investment case - capricorn

2 C APRICORN INVESTMENT GROUP LIMITED

01 INVESTMENT CASE

A Namibian success story

2013 15/16 MAY

BWH announce public share offer

Bank Windhoek Holdings (BWH) announced its proposed listing on the Namibian Stock Exchange

(NSX) through a prospectus that offered all stakeholders, including previously disadvantaged

Namibians, employees, customers and members of the public, an opportunity to acquire BWH shares and

thereby participate in the ownership of the BWH group.

BWH hosted an event at Safari Hotel Windhoek, attended by 450 people including the founding

shareholders, members of government, the business

community and civil society.

24 MAY

5,827 applications were received for a total of

153,177,400 shares. The offer was 3.5 times oversubscribed,

and the total value of applications received:

N$1.34 billion.

13 JUNE

Celebration of the successful listing of BWH

on the NSX with a symbolic

“ringing of the bell”.

20 JUNE

BWH listing and bell-ringing

function

JAN

Capricorn Group acquired the controlling shareholding in Bank

Gaborone and Cavmont Bank.

2017

Capricorn Group acquired the controlling shareholding of 68.7% in Capricorn Investment Holdings (Botswana) Limited, which in

turn holds 100% of the share capital in Bank Gaborone. Capricorn Group also bought 97.9% of the shares in Cavmont

Capricorn Holdings Zambia which owns 100% of the share capital of Cavmont Bank. These transactions allowed for more

synergies and collaboration between the group companies.

16 MAR

Launch of The Capricorn Way as a tool and embodiment

of the shared culture to which the group aspires.

27 MAR

Capricorn Asset Management (CAM) brand refreshed in line with the monolithic brand. The unit trusts were rebranded from Bank

Windhoek Unit Trusts to Capricorn Unit Trusts.

6 APR

Bank Windhoek brand refreshed in line with the monolithic brand

architecture.

Successful GIPF transaction

The Government Institutions Pension Fund (GIPF), the

largest institutional investor in Namibia, acquired a 26%

interest in the issued ordinary shares of Capricorn Group.

30 JUNE

The retirement of Koos Brandt and appointment of

Johan Swanepoel as chairman

Koos Brandt retired as chairman of the boards of Bank Windhoek and Capricorn Group on 30 June 2017, but remained on these boards as non-executive director. He is also the chairman of Capricorn Investment Holdings(CIH). CIH holds 40.7%of the shares in Capricorn Group. Johan Swanepoel, the then vice-

chairman of Bank Windhoek and Capricorn Group, became the chairman of these boards as from 1 July 2017.

19 OCT

Refreshed Bank Gaborone brand launched

15 NOV

Capricorn Group scoops Regional Integrated

Reporting Award

Capricorn Group won the Regional Company Award at the Annual Integrated

Reporting Awards of 2017, hosted by Chartered Secretaries Southern Africa in partnership

with the JSE Limited.

18 APR

BWH pre-listing celebration

Capricorn Private Wealth launched internally

12 MAY

3INTEGR ATED ANNUAL REPORT 2018

2014

2015

1 JAN

BWH Limited acquired the entire issued share capital of Capricorn Asset

Management (Proprietary) Limited effective 1 January 2014

AsOne strategic focus for 2014 – 2017:

• Value created by offerings to customers (CVP)• Value created by reciprocal employee-employer handshake (EVP)• Loyalty vested in the brand through stakeholder engagement• Channels and digitisation for unique customer experience

JULY

Main Strategic Themes

2014 – 2017formulated

2016

A need was identified to establish the group as a well recognised and respected regional brand and, in turn, one that supports local brands. This necessitated the development of a clear and well-defined brand architecture and a coordinated and integrated framework, to maximise the group’s brand equity. A monolithic brand architecture journey was embarked upon to simplify and refine the group’s brand architecture. This approach inspired the name change and a new visual identity that will be applied to all group entities. The decision to rebrand has opened up

exciting possibilities and signalled the birth of a value-driven brand.

JUNE

Monolithic brand architecture of the group approved.

