Investec PLC — Annual Report 2018

Mar 31, 2018

AR

|

2018

V.1

Investec strategic report incorporating governance, corporate responsibility and the renumeration report

Specialist Banking | Asset Management | Wealth & Investment

Annual Report

(continued) Presentation of financial information Investec strategic report incorporating governance, corporate responsibility and the renumeration report Volume 1

Overview of the year

Investec integrated annual report 2018 A

The 2018 integrated annual report covers the period 1 April 2017 to 31 March 2018 and provides an overview of the Investec group.

This report covers all our operations across the various geographies in which we operate and has been structured to provide stakeholders with relevant financial and non‑financial information.

Strategic report incorporating governance, corporate responsibility and remuneration report

Volume 1 Volume 2 Volume 3 Risk disclosures Annual

financial statements

Ongoing and statutory information

Statutory information is set out in volume three. In order to present a more meaningful view of the group's performance, additional management information is presented on our ongoing businesses. This additional information excludes items that in management's view could distort the comparison of performance between periods (for both current and historical information). This information is only set out in volume one of our integrated annual report.

Based on this principle, the following items have been excluded from underlying statutory profit (for both current and historical information where applicable) to derive ongoing operating profit:

• The results of the businesses sold in the 2015 financial year i.e. Investec Bank (Australia) Limited, Kensington Group plc and Start Mortgage Holdings Limited. These sales had a significant effect on the comparability of the group's financial position and results
• The remaining legacy business (as set out on page 85).

This basis of presentation is consistent with the approach adopted for the year ended 31 March 2017.

A reconciliation between the statutory and ongoing income statement is provided on pages 73 and 74. All information in our annual report is based on our statutory accounts unless otherwise indicated.

Cross reference tools

Feedback

reports that forms part of the group's audited annual financial statements

We value feedback and invite questions and comments on our reporting. To give feedback or request hard copies of our reports, please contact our Investor Relations division.

For queries regarding information in this document

Investor Relations

Telephone (27) 11 286 7070 (44) 20 7597 5546

on our website: www.investec.com

e-mail: investorrelations@investec.com

Investor Relations

www.investec.com/en_za/welcome-to-investec/about-us/investor-relations.html

responsibility report available on our website: www.investec.com

Contents

Overview of the year

Operational and strategic report	5
Highlights	9
About the Investec group	18
Our strategic focus	20
Our operational structure	23
Our operational footprint	24
Financial review	28

Divisional review

Group divisional structure	87
Asset Management	88
Wealth & Investment	95
Specialist Banking	102

Corporate governance and corporate responsibility

Corporate governance	116
Shareholder analysis	166
Corporate responsibility	171

Remuneration report

Remuneration report	185
Definitions	245
Corporate information	246

Overview of the year

Operational and strategic report

The progress made in achieving our strategic priorities, and the successful transitioning of leadership, gives us confidence in our strategy to invest for the long term.

In the past year, sound growth in the core earnings drivers for our three business areas and solid client activity levels supported underlying performance. The group has continued to make strategic investments to ensure it remains competitive and relevant in the markets in which it operates.

Overview of financial performance

The group achieved an increase in statutory operating profit of 1.4% to £607.5 million (2017: £599.1 million), a decrease of 3.5% on a currency neutral basis. Adjusted EPS increased 10.1% from 48.3 pence to 53.2 pence, a 4.1% increase on a currency neutral basis. Distributions to shareholders increased to 24.0 pence (2017: 23.0 pence) resulting in a dividend cover of 2.2 times (2017: 2.1 times).

The total legacy portfolio reduced from £476 million to £313 million through asset sales, redemptions and write-offs. This resulted in a loss before taxation on the legacy business of £93.5 million (2017: £64.6 million) with impairments on the legacy portfolio increasing from £54.3 million to £84.7 million reflecting an increase in impairments for accelerated exits anticipated to occur on certain legacy assets.

The ongoing business delivered a satisfactory performance with operating profit up 5.6% to £701.0 million (2017: £663.7 million). This is a 1.2% increase on a currency neutral basis.

Our geographic mix and diversity of revenue streams continued to support the sound balance of earnings generated between capital light businesses and capital intensive businesses. The group's asset and wealth management businesses have generated substantial net inflows of £7.3 billion which, together with favourable market levels, supported higher average funds under management. Third party

assets under management increased 6.5% to £160.6 billion (31 March 2017: £150.7 billion), an increase of 6.2% on a currency neutral basis.

The banking businesses benefited from sound levels of corporate and private client activity driving strong loan book growth over the year. Customer accounts (deposits) increased 6.5% to £31.0 billion (31 March 2017: £29.1 billion), an increase of 5.9% on a currency neutral basis. Core loans and advances (excluding the legacy portfolio) increased 11.6% to £24.8 billion (31 March 2017: £22.2 billion), an increase of 11.0% on a currency neutral basis.

This supported growth in total ongoing operating income before impairment losses of 6.9% to £2 442.8 million (2017: £2 285.9 million) with the percentage of annuity income increasing to 76.3% of total operating income (2017: 72.0%). The ongoing cost to income ratio increased to 66.5% (2017: 65.8%) with total operating costs growing by 8.0% to £1 623.2 million (2017: £1 502.6 million) due to planned investment spend across the business.

Operating environment

While the global economy strengthened during the past year, Investec's two core geographies experienced persistent economic uncertainty. In the UK, economic growth slowed as indecision around Brexit continued to impact corporate and consumer confidence. Inflation rose sharply, squeezing household spending power, and the country experienced its first hike in the bank rate in over a decade.

(continued)

Overview of the year

The UK's departure from the European Union remains one of the biggest uncertainties to the UK outlook although negotiations are progressing in line with the scheduled timetable.

Economic growth in South Africa remained subdued as a result of the poor macro environment and heightened political and policy uncertainties. This was worsened by successive downgrades by the three largest credit rating agencies, subdued demand for credit and low business and consumer confidence. Despite local sentiment, South Africa emerged from a technical recession in the second quarter and the country experienced its first interest rate cut since 2012. The transition to new leadership under President Cyril Ramaphosa has restored some confidence. We are encouraged to see that investment and economic growth are clear priorities on the national agenda which should support client activity for our businesses going forward.

Business performance

There was a consistent contribution from all business activities during the period under review with Asset Management and Wealth & Investment contributing a combined 36.9% (2017: 36.2%) to group operating profit on an ongoing basis (excluding group costs).

Asset Management

Operating profit in Asset Management increased by 8.0% to £178.0 million (2017: £164.8 million) benefiting from higher average funds under management driven by favourable market and currency movements and strong net inflows of £5.4 billion. Lower performance fees in South Africa negatively affected earnings. Total funds under management increased to £103.9 billion (31 March 2017: £95.3 billion).

It was pleasing to note that net flows were positive across all regions, largely driven by inflows from the Americas and Asia-Pacific regions supporting the business's consistent strategic focus in those areas. While fundamental challenges to the industry persist, momentum remains positive and management are confident in their strategy to build a long-term intergenerational business.

Wealth & Investment

Wealth & Investment experienced an increase in operating profit of 5.7% to £98.6 million (2017: £93.2 million). The business benefited from higher average funds under management supported by higher equity market levels over the year and solid net inflows of £2.0 billion.

Total funds under management increased to £56.0 billion (31 March 2017: £54.8 billion). Operating margin was slightly down from 25.9% to 24.3% as the business continued to invest in digital platforms, IT infrastructure and compliance.

The operating profit for the South African business declined 2.1% in Rands with the increase in annuity fees earned offset by lower brokerage volumes. Progress continued to be made in attracting discretionary net inflows which amounted to R5.0 billion in the current year.

The UK and Other business experienced a 6.3% increase in operating profit with solid net inflows of £1.8 billion. The launch of Investec Click & Invest, a digital discretionary investment management service, was well received by the market and was ranked first place in an independent survey of the digital portfolio management market.

Despite continued market uncertainty, management remain comfortable with their strategy of investing for long-term sustainability focusing on providing a global investment offering and maintaining the highest standards of client service.

Specialist Banking

The ongoing business of Specialist Banking increased operating profit by 4.3% to £474.0 million (2017: £454.4 million).

The UK and Other businesses reported a 9.3% decrease in operating profit. Strong growth in net interest income was supported by loan book growth of 15.1% to £9.4 billion (31 March 2017: £8.1 billion) and a reduction in the cost of funding. This was offset by a decrease in non-interest revenue following particularly strong investment banking and client flow trading activity levels in the prior year. In line with the business's current investment strategy to support franchise growth, IT infrastructure costs and headcount increased, notably for the continued build out of the private client banking offering. We will continue to focus on our strategy to be a high-tech and high-touch specialist bank. Expansion of our client offering through enhanced digital initiatives remains key, as does increasing our capital light activities. Having accelerated our strategy to run down the legacy portfolio, we expect this business to continue generating a sustainable level of recurring income as it focuses on deepening the franchise and expanding the growthorientated client base.

The South African business reported an increase in operating profit in Rands of 6.9% supported by sound corporate and private client activity levels as well as an increase in associate earnings from the IEP Group. This was partially offset by lower investment income. Core loans and advances increased 8.7% to R256.7 billion (31 March 2017: R236.2 billion) reflecting the consistent strategy to penetrate the existing client base and grow market share. The launch of Investec Life was particularly successful with over R1 billion in cover written in the first six months of the launch. We received recognition from a number of international awards and rankings, including top Private Banking group overall for South Africa for the sixth consecutive year by UK finance magazine's Euromoney. The focus for the next year remains centred on client penetration, managing capital and liquidity, investing in digitalisation and the expansion of Investec for Business which is designed to deliver an integrated service offering to mid-market corporates.

Review of risks

Despite the prevailing macro-economic conditions, the group was able to maintain sound asset performance and risk metrics throughout the year in review. Growth in the core loan book was diversified across select target markets with loan to values at conservative levels and asset margins broadly in line with the prior year. Our risk appetite continues to favour lower risk, income-based lending, with exposures well collateralised and credit risk taken over a short to medium term. The ongoing credit loss ratio remains at the lower end of our long-term average trend of 30bps to 40bps in both South Africa and the UK. We continue to stress our loan books against a number of macro-economic scenarios, and manage these risks accordingly. We are closely monitoring political developments with respect to Brexit and are equipped to adapt to a rapidly changing environment.

We continue to maintain appropriate capital and leverage ratios and ensure we have a high level of readily available, quality liquid assets. The group has always held capital comfortably in excess of regulatory requirements and all our banking subsidiaries meet current internal targets for total capital adequacy with leverage ratios remaining above our 6% minimum target. Cash and near cash balances remain strong and we exceed the Liquidity Coverage Ratio and Net Stable Funding Ratio requirements in both the UK and South Africa. We have continued to benefit from a reduction in our cost of funding in the UK, whilst net interest margins remained stable in South Africa.

Operational and strategic report

(continued)

During the year, we continued to enhance our ratings systems and risk quantification models in preparation for the group's implementation of IFRS 9 and the move to the Foundation Internal Ratings-Based (FIRB) approach to capital in South Africa. IFRS 9 has had a moderate impact on our capital ratios.

Meeting regulatory obligations and ensuring the safety of our clients' wealth are key priorities for the group. We therefore continue to spend much time and effort managing our operational, reputational, conduct, recovery and resolution risks. Financial crime and cyber crime remain high priorities and we are continually strengthening our systems and controls in order to manage cyber risk, combat money laundering and prevent bribery and corruption. State capture in South Africa and the increase in corporate and audit scandals in South Africa and around the world has heightened the awareness around who we deal with and the process to 'on-board' clients. A significant amount of time and resources have been spent on training in this regard.

Board focus areas

During the year, the board continued to engage with various stakeholders on a number of issues. These included strategy and corporate performance, executive succession, executive remuneration, governance and board composition.

Succession of the group's long-serving executive management has been an ongoing focus area for the board for the past few years as part of the group's orderly succession plan to move from founding members to the next generation of leadership. As chief executive officer and managing director, respectively, Stephen Koseff and Bernard Kantor will step down from their roles on 1 October 2018 and will continue to serve as executive directors until 31 March 2019 to provide support and advice to the incoming executive. Thereafter, they will continue to be available to staff and leadership as non-executive directors. The role of CEO will be jointly assumed by Fani Titi, who has been the chairman of the group since November 2011, and Hendrik du Toit, the founding chief executive officer of Investec Asset Management. Perry Crosthwaite, the group's former senior independent non-executive director, became the chairman of the group on 15 May 2018. In addition, Glynn Burger, the group risk and finance director, will retire on 31 March 2019 but will remain available and willing to assist the new management team. Ciaran Whelan, who has held various senior positions globally with the group over the past 30 years, will assume the role of group risk director while Kim McFarland, who has been with Investec Asset Management since December 1993, will take over as group finance and operations director from 1 April 2019.

Further changes to the board include Peter Thomas stepping down from the group board at the annual general meeting in August 2017. We thank Peter for his extraordinary dedication to the group since joining the board of Investec in 1981. At the same time, we welcomed to the board Philip Hourquebie who was appointed as a non-executive director. Philip brings a wealth of expertise in his longstanding position as the regional managing partner of EY Inc for Africa and more recently, Central and South East Europe.

In considering the composition of the board, we are mindful of a number of aspects including skills experience, knowledge, race and gender. We are focused on maintaining the necessary banking experience, appropriate regional balance between South African and non-South African board members and reaching our gender diversity target of 30% females on the board. The board has also played an integral role in encouraging and participating in diversity initiatives across all our operations.

One of the key topics of discussion with stakeholders over the past year was that of remuneration. We maintain our philosophy that, in order to employ and retain the highest calibre individuals, we need to reward them with industry competitive packages and long-term share incentives. It is also important to ensure there is clear alignment between remuneration and delivery of strategic priorities. The group is submitting a revised remuneration policy for approval by shareholders at the annual general meeting on 8 August 2018 and various issues raised by stakeholders have been incorporated into this policy. Where appropriate, we will be reducing the quantum of remuneration as well as simplifying the structure to ensure stronger alignment to strategy with relevant performance targets and measurements in place for monitoring.

Further to this, the group published its first gender pay gap report as required by legislation in the UK. We are comfortable that the group pays men and women equally for the same roles and that we have the appropriate practices in place to ensure fairness. Our gender pay gap occurs primarily because there is a lower proportion of women in senior leadership

and revenue-generating roles. We are dedicated to improving our position in line with our commitment to promoting diversity.

In addition to the regular agenda items discussed, the board has focused on a number of new regulations, policies and practices including IFRS 9, Markets in Financial Instrument Directive (MiFid) II, General Data Protection Regulation (GDPR), King IV and the Advanced Internal Ratings Based (AIRB) and FIRB approach to capital.

In light of prevailing market conditions, the board continued to assess the appropriateness of the business strategy of the group, in particular the strategy of the UK Specialist Bank, and we are comfortable with the progress made. As we start the new financial year, we are confident in our leadership to deliver on the group's strategic priorities. The focus of the board remains on ensuring stability within the group and we believe the board has the appropriate balance of skills and expertise to ensure that the group is well governed, and that the interests of all stakeholders are well served.

Living in society

Investec has a deeply-rooted tradition of active corporate citizenship and we are mindful of our responsibility to live in society and not off it. As a distinctive financial institution with specialist skills in lending and investing, Investec plays a critical role in funding a stable and sustainable economy that contributes to the upliftment of communities and is cognisant of the world's limited natural resources.

Caring for our people is at the heart of Investec's approach to corporate responsibility. We provide staff with a safe, healthy and stimulating work environment to ensure they are motivated and equipped to deliver exceptional service for our clients. As part of the move to our new London head office at 30 Gresham Street, we are providing staff with a learning environment that encourages collaboration and knowledge sharing among colleagues and business areas. We also invest in learning opportunities for our staff and, in the past year, we spent £22.5 million (2017: £22.9 million) on the learning and development of our people with the group learning and development spend at 1.9% of staff costs. This exceeds our target of a minimum of 1.5% for the group. We were pleased to be recognised as the second most attractive employer in South Africa by professionals and fourth by university students in the 2017 Universum Most Attractive Employer Awards.

(continued)

Overview of the year

Our approach to corporate social investment (CSI) is to provide our beneficiaries with a 'hand up' instead of a 'hand-out'. We believe this promotes lifelong skills that will transform their lives and, in turn, enable them to help others around them. In the UK, our flagship programme, the Beyond Business social enterprise incubator which we run in partnership with the Bromley by Bow Centre, won several awards recognising the community impact of this partnership. In South Africa, our flagship Promaths programme contributed to 4.8% and 5.0% of the country's total mathematics and science distinctions respectively in the 2017 academic year. Since inception 12 years ago, Investec has funded over 7 000 previously disadvantaged learners through the programme with 84% having completed, or in the process of completing, tertiary education. This will go a long way towards helping us achieve our aim of creating economic participants who can contribute towards building and growing the economy of the country.

We remain committed to transformation in South Africa and fund a number of initiatives to create a more equitable society. Investec has been intimately involved in the CEO Initiative to, among other things, formulate the Youth Employment Service (YES) programme to address the unemployment issue among young people. At the launch of the programme by President Cyril Ramaphosa towards the end of March 2018, Investec committed to finding employment for approximately 1 200 youth annually for the next three years. We see this as an important investment in the transformation of our country and the future of the group.

Our sustainability efforts continue to be recognised, with Investec Limited now ranked as one of four industry leaders on the Dow Jones Sustainability Investment (DJSI) Emerging Markets index, and Investec plc one of 15 industry leaders on the DJSI World index and one of nine in the DJSI Europe index. We were also included as a leader in the RobecoSam Sustainability Yearbook 2018, which recognises the world's most sustainable companies, for moving the needle in ways that will help realise the United Nation's Sustainable Development Goals (SDGs).

In this regard, we have seen increased interest in the role that the private sector can play in advancing the SDGs and Investec has committed to participate and collaborate with clients, investors and public stakeholders to support delivery of the SDGs. Through our various activities, the group contributes to a number of SDG targets and we have included the impacts, where relevant, throughout this report. One of the greatest environmental impacts we can have is to support the transition to a clean and energy-efficient global economy. Investec Power and Infrastructure has financed eight projects globally in the past year with an installed capacity of approximately 1 450MW of clean energy. Overall, clean energy comprises 88% of our total energy portfolio consisting of biomass, wind, waste, solar and hydro projects. This is the most meaningful way we can contribute to climate change and reduce the impact of our existence on the natural environment.

Strategy and outlook

The complexities of Brexit continue to cause uncertainty in the UK economy. While growth in South Africa was down in the first quarter of 2018 relative to the final quarter of 2017, the rest of the year should be positive due to a mix of investor confidence and a rebound in consumer spending. We will continue to focus on the growth levers available to improve our returns, including growing our client base and core revenue drivers, leveraging off our investment into the business, managing our liquidity and optimising our capital structure. Looking forward, we believe that our strategic priorities, together with the diversity of our business model that has been built over many years, will ensure the group is favourably positioned to grow in core markets, supporting future growth and delivering value to all our stakeholders.

Closing remarks from Stephen and Bernard

We have spent almost 40 years building a quality business that, in 1981, had less than £1 million of capital, and today has over £5.4 billion of capital. Our aim was to build a sustainable business, one that has been able to survive and thrive through all conditions, growing earnings from £0.16 million in 1981 to £491 million at the end of the 2018 financial year. We have had a client-focused approach, recognising the value in building committed long-term relationships and working with clients to build their wealth and, at the same time, creating value for shareholders.

This was only possible because of the many incredibly talented and entrepreneurial people who have worked with us through all these decades. People who work at Investec are generally characterised by an enduring enthusiasm, tenacity and desire to challenge the status quo in their efforts to meet clients' expectations. It is this strongly embedded culture of uncompromising integrity in the pursuit of extraordinary performance that is ingrained in our DNA and will ensure that the Investec of today continues long after our departure.

Lastly, we leave a business that has a conscience and is conscious, not only of our duty to clients and shareholders, but also to the individuals within the business and the broader communities we serve. We are therefore proud and happy to hand over a solid, sustainable and caring organisation to the next generation of leaders, knowing that they are wellequipped to take the group from strength to strength.

On behalf of the boards of Investec plc and Investec Limited.

Fani Titi Perry Crosthwaite Stephen Koseff Bernard Kantor Former chairman Chairman Chief executive officer Managing director

(References to 'operating profit' in the text above relates to operating profit before taxation, goodwill, acquired intangibles, non-operating items and after other non-controlling interests.)

The operating financial review provides an overview of our strategic position, performance during the financial year and outlook for the business. It should be read together with the sections that follow on pages 9 to 245 as well as volume two of our integrated annual report, which elaborate on the aspects highlighted in this review.

Overview of the year

Solid client activity levels supporting underlying performance.

• The group's asset and wealth management businesses have generated substantial net inflows of £7.3 billion, which together with favourable market levels has supported higher average funds under management.
• The banking businesses have benefited from sound levels of corporate and private client activity driving strong loan book growth over the year.
• The group has continued to invest into the business, positioning itself for further growth across its client franchise businesses and ensuring that it remains

competitive and relevant in the markets in which it operates.

• Impairments on the legacy portfolio have increased in anticipation of accelerated exits of certain assets in line with the group's strategy of managing down this portfolio.
• Taking into account the abovementioned factors, the group has achieved satisfactory operating performance against a challenging backdrop in its two core geographies (refer to pages 34 to 39 for an economic overview of our operating environments), underpinned by sound growth in key earnings drivers and a solid recurring income base.

performance

Statutory financial

2018 £607.5mn

2017 £599.1mn

Operating profit* increased 1.4% (decrease of 3.5% on a currency neutral basis)

2018 £491.1mn

2017 £434.5mn

Adjusted attributable earnings^ increased 13.0% (increase of 6.9% on a currency neutral basis)

2018

2017 48.3p

* Before goodwill, acquired intangibles, non-operating items, taxation and after other non-controlling interests.

^ Before goodwill, acquired intangibles, non-operating items and after non-controlling interests and deduction of preference dividends.

Adjusted earnings per share^ increased 10.1% (increase of 4.1% on a currency neutral basis)

Dividends per share increased 4.3%

We continued to actively manage down the UK legacy portfolio

• The legacy portfolio reduced from £476 million at 31 March 2017 to £313 million through asset sales, redemptions and write-offs.
• The legacy business reported a loss before taxation of £93.5 million (2017: £64.6 million) reflecting an increase in impairments for accelerated exits anticipated to occur on certain legacy assets.

Satisfactory performance from the ongoing business

(continued) Highlights

We have a diversified business model

% contribution of operating prot* before taxation of the ongoing business

^^ Excluding group costs.

We continued to grow our key earnings drivers

Funds under management increased 6.5% to £160.6 billion – an increase of 6.2% on a currency neutral basis

Funds under management**

Customer accounts (deposits) increased 6.5% to £31.0 billion – an increase of 5.9% on a currency neutral basis

Core loans and advances increased 11.6% to £24.8 billion – an increase of 11.0% on a currency neutral basis

Customer accounts (deposits) and loans ongoing business**

• * Before goodwill, acquired intangibles, non-operating items, taxation and after other non-controlling interests.
• ^ Before goodwill, acquired intangibles, non-operating items and after non-controlling interests and deduction of preference dividends.
• ** Trends in these graphs are shown on a currency neutral basis using the closing Rand: Pound Sterling exchange rate applicable at 31 March 2018.

Supporting growth in operating income

Total operating income ongoing business

Increase in impairments largely driven by accelerated exits anticipated in the legacy portfolio

* The trend for this line is shown on a currency neutral basis using the average Rand: Pound Sterling exchange rate applicable at 31 March 2018.

** Refers to the remaining UK legacy business as well as group assets that were sold in the 2015 financial year.

Costs increased largely due to planned investment across the business

Operating costs increased reflecting: continued investment into IT and digital initiatives and higher headcount across divisions to support increased activity and growth strategies, notably the build out of the UK private client offerings. Cost growth in South Africa was somewhat offset by the pending acquisition of the South African head office building and the related provision no longer required.

Jaws ratio for the group ongoing business^

Headcount^^

^ Trends in this graph are shown on a currency neutral basis using the average Rand: Pound Sterling exchange rate applicable at 31 March 2018.

^^ Permanent headcount and includes acquisitions.

Resulting in a satisfactory performance from our ongoing business

Operating prot* – Asset Management

Operating prot* – Specialist Banking ongoing business

Progress made on our financial targets

		Ongoing		Statutory
	Target	March 2018	March 2017	March 2018	March 2017
ROE (post-tax)	12% – 16% over a rolling five-year period	14.1%	14.2%	12.1%	12.5%
Adjusted^ EPS growth	Target: 10% > UKPRI	13.3%	11.3%	10.1%	16.9%
Cost to income	Target: < 65%	66.5%	65.8%	66.9%	66.3%
Dividend cover (times)	Target: 1.7x – 3.5x	n/a	n/a	2.2x	2.1x

* Before goodwill, acquired intangibles, non-operating items, taxation and after other non-controlling interests.

^ Before goodwill, acquired intangibles, non-operating items and after non-controlling interests and deduction of preference dividends.

Maintained a sound balance sheet

Total capital adequacy: 14.0% – 17.0% Common equity tier 1 ratio: > 10.0% Tier 1 ratio: > 11.0% Leverage ratio: > 6.0%

Capital adequacy ratios Tier 1 ratios

Leverage ratios Common equity tier 1 ratios

Note: Refer to page 65 for detailed definitions and explanations.

Sound capital and liquidity principles maintained

Continue to focus on:

• Maintaining a high level of readily available, high-quality liquid assets targeting a minimum cash to customer deposit ratio of 25.0%, with the year-end ratio at 41.4%
• Diversifying funding sources
• Maintaining an appropriate mix of term funding
• Limiting concentration risk.

The intimate involvement of senior management ensures stringent management of risk and liquidity.

A well-established liquidity management philosophy remains in place.

The group's loan to deposit ratios are as follows:

• Investec Limited: 77.4% (2017: 75.0%)
• Investec plc: 83.2% (2017: 78.2%).

Liquidity remains strong with cash and near cash balances amounting to £12.8 billion (2017: £12.0 billion).

Capital remained in excess of current regulatory requirements.

We are comfortable with our common equity tier 1 ratio target at a 10% level given the group's significant capital light revenues, and leverage ratios for Investec Limited and Investec plc of 7.5% and 8.5% respectively.

The banking entities exceed the minimum regulatory requirements for the liquidity coverage ratio and the net stable funding ratio.

Highlights

(continued)

Contributing to society, macroeconomic stability and the environment.

For Investec, corporate responsibility is about building our businesses to ensure we have a positive impact on the economic and social progress of communities and on the environment, while growing and preserving clients' and stakeholders' wealth based on strong relationships of trust. This commitment to corporate responsibility means integrating social, ethical and environmental considerations into our day-to-day operations. A key element of this is solid corporate governance that ensures sustainable management with a long-term vision.

For further information download the corporate responsibility report available on our website.

Value added statement

£'000	31 March 2018	31 March 2017
Net income generated
Interest receivable	2 491 009	2 230 765
Other income	1 607 007	1 525 789
Interest payable	(1 730 611)	(1 550 870)
Other operating expenditure and impairments on loans	(467 982)	(439 962)
	1 899 423	1 765 722
Distributed as follows:
Employees	795 420	757 390
Salaries, wages and other benefits
Communities	7 167	7 054
Spend on corporate social initiatives
Government	550 610	522 984
Corporation, deferred payroll and other taxes
Shareholders	261 435	242 440
Dividends paid to ordinary shareholders	227 908	216 602
Dividends paid to preference shareholders	33 527	25 838
Retention for future expansion and growth	284 791	235 854
Depreciation	28 804	25 006
Retained income for the year	255 987	210 848
Total	1 899 423	1 765 722

Investec's corporate responsibility encompasses three key areas of people, planet and profit, including our contribution to the six capitals and our commitment to the Sustainable Development Goals (SDGs).

People

Human capital

We depend on the experience and proficiency of our people to perform and deliver superior client services.

Purpose and priorities	Impact
Providing a safe and healthy work environment that values physical as well as psychological well-being	In the UK, we are progressing towards a more agile environment with flexible work encouraged where appropriate 72% of employees in South Africa participated in employee wellness initiatives
Investing in our people and growing talent and leadership	Learning and development spend as a % of staff costs is 1.9% for the group (target of >1.5% for the group) Learning and development spend of £22.5 million (2017: £22.9 million) 21 CAs graduated from the CA programme in the past year and were retained in our business
Retaining and motivating staff through appropriate remuneration and rewards structures	Voluntary staff turnover rate in South Africa is 8.8% and 8.4% in the UK 5% of Investec shares are held by staff (excluding directors' holdings)
Respecting and upholding human rights by entrenching a value-driven culture through the organisation that is supported by strong ethics and integrity	Participant to the United Nations Global Compact and remain committed to the 10 principles
Promoting diversity and equality at all levels of the group	49% female employees 20% females on the board (target of at least 30%) Made good progress towards the target of 33% females on the board by 2020, per Hampton-Alexander Review
	For information on our BEE transformation refer to page 177.

Intellectual capital

We use our specialist financial skills and expertise to provide efficient solutions for clients and have a robust risk management process in place.

	Purpose and priorities	Impact
	Maintaining a diversified portfolio of businesses that supports performance through varying economic cycles	Consistent contribution to the group's performance from asset and wealth management businesses of 36.9% of operating profit (2017: 36.2%) on an ongoing basis (excluding group costs)
		Annuity income as a percentage of ongoing operating income is 76.3% (2017: 72.0%)
	Leveraging our expertise in risk management to protect value	Ongoing credit loss ratio remains at lower end of its long-term average trend at 0.26% (2017: 0.29%)
	Ensure solid and responsible lending and investing activities	Trained 195 frontline consultants on environmental, social and governance (ESG) practices in South Africa and the UK

Social and relationship capital

We leverage key stakeholder relationships to enhance our impact on society and the macro‑economy.

	Purpose and priorities	Impact
	Building deep durable relationships with our clients and creating new client relationships	Customer accounts (deposits) up 6.5% since 31 March 2017
	Investing in our distinctive brand and providing a high level of service by being nimble, flexible and innovative	Voted South Africa's eighth most valuable brand
	Unselfishly contributing to society through our corporate	1.2% CSI spend as a % of operating profit (2017: 1.2%) (target of >1% for the group)
	social investment (CSI) programmes	CSI spend of £7.2 million (2017: £7.1 million)
	Contributing to the transformation of the financial sector in South Africa	Investec will be rated under the revised Financial Sector Code for the first time in 2018
	Committed to youth employment in South Africa	One of the first signatories to Youth Employment Service (YES) programme

People recognition

• Voted second most attractive employer by professionals and fourth by students in South Africa in the 2017 Universum awards
• Investec CEO, Stephen Koseff won the Lifetime Achievement Award presented by the 2018 African Banker Awards
• Winner of the Business of the Year award by Business Charity Awards 2017 (for Beyond Business)
• Winner of the Community Impact Award 2017 for our flagship programme the Beyond Business social enterprise incubator we run in partnership with Bromley by Bow Centre
• Winner of the National CSR Awards 2017, in the individual Community (Legacy) category Project Award (for Beyond Business)
• Winner of the Community Partners award in the Lord Mayor's Dragon Awards 2017
• Reaccredited winner (for Beyond Business) in the Responsible Business Awards 2017
• Received the Financial Innovation Awards 2017 Innovation in Sustainability or Social Responsibility Awards for our Invest for Success programme run in partnership with Arrival Education

(continued)

Planet

Natural capital

We support the transition to a low-carbon economy and believe we can make a meaningful impact in addressing climate change. We consider any meaningful activity that either reduces the negative impact on, or prolongs the life of, our planet.

