum allocation per category

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Group Remuneration Report continued

5.5 EV and Goodwill Schemes

The remuneration packages for Group Excom and Excom members comprise both a guaranteed portion in the form of salary (unconditional entitlement) and a non-guaranteed portion in the form of bonuses and incentives (conditional entitlement).

At the core of Clientèle’s policy for Group Excom remuneration is that the major portion of an individual’s potential package (non-guaranteed portion) is based on individual performance linked to, and dependent upon growth in Clientèle’s EV and the creation of Scheme Goodwill over time. These are referred to as the EV Scheme and the Goodwill Scheme respectively. This is structured on a basis that aligns Group Excom’s interests to that of shareholders. It is the intention that, should Group Excom and Excom perform in line with, or better than, expectation, the total remuneration paid to them will be in the top quartile.

This Incentive Scheme is a formally documented Scheme. The Incentive Scheme was adopted as it was felt that a typical share or option scheme may not achieve the desired result given the tightly held nature of Clientèle’s shareholding and also given the Board’s conviction that the most important element of success of Clientèle in the long-term is growth in EV and VNB. The Goodwill Scheme is for members of Group Excom whereas the EV Scheme also includes members of Life and General Excom and is based on individual performance linked to, and dependent upon growth in Clientèle’s EV and the creation of Scheme Goodwill over time.

The Incentive Schemes are formulated and managed to encourage behaviour that fosters long-term sustainable growth for Clientèle and to discourage short-term behaviour and unnecessary risk-taking. Inappropriate risk taking results in the Executive involved receiving a reduced (or nil) incentive payment.

The core principles of the Incentive Schemes are to:

• Align Executives’ interests with those of shareholders;

• Link remuneration directly to growth in EV, Group profitability and growth in the overall value of Clientèle;

• Provide a tool whereby remuneration is determined to encourage long-term employment with Clientèle;

• Include a “clawback” on a portion of historic incentive bonus allocations – this applies in instances where the growth in EV is negative; and,

• Includes an adjustment which is made, positive or negative, if actual experience differs by a pre-determined percentage compared to the assumptions used in calculating Scheme Goodwill.

In summary Group Excom and Excom receive the following remuneration package:

• A monthly salary;

• A short-term bonus based on an individual’s key measurement factors;

• A medium-term incentive (EV Scheme); and,

• A long-term incentive (Goodwill Scheme) – Group Excom only.

Life Excom and General Excom participate in the EV Scheme as well as the BR Scheme. The BR Scheme benefits participants for the more general long-term performance of the Group and this is deemed to be more appropriate for Life and General Excoms. They do not participate in the Goodwill Scheme. Group Excom participates in the EV Scheme as well as the Goodwill Scheme but do not participate in the BR Scheme.

5.5.1 Current Components of Group Excom Remuneration

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Fixed/
variable Element Definition
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Fixed	Salary, Medical Aid, Provident Fund	CTC refers to the fixed element of remuneration and includes a basic salary, contributions to the medical aid scheme and contributions to the provident fund. Capital disability cover is provided over and above the CTC.
Variable	Annual short-term incentive	The short-term bonus is an annual cash payment aimed at delivering the Group’s goals and strategic priorities.
Variable	Medium-term incentive (EV Scheme)	The medium-term incentive is calculated annually and paid over four years via an annual cash payment. The aim is to maximise growth in the Group’s EV.
Variable	Long-term incentive (Goodwill Scheme)	The long-term incentive is calculated in five-year cycles and is paid via five annual incentive payments. This Scheme is aimed at the creation of Value of Future New Business (i.e. value in excess of EV). The rationale for this is that the Goodwill Scheme is designed to incentivise behaviour and performance over the long-term and the drivers of this performance are largely under the control of Group Excom.

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Group Remuneration Report continued

5.5.2 Annual Short-term Incentive

Purpose	To encourage and reward delivery of the Group’s strategic priorities and short-term goals.	To encourage and reward delivery of the Group’s strategic priorities and short-term goals.
Participants	Group Excom, Excom and members of management.
Operation	The short-term bonus potential is determined at the beginning of the year and the actual pay-out is based on Clientèle’s performance in terms of profit, EV earnings and the individual key measurement factors tailored for the individual concerned which may include financial and non-financial elements. The Group Remuneration Committee looks at recommendations provided by the Group Managing Director and can change the payment upwards or downwards for individuals or all participants at its discretion.
Performance measures	The award for all participants is determined on the basis of Clientèle’s performance as well as individual performance assessments measured against key measurement factors determined at the beginning of the year. Key measurement factors considered for Group Excom include the following: • Group profits; • Managing Withdrawals; • Production and Quality of New Business; • Developing new distribution channels; • Lead creation; • Focus on Authenticated Collections; • Building brand and other marketing activities; • Innovation; • Smooth functioning of relevant business areas; • Improving culture and level of client service; • Staff Management and Treating Employees Well; • Staff development and stability; • Succession planning; • Expense management; • Strategic input and Executive contribution; • Fintech, automation, digital strategy; • System stability; • IT Governance; • Hardware development and planning; • Attainment of appropriate B-BBEE certification; • TCW; • Maintaining appropriate service levels and standards; • Transformation; • Compliance; • Living the values; and, • Key staff retention. The key measurement factors are different in weight depending on the role of the participant and do not all apply to each and every participant. The key measurement factors also contribute to the final awards for the EV incentive.
Key measurement scores of Group Excom for 2022	Ranged from 83.5% to 92% (2021: 70% to 93%)
Maximum value of annual incentive earned and paid for 2022	6 Months (2021: 6 months)	Group Excom
	4 Months (2021: 4 months)	Excom
	2 Months (2021: 2 months)	Members of Management
	The amounts are expressed as multiples of the monthly salaries.
Changes for 2022	No changes this year and no changes currently expected in future years.

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43

Group Remuneration Report continued

5.5.3 EV Scheme – Medium-term Incentive

Purpose	The medium-term incentive is calculated annually and paid over four years via an annual cash payment. The aim is to maximise growth in the Group’s EV.
Participants	Life Excom, General Excom and Group Excom. A small portion of the pool is also allocated to members of management outside of Excom teams based on their strategic importance and performance during the year. This is done at the discretion of the Group Managing Director and subject to Group Remuneration Committee approval.
Operation	The EV incentive element incentivises participants over the medium-term for performance over and above that for which they are remunerated and incentivised for under Clientèle’s standard remuneration and short-term bonus policy. The EV Scheme is based on growth in EV, as certified by Clientèle’s External Actuaries and approved by the Group Remuneration Committee, and vests and is payable over a four-year period. The EV Scheme is split into two pools. Pool 1 is calculated as a percentage (5%) of adjusted REVE. Pool 2 is based on out-performance of adjusted REVE over a defined hurdle rate at a participation level of 5.6%. Each participant’s share in the pool is set at an initial level at the beginning of the year and then adjusted up or down based on individual performance during the year. The Group Remuneration Committee is entitled to allocate 100% of the pool to the participants; however, this has not been done to date with such lesser amount allocated based on circumstances. Each participant’s share in the pool is determined annually, it is then paid out in four equal annual payments with the first annual payment being at the time of the amount of the pool being determined. There is a “clawback” on Pool 1 if the pre-determined assumptions are not met, which is deducted from non-vested amounts earned but not yet paid.
Performance measures	Each participant’s allocation within the pool is determined (on a provisional basis) at the beginning of the year. The ultimate allocation will be similar to the initial allocation; however, it may be adjusted upwards or downwards based on the individual’s performance during the year. Performance is assessed both on financial and non-financial elements.
Maximum value of annual incentive for 2022	There is no specific cap, however, the quantum of the bonus pool and the amounts per individual are approved by the Group Remuneration Committee.
Changes for 2022	No changes this year and no changes currently expected in future years.

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Group Remuneration Report continued

5.5.4 Goodwill Scheme – Long-term Incentive

Purpose	The long-term incentive is calculated in five year cycles and is paid via five annual incentive payments. This Scheme is aimed at the creation of Value of Future New Business (i.e. value in excess of EV).
Participants	Group Excom
Operation	The Scheme Goodwill element of the Scheme is intended to take account of long-term capital growth in Clientèle that is not adequately dealt with under the EV element of the Scheme. The Goodwill Scheme component recognises the creation of value in excess of EV. This is measured in five-year cycles. Amounts are payable over a five-year period and are subject to criteria included in the Incentive Scheme. The cycle where payments are currently being made commenced on 1 July 2012, and ended on 30 June 2017 with the first payment made in August 2017. The next cycle commenced on 1 July 2017 and ended on 30 June 2022 with the first payments for this cycle being made in August 2022. The Goodwill Scheme results in a pool being created as a consequence of the growth in the Value of Future New Business. This pool is calculated at the end of each five-year cycle, as 7.5% x the difference between the VNB x 5 at the end of the period and the VNB x 5 at the beginning of the period. Participants in this Scheme currently receive a percentage of this pool based on their average percentage allocation to the EV Scheme pool over the five-year cycle. There is an adjustment made to future payments under this Scheme, positive or negative, if actual experience differs by more than 10% from the assumptions used in calculating the Scheme Goodwill value. The adjustment is made to non-vested amounts earned but not yet paid. The Group Remuneration Committee is entitled to allocate 100% of the pool to the participants; however, this has not been done to date with such lesser amount allocated based on circumstances.
Performance measures	The Goodwill allocation vests every fifth year, and the ultimate allocation is only calculated at the time of vesting. The allocation, per participant, is calculated as the average Medium-term Scheme allocation over the five years (or part thereof if the participant joined the Group Excom team during the five-year period). The medium-term scheme performance is assessed on financial and non-financial factors.
Maximum value of annual incentive	There is no specific cap, however, the quantum of the bonus pool is approved by the Group Remuneration Committee. 51.58% of the pool was allocated when the previous cycle came to an end on 30 June 2017. 78.9% of the pool was allocated when the current cycle came to an end on 30 June 2022.
Changes for 2022	To take account of the impact of COVID-19 a revised calculation has been applied to the current cycle calculation. With effect from 1 July 2021, it has been measured over a 2-year period ending 30 June 2022, with an adjustment factor of 2/5 applied to the pool created. From the next cycle onwards, the Goodwill Scheme will no longer be based on a fixed point VNB at the end of each Cycle but rather on a weighted average of the VNB created during the five-year Cycle in determining the pool, which will be calculated as follows: Weighted average VNB = (VNB year 1 + (2 x VNB year 2) + (3 x VNB year 3) + (4 x VNB year 4) + (5 x VNB year 5)) / 15 The methodology for determining the clawback after the Scheme has vested has been modified to take account of the above.

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45

Group Remuneration Report continued

5.6 Excom Contracts of Service

All Excom members have employment contracts with notice periods ranging from 3 to 6 months.

The contracts do not provide for restraint of trade payments but this may be negotiated by the Group Remuneration Committee when necessary.

Upon resignation of an Excom member, all vested amounts relating to the EV and Goodwill Scheme incentives will be paid in accordance with the rules of the Incentive Schemes. Except where determined otherwise by the Group Remuneration Committee or in exceptional circumstances, all unvested bonus benefits will be forfeited.

6. NON-EXECUTIVE DIRECTORS

6.1 Appointment of Non-executive Directors

The appointment of Non-executive Directors for the reporting period is a matter for the Board as a whole. The Group Nominations Committee is tasked with this function, in conjunction with the Board.

Non-executive Directors are subject to election by shareholders at the first AGM following their appointment according to the Board rotation plan.

Employment contracts are in place with all Non-executive Directors, setting out their responsibilities.

6.2 Non-executive Director Fees

The Group Managing Director and the Chairman of the Board recommend the Non-executive Director fees to the Group Remuneration Committee for approval subsequent to periodic input by external independent advisers regarding benchmark studies based on the same competitive group used for Executive Directors’ remuneration.

The remuneration packages of the Non-executive Directors comprise a Directors fee. Non-executive Directors do not qualify to participate in any Bonus or Incentive Scheme (including the BR Scheme).

The performance of Non-executive Directors is assessed by Group Excom. The Non-executive Director’s fees are approved at the AGM.

7. NON-BINDING ADVISORY VOTE

Shareholders are requested to cast a non-binding advisory vote on part 2 of this Remuneration Report.

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Group Remuneration Report continued

PART 3: IMPLEMENTATION OF POLICIES FOR THE FINANCIAL YEAR – IMPLEMENTATION REPORT

1. GUARANTEED PAY ADJUSTMENTS FOR 2022

As a rule, Clientèle’s annual increase system is based on the principle of rewarding good performance and discouraging poor performance. As such, the determining factor for increases, relative to inflation, is based on merit and on rewarding commitment and dedication in employee performance.

The average increase across all levels of employees (excluding Excom) amounted to 5.68%.

2. BRs

The Clientèle BR Scheme was approved by Shareholders and launched in October 2012 as part of a staff reward and retention initiative.

The value through this Scheme is derived from the increase in the share price between date of allocation (strike price) and date of exercise (exercise price). The prices used are the closing 30 day volume weighted average price.

The strike price of the BRs available to exercise ranged from R7.69 to R20.01.

The depressed economy had a negative impact on the share price, limiting the ability of staff to exercise BRs.

BRs are allocated to staff who have been employed by the Group for at least 9 months.

BRs	2022	2021
Total issued to date Total exercised to date Total terminated to date Available to exercise Shares issued under the BR Scheme	55,961,954 14,903,377 26,494,712 14,563,865 4,299,731	52,879,568 14,903,377 24,212,522 13,808,669 4,299,731
Value created to date (Rand)	72,829,453	72,829,453

The BRs issued for the year can be split between the various categories as follows at prices ranging from R9.49 to R10.39:

to R10.39:
Category	2022	2021
Exceptional performers Good performers Average performers	573,268 1,467,528 1,041,590	1,520,680 1,577,927 969,839
Low performers and Underperformers	–	–
Total	3,082,386	4,068,446

* Also see Note 14 on pages 147 to 149 to the Annual Financial Statements.

3. EV SCHEME

The principal actuarial assumptions used for estimating the obligation that relates to the EV Scheme are based on the EV assumptions and calculations as outlined in the Statement of Group EV (refer to pages 62 to 68 of the Integrated Annual Report).

Details of the pool (2022 numbers confirmed by the External Actuaries (QED Actuaries and Consultants)), are as follows:

EV Scheme pool	2022 2021
Total pool (R’000) Pool 1 Pool 2 Payment terms (years) Hurdle rate (%) (only applicable to Pool 2) Pool utilisation (%)*	47,112 46,971
	39,469 37,541 7,643 9,430
	4 4 12.10 10.60 83.00 79.69

* Including 6.62% (2021: 5.32%) to select members of management.

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Group Remuneration Report continued

4. GOODWILL SCHEME

(Refer to Note 21 on pages 155 to 156).

The principal details relating to the Goodwill Scheme have been confirmed by the External Actuaries (QED Actuaries and Consultants) and are as follows:

Consultants) and are as follows:
Cycle 4 ending 30 June 2022	2022	2021
Expected VNB at the end of the cycle (R’000) Actual VNB at the end of the cycle (R’000) Total pool (R’000) Expected pool utilisation (%) Actual pool utilisation (%) VNB multiple	N/A 290,575 33,256 N/A 78.90 5	500,000 N/A 64,670 90 N/A 5
Payment term (years)	5	5
Cycle 3 ended 30 June 2017	2022	2021
Projected In-force business (R’000)* Actual In-force business (R’000) VNB at the end of the cycle (R’000) Total Pool (R’000) Pool Utilisation % VNB multiple	N/A N/A 527,184 60,632 50.18 5	659,848 393,773 527,184 60,632 50.18 5
Payment term (years)	5	5

* Based on current demographic assumptions with economic assumptions as at 30 June 2017.

The variables used in calculating and estimating the liability in respect of the Goodwill Scheme are subject to approval by the Group Remuneration Committee. Those variables, which are subjective in nature, have been set at levels which the Group Remuneration Committee deem to be fair and equitable to both shareholders and the participants. The variables used are changed over time as circumstances, Group performance and the economic environment change.

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5. REMUNERATION OF EXECUTIVE DIRECTORS, GROUP EXCOM AND EXCOM

The table below summarises the remuneration packages of Executives applicable for the 2022 financial year.

EARNED 2022

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||||||||||
|---|---|---|---|---|---|---|---|---|
|(R’000)|Number of|Base|Short-term|EV|Goodwill|
|Category|individuals|salary|[2]|Incentive|Scheme|Scheme|[3]|Total|
|Group Managing Director –|
|BW Reekie|[1]|1|7,855|3,574|5,757|7,022|24,208|
|Managing Director|
|Clientèle Life – H Louw|[1]|1|4,713|2,097|3,775|3,801|14,386|
|Financial Director – IB Hume|[1]|1|4,975|2,189|3,657|4,893|15,714|
|Director – T Tabane|[1]|1|2,471|1,100|1,705|1,820|7,095|
|Balance of Group Excom|[5]|7|14,112|5,878|11,246|8,694|39,930|
|Balance of Excom|[6]|17|27,801|6,610|9,846|–|44,257|
|Total|28|61,928|21,447|35,986|26,230|145,591|

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“Earned” amounts for the EV Scheme and the Goodwill Scheme will only be payable assuming the Group achieves certain performance metrics and contingent on further service of the relevant executives. Thus, this will only be fully earned over their respective vesting periods (3 years for the EV Scheme and 4 years for the Goodwill Scheme), both of which commenced as at 1 July 2022.

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|||||||||||
|---|---|---|---|---|---|---|---|---|---|
|Base|Short-term|EV|Goodwill|
|(R’000)|salary|[2]|Incentive|Scheme|Scheme|[3]|Total|
|Average for the Balance of Group Excom|2,016|840|1,607|1,242|5,704|
|Average for the Balance of Excom|1,635|389|579|–|2,603|
|PAID 2022|
|(R’000)|Number of|Base|Short-term|EV|Goodwill|
|Category|individuals|salary|[2]|Incentive|Scheme|[4]|Scheme|[3]|Total|
|Group Managing Director –|
|BW Reekie|[1]|1|7,855|3,574|4,070|1,404|16,904|
|Managing Director|
|Clientèle Life – H Louw|[1]|1|4,713|2,097|2,480|760|10,051|
|Financial Director – IB Hume|[1]|1|4,975|2,189|2,686|979|10,828|
|Director – RDT Tabane|[1]|1|2,471|1,100|1,197|364|5,132|
|Balance of Group Excom|[5]|7|14,112|5,878|7,153|1,739|28,882|
|Balance of Excom|[6]|17|27,801|6,610|5,431|–|39,843|
|Total|28|61,928|21,447|23,017|5,246|111,638|
|Base|Short-term|EV|Goodwill|
|(R’000)|salary|[2]|Incentive|Scheme|[4]|Scheme|[3]|Total|
|Average Balance of Group Excom|2,016|840|1,022|248|4,126|
|Average Balance of Excom|1,635|389|319|–|2,344|

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1 Months in office = 12.

• 2 Including retirement, medical and other benefits.

3 The Goodwill Scheme has a five-year cycle, 2022 was the fifth year of the cycle that commenced on 1 July 2017.

4 Includes Control Function Head bonuses.

5 Two members of Group Excom left on 31 December 2021 and 1 member of Group Excom joined on 1 February 2022.

• 6 One member joined during the year and three members left during the year, with 14 active members as at 30 June 2022.

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Group Remuneration Report continued

EARNED 2021

EARNED 2021
	Number of
	individuals
	earned
(R’000)	during	Base	Short-term	EV	Special	Goodwill
Category	the period	salary2	Incentive	Scheme	bonus	Scheme3	Total
Group Managing Director
– BW Reekie1	1	7,488	3,482	5,700	–	–	16,670
Group Financial Director
– IB Hume1	1	4,742	2,158	3,618	–	–	10,518
Director – B Frodsham1	1	2,808	1,123	1,867			5,798
Director – H Louw1	1	4,493	2,044	3,732	–	–	10,269
Director – RDT Tabane1	1	2,246	1,011	1,727	–	–	4,984
Balance of Group Excom	6	13,874	5,673	9,977	–	–	29,524
Balance of Excom5	19	24,836	5,786	8,311	–	–	38,933
Total	30	60,488	21,277	34,932	–	–	116,696
		Base	Short-term	EV	Special	Goodwill
(R’000)		salary2	Incentive	Scheme	bonus	Scheme3	Total
Average for the Balance of	Group Excom	2,312	945	1,663	–	–	4,921
Average for the Balance of	Excom	1,307	305	437	–	–	2,049

PAID 2021

PAID 2021
	Number of
	individuals
(R’000)	paid during	Base	Short-term	EV	Special	Goodwill
Category	the period	salary2	Incentive	Scheme4	bonus	Scheme3	Total
Group Managing Director
– BW Reekie1	1	7,488	3,482	2,720	–	1,198	14,888
Group Financial Director
– IB Hume1	1	4,742	2,158	1,839	–	895	9,634
Director – B Frodsham1	1	2,808	1,123	960	–	612	5,503
Director – H Louw1	1	4,493	2,044	1,574	–	375	8,486
Director – RDT Tabane1	1	2,246	1,011	789	–	119	4,165
Balance of Group Excom	6	13,874	5,673	4,592		422	24,560
Balance of Excom5	19	24,836	5,786	3,332	–	–	33,954
Total	30	60,488	21,277	15,806	–	3,621	101,191
		Base	Short-term	EV	Special	Goodwill
(R’000)		salary2	Incentive	Scheme4	bonus	Scheme3	Total
Average for the Balance of	Group Excom	2,312	945	765	–	70	4,093
Average for the Balance of	Excom	1,307	305	175	–	–	1,787

• 1 Months in office = 12.

• 2 Including retirement, medical and other benefits.

• 3 The Goodwill Scheme has a five-year cycle, 2021 was the fourth year of the cycle.

• 4 Includes Control Function Head bonuses.

• 5 5 members joined during the year and 3 members left during the year, with 16 active members as at 30 June 2021.

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Group Remuneration Report continued

6. REMUNERATION OF NON-EXECUTIVE DIRECTORS

EARNED AND PAID 2022 – EXCLUSIVE OF VAT

EARNED AND PAID 2022 – EXCLUSIVE OF VAT
Name	Months in office Directors’ fees R’000 Total emoluments R’000
PR Gwangwa	12 819 819
GQ Routledge	12 3,357 3,357
BA Stott	12 1,964 1,964
RD Williams	12 1,160 1,160
PG Nkadimeng	12 – –
ADT Enthoven	12 – –
GK Chadwick	12 – –
LED Hlatshwayo	12 538 538
Total	7,838 7,838

EARNED AND PAID 2021 – EXCLUSIVE OF VAT

		Directors’	Total
	Months	fees	emoluments
Name	in office	R’000	R’000
PR Gwangwa	12	610	610
BY Mkhondo	10	554	554
GQ Routledge	12	3,197	3,197
BA Stott	12	1,871	1871
RD Williams	12	1,085	1,085
PG Nkadimeng	12	–	–
ADT Enthoven	12	–	–
GK Chadwick	12	–	–
LED Hlatshwayo	12	493	493
Total		7,810	7,810

7. INCREASE IN NON-EXECUTIVE DIRECTOR FEES

Refer to Special Resolution 1 in the Notice of AGM, detailing the increase in Non-executive Directors’ fees (pages 173 to 174).

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Group Remuneration Report continued

8. INTERESTS OF DIRECTORS, INCLUDING THEIR FAMILIES, IN THE SHARE CAPITAL OF CLIENTÈLE

2022

Name	Beneficial direct	Indirect	Associates	Total
GQ Routledge BA Stott IB Hume#	300,000 20,000 192,000	2,565,794 45,000 915,762	79,013 32,000 777,000	2,944,807 97,000 1,884,762
H Louw	105,049	–	–	105,049
RDT Tabane	4,994	–	–	4,994
BW Reekie#	179,052	1,293,126	–	1,472,177
Total	801,095	4,819,682	888,013	6,508,790
2021
	Beneficial
Name	direct	Indirect	Associates	Total
GQ Routledge	300,000	2,565,794	79,013	2,944,807
BA Stott	20,000	45,000	32,000	97,000
IB Hume#	177,000	932,762	665,000	1,774,762
H Louw	105,049	–	–	105,049
RDT Tabane	4,994	–	–	4,994
BW Reekie#	158,000	1,293,126	–	1,451,126
Total	765,043	4,836,682	776,013	6,377,738

There were no changes in the interests of Directors between the end of the financial year and the date of the approval of the Integrated Annual Report.

• # A portion of the Indirect shareholding is represented by the Directors' shareholding in River Lily Investments Proprietary Limited, which in turn owns shares in Clientèle.

River Lily Proprietary Limited has issued preference shares in favour of Depfin and has pledged the underlying Clientèle shares as security for the preference share issue. This is applicable to the following numbers of shares.

the preference share issue. This is applicable to the following numbers of shares.
Name	2022	2021
IB Hume	634,762	634,762
BW Reekie	1,293,126	1,293,126

9. VOTING ON REMUNERATION

In the event that either the Remuneration Policy or the Implementation Report, or both, are voted against by 25% or more of the voting rights exercised at the AGM, the Board will:

• disclose in the voting results announcement, an invitation for dissenting shareholders to engage with the Board;

• detail the manner and timing of such engagement;

• engage with dissenting voters to ascertain the reasons for the dissenting votes;

• appropriately address legitimate and reasonable objections and concerns raised;

• amend the Group Remuneration Policy and/or Implementation Report, if necessary; and,

• record in next year’s Group Remuneration Report, the details and results of such engagements, and the steps taken to address legitimate and reasonable objections and concerns.

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Group Social and Ethics Report

for the year ended 30 June 2022

1. INTRODUCTION

Ethical and effective leadership is one of the cornerstones of good corporate governance. As the conscience of the Group on social and ethical matters, the Group Social and Ethics Committee assists and guides the Group, in accordance with its terms of reference.

The Committee also assists the Group to ensure that it lives its purpose of “Safeguarding Your World… with Compassion”. This it does through guiding the Group in its implementation of the United Nations Sustainable Development Goals (SDGs) as embodied in its policies and processes, particularly those of ending poverty, quality education, climate action and decent work and economic opportunities.

The Clientèle values, particularly those of respect, integrity and customer excellence form the bedrock of the Committee’s function. The Committee supervises Clientèle’s application of the “Treating Customers Fairly” Regulatory outcomes, which have been adopted into its “Treating Clients Well” policy.

2. EMPLOYMENT EQUITY AND TRANSFORMATION

The Clientèle Group recognises that transformation adds value to its business outcomes; it is a business imperative that Clientèle applies in its policies and processes. During the period under review, the Clientèle Group was scored as a level 4 B-BBEE contributor, with Employment Equity (EE) remaining a key pillar in its transformation journey. To this end, the Group is focused on meeting both its numerical and non-numerical goals as set out in its EE Plans. Focus is being given to opportunities to close the gaps to the national Economically Active Population at all the levels of the organisation and EE plans were revised to accommodate the stretching of the numerical targets. These included the recruitment of candidates from race and gender groups that are under-represented when opportunities arise as a result of attrition. Promotions also created an opportunity to close these gaps, which also achieved the other objective of “growing our own timber”. Good progress has been made with regards to achieving numerical targets in the Senior Management categories where all targets were exceeded, with 83% of employees that were promoted being from the designated groups. The focus will be on the Professionally Qualified category as the promotion of people from this level to Senior Management has left a gap in this category.

The Group’s Employment Equity status as of 30 June 2022 can be summarised as follows:

Total number of

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employees, defined by
Occupational Categories Clientèle Group June 2022
Foreign
National
Occupational Categories AM AF CM CF IM IF WM WF Male Female Total
Top Management – 2 – 1 4 1 8 7 – – 23
Senior Management 10 12 2 4 15 11 15 21 1 1 92
Professionally Qualified 15 13 4 6 3 3 12 4 2 – 62
Skilled 96 95 11 14 11 20 20 13 1 – 281
Semi-Skilled 612 881 28 33 7 6 1 7 – – 1,575
Unskilled 13 12 – – – – – – – – 25
Intern 5 13 – – – – – – – – 18
Temporary 2 5 – 1 – – – 1 – – 9
Total 753 1,033 45 59 40 41 56 53 4 1 2,085
Actual (%) 36.12 49.54 2.16 2.83 1.92 1.97 2.69 2.54 0.19 0.05 100.00
National EAP Targets (%) 43.60 35.80 5.00 4.10 1.80 0.90 4.90 3.90 0.00 0.00 100.00
Variance (%) (7.48) (13,74) (2.84) (1.27) 0.12 1.07 (2.21) (1.36) 0.19 0.05
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Group Social and Ethics Report continued

3. EMPLOYEES

In keeping with its Employee Value Proposition (EVP) of:

• Equal employment opportunities;

• Growth; and,

• Wellness,

the Clientèle Group provides opportunities for the youth to access job opportunities, through its partnerships and collaboration with organisations such as Harambee, with some of its employees being first-time entrants in the job market.

There are many elements that boost staff morale and two of these elements are clearly defined opportunities to earn, such as viable lead sources for Sale agents, as well as clearly defined key performance indicators that are linked to an employee’s department as well as the organisation as a whole. The Committee played its supervisory role over these performance management processes, specifically with respect to the legitimacy and fairness of the processes.

Clientèle’s involvement in industry-wide initiatives with regards to proactively growing the pool of the scarce skills in the areas of actuarial sciences and information technology (specifically for long term insurance) to ensure the sustainability of the business is another sign of its good corporate citizenship. Its mentorship programme is also bearing fruit, with the mentees feeling valued and having a visible trajectory on their career path, and the mentors feeling a sense of pride and achievement in helping to advance another individual’s career goals.

In addition to the salary increases and bonuses, Clientèle employees enjoy the benefits offered through Perks as part of this EVP. Staff Awards are also granted to staff who have performed exceptionally well. These awards improve morale and create excitement in the Group as a whole.

The pandemic introduced another layer of trauma on communities, over and above the every-day traumatic life experiences that communities, our employees included, deal with on a regular basis. The Group continued to offer its employees wellness support in five areas: Physical, Mental/Emotional, Social, Financial and Intellectual wellbeing.

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PHYSICAL EMOTIONAL/ SOCIAL FINANCIAL INTELLECTUAL
WELLBEING MENTAL WELLBEING WELLBEING WELLBEING
WELLBEING
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Staff were encouraged to get vaccinated against COVID-19, and vaccination sites were set-up at the Clientèle Office Park. As Clientèle was considered a low-risk area, mandatory vaccinations were not deemed to be appropriate for existing staff, nonetheless vaccinations were encouraged.

The Committee is pleased with the opportunities available to staff through the Learning and Development initiatives, which can assist staff in improving earning potential.

A concern for the Committee is the high turnover of employees in the Telesales area, experienced in the first six months of a consultant’s employment. This is caused inter alia by the quality of the consultants recruited and the perceived quality of the leads, thereby impacting their perception of their ability to earn. The Group is committed to addressing these issues and creating an environment in which employees can grow and thrive, and the Committee will continue its supervisory and guidance role in this regard.

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Group Social and Ethics Report continued

4. CLIENT CENTRICITY

To give effect to TCF Outcome 2, of ensuring that “Products & services marketed and sold in the retail market are designed to meet the needs of identified customer groups and are targeted accordingly”, the Committee has, during the period under evaluation, reviewed existing and new products sold by the Group, to ensure that there is adherence to this principle. This, the Committee found to be at the core of the Clientèle Group's offerings.

This review included the measurement of the service rendered to clients during and after the sales process. The Committee intends on conducting the review annually or when new products are added to the Group’s product offering. The Committee continues its involvement to ensure that clients are being sold products that they need and that the marketing messages are targeted accordingly.

5. STAKEHOLDERS AND REPUTATION MANAGEMENT

Stakeholder engagement enjoys consideration at the highest level – at Excom level. This high-level consideration ensures that each stakeholder’s impact, value and influence gets assessed; and relevant engagement strategies are devised and implemented. These strategies are designed to ensure timely, accurate, transparent and appropriate information is provided to and received from these stakeholders. They are also designed to ensure that we continually deliver on Clientèle’s contractual and brand promise to its clients. The Group’s attitude towards all of its stakeholders is to take a pro-active approach in terms of building relationships. These strategies and levels of engagement have developed the relevant stakeholders’ trust and confidence in Clientèle. The Committee’s oversight on stakeholder and reputation management includes making sure that the Clientèle representatives are senior, diverse and inclusive, and that they uphold the Clientèle values in all such engagements. With the introduction of funeral parlours as clients of the Clientèle business model/distribution channels, and the keen interest that the Regulators have taken therein, it was important to the Committee that they get the relevant information and assurances on how the challenges brought about by this new distribution channel are dealt with. The Committee has received information and assurances in this regard and will continue to monitor this channel.

6.

ENVIRONMENTAL SUSTAINABILITY

The Committee has borne witness to Clientèle’s commitment to contributing positively to the Environmental Social Governance (“ESG”) initiatives which are also an important strategic focus for its majority shareholder. Significant progress has been made in respect of carbon emissions, base lining and measurement, the installation of solar panels throughout Clientèle’s Office Park as well as some other initiatives including responsible investing. The journey in this regard has just begun and the Committee has no doubt that Clientèle will continue to accelerate and improve its ESG practices and reporting into the future.

The carbon emissions baseline exercise was completed with assistance from Carbon Calculated.

Clientèle used the Greenhouse Gas Inventory report, setting out the carbon emissions for the 2020 financial year and including scope 1 (direct emissions) and scope 2 (indirect emissions) as the baseline. Scope 3 emissions were partially included in the FY2022 report. This process will be repeated at each year-end to measure the reduction in the carbon footprint for the Clientèle Group. All reports were prepared using the GHG (Green House Gas) Protocol Corporate Accounting and Reporting Standard methodology.

footprint for the Clientèle Group. All reports were Accounting and Reporting Standard methodology.	prepared using the GHG (Green House Gas) Protocol Corporate
	metric tonnes of CO2e
Description	Baseline Year* FY2020 FY2021 FY2022
Scope 1	77.67 87.00 62.72 56.23
Scope 2	4,259.83 3,776.66 2,863.17 3,003.81
Scope 3	Not reported Not reported 371.71 1,073.32
Outside of scopes	24.62 24.62 24.62 135.57

Scope 1 Emissions are those resulting from equipment owned or controlled by the reporting company e.g. fuel, R410a gas and mobile fuel; Scope 2 Emissions are those resulting from consumption of electricity, steam or heat purchased by the company; Scope 3 Emissions are those resulting from indirect activities such as business travel, paper consumption and commuting travel; and Outside of Scopes Emissions are those accounted for by the direct CO2 impact of burning biomass and biofuels because the Scope 1 impact of these fuels has been determined to be a net zero. This also includes fugitive emissions outside of the GHG Protocol which Clientèle is using, called R22.

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Group Social and Ethics Report continued

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SCOPE 1 SCOPE 2 SCOPE 3
Purchased electricity
56 tCO e 1 073 tCO e
2 2
3 004 tCO e
2
Stationary fuels 39 tCO2e Purchased goods – paper & water 45 tCO2e
Fugitive emissions 0 tCO2e T&D losses fuel & 928
Mobile fuels 17 tCO2e energy tCO2e
On-site renewable Waste 25 tCO2e
energy 0 tCO2e
Rental cars 3 tCO2e
OWNED/CONTROLLED Air travel 73 tCO2e
by reporting compan y
Intensity metrics
Scope 1 & 2
3 060
tCO e
2 TOTAL OUTSIDE
OF SCOPES
Company metrics and Scope 1 & 2 intensity
FTE 2 052 tCO2e/FTE 1.491 m [2 ] 23 170 tCO2e/m [2] /0.132 136 tCO2e
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In addition to the installation of solar panels at the Office Park, water management measures such the harvesting of rain and ground water have been introduced. As of 30 June 2022, harvested water amounted to 743,000 litres.

With respect to electricity usage and measures to reduce consumption, the Group is replacing air-conditioners which have faulty inverter units and have refrained from using any other air-conditioning type. The Group follows the Independent Electrotechnical Commission standards. The principles of reduce, re-use and recycle also permeate through the Office Park, with different bins to sort different types of waste placed throughout the park. Destruction and disposal of equipment is also done in an environmentally friendly way, through companies registered with EWASA (E-Waste Association of South Africa).

7. REGULATORY COMPLIANCE

The focus and engagement with the Regulator on products and distribution channels remains a priority. FICA compliance has been at the forefront of investigations by the Regulator and based on assurances from our Regulatory and Compliance department, the Committee is satisfied with the Group’s Risk Management Plan and how it is executed. The Committee commended the Group on the work done on POPIA compliance and ensuring that a POPIA compliant culture is embedded in everything that the Group does. The Group is also in compliance with the FSCA requirement that insurers ensure fair outcomes for policyholders in the issue of premium increases, in that the premiums should be actuarially sound and in compliance with the Long-term Insurance Act.

There have been proposed amendments to the PPR of 2017, to make the necessary enhancements informed by the Regulator’s supervisory findings on the implementation and compliance with PPRs. The Committee is confident that Clientèle will be able comply with these when they are promulgated.

The Committee is pleased that the PA has nominated Clientèle Life, which was chosen from a sample of institutions, to assist it by evaluating the draft Money Laundering (ML) / Terrorist Financing (TF) / Proliferation Financing (PF) risk return and to provide feedback on questions. This cements Clientèle Life’s leadership position in the industry.

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Group Social and Ethics Report continued

8. SOCIAL IMPACT

The Group’s CSI strategy links back to its support of the SDGs and it is premised on a number of pillars:

• to solidify compassion as a value that pulls through in all areas of the organisation, including sales and services;

• as a corporate gift to staff – to show that ‘we care about the things they care about’;

• to help solve a client problem that will also help the business; and,

• to build brand equity/social currency.

One of the short-term goals, was to educate the public about financial resilience. The Group partnered with Avocado Vision to assist with consumer education, mainly in the rural communities, on financial literacy. The Programme has, to date, educated approximately 2,248 consumers, the majority of whom were in the rural communities. The next step in this process will be tracking consumer behaviour for any behavioural changes following this education initiative.

The Group's CSI initiatives also support Small Black Businesses and Vendors to assist them in the building of long-term sustainable businesses. For the period under review, the Group’s Bursaries programme supported 18 recipients. Not only are many of these students exceeding academic expectations, but several have taken the opportunity to broaden their tertiary experience by engaging in other campus opportunities e.g. campus radio broadcasting and residence community representation, which should ultimately produce more well-rounded individuals with core leadership abilities. It is gratifying and humbling for the Group, to be able to affect the lives of the recipients in such a significant way.

9. CONCLUSION

The Group Social and Ethics Committee is satisfied that at the Clientèle Group, ethics are being managed effectively. An ethical culture is driven across the organisation, and not just at the management level.

With the lessons learnt from the ‘Judicial Commission of Inquiry into allegations of State Capture, Corruption and Fraud in the Public Sector including Organs of State’, commonly known as the Zondo Commission, whistleblowing which is important to shaping this ethical culture is alive and well at Clientèle and receiving the necessary attention.

The Committee is satisfied that it has discharged its mandate in accordance with its terms of reference.

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Pheladi Gwangwa Chairperson: Social and Ethics Committee

19 September 2022

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Group Audit Committee Report

for the year ended 30 June 2022

The Group Audit Committee has pleasure in submitting this report on its activities as required by section 94(7)(f) of the Companies Act.

The Group Audit Committee is a shareholder Committee. The members of the Group Audit Committee were appointed at the AGM held on 28 October 2021. Further duties are delegated to the Group Audit Committee by the Boards of the Companies in the Group. This report covers these sets of duties and responsibilities.

The composition and responsibilities of this Committee are aligned to Prudential Standard GOI 2 – Governance of Insurers.

For the year under review, the PA approved an exemption to appoint separate Audit Committees for Clientèle Life and Clientèle General. The Group Audit Committee acts on behalf of all the entities within the Group.

1. GROUP AUDIT COMMITTEE TERMS OF REFERENCE

The Group Audit Committee has adopted its formal Terms of Reference that has been approved by the Board and are reviewed annually. The Group Audit Committee has conducted its affairs in compliance with its Terms of Reference and has discharged the responsibilities contained therein.

2. GROUP AUDIT COMMITTEE MEMBERS, MEETINGS AND ASSESSMENT

The Group Audit Committee is Independent and consists of four Independent Non-executive Directors. It meets at least four times a year as required by its Terms of Reference.

The Group Managing Director, Group Financial Director, Chief Risk Officer, CAE, External Auditors and other assurance providers attend meetings by invitation only.

During the year six meetings were held.

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Number
Members Number of meetings held attended
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Members	Number of meetings held	Number of meetings held	Number attended
BA Stott (Chairperson)	6		6
RD Williams			6
GQ Routledge			6
LED Hlatshwayo			6
Appointed by: • Shareholders at the AGM Authority: • Shareholders • Report to shareholders through the Integrated Annual Report and at the AGM • Refer to page 73 to 74 for member's qualifications and experience		Assessment: • At least every second year • Satisfactory rating in September 2021

The Chairman of the Group Audit Committee attended the AGM held during this reporting period. The effectiveness of the Group Audit Committee and its members is assessed on a biennial basis. The most recent assessment carried out did not highlight any significant matters of concern.

3. ROLE, RESPONSIBILITIES AND FULFILMENT THEREOF

3.1 Statutory Duties

The Group Audit Committee’s role and responsibilities include statutory duties in terms of the Companies Act, Long-term Insurance Act, Short-term Insurance Act, Insurance Act, JSE Listing Requirements, Prudential Standards and further responsibilities assigned to it by the Board.

The Group Audit Committee executed its duties in terms of the requirements of King IV.

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External Auditor

The Group Audit Committee has satisfied itself that the External Auditor is independent of the Group, as set out in section 94(8) of the Companies Act, which includes consideration of previous appointments of the External Auditor, the extent of other work undertaken by the External Auditor for the Group and compliance with criteria relating to independence or conflicts of interest as prescribed by IRBA. Requisite assurance was sought and provided by the External Auditor that internal governance processes within the audit firm support and demonstrate its claim to independence.

As required by paragraph 22.15(h) of the Listing Requirements, the Group Audit Committee has received from the external audit firm, PricewaterhouseCoopers Inc, the latest inspection reports and accompanying correspondence on inspections performed by IRBA on PwC, and the individual designated auditor, Mr. Francois Johannes Kruger. The Group Audit Committee has reviewed such reports and was satisfied that there were no findings which would impair the quality of the audits.

The Group Audit Committee ensured that the appointment of the External Auditor complied with the Companies Act, and any other legislation relating to the appointment of External Auditors.

The Group Audit Committee approved the Group engagement letter, and budgeted fees for the 2022 financial year and actual audit fees for the 2021 financial year.

