ISAE 3402

SERVICE ORGANISATION REVIEW

TYPE 2 REPORT

AS AT 31 MARCH 2016

THE PRESCIENT GROUP INCLUDES PRESCIENT INVESTMENT MANAGEMENT (PTY) LTD, PRESCIENT LIFE LTD, PRESCIENT FUND SERVICES (PTY) LTD AND PRESCIENT MANAGEMENT COMPANY (RF) PTY LTD

Prescient Group

Prescient Group

ISAE 3402 Type 2 report

31 March 2016

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4.1 Accepting Clients

Following a successful presentation to a client, the following procedures occur to take-on a new client:

A mandate is drafted and signed by the client and Prescient. The mandate will normally include the granting of power of attorney over bank and scrip accounts to Prescient. Prescient opens a bank account for the client and a scrip account at the same bank. An e-mail is sent to the client with the bank account details for their own records.

In certain instances a client will prefer to open the account, in which case Prescient is notified (the details are, however, still included in the mandate).

Management fees are agreed with the new client when the mandate is signed by both parties. The management fee can be calculated in several ways depending on the specific client mandate. These include daily portfolio valuation, monthly portfolio valuation and performance fees.

On the initial joining of a client, a take-on checklist is completed. On this checklist, one of the sections is whether performance fees are applicable. Performance fees are only calculated if there is a mandate in place.

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ISAE 3402 Type 2 report

31 March 2016

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4.2 Authorising and processing transactions

Transfer of funds/scrip

Transfer of funds/ scrip occurs as follows:

Notification is received by the client (e-mail) if a transfer has been made.

Upon notification, the administration department will review the bank and/or custody account to confirm that the transaction has occurred and positions are reconciled before any trading on that account commences.

Scrip transfers are checked against custody communications. In the case of Standard Bank and Nedbank this is done via online viewing of scrip balances, whereas for the other banks, balances are confirmed via fax from the custodians.

Once all transactions have been confirmed, approval is given by the administration department to the dealers that trading on the accounts may commence.

Trading process

Orders for the purchase and sale of equities are initiated by the trading team and executed by the brokerage team. A manual deal sheet is completed by the trading team and signed by an authorised signatory. The deal sheet will stipulate the rate at which the deal is to be executed by the brokers. The deal sheet is then sent to the portfolio administration team who will upload the deal on Eagle. A copy of the deal sheet will then be sent to the brokers. The administration team will keep all the deal sheets for the day while they are being executed by the brokers. Once the trade has been executed the administration team will receive a copy of the brokers note and match these to the deal sheets. Any unmatched deals will be investigated by the administration team with the fund manager and/or counterparty and any differences in the trade details will be updated within Eagle or by the counterparty as necessary.

The administration team is responsible for reconciling swap agreements, broker notes and deal sheets. Settlement instructions are prepared and sent to the relevant custodians for settlement of the trade only once the trade has been reconciled and matched to the counterparty. The same control environment is in place for both purchases and sales. Standard Corporate and Merchant Bank, Rand Merchant Bank and BNP Paribas e-mails Prescient a daily booking report, which includes the current position of any derivative instruments held, previous day derivate positions and trades done. This report is reconciled to the positions on Eagle, updating the portfolio for any trades. The report is also compared to the deal slip for completeness and accuracy. An Excel spreadsheet is maintained to monitor and reconcile daily cash flows for mark-to-market and initial margin settlements are required with each bank for each account. This reconciliation reconciles Eagle daily calculated margin amounts against that received by the bank.

Orders for the purchase and sale of money market instruments are initiated and executed by the trading team. A manual deal sheet is completed by the trading team and signed by an authorised signatory. The deal sheet will stipulate the rate and amount at which the deal is to be done. The deal will then be executed by the trading team with the counter party over the phone. The deal sheet is then sent to the portfolio administration team who will upload the deal on the investment system. If the money market instrument is a new instrument, then the trading team will create the instrument on Eagle. Dematerialised money market trades are reported to Strate for matching with the counterparty. The counterparty or Strate will contact the trading team if they find any discrepancies. The administration team will send a settlement instruction to the custodians to transfer money to the counter party as per the deal sheet once trade details have been matched at Strate. A signed settlement instruction will then be sent to the custodian for settlement for physical money market that is not in dematerialised form. All trades are sent to the custodian for settlement via Data Matrix tool using SWIFT. DataMatrix is an internal tool that tracks the