	Purpose and priorities	Impact
	Funding and participating in renewable energy	88% of our energy lending portfolio relates to clean energy
	Limiting our direct operational carbon impact	Carbon emissions reduced by 6.1% (Refer to our corporate responsibility report on our website for emission reduction targets)
	Protecting biodiversity through various conservation activities	51% increase in number of children reached through our Coaching for Conservation programme (approximately 12 000 reached since 2013)
		Investec Rhino Lifeline has supported the rescue of 70 rhino since 2012
	Ensuring the security of natural resources in all our operations	R2.5 million spent on water initiatives to ensure continuation of business in our Cape Town office during the 2017/2018 drought

Planet recognition

• Investec group was awarded a B for the Carbon Disclosure Project (CDP) climate scoring
• Investec's Energy Management System that covers 23 of our physical buildings in the UK, Ireland and Channel Islands was certified to the international energy standard ISO 50001
• In our UK head office, the Environment Management System retained the international environment standard ISO 14001
• Our UK head office, won the top prize the Chairman's Cup for its waste management processes in the Corporation of London's Clean City Award Scheme for 2017
• The coordinator of the Investec Coaching for Conservation kids programme at Good Work Foundation won a silver in the Eco-Logic Awards in the category 'Eco-Youth'

Profit
Financial capital	We create sustained long-term wealth by growing our core businesses.
	Purpose and priorities	Impact
	Maintaining a balanced and resilient business model	Our capital light activities contributed 56% to group income (target of > 50% of our income from capital
	Maintaining a sound capital base and strong liquidity	light activities) Healthy capital and leverage ratios in excess of regulatory requirements (target a leverage ratio > 6%) Cash and near cash to customer deposit ratio of 41.4% (target of > 25%)
	Organically growing our business	Adjusted EPS* growth of 10.1% (2017: 16.9%) (target of 10% > UK PRI)
	Focusing to improve the returns and operational efficiency	Group cost to income ratio 66.9% (target of < 65% in Pounds Sterling) ROE of 12.1% overall group and 14.1% on an ongoing basis (target of 12% – 16% over a rolling five-year period in Pounds Sterling)
	Creating value for shareholders	4.3% increase in dividends per share Dividend cover of 2.2 times (target of 1.7 – 3.5 times)
	* Adjusted EPS is before goodwill, acquired intangibles, non-operating items and after non-controlling interests and deduction of preference dividends.
Technological capital	We deliver efficient and effective information technology to support our businesses and facilitate our digital strategy.
	Purpose and priorities	Impact
	Aligning architecture across the group and reducing our application and data footprint	90% of all servers now virtualised reducing our data centre storage footprint in South Africa by 80% Migration of the UK data centres to a fully hosted energy efficient environment reducing the energy footprint
	Creating an international platform for clients with global access to products and services which is both high-tech and high-touch	Completed a number of enhancements to our digital capability See page 22 for more information
	Investing in technology to deliver exceptional client experience	Click & Invest successfully launched to market
		Extensive simulations on various cyber threats were

with our procedures in place All staff are required to do regular training on the prevention of cyber crime

conducted during the period and we are comfortable

Profit recognition

• Won the Best Digital Bank in South Africa and most Innovative Digital Bank in Africa in the Best Digital Bank Awards 2017

compliance-driven approach

Maintaining a cyber resilient strategy based on a threat-driven approach rather than a contemporary

• Joint 1st Robo-Advisor for Click & Invest in the MyPrivateBanking Research Awards 2017
• Winner of the Online Personal Wealth Awards 2018 for best newcomer

About the Investec group

We strive to be a distinctive specialist bank and asset manager, driven by commitment to our core philosophies and values.

Investec (comprising Investec plc and Investec Limited) is an international specialist bank and asset manager that provides a diverse range of financial products and services to a select client base.

Who we are

Founded as a leasing company in Johannesburg in 1974.

We acquired a banking licence in 1980 and were listed on the JSE Limited South Africa in 1986.

In July 2002, we implemented a dual listed companies (DLC) structure with linked companies listed in London and Johannesburg.

A year later, we concluded a significant empowerment transaction in which our empowerment partners collectively acquired a 25.1% stake in the issued share capital of Investec Limited.

Since inception, we have expanded through a combination of substantial organic growth and a series of strategic acquisitions.

Today, we have an efficient integrated international business platform, offering all our core activities in the UK and South Africa.

About the Investec group

Our philosophies We value What we do

• Single organisation
• Meritocracy
• Focused businesses
• Differentiated, yet integrated
• Material employee ownership
• Creating an environment that stimulates extraordinary performance.

Distinctive performance

• Outstanding talent empowered, enabled and inspired
• Meritocracy
• Passion, energy, stamina, tenacity
• Entrepreneurial spirit

Client focus

• Distinctive offering
• Leverage resources
• Break china for the client
• Cast-iron integrity
• Moral strength
• Risk consciousness
• Highest ethical standards

Dedicated partnership

• Respect for others
• Embrace diversity
• Open and honest dialogue
• Unselfish contribution to colleagues, clients and society

We are an international specialist bank and asset manager that provides a diverse range of financial products and services to a select client base in three principal markets, the UK and Europe, South Africa and Asia/Australia as well as certain other countries.

Investec focuses on delivering distinctive profitable solutions for its clients in three core areas of activity namely, Asset Management, Wealth & Investment and Specialist Banking.

Our strategic goals and objectives are based on the aspiration to be recognised as a distinctive specialist bank and asset manager. This distinction is embodied in our entrepreneurial culture, which is balanced by a strong risk management discipline, client-centric approach and an ability to be nimble, flexible and innovative. We do not seek to be all things to all people and aim to build well-defined, value-added businesses focused on serving the needs of select market niches where we can compete effectively.

Our strategic focus

Our strategic goals and objectives are based on our aspiration to be recognised as a distinctive specialist bank and asset manager.

Client focused approach

• Clients are at the core of our business
• We strive to build business depth by deepening existing and creating new client relationships
• High level of service by being nimble, flexible and innovative.

Specialised strategy

• Serving select market niches as a focused provider of tailored structured solutions
• Enhancing our existing position in principal businesses and geographies through organic growth and select bolt-on acquisitions.

Sustainable business

• Contributing to society, macro-economic stability and the environment
• Well-established brand
• Managing and positioning the group for the long term
• Balancing operational risk with financial risk while creating value for shareholders
• Cost and risk conscious.

Strong culture

• Strong entrepreneurial culture that stimulates extraordinary performance
• Passionate and talented people who are empowered and committed
• Depth of leadership
• Strong risk awareness
• Material employee ownership.

Our strategy

Our long-term strategy is to build a diversified portfolio of businesses and geographies to support clients through varying markets and economic cycles. Since inception we have expanded through a combination of organic growth and strategic acquisitions.

In order to create a meaningful and balanced portfolio we need proper foundations in place which gain traction over time.

Our long-term internationalisation strategy:

• follow our customer base
• gain domestic competence and critical mass in our chosen geographies
• facilitate cross-border transactions and flow.

We have a very deliberate and focused client strategy:

• to leverage our unique client profile
• to provide the best integrated solution supported by our comprehensive digital offering.

Our strategic focus

(continued)

Our strategy (continued)

Investec Asset Management

• Continue to improve our investment performance
• Maintain strong momentum in the Advisor business globally
• Grow our presence in the large markets, especially North America
• Evolve all our capabilities for the future, continue to scale Multi-Asset and Quality and build a compelling foundation for Alternatives.

Investec Wealth & Investment

• Focus on investing in and developing our digital channel including enhancements to our core service
• Coordinating and leveraging capabilities across businesses to enhance our services for clients
• Providing a global investment offering and building skills in alternative investment, fiduciary and tax
• Continually improving business processes.

Specialist Banking UK

• Broaden client base by building franchise while deepening client relationships
• Establishing a high-tech and high-touch domestically relevant bank to growth-orientated businesses
• Private Bank shift in focus from platform development to client acquisition.

Specialist Banking South Africa

• Identify new sources of revenue across our existing client base
• Management of our liquidity ratios with an emphasis on retail funding initiatives

Private client (high net worth/high income)/ charities/trusts

• Management of our capital to optimise returns
• Launch of Investec for Business to mid-market corporates.

Other objectives

• Diversity and transformation remain a key focus
• Continually evolving the digital offering.

Our diversified and balanced business model supporting long-term strategy

Broadly defined, we operate across three areas of specialisation focused on well defined target clients:

Asset Management Specialist Banking Wealth & Investment

– Investment management services – Independent financial planning advice

Operating completely independently

Corporate/institutional/government

• Investment management services to external clients
• Lending
• Transactional banking
• Deposit raising activities
• Treasury and trading
• Advisory
• Investment activities

We aim to maintain an appropriate balance between revenue earned from capital light activities and revenue earned from capital intensive activities.

This ensures that we are not over reliant on any one part of our businesses to sustain our activities and that we have a large recurring revenue base that enables us to navigate through varying cycles and supports our long-term strategy.

Contributed to group income

• Asset management
• Wealth management
• Advisory services
• Transactional banking services
• Property and other funds

Capital light activities Capital intensive activities

• 56% 44%
  -

Contributed to group income

• Investment portfolios • Trading income

– client flows

• Lending portfolios

• balance sheet management
• Fee and commission income Types of income Net interest, investment, associate and trading income

Integrated client strategy

Clients are at the core of our business and we strive to provide them with a high level of service by being nimble, flexible and innovative. In the past few years, we have created an international digital platform for clients with global access to products and services which is both high-tech and high-touch. Our integrated client strategy leverages off the natural linkages within the private client businesses and between the private client and corporate banking businesses, which are all centred around the client. We are continually enhancing and evolving our digital platform to ensure a seamless, integrated client service experience.

Investec Digital enables our clients to get a real-time consolidated view of their banking and investment accounts, locally and internationally, on one platform with one login. Through this consolidated global dashboard (Investec Online and the App), clients can access and transact on their banking and investment accounts across South Africa, the UK, Channel Islands and more, at no additional fees. To add value to clients' daily banking and investment experience, we continue to enhance our digital capability through regular innovations.

Initiative	Completed in past year
	OnePlace mobile app ranked joint second place in the MyPrivateBanking awards
	Rebuild of corporate platform Investec Dotcom
	Enhancements to the Manage My Life toolset (for clients to manage non financial aspects of their life, legacy management)
One Place – global platform	Investec Life Limited (Investec Life) launched in October 2017 – more than R1 billion of life policies have been sold in the six months to 31 March 2018
	Additional value added services (e.g.: pre-paid electricity)
	Enhanced mobile payments
Personal portfolio	Self service financial management (e.g.: budgets, cash flow forecasting) – development completed and in testing phase
South African online portfolio	Included unit trusts from Wealth & Investment and Investec Asset Management
manager	Enhanced capability on Tax Free Savings
UK online portfolio manager	Click & Invest successfully launched to market – won Joint First Robo-Advisor award from MyPrivateBanking

Focus for the financial year ending 31 March 2019

• Private client mobile app refresh
• Goal-based investing for South African private clients
• Business banking for South Africa and the UK
• Click & Invest Self Invested Personal Pensions (SIPPs)
• Open application interface (API) allowing fintech ecosystem to utilise Investec's digital API (services) and allowing Investec to access Fintech capability more easily – including a revised operating model to create API's as a new channel for the group
• A unified digital interface for financial intermediaries.

Our operational structure

Operating structure

Investec Limited, which houses our Southern African and Mauritius operations, has been listed in South Africa since 1986.

During July 2002 Investec Group Limited (since renamed Investec Limited) implemented a dual listed companies (DLC) structure and listed its offshore business on the London Stock Exchange.

A circular on the establishment of our DLC structure was issued on 20 June 2002 and is available on our website.

In terms of our DLC structure, Investec Limited is the holding company of our businesses in Southern Africa and Mauritius, and Investec plc is the holding company of our non-Southern African businesses.

Our DLC structure and main operating subsidiaries as at 31 March 2018

Salient features of the DLC structure

• Investec plc and Investec Limited are separate legal entities and listings, but are bound together by contractual agreements and mechanisms
• Investec operates as if it is a single unified economic enterprise
• Shareholders have common economic and voting interests as if Investec plc and Investec Limited were a single company
• Creditors, however, are ring-fenced to either Investec plc or Investec Limited as there are no cross-guarantees between the companies.

Our operational footprint

We have built a solid international platform, with diversified revenue streams and geographic diversity.

Southern Africa

• Founded as a leasing company in 1974
• Acquired a banking licence in 1980
• Listed on the JSE Limited South Africa in 1986
• In 2003 we implemented a 25.1% empowerment shareholding transaction
• Market leading position in all three of our core activities
• Fifth largest bank in the country
• Offices supporting the Southern African businesses include Botswana; Cape Town; Durban; East London; Johannesburg; Knysna; Mauritius; Namibia; Pietermaritzburg; Port Elizabeth; Pretoria; and Stellenbosch.

Operating profit* of the Southern African operations increased 9.1% to £408.1 million

£19.4bn		£15.4bn
Total deposit book		Total net core loans
£53.9bn		Total funds under management
As a % of the group
67.2%	Operating profit*	55.9%	Permanent employees
64.3%	Assets	Actual
		52.5%	COI^
57.3%	NAV**	17.2%	ROE^

Investec in total

Operating profit* £607.5mn

Assets

£57 617mn

NAV**

£3 750mn

Permanent employees

9 444

Our operational footprint

UK and Other

• In 1992 we made our first international acquisition, acquiring Allied Trust Bank in London
• Since that date, we have expanded organically and through a number of strategic acquisitions
• Solid positioning in all three of our core activities
• Listed in London in July 2002 through the implementation of a dual listed companies structure
• Offices supporting the UK and Other businesses include Australia; Channel Islands; Hong Kong; India; Ireland; Luxembourg; North America; Singapore; Switzerland and 18 offices across the UK.

Operating profit* (statutory) of the UK operations decreased 11.4% to £199.4 million

Operating profit* (ongoing) of the UK operations increased 1.2% to £292.9 million

£11.6bn £9.7bn

Total deposit book	Total net core loans
£106.6bn	Total funds under management
As a % of the group 32.8% Operating profit*	44.1% Permanent employees
35.7% Assets	Actual 78.0% COI^
42.7% NAV**	6.9% ROE^ ROE^ 10.9% ongoing

* Before goodwill, acquired intangibles, non-operating items, taxation and after other non-controlling interests.

** NAV is tangible shareholders' equity as calculated on page 64.

^ COI is cost to income ratio. ROE is the post-tax return on adjusted average shareholders' equity as calculated on pages 66 and 67.

Our three distinct business activities are focused on well-defined target clients.

Asset Management

(continued)

Core client base and what we do

Operates independently from Investec's other businesses. Our sole focus is the provision of investment management services to our predominantly global institutional client base

Market positioning

Total funds under management# 1991: £0.4 billion 2018: £103.9 billion Good long-term investment performance with growing traction in our distribution channels

Wealth & Investment

Core client base and what we do

Provides investment management services and independent financial planning advice to private clients, charities and trusts

Market positioning

Total funds under management# 1997: £0.04 billion 2018: £56.0 billion UK: One of the top five players South Africa: Largest player

Specialist Banking

Core client base and what we do

We offer a broad range of services including lending, transactional banking, treasury and trading, advisory and investment activities. These services are aimed at government, institutional, corporate and high net worth and high-income clients

Market positioning

Global core loan portfolio: £25.1 billion^^

• Corporate and other clients: £10.9 billion
• Private clients: £14.2 billion^^

Global deposit book: £31.0 billion

(continued) Our operational footprint

Operating profit* of Asset Management increased 8.0% to £178.0 million Operating profit*° NAV** Permanent employees 29.3% 3.0% 16.1% £59.1bn £44.7bn £103.9bn# 33.0% 91.0% Total funds under management Segregated mandates Mutual funds operating margin ROE^ As a % of group

Operating profit* of Wealth & Investment increased 5.7% to £98.6 million Operating profit*° NAV** Permanent 16.2% 1.5% 24.3% 38.7% £35.6bn Discretionary funds under management Non-discretionary funds under management £20.5bn Total funds under management £56.0bn# As a % of group

Operating profit* (statutory) of Specialist Banking decreased 2.4% to £380.5 million

Operating profit* (ongoing) of Specialist Banking increased 4.3% to £474.0 million

£31.0bn

Total deposit book

	margin
38.7%	ROE^

operating

As a % of group

62.6%

95.5%

66.1%

* Before goodwill, acquired intangibles, non-operating items, taxation and after other non-controlling interests.

** NAV is tangible shareholders' equity as calculated on page 64.

^ COI is cost to income ratio. ROE is the pre-tax return on adjusted average shareholders' equity as calculated on page 68.

^^ Including legacy assets of £0.3 billion as explained on page 85.

° Contributions are larger than 100% due to group costs amounting to £49.6 million which are included in operating profit.

# Refer to page 71 for further detail on funds under management.

Introduction

Investec operates under a DLC structure with primary listings of Investec plc on the London Stock Exchange and Investec Limited on the JSE Limited.

In terms of the contracts constituting the DLC structure, Investec plc and Investec Limited effectively form a single economic enterprise in which the economic and voting rights of ordinary shareholders of the companies are maintained in equilibrium relative to each other.

The directors of the two companies consider that for financial reporting purposes, the fairest presentation is achieved by combining the results and financial position of both companies.

Accordingly, the year-end results for Investec plc and Investec Limited present the results and financial position of the combined DLC group under International Financial Reporting Standards (IFRS), denominated in Pounds Sterling.

All references in this document to Investec or the group relate to the combined DLC group comprising Investec plc and Investec Limited.

Exchange rates

Our reporting currency is Pounds Sterling. Certain of our operations are conducted by entities outside the UK. The results of operations and the financial position of our individual companies are reported in the local currencies of the countries in which they are domiciled, including South African Rands, Australian Dollars, Euros and US Dollars. These results are then translated into Pounds Sterling at the applicable foreign currency exchange rates for inclusion in our combined consolidated financial results. In the case of the income statement, the weighted average rate for the relevant period is applied and, in the case of the balance sheet, the relevant closing rate is used.

The following table sets out the movements in certain relevant exchange rates against Pounds Sterling over the year.

	31 March 2018		31 March 2017
Currency per £1.00	Year end	Average	Year end	Average
South African Rand	16.62	17.21	16.77	18.42
Australian Dollar	1.83	1.72	1.64	1.75
Euro	1.14	1.14	1.17	1.19
US Dollar	1.40	1.33	1.25	1.31

Exchange rates between local currencies and Pounds Sterling have fluctuated over the year. The most significant impact arises from the volatility of the Rand. The average Rand: Pound Sterling exchange rate over the year has appreciated by 6.6% and the closing rate has appreciated by 0.9% since 31 March 2017.

	Results in Pounds Sterling
	Actual as reported Year to 31 March 2018	Actual as reported Year to 31 March 2017	Actual as reported % change	Neutral currency^ Year to 31 March 2018	Neutral currency % change
Operating profit before taxation* (million)	£608	£599	1.4%	£578	(3.5%)
Earnings attributable to shareholders (million)	£506	£442	14.3%	£478	8.1%
Adjusted earnings attributable to shareholders** (million)	£491	£435	13.0%	£465	6.9%
Adjusted earnings per share**	53.2p	48.3p	10.1%	50.3p	4.1%
Basic earnings per share	51.2p	50.8p	0.8%	48.4p	(4.7%)
Dividends per share	24.0p	23.0p	4.3%	n/a	n/a

* Before goodwill, acquired intangibles, non-operating items and after other non-controlling interests.

** Before goodwill, acquired intangibles, non-operating items and after non-controlling interests.

^ For income statement items we have used the average Rand: Pound Sterling exchange rate that was applied in the prior year, i.e. 18.42.

(continued)

		Results in Pounds Sterling
	Actual as reported at 31 March 2018	Actual as reported at 31 March 2017	Actual as reported % change	Neutral currency^^ at 31 March 2018	Neutral currency % change
Net asset value per share	452.5p	431.0p	5.0%	454.0p	5.3%
Net tangible asset value per share	401.5p	377.0p	6.5%	403.0p	6.9%
Total equity (million)	£5 428	£4 809	12.9%	£5 403	12.4%
Total assets (million)	£57 617	£53 535	7.6%	£57 288	7.0%
Core loans and advances (million)	£25 132	£22 707	10.7%	£24 995	10.1%
Cash and near cash balances (million)	£12 825	£12 038	6.5%	£12 763	6.0%
Customer deposits (million)	£30 987	£29 109	6.5%	£30 815	5.9%
Third party assets under management (million)	£160 576	£150 735	6.5%	£160 138	6.2%

^^ For balance sheet items we have assumed that the Rand: Pound Sterling closing exchange rate has remained neutral since 31 March 2017.

The following table provides a comparison of the group's results as reported in Pounds Sterling and the group's results as translated into Rands.

		Results in Pounds Sterling		Results in Rands
	Year to 31 March 2018	Year to 31 March 2017	% change	Year to 31 March 2018	Year to 31 March 2017	% change
Operating profit before taxation* (million)	£608	£599	1.4%	R10 412	R10 885	(4.3%)
Earnings attributable to shareholders (million)	£506	£442	14.3%	R8 648	R8 025	7.8%
Adjusted earnings attributable to shareholders**
(million)	£491	£435	13.0%	R8 395	R7 880	6.5%
Adjusted earnings per share**	53.2p	48.3p	10.1%	909c	875c	3.9%
Basic earnings per share	51.2p	50.8p	0.8%	875c	920c	(4.9%)
Headline earnings per share	48.7p	48.2p	1.0%	833c	872c	(4.5%)
Dividends per share	24.0p	23.0p	4.3%	432c	403c	7.2%

		Results in Pounds Sterling		Results in Rands
	At 31 March 2018	At 31 March 2017	% change	At 31 March 2018	At 31 March 2017	% change
Net asset value per share	452.5p	431.0p	5.0%	7 521c	7 228c	4.1%
Net tangible asset value per share	401.5p	377.0p	6.5%	6 674c	6 322c	5.6%
Total equity (million)	£5 428	£4 809	12.9%	R90 218	R80 638	11.9%
Total assets (million)	£57 617	£53 535	7.6%	R957 592	R897 749	6.7%
Core loans and advances (million)	£25 132	£22 707	10.7%	R417 695	R380 786	9.7%
Cash and near cash balances (million)	£12 825	£12 038	6.5%	R213 155	R201 877	5.6%
Customer deposits (million)	£30 987	£29 109	6.5%	R515 007	R488 149	5.5%
Third party assets under management (million)	£160 576	£150 735	6.5%	R2 661 492	R2 527 826	5.3%

* Before goodwill, acquired intangibles, non-operating items and after other non-controlling interests.

** Before goodwill, acquired intangibles, non-operating items and after non-controlling interests.

(continued)

Ten-year review

Salient features*

			% change
For the year ended 31 March	2018	2017	2018 vs 2017
Income statement and selected returns Adjusted earnings attributable to ordinary shareholders before goodwill, acquired
intangibles and non-operating items (£'000)	491 062	434 504	13.0%
Headline earnings (£'000)	449 647	434 425	3.5%
Operating profit before goodwill, acquired intangibles, non-operating items and taxation (£'000)ø	607 505	599 121	1.4%
Operating profit: Southern Africa (% of total)ø	67.2%	62.5%
Operating profit: UK and Other (% of total)ø	32.8%	37.5%
Cost to income ratio	66.9%	66.3%
Staff compensation to operating income ratio#	47.5%	46.1%
Return on average adjusted shareholders' equity (post-tax)	12.1%	12.5%
Return on average adjusted tangible shareholders' equity (post-tax)	13.7%	14.5%
Return on average risk-weighted assets	1.45%	1.45%
Operating margin of the combined Asset Management and Wealth & Investment businesses	29.3%	30.1%
Operating profit per employee (£'000)	61.2	64.1	(4.5%)
Net interest income as a % of operating income	31.1%	29.7%
Non-interest income as a % of operating income	68.9%	70.3%
Annuity income as a % of total operating income	76.2%	72.0%
Effective operational tax rate	9.6%	18.5%
Balance sheet
Total capital resources (including subordinated liabilities) (£'million)	6 911	6 211	11.3%
Total shareholders' equity (including preference shares and non-controlling interests) (£'million)	5 428	4 809	12.9%
Shareholders' equity (excluding non-controlling interests) (£'million)	4 442	4 131	7.5%
Total assets (£'million)	57 617	53 535	7.6%
Net core loans and advances to customers (£'million)	25 132	22 707	10.7%
Core loans and advances to customers as a % of total assets	43.6%	42.4%
Cash and near cash balances (£'million)	12 825	12 038	6.5%
Customer accounts (deposits) (£'million)	30 987	29 109	6.5%
Third party assets under management (£'million)	160 576	150 735	6.5%
Capital adequacy ratio: Investec plcº	15.4%	15.1%
Capital adequacy tier 1 ratio: Investec plcº	12.9%	11.5%
Common equity tier 1 ratio: Investec plc^^º	11.0%	11.3%
Leverage ratio: Investec plc – current^^º	8.5%	7.8%
Capital adequacy ratio: Investec Limitedº	14.6%	14.1%
Capital adequacy tier 1 ratio: Investec Limitedº	11.0%	10.7%
Common equity tier 1 ratio: Investec Limited^^º	10.2%	9.9%
Leverage ratio: Investec Limited – current^^º	7.5%	7.3%
Credit loss ratio (income statement impairment charge as a % of average gross core loans
and advances)	0.61%	0.54%
Defaults (net of impairments and before collateral) as a % of net core loans and advances
to customers	1.17%	1.22%
Gearing ratio (assets excluding assurance assets to total equity)	9.1x	9.5x
Core loans to equity ratio	4.6x	4.7x
Loans and advances to customers: customer deposits	79.6%	76.2%
Salient financial features and key statistics
Adjusted earnings per share (pence)	53.2	48.3	10.1%
Headline earnings per share (pence)	48.7	48.2	1.0%
Basic earnings per share (pence)	51.2	50.8	0.8%
Diluted earnings per share (pence)	49.8	48.8	2.0%
Dividends per share (pence)	24.0	23.0	4.3
Dividend cover (times)	2.2	2.1
Net asset value per share (pence)	452.5	431.0	5.0%
Net tangible asset value per share (pence)	401.5	377.0	6.5%
Weighted number of ordinary shares in issue (million)	923.5	900.4	2.6%
Total number of shares in issue (million)	980.6	958.3	2.3%
Closing share price (pence)	550	544	1.1%
Market capitalisation (£'million)	5 393	5 213	3.5%
Number of employees in the group (including temps and contractors)	10 146	9 716	4.4%
Closing ZAR:£ exchange rate	16.62	16.77	0.9%
Average ZAR:£ exchange rate	17.21	18.42	6.6%

* Refer to definitions on page 245.

** Where nc is not comparable. ^ Where nd is not previously disclosed.

^^ The group's expected Basel III 'fully loaded' numbers are provided on page 91 in volume two.

º Investec Limited's numbers have been reported in terms of Basel III since 31 March 2013, and Investec plc has been reporting in terms of Basel III since 31 March 2014. ø Before goodwill, acquired intangibles, non-operating items, taxation and after other non-controlling interests.

# Staff compensation ratio has been calculated based on revised definition as per page 245 for financial years 2017 and 2018. Prior year numbers have not been recalculated on this basis.

(continued)

2016	2015	2014	2013	2012	2011	2010	2009
359 732	339 532	326 923	309 310	257 579	327 897	309 710	269 215
334 720	308 770	291 561	265 227	217 253	286 659	275 131	261 627
505 593	493 157	450 676	426 278	358 625	434 406	432 258	396 766
63.8%	70.8%	66.0%	67.5%	80.7%	69.1%	67.2%	74.0%
36.2% 66.4%	29.2% 67.6%	34.0% 67.6%	32.5% 65.7%	19.3% 64.7%	30.9% 61.7%	32.8% 57.8%	26.0% 55.9%
47.0%	47.4%	46.3%	43.9%	43.0%	40.7%	36.1%	34.9%
11.5%	10.6%	10.0%	9.4%	7.8%	11.2%	13.5%	14.8%
13.7%	12.7%	12.3%	11.7%	9.6%	13.2%	15.4%	17.4%
1.34%	1.25%	1.14%	1.06%	0.91%	1.23%	1.33%	1.36%
29.6%	30.4%	29.9%	29.1%	30.2%	33.6%	nc**	nc**
58.7 29.6%	59.7 32.4%	54.9 33.6%	53.5 35.2%	47.8 36.2%	64.4 34.9%	69.7 37.0%	62.6 46.6%
70.4%	67.6%	66.4%	64.8%	63.8%	65.1%	63.0%	53.4%
71.7%	74.2%	70.7%	68.6%	67.7%	62.3%	60.4%	70.0%
19.1%	19.6%	17.1%	18.4%	18.1%	15.5%	20.6%	21.1%
4 994	5 219	5 355	5 693	5 505	5 249	4 362	3 762
3 859	4 040	4 016	3 942	4 013	3 961	3 292	2 621
3 360	3 501	3 572	3 661	3 716	3 648	2 955	2 297
45 352 18 119	44 353 17 189	47 142 17 157	52 010 18 415	51 550 18 226	50 941 18 758	46 572 17 891	37 365 16 227
40.0%	38.8%	36.4%	35.4%	35.4%	36.8%	38.4%	43.4%
10 962	9 975	9 136	9 828	10 251	9 319	9 117	4 866
24 044	22 615	22 610	24 461	25 344	24 441	21 934	14 573
121 683	124 106	109 189	110 678	96 776	88 878	74 081	48 828
15.1%	16.7%	15.3%	16.7%	17.5%	16.8%	15.9%	16.2%
10.7%	11.9%	10.5%	11.0%	11.6%	11.6%	11.3%	10.1% nd^
9.7% 7.0%	10.2% 7.7%	8.8% 7.4%	8.8% nd^	9.3% nd^	nd^ nd^	nd^ nd^	nd^
14.0%	14.7%	14.9%	15.5%	16.1%	15.9%	15.6%	14.2%
10.7%	11.3%	11.0%	10.8%	11.6%	11.9%	12.0%	10.8%
9.6%	9.6%	9.4%	8.9%	9.3%	nd^	nd^	nd^
6.9%	8.1%	7.8%	nd^	nd^	nd^	nd^	nd^
0.62%	0.68%	0.68%	0.84%	1.12%	1.27%	1.16%	1.08%
1.54%	2.07%	2.30%	2.73%	3.31%	4.66%	3.98%	3.28%
10.2x	9.4x	10.3x	11.6x	11.3x	11.3x	12.5x	13.0x
4.7x 73.6%	4.3x 74.0%	4.3x 72.0%	4.7x 71.5%	4.5x 67.8x	4.7x 72.4%	5.4x 76.2%	6.2x 103.6%
41.3	39.4	37.9	36.1	31.8	43.2	45.1	42.4
38.5	35.8	33.8	31.0	26.8	37.7	40.1	41.2
38.5	24.4	34.3	31.7	25.7	49.7	44.0	38.5
36.7	23.1	32.3	29.8	24.3	46.7	41.5	36.1
21.0	20.0	19.0	18.0	17.0	17.0	16.0	13.0
2.0 352.3	2.0 364.9	2.0 376.0	2.0 384.2	1.9 392.0	2.5 416.0	2.8 364.0	3.3 308.8
294.3	308.1	309.0	310.9	317.0	343.8	324.1	266.3
870.5	862.7	862.6	856.0	809.6	759.8	686.3	634.6
908.8	899.4	891.7	884.8	874.0	810.0	741.0	713.2
513	561	485	459	382	478	539	292
4 662	5 045	4 325	4 061	3 340	3 872	3 993	2 083
8 966 21.13	8 254 17.97	8 258 17.56	8 151 13.96	7 781 12.27	7 237 10.88	6 123 11.11	5 951 13.58
20.72	17.82	16.12	13.44	11.85	11.16	12.38	14.83

Ten-year review Salient features*

^^ The group's expected Basel III 'fully loaded' numbers are provided on page 91 in volume two.

º Investec Limited's numbers have been reported in terms of Basel III since 31 March 2013, and Investec plc has been reporting in terms of Basel III since 31 March 2014. ø Before goodwill, acquired intangibles, non-operating items, taxation and after other non-controlling interests.