BWH name change to Capricorn Group approved by the board.

20 SEPT

First integrated

report released

22 SEPT

Capricorn Group brand launched with

new brand values and brand proposition.

2018 APRIL

Launch of Capricorn Group SA

Capricorn Capital starts operating

Capricorn Capital is a newly established southern African corporate finance firm with

extensive investment banking experience and expertise. It is a wholly owned subsidiary of

Capricorn Group.

Capricorn Group acquired a stake

in Entrepo

Capricorn Group acquired a 55.5% shareholding in Entrepo Holdings (Proprietary) Limited (Entrepo),

a focused financial services group providing microlending and credit

protection products in Namibia since 2014.

1 JAN

Capricorn Group acquired a stake

in Nimbus

Capricorn Group acquired a 18.3% (increased to 30% after year end) interest in Nimbus Infrastructure Limited (Nimbus),

listed on the NSX. Nimbus is focusing its investment strategy on information and

communications technology companies in sub-Saharan Africa.


01 INVESTMENT CASE

Capricorn Group’s investment caseCapricorn Group is a leading Namibian-owned financial services group listed on the NSX. The group creates sustainable value in the following ways:

A diversified group:

• With operations in Namibia, Botswana, Zambia and South Africa, Capricorn Group is a diversified regional financial services group that provides attractive and sustainable returns for shareholders. The group delivered an average annual return on equity of 20.8% and a compound annual dividend growth rate of 12.7% over the past five years.

• The group has a regionally diversified revenue stream and a steady record of new product and service launches, which reduces economic risk and provides opportunities for growth in new geographic areas.

• Capricorn Group is diversified with interests, not only in banking, but also in asset management, insurance and microfinance through Capricorn Asset Management (CAM), Sanlam Namibia Holdings (Pty) Ltd (Sanlam Namibia), Santam Namibia Ltd (Santam Namibia) and Entrepo Holdings (Proprietary) Limited (Entrepo).

• The group has also diversified outside of financial services during 2018 following its investment in Nimbus, a telecommunication and technology investment company listed on the NSX. This positions the group well to benefit from the convergence between telecommunications and financial services combined with strong growth in demand for data services.

Scale and reputation:

• Bank Windhoek, the group’s flagship brand, is the largest locally owned bank and the second largest commercial bank in Namibia. Bank Windhoek’s scale is evident from its network of 55 branches and agencies, 121 automated teller machines (ATMs) and 228 Cash Express ATMs in Namibia.

Stability and compliance:

• Two strong shareholders of reference ensure stability, liquidity and access to capital. They are the GIPF, the largest institutional investor in Namibia with a net asset value of approximately N$100 billion, and Capricorn Investment Holdings (CIH), the founding holding company of Bank Windhoek, established in 1982.

• Capricorn Group retained its credit rating of AA(NA) and A1+(NA) for the long term and short term respectively with a stable outlook.• The group remains well capitalised with a significant buffer above the minimum capital requirements.

Shared value creation:

• Since listing on the NSX five years ago, Capricorn Group has created significant value for shareholders, employees, government and strategic partners. It has delivered N$128.7 of dividends to empowerment beneficiaries through Nam-mic Financial Services Holdings (NFSH) since 2013. Read more in the case study on page 7.

• The Capricorn Group share price has increased from its public offer price of N$8.75 at listing in June 2013 to N$17.23 on 30 June 2018, thereby achieving a compound annual growth rate of 14.51%.

• 8.9% of direct economic value created in 2018 – at a total value of N$485 million – was distributed to government in the form of taxes, levies and duties.

Governance, ethics and transformation:

• Since rebranding the group in 2016, a new corporate identity and culture have been embedded through The Capricorn Way, which encourages exceptional performance. The Capricorn Way outlines the group’s values as a unique set of behaviours and beliefs that inspire employees to be connectors of positive change.

• With a 10% shareholding by NFSH, the group’s strategic broad-based black economic empowerment (BBBEE) partner, Capricorn Group is proud to be part of one of the most successful broad-based black economic empowerment initiatives in Namibia. Read more in the case study on page 7.