Prescient Group

ISAE 3402 Type 2 report

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status of the trades, identifies trades that are in a “Matched” state with Strate for money market trades and then upon review, the administrator acknowledges that SWIFT instructions for settlement to the custodian are ready to be sent for all trades that have met the matching criteria with the counterparty. A manually signed letter of instructions for settlement will be sent to the custodian for execution of physical money market positions that that are not in dematerialised form. The DataMatrix tool will identify traded money market positions whereby the security is not in dematerialised form. The administrator reviews the status on DataMatrix after importing the trade files and will generate manual letters for instruction to be reviewed and matched to the deal sheet before being signed by an authorised signatory before they are sent to the custodian for settlement.

Bank reconciliations

An extract of the bank balances from Eagle is obtained and compared to the bank balance per the electronic banking system positions. For SCB, Societe Generale, FNB, Bank of New York, Citibank, Standard Bank, JP Morgan and Nedbank bank account balances are saved daily. The settled cash balances for each client account is sourced from Eagle and updated. Existing reconciliation templates per fund administrator are then automatically updated and exceptions are highlighted with the use of formulas stored in the file templates. The bank reconciliation is performed by each fund administrator on a daily basis. All reconciling items are investigated and reasons for reconciling items are noted on the reconciliation.

Prescient Group

ISAE 3402 Type 2 report

31 March 2016

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Senior Prescient staff members review each fund administrator’s account on a weekly basis to ensure that long outstanding reconciling items are being attended to. Any exceptional outstanding items identified through this process are also taken to the Prescient group risk meetings which are held quarterly, for further review.

Scrip Reconciliations

The administration department reconciles the custodian statement to the portfolio holdings on a monthly basis. Any differences are followed up. The reconciliations are automated in the administration system – and the custodians positions are updated via SWIFT. The report is completed in Excel in order to bring in external data sources such as Finswitch record of client positions in order to reconcile Manco unit holdings. Each administrator investigates any reconciling differences and a review is performed by a senior team member.

Price Feeds

Listed equity and bond prices are received from I-Net Bridge (I-Net) at 15h00 and fund pricing begins at 15h15. Prescient also receives the closing bond yields from BESA for bond instruments. A spreadsheet is maintained with links to I-Net that pulls in the closing prices directly from I-Net.

For listed bonds, money markets and credit linked notes, an Excel spreadsheet, with links to I-Net to import prices, is maintained. The prices are compared to the BESA prices for the same time stamp, and any differences will be followed up. Another check that is performed is to compare the I-Net prices per the Excel spreadsheet to the ICDF file sent by I-Net, to ensure that all prices agree. The same procedure will be followed for equities, and the closing prices on the spreadsheet will be compared to the I-Net ICDF file to ensure that the prices agree.

SAFEX and Yieldx prices are included on the I-Net feed, and the daily booking fee report from Standard Bank (the clearing member) is used to agree the prices imported from the I-Net feed, thereby ensuring that the daily mark to market calculation is correct.

For the unlisted money market securities, a clean price feeds daily from Fincad into Eagle. This happens automatically at 12 o'clock every day. Eagle will calculate the accrued interest on each money market security and add it to the clean price to get the all-in-market value.

The Fincad tool values all other unlisted instruments. Fincad is a valuation tool, with built in models, to value each type of instrument. Contract/deal information feeds automatically from Eagle into Fincad. Fincad then uses the daily SWAP curve, built by Prescient, together with deal information from Eagle, and other market related information from Bloomberg to get a clean price per instrument.

Prescient Group

ISAE 3402 Type 2 report

31 March 2016

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For OTC derivative (Interest Rate Swap) a clean price feeds twice a day from Fincad into Eagle. This happens automatically at 12 o'clock

and end of business every day. Eagle will calculate the accrued interest on each security and add it to the clean price to get the all-in-

market value.