Staff compensation ratio has been calculated based on revised definition as per page 245 for financial years 2017 and 2018. Prior year numbers have not

* Refer to definitions on page 245. ** Where nc is not comparable. ^ Where nd is not previously disclosed.

been recalculated on this basis.

#

% change

Track record

Adjusted earnings per share

Core loans: up 10.7% to £25.1 billion since 31 March 2017 – an increase of 10.1% on a currency neutral basis*

Deposits: up 6.5% to £31.0 billion since 31 March 2017 – an increase of 5.9% on a currency neutral basis*

Core loans and customer deposits

Up 10.1% to 53.2 pence Up 13.0% to £491.1 million

Adjusted earnings attributable to ordinary shareholders before goodwill, acquired intangibles and non-operating items

Up 6.5% to £160.6 billion since 31 March 2017 – an increase of 6.2% on a currency neutral basis*

Net inflows of £7.3 billion

Third-party assets under management

* Currency neutral basis: calculation assumes that the group's relevant closing exchange rates at 31 March 2018, as reflected on page 28, remain the same as those at 31 March 2017.

(continued)

Financial targets

We have set the following target over the medium to long term: Target Target

Group ROE: 12% to 16% over a rolling five-year period in Pounds Sterling

ROE*

In the medium to long term, we aim to achieve adjusted EPS growth of 10% in excess of UK inflation (in Pounds Sterling). We continually strive to build and maintain a sustainable business model. We intend to maintain a dividend cover of between 1.7 to 3.5 times based on earnings per share as defined above, denominated in Pounds Sterling Target Target

Adjusted earnings per share (EPS) and dividends per share (DPS)

We have set the following target over the medium to long term:

Group COI ratio: less than 65% in Pounds Sterling

Cost to income ratio (COI) and staff compensation to operating income ratio (SC)

We intend to maintain a sufficient level of capital to satisfy regulatory requirements, as well as take advantage of opportunities that may arise in the financial services industry focusing on increasing our return on equity in the medium to long term. We target a capital adequacy ratio range of between 14% and 17% on a consolidated basis for Investec plc and Investec Limited, a minimum tier 1 ratio of 11% and a common equity tier 1 ratio above 10%. We also target a leverage ratio above 6.0%

Refer to page 65 for our reported capital ratios.

Total shareholders' equity and capital adequacy ratios (CAR)

* ROE is post-tax return on adjusted average shareholders' equity as calculated on page 66.

** Adjusted EPS before goodwill, acquired intangibles and non-operating items as defined on page 245.

*** Investec Limited's numbers have been reported in terms of Basel III since 31 March 2013, and Investec plc has been reporting in terms of Basel III since 31 March 2014.

Note:

The numbers shown in the financial targets graphs on this page are for the years ended 31 March, unless otherwise stated.

Overview of the year

(continued)

Overview of the year

An overview of the operating environment impacting our business.

South Africa

Our views

South Africa's GDP improved in 2017, assisted by a strengthening in global demand and a recovery from severe drought conditions in the northern provinces.

Calendar year 2017	Calendar year 2016
1.3%	0.6%
Economic growth	Economic growth
Calendar year 2017	Calendar year 2016
R56 020	R56 054
GDP per capita	GDP per capita

The global economy continued to strengthen meaningfully on a broad basis as trade lifted, along with industrial production and confidence, while global lending conditions were favourable. This saw South Africa's gross domestic product (GDP) growth reach 1.3% year-on-year in calendar year 2017 from 0.6% year-on-year in calendar year 2016 as global demand strengthened, while recovery from severe drought conditions also assisted notably. Interest rates remained accommodative in many economies, with South Africa experiencing its first interest rate cut since 2012. The upturn in the commodity cycle

persisted, a key driver of the lift in South Africa's 2017 GDP growth, with equity markets reaching new highs globally as the world's economic outlook brightened. Global risk-on remained a feature, and the lengthy bull market saw emerging markets experience strong foreign portfolio inflows, benefiting the Rand, while low bond yields in advanced economies and low volatility supported bourses globally.

However, the lengthy low volatility period in financial markets was broken early in 2018, with a correction that reflected sudden global risk-off as a steeper than previously anticipated rise in future US interest rates was factored into the markets on Federal Open Market Committee (FOMC) commentary. Subsequently, stock markets have recovered some lost ground, as the correction has proved welcome in an environment that was becoming overblown, where fears even of a financial crisis were building. The Rand saw substantial strength from the end of December 2017 on the election of Cyril Ramaphosa as leader of the African National Congress (ANC) and then as South African President, with a reduction of over R2.00/USD of the risk premium inherent in the domestic currency.

South Africa has lost ground on an institutional basis over the past 10 years, resulting in weaker economic growth and intense pressure on government finances. Indeed, the World Economic Forum's (WEF) Global Competitiveness Survey, shows South Africa's institutional ranking has dropped to 76th, from 39th in 2007/08. Major slippages occurred particularly in

perceptions of auditing and reporting standards, efficacy of corporate boards, perceptions of minority shareholder rights, efficacy of the legal framework and in judicial independence. Additionally, irregular payments and bribes and favouritism in decisions of government officials were seen to have risen substantially, and public trust in politicians declined as the corruption and state capture infesting the country came to a head.

Key among the new President's goals is to eradicate corruption and state capture, repair the financial health of the State-owned Entities (SOEs) and fiscal consolidation. President Ramaphosa's cabinet reshuffle in early 2018 saw the key appointments of Nhlanhla Nene and Pravin Gordhan (as Finance and Public Enterprises Ministers respectively).

The closer working relationship between government, labour and business continues to bear fruit, with President Ramaphosa quick to point out the necessity of repairing investor confidence and business sentiment, in order to quicken economic growth via increased private sector fixed investment and job creation. Rapid, sustained, private sector led economic growth of 5% to 7% plus remains the key to reducing unemployment and inequality, and eliminating poverty in South Africa.

United Kingdom

Our views

UK economic expansion has slowed, weighed down by weak consumer spending and higher levels of inflation.

GDP per capita GDP per capita Economic growth 1.8% 1.9% £29 670 £29 328 Economic growth Calendar year 2017 Calendar year 2016 Calendar year 2017 Calendar year 2016 Quarterly GDP growth of 0.4% in the fourth quarter capped off full-year growth of 1.8% in calendar year 2017, the weakest annual expansion recorded since 2012. Weighing on growth was softer consumer spending amid the squeeze on household finances as inflation rose to a more than five-year high of 3.1% in November 2017. Inflation started to ease as the first quarter of 2018 drew to a close whilst an increase in wage growth, to the firmest seen since 2015, also started to reduce the squeeze for households. Still, the quarterly pace of GDP growth slowed to just 0.1% in the first quarter of 2018, according to early GDP estimates, with heavy snow a key contributing factor.

The UK's departure from the European Union (EU) (Brexit) remained one of the biggest uncertainties to the UK outlook, even though negotiations progressed largely as planned along the scheduled timetable. In March 2018 the remaining 27 EU member states gave the green light for talks to shift to the future trading relationship after progress was made on the EU's draft withdrawal treaty and a 21 month transition period was agreed.

On the monetary policy front, the first hike in Bank Rate in over 10 years was enacted in November 2017, lifting UK interest rates to 0.50%. The Bank of England appeared to remain on course to pursue a gradual path of policy tightening over the next few years, with rate setters signalling that further hikes are likely to be necessary to bring inflation back sustainably to the Bank's 2% target. Governor Mark Carney is set to step down in June 2019 with his successor possibly to be announced in late 2018.

The November 2017 UK Budget was an expansionary exercise, with several measures aimed at improving affordability and supply in the housing market. The subsequent 'Spring Statement' was a much more subdued affair, with the Chancellor unveiling no new fiscal initiatives.

(continued)

An overview of the operating environment impacting our business (continued)

United States

Our views

The US economy expanded by 2.3% in 2017.

The annual reading of 2.3% was dragged down by a weak first three months of the year, with the three quarters that followed seeing annualised growth paces of around 3% each. At the start of 2018, the advance estimate of quarter one GDP growth pointed to a moderation from a 2.9% (seasonally adjusted) annualised pace to 2.3%. US tax reforms passed by Congress in December 2017 and a fiscally supportive two year spending bill agreed in February 2018, look set to bolster growth momentum over the period ahead.

Through 2017 the labour market continued to tighten with the unemployment rate having stood at 4.1% since October 2017, its lowest level since 2001. However despite the low level of the unemployment rate, pay growth showed little sign of a sharp move upward, having hovered in a range between 2.3% and 2.8% over the 12 months to March 2018.

The absence of a material upshift in pay growth and a period of relatively subdued inflation allowed the Federal Reserve to adjust its policy stance relatively slowly. The Federal Open Market Committee (FOMC) raised interest rates three times in 2017 whilst it enacted a further 25 basis point hike in March 2018, taking the Federal funds target rate range to 1.50% – 1.75%, having commenced its slow 'normalisation' process with its first post-crisis rate hike in December 2015.

Importantly the FOMC has also embarked on a process of reducing its Quantitative Easing (QE) holdings on its balance sheet; since October 2017 it has allowed holdings to roll-off up to a prescribed cap. The cap started at \$10 billion per month in October, has risen slowly and will reach a maximum of \$50 billion per month by the end of 2018. So far, markets have taken the Federal Reserve's gradual process of policy normalisation in their stride, albeit with some concerns that a sharp step up in inflation, if realised, might force the Fed to raise rates more rapidly over the coming years. Since summer 2017, the Federal Reserve's favoured Personal Consumption Expenditures (PCE) inflation measure has stood in the range 1.4% to 1.8% and has not shown a clear sign of a shift higher.

In US politics, the Trump administration achieved its first major legislative win as it passed its tax reform proposals in December 2017. That appeared to energise the administration, which has moved forward on other policy initiatives since. The President's recent focus has been on addressing what he sees as inequalities in the US's trade relationship, not least with China.

Eurozone

Our views

The Eurozone recovery solidified over the period with growth of 2.5% recorded in calendar year 2017, the strongest Euro area expansion pace since 2007.

Growth momentum also broadened out through 2017 with recent laggards in the recovery story, particularly France and Italy, seeing a step-up in their growth rates. Growth momentum has continued into 2018, albeit with the pace of GDP growth having slowed from 0.7% (quarter-onquarter) in the final three months of 2017 to 0.4% in the first quarter of 2018, according to early GDP estimates.

The Euro area labour market continued to tighten with the unemployment rate having slid to 8.5%, a touch below the nine-year pre-crisis average. Rising employment helped to bolster household spending, supporting growth momentum more broadly. Meanwhile, credit conditions remained supportive of the economic outlook, with borrowing costs for households and corporates remaining near record lows and credit availability improving.

The European Central Bank's (ECB) interest rate stance has remained unchanged since March 2016. As such the main refinancing rate remained at 0.00% and the deposit rate at -0.40%. The monthly pace of ECB asset purchases was held at €60 billion per month as 2017 closed, with the bond

buying pace having stood at that level since April 2017. From January 2018 bond buys were at a lower €30 billion per month pace. The ECB is not set to bring its QE programme to an end until late 2018. It continued to judge that an ultra-loose policy stance remained appropriate, given that it continued to expect that inflation would take some time to return to its target of 'below but close to 2%'; Euro area inflation averaged just 1.4% over the 12 months to March 2018.

European political events punctuated the period once more. No clear victor emerged from Italian elections in March 2018, however, three months of negotiations have led to the formation of a coalition government. Market sentiment has been unnerved by the agreement between the two populist parties given plans for large scale fiscal stimulus and a more combative approach to the EU. The solid Euro area economic growth backdrop, which drove views that the ECB will finally start to move away from its ultra-loose policy stance next year, provided a key source of support for the Euro over the past 12 months.

(continued)

An overview of the operating environment impacting our business (continued)

Global stock markets

Our views

Global equity markets enjoyed a positive 2017 overall.

The MSCI World index ended 2017 20% up on year opening levels with the index continuing to climb right through to late January 2018. From that point a reappraisal of risk sentiment, amidst fears over the pace of central bank policy tightening, particularly at the Federal Reserve, saw a period of increased volatility. In addition, from early March, trade war worries increasingly became a concern. The MSCI World index closed the first quarter of 2018 8.1% off its January 2018 high. On Wall Street, the S&P500 was off to a similar extent.

European equity markets saw a more tentative and somewhat choppier path through 2017, ending the year 6% up on year opening levels after much intervening volatility, not helped by a string of high stake elections in the likes of France, Germany and the Netherlands and with an independence referendum (deemed illegal by the Spanish authorities) in Catalonia, Spain. At the start of 2018 European equity markets rose robustly amidst hopes of a more buoyant growth backdrop. The Eurostoxx 50 index rose 5% over the first three weeks of the year, but then turned sharply lower amidst the hit to the global risk backdrop that followed at the end of January.

The back end of 2017 saw a rally in South African domestic shares as the election of Cyril Ramaphosa as leader of the ANC led to renewed enthusiasm about the growth prospects for South Africa. There has so far been little hard evidence of a turnaround on the ground but longer-term growth forecasts have been revised up. While business confidence lifted in early 2018, it is not yet at levels that indicate a faster pace of business activity.

Operating environment

The table below provides an overview of some key statistics that should be considered when reviewing our operational performance

	As at	As at		Average over the year 1 April 2017 to
	31 March 2018	31 March 2017	% change	31 March 2018
Market indicators
FTSE All share	3 894	3 990	(2.4%)	4 062
JSE All share	55 475	52 056	6.6%	56 405
S&P	2 641	2 363	11.8%	2 550
Nikkei	21 454	18 909	13.5%	20 977
Dow Jones	24 103	20 663	16.6%	22 923
Rates
UK overnight	0.44%	0.17%		0.31%
UK 10 year	1.35%	1.20%		1.27%
UK Clearing Banks Base Rate	0.50%	0.25%		0.35%
LIBOR – three month	0.71%	0.34%		0.41%
SA R186	7.99%	8.84%		8.63%
Rand overnight	6.76%	6.97%		6.81%
SA prime overdraft rate	10.00%	10.50%		10.32%
JIBAR – three month	6.87%	7.36%		7.16%
US 10 year	2.74%	2.39%		2.41%
Commodities
Gold	US\$1 324/oz	US\$1 245/oz	6.3%	US\$1 285/oz
Brent Crude Oil	US\$70/bbl	US\$53/bbl	32.1%	US\$58/bbl
Platinum	US\$936/oz	US\$940/oz	(0.4%)	US\$948/oz
Macro-economic
UK GDP (% change over the calendar year)	1.8%	1.9%
UK per capita GDP (calendar year, real value in Pounds at constant 2015 prices)*	29 670	29 328	1.2%
South Africa GDP (% change over the calendar year)	1.3%	0.6%
South Africa per capita GDP (calendar year, historical revised, real value in Rands at constant 2010 prices)	56 020	56 054	(0.1%)

Sources: Bureau For Economic Research, Bloomberg, IRESS, Johannesburg Stock Exchange, Macrobond, SARB Quarterly Bulletin, World Economic Forum.

* Population used in 2017 per capita GDP reflects estimated population as per the Office for National Statistics.

(continued)

Key income drivers

We provide a wide range of financial products and services to a select client base in three principal markets, the UK and Europe, South Africa and Asia/Australia. We are organised as a network comprising three principal business divisions: Asset Management, Wealth & Investment and Specialist Banking.

There are a number of key income drivers for our business which are discussed below and alongside.

Asset Management

Key income drivers Income impacted

• Fixed fees as a percentage of assets under management
• Variable performance fees.

primarily by

• Movements in the value of the assets underlying client portfolios
• Performance of portfolios against set benchmarks
• Net flows.

Income statement – primarily reflected as

– Fees and commissions.

Wealth & Investment

Key income drivers Income impacted

• Investment management fees levied as a percentage of assets under management
• Commissions earned for executing transactions for clients.

primarily by

• Movement in the value of assets underlying client portfolios
• The level of investment activity undertaken on behalf of clients, which, in turn, is affected by, among other things, the performance of the global stock markets (which drives investment opportunities), the equity investment risk appetite of our clients, tax considerations and market liquidity.

Income statement – primarily reflected as

– Fees and commissions.

Key income drivers	Income impacted primarily by	Income statement – primarily reflected as
– Lending activities.	– Size of loan portfolio – Clients' capital and infrastructural investments – Client activity – Credit spreads – Interest rate environment.	– Net interest income – Fees and commissions – Investment income.
– Cash and near cash balances.	– Capital employed in the business and capital adequacy targets – Asset and liability management policies and risk appetite – Regulatory requirements – Credit spreads – Interest rate environment.	– Net interest income – Trading income arising from balance sheet management activities.
– Deposit and product structuring and distribution.	– Distribution channels – Ability to create innovative products – Regulatory requirements – Credit spreads – Interest rate environment.	– Net interest income – Fees and commissions.
– Investments made (including listed and unlisted equities; debt securities; investment properties) – Gains or losses on investments – Dividends received.	– Macro- and micro-economic market conditions – Availability of profitable exit routes – Whether appropriate market conditions exist to maximise gains on sale – Attractive investment opportunities – Credit spreads.	– Net interest income – Investment income – Share of post taxation profit of associates.
– Advisory services.	– The demand for our specialised advisory services, which, in turn, is affected by applicable, regulatory and other macro- and micro-economic fundamentals.	– Fees and commissions.
– Derivative sales, trading and hedging.	– Client activity, including lending activity – Market conditions/volatility – Asset and liability creation – Product innovation.	– Fees and commissions – Trading income arising from customer flow.
– Transactional banking services.	– Levels of activity – Ability to create innovative products – Appropriate systems infrastructure.	– Net interest income – Fees and commissions.

Investec integrated annual report 2018 41

Specialist Banking

(continued)

An overview of the principal risks relating to our operations

The most material and significant risks we face, which the board and senior management believe could have an impact on our operations, financial performance, viability and prospects are summarised briefly below with further details provided in volumes one and two of the integrated annual report. The board, through its various sub-committees, has performed a robust assessment of these principal risks. For additional information pertaining to the management and monitoring of these principal risks, see the references provided. Regular reporting of these risks is made to senior management, the executives and the board at the group risk and capital committee (GRCC) and board risk and capital committee (BRCC).

The group's board approved risk appetite framework is provided on page 11 in volume two. The board recognises that, even with sound appetite and judgement, extreme events can happen which are completely outside of the board's control. It is however, necessary to assess these events and their impact and how they may be mitigated by considering the risk appetite framework if necessary. It is policy to regularly carry out multiple stress testing scenarios which in theory test extreme, but plausible events and from that assess and plan what can be done to mitigate the potential outcome.

Principal risks	Key mitigating actions	Further information provided
Credit and counterparty risk
Credit and counterparty risk is defined as the risk arising from an obligor's (typically a client or counterparty) failure to meet the terms of any agreement thereby resulting in a loss to the group.	• Independent credit committees exist in each geography where we assume credit risk. These committees operate under board approved delegated limits, policies and procedures. • There is a high level of executive involvement and non-executive review and oversight in the credit decision-making forums. • Our credit exposures are to a select target market comprising high-income and high net worth individuals, established corporates, and medium-sized enterprises. • Our risk appetite continues to favour lower risk, income-based lending, with exposures well collateralised and credit risk taken over a short to medium term. • Investec has a limited appetite for unsecured debt, thus the credit risk mitigation technique most commonly used is the taking of collateral, with a strong preference for tangible assets. • Portfolio reviews (including stress testing analyses) are undertaken on all material businesses, where the portfolios are analysed to assess any migration in portfolio quality, highlight any vulnerabilities, identify portfolio concentrations and make appropriate recommendations, such as a reduction in risk appetite limits or specific exposures.	Pages 16 to 49 in volume two.

(continued)

Principal risks Country risk	Key mitigating actions	Further information provided
Country risk refers to the risk of lending to a counterparty operating in a particular country or the risk inherent in sovereign exposure, i.e. the risk of exposure to loss caused by events in other countries. Country risk covers all forms of lending or investment activity whether to/with individuals, corporates, banks or governments.	• Exposures are only to politically stable jurisdictions that we understand and have preferably operated in before. • There is little appetite for exposures outside of the group's pre-existing core geographies or target markets. • The legal environment should be tested, have legal precedent in line with OECD standards and have good corporate governance. • In certain cases, we may make use of political risk insurance to mitigate exposure where deemed necessary.	Page 17 in volume two.
Investment risk
Investment risk in the banking book arises primarily from the group's principal investments (private equity) and property investment activities, where the group invests in largely unlisted companies and select property investments, with risk taken directly on the group's balance sheet.	• Independent credit and investment committees exist in each geography where we assume investment risk. • Risk appetite limits and targets are set to limit our exposure to equity and investment risk. • As a matter of course, concentration risk is avoided and investments are well spread across geographies and industries.	Pages 50 to 53 in volume two.

(continued)

Principal risks	Key mitigating actions	Further information provided
Market risk in the trading book
Traded market risk is the risk of potential changes in the value of the trading book as a result of changes in market risk factors such as interest rates, equity prices, commodity prices, exchange rates, credit spreads and the underlying volatilities where derivatives are traded.	• To manage, measure and mitigate market risk, we have independent market risk management teams in our core geographies where we assume market risk. • The focus of our trading activities is primarily on supporting client activity. Our strategic intent is that proprietary trading should be limited and that trading should be conducted largely to facilitate clients in deal execution. • Within our trading activities, we act as principal with clients or the market. Market risk, therefore, exists where we have taken on principal positions resulting from market-making, underwriting, investments and limited proprietary trading in the foreign exchange, capital and money markets. The focus of these businesses is primarily on supporting client activity. • Measurement techniques used to quantify market risk arising from our trading activities include sensitivity analysis, value at risk (VaR), stressed VaR (sVaR), expected shortfall (ES) and extreme value theory (EVT). Stress testing and scenario analysis are used to simulate extreme conditions to supplement these core measures.	Pages 56 to 62 in volume two.
Liquidity risk
Liquidity risk refers to the possibility that, despite being solvent, we have insufficient capacity to fund increases in assets or are unable to meet our payment obligations as they fall due, in normal and stressed conditions. This includes repaying depositors or maturing wholesale debt. This risk arises from mismatches in the timing of cash flows, and is inherent in all banking operations and can be impacted by a range of institution-specific and market-wide events.	• Each geographic entity must be self-sufficient from a funding and liquidity standpoint. • Our banking entities in South Africa and the UK are ring-fenced from one another and are required to meet the regulatory liquidity requirements in the jurisdictions in which they operate. • We maintain a liquidity buffer in the form of unencumbered cash, government or rated securities (typically eligible for repurchase with the central bank), and near cash well in excess of the statutory requirements as protection against unexpected disruptions in cash flows. • The maintenance of sustainable prudent liquidity resources takes precedence over profitability. • We target a diversified funding base, avoiding undue concentrations by investor type, maturity, market source, instrument and currency. • Stable customer deposits must fully fund our core loan book, with little reliance therefore placed on wholesale funding. • The group does not rely on committed funding lines for protection against unforeseen interruptions to cash flow. • The balance sheet risk management team independently monitors key daily funding metrics and liquidity ratios to assess potential risks to the liquidity position, which further act as early warning indicators of potential normal market disruption. • Daily liquidity stress tests are carried out.	Pages 62 to 70 in volume two.

(continued)

Principal risks	Key mitigating actions	Further information provided
Capital risk
The risk that we do not have sufficient capital to meet regulatory requirements or that capital is inefficiently deployed across the group.	• Both the Investec Limited and Investec plc groups undertake an approach to capital management that utilises both regulatory capital as appropriate to that jurisdiction and internal capital, which is an internal risk-based assessment of capital requirements. • The determination of target capital is driven by our risk profile, strategy and risk appetite, taking into account the regulatory and market factors applicable to the group. • At the most fundamental level, we seek to balance our capital consumption between prudent capitalisation in the context of the group's risk profile and optimisation of shareholder returns. • Our internal capital framework is designed to manage and achieve this balance. • The framework has been approved by the board and is managed by the DLC capital committee, which is responsible for oversight of the management of capital on a regulatory and an internal capital basis.	Pages 78 to 91 in volume two.
Non-trading interest rate risk
Non-trading interest rate risk, otherwise known as interest rate risk in the banking book, arises from the impact of adverse movements in interest rates on both net interest earnings and economic value of equity. Non-trading interest rate risk in the banking book is an inherent consequence of conducting banking activities, and arises from the provision of retail and wholesale (non-trading) banking products and services.	• The daily management of interest rate risk in the banking book is centralised within the Central Treasury function of each geographic entity and is subject to local independent risk and Asset and Liability committee (ALCO) review. • Together with the business, the treasurer develops strategies regarding changes in the volume, composition, pricing and interest rate characteristics of assets and liabilities to mitigate the interest rate risk and ensure a high degree of net interest margin stability over an interest rate cycle. These are presented, debated and challenged in the liability product and pricing forum and the ALCO. • Each geographic entity has its own board approved non-trading interest rate risk policy and risk appetite, which dictates that long-term (>1 year) non-trading interest rate risk is materially eliminated. Where natural hedges between banking book items do not suffice to reduce the exposure within defined limits, interest rate swaps are used to transform fixed rate assets and liabilities into variable rate items. • Non-trading interest rate risk is measured and analysed by utilising standard tools of traditional interest rate repricing mismatch and NPV sensitivity to changes in interest rate risk factors.	Pages 70 to 73 in volume two.

Overview of the year

(continued)

Principal risks	Key mitigating actions	Further information provided
Operational risk
Operational risk is defined as the potential or actual impact to the group as a result of failures relating to internal processes, people, systems or from external events. The impacts can be financial as well as non financial such as customer detriment, reputational or regulatory consequences. Operational risk includes key aspects such as: cyber security; information security; financial crime; technology; outsourcing and process failure; business continuity; regulatory and compliance.	• An independent Group Operational Risk Management function ensures that operational risk policies and procedures are developed and applied consistently and effectively throughout the group. • Business unit management, supported by operational risk managers who operate at a business unit level, are responsible for embedding and implementing operational risk practices and policies. • Ensuring that personnel are adequately skilled at both a business unit and a group level.	Pages 74 to 77 in volume two.
Reputational and strategic risk
Reputational risk is damage to our reputation, name or brand. Reputational risk is often associated with strategic decisions made and also arises as a result of other risks manifesting and not being appropriately mitigated.	• We have various policies and practices to mitigate reputational risk, including strong values that are regularly and proactively reinforced. • Strategic and reputational risk is mitigated as much as possible through detailed processes and governance/escalation procedures from business units to the board, and from regular, clear communication with shareholders, customers and all stakeholders. • A disclosure and public communications policy has been approved by the board.	Page 77 in volume two.

(continued)

Principal risks	Key mitigating actions	Further information provided
Conduct risk
Conduct risk means the risk that detriment is caused to the group, its customers, its counterparties or the market, as a result of inappropriate execution of business activities.	• Investec's approach to conduct risk is driven by our values and philosophies, ensuring that Investec operates with integrity and puts the well-being of its clients at the heart of how the business is run. • Investec ensures that its products and services are scrutinised and regularly reviewed to identify any issues early on and to make sure they are escalated for appropriate resolution and, where necessary, remedial action. • Investec's conduct risk policy aims to create an environment for consumer protection and market integrity within the business, supported with the right conduct risk management framework. • Customer and market conduct committees exist in South Africa and the UK, with the objective of ensuring that Investec maintains a client-focused and fair outcomes-based culture.	Page 78 in volume two.
Compliance, governance and regulatory risk
The risks of changing legislation, regulation, policies, voluntary codes of practice and their interpretation in the markets in which we operate can have a significant impact on the group's operations, business prospects, costs, liquidity and capital requirements.	• Investec remains focused on complying with the highest levels of compliance to professional standards and integrity in each of our jurisdictions. Our culture is a major component of our compliance framework and is supported by robust policies, processes and talented professionals who ensure that the interests of our customers and shareholders remain at the forefront of everything we do. • We have independent compliance functions in each of our core operating jurisdictions, which ensure that the group implements the required processes, practices and policies to adhere to applicable regulations and legislation. • A global compliance forum exists which establishes and standardises group standards where applicable.	Pages 94 and 95 in volume two.

(continued)

Principal risks	Key mitigating actions
Legal risk
Legal risk is the risk of loss resulting from any of our rights not being fully enforceable or from our obligations not being properly performed. This includes our rights	needs dictate.
and obligations under contracts entered into with counterparties.

Principal risks	Key mitigating actions	provided
Legal risk
Legal risk is the risk of loss resulting from any of our rights not being fully enforceable or from our obligations not being properly performed. This includes our rights and obligations under contracts entered into with counterparties.	• A legal risk forum is constituted in each significant legal entity within the group to ensure we keep abreast of developments and changes in the nature and extent of our activities, and to benchmark our processes against best practice. • We have a central independent in-house legal team with embedded business unit legal officers where business volumes or needs dictate. • This is supplemented by a pre-approved panel of third party firms to be utilised where necessary.
Business risk
Business risk means the risk that external market factors create income volatility.	• The risk of loss caused by income volatility is mitigated through diversification of income sources, reducing concentration of income from any one type of business or geography and maintaining a flexible cost base. • Group strategy is directed towards generating and sustaining a diversified income base for the group. • In the instance where income falls we retain the flexibility to reduce costs (particularly variable remuneration), thereby maintaining a competitive cost to income ratio.	Pages 34 to 39.
	Environmental (including climate change), social and economic risk
The risk that our lending and investment activities give rise to unintended environmental (including climate change), social and economic consequences.	• Investec has a holistic approach to corporate responsibility, which runs beyond recognising our own footprint on the environment, includes our many corporate social investment activities and is based on a broader responsibility to our environment and society. • Accordingly, corporate responsibility risk considerations are considered by the credit committee and investment committee when making lending or investment decisions. • There is also oversight by the social and ethics committee (a board committee) on social and environmental issues, including climate related impact considerations.	Pages 171 to 183 and refer to our corporate responsibility report on our website.
People risk
The risk that we may be unable to recruit, retain and motivate key personnel.	• We focus on building a strong, diverse and capable workforce by providing a workplace that stimulates and rewards distinctive performance. • We invest significantly in a number of opportunities for developing and upskilling employees, and in leadership programmes to develop current and future leaders of the group. • Our internal people activities involve dedicated divisions such as Human Resources (HR) and Organisation Development (OD), which serve to supplement the ongoing people focus of our	Pages 175 to 180 and refer to our corporate responsibility report on our website.

individual business units. • The Investec careers and HR teams are mandated to enable the attraction, development and retention of talent who can perform in a manner consistent with our culture and values. OD acts to strengthen the culture of the business, ensure its values are lived, build capability and contribute to the long-term sustainability of the organisation.

Further information

(continued)

Emerging and other risks

In addition to the principal risks outlined above, the risks below may have the potential to impact and/or influence our principal risks and consequently the operations, financial performance, viability and prospects of the group. A number of these risks are beyond the group's control and are considered in our capital plans, stress testing analyses and budget processes, where applicable. These emerging risks are briefly highlighted below and should be read in the context of our approach to risk management and our overall group risk appetite framework (refer to volume two of the integrated annual report).

Additional risks and uncertainties not presently known to us or that we currently deem immaterial may in the future also negatively impact our business operations.

• Macro-economic and geopolitical risks: The group is subject to inherent risks arising from general macroeconomic and geopolitical conditions in the countries in which it operates, including in particular the UK and South Africa, as well as global economic and geopolitical conditions.

A macro-economic overview is provided on pages 34 to 39, and the impact of changes in the external environment during our financial year is discussed in the respective divisional sections on pages 94, 100, 101, 113 and 114.