There is a formal procedure that governs the process whereby the External Auditor is considered for non-audit services and the Group has approved a policy relating to non-audit services performed by the External Auditor, which is reviewed on an annual basis. The Group Audit Committee approved the terms of a master service agreement 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 Group Audit Committee approved the fees paid for non-audit services up to the date of this report.

The Group Audit Committee has nominated, for election at the next AGM, Deloitte as the External Audit firm and Mr. John Leon Preston Kruger as the designated External Auditor responsible for performing the functions of External Auditor for the 2023 financial year. In terms of section 92 of the Companies Act, the designated Auditor is required to rotate every five years. The Group Audit Committee has satisfied itself that the External Audit firm and designated Auditor are accredited as such on the JSE list of Auditors and their advisors.

The External Auditor has confirmed that no reportable irregularities have been reported up to the date of this report.

Group Annual Financial Statements, Group Preliminary Results and Accounting Practices

The Group Audit Committee has reviewed the accounting policies, the condensed Group results for the six months to 31 December 2021, the preliminary Group results for the year ended 30 June 2022 and the Group Annual Financial Statements for the year ended 30 June 2022 and is satisfied that they are appropriate and comply with IFRS. A formal written report to the Committee on estimates and judgments used in the preparation of the Group Annual Financial Statements was reviewed and approved.

The Group Audit Committee was satisfied that issues identified in the report on pro-active monitoring of Group Annual Financial Statements, issued by the JSE during the year, were complied with where relevant.

The Group Audit Committee was satisfied that appropriate financial reporting procedures exist and are effective, including those of all entities included in the consolidated Group IFRS financial statements.

The dividend for the year was considered by the Group Audit Committee and recommended to the Board for approval.

The Group Annual Financial Statements have been recommended to the Board for approval.

The Group Audit Committee did not receive any complaints from within or outside the Group relating to accounting practices, GIA or the content or audit of the Group Annual Financial Statements, or to any related matter.

Internal Controls and Internal Financial Controls

The Group Audit Committee has overseen a process by which GIA was requested to provide a written assessment of the effectiveness of the Group’s system of internal control and risk management, including internal financial controls. This written assessment by GIA formed the basis for the Group Audit Committee’s recommendation in this regard to the Board, in order for the Board to report thereon. The Group Audit Committee Report on the Effectiveness of Internal Financial Controls is included on page 36. The Board Report on the Effectiveness of Internal Controls is included on page 35.

The Group Audit Committee oversees the processes implemented for the sign-off on the internal financial controls by the Group Managing Director and the Group Financial Director, included on page 36.

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Group Audit Committee Report continued

3.2 Duties Assigned by the Board

In addition to the statutory duties of the Group Audit Committee, in accordance with the provisions of the Companies Act, as reported above, the Board has determined further functions for the Group Audit Committee to perform, as set out in the Group Audit Committee’s Terms of Reference. These functions include the following:

Integrated Reporting

The Group Audit Committee fulfils an oversight role regarding the Group’s Integrated Annual Report. The Group’s Integrated Annual Report for the year ended 30 June 2022 was reviewed and approved by a sub-committee appointed by the Group Audit Committee and recommended to the Board for approval.

Going Concern

The Group Audit Committee has reviewed a documented assessment, including key assumptions, prepared by management on the going concern status of the companies within the Group and has made recommendations to the Board to enable the Board to report on the going concern status as set out on page 33.

Governance of Risk

The Board has assigned oversight of the Group’s risk management function to the Group Risk Committee. The Group Audit Committee has received and considered Reports from the Group Risk Committee and satisfied itself that risks relating to financial reporting have been adequately considered.

The Group Audit Committee fulfils an oversight role regarding financial reporting risks, internal financial controls, fraud risk as it relates to financial reporting and IT risk as it relates to financial reporting.

Governance of Compliance

The Group Audit Committee receives and considers reports by GIA on the effectiveness of the Group’s compliance policies and effectiveness of the compliance function.

The Group Compliance Officer formally reports to the Group Audit Committee at each Group Audit Committee meeting. This report addresses the laws and regulations impacting the business of the Group, as well as the risk identification, assessment and monitoring process followed on compliance risk.

The Group Audit Committee was satisfied with the governance of compliance.

All legal matters which could impact on the Group Annual Financial Statements and the Integrated Annual Report are considered by the Group Audit Committee at its meetings.

The Group Audit Committee ensures compliance with the JSE Listings requirements relating to the timing of the issue of financial reports and related issues.

GIA

The Group Audit Committee is responsible for ensuring that GIA is independent and has the necessary resources, standing and authority within the Group to enable it to discharge its duties. Furthermore, the Group Audit Committee oversees co-operation between GIA and the External Auditors, and serves as a link between the Board and these functions.

The Group Audit Committee confirms that the Group has processes in place to deal appropriately with any concerns or complaints relating to internal audit of the Group.

The Group Audit Committee considered and recommended the GIA Terms of Reference for approval by the Board. GIA’s annual audit plan was approved by the Group Audit Committee. The results of the work carried out by GIA in terms of the audit plan were reviewed and the effect of any action plans to mitigate risks of any matters reported were considered and approved by the Group Audit Committee.

GIA reports centrally with responsibility for reviewing and providing assurance on the adequacy of the internal control environment across all of the Group’s operations. The CAE is responsible for reporting the findings of the internal audit work, against the agreed GIA plan to the Group Audit Committee on a regular basis.

Mr. Ryan Michael Prettirajh resigned as the CAE on 30 June 2022 to pursue other responsibilities within the Group. Ms. Nandipha Juqu was appointed CAE effective 1 July 2022, and resigned on 30 September 2022. Ms. Asthika Bipath was appointed as CAE, effective 1 November 2022.

The CAE has direct access to the Group Audit Committee, primarily through its Chairman.

The Group Audit Committee has assessed and was satisfied with the performance of the CAE and the GIA function.

During the year, the Group Audit Committee met with the CAE without management being present.

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Group Audit Committee Report continued

External Auditors

A primary function of the Group Audit Committee is overseeing the relationship and performance of the External Auditors.

The External Audit plan was reviewed and approved and the results of the External Audit in accordance with the plan, were discussed with the External Auditors. In particular the key audit matters as set out in the External Auditor’s Report on the Group Annual Financial Statements were agreed and the results of the audit on these matters reviewed. The Independant Auditors’ Report to the Shareholders of Clientèle Limited is set out on pages 83 to 88.

The quality of the External Auditor’s work was assessed by continuous engagement with the Designated Auditor throughout the year and considering the results of formal surveys completed by members of the Group Audit Committee and management on the performance of the External Auditors. As reported above, the Group Audit Committee also received and considered a written report on the quality control procedures implemented by the firm. The results of external quality reviews on the firm and on the Designated Auditor were received and considered. The Group Audit Committee was satisfied with the quality of the firm and the quality of the audit for the year.

The Group Audit Committee reviewed the Group Management Representation letter and authorised the Group Financial Director to sign the letter.

The Group Audit Committee met with the External Auditors without management being present. The Chairman of the Group Audit Committee also met with the designated External Auditor informally throughout the year.

Combined Assurance

GIA is the custodian of Combined Assurance. GIA, in conjunction with management, has compiled a matrix of risks in the Group’s business and mitigating action to manage the impact of the risks on the business. The model reflects the level of assurance provided by the five lines of defence. The risks are those identified through the Group’s risk management processes.

The model has been reviewed by the Group Audit Committee and the Committee is satisfied with the level of assurance provided by the five lines of defence and the overall adequacy of assurance.

Evaluation of the expertise and experience of the Group Financial Director and the finance function

The Group Audit Committee has satisfied itself that the Group Financial Director has appropriate expertise and experience.

The Group Audit Committee has considered, and has satisfied itself, of the experience of the senior members of management responsible for the financial function.

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

General

During the current year, the Group Audit Committee re-evaluated their key focus areas for improvement in internal controls due to the maturity of the control environment in these focus areas and included new relevant key areas to take account of changes in the business environment and new strategic Initiatives.

The Group Audit Committee reviewed, approved and monitors periodically the plan for implementation of IFRS 17 relating to the accounting for Insurance Contracts.

The Group Audit Committee has made submissions to the Board on any matter concerning the Group's accounting policies, financials controls and records and reporting.

In order to comply with mandatory audit firm rotation and to address the requirements of IFRS 17, Deloitte has been appointed as the Group External Auditors for the financial year ending 30 June 2023. This appointment will be subject to approval by a majority of shareholders at the AGM on 27 October 2022.

The Group Audit Committee has reviewed the adequacy and effectiveness of the IT control framework and governance structure.

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Mr. BA Stott Chairman of the Group Audit Committee

19 September 2022

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61

Statement of Group Embedded Value

for the year ended 30 June 2022

1. GROUP EMBEDDED VALUE

The EV calculation has been reviewed by the Group’s Independent Actuaries, QED Actuaries Consultants (Pty) Ltd.

PricewaterhouseCoopers Inc. has not reviewed the Group EV Results.

The EV represents an estimate of the value of the Group, exclusive of goodwill attributable to future new business.

The EV comprises:

• the Free Surplus; plus,

• the Required Capital identified to support the in-force business; plus,

• the Present Value of In-force (“PVIF”) business; less,

• the Cost of Required Capital (“CoC”).

The PVIF business is the present value of future after-tax profits arising from covered business in force as at 30 June 2022.

All material business written by the Group has been covered by EV Methodology as outlined in Advisory Practice Notice, APN 107 of the ASSA, including:

• Life insurance policies regulated in terms of the Long-term Insurance Act, 1998 and the Insurance Act 18, 2017;

• Legal insurance business where EV Methodology has been used to determine future shareholder entitlements; and,

• Annuity income arising from non-insurance contracts (including IFA business fees, Clientèle Rewards, Clientèle Mobile, Direct Rewards contracts and fees earned for the use of digital applications) where EV Methodology has been used to determine future shareholder entitlements.

The impact of COVID-19, national lockdowns, the floods in Kwazulu-Natal, loadshedding, high inflation and the riots and civil unrest have had a major impact on the economy over the last year. This has had a knock-on impact on most businesses including Clientèle and its customers. Actual claims experience was severely impacted by the pandemic.

The explicit COVID-19 risk reserve allows for expected additional COVID-19 related policyholder risk claims. Much of this reserve has been utilised in the year and it has been recalculated to allow for the further expected excess claims as a result of the pandemic. The reserve at 30 June 2022 amounted to R81.7 million gross of reinsurance recoveries (2021: R144.1 million) and R26.2 million (2021: R55.1 million) net of reinsurance recoveries.

The Risk Discount Rate (“RDR”) increased noteably over the year to 13.8% (30 June 2021: 12.1%).

No other major modelling or assumption changes were made over the year apart from those described above.

Clientèle Life commenced underwriting a large number of funeral policies for some Funeral Parlours in November and December 2021, following the cancellation of these policies by the previous underwriter. Reserves (including COVID-19 reserves) were set up for this business during the year.

The EV can be summarised as follows:

The EV can be summarised as follows:
	Year ended	Year ended
	30 June	30 June
(R’000)	2022	2021
Required economic capital	518,325	514,588
Free Surplus	692,747	636,327
ANW of covered business	1,211,072	1,150,915
CoC	(89,138)	(87,958)
PVIF	4,685,133	4,743,499
EV of covered business	5,807,067	5,806,456
Risk Discount Rate (“RDR”) % p.a.	13.8	12.1

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Statement of Group Embedded Value continued

The Required Economic Capital is based on the Published Reporting Basis and has been set as one times the Economic Capital Requirement for the Life Company (R358.9 million) and for the General Company (R159.4 million) as at 30 June 2022.

The ANW of covered business is defined as the excess value of all assets attributed to the covered business, but not required to back the liabilities of covered business. Free Surplus is the ANW less the Required Capital attributed to covered business.

The CoC is the opportunity cost of having to hold the Required Capital of R518.3 million as at 30 June 2022 (30 June 2021: R514.6 million).

The PVIF business is the present value of future after-tax profits arising from covered business in force as at 30 June 2022 on the Published Reporting Basis. The Published Reporting Basis is based on IFRS.

The Group EV increased from R5,806 billion at 30 June 2021 (RDR: 12.1%) to R5,807 billion as at 30 June 2022 (RDR: 13.8%), after the payment of the annual dividend of R368.9 million in September 2021. The EV was adversely impacted by the change in economic assumptions (mainly RDR); however, the REVE of R724.9 million, which translates into a RRoEV of 13.3% p.a, gives a more accurate reflection of the considerable EV growth over the year (ignoring the change in the RDR).

2. RECONCILIATION OF TOTAL EQUITY TO ANW

RECONCILIATION OF TOTAL EQUITY TO ANW
	Year ended	Year ended
	30 June	30 June
(R’000)	2022	2021
Total equity and reserves per the Statement of Financial Position Adjusted for deferred profits on investment business Adjusting subsidiaries to Net Asset Value Reversal of investment in Direct Rewards Bonus Right Scheme adjustment	1,142,144 53,965 31,383 (4,543) (9,152)	1,080,661 52,804 33,808 (1,142) (7,553)
Net of tax impact of adjusting Single Premium business to market value	(2,725)	(7,663)
ANW	1,211,072	1,150,915

The BR Scheme adjustment recognises the expected future dilution in EV, on a mark to market basis, as a result of the BR Scheme.

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Statement of Group Embedded Value continued

3. VALUE OF NEW BUSINESS

The VNB (excluding any allowance for the Management Incentive Schemes, which is shown as a separate component of EV Earnings), represents the present value of projected after-tax profits at the point of sale on new covered business commencing during the year ended 30 June 2022 on the Published Reporting Basis, less the CoC pertaining to the specific business lines. The assumptions used in the VNB calculations were consistent with the VIF assumptions as at 30 June 2022, and the actual cash flows in the year are from the Published Reporting Basis.

The New Business profit margin is the VNB expressed as a percentage of the present value of future premiums (and other annuity fee income) pertaining to the same business.

other annuity fee income) pertaining to the same business.
(R’000's)	VNB	Present Value of New Business Premiums	New Business profit margin
30 June 2022 Recurring premium business	260,633	2,562,828	10.2%
Single premium business	29,942	1,343,481	2.2%
Total	290,575	3,906,309	7.4%
30 June 2021
Recurring premium business	213,027	1,997,860	10.7%
Single premium business	2,441	126,519	1.9%
Total	215,468	2,124,379	10.1%

The Present Value of New Business premiums has increased due to a major increase in single premium investment business written over the year. The relatively low profit margin on this block of business has resulted in a marked decrease (to 7.4%) in the overall New Business profit margin.

4. LONG-TERM ECONOMIC ASSUMPTIONS

LONG-TERM ECONOMIC ASSUMPTIONS
	Year ended	Year ended
	30 June	30 June
%	2022	2021
RDR Non-unit investment return	13.8 10.3	12.1 8.6
Unit investment return	11.7	10.0
Expense inflation	7.3	5.6
Corporate tax	27.0	28.0
Gross of tax equity return	12.8	11.1
Gross of tax cash return	8.3	6.6
Gross of tax bond return	10.3	8.6
Gross of tax risk free return	10.3	8.6

The RDR has been determined using a top-down weighted average cost of capital approach, with the equity return calculated using the CAPM theory. In terms of current actuarial guidance, the RDR has been set as the risk free rate plus a beta multiplied by the assumed equity risk premium. It has been assumed that the equity risk premium is 3.5% (June 2021: 3.5%). The beta pertaining to the Clientèle share price is relatively low, which is partially a consequence of the relatively small free-float of shares. After careful consideration, the Board has decided to continue to use a more conservative beta of 1, as opposed to its actual beta of 0.21, in the calculation of the RDR. The Board draws the reader’s attention to the RDR sensitivity analysis in the next table, which allows for sensitivity comparisons using various alternative RDRs.

The resulting RDR utilised as at 30 June 2022 was 13.8% p.a. (30 June 2021: 12.1% p.a.).

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OUR BUSINESS GOVERNANCE REPORT FINANCIAL STATEMENTS

Statement of Group Embedded Value continued

5. SENSITIVITIES – EV

The table below illustrates the effect of the different assumptions on the EV (net of company tax) at a RDR of 13.8% p.a. (unless otherwise specified):

(R’000)	ANW Value of in-force Business Cost of Capital EV % of Main Basis
Main Basis (RDR of 13.8%)	1,211,072 4,685,133 (89,138) 5,807,067
RDR of 11.8%	1,211,072 5,252,194 (53,429) 6,409,837 110.4
RDR of 12.1 (June 2021 RDR)	1,211,072 5,157,074 (59,189) 6,308,957 108.6
RDR of 12.8%	1,211,072 4,949,013 (72,052) 6,088,033 104.8
RDR of 14.8%	1,211,072 4,452,785 (104,868) 5,558,989 95.7
RDR of 15.8%	1,211,072 4,246,997 (119,397) 5,338,672 91.9
RDR of 17.8%	1,211,072 3,898,066 (145,365) 4,963,773 85.5
Assuming a 10% decrease in
the following:
– Future expenses	1,211,072 4,739,305 (89,161) 5,861,217 100.9
– Policy discontinuance rate	1,211,072 5,218,545 (113,027) 6,316,591 108.8
Claims (and reinsurance rates) less 5%	1,211,072 4,735,672 (73,375) 5,873,369 101.1
Investment return less 1%	1,211,072 4,639,020 (89,142) 5,760,950 99.2
Inflation plus 1%	1,211,072 4,652,434 (112,624) 5,750,883 99.0
Assuming a once-off 10% reduction
in the value of equity holdings	1,182,773 4,683,835 (88,281) 5,778,328 99.5

The sensitivity analysis has assumed that the reserving basis will remain static, despite changes in experience, except in the following case (where APN107 (Version 8) requires the change in reserving basis to be considered in conjunction with the change in assumptions):

• Assuming a once-off 10% reduction in the value of equity holdings.

6. SENSITIVITIES – VNB

The table below illustrates the effect of the different assumptions on the VNB at a RDR of 13.8% p.a. (unless otherwise specified):

otherwise specified):
(R’000)	VNB % of Main Basis
Main Basis (RDR of 13.8%)	290,575
Initial expenses less 10%	312,378 107.5
Renewal expenses less 10%	300,565 103.4
Inflation plus 1%	274,492 94.5
Investment return less 1%	287,726 99.0
Claims (and reinsurance rates) less 5%	300,153 103.3
Withdrawals less 10%	497,443 171.2
RDR of 11.8%	375,969 129.4
RDR of 12.1 (June 2021 RDR)	361,814 124.5
RDR of 12.8%	330,866 113.9
RDR of 14.8%	255,648 88.0
RDR of 15.8%	223,865 77.0

7. EV PER SHARE

EV PER SHARE
	Year ended	Year ended
	30 June	30 June
(Cents)	2022	2021
EV per share	1,731.79	1,731.61
Diluted EV per share	1,729.80	1,729.78

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65

Statement of Group Embedded Value continued

8. SEGMENT INFORMATION

The table below shows the EV split between segments for the year ended:

(R’000)	ANW	PVIF	CoC	EV
30 June 2022 Long-term insurance Short-term insurance	869,792 281,891	3,480,447 1,154,087	(62,416) (26,722)	4,287,823 1,409,256
CBC Rewards, Clientèle Mobile and
Direct Rewards	(44,587)	50,599		6,012
Other	103,976			103,976
Total	1,211,072	4,685,133	(89,138)	5,807,067
30 June 2021
Long-term insurance	836,550	3,548,158	(61,162)	4,323,546
Short-term insurance	259,704	1,149,638	(26,796)	1,382,546
CBC Rewards, Clientèle Mobile and
Direct Rewards	(36,386)	45,703		9,317
Other	91,047	615		91,047
Total	1,150,915	4,743,499	(87,958)	5,806,456

The VNB can be split between segments as follows:

The VNB can be split between segments as follows:
	Year ended	Year ended
	30 June	30 June
(R’000)	2022	2021
Long-term insurance Short-term insurance	233,171 49,503	126,897 87,281
CBC Rewards, Clientèle Mobile and Direct Rewards	7,901	1,290
Total	290,575	215,468

9. EV EARNINGS ANALYSIS

EV earnings (per APN 107) comprises the change in EV for the year after adjusting for capital movements and dividends paid.

(R’000)	Year ended 30 June 2022 30 June 2021 EV ANW VIF CoC EV
Closing EV Opening EV Dividends	1,211,072 4,685,133 (89,138) 5,807,067 5,806,456 1,150,915 4,743,499 (87,958) 5,806,456 5,874,486 (368,854) (368,854) (318,556)
Adjusted EV at the beginning of the year	782,061 4,743,499 (87,958) 5,437,602 5,555,930
EV earnings Reversal of impact of economic assumption changes Reversal of impact of banking system and data issues pertaining to DebiCheck	429,011 (58,366) (1,180) 369,465 250,526 (1,247) 359,567 (2,872) 355,448 411,006 – 25,924
REVE RRoEV	427,764 301,201 (4,052) 724,913 687,456 13.3% 12.4%
RoEV	6.8% 4.5%

66 Clientèle Limited Integrated Annual Report 2022

OUR BUSINESS GOVERNANCE REPORT FINANCIAL STATEMENTS

Statement of Group Embedded Value continued

9. EV EARNINGS ANALYSIS (continued)

9. EV EARNINGS ANALYSIS(continue	d)
(R’000)	Year ended 30 June 2022 30 June 2021 EV ANW VIF CoC EV
Components of EV earnings VNB Expected return on covered business Expected profit transfer Expected return on ANW Withdrawal and unpaid premium experience variance 1 Impact of instability and errors within the banking environment in the prior year Changes in non-economic assumptions and modelling (mainly accidental death and withdrawal assumptions) Claims and reinsurance experience variance YTI guarantee cost in respect of B-BBEE share financing Change in property fair value B-BBEE Expense Purchase and impairment of Direct Rewards BR Scheme Goodwill and Medium-term Incentive schemes Sundry experience variances	(438,109) 740,300 (11,616) 290,575 215,468 571,602 24,305 595,907 516,314 958,164 (958,164) – – 52,063 52,063 42,084 (97,718) (107,849) (9,775) (215,342) 14,081 – (85,807) 6,866 60,495 (6,091) 61,270 29,890 126 126 (49,425) (1,330) (1,330) (2,053) (9,179) (9,179) (9,689) (23,280) (3,224) 23 23 307 (9,187) (5,770) (14,957) (35,747) (4,505) 588 (3,917) 349
EV operating return	457,214 301,202 (3,177) 755,239 609,268
Investment return variances on ANW Impact of economic assumption changes Intangible assets and inventory write-off	(20,149) (875) (21,024) 52,264 1,247 (359,568) 2,872 (355,449) (411,006) (9,301) (9,301)
EV earnings	429,011 (58,366) (1,180) 369,465 250,526

Clientèle Limited Integrated Annual Report 2022

67

Statement of Group Embedded Value continued

Notes

Note 1

The challenges in the collections environment, particularly when it comes to stability, have persisted over the course of the financial year. Clientèle was impacted by these and this is expected to continue to impact debit order users in the short term. Clientèle was also impacted by the closure of AEDO and NAEDO at the end of November 2021 which, as expected, resulted in considerable additional lapses in the months thereafter. Furthermore, Clientèle is now experiencing major volumes of (multiple) disputes on RMS. It is expected that all of these challenges will be resolved in the short to medium term and thus longterm expected premium collection and withdrawal assumptions were not changed.

10. CONCLUSION

Based on the review of the methodology and assumptions used and the calculations performed and described, we hereby confirm the above EV results.

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Mr. AA Faurè, FASSA Consulting Actuary Fellow of the Actuarial Society of South Africa

19 September 2022

68

Clientèle Limited Integrated Annual Report 2022

OUR BUSINESS GOVERNANCE REPORT FINANCIAL STATEMENTS

Approval of the Annual Financial Statements

In accordance with the requirements of the Companies Act, the Directors are responsible for the preparation of the Annual Financial Statements, which conform with IFRS, and in accordance with IFRS fairly present the state of affairs of the Company and the Group as at the end of the financial year, and the net profit and cash flows for that period.

Clientèle and the Group operated in compliance with the provisions of the Companies Act and their respective MOls.

It is the responsibility of the External Auditors to report on the fair presentation of the Company and the Group Annual Financial Statements.

The Directors are ultimately responsible for the internal controls. Management enables the Directors to meet these responsibilities. Standards and systems of internal control are designed and implemented by management to provide reasonable assurance as to the integrity and reliability of the Annual Financial Statements in terms of IFRS and to adequately safeguard, verify and maintain accountability for Group assets. Accounting policies supported by judgments, estimates, and assumptions which comply with IFRS are applied on a consistent and going concern basis. Systems and controls include the proper delegation of responsibilities within a clearly defined framework, effective accounting procedures and adequate segregation of duties.

Systems and controls are monitored throughout the Group. More detail, including the operation of GIA, is provided in the Corporate Governance section of the Integrated Annual Report on pages 12 to 34.

Based on the information and explanations given by management and GIA, the Directors are of the opinion that the internal financial controls and the financial records may be relied upon for preparing Annual Financial Statements in accordance with IFRS and maintaining accountability for the Group’s assets and liabilities. Nothing has come to the attention of the Directors to indicate that any breakdown in the functioning of these controls, resulting in material loss to the Group, has occurred during the year and up to the date of this report.

The Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the Annual Financial Statements.

The Integrated Annual Report, including the Annual Financial Statements for the year ended 30 June 2022, prepared in accordance with IFRS, were approved by the Board on 19 September 2022 and signed on its behalf by:

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Mr. GQ Routledge Chairman

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Mr. BW Reekie Group Managing Director

19 September 2022

Certificate by the Company Secretary

I, Wilna van Zyl, being the Company Secretary of Clientèle, certify that the Company has, for the year under review, lodged all returns required of a Public Company with the Registrar of Companies, and that all such returns are, to the best of my knowledge and belief, true, correct and up to date.

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Mrs. W van Zyl Company Secretary

19 September 2022

Clientèle Limited Integrated Annual Report 2022

69

Report of the Directors

for the year ended 30 June 2022

The Directors have pleasure in submitting their Director’s Report, which forms part of the Integrated Annual Report for the year ended 30 June 2022.

1. NATURE OF BUSINESS

Clientèle, the holding Company of the Group, is incorporated in South Africa and is listed under the Insurance sector index on the JSE. Its Long-term insurance subsidiary, Clientèle Life, markets, distributes and underwrites insurance and investment products and invests funds derived therefrom and accounts for the majority of the Group’s earnings and assets. The Group also provides personal and business lines legal insurance policies underwritten by Clientèle General, its short-term insurance subsidiary.

Clientèle, through CBC Rewards, offers rewards benefits to its clients from a number of retailers and service providers. Clientèle Mobile offers airtime and data to clients at discounted rates.

Refer to page 2 for the Group Structure and the companies that form part of the Group.

2. FINANCIAL RESULTS AND DIVIDEND

Full details of the Company’s and the Group’s financial position and results are set out in the attached Group Annual Financial Statements and Notes thereto on pages 89 to 170. An ordinary dividend of 120.00 cents per share (2021: 110.00 cents per share) was declared on 31 August 2022. The dividend will be paid on Monday, 26 September 2022.

To comply with the procedures of Strate Limited, the last day to trade in the shares for purposes of entitlement to the dividend is Tuesday, 20 September 2022. The shares commence trading ex-dividend on Wednesday, 21 September 2022 and the record date will be Friday, 23 September 2022.

Share certificates can not be dematerialised or rematerialised between Wednesday, 21 September 2022 and Friday, 23 September 2022, both days inclusive.

Key statistics relating to the financial position and profit of the Group for the year are set out in the table below:

30 June	30 June
2022	2021	% change
Financial position Total assets (R’m) 10,478	9,735	8
Net asset value per share (cents) 340.61	322.28	6
Return on shareholders interest (%) 39	37
Operating results Insurance premium revenue (R’m) 2,358	2,297	1
Profit before tax (R’m) 661	578	11
Tax (R’m) 225	186	11
Net profit attributable to ordinary shareholders of the Group (R’m) 435	392	11
Diluted EPS (cents) 129.72	116.86	11
Diluted headline EPS (cents) 131.30	117.70	12
Dividend per share: Declared (cents) 120.00	110.00	9

The Holding Company’s interest in the aggregate profits earned after tax, of the subsidiaries amounted to R435 million (2021: R392 million).

70 Clientèle Limited Integrated Annual Report 2022

OUR BUSINESS GOVERNANCE REPORT FINANCIAL STATEMENTS

Report of the Directors continued

Headline earnings per share

Headline earnings per share
(R’000)	Group
	2022 2021
Reconciliation of earnings to headline earnings Net profit attributable to ordinary shareholders Impairment of intangible assets and PPE (Profit)/loss on disposal of PPE (Reversal of)/impairment of investment in Associate	435,469 392,255 7,920 873 (531) (123) (2,082) 2,082
Headline earnings	440,776 395,087
Diluted weighted ordinary shares in issue Ordinary shares in issue (000’s) Weighted average ordinary shares in issue (000’s) Adjustment for dilution due to BR Scheme (000’s) Headline earnings per share (cents) Diluted average ordinary shares in issue (000’s) Diluted earnings per share (cents) Diluted headline earnings per share (cents)	335,322 335,322 335,322 335,322 385 354 131.45 117.82 335,707 335,676 129.72 116.86 131.30 117.70

3. SHARE CAPITAL

No shares were issued (2021: Nil) during the year. The share capital as at 30 June 2022 is as follows:

(R’000)	Group
	2022 2021
Authorised: 750,000,000 (2021: 750,000,000) ordinary shares of 2 cents each Issued: 335,321,768 (2021: 335,321,768) ordinary shares of 2 cents each	15,000 15,000 6,706 6,706

Clientèle Limited Integrated Annual Report 2022

71

Report of the Directors continued

SHAREHOLDERS ANALYSIS

Ordinary shareholders analysis as at 30 June 2022

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||||||
|---|---|---|---|---|
|Number of|% of total|Number of|% of|
|Shareholder spread|shareholdings|shareholdings|shares|issued Capital|
|1 – 1,000|9,133|89.94|408,339|0.12|
|1,001 – 10,000|689|6.79|2,944,682|0.88|
|10,001 – 100,000|282|2.78|8,846,455|2.64|
|100,001 – 1,000,000|37|0.36|10,567,116|3.15|
|Over 1,000,000|13|0.13|312,555,176|93.21|
|Total|10,154|100.00|335,321,768|100.00|
|Number of|% of total|Number of|% of|
|Distribution of shareholders|shareholdings|shareholdings|shares|issued Capital|
|Assurance Companies|4|0.04|28,378,742|8.46|
|Close Corporations|17|0.17|1,537,499|0.46|
|Collective Investment Schemes|11|0.11|1,979,894|0.59|
|Custodians|8|0.08|719,623|0.21|
|Foundations Charitable Funds|2|0.02|100,011|0.03|
|Hedge Funds|7|0.07|1,727,981|0.52|
|Insurance Companies|2|0.02|34,584,769|10.31|
|Investment Partnerships|18|0.18|203,514|0.06|
|Managed Funds|2|0.02|2,664,105|0.79|
|Private Companies|80|0.79|209,842,507|62.58|
|Public Companies|1|0.01|17|0.00|
|Retail Shareholders|9,587|94.42|18,744,328|5.59|
|Retirement Benefit Funds|308|3.03|32,026|0.01|
|Scrip Lending|1|0.01|689,018|0.21|
|Stockbrokers Nominees|9|0.09|309,936|0.09|
|Trusts|97|0.96|33,807,798|10.08|
|Total|10,154|100.00|335,321,768|100.00|

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||||||
|---|---|---|---|---|
|Number of|% of total|Number of|% of|
|Shareholder type|shareholdings|shareholdings|shares|issued Capital|
|Non-Public Shareholders|34|0.33|304,588,470|90.83|
|Directors and Associates|
|(Excl Employee Share Schemes)|23|0.23|6,508,790|1.94|
|Management of the Company|2|0.02|85,197|0.03|
|Strategic Holders|9|0.09|297,994,483|88.87|
|Public Shareholders|10,120|99.67|30,733,298|9.17|
|Total|10,154|100.00|335,321,768|100.00|

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Beneficial shareholders holding 5% or more

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||||
|---|---|---|
|Number of|
|shares|%|
|Friedshelf 1577 (Pty) Ltd|202,504,352|60.40|
|Hollard Group|65,375,443|19.50|
|YTI|30,094,688|8.97|
|Total|297,994,483|88.87|

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72 Clientèle Limited Integrated Annual Report 2022

OUR BUSINESS GOVERNANCE REPORT FINANCIAL STATEMENTS

Report of the Directors continued

4. PARENT COMPANY

Clientèle’s Parent Company is Friedshelf 1577 Proprietary Limited, which is incorporated in South Africa, through the holding of voting rights (indirectly) of 60.40% (2021: 60.40%) of the issued share capital (refer to Note 13 on page 147: Share capital and premium).

5. DIRECTORS AND SECRETARY

The following people acted as Directors during the year:

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Appointed as
Name and qualification Director of Clientèle
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Gavin Quentin Routledge – BA, LLB	31 January 2008
Adrian Domonic t’Hooft Enthoven – BA Hons in Politics, Philosophy and Economics, PhD (Political Science)	5 March 2008
Iain Bruce Hume – CA(SA), ACMA	31 January 2008
Basil William Reekie – BSc (Hons), FASSA	31 January 2008
Barry Anthony Stott – CA(SA)	4 January 2010
Pheladi Raesibe Gwangwa – BProc, LLB, LLM	4 January 2010
Robert Donald Williams – BBusSc(Hons), FASSA	1 January 2013
Phethedi Gideon Nkadimeng – BSc (Statistics and Economics)	1 March 2017
Gavin Chadwick – MBA MAg*	2 October 2019
Lemuel Edwin Dumisa Hlatshwayo – CA(SA), CD(SA)	1 February 2020
Hugo Louw – BCom(Hons), FASSA	1 March 2021
Ramaesela Dorcas Tshepisho Tabane – BA, MBA, M.Phil	1 March 2021

* Alternate to Dr. Adrian Domonic t’Hooft Enthoven.

Gavin Quentin Routledge, 66, (Independent Non-executive Chairman), BA, LLB

Mr. Gavin Routledge is based in Cape Town and is engaged in private equity for his own account and also advises companies and Executives on strategy and deal making. When required, he attends to the Group’s business in his capacity as Chairman of the Board. Previously he was responsible for many of the Hollard Group’s private equity investments in Southern Africa and prior to that he was Chief Executive of a niche investment banking company, A&R Corporate Finance, concentrating on international financial transactions and investment banking. Prior to that he was a partner at Webber Wentzel, specialising in commercial law and cross border transactions.

Basil William Reekie, 49, (Group Managing Director), BSc(Hons), FASSA

Mr. Basil Reekie is a qualified actuary who joined Clientèle on 1 January 2008 and was the Managing Director of Clientèle Life (the major subsidiary of Clientèle) from May 2008 until June 2020 and has been the Managing Director of Clientèle since 1 July 2013. Prior to joining Clientèle, Mr. Basil Reekie was the Managing Executive of QED Actuaries and Consultants where he was responsible for the day-to-day operations of QED and consulted to numerous life insurance companies in South Africa and across the African continent. As a consultant, he acted in the capacity of Statutory Actuary for many of these companies.

Adrian Domonic t’Hooft Enthoven, 53, (Non-executive Director), BA Hons in Politics, Philosophy and Economics,

PhD in Political Science

Dr. Adrian Enthoven is Executive Chairman of Yellowwoods, a private investment group. He is responsible for their African portfolio of financial services, hospitality and wine investments. He serves on the boards of the Yellowwood Group’s South African based businesses. He is also involved in various projects and initiatives in youth employment, education, social justice and the arts. He is a Board member of Citizens ZA, the African Leadership Initiative and Business Leadership South Africa, and a Trustee of Spier Arts Trust and WWF South Africa. He was educated at Michaelhouse School and at Oxford University. Dr. Adrian Enthoven is the Vice Chairman of the South African Solidarity Response Fund.

Iain Bruce Hume, 55, (Group Financial Director), CA(SA), ACMA

Mr. Iain Hume is a Chartered Accountant and an associate of the Chartered Institute of Management Accountants with over 26 years of experience in the banking and insurance industries. Mr. Hume has been with the Group since 2000. Mr. Hume has advised the Board that he will be taking early retirement, effective 31 December 2022.

Clientèle Limited Integrated Annual Report 2022

73

Report of the Directors continued

Barry Anthony Stott, 73, (Independent Non-executive Director), CA(SA)

Mr. Barry Stott was previously a senior partner of PricewaterhouseCoopers Inc. and responsible for their financial services practice. His experience in the financial services industry includes consulting to various long-term and short-term insurers, asset managers and stockbrokers. Mr. Barry Stott was the Chairman of Discovery Health Medical Scheme Audit and Risk Committees and a member of the Investment Committee. He has also served on various audit committees within the MMI Group.

Pheladi Raesibe Gwangwa, 49, (Independent Non-executive Director), BProc, LLB, LLM

Ms. Pheladi Gwangwa is a qualified lawyer who has previously worked for the State Attorney, IBA, ICASA and Cell C before joining Primedia Broadcasting. She was the previous Station Manager of Talk Radio 702, having been involved with Primedia Broadcasting from 2002 to 2016. She is currently a Director at Chueu Attorneys, and the Managing Director of PRG Consultancy.

Robert Donald Williams, 66, (Independent Non-executive Director), BBusSc(Hons), FASSA

Mr. Robert Williams is a Fellow of the ASSA and his previous experience includes six years as the Executive Head of Aon Hewitt (Retirement Funding, Health care and Actuarial Services), prior to that, he was the Managing Director of QED Actuaries and Consultants (providing actuarial services to life insurers, short-term insurers, retirement funds). Mr. Robert Williams has over 26 years’ experience acting as the appointed Head of the Actuarial Function to various life insurance companies in Southern Africa.

Gavin Knighton Chadwick, 65, (Alternate Non-executive Director), Masters in Agricultural Management, MBA Mr. Gavin Chadwick was appointed as an Alternate Non-executive Director of Clientèle with effect 2 October 2019. Mr. Chadwick is an alternate Director to Dr. ADT Enthoven and is currently the Head of Investments of Yellowwoods Ventures Investments SA (Pty) Ltd. Mr. Chadwick has over 3 decades experience in the financial services industry.

Dumisa Hlatshwayo, 55, (Independent Non-executive Director) CA(SA)

Mr. Dumisa Hlatshwayo was appointed as a Non-executive Director of Clientèle with effect 1 February 2020. Mr. Hlatshwayo was previously the Chief Financial Officer of South African Forestry Company Limited and further has extensive experience in the financial services industry.

Phethedi Gideon Nkadimeng, 50, (Non-executive Director), B Sc (Statistics and Economics)

Mr. Gideon Nkadimeng was appointed as a Non-executive Director of Clientèle with effect 1 March 2017. Mr. Nkadimeng is currently the Investment Executive of Yellowwoods Ventures Investments SA (Pty) Ltd and has extensive experience in the financial services industry.

Hugo Louw, 49, (Executive Director), BCom(Hons), FASSA

Mr. Louw joined Clientèle in 2013 as Head of Operations. Mr. Louw was appointed as a Director of Clientèle Life in July 2016 and appointed as Managing Director of Clientèle Life on 1 July 2020. Mr. Louw holds a BCom (Hons) Actuarial, is a qualified Actuary and a Fellow of the ASSA. Mr. Louw was appointed to the Board of Clientèle on 1 March 2021.

Ramaesela Dorcas Tshepisho Tabane, 44, (Executive Director), BA, MBA, M. Phil

Ms. Tabane joined the Group in January 2014 as Human Resources Executive. Ms. Tabane was appointed as a Director of Clientèle Life in July 2016. Ms. Tabane holds a BA, MBA (GIBS) and an M. Phil – Change Management and Leadership. Ms. Tabane was appointed to the Board of Clientèle on 1 March 2021.

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OUR BUSINESS GOVERNANCE REPORT FINANCIAL STATEMENTS

Report of the Directors continued

Other Directorships and Professional Commitments held by the Directors as at 30 June 2022

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Name Other Directorships/Partnerships Other Professional Commitments
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Name	Other Directorships/Partnerships	Other Professional Commitments
ADT Enthoven	Africa Leadership Initiative South Africa Fellowship	Employee of Yellowwoods Ventures Investments Proprietary Limited
	And Beyond Holdings Proprietary Limited
	Business Leadership South Africa
	Citizens ZA Movement
	Clientèle Life Assurance Company Limited
	Etana Holdings
	Harambee Academy NPC
	Harambee Youth Employment Accelerator NPC
	Hollard Holdings Proprietary Limited
	Hollard Life Assurance Company Limited
	Hollard Business Associates Proprietary Limited
	Hollard Dealer Partners
	Hollard Fundco (RF)
	Hollard Specialist Insurance
	Hollard Specialist Life
	Solidarity Response Fund
	The Hollard Insurance Company Limited
	Youth Employment Service (RF)
GQ Routledge	Clientèle Life Assurance Company Limited	None
	Clientèle General Insurance Limited
	Genasys Holdings Proprietary Limited
	Genasys Technologies UK Limited
	Haven Sandown One Proprietary Limited
IB Hume	Clientèle Life Assurance Company Limited	Iain Hume Family Trust – Trustee
	Clientèle General Insurance Limited
	Clientèle Properties East Proprietary Limited
	Clientèle Properties North Proprietary Limited
	Clientèle Properties South Proprietary Limited
	Clientèle Mobile Proprietary Limited (dormant)
	Clientèle Direct Proprietary Limited
	CBC Rewards Proprietary Limited
BW Reekie	Clientèle Life Assurance Company Limited	Fellow of the ASSA
	Clientèle General Insurance Limited
	Clientèle Direct Proprietary Limited (dormant)
	Clientèle Mobile Proprietary Limited
	Clientèle Properties East Proprietary Limited
	Clientèle Properties North Proprietary Limited
	Clientèle Properties South Proprietary Limited
	Direct Rewards Proprietary Limited
	CBC Rewards Proprietary Limited
	Reekie Family Investments Proprietary Limited

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Report of the Directors continued

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Name Other Directorships/Partnerships Other Professional Commitments
----- End of picture text -----

Name	Other Directorships/Partnerships	Other Professional Commitments
BA Stott	Boca Raton Owners Association	Charles Duggan Family Trust – Trustee
	Clientèle Life Assurance Company Limited	Lisa Stott Family Trust – Trustee
	Clientèle General Insurance Limited	The Boery Family Trust – Trustee
		The Hugh Cameron Family Trust – Trustee
PR Gwangwa	Clientèle Life Assurance Company Limited	Chueu INC Attorneys
	Clientèle General Insurance Limited	PRS Consultancy
	FOTAD (NPC)
	Malebo Alumni Foundation (NPC)
	University of Cape Town Council
RD Williams	Clientèle Life Assurance Company Limited	Independent Trustee – Ninety-One Preservation Provident Fund
	Clientèle General Insurance Limited	Independent Trustee – Ninety-One Pension Fund
	Discovery Life Limited	Independent Trustee – Ninety-One Retirement Annuity Fund
	Discovery Life Nominees Proprietary Limited
	Grayston Nominees Proprietary Limited
	RD Williams Actuarial Consulting Services Proprietary Limited
PG Nkadimeng	Bopa Telecom Proprietary Limited	None
	Clientèle Life Assurance Company Limited
	Coidlink Proprietary Limited
	Clientèle General Insurance Limited
	Cyber Guard Proprietary Limited
	Hollard International Proprietary Limited
	K2021112419 (South Africa) Proprietary Limited
	LHM Advisors Proprietary Limited
	Mozambique Logistic Holdings
	Tafari Technology Proprietary Limited
	Tafari Financial Services Proprietary Limited
	Tafari Capital Proprietary Limited
	Tizavista Proprietary Limited
LED Hlatshwayo	Clientèle Life Assurance Company Limited	None
	COIDLink Proprietary Limited
	Imisebe Investment Holdings Proprietary Limited
	Mhayise Properties CC
	Nex Rubica Capital
	The Mhayise Family Trust
	The Mhayise Residence Trust
	The Mhayise Share Trust

76

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Report of the Directors continued

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Name Other Directorships/Partnerships Other Professional Commitments
----- End of picture text -----

GK Chadwick	African Metals Corporation Proprietary Limited (trading as Eurosteel Holdings)	Head of Investments of Yellowwoods Ventures Investments Proprietary Limited
	Animal Friends Proprietary Limited
	Capricorn Royal Company Proprietary Limited
	Chadwick Investments
	Clientèle Life Assurance Company Limited
	Hollard International Proprietary Limited
	lsitali Consortium Proprietary Limited
	lsitali PrefCo Proprietary Limited
	Profibre Investment Holdings Proprietary Limited
	Profibre Products Proprietary Limited
	Yellowwoods Ventures Investments Proprietary Limited
H Louw	Clientèle Life Assurance Company Limited	Fellow of the ASSA
	Clientèle Mobile Proprietary Limited
	CBC Rewards Proprietary Limited
	Direct Rewards Proprietary Limited
RDT Tabane	Clientèle Life Assurance Company Limited	None
	Palladio Homeowners Association NPC

The appointment of new Directors to the Board is approved by the Group Nominations Committee, assisted by the Board as a whole, and subject to ratification by shareholders at the next AGM.