For Contract for Differences (“CFDs”) derivatives, these derivatives are based off equity underlyings with daily prices obtained from the I-

Net / Bloomberg closing prices feeds and used to price CFDs on a daily basis. These prices are uploaded into Eagle and reconciled

back to Prime Broker data on a daily basis. The pricing of CFDs are then used to calculate daily mark to markets, which are valued in the

underling funds.

For Fund of Hedge Fund investments, prices are agreed to monthly investment statements received from underlying administrator or

custodians. These unlisted securities are then setup in the Accounting System. The pricing is uploaded into Eagle on a daily basis,

based on the latest available prices received.

Portfolio valuations are reviewed by the administration department and the fund managers on a daily basis for reasonability. A check

that is performed by the fund manager is to ensure that all portfolios within a composite should perform relatively the same. The

reasonability check is performed by comparing today's prices to the previous day, to ensure that all significant movement in prices can

be identified and explained. Fund price movements are compared to the benchmark movement as well as to movements in similar

portfolios. An explanation is sought for large variations above 5% for equities and 0.1% for bonds.

Corporate Events

Corporate events notifications, pending for processing, are fed into Eagle system via a Bloomberg data feed on a daily basis each night. This is validated with a second source such as a custodian event diary. The event is then approved in the system and the system will then generate the required journal entries for each client holding applicable. Every corporate event raised in the system is signed off by a senior staff member and event details are then kept on file. Event entitlements are raised to the client’s account on the ex-date of the event by the system automatically as part of the systems scheduled start of day run. Any unallocated income is identified via the bank reconciliation process.

An entitlement report is received from the custodian by the administration team for items such as dividends several days before settlement is expected. This report serves as a final confirmation that the income event is payable and will be settled shortly. The entitlement report is checked against the dividends raised on Eagle to ensure that the amount agrees, and also checked against the payment on settlement date.

Corporate actions on unlisted CFDs are verified to event slides and to Prime Broker records. This reconciliation is performed daily and as part of the monthly checklist process, the corporate actions on these “manufactured” dividends are checked for accuracy against event slides, against Prime Broker (PB) election and for completeness, against the Accounting Systems universe of underlying equity corporate event listings.

Prescient Group

ISAE 3402 Type 2 report

31 March 2016

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Elections regarding corporate events

If a decision regarding an election is to be made then the investment team will make the decision.

The administration department is informed of the decision and in turn notifies the custodian of the election decision via email. The administration department then monitors the expected receipt of any scrip/cash and ensures that it is included in the scrip holding report/ bank statement.

Investment Income

The daily bank reconciliation process identifies any interest and dividends received. The entitlement report will also highlight dividend/interest receipts to be expected.

Alternative Administration

System interest accruals are matched to month end third party accruals and statements, and are then adjusted appropriately to match those statements received, for month end valuation purposes.

Interest

Short term security information is provided by either the fund manager and is referenced with what is available on the JSE website to create and update instrument details, which determines the interest accrual method for each day.

SAFEX and Yield X derivatives are marked to market daily and agreed to the booking fee reports.

Bond interest is accrued for at the effective rate. Purchased interest is debited against the interest account, and cumulative interest on the bond is credited to the interest account daily (thus leave a net credit of accrued interest in the account). The accrual for bond interest is calculated at a combination of the coupon rate and a pull-to-par rate (the difference between the book yield when purchased and the coupon rate).

Dividends

Dividend cents per share are obtained from the corporate events spreadsheet maintained by the administration department (updated from the custodian event advices daily). The dividend will be agreed to the entitlement report obtained from the custodian.

Dividends are accrued for on the portfolios at ex-date.

The bank statements are inspected regularly to ensure that the dividends are received timeously.

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Prescient Group

ISAE 3402 Type 2 report

31 March 2016

Yield curves

Fincad has been programmed to import yield curves from the specific network folder, where these curves are saved, on a daily basis. The programme can be altered to instruct it to import daily yield curves from a different network location, however, this can only be done by an authorised staff member. Furthermore, access to programme changes are limited to the Fincad terminal.