• Fluctuations in exchange rates could have an adverse impact on the group's results of operations: The group's reporting currency is Pounds Sterling. Certain of our operations are conducted by entities outside the UK. The results of operations and the financial position of individual companies are reported in the local currencies of the countries in which they are domiciled, including Rand, Australian Dollars, Euros and US Dollars. These results are then translated into Pounds Sterling at the applicable foreign currency exchange rates for inclusion in the group's financial statements. In the case of the income statement, the weighted average rate for the relevant period is applied and, in the case of the balance sheet, the relevant closing rate is used. Exchange rates between local currencies and Pounds Sterling have fluctuated substantially over the financial year.

Further information is provided on page 28.

• The group's borrowing costs and its access to debt capital markets depend significantly on its credit ratings: Rating agencies have, in the past, altered their ratings of all or a majority of the participants in a given industry as a result of the risks affecting that industry. A reduction in the group's respective banking entities long- or short-term credit ratings could increase their borrowing costs, limit their access to capital markets and trigger additional collateral requirements in derivative contracts and other secured funding arrangements.

Following downgrades to the South African Sovereign credit rating in April 2017, the foreign currency credit ratings of Investec Limited and Investec Bank Limited were downgraded, as no banking entity can typically have a foreign currency rating higher than the Sovereign rating of the country in which it operates. Conversely, rating upgrades and favourable changes in outlook were received by Investec Bank plc and Investec plc during the 2018 financial year. Further information is provided on page 7 in volume two.

• The financial services industry in which the group operates is intensely competitive: The financial services industry is competitive and the group faces substantial competition in all aspects of its business. The group has developed leading positions in many of its core areas of activity, but does not take competition lightly, and our strategic objectives continue to focus on building business depth; providing the best integrated solution to our clients; and leveraging our digitisation strategy in order to remain competitive.

Refer to pages 20 to 22 for further information.

• The group may be exposed to pension risk in relation to its UK operations: Pension risk arises from obligations arising from defined benefit pension schemes where the group is required to fund any deficit in the schemes. There is one remaining defined benefit pension scheme within the group at 31 March 2018, which is closed to new business.

During the year the second defined benefit scheme entered into a buy-out, with the assets and liabilities of the scheme being transferred to a third party insurer. Members now receive their pension from the third party insurer and Investec has no remaining liability relating to this scheme. Refer to pages 77 and 78 in volume two and pages 97 to 100 in volume three for further information.

Emerging risks which have continued to unfold and develop during the year, and which are included in our stress tests include:

• The UK's exit from the European Union: On 23 June 2016 the UK voted to leave the European Union and the formal exit process commenced on 29 March 2017 when the UK triggered Article 50. Although negotiations between the UK and the European Union are still underway, the group faces certain risks associated with the UK's decision to exit the European Union.

For example, the UK's vote in favour of leaving the European Union may alter the legal framework applicable to the group's European operations, including in relation to our current branch structure in Ireland and our ability to provide certain services from London to European clients.

Investec Bank plc, Investec Asset Management UK and Investec Wealth & Investment UK have each carried out a Brexit impact assessment, identified key risks and are taking measures to mitigate them which will allow the group to service European clients once the UK leaves the EU.

(continued)

Overview of the year

The political events that unfolded in the year under review in South Africa, and the outlook for the Sovereign's ratings:

In the fiscal year under review South Africa experienced key credit rating changes, with downgrades from investment to sub-investment grade from both Standard & Poor's and Fitch. These downgrades occurred on the marked deterioration in both public finances and the financial health of key State Owned Entities (SOEs), as well as persistent low economic growth and weak GDP per capita. The October 2017 Medium-Term Budget drove further downgrades from Standard & Poor's (foreign and local currency long-term ratings) on a shift away from fiscal consolidation, with business and investor sentiment becoming very negative.

The back end of 2017 saw a rally in South African domestic shares as the election of Cyril Ramaphosa as leader of the ANC led to renewed enthusiasm about the growth prospects for South Africa. There has so far been little hard evidence of a turnaround on the ground but longer-term growth forecasts have been revised up. While business confidence lifted in early 2018, it is not yet at levels that indicate a faster pace of business activity. While the chance of further credit rating downgrades has diminished notably, there is still some risk, and no credit rating upgrades are expected in the coming year.

A key risk for South Africa is the extreme deterioration in many SOEs' finances that are guaranteed by the state, while union wage demands risk putting South Africa's spending cuts, and so its expenditure ceiling and fiscal consolidation at risk. Should South Africa not meet the fiscal consolidation it has outlined in its 2018 Budget the risk for sovereign rating downgrades would rise substantially again.

The group runs a number of stress scenarios which consider the impact of further sovereign rating downgrades on our business.

Further information is provided on page 34.

Statutory income statement analysis

The overview that follows will highlight the main reasons for the variance in the major category line items on the face of the statutory income statement during the year under review.

Further details on the key income drivers and significant variances in the various components of our operating income, expenses and profit can be found in the description of our principal businesses on pages 88 to 114.

Total operating income

Total operating income before impairment losses on loans and advances increased by 6.9% to £2 443.5 million (2017: £2 286.2 million).

£'000	31 March 2018	% of total income	31 March 2017	% of total income	% change
Net interest income	760 398	31.1%	679 895	29.7%	11.8%
Net fees and commissions income	1 361 207	55.7%	1 271 524	55.6%	7.1%
Investment income	130 048	5.3%	136 203	6.0%	(4.5%)
Share of post taxation profit of associates	46 823	1.9%	18 890	0.8%	147.9%
Trading income arising from customer flow	138 226	5.7%	158 001	6.9%	(12.5%)
Trading income arising from balance sheet management
and other trading activities	(4 307)	(0.2%)	8 218	0.4%	(152.4%)
Other operating income	11 115	0.5%	13 483	0.6%	(17.6%)
Total operating income	2 443 510	100.0%	2 286 214	100.0%	6.9%

The following table sets out information on total operating income before impairment losses on loans and advances by geography for the year under review.

£'000	31 March 2018	% of total income	31 March 2017	% of total income	% change
UK and Other	1 380 219	56.5%	1 306 940	57.2%	5.6%
Southern Africa	1 063 291	43.5%	979 274	42.8%	8.6%
Total operating income before impairments	2 443 510	100.0%	2 286 214	100.0%	6.9%

The following table sets out information on total operating income before impairment losses on loans and advances by division for the year under review.

£'000	31 March 2018	% of total income	31 March 2017	% of total income	% change
Asset Management	539 678	22.1%	497 990	21.8%	8.4%
Wealth & Investment	404 797	16.6%	360 569	15.8%	12.3%
Specialist Banking	1 499 035	61.3%	1 427 655	62.4%	5.0%
Total operating income before impairments	2 443 510	100.0%	2 286 214	100.0%	6.9%

% of total operating income before impairments

Net interest income

Net interest income increased by 11.8% to £760.4 million (2017: £679.9 million) driven by robust levels of lending activity across the banking businesses and further supported by a reduction in the UK's cost of funding. This was slightly offset by the roll off of higher yielding debt securities and increased subordinated debt in South Africa.

£'000	31 March 2018	31 March 2017	Variance	% change
Asset Management	5 471	5 118	353	6.9%
Wealth & Investment	10 744	11 968	(1 224)	(10.2%)
Specialist Banking	744 183	662 809	81 374	12.3%
Net interest income	760 398	679 895	80 503	11.8%

A further analysis of interest income and interest expense is provided in the tables below.

		UK and Other		Southern Africa		Total group
For the year to 31 March 2018 £'000	Notes	Balance sheet value	Interest income	Balance sheet value	Interest income	Balance sheet value	Interest income
Cash, near cash and bank debt and sovereign
debt securities	1	6 486 676	26 413	8 025 280		425 715 14 511 956	452 128
Core loans and advances	2	9 687 224		518 070 15 444 873		1 366 945 25 132 097	1 885 015
Private client		3 785 828		161 107 10 426 762		916 099 14 212 590	1 077 206
Corporate, institutional and other clients		5 901 396	356 963	5 018 111		450 846 10 919 507	807 809
Other debt securities and other loans and advances		610 316	54 927	641 096	43 794	1 251 412	98 721
Other interest-earning assets	3	–	–	17 999	55 145	17 999	55 145
Total interest-earning assets		16 784 216		599 410 24 129 248		1 891 599 40 913 464	2 491 009

Notes:

1. Comprises (as per the balance sheet) cash and balances at central banks; loans and advances to banks; non-sovereign and non-bank cash placements; reverse repurchase agreements and cash collateral on securities borrowed; sovereign debt securities; and bank debt securities.

2. Comprises (as per the balance sheet) loans and advances to customers and own originated loans and advances to customers securitised.

3. Comprises (as per the balance sheet) other securitised assets. No securitised assets are held at amortised cost outside of Southern Africa.

29.7% 55.6% 6.0% 0.8% 6.9% 0.4% 0.6%

(continued)

		UK and Other		Southern Africa		Total group
For the year to 31 March 2018 £'000	Notes	Balance sheet value	Interest expense	Balance sheet value	Interest expense	Balance sheet value	Interest expense
Deposits by banks and other debt-related securities	4	3 712 857	(92 513)	2 591 437	(123 500)	6 304 294	(216 013)
Customer accounts (deposits)		11 624 157		(113 972) 19 363 016	(1 247 509) 30 987 173		(1 361 481)
Other interest-bearing liabilities	5	–	–	136 812	(24 389)	136 812	(24 389)
Subordinated liabilities		579 673	(55 345)	903 314	(73 383)	1 482 987	(128 728)
Total interest-bearing liabilities		15 916 687		(261 830) 22 994 579	(1 468 781) 38 911 266		(1 730 611)
Net interest income			337 580		422 818		760 398
Net interest margin (local currency)			2.11%		1.84%**

		UK and Other		Southern Africa		Total group
For the year to 31 March 2017 £'000	Notes	Balance sheet value	Interest income	Balance sheet value	Interest income	Balance sheet value	Interest income
Cash, near cash and bank debt and sovereign debt
securities	1	5 621 557	33 255	8 260 231		398 053 13 881 788	431 308
Core loans and advances	2	8 620 742		471 547 14 086 395		1 188 974 22 707 137	1 660 521
Private client		3 454 366	151 645	9 413 110		798 380 12 867 476	950 025
Corporate, institutional and other clients		5 166 376	319 902	4 673 285	390 594	9 839 661	710 496
Other debt securities and other loans and advances		735 059	58 552	735 747	58 244	1 470 806	116 796
Other interest-earning assets	3	–	–	10 336	22 140	10 336	22 140
Total interest-earning assets		14 977 358		563 354 23 092 709		1 667 411 38 070 067	2 230 765

		UK and Other		Southern Africa		Total group
For the year to 31 March 2017 £'000	Notes	Balance sheet value	Interest expense	Balance sheet value	Interest expense	Balance sheet value	Interest expense
Deposits by banks and other debt-related securities	4	2 708 483	(87 872)	3 104 378	(118 225)	5 812 861	(206 097)
Customer accounts (deposits)		11 012 809		(130 419) 18 096 619	(1 087 496) 29 109 428		(1 217 915)
Other interest-bearing liabilities	5	–	–	90 125	(13 050)	90 125	(13 050)
Subordinated liabilities		579 356	(55 883)	823 282	(57 925)	1 402 638	(113 808)
Total interest-bearing liabilities		14 300 648		(274 174) 22 114 404	(1 276 696) 36 415 052		(1 550 870)
Net interest income			289 180		390 715		679 895
Net interest margin (local currency)			1.96%		1.86%**

Notes:

1. Comprises (as per the balance sheet) cash and balances at central banks; loans and advances to banks; non-sovereign and non-bank cash placements; reverse repurchase agreements and cash collateral on securities borrowed; sovereign debt securities; and bank debt securities.

2. Comprises (as per the balance sheet) loans and advances to customers; and own originated loans and advances to customers securitised.

3. Comprises (as per the balance sheet) other securitised assets. No securitised assets are held at amortised cost outside of Southern Africa.

4. Comprises (as per the balance sheet) deposits by banks; debt securities in issue; repurchase agreements and cash collateral on securities lent.

5. Comprises (as per the balance sheet) liabilities arising on securitisation of own originated assets; and liabilities arising on securitisation. No liabilities on securitisation are held at amortised cost outside of Southern Africa.

** Impacted by debt funding issued by the Investec Property Fund in which the group has a 26.75% interest (2017: 27.86%). Excluding this debt funding cost, the net interest margin amounted to 1.99% (2017: 1.99%).

Net fee and commission income

Net fee and commission income increased by 7.1% to £1 361.2 million (2017: £1 271.5 million) supported by higher average funds under management and strong net inflows in the Asset Management and Wealth Management businesses, as well as a good performance from the South African banking businesses.

£'000	31 March 2018	31 March 2017	Variance	% change
Asset Management	537 134	484 872	52 262	10.8%
Wealth & Investment	382 463	343 708	38 755	11.3%
Specialist Banking	441 610	442 944	(1 334)	(0.3%)
Net fee and commission income	1 361 207	1 271 524	89 683	7.1%

Further information on net fees by type of fee and geography is provided in the tables below.

For the year to 31 March 2018 £'000	UK and Other	Southern Africa	Total group
Asset management and wealth management businesses net fee and commission income	652 137	267 460	919 597
Fund management fees/fees for assets under management	743 670	232 550	976 220
Private client transactional fees	54 629	42 348	96 977
Fee and commission expense	(146 162)	(7 438)	(153 600)
Specialist Banking net fee and commission income	197 797	243 813	441 610
Corporate and institutional transactional and advisory services	192 579	216 216	408 795
Private client transactional fees	14 757	46 698	61 455
Fee and commission expense	(9 539)	(19 101)	(28 640)
Net fee and commission income	849 934	511 273	1 361 207
Annuity fees (net of fees payable)	662 924	439 834	1 102 758
Deal fees	187 010	71 439	258 449

For the year to 31 March 2017 £'000	UK and Other	Southern Africa	Total group
Asset management and wealth management businesses net fee and commission income	575 931	252 649	828 580
Fund management fees/fees for assets under management	639 100	224 498	863 598
Private client transactional fees	56 955	39 400	96 355
Fee and commission expense	(120 124)	(11 249)	(131 373)
Specialist Banking net fee and commission income	227 932	215 012	442 944
Corporate and institutional transactional and advisory services	206 407	196 246	402 653
Private client transactional fees	29 684	37 298	66 982
Fee and commission expense	(8 159)	(18 532)	(26 691)
Net fee and commission income	803 863	467 661	1 271 524
Annuity fees (net of fees payable)	581 895	383 355	965 250
Deal fees	221 968	84 306	306 274

(continued)

Investment income

Investment income reduced by 4.5% to £130.0 million (2017: £136.2 million) as a result of a weaker performance from the unlisted investment portfolio in South Africa as well as the group's investments in its listed property funds.

£'000	31 March 2018	31 March 2017	Variance	% change
Asset Management	(15)	143	(158)	(> 100.0%)
Wealth & Investment	10 551	2 269	8 282	> 100.0%
Specialist Banking	119 512	133 791	(14 279)	(10.7%)
Investment income	130 048	136 203	(6 155)	(4.5%)

Further information on investment income is provided in the tables below.

For the year to 31 March 2018 £'000	UK and Other	Southern Africa	Total group
Realised	43 504	62 120	105 624
Unrealised^	6 435	(15 769)	(9 334)
Dividend income	10 171	18 107	28 278
Funding and other net related income/(costs)	8 405	(2 925)	5 480
Investment income	68 515	61 533	130 048

For the year to 31 March 2018 £'000	Investment portfolio (listed and unlisted equities)*	Debt securities (sovereign, bank and other)	Investment properties	Other asset categories	Total
UK and Other	62 106	8 509	(86)	(2 014)	68 515
Realised	38 516	5 779	(86)	(705)	43 504
Unrealised^	13 419	2 730	–	(9 714)	6 435
Dividend income	10 171	–	–	–	10 171
Funding and other net related income	–	–	–	8 405	8 405
Southern Africa	11 832	7 338	39 499	2 864	61 533
Realised	41 070	7 338	12 580	1 132	62 120
Unrealised^	(42 529)	–	26 919	(159)	(15 769)
Dividend income	17 986	–	–	121	18 107
Funding and other net related (costs)/income	(4 695)	–	–	1 770	(2 925)
Total investment income	73 938	15 847	39 413	850	130 048

* Including embedded derivatives (warrants and profit shares).

^ In a year of realisation, any prior period mark-to-market gains/(losses) recognised are reversed in the unrealised line item.

(continued)

Ov erv
iew of
th
e y
ea r

For the year to 31 March 2017 £'000	UK and Other	Southern Africa	Total group
Realised	50 335	51 070	101 405
Unrealised^	(9 271)	6 940	(2 331)
Dividend income	12 339	18 540	30 879
Funding and other net related income/(costs)	6 572	(322)	6 250
Investment income	59 975	76 228	136 203

	Investment portfolio (listed and	Debt securities (sovereign,
For the year to 31 March 2017 £'000	unlisted equities)*	bank and other)	Investment properties	Other asset categories	Total
UK and Other	47 786	(3 344)	8 329	7 204	59 975
Realised	38 533	(8 482)	18 337	1 947	50 335
Unrealised^	(3 086)	5 138	(10 008)	(1 315)	(9 271)
Dividend income	12 339	–	–	–	12 339
Funding and other net related income	–	–	–	6 572	6 572
Southern Africa	21 313	8 615	44 992	1 308	76 228
Realised	20 483	6 360	22 003	2 224	51 070
Unrealised^	(13 504)	2 255	22 989	(4 800)	6 940
Dividend income	18 102	–	–	438	18 540
Funding and other net related (costs)/income	(3 768)	–	–	3 446	(322)
Total investment income	69 099	5 271	53 321	8 512	136 203

* Including embedded derivatives (warrants and profit shares).

^ In a year of realisation, any prior period mark-to-market gains/(losses) recognised are reversed in the unrealised line item.

Share of post taxation profit of associates

Share of post taxation profit of associates of £46.8 million (2017: £18.9 million) primarily reflects earnings in relation to the group's investment in the IEP Group Proprietary Limited (IEP Group).

Trading income

Trading income arising from customer flow decreased by 12.5% to £138.2 million (2017: £158.0 million) as a consequence of lower volatility, relative to the elevated levels experienced in the prior year following the Brexit vote, as well as losses incurred in South Africa on Steinhoff (refer to page 63 for additional information). Trading income from other trading activities reflected a loss of £4.3 million (2017: £8.2 million income) predominantly impacted by currency volatility over the year.

Arising from customer flow

£'000	31 March 2018	31 March 2017	Variance	% change
Wealth & Investment	537	1 028	(491)	(47.8%)
Specialist Banking	137 689	156 973	(19 284)	(12.3%)
Trading income arising from customer flow	138 226	158 001	(19 775)	(12.5%)

Arising from balance sheet management and other trading activities

£'000	31 March 2018	31 March 2017	Variance	% change
Asset Management	(5 077)	2 213	(7 290)	(>100.0%)
Wealth & Investment	(150)	87	(237)	(>100.0%)
Specialist Banking	920	5 918	(4 998)	(84.5%)
Trading income arising from balance sheet management and
other trading activities	(4 307)	8 218	(12 525)	(>100%)

Impairment losses on loans and advances

Impairments on loans and advances increased from £111.5 million to £148.6 million, largely reflecting an increase in impairments for accelerated exits anticipated to occur on certain legacy assets. The credit loss ratio on core loans and advances amounted to 0.61% (2017: 0.54%). Since 31 March 2017 gross defaults have increased from £476.0 million to £532.7 million largely due to a few specific defaults in the UK banking business. The percentage of default loans (net of impairments but before taking collateral into account) to core loans and advances amounted to 1.17% (31 March 2017: 1.22%). The ratio of collateral to default loans (net of impairments) remains satisfactory at 1.72 times (31 March 2017: 1.63 times).

Further information is provided on page 35 in volume two.

£'000	31 March 2018	31 March 2017	Variance	% change
UK and Other	(106 085)	(74 956)	(31 129)	41.5%
Southern Africa	(42 471)	(36 498)	(5 973)	16.4%
Total impairment losses on loans and advances	(148 556)	(111 454)	(37 102)	33.3%
Impairment losses on loans and advances in home currency
Southern Africa (R'million)	(726)	(659)	(67)	10.2%

Operating costs

The cost to income ratio amounted to 66.9% (2017: 66.3%). Our cost to income ratio will remain elevated as we continue to invest in a number of growth strategies across the businesses which should yield returns in the medium term. Total operating costs grew by 7.9% to £1 635.2 million (2017: £1 515.4 million) reflecting continued investment into IT and digital initiatives and higher headcount across divisions to support increased activity and growth strategies; notably the build out of the UK private client offerings in the Specialist Banking and Wealth & Investment businesses. Cost growth in South Africa was somewhat offset by the pending acquisition of the South African head office building and the related rental provision no longer required.

£'000	31 March 2018	% of total operating costs	31 March 2017	% of total operating costs	% change
Staff costs	(1 191 691)	72.9%	(1 079 701)	71.2%	10.4%
– fixed	(773 802)	47.3%	(690 161)	45.5%	12.1%
– variable	(417 889)	25.6%	(389 540)	25.7%	7.3%
Business expenses	(190 385)	11.6%	(177 057)	11.7%	7.5%
Premises expenses (excluding depreciation)	(59 442)	3.7%	(80 083)	5.3%	(25.8%)
Equipment expenses (excluding depreciation)	(93 928)	5.8%	(82 928)	5.5%	13.3%
Marketing expenses	(70 911)	4.3%	(70 625)	4.7%	0.4%
Depreciation and impairment of property, plant,
equipment and software	(26 383)	1.6%	(22 837)	1.5%	15.5%
Depreciation on operating leased assets	(2 421)	0.1%	(2 169)	0.1%	11.6%
Total operating costs	(1 635 161)	100.0%	(1 515 400)	100.0%	7.9%

(continued)

The following table sets out certain information on total operating costs by geography for the year under review.

£'000	31 March 2018	% of total operating costs	% of total 31 March operating 2017 costs		% change
UK and Other	(1 076 462)	65.8%	(1 007 271)	66.5%	6.9%
Southern Africa	(558 699)	34.2%	(508 129)	33.5%	10.0%
Total operating costs	(1 635 161)	100.0%	(1 515 400)	100.0%	7.9%

The following table sets out certain information on total operating costs by division for the year under review.

£'000	31 March 2018	% of total operating costs	31 March 2017	% of total operating costs	% change
Asset Management	(361 633)	22.1%	(333 166)	22.0%	8.5%
Wealth & Investment	(306 232)	18.7%	(267 326)	17.6%	14.6%
Specialist Banking	(917 698)	56.2%	(866 132)	57.2%	6.0%
Group costs	(49 598)	3.0%	(48 776)	3.2%	1.7%
Total operating costs	(1 635 161)	100.0%	(1 515 400)	100.0%	7.9%

% of total operating costs

31 March 2018

£1 635.2 million total operating costs

Staff costs	72.9%
Business expenses	11.6%
Premises expenses	3.7%
Equipment expenses	5.8%
Marketing expenses	4.3%
Depreciation and impairment of property, plant, equipment and software	1.6%
Depreciation on operating leased assets	0.1%

31 March 2017

£1 515.4 million total operating costs

Staff costs	71.2%
Business expenses	11.7%
Premises expenses	5.3%
Equipment expenses	5.5%
Marketing expenses	4.7%
Depreciation and impairment of property, plant, equipment and software	1.5%
Depreciation on operating leased assets	0.1%

Operating profit before goodwill, acquired intangibles, non-operating items and after other non-controlling interests

As a result of the foregoing factors, our operating profit before goodwill, acquired intangibles, non-operating items, taxation and after other non-controlling interests increased by 1.4% from £599.1 million to £607.5 million.

The following tables set out information on operating profit before goodwill, acquired intangibles, non-operating items, taxation and after other non-controlling interests by geography and by division for the year under review.

For the year to 31 March 2018 £'000	UK and Other	Southern Africa	Total	group % change	% of total
Asset Management	103 918	74 127	178 045	8.0%	29.3%
Wealth & Investment	69 269	29 296	98 565	5.7%	16.2%
Specialist Banking	59 958	320 535	380 493	(2.4%)	62.6%
	233 145	423 958	657 103	1.4%	108.1%
Group costs	(33 789)	(15 809)	(49 598)	(1.7%)	(8.1%)
Total group	199 356	408 149	607 505	1.4%	100.0%
Other non-controlling interest – equity			52 288
Operating profit			659 793
% change	(11.4%)	9.1%	1.4%
% of total	32.8%	67.2%	100.0%

For the year to 31 March 2017 £'000	UK and Other	Southern Africa	Total	group % change	% of total
Asset Management	91 262	73 562	164 824	22.3%	27.5%
Wealth & Investment	65 190	28 053	93 243	8.8%	15.6%
Specialist Banking	104 604	285 226	389 830	17.8%	65.0%
	261 056	386 841	647 897	17.5%	108.1%
Group costs	(36 163)	(12 613)	(48 776)	6.5%	(8.1%)
Total group	224 893	374 228	599 121	18.5%	100.0%
Other non-controlling interest – equity			35 201
Operating profit			659 360
% of total	37.5%	62.5%	100.0%

(continued)

Key income drivers in our core businesses

The information below reflects our key income drivers in our core businesses.

Asset Management

Global business (in Pounds Sterling)	31 March 2018	31 March 2017	31 March 2016	31 March 2015	31 March 2014	31 March 2013	31 March 2012
Operating margin	33.0%	33.1%	32.0%	34.2%	34.7%	34.5%	35.7%
Net inflows in funds under management as a % of opening funds under management	5.6%	(0.8%)	4.1%	4.6%	3.7%	6.7%	8.8%
Average income yield earned on funds under management^	0.54%	0.58%	0.55%	0.60%	0.60%	0.62%	0.62%

Wealth & Investment

Global business (in Pounds Sterling)	31 March 2018	31 March 2017	31 March 2016	31 March 2015	31 March 2014	31 March 2013	31 March 2012
Operating margin	24.3%	25.9%	26.4%	25.2%	22.9%	20.3%	19.7%
Net organic growth in funds under management as a % of opening funds under management	3.6%	2.7%	4.5%	6.6%	3.5%	2.0%	(5.3%)
Average income yield earned on funds under management^	0.73%	0.72%	0.71%	0.72%	0.71%	0.66%	0.61%
UK and Other^^ (in Pounds Sterling)
Operating margin^^	22.0%	23.5%	24.6%	22.7%	20.1%	17.3%	16.3%
Net organic growth in funds under management as a % of opening funds under management	5.0%	4.2%	4.5%	7.1%	5.1%	1.3%	(7.4%)
Average income yield earned on funds under management^	0.87%	0.85%	0.87%	0.89%	0.89%	0.86%	0.80%
South Africa (in Rands)
Operating margin	32.3%	33.8%	33.1%	35.1%	33.9%	31.3%	28.5%
Net organic growth in discretionary funds under management as a % of opening discretionary funds under management	4.6%	8.1%	10.4%	8.5%	13.6%	13.9%	8.7%
Average income yield earned on funds under management^*	0.49%	0.47%	0.45%	0.41%	0.41%	0.37%	0.39%

* A large portion of the funds under management are non-discretionary funds.

^ The average income yield on funds under management represents the total operating income for the period as a percentage of the average of opening and closing funds under management. This calculation does not take into account the impact of market movements throughout the period on funds under management or the timing of acquisitions and disposals during the respective periods.

^^ 'Other' comprises the Wealth operations in Switzerland, the Republic of Ireland, the Channel Islands, and Hong Kong. Excluding 'Other', Investec Wealth & Investment UK has an operating margin of 23.2% (2017: 26.8%).

(continued)

Specialist Banking – statutory basis

Global business (in Pounds Sterling)	31 March 2018	31 March 2017	31 March 2016	31 March 2015	31 March 2014	31 March 2013	31 March 2012
Cost to income ratio	61.2%*	60.6%*	60.1%*	63.1%*	63.2%*	63.1%	62.4%
ROE post-tax^	9.2%	10.5%	10.1%	8.6%	7.9%	6.4%	5.1%
ROE post-tax (ongoing business)^	11.7%	12.6%	13.0%	12.8%	11.9%	–	–
Growth in net core loans	10.7%	25.3%	5.4%	0.2%^^	(6.8%)	1.0%	(2.8%)
Growth in risk-weighted assets	5.6%	22.2%	2.2%	(4.9%)^^	(6.0%)	4.7%	1.5%
Defaults (net of impairments as a % of
core loans)	1.17%	1.22%	1.54%	2.07%	2.30%	2.73%	3.31%
Credit loss ratio on core loans	0.61%	0.54%	0.62%	0.68%	0.68%	0.84%	1.12%
UK and Other# (in Pounds Sterling)
Cost to income ratio	76.9%*	74.8%*	73.4%*	78.9%*	72.5%*	69.0%	68.3%
ROE post-tax^	3.2%	7.0%	5.5%	2.1%	3.6%	1.7%	(1.8%)
ROE post-tax (ongoing business)**^	8.5%	11.5%	11.4%	9.6%	10.9%	–	–
Growth in net core loans	12.4%	10.5%	10.5%	(14.1%)^^	(0.3%)	6.6%	0.3%
Growth in risk-weighted assets	8.2%	8.4%	6.7%	(15.5%)^^	0.4%	7.7%	4.6%
Defaults (net of impairments as a % of
core loans)	2.16%	1.55%	2.19%	3.00%	3.21%	3.75%	4.10%
Credit loss ratio on core loans	1.14%	0.90%	1.13%	1.16%	0.99%	1.16%	1.65%
Southern Africa (in Rands)
Cost to income ratio	47.1%*	46.9%*	46.5%*	47.2%*	51.0%*	55.5%	55.2%
ROE post-tax^	12.8%	12.7%	15.1%	15.2%	12.5%	10.0%	9.6%
ROE post-tax (excluding investment activities)##
	14.1%	15.3%	15.2%	14.8%	–	–	–
Growth in net core loans	8.7%	8.4%	19.7%	16.1%	10.6%	10.2%	6.6%
Growth in risk-weighted assets	3.0%	6.2%	15.1%	8.3%	11.0%	16.5%	11.9%
Defaults (net of impairments as a % of core loans)	0.56%	1.02%	1.05%	1.43%	1.46%	1.89%	2.73%
Credit loss ratio on core loans	0.28%	0.29%	0.26%	0.28%	0.42%	0.61%	0.65%

^ Divisional ROEs are reported on a pre-tax basis. For the purpose of this calculation we have applied the group's effective tax rate in its respective geographies to derive post-tax numbers. For 31 March 2018 in South Africa we have applied a 'normalised' tax rate of 18%. Capital allocated to the Specialist Bank as at 31 March 2018 was c.£1.5 billion in the UK and c.R35 billion in South Africa.

^^ Impacted by sale of assets.

* Excludes group costs.

** Further information is provided on pages 75 and 105.

# Includes UK, other non-Southern African jurisdictions and the legacy businesses.

## Refer to pages 109 and 110 for further information on the group's investment activities in South Africa.

(continued)

Impairment of goodwill

There was no impairment of goodwill in the current year.

Amortisation of acquired intangibles

Amortisation of acquired intangibles largely relates to the Wealth & Investment business and mainly comprises amortisation of amounts attributable to client relationships.

Goodwill and intangible assets analysis – balance sheet information

£'000	31 March 2018	31 March 2017
UK and Other	356 265	355 155
Asset Management	88 045	88 045
Wealth & Investment	243 343	243 169
Specialist Banking	24 877	23 941
South Africa	12 538	12 424
Wealth & Investment	2 174	2 061
Specialist Banking	10 364	10 363
Intangible assets	125 389	143 261
Total group	494 192	510 840

Taxation

The effective tax rate amounted to 9.6% (2017: 18.5%) mainly impacted by the lower rate in South Africa following the release of provisions no longer required.

	tax rates	Effective operational
	2018	2017	31 March 2018 £'000	31 March 2017 £'000	% change
UK and Other	19.6%	17.6%	(38 509)	(39 144)	(1.6%)
Southern Africa	4.9%	19.0%	(20 590)	(79 344)	(74.0%)
Tax	9.6%	18.5%	(59 099)	(118 488)	(50.1%)

We have published our tax strategy for Investec plc on our website in accordance with UK tax law.