At each AGM of Clientèle, one-third of the Non-executive Directors shall retire from office. The Directors so to retire at each AGM shall be the Directors whom have been longest in office, as well as the Directors that have been appointed since the last AGM. The rotation of Directors at regular intervals is accepted as good practice.

The Group Company Secretary is Mrs. Wilna van Zyl whose addresses are:

Business address: Postal address: Clientèle Office Park PO Box 1316 Corner Rivonia and Alon Roads Rivonia Morningside, 2196 2128

6. DIRECTORS’ SHAREHOLDINGS

The interests, direct, indirect and through associates of the Directors are shown on page 52 of the Group Remuneration Report.

7. EXTERNAL AUDITORS

In order to comply with mandatory audit firm rotation, to address the implementation of IFRS 17 and in accordance with section 94(7)a of the Companies Act, the Group Audit Committee, on behalf of the Board, nominated Mr. JLP Kruger of Deloitte for appointment as External Auditor. This appointment will be subject to approval by a majority of shareholders at the AGM on 27 October 2022.

8. DIRECTORS’ EMOLUMENTS

Details of Directors’ emoluments are set out in Note 34 on pages 162 to 163 to the Group Annual Financial Statements. Details of Directors’ employment contracts are set out in section 2.3 on page 19 of the Integrated Annual Report.

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Report of the Directors continued

9. SPECIAL RESOLUTIONS: CLIENTÈLE

The following special resolutions were passed during the year:

1. Remuneration of Non-executive Directors

• The remuneration of the Non-executive Directors for the period 1 July 2021 to 30 June 2022 and 1 July 2022 to 30 June 2023.

2. Financial Assistance (Section 45 of the Companies Act)

• The Board was authorised to provide direct or indirect financial assistance (subject to section 45 of the Companies Act) to one or more related or inter-related companies or to any one or more members of any such related or inter-related company subject to the following:

• Any such financial assistance shall not in the aggregate for any particular financial year exceed R300 million;

• The Board will, before making any such financial assistance available, satisfy the solvency and liquidity tests as per the Companies Act; and,

• The terms under which the financial assistance is proposed to be given are fair and reasonable to the Company.

3. General authority to repurchase securities

The Company was authorised to repurchase up to 20% of the shares in the capital of the Company in accordance with section 48 of the Companies Act subject to the Listings Requirement.

4. Authority of CBC Rewards to issue ordinary shares

• The issue of shares by CBC Rewards was approved.

5. Authority of Clientèle Mobile to issue ordinary shares

The issue of shares by Clientèle Mobile was approved.

10. SPECIAL RESOLUTIONS: SUBSIDIARIES

The following special resolutions were passed during the year by the following subsidiaries:

Clientèle Life: Approval of financial assistance to a maximum of R100 million for the year and the remuneration of the Directors;

Clientèle General: Approval of financial assistance to a maximum of R30 million for the year and the remuneration of the Directors;

Clientèle Properties North: Approval of financial assistance to a maximum of R20 million for the year and the remuneration of the Directors;

Clientèle Properties South: Approval of financial assistance to a maximum of R20 million for the year and the remuneration of the Directors;

Clientèle Properties East: Approval of financial assistance to a maximum of R20 million for the year and the remuneration of the Directors;

CBC Rewards: Remuneration of the Directors, increase in authorised shares and approval of financial assistance to a maximum of R100,000; and,

Clientèle Mobile: Remuneration of the Directors, conversion of shares to non par value shares, increase in authorised shares and approval of financial assistance to a maximum of R100,000.

11. DIRECTORS’ INTERESTS IN CONTRACTS

During the financial year no contracts were entered into in which Directors of the Company had an interest and which significantly affect the business of the Group.

The Directors had no interest in any third party or Company responsible for managing any of the business activities of the Group.

78

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OUR BUSINESS GOVERNANCE REPORT FINANCIAL STATEMENTS

Statement of Actuarial Values of Assets and Liabilities of Clientèle Life

A statement of the Actuarial Values of Assets and Liabilities of Clientèle Life is provided below as its assets and liabilities form the majority of the Group’s assets and liabilities.

1. EXCESS ASSETS

The excess of assets over liabilities on the Published Reporting Basis is shown in the table below:

EXCESS ASSETS The excess of assets over liabilities on the Published Reporting Basis is shown in the	table below:
	June	June
(R’000)	2022	2021
Assets
SOFP assets	10,070,315	9,439,983
Reinsurance assets	(84,178)	(91,128)
Total assets net of reinsurance assets	9,986,136	9,348,856
Less: Liabilities
Actuarial value of liabilities Reduction in policy liabilities due to reinsurance Other policyholder liabilities Current liabilities Deferred Profits	792,742 (84,178) 7,999,499 387,802 105,316	841,961 (91,128) 7,213,412 482,642 73,339
IAS12 adjustment to other policyholder liabilities	57,563	112,025
Total liabilities	9,258,744	8,632,251
Excess of assets over liabilities	727,392	716,605
Economic Capital (EC)	358,898	350,805
EC ratio	2.03	2.04

The excess of assets over liabilities on the Prudential Basis is shown in the table below:

	June	June
(R’000)	2022	2021
Assets
Total fair value of assets	9,969,005	9,214,556
Disallowed assets	(28,190)	(42,787)
Total assets net of disallowed assets	9,940,815	9,171,769
Less: Liabilities Technical Provisions Risk Margin Current liabilities	3,748,144 949,105 360,264	2,695,441 1,029,022 490,186
Deferred tax liability	1,227,660	1,262,015
Total liabilities	6,285,173	5,476,665
Excess of assets over liabilities (Own funds)	3,655,642	3,695,104
Adjustment to own funds	(307,386)	(298,854)
Own Funds eligible for SCR cover	3,348,256	3,396,250
SCR	2,341,135	2,440,710
SCR ratio	1.43	1.39

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Statement of Actuarial Values of Assets and Liabilities of Clientèle Life continued

2. ANALYSIS OF CHANGE IN EXCESS ASSETS ON THE PUBLISHED REPORTING BASIS

The abbreviated analysis of the change, from the previous reporting period, in the Excess Assets on the Published Reporting Basis is shown below:

Reporting Basis is shown below:
	June	June
(R’000)	2022	2021
Excess assets at the end of reporting period	727,392	716,605
Excess assets at the beginning of reporting period	716,605	716,229
Change in excess assets over the reporting period	10,787	376
The change in excess assets is due to the following factors: Investment income and growth on excess assets Operating surplus (excluding changes in method or assumption) Changes in Valuation method or assumptions Consolidation of subsidiaries	28,323 458,786 12,716 (10,021)	39,272 348,324 28,868 2,892
Tax	(180,164)	(150,425)
Total earnings	309,641	268,932
Dividends paid	(298,854)	(268,556)
Total Change in Excess Assets	10,787	376

3. RECONCILIATION OF EXCESS ASSETS TO REPORTED EARNINGS

The change in the excess of assets over liabilities in this statement on the Published Reporting Basis reconciles to the net income of the life operations as follows:

The change in the excess of assets over liabilities in this statement on the Published net income of the life operations as follows:	Reporting Basis	reconciles to the
	June	June
(R’000)	2022	2021
Net profit attributable to ordinary shareholders Dividend paid	308,171 (298,854)	267,472 (268,556)
BR Scheme	1,470	1,460
Total Change in Excess Assets (Published Reporting Basis)	10,787	376

4. CHANGES IN PUBLISHED REPORTING BASIS ACTUARIAL LIABILITY VALUATION METHOD AND ASSUMPTIONS

The methodology and Actuarial Valuation assumptions used for the Actuarial Liability (IFRS 4) remained broadly the same as those applied as at 30 June 2021, except for the following changes (before allowing for compulsory margins):

• The long-term investment return assumption was increased from the previous Actuarial Valuation as shown in the table below. This change was based on the economic data as it applied at the Actuarial Valuation date. The return was based on the risk-free yield curve over the appropriate term to maturity;

• The inflation gap was updated based on the difference between the Prudential Authority real and nominal yield curve;

• The lapse experience was updated to be in line with the latest withdrawal investigations as per the withdrawals report produced by the Actuarial department, and;

• The expense assumptions were changed to be in line with the latest expectations.

The table below shows the long-term economic assumptions for business written in South Africa for the period:

	June	June
	2022	2021
Non-unit investment return Unit investment return Expense inflation rate	10.3% 11.7% 7.3%	8.6% 10.0% 5.6%
Corporate tax rate	27.0%	28.0%

Other Assumptions:

• A few other refinements were made to the modelling of the business which collectively, as well as individually, had an immaterial impact on the results.

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OUR BUSINESS GOVERNANCE REPORT FINANCIAL STATEMENTS

Statement of Actuarial Values of Assets and Liabilities of Clientèle Life continued

5. PUBLISHED REPORTING VALUATION METHOD

The Actuarial liabilities of Clientèle Life’s insurance contracts have been calculated and disclosed in accordance with the ASSA’s guidelines and in particular SAP104 (version 10). The Actuarial Valuation is a gross premium method of valuation. Where policy values are linked to the value of underlying units, the reserve has been set equal to the sum of the value of the Investment Account and a Rand Reserve allowing for, inter alia , expenses, risk benefits, risk charges, management fees (as well as other expense charges) and reinsurance.

Valuation assumptions regarding future mortality, morbidity, expenses and yields are based on prudent best estimates taking into account the Company’s current and expected future experience and allowing for any specific conditions of the various policy classes.

Liabilities and assets in respect of Investment contracts (other policyholder liabilities) have been valued in accordance with IFRS 9.

Investment contracts liabilities and assets have been valued in accordance with IFRS 9.

For the majority (at least 95%) of liabilities, the liability has been based on cashflow projections on the assumptions contained in Note 6 below. For the balance of the liability (mainly annually renewable risk business), an IBNR reserve has been established.

The results of the Valuation method and assumptions is that profits for insurance contracts are released appropriately over the term of each policy. Margins have been set up such that no losses are expected to be made in the future and that all expected future cash flows are positive. As such, the premature recognition of profits is avoided.

6. PUBLISHED REPORTING BASIS ACTUARIAL LIABILITY VALUATION ASSUMPTIONS

The Valuation of the policy liabilities was conducted on a basis consistent with the Valuation of the assets. Assumptions were based on analysis of past experience and expected future experience. The most recent experience investigations were for the period under review.

In reserving for the annually renewable term assurance business (without cash-back benefits), an IBNR liability has been established. All other liabilities have been calculated on a prospective gross premium valuation basis, allowing for future income, benefits and expenses.

Compulsory margins in terms of SAP104 (version 10) were also allowed for, in addition to the main assumptions. Specific allowance has been made for the expected deterioration in mortality experience due to AIDS and HIV infection where appropriate.

The main assumptions for business valued on a prospective cash flow basis, before allowing for compulsory margins, were as follows (figures for the previous Valuation are shown in brackets):

• A non-unit investment return rate of 10.3% (June 2021: 8.6%) was used for all classes of business;

• The expense allowance for the year after the Valuation date was based on the budgeted expenses and policy counts for the following financial year.

• For assurances, mortality rates are based on June 2022 experience investigations plus an allowance for additional risk claims due to COVID-19 in the next year;

• Withdrawal rates are based on recent experience investigations, reducing from July 2022 to July 2025 to allow for the economy’s expected recovery from COVID-19 and lockdowns; and,

• The following additional discretionary margin was held:

• Where reserving cashflow projections resulted in negative reserves, these were eliminated per policy. As such, no policy was treated as an asset.

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Statement of Actuarial Values of Assets and Liabilities of Clientèle Life continued

7. PUBLISHED REPORTING INVESTMENT CONTRACTS

All Investment contracts liabilities have been taken at SOFP values as described in the accounting policies. In addition, a Deferred Profit Liability is held, which defers the profit over the term of the policy. As at 30 June 2022, the Deferred Profit is R105 million (June 2021: R73 million).

8. PUBLISHED REPORTING ASSET VALUATION METHOD AND ASSUMPTIONS

All assets have been taken at SOFP values as described in the accounting policies.

9. PRUDENTIAL BASIS CAPITAL

The Prudential Solvency Capital Requirements (SCR) is the additional amount required, over and above the actuarial liabilities on the Prudential Basis, to enable a Company to meet material deviations in the main parameters affecting the life assurer’s business. The SCR was calculated according to the guidelines issued by the PA FSI.

The SCR can allow for management action; for the purpose of this Valuation, no management action has been allowed for.

10. PUBLISHED BASIS ECONOMIC CAPITAL

The Economic Capital is the additional amount required, over and above the liabilities on the Published Reporting Basis, to enable a Company to meet material deviations in the main parameters affecting the life assurer’s business. The EC was calculated according to the Company’s Capital Policy.

11. APN110 DISCLOSURE

Clientèle Life has a book of unit-linked business with investment guarantees on death. In particular, these policies have a minimum benefit on death equal to the fund premiums accumulated at 6% p.a. This block of business consists of two components, a saver component and a protection component. APN 110 Disclosure applies to the saver component, as it is a market-related savings product with a guaranteed return on death only. An investment account is built up based on the allocated component of saver benefit premiums and market returns in the form of income and growth. No such investment guarantee exists on maturity or surrender. There is the risk that investment returns are less than 6% p.a. (in which case the minimum benefit on death would still be granted).

A Monte Carlo simulation technique was used to quantify the liability and SCR requirement in respect of these embedded investment derivatives.

12. REPORT BY HEAD OF ACTUARIAL FUNCTION

I hereby certify that:

• The Valuation on the Prudential Basis of Clientèle Life as at 30 June 2022, the results of which are summarised above, has been conducted in accordance with FSI as published by the Prudential Authority, and this Head of Actuarial Function’s Report has been produced in accordance with applicable ASSA APNs and SAPs.

• In terms of the Prudential Basis, Clientèle Life has assets exceeding the liabilities and SCR.

• Therefore, Clientèle Life is financially sound in terms of section 36 of the Insurance Act 18 of 2017, and, in my opinion, is likely to remain financially sound for the foreseeable future.

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Mr. JL Potgieter

Head of the Actuarial Function Fellow of the Actuarial Society of South Africa

19 September 2022

82 Clientèle Limited Integrated Annual Report 2022

OUR BUSINESS GOVERNANCE REPORT FINANCIAL STATEMENTS

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Independent Auditor’s Report

To the Shareholders of Clientèle Limited

REPORT ON THE AUDIT OF THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS

OUR OPINION

In our opinion, the consolidated and separate financial statements present fairly, in all material respects, the consolidated and separate financial position of Clientèle Limited (the Company) and its subsidiaries (together the Group) as at 30 June 2022, and its consolidated and separate financial performance and its consolidated and separate cash flows for the year then ended in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa.

What we have audited

Clientèle Limited’s consolidated and separate financial statements set out on pages 97 to 170 comprise:

• the consolidated and separate statements of financial position as at 30 June 2022;

• the consolidated and separate statements of comprehensive income for the year then ended;

• the group and company statements of changes in equity for the year then ended;

• the consolidated and separate statements of cash flows for the year then ended; and

• the notes to the financial statements, which include a summary of significant accounting policies.

BASIS FOR OPINION

We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the consolidated and separate financial statements section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence

We are independent of the Group in accordance with the Independent Regulatory Board for Auditors’ Code of Professional Conduct for Registered Auditors (IRBA Code) and other independence requirements applicable to performing audits of financial statements in South Africa. We have fulfilled our other ethical responsibilities in accordance with the IRBA Code and in accordance with other ethical requirements applicable to performing audits in South Africa. The IRBA Code is consistent with the corresponding sections of the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence Standards) .

OUR AUDIT APPROACH

Overview

Overall group materiality

• Overall group materiality: R33 million, which represents 5% of profit before tax.

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Materiality
Group
scoping
Key audit
matters
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Group audit scope

• Full scope audits were performed for seven out of eight components (a component represents a subsidiary or a sub-group of subsidiaries) based on their financial significance and/or significant risks associated with these components.

• Specified audit procedures and analytical review procedures were performed on the remaining component.

Key audit matters

• The valuation of the policyholder liabilities under insurance contracts of Clientèle Life Assurance Company Limited; and

• The recoverability of the Deferred Tax Asset on the assessed loss within the Individual Policyholder Fund (“IPF”) of Clientèle Life Assurance Company Limited.

PricewaterhouseCoopers Inc. , 4 Lisbon Lane, Waterfall City, Jukskei View, 2090 Private Bag X36, Sunninghill, 2157, South Africa T: +27 (0) 11 797 4000, F: +27 (0) 11 209 5800, www.pwc.co.za

Chief Executive Officer: L S Machaba

The Company's principal place of business is at 4 Lisbon Lane, Waterfall City, Jukskei View, where a list of directors' names is available for inspection. Reg. no. 1998/012055/21, VAT reg.no. 4950174682.

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Independent Auditor’s Report to the Shareholders of Clientèle Limited continued

As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the consolidated and separate financial statements. In particular, we considered where the directors made subjective judgements; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters, consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.

Materiality

The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable assurance whether the financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the consolidated financial statements.

Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall group materiality for the consolidated financial statements as a whole as set out in the table below. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and in aggregate on the financial statements as a whole.

Overall group materiality	R33 million
How we determined it	5% of the profit before tax
Rationale for the materiality benchmark applied	We chose the consolidated profit before tax as the benchmark, because, in our view, it is the benchmark against which the performance of the Group is most commonly measured by users, and is a generally accepted benchmark. We chose 5% which is within the range of acceptable quantitative materiality thresholds used for profit-oriented companies.

How we tailored our group audit scope

We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the consolidated financial statements as a whole, taking into account the structure of the Group, the accounting processes and controls, and the industry in which the Group operates.

The consolidated financial statements are a consolidation of eight reporting components, contributing to the Group’s principal operating segments. We conducted a full scope audit of the financially significant components and/or the significant risks associated with these components, which are seven of the Group’s eight components. This, together with additional procedures performed at the Group level, including testing of consolidation journals and intercompany eliminations, gave us sufficient and appropriate evidence to form an opinion on the consolidated financial statements as a whole.

KEY AUDIT MATTERS

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated and separate financial statements of the current period. These matters were addressed in the context of our audit of the consolidated and separate financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

84 Clientèle Limited Integrated Annual Report 2022

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Independent Auditor’s Report to the Shareholders of Clientèle Limited continued

The following key audit matters relate to the consolidated financial statements. We have determined that there are no key audit matters in respect of the separate financial statements to communicate in our report.

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Key audit matter How our audit addressed the key audit matters
----- End of picture text -----

The valuation of policyholder liabilities	We utilised our actuarial expertise in obtaining sufficient and appropriate
under insurance contracts of Clientèle Life	audit evidence in relation to the valuation of policyholder liabilities under
Assurance Company Limited	insurance contracts. Our procedures included, amongst others:
(Refer to Note 16 of the annual financial	• Evaluated the competence and objectivity of management’s internal
statements)	and external actuarial experts;
	• Considered the Group’s actuarial control environment and governance,
As at 30 June 2022, the carrying amount of	including the functioning of the Actuarial Committee which approves
policyholder liabilities under insurance	the methodology and assumption changes. In this regard, we attended
contracts were R792.7 million, which is	the Actuarial Committee meetings where valuation principles were
measured in accordance with the Standard	agreed and assessed whether these were executed as approved.
of Actuarial Practice 104 (SAP 104), the	We noted no material inconsistencies;
existing accounting practice adopted, as an	• Assessed the comparison performed by management where
accounting policy under International	management compares the internal valuation performed as at
Financial Reporting Standard (IFRS) 4:	30 June 2022 to the valuation performed by management’s independent
Insurance Contracts.	external actuarial experts. We noted no material inconsistencies;
Policyholder liabilities under insurance contracts include provisions for the net present value of expected future benefits and	• Evaluated the methodology applied in the valuation against the requirements of Standard of Actuarial Practice 104 (SAP 104) and the Group’s accounting policies. No material inconsistencies were noted;
expected future costs, less expected future	• Compared the most significant assumptions applied by management
premiums, units allocated to policyholders	to recent actual experience, industry trends and economic market
based on an internal investment fund and	trends, noting no material inconsistencies;
claims incurred but not reported (IBNR).	• Tested the valuation of the internal investment fund units by inspecting
There are complex and significant subjective judgments involving high estimation uncertainty in forecasting uncertain future events, policyholder behaviour and economic conditions. The assumptions, as disclosed in Note 16 to the consolidated	management’s controls in respect of unit pricing and unit reconciliations. In addition we tested on a sample basis the unit calculations by testing the market value of the underlying assets to calculate the unit price. • Tested the underlying data used in the valuation by performing the following procedures: – Testing the controls performed by management to ensure the
financial statements, are applied in	accuracy and completeness of the policyholder data;
determining the value of policyholder	– Tracing a sample of the policyholder valuation input data, such as
liabilities. Lapses, mortality, expenses,	premiums and expense data used in the valuation model, back to
morbidity and economic assumptions,	information contained in the administration and accounting
including the impact of COVID-19, may	systems; and
result in a material adjustment to the	– Compared, on a sample basis, policyholder information as recorded
valuation of policyholder liabilities.	in the administration system to policyholder application forms and
The valuation of policyholder liabilities under	telesales calls.
insurance contracts was considered to be a	– The testing of the underlying data, as per the above three points,
matter of most significance to the audit due	identified no material exceptions.
to the following reasons:	To test the appropriateness of management’s key assumptions/areas of
• Significant management judgement	judgement, we performed, amongst others, the following procedures:
required in determining the value of the	• Tested the economic assumptions, which includes the investment
policyholder liabilities; and	returns and inflation rates, to current economic indicators.
• The magnitude of the policyholder liabilities balance (R792.7 million) in relation to total liabilities (R9,336 million).	• Assessed the reasonability of management’s experience investigations and the reflection of the results on the various assumptions, including the lapse, mortality, morbidity, unmets and expense assumptions.
	The assumptions took into account the uncertainty regarding current
	economic outlook and the COVID-19 pandemic.
	Considered sensitivity analyses on the assumptions and noted no material
	aspects requiring further consideration.

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85

Independent Auditor’s Report to the Shareholders of Clientèle Limited continued

Key audit matter How our audit addressed the key audit matter

The recoverability of the deferred tax asset of the assessed loss within the Individual Policyholder Fund (“IPF”) of Clientèle Life Assurance Company Limited (Refer to Note 22 to the annual financial statements)

From 1 July 2016, risk policies (as defined in the Income Tax Act) are taxed in a separate fifth tax fund called the Risk Policy Fund (“RPF”). At the transition date, Clientèle Life Assurance Company Limited elected to move all existing risk policies from the IPF to the RPF under the “once off election” as provided for under the Income Tax Act.

We obtained management’s calculation and forecast of the recovery of the assessed loss and the resultant deferred tax asset to be raised. We challenged the assumptions made by management in determining future levels of investment business against actual experience, as well as the expected period over which the “I-E” assessed loss will be recovered. We assessed the probabilities applied for reasonableness by comparing it to past experience and management’s forecasts. Based on our work performed, we accepted management’s projections.

We made use of our tax expertise to evaluate the appropriateness of the tax principles applied in projecting the recovery of the assessed loss in terms of the relevant taxation laws. No exceptions were noted in the tax principles applied.

The election decision affected the composition and extent of expenses (“E”) in the IPF and the timing of when the fund is expected to be in an excess income (“I”) taxable position.

At year end, the IPF estimated tax loss amounted to R1.5 billion and arose as a result of the excess of expenses (mainly acquisition and administration expenses on risk policies) allocated to the IPF compared to taxable income (mostly interest) earned in the IPF in the past.

The investment policies amounted to R7.8 billion in the current year, which is expected to generate taxable profits. As a result, management has performed projections based on a number of assumptions, including the attrition rate, which indicate that the recovery of a portion of the losses within the IPF is probable and therefore recognised a deferred tax asset of R61.3 million in terms of International Accounting Standard 12, Income taxes (IAS 12).

The deferred tax on the assessed loss within the IPF was considered to be a matter of most significance to our current year audit as it is subject to significant management judgement and high estimation uncertainty.

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Independent Auditor’s Report to the Shareholders of Clientèle Limited continued

OTHER INFORMATION

The directors are responsible for the other information. The other information comprises the information included in the document titled “Clientèle Integrated Annual Report 2022”, which includes the Report of the Directors, the Group Audit Committee Report and the Certificate by the Company Secretary as required by the Companies Act of South Africa. The other information does not include the consolidated or the separate financial statements and our auditor’s report thereon.

Our opinion on the consolidated and separate financial statements does not cover the other information and we do not express an audit opinion or any form of assurance conclusion thereon.

In connection with our audit of the consolidated and separate financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the consolidated and separate financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

RESPONSIBILITIES OF THE DIRECTORS FOR THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS

The directors are responsible for the preparation and fair presentation of the consolidated and separate financial statements in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa, and for such internal control as the directors determine is necessary to enable the preparation of consolidated and separate financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated and separate financial statements, the directors are responsible for assessing the Group and the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group and/or the Company or to cease operations, or have no realistic alternative but to do so.

AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS

Our objectives are to obtain reasonable assurance about whether the consolidated and separate financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated and separate financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the consolidated and separate financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s and the Company’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.

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Independent Auditor’s Report to the Shareholders of Clientèle Limited continued

• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s and the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated and separate financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group and/or Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the consolidated and separate financial statements, including the disclosures, and whether the consolidated and separate financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.

From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the consolidated and separate financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

In terms of the IRBA Rule published in Government Gazette Number 39475 dated 4 December 2015, we report that PricewaterhouseCoopers Inc. has been the auditor of Clientèle Limited for 25 years.

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PricewaterhouseCoopers Inc. Director: F.J. Kruger Registered Auditor Johannesburg, South Africa

21 September 2022

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Risk Management

for the year ended 30 June 2022

1. FRAMEWORK AND OBJECTIVES

Risk is an integral part of any business. Having an effective risk management process is essential for sustainable and profitable growth.

The risk management framework and policy is fully aligned to ensure compliance with the Prudential Standard GOI 3 – Risk Management and Internal Controls for Insurers.

The risk management processes cover strategic, insurance, financial, compliance and operational risks inherent to the Group’s business.

• 1.1 Responsibility for Risk Management

The overall responsibility for risk management resides with the Board. This responsibility has been delegated to the Group Risk Committee. At an operational level, the Group Risk Function facilitates the risk management process. The Group has a number of Committees and business functions which manage the risks in their respective areas. These Committees and business functions are responsible for identifying and rating all risks, internal controls and actions taken to mitigate risk, and act as a first line of assurance in the combined assurance model. The Committees and business functions sufficiently cover all risk areas.

The Group Risk Function acts as the second line of assurance in the combined assurance model.

• 1.2 Key Focus Areas During the Year

• COVID-19

Our focus involves achieving a balance between keeping all staff members safe and protecting the interests of our policyholders.

Office park safety remains a major focus area for the risk team.

Internal triggers were developed based on COVID-19 experience, including hospitilisations, within Gauteng, South Africa and the office park. These were used as a guide for the COVID-19 Committee when deciding when additional restrictions should be implemented in the office park.

The national state of disaster came to an end in April 2022 reducing many of the COVID-19 requirements. The Hazardous Biological Agents Committee (previously the COVID-19 Committee), however, continues to monitor the situation and track specifically identified triggers.

Compliance with all relevant COVID-19 Regulations remains a focus area for the Group Risk Function.

• IFRS 17

IFRS 17 is an International Financial Reporting Standard that was issued by the International Accounting Standards Board in May 2017. It will replace IFRS 4 on accounting for insurance contracts. IFRS 17 needs to be fully implemented by June 2024. This means that implementation is necessary by June 2023 as comparative financial statements for FY 2023 are required in FY 2024.

An IFRS 17 Committee has been established and has a mandate to drive the IFRS 17 process. This is done with the assistance of external consultants (QED). The IFRS17 Committee, in collaboration with the Group Risk Function, has created a special risk register for the project and a summary of the main risks are as follows:

• The most significant risk is finding and keeping appropriate human resources. This risk has been mitigated by promoting internal resources and cross skilling within the Finance and Actuarial departments;

• The Project not being implemented within the allocated time frame;

• The expenses related to the project being higher than anticipated/budgeted; and,

• Historical data from our legacy systems not being sufficient/detailed enough to service the requirements of the new system.

A Project Plan is in place and makes provision for appropriate education and training to be provided to the Board and Audit Committee members.

• Risk culture

Training to emphasize management’s responsibility towards effective risk management is provided on an ongoing basis.

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Risk Management continued

• Enhancement of the risk frameworks

• “Risk” is a standing agenda item for most Committee and other meetings across the Group.

The Group Risk Committee provides the Board with a holistic view of the risks facing the Group, as well as the business units responsible for managing these risks. Specific risk templates are in place for broad categories of risk. This ensures that all areas receive the necessary focus from management with facilitation by a risk champion.

• Key Risk Indicators (KRIs)

Each risk area across the Group has its own specific and relevant KRIs which are measured and monitored.

• Operational Risk Incidents (ORI)

There is a focus on, and regular reporting of, ORIs throughout the Group. A survey focusing on Operational risk was conducted by the Group Risk Function in order to measure the understanding of Operational risk amongst members of the management team. The results of the survey were satisfactory.

2. RISK APPETITE

The Group defines its risk appetite as the total quantum of risk that the Group is willing to accept in the pursuit of its long-term objectives.

The following are the three risk appetite metrics, as approved by the Board:

• Financial soundness (Prudential and Published Reporting basis);

• Free cash flow; and,

• Recurring EV Earnings (“REVE”).

The risk appetite is based on a 1 in 7 year risk event for free cash flow and REVE, and as a result of this we have to remove the impact of COVID-19 (arguably a 1 in a 100 year event) when assessing these two criteria.

The financial soundness is measured based on a 1 in 200-year risk event, and as a result the impact of COVID-19 is taken into account when considering this measure. The Group remains financially sound.

Specific key risks are also measured individually against pre-defined risk tolerance levels.

3. SIGNIFICANT AND WATCHLIST RISKS

All risks are rated using a risk rating scale. The risk rating is obtained by multiplying the impact rating with the likelihood rating.

Significant risks are classified as any risk where the risk rating is above 12 (impact is high and the likelihood is possible). WatchList risks are classified as any risk where the impact rating is 4 or 5 but the likelihood is low.

The following are the Long-term Significant and WatchList Risks that are monitored against the Group’s business objectives:

LONG-TERM SIGNIFICANT AND WATCHLIST RISKS

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20
16 Persistency
15
12 Competitor activity
People risk
10
New business
8 Sales Quality
Media Comment
Executive travel
5
Cyber crimes
4 Existing legislation
FY 2021 FY 2022
Risk rating (RR)
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Long-term risks refer to risks that we expect to stay on the Group’s radar for the foreseeable future.

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Risk Management continued

The following are the short-term Significant Risks and WatchList Risks that are monitored against the Group’s business objectives and includes all Significant emerging risks:

SHORT-TERM SIGNIFICANT AND WATCHLIST RISKS

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20
16
15 Collection Environment
12
10
Legacy system
8 Policyholder Protection Rules
Conduct of financial institutions bill (COFI)
COVID-19
5 Health and safety
4
FY 2021 FY 2022
Risk rating (RR)
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Short-term risks refer to risks that can potentially affect us within the next three years whereafter the risk is expected to either disappear completely, having been realised or is expected to have been mitigated by internal or external controls or actions taken to mitigate the risk.

4. FOCUS AREAS FOR 2023

• Assisting the IFRS 17 Committee with the IFRS 17 implementation project and uncertainties surrounding this;

• Identifying further KRI’s and internal controls for business areas throughout the Group;

• Further embedding of risk management throughout the Group;

• Finding ways in which risk management can create more value throughout the Group; and,

• More extensive reporting of ORIs throughout the Group.

5. STRATEGIC RISK

5.1 New Business (Production)

• New business risk is the risk of not achieving the budgeted production numbers and quality of sales. The overall risk relating to new business production is a Significant risk.

Factors with the potential to affect this risk

• New business volumes across all distribution channels being lower than expected;

• Quality of new business across all distribution channels being lower than expected;

• Initial expenses being higher than anticipated;

• RDR being higher than allocated for in the budget;

• Competitor offerings may seem more attractive to potential clients especially if the monthly premiums are lower;

• Political paralysis in South Africa;

• Overall increase in food prices leaving potential policyholders with less cash at the end of the month;

• Increasing prices in fuel resulting in higher transport costs for our policyholders and prospective policyholders resulting in less disposable cash; and,

• Load shedding negatively affecting the economy and our potential policyholders’ ability to pay their insurance premiums.

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Risk Management continued

Risk mitigation

• Frequent updates are received by various key members of management to ensure that new business related risks are correctly monitored and assessed at all times;

• The management incentive structure is linked to, inter alia , new business volumes and quality of new business;

• New business volumes are monitored by various Committees on a regular basis;

• Various initiatives to better understand our clients’ needs to ensure that we design products that drive production;

• Products are designed in such a way as to reduce new business risks and increase new business volumes;

• Limiting the number of policies per bank account to help ensure that all new business that is written is of acceptable quality;

• Generators, solar panels and UPS systems are in place to ensure that sales can continue irrespective of an electricity failure;

• A business continuity plan is in place to ensure that sales can continue in the event that one or more of the sales floors can’t be accessed for any reason;

• Additional distribution channels are continuously being explored and introduced; and,

• Introducing new business channels, such as Funeral parlour intermediaries.

6. OPERATIONAL RISK

The risk of losses resulting from inadequate or failed processes, people, systems, or from external events.

6.1 External events/changes that impact operational processes

The Significant risk of banking system changes and the WatchList risk of public perception relating to real or fake media comment forms part of this risk.

This risk also includes the impact of the increasingly difficult economic conditions on our business (including employees, policyholders and future business).

Factors with the potential to affect this risk

• External events having an impact on our business;

• Changes brought about by the banking industry, for example RMS affecting the way in which we do business;

• Overall collection environment stability;

• The risk related to a negative media comment whether it is fake news or factually correct; and

• The impact of external economic conditions (including the price of fuel, load shedding and inflation) on our staff morale as well as the impact on policyholders.

Risk mitigation

• Business Disaster risks together with their relevant controls that are currently in place and any possible future risk mitigation that may be considered, are documented and discussed on an annual basis by the Group Risk Committee;

• A Business Continuity Plan is in place and outlines the way in which the business will continue should access not be available to specific buildings within the office park;

• Active involvement in lobbying changes should a change potentially impact and limit the way in which the Group can do business;

• The Group Risk Committee agenda has a standard item titled ‘Blue Sky discussions’. These refer to any external events that are currently trending and provides a forum for members to discuss scenarios and suggestions on how best to deal with these;

• Involvement in lobbying for changes should a newly proposed change affect the way in which we do business;

• All ORIs are reported to the Group Risk Function on a quarterly basis;

• A close working relationship is maintained between GIA and the Group Risk Function to ensure that the correct focus is placed on specific operational areas;

• Numerous Committees and business functions throughout the Group are responsible for managing and

• reporting on operational risks within their areas; and,

• The Hazardous Biological Agents Committee (replacing the COVID-19 Committee) ensures that all applicable legislation and Regulations are complied with and that our internal policies and procedures are adhered to by all employees.

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Risk Management continued

6.2 Systems/Technology

The WatchList risk of Cyber risk forms part of this risk.

Factors with the potential to affect this risk

• Legacy IT system changes affecting existing processes;

• Systems not operating as expected, making them unable to comply with business requirements;

• IT covers an extremely broad spectrum of tasks and technologies which constantly change;

• Service availability which includes both internal and external service;

• Potential disconnect between IT and business in terms of requirements, capacity, time lines and delivery;

• IT resources are not always readily available;

• External risk of our systems being infiltrated and damaged, stolen or destroyed by a third party; and,

• Executive continuity in the IT environment.

Risk mitigation

• Specific policies and processes (e.g. Disaster Recovery Framework, Internet Policy, Backup Policy, Software Acquisition Policy) deal with the operational risks arising from system or technology failures;

• Penetration tests are performed on a regular basis;

• IT Service Continuity Plan is in place and has been tested;

• Email web-link protection is in place;

• Security Operations Centre alerts (potential/successful attacks) are in place;

• All ORIs are reported to the Group Risk Function on a quarterly basis;

• A close working relationship is maintained between GIA and the Group Risk Function to ensure that the correct focus is placed on specific operational areas; and,

• Numerous Committees and business functions throughout the Group are responsible for managing and reporting on operational risks within their areas.

6.3 People

People risk, including the potential of negative staff morale and succession risks (mainly due to external market conditions and the effect that this has on employees), are classified as a Significant risk and Group Excom and Non-executives travelling together is classified as a WatchList risk.

Factors with the potential to affect this risk

• Negative staff morale causing staff to not perform efficiently and at optimal levels;

• Increased staff turnover causing staff members to be overworked or certain positions to not be filled within an acceptable period of time and the Group’s performance to decrease as a result;

• Succession risk where appropriate succession plans are not in place;

• Unplanned staff absenteeism negatively affecting the Group’s overall performance for a specific period;

• Business disruption at the Office Park;

• Change management not being implemented correctly and resulting in unhappy staff members;

• A lack of transparency in the transformation process;

• Business processes not followed due to human error, either negligent or intentional;

• Increased emigration;

• Health and Safety of all employees, including the COVID-19 threat;

• Load shedding and the worsening position of Eskom;

• Food inflation not corresponding to increases in social grants, salary increases across South Africa; and

• The rising price of fuel, and the consequence of this on the cost of transport.

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Risk Management continued

Risk mitigation

• Succession planning is in place;

• Disciplinary and remedial processes are in place should any staff member act outside their Standard Operating Procedures;

• Sign-off procedures and segregation of duties exist as far as possible within all departments and are monitored by GIA;

• A Fraud policy is in place and this, coupled with continuous fraud training and awareness, mitigates internal fraud;

• All ORIs are reported to the Group Risk Function on a quarterly basis;

• A close working relationship is maintained between GIA and the Group Risk Function to ensure that the correct amount of focus is placed on specific operational areas;

• Numerous committees and business functions throughout the Group are responsible for managing and reporting on operational risks within their areas;

• A Group Excom Travel Risk Policy, regulating the way in which Excom members travel together, is in place;

• Staff focus groups are in place;

• A Group Employment Equity Committee is in place and receives direct feedback from staff members;

• Numerous additional controls have been introduced (in the form of training, awareness, constant communication, internal Group processes and procedures) in an attempt to limit the spread of COVID-19;

• Our GROW (Growth, Retention, Optimisation, and Wellness) strategy implemented across the Group;

• The Health and Safety Committee reports and monitors the safety of employees at the office park; and,

• The EE Committee ensures transparency on the transformation process amongst all staff levels.

6.4 Process

Factors with the potential to affect this risk

• Any area where there is no process in place, resulting in a breakdown of controls; and,

• Any area where the process is incomplete or inadequate.

Risk mitigation

• Where applicable, all operational areas have Standard Operating Procedures in place to mitigate risk;

• The ICC and IFCC oversee the identification and improvement of internal controls and internal financial controls respectively;

• All ORIs are reported to the Group Risk Function on a quarterly basis;

• A close working relationship is maintained between GIA and the Group Risk Function to ensure that the correct amount of focus is placed on specific operational areas; and,

• Numerous committees and business functions throughout the Group are responsible for managing and reporting on operational risks within their areas.

6.5 Contract and Litigation

The WatchList risk of the potential negative public perception relating to the legal action taken against PASA forms part of this risk.

Factors with the potential to affect this risk

• Proper contracts not being in place between the Group and suppliers; and,

• Terms of a contract not being followed by the Group or our suppliers.

Risk mitigation

• All contracts are kept by the Legal Department on a Contract Management System;

• All contracts are reviewed by the Group Legal Department prior to signature;

• Where appropriate, matters are referred to external legal counsel for opinion;

• All ORIs are reported to the Group Risk Function on a quarterly basis;

• A close working relationship is maintained between GIA and the Group Risk Function to ensure that the correct amount of focus is placed on specific operational areas; and,

• Numerous committees and business functions throughout the Group are responsible for managing and reporting on operational risks within their areas.