4.3 Maintaining financial and other records

Performance Fees

Performance fees are calculated by the fund administrator and/or finance team based on the mandate. The administrator will prepare a calculation spreadsheet and place the performance criteria on file, along with the date of calculation. The calculation is reviewed by a more senior staff member. Performance fees are sent for review to the Fund Manager who is ultimately responsible for validating that the fee calculation method is appropriate. After they have reviewed the calculation, they will give their authorisation to be billed via email.

Management Fee

At month-end, before the management fees are calculated, Prescient ensures that the following processes have been performed:

All trades have been captured;

All income has been raised;

All corporate events have been attended to;

All cash has been applied; and

Securities have been valued.

The calculation of the management fee is maintained in Excel, and the spreadsheet is updated with the management fee percentage as per the mandate. Once the portfolios have been updated as per above, the market values are captured into the excel spreadsheet. The management fee is calculated using an Excel formula within the password protected spreadsheet.

The finance team prepares a management fee analysis report which forms part of the monthly management accounts.

For a small percentage of clients who do not pay the management fee from their portfolios, the invoice will be sent by email, fax or post.

The management fee will be amended if there are changes to the client's fee arrangements. The Compliance team is the custodian of this process, and is responsible for ensuring that the finance team is aware of any changes to client mandates (with respect to fees). This ensures that client fees are always levied at the correct rate.

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Prescient Group

ISAE 3402 Type 2 report

31 March 2016

4.4 Cash management and segregation of assets

Prescient maintains day to day bank accounts with Nedbank, SCB, SCMB, Societe Generale, Nedbank Namibia, BNY, BNP Paribas, JP Morgan, Citi and FNB. The authorised administrator completes an online authorisation before payments are released from the bank accounts. Bank balances are reconciled on a daily basis and inspected for any unusual movements. Bank reconciliations are prepared weekly and reviewed by a more senior staff member.

EFT and non-EFT transactions are only authorised after supporting documentation has been inspected (e.g. deal slip, booking fee report, and invoice). Subsequent settlement of these transactions is monitored through daily bank reconciliations.

EFT payments

Online system platforms are used by Prescient for all EFT payments as authorised by the client except for Societe Generale where only fax instruction is available. Capture of EFT transfers are made by the administration department. It is possible for the same person to capture and verify/audit an EFT payment, but the person who captures and or verifies a payment will be unable to authorise a release of the final payment. Two authorised signatories are required for all EFT transfers (authorised signatories per company resolutions). User profiles are set up with these controls and restrictions by the banking institutions. They cannot be amended without required authorisation and required banking protocols.

Non-EFT payments

Societe General clients receive non EFT payments instructions, as well as clients that have elected for Prescient to send manual instruction letters to the bank to initiate cash transfers for settlement.

In all cases, the administration department monitors and follows up with banks on all transfers that have been made each day. PFSI

PFSI maintains Fund bank accounts with BNY Mellon and shareholder bank accounts with Citibank. All payments are made manually and must be authorised by a second person. Users of the BNYM and Citi online system must be authorised by the Head of Operations, who also defines the permissions for each user.

All bank accounts are reconciled daily, and the bank reconciliations are also reviewed on a daily basis.

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Prescient Group

ISAE 3402 Type 2 report

31 March 2016

4.5 Monitoring Compliance

Monthly validation checks are performed on all product models to ensure that the client’s investments are being managed in accordance with client mandates. All compliance breaches will be flagged by the StatPro system and will be followed up by the legal and compliance department.

All applicable regulations (which include Regulation 28 for Pension Funds, Regulation 30 for Medical Schemes and Notice 80 of the Collective Investment Schemes Control Act) are monitored and reported on by Prescient.

4.6 Reporting to Clients

Prices, units held and market value information is sent to the authorised recipient(s) at each client. The content of daily price / market value reporting is determined in the client acceptance phase and can be amended by client request from time to time.

Daily transactions reports are sent to authorised client recipients for review.

Monthly administration reports are sent to clients detailing, among other items, a portfolio summary for the month. These reports are prepared based on the needs of the client; in some instances clients prefer quarterly or annual reports.

Regulation 28 and Regulation 30 reports are generated for clients and are distributed based on the requirements of these regulations.