(continued)

Profit attributable to non-controlling interests

Profit attributable to non-controlling interests mainly comprises:

• £23.8 million profit attributable to non-controlling interests in the Asset Management business (2017: £20.3 million)
• £52.6 million profit attributable to non-controlling interests in the Investec Property Fund Limited (2017: £59.9 million).

Earnings attributable to shareholders

As a result of the foregoing factors, earnings attributable to shareholders increased from £442.5 million to £505.5 million.

Dividends and earnings per share

Information with respect to dividends and earnings per share is provided on pages 61 to 63 in volume three.

Statutory balance sheet analysis

Since 31 March 2017:

• Total equity increased by 12.9% to £5.4 billion largely due to an increase in retained earnings and the issuance of Additional Tier 1 securities during the year.
• Net asset value per share increased 5.0% to 452.5 pence and net tangible asset value per share (which excludes goodwill and intangible assets) increased by 6.5% to 401.5 pence.
• The return on adjusted average shareholders' equity decreased from 12.5% to 12.1%.

Assets by geography

Additional information

On 11 December 2017 the group released an announcement on the Johannesburg Stock Exchange in relation to its exposures to Steinhoff International Holdings NV (Steinhoff), its subsidiaries and related entities. Trading and investment losses incurred in respect of these exposures amounted to R220 million (approximately £13 million) in the current financial year, less than the estimate referred to in the December announcement. As noted in that announcement Investec has credit exposures largely to Steinhoff Africa Holdings Proprietary Limited subsidiaries and Steinhoff Africa Retail Limited, which represent a small portion of the group's balance sheet. Based on the information currently available to the group, Investec is not expecting to suffer any losses on these exposures.

(continued)

Statutory net tangible asset value per share

The group's net tangible asset value per share is reflected in the table below.

£'000	31 March 2018	31 March 2017
Shareholders' equity	4 442 094	4 131 093
Less: perpetual preference shares issued by holding companies	(216 343)	(214 645)
Less: goodwill and intangible assets (excluding software)	(475 922)	(490 841)
Net tangible asset value	3 749 829	3 425 607
Number of shares in issue (million)	980.6	958.3
Treasury shares (million)	(46.7)	(49.7)
Number of shares in issue in this calculation (million)	933.9	908.6
Net tangible asset value per share (pence)	401.5	377.0
Net asset value per share (pence)	452.5	431.0

Statutory return on risk-weighted assets

The group's return on risk-weighted assets is reflected in the table below.

	31 March 2018	31 March 2017	Average	31 March 2016	Average
Adjusted earnings attributable to ordinary shareholders before goodwill, acquired intangibles
and non-operating items (£'000)	491 062	434 504		359 732
Investec plc risk-weighted assets (£'million)	14 411	13 312	13 862	12 297	12 805
Investec Limited risk-weighted assets^ (£'million)	20 366	19 667	20 016	14 626	17 146
Total risk-weighted assets (£'million)	34 777	32 979	33 878	26 923	29 951
Return on average risk-weighted assets	1.45%	1.45%		1.34%
^Investec Limited risk-weighted assets (R'million)	338 484	329 808	334 146	309 052	319 430

Capital management and allocation

We hold capital in excess of regulatory requirements targeting a minimum common equity tier 1 capital ratio of 10% and a total capital adequacy ratio range of 14% – 17% on a consolidated basis for each of Investec plc and Investec Limited.

Further information is provided on pages 78 to 91 in volume two.

A summary of capital adequacy and leverage ratios

As at 31 March 2018	Investec plcº*	IBPº*	Investec Limited*^	IBL*^
Common equity tier 1 (as reported)	11.0%	11.9%	10.2%	10.9%
Common equity tier 1 ('fully loaded')^^	11.0%	11.9%	10.2%	10.9%
Tier 1 (as reported)	12.9%	13.4%	11.0%	11.2%
Total capital adequacy ratio (as reported)	15.4%	16.6%	14.6%	15.5%
Leverage ratio** – current	8.5%	8.6%	7.5%#	7.7%#
Leverage ratio** – 'fully loaded'^^	8.4%	8.6%	7.1%#	7.5%#

As at 31 March 2017	Investec plcº*	IBPº*	Investec Limited*^	IBL*^
Common equity tier 1 (as reported)	11.3%	12.5%	9.9%	10.8%
Common equity tier 1 ('fully loaded')^^	11.3%	12.5%	9.9%	10.8%
Tier 1 (as reported)	11.5%	12.5%	10.7%	11.1%
Total capital adequacy ratio (as reported)	15.1%	16.9%	14.1%	15.4%
Leverage ratio** – current	7.8%	8.2%	7.3%#	7.6%#
Leverage ratio** – 'fully loaded'^^	7.7%	8.2%	6.8%#	7.4%#

* Where: IBP is Investec Bank plc consolidated and IBL is Investec Bank Limited. The information for Investec plc includes the information for IBP. The information for Investec Limited includes the information for IBL.

** The leverage ratios are calculated on an end-quarter basis.

º The capital adequacy disclosures follow Investec's normal basis of presentation so as to show a consistent basis of calculation across the jurisdictions in which the group operates. For Investec plc and IBP this does not include the deduction of foreseeable charges and dividends when calculating CET 1 capital as required under the Capital Requirements Regulation and European Banking Authority technical standards. The impact of this deduction totalling £65 million (31 March 2017: £60 million) for Investec plc and £18 million (31 March 2017: £34 million) for IBP would lower the CET 1 ratio by 45bps (31 March 2017: 45bps) and 13bps (31 March 2017: 28bps) respectively.

^ Investec Limited's and IBL's capital information includes unappropriated profits. If unappropriated profits are excluded from capital information, Investec Limited's and IBL's common equity tier 1 ratio would be 25bps and 13bps lower, respectively. At 31 March 2017, Investec Limited's and IBL's common equity tier 1 ratio would be 24bps and 13bps lower.

^^ The key difference between the 'reported' basis at 31 March 2018 and the 'fully loaded' basis is primarily relating to capital instruments that previously qualified as regulatory capital, but do not fully qualify under the CRD IV rules/South African Prudential Authority. These instruments continue to be recognised on a reducing basis in the 'reported' figures until 2022.

# Based on revised BIS rules.

(continued)

Return on equity by country and business – statutory

£'000	31 March 2018	31 March 2017	Average	31 March 2016	Average
Calculation of average shareholders' equity
Ordinary shareholders' equity	4 225 751	3 916 448	4 071 100	3 060 029	3 488 239
Goodwill and intangible assets (excluding software)	(475 922)	(490 841)	(483 382)	(503 996)	(497 419)
Adjusted tangible shareholders' equity	3 749 829	3 425 607	3 587 718	2 556 033	2 990 820

£'000	31 March 2018	31 March 2017
Operating profit*	659 793	659 360
Non-controlling interests	(76 105)	(80 530)
Accrued preference dividends, adjusted for currency hedge	(33 527)	(25 838)
Revised operating profit	550 161	552 992
Taxation on operating profit before goodwill and acquired intangibles	(59 099)	(118 488)
Adjusted attributable earnings to ordinary shareholders*	491 062	434 504
Pre-tax return on average adjusted shareholders' equity	13.5%	15.9%
Post-tax return on average adjusted shareholders' equity	12.1%	12.5%
Pre-tax return on average adjusted tangible shareholders' equity	15.3%	18.5%
Post-tax return on average adjusted tangible shareholders' equity	13.7%	14.5%

Return on equity on an ongoing basis is provided on page 82.

* Before goodwill, acquired intangibles and non-operating items.

Financial review

(continued)

Return on equity by geography

£'000	UK and Other	Southern Africa	Total group	UK and Other ongoing
Total operating profit	197 672	462 121	659 793	291 174
Tax on profit on ordinary activities	(38 509)	(20 590)	(59 099)	(56 858)
Non-controlling interests	(13 079)	(63 026)	(76 105)	(13 079)
Preference dividends paid	(7 129)	(26 398)	(33 527)	(7 129)
Profit on ordinary activities after taxation – 31 March 2018	138 955	352 107	491 062	214 108
Profit on ordinary activities after taxation – 31 March 2017	173 503	261 001	434 504	226 145
Ordinary shareholders' equity – 31 March 2018	2 050 127	2 175 624	4 225 751	2 002 909
Goodwill and intangible assets (excluding software)	(447 135)	(28 787)	(475 922)	(447 135)
Tangible ordinary shareholders' equity – 31 March 2018	1 602 992	2 146 837	3 749 829	1 555 774
Ordinary shareholders' equity – 31 March 2017	1 991 697	1 924 751	3 916 448	1 934 784
Goodwill and intangible assets (excluding software)	(459 245)	(31 596)	(490 841)	(459 245)
Tangible ordinary shareholders' equity – 31 March 2017	1 532 452	1 893 155	3 425 607	1 475 539
Average ordinary shareholders' equity – 31 March 2018	2 020 912	2 050 188	4 071 100	1 968 847
Average tangible shareholders' equity – 31 March 2018	1 567 722	2 019 996	3 587 718	1 515 657
Post-tax return on average ordinary shareholders' equity – 31 March 2018	6.9%	17.2%	12.1%	10.9%
Post-tax return on average ordinary shareholders' equity
– 31 March 2017	9.4%	16.0%	12.5%	12.6%
Post-tax return on adjusted tangible shareholders' equity
– 31 March 2018 Post-tax return on adjusted tangible shareholders' equity	8.9%	17.4%	13.7%	14.1%
– 31 March 2017	12.5%	16.3%	14.5%	17.1%
Pre-tax return on adjusted average ordinary shareholders' equity
– 31 March 2018	8.8%	18.2%	13.5%	13.8%
Pre-tax return on adjusted average ordinary shareholders' equity – 31 March 2017	11.5%	20.8%	15.9%	15.5%
Pre-tax return on average tangible ordinary shareholders' equity
– 31 March 2018	11.3%	18.5%	15.3%	17.9%
Pre-tax return on average tangible ordinary shareholders' equity – 31 March 2017	15.3%	21.2%	18.5%	20.9%

(continued)

Return on equity by business*

£'000	Asset Management	Wealth & Investment^	Specialist Banking	Specialist Banking ongoing**
Operating profit#	178 045	98 565	380 493	473 995
Notional return on regulatory capital	3 174	1 889	(5 063)	(5 063)
Notional cost of statutory capital	(3 442)	(4 542)	7 984	7 984
Cost of subordinated debt	(1 403)	(1 147)	2 550	2 550
Cost of preference shares	(790)	(595)	(32 142)	(32 142)
Adjusted earnings – 31 March 2018	175 584	94 170	353 822	447 324
Adjusted earnings – 31 March 2017	162 399	88 734	370 917	435 509
Ordinary shareholders' equity – 31 March 2018	199 416	235 181	3 632 104	3 584 886
Goodwill and intangible assets (excluding software)	(88 045)	(179 223)	(49 604)	(49 604)
Tangible ordinary shareholders' equity – 31 March 2018	111 371	55 958	3 582 500	3 535 282
Ordinary shareholders' equity – 31 March 2017	186 423	251 523	3 319 452	3 262 539
Goodwill and intangible assets (excluding software)	(88 059)	(191 707)	(52 025)	(52 025)
Tangible ordinary shareholders' equity – 31 March 2017	98 364	59 816	3 267 427	3 210 514
Ordinary shareholders' equity – 31 March 2016	171 629	246 302	2 483 048	2 413 028
Goodwill and intangible assets (excluding software)	(89 194)	(203 534)	(52 220)	(52 220)
Tangible ordinary shareholders' equity – 31 March 2016	82 435	42 768	2 430 828	2 360 808
Average ordinary shareholders' equity – 31 March 2018	192 920	243 352	3 475 777	3 423 712
Average ordinary shareholders' equity – 31 March 2017	179 026	248 913	2 901 249	2 837 783
Average tangible shareholders' equity – 31 March 2018	104 868	57 887	3 424 963	3 372 897
Average tangible shareholders' equity – 31 March 2017	90 400	51 292	2 849 127	2 785 660
Pre-tax return on adjusted average ordinary shareholders'
equity – 31 March 2018	91.0%	38.7%	10.2%	13.1%
Pre-tax return on adjusted average ordinary shareholders'
equity – 31 March 2017	90.7%	35.7%	12.8%	15.3%
Pre-tax return on average tangible ordinary shareholders'
equity – 31 March 2018	167.4%	162.7%	10.3%	13.3%
Pre-tax return on average tangible ordinary shareholders' equity – 31 March 2017	179.6%	173.0%	13.0%	15.6%

* The return on equity by business is based on the level of internal capital required by each business, inclusive of an allocation of any surplus capital held by the group. The operating profit is adjusted to reflect a capital structure that includes common equity, Additional Tier 1 capital instruments and subordinated debt.

^ Wealth & Investment is consistent with the group computation, except for an adjustment of £159.1 million between ordinary shareholders' funds and goodwill, which represents historical accounting gains with a corresponding effective increase in goodwill and intangible assets. These gains were excluded from group adjusted earnings.

** Excluding the remaining UK legacy business as shown on page 85.

# Before goodwill, acquired intangibles, non-operating items and after other non-controlling interests.

Number of employees

By division – permanent employees	31 March 2018	31 March 2017
Asset Management
UK and international	497	478
Southern Africa^	1 024	1 072
Total	1 521	1 550
Wealth & Investment
UK and Other	1 345	1 279
South Africa	340	321
Total	1 685	1 600
Specialist Banking
UK and Other	2 320	2 169
Southern Africa	3 918	3 710
Total	6 238	5 879
Total number of permanent employees	9 444	9 029

^ Includes Silica employees, its third party administration business.

By geography	31 March 2018	31 March 2017	31 March 2016	31 March 2015	31 March 2014	31 March 2013
UK and Other	4 162	3 926	3 701	3 560	3 671	3 827
Southern Africa	5 282	5 103	4 720	4 199	3 986	3 748
Temporary employees and contractors	702	687	545	495	601	576
Total number of employees	10 146	9 716	8 966	8 254	8 258	8 151

Statutory operating profit (before goodwill, acquired intangibles, non-operating items, taxation and after other non-controlling interests) per employee

Operating profit increased 1.4% to £607.5 million (2017: £599.1 million). Refer to the statutory income statement analysis on pages 51 to 63 for further information. Average headcount increased across divisions by 6.3% to 9 931 (2017: 9 341) to support increased activity and growth strategies; notably the build out of the UK private client offerings in the Specialist Banking and Wealth & Investment businesses.

By division	Asset Management	Wealth & Investment	Specialist Banking
Number of employees – 31 March 2018	1 592	1 821	6 733
Number of employees – 31 March 2017	1 654	1 697	6 365
Number of employees – 31 March 2016	1 543	1 597	5 826
Average employees – year to 31 March 2018	1 623	1 759	6 549
Average employees – year to 31 March 2017	1 598	1 647	6 096
Operating profit* – year to 31 March 2018 (£'000)	178 045	98 565	380 493
Operating profit* – year to 31 March 2017 (£'000)	164 824	93 243	389 830
Operating profit per employee^ – year to 31 March 2018 (£'000)	109.7^^	56.0	58.1
Operating profit per employee^ – year to 31 March 2017 (£'000)	103.1^^	56.6	63.9

* Operating profit excluding group costs

^ Based on average number of employees over the year.

^^ For Asset Management, operating profit per employee includes Silica, its third party administration business.

By geography	UK and Other	Southern Africa	Total group
Number of employees – 31 March 2018	4 472	5 674	10 146
Number of employees – 31 March 2017	4 165	5 551	9 716
Number of employees – 31 March 2016	3 869	5 097	8 966
Average employees – year to 31 March 2018	4 318	5 613	9 931
Average employees – year to 31 March 2017	4 017	5 324	9 341
Operating profit – year to 31 March 2018 (£'000)	199 356	408 149	607 505
Operating profit – year to 31 March 2017 (£'000)	224 893	374 228	599 121
Operating profit per employee^ – year to 31 March 2018	46.2	72.7	61.2
Operating profit per employee^ – year to 31 March 2017 (£'000)	56.0	70.3	64.1

* Operating profit excluding group costs.

^ Based on average number of employees over the year.

Total third party assets under management

£'million	31 March 2018	31 March 2017
Asset Management	103 862	95 287
UK and Other	69 371	61 379
Southern Africa	34 491	33 908
Wealth & Investment	56 048	54 773
UK and Other	36 923	35 555
Southern Africa	19 125	19 218
Specialist Banking	666	675
UK and Other	353	386
Southern Africa	313	289
	160 576	150 735

A further analysis of third party assets under management

At 31 March 2018 £'million	UK and Other	Southern Africa	Total
Asset Management	69 371	34 491	103 862
Mutual funds	29 615	15 126	44 741
Segregated mandates	39 756	19 365	59 121
Wealth & Investment	36 923	19 125	56 048
Discretionary	28 638	6 936	35 574
Non-discretionary	8 285	12 189	20 474
Specialist Banking	353	313	666
	106 647	53 929	160 576

At 31 March 2017 £'million	UK and Other	Southern Africa	Total
Asset Management	61 379	33 908	95 287
Mutual funds	23 399	15 848	39 247
Segregated mandates	37 980	18 060	56 040
Wealth & Investment	35 555	19 218	54 773
Discretionary	26 336	6 552	32 888
Non-discretionary	9 219	12 666	21 885
Specialist Banking	386	289	675
	97 320	53 415	150 735

(continued)

Overview of our ongoing results

In order to present a more meaningful view of the group's performance, additional management information is presented on the group's ongoing businesses. This information is set out on pages 72 to 84.

The additional information presented on an ongoing basis excludes items that in management's view could distort the comparison of performance between periods. Based on this principle, the remaining legacy business in the UK (as set out on page 85) has been excluded from underlying statutory profit to derive the group's ongoing operating profit.

This basis of presentation is consistent with the approach adopted for the year ended 31 March 2017.

A reconciliation between the statutory and ongoing income statement is provided on pages 73 and 74.

All information in our annual report is based on our statutory accounts unless otherwise indicated.

	Results in Pounds Sterling		Results in Rand
	Year to 31 March 2018	Year to 31 March 2017	% change	Year to 31 March 2018	Year to 31 March 2017	% change
Operating profit before taxation* (million)	£701.0	£663.7	5.6%	R12 022	R12 075	(0.4%)
Adjusted earnings attributable to shareholders** (million)	£566.2	£487.1	16.2%	R9 689	R8 849	9.5%
Adjusted earnings per share**	61.3p	54.1p	13.3%	1 049c	983c	6.7%

* Before goodwill, acquired intangibles, non-operating items and after other non-controlling interests.

** Before goodwill, acquired intangibles, non-operating items and after non-controlling interests.

Consolidated summarised ongoing income statement

For the year to £'000	31 March 2018	31 March 2017	Variance	% change
Net interest income	760 101	680 539	79 562	11.7%
Net fee and commission income	1 361 214	1 271 591	89 623	7.0%
Investment income	129 722	135 631	(5 909)	(4.4%)
Share of post taxation profit of associates	46 823	18 890	27 933	>100%
Trading income arising from
– customer flow	138 244	158 006	(19 762)	(12.5%)
– balance sheet management and other trading activities	(4 326)	8 078	(12 404)	(>100%)
Other operating income	11 038	13 158	(2 120)	(16.1%)
Total operating income before impairment losses on loans
and advances	2 442 816	2 285 893	156 923	6.9%
Impairment losses on loans and advances	(63 890)	(57 149)	(6 741)	11.8%
Operating income	2 378 926	2 228 744	150 182	6.7%
Operating costs	(1 623 210)	(1 502 623)	(120 587)	8.0%
Depreciation on operating leased assets	(2 421)	(2 169)	(252)	11.6%
Operating profit before goodwill, acquired intangibles and
non‑operating items	753 295	723 952	29 343	4.1%
Profit attributable to other non-controlling interests	(52 288)	(60 239)	7 951	(13.2%)
Profit attributable to Asset Management non-controlling interests	(23 817)	(20 291)	(3 526)	17.4%
Operating profit before taxation	677 190	643 422	33 768	5.2%
Taxation	(77 448)	(130 438)	52 990	(40.6%)
Preference dividends accrued	(33 527)	(25 838)	(7 689)	29.8%
Adjusted attributable earnings to ordinary shareholders	566 215	487 146	79 069	16.2%
Adjusted earnings per share (pence)	61.3	54.1		13.3%
Number of weighted average shares (million)	923.5	900.4
Cost to income ratio	66.5%	65.8%

Reconciliation from statutory summarised income statement to ongoing summarised income statement

		Removal of:
For the year to 31 March 2018 £'000	Statutory as disclosed^	UK legacy business	Ongoing business
Net interest income/(expense)	760 398	297	760 101
Net fee and commission income/(expense)	1 361 207	(7)	1 361 214
Investment income	130 048	326	129 722
Share of post taxation profit of associates	46 823	–	46 823
Trading income/(losses) arising from
– customer flow	138 226	(18)	138 244
– balance sheet management and other trading activities	(4 307)	19	(4 326)
Other operating income	11 115	77	11 038
Total operating income before impairment losses on loans and advances	2 443 510	694	2 442 816
Impairment losses on loans and advances	(148 556)	(84 666)	(63 890)
Operating income/(loss)	2 294 954	(83 972)	2 378 926
Operating costs	(1 632 740)	(9 530)	(1 623 210)
Depreciation on operating leased assets	(2 421)	–	(2 421)
Operating profit/(loss) before goodwill, acquired intangibles and
non-operating items	659 793	(93 502)	753 295
Profit attributable to other non-controlling interests	(52 288)	–	(52 288)
Profit attributable to Asset Management non-controlling interests	(23 817)	–	(23 817)
Operating profit/(loss) before taxation	583 688	(93 502)	677 190
Taxation	(59 099)	18 349*	(77 448)
Preference dividends accrued	(33 527)	–	(33 527)
Adjusted attributable earnings to ordinary shareholders	491 062	(75 153)	566 215
Adjusted earnings per share (pence)	53.2		61.3
Number of weighted average shares (million)	923.5		923.5
Cost to income ratio	66.9%		66.5%

* Applying the UK's effective taxation rate of 19.6%.

^ Refer to page 26 in volume three.

(continued)

Reconciliation from statutory summarised income statement to ongoing summarised income statement

		Removal of:
For the year to 31 March 2017 £'000	Statutory as disclosed^	UK legacy business	Ongoing business
Net interest income/(expense)	679 895	(644)	680 539
Net fee and commission income/(expense)	1 271 524	(67)	1 271 591
Investment income	136 203	572	135 631
Share of post taxation profit of associates	18 890	–	18 890
Trading income/(losses) arising from
– customer flow	158 001	(5)	158 006
– balance sheet management and other trading activities	8 218	140	8 078
Other operating income	13 483	325	13 158
Total operating income before impairment losses on loans and advances	2 286 214	321	2 285 893
Impairment losses on loans and advances	(111 454)	(54 305)	(57 149)
Operating income/(loss)	2 174 760	(53 984)	2 228 744
Operating costs	(1 513 231)	(10 608)	(1 502 623)
Depreciation on operating leased assets	(2 169)	–	(2 169)
Operating profit/(loss) before goodwill, acquired intangibles and non-operating
items	659 360	(64 592)	723 952
Profit attributable to other non-controlling interests	(60 239)	–	(60 239)
Profit attributable to Asset Management non-controlling interests	(20 291)	–	(20 291)
Operating profit/(loss) before taxation	578 830	(64 592)	643 422
Taxation	(118 488)	11 950*	(130 438)
Preference dividends accrued	(25 838)	–	(25 838)
Adjusted attributable earnings to ordinary shareholders	434 504	(52 642)	487 146
Adjusted earnings per share (pence)	48.3		54.1
Number of weighted average shares (million)	900.4		900.4
Cost to income ratio	66.3%		65.8%

* Applying the group's effective taxation rate of 18.5%.

^ Refer to page 26 in volume three.

Reconciliation from statutory summarised income statement to ongoing summarised income statement for the UK and Other Specialist Banking Business

		Removal of:
For the year to 31 March 2018 £'000	UK and Other Specialist Banking statutory as disclosed^	UK legacy business	UK and Other Specialist Banking ongoing business
Net interest income/(expense)	332 157	297	331 860
Net fee and commission income/(expense)	197 797	(7)	197 804
Investment income	58 116	326	57 790
Share of post taxation profit of associates	1 021	–	1 021
Trading income/(losses) arising from			–
– customer flow	113 370	(18)	113 388
– balance sheet management and other trading activities	3 127	19	3 108
Other operating income	8 055	77	7 978
Total operating income before impairment losses on loans and advances	713 643	694	712 949
Impairment losses on loans and advances	(106 085)	(84 666)	(21 419)
Operating income/(loss)	607 558	(83 972)	691 530
Operating costs	(546 934)	(9 530)	(537 404)
Depreciation on operating leased assets	(2 350)	–	(2 350)
Operating profit/(loss) before goodwill, acquired intangibles and
non-operating items	58 274	(93 502)	151 776
Profit attributable to other non-controlling interests	1 684	–	1 684
Operating profit/(loss) before taxation	59 958	(93 502)	153 460

Removal of:

For the year to 31 March 2017 £'000	UK and Other Specialist Banking statutory as disclosed^	UK legacy business	UK and Other Specialist Banking ongoing business
Net interest income/(expense)	284 701	(644)	285 345
Net fee and commission income/(expense)	227 932	(67)	227 999
Investment income	57 806	572	57 234
Share of post taxation profit of associates	840	–	840
Trading income/(loss) arising from
– customer flow	128 967	(5)	128 972
– balance sheet management and other trading activities	5 235	140	5 095
Other operating income	7 883	325	7 558
Total operating income before impairment losses on loans and advances	713 364	321	713 043
Impairment losses on loans and advances	(74 956)	(54 305)	(20 651)
Operating income/(loss)	638 408	(53 984)	692 392
Operating costs	(531 843)	(10 608)	(521 235)
Depreciation on operating leased assets	(2 141)	–	(2 141)
Operating profit/(loss) before goodwill, acquired intangibles and
non-operating items	104 424	(64 592)	169 016
Profit attributable to other non-controlling interests	180	–	180
Operating profit/(loss) before taxation	104 604	(64 592)	169 196

^ Refer to pages 49 and 51 in volume three.

(continued)

Segmental geographical and business analysis of operating profit before goodwill, acquired intangibles, non-operating items, taxation and after other non-controlling interests – ongoing business

For the year to 31 March 2018 £'000	UK and Other	Southern Africa	Total group	% change	% of total
Asset Management	103 918	74 127	178 045	8.0%	25.4%
Wealth & Investment	69 269	29 296	98 565	5.7%	14.1%
Specialist Banking	153 460	320 535	473 995	4.3%	67.6%
	326 647	423 958	750 605	5.3%	107.1%
Group costs	(33 789)	(15 809)	(49 598)	1.7%	(7.1%)
Total group	292 858	408 149	701 007	5.6%	100.0%
Other non-controlling interest – equity			52 288
Operating profit			753 295
% change	1.2%	9.1%	5.6%
% of total	41.8%	58.2%	100.0%

For the year to 31 March 2017 £'000	UK and Other	Southern Africa	Total group	% change	% of total
Asset Management	91 262	73 562	164 824	22.3%	24.8%
Wealth & Investment	65 190	28 053	93 243	8.8%	14.0%
Specialist Banking	169 196	285 226	454 422	11.0%	68.5%
	325 648	386 841	712 489	13.1%	107.3%
Group costs	(36 163)	(12 613)	(48 776)	6.5%	(7.3%)
Total group	289 485	374 228	663 713	13.7%	100.0%
Other non-controlling interest – equity			60 239
Operating profit			723 952
% of total	43.6%	56.4%	100.0%

A reconciliation of the UK and Other Specialist Banking's operating profit: ongoing vs statutory basis

£'000	31 March 2018	31 March 2017	% change
Total ongoing UK and Other Specialist Banking per above	153 460	169 196	(9.3%)
UK legacy remaining	(93 502)	(64 592)	(44.8%)
Total UK and Other Specialist Banking per statutory accounts	59 958	104 604	(42.7%)

(continued)

		31 March 2018			31 March 2017
For the year to £'000	UK and Other	Southern Africa	Total	UK and Other	Southern Africa	Total
Net interest income	337 283	422 818	760 101	289 824	390 715	680 539
Net fee and commission income	849 941	511 273	1 361 214	803 930	467 661	1 271 591
Investment income	68 189	61 533	129 722	59 403	76 228	135 631
Share of post taxation profit of associates	1 436	45 387	46 823	2 349	16 541	18 890
Trading income/(loss) arising from
– customer flow	114 420	23 824	138 244	129 712	28 294	158 006
– balance sheet management and other trading activities	(2 088)	(2 238)	(4 326)	8 531	(453)	8 078
Other operating income	10 344	694	11 038	12 870	288	13 158
Total operating income before impairment losses on
loans and advances	1 379 525	1 063 291	2 442 816	1 306 619	979 274	2 285 893
Impairment losses on loans and advances	(21 419)	(42 471)	(63 890)	(20 651)	(36 498)	(57 149)
Operating income	1 358 106	1 020 820	2 378 926	1 285 968	942 776	2 228 744
Operating costs	(1 064 582)		(558 628) (1 623 210)	(994 522)		(508 101) (1 502 623)
Depreciation on operating leased assets	(2 350)	(71)	(2 421)	(2 141)	(28)	(2 169)
Operating profit before goodwill, acquired intangibles
and non-operating items	291 174	462 121	753 295	289 305	434 647	723 952
(Profit)/loss attributable to other non-controlling interests	1 684	(53 972)	(52 288)	180	(60 419)	(60 239)
Operating profit before goodwill, acquired intangibles and non-operating items and after other non-controlling interests	292 858	408 149	701 007	289 485	374 228	663 713
Profit attributable to Asset Management non-controlling interests	(14 763)	(9 054)	(23 817)	(11 807)	(8 484)	(20 291)
Operating profit before goodwill, acquired intangibles and non-operating items and after non-controlling
interests	278 095	399 095	677 190	277 678	365 744	643 422
Cost to income ratio	77.3%	52.5%	66.5%	76.2%	51.9%	65.8%

Ongoing segmental geographic analysis – summarised income statement

(continued)

Ongoing segmental business and geographic analysis – summarised income statement

		Asset Management			Wealth & Investment
For the year to 31 March 2018 £'000	UK and Other	Southern Africa	Total	UK and Other	Southern Africa	Total
Net interest income	242	5 229	5 471	5 181	5 563	10 744
Net fee and commission income	355 230	181 904	537 134	296 907	85 556	382 463
Investment income	(47)	32	(15)	10 446	105	10 551
Share of post taxation profit of associates	–	–	–	415	1	416
Trading income/(loss) arising from
– customer flow	–	–	–	1 032	(495)	537
– balance sheet management and other trading activities	(5 189)	112	(5 077)	(7)	(143)	(150)
Other operating income	2 131	34	2 165	235	1	236
Total operating income before impairment losses on loans and advances	352 367	187 311	539 678	314 209	90 588	404 797
Impairment losses on loans and advances	–	–	–	–	–	–
Operating income	352 367	187 311	539 678	314 209	90 588	404 797
Operating costs	(248 449)	(113 184)	(361 633)	(244 940)	(61 292)	(306 232)
Depreciation on operating leased assets	–	–	–	–	–	–
Operating profit/(loss) before goodwill, acquired intangibles and non-operating items	103 918	74 127	178 045	69 269	29 296	98 565
Profit attributable to other non-controlling interests	–	–	–	–	–	–
Operating profit/(loss) before goodwill, acquired intangibles, non-operating items and after other non-controlling interests	103 918	74 127	178 045	69 269	29 296	98 565
Profit attributable to Asset Management non-controlling interests	(14 763)	(9 054)	(23 817)	–	–	–
Operating profit/(loss) before goodwill, acquired intangibles, non-operating items
and after non-controlling interests	89 155	65 073	154 228	69 269	29 296	98 565
Cost to income ratio	70.5%	60.4%	67.0%	78.0%	67.7%	75.7%