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Risk Management continued

7. COMPLIANCE RISK

7.1 Regulatory Compliance

Regulatory compliance is the risk that the Group may not comply with applicable regulatory requirements that are currently in force.

The WatchList risk of non-compliance with existing legislation is the main component of this risk.

Factors with the potential to affect this risk

• Growing regulatory universe; and,

• Differing interpretations of legislation and/or regulations.

Risk mitigation

• The Group has a zero tolerance approach to non-compliance with existing laws, regulations, rules, codes and standards;

• The Group has a qualified and experienced Compliance Officer;

• Compliance training is provided on an ongoing basis to various areas within the Group;

• A regulatory compliance risk universe, setting out the applicable and relevant Acts, Regulations, standards and best practices facing the Group is in place;

• A regulatory compliance management software system is used to manage the top 20 identified Acts and Regulations facing the Group; and,

• A close and combined assurance working relationship between the control functions exist to ensure, amongst other things that new legislation is properly understood and implemented across the Group.

7.2 Regulatory

Regulatory risk includes the risk that proposed new legislation, not yet in force, may impact our business processes or the way in which we do business in the future.

The WatchList risks of Conduct of Financial Institutions Bill (COFI), Policyholder Protection Rules (PPR) and the possible IFRS 17 tax implications forms part of this risk.

Factors with the potential to affect this risk

• Growing regulatory universe; and,

• Differing interpretation of new legislation or regulations.

Risk mitigation

• Weekly regulatory scanning is performed to identify any upcoming legislation, regulations or enforcement trends that may have a potential impact on the business;

• Any new legislation and regulations that may be applicable are communicated to the relevant business units;

• Where issues are identified that can potentially result in non-compliance, should the legislation or regulations

• be implemented, remedial actions are taken to ensure compliance in advance;

• In some instances, working groups may be established to focus on compliance and ensure that the Group is

• prepared; and,

• Interaction with regulators and other role players and involvement in lobbying changes throughout the finalisation and implementation of new legislation and regulations.

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Risk Management continued

7.3 Conduct

Conduct risk is the risk of the Group’s employees or sales representatives interacting with clients in a noncompliant (with applicable laws and Regulations) or in an unacceptable way that is not in line with the Group’s values and TCW philosophy.

Factors with the potential to affect this risk

• Sales agents not following the relevant sales scripts;

• IFA presenters not following the presentation script;

• Agents and Brokers not adhering to their scripts and/or processes;

• Inappropriate behaviour by associated funeral parlour intermediaries and their agents; and,

• Any client facing area not treating a client with due consideration of the Group’s values and TCW philosophy.

Risk mitigation

• A risk-based compliance plan is followed;

• A compliance culture, that values responsible conduct and compliance with internal processes and procedures and external obligations in terms of laws, regulations, standards and best practices, are continuously promoted;

• The confidential reporting by employees of concerns, shortcomings or potential non-compliance in respect of the insurer’s policies, legal or regulatory obligations, or ethical considerations is promoted;

• The Market Conduct Department monitors sales and service phone calls to ensure that a certain benchmark is achieved and that actions are taken when sales representatives and employees do not perform in terms of the internal quality rating;

• The Market Conduct Department is responsible for sales complaint resolution; and,

• The Internal Arbitration Department is responsible for dealing with internal complaints that have been escalated, as well as Ombudsman and regulatory complaints.

8. SOLVENCY

The Group’s capital management process ensures that each entity within the Group maintains sufficient capital for legal and regulatory compliance purposes. The Group ensures that its actions do not compromise sound governance and appropriate business practices. When determining the Group SCR, an allowance is made for various factors, including external borrowings and guarantees. The Group SCR ratio is maintained at a level greater than 1.

As at 30 June 2022, the Group SCR amounted to R2.52 billion (2021: R2.63 billion) and was covered 1.53 times (2021: 1.32 times) by the excess of assets over liabilities after allowing for the expected dividend payment following year-end.

8.1 Long-term Insurance

The solvency of the long-term insurance business is monitored based on the principles and calculations outlined under Pillar 1 of SAM, which follows a risk-based approach.

As at 30 June 2022, the SCR of Clientèle Life amounted to R2.34 billion (2021: R2.44 billion) and was covered 1.43 times (2021: 1.39 times) by the excess of assets over liabilities after allowing for the expected dividend payment following year-end.

8.2 Short-term Insurance

The solvency of the short-term insurance business is monitored based on the principles and calculations outlined under Pillar I of SAM, which follows a risk-based approach.

As at 30 June 2022, the SCR for Clientèle General amounted to R159.4 million (2021: R163.8 million). This translated into a SCR cover ratio of 1.64 assuming that no dividend is paid and 1.04 (2021: 1.02) after allowing for the expected dividend payment following year-end, assuming that the dividend was paid immediately (1 July) but before allowing for the reduction in Market risk component of the SCR following the Dividend payment. When the Dividend is paid, the assets of the Clientèle General will reduce, resulting in a lower Market risk component and the SCR cover ratio would exceed 1.1 immediately after the dividend payment assuming that the payment was made immediately at year end.

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Insurance and Financial Risk Management

for the year ended 30 June 2022

1. INSURANCE RISK

Insurance risk is the risk relating to the unknown future cash flows (including premiums, claims, and expenses) and the persistency thereof relating to the policies on the books as well as the Group’s insurance liabilities.

1.1 Persistency Risk

This is a Significant risk for the Group. This risk has increased during the year as it was impacted by the worsening economic conditions, including an increase in inflation, fuel price and load shedding.

Policyholders have a right to pay reduced premiums or no future premiums with corresponding reduced benefits, or to terminate the contract completely before expiry of the contract term.

Factors with the potential to affect this risk

• Economic conditions, such as the total labour force participation rate, inflation, real disposable income, credit extension, total household consumption and budget deficit to GDP which may impact our clients’ ability to pay premiums;

• Changes in banking processes and procedures (e.g. inter alia , the use of DebiCheck and the debit order dispute process and DebiCheck mandate suspensions followed by banks);

• Collection environment failures that have been more frequent following the introduction of recent payment system changes (e.g. the introduction of Registered Mandate Service);

• Closure of the NAEDO billing channel continuing to have a negative impact on our ability to collect premiums;

• Misunderstanding of new banking payment system communications from banks by our customers;

• The level of service rendered;

• Quality of sales;

• Disputes of valid debit orders;

• Competitor offerings may seem more attractive to clients especially if the monthly premiums are lower;

• Political paralysis in South Africa;

• Overall increase in food prices leaving our policyholders with less cash at the end of the month;

• Increasing prices in fuel resulting in higher transport fees for our policyholders resulting in less disposable cash; and,

• Load shedding negatively impacting the economy and the policyholder’s potential to pay their insurance premiums.

Risk mitigation

• The Clientèle App makes it easier for clients to manage their policies;

• Persistency rates are measured on a monthly basis and resources are directed towards the sale of business with higher persistency, understanding our policyholders’ payment abilities and improved mechanisms of collecting premiums;

• Authenticated Collection systems are used and actively encouraged where possible;

• Various initiatives to better understand our clients’ needs in order to provide policy benefits that encourage persistency;

• Discussion and participation in meetings of industry committees (e.g. ASISA, PASA, and ASSA);

• Products are designed in such a way as to increase persistency by providing policy benefits which encourage persistency and reduce the risk of early withdrawal;

• Limiting the number of new sales per individual bank account; and,

• Clientèle “Thank You” has been introduced which incorporates additional benefits for loyal clients and will be used to reward loyalty.

1.2 Client Payments and Benefits

1.2.1 Mortality and Morbidity (Clientèle Life)

Contracts provide benefits on death, dread disease, hospitalisation and disability. Premium rates are determined using mortality and morbidity assumptions. If actual experience differs from assumptions, premium rates may become inappropriate.

Factors with the potential to affect this risk

• Fraudulent claims;

• Epidemics (e.g. AIDS, Ebola and COVID-19);

• Widespread changes in lifestyle (e.g. smoking, physical activity, nutrition, stress or sexual practices);

• Income bracket (e.g. the lower income bracket may be more susceptible to extreme weather conditions and have less access to basic facilities); and,

• Sector of employment.

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Risk mitigation

• Underwriting processes are in place to manage exposure to mortality and morbidity risks. The most significant measures are:

• Premium rates are required to be certified by the Head of the Actuarial Function as being financially sound;

• Semi-annual experience investigations are conducted and used to set and review premium rates;

• Reinsurance arrangements are negotiated in order to limit the risk on any individual contract;

• To reduce cross-subsidisation of risks and the possibility of anti-selection, premium rates differentiate on the basis of age, gender and other relevant factors, where applicable and permitted in terms of current legislation. Semi-annual experience investigations have shown that these are reliable indicators of the risk exposure;

• Policy terms and conditions are used to avoid anti-selection to ensure the fair treatment of policyholders;

• Claims as a result of accidental death below a pre-determined value are not reinsured and claims experience is monitored monthly;

• Ways in which to further mitigate claims fraud are constantly investigated and tools (fraud risk scoring model, account verification system, internal fraud database) are used to manage this as far as possible;

• Claims experience is carefully monitored to identify any anomalies in specific geographies or institutions and external medical experts are consulted to confirm the validity of claims; and,

• The Group’s policyholder spread is closely linked to the spread of the actual population of South Africa, thereby limiting concentration risk.

1.2.2 Frequency and Severity of Claims (Clientèle General)

The frequency of claims per policyholder is expected to be high and the claim values are expected to be low. Increases in the average cost per claim will potentially have a large financial impact.

Factors with the potential to affect this risk

• Litigation costs in the future may be higher than expected;

• Accidental death claims can be higher than expected;

• Misrepresentation at sales stage could cause a higher than expected number of claims to be covered; and,

• External attorney referrals (that involve a high direct cost) could be higher than expected.

Risk mitigation

• All contracts contain specific terms and conditions (e.g. pre-existing conditions are excluded) to ensure fair treatment of all policyholders;

• Limits are set on the amount which can be claimed annually as well as in a policyholder’s lifetime;

• Most matters are dealt with through in-house legal advice and day-to-day management is exercised with regard to the efficiency of resolving legal matters;

• Management of sales consultants (quality assurance) and appropriate training of sales agents;

• Oversight and monitoring of claims referred to external attorneys; and,

• The panel of external attorneys who provide legal advice is continually reviewed and assessed to ensure the appropriate level of advice is given and that this advice is charged for at an appropriate level. This panel of external attorneys must provide a valid fidelity fund certificate to ensure that they are registered with the Law Society. This ensures that they enjoy professional indemnity cover.

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1.3 Expenses

Expense risk is the risk that actual expenses are greater than expected.

Factors with the potential to affect this risk

• Stagnation or reduction in new business volumes (making it difficult to cover fixed expenses);

• Unexpected sudden increase in expenses; and,

• Withdrawals at rates higher than assumptions.

Risk mitigation

• Comprehensive budgeting and forecasting processes, strict cost control by business units together with strong new business flows and the management of collections; and

• Actual experience is closely monitored and compared to assumptions on a monthly basis.

1.4 Model

1.4.1 Data

• Data risk is the risk that data used in the policyholder liability valuation calculations is inaccurate or incomplete.

Factors with the potential to affect this risk

• Incorrect data or valuation extracts emanating from the policy administration system and being used as input for the Actuarial valuation model; and,

• Incorrect capturing of data on the policy administration system.

Risk mitigation

• Data integrity testing and investigation of any exceptions, conducted on a monthly basis;

• Group Actuarial Committee meetings on a quarterly basis; and,

• Annual review by External Actuaries.

1.4.2 Assumptions

Assumption risk is the risk that the assumptions used in the Valuation are not borne out in reality.

Factors with the potential to affect this risk

Adverse actual experience or the use of incorrect assumptions.

Risk mitigation

• Actuarial assumptions are set by the Actuarial Department and reviewed by the Head of the Actuarial Function;

• Actuarial assumptions are also reviewed by External Actuaries once a year; and,

• The following are performed on a regular basis:

• Policyholder Liability valuation calculations (monthly);

• EV calculations (quarterly);

• Management review of valuation and calculations (quarterly); and,

• Actual experience is monitored and compared to assumptions (monthly).

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1.5 Solvency

The Group’s capital management process ensures that each entity within the Group maintains sufficient capital for legal and regulatory compliance purposes. The Group ensures that its actions do not compromise sound governance and appropriate business practices. When determining the Group SCR, an allowance is made for various factors, including external borrowings and guarantees. The Group SCR ratio is maintained at a level greater than 1.

1.5.1 Group Insurance

The Clientèle Group is required to maintain a capital balance equivalent to, at least, the SCR and targets an internal SCR cover ratio of no less than 1. This will ensure that the Clientèle Group will meet its obligations in the event of substantial deviations from the main experience assumptions affecting the Clientèle Group’s financial instruments, insurance and investment contract business.

Risk mitigation

• The SCR coverage is monitored on a quarterly basis to ensure compliance with the regulatory SCR and the Group’s risk appetite;

• The Head of the Actuarial Function reviews all the calculations; and

• The quarterly and annual returns are signed off by two Directors.

1.5.2 Long-term Insurance

The solvency of the long-term insurance business is monitored based on the principles and calculations outlined under Pillar 1 of SAM, which follows a risk-based approach.

Clientèle Life is required to maintain a capital balance equivalent to, at least, the SCR and targets an internal SCR cover ratio of no less than 1.1. This will ensure that Clientèle Life will meet its obligations in the event of substantial deviations from the main experience assumptions affecting Clientèle Life’s financial instruments, insurance and investment contract business.

Risk mitigation

• The SCR coverage is monitored on a quarterly basis to ensure compliance with the regulatory SCR and the Group’s risk appetite;

• The Head of Actuarial Function reviews all of the calculations; and

• The quarterly and annual returns are signed off by two Directors.

1.5.3 Short-term Insurance

The solvency of the short-term insurance business is monitored based on the principles and calculations outlined under Pillar I of SAM, which follows a risk-based approach.

Clientèle General is required to maintain a capital balance equivalent to, at least, the SCR and targets an internal SCR cover ratio of no less than 1.1.

Risk mitigation

• The SCR coverage is monitored on a quarterly basis to ensure compliance with the regulatory SCR and the Group’s risk appetite;

• The Head of the Actuarial Function reviews all the calculations; and

• The quarterly and annual returns are signed off by two Directors.

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2. FINANCIAL RISK

2.1 ALM and Liquidity Risk

2.1.1 ALM Risk

ALM risk is the risk that the Group’s assets are not adequately matched to back the Group’s insurance contract liabilities and financial liabilities.

Factors with the potential to affect this risk

• A mismatch in the investment performance of financial assets relating to the underlying insurance contract liabilities or financial liabilities at fair value through profit or loss; and,

• Holding insufficient free assets in relation to actuarial liabilities and the SCR.

Risk mitigation

• Products with a savings component (i.e. unit-linked products) are matched to the underlying net investment performance;

• The assets backing financial liabilities at fair value through profit or loss are matched upfront and are monitored on a monthly basis to ensure appropriate ALM is achieved;

• A current, as well as a forecast liquidity, matching schedule, which takes account of annual strategic planning, forecasting and budget processes, is prepared and reviewed;

• Monitoring and updating the liquidity matching schedule for known and anticipated changes is conducted quarterly;

• The appropriateness of the market and credit risk of each asset or asset class is considered regularly;

• The outputs of the liquidity matching schedule, and the market and credit risk exposures are considered when making investment decisions;

• The nature, quantum and period of any mismatch (if applicable) is reviewed and approved by the Head of the Actuarial Function;

• Special attention is given to single premium guaranteed products, which need to be considered separately;

• An understanding of the structure (including pricing) and obligations related to new and existing products is gained through a close working relationship between the Group Investment Committee, the Group Product Committee and the Group Actuarial Committee;

• The ALM process recognises the interdependence between the Group assets and liabilities and takes into account the correlation of risk between different asset classes and the correlation between different products and business lines;

• The ALM process also takes into account any possible off balance sheet exposures, including contingent liabilities, capital commitments and guarantees and the contingency that risks transferred may revert back to the Group;

• Regular monitoring is undertaken by the Group Actuarial and Group Investment Committees, with the Group Actuarial Committee having ultimate oversight of this aspect;

• Spreading of assets in terms of the provisions of the Insurance Act for Clientèle Life and Clientèle General respectively has the effect of limiting exposure to individual issuers due to the inadmissibility of assets for regulatory purposes if specified limits are breached; and,

• The Group’s exposure to the various banking institutions is reviewed on a quarterly basis, both in rand terms as well as by percentage concentration and credit rating, giving focus to the SAM capital charge relating to investment concentration.

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2.1.2 Liquidity Risk

Liquidity risk is the risk that cash may not be available to pay obligations when due.

Factors with the potential to affect this risk

• Poor cash flow management within the Group;

• Third party defaults on obligations; and,

• Depfin calling on the financial guarantee (refer to Note 41 on page 170).

Risk mitigation

• Cash flow management: Active liquidity and funding management is an integrated effort across a number of functional areas, which is monitored by management. Active liquidity and cash flow management happens on a monthly basis;

• Appropriate assets back and match the Group’s liabilities and it has sufficient liquid resources;

• Insurance business: The expected and contractual maturities of insurance liabilities are monitored on a monthly basis, this ensures that the assets are appropriate to cover expected insurance obligations (both life insurance and short-term insurance) when due. The Group Investment Committee ensures that the mix of investments is appropriate to ensure that sufficient cash will be available to meet insurance obligations when due;

• SOCI, SOFP, Statement of Cash Flows and performance versus monthly budgets are tabled and reviewed at monthly management meetings;

• Investment business: The liability relating to contractual maturities of single premium endowment investment products are matched by purchasing appropriate assets of the same maturity profile. This ensures that cash is available on maturity of the policyholder obligations. Policyholders carry interest rate risk if there is an early surrender. The single premium liabilities are matched with appropriate A1 – or above grade bank paper of appropriate maturities. The maturity profile of the shareholder and policyholder linked zero coupon fixed deposits is detailed in the tables in Risk Management Note 2.1.2 on pages 103 to 104; and,

• Financial Guarantee: Clientèle has provided a guarantee to YTI, amounting to R374 million (2021: R374 million). This is partially covered by a back-to-back guarantee provided by HSBC of R174 million thus resulting in a net exposure through guarantees of R200 million for the purchase of approximately 9% of Clientèle’s issued ordinary shares by YTI. The 12 month stage is used in the calculation of the ECL. Refer to Note 41: Commitments on page 170 for further details.

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The following table summarises the overall maturity profile of the Group’s financial and reinsurance assets and liabilities:

(R’000)	Contractual cash flows for financial instruments and expected cash flows for insurance contracts (undiscounted) Open ended Dis- counting and ECL effect* Margins Undis- counted assets and liabilities Total < 1 year 1 – 5 years > 5 years
2022 Reinsurance assets Financial assets at amortised cost Financial assets at fair value through profit or loss: Debt securities Promissory notes and fixed deposits – Assets backing guaranteed endowment investment contracts – Assets backing linked endowment investment contracts Funds on deposit Fixed interest securities (Includes ABL exposure – notes 1, 2 and 3 in the table below) Government and public authority bonds Equity securities Listed equity securities Foreign listed equity securities Unlisted equity securities Receivables including insurance receivables Cash and cash equivalents
	51563 3536 29079 84178
	, , , , 32419 (5062) 27357
	, , ,
	2,256,944 7,160,910 308,796 28,632 (1,401,446) – – 8,353,836
	219226 847980 (165909) 901297
	, , , , 1839730 6099401 (1014623) 6924508
	,, ,, ,, ,, 177183 78618 (19285) 236516
	, , , , 255 4,220 92 28,632 (1,083) 32,116
	20,550 130,691 308,704 (200,546) 259,399
	– – – 844,647 – – – 844,647
	632980 632980
	, , 177088 177088
	, , 34,579 34,579
	70377 70377
	, , 502,000 502,000
Total assets	2,913,303 7,160,910 308,796 873,279 (1,406,508) 3,536 29,079 9,882,395
Policyholder liabilities under insurance contracts*** Financial liabilities at fair value through profit and loss Financial liabilities at amortised cost Loans at amortised cost Financial guarantee liability Accruals and payables including insurance payables	(759760)(1853997)(1025300) 1661526 2755901 23554 801924
	,,,,, ,, ,, , , 2094794 7065601 (1318777) 7841618
	,, ,, ,, ,, 74842 177776 (37173) 215445
	, , , , 7743 108497 (16240) 100000
	, , , , 2000 2000
	, , 195,546 61,808 257,354
Total liabilities	1,613,165 5,559,685 (1,025,300) 2,000 289,336 2,755,901 23,554 9,218,341
Excess/(shortfall) of assets over liabilities	1,300,138 1,601,225 1,334,096 871,279 (1,695,844) (2,752,365) 5,525 664,054

* Including compulsory and discretionary margins. This column is included to reconcile the cash flow to the SOFP and does not result in an actual shortfall of assets over liabilities.

** This column is included to reconcile the cashflow to the SOFP and does not result in an actual shortfall of assets over liabilities.

*** Brackets in respect of liabilities denotes positive cash flows.

The table below summarises the maturity profile of ABL financial assets of the Group:

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----- Start of picture text -----

Contractual cash flows for ABL financial instruments
Dis-
2022 1 – 2 2 – 3 3 – 4 4 – 5 > 5 Open counting
(R’000) < 1 year years years years years years ended effect Total
1) Linked policyholders 9,635 9,635
2) Other policyholders 1 1
3) Other shareholders 18,996 18,996
Total ABL assets – – – – – – 28,632 – 28,632
----- End of picture text -----

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The following table summarises the overall maturity profile of the Group’s financial and reinsurance assets and liabilities:

liabilities:
(R’000)	Contractual cash flows for financial instruments and expected cash flows for insurance contracts (undiscounted) Open ended Dis- counting effect* Margins Undis- counted policy- holder liabilities under insurance contracts Total < 1 year 1 – 5 years > 5 years
2021 Reinsurance assets Financial assets at fair value through profit or loss: Debt securities Promissory notes and fixed deposits – Assets backing guaranteed endowment investment contracts – Assets backing linked endowment investment contracts Funds on deposit Fixed interest securities (Includes ABL exposure – notes 1, 2 and 3 in the table below) Government and public authority bonds Equity securities Listed equity securities Foreign listed equity securities Unlisted equity securities Receivables including insurance receivables Cash and cash equivalents	84,937 (18) 6,209 91,128 648,461 7,505,589 335,244 33,417 (978,639) – – 7,544,072
	334,014 809,664 (72,720) 1,070,958 175,424 6,592,894 (782,810) 5,985,508 126,763 47,317 (2,864) 171,216 122 581 599 33,417 (398) 34,321 12,138 55,133 334,645 (119,847) 282,069
	– – – 902,953 – – – 902,953
	714,473 714,473 163,466 163,466 25,014 25,014
	59,954 59,954 463,221 463,221
Total assets	1,256,573 7,505,589 335,244 936,370 (978,657) 6,209 – 9,061,328
Policyholder liabilities under insurance contracts Financial liabilities at fair value through profit and loss Financial liabilities at amortised cost Loans at amortised cost Financial guarantee liability* Accruals and payables including insurance payables	(859,786) (1,865,525) (1,181,187) 1,822,110 2,925,620 9,233 850,465 476,491 7,330,235 (683,262) 7,123,464 253,920 (51,947) 201,973 16,176 112,250 (18,392) 110,034 2,000 2,000 215,007 39,624 254,631
Total liabilities	(152,112) 5,870,504 (1,181,187) 2,000 1,068,509 2,925,620 9,233 8,542,567
Excess/(shortfall) of assets over liabilities	1,408,685 1,635,085 1,516,431 934,370 (2,047,166) (2,919,411) (9,233) 518,761

* Including compulsory and discretionary margins. This column is included to reconcile the cash flow to the SOFP and does not result in an actual shortfall of assets over liabilities.

• ** This column is included to reconcile the cashflow to the SOFP and does not result in an actual shortfall of assets over liabilities.

• *** Brackets in respect of liabilities denotes positive cash flows.

**** Clientèle has provided a guarantee amounting to R374 million, offset by a back to back guarantee provided by HSBC of R174 million thus resulting in net exposure through guarantees of R200 million for the purchase of 9% of Clientèle’s issued shares (“ordinary Shares”) by YTI. Refer to Note 41: Commitments for further details.

The table below summarises the maturity profile of ABL financial assets of the Group:

Contractual cash flows for ABL financial instruments

2021 (R’000)	<	1 year	1 – 2 years	2 – 3 years	3 – 4 years	4 – 5 years	> 5 years	Open ended	Dis- counting effect	Total
1) Linked policyholders								11,245		11,245
2) Other policyholders								1		1
3) Other shareholders								22,171		22,171
Total ABL assets		–	–	–	–	–	–	33,417	–	33,417

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The following table summarises the liabilities and surrender values for investment and insurance business held in Clientèle Life:

Clientèle Life:
(R’000)	30 June 2022 30 June 2021
	Carrying value for policies with no surrender value Carrying value for policies with a surrender value Surrender value Carrying value for policies with no surrender value Carrying value for policies with a surrender value Surrender value
Insurance business Investment business	209,836 582,906 931,811 252,136 589,825 933,966 9,637 8,042,734 7,884,177 11,245 7,202,167 7,045,960
Total	219,473 8,625,640 8,815,988 263,381 7,791,992 7,979,926

2.2 Market Risk

2.2.1 Equity Risk

Equity risk is the risk that the fair value of equity instruments will fluctuate as a result of changes in the market-place. This includes Equities invested in both South African equities as well as Global equities.

Equity investments are made on behalf of policyholders and shareholders. The vast majority of Clientèle’s equity investments are listed. Equities are reflected at market values, which are susceptible to fluctuations. Global equities are also impacted by changes in foreign exchange rates.

Factors with the potential to affect this risk

• The equity content in investment portfolios;

• Foreign currency exchange rates on Global equities;

• The categories of equities invested in (sectoral spread); and,

• Market performance of equities in general.

Risk mitigation

• The equities selection and investment analysis process is outsourced to Melville Douglas, who invest within the mandates set by the Group Investment Committee;

• Asset allocations are monitored on a daily basis by Melville Douglas and reviewed on a quarterly basis by the Group Investment Committee;

• Limitations in terms of the Insurance Act on the types and amounts which may be invested in certain financial assets are monitored and adhered to;

• A conservative investment strategy, with an appropriate mix of assets, which avoids undue concentration in riskier asset classes, is adopted;

• Investments in assets which are not admitted to trading on a regulated financial market are limited to agreed prudent levels;

• Assets are properly diversified in a manner that avoids excessive reliance on any particular asset, issuer, group of companies or geographical area and excessive concentration of risk in the portfolio as a whole thus avoiding the risk of contagion between concentrated exposures;

• Factors that may materially affect the sustainable long-term performance of assets or asset classes, including factors of an environmental, social and governance nature are considered; and,

• The Group’s exposure to the various banking institutions is reviewed on a quarterly basis, both in rand terms as well as by percentage concentration, giving focus to the SAM capital charge relating to investment concentration.

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2.2.2 Property Risk

Property risk is the risk that the value of properties will fluctuate as a result of changes in the property market.

The Group is exposed to property risk through its ownership of the three property subsidiaries of Clientèle Life, which, together, own the Clientèle Office Park, as reflected in the SOFP, as well as to listed real estate exposure in the Melville Douglas portfolios.

Factors with the potential to affect this risk

• Changes in interest rates (fixed and floating interest rates apply to owner occupied properties);

• Occupancy levels in the Sandton, Morningside and Rivonia areas and general occupancy levels of commercial property in South Africa;

• The condition of the buildings and surrounds of the office park; and,

• The state of the South African property market.

Risk mitigation

• The office park is continually maintained and improved to enhance its value;

• Management believes that the Sandton, Morningside and Rivonia areas have an attractive long-term investment future for property, which is continually reviewed and assessed by management;

• Management ensures that appropriate insurance cover is in place to protect against property damage;

• The exposure to listed property is kept at acceptable levels and is reviewed monthly by management

• and Melville Douglas;

• The office park is occupied by Clientèle Life and Clientèle General who have entered into long term leases; and,

• The investment property is valued annually by Broll Valuation and Advisory Services Proprietary Limited (part of the CB Richard Ellis Proprietary Limited network), an independent valuator.

2.3 Interest rate risk

Interest rate risk is the risk that the value of, or cash flows from, a financial instrument will fluctuate as a result of changes in interest rates. In addition, policyholders’ liabilities will be affected by changes in interest rates.

Financial liabilities held at fair value through profit or loss consist of non-linked investment contracts (Single Premium) that are exposed to interest rate risk and linked investment contracts that are not exposed to interest rate risk.

Factors with the potential to affect this risk

• Changes in market interest rates have a direct effect on the contractually determined cash flows associated with floating rate financial assets and financial liabilities, and on the fair value of other investments;

• Fair values of fixed maturity investments included in the Group’s investment portfolios are subject to changes in the prevailing market interest rates;

• Our RDR is based on the long-term zero coupon government bond yield curve and, as a result, any movement in the yield curve will impact the actuarial liabilities and EV (unaudited EV) of the Group; and,

• Withdrawals by policyholders can result in the fair values of the asset at the date of the withdrawal being lower than the original purchase price of the contract.

Risk mitigation

• The ongoing market expectations assessment by Melville Douglas within the South African interest rate environment, in conjunction with consultation with the Group Investment Committee, drives the process of asset allocation in this category;

• The majority of financial assets and financial liabilities are negotiated on a fixed interest basis as a result the

• exposure to interest rate risk is largely mitigated;

• Interest rate risk is minimised by matching the profile of the financial liabilities of the long term investment

• contract with similar assets at contract inception;

• Policyholder contracts provide that, in the event of an early withdrawal by the policyholder, the interest rate risk

• is carried by the policyholder; and,

• For most Single Premium contracts, the lower of market value or original investment value plus accrued interest is paid out to policyholders after deducting a surrender fee on an early withdrawal.

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2.4 Credit Risk

Credit risk is the risk that a counterparty will fail to discharge an obligation on an asset held or agreement entered into and cause the Group to incur a financial loss.

Balances where the Group has exposure to credit risk include financial assets, amounts receivable from insurance policyholders, amounts due from reinsurers and cash and cash equivalents.

In terms of IFRS 9, an assessment of ECL is necessary for assets that are held at amortised cost.

ECLs were calculated on the following balances that are exposed to credit risk (excluding insurance receivables) and include:

• Financial assets at amortised cost;

• Trade receivables;

• Cash and cash equivalents; and,

• Financial guarantees.

The following methodology was applied in calculating the ECLs:

(i) Trade receivables

The simplified approach is adopted for calculating a potential ECL provision. The provision matrix is based on the entities’ historical default rates over the expected life of the trade receivable. There have been no material historical defaults on this category of assets. The identified ECL was immaterial as the majority of receivables is in respect of prepayments for goods and services to be delivered over the course of the 2023 financial year. In addition, over 21% of receivables were received within 30 days of financial year-end. Furthermore, prepayments are not in the scope of IFRS 9.

Trade receivables are written off when there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with the Group, and a failure to make contractual payments for a period of greater than 120 days past due.

Trade receivables are presented net of ECLs. Subsequent recoveries of amounts previously written off are credited against the same line item.

(ii) Cash and cash equivalents

Cash and cash equivalents are also subject to the ECL requirements of IFRS 9, however the identified ECL was immaterial as the counterparties are considered to have good credit quality based on the external credit ratings of the counterparties, and the assets are liquid.

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(iii) Financial Guarantees

A loan was provided by Depfin to YTI for the purchase of shares in Clientèle. A financial Guarantee was provided to Depfin for the loan between Depfin and YTI. Clientèle has provided a guarantee to YTI, amounting to R374 million (2021: R374 million). This is covered by a back-to-back guarantee provided by HSBC of R174 million (2021: R174 million). The net credit exposure to this guarantee as at 30 June 2022 is R200 million (2021: R200 million).

The financial guarantee is recognised at the higher of the ECL and the Fair value less cumulative amortisation.

A Monte Carlo simulation was conducted at the end of the 2022 financial year to determine the ECL in respect of the financial guarantee issued by Clientèle in favour of Depfin.

The following factors were taken into consideration in calculating the ECL:

• The expected future share price of Clientèle;

• The EV per share of Clientèle;

• The probability of default times the exposure times the loss given default; and,

• The possible dates of default.

The ECL using the above methodology amounted to R2 million (2021: R2 million).

Reconciliation of expected credit losses

ECL for financial assets at amortised cost reconciliation:

Reconciliation of expected credit losses ECL for financial assets at amortised cost reconciliation:
	Financial
	assets at
	amortised	Financial
(R’000)	cost	guarantees	Total
Credit loss allowance as at 30 June 2021	1,812	2,000	3,812
Increase in allowance recognised in profit or loss	3,249		3,249
Credit loss allowance as at 30 June 2022	5,061	2,000	7,061

Factors with the potential to affect this risk

• Fair values of investments may be affected by the creditworthiness of the issuer of securities;

• Changes in interest rates; and,

• Deteriorating economic environment.

Risk mitigation

• Spreading of financial assets in terms of the provisions of the Insurance Act for Clientèle Life and Clientèle General respectively has the effect of limiting exposure to individual issuers due to the inadmissibility of assets, for regulatory purposes, if specified limits are breached. Exposure versus legislated limits is evaluated on an on-going basis;

• Cash equivalents, financial assets and reinsurance cover are placed with reputable companies. The credit rating of the counterparty is assessed when placing the business and when there is a decrease in the credit rating of the counterparty. The counterparties for assets backing financial liabilities at fair value, through profit or loss in respect of guaranteed single premium investment contract business are rated at least A1- by international rating agencies;

• The Group places business with at least A1+ rated reinsurers (refer to the internal debt rating scale on page 110);

• ECL is determined on the financial assets at amortised cost on a bi-annual basis or more regularly when indicators require; and,

• Credit ratings of debt instruments are monitored quarterly by the Group Investment Committee.

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The following table provides information regarding the aggregated credit risk exposure for the assets relating to the Group’s long-term insurance and investment contract business (includes all promissory notes and fixed deposits) at 30 June:

(R’000)	A1+ A1 A1- B Not rated Total carrying value
2022 Reinsurance assets Financial assets at amortised cost Financial assets at fair value through profit or loss (Refer to note 8 on page 145) Promissory notes and deposits Funds on deposit Fixed interest securities Government and public authority bonds Trade receivables including insurance receivables Cash and cash equivalents
	84178 84178
	, , 27357 27357
	, , 8,065,805 28,632 259,399 – – 8,353,836
	7825805 7825805
	,, ,, 236516 236516
	, , 3484 28632 32116
	, , , 259,399 259,399
	70377 70377
	, , 502,000 502,000
Total assets bearing credit risk	8,651,983 28,632 259,399 – 97,734 9,037,748
2021 Reinsurance assets Financial assets at fair value through profit or loss (Refer to note 8 on page 145) Promissory notes and deposits Funds on deposit Fixed interest securities Government and public authority bonds Trade receivables including insurance receivables Cash and cash equivalents	91,128 91,128 7,228,586 33,417 282,069 – – 7,544,072
	7,056,466 7,056,466 171,216 171,216 904 33,417 34,321 282,069 282,069
	59,954 59,954 460,661 2,560 463,221
Total assets bearing credit risk	7,780,375 33,417 284,629 – 59,954 8,158,375

Clientèle has in prior years provided financial assistance resulting in a gross exposure of R374 million and a net exposure after guarantees of R200 million for the purchase of approximately 9% of Clientèle’s issued shares (“ordinary Shares”) by YTI. Clientèle is exposed to YTI’s credit risk. YTI is classified as “not rated” as YTI does not have a credit rating. HSBC has a Long-term counter party risk rating of Aa3 (Moody’s) (Refer to Note 41: Commitments for further details).

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Internal debt rating scale

The Group has developed its own internal debt rating scale to categorise the credit quality of its financial and reinsurance assets. The Group uses the long-term national credit ratings of the ratings agencies as set out below to classify the Group’s financial assets (Due to the unavailability of a national scale rating for government bonds an international rating scale was used). Where discrepancies exist between Moody’s and Fitch ratings, preference is given to the Moody’s ratings.

		Moody’s	Fitch
		Long-term	Long-term
A1+	Financial assets rated A1+ are considered to be upper-
	medium grade to highest quality and subject to low to minimal
	credit risk	Aaa/Aa	AAA
A1	Financial assets rated A1 are subject to moderate credit risk.
	They are considered medium-grade and as such may possess
	certain speculative characteristics.	A	AA/A/BBB
A1-	Financial assets rated A1- are considered speculative and
	subject to high credit risk	Baa/Ba	BB/B
B	Financial assets rated B are of poor standing and subject to
	very high credit risk	Caa	CCC

Not rated

The Group considers and reviews credit risk on all financial asset exposures, however, in certain categories a formal investment grade is not available. The financial assets in the “not rated” category comprise mainly prepaid expenses (trade receivables including insurance receivables and financial assets at amortised cost) to usual third parties, which are managed via contractual agreements. An internal analysis of these items is performed to assess the riskiness thereof.

3. FAIR VALUE HIERARCHY

3.1 Introduction

Fair value is the amount for which an asset could be exchanged or a liability settled between knowledgeable, willing parties in an arms-length transaction.

The Group establishes fair value by using a Valuation technique if the market for a financial instrument is not quoted in an active market. Valuation techniques include using transactions between knowledgeable, willing parties, if available, reference to the current fair value of another instrument that is substantially the same, discounted cash flow analysis and option pricing models. If there is a Valuation technique commonly used by market participants to price the instrument and that technique has been demonstrated to provide reliable estimates of prices obtained in actual market transactions, the Group uses that technique. Fair value is estimated on the basis of the results of a Valuation technique that makes maximum use of market inputs, and relies as little as possible on entity – specific inputs.

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This requires disclosure of fair value measurements by level, according to the following fair value measurement hierarchy:

• Level 1: Values are determined using readily and regularly available quoted prices in an active market for identical assets or liabilities.

• Level 2: Values are determined using Valuation techniques or models, based on assumptions supported by observable market prices or rates either directly (that is, as prices) or indirectly (that is, derived from prices) prevailing at the SOFP date.

• Level 3: Values are estimated indirectly using Valuation techniques or models for which one or more of the significant inputs are assumptions (based on unobservable market inputs).

3.2 Asset Hierarchy

Group

(R’000)	Level 1	Level 2	Level 3	Total
2022
Assets
Listed equity securities	632,980			632,980
Foreign Listed equity securities	177,088			177,088
Unlisted equity securities		3,850	30,729	34,579
Promissory notes and fixed deposits		7,825,805		7,825,805
Funds on deposit		236,516		236,516
Fixed interest securities		3,484	28,632	32,116
Government and public authority bonds		259,399		259,399
Total assets	810,068	8,329,054	59,361	9,198,483
2021
Assets
Listed equity securities	714,473			714,473
Foreign listed equity funds	163,466			163,466
Unlisted equity securities		3,850	21,164	25,014
Promissory notes and fixed deposits		7,056,466		7,056,466
Funds on deposit		171,216		171,216
Fixed interest securities		904	33,417	34,321
Government and public authority bonds		282,069		282,069
Total assets	877,939	7,514,505	54,581	8,447,025

Refer to Note 4 on page 143 for the fair value hierarchy disclosure of owner-occupied properties.

Fair values for level 2 financial assets are determined using the rates from the zero coupon risk free yield curve, based on the term to maturity of the instrument. These interest rates range between 5.7% and 10.1% (2021: 4.8% and 7.4%) per annum. A discounted cash flow model is then applied using the determined yield after adjusting for credit risk, in order to calculate the market value.

Policyholders’ linked exposure to Residual Debt Services Limited through investments in Stub paper of R28.6 million as at 30 June 2022 (2021: R33.4 million) is disclosed at level 3 in the fair value hierarchy as the value of the stub paper is estimated indirectly using valuation techniques and models. Key assumptions used in the valuation include a discounted future cash flow approach, applying a discount rate of 14% (2021: 14%).

Level 3 unlisted equity securities consist of YTI preference shares purchased as part of the financing mechanism for B-BBEE, valued using a Monte Carlo simulation with primary inputs consisting of the Clientèle share price, the dividend yield and 77% of the prime interest rate.

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3.3 Liability Hierarchy

Liability Hierarchy
		Group
(R’000)	Level 1	Level 2	Level 3	Total
2022
Financial liabilities at fair value through
profit or loss		7,831,981	9,637	7,841,618
Liabilities subject to fair value hierarchy
analysis	–	7,831,981	9,637	7,841,618
2021
Financial liabilities at fair value through
profit or loss		7,112,219	11,245	7,123,464
Liabilities subject to fair value hierarchy
analysis	–	7,112,219	11,245	7,123,464

Fair values for level 2 financial liabilities are determined using the rates from the zero coupon risk free yield curve, based on the term to maturity of the instrument. These interest rates range between 5.7% and 10.1% (2021: between 4.8% and 7.4%) per annum. A discounted cash flow model is then applied, using the determined yield after adjusting for credit risk, in order to calculate the market value.

Fair value for level 3 financial liabilities of R9.6 million (2021: R11.2 million) are estimated indirectly using valuation techniques and models. Key assumptions in the valuation include a discounted future cash flow, applying a discount rate of 14% (2021: 14%).

3.4 Reconciliation of Level 3 Financial Instruments

The following table presents the changes in level 3 financial instruments for the year ended 30 June 2022:

(R’000)	30 June 2022 30 June 2021
	Financial Assets at fair value through profit or loss Fixed interest securities Financial Assets at fair value through profit or loss unlisted equity securities Financial liabilities at fair value through profit or loss Financial Assets at fair value through profit or loss Fixed interest securities Financial Assets at fair value through profit or loss unlisted equity securities Financial liabilities at fair value through profit or loss
Opening balances 33,417 21,164 11,245 39,483 – 13,288 Interest raised during the year 2,059 3,005 692 2,826 943 Additions1 20,000 Fair value adjustments recognised in profit or (loss) 29 8,200 12 (422) 1,164 (134) Repayments (6,872) (1,640) (2,312) (8,470) (2,852)
Closing balance 28,633 30,729 9,637 33,417 21,164 11,245

1 The Group purchased preferences shares as part of a B-BBEE transaction, which are deemed to be level 3 as they are not listed on the JSE and the determination of the fair value makes use of inputs that are not observable by the market.

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4. SENSITIVITY ANALYSIS

The Group’s profitability and capital base, through its insurance and investment contract operations and financial assets held, are exposed to both financial and insurance risks.