• Capricorn Group has a strong governance culture, entrepreneurial spirit and commitment to transparency.

2018 SALIENT FINANCIAL FEATURES

TOTAL COMPREHENSIVE INCOME

NET ASSET VALUE RETURN ON AVERAGE EQUITY

+5.9%TO N$986M

+11%TO N$5.6BN

17.3%

(2017: N$931M) (2017: N$5,1BN) (2017: 19.5%)

PROFIT AFTER TAX CAPITAL ADEQUACY DIVIDEND PER SHARE

+1.8%TO N$934M

15.4% 60 CENTS

(2017: N$918M) (2017: 16.6%) (2017: 68 CENTS)


0

200

400

600

800

1,000

1,200

2016 2017 2018

Cen

ts

Net asset value per share (cents)


01 INVESTMENT CASE

Capricorn group acting as a connector of positive changeThe past year offered many opportunities for Capricorn Group to act as a connector of positive change, and for employees to contribute and create occasions for these connections to materialise. Examples include the following:

Connecting business entities with mutual opportunities:

• Through funding and technical assistance obtained from the Sustainable Use of Natural Resources and Energy Finance (SUNREF) initiative, Bank Windhoek was able to connect financial institutions and clients to a range of solar and energy projects that will address some of Namibia’s long term challenges. These include N$38 million for a solar plant at Aussenkehr, N$100 million for one at Trekkopje, close to Arandis, N$100 million for a wind farm at Namdeb Elizabeth Bay Diamond Mine, close to Lüderitz, and N$100 million for a solar plant at Okatope, close to Ondangwa.

Creating connections for support and assistance:

• Through a new partnership with SPES – a Namibian charity established to help less fortunate children and youth step out of poverty through encouragement, education and support – the group funded infrastructure and facilities that will improve learning environments for children and teachers while creating employee volunteering opportunities.

• Through a partnership with Imago Dei, a not-for-profit organisation that aims to bring together the community of needs, with the community of means, Capricorn Group is involved in a number of welfare projects. In addition to financial support, Capricorn Group’s Brand and Corporate Affairs team has assisted the Imago Dei team with design, copywriting and events management support.

• Employees are encouraged to volunteer their time to assist the projects supported by the group under the theme “I am a Changemaker”.

• Employees joined hands with the Namibia Blood Transfusion Services in its national blood drive to raise critically low levels of blood reserves and educate people about the health benefits of blood donation. During the year under review, employees donated blood 374 times at on-site clinics hosted by our branches to potentially save 1,122 lives.

Creating conversation opportunities for the group and stakeholders:

• Capricorn Group launched a stakeholder engagement project to gain an external view of matters considered material for continued value creation for the group. Stakeholders from different groups participated in the project across Namibia, Botswana and Zambia. They were, inter alia, invited to share their expectations and concerns about Capricorn Group, and provided input on what they believe is necessary for the group to remain sustainable and create positive change. Read more about this initiative on page 41.

• To contribute to the improvement of financial reporting in Namibia, Capricorn Group hosted a workshop for stakeholders on integrated reporting – highlighting the key content elements and principles – with a high-level introduction to King IV™.

Connecting business, specialists and government through feedback:

• Capricorn Group provided extensive input and guidance on the new equitable economic empowerment framework (NEEEF). The group’s submission connected government with a wide range of experts in Namibia and the region.

Creating relationships through development and information sharing:

• Capricorn Group hosted “Inspire” Thought Leadership events on a variety of topics including exponential thinking among others.

• Capricorn Group hosted a three-part financial journalism workshop where Namibian media practitioners from the broadcast, print and digital disciplines could improve their financial reporting skills. This included insight into interpreting financial data, understanding accounting, technical financial language and following economic trends. The workshop resulted in collaborative information sharing to educate and benefit the group and its media stakeholders.

