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RMI INTEGRATED REPORT REPORT RMI INTEGRATED 2020 2020 INTEGRATED REPORT ABOUT THIS INTEGRATED REPORT RMI’S ENDURING to create and sustain value for its forecasts but do not represent VALUE CREATION stakeholders, are discussed. an earnings forecast. All forward- Management is not aware of the looking statements are based This integrated report of Rand unavailability of any reliable solely on the views and Merchant Investment Holdings information or any legal considerations of the directors. Limited (RMI) for the year ended prohibitions to disclosing any Those statements have not been 30 June 2020 was prepared for material information. reviewed and reported on by the all its stakeholders. external auditor. This report focuses on reporting The report contains comprehensive material aspects under the control information about RMI’s financial of RMI which can significantly RESPONSIBILITY performance, stakeholders, impact capital resources, financial The board is ultimately responsible governance, material issues, risks performance or could lead to for this report. and opportunities and how these significant reputational damage or influence RMI’s strategy. We show negatively impact RMI’s position The company secretary and how we create value and how we as a responsible corporate citizen. financial manager, Schalk Human will ensure that our value creation MCom (Acc) CA(SA), prepared this is enduring. The group is proud of report; the chief executive officer its heritage, steeped in strong ASSURANCE and financial director, Herman ethics. We therefore also outline Assurance was received from Bosman LLM CFA, supervised how our value creation is RMI’s external auditor, the preparation; and management underpinned by sound and PricewaterhouseCoopers Inc. on convened and contracted the enduring values. the fair presentation of the annual relevant skills and experience to financial statements. undertake the reporting process and provided management FRAMEWORKS The annual financial statements including the external auditor’s oversight. The report is compiled and unmodified report are available on RMI’s website www.rmih.co.za. The board, after consultation with presented in accordance with the: the audit and risk committee and » Companies Act of South Africa, The external auditor also read the applying its collective mind to the 71 of 2008, as amended integrated report and considered preparation and presentation of (Companies Act); whether any information is the report, concluded that it was International Financial Reporting » materially inconsistent with the presented in accordance with the Standards (IFRS); annual financial statements or their <IR> Framework and approved it » International Integrated Reporting knowledge obtained during the for publication. Framework (<IR> Framework) of course of their audit or otherwise For and on behalf of the board. the International Integrated appears to be materially misstated. Reporting Council (IIRC); No such misstatement was » JSE Limited Listings reported. Requirements (JSE Listings Requirements); The audit and risk committee had oversight of the preparation of the » King IV Report on Corporate JJ Durand integrated report and Governance for South Africa, Chairman recommended it for board 2016 (King IV); and approval. » United Nations Sustainable Development Goals (SDGs). FORWARD-LOOKING MATERIALITY STATEMENTS Herman Bosman Chief executive officer The most material issues, being Certain statements in this those which have the potential to integrated report may be regarded Sandton substantially impact RMI’s ability as forward-looking statements or 28 October 2020 INDEX ABOUT RMI 1 Snapshot 1 2 Contribution to normalised earnings 2 Enduring value created 3 The investments VALUE CREATION PROCESS 8 Strategic focus 2 9 Structured and disciplined investment approach 11 Active portfolio management PERFORMANCE 3 AND FINANCIAL REVIEW 16 Chairman and chief executive officer’s statement 30 Key performance indicators 31 Financial review 35 Value added statement PORTFOLIO OVERVIEW 38 Discovery 4 46 Hastings 52 Momentum Metropolitan 56 OUTsurance 62 RMI Investment Managers 67 AlphaCode ENVIRONMENTAL, SOCIAL AND 5 CORPORATE GOVERNANCE 70 RMI’s sustainability framework 73 The effect of climate change on RMI 74 Corporate governance report 78 Directors 84 How RMI’s business model creates enduring value 86 Audit and risk committee report 88 Risks and opportunities to create enduring value 90 Director’s affairs and governance committee report 92 Investment committee report 93 Nominations committee report 94 Remuneration committee report ABOUT THE ART IN THIS REPORT 104 Social, ethics and transformation committee report 106 Enduring value material to stakeholders JAKE MICHAEL SINGER SUMMARY CONSOLIDATED Each year, RMI features an artist or artwork that embodies its enduring values and strategic positioning. 