In order to interpret the tables on pages 114 to 115 users are encouraged to understand the basis on which the variables were set and combine this information with other components of the Group Annual Financial Statements. The sensitivities provided are not amounts that can be simply extrapolated to determine prospective earnings forecasts and caution is advised to any user doing this. They do, however, provide insight into the impact that changes in these risks can have on policyholders’ liabilities, where applicable, and attributable profit after tax.

Sensitivity ranges

The sensitivity ranges, i.e. the upper and lower limits, are indicative of the range of possible changes as at the reporting date of 30 June 2022. The sensitivity analysis below does not include the investment contract business as these liabilities have been exactly matched to assets and the impact of the maturities on profit is immaterial.

Sensitivities provided are as follows:

Financial risk variables

Equity price: Possible price movements in equities held based on changes in the JSE ALSI. Interest rate: Based on a parallel shift in the prevailing interest rate yield curves. Property equity value: Possible price movements in the property investments held.

Default:

Where issuers of financial instruments fail to honour their obligations either in part or in full.

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4.1 Long-term Insurance

Long-term Insurance Risk Variables

Assurance mortality/morbidity: Where actual death or disability rates by age category vary to those assumed on measurement of policies that offer death or disability benefits.

Renewal expenses: Where actual expenses incurred differ to those assumed for maintaining and servicing the in-force contracts. Withdrawals: The possible change in the expected number of policyholders withdrawing or lapsing benefits prior to the expiry of the contract or the assumed duration of the contract. Inflation: A parallel shift in the prevailing inflation rate.

The table below summarises the impact of each change to the risk variables outlined above.

Positive numbers represent an increase in policyholders’ liabilities or profit after tax/equity and, correspondingly, negative numbers indicate a decrease in policyholders’ liabilities or profit after tax/equity.

negative numbers indicate a decrease	in policyholders’ liabilities or profit after tax/equity.
Financial risk variables	30 June 2022 30 June 2021
	% change Impact on liabilities R’000 Impact on profit after tax/equity R’000 Impact on liabilities R’000 Impact on profit after tax/equity R’000
Equity price Equity price Interest rate Interest rate Property equity value Property equity value Long-term insurance risk variables Assurance mortality and morbidity Assurance mortality and morbidity Renewal expenses Renewal expenses Withdrawals Withdrawals Inflation Inflation Financial instruments risk variable Default (non-linked)	10 30,977 24,907 34,902 30,036 (10) (34,585) (22,309) (36,031) (29,223) 1 (15,149) 10,907 (17,184) 12,372 (1) 14,055 (10,120) 19,509 (14,047) 10 15,682 22,815 (10) (15,682) (22,815) 10 8,109 (5,838) 10,438 (7,516) (10) (8,932) 6,431 (8,730) 6,286 10 8,431 (6,071) 9,823 (7,072) (10) (10,589) 7,624 (9,673) 6,965 10 7,687 (5,534) 7,382 (5,315) (10) (10,869) 7,825 (7,869) 5,665 1 1,128 (812) 2,238 (1,611) (1) (3,595) 2,588 (2,185) 1,573 5 (49,119) (35,365) (54,609) (39,318)

* The impact on profit after tax/equity includes the impact of the movement in the Policyholder liabilities and the related movement in financial assets.

It should be noted that the above sensitivities allow for the elimination of negative reserves. As a result the reader is also referred to the EV sensitivities on page 65 (unaudited EV sensitivities).

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4.2 Short-term Insurance

Short-term Insurance Risk Variables

Withdrawals: The possible change in the expected number of policyholders withdrawing or lapsing benefits prior to the expiry of the contract or the assumed duration of the contract.

Value of claims: Where actual claims incurred differ from historical claims incurred. Duration of settlement: Where actual time taken to settle claims varies.

The table below summarises the impact of each change to the risk variables outlined above.

Positive numbers represent an increase in policyholders’ liabilities or profit after tax/equity and, correspondingly, negative numbers indicate a decrease in policyholders’ liabilities or profit after tax/equity.

In each sensitivity calculation, all other assumptions remain unchanged.

In each sensitivity calculation, all other	assumptions remain unchanged.
Sensitivities	30 June 2022 30 June 2021
	% change Impact on liabilities R’000 Impact on profit after tax/equity R’000 Impact on liabilities R’000 Impact on profit after tax/equity R’000
Financial risk variables Equity price Equity price Interest rate Interest rate Short-term variables Withdrawals Withdrawals Value of claims Value of claims Duration of settlement Duration of settlement	10 9,965 10,843 (10) (9,965) (10,843) 1 (18) 13 (19) 13 (1) 18 (13) 19 (13) 10 (14) 10 (21) 15 (10) 14 (10) 21 (15) 10 1,577 (1,135) 1,492 (1,074) (10) (1,577) 1,135 (1,492) 1,074 10 1,130 (814) 1,045 (752) (10) (1,130) 814 (1,045) 752

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Accounting Policies

for the year ended 30 June 2022

1. INTRODUCTION

The Group adopted the following policies in preparing its consolidated and separate Annual Financial Statements.

2. BASIS OF PREPARATION OF THE STATEMENTS

The consolidated and separate Annual Financial Statements have been prepared in accordance with IFRS, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council, the Listing Requirements and the Companies Act. These Annual Financial Statements have been prepared on the historical cost basis, as modified by the revaluation of owner-occupied properties, financial assets, financial liabilities and the Valuation of insurance contracts.

The preparation of Annual Financial Statements in accordance with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise judgment in the process of applying the Group’s accounting policies. There are areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated and separate Annual Financial Statements.

The accounting policies set out below have been applied consistently to all years presented in these consolidated and separate Annual Financial Statements unless otherwise stated.

All amounts in the notes are shown in thousands of Rands, rounded to the nearest thousand, unless otherwise stated.

RECENT IFRS PRONOUNCEMENTS

New IFRS Standards and Amendments Effective for the year ended 30 June 2022

New or amended standards effective for the period have no impact on the results for the period.

New standards not yet effective that may significantly impact the Group’s results or disclosures IFRS 17 – Insurance contracts

Scope

IFRS 17 establishes the principles for the recognition, measurement, presentation and disclosure of insurance contracts within the scope of the standard. Whereas the current standard, IFRS 4, allows insurers to use their local GAAP, IFRS 17 defines clear and consistent rules that are intended to increase the comparability of Financial Statements.

Under IFRS 17, the general model requires entities to measure an insurance contract at initial recognition at the total of the fulfilment cash flows (comprising the estimated future cash flows, an adjustment to reflect the time value of money and an explicit risk adjustment for non-financial risk) and the contractual service margin. The fulfilment cash flows are remeasured on a current basis each reporting period. The unearned profit (contractual service margin) is recognised over the coverage period.

Aside from this general model, the standard provides, as a simplification, the premium allocation approach. This simplified approach is applicable for certain types of contracts, including those with a coverage period of one year or less.

For insurance contracts with direct participation features, the variable fee approach applies. The variable fee approach is a variation on the general model. When applying the variable fee approach, the entity’s share of the fair value changes of the underlying items is included in the contractual service margin. As a consequence, the fair value changes are not recognised in profit or loss in the period in which they occur but over the remaining life of the contract.

The new standard will be effective for Clientèle from 1 July 2023.

Potential Impact to the Group

The new standard will have significant impacts on underlying valuation models, systems, processes, profit recognition and presentation. Data collection and storage, modelling and general ledger configuration will require significant development.

An IFRS 17 Steering Committee has been established to identify and implement systems and process changes in anticipation of the implementation of the standard. The Committee provides weekly updates regarding the progress of implementation of IFRS 17.

Clientèle has, with the support of QED (an Actuarial consulting firm) and using RiskIntegrity (software of Moodys Analytics), elected to execute the implementation of IFRS 17 in phases (“Sprints”). Each Sprint focuses on a product, for a specific financial year under review. The outcome of the results from each Sprint is analysed and reviewed in conjunction with QED .

Other amendments to standards

Other amendments to standards that are effective for years commencing on or after 1 July 2022 are not expected to significantly impact the Group’s results or disclosures.

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3. BASIS OF CONSOLIDATION

The Group Annual Financial Statements consolidate the Annual Financial Statements of the Company and its subsidiaries.

Where necessary, accounting policies of subsidiaries have been changed to ensure consistency with the policies adopted by the Group.

3.1 Investment in Subsidiaries

Subsidiaries are entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

The Group uses the acquisition method of accounting to account for the acquisition of subsidiaries. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange. The cost of an acquisition transferred includes the fair value of any asset or liability resulting from a contingent consideration agreement. Acquisition-related costs are expensed as incurred. Identifiable assets and liabilities acquired and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any non-controlling interest. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as Goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the SOCI.

Intra-group transactions, balances and unrealised gains on intra-group transactions are eliminated. Unrealised losses are also eliminated.

Interest in subsidiaries in the Company’s Annual Financial Statements are valued at cost less any impairments. When the Group ceases to have control or significant influence, any retained interest in the entity is re-measured to its fair value, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in Other Comprehensive Income are reclassified to profit or loss.

3.2 Investment in Associate

An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the entity but is not control or joint control of those policies.

If the Group holds, directly or indirectly (e.g. through subsidiaries), 20 per cent or more of the voting power of the entity, it is presumed that the Group has significant influence, unless it can be clearly demonstrated that this is not the case. Conversely, if the Group holds, directly or indirectly (e.g. through subsidiaries), less than 20 per cent of the voting power of the entity, it is presumed that the entity does not have significant influence, unless such influence can be clearly demonstrated. A substantial or majority ownership by another investor does not necessarily preclude an entity from having significant influence.

The Group applies the equity method as per IAS 28 Investments in Associates and Joint Ventures, to account for an investment in associate. Under the equity method, on initial recognition the investment in an associate or a joint venture is recognised at cost, and the carrying amount is increased or decreased to recognise the investor’s share of the profit or loss of the investee after the date of acquisition. The Group’s share of the associate’s profit or loss is recognised in the Group’s profit or loss. Distributions received from an associate reduce the carrying amount of the investment.

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• 3.3 Accounting for Transactions under Common Control

Common control transactions are business combinations in which all of the combining entities (subsidiaries) are ultimately controlled by the same party before and after the transaction, and the control is not transitory. These transactions are accounted for at predecessor values. Predecessor values are considered to be the book value of assets and liabilities acquired as accounted for in the consolidated Financial Statements of the highest entity under common control and the Group does not restate assets and liabilities to their fair values. Instead the Group incorporates the assets and liabilities at the amounts recorded in the books of the combined entities.

The cost of an acquisition of a subsidiary under common control is measured as the book value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange. Costs directly attributable to the acquisition are recognised in profit or loss. No goodwill arises in predecessor accounting. The difference between the cost of the acquisition and the predecessor value of the net assets acquired is taken to equity and disclosed as a common control reserve or deficit.

The consolidated Financial Statements incorporate the combined companies’ results as if the companies had always been combined. Consequently under predecessor accounting, the consolidated Financial Statements reflect both companies’ full year results even though the business combination may have occurred part way through the year.

4. FOREIGN CURRENCIES

The Group’s presentation and functional currency is the South African Rand (ZAR).

Transactions in foreign currencies are translated into the functional currency at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies different to the functional currency at the SOFP date are translated into the functional currency at the SOFP date at the ruling rate at that date. Foreign exchange differences are recognised in profit or loss.

5. INTANGIBLE ASSETS

Research costs – being the investigation undertaken with the prospect of gaining new knowledge and understanding, are recognised in profit or loss as they are incurred. Development costs – costs that are clearly associated with an identifiable system, which will be controlled by the Group and has a probable benefit exceeding the cost beyond one year, are recognised as an asset. Development expenditure is capitalised only if the development costs can be measured reliably, completion of the development of the software is technically and commercially feasible, the Group intends to demonstrate that the intangible asset will be used to generate future economic benefits, the Group intends to and has sufficient resources to complete development and to use the asset and the Group can demonstrate the ability to use or sell the intangible asset. These costs comprise all directly attributable costs necessary to create, produce and prepare the asset for its intended use, such as costs of materials and employee services used or consumed in generating the intangible asset.

5.1 Amortisation

Computer software development and video production costs recognised as assets are amortised in the SOCI on a straight-line basis at rates appropriate to the expected life of the asset. Amortisation of computer software commences from the date the intangible asset becomes available for use. As the software costs are proprietary and specific to the Group operations, no residual value is estimated. The useful lives are assessed on an annual basis. Amortisation of video production commences when the video production is brought into use. Since existing video production is replaced by new video production, it has no residual value.

Computer software costs recognised as intangible assets are amortised over the useful lives, which do not exceed 5 years. Video production costs recognised as intangible assets are amortised over the useful lives, which do not exceed 2 years.

5.2 Impairment

Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use.

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6. PROPERTY AND EQUIPMENT

Equipment is stated at cost less accumulated depreciation and impairment losses. Repairs and maintenance, which neither materially adds to the value of assets nor appreciably prolong their useful lives, are recognised in the SOCI.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the SOCI during the financial period in which they are incurred.

When significant components of equipment have different useful lives, those components are accounted for and depreciated as separate items.

Land and buildings held for use for administrative purposes are classified as owner-occupied properties and stated at fair value, determined from market-based evidence by appraisals undertaken by professional valuators, less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Revaluations are performed at least once every year to ensure that the carrying amount does not differ materially from that which would be determined using fair values at the SOFP date. Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset, and the net amount is restated to the revalued amount of the asset.

Increases in the carrying amount arising on revaluation of land and buildings are credited to the revaluation surplus in shareholders’ equity. Decreases that offset previous increases of the same asset are charged against fair value reserves directly in equity; all other decreases are charged to the SOCI.

General and specific borrowing costs directly attributable to the acquisition and construction of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount. These are included in the SOCI in other operating income or operating expenses. When revalued assets are sold, the amounts included in the revaluation surplus are transferred to retained earnings.

6.1 Depreciation

Depreciation is recognised in the SOCI on a straight-line basis at rates appropriate to allocate their costs or revalued amounts to their residual values over their estimated expected useful lives. Depreciation is calculated on the cost less any impairment and taking into account expected residual value. The estimated useful lives (rates) applied are as follows:

applied are as follows:	applied are as follows:
Computer equipment and purchased computer software		20% – 33.33%
Furniture and equipment		10% – 50%
Motor vehicles		25%
Leasehold improvements	The lease term or useful life, whichever is the shorter period
Buildings		2.5%
Solar panels		5%

The residual values and useful lives are reassessed on an annual basis. Land is not depreciated.

Where the estimated residual value (based on historical trends and future expectations with regard to property values) exceeds the current carrying amount, the assets’ depreciation charge for the period is zero.

6.2 Impairment

Property and equipment which is subject to depreciation is assessed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use.

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7. INVENTORIES

Inventories (which include vouchers, Sim cards and IFA marketing materials) are measured at the lower of cost and net realisable value. The cost of inventory is determined using the weighted average method. Cost comprises direct materials and, where applicable, overheads that have been incurred in bringing the inventories to their present location and condition. Net realisable value represents the estimated selling price in the ordinary course of business, less applicable variable selling expenses.

8. FINANCIAL INSTRUMENTS

8.1 Financial Assets

8.1.1 Classification

The classification of financial assets depends on the entity’s business model for managing the financial assets and the contractual terms of the cash flows.

The Group classifies its financial assets in the following measurement categories:

• those to be measured subsequently at fair value through profit or loss; and,

• those to be measured at amortised cost.

The Groups’ business model is to hold financial assets to collect the contractual cash flows. The business model is further supported by the following factors:

• the assets include five year zero coupon fixed deposits, promissory notes or NCD’s whereby the coupon rate is contracted at inception of the investment, and is fixed for the duration of the contract; and,

• maturity cash flows of assets are matched to maturity cash flows of liabilities, and recorded and reported on that basis.

The only circumstances under which an asset will be early surrendered is if the policyholder contract that the asset is backing is early surrendered.

Assets included in the Melville Douglas Portfolios include listed Equities, Exchange Traded Funds, Fixed Interest Instruments, Money Market Instruments and Mutual Funds. Neither the criteria for measurement at “amortised cost” (“business model” and “SPPI” tests) nor the criteria for “fair value measurement through other comprehensive income” have been met for the assets held within the Melville Douglas Portfolios backing the unitised Investment Policies. These assets within the Melville Douglas Portfolio are held for sale and are therefore measured at fair value through profit or loss.

• (i) Classification of financial assets at fair value through profit or loss.

• The Group classifies the following financial assets at fair value through profit or loss (FVPL):

• Debt investments that do not qualify for measurement at either amortised cost or Fair Value through Other Comprehensive Income (FVOCI);

• Equity investments;

• Assets designated at FVPL; and,

• Debt instruments that are held for trading.

Under these criteria, the main classes of financial assets at FVPL are promissory notes and fixed deposits, funds on deposit, fixed interest securities, government and public authority bonds, listed equity securities and unlisted equity securities.

The business model assessment relating to promissory notes backing guaranteed and linked investment contracts identified an unintended accounting mismatch between the financial assets and the financial liabilities. Therefore in terms of paragraph 4.1.5 of IFRS 9; designation at fair value through profit or loss is more appropriate.

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• (ii) Classification of financial assets at amortised cost:

The Group classifies its financial assets at amortised cost only if both of the following criteria are met:

• The asset is held within a business model whose objective is to collect the contractual cash flows; and,

• The contractual terms give rise to cash flows that are solely payments of principal and interest.

Under the above criteria the assets that are held at amortised cost are African Bank fixed deposits (prior year), trade receivables and loans to intermediaries. The African Bank assets comprised of zero coupon fixed deposits with a fixed maturity dates and gave rise to cash flows of solely payments of principle and interest.

(iii) Classification of financial assets at fair value through other comprehensive income:

• Equity securities which are not held for trading, and which the Group has irrevocably elected at initial recognition to recognise in this category. These are strategic investments and the Group considers this classification to be relevant; and,

• Debt securities where the contractual cash flows are solely principal and interest and the objective of the Group’s business model is achieved both by collecting contractual cash flows and selling financial assets.

Under the above criteria there are no assets classified at fair value through other comprehensive income.

• (iv) Classification of trade receivables

Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. They are generally due for settlement within 30 days and are therefore classified as current. Trade receivables are initially recognised at the amount of consideration that is unconditional, unless they contain significant financing components, subject to which they are recognised at fair value. The Group holds the trade receivables with the objective to collect the contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest method. Details about the Group’s impairment policies and the calculation of the loss allowance are provided in the credit risk note as part of Risk Management on pages 108 to 110.

8.1.2 Initial measurement

Purchases and sales of financial assets are recognised when the Group becomes a party to the contractual provisions of the instrument. Financial assets are initially recognised as follows:

• Fair value through profit or loss – at fair value. Transaction costs are expensed;

• Amortised cost – measured initially at its fair value, net of transaction costs incurred; and,

• Trade receivables – at fair value plus transaction costs that are directly attributable to their acquisition.

Financial assets are derecognised when the rights to receive cash flows from the assets have expired or where they have been transferred and the Group has also transferred substantially all the risks and rewards of ownership.

8.1.3 Subsequent measurement

Financial assets at fair value through profit or loss

Financial assets which are designated at fair value through profit or loss are subsequently measured at fair value and the fair value adjustments are recognised in profit or loss.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at measurement date. Fair values for quoted financial assets are based on the quoted closing prices at the close of business on the last trading day on or before the SOFP date. A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency, and those prices represent actual and regularly occurring market transactions. If a quoted price is not available in an active market the fair value is estimated using the repurchase price for unit trusts or discounted cash flow techniques for other financial instruments.

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Accounting Policies continued

Financial assets held at amortised cost

Subsequent to initial recognition financial assets are carried at amortised cost using the effective interest rate method less any required ECL.

Trade receivables including insurance receivables

Subsequent to initial recognition trade receivables, including insurance receivables, are held with the objective of collecting contractual cash flows and are therefore measured at amortised cost using the effective interest rate method.

8.1.4 Impairment model (Expected credit losses)

The Group assesses the expected credit losses associated with its debt instruments carried at amortised cost and financial guarantees incorporating forward looking information. The impairment methodology applied depends on whether there has been a significant increase in credit risk, which is indicated by, inter alia a deterioration in the counterparty risk or a repayment default by a counterparty. “The probability of default and the loss given default factors are used to determine the ECL”.

For trade receivables, the Group applies the simplified approach permitted by IFRS 9, which requires lifetime expected credit losses to be recognised from initial recognition of the receivables.

8.2 Financial liabilities

8.2.1 Financial liabilities at fair value through profit or loss

The Group issues contracts with guaranteed terms which include a guaranteed endowment policy with a term of five years with a guaranteed value at maturity (“Guaranteed Growth Plan”) and a guaranteed annuity product with 60 equal monthly payments and a guaranteed value at maturity (“Income Plan”). The Group also issues linked endowment contracts with terms of five years where the value at maturity is linked to the underlying investment performance. These contracts are recognised on initial recognition at fair value, which is the transaction price. Subsequently, these contracts are measured at fair value which is determined by discounting the maturity values. The maturity values are discounted at the risk-free rate with an adjustment for credit risk where appropriate. Any initial profit on recognition is subsequently amortised over the life of the contract. In terms of IFRS 9, any change in the fair value of the financial liability that is attributable to changes in the credit risk of an entity’s own credit rating is presented in other comprehensive income.

The business model assessment identified an unintended accounting mismatch between the financial assets and the financial liabilities. Therefore in terms of par 4.1.5 of IFRS 9; designation at fair value through profit or loss is more appropriate. The Group at initial recognition irrevocably chose to measure these liabilities at fair value through profit or loss as it significantly reduces the measurement and/or recognition inconsistency that would arise from measuring the financial assets on a different basis. The liability is now therefore also at fair value through profit and loss in order to match the asset.

8.2.2 Financial liabilities at amortised cost

Financial liabilities are carried at amortised cost using the effective interest method.

8.2.3 Loans at amortised cost

Loans at amortised cost are initially measured at fair value, net of transaction costs incurred. Loans are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the SOCI over the period of the loan using the effective interest method.

Financial liabilities are derecognised when the obligation to settle the liabilities has expired.

8.2.4 Contract Modifications

Where an existing financial liability is replaced by another with the same counterparty on substantially different terms, or the terms of an existing financial liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the rerecognition of a new liability at fair value, with the difference in the respective carrying amounts being recognised as a movement in ECL in profit or loss.

In assessing whether a financial liability was substantially modified, the Group performs a quantitative assessment to determine if the terms were substantially modified.

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Accounting Policies continued

9. CASH AND CASH EQUIVALENTS

Cash and cash equivalents comprise balances with bankers, short-term funds, deposits, cash on hand and highly liquid investments with original maturity profiles of three months or less. Cash and cash equivalents are carried at amortised cost in the SOFP.

10. SHARE CAPITAL

Shares are classified as equity when there is no obligation to transfer cash or other assets to the holder. Incremental costs directly attributable to the issue of new shares or options are recognised in equity as a deduction from the proceeds.

11. DIVIDEND DISTRIBUTION

Dividend distributions to the Company’s shareholders are recognised in the Statement of Changes in Equity when declared and, if not paid then, as a liability in the Group’s Financial Statements in the period in which the dividends are approved by the Group’s Directors.

12. INSURANCE CONTRACTS AND FINANCIAL INSTRUMENTS CLASSIFICATION

The Group issues contracts that transfer insurance risk or financial risk or, in some cases, both.

An insurance contract is a contract under which the Group (insurer) accepts significant insurance risk from the policyholder by agreeing to compensate the policyholder if a specified uncertain future event (the insured event) adversely affects the policyholder. Such contracts may also transfer financial risk. The Group defines significant insurance risk as the possibility of having to pay benefits on the occurrence of an insured event that are significantly more (at least 10%) than the benefits payable if the insured event did not occur. The Group issues long-term and short-term insurance contracts.

Those contracts that transfer financial risk with no significant insurance risk are accounted for as financial liabilities at fair value through profit or loss or at amortised cost. Financial risk is the risk of a possible future change in one or more of a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index or other variable. Amounts received under these contracts are recorded as deposits and amounts paid are recorded as withdrawals.

INSURANCE CONTRACTS

12.1 Long-term Insurance Contracts

In terms of IFRS 4 – Insurance contracts, defined insurance liabilities are allowed to be measured under existing local practice. The Group has applied the SAPs and considered the APNs issued by ASSA to determine the liability in respect of contracts classified as long-term insurance contracts in terms of IFRS 4 – Insurance contracts. The following SAPs/APNs are of relevance to the determination of insurance contract liabilities:

SAP 104: Calculation of the value of the assets and liabilities of Long-term Insurers; APN 105: Minimum requirements for deriving AIDS extra mortality rates; APN 106: Actuaries and long-term insurance in South Africa; and,

APN 110: Allowance for embedded investment derivatives.

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Accounting Policies continued

Features of Clientèle Life’s main Long-term insurance contracts

Clientèle Life’s main Long-term insurance contracts are as follows:

• Market-related savings products (“market-related products”) with risk benefits, for example accidental death or disability. These products have an investment account which is built up based on the allocated portion of premiums and market returns in the form of income and growth less expenses and tax; benefits are paid upon defined events, such as death, surrender or maturity of the product;

• Whole life, final benefits products (“whole life products”) with benefits which are payable upon defined events, for example death or disability;

• Whole life, Funeral insurance products (“funeral products”) are whole life products with benefits which are payable upon defined events, for example, death;

• Whole life, cash-back products (“cash-back products”) are whole life final benefits products with benefits which are payable upon defined events, for example death, disability or dread disease and include a return of either one year’s or six months premiums every five years; and,

• Health insurance products:

• Commencing before 1 April 2018 – Health insurance products (“health products”) with a “cash-back” element are whole life products with benefits payable on defined events, for example hospitalisation or accidental disability and include a return of six months premiums every five years; and,

• Commencing after 1 April 2018 – Health Event Life Plans (“H.E.L.P. products”), are annually renewable products with benefits on defined life events, for example hospitalisation, accidental death, accidental disability and dread disease.

Measurement of Long-term insurance contracts

These contracts are valued in terms of the FSV basis as described in SAP 104 and the liability is reflected under insurance contracts in the SOFP.

Clientèle Life’s Long-term insurance contracts are measured on either a discounted or undiscounted basis depending on the features of the contracts described above.

• Undiscounted liabilities (market related products)

• A market related insurance contract is an insurance contract with an embedded derivative linking payment on the policy to units of an internal investment fund set up by the Group with the consideration received from the contract holders. This embedded derivative meets the definition of an insurance contract and is not therefore accounted for separately from the host insurance contract. The liability for the market related portion is determined on a policy by policy basis in relation to the fair value of the underlying assets;

• Discounted liabilities (market-related products, cash-back products, funeral products, whole life products and health insurance products)

The Valuation of these products has been performed on a policy by policy basis by discounting future expected premiums, risk benefits, cash-back benefits, risk charges, reinsurance costs and expenses at the actuarial discount rate. The projection of future expected experience is based on the Group’s best estimate assumptions for investment returns, expenses, death rates, disability rates and withdrawal rates plus compulsory margins. The valuation of the balance of the liability has been calculated on a discounted basis; and,

• Undiscounted liabilities (selected whole life products)

• IBNR liabilities are calculated for these products, which are based on a percentage of net premiums payable. Discretionary margins are added to the actuarial liabilities so that the shareholders’ participation in profit emerges when it is probable that future economic benefits will flow to the entity. Effectively these margins are released to income on a policy by policy basis, over the policy term.

The liability assumptions are reviewed semi-annually. Any changes in assumptions and/or other changes to the liability calculation are reflected in the SOCI as they occur.

Outstanding claims provisions

Provision is made for the estimated cost of claims outstanding at the end of the year. Outstanding claims and benefit payments are stated gross of reinsurance. The impact of reinsurance is shown separately. Outstanding claims are determined by making reference to the value of the sum assured in terms of the underlying policy when a claim is reported.

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Accounting Policies continued

Liability adequacy test

At each SOFP date, liability adequacy tests are performed to ensure the adequacy of the insurance contract liabilities. The liability is calculated in terms of the FSV basis as described in SAP 104. The FSV basis meets the minimum requirement of the liability adequacy test. For undiscounted liabilities these tests include current best estimates of future contractual cash flows and claims handling and administration expenses, as well as investment income from the assets backing such liabilities. Any deficiency is charged to the SOCI in establishing a provision for losses arising from liability adequacy tests.

Reinsurance contracts held

Reinsurance contracts, which are insurance contracts, are contracts entered into by the Group with reinsurers under which the Group is compensated for a portion of losses arising on one or more of the insurance contracts issued by the Group.

The expected benefits to which the Group is entitled under its reinsurance contracts held are recognised as reinsurance assets. These assets consist of short-term balances due from reinsurers (classified with trade receivables including insurance receivables) as well as longer-term receivables (classified as reinsurance assets) that are dependent on the present value of expected claims and benefits arising on insurance contracts net of expected premiums payable under the reinsurance contracts. Amounts recoverable from or due to reinsurers are measured consistently with the amounts associated with the reinsured insurance contracts and in accordance with the terms of each reinsurance contract.

Premium income

Premiums on insurance contracts are recognised when due. Premium income on insurance contracts is shown gross of reinsurance. Premiums are shown before deduction of commission.

Reinsurance premiums

Reinsurance premiums are recognised when insurance premiums are due.

Claims and benefits paid

Claims on insurance contracts, which include death, disability, maturity and surrenders are charged against income when notified of a claim based on the estimated liability for compensation owed to policyholders. They include claims that arise from death and disability events that have occurred up to the SOFP date.

Reinsurance recoveries are accounted for in the same period as the related claim.

Acquisition costs

Acquisition costs for insurance contracts comprises of commission, advertising and other costs that relate to the securing of new contracts.

These costs include referral fees and bonus payments to IFAs, outbound call centre staff costs, commissions and a proportional allocation of costs in respect of those employees and activities which relate to the securing of new contracts. Commissions and other acquisition costs relating to insurance contracts and financial liabilities at fair value through profit or loss are expensed as incurred.

12.2 Short-term Insurance Contracts

Circular 2/2007 – Recognition and measurement of short-term insurance contracts issued by the

South African Institute of Chartered Accountants

In terms of IFRS 4 – Insurance contracts, insurance contracts are allowed to be measured under existing local practice. The Group has adopted Circular 2/2007 to determine the measurement in respect of short-term insurance contracts.

Features of Clientèle General’s short-term insurance contracts

Clientèle General’s Short-term insurance contracts are personal lines and business lines legal policies with risk benefits to cover individual persons and SMME categories for civil, criminal and labour related matters. Certain personal lines contracts also include accidental death benefits. These contracts are monthly renewable contracts.

Clientèle Limited Integrated Annual Report 2022 125

Accounting Policies continued

Measurement of short-term insurance contracts

Premium income

Insurance premium revenue comprises the premiums on contracts that become due and payable during the current reporting period irrespective of whether the contract was entered into during the current or a previous reporting period. Premiums are recognised gross of commission payable to intermediaries and exclude Value Added Tax.

Claims and benefits paid

Claims and benefits paid consist of claims and claims handling expenses paid during the financial year and are determined by the market value of the indemnification received by the policyholder.

Outstanding claims and IBNR provisions

The provision for outstanding claims comprises the Group’s estimate of the cost of settling all claims reported (notified claims) but unpaid at the SOFP date and claims IBNR.

Each notified claim is assessed on a case by case basis with due regard to the specific circumstances, information available from the insured and past experience with similar claims. Standardised policies and procedures are applied to claims assessments. The provision for each notified claim includes an estimate of the associated claims handling costs but excludes Value Added Tax.

The ultimate cost of incurred claims may vary as a result of future developments or better information becoming available about the current circumstances. Adjustments to the quantum of claims provisions established in prior years are reflected in the Group Annual Financial Statements for the period in which the adjustments are made, and disclosed separately if material.

An IBNR provision is raised for claims incurred but not yet reported based on historical experience. The Group determines the IBNR by considering the historical run-off pattern of claims and the average claims cost. Outstanding claims and the IBNR provision are included in the policyholder liabilities under insurance contracts item in the SOFP.

Liability adequacy test

The net liability recognised for short-term insurance contracts is tested for adequacy by assessing current estimates of all future contractual cash flows (i.e. expected claims and expenses of settling claims) and comparing this amount to the carrying value of the insurance contract liability. Where a shortfall is identified, an additional provision is made and the Group recognises the deficiency in income for the year.

Acquisition costs

Acquisition costs comprise all commission, advertising and other costs arising from the securing of short-term insurance contracts and are expensed when incurred.

12.3 Cash-Back Benefits to Policyholders

The Group, through Clientèle Life (and Clientèle General in terms of commencements before July 2011), issues policies which pay cash-back benefits to policyholders if their policies persist for certain pre-determined periods. An actuarial liability (based on best estimate assumptions plus margins) is created, through the SOCI, to ensure that, based on actuarial assumptions, the liability is sufficient to meet the obligations to policyholders when they become due and payable. Discounting and decrementing is used in determining the actuarial liability.

13. INTEREST INCOME AND EXPENSES

The Group recognises interest income and expenses in the SOCI for all interest-bearing financial instruments based on amortised cost using the effective interest method. The effective interest method is a method of calculating the amortised cost of a financial asset or financial liability and allocating the interest income or expense over the average expected life of the financial instrument.

14. REVENUE FROM CONTRACTS WITH CUSTOMERS

Revenue from contracts with customers is recognized either over time or at a point in time, as or when the Group satisfies performance obligations and transfers control of goods or services to its customers at an amount that reflects the consideration the Group expects to be entitled to in exchange for these goods or services, allocated to each specific performance obligation. Revenue is measured at the fair value of the consideration received or receivable.

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OUR BUSINESS GOVERNANCE REPORT FINANCIAL STATEMENTS

Accounting Policies continued

14.1 IFA annuity fee

The monthly annuity fees received from IFA members in respect of services provided to them over time.

The Group recognises revenue over time.

14.2 Loyalty Benefits

Fee income received from loyalty benefits are recognised as the service is rendered. Services are rendered over the expected duration of the contract at a fixed contract price.

The Group recognises revenue over time.

14.3 Non-Insurance Benefits

Fee income received from other non-insurance benefits are recognised as the service is rendered. Services are rendered over the expected duration of the contract at a fixed contract price.

15. OTHER INCOME

Other income is measured based on the consideration specified in a contract and excludes amounts collected on behalf of third parties. The Group recognises other income when it transfers control over a product or service to a customer.

The following is a breakdown of the various incomes that make up the other income for the Group:

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Product and or service Nature, timing of satisfaction of performance obligations
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Deferred profit release on single	At inception of a single premium contract there is a profit that is calculated
premium contracts	based on the difference between the amount required to be invested in order to
	provide a return to a policyholder and the amount actually received from the
	policyholder. This profit is deferred over the lifetime of the policy.
INSETA grants	There are two components to this revenue:
	1) Amounts claimed related to payments in respect of training; and,
	2) Bursaries provided to new employees.
	Amounts claimed related to payments in respect of training
	The Group conducts training on an ongoing basis and deducts the necessary
	Skills Development Levy as required by SARS. These amounts are then claimed
	back in terms of the INSETA grants.
	Bursaries provided to new employees
	INSETA provides grants in respect of yearly bursaries provided to prospective
	new employees conditional upon certain requirements being met.

16. DIVIDEND REVENUE

Dividends are recognised in the Company’s Financial Statements when the right to receive payment is established.

17. TAXATION

The tax charge comprises current tax, deferred tax and DWT. The income tax expense is recognised in the profit and loss component of the SOCI, except to the extent that it relates to items recognised directly in Other Comprehensive Income, in which case it is recognised in Other Comprehensive Income.

17.1 Current Tax

Current tax including capital gains tax is the expected tax payable, using tax rates enacted at the SOFP date, including any prior year over- or under-provision. The Group periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

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Accounting Policies continued

17.2 Deferred Tax

Deferred tax is provided in full using the liability method. Provision is made for deferred tax attributable to temporary differences in the accounting and tax treatment of items in the Group Annual Financial Statements. However, if the deferred tax arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss then it is not recognised. Deferred tax is recognised for all temporary differences, at enacted or substantially enacted rates of tax at the SOFP date. A deferred tax asset is recognised for the carry forward of unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profit will be available against which it can be utilised.

Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except for where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same tax authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

17.3 DWT

Shareholders are subject to DWT on dividends received, unless they are exempt in terms of the current tax law. DWT is levied at 20% (2021: 20%) of the dividend received. The DWT is categorised as a withholding tax, as the tax is withheld and paid to tax authorities by the company paying the dividend or by a regulated intermediary and not the beneficial owner of the dividend.

17.4 Other indirect taxes

Other indirect taxes include various other taxes paid to central and local governments, including Value Added Tax. Indirect taxes are recognised as part of operating expenditure for the long-term insurance business.

18. ACCRUALS AND PAYABLES (INCLUDING INSURANCE PAYABLES):

Accruals and payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers.

Accruals and payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

Insurance payables are obligations to pay for services that have been acquired in the ordinary course of business and include amounts due to agents, intermediaries and insurance contract holders.

Insurance payables are recognised initially at fair value and subsequently measured at amortised cost using the effectiveinterest method.

19. PROVISIONS

Provisions are recognised when the Group has a present legal or constructive obligation of uncertain timing or amount, as a result of past events and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the amount of the obligation can be made. When the effect of discounting is material, provisions are discounted using a pre-tax discount rate that reflects current market assessments of the time value of money. Provisions are reviewed at the end of each financial year and are adjusted to reflect current best estimates of expenditure required to settle the obligations.

20. EMPLOYEE BENEFITS

20.1 Incentive Bonus Schemes

The Group provides an Incentive Scheme for Excom and Group Excom, which is based on individual performance, linked to and dependent upon profitability and, in particular growth, in the Group’s EV and the creation of Goodwill. The Scheme comprises two elements, namely an EV element (which all of Excom participate in) and a Goodwill element (which Group Excom participates in).

EV Scheme

The EV Scheme component is based on growth in EV, as confirmed by the Group’s External Actuaries and approved by the Group Remuneration Committee, and is payable over a four year period. Two pools are created based on achievement of certain criteria. There is a “clawback” on Pool 1 if the pre-determined assumptions are not met, which is deducted from non-vested amounts earned but not yet paid.

128 Clientèle Limited Integrated Annual Report 2022

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Accounting Policies continued

Goodwill Scheme

The Goodwill Scheme component recognises the creation of value in excess of EV.

The Group recognises a provision and an expense for the Goodwill Scheme component based on a formula that takes into consideration the conditions of the Bonus Scheme.

The Goodwill element created is measured in five year cycles.

The third cycle commenced 1 July 2012 and ended on 30 June 2017. The fourth cycle commenced 1 July 2017 and ended on 30 June 2022. The Goodwill element created is determined with reference to the VNB (as certified by the Group’s External Actuaries) in the fifth year of a cycle and by applying a multiple, as approved by the Board on recommendation of the Group Remuneration Committee having regard to criteria included in the Incentive Scheme document. An adjustment is made, positive or negative, if actual experience differs by a pre-determined percentage compared to the assumptions used in calculating the Goodwill element.

The Board has, based on a recommendation from the Group Remuneration Committee agreed to measure the latest Goodwill cycle (ended 30 June 2022) over a 2 year period, applying a factor of 2/5 to the revised incentive pool. Furthermore, from the next cycle onwards, the Goodwill Scheme will no longer be based on a fixed point VNB at the end of each Cycle but rather on a weighted average of the VNB created during the five-year Cycle in determining the pool. The methodology for determining the clawback after the Scheme has vested has also been updated.

A provision is recognised in the SOFP and an expense in the SOCI in respect of the Goodwill Scheme component at the present value of the obligation at the SOFP date together with adjustments for unrecognised actuarial gains or losses and past service costs. The Goodwill Scheme component obligation is calculated annually using the projected unit credit method. The present value of the Goodwill Scheme component obligation is determined by discounting the estimated future cash outflows using a risk-free interest rate.

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to profit or loss as they arise each year.

Past-service costs are charged against profit or loss in the period in which they arise.

20.2 Retirement Benefits

The majority of the Group’s employees are members of the Clientèle Life Provident Fund.

The Group operates a defined contribution provident fund for its employees, the assets of which are held in a separate trustee administered fund. The Clientèle Life Provident Fund is governed by the Pension Fund Act of 1956. The fund is funded by contributions by the Group which are charged to profit or loss in the year to which they relate.

The Group has no further payment obligations once the contributions have been paid. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.

20.3 Share-Based Payments

The Group operates an equity-settled share-based compensation plan in the form of the BR Scheme.

The fair value of the employee services received in exchange for the grant of BRs are recognised as an expense and calculated at the grant date using the Black Scholes model.

The grant by the Company of BRs to the employees of the subsidiaries in the Group is treated as a capital contribution to the subsidiary. The fair value of the employee services received, measured by reference to the grant date fair value, is recognised over the vesting period as an increase to the investment in the subsidiaries, with a corresponding credit to equity (BR Scheme Reserve) in the Company Annual Financial Statements.

The total amount to be expensed over the vesting period is determined by reference to the fair value of the BRs granted, excluding the impact of any non-market vesting conditions. Non-market performance vesting conditions are included in assumptions about the number of BRs that are expected to become exercisable.

At each SOFP date, the entity revises its estimates of the number of BRs that are expected to become exercisable. It recognises the impact of the revision of original estimates, if any, in the SOCI, and a corresponding adjustment to equity over the remaining vesting period.

When the BRs vest and are exercised, the Company issues new shares. The fair value of the shares issued at exercise date is credited to share capital (nominal value) and share premium, with a debit to the BR Scheme Reserve (equity) for the grant date fair value. Any difference between the grant date fair value and the exercise date fair value is debited/credited to retained earnings.

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Accounting Policies continued

The exercising by employees of their rights results in a realisation of the investment for which there is a recharge to the subsidiaries. The recharge is a repayment arrangement which requires the subsidiaries to repay the Company for the provision of the equity settled share-based payments to the suppliers of goods and services (being the employees of the subsidiaries). The recharge is determined by reference to the fair value at exercise date.

The investment in the subsidiary is accordingly reduced by the corresponding cumulative grant date fair value in respect of the BRs exercised in that period, and the amount by which the recharge exceeds the cumulative grant date fair value in respect of the BRs exercised is considered a capital contribution and credited to the SOCI in the Company.

The cash received in respect of the recharge is reflected in the Company statement of cash flows as follows:

• The cash received in respect of the grant date fair value is included in investment activities as proceeds from receiving a capital repayment by the subsidiary in respect of the issue of share capital.

• The cash in respect of the amount by which the recharge exceeds the cumulative grant date fair value is included under cash generated by operations.

• This transaction is eliminated in the Statement of Cash Flows on consolidation.

21. SEGMENT INFORMATION

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker that makes strategic decisions and who is responsible for allocating resources and assessing performance of the operating segments has been identified as Group Excom.

The Group’s operations are analysed across four reportable operating segments. This is consistent with the way the Group manages the business. The four reportable operating segments, based on the four principal lines of business from which the Group generates revenue are long-term insurance, short-term insurance, CBC Rewards, Clientèle Mobile & Direct Rewards and the “other” business segment, Clientèle (consisting of Clientèle’s dividend income, investment income, ECLs and operating expenses).

Segment information is prepared in conformity with the measure that is reported to Group Excom. These values have been reconciled to the consolidated Annual Financial Statements. The measure reported by the Group is in accordance with the accounting policies adopted for preparing and presenting the consolidated Annual Financial Statements.

The segment assets, liabilities, revenue and expenses comprise of all assets, liabilities, revenue and expenses which are directly attributable to the segment, or can be allocated to the segment on a reasonable basis. The Group accounts for inter-segment revenues and transfers as if the transactions were with third parties at current market prices.

Capital expenditure on property and equipment and intangible assets has been allocated to the segments to which it relates.

130 Clientèle Limited Integrated Annual Report 2022

OUR BUSINESS GOVERNANCE REPORT FINANCIAL STATEMENTS

Statements of Financial Position

as at 30 June 2022

(R’000) Notes	(R’000) Notes	Group 2022 2021	Company
			2022 2021
Assets Owner-occupied properties Investment in subsidiaries Investment in associate Intangible assets Property and equipment Deferred tax Reinsurance assets Loans to subsidiaries Financial assets held at fair value through profit or loss Financial assets at amortised cost Inventories Trade receivables including insurance receivables Current tax Cash and cash equivalents			301,388 299,766 5,837 1,692 3,215 4,892 44,682 43,152 48,006 48,018 1,069 1,067 405 12,524 12,723
	4	412318 417783
	5	, ,
	10	5837 1692
	2	, , 43165 57226
	3	, , 43689 42257
	22	, , 85636 147009
	6	, , 84178 91128
	7	, ,
	8	9198483 8447025
	9	,, ,, 27357
		, 5038 7988
	11	, , 70377 59954
		, ,
	12	502,000 463,221
Total assets		10,478,078 9,735,283	417,126 411,310
Equity Share capital Share premium Common control deficit			6,706 6,706 389,135 389,135
	13	6706 6706
	13	, , 389135 389135
	13	, , (220,273) (220,273)
Retained earnings BR Scheme Reserve NDR: Revaluation	13	175568 175568	395,841 395,841 (6,438) (10,524) 25,362 23,740
		, , 885792 819177
	14	, , 25362 23740
	15	, , 55,422 62,176
Total equity		1,142,144 1,080,661	414,765 409,057
Liabilities Deferred tax Financial liabilities held at amortised cost Policyholder liabilities under insurance contracts Financial liabilities held at fair value through profit or loss Loans at amortised cost Financial guarantee liability Employee benefits Accruals and payables including insurance payables Current tax			2,000 2,000 361 245 8
	22	16962 19742
	18	, , 215444 201973
	16	, , 801924 850465
	17	, , 7841618 7123464
	19	,, ,, 100000 110034
	20	, , 2000 2000
	21	, , 77708 83380
	23	, , 257354 254631
		, , 22,924 8,933
Total liabilities		9,335,934 8,654,622	2,361 2,253
Total equity and liabilities		10,478,078 9,735,283	417,126 411,310

Clientèle Limited Integrated Annual Report 2022

131

Statements of Comprehensive Income

for the year ended 30 June 2022

(R’000)	Notes	Group 2022 2021	Company
			2022 2021
Revenue Insurance premium revenue Reinsurance premiums
	24	2357703 2297436
	25	,, ,, (168,583) (127,960)
Net insurance premiums Revenue from contracts with customers Cost of sales Dividend income Other income Interest income Interest income on financial assets at amortised cost Fair value adjustment to financial assets at fair value through profit or loss		2189120 2169476	– – 368,854 318,556 4,212 119 186 334 4,852 6,764
	26	,, ,, 124592 137570
		, , (13222) (14881)
	32	, ,
	27	48548 43762
	28	, , 7636 8027
	28	, , 453 1701
	29	, 282,384 507,096
Net Income Net insurance benefits and claims Gross insurance benefits and claims Insurance claims recovered from reinsurers Decrease/(increase) in policyholder liabilities under insurance contracts (Decrease)/increase in reinsurance assets Fair value adjustment to financial liabilities at fair value through profit or loss Movement in ECL Finance cost on financial liabilities Interest expense Acquisition cost Administrative expenses		2639511 2852751	378,104 325,773 – –
	30	,, ,, (433,119) (424,515)
	30	(627592) (594755)
	30	, , 194,473 170,240
	31	48541 (108727)	18,000 (3,508) (19,427)
	6	, , (6950) 52390
	17	, , (171807) (319600)
		, , (3249) 18000
	18	, , (16300) (13898)
	19	, , (6512) (6371)
	33	, , (1061869) (1148931)
	33	,, ,, (327,305) (322,690)
Net profit before tax Tax		660941 578409	374,596 324,346 (1,656) (1,168)
	35	, , (225,472) (186,154)
Net profit for the year		435,469 392,255	372,940 323,178
Attributable to: – Equity holders of the Group – ordinary shareholders			372,940 323,178
		435,469 392,255
Net profit for the year		435,469 392,255	372,940 323,178
Other comprehensive expense: Loss on property revaluation* Income tax relating to loss on property revaluation
		(9092) (11280)
		, , 2,338 2,954
Other comprehensive expense for the year – net of tax		(6,754) 8,326	– –
Total comprehensive income for the year		428,715 383,929	372,940 323,178
Attributable to: – Equity holders of the Group – ordinary shareholders			372,940 323,178
		428,715 383,929
Earnings per share (cents) Diluted Earnings per share (cents)	36	129.87 116.98
	36	129.72 116.86

* Items that cannot be recycled to profit and loss.

132 Clientèle Limited Integrated Annual Report 2022

OUR BUSINESS GOVERNANCE REPORT FINANCIAL STATEMENTS

Group Statement of Changes in Equity

for the year ended 30 June 2022

(R’000)	Share capital Share premium Common control deficit Sub- total Retained earnings BR Scheme reserve1 NDR revaluation2 Total
Balance as at 1 July 2020 Ordinary dividends Total comprehensive income – Net profit for the year – Other comprehensive expense BR Scheme allocated	6,706 389,135 (220,273) 175,568 745,478 22,162 70,502 1,013,710 (318,556) (318,556) – – – – 392,255 – (8,326) 383,929
	– 392,255 392,255 – (8,326) (8,326)
	– 1,578 1,578
Balance as at 30 June 2021	6,706 389,135 (220,273) 175,568 819,177 23,740 62,176 1,080,661
(R’000)	Share capital Share premium Common control deficit Sub- total Retained earnings BR Scheme reserve1 NDR revaluation2 Total
Balance as at 1 July 2021 Ordinary dividends Total comprehensive income – Net profit for the year – Other comprehensive expense BR Scheme allocated	6706 389135 (220273) 175568 819177 23740 62176 1080661
	, , , , , , , ,, – (368854) (368854)
	, , – – – – 435,469 – (6,754) 428,715
	– 435469 435469
	, , – (6,754) (6,754)
	– 1,622 1,622
Balance as at 30 June 2022	6,706 389,135 (220,273) 175,568 885,792 25,362 55,422 1,142,144

• 1 The BR Scheme reserve held is in respect of BRs granted to management (excluding Group Excom), IFAs and key employees in terms of the BR Scheme. No shares (2021: no shares) were issued during the year.

• 2 Comprises the accumulated owner-occupied properties fair value adjustment and related tax.

Company Statement of Changes in Equity

for the year ended 30 June 2022

for the year ended 30 June 2022
				BR
	Share	Share	Retained	Scheme
(R’000)	capital	premium	earnings	reserve1	Total
Balance as at 1 July 2020	6,706	389,135	(15,146)	22,162	402,857
Ordinary dividends			(318,556)		(318,556)
Net profit for the year			323,178		323,178
BR Scheme allocated				1,578	1,578
Balance as at 30 June 2021	6,706	389,135	(10,524)	23,740	409,057
Balance as at 1 July 2021	6,706	389,135	(10,524)	23,740	409,057
Ordinary dividends			(368,854)		(368,854)
Net profit for the year			372,940		372,940
BR Scheme allocated				1,622	1,622
Balance as at 30 June 2022	6,706	389,135	(6,438)	25,362	414,765

• 1 The BR Scheme reserve held is in respect of BRs granted to management (excluding Group Excom), IFAs and key employees in terms of the BR Scheme. No shares (2021: no shares) were issued during the year.

Clientèle Limited Integrated Annual Report 2022 133

Statements of Cash Flows

for the year ended 30 June 2022

(R’000)	Notes	Group 2022 2021	Company
			2022 2021
Profit from operations Adjusted for non-cash items Separately disclosable items Working capital changes Increase/(decrease) in financial liabilities Acquisition of financial assets Disposal of financial assets		660941 578409	374,596 324,346 (8,827) (17,147) (3,968) (2,850) (3) 80 (6,000) 4,864 17,877
	37	, , (25922) (43248)
	37	, , (92703) (70244)
	37	, , (64831) (41027)
	37	, , 543518 (400595)
	8	, , (1438028) (184001)
	8, 9	,, , 968,954 586,138
Cash generated from operations Interest received Dividends received Dividends paid Taxation paid		551929 425432	366,662 316,306 1,416 1,764 2,552 1,086 (368,736) (318,590) (393) (966)
	37	, , 47446 52325
		, , 45257 17919
	38	, , (368736) (318590)
	39	, , (155,310) (138,738)
Cash flows from operating activities		120,586 38,348	1,501 (400)
Acquisition of intangible assets Acquisition of property and equipment Acquisition of owner-occupied properties Proceeds from disposal of property and equipment, and intangible assets Acquisition of investment in associate Increase in loans to subsidiaries Repayment of loans from subsidiaries Increase in financial assets at amortised cost	2	(20198) (29560)	(4,599) (2,728) (9,150) 1,028 6,636
	3	, , (15238) (15300)
	4	, , (4574) (1781)
		, , 7167 326
		, (4599)
		,
	9	(32,419)
Cash flows from investing activities		(65,261) (50,914)	(1,700) (7,113)
Repayment of loans at amortised cost	19	(16,546) (9,118)
Cash flows from financing activities		(16,546) (9,118)	– –
Increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year		38779 (21684)	(199) (7,513) 12,723 20,236
		, , 463,221 484,905
Cash and cash equivalents at end of year		502,000 463,221	12,524 12,723

134 Clientèle Limited Integrated Annual Report 2022

OUR BUSINESS GOVERNANCE REPORT FINANCIAL STATEMENTS

Segment Information

as at 30 June 2022

BASIS OF SEGMENTATION

The Group’s operations are analysed across four reportable operating segments, based on the four principal lines of business from which the Group generates revenue, being Long-term insurance (incorporating the property subsidiaries), short-term insurance, CBC Rewards, Clientèle Mobile and Direct Rewards, and “other” business segment (consisting of Clientèle’s dividend income, investment income, ECL and operating expenses). Due to the size of the CBC Rewards, Clientèle Mobile and Direct Rewards segment the chief operating decision maker has decided to disclose this segment separately.

The long-term insurance segment incorporates the sale and administration of long-term insurance risk policies (Refer to Insurance and Financial Risk Management Note 4.1 on page 114) as well as the transactions associated with the owneroccupied properties.

The short-term insurance segment incorporates the sale and administration of legal advice policies concluded under the short-term insurance license (Refer to Insurance and Financial Risk Management Note 4.2 on page 115).

The CBC Rewards, Clientèle Mobile and Direct Rewards segment incorporates the sale and administration of loyalty rewards contracts as well as cellular sim cards, mobile data and airtime to clients.

Clientèle is the Holding Company of the Group. The vast majority of policies are in respect of individuals.

Statement of Financial Position – Segment Information as at 30 June 2022

(R’000)	Long-term insurance Short-term insurance CBC Rewards, Clientèle Mobile, & Direct Rewards Other Inter- segment Total
Segment assets and liabilities Owner-occupied properties Investment in Associate Intangible assets Property and equipment Deferred tax Reinsurance assets Financial assets – At fair value through profit or loss – At amortised cost Inventories Loans to subsidiaries Trade receivables including insurance receivables Cash and cash equivalents
	412318 412318
	, , 5837 5837
	, , 28205 5216 9744 43165
	, , , , 42376 1240 73 43689
	, , , 72841 8607 8337 (4149) 85636
	, , , , , 84178 84178
	, , 8,974,140 203,694 – 48,006 – 9,225,840
	8946783 203694 48006 9198483
	,, , , ,, 27,357 27,357
	116 4922 5038
	, , 4538 44681 (49220) –
	, , , 57197 4292 7819 1069 70377
	, , , , , 358,465 128,196 2,815 12,524 502,000
Total assets	10,034,375 351,245 39,547 102,131 (49,220) 10,478,078
Deferred tax Policyholder liabilities under insurance contracts Financial liabilities – At fair value through profit or loss – At amortised cost Loans at amortised cost Financial guarantee liability Intergroup loans Employee benefits Accruals and payables including insurance payables Current tax	16962 16962
	, , 792742 9182 801924
	, , , 8,057,061 – – – – 8,057,061
	7841618 7841618
	,, ,, 215,444 215,444
	100000 100000
	, , 2000 2000
	, , (2168) 1432 49955 (49220) –
	, , , , 65804 11904 77708
	, , , 218961 31154 6923 316 257354
	, , , , 20,559 2,365 22,924
Total liabilities	9,269,923 56,037 56,878 2,316 (49,220) 9,335,934
Segment items included in the SOFP: 2022 Acquisition of intangible assets Acquisition of property and equipment
	9633 2632 3416 15681
	, , , , 14,073 135 9 14,217

Clientèle Limited Integrated Annual Report 2022

135

Segment Information continued

Statement of Financial Position – Restated Segment Information as at 30 June 2021

as at 30 June 2021
(R’000)	Long-term insurance Short-term insurance CBC Rewards, Clientèle Mobile, & Direct Rewards Other Inter- segment Total
Segment assets and liabilities Owner-occupied properties Investment in Associate Intangible assets Property and equipment Deferred tax Reinsurance assets Financial assets – At fair value through profit or loss – At amortised cost Inventories Loans to subsidiaries Trade receivables including insurance receivables Cash and cash equivalents	417,783 417,783 1,692 1,692 42,806 5,297 9,123 57,226 40,607 1,569 81 42,257 128,482 6,930 9,053 2,544 147,009 91,128 91,128 8,160,978 238,030 – 48,017 – 8,447,025
	8,160,978 238,030 48,017 8,447,025 –
	182 7,806 7,988 1,036 47,947 (48,983) – 49,229 4,921 4,737 1,067 59,954 386,061 63,757 680 12,723 463,221
Total assets	9,318,292 320,504 31,480 113,990 (48,983) 9,735,283
Deferred tax Policyholder liabilities under insurance contracts Financial liabilities – At fair value through profit or loss – At amortised cost Loans at amortised cost Financial guarantee liability Intergroup loans Employee benefits Accruals and payables including insurance payables Current tax	20,900 (1,158) 19,742 841,961 8,504 850,465 7,325,437 – – – – 7,325,437
	7,123,464 7,123,464 201,973 201,973
	110,034 110,034 2,000 2,000 630 13 48,340 (48,983) – 68,114 15,266 83,380 221,670 25,495 7,027 439 254,631 5,845 3,080 8 8,933
Total liabilities	8,594,591 52,358 55,367 1,289 (48,983) 8,654,622
Segment items included in the SOFP: 2021 Acquisition of intangible assets Acquisition of property and equipment	22,630 3,546 3,384 29,560 14,824 399 77 15,300

136 Clientèle Limited Integrated Annual Report 2022

OUR BUSINESS GOVERNANCE REPORT FINANCIAL STATEMENTS

Segment Information continued

Statement of Comprehensive Income – Segment Information for the year ended 30 June 2022

(R’000)	Long-term insurance Short-term insurance CBC Rewards, Clientèle Mobile, & Direct Rewards Other Inter- segment Total
Revenue
Insurance premium revenue	1,866,566 491,137 2,357,703
Reinsurance premiums	(168,583) (168,583)
Net insurance premiums	1,697,983 491,137 – – – 2,189,120
Revenue from contracts
with customers	90,125 45,398 (10,931) 124,592
Cost of sales	(13,222) (13,222)
Other income	35,312 203 3,648 371,811 (362,426) 48,548
Interest income	6,012 1,438 186 7,636
Interest income on financial assets
at amortised cost	453 453
Fair value adjustment on financial
assets at fair value through profit
or loss	267,170 10,362 4,852 282,384
Segment income	2,097,055 503,140 35,824 376,849 (373,357) 2,639,511
Net insurance benefits and claims	(416,402) (16,717) (433,119)
Increase/(decrease) in policyholder
liabilities under insurance contracts	49,220 (679) 48,541
Decrease in reinsurance assets	(6,950) (6,950)
Fair value adjustment to financial
liabilities at fair value through profit
or loss	(171,807) (171,807)
Movement in ECL	(3,249) (3,249)
Finance cost on finance liabilities	(16,300) (16,300)
Interest expense	(6,512) (6,512)
Operating expenses	(1,015,803) (353,523) (33,097) (3,338) 16,587 (1,389,174)
Segment expenses and claims	(1,587,803) (370,919) (33,097) (3,338) 16,587 (1,978,570)
Profit before tax	509,252 132,221 2,727 373,511 (356,770) 660,941
Tax	(183,259) (37,359) (727) (4,127) (225,472)
Net profit for the year attributable
to equity holders of the Group	325,993 94,862 2,000 369,384 (356,770) 435,469
Segment items included in the
SOCI: 2022
Amortisation and impairment
of intangible assets	(14,406) (2,713) (2,795) (19,914)
Depreciation	(13,073) (464) (17) (13,554)

Clientèle Limited Integrated Annual Report 2022

137

Segment Information continued

Statement of Comprehensive Income – Restated segment Information for the year ended 30 June 2021

for the year ended 30 June 2021
			CBC
			Rewards
	Long-term	Short-term	and Clientèle		Inter-
(R’000)	insurance	insurance	Mobile	Other	segment	Total
Revenue
Insurance premium revenue	1,798,809	498,627				2,297,436
Reinsurance premiums	(127,960)					(127,960)
Net insurance premiums	1,670,849	498,627	–	–	–	2,169,476
Revenue from contracts
with customers	104,352		41,895		(8,677)	137,570
Cost of sales			(14,881)			(14,881)
Other income	49,475	58	586	318,676	(325,033)	43,762
Interest income	6,252	1,435	6	334		8,027
Interest income on financial assets
at amortised cost	1,701					1,701
Fair value adjustment on financial
assets at fair value through profit
and loss	475,516	24,817		6,763		507,096
Segment income	2,308,145	524,937	27,606	325,773	(333,710)	2,852,751
Net insurance benefits and claims	(379,129)	(45,386)				(424,515)
Increase in policyholder liabilities
under insurance contracts	(108,859)	132				(108,727)
Decrease in reinsurance assets	52,390					52,390
Fair value adjustment to financial
liabilities at fair value through profit
or loss	(319,600)					(319,600)
Movement in ECL				18,000		18,000
Finance cost on finance liabilities
at amortised costs	(13,898)					(13,898)
Interest expense	(6,371)					(6,371)
Operating expenses	(1,096,612)	(359,402)	(27,406)	(14,632)	26,431	(1,471,621)
Segment expenses and claims	(1,872,079)	(404,656)	(27,406)	3,368	26,431	(2,274,342)
Profit before tax	436,066	120,281	200	329,141	(307,279)	578,409
Tax	(153,407)	(30,181)	(56)	(2,510)		(186,154)
Net profit for the year attributable to
equity holders of the Group	282,659	90,100	144	326,631	(307,279)	392,255
Segment items included in the
SOCI: 2021
Amortisation and impairment of
intangible assets	(16,093)	(3,422)	(2,165)			(21,680)
Depreciation	(14,210)	(590)	(12)			(14,812)

138 Clientèle Limited Integrated Annual Report 2022

OUR BUSINESS GOVERNANCE REPORT FINANCIAL STATEMENTS

Notes to the Annual Financial Statements

for the year ended 30 June 2022

1. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS USED IN APPLYING ACCOUNTING POLICIES

The Group makes use of estimates and assumptions that affect the reported amounts of its insurance liabilities, owner occupied properties, employee benefit obligations, intangible assets, deferred tax assets and related liabilities and unquoted financial instruments. Save for employee benefit obligations which are evaluated semi-annually, estimates and judgments are evaluated monthly and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances, as set out below.

• 1.1 Long-term Insurance

Other than where an IBNR liability has been established, the insurance liabilities are calculated by projecting liability outgo and expected future premiums and discounting the cash flows to the Valuation date based on the Valuation discount rate. These are referred to as discounted liabilities. Where reserving cashflow projections resulted in negative reserves, these were eliminated per policy. As such, no policy was treated as an asset. (Refer to Note 16 on pages 150 to 151 and to the sensitivity analysis in Insurance and Financial Risk Management Note 4 on pages 113 to 115.)

• 1.2 Employee Benefits

The determination of the liabilities in respect of the Goodwill Scheme component of the Group’s Bonus Scheme is dependent on estimates made by the Group. Estimates are made as to the expected VNB generated in the fifth year of a five year cycle of the Scheme, the multiple used in the formula and the expected number of participants in the Scheme. From the next Cycle onwards, the Goodwill Scheme will no longer be based on a fixed point VNB at the end of each Cycle, but rather on a weighted average of the VNB created during the five-year Cycle in determining the pool. The methodology for determining the clawback after the Scheme has vested has also been updated (Refer to Note 21 on pages 155 to 156). The determination of the liabilities in respect of the EV component of the Group’s Bonus Scheme is dependent on estimates made by the Group. Factors affecting the calculation are the Recurring EV earnings, the hurdle rate and the expected pool utilisation. (Refer to Note 21 on pages 155 to 156.)

• 1.3 Deferred tax assets

The calculation of the deferred tax asset in respect of the Individual Policyholders’ Tax Fund (“IPF”) of R61.3 million (2021: R122.7 million) and future utilisation of the assessed loss together with the related policyholder liability amounting to R57.6 million (2021: R112.0 million) is subject to estimates and judgments. The input with the most effect on the calculation is the attrition of business. Management has used an attrition rate of 20% in respect of the co-branded single premium business as the behaviour of this book of business, which has been written in large tranches, is similar to Group business. Management will monitor this assumption annually. If the attrition rate decreased to 17.5%, the deferred tax asset would increase to R66.4 million (2021: R131.6 million), with an additional positive impact of R0.4 million (2021: R1.1 million) on net profit after tax. If the attrition rate increased to 22.5%, the deferred tax asset would decrease to R56.9 million (2021: R113.9 million), with an additional negative impact of R0.4 million (2021: R1.0 million) on net profit after tax. At the reporting date the IPF has an estimated tax loss of R1.5 billion (2021: R1.9 billion).

• 1.4 Owner Occupied Properties

The investment property is disclosed at level 3 in the fair value measurement hierarchy. Level 3 values are estimated indirectly using Valuation techniques or models, for which one or more of the significant inputs are assumptions (based on unobservable market inputs). The investment property is valued annually by Broll Valuation and Advisory Services Proprietary Limited (part of the CB Richard Ellis Proprietary Limited network), an independent valuator. For the purpose of valuing the property, the discounted cash flow methodology was adopted, in terms of which estimated gross income is projected for a ten year period.

Forecast expenses are then deducted from the estimated gross annual income projections, to arrive at the net annual income stream throughout the cash flow period. An amount that represents an estimate of the value of the property upon reversion at the end of the cash flow period is added to the sum of the discounted net annual value of the cash flows. The estimated value upon reversion at the end of the cash flow period is calculated as the value of the estimated net income in the forward period of 12 months immediately following the final year of the cash flow capitalised at an appropriate rate to reflect the perceived risk in the investment.

The underlying assumptions used are a gross market rentals of between R125 and R165 (2021: between R125 and R160) per square meter per month. This has then been capitalised into perpetuity at a yield of between 8.75% and 9.50%. (2021: between 8.75% and 9.50%), which is appropriate given the current state of the property market and the quality of the property investments where the estimated vacancies is not a major risk as the office park is close to 100% owner occupied and the forecast rental increases at 7% per annum. (Refer to Note 4 on page 143.)

Clientèle Limited Integrated Annual Report 2022

139

Notes to the Annual Financial Statements continued

1.5 Financial Guarantee

A Monte Carlo simulation was conducted at the end of the financial year to determine the amount of the Financial Guarantee Liability in respect of the financial guarantee issued by Clientèle in favour of Depfin (Refer to Commitments disclosed in Note 41 on page 170).

The following factors inter alia , were taken into consideration in calculating the Financial Guarantee Liability:

• The future share prices of Clientèle;

• The future EV per share of Clientèle;

• The probability of default times the exposure at default times the loss given default; and,

• The dates of default.

A new preference share funding arrangement was entered into in the 2021 financial year and the guarantee covenant was formally renegotiated with Depfin to include an EV per share covenant in addition to the Market Value per share covenant.

The ECL using the above methodology amounted to R2 million (2021: R2 million).

1.6 Financial assets at level 3 of the fair value hierarchy

Level 3 values are estimated indirectly using Valuation techniques or models, for which one or more of the significant inputs are assumptions (based on unobservable market inputs). Residual Debt Services stub paper has been classified as level 3 on the fair value hierarchy as the instruments are not traded directly on the market.

The following factors are taken into consideration in determining the fair value of the stub paper:

• Market interest rates;

• Experience gained from the stub paper from the past;

• Market conditions currently experienced;

• The value of the instrument had it been measured at amortised cost; and,

• Market knowledge obtained from news sources and Investment managers.

The fair value of the stub paper is reviewed twice a year at least, and when information becomes available that indicates that the fair value is different to the value recorded.

YTI preferences shares are classified as Level 3 on the fair value hierarchy and are valued using a Monte Carlo simulation. The primary inputs used to value the shares consist of:

• the Clientèle share price;

• the dividend yield; and,

• 77% of the prime interest rate.

1.7 ECL

Expected credit losses on financial assets held at amortised cost are calculated on a bi-annual basis. “The probability of default and the loss given default factors are used to determine the ECL. A Standard and Poors Credit rating of B+/B over a 12 month period was used for the quoted financial instruments as there was no deterioration in the underlying instrument since initial recognition. The ECL using the above methodology amounted to R5.1 million (2021: R1.8 million).

1.8 COVID-19

COVID-19 related assumptions include explicit allowances in respect of net insurance benefits and claims, policyholder liabilities under insurance contracts, withdrawals and premium collection.

Long-term assumptions (other than claims) were set based on experience over the year (ignoring the impact of changes within the collection environment); however, withdrawal rates were modelled to decrease annually from July 2022 to July 2025 as the economic impact of COVID-19 is expected to subside. Long-term withdrawal rates have been assumed to be higher (now) than pre-COVID-19.

Actual claims experience over the last year has been considerably impacted by the pandemic; however, this has been assumed to be short-term in nature and thus long-term claims assumptions have not been amended. An explicit COVID-19 risk reserve was set up as at 30 June 2021 to allow for expected additional COVID-19 related policyholder risk claims. This reserve has been utilised in the financial year and has been increased to allow for the future expected excess claims on the new funeral parlour business as a result of the pandemic.

140 Clientèle Limited Integrated Annual Report 2022

OUR BUSINESS GOVERNANCE REPORT FINANCIAL STATEMENTS

Notes to the Annual Financial Statements continued

(R’000)	(R’000)	Group
		2022 2021
		Computer Software Intellectual property Video production Total Computer software Intellectual property Video production Total
2.	INTANGIBLE ASSETS Cost at beginning of year Additions Disposals Assets written off*
		75934 4520 18774 99228 65943 4520 15627 86090
		, , , , , , , , 10518 9680 20198 22836 6754 29590
		, , , , , , (2379) (2138) (4517) (30) (30)
		, , , (5,673) (4,520) (2,529) (12,722) (12,815) (3,607) (16,422)
	Cost at end of year	78,400 – 23,787 102,187 75,934 4,520 18,774 99,228
	Accumulated amortisation at beginning of year Amortisation charge for the year Assets written off* Impairment Disposals Reassessment of residual value	(28509) (4520) (8973) (42002) (26850) (4520) (5380) (36750)
		, , , , , , , , (12460) (7454) (19914) (14480) (7200) (21680)
		, ,, , , , 5673 4520 2529 12722 12809 3607 16416
		, , , , , , , (11000) (11000) –
		, , 12 12
		1,014 158 1,172
	Accumulated amortisation at end of year	(45,282) – (13,740) (59,022) (28,509) (4,520) (8,973) (42,002)
	Net carrying amount at end of year	33,118 – 10,047 43,165 47,425 – 9,801 57,226

* Fully amortised/depreciated assets that were not in use were written off by the Group.

Clientèle Limited Integrated Annual Report 2022

141

Notes to the Annual Financial Statements continued

Group

(R’000)	(R’000)	Leasehold improvements Furniture and equipment Solar plant Computer equipment Motor vehicles Total
3.	PROPERTY AND EQUIPMENT Year ended 30 June 2022 Cost at beginning of year Additions Assets written off* Disposals
		5822 30794 6688 56104 1877 101283
		, , , , , , 699 3022 2499 8720 298 15238
		, , , , (39) (29) (201) (269)
		(75) (255) (2,708) (1,012) (4,050)
	Cost at end of year	6,407 33,532 9,187 61,915 1,163 112,202
	Accumulated depreciation at beginning of year Depreciation charge for the year Reassessment of residual value Assets written off* Disposals	(2456) (20115) (34865) (1589) (59026)
		, , , , , (824) (3220) (318) (9023) (169) (13554)
		, , , 13 244 509 766
		39 29 201 269
		10 77 1,971 971 3,029
	Accumulated depreciation at end of year	(3,218) (22,985) (318) (41,207) (787) (68,513)
	Net carrying amount at end of year	3,189 10,547 8,869 20,708 376 43,689

* Fully amortised/depreciated assets that were not in use were written off by the Group.

(R’000)	(R’000)	Group
		Leasehold improvements Furniture and equipment Solar plant Computer equipment Motor vehicles Total
	Year ended 30 June 2021 Cost at beginning of year Additions Assets written off* Disposals Impairment	11,162 31,422 – 56,748 1,960 101,290 263 3,963 6,688 4,219 167 15,300 (2,072) (4,226) (4,665) (10,963) (187) (33) (198) (250) (668) (3,344) (332) (3,676)
	Cost at end of year	5,822 30,794 6,688 56,104 1,877 101,283
	Accumulated depreciation at beginning of year Depreciation charge for the year Assets written off* Disposals Impairment	(5,840) (19,824) – (30,866) (1,610) (58,141) (1,000) (4,799) (8,758) (255) (14,812) 2,072 4,226 4,665 10,963 111 19 94 276 500 2,201 263 2,464
	Accumulated depreciation at end of year	(2,456) (20,115) – (34,865) (1,589) (59,026)
	Net carrying amount at end of year	3,366 10,679 6,688 21,239 288 42,257

* Fully amortised/depreciated assets that were not in use were written off by the Group.

142 Clientèle Limited Integrated Annual Report 2022

OUR BUSINESS GOVERNANCE REPORT FINANCIAL STATEMENTS

Notes to the Annual Financial Statements continued

(R’000)	(R’000)	Group
		2022 2021
		Land Buildings Total Land Buildings Total
4.	OWNER-OCCUPIED PROPERTIES At Valuation at beginning of year Additions at cost (buildings 1 to 7) Disposals Revaluation	80,218 337,565 417,783 83,867 343,416 427,283 4,575 4,575 1,781 1,781 (946) (946) (2,197) (6,897) (9,094) (3,649) (7,633) (11,281)
	At Valuation at end of year	78,021 334,296 412,318 80,218 337,565 417,783

The land and buildings are valued annually on 30 June, at fair value by an independent valuator, Broll Valuation and Advisory Services Proprietary Limited (part of the CB Richard Ellis Proprietary Limited Network).

In arriving at the open market value of the lettable properties, the discounted cash flow methodology is adopted and estimated gross income is projected for a 10 year period.

Forecast expenses are then deducted from the estimated gross annual income projections to arrive at the net annual income stream throughout the cash flow period. This net annual income stream is then discounted and aggregated to determine an estimated net present value of the cash flow. A discounted end of lease terminal value is added to the net present value of the cash flow.

The underlying assumptions used comprise of gross market rentals of between R125 and R165 (2021: between R125 and R160) per square meter per month. This has then been capitalised into perpetuity at the following yields for the following buildings:

• Building 7: 8.75% (2021: 8.75%)

• Building 1 to 4: 9.50% (2021: 9.50%)

• Building 5 to 6: 9.50% (2021: 9.50%)

Owner-occupied properties are disclosed at level 3 in the fair value measurement hierarchy.

Sensitivity Analysis

The effect of changes in the discount and terminal cap rate, will have the following effect on the fair value of the properties and corresponding effect on equity:

						2022	2021
					%	R’000	R’000
Change Change	in in	discount discount	rate rate		0.5 (0.5)	(10,561) 10,990	(11,056) 11,593
Change	in	terminal	Cap	rate	0.5	(6,751)	(6,734)
Change	in	terminal	Cap	rate	(0.5)	7,538	7,605

The properties consist of seven contiguous office buildings and a parking structure situated on Erf 1725, Morningside Extension 71, Erf 1731, Morningside Extension 42, Portions 1, 2 and 3 of Erf 1502, Morningside Extension 71, Erf 1726, Morningside Extension 42, Erf 777 Morningside Extension 71 and Erf 776 Morningside Extension 71, Sandton, Gauteng. The buildings and parking structure are leased by Group companies.

Register of Owner-Occupied Properties

A register containing the details of all owner-occupied properties is available for inspection at the registered office of Clientèle.

If the owner-occupied properties were stated on the historical cost basis, the net book value or historical cost would be R335.1 million as at 30 June 2022 (2021: R330.5 million).

Clientèle Limited Integrated Annual Report 2022 143

Notes to the Annual Financial Statements continued

5. INVESTMENT IN SUBSIDIARIES

5.	INVESTMENT IN SUBSIDIARIES
		Company
		Amount of issued share capital and share premium R Percentage of issued share capital % Shares held at cost R’000
	2022 Direct holdings Unlisted subsidiaries Clientèle Life Clientèle General Insurance CBC Rewards (Pty) Ltd Clientèle Mobile (Pty) Ltd
		4853000 100 250716#
		,, , 42500000 100 46785#
		,, , 8610 100 3887
		, , 1 100 *
		301,388
	2021 Direct holdings Unlisted subsidiaries Clientèle Life Clientèle General Insurance CBC Rewards (Pty) Ltd Clientèle Mobile (Pty) Ltd	4,853,000 100 249,246# 42,500,000 100 46,634# 8,610 100 3,887 1 100 *
		299,766

* Less than R1,000.

# The increase relates to the recharge arrangement described in accounting policy 20.3.

A register of listed and unlisted investments is available for inspection at the Company registered office in terms of the provisions of section 113 of the Companies Act.

(R’000)	(R’000)	Group 2022 2021 91,128 38,738 (6,950) 52,390	Group 2022 2021 91,128 38,738 (6,950) 52,390	Company
				2022 2021
6.	REINSURANCE ASSETS Reinsurers’ share of insurance liabilities Balance at beginning of the year Movement for the year Movement in reinsurers’ share of insurance liabilities COVID-19 reinsurance reserve			– –
		26436 (161)
		, (33,386) 52,551
	Balance at end of the year	84,178 91,128		– –
(R’000)		Group 2022 2021 – –		Company
				2022 2021
7.	LOANS TO SUBSIDIARIES Opening balance Advances Payments Movement in ECL			43,152 45,433 2,728 9,150 (1,028) (6,636) (170) (4,795)
	Closing balance	– –		44,682 43,152
	Gross loans to subsidiaries ECL			49,647 47,947 (4,965) (4,795)
	Closing balance	– –		44,682 43,152

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144

OUR BUSINESS GOVERNANCE REPORT FINANCIAL STATEMENTS

Notes to the Annual Financial Statements continued

(R’000)	(R’000)	Group 2022 2021 1,377,291 1,153,056 7,069,734 7,117,773 49,775 148,013 232,609 359,083 200,146 145,245 1,237,882 38,756 (264,382) (69,023) (704,572) (445,878)	Company
			2022 2021
8.	FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS Balance at beginning of the year – mandatory Balance at beginning of the year – designated Movements for the year – Fair value adjustments – mandatory – Fair value adjustments – designated – Additions – mandatory – Additions – designated – Disposals – mandatory – Disposals – designated		48,018 53,131 4,852 6,764 6,000 (4,864) (17,877)
	Balance at the end of year – mandatory	1,362,830 1,377,291	48,006 48,018
	Balance at end of year – designated	7,835,653 7,069,734
	Total debt securities Promissory notes and deposits (unquoted) Funds on deposit Fixed interest securities (quoted) Government and public authority bonds (quoted) Total equity securities Listed on the JSE Unlisted equities Foreign equity funds*	8,353,836 7,544,072	10,519 10,884
		7825805 7056466	1,419 1,042 152 43 8,948 9,799
		,, ,, 236516 171216
		, , 32116 34321
		, , 259,399 282,069
		844,647 902,953	37,487 37,134
		632980 714473	23,167 26,007 9,062 6,283 5,258 4,844
		, , 34579 25014
		, , 177,088 163,466
	Total instruments	9,198,483 8,447,025	48,006 48,018
		% % 28.5 31.7 22.8 20.7 29.7 23.9 5.7 4.8 13.3 18.9	% %
	Spread of equities listed on the JSE by sector Industrials Resources Financials Real estate Technology		28.5 31.9 22.8 20.6 29.7 23.9 5.7 4.7 13.3 18.9
		100.0 100.0	100.0 100.0

* This comprises of a fund managed by our fund managers which invests in foreign equities with exposure to the United States of America, Great Britain, Hong Kong and Japan as at 30 June 2022.

A register of listed and unlisted investments is available for inspection at the Company registered office in terms of the provisions of section 113 of the Companies Act.

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145

Notes to the Annual Financial Statements continued

(R’000)	(R’000)	Group 2022 2021 – 69,535 453 1,701 (71,236) 45,521 (13,556)	Company
			2022 2021
9.	FINANCIAL ASSETS AT AMORTISED COST Balance at beginning of the year Movements for the year – Interest income – Reclassification of financial assert previously held at fair value through profit or loss – Additions – Repayments		– –
	Balance at end of year before ECL provision	32,418 –	– –
	ECL provision	(5,061)
	Balance at end of year	27,357 –	– –
	Current Non-current	27,357
		27,357 –	– –
	Maturity analysis Due within one year Due within two to five years Less: ECL	32,418 (5,061)
	Balance at end of year	27,357 –	– –
(R’000)		Group 2022 2021 1,692 – 4,599 1,254 (16) 2,891 (2,891)	Company
			2022 2021
**10. **	INVESTMENT IN ASSOCIATE Investment at beginning of year Purchase of investment in Direct Rewards Equity-accounted profit/(loss) for the year Reversal/(raising) of impairment of investment in associate		1,692 – 4,599 1,254 (16) 2,891 (2,891)
	Balance at end of year	5,837 1,692	5,837 1,692
(R’000)		Group 2022 2021 10,565 11,950 13,163 7,640 11,953 10,936 34,696 29,429	Company
			2022 2021
**11. **	TRADE RECEIVABLES INCLUDING INSURANCE RECEIVABLES Trade receivables Premiums receivable under insurance contracts Reinsurance receivable under reinsurance contracts Prepayments		1,000 1,000 69 67
		70,377 59,954	1,069 1,067
	Current Non-current	70,377 59,954	69 67 1,000 1,000
	The carrying value amounts approximates the fair value of these amounts Maturity analysis Due within one year Due within two to five years	70,377 59,954	69 67 1,000 1,000
		70,377 59,954	1,069 1,067

146

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OUR BUSINESS GOVERNANCE REPORT FINANCIAL STATEMENTS

Notes to the Annual Financial Statements continued

(R’000)	(R’000)	Group 2022 2021 502,000 463,221	Company
			2022 2021
12. CASH AND CASH EQUIVALENTS Cash in bank and at hand			12,524 12,723
(R’000)		Group 2022 2021 15,000 15,000	Company
			2022 2021
**13. **	SHARE CAPITAL AND PREMIUM Authorised share capital 750,000,000 ordinary shares of 2 cents each
			15,000 15,000
	Issued share capital 2022: 335,321,768 (2021: 335,321,768) ordinary shares of 2 cents each Share premium Common control deficit*	6,706 6,706 389,135 389,135 (220,273) (220,273)
			6706 6706
			, , 389135 389135
			, ,
		175,568 175,568	395,841 395,841

* Clientèle acquired the shares in Clientèle Life and its subsidiaries with effect from 19 May 2008. As there were no change in the beneficial shareholders, this transaction was treated as a common control transaction. This treatment resulted in a common control deficit of R220.3 million, which was the difference between the net asset value of Clientèle Life at the date of transfer and the par value of the shares issued.

No shares (2021: Nil) were issued in terms of the BR Scheme.

All issued shares are fully paid. The unissued ordinary shares have been placed under the control of the Directors of the Company until the forthcoming AGM of shareholders.

(R’000)	(R’000)	Group 2022 2021 25,362 23,740	Company
			2022 2021
**14. **	BR SCHEME RESERVE BR Scheme Reserve		25,362 23,740

BRs are granted to qualifying employees, excluding Group Excom.

The initial price of the BR is the volume weighted average price that the ordinary share traded at on the JSE during the 30 (thirty) trading days immediately preceding the invitation date. BRs are conditional on the employee staying in the employ of the Group for the vesting period. The BRs are exercisable starting three years from the invitation date. All BRs not exercised on the seventh anniversary of the invitation date will lapse, except for any BRs allocated for the period 1 November 2013 to 31 December 2015, where the period was extended to 10 years from the Invitation Date.