(continued)

Asset Management Wealth & Investment		Specialist Banking			Group costs
UK and Southern UK and Southern Other Africa Total Other Africa Total	UK and Other	Southern Africa	Total	UK and Other	Southern Africa	Total	Total group
242 5 229 5 471 5 181 5 563 10 744	331 860	412 026	743 886	–	–	–	760 101
181 904 537 134 296 907 85 556 382 463	197 804	243 813	441 617	–	–	–	1 361 214
10 446 105 10 551	57 790	61 396	119 186	–	–	–	129 722
1 416	1 021	45 386	46 407	–	–	–	46 823
(495) 537	113 388	24 319	137 707	–	–	–	138 244
(143) (150)	3 108	(2 207)	901	–	–	–	(4 326)
1 236	7 978	659	8 637	–	–	–	11 038
404 797	712 949	785 392	1 498 341	–	–	–	2 442 816
–	(21 419)	(42 471)	(63 890)	–	–	–	(63 890)
	691 530	742 921	1 434 451	–	–	–	2 378 926
	(537 404)	(368 343)	(905 747)	(33 789)	(15 809)	(49 598)	(1 623 210)
	(2 350)	(71)	(2 421)	–	–	–	(2 421)
	151 776	374 507	526 283	(33 789)	(15 809)	(49 598)	753 295
–	1 684	(53 972)	(52 288)	–	–	–	(52 288)
98 565	153 460	320 535	473 995	(33 789)	(15 809)	(49 598)	701 007
	–	–	–	–	–	–	(23 817)
98 565	153 460	320 535	473 995	(33 789)	(15 809)	(49 598)	677 190
	75.6%	46.9%	60.5%	n/a	n/a	n/a	66.5%

Ongoing segmental business and geographic analysis – summarised income statement

(continued)

Ongoing segmental business and geographic analysis – summarised income statement

		Asset Management			Wealth & Investment
For the year to 31 March 2017 £'000	UK and Other	Southern Africa	Total	UK and Other	Southern Africa	Total
Net interest income	111	5 007	5 118	4 368	7 600	11 968
Net fee and commission income	308 084	176 788	484 872	267 847	75 861	343 708
Investment income	–	143	143	2 169	100	2 269
Share of post taxation profit of associates	–	–	–	1 509	–	1 509
Trading income/(loss) arising from
– customer flow	–	–	–	740	288	1 028
– balance sheet management and other trading activities	3 221	(1 008)	2 213	215	(128)	87
Other operating income/(loss)	5 312	332	5 644	–	–	–
Total operating income before impairment losses on loans and advances	316 728	181 262	497 990	276 848	83 721	360 569
Impairment losses on loans and advances	–	–	–	–	–	–
Operating income	316 728	181 262	497 990	276 848	83 721	360 569
Operating costs	(225 466)	(107 700)	(333 166)	(211 658)	(55 668)	(267 326)
Depreciation on operating leased assets	–	–	–	–	–	–
Operating profit/(loss) before goodwill, acquired intangibles and non-operating items	91 262	73 562	164 824	65 190	28 053	93 243
Profit attributable to other non-controlling interests	–	–	–	–	–	–
Operating profit/(loss) before goodwill, acquired intangibles, non-operating items and after other non-controlling interests	91 262	73 562	164 824	65 190	28 053	93 243
Profit attributable to Asset Management non controlling interests	(11 807)	(8 484)	(20 291)	–	–	–
Operating profit/(loss) before goodwill, acquired intangibles, non-operating items
and after non-controlling interests	79 455	65 078	144 533	65 190	28 053	93 243
Cost to income ratio	71.2%	59.4%	66.9%	76.5%	66.5%	74.1%

(continued)

		Group costs			Specialist Banking
Total group	Total	Southern Africa	UK and Other	Total	Southern Africa	UK and Other
680 539	–	–	–	663 453	378 108	285 345
1 271 591	–	–	–	443 011	215 012	227 999
135 631	–	–	–	133 219	75 985	57 234
18 890	–	–	–	17 381	16 541	840
158 006	–	–	–	156 978	28 006	128 972
8 078	–	–	–	5 778	683	5 095
13 158	–	–	–	7 514	(44)	7 558
2 285 893	–	–	–	1 427 334	714 291	713 043
(57 149)	–	–	–	(57 149)	(36 498)	(20 651)
2 228 744	–	–	–	1 370 185	677 793	692 392
(1 502 623)	(48 776)	(12 613)	(36 163)	(853 355)	(332 120)	(521 235)
(2 169)	–	–	–	(2 169)	(28)	(2 141)
723 952	(48 776)	(12 613)	(36 163)	514 661	345 645	169 016
(60 239)	–	–	–	(60 239)	(60 419)	180
663 713	(48 776)	(12 613)	(36 163)	454 422	285 226	169 196
(20 291)	–	–	–	–	–	–
643 422	(48 776)	(12 613)	(36 163)	454 422	285 226	169 196
65.8%	n/a	n/a	n/a	59.9%	46.5%	73.3%

Ongoing segmental business and geographic analysis – summarised income statement

(continued)

Return on equity – ongoing basis

£'000	31 March 2018	31 March 2017	Average	31 March 2016	Average
Calculation of average shareholders' equity
Ordinary shareholders' equity	4 178 533	3 859 535	4 019 034	2 990 009	3 424 772
Goodwill and intangible assets (excluding software)	(475 922)	(490 841)	(483 382)	(503 996)	(497 419)
Adjusted tangible shareholders' equity	3 702 611	3 368 694	3 535 652	2 486 013	2 927 353

£'000	31 March 2018	31 March 2017
Operating profit*	753 295	723 952
Non-controlling interests	(76 105)	(80 530)
Accrued preference dividends, adjusted for currency hedge	(33 527)	(25 838)
Revised operating profit	643 663	617 584
Taxation on operating profit before goodwill and acquired intangibles	(77 448)	(130 438)
Adjusted attributable earnings to ordinary shareholders*	566 215	487 146
Pre-taxation return on average adjusted shareholders' equity	16.0%	18.0%
Post-taxation return on average adjusted shareholders' equity	14.1%	14.2%
Pre-taxation return on average adjusted tangible shareholders' equity	18.2%	21.1%
Post-taxation return on average adjusted tangible shareholders' equity	16.0%	16.6%

* Before goodwill, acquired intangibles and non-operating items.

(continued)

An analysis of core loans and advances to customers and asset quality by geography – ongoing business

	UK and Other		Southern Africa		Total group
£'000	31 March 2018	31 March 2017	31 March 2018	31 March 2017	31 March 2018	31 March 2017
Gross core loans and advances to customers	9 412 611		8 169 901 15 531 184	14 158 547 24 943 795		22 328 448
Total impairments	(38 434)	(25 356)	(86 311)	(72 152)	(124 745)	(97 508)
Specific impairments	(37 357)	(12 393)	(47 848)	(52 689)	(85 205)	(65 082)
Portfolio impairments	(1 077)	(12 963)	(38 463)	(19 463)	(39 540)	(32 426)
Net core loans and advances to customers	9 374 177	8 144 545	15 444 873	14 086 395	24 819 050	22 230 940
% change of net core loans and advances to customers since March 2017	15.1%		9.6%		11.6%
Average gross core loans and
advances to customers	8 791 256	7 706 123	14 844 866	12 258 560	23 636 122	19 964 683
Total income statement charge for impairments
on core loans and advances	(21 198)	(20 690)	(40 788)	(36 580)	(61 986)	(57 270)
Gross default loans and advances to customers	157 203	34 166	172 086	215 633	329 289	249 799
Specific impairments	(37 357)	(12 393)	(47 848)	(52 689)	(85 205)	(65 082)
Portfolio impairments	(1 077)	(12 963)	(38 463)	(19 463)	(39 540)	(32 426)
Defaults net of impairments before collateral held	118 769	8 810	85 775	143 481	204 544	152 291
Collateral and other credit enhancements	130 498	25 948	213 776	259 057	344 274	285 005
Net default loans and advances to customers (limited to zero)	–	–	–	–	–	–
Ratios:
Total impairments as a % of gross core loans and advances to customers	0.41%	0.31%	0.56%	0.51%	0.50%	0.44%
Total impairments as a % of gross default loans	24.45%	74.21%	50.12%	33.46%	37.88%	39.03%
Gross defaults as a % of gross core loans and advances to customers	1.67%	0.42%	1.11%	1.52%	1.32%	1.12%
Defaults (net of impairments) as a % of net core loans and advances to customers	1.27%	0.11%	0.56%	1.02%	0.82%	0.69%
Net defaults as a % of net core loans and advances to customers	–	–	–	–	–	–
Credit loss ratio (i.e. income statement impairment charge on core loans as a % of average gross core loans and advances)	0.24%	0.27%	0.28%	0.29%	0.26%	0.29%

(continued)

A reconciliation of core loans and advances: statutory basis and ongoing basis

		Removal of:
	Statutory as disclosed^	UK Legacy business	Ongoing business
31 March 2018 (£'000)
Gross core loans and advances to customers	25 370 248	426 453	24 943 795
Total impairments	(238 151)	(113 406)	(124 745)
Specific impairments	(137 711)	(52 506)	(85 205)
Portfolio impairments	(100 440)	(60 900)	(39 540)
Net core loans and advances to customers	25 132 097	313 047	24 819 050
31 March 2017 (£'000)
Gross core loans and advances to customers	22 906 165	577 717	22 328 448
Total impairments	(199 028)	(101 520)	(97 508)
Specific impairments	(136 177)	(71 095)	(65 082)
Portfolio impairments	(62 851)	(30 425)	(32 426)
Net core loans and advances to customers	22 707 137	476 197	22 230 940

^ Refer to page 35 in volume two.

(continued)

The legacy business in the UK Specialist Bank comprises:

• Assets put on the bank's books pre-2008 where market conditions post the financial crisis materially impacted the business model
• Assets written prior to 2008 with very low/negative margins
• Assets relating to business we are no longer undertaking.

Legacy business – overview of results

Since 31 March 2017 the group's legacy portfolio in the UK has continued to be actively managed down from £476 million to £313 million through asset sales, redemptions and write-offs. The total legacy business over the period reported a loss before taxation of £93.5 million (2017: £64.6 million) reflecting an increase in impairments for accelerated exits anticipated to occur on certain legacy assets. Total net defaults in the legacy book amounted to £90 million (31 March 2017: £125 million).

An analysis of assets within the legacy business

£'million	31 March 2018 Total net assets (after impairments)	31 March 2018 Total balance sheet impairments	31 March 2017 Total net assets (after impairments)	31 March 2017 Total balance sheet impairments
Private Bank Irish planning and development assets	12	1	18	9
Other Private Bank assets	301	112	458	93
Total legacy assets	313	113	476	102
Performing	223	–	351	–

* Included in balance sheet impairments is a group portfolio impairment of £60.9 million (31 March 2017: £30.4 million).

Total UK legacy assets

Group divisional structure

Divisional review

Investec is a focused specialist bank and asset manager striving to be distinctive in all that it does. Our strategic goals and objectives are motivated by the desire to develop an efficient and integrated business on an international scale through the active pursuit of clearly established core competencies in our principal business areas. Our core philosophy has been to build well-defined, value-added businesses focused on serving the needs of select market niches where we can compete effectively.

We seek to maintain an appropriate balance between revenue earned from operational risk businesses and revenue earned from

What we do

Equities Fixed Income Multi-Asset Alternatives

Where we operate

Africa Americas Asia Pacific UK Europe

What we do

Portfolio management Stockbroking Alternative investments Investment advisory services Electronic trading services Retirement portfolios

Where we operate

South Africa UK Europe Hong Kong Mauritius

Specialist Banking Asset Management

Hendrik du Toit

financial risk businesses. This ensures that we are not over reliant on any one part of our business to sustain our activities and that we have a large recurring revenue base that enables us to navigate through varying cycles and to support our long-term growth objectives.

Our current strategic objectives include increasing the proportion of our nonlending revenue base which we largely intend to achieve through the continued strengthening and development of our Wealth and Asset Management businesses.

Asset Management Wealth & Investment Specialist Banking

What we do

Private Banking activities Corporate and Institutional Banking activities Investment activities Property activities Group Services and Other activities

Where we operate

Southern Africa UK Europe Australia Mauritius Hong Kong India USA

Integrated global management structure Global roles

As at 31 March 2018
Chief executive officer	Stephen Koseff^^
Managing director	Bernard Kantor^^

South Africa Glynn Burger Richard Wainwright

United Kingdom David van der Walt Steve Elliott

GEOGRAPHICAL BUSINESS LEADERS

From 1 October 2018* Joint chief executive officers Fani Titi Executive director Hendrik du Toit Group risk and finance director Glynn Burgerø

SUPPORT STRUCTURES

From 1 April 2019* Group risk director Ciaran Whelan Group finance and operations director Kim McFarland

Wealth & Investment

Hendrik du Toit^

Steve Elliott

Human resources and organisational development Marc Kahn

Corporate governance and compliance Bradley Tapnack

Group finance Nishlan Samujh

Share schemes and company secretarial Les Penfold

Group marketing Malcolm Fried

Group investor relations Ursula Nobrega

* Subject to regulatory approval as per the group's announcement made on 6 February 2018.

** As from 1 April 2018 Richard Wainwright has replaced Ciaran Whelan as joint head of the Specialist Bank.

^ Per the group's announcement made on 6 February 2018, John Green and Mimi Ferrini will be deputy CEOs of Investec Asset Management from 1 April 2018, and from 1 October 2018 will become joint CEOs of the business.

^^ Stephen Koseff and Bernard Kantor will become non-executive directors of the group on 1 April 2019.

^ø Glynn Burger will retire as a group executive director on 31 March 2019.

Ciaran Whelan** David van der Walt

For further information on the management succession changes announced by the group on 6 February 2018, refer to pages 121 and 122.

At Investec Asset Management, we believe in investing in a better tomorrow. We want to assist people around the globe to retire with dignity or meet their financial objectives by offering specialist, active investment expertise. We are a patient, organic, long-term business offering organically-developed investment capabilities through active segregated mandates or mutual funds to sophisticated clients. Our clients include some of the world's largest private and public sector pension funds, financial institutions, corporates, foundations, central banks and intermediaries serving individual investors. Our business is to manage our clients' investments to the highest standard possible by exceeding their investment and client service expectations.

Global executive committee*

at 31 March 2018

Chief executive officer Hendrik du Toit

Chief operating officer Kim McFarland

Global head of client group John Green

Co-chief investment officer Domenico (Mimi) Ferrini

Co-chief investment officer John McNab

It all began in South Africa in 1991. After more than twenty-seven years, we have grown to become a successful global investment management firm from the emerging markets. We continue to develop an owner culture and are committed to building a long-term intergenerational business.

Our investment team, of over 200 investment professionals, applies clear investment philosophies and processes across multiple asset classes. Our client group is organised across five geographically defined units serving our clients around the globe. These teams are supported by our global investment and operational structure.

Our value proposition

• Organically build an independent global platform from an emerging market base
• Independently managed entity within the Investec group
• Competitive investment performance in chosen specialities
• Global approach to:
  • Investing
  • Client base
  • Operations platform
• Institutional and advisor focus
• Unique and clearly understood culture
• Stable and experienced leadership.

Annual highlights

Net flows of

£5.4 billion (2017: £(0.6) billion)

Operating margin 33.0% (2017: 33.1%)

Assets under management

£103.9 billion (2017: £95.3 billion)

Operating profit before non-controlling interests increased by 8.0% to

£178.0 million contributing 29.3% to group profit

* This information reflects the Investec Asset Management global executive committee before the changes announced on 6 February 2018.

What we do

Where we operate

Net flows by geography

Financial years to 31 March 2017 and 31 March 2018

Note: The net flows exclude a historic low value cash plus account which is subject to volatile net flows.

(continued)

Divisional review

Financial analysis

* Before goodwill, acquired intangibles, non-operating items, taxation and after other non-controlling interests.

** As calculated on page 68, based on regulatory capital requirements.

Historical nancial performance

(continued)

Asset management

Income statement analysis

£'000	31 March 2018	31 March 2017	Variance	% change
Net interest income	5 471	5 118	353	6.9%
Net fee and commission income	537 134	484 872	52 262	10.8%
Investment income	(15)	143	(158)	(> 100.0%)
Trading income arising from balance sheet management and other trading activities	(5 077)	2 213	(7 290)	(> 100.0%)
Other operating income	2 165	5 644	(3 479)	(61.6%)
Total operating income	539 678	497 990	41 688	8.4%
Operating costs	(361 633)	(333 166)	(28 467)	8.5%
Operating profit before goodwill, acquired intangibles, non-operating items, taxation and before non-controlling interests	178 045	164 824	13 221	8.0%
Profit attributable to Asset Management non-controlling interests**	(23 817)	(20 291)	(3 526)	17.4%
Operating profit before goodwill, acquired intangibles,
non-operating items, taxation and after non-controlling interests	154 228	144 533	9 695	6.7%
UK and Other	89 155	79 455	9 700	12.2%
Southern Africa	65 073	65 078	(5)	–
Operating profit before goodwill, acquired intangibles,
non-operating items, taxation and after non-controlling interests	154 228	144 533	9 695	6.7%
Selected returns and key statistics
Ordinary shareholders' equity*	199 416	186 423	12 993	7.0%
ROE (pre-tax)*	91.0%	90.7%
Return on tangible equity (pre-tax)*	167.4%	179.6%
Operating margin	33.0%	33.1%
Operating profit per employee (£'000)*^	172.3	168.6	3.7	2.2%

* As calculated on pages 68 and 70, based on regulatory capital requirements.

** Earnings after tax attributable to non-controlling interests includes the portion of earnings attributable to the 17% shareholding in the business by

employees (31 March 2017: 16%).

^ Operating profit per employee excludes Silica, our third party administration business.

The variance in operating profit over the year can be explained as follows:

• Rising markets, a weaker Sterling and strong net inflows increased our net fee and commission income in the period to £537.1 million.
• Against this backdrop, our operating profit before non-controlling interests increased by 8.0%.
• Performance fees decreased over the period under review from £28.0 million to £18.4 million.

(continued)

Divisional review

Assets under management and flows

£'million	AUM 31 March 2018	Net flows	Markets/ foreign exchange movements	AUM 31 March 2017
Equities	45 496	4 583	2 049	38 864
Fixed Income	27 307	(215)	422	27 100
Multi-Asset	20 810	1 212	658	18 940
Alternatives	2 876	(288)	(315)	3 479
Third party funds on advisory platform	7 373	71	398	6 904
Total	103 862	5 363	3 212	95 287

Assets under management by asset class

Note: The assets under management and flows exclude a historic low value cash plus account that is subject to volatile flows.

Investment performance

All of our investment capabilities are managed with the simple aim of delivering performance which meets or exceeds our clients' expectations around agreed, well defined risk and return parameters.

We measure our investment performance relative to peer groups and against benchmarks over one, three, five and 10 year periods, and since inception.

Our long-term track record remains competitive.

(continued)

Overall rm investment performance

* For 'since inception', performance is shown only for portfolios that are older than 12 months.

Source: Calculated by Investec Asset Management, returns from StatPro, capability weighted. Performance to 31 March 2018.

Note: Outperformance/(underperformance) is calculated as the sum of the total market values for individual portfolios that have positive active returns (negative active returns) on a gross basis expressed as a percentage of total assets under management. Our percentage of fund outperformance is reported on the basis of current AUM and therefore does not include terminated funds. Total assets under management exclude double-counting of pooled products and third party assets administered on our South African platform. Benchmarks used for the above analysis include cash, peer group averages, inflation and market indices as specified in client mandates or fund prospectuses. For all periods shown, market values are as at the period end date.

Mutual funds investment performance

Performance to 31 March 2018. Fund performance and ranking as per Morningstar data using primary share classes net of fees. Peer group universes are either IA, GIFS or ASISA sectors as classified by Morningstar. Cash or cash-equivalent funds are excluded from charts.

Independent recognition

• 2018 Raging Bull Award for Top Management Company of the Year and Offshore Management Company of the Year
• Winner of Insurance Asset Risk Awards 2018 Emerging Market Manager
• Winner of Private Equity Africa Awards 2017 Credit Investor of the Year
• Winner of Global Investor Awards 2017 Emerging Markets Manager of the Year

(continued)

Questions and answers

Hendrik du Toit

Chief executive officer

Q. How has the operating environment impacted your business over the past financial year?

The global political environment remains uncertain. Notwithstanding this, markets have remained buoyant, thus supporting growth in our assets under management. The fundamentals for long-term growth in the asset management industry remain strong: the growing need for retirement savings and the growing wealth of developing economies are expanding the global pool of long-term savings – the key growth driver for our industry. These factors are expected to increase global assets under management from c. \$85 trillion in 2016 to c. \$145 trillion by 2025. (Source: PricewaterhouseCoopers)

There are however multiple challenges facing our industry. These include the risk of a market correction, growing regulatory scrutiny, technological advancements and the need to justify value for money (especially against passive strategies). The result is fee pressure, rising fixed costs and increased investment in technology – in summary, a more competitive market in which excellence continues to be rewarded but mediocrity punished.

One of the responses to the increased competitiveness of the asset management industry is consolidation in the market. In 2017, we saw deals that were motivated by expanding product range, increasing distribution footprint, cost synergies and adapting in response to the regulatory environment. However, Investec Asset Management remains firmly committed to its path of long-term organic growth.

Q. What have been the key developments in your business over the past financial year?

Positive net inflows of £5.4 billion for the last 12 months and competitive investment performance were the highlights for the year. Our net flows were positive across all regions, largely driven by inflows from the Americas and Asia-Pacific regions. Our Advisor net flows were significant, in all regions, over the year.

Beyond our financial results, we have been devoting time to clarify our purpose and our impact as a global business, including owning the sustainability agenda. We want to ensure that we are responsible and sustainable in all our activities. We have a motivated and energetic team with a long-term orientation, which is organically built around, and focused on, excellence. Investment performance and clients are always our priority.

Following the announcement of the succession plan at Investec Group, transition planning at Investec Asset Management is well underway. We have an orderly and well-executed transition in progress which will be completed by the end of the first half of the 2019 financial year. I am confident that my successors, John Green and Mimi Ferrini, will take Investec Asset Management to new heights during their tenure as Joint CEOs.

Q. What are your strategic objectives in the coming financial year?

Our fundamental strategic objectives and principles remain unchanged: we want to assist people around the globe to retire with dignity or to meet their financial objectives. We do this by offering organically developed investment capabilities through active

segregated mandates or mutual funds to sophisticated clients. We operate globally in both the Institutional and Advisor space through five geographically defined client groups and have an approach to growth that is driven by sensible medium to longterm investment performance.

Over the coming financial year, we will endeavour to deliver competitive investment performance, scale our Multi-Asset and Quality capabilities and grow our presence in large markets, with a particular focus on North America, while maintaining the strong momentum we have in the Advisor market. We continue to evolve all our investment capabilities for the future, including building a compelling foundation for Alternatives.

Since the conclusion of the previous financial year, we have achieved positive momentum in respect of both inflows and investment performance. However, we are aware of the fundamental challenges that face our industry, and the possibility of a market correction. We recognise the need to offer value for money to our clients, and be able to explain how this value is delivered. We believe value is a combination of active long-term alpha, appropriate and relevant products, combined with a compelling service and pricing proposition.

Q. What is your outlook for the coming financial year?

At Investec Asset Management, we always think about the long term. We are organically building a long-term intergenerational business and as such concentrate less on short-term outcomes. We believe that we have created a sustainable, competitive long-term business and remain committed to being an active investment manager. We believe that the opportunity for growth in our industry over the next five years is substantial. Our momentum is positive and we are confident about our future.

Investec Wealth & Investment offers its clients comfort in its scale, international reach and depth of investment processes. Investec Wealth & Investment is one of the UK's leading private client investment managers and the largest in South Africa.

Global head Steve Elliott

UK head Jonathan Wragg

South Africa head Henry Blumenthal

Switzerland head Peter Gyger

Ireland head Eddie Clarke

The business specialises in wealth management, portfolio management, private office and stockbroking services for individuals, families, trusts and charities.

Investec Wealth & Investment is one of the UK's leading private client investment managers, the largest in South Africa, has a significant European presence and is developing its operations internationally.

Further detail on the Wealth & Investment management structure is available on our website: www.investec.com

Our value proposition

• Investec Wealth & Investment has been built via the acquisition and integration of businesses and organic growth over a long period of time
• Well-established platforms in the UK, South Africa, Switzerland, Republic of Ireland and Guernsey
• The business has five distinct channels: direct, intermediaries, charities, international and digital
• Strategy to internationalise within jurisdictions where the Investec group already has an established business
• Focus is on organic growth in our key markets and enhancing our range of services for the benefit of our clients.

Annual highlights

Net flows of

Operating margin 24.3% (2017: 25.9%)

£2.0 billion (2017: £1.2 billion)

Operating profit before non-controlling interest increased by 5.7% to

£98.6 million contributing 16.2% to group profit

Assets under management £56.0 billion (2017: £54.8 billion) Divisional review

(continued)

What we do

UK and Other
Investment and savings	Pensions and retirement	Financial planning
• Discretionary and advisory portfolio management services for private clients	• Discretionary investment management for company pension and Self Invested Personal	• Estate planning • Retirement planning
• Specialist investment management services for charities, pension schemes and trusts	Pensions (SIPPs) • Advice and guidance on pension schemes.	• Bespoke advice and independent financial reviews.
• Independent financial planning advice for private clients
• Specialist portfolio management services for international clients.		The UK operation is conducted through Investec Wealth & Investment Limited. The other Wealth & Investment operations are conducted through Investec Bank Switzerland, Investec

Wealth & Investment operations are conducted through Investec Bank Switzerland, Investec Wealth & Investment Ireland, Investec Wealth & Investment Channel Islands and in Hong Kong, through Investec Capital Asia Limited.

Over 1 300 staff operate from offices located throughout the above jurisdictions, with combined funds under management of £36.9 billion. Investec Wealth & Investment is one of the UK's leading providers of private client investment management services.

South Africa

Investec Wealth & Investment South Africa provides portfolio management, wealth management and stockbroking services for private clients, charities, pension funds and trusts. Operating from eight offices across South Africa with R115.3 billion of discretionary and annuity managed assets and a further R202.6 billion of funds under various other forms of administration.

Where we operate

UK and Other

Brand well recognised Established platforms and

distribution in the UK, Switzerland, Republic of Ireland, Guernsey and Hong Kong

One of the UK's leading private client investment managers

Proven ability to attract and recruit investment managers Newly launched digital

investment offering, Investec Click & Invest

South Africa and Mauritius

Strong brand and positioning Largest player in the South African market Developing Wealth & Investment capability in

Mauritius

(continued)

Financial analysis

* Before goodwill, acquired intangibles, non-operating items, taxation and after other non-controlling interests.

** As calculated on page 68, based on regulatory capital requirements.

Operating prot^ — track record

^ Trend reflects numbers as at the year ended 31 March. Amounts are shown before goodwill, acquired intangibles, non-operating items, taxation and after other non-controlling interests.

(continued)

Income statement analysis

£'000	31 March 2018	31 March 2017	Variance	% change
Net interest income	10 744	11 968	(1 224)	(10.2%)
Net fee and commission income	382 463	343 708	38 755	11.3%
Investment income	10 551	2 269	8 282	> 100.0%
Share of post taxation profit of associates	416	1 509	(1 093)	(72.4%)
Trading income/(loss) arising from
– customer flow	537	1 028	(491)	(47.8%)
– balance sheet management and other trading activities	(150)	87	(237)	(> 100.0%)
Other operating income	236	–	236	100.0%
Total operating income	404 797	360 569	44 228	12.3%
Operating costs	(306 232)	(267 326)	(38 906)	14.6%
Operating profit before goodwill, acquired intangibles, non-operating items, taxation and after other
non-controlling interests	98 565	93 243	5 322	5.7%
UK and Other	69 269	65 190	4 079	6.3%
Southern Africa	29 296	28 053	1 243	4.4%
Operating profit before goodwill, acquired intangibles, non-operating items, taxation and after other
non-controlling interests	98 565	93 243	5 322	5.7%
Selected returns and key statistics
Ordinary shareholders' equity*	235 181	251 523	(16 342)	(6.5%)
ROE (pre-tax)*	38.7%	35.7%
Return on tangible equity (pre-tax)*	162.7%	173.0%
Operating margin	24.3%	25.9%
Operating profit per employee (£'000)*	56.0	56.6	(0.6)	(1.1%)

* As calculated on pages 68 and 70, based on regulatory capital requirements.

The variance in operating profit over the year can be explained as follows:

• The UK and Other business benefited from higher average funds under management supported by higher equity market levels over the year and solid net inflows of £1.8 billion. In addition, a one off gain of £10.0 million was earned on the sale of the business's holding in the Irish Stock Exchange.
• The South African business posted an operating profit of R503 million, a decrease of 2.1% (in Rand terms) over the prior year. An increase in annuity fees earned was offset largely as a result of lower brokerage volumes. Progress continued to be made in attracting discretionary net inflows amounting to R5.0 billion in the current year.
• Operating costs increased as the business globally continued to invest in its digital platforms, IT and compliance areas and in recruiting experienced investment managers. Headcount increased by 5.3% from 31 March 2017 to 31 March 2018.

Analysis of key earnings drivers (funds under management)

£'million	31 March 2018	31 March 2017	% change
UK and Other	36 923	35 555	3.8%
Discretionary	28 638	26 336	8.7%
Non-discretionary and other	8 285	9 219	(10.1%)
South Africa	19 125	19 218	(0.5%)
Discretionary and annuity assets	6 936	6 552	5.9%
Non-discretionary and other	12 189	12 666	(3.8%)
Total	56 048	54 773	2.3%

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(continued)

Wealth & Investment

UK and Other: analysis of key drivers (funds under management and flows)

Funds under management

£'million	31 March 2018	31 March 2017	% change
Investec Wealth & Investment Limited (UK)	33 206	31 866	4.2%
Discretionary	27 346	25 393	7.7%
Non-discretionary	5 860	6 473	(9.5%)
Other	3 717	3 689	0.8%
Discretionary	1 292	943	37.0%
Non-discretionary	2 425	2 746	(11.7%)
Total	36 923	35 555	3.8%

Further analysis of the Investec Wealth & Investment Limited UK business

Funds under management and flows

£'billion	31 March 2018	31 March 2017	% change
At the beginning of the year	31.87	27.11
Inflows	4.28	3.53
Outflows	(2.50)	(2.19)
Market adjustment^	(0.25)	3.71
Transfers^^	–	(0.05)
Disposals*	(0.19)	(0.24)
At the end of the year	33.21	31.87	4.2%
MSCI WMA Private Investor Balanced Index (at year end)	1 527	1 536	(0.6%)
Underlying rate of net organic growth in total funds under management**	5.6%	4.9%
% of total funds managed on a discretionary basis	82.4%	79.7%

^ Impact of market movement and relative performance.

^^ Reflects the transfer of clients between jurisdictions.

* Reflects the disposal of funds relating to certain non-core operations.

** Net organic inflows less outflows (excluding acquired inflows and exceptional outflows) as a percentage of opening funds under management.

South Africa: analysis of key drivers (funds under management and flows)

Funds under management

R'billion	31 March 2018	31 March 2017	% change
Discretionary and annuity assets	115 287	109 869	4.9%
Non-discretionary	202 589	212 412	(4.6%)
Total	317 876	322 281	(1.4%)

Net inflows at cost over the year

R'million	31 March 2018	31 March 2017
Discretionary and annuity assets	5 020	8 335
Non-discretionary	(1 640)	(8 597)#
Total	3 380	(262)

# Included an outflow of R4.9 billion of assets transferred to our specialised securities division not included in Wealth & Investment assets.