Enabling Capricorn Connectors to influence and share:

• The first Capricorn Connector conference was held in March 2018 with 105 employees from four countries. The Connectors were identified as key influencers who could create awareness around The Capricorn Way and the AsOne 2020 strategy and play a role in shifting the mindset within all Capricorn Group employees to a more future-focused, open, collaborative and regional approach to the business. Read more about this initiative on page 41.


Capricorn Investment Holdings (CIH) identified Nam-mic Financial Services Holdings

(NFSH) as an ideal broad based strategic empowerment partner of the group in 2003.

NFSH was, at the time, wholly owned by the National Union of Namibian Workers (NUNW)

and a number of trade unions affiliated with the NUNW.

CIH, through a contribution of capital and arrangement of deal finance by Bank Windhoek,

facilitated the acquisition by NFSH of a 7.5% shareholding in Capricorn Group (then Bank

Windhoek Holdings). CIH also brokered investments by NFSH in Sanlam and Santam and

further investments in Capricorn Group. At 30 June 2018, NFSH owned 10.2% of Capricorn

Group, 16.4% of Sanlam and 12.0% of Santam. The net asset value of NFSH based on the

fair value of its investments amounted to N$1,3 billion at 30 June 2018, making it the most

successful and strongest broad-based BEE company in Namibia.

Capricorn Group has distributed N$234.7 million as dividends to NFSH since its inception,

with 69% of that amount being for the benefit of more than 93,000 previously

disadvantaged Namibians.

NFSH beneficiaries include the members of the Mineworkers’ Union of Namibia, the

Namibia Public Workers’ Union, the Namibia Food and Allied Workers’ Union, the National

Teachers’ Union of Namibia, the Namibia Transport and Allied Workers’ Union and the

Namibia Farm Workers’ Union.

Dividends from all its investments flow to NFSH, which in turn declares dividends that are

paid to the respective investment trusts of the union shareholders. Each trust allocates and

shares these dividends in terms of its own empowerment and development objectives.

Through these dividends, support is provided to education through bursaries, training,

community projects, housing and health programmes.

Empowerment is not effected through dividends only. In collaboration with its strategic

partners, NFSH has developed financial services and products for union members,

including microloans, life and funeral insurance, short-term insurance and the Nam-mic

CellCard, a multifunctional membership card that facilitates banking and loyalty

transactions.

According to Walter Don, the chief executive officer of NFSH, the company’s dream is to

support value creation over the next five years by ensuring that at least one third of its

union members own property, have life cover and use a savings instrument.

Capricorn Group is proud of its association and strategic partnership with NFSH and the

role it played in the development and growth of NFSH.

SIGNIFICANT FINANCIAL VALUE CONTRIBUTION TO EMPOWERMENT IN NAMIBIA

CA

SE STU

DY

N$1.3bnNet asset value

CASE STUDY:

N$234.7mDistributed as

dividends

93,000previously

disadvantaged Namibians benefited


01 INVESTMENT CASE

Reporting approach and approvalThis integrated report, which covers the financial period from

1 July 2017 to 30 June 2018, and which includes all subsidiaries,

was prepared and approved according to a set of regulatory

and voluntary guidelines, set out on page 107.

The board, assisted by the audit, risk and compliance committee

(BARC) and the sustainability and ethics committee (BSEC),

is ultimately responsible for the integrity and completeness

of this report, which includes the material social, environmental

and governance aspects that are related to the group’s activities

and performance.

The board has applied its collective mind to the preparation

and presentation of the report and, accordingly, approved it

on 4 September 2018.

Johan Swanepoel Thinus Prinsloo

Group chairman Group managing director

Forward-looking statementsThis report contains certain forward-looking statements regarding

the results and operations of Capricorn Group, which by their

nature involve risk and uncertainty, because they relate to events

and depend on circumstances that may or may not occur in the

future. These forward-looking statements have not been reviewed

or reported on by the group’s external auditors.


“We foster a deep passion for inspiring those around us to become catalysts of positive change for themselves, and then for those in their personal spheres of influence.” – Thinus Prinsloo, Group managing director

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investment case - capricorn

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