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147

Notes to the Annual Financial Statements continued

14. BR SCHEME RESERVE (continued)

BR SCHEME RESERVE(continued)
	2022 2021
	Volume weighted average price on grant date (Rands) Number of BRs granted Volume weighted average price on grant date (Rands) Number BRs granted
At beginning of year Allotment Allotment Allotment Allotment Allotment Allotment Allotment Forfeited Forfeited Forfeited Forfeited Forfeited Forfeited Forfeited Forfeited Forfeited Forfeited Forfeited Forfeited Forfeited Forfeited Forfeited Forfeited Forfeited Forfeited Forfeited Forfeited Forfeited Forfeited Forfeited Forfeited Forfeited Forfeited	13,808,668 13,466,337 8.35 8.35 2,696,245 9.34 9.34 913,951 9.49 1,022,160 9.51 9.51 458,250 9.94 393,800 10.20 719,323 10.39 902,605 7.69 (245,000) 7.69 (627,500) 8.35 (302,542) 8.35 (230,090) 9.34 (111,750) 9.34 (334,250) 9.49 (304,605) 9.51 (47,950) 9.51 (34,300) 9.94 (147,350) 10.20 (194,320) 10.39 (67,200) 13.14 (3,875) 13.14 (23,431) 14.18 (107,400) 14.18 (179,396) 14.78 14.78 (1,893) 14.89 (94,000) 14.89 (355,600) 14.90 (185,500) 14.90 (423,000) 14.94 14.94 (113,650) 15.87 (94,000) 15.87 (75,000) 16.01 (5,749) 16.01 (92,500) 16.36 (75,341) 16.36 (210,887) 16.51 (88,400) 16.51 (98,500) 16.93 (37,200) 16.93 (91,000) 17.00 (13,875) 17.00 (82,677) 17.24 (40,650) 17.24 (159,200) 17.27 17.27 (116,181) 17.47 (21,983) 17.47 (187,710) 18.21 18.21 (70,000) 19.71 (48,400) 19.71 (124,000) 19.96 (45,600) 19.96 (95,350)
At end of year	14,563,866 13,808,668

4.8 million (2021: 3.7 million) of the 14.6 million (2021: 13.8 million) outstanding Bonus Rights were exercisable.

148 Clientèle Limited Integrated Annual Report 2022

OUR BUSINESS GOVERNANCE REPORT FINANCIAL STATEMENTS

Notes to the Annual Financial Statements continued

14. BR SCHEME RESERVE (continued)

Bonus Rights granted have the following expiry dates at the end of the year:

	2022	2021	2021
	Average Number of	Average	Number of
	Grant Price Bonus Rights	Grant Price	Bonus Rights
	(Rands) – Limited	(Rands)	– Limited
01 November 2023	13.14 842,065	13.14	845,940
03 January 2024	14.78 20,256	14.78	20,256
18 February 2024	14.36 110,000	14.36	110,000
01 September 2024	17.00 320,558	17.00	334,433
30 March 2025	17.27 451,712	17.27	451,712
30 September 2025	18.21 493,240	18.21	493,240
31 March 2023	14.94 639,941	14.94	639,941
30 September 2023	16.01 437,537	16.01	443,286
31 March 2024	17.47 614,496	17.47	636,479
30 September 2024	16.36 432,988	16.36	508,329
01 April 2025	17.24 468,050	17.24	508,700
30 June 2025	19.71 341,350	19.71	389,750
1 July 2025	19.71 40,000	19.71	40,000
27 August 2025	20.01 100,000	20.01	100,000
1 October 2025	19.96 222,347	19.96	267,947
1 December 2025	16.93 151,300	16.93	188,500
1 March 2026	16.51 418,275	16.51	506,675
01 July 2026	14.89 448,175	14.89	542,175
01 October 2026	15.87 509,500	15.87	602,500
01 December 2026	14.90 918,000	14.90	1,103,500
01 March 2027	14.18 394,600	14.18	502,000
01 June 2027	7.69 858,000	7.69	1,103,500
01 September 2027	9.34 467,951	9.34	579,701
01 December 2027	8.35 2,163,613	8.35	2,466,155
01 March 2028	9.51 376,000	9.51	423,950
01 July 2028	9.49 717,555
30 September 2028	10.20 525,003
01 December 2028	9.94 246,450
31 March 2029	10.39 834,904
At end of year	14,563,866		13,808,669

The Statement of Comprehensive Income (SOCI) charge was determined using the Black Scholes model. The IFRS 2: Share based payments costs relating to the BR Scheme amounted to R1.6 million (2021: R1.6 million). Significant inputs into the model include grant prices of Bonus Rights, the dividend yield of 5% p.a., and the risk-free yield depending on term until assumed exercised date, employee turnover of 16.60% (2021: 17.94%). contractual life of 1 to 7 years (2021: 1 to 7 years) and potential share price growth.

(R’000)	(R’000)	Group 2022 2021 55,422 62,176	Company
			2022 2021
**15. **	NDR NDR: Revaluation		– –

The revaluation reserve relates to owner-occupied land and buildings owned by the subsidiaries, Clientèle Properties North, Clientèle Properties South and Clientèle Properties East referred to in Note 4 on page 143. The land and buildings have been revalued to market value through equity. Deferred tax (Refer to Note 22 on pages 157 to 158) has been provided at rates appropriate to the land and buildings and resulted in a net increase of R3.0 million to the deferred tax liability (2021: R2.9 million decrease).

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149

Notes to the Annual Financial Statements continued

(R’000)	(R’000)	Group
		2022 2021
**16. **	POLICYHOLDERS’ LIABILITIES UNDER INSURANCE CONTRACTS Balance at beginning of the year Change in policyholder liabilities under insurance contracts	850,465 741,738 (48,541) 108,727
	Balance at end of the year	801,924 850,465

(R’000)	Group
	2022 2021
	Gross of reinsurance Net of reinsurance Gross of reinsurance Net of reinsurance
Changes in insurance liabilities and reinsurance Discounted insurance liabilities as at the beginning of the year Less: Discretionary margins	692,463 692,444 671,524 671,484 (2,887,421) (2,887,351) (2,886,118) (2,885,962)
Discounted insurance liabilities as at the beginning of the year prior to allowance for discretionary margins Interest on insurance liabilities (and cashflows) Expected premiums on insurance liabilities Expected unwinding of margins (existing business) Expected claims, expiries and lapses Expected expenses, commission and charges Experience variations Changes in valuation basis (renewal business only) New business added during the year	(2,194,958) (2,194,907) (2,214,594) (2,214,478) (202,501) (202,501) (132,699) (132,699) 1,335,791 1,223,403 1,402,573 1,272,870 28,646 28,646 (2,695) (2,694) (509,647) (419,322) (450,996) (351,216) (129,711) (129,711) (158,364) (158,364) 62,100 84,124 (53,642) (23,797) 108,606 108,607 153,694 153,688 (558,638) (558,632) (738,235) (738,217)
Discounted insurance liabilities as at the end of the year prior to allowance for discretionary margins Plus: Discretionary margins	(2,060,312) (2,060,293) (2,194,958) (2,194,907) 2,725,585 2,725,952 2,887,421 2,887,351
A: Discounted insurance liabilities as at the end of the year	665,273 665,659 692,463 692,444
COVID-19 risk reserve as at the beginning of the year Change in COVID-19 risk reserve during the year	144,051 55,136 55,680 19,315 (62,341) (28,954) 88,371 35,821
B: COVID-19 risk reserve as at the end of the year	81,710 26,182 144,051 55,136
Undiscounted insurance liabilities as at the beginning of the year Withdrawals and change in reinsurance during the year New business added during the year	5,447 3,253 5,899 3,565 (1,320) (972) (1,809) (1,048) 41,631 14,441 1,357 736
C: Undiscounted insurance liabilities as at the end of the year	45,758 16,722 5,447 3,253
Total insurance liabilities as at the end of the year (A+B+C)	792,742 708,564 841,961 750,833
Reinsurance assets	– 84,178 – 91,128
Gross long-term insurance liabilities as at the end of the year	792,742 792,742 841,961 841,961
Short-term insurance liabilities as at the end of the year IBNR Cash Back Bonus Outstanding Claims	9,182 9,182 8,504 8,504
	304 304 286 286 2,351 2,351 2,523 2,523 6,527 6,527 5,695 5,695
Total insurance liabilities as at the end of the year	801,924 801,924 850,465 850,465

150

Clientèle Limited Integrated Annual Report 2022

OUR BUSINESS GOVERNANCE REPORT FINANCIAL STATEMENTS

Notes to the Annual Financial Statements continued

16. POLICYHOLDERS’ LIABILITIES UNDER INSURANCE CONTRACTS (continued)

Discounted Liabilities

These liabilities are established on a policy by policy basis. The basis of the projections is on a “best estimate” assumption basis. Compulsory margins are added to allow for risk and uncertainty based on the relevant local Actuarial Guidance Note (SAP104). In addition discretionary margins are included.

The compulsory margins were as follows:

Assumption	2022 Margin	2021 Margin
Investment return Mortality Expenses Expense inflation Lapses	0.25% increase/decrease 7.50% increase 10.0% increase 10.0% increase 25.0% increase/decrease	0.25% increase/decrease 7.50% increase 10.0% increase 10.0% increase 25.0% increase/decrease
Surrenders	10.0% increase/decrease*	10.0% increase/decrease*

* Depending on which change increases the liability.

Discretionary margins

Assets under insurance contracts (“negative liabilities”) have been zeroised against policyholder liabilities under insurance contracts. The total value of this discretionary margin amounted to R2,726 million (2021 R2,887 million).

Significant assumptions and other sources of estimation uncertainty

Discounted liabilities assumptions

The key assumptions used in the calculation of the insurance liabilities are based on recent experience investigations of the Group’s business. Each assumption is reviewed annually based on the results of the most recent experience investigations. The intention is to arrive at a best estimate of the Group’s experience.

Where data is not credible, more prudent assumptions are used based on industry data where available. However, for the bulk of the Group’s business, internal data was used. The results of the internal mortality investigations were used to establish current assumption levels.

Once the best estimate is determined, compulsory margins (as set out in SAP104) are incorporated as described above.

Demographic Assumptions

Mortality

A detailed mortality investigation was undertaken for homogenous groupings of business for a 24-month period ended 30 June 2022 based on the in-force data file, movements data and claims during the period. These results, adjusted for excess COVID-19 claims were used to set the mortality assumptions relative to either the latest published local assured lives or in-house rates. In addition, an explicit COVID-19 risk reserve have been set up (refer below).

Withdrawals

A detailed withdrawal investigation was carried out for the 12-month period ended 30 June 2022 based on homogenous groupings of business. Based on this investigation and allowing for the impact of challenges in the collections environment, the withdrawal assumptions of some of the classes of business were amended to reflect the recent and expected future experience. An explicit allowance was made for the expected improvement of withdrawal rates from July 2022 to July 2025 as the economic impact of COVID-19 and the lockdowns are expected to subside.

Expenses

The renewal expense assumptions were set based on the budgeted expenses for the 2022/2023 financial year.

Economic Assumptions

(a) Investment Return

The non-unit investment return assumption for all classes of business, except those where the liability has a specific asset backing it, was determined based on:

• The current zero-coupon yield curve (assuming an appropriate duration); and,

• adjusted for a compulsory margin (prescribed as being 0.25%).

For June 2022, the Valuation rate has been set with reference to the current zero coupon yield curve (an effective rate of 10.3% (2021: 8.6%) at a term of 6.00 years (2021: 6.75 years).

Based on the above, a non-unit investment return of 10.3% p.a. (2021: 8.6% p.a.) before compulsory margins was assumed for the majority of the business.

The unit investment return assumption was set based on the expected performance of the underlying assets, and thus a return of 11.7% p.a. (2021: 10.0%) (before compulsory margins) was assumed.

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151

Notes to the Annual Financial Statements continued

16. POLICYHOLDERS’ LIABILITIES UNDER INSURANCE CONTRACTS (continued)

Economic Assumptions (continued)

• (b) Inflation

The current assumed level of future expense inflation is 7.3% (2021: 5.6%) per annum. This was set with reference to the revised level of the Valuation interest rate. The gap between the non-unit investment return assumption and the inflation rate of 3.0% (2021: 3.0%) was updated and based on the difference between the Prudential Authority’s real and nominal yield curve as at 30 June 2022.

(c) Taxation

Future taxation and taxation relief are allowed for at the rates and on the basis applicable to section 29A of the Income Tax Act at the SOFP date. Clientèle Life’s current tax position is taken into account, and taxation rates, consistent with that position and the likely future changes in that position, are allowed for.

Effect of changes in assumptions – 2022

The following changes were made to the Actuarial Valuation basis when compared to the 2021 basis (Impacts shown after allowing for discretionary margins):

• Economic assumptions were reviewed to reflect the current environment resulting in a decrease in liabilities of R2.9 million;

• The expense assumptions were updated, which led to a liability decrease of R5.4 million;

• The withdrawal and other decrement assumptions were reviewed and adjusted where necessary in light of recent experience and resulted in a decrease in liabilities of R4.4 million; and,

• Modelling refinements, mainly pertaining to Savings products and commission, resulted in a decrease in liabilities of R0.5 million.

Effect of changes in assumptions – 2021

The following changes were made to the Actuarial Valuation basis when compared to the 2020 basis:

• Economic assumptions were reviewed to reflect the current environment resulting in a decrease in liabilities of R28.7 million;

• The expense assumptions were updated, which led to a liability decrease of R1.9 million;

• The withdrawal and other decrement assumptions were reviewed and adjusted where necessary in light of recent experience and resulted in a decrease in liabilities of R1.1 million; and,

• Modelling refinements, mainly pertaining to Savings products and commission, resulted in an increase in liabilities of R2.5 million.

Undiscounted Liabilities

IBNR liabilities on short-term insurance of R0.3 million (2021: R0.3 million) are based on a percentage of the premiums payable and have been established at a level which is appropriate based on historic trends. The percentage is reviewed annually against actual experience and expected future trends.

COVID-19 risk reserve

An explicit COVID-19 risk reserve has been set up to allow for expected additional COVID-19 related policyholder claims. This additional claims reserve, including compulsory margins, amounted to R81.7 million gross and R26.2 million net of reinsurance recoveries at 30 June 2022 (R144.1 million gross and R55.1 million net of reinsurance recoveries at 30 June 2021).

152 Clientèle Limited Integrated Annual Report 2022

OUR BUSINESS GOVERNANCE REPORT FINANCIAL STATEMENTS

Notes to the Annual Financial Statements continued

(R’000)	(R’000)	Group 2022 2021 7,123,464 7,222,354 171,807 319,600 1,337,352 48,719 (791,005) (467,209)	Company
			2022 2021
17.	FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS Balance at beginning of the year Movements for the year – Fair value adjustments* – Deposits – Withdrawals and maturities
	Balance at end of the year	7,841,618 7,123,464	– –
_ Includes R54.5 million (2021: R34.7 million) related to the IPF policyholder liability of R57.6 million (2021: R112.0 million)._ (R’000) Group Company 2022 2021 2022 2021 18. FINANCIAL LIABILITIES AT AMORTISED COST* Balance at beginning of the year 201,973 170,215 – Interest 16,300 13,898 – Additions 10,000 83,700 – Repayments (12,829) (65,840) Balance at end of the year 215,444 201,973 – – Current 70,326 Non-current 145,118 201,973 215,444 201,973 – – Maturity analysis Due within one year 74,842 Due within two to five years 177,776 253,920 Less: Discounting (37,174) (51,974) Balance at end of year 215,444 201,946 – –
			2022 2021
**18. **	FINANCIAL LIABILITIES AT AMORTISED COST Balance at beginning of the year – Interest – Additions – Repayments
	Balance at end of the year	215,444 201,973	– –
	Current Non-current	70,326 145,118 201,973
		215,444 201,973	– –
	Maturity analysis Due within one year Due within two to five years Less: Discounting	74,842 177,776 253,920 (37,174) (51,974)
	Balance at end of year	215,444 201,946	– –

Financial liabilities at amortised cost comprise single premium endowment investment product liabilities. These liabilities have not been designated at fair value through profit or loss as the corresponding assets relate to inter-company balances eliminated on consolidation.

Clientèle Limited Integrated Annual Report 2022

153

Notes to the Annual Financial Statements continued

(R’000)	(R’000)	Group 2022 2021 110,034 112,781 6,512 6,371 (16,546) (9,118)	Company
			2022 2021
**19. **	LOANS AT AMORTISED COST Nedbank Balance at beginning of the year Interest Repayments
		100,000 110,034	– –
	Current Non-current	7,743 16,176 92,257 93,858
		100,000 110,034	– –
	Maturity analysis Due within one year Due within two to five years Less: Discounting	7,743 16,176 108,497 112,250 (16,240) (18,392)
	Balance at end of year	100,000 110,034	– –

The loans comprise of medium-term credit facilities granted for the construction of Building 7 in Clientèle Properties East, a parking structure and the front entrance upgrade in Clientèle Properties North, and are secured by guarantees issued in favour of Nedbank from Clientèle.

The carrying value amounts approximate the fair value of these amounts.

The loans are unsecured with interest charged at the aggregate of the base rate and the applicable margins. The base rate for the facility is the 3 month JIBAR rate. The margin 250 basis points and the terms of the loans are 36 months.

(R’000)	(R’000)	Group 2022 2021 2,000 20,000 – (18,000)	Company
			2022 2021
**20. **	FINANCIAL GUARANTEE LIABILITY Balance at beginning of the year Movement in estimated credit loss Derecognition of liability Recognition of liability		2,000 20,000 – (18,000)
		(20,000)	(20,000) 2,000
		2,000
	Balance at end of year	2,000 2,000	2,000 2,000

154 Clientèle Limited Integrated Annual Report 2022

OUR BUSINESS GOVERNANCE REPORT FINANCIAL STATEMENTS

Notes to the Annual Financial Statements continued

(R’000)	(R’000)	(R’000)	Group 2022 2021 14,383 24,474 25,423 21,437 37,902 37,469	Company
				2022 2021
**21. **	EMPLOYEE BENEFITS Goodwill Scheme (Refer to note 21.1) EV Scheme (Refer to note 21.2) Bonuses (Refer to note 21.3)
			77,708 83,380	– –
	Current Non-current		63,325 62,527 14,383 20,853
			77,708 83,380	– –
	**21.1 **	Goodwill Scheme Balance at beginning of year Payment during the year Provision (released)/raised (Refer to Note 33) Interest cost Service cost Net actuarial gain	24,474 31,596 (3,621) (3,258) (6,470) (3,863)	– –
			1592 2058
			, , 2877 8388
			, , (10,939) (14,309)
		Balance at end of year	14,383 24,474	– –

The principle actuarial assumptions used for estimating the obligation that relates to the Goodwill Scheme are as follows:

The principle actuarial assumptions used for estimating the obligation that relates follows:	to the Goodwill Scheme are as
	Cycle 3 (ending 30 June 2017)
	2022 2021
Value of New Business at end of cycle (R million) Risk free rate (%) Pool utilisation (%) Value of New Business multiple Payment term (years)	N/A 527 N/A 8.24 N/A 50.18 N/A 5.00 N/A 5

Cycle 4 (ending 30 June 2022)

	Cycle 4 (ending 30 June 2022)
	2022 2021
Value of New Business at end of cycle (R million) Actual VNB at the end of the cycle (R million) Total Pool (R million) Expected pool utilisation (%) Actual pool utilisation (%) Risk free rate (%) Value of New Business multiple Payment term (years)	N/A 500 291 N/A 33 64.6 N/A 90.00 78.90 N/A 9.83 7.55 5.00 5.00 5 5

The variables used in calculating and estimating the liability in respect of the Goodwill Scheme are subject to approval by the Group Remuneration Committee. Those variables, which are subjective in nature, have been set at levels which the Group Remuneration Committee deems to be fair and equitable to both shareholders and the participants. The variables used for cycle 4 changed over time as circumstances, Group performance and the economic environment changed.

Clientèle Limited Integrated Annual Report 2022

155

Notes to the Annual Financial Statements continued

21. EMPLOYEE BENEFITS (continued)

21.2 EV Scheme

The build-up of the EV Scheme liability is as follows:

(R’000)	Group 2022 2021 21,437 4,051 21,217 20,767 (17,231) (3,381)	Company
		2022 2021
Balance at beginning of year Provision raised (Refer to note 33) Payment during the year Executives Management		– –
	(15806) (2241)
	, , (1,425) (1,140)
Balance end of year	25,423 21,437	– –
The principle actuarial assumptions used for estimating the obligation that relates to the EV Scheme are as follows: Payment terms (years) 4 4 Hurdle rate (%) (only applicable to Pool 2) 12.10 10.6 In-force participants (%) 87.88 79.69

EV earnings are based on the EV assumptions and calculations as outlined in the unaudited Statement of Group EV (pages 62 to 68).

**21.3 **	(R’000)	Group 2022 2021	Company
			2022 2021
	Short-term bonuses The build-up of the liability in respect of short-term bonuses is as follows: Balance at beginning of year Provision raised (Refer to Note 33) Payments during the year	37,469 32,262 33,423 28,456 (32,990) (23,248)
	Balance end of year	37,902 37,469	– –

156 Clientèle Limited Integrated Annual Report 2022

OUR BUSINESS GOVERNANCE REPORT FINANCIAL STATEMENTS

Notes to the Annual Financial Statements continued

(R’000)	(R’000)	Group 2022 2021 147,009 189,854 (61,938) (42,845)	Company
			2022 2021
**22. **	DEFERRED TAX Assets Balance at beginning of the year Charge to the SOCI – Tax losses/capital allowances – Tax losses in respect of IPF assessed losses – IPF and UPF return tax credits – Unrealised gains on investments – Prepayments – Property and equipment – Inventory – Disregarded assets for tax purposes (S29A(16)) – BR Scheme – Goodwill/EV Schemes – Financial guarantee liability – Revaluation of investments – Movement in estimated credit loss – B-BBEE expense – Transfer to liability		4,892 6,042 (1,677) (1,150)
		(2979) 279	(440) 511 20 (5,040) (1,142) (22) 1,343 (73) 2,016
		, (61320) (42278)
		, , (20829) (6307)
		, , 7665 (6924)
		, , (54) 220
		(223) (176)
		507
		20234 9989
		, , 144 320
		(3367) 351
		, (5040)
		, (1142)
		, 1367
		, (1,491) 6,721
		(450)
	Charge to Other Comprehensive Income Deferred taxation on revaluation of land Deferred taxation on revaluation of buildings	565 –	– –
		(627)
		1,192
	Balance at end of year	85,636 147,009	3,215 4,892
	Liability Balance at beginning of the year Charge to the Statement of Comprehensive Income – Tax losses/capital allowances – Property and equipment – Section 13quin Transfer to liability Charge to Other Comprehensive Income – Deferred taxation on revaluation of land – Deferred taxation on revaluation of buildings	19,742 19,829 573 2,867
		2077 549
		, (1584)
		, 81 2,318
		(450) (2,903) (2,954)
		(866) (818)
		(2,037) (2,136)
	Balance at end of year	16,962 19,742	– –
	Analysis of deferred tax balances: Assets Tax losses/capital allowances Tax losses in respect of IPF IPF and UPF return tax credits Unrealised gains on investments Prepayments Plant and equipment Inventory Disregarded assets for tax purposes (S29A(16)) BR Scheme Goodwill/EV Schemes Financial guarantee liability Revaluation of investments Movement in estimated credit loss B-BBEE expense Revaluation of land Revaluation of buildings	17,655 16,757 61,349 122,668 17,952 38,782 (5,924) (13,590) (751) (697) (1,396) (1,173) 507 (18,367) (38,601) 5,037 4,892 7,322 10,691 540 560 (1,142) 1,367 5,227 6,720 (2,394) (1,346)	552 992 (19) (19) 540 560 (1,142) 1,340 1,343 1,944 2,016
	Deferred tax asset at end of the year	85,636 147,009	3,215 4,892

Clientèle Limited Integrated Annual Report 2022

157

Notes to the Annual Financial Statements continued

(R’000)	(R’000)	Group 2022 2021 (18,565) (17,950) 3,822 2,318 5,700 7,229 26,005 28,145	Company 2022 2021 – – Company 2022 2021 361 245
**22. **	DEFERRED TAX(continued) Liability Tax losses/capital allowances Plant and equipment Revaluation of land Revaluation of buildings
	Deferred tax liability at end of the year	16,962 19,742
(R’000)		Group 2022 2021 1,114 500 17,056 14,297 105,316 73,339 43,791 28,072 41,678 83,188 36,263 41,831 12,136 13,405
23.	ACCRUALS AND PAYABLES INCLUDING INSURANCE PAYABLES IFA Referral fees and bonuses payable Premiums received in advance Deferred profit Trade payables Accruals Insurance payables Other payables
		257,354 254,631	361 245
	Maturity analysis Due within one year Due within two to five years	195,546 215,007 61,808 39,624	361 245
		257,354 254,631	361 245
(R’000)		Group 2022 2021 1,866,566 1,798,809 491,137 498,627	Company 2022 2021
**24. **	INSURANCE PREMIUM REVENUE Long-term insurance – individual recurring Short-term insurance
		2,357,703 2,297,436	– –
(R’000)		Group 2022 2021 168,583 127,960	Company 2022 2021
**25. **	REINSURANCE PREMIUMS Long-term insurance – individual recurring
		168,583 127,960	– –

158 Clientèle Limited Integrated Annual Report 2022

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Notes to the Annual Financial Statements continued

(R’000)	(R’000)	Group 2022 2021 90,125 104,352 31,015 29,899 3,452 3,319	Company
			2022 2021
**26. **	REVENUE FROM CONTRACTS WITH CLIENTS IFA annuity fee Loyalty benefits Non-insurance benefits
		124,592 137,570	– –
(R’000)		Group 2022 2021 36,981 37,853 5,339 5,766 1,398 685 159 1,254 (16) 2,891	Company
			2022 2021
**27. **	OTHER INCOME Release of Single Premium deferred profits Other income INSETA grants Profit on sale of assets Profit/(loss) in Associate Reversal of impairment		67 135 1,254 (16) 2,891
		48,548 43,762	4,212 119
(R’000)		Group 2022 2021 453 1,701 7,636 8,027	Company
			2022 2021
**28. **	INTEREST INCOME Financial assets at amortised cost Cash and cash equivalents		186 334
		8,089 9,728	186 334
(R’000)		Group 2022 2021 49,774 148,013 232,610 359,083	Company
			2022 2021
29.	FAIR VALUE ADJUSTMENT TO FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (Refer to note 8 on page 145) Fair value adjustment – mandatory Fair value adjustment – designated		4,852 6,764
		282,384 507,096	4,852 6,764
	The above fair value adjustments includes: – Fair value (losses)/gains – Interest (unlisted) – Dividends (listed)	(385,842) (120,552) 621,407 610,421 46,819 17,227	1,069 4,249 1,231 1,430 2,552 1,086
		282,384 507,096	4,852 6,764
	Adjustment for non-cash amounts included in the fair value expenses Dividend tax paid Net non-cash amount (refer to note 37 on page 165)	(4,953) 277,430

Clientèle Limited Integrated Annual Report 2022

159

Notes to the Annual Financial Statements continued

(R’000)	(R’000)	Group 2022 2021 567,164 527,264	Company
			2022 2021
30.	NET INSURANCE BENEFITS AND CLAIMS Long-term insurance Claims and policyholders’ benefits under insurance contracts Death and disability claims Policy surrender claims Insurance claims recovered from reinsurers Cashback bonus claims		– –
		322956 285053
		, , 244,208 242,211
		(194,473) (170,240) 45,845 23,934
	Short-term insurance Legal claims Cashback bonus claims	418,536 380,958 14,583 43,557	– – – –
		13245 42070
		, , 1,338 1,487
		433,119 424,515	– –
(R’000)		Group 2022 2021 (49,219) 108,858 678 (132)	Company
			2022 2021
31.	CHANGE IN POLICYHOLDER LIABILITIES UNDER INSURANCE CONTRACTS (Refer to note 16 on pages 151 to 152) Long-term insurance Short-term insurance IBNR Cash back bonus Outstanding claims		– –
		18 46
		(172) (110)
		832 (68)
	(Decrease)/increase in policyholder liabilities	(48,541) 108,727	– –

(R’000)	(R’000)	Group 2022 2021	Company
			2022 2021
**32. **	DIVIDEND REVENUE Dividends revenue (unlisted)		368,854 318,556
		– –	368,854 318,556

160 Clientèle Limited Integrated Annual Report 2022

OUR BUSINESS GOVERNANCE REPORT FINANCIAL STATEMENTS

Notes to the Annual Financial Statements continued

(R’000)	(R’000)	Group 2022 2021 10,402 8,865	Company
			2022 2021
**33. **	OPERATING EXPENSES Acquisition and administration expenses by nature are as follows: Total auditors’ remuneration Audit fees Other services Actuarial fees Computer expenses Consultancy fees Employee benefits Salaries and other short-term benefits Defined contribution provident fund – current service costs Goodwill Scheme release EV Scheme expense Short-term bonuses BR Scheme expense Amortisation of intangible assets Depreciation Computer equipment Solar Furniture and equipment Leasehold improvements Motor vehicles Impairment of intangible asset Impairment of PPE Impairment of Investment in Direct Rewards Local travel costs Administration and marketing Agency, Broker and outsourced sales IFA referral fees and bonuses paid Property expenses B-BBEE expense* Rewards expenses Movement in ECL on intergroup loans Foreign exchange gain B-BBEE guarantee expense COVID-19 related expenses/(release) Other		2,286 1,972
		10057 8304	1,564 1,689 722 283
		, , 345 561
		966 1,038 38,697 35,005 14,715 14,620 546,062 510,485	– –
		481081 448401
		, , 15189 15146
		, , (6470) (3863)
		, , 21217 20767
		, , 33423 28456
		, , 1,622 1,578
		19,914 21,680 13,554 14,812	– –
		9023 8758
		, , 318
		3220 4799
		, , 824 1000
		, 169 255
		11,000 1,212 2,891 1,927 1,684 427,867 510,061 223,794 232,230 37,358 44,381 22,293 20,998 30,000 75 174 (5) 1,357 1,928 504 (2,516) 18,689 22,076	2,891 9,000 170 4,795 1,052 769
		1,389,174 1,471,621	3,508 19,427
	Comprising: Acquisition costs associated with insurance contracts Administrative expenses	1,061,869 1,148,931 327,305 322,690	3,508 19,427
		1,389,174 1,471,621	3,508 19,427

* The B-BBEE expense was incurred in relation to the preference share investment in YTI.

Clientèle Limited Integrated Annual Report 2022 161

Notes to the Annual Financial Statements continued

34. DIRECTORS’ AND KEY MANAGEMENT REMUNERATION

The Companies Act requires the remuneration of Prescribed Offices to be disclosed in the Integrated Annual Report. It is the opinion of the Board that Clientèle’s Prescribed Officers are the Directors of Clientèle, whose remuneration is disclosed below.

Year ended 30 June 2022

Year ended 30 June 2022
Non-executive Directors	Months Directors’ fees and total emoluments Excluding VAT Directors’ fees and total emoluments Including VAT
Group Remuneration	in office R’000 R’000
GQ Routledge*	12 3,357 3,861
BA Stott*	12 1,964 2,259
PR Gwangwa#	12 819 819
LED Hlatshwayo*	12 538 619
RD Williams*	12 1,160 1,334
Total emoluments	7,838 8,892

* Registered for VAT for the year.

# Not registered for VAT.

Executive Directors	Months Basic salary Bonuses and performance related payments Retirement, medical and other benefits Total emoluments
Group Remuneration	in office R’000 R’000 R’000 R’000
IB Hume	12 4,670 5,853 305 10,828
BW Reekie	12 7,097 9,049 758 16,904
H Louw	12 4,393 5,338 320 10,051
RDT Tabane	12 2,285 2,661 186 5,132
Total emoluments	18,445 22,901 1,569 42,915

Bonuses and performance related payments include incentive bonus scheme payments and amounts payable. No BRs have been issued to Directors.

Year ended 30 June 2021

Year ended 30 June 2021
		Directors’	Directors’
		fees and total	fees and total
		emoluments	emoluments
		Excluding	Including
Non-executive Directors	Months	VAT	VAT
Group Remuneration	in office	R’000	R’000
GQ Routledge*	12	3,197	3,677
BA Stott*	12	1,871	2,151
PR Gwangwa#	12	610	610
BY Mkhondo#	10	554	554
LED Hlatshwayo*	12	493	567
RD Williams*	12	1,085	1,247
Total emoluments		7,810	8,806

* Inclusive of VAT.

# Not registered for VAT.

* Inclusive of VAT. # Not registered for VAT.
			Bonuses and	Retirement,
		Basic	performance related	medical and other	Total
Executive Directors	Months	salary	payments	benefits	emoluments
Group Remuneration	in office	R’000	R’000	R’000	R’000
B Frodsham	12	2,473	2,695	335	5,503
IB Hume	12	4,453	4,892	289	9,634
BW Reekie	12	6,769	7,400	719	14,888
H Louw	12	4,188	3,994	304	8,486
T Tabane	12	2,075	1,918	172	4,165
Total emoluments		19,959	20,899	1,819	42,677

Bonuses and performance related payments include incentive bonus scheme payments and vested amounts payable. No BRs have been issued to Directors.

162 Clientèle Limited Integrated Annual Report 2022

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Notes to the Annual Financial Statements continued

(R’000)	Group 2022 2021 68,724 58,514	Company
		2022 2021
34. DIRECTORS’ AND KEY MANAGEMENT REMUNERATION (continued) Key management The following includes salaries paid and bonuses payable to key management, excluding individuals who acted as Clientèle Directors during the year. Key management are part of Excom. Salaries and other benefits Short-term bonuses EV Scheme Goodwill Scheme		– –
	41914 38710
	, , 12488 11459
	, , 12584 7923
	, , 1,739 422

(R’000)	(R’000)	Group 2022 2021 223,618 185,862	Company
			2022 2021
**35. **	TAX South African normal tax – Current year tax – Deferred tax – Policyholder deferred tax on assessed loss in the IPF (IAS 12) South African capital gains tax – Current year tax – Deferred tax		1,226 1,168
		159293 140150	(450) 18 1,676 1,150
		, , 3005 3434
		, , 61,320 42,278
		1,854 292	430 –
		4,241 292	430
		(2,387)
	Total tax expense	225,472 186,154	1,656 1,168
	Taxation rate reconciliation Profit before tax Tax	660,941 578,410 (225,472) (186,154)	374,596 324,347 (1,656) (1,168)
		% % 34.11 32.18 0.28 (0.16) (9.28) (26.10) 0.88 11.32 3.06 (5.37) (0.16) 0.37 16.12 (1.26)	% %
	Effective tax rate Adjustments due to: Capital gains tax Policyholder deferred tax on assessed loss in the IPF (IAS 12) Exempt income Deferred tax i.r.o assets disregarded in terms of S29A (16) Tax rate change Under-provision in respect of prior year B-BBEE expense (capital in nature) Other		0.44 0.36 0.11 (0.15) 27.82 27.56 (0.05) 0.52 (0.32)
	Statutory tax rate	28.00 28.00	28.00 28.00

Policyholder taxation funds are separate tax entities which have differing tax rules as applied in the South African taxation legislation for life insurance companies.

There are three separate policyholder funds applicable to Clientèle Life, defined as the untaxed, individual (IPF) and risk funds. The IPF has an estimated tax loss of R1.5 billion (2021 R1.9 billion). It is currently probable that future taxable profits in the Clientèle Life IPF will be available against which the assessed loss can be utilised.

Clientèle Limited Integrated Annual Report 2022

163

Notes to the Annual Financial Statements continued

(R’000)	(R’000)	Group
		2022 2021
**36. **	EARNINGS PER SHARE Net profit for the year attributable to equity holders of the Group Impairment of intangible assets & PPE (Reversal)/raising of impairment of investment in associate Profit on disposal of property and equipment	435,469 392,255 7,920 873 (2,082) 2,082 (531) (123)
	Headline earnings for the year	440,776 395,087
	Ordinary shares in issue ('000) Weighted ordinary shares in issue (‘000) Diluted average ordinary shares in issue (‘000)	335,322 335,322 335,322 335,322 335,707 335,676
		Cents Cents
	Earnings per share	129.87 116.98
	Headline earnings per share	131.45 117.82
	Diluted earnings per share	129.72 116.86
	Diluted headline earnings per share	131.30 117.70

Diluted earnings per share

Diluted earnings per share is calculated on the same basis as earnings per share, except that the weighted average number of ordinary shares in issue during the year is adjusted for the dilutive effect of the BR Scheme. This potential dilutive effect is calculated using the average Clientèle share price less the sum of the estimated fair value of goods and services rendered by employees per BR and the strike price at grant date. The difference gives the value per share of the benefit accruing to the BR participant. The value is multiplied by the number of BRs and divided by the average Clientèle share price to quantify this value as a notional number of shares.

164 Clientèle Limited Integrated Annual Report 2022

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Notes to the Annual Financial Statements continued

(R’000)	(R’000)	Group 2022 2021 660,941 578,409 (25,922) (43,248)	Company
			2022 2021
**37. **	CASH GENERATED BY OPERATIONS Net profit for operations Adjusted for non-cash items:		374,596 324,346 (8,827) (17,147)
	– Fair value adjustment to financial assets at fair value through profit or loss – (Decrease)/Increase in policyholder liabilities under insurance contracts – Fair value adjustment to financial liabilities at fair value through profit and loss – Interest receivable on financial assets held at amortised cost – Interest expense on financial liabilities held at amortised cost – Interest expense – Decrease/(increase) in reinsurance assets – ECL on guarantee fee – ECL on financial assets at amortised cost – ECL on intergroup loans – Provisions – Amortisation of intangible assets – Depreciation – Impairment of intangible assets – Impairment of PPE – BR Scheme expense – Equity accounted earnings from associate – Profit on disposal of fixed assets – (Reversal)/raising of impairment of investment in associates – Employee benefits	(277431) (507096)	(4,852) (6,764) (18,000) 170 4,795 (85) (1,254) 16 (2,891) 2,891
		, , (48541) 108727
		, , 171807 319600
		, , (453) (1701)
		, 16300 13898
		, , 6512 6371
		, , 6950 (52390)
		, , (18000)
		, 3249
		,
		19914 21680
		, , 13554 14812
		, , 11000
		, 1213
		, 1622 1578
		, , (1254) 16
		, (685) (157)
		(2,891) 2,891
		54,425 45,311
		635,019 535,161	365,769 307,278
	Items disclosed separately: – Interest received – Dividends received	(92,703) (70,244)	(3,968) (2,850)
		(47446) (52325)	(1,416) (1,764) (2,552) (1,086)
		, , (45,257) (17,919)
	Working capital changes: – Decrease/(increase) in inventories – Increase in receivables including insurance receivables – Decrease in provisions, accruals, payables and employee benefits – (Decrease)/increase in deferred profits not recognised – Increase/(decrease) in financial liabilities – Acquisition of financial assets at fair value through profit or loss – Disposal of financial assets at fair value through profit or loss – Disposal of financial assets at amortised cost	(64,831) (41,027)	(3) 80
		2950 (4096)	2 652 (5) (572)
		, , (10423) (12519)
		, , (52,354) (28,707)
		(5,004) 4,295
		543,518 (400,595) (1,438,028) (184,001) 968,954 514,900 71,237	(4,623) 4,864 16,500
	Cash generated by operations	551,929 425,432	366,662 316,306

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165

Notes to the Annual Financial Statements continued

(R’000)	(R’000)	Group 2022 2021 245 280 368,854 318,556	Company
			2022 2021
**38. **	DIVIDENDS PAID Balance owing at the beginning of the year Amount declared for the year		245 280 368,854 318,556
	Balance owing at the end of the year	369,099 318,836 (363) (245)	369,099 318,836 (363) (245)
	Amount paid during the year	368,736 318,590	368,736 318,590
(R’000)		Group 2022 2021 (115,560) (162,976) 225,472 186,154	Company
			2022 2021
**39. **	TAXATION PAID Balance owing at the beginning of the year Amount provided for the year		(4,884) (5,086) 1,656 1,168
	Balance receivable at the end of the year	109,912 23,178 45,398 115,560	(3,228) (3,918) 3,621 4,884
	Amount paid during the year	155,310 138,738	393 966

40. RELATED PARTIES DISCLOSURE

The Clientèle Group defines related parties as:

• The parent company;

• Subsidiaries and fellow subsidiaries;

• Associates; and,

• Key management personnel.

40.1 The parent company

Friedshelf 1577 Proprietary Limited is the Parent Company of Clientèle and controls 60.40% (2021: 60.40%) of the issued ordinary shares via its Group companies (Refer to the Report of the Directors on pages 70 to 78).

40.2 Subsidiaries and fellow subsidiaries

Transactions between the Clientèle Group and its subsidiaries have been eliminated on consolidation and are disclosed in this Note.

disclosed in this Note.
(R’000)	Group
	2022 2021
Balance sheet information The following are the transactions and balances in respect of subsidiaries: – Inter company loan to Clientèle by Clientèle Life* Opening balance Advances Repayments	– 295 (295)
Closing balance	– –
– Inter company loan to Clientèle Mobile by Clientèle Opening balance Advances Repayments	8,950 8,300 300 650 (1,000)
Closing balance	8,250 8,950
ECL raised	(825)
Closing balance	7,425 8,950

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Notes to the Annual Financial Statements continued

40. RELATED PARTIES DISCLOSURE (continued)

ATED PARTIES DISCLOSURE(continued)
(R’000)	Group
	2022 2021
– Inter company loan to CBC Rewards (Pty) Limited by Clientèle Opening balance Advances Repayments	38,997 37,133 2,400 8,500 (6,636)
Closing balance	41,397 38,997
ECL raised	(4,140)
Closing balance	37,257 38,997
– Inter company loan to Clientèle General by Clientèle Life* Opening balance Management and support services charge Advances Repayments	132 15 201,690 112,222 207,243 (200,274) (319,348)
Closing balance	1,548 132
– Inter company loan to CBC Rewards (Pty) Limited by Clientèle Life Opening balance Advances Repayments	274 1,194 26,700 26,908 (26,782) (27,828)
Closing balance	192 274
– Inter company loan to Clientèle Properties East by Clientèle Life*** Opening balance Interest Advances Repayments	– 35,266 1,566 457 50,141 (431) (86,973)
Closing balance	26 –
– Inter company loan to Clientèle Properties South by Clientèle Life* Opening balance Management and support services charge Repayments	282 – 3,554 3,004 (1,000) (2,722)
Closing balance	2,836 282
– Inter company loan to Clientèle Properties North by Clientèle Life* Opening balance Management and support services charge Repayments	– – 3,066 2,781 (3,124) (2,583)
Closing balance	(58) –
– Investment by Clientèle Life in corporate bond issued by Clientèle Properties South** Opening balance Advances Interest expense – corporate bonds Repayment	48,484 55,991 3,000 2,594 2,872 (2,466) (13,379)
Closing balance	48,612 48,484
– Investment by Clientèle Life in corporate bond issued by Clientèle Properties North** Opening balance Interest expense – corporate bonds Advances Repayments	95,737 93,977 9,081 8,080 10,000 (4,488) (6,320)
Closing balance	110,330 95,737

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Notes to the Annual Financial Statements continued

40. RELATED PARTIES DISCLOSURE (continued)

ATED PARTIES DISCLOSURE(continued)
(R’000)	Group
	2022 2021
– Investment by Clientèle Life in corporate bond issued by Clientèle Properties East*** Opening balance Interest expense – corporate bonds Additions Repayments	103,108 67,062 7,022 5,472 80,700 (8,341) (50,125)
Closing balance	101,789 103,108
– Inter company loan to Clientèle Mobile (Pty) Limited by Clientèle Life Opening balance Advances Repayments	– – 11 1,698 (11) (1,698)
Closing balance	– –
– Inter-company loan by Clientèle Properties South to Clientèle Properties East*** Opening balance Interest Repayments	– 809 49 (859)
Closing balance	– –
– Inter company loan to Clientèle Properties East by Clientèle Properties North Opening balance Advances Repayments	– 7,020 4 (7,020)
Closing balance	4 –
– Inter company loan to CBC Rewards by Clientèle General Opening balance Advances Repayments	119 (35) 13,641 15,514 (13,644) (15,360)
Closing balance	116 119
– Inter company loan to Properties South by Clientèle General Opening balance Advances Repayments	– 3 22 (22) (3)
Closing balance	– –
– Inter company loan to CBC Rewards by Clientèle Mobile Opening balance Advances Repayments	(155) 131 333 541 (178) (827)
Closing balance	– (155)

* The loan does not bear interest and has no fixed terms of repayment.

** The investment bears market-related interest and is repayable over a 5 year period.

*** The investment bears market-related interest and has no fixed terms of repayment.

168 Clientèle Limited Integrated Annual Report 2022

OUR BUSINESS GOVERNANCE REPORT FINANCIAL STATEMENTS

Notes to the Annual Financial Statements continued

40. RELATED PARTIES DISCLOSURE (continued)

**40.3 **	(R’000)	Group
		2022 2021
	Income statement information The Group has related-party transactions between its subsidiaries which were concluded at an arms length. Details of material transactions with related parties not disclosed elsewhere in the financial statements are as follows: Interest – Interest expense paid by Clientèle Properties South to Clientèle Life – Interest expense paid by Clientèle Properties North to Clientèle Life – Interest expense paid by Clientèle Properties East to Clientèle Life Rentals – Rental expense paid by Clientèle Life to Clientèle Properties South – Rental expense paid by Clientèle Life to Clientèle Properties North – Rental expense paid by Clientèle Life to Clientèle Properties East – Rental expense paid by Clientèle General to Clientèle Properties North – Rental expense paid by Clientèle General to Clientèle Properties South – Rental expense paid by Clientèle General to Clientèle Properties East Management and support services charge – Expenses paid by Clientèle Properties East to Clientèle Life – Expenses paid by Clientèle Properties South to Clientèle Life – Expenses paid by Clientèle Properties North to Clientèle Life – Expenses paid by Clientèle General to Clientèle Life – Expenses paid by Clientèle General to Clientèle Properties South – Expenses paid by CBC Rewards to Clientèle Life – Expenses paid by CBC Rewards to Clientèle Mobile – Expenses paid by Clientèle Life to CBC Rewards – Expenses paid by Clientèle General to CBC Rewards – Expenses paid by Clientèle Mobile to Direct Rewards Cost of sales – Cost of sales paid by CBC Rewards to Direct Rewards – Cost of sales paid by Clientèle Mobile to Direct Rewards	2,594 2,872 9,081 8,080 7,022 7,038 11,305 14,208 6,984 7,735 20,703 22,638 5,093 5,165 3,304 4,103 6,164 7,852 456 1 3,554 2,583 3,066 2,781 201,690 316,181 22 3 7,415 2,507 2,659 620 8,383 5,726 3,779 2,951 12 11,105 13,763 1,771 597

40.4 Transactions with key management personnel, remuneration and other compensation:

For the purposes of IAS 24 ‘related party disclosures’, key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly, including any Director (whether Executive or otherwise) of the Group. Details of Directors’ remuneration are disclosed in Note 34 to the Annual Financial Statements. No Director had a material interest in any contract of significance with the Company or any of its subsidiaries during 2022.

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Notes to the Annual Financial Statements continued

41. COMMITMENTS

Letters of guarantees:

Letter of support: Clientèle has agreed to provide financial assistance to CBC Rewards, Clientèle Mobile & Clientèle Properties North for the foreseeable future, until such time as both the companies’ assets fairly valued exceed their liabilities.

Nedbank guarantee: Clientèle’s Board approved the granting of a guarantee on 13 February 2015 in favour of Nedbank Limited of R100.0 million in respect of a Term Credit Facility for Clientèle Properties East.

Depfin guarantee: Clientèle Limited has, in prior years, provided financial assistance resulting in a gross exposure of R374 million (2021: R374 million) and a net exposure through guarantees of R200 million (2021: R200 million) for the purchase of approximately 9.0% (2021: 8.97%) of Clientèle’s issued shares (“Ordinary Shares”) by YTI.

A preference share funding arrangement was entered into in the 2021 financial year and the guarantee covenant was formally renegotiated with Depfin to include an EV per share covenant in addition to the Market Value per share covenant.

42. EVENTS AFTER THE REPORTING DATE

Dividend

The Board declared a final gross dividend of 120.00 cents per share on 26 August 2022 for the year ended 30 June 2022.

The dividend is subject to DWT.

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Notice of Annual General Meeting

for the year ended 30 June 2022

MEETING DATE: 27 OCTOBER 2022

The Companies Act requires that a Record Date be determined by the Board for the purposes of determining who is entitled to attend and to vote at the relevant AGM.

Accordingly, for purposes of the 14th AGM of Clientèle, the Record Date is hereby set as close of business on 21 October 2022. For AGM attendance purposes, the last day to trade in the shares of Clientèle on the JSE is Tuesday, 18 October 2022.

The holders of Clientèle shares (the “shareholders”) and any persons who are not shareholders but who are entitled to exercise any voting rights in relation to the resolutions to be proposed at the AGM (irrespective of the form, title or nature of the securities to which those voting rights are attached), (collectively the “holders”) as at the Record Date are entitled to participate in and vote at the AGM in person or by proxy/ies, and may appoint a proxy to exercise voting rights attached to different securities held by the person entitled to vote. A proxy need not be a person entitled to vote at the meeting. A beneficial holder of certificated Clientèle securities may attend and vote at the AGM if:

• a. the beneficial interest includes the right to vote on the matters in this document; and,

• b. the person’s name is on the Company’s register of disclosures as the holder of the beneficial interest, or a person holds a proxy appointment in respect of the matters in this document from the registered holder of those securities.

Notice is hereby given that the 14th AGM of Clientèle will be held in the Yellowwood Boardroom, Building 7, Clientèle Office Park, corner Rivonia and Alon Roads, Morningside on 27 October 2022 at 08:00 for the following business to be transacted and for the following resolutions to be proposed and, if deemed fit, to be passed with or without modification, at the AGM or at such adjournment thereof in the manner required by the Companies Act, as read with the Listings Requirements:

ORDINARY RESOLUTION 1 – PRESENTATION OF ANNUAL FINANCIAL STATEMENTS

To present the Annual Financial Statements of the Company and the Group for the year ended 30 June 2022 as per the attached pages 89 to 170. A copy of the Annual Financial Statements of the Company relating to the preceding financial year can be obtained from the Group Company Secretary.

ORDINARY RESOLUTION 2 – ROTATION OF A DIRECTOR – GQ ROUTLEDGE

“RESOLVED that Mr. Gavin Quentin Routledge be and is hereby re-elected as a Director of the Company with effect from 27 October 2022.”

Mr. Routledge, who retired in terms of the provisions of the MOI, is eligible and offers himself for re-election.

Gavin Quentin Routledge, 66, Independent Non-executive Director, BA, LLB

Mr. Gavin Routledge is based in Cape Town and is engaged in private equity for his own account and also advises companies and Executives on strategy and deal making. When required, he attends to the Group’s business in his capacity as Chairman of the Board. Previously he was responsible for many of the Hollard Group’s private equity investments in Southern Africa and prior to that he was Chief Executive of a niche investment banking company, A&R Corporate Finance, concentrating on international financial transactions and investment banking. Prior to that he was a partner at Webber Wentzel, specialising in commercial law and cross border transactions.

Having taken into account the Director’s performance, attendance at Board and Committee meetings and having reviewed the composition of the Board against corporate governance requirements, the Board recommends the reelection of this Director. It is the view of the Board that the re-election of this candidate would enable the Company to effectively maintain a diversity of academic qualifications, technical expertise, industry knowledge and business skills relevant to the Company and balance the requirements of continuity and succession planning.

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Notice of Annual General Meeting continued

ORDINARY RESOLUTION 3 – ROTATION OF A DIRECTOR – PG NKADIMENG

“RESOLVED that Mr. Phethedi Gideon Nkadimeng be and is hereby re-elected as a Director of the Company with effect from 27 October 2022.”

Mr. Nkadimeng who retired in terms of the provisions of the MOI, is eligible and offers himself for re-election.

Phethedi Gideon Nkadimeng, 50, Non-executive Director, BSc (Statistics and Economics)

Mr. Gideon Nkadimeng was appointed as a Non-executive Director of Clientèle with effect 1 March 2017. Mr. Nkadimeng is currently the Investment Executive of Yellowwoods Ventures Investments SA (Pty) Ltd and has extensive experience in the financial services industry.

Having taken into account the Director’s performance, attendance at Board and Committee meetings and having reviewed the composition of the Board against corporate governance requirements, the Board recommends the reelection of this Director. It is the view of the Board that the re-election of this candidate would enable the Company to effectively maintain a diversity of academic qualifications, technical expertise, industry knowledge and business skills relevant to the Company and balance the requirements of continuity and succession planning.

ORDINARY RESOLUTION 4 – ROTATION OF A DIRECTOR – GK CHADWICK

“RESOLVED that Mr. Gavin Knighton Chadwick be and is hereby re-elected as a Director of the Company with effect from 27 October 2022.”

Mr. Chadwick, who retired in terms of the provisions of the MOI, is eligible and offers himself for re-election.

Gavin Knighton Chadwick, 65, Non-executive Director, Masters in Agricultural Management, MBA

Mr. Gavin Chadwick was appointed as a Non-executive Director of Clientèle with effect 2 October 2019. Mr. Chadwick is an alternate Director to Dr. ADT Enthoven and is currently the Head of Investments of Yellowwoods Ventures Investments SA (Pty) Ltd. Mr. Chadwick has over 3 decades experience in the financial services industry.

Having taken into account the Directors’ performance, attendance at Board and Committee meetings and having reviewed the composition of the Board against corporate governance requirements, the Board recommends the reelection of this Director. It is the view of the Board that the re-election of this candidate would enable the Company to effectively maintain a diversity of academic qualifications, technical expertise, industry knowledge and business skills relevant to the Company and balance the requirements of continuity and succession planning.

ORDINARY RESOLUTION 5 – ROTATION OF A DIRECTOR – LED HLATSHWAYO

“RESOLVED that Mr. Lemuel Edwin Dumisa Hlatshwayo be and is hereby re-elected as a Director of the Company with effect from 27 October 2022.”

Mr. Hlatshwayo, who retired in terms of the provisions of the MOI, is eligible and offers himself for re-election.

Leumuel Edwin Dumisa Hlatshwayo, 55, Independent Non-executive Director, CA(SA)

Mr. Dumisa Hlatshwayo was appointed as a Non-executive Director of Clientèle with effect 1 February 2020. Mr. Hlatshwayo was previously the Chief Financial Officer of South African Forestry Company Limited and further has extensive experience in the financial services industry.

Having taken into account the Directors’ performance, attendance at Board and Committee meetings and having reviewed the composition of the Board against corporate governance requirements, the Board recommends the reelection of this Director. It is the view of the Board that the re-election of this candidate would enable the Company to effectively maintain a diversity of academic qualifications, technical expertise, industry knowledge and business skills relevant to the Company and balance the requirements of continuity and succession planning.

ORDINARY RESOLUTION 6 – APPOINTMENT OF THE EXTERNAL AUDITORS

“RESOLVED that Deloitte be appointed as Independent Auditors for the financial year ending 30 June 2023 and their concomitant remuneration be approved.”

To appoint the External auditors, Deloitte, (as nominated by Clientèle’s Group Audit Committee, which has concluded that the appointment of Deloitte will comply with the requirements of the Companies Act and the Listings Requirements), as Independent Auditors for the financial year ending 30 June 2023 and their concomitant remuneration. The Designated Auditor for the year ending 30 June 2023 will be Mr. JLP Kruger, who meets the requirements of section 90(2) of the Companies Act. The Group Audit Committee has evaluated the independence, experience and effectiveness of both Deloitte and Mr. JLP Kruger and has concluded that both the firm and the individual Designated Auditor are independent of the Group in accordance with section 94(8) of the Companies Act. In compliance with the Listings Requirements (paragraph 3.94(h) (iii)) the Group Audit Committee obtained and considered all information listed in 22.15(h) of the Listings Requirements in its assessment of the suitability of Deloitte and Mr. JLP Kruger for appointment.

ORDINARY RESOLUTION 7 – ELECTION TO THE GROUP AUDIT COMMITTEE

“RESOLVED that Mr. Robert Williams, who is an Independent Non-executive Director of Clientèle, be and is hereby re- elected as a member of the Group Audit Committee effective 27 October 2022 until the conclusion of the next AGM.”

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Notice of Annual General Meeting continued

ORDINARY RESOLUTION 8 – ELECTION TO THE GROUP AUDIT COMMITTEE

“RESOLVED that Mr. Barry Stott, who is an Independent Non-executive Director of Clientèle, be and is hereby reelected as a member of the Group Audit Committee effective 27 October 2022 until the conclusion of the next AGM.”

ORDINARY RESOLUTION 9 – ELECTION TO THE GROUP AUDIT COMMITTEE

“RESOLVED that, subject to the approval of ordinary resolution 2, Mr. Gavin Routledge, who is an Independent Non-executive Director of Clientèle and also the Chairman of the Board of Clientèle, be and is hereby re-elected as a member of the Group Audit Committee effective 27 October 2022 until the conclusion of the next AGM.”

ORDINARY RESOLUTION 10 – ELECTION TO THE GROUP AUDIT COMMITTEE

“RESOLVED that, subject to the approval of ordinary resolution 5, Mr. Dumisa Hlatshwayo, who is an Independent Non-executive Director of Clientèle be and is hereby reelected as a member of the Group Audit Committee effective 27 October 2022 until the conclusion of the next AGM.”

Reason for and effect of Ordinary Resolutions Numbers 7 to 10

In terms of the Companies Act, the Group Audit Committee is a Committee elected by the shareholders and those entitled to exercise votes at the meeting when the election takes place at each AGM. In terms of the Companies Regulations, 2011, for the purposes contemplated in section 94 (5) of the Companies Act, at least one-third of the members of a Company’s Audit Committee at any particular time must have academic qualifications or experience in economics, law, corporate governance, finance, accounting, commerce, industry, public affairs or human resource management.

As can be seen from the condensed curriculum vitae of the proposed members (refer to pages 73 to 74 in the Report of the Directors), the proposed members all have relevant experience in audit, accounting law, finance and the insurance industry, amongst others.

ORDINARY RESOLUTION 11 – GENERAL APPROVAL FOR THE ISSUE OF AUTHORISED BUT UNISSUED ORDINARY SHARES

“RESOLVED that, in terms of section 38 of the Companies Act as read with Schedule 10.1 of the Listing Requirements, the entire authorised but unissued ordinary share capital of Clientèle, be and is hereby placed under the control of the Directors to allot and issue such shares on such terms and conditions as they may deem fit, but subject always to the provisions of the Companies Act and the Listing Requirements.”

Reason for and effect of Ordinary Resolution Number 11

Section 38 of the Companies Act provides that the Board has the authority to issue authorised shares of the Company except in certain circumstances and save to the extent that a Company’s MOI provides otherwise. In this regard, the Company’s MOI provides that the prior approval of shareholders at an AGM and the JSE is required.

This resolution is proposed in order to place the authorised but unissued ordinary shares of the Company under the control of the Board, in compliance with the requirements of the MOI and the Listings Requirements.

Ordinary resolution number 11 authorises the Board to issue authorised but unissued shares in accordance with the provisions of section 38 of the Companies Act, but subject always to the provisions of the Company’s MOI, the Companies Act and the Listing Requirements.

ORDINARY RESOLUTION 12 – BR SCHEME SHARE ISSUE

“RESOLVED that, the Board is authorised to allot and issue, pursuant to the provisions of the Clientèle Bonus Rights Scheme rules (as approved by the shareholders of the Group on 30 October 2012), the allowable maximum number of ordinary shares as provided thereunder and subject to the terms and conditions included in the scheme allocation limits as set out in the Scheme rules is placed under the control of the Board.”

Reason for and effect of Ordinary Resolution Number 12

In order to comply with the BR Scheme Rules, which require ordinary shares to be issued to participants of the BR Scheme.

NON-BINDING ADVISORY ENDORSEMENT 1 – ADVISORY OF THE REMUNERATION POLICY

“RESOLVED that the Company’s remuneration policy be and is hereby approved by way of a non-binding advisory vote, as recommended in King IV.”

NON-BINDING ADVISORY ENDORSEMENT 2 – ADVISORY OF THE IMPLEMENTATION OF THE REMUNERATION POLICY

“RESOLVED that the implementation of the Company’s remuneration policy be and is hereby approved by way of a non-binding advisory vote, as recommended in King IV.”

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Notice of Annual General Meeting continued

Explanatory note on Advisory Endorsement

In accordance with King IV, shareholder approval is sought for the Company’s remuneration policy and implementation thereof by way of separate non-binding advisory votes. The non-binding votes enable shareholders to express their views on the Company’s remuneration policy and the implementation thereof.

The detailed Remuneration Policy and the implementation thereof, for which approval is being sought, is set out on pages 37 to 52 of the Integrated Annual Report.

SPECIAL RESOLUTION NUMBER 1 – REMUNERATION OF NON-EXECUTIVE DIRECTORS FOR THE YEAR 1 JULY 2022 TO 30 JUNE 2023 AND 1 JULY 2023 TO 30 JUNE 2024

“RESOLVED that, in accordance with sections 65(11)(h) of the Companies Act, read with sections 66(8) and 66(9) of the Companies Act, the remuneration payable to the Non- executive Directors for their services as Directors for the period 1 July 2022 to 30 June 2023, on the basis set out hereunder, be approved.”

Non-executive Directors’	VAT		Year ending
Fees (R)	exclusive	VAT@ 15%	30 June 2023
GQ Routledge*	3,575,590	536,339	4,111,929
BA Stott*	2,091,969	313,795	2,405,764
PR Gwangwa	872,235	–	872,235
RD Williams*	1,246,153	186,923	1,433,075
PG Nkadimeng	–	–	–
ADT Enthoven	–	–	–
GK Chadwick	–	–	–
LED Hlatshwayo*	584,244	87,637	671,880
	8,370,191	1,124,694	9,494,913

* Directors registered for VAT for the full year.

This represents an increase of 6.5% on the June 2022 fees.

The remuneration of the Non-executive Directors, for their services as Directors, for the period 1 July 2023 to 30 June 2024 also be increased at the higher of:

• 5%; or

• the inflationary increase granted to Group Excom for the year from 1 July 2023 to 30 June 2024 (such increase is based on the change in the CPI index over the same period).

The remuneration of any Non-executive Director/s to be appointed during the period 1 July 2022 to 30 June 2023 would be determined by the Group Remuneration Committee and ratified at the next AGM.

Reason for and effect of Special Resolution Number 1

In terms of section 66(8) and (9) of the Companies Act, which took effect on 1 May 2011, remuneration may only be paid to Directors for their services as Directors in accordance with a special resolution approved by the shareholders within the previous two years and if not prohibited in terms of the Company’s MOI. Therefore the reason and effect of this special resolution is to approve the payment of remuneration of the Non-executive Directors for their services as Directors for the years ending 30 June 2023 and 30 June 2024, in accordance with the requirements of section 66(9) of the Companies Act.

174 Clientèle Limited Integrated Annual Report 2022

OUR BUSINESS GOVERNANCE REPORT FINANCIAL STATEMENTS

Notice of Annual General Meeting continued

SPECIAL RESOLUTION NUMBER 2 – FINANCIAL ASSISTANCE IN TERMS OF SECTION 45 OF THE COMPANIES ACT

“RESOLVED that, to the extent required in terms of, and subject to the provisions of, section 45 of the Companies Act, the Board (or any person/s authorised by the Board to do so) is authorised from time to time during the period of 2 (two) years commencing on the date of this special resolution, to provide any direct or indirect financial assistance as contemplated in such section of the Companies Act to any 1 (one) or more related or interrelated companies of the Company and/or to any 1 (one) or more members of any such related or inter-related company and/or to any 1 (one) or more persons related to any such company, on such terms and conditions as the Board, or any one or more persons authorised by the Board from time to time for such purpose, deems fit, subject to the following:

Any such financial assistance shall not, in the aggregate for any particular financial year, exceed R300 million.

The Board will, before making any such financial assistance available, satisfy itself that:

• Immediately after providing such financial assistance, the Company will satisfy the solvency and liquidity tests as referred to in section 45(3)(b)(i) of the Companies Act; and,

• The terms under which the financial assistance is proposed to be given are fair and reasonable to the Company as referred to in section 45(3)(b)(ii) of the Companies Act.”

Reason for and effect of Special Resolution Number 2

Reason for and effect of this special resolution is to grant the Board the authority to provide, at any time and from time to time during the period of 2 (two) years commencing on the date on which special resolution number 2 is adopted, any direct or indirect financial assistance as contemplated in section 45 of the Act to any one or more related or inter-related companies of the Company and/or to any one or more members of any such related or interrelated company and/or to any one or more persons related to any such company.

The section 45 Resolution will be effective only if and to the extent that:

• (i) immediately after providing such financial assistance, the Company will satisfy the solvency and liquidity tests as referred to in section 45(3)(b)(i) of the Companies Act, and

• (ii) the terms under which such financial assistance is to be given are fair and reasonable to the Company as referred to in section 45(3)(b)(ii) of the Companies Act.

SPECIAL RESOLUTION NUMBER 3 – GENERAL AUTHORITY TO REPURCHASE SECURITIES (“GENERAL AUTHORITY”)

“RESOLVED that, in terms of clause 4 of the Company’s MOI that the Company be and it is hereby authorised, by way of a general authority, to repurchase up to 20% of the shares in the capital of the Company as contemplated by and in accordance with Section 48 of the Companies Act and subject to the Listings Requirements.”

So as to comply with the Companies Act and the Listings Requirements the approval of Shareholders by way of a special resolution at this AGM is required for the general authority to become effective.

Reason and effect of special resolution Number 3

The reason for Special Resolution Number 3 is to facilitate the repurchase, by the Company, of shares in its capital, thus allowing the Directors to effect repurchases from time to time if they believe such to be in the best interests of the Company. The effect of the special resolution is to authorise the Board to act accordingly subject to compliance with the Listings Requirements and the Companies Act.

The Listings Requirements provide inter alia that:

• a) any such share repurchase of the Company will be effected through the order book operated by the JSE trading system and done without prior understanding or arrangement between the Company and the counterparty (reported trades are prohibited);

• b) this general authority will only be valid until the Company’s next AGM, provided that it does not extend beyond 15 months from the date of passing this special resolution;

• c) the repurchases may not be made at a price greater than 10% above the weighted average of the market value for the securities for the five business days immediately preceding the date on which the transaction is effected;

• d) the general repurchase by the Company shall not, in the aggregate in any one financial year exceed 20% of the issued share capital of that class in that financial year;

• e) at any point, the Company may only appoint one agent to effect any repurchase/s on its behalf;

• f) a resolution by the Board of Directors that it has authorised the repurchase, that the Company and its subsidiary/ies have passed the solvency and liquidity tests and that, since the tests were performed, there have been no material changes to the financial position of the Group;

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Notice of Annual General Meeting continued

• g) The Company may not repurchase its own shares during a prohibited period as defined in the Listings Requirements unless it has a repurchase programme where the dates and quantities of securities to be traded during the relevant period are fixed (not subject to any variation) and full details of the programme have been disclosed in an announcement over SENS prior to the start of the prohibited period; and,

• h) An announcement will be published as soon as the Company has acquired shares constituting, cumulatively, 3% of the number of Company shares in issue at the time the authority is granted and for each subsequent 3% purchased, containing full details of such acquisition.

• The resolution will be effective only if and to the extent that:

• (i) The Company and the Group will be able, in the ordinary course of business, to pay its debts for a period of 12 months after the date of this Integrated Annual Report:

• (ii) The assets of the Company and the Group will exceed the liabilities of the Company and the Group for a period of 12 months after the date of this Integrated Annual Report; and,

• (iii) The working capital, share capital and reserves of the Company and the Group will be adequate for a period of 12 months after the date of this Integrated Annual Report.

Other than the facts and developments noted 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 signing the audit report and up to the date of this notice of AGM.

The Listings Requirements require the following disclosures, which appear elsewhere in this Integrated Annual Report;

• Major shareholders on page 72; and,

• Share capital of the Company on page 147.

Directors’ responsibility statement

The Directors of the Company, collectively and individually, accept full responsibility for the accuracy of information relating to these special resolutions and certify that, to the best of their knowledge, no facts have been omitted that would make any statement false or misleading, and that all reasonable enquiries to ascertain such facts have been made and that these special resolutions contain all information required by law and by the Listings Requirements.

VOTING AND PROXIES

A shareholder (“holder”) is entitled to appoint a proxy or proxies to attend, speak and vote or abstain from voting in his stead. A proxy need not be a holder.

Proxy forms must be returned to the Company’s transfer secretaries, Computershare Investor Services Proprietary Limited, Rosebank Towers, 15 Biermann Ave, Rosebank, Johannesburg, 2196 (Private Bag X9000, Saxonwold, 2132).

The form of proxy is to be completed only by those holders who are:

• Holding shares in certificated form; or

• Recorded on sub-register in electronic form in “own name”.

Before any person may attend or participate in the AGM, the person must, in terms of section 63(1) of the Companies Act present reasonably satisfactory identification. Without limiting the generality thereof, the Company will accept the following as satisfactory means of identification:

• South African Identification document;

• Passport; and,

• Driver’s licence.

Beneficial owners of dematerialised securities who wish to attend the AGM, or to be represented thereat, must contact their Central Securities Depositary Participant (“CSDP”) or broker who will furnish them with the necessary authority to attend the AGM or alternatively, should you not wish to attend the AGM, you should provide your broker or CSDP with your voting instructions.

If you have disposed of all of your securities, this document should be handed to the purchaser of such securities or to the broker, CSDP, banker, attorney, accountant or other person through whom the disposal was effected.

By order of the Board.

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Mrs. W van Zyl Group Company Secretary

19 September 2022

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OUR BUSINESS GOVERNANCE REPORT FINANCIAL STATEMENTS

Definitions and Interpretations

“ABL”	African Bank Holdings Limited “Good Bank” (Registration number 2014/176899/06), which was formed as part of the restructuring process and started operation on 4 April 2016 (the restructuring date)
“Actuarial Valuation”	An Actuarial Valuation is an appraisal which requires making economic and demographic assumptions in order to estimate the present value of future policyholder liabilities. The assumptions are typically based on statistical analysis.
“AEDO”	Authenticated Early Debit Order
“AGM”	Annual General Meeting
“ALM”	Asset and Liability Matching
“ALSI”	All Share Index
“ANW”	Adjusted Net Worth
“APN”	Advisory Practice Notes of the Actuarial Society of South Africa
“ASISA”	The Association for Savings and Investment South Africa
“ASSA”	The Actuarial Society of South Africa
“B-BBEE”	Broad-based Black Economic Empowerment
“BLSA”	Business Leadership South Africa
“the Board”	The Directors of Clientèle
“BR Scheme”	The Clientèle Limited Bonus Rights Scheme, approved by shareholders at the AGM on 30 October 2012.
“BR”	Bonus Right
“CAE”	The Chief Audit Executive, the head of GIA.
“CAPM”	Capital Asset Pricing Model
“CBC Rewards”	CBC Rewards Proprietary Limited (Registration number 2016/195907/07), a private company incorporated in South Africa, previously known as Clientèle Benefits Company Proprietary Limited
“Clientèle or the Company”	Clientèle Limited (Registration number 2007/023806/06), a public company incorporated in South Africa
“the Clientèle App”	The Clientèle Application
“Clientèle General”	Clientèle General Insurance Limited (Registration number 2007/023821/06), a public company incorporated in South Africa
“Clientèle Group or the Group”	Clientèle and its subsidiaries
“Clientèle Legal”	A division of Clientèle General Insurance Limited
“Clientèle Life”	Clientèle Life Assurance Company Limited (Registration number 1973/016606/06), a public company incorporated in South Africa
‘‘Clientèle Mobile”	Clientèle Mobile Proprietary Limited (Registration number 2007/026058/07), a private company incorporated in South Africa
“Clientèle Properties East”	Clientèle Properties East Proprietary Limited (Registration number 1992/001651/07), a private company incorporated in South Africa
“Clientèle Properties North”	Clientèle Properties North Proprietary Limited (Registration number 2001/029155/07), a private company incorporated in South Africa
“Clientèle Properties South”	Clientèle Properties South Proprietary Limited (Registration number 2005/030653/07), a private company incorporated in South Africa

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Definitions and Interpretations continued

“CoC”	Cost of Required Capital. The Cost of Required Capital reflects the opportunity cost of restricted capital given the difference between the assumed future investment earnings rate on surplus capital and the interest rate at which this income and future capital releases are discounted to the present in the EV calculation.
“Companies Act”	The Companies Act, Act 71 of 2008, including the Regulations
‘‘COVID-19”	An infectious disease caused by a newly discovered coronavirus disease in 2019, a severe acute respiratory syndrome
“CSDP”	Central Securities Depositary Participant
“CSI”	Corporate Social Investment
“CTC”	Cost to Company
“DebiCheck”	Authenticated debit order collection mechanism
“Depfin”	Depfin Proprietary Limited, a wholly-owned subsidiary of Nedbank Limited
“Direct Rewards”	Direct Rewards Proprietary Limited (Registration number 2014/076232/07), a private company incorporated in South Africa
“DWT”	Dividend Withholding Tax
“ECL”	Expected Credit Loss
“EV”	Embedded Value
“EVE”	Embedded Value Earnings. This comprises the change in EV for the year after adjusting for capital movements and dividends paid.
‘‘EV Scheme”	The Embedded Value Scheme of Clientèle, a medium-term incentive scheme, in which Excom and members of management participate. Participation is based on individual performance linked to, and dependent upon, growth in Clientèle's EV over time.
“Excom”	The Executive Committee of the Clientèle Group, including Life Excom and General Excom
“Executive”	Member of Excom
“FSCA”	Financial Sector Conduct Authority
“FSI”	Financial Soundness Standards for Insurers
“FSV”	Financial Soundness Valuation
“General Excom”	The Executive Committee of Clientèle General Insurance
“GIA”	Group Internal Audit Department
“GOI”	Governance and Operational Standards for Insurers
“Group Excom”	The Group Executive Committee of Clientèle
“Goodwill Scheme”	A management incentive scheme based on the Scheme Goodwill created
“GSD”	Government Salary Deduction
“Head of the Actuarial Function”	The Internal Actuary who reviews all the Group actuarial calculations and also acts as the Head of the Actuarial Function of Clientèle Life and Clientèle General, appointed in terms of the Insurance Act
“Hollard Group”	Hollard Insurance Group
“HSBC”	HSBC Private Bank (Suisse) S.A., Geneva
“IAS”	International Accounting Standards
“IBNR”	Incurred But Not Reported

178 Clientèle Limited Integrated Annual Report 2022

OUR BUSINESS GOVERNANCE REPORT FINANCIAL STATEMENTS

Definitions and Interpretations continued

“ICC”	The Internal Controls Committee of the Group
“IFA/IFAs”	Independent Field Advertisers, independent contractors to Clientèle Life
“IFCC”	The Internal Financial Controls Committee of the Group
“IFRS”	International Financial Reporting Standards
“INSETA”	Insurance Sector Education and Training Authority
“Insurance Act”	Insurance Act, Act 18 of 2017
“Investment contract business”	Policies which provide, in consideration for a single premium, a series of benefit payments for a defined period or which provide benefits that are fixed contractually e.g. linked or fixed benefit policies
“IPF”	Individual Policyholder Fund
“IRBA”	The Independent Regulatory Board for Auditors
“IT”	Information Technology
“JSE”	JSE Limited (Registration number 2005/022939/06), a South African incorporated public company and licensed as an exchange under the Financial Markets Act, Act 19 of 2012
“King IV”	King IV Report on Corporate Governance for South Africa, 2016, effective in respect of financial years starting on or after 1 April 2017
“KRI”	Key Risk Indicators
“Life Excom”	The Executive Committee of Clientèle Life
“Listings Requirements”	The Listings Requirements of JSE Limited
“Long-term Insurance Act”	Long-term Insurance Act, Act 52 of 1998
“Melville Douglas”	Melville Douglas Investment Management Proprietary Limited, a subsidiary of the Standard Bank Group Limited
“MOI”	Memorandum of Incorporation
“NAEDO”	Non-authenticated early debit-order
“NDR”	Non-distributable Reserves
“NPS”	Net Promoter Score, a measurement of client satisfaction in terms of agent interaction and the client’s overall perception of Clientèle
“OECD”	Organisation for Economic Co-operation and Development
“ORI”	Operational Risk Incidents
“ORSA”	Own Risk and Solvency Assessment
“PA”	Prudential Authority
“PASA”	Payments Association of South Africa
“POPIA”	Protection of Personal Information Act, Act 4 of 2013
“PPE”	Property, plant and equipment
“PPR”	Policyholder Protection Rules, prescribed under section 62 of the Long-term Insurance Act and Section 55 of the Short-term Insurance Act
“PVIF”	Present Value of In-force business
“RDR”	Risk Discount Rate

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Definitions and Interpretations continued

“REVE”	Recurring Embedded Value Earnings is set as the EV earnings excluding the impact of assumptions changes outside of management control (Economic, tax etc.) and other once-off items. Once-off items are defined as any genuinely extraordinary expenses (e.g. approved new venture costs and the impact of discontinued operations) plus any other item that will not recur in the following year(s). For items not expected to recur in the following year, the probability should be similar to the probability of a SCR event. For example, a SCR event for listed equities would be a 43% drop in the equity value. As such, a market crash of a 43% drop in equities could be considered a once-off item. Equally an increase in 43% of the market should be treated as a once-off item.
“RMS”	Registered Mandate Service, as approved by the Payments Regulator during December 2019
“ROEV”	Return on EV
“RRoEV”	Recurring Return on Embedded Value is the REVE expressed as an annual rate of return on the EV or annual REVE divided by opening EV
“SAM”	Solvency Assessment and Management
“SAP”	Standards of Actuarial Practice, issued by the Actuarial Society of South Africa
“SARS”	The South African Revenue Service
“Scheme Goodwill”	The amount derived by applying a multiple of 5 to one year’s VNB at the end of each financial year
“SENS”	Securities Exchange News Service
“Short-term Insurance Act”	Short-term Insurance Act, Act 53 of 1998
“SMME”	Small, medium and micro-sized enterprises
“SOCI”	Statement of Comprehensive Income
“SOFP”	Statement of Financial Position
“SPPI”	Solely Payments of Principal and Interest
“TCF”	Treating Customers Fairly
“TCW”	Treating Clients Well
“TEW”	Treating Employees Well
“Valuations”	see ‘Actuarial Valuations’
“VNB”	Value of New Business
“YTI”	Yellowwoods Trust Investments Proprietary Limited, a 100% subsidiary of the Hollard Foundation Trust, a B-BBEE Trust

180 Clientèle Limited Integrated Annual Report 2022

OUR BUSINESS GOVERNANCE REPORT FINANCIAL STATEMENTS

Form of proxy

(For use only by certificated and own name dematerialised shareholders)

Please use block letters

I/We of

being a member/s of the Company and the registered owner/s of

ordinary shares in the Company hereby appoint

or failing him/her

the Chairman of the meeting to vote for me/us and on my/our behalf at the AGM of the Company to be held at 08:00 on 27 October 2022 and at any adjournment thereof and to speak and act for me/us and on a poll, vote on my/our behalf.

My/Our proxy shall vote as follows:

(Indicate with a cross how you wish your votes to be cast. If you do not do so, the proxy may vote or abstain at his/her discretion.)

(One vote per ordinary share)

(One vote per ordinary share)
	In favour of	Against	Abstain
Ordinary resolutions:
1. Presentation of the Annual Financial Statements
2. Rotation of a Director: Gavin Quentin Routledge
3. Rotation of a Director: Phethedi Gideon Nkadimeng
4. Rotation of a Director: Gavin Knighton Chadwick
5. Rotation of a Director: Lemuel Edwin Dumisa Hlatshwayo
6. Appointment of the External Auditors
7. Election to the Group Audit Committee: Robert Donald Williams
8. Election to the Group Audit Committee: Barry Anthony Stott
9. Election to the Group Audit Committee: Gavin Quentin Routledge
10. Election to the Group Audit Committee: Lemuel Edwin Dumisa Hlatshwayo
11. General approval for the issue of authorised but unissued shares
12. Approval of the Bonus Rights Scheme share issue
Endorsements:
1. Advisory endorsement of the remuneration policy
2. Advisory endorsement of the implementation of the remuneration policy
Special resolutions:
1. Approval of the remuneration of Non-executive Directors: 30 June 2023 and 30 June 2024
2. Approval of section 45 related or inter-related company financial assistance
3. Approval of general authority to repurchase securities

Dated this day of

2022

Signature

Clientèle Limited Integrated Annual Report 2022

181

Notes to the Form of proxy

Please refer to section 58 of the Companies Act

1. A form of proxy is only to be completed by those shareholders (“holders”) who are:

2. Holding securities in certificated form; or

3. Recorded on sub-register electronic form in “own name”.

All other beneficial owners who have dematerialised their shares through a CSDP or broker and wish to attend the AGM, must instruct their CSDP or broker to provide them with the required Letter of Representation.

Beneficial owners who have dematerialised their shares through a CSDP or broker who do not wish to attend the AGM, must provide the CSDP or broker by the time of the commencement of the AGM with their voting instructions in terms of the relevant custody agreement entered into between them and the CSDP or broker.

1. A holder entitled to attend and vote may insert the name of a proxy or the names of two alternative proxies of the holder’s choice in the space provided, with or without deleting “the Chairman of the AGM”.

2. A proxy need not be a holder of the Company. The person whose name stands first on the form of proxy and who is present at the meeting will be entitled to act as proxy to the exclusion of those whose names follow.

3. A holder is entitled to one vote on a show of hands and, on a poll, one vote in respect of each ordinary share held in terms of section 58 of the Companies Act. A holder’s instructions to the proxy must be indicated by inserting a cross in the appropriate box(es). Failure to comply with this will be deemed to authorise the proxy to vote or to abstain from voting at the general meeting as he deems fit in respect of all the holder’s votes.

A vote given in terms of an instrument of proxy shall be valid in relation to the general meeting notwithstanding the death of the person granting it, or the revocation of the proxy, or the transfer of the ordinary shares in respect of which the vote is given.

1. If a holder does not indicate on this form that the holder’s or his/her proxy is to vote in favour or against any resolution or to abstain from voting, or gives contradictory instructions, or should any further resolution(s) or any amendment(s) which may be properly put before the general meeting be proposed, the proxy shall be entitled to vote as he/she thinks fit.

2. The Chairman of the general meeting may reject or accept any form of proxy which is completed and/or received other than in compliance with these notes.

3. The completion and lodging of this form of proxy will not preclude the relevant holder from attending the meeting and speaking and voting in person thereat to the exclusion of any proxy appointed in terms hereof, should such holder wish to do so.

4. Documentary evidence establishing the authority of a person signing the proxy form in a representative capacity must be attached to this form of proxy, unless previously recorded by the Company or unless this requirement is waived by the Chairman of the AGM.

5. A minor or any other person under legal incapacity must be assisted by his/her parent or guardian, as applicable, unless the relevant documents establishing his/her capacity are produced or have been registered with the Company.

6. Where there are joint holders of ordinary securities: Any one holder may sign the form of proxy;

The vote(s) of the most senior (for that purpose seniority will be determined by the order in which the names of shareholders appear in the Company’s register of shareholders) who tenders a vote (whether in person or by proxy) will be accepted to the exclusion of the vote(s) of the other joint holder(s).

1. Forms of proxy should be lodged with or posted to the Company’s transfer secretaries, Computershare Investor Services Proprietary Limited:

Hand deliveries:

Postal deliveries:

Rosebank Towers Private Bag X9000 15 Biermann Ave Saxonwold Rosebank 2132 Johannesburg 2196

182 Clientèle Limited Integrated Annual Report 2022

Corporate information

COMPANY REGISTRATION NUMBER

2007/023806/06

REGISTERED OFFICE

Clientèle Office Park Corner Rivonia and Alon Roads Morningside, 2196 Telephone: (011) 320-3333

Website: www.clientèle.co.za E-mail: info@clientèle.co.za

TRANSFER SECRETARIES

Computershare Investor Services Proprietary Limited First floor, Rosebank Towers, Biermann Avenue, Rosebank, 2196 (Private Bag X9000, Saxonwold, 2132)

AUDITORS

PricewaterhouseCoopers Inc. 4 Lisbon Lane Waterfall City, Jukskei View, 2090 (Private Bag X36, Sunninghill, 2157)

SPONSORS

PricewaterhouseCoopers Corporate Finance Proprietary Limited 4 Lisbon Lane Waterfall City, Jukskei View, 2090 (Private Bag X36, Sunninghill, 2157)

CLIENTÈLE HEAD OFFICE

Telephone: +27 (0)11 320 3000 Fax: +27 (0)11 320 3133 E-mail: services@clientèle.co.za

Physical Address

Clientèle Office Park Corner Rivonia and Alon Roads Morningside, 2196

COMPANY SECRETARY

Wilna van Zyl E-mail: wvanzyl@clientèle.co.za Telephone: +27 (0)11 320 3284

Shareholders’ calendar

Financial year-end 30 June 2022 Dividend declaration 31 August 2022 Final results announcement 31 August 2022 Dividend record date 23 September 2022 Dividend payment date 26 September 2022

Publication of Integrated Annual Report 27 September 2022 AGM record date 21 October 2022 AGM 27 October 2022

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