6 FINANCIAL STATEMENTS 110 Directors’ responsibility statement Sculptor Jake Michael Singer and his team have produced a group of 111 Declaration by the company secretary works called the Murmuration series. Each work is crafted using traditional 112 Directors’ report thatching techniques, bringing many pieces – in this case marine-grade 116 Independent auditor’s report on the stainless steel security fencing material – into a coherent whole. summary consolidated financial statements The process demonstrates the truth that collective effort towards a goal 117 Summary consolidated financial statements is always more effective. SHAREHOLDER INFORMATION The lockdown measures required as a result of the COVID-19 pandemic 132 Shareholding and the need to implement social isolation measures have highlighted the 7 133 Performance on the JSE Limited importance of connectedness for people, which the works also represent. 134 Shareholders’ diary Jake is a South African multi-disciplinary artist, who completed his 135 Notice of the annual general meeting bachelor’s degree at Michaelis School of Fine Art at the University of 147 Form of proxy Cape Town and went on to study at Central Saint Martins in London. IBC Administration He has exhibited widely, both locally and internationally. Further information about Jake Michael Singer can be found NAVIGATION Indicates further information on RMI’s website www.rmih.co.za. available on our website, WITHIN www.rmih.co.za THIS Directs readers to the page REPORT in the integrated report with supplementary information. 25.0% Discovery Limited LISTED (Discovery) 29.7% ABOUT Hastings Group Holdings plc 1 (Hastings) TRADITIONAL PORTFOLIO RMI 27.3% Momentum Metropolitan Holdings Limited SNAPSHOT (Momentum Metropolitan) RMI is a strategic, active and long-term investor in a multi-billion 89.1% Rand financial services portfolio. RMI is an investment holding UNLISTED OUTsurance Holdings Limited (OUTsurance) company listed on the JSE Limited and has a proud track record of investing in dynamic, disruptive and entrepreneurial 100% financial services businesses. RMI Investment Managers Group Proprietary Limited RMI strives to build on the rich legacy (RMI Investment Managers) of the RMB group of companies, founded in 1977 by GT Ferreira, Laurie Dippenaar and Paul Harris. At the centre of RMI’s strategic approach is its values-driven culture forged over decades. 100% The group’s long-term performance AlphaCode Proprietary Limited has been achieved by partnering (AlphaCode), with its next- PORTFOLIO NEXT-GENERATION with exceptional management teams, generation investments: allowing management the individuality » Entersekt Proprietary Limited to operate their businesses as owners. (Entersekt) (28.2%) Sound management is an important » Merchant Capital Advisory investment criterion and operational Services Proprietary Limited autonomy and management independence (Merchant Capital) (24.8%) is at the core of the RMI culture and » Prodigy Investments Limited investment methodology. (Prodigy) (13.1%) RMI’s portfolio comprises of the following » Sancreed Proprietary Limited, investments in both listed and unlisted trading as Guidepost financial services businesses: (Guidepost) (25.1%) INTEGRATED REPORT 2020 1 INTEGRATED REPORT 2020 1 1 About RMI / continued CONTRIBUTION TO NORMALISED EARNINGS THE INVESTMENTS PORTFOLIO GEOGRAPHIC LISTED/UNLISTED LISTED/UNLISTED RMI’S SIGNIFICANT INVESTMENTS AS AT 30 JUNE 2020 COMPOSITION EXPOSURE (as at 30 June 2020) (post pending delisting of Hastings) LISTED OR UNLISTED JSE-listed LSE-listed1 JSE-listed Unlisted MARKET CAPITALISATION/ R68.8 R27.3 R28.4 R24.6 IMPLIED VALUE (100%) 63% Short-term insurance 68% South Africa 52% Unlisted 65% Unlisted billion billion billion billion 34% Life insurance 18% United Kingdom 48% Listed 35% Listed 2% Next-generation (fintech) 14% Australia RMI’s INTEREST 25.0% 29.7% 27.3% 89.1% 1% Asset Management RMI’s RANKING 1st 1st 1st 1st ENDURING VALUE CREATED AS SHAREHOLDER for the year ended 30 June 2020 MARKET VALUE/ R17.2 R8.1 R7.1 R21.1 IMPLIED VALUE OF RMI measures the execution of its strategy through the creation of enduring value. The true value created is measured in RMI’S INTEREST billion billion billion billion terms of capital growth, which reflects the growth in the underlying value of our investments. SHARE OF RMI PORTFOLIO Investment activity – Compound BASED ON VALUE 32% 15% 13% 40% traditional portfolio shareholders’ Normalised (R million) return earnings NORMALISED R3 747 R1 720 R1 521 R2 218 EARNINGS (100%) Value Value 14 699 910 million million million million created 16.3%created R3 086 Capital Capital EMPLOYEES
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