Wealth & Investment

(continued)

Questions and answers

Steve Elliott

Global head

Q. How has the operating environment impacted your business over the past financial year?

In the UK, the year has presented significant challenges for investors, with numerous events and concerns in the political and economic environment testing investors' nerve. These include general elections in the UK and Europe, tensions over North Korea, the prospect of tighter monetary policy across a number of regions and the uncertainty of the Brexit negotiations. Despite these uncertainties, equity indices remained buoyant for the most part. Gains made during the latter part of the 2017 financial year were sustained for the majority of the 2018 financial year, with markets reaching record highs. This remained the case until markets fell back towards the end of the financial year, leaving them marginally lower than where they started the year.

Given this backdrop, our challenge has been to manage the risks presented by the political and economic uncertainties, and the resulting volatility, whilst ensuring our clients remain positioned to benefit from the periods of market progress. Our well established research capability and investment process, and the close relationships we maintain with our clients, have served us well as we navigated through these challenges. Although markets fell back towards the end of the financial year, their higher average level for the year overall has had a positive impact on the performance of the business.

It is also pleasing that, despite the focus that has had to be applied to the preparation for regulatory change, the UK business has continued to deliver strong net organic growth in funds under management. Our strategy of seeking to attract experienced and high-calibre investment managers who share our clientcentric culture has contributed positively to the overall growth that has been achieved during the year.

Changes in the regulatory landscape have also been a dominant theme and will continue to be so in the coming year. The second Markets in Financial Instruments Directive (MiFID II) took effect on 3 January 2018 and is the single biggest regulatory change the industry has faced for some time. Preparing the business for the new regulations has required substantial resources. In addition, the new General Data Protection Regulation (GDPR) requirements came into effect in May 2018 and present a further significant change to the way businesses are required to manage data. We recognise the benefits these regulatory changes seek to achieve but also acknowledge the impact the changes have on both clients and businesses and the continuing level of resources needed to bed down the changes that have taken place and to prepare for the changes yet to come.

In South Africa the equity market has proven to be challenging, impacting brokerage volumes. An increase in volatility during the fourth quarter of the financial year has also had an impact on market returns.

On the other hand, the transition to a new leadership under President Cyril Ramaphosa has restored some confidence among investors by staving off the previously likely downgrade by rating agencies. A more stable Rand and lower inflation meant that the South African Reserve Bank was able to cut interest rates in March 2018 and this should provide some support for domestic equities. We have seen an increase in discretionary flows and increased appetite for some of our offshore products.

Q. What have been the key developments in your business over the past financial year?

In June, the UK business launched its new digital discretionary investment management service, Investec Click & Invest. The service has received a positive reaction from the marketplace following its launch, attracting favourable media interest and being ranked first place in an independent survey of the digital portfolio management market. It was particularly pleasing that the survey highlighted outstanding performance in the areas of portfolio management and client coaching, being areas in which we have sought to differentiate the Click & Invest service from its peers. We are continuing to invest in further development to enhance and expand the service as the business establishes itself in this new and exciting sector of the marketplace.

Wealth & Investment

In South Africa we continued to increase our digital offering across the proposition chain – from enhanced reporting and access, to domestic and global portfolio information and data. Our international offering remained a key focus and is one we believe is a core differentiator in the South African market.

We continue to source investments for distribution in all asset classes including alternative investments which play an important role in diversifying investment portfolios and are proving popular with high net worth clients.

Investec continues to gain global recognition as a leader in wealth management and private banking. Investec Wealth & Investment and Private Bank have been awarded, for the sixth year in a row by Euromoney and the fifth year in a row by the FT in London, the accolade as Best Private Bank and Wealth Manager in South Africa. The awards once again endorse the strategy of delivering banking and investments, locally and internationally, to our clients, in One Place.

Q. What are your strategic objectives in the coming financial year?

We believe the digital delivery of services will be central to the future investment management landscape. We will therefore continue to invest in and develop our digital channel, along with digital enhancements to our core service, so that we are well positioned to meet the needs of the increasing number of clients who prefer some or all of their service delivered digitally.

In South Africa, our clients are internationally mobile individuals who want to access investments in a high-touch, high-tech manner and this understanding underpins our strategic initiatives, as we strive to remain the investment manager of choice. We will continue to focus on leveraging our efforts with the Private Bank to ensure ongoing enhancement of our offering of an integrated banking and investment solution, both locally and internationally.

Furthermore, we understand that a global view of investment means understanding the complexities that go with it. As investment managers it is our job to identify opportunities in a complex world and to help navigate the complexities on our clients' behalf. To this end we continue to build our skills in areas like alternative investments, fiduciary and tax, while developing technological solutions to expand our offering.

Regulation and compliance will remain a key focus for the business globally. In the UK in particular, over the coming year we will seek to assist clients with the changes resulting from MiFID II and continue our preparations for GDPR.

Our strategic priorities continue to include a number of initiatives that are driven by our desire to deliver continuous improvement to our client service and business processes. This reflects our focus on growing organically, which can only be achieved by maintaining high standards of client service.

Q. What is your outlook for the coming financial year?

(continued)

Considerable achievements have been made during the year, including the successful launch of Click & Invest, adapting to significant regulatory change and the continuing achievement of strong discretionary net organic growth.

Whilst many of the uncertainties which the business and investors have faced over the last year will remain a feature of the coming year, we believe that our global investment strategy and asset allocation processes, together with the strength of our core businesses and our continuing investment for the future, will position us well.

Specialist expertise delivered with dedication and energy.

Global heads at 31 March 2018 David van der Walt Ciaran Whelan*

UK heads David van der Walt Ciaran Whelan

South Africa head Richard Wainwright

Our specialist teams are well positioned to provide services for both personal and business needs across Corporate and Institutional Banking, Investment and Private Banking activities.

Our value proposition

• High-quality specialist banking solution to corporate and private clients with leading positions in selected areas
• Provide high-touch personalised service – ability to execute quickly
• Ability to leverage international, crossborder platforms
• Well positioned to capture opportunities between the developed and the emerging world – internationally mobile
• Strong ability to originate, manufacture and distribute
• Balanced business model with good business depth and breadth.

Further detail on the Specialist Banking management structure is available on our website: www.investec.com

Annual highlights

Operating profit (ongoing) up 4.3% to

£474.0 million

ROE (pre-tax) (ongoing)

13.1% (2017: 15.3%)

Loans and advances (statutory)

£25.1 billion

Operating profit (statutory) down 2.4%

£380.5 million

ROE (pre-tax) (statutory)

10.2% (2017: 12.8%)

Customer deposits (statutory) £31.0 billion

* As from 1 April 2018 Richard Wainwright has replaced Ciaran Whelan as joint head of the Specialist Bank.

What we do

worth private clients

Private Banking activities

Transactional banking and foreign exchange

Lending

Deposits

Investments

• Southern Africa
• UK and Europe

Corporates/government/institutional clients High income and high net

Investment activities

Principal investments

Property investment fund management

• Southern Africa
• UK and Europe
• Australia
• Hong Kong

Corporate and Institutional banking

(continued)

Specialist Banking

Treasury and trading services Specialised lending, funds and debt capital markets

Institutional research sales and trading

Advisory

• Southern Africa
• UK and Europe
• Australia
• Hong Kong
• India
• USA

Where we operate

North America

Distribution platform

in 2010

India Established a presence

Facilitates the link between India, UK and South Africa

UK and Europe

Brand well established Sustainable business on the back of client activity

Australia

Hong Kong Investment activities Distribution platform

Experienced local teams in place with industry expertise

Focus is on entrenching position as a boutique operation

South Africa

Strong brand and positioning

Leading position in corporate, institutional and private client banking activities

Mauritius

Established in 1997

Focus on corporate, institutional and private client banking activities

Investec integrated annual report 2018 103

(continued)

Financial analysis

* Before goodwill, acquired intangibles, non-operating items, taxation and after other non-controlling interests.

** As calculated on page 68, based on regulatory capital requirements.

Operating prot^ — track record (statutory)

^ Trend reflects numbers as at the year ended 31 March. Amounts are shown before goodwill, acquired intangibles, non-operating items, taxation and after other non-controlling interests.

Divisional review

(continued)

Income statement analysis

£'000	31 March 2018	31 March 2017	Variance	% change
Net interest income	744 183	662 809	81 374	12.3%
Net fee and commission income	441 610	442 944	(1 334)	(0.3%)
Investment income	119 512	133 791	(14 279)	(10.7%)
Share of post taxation profit of associates	46 407	17 381	29 026	> 100.0%
Trading income arising from
– customer flow	137 689	156 973	(19 284)	(12.3%)
– balance sheet management and other trading activities	920	5 918	(4 998)	(84.5%)
Other operating income	8 714	7 839	875	11.2%
Total operating income before impairment on loans and advances	1 499 035	1 427 655	71 380	5.0%
Impairment losses on loans and advances	(148 556)	(111 454)	(37 102)	33.3%
Operating income	1 350 479	1 316 201	34 278	2.6%
Operating costs	(915 277)	(863 963)	(51 314)	5.9%
Depreciation on operating leased assets	(2 421)	(2 169)	(252)	11.6%
Operating profit before goodwill, acquired intangibles,
non-operating items, taxation and before non-controlling interests	432 781	450 069	(17 288)	(3.8%)
Profit attributable to non-controlling interests	(52 288)	(60 239)	7 951	(13.2%)
Operating profit before goodwill, acquired intangibles, non-operating items, taxation and after other
non-controlling interests	380 493	389 830	(9 337)	(2.4%)
UK and Other	59 958	104 604	(44 646)	(42.7%)
Ongoing^	153 460	169 196	(15 736)	(9.3%)
Legacy remaining^	(93 502)	(64 592)	(28 910)	44.8%
Southern Africa	320 535	285 226	35 309	12.4%
Operating profit before goodwill, acquired intangibles,
non-operating items, taxation and after other
non-controlling interests	380 493	389 830	(9 337)	(2.4%)
Selected returns and key statistics
Ordinary shareholders' equity**	3 632 104	3 319 452	312 652	9.4%
Southern Africa	2 113 691	1 868 797	244 894	13.1%
Ongoing UK and Other	1 471 195	1 393 742	77 453	5.6%
Remaining Legacy	47 218	56 913	(9 695)	(17.0%)
Statutory ROE (pre-tax)**	10.2%	12.8%
Ongoing ROE (pre-tax) **	13.1%	15.3%
Southern Africa	15.6%	16.4%
Ongoing UK and Other	10.6%	13.9%
Southern Africa excluding investment activities ROE (pre-tax)#	17.2%	19.6%
Cost to income ratio	61.2%	60.6%
Operating profit per employee (£'000)**	58.1	63.9	(5.8)	(9.1%)

^ Detailed income statement provided on page 75.

** As calculated on pages 68 and 70, based on regulatory capital requirements.

# Refer to analysis on pages 109 and 110.

The variance in the operating profit in the UK ongoing business over the year can be explained as follows:

• Net interest income increased by 16.3% driven by robust levels of lending activity and a reduction in the cost of funding.
• Net fee and commission income decreased by 13.2% largely as a result of less investment banking activity following a strong prior year.
• Investment income increased 1.0% with gains from the debt securities portfolio and lower write downs of an investment in the Hong Kong portfolio offset by less realisations in the UK investment portfolio.
• Trading income from customer flow decreased 12.1% as a consequence of lower volatility relative to the elevated levels experienced in the prior year following the Brexit vote.
• As a result of the foregoing factors, total operating income was flat relative to the prior year.
• Impairments increased 3.1%, however, the credit loss ratio reduced to 0.24% (2017: 0.27%). Further information is provided on page 83.
• Operating costs increased 3.1% reflecting continued investment into IT and digital initiatives and higher headcount to support increased activity and growth strategies; notably the build out of the private client banking offering. This was partially offset by lower variable remuneration.

(continued)

The variance in the operating profit in Southern Africa over the year can be explained as follows: Note: The analysis and variances described below for the South African Specialist Banking division are based on the Rand numbers reported.

• The Specialist Banking division reported operating profit before taxation of R5 466 million (2017: R5 117 million).
• Net interest income increased by 2.9%. Sound levels of lending activity was somewhat offset by the roll off of higher yielding debt securities and increased subordinated debt.
• Net fee and commission income increased by 7.8% supported by continued growth and activity levels in the private banking client base as well as a good performance from the corporate businesses.
• Investment income decreased by 18.8% as a result of a weaker performance from the unlisted direct investment portfolio as well as the group's investments in its listed property funds. The bank's client-driven private equity portfolio performed well.
• Trading income arising from customer flow decreased by 13.1% as a consequence of losses incurred on Steinhoff (refer to page 63 for additional information).
• Trading income from other trading activities reflected a loss predominantly impacted by foreign currency translation.
• As a result of the foregoing factors, total operating income increased by 4.7%.
• Impairments increased, however, the credit loss ratio reduced to 0.28% (2017: 0.29%), remaining at the lower end of its long-term average trend. Further information is provided on page 105.
• Costs increased 5.1% reflecting continued investment into IT and digital initiatives and higher headcount to support increased activity and growth strategies; partly offset by the pending acquisition of the South African head office building and the related rental provision no longer required.

Analysis of key earnings drivers

Net core loans and advances

	£'million			Home currency (million)
	31 March 2018	31 March 2017	% change	31 March 2018	31 March 2017	% change
UK	9 687	8 621	12.4%	£9 687	£8 621	12.4%
Southern Africa	15 445	14 086	9.6%	R256 702	R236 225	8.7%
Total	25 132	22 707	10.7%

Net core loans and advances

Trend reflects numbers as at the year ended 31 March.

Total deposits

	£'million			Home currency (million)
	31 March 2018	31 March 2017	% change	31 March 2018	31 March 2017	% change
UK	11 624	11 013	5.5%	£11 624	£11 013	5.5%
Southern Africa	19 363	18 096	7.0%	R321 823	R303 470	6.0%
Total	30 987	29 109	6.5%

Total deposits

Trend reflects numbers as at the year ended 31 March.

(continued)

An analysis of net core loans over the period

Refer to further information on pages 42 to 45 in volume two.

Net core loans – Southern Africa

R'million	31 March 2018	31 March 2017	% change
Lending collateralised by property	40 297	40 332	(0.1%)
Commercial real estate	36 512	36 375	0.4%
Commercial real estate – investment	32 694	33 521	(2.5%)
Commercial real estate – development	3 043	1 868	62.9%
Commercial vacant land and planning	775	986	(21.4%)
Residential real estate	3 785	3 957	(4.3%)
Residential real estate – development	2 995	2 619	14.4%
Residential real estate – vacant land and planning	790	1 338	(41.0%)
High net worth and other private client lending	133 238	117 743	13.2%
Mortgages	67 966	61 330	10.8%
High net worth and specialised lending	65 272	56 413	15.7%
Corporate and other lending	83 806	78 476	6.8%
Acquisition finance	13 982	13 225	5.7%
Asset-based lending	7 057	5 788	21.9%
Fund finance	4 909	5 548	(11.5%)
Other corporates and financial institutions and governments	47 884	43 914	7.2%
Asset finance	2 678	2 697	(0.7%)
Small ticket asset finance	2 225	2 142	3.9%
Large ticket asset finance	453	555	(18.4%)
Project finance	6 641	6 414	3.5%
Resource finance	655	890	(26.4%)
Portfolio impairments	(639)	(326)	96.0%
Total net core loans	256 702	236 225	8.7%

Net core loans – UK and Other

£'000	31 March 2018	31 March 2017	% change
Lending collateralised by property	1 934 296	1 893 121	2.2%
Commercial real estate	1 118 080	1 158 847	(3.5%)
Commercial real estate – investment	940 092	924 770	1.7%
Commercial real estate – development	140 222	146 100	(4.0%)
Commercial vacant land and planning	37 766	87 977	(57.1%)
Residential real estate	816 216	734 274	11.2%
Residential real estate – investment	237 795	253 622	(6.2%)
Residential real estate – development	514 080	438 687	17.2%
Residential real estate – vacant land and planning	64 341	41 965	53.3%
High net worth and other private client lending	1 913 432	1 592 671	20.1%
Mortgages	1 479 499	1 227 640	20.5%
High net worth and specialised lending	433 933	365 031	18.9%
Corporate and other lending	5 901 473	5 178 338	14.0%
Acquisition finance	1 530 815	1 309 335	16.9%
Asset-based lending	354 872	333 731	6.3%
Fund finance	1 030 450	861 140	19.7%
Other corporates and financial institutions and governments	650 312	718 760	(9.5%)
Asset finance	1 846 144	1 481 601	24.6%
Small ticket asset finance	1 377 753	1 055 528	30.5%
Large ticket asset finance	468 391	426 073	9.9%
Project finance	483 427	463 958	4.2%
Resource finance	5 453	9 813	(44.4%)
Portfolio impairments	(61 977)	(43 388)	42.8%
Total net core loans	9 687 224	8 620 742	12.4%

Additional information on the group's South African investment portfolio

31 March 2018	Asset analysis £'million	Income analysis £'million	Asset analysis R'million	Income analysis R'million
IEP Group	372	45	6 180	766
Equity investments^	127	1	2 103	16
Property investments*	252	14	4 186	245
Total equity exposures	751	60	12 469	1 027
Associated loans and other assets	33	1	545	21
Total exposures on balance sheet	784	61	13 014	1 048
Debt funded	368	(28)	6 105	(486)
Equity	416	–	6 909	–
Total capital resources and funding	784		13 014
Operating profit before taxation**		33		562
Taxation		(2)		(33)
Operating profit after taxation		31		529
Risk-weighted assets	2 828		47 003
Ordinary shareholders' equity held on investment portfolio – 31 March 2018	416		6 909
Ordinary shareholders' equity held on investment portfolio – 31 March 2017	398		6 670
Average ordinary shareholders' equity held on investment portfolio – 31 March 2018	407		6 790
Post-tax return on adjusted average ordinary shareholders' equity – 31 March 2018		7.6%

* The group's investment holding of 26.75% in the Investec Property Fund and 15.07% in the Investec Australia Property Fund.

^ Does not include equity investments residing in our corporate and private client businesses.

** Further analysis of operating profit before taxation:

£'million	Total
Net interest expense	(62)
Net fee and commission income	87
Investment income	18
Share of post taxation profit of associates	45
Trading and other operating losses	(1)
Total operating income before impairment losses on loans and advances	87
Impairment losses on loans and advances	–
Operating income	87
Operating costs	(1)
Operating profit before goodwill, acquired intangibles and non-operating items	86
Profit attributable to other non-controlling interests	(53)
Operating profit before taxation	33

(continued)

Additional information on the group's South African investment portfolio

31 March 2017	Asset analysis £'million	Income analysis £'million	Asset analysis R'million	Income analysis R'million
IEP Group	323	16	5 413	303
Equity investments^	130	–	2 177	(1)
Property investments*	260	22	4 361	399
Total equity exposures	713	38	11 951	701
Associated loans and other assets	36	2	612	36
Total exposures on balance sheet	749	40	12 563	737
Debt funded	351	(24)	5 893	(446)
Equity	398	–	6 670	–
Total capital resources and funding	749		12 563
Operating profit before taxation**		16		291
Taxation		(3)		(53)
Operating profit after taxation		13		238
Risk-weighted assets	2 510		42 099
Ordinary shareholders' equity held on investment portfolio – 31 March 2017	398		6 670
Ordinary shareholders' equity held on investment portfolio – 31 March 2016	301		6 354
Average ordinary shareholders' equity held on investment portfolio – 31 March 2017	349		6 512
Post-tax return on adjusted average ordinary shareholders' equity – 31 March 2017		3.7%
Post-tax return on adjusted average ordinary shareholders' equity – 31 March 2016		14.7%
Post-tax return on adjusted average ordinary shareholders' equity – 31 March 2015		15.1%

* The group's investment holding of 27.86% in the Investec Property Fund and 16.57% in the Investec Australia Property Fund.

^ Does not include equity investments residing in our corporate and private client businesses.

** Further analysis of operating profit before taxation:

£'million	Total
Net interest expense	(52)
Net fee and commission income	80
Investment income	35
Share of post taxation profit of associates	16
Trading and other operating losses	(5)
Total operating income before impairment losses on loans and advances	74
Impairment losses on loans and advances	–
Operating income	74
Operating costs	(2)
Operating profit before goodwill, acquired intangibles and non-operating items	72
Profit attributable to other non-controlling interests	(56)
Operating profit before taxation	16

(continued)

Additional information on the UK Specialist Banking costs

Statutory UK Specialist Bank

* Adjusted to exclude the investment into the Private Bank Banking business and double premises costs incurred in the year to 31 March 2018 as reflected above.

^ Refer to pages 49 and 51 in volume three.

(continued)

Total costs

Total costs Cost to income ratio

Impairments

Net prot before tax and ROE

Trends in the above graphs are for the year ended 31 March, unless otherwise stated.

UK Specialist Bank ongoing Southern Africa Specialist Bank ongoing

Total operating income

Net prot before tax and ROE (including the investment portfolio)*

Questions and answers

David van der Walt and Ciaran Whelan

Geographical business leaders United Kingdom

Q. How has the operating environment impacted your business over the past financial year?

The past year saw continued uncertainty around Brexit and with the knock on impact on confidence levels, mid-market M&A and equity capital markets activity was subdued.

Lower volatility reduced client hedging and trading activity, particularly when compared to the elevated levels in the previous year following the Brexit vote.

Both corporate and private clients remained active during the year, driving solid loan growth.

Regulation has been a key theme in the financial services industry with various new regulations being implemented in 2018. We have run a number of regulatory projects over the year to ensure operational readiness and business model resilience.

Q. What have been the key developments in your business over the past financial year?

The private banking business has continued to focus on the build-out of its UK platform with the bulk of its incremental investment having completed in the current financial year. The business has already seen positive progress with a substantial number of new-to-bank, key high net worth clients on-boarded over the past year and growth in the mortgage book.

In addition to this, the further development of the private banking proposition has now delivered a fully functional onshore and offshore banking business, coupled with the niche wealth-creating areas of structured property finance and private capital. These offerings, now all appropriately integrated, give high net worth clients the ability to

both bank with Investec on a daily basis, in a variety of on and offshore jurisdictions, as well as look to the firm for assistance, support and partnership in wealth-creating opportunities where they require capital.

The corporate business continued to generate a sound level of earnings across its franchise businesses. Strong loan growth was diversified across our lending businesses with notable activity levels in our asset finance, fund finance and corporate lending businesses.

We have successfully managed down our cost of funding over the year, while maintaining appropriate and conservative liquidity levels and without disrupting our funding channels. This together with combined loan book growth of 12.4% has resulted in a solid increase in our net interest income and a strong annuity base going into the coming year.

Q. What are your strategic objectives in the coming financial year?

We will continue to focus on deepening our franchise and growing our client base across growth-orientated companies, institutional investors, the private equity community, wealthy entrepreneurs and high net worth clients.

In line with our strategy to be a high-tech and high-touch domestically relevant bank, a key focus has been around digital initiatives to expand our client offering. A specific focus will be on developing smart digital solutions and transactional products and services for businesses. This will be complementary to our strategy to grow our offering to this segment of the market.

The emphasis on increasing capital light activities within the bank will continue into the coming year. With this in mind, one of our focus areas is on expanding our funds and investment products business to allow us to create off-balance sheet solutions

that meet client needs while reducing capital intensity. We will do this by creating investment opportunities aligned to our specialist areas of expertise and our access to distinctive deal flow, particularly targeted at our institutional clients who already invest in our funds.

(continued)

The investment into the private bank has created a scalable foundation which will allow us to focus on client acquisition and retention in the coming year – a shift from the current focus on platform development.

Q. What is your outlook for the coming financial year?

Over the last few years, the specialist bank has generated a sustainable level of recurring income which we would expect to continue into the coming year, while at the same time remaining cautiously optimistic given the uncertain political backdrop and the potential impact on economic activity levels.

The strategy to accelerate the run down of the legacy portfolio, together with the completion of the bulk of the incremental investment into the private bank and the reduction in the double premises cost in the coming year, gives us a clear runway to grow our key franchise businesses.

Divisional review

Specialist Banking

(continued)

Questions and answers

Richard Wainwright

Geographical business leader Southern Africa

Q. How has the operating environment impacted your business over the past financial year?

The global economy saw positive momentum during the course of the year, whilst the South African environment remained volatile and uncertain particularly leading up to December 2017. Our clients however, have remained active and our international offering in our client segments remains a strategic advantage.

Q. What have been the key developments in your business over the past financial year?

The Specialist Bank in South Africa reported results ahead of the prior period. This reflects our continued client focus and co-ordination across divisions and implementation of enhanced strategies to penetrate our existing client base and grow our market share. This together with the combined book growth of 8.7% has resulted in a strong increase in our net interest and annuity income.

Investment in our digital and technology platforms continues as we remain competitive in our client facing digital platform, while simultaneously focusing on efficiencies in our core infrastructure. We moved up from fourteenth to second place ranking for our mobile app as ranked by MyPrivateBanking Research, and were recently awarded 'Best Digital bank in South Africa' by Global Finance publication.

We were recognised by the Financial Times of London as the best Private Bank and Wealth Manager in South Africa for the fifth year running. This is testament to our continued efforts to offer our private clients an international, streamlined offering.

The launch of Investec Life has been particularly successful, with over R1 billion in cover written in the first six months of its launch in 2017. Investec Life's approach to focus on simplification, personalisation and technical integration should continue to underpin growth in its business.

Q. What are your strategic objectives in the coming financial year?

Building and developing our client franchises remains integral to the growth and development of our organisation. We are committed to optimising the client experience as part of our strategy to deepen our relationships with our core client base and offering them a broad spectrum of services and products.

Our strategic focus in South Africa remains the following:

• Grow market share in our niche businesses
• Identify new sources of revenue across our existing client base
• Manage our liquidity ratios with an emphasis on retail funding initiatives
• Manage our capital to optimise returns
• Invest in our technology platforms, including in increased digitalisation of products and services
• Launch Investec for Business which is designed to deliver an integrated service offering to mid-market corporates.

Q. What is your outlook for the coming financial year?

We remain cautiously optimistic in light of the past year's challenging political environment. Our strategy to identify new sources of revenue in order to remain relevant, together with our sustainable level of recurring income and the uplift in business confidence should continue to support momentum and reasonable levels of client activity in the Specialist Banking businesses.

Corporate governance and corporate responsibility

"Sound corporate governance is implicit in Investec's values, culture, processes, functions and organisational structure. The board sets the tone from the top in the manner in which it conducts itself and oversees the structures and the framework for corporate governance"

Former chairman's introduction

Dear Shareholder

Investec thrives on change, continually challenging the status quo and recognising that success depends on flexibility, innovation and enthusiasm in meeting the needs of our changing environment. In light thereof, I am pleased to announce that as part of the management succession plan, as announced by the board and as discussed in more detail below, I stepped down as chairman of the board on 15 May 2018. Perry Crosthwaite, the Investec group's former senior independent non-executive director became chairman of the group on 15 May 2018. Perry Crosthwaite was appointed as non-executive director of the Investec Limited and Investec plc board in June 2010. Perry stepped down as chairman of the remuneration committee with Philip Hourquebie assuming the position on 1 April 2018. I am humbled to be continuing with the Investec group as joint chief executive officer with effect from 1 October 2018.

We present the annual corporate governance report for the year ended 31 March 2018, which describes our approach to corporate governance. For the purpose of this report, the boards of Investec plc and Investec Limited will be referred to as the board.

This year two chairman's letters will be included in the report as a result of the management change implemented as indicated above.

From an outlook perspective, the past year was difficult to navigate as uncertainty in both South Africa and the UK remained. Corporate failures within all jurisdictions exacerbated this uncertainty. On a macro front the global economy experienced synchronised growth for the first time before the global financial crisis. The complexities of Brexit continue to cause uncertainty in the UK economy. While growth in South Africa was down in the first quarter of 2018 relative to the final quarter of 2017, the rest of the year should be positive due to a mix of investor confidence and a rebound in consumer spending.

Sound corporate governance is implicit in Investec's values, culture, processes, functions and organisational structure. Our values require that directors and employees behave with integrity, displaying consistent and uncompromised moral strength in order to promote and maintain trust. We demand cast-iron integrity in all internal and external dealings, consistently and uncompromising displaying moral strength and behaviour.

We believe that open and honest dialogue is the appropriate process to test decisions, reach consensus and accept responsibility. We have adopted a multidimensional approach involving everyone in the organisation which incorporates challenge at every level as a defence mechanism against corruption and fraud. Creating fraud and ethics awareness throughout the organisation assists in influencing ethical behaviour.

The board oversees and monitors, on an ongoing basis, how the consequences of our organisation's activities and outputs affect its status as a responsible corporate citizen. This oversight and monitoring is performed against measures and targets agreed with management in the workplace, economy, society and the environment.

Our group wide philosophy seeks to maintain an appropriate balance between the interests of all stakeholders, and is closely aligned to our culture and values which include risk consciousness, meritocracy, material employee ownership and an unselfish contribution to colleagues, clients and society.

We respect the dignity of all individuals and embrace diversity through openness and by the sincere, consistent and considerate manner in which we seek to interact.

The past year in focus

In an uncertain and volatile world, Investec's culture and values continue to support the organisation in achieving its strategic objectives. The board has remained committed to the highest standards of integrity and ethical behaviour. Our client focus and entrepreneurial spirit have continued to be front of mind over the past year. The board and management have sought to develop a strategy for the group which is balanced in terms of managing the risks presented in these uncertain times and positioning for future opportunities as they arise.

Management succession

The board, working closely with the DLC nominations and directors' affairs committee (nomdac), continued to drive and monitor succession planning. Succession of the group's long-serving executive management has been an ongoing focus area for the board with the group's initial announcement in this regard made in November 2015, with further announcements in February 2018 and May 2018. The details pertaining to the management succession will be addressed in more detail in the governance report.

(continued)

Diversity

At Investec, we are committed to attracting, developing and retaining a diverse team of talented people. A diverse workforce is vital to our ability to be an innovative organisation that is able to adapt and prosper in a fast changing world. Our recruitment strategies prioritise previously disadvantaged, female and disabled candidates where possible. We have various processes to encourage debate and dialogue around valuing diversity and difference.

To help us measure the pace of change, we have set a number of goals and targets. Investec is a member of the 30% Club in South Africa and the UK committing to a goal of 30% women on the board, and has made good progress towards the target of 33% female representation by 2020, per the Hampton-Alexander Review. Investec has signed up to the Women in Finance Charter in the UK, pledging to promote gender diversity by having a senior executive team member responsible and accountable for gender diversity and inclusion, setting internal targets for gender diversity at senior management levels, publishing progress annually against these targets, and linking the pay of senior executives to delivery against these gender diversity targets.

In addition, during the year we reported on our gender pay gap. We are confident that across our organisation men and women are paid equally for doing the same job. Our gender pay gap occurs primarily because there is a lower proportion of women in senior leadership and revenue-generating roles which attract higher market levels of pay. We are dedicated to improving our position in line with our commitment to promote diversity. We know that while we have worked to address greater representation of women, we have more to do. We have measures in place to improve this and we are committed to advancement and holding ourselves publicly accountable.

Having a diverse board and workplace is and remains important to the group bringing as it does the clear benefits of distinct and different outlooks, alternative viewpoints, and challenging mindsets.

Strategic initiatives

The board has continued to exercise leadership, integrity and judgement in pursuit of Investec's strategic goals and objectives. In terms of positioning for future opportunities, the group has continued to invest into the business ensuring that it remains competitive and relevant in the markets in which it operates. Strategic initiatives were focused on improving the position and returns of the UK bank, reshaping the mid-market corporate offering in South Africa and improving economic returns across the group.

Board effectiveness

The board continues to regularly review its own effectiveness and therefore undertakes an evaluation of its performance and that of its committees and individual directors annually, with independent external input into the process every third year. The last board effectiveness review was conducted by an independent external facilitator in 2015. This year the board effectiveness review was internally facilitated.

The responses received from the review indicated that the board is satisfied with the various aspects in relation to the board and committee governance and functioning. Comments and scores received provided a sense that the board members were of the opinion that the board's dynamic continued to strengthen and improve. Strengths highlighted in the comments in respect of board effectiveness indicated that the board is "increasingly more effective" and the board was settling down after a number of members joined the board.

Shareholder engagement

During the past year, the board continued its shareholder consultations. The primary focus of these consultations was executive remuneration and succession, however, these consultations have also provided an opportunity to discuss governance and business strategy more broadly with shareholders. From a governance perspective, the dialogue centred on the composition of the board, while on remuneration, the discussion related to the new remuneration policy and appropriate linkage between pay and performance.

Composition

With regard to the composition of the board, Peter Thomas stepped down from the board following the annual general meeting on 10 August 2017 and Philip Hourquebie was appointed to the board on 14 August 2017.

Conclusion

I would like to thank the board for their dedication and the time spent with them during my time as chairman of the board. I would furthermore like to congratulate Perry Crosthwaite on his new appointment and wish him all the best in this new endeavour. The group will benefit from his continued contribution and dedication.

Fani Titi Former chairman 12 June 2018

(continued)

Chairman's introduction

Dear Shareholder

As newly appointed chairman of the board I am pleased to provide you with our corporate governance report. It is a great honour to be appointed chairman of Investec.

The year ahead

We approach the year ahead with confidence in our leadership and strategy. Stability within the group and the orderly transition of leadership roles within the organisation has been and will continue to be a key area of focus for the board. The board will continue to motivate and lead our people to ensure long-term success, and to ensure that we operate from an agile and technologically-enabled platform.

In this continually changing environment, the board more than ever, needs to focus on its key strategic priorities. The board will also continue to ensure that Investec has the ability to react rapidly to the changing environment, and ensure that Investec's strategic objectives remain valid.

Conclusion

The board congratulates the new executive team on their appointments. The board is confident that Fani Titi and Hendrik du Toit together with senior management, will continue to grow and build Investec's core businesses and deliver the right outcomes for the group's clients and stakeholders.

Over the following pages, you will find more detail of our governance framework, including who our board and management are, how they make decisions and what they have done over the past year in terms of their leadership, strategic direction and oversight of the organisation. We hope that this report, together with the integrated report and financial statements will provide you with an overview of how we are managing the group and looking after the interests of our stakeholders.

Perry Crosthwaite Chairman

12 June 2018

Within this report you will find: Page

Who we are

•	Governance framework	120
•	Board roles	123
•	Director biographies	124
•	Board composition	130

What we did

•	Board report	132
	– DLC nominations and directors' affairs committee report	140
	– DLC social and ethics committee report	146
	– DLC audit committee report	151
	– DLC board risk and capital committee report	158
	– DLC remuneration committee report	161
•	Management committees	162

How we comply

•	Regulatory context	163
•	Statement of compliance	163
•	Other statutory information	163

(continued)

Governance framework

Investec operates under a dual listed companies (DLC) structure and considers the corporate governance principles and regulations of both the UK and South Africa before adopting the appropriate standard for the group which also complies with requirements in both jurisdictions.

From a legal perspective, the DLC is comprised of:

• Investec plc a public company incorporated in the UK and listed on the London Stock Exchange with a secondary listing on the Johannesburg Stock Exchange; and
• Investec Limited a public company incorporated in South Africa and listed on the Johannesburg Stock Exchange, with secondary listings on the Namibia Stock Exchange and the Botswana Stock Exchange.

The boards of Investec plc and Investec Limited are identical in terms of their composition and board meetings are held jointly. The committee structure has been derived from the requirements of the UK Corporate Governance Code and the King IV Report on Corporate Governance, as well as the activities of the group.

Management and board succession

Stephen Koseff (chief executive officer of the Investec group), Bernard Kantor (managing director (MD) of the Investec group) and Glynn Burger (risk and finance director of the Investec group) are part of the "founding members" of Investec and for almost 40 years, together with the board and the group's senior management team, have steered the group to becoming an internationally recognised specialist bank and asset manager.

As part of the group's succession plan and orderly transition from the founding members to the next generation of leadership, the following management and board succession changes have and shall be implemented subject to regulatory approval:

Investec Limited and Investec plc board – executive director changes

Stephen Koseff and Bernard Kantor will step down from their roles on 1 October 2018. From that date until 31 March 2019 they will continue to serve as executive directors and be available to provide support and advice to the incoming executives. As from 1 April 2019 they will become non-executive directors.

Glynn Burger, group risk and finance director, will retire on 31 March 2019. Glynn remains available and willing to assist in any capacity that the new management team require him for.

Fani Titi who has been a non-executive director on the Investec group board since January 2004 and chairman of the group since November 2011, and Hendrik du Toit the founding CEO of Investec Asset Management and an executive director of the group since December 2010, have been appointed as Joint CEO designates on 1 April 2018. On 1 October 2018 they will become joint CEOs of the group and will be held jointly accountable and responsible for the leadership and management of the Investec group. Hendrik will remain CEO of Investec Asset Management until 30 September 2018 to ensure an orderly transition in this business.

Kim McFarland, chief operating officer (COO) and chief financial officer (CFO) of Investec Asset Management since December 1993, will take over as group finance and operations director on 1 April 2019. Kim will continue with her duties as COO and CFO of Investec Asset Management until 31 March 2019 to support an orderly transition in this business.

Ciaran Whelan, who has held various senior positions globally with the Investec group over the past 30 years, and who is currently global joint head of the Specialist Bank and Global Head of Private Banking, will succeed Glynn Burger as director of risk on 1 April 2019. Ciaran will remain the global head of the Private Bank until 31 March 2019.

During the transition period Stephen, Bernard and Glynn will work closely with the new executive designates to ensure a smooth and orderly transition.

Investec Limited and Investec plc board – non-executive director changes

Fani Titi has stepped down as group chairman.

Perry Crosthwaite, the Investec group's senior independent non-executive director has been appointed as chairman of the group on 15 May 2018. Perry Crosthwaite was appointed as a non-executive director of the board in June 2010. Perry's biography follows later in this report.

Perry Crosthwaite has stepped down as chairman of the remuneration committee with Philip Hourquebie assuming the position on 1 April 2018. Philip was appointed as a non-executive director of the board in August 2017. Philip's biography follows later in this report.

Zarina Bassa has been appointed as the group's senior independent non-xecutive director on 1 April 2018. Zarina was appointed as a non-executive director of the board in November 2014. Zarina's biography follows later in this report.

Chairman of Investec Bank Limited and Investec Bank plc

Fani Titi has stepped down as chairman of Investec Bank Limited with Khumo Shuenyane assuming this position on 15 May 2018. Khumo has been a director of Investec Bank Limited since August 2014.

Fani Titi has stepped down as chairman of Investec Bank plc with Brian Stevenson assuming this position on 15 May 2018. Brian has been a director of Investec Bank plc since September 2016.

Global divisional management

John Green and Mimi Ferrini became deputy CEOs of Investec Asset Management on 1 April 2018 and from 1 October 2018, will assume the roles of Joint CEOs of the business.

David van der Walt and Richard Wainwright remain CEOs of Investec Bank plc and Investec Bank Limited, respectively. David van der Walt will remain joint global head of the Specialist Bank together with Richard Wainwright who replaced Ciaran Whelan in this role on 1 April 2018.

Steve Elliott remains global head of Investec Wealth & Investment.

Nishlan Samujh, the current global group CFO, will remain in his role.

Corporate governance and corporate responsibility

Corporate governance

(continued)

Timeline of board and management changes

	Current changes		Future changes
Philip Hourquebie • Became chairman of DLC remuneration committee Zarina Bassa • Became group senior independent non executive director Perry Crosthwaite • Stepped down as chairman of DLC remuneration committee Richard Wainwright • Became Joint Global Head of the Specialist Bank with David van der Walt Ciaran Whelan • Stepped down as Joint Global Head of the Specialist Bank but remains Global Head of the Private Bank Fani Titi and Hendrik du Toit • Appointed as Joint CEO designates	Fani Titi • Stepped down as group, IBP and IBL chairman and chairman of DLC nomdac (15 May 2018) Perry Crosthwaite • Became chairman of Investec group (15 May 2018) and chairman of DLC nomdac Brian Stevenson • Became chairman of IBP and chairman of IBP nominations committee (15 May 2018) Khumo Shuenyane • Became chairman of IBL* (15 May 2018)	Stephen Koseff • Will step down as group CEO (remains an executive director of Investec Limited and Investec plc) Bernard Kantor • Will step down as group MD (remains an executive director of Investec Limited and Investec plc) Fani Titi and Hendrik du Toit • Will assume Joint CEO roles Mimi Ferrini and John Green • Will become Joint CEOs of Investec Asset Management	Stephen Koseff and Bernard Kantor • Will step down as executive directors of Investec Limited and Investec plc Glynn Burger • Will step down as group risk and finance director Ciaran Whelan • Will step down as Global Head of Private Bank	Stephen Koseff and Bernard Kantor • Will join the group board (Investec Limited and Investec plc) as non-executive directors Ciaran Whelan • Will become group risk director Kim McFarland • Will become group finance and operations director

• * Investec Bank plc.
• ** Investec Bank Limited.

Board roles

The key governance roles and responsibilities of the board are outlined below:

Chairman	Chief executive officer and managing director/joint group CEOs	Group risk and finance director
Fani Titi/Perry Crosthwaite effective from 15 May 2018	Stephen Koseff and Bernard Kantor up to 30 September 2018 Hendrik du Toit and Fani Titi effective from 1 October 2018	Glynn Burger
• Set the board agenda, ensuring that there is sufficient time available for discussion of all items • Encourage open and honest dialogue between all board members • Lead and manage the dynamics of the board, providing direction and focus • Ensure that the board sets the strategy of the group and assist in monitoring progress towards achieving the strategy • Perform director evaluations • Serves as the primary interface with regulators and other stakeholders on behalf of the board	• Lead and manage the group within the authorities delegated by the board • Execution of group strategy • Ensuring Investec's unique culture is embedded and perpetuated • Development and growth of all Investec's businesses	• Ensures that the group's risk management processes are effective • Leads and manages the group finance functions • Provides the board with updates on the group's financial performance • Approval of the risk management plan
Senior independent director (SID)	Non-executive directors	Company secretaries
Perry Crosthwaite/Zarina Bassa effective from 1 April 2018	Zarina Bassa, Laurel Bowden, Cheryl Carolus, David Friedland, Philip Hourquebie, Charles Jacobs, Ian Kantor, Lord Malloch-Brown KCMG,	David Miller and Niki van Wyk
	Khumo Shuenyane, Peter Thomas Resigned on 10 August 2017 from Investec Limited and Investec plc

(continued)

Director biographies as at 31 March 2018

Biographies of our directors are outlined below, including their relevant skills and experience, other principal appointments and any appointments to Investec's DLC committees for the year under review.

Fani Titi, chairman, Investec Limited and Investec plc

Age: 56

Qualifications: BSc (cum laude), BSc Hons (cum laude) in Mathematics, MA in Mathematics, MBA

Relevant skills and experience

Fani Titi has been a member of the boards of Investec Limited and Investec plc since January 2004 and has been non-executive chairman of Investec Limited and Investec plc from November 2011. He has also been a member of the Investec Bank Limited board from July 2002, and has chaired its board from June 2007. He has been a member of the Investec Bank plc board from August 2011, and its chairman from August 2014. He has served on the board of Investec Asset Management from November 2013. Fani was a founding member of the private investment group Kagiso Trust Investments Limited (now Kagiso Tiso Holdings), and later cofounded and led the public offering of Kagiso Media Limited on the JSE Limited as its CEO. Fani was subsequently the founding executive chairman of the private investment firm the Tiso Group, which subsequently merged with Kagiso Trust Investments to form Kagiso Tiso Holdings. Fani stepped down from the Tiso Group in 2008 to concentrate his time on his duties at the Investec group, while also looking after his private investment portfolio. Fani has over two decades of investment banking experience, and has sat on the boards of different investee companies and JSE listed companies

Other principal appointments

Investec plc, Investec Limited, Investec Bank plc, IEP Group Proprietary Limited, Investec Asset Management Holdings Proprietary Limited, Investec Asset Management Limited and a number of Investec subsidiaries

Committees

DLC remuneration*, DLC board risk and capital, DLC nominations and directors' affairs (chairman)** and DLC social and ethics (chairman)**

Date of appointment

Investec Limited and Investec plc 30 January 2004

• * Resigned from DLC remuneration committee as at 23 February 2018
• ** Resigned as chairman of the DLC nominations' and directors' affairs committee and social and ethics committee

Perry KO Crosthwaite, senior independent director (SID)

Age: 69

Qualifications: MA (Hons) (Oxon) in modern languages

Relevant skills and experience

Perry was appointed chairman of Investec plc and Investec Limited on 15 May 2018. Perry was previously senior independent director of Investec plc and Investec Limited, a post he held from August 2014 to March 2018, having joined the boards of Investec plc and Investec Limited in June 2010. Perry is a former chairman of Investec Investment Banking and Securities and left the group on 31 March 2004

Perry has financial experience gained through a distinguished career in investment banking with over 30 years of experience as a director in the city of London. Perry has served as a non-executive director of Melrose Industries plc from July 2005 to May 2016, and was a founding member of Henderson Crosthwaite Institutional Brokers Limited, serving as its director from 1986 to 1998

Other principal appointments

Investec Holdings (Ireland) Limited (chairman) and Investec Capital and Investments (Ireland) Limited

Committees

DLC nominations and directors' affairs, DLC remuneration committee (chairman)*

Date of appointment

Investec Limited 18 June 2010 Investec plc 18 June 2010

* Resigned as chairman of the DLC remuneration committee on 31 March 2018

Corporate governance and corporate responsibility

(continued)

Stephen Koseff, group chief executive officer

Age: 66

Qualifications: BCom, CA(SA), H Dip BDP, MBA

Relevant skills and experience

Stephen joined Investec in 1980. He has diverse experience within Investec as chief accounting officer and general manager of banking, treasury and merchant banking

Other principal appointments

Investec Bank Limited, Investec Bank plc and a number of Investec subsidiaries, Bid Corporation Limited (chairman), IEP Group Proprietary Limited

Committees

DLC board risk and capital, DLC social and ethics and DLC capital (chairman)

Date of appointment

Investec Limited 6 October 1986 Investec plc 26 June 2002

Bernard Kantor group, managing director

Age: 68 Qualifications: CTA

Relevant skills and experience

Bernard joined Investec in 1980. He has had varied experience within Investec as a manager of the trading division, marketing manager and chief operating officer

Other principal appointments

Investec Bank Limited, Investec Bank plc and a number of Investec subsidiaries, Phumelela Gaming and Leisure Limited (chairman) and IEP Group Proprietary Limited

Committees

DLC board risk and capital, DLC social and ethics and DLC capital

Date of appointment

Investec Limited 8 June 1987 Investec plc 19 March 2002

Glynn R Burger, group risk and finance director

Age: 61 Qualifications: BAcc, CA(SA), H Dip BDP, MBL

Relevant skills and experience

Glynn joined Investec in 1980. His positions within Investec have included chief accounting officer, group risk manager and joint managing director for South Africa

Other principal appointments

Investec Bank Limited and a number of Investec subsidiaries

Committees DLC board risk and capital and DLC capital

Date of appointment

Investec Limited 3 July 2002 Investec plc 3 July 2002

(continued)

Hendrik J du Toit, Investec Asset Management chief executive officer

Age: 56

Qualifications: BCom Law, BCom (Hons) (cum laude), MCom (cum laude), MPhil (Cambridge)

Relevant skills and experience

After lecturing economics at the University of Stellenbosch, Hendrik joined the Investment division of Old Mutual from where he moved to Investec in 1991 to establish Investec Asset Management

Other principal appointments

Investec Asset Management Holdings Proprietary Limited and Investec Asset Management Limited as well as their subsidiaries and non-executive director of Naspers Limited. Over the past two years, Hendrik has also served on the Global Business Commission for Sustainable Development

Committees

None

Date of appointment

Investec Limited 15 December 2010 Investec plc 15 December 2010

Zarina BM Bassa, independent non-executive director

Age: 54

Qualifications: BAcc, DipAcc, CA(SA)

Relevant skills and experience

Zarina is a former partner of Ernst & Young Inc. She joined the Absa Group in 2002 and was an executive director and a member of the group's executive committee, with accountability for private banking. She has previously chaired the South African Public Accountants' and Auditors' Board and the South African Auditing Standards Board, has been a member of the JSE GAAP Monitoring Panel and the Financial Service Board. Zarina has previously served as a non-executive director of Kumba Iron Ore Limited and Sun International Limited amongst other

Other principal appointments

The Financial Services Board, Oceana Group Limited, Yebo Yethu Limited, Vodacom Proprietary Limited and Woolworths Holdings Limited and various Investec subsidiaries including Investec Bank Limited, Investec Bank plc, Investec Life Limited

Zarina has been appointed as the senior independent director (SID) of Investec plc and Investec Limited effective from 1 April 2018

Committees

DLC audit (chairman), Investec plc audit (chairman), Investec Limited, and Investec Bank Limited audit (chairman), Investec Bank plc audit, DLC remuneration, DLC nominations and directors affairs and DLC board risk and capital

Date of appointment

Investec Limited 1 November 2014 Investec plc 1 November 2014

Laurel C Bowden, independent non-executive director

Age: 53

Qualifications: MBA (INSEAD), BSc Electronic Engineering, HND Eng

Relevant skills and experience

Laurel is a founding partner at 83 North UK LLP (a private equity business), where her areas of focus include internet, enterprise software and fintech. Laurel has over 15 years' investment experience and has led investments in many leading European technology companies, including Just Eat, Qliktech and Hybris (acquired by SAP). She was previously a director at GE Capital in London

Other principal appointments

83 North Limited, Bluevine Capital Inc, Ebury Partners Limited, iZettle AB, Celonis GmbH, Mirakl SAS, TIS GmbH, Wonga Group Limited, MotorK Limited, Workable Technology Limited (the majority of these are companies which Laurel serves on as a representative of 83 North)

Committees

None

Date of appointment

Investec Limited 1 January 2015 Investec plc 1 January 2015

(continued)

Cheryl A Carolus, independent non-executive director

Age: 60

Qualifications: BA (Law), Honorary doctorate in Law

Relevant skills and experience

Cheryl was the South African High Commissioner to London between 1998 and 2001 and was chief executive officer of South African Tourism

Other principal appointments

De Beers Consolidated Mines Limited, Gold Fields Limited (chairman), The IQ Business Proprietary Limited, Ponahalo Capital Proprietary Limited, executive chairperson of Peotona Group Holdings Proprietary Limited (chair) and director of a number of the Peotona group companies and International Crisis Group. Constitution Hill Education Trust (chairman) and WWF South Africa

Committees

DLC social and ethics

Date of appointment

Investec Limited 18 March 2005 Investec plc 18 March 2005

David Friedland, independent non-executive director

Age: 65 Qualifications: BCom, CA(SA)

Relevant skills and experience

David is a former partner of both Arthur Andersen and KPMG Inc. where he also served as head of audit and risk in the KPMG Cape Town office before leaving in March 2013

Other principal appointments

Investec Bank Limited, Investec Bank plc, The Foschini Group Limited, Pick n Pay Stores Limited and Pres Les Proprietary Limited

Committees

DLC board risk and capital (chairman), DLC capital and DLC nominations and directors' affairs

Date of appointment

Investec Limited 1 March 2013 Investec plc 1 March 2013

Philip A Hourquebie, independent non-executive director

Age: 65 Qualifications: BAcc, BCom (Hons), CA(SA)

Relevant skills and experience

Philip has been a longstanding Regional Managing Partner of two regions of Ernst & Young Inc. (Africa and Central and South East Europe, including Turkey). Philip left Ernst & Young in 2014. As a senior partner at Ernst & Young Inc., Philip's background is in the advisory services in both the private and public sector. As an advisory partner and senior client service partner, he has worked, inter alia, with clients in financial services, mining, telecommunications, consumer products and retail, state-owned enterprises, government agencies and government departments at all three levels. Philip has also been a past chair of the board of South African Institute of Chartered Accountants (SAICA)

Other principal appointments

Aveng Limited and Investec Property Fund Limited

Committees

DLC audit, Investec plc audit, Investec Limited and Investec Bank Limited audit, DLC remuneration (chairman*), DLC board risk and capital, DLC nominations and directors' affairs*

Date of appointment

Investec Limited 14 August 2017 Investec plc 14 August 2017

* Effective from 1 April 2018

(continued)

Charles R Jacobs, independent non-executive director

Age: 51

Qualifications: LLB

Relevant skills and experience

Charles brings to the board a valuable combination of knowledge of the UK regulatory and corporate governance standards, global capital markets and M&A. Charles sits on the board of Fresnillo plc, a FTSE 100 company. Charles was elected as chairman and senior partner at the global law firm Linklaters LLP in October 2016, having been appointed a partner in 1999, and has over 27 years of experience of advising companies around the world, including in relation to their legal and regulatory requirements. Charles chairs the Linklaters Partnership Board and holds an LLB from Leicester University

Other principal appointments

Linklaters LLP and Fresnillo plc (senior independent non-executive director and chairman of the remuneration committee)

Committees

DLC remuneration

Date of appointment

Investec Limited 8 August 2014 Investec plc 8 August 2014

Ian R Kantor, non-executive director

Age: 71

Qualifications: BSc. Eng (Elec.), MBA

Relevant skills and experience

Ian is co-founder of Investec, served as the chief executive of Investec Bank Limited until 1985 and was the chairman of Investec Holdings Limited. Ian is currently a non-executive director on the boards of Investec Asset Management Holdings Proprietary Limited and Investec Asset Management Limited

Other principal appointments

Chairman of Blue Marlin Holdings SA (formerly Insinger de Beaufort Holdings SA, in which Investec Limited indirectly holds an 8.3% interest)

Committees

None

Date of appointment

Investec Limited 30 July 1980 Investec plc 26 June 2002

Lord Malloch-Brown KCMG, independent non-executive director

Age: 64

Qualifications: BA (Hons) (History), MA (Political Science)

Relevant skills and experience

Lord Malloch-Brown is chairman of SGO Corporation Limited and Senior Advisor to the Eurasia Group, he was a UK government minister and member of the cabinet. Lord Malloch-Brown was formerly the deputy secretary-general of the United Nations as well as a vice president at the World Bank and head of United Nations Development Programme and a journalist at the Economist with wide ranging experience of boards

Other principal appointments

Seplat Petroleum Development Company plc, ISquared Capital and Kerogen Capital

Committees

DLC social and ethics (chairman)* and DLC nominations and director's affairs

Date of appointment

Investec Limited 8 August 2014 Investec plc 8 August 2014

* Effective from 1 April 2018

Khumo L Shuenyane, independent non-executive director

Age: 47

Qualifications: BEcon, CA (England and Wales)

Relevant skills and experience

Khumo serves on the boards of a number of companies, in the Investec group. He is also a partner at Delta Partners, an advisory firm headquartered in Dubai focused on the telecoms, technology and digital sectors across emerging markets

Between 2007 and 2013 Khumo served as group chief mergers and acquisitions officer for MTN Group Limited and was a member of its group executive committee

Khumo was previously head of Principal Investments at Investec and was a member of Investec's Corporate Finance division for a total of nine years

Prior to joining Investec in 1998, Khumo worked for Arthur Andersen in Birminghand (UK) and Johannesburg for six years from 1992. He qualified as a member of the Institute of Chartered Accountants in England and Wales in 1995

Other principal appointments

Investec Bank Limited (chairman)*, Investec Life Limited, Investec Specialist Investments (RF) Limited, Investec Asset Management Holdings Proprietary Limited and Investec Asset Management Limited

Committees

DLC audit, Investec plc audit, Investec Limited and Investec Bank Limited audit and DLC board risk and capital, DLC nominations and directors' affairs

Date of appointment

Investec Limited 8 August 2014

Investec plc 8 August 2014

* Effective from 15 May 2018

Board composition

Independence

As at 31 March 2018, the board is compliant with Provision B.1.2 of the UK Corporate Governance Code in that at least half the board, excluding the chairman, comprises independent nonexecutive directors. The board is of the view that the chairman, Perry Crosthwaite, was considered independent on appointment.

As at 31 March 2018, the board is compliant with King IV in that the majority of non-executive directors are independent. A summary of the factors the board uses to determine the independence of non-executive directors are detailed below:

Relationships and associations

Ian Kantor is the brother of Bernard Kantor, Investec's managing director. Ian is also the founder and was previously chief executive officer of Investec. Accordingly, the board concluded that Ian could not be considered independent under the UK Corporate Governance Code and King IV.

Prior to joining the board on 1 March 2013, David Friedland was a partner of KPMG Inc. KPMG Inc. along with Ernst & Young Inc., are joint auditors of Investec Limited. The board concluded that, notwithstanding his previous association with KPMG Inc., David retains independence of judgement given he was never Investec Limited's designated auditor or relationship partner and was not involved with its Investec account.

Philip Hourquebie has been a longstanding Regional Managing Partner of two regions of Ernst & Young Inc. (Africa and Central South East Europe, including Turkey) up to 2014. The board concluded that notwithstanding his previous association with Ernst & Young Inc. Philip retains independence of judgement as he was never Investec Limited's designated auditor.

Charles Jacobs is the chairman and senior partner of the global law firm Linklaters LLP. Linklaters is currently one of Investec's legal advisors. The board considers independence on an annual basis and again concluded that, notwithstanding this link, Charles retains independence of judgement. Charles does not form part of the Linklaters team that provides advice to Investec and he has not provided advice to Investec for over a decade. In addition, selection of legal advisors is not a board matter and is decided at the management level. If any decision were to be made at the board level regarding Linklaters, which has not happened to date, Charles would recuse himself in accordance with the provisions of the relevant Companies Act relating to directors' interests. Charles plays no role in any team advising Investec. Where advice is provided by Linklaters to Investec, it is provided by separate Linklaters partners and not Charles. The legal fees paid to Linklaters have not been material either to Linklaters or Investec.

Tenure

The board is also mindful of its responsibility to ensure that there remains an appropriate balance of skills and experience on the

board, and it is therefore of the view that the retention of certain members beyond nine years may in certain circumstances be beneficial in ensuring this balance and that orderly succession can take place.

The board follows a thorough process of assessing independence on an annual basis for each director. The board does not believe that the tenure of any of the current non-executive directors interferes with their independence of judgement and their ability to act in Investec's best interest.

Accordingly, the board has concluded that Cheryl Carolus despite having been a director for more than nine years retains both financial independence and independence of character and judgement.

Notwithstanding the guidelines set out in the UK Corporate Governance Code, the board is of the view that Cheryl Carolus is independent of management and promote the interest of stakeholders. The balance of the executive and non-executive directors is such that there is a clear division of responsibility to ensure a balance of power, such that no one individual or group can dominate board processes or have unfettered powers of decisionmaking. The board believes that it functions effectively and evaluates its performance annually.

Attendance at credit

David Friedland regularly attends credit committees of the group. The board considers his attendance at the committee to be desirable in terms of developing an understanding of the day-to-day issues facing the business.

Independence

Non-independent 1 non-executive directors
Independent non-executives including chairman	10
Executives		4
66.6%	of board independent		Non-executive Executive

Balance of non-executive and executive directors:

Terms of appointment

On appointment, non-executive directors are provided with a letter of appointment. The letter sets out, among other things, duties, responsibilities and expected time commitments, details of Investec's policy on obtaining independent advice and, where appropriate, details of the board committees of which the non-executive director will be a member. Investec has an insurance policy that insures directors against liabilities they may incur in carrying out their duties. On the recommendation of the nominations and directors' affairs committee (nomdac), non-executive directors will be appointed for an expected term of nine years (three times three-year terms) from the date of their first appointment to the board.

Independent advice

Through the senior independent director (SID) or the company secretaries, individual directors are entitled to seek professional independent advice on matters related to the exercise of their duties and responsibilities at the expense of Investec. No such advice was sought during the 2018 financial year.

Company secretaries

David Miller is the company secretary of Investec plc and Niki van Wyk is the company secretary of Investec Limited. The company secretaries are professionally qualified and have gained experience over a number of years. Their services are evaluated by board members during the annual board evaluation process. They are responsible for the flow of information to the board and its committees and for ensuring compliance with board procedures. All directors have access to the advice and services of the company secretaries whose appointment and removal are a board matter.

In compliance with the UK Corporate Governance Code, the King IV Code and the JSE Listings Requirements, the board has considered and is satisfied that each of the company secretaries is competent, has the relevant qualifications and experience and maintains an arm's-length relationship with the board. In evaluating these qualities, the board has considered the prescribed role and duties pursuant to the requirements codified in the South African Companies Act of 2008 as amended, the UK Companies Act of 2006 and the listings and governance requirements as applicable.

In addition, the board confirms that for the period 1 April 2017 to 31 March 2018 neither of the company secretaries served as directors on the board nor did they take part in board deliberations and only advised on matters of governance, form or procedure.

Diversity

Age:

40 – 50	7%
51 – 60	40%
61 and above	53%

Aspirational target:

Per the Hampton-Alexander Review: Good progress has been made towards the target of 33% female representation by 2020 which continues to be a priority.

Tenure

Average length of service (years):

for non-executive directors

UK Corporate Governance recommendation:

Recommendation that non-executives should not serve longer than nine years from the time of their appointment.

Geographical mix:

Board gender balance:

Average tenure:

4

What we did

Board report

Role

The board seeks to exercise leadership, integrity and judgement in pursuit of Investec's strategic goals and objectives to achieve long-term sustainability, growth and prosperity. In fulfilling this objective the board is responsible for:

• approving the group's strategy
• acting as a focal point for, and custodian of corporate governance
• providing effective leadership on an ethical foundation
• ensuring the group is a responsible corporate citizen
• being responsible for the governance of risk, including risks associated with information technology
• ensuring the group complies with the applicable laws and considers adherence to non-binding rules and standards
• monitoring performance
• ensuring succession plan is in place.

The board

Meeting schedule and attendance

The board meets at least six times annually, excluding the annual two-day board strategy session. For the period 1 April 2017 to 31 March 2018, four board meetings were held in the UK and four in South Africa, in line with the requirements of Investec's DLC structure.

Furthermore, during the year ended 31 March 2018, the board held one additional meeting each in the UK and South Africa, respectively. Unscheduled meetings are called as the need arises. Comprehensive information packs on matters to be considered by the board are provided to directors in advance of the meetings.

Key matters deliberated by our board

Apart from standard and regular agenda items, such as report backs from each board committee and comprehensive reports from the CEO and financial director, discussions in relation to succession planning was of material importance for the group. The board remains focused on the group's orderly transition plan to move from the founding members to the next generation of leadership.

The board focused on gender initiatives in the UK and South Africa and reviewed the headcount and revenue per employee within the organisation. Furthermore the new remuneration policy was considered.

The board complied with Investec's policy regarding directors' conflicts of interest and dealings with the group.

Performance of the bank in the UK, including digitalisation, and performance reviews of business were debated.

The board effectiveness review was considered and the strength and weaknesses highlighted and appropriate steps to address the weaknesses were identified.

The terms of references of board committees and the group policies were reviewed on an ad hoc basis.

The annual meeting with the South African Prudential Authority (previously known as the Banking Supervision Division of the South African Reserve Bank), to discuss strategy, performance, risk and the "flavour of the year" topics of International Financial Reporting Standards (IFRS 9) and effective risk data aggregation and risk reporting, was attended by board members.

During the course of the year the board received training in respect of the senior management and certificate regime, the Financial Conduct Authority (FCA) approach and topical matters including IFRS 9, Markets in Financial Instrument Directive (MiFID) II, Advanced Internal Rating Based (AIRB) approach and General Data Protection Regulation (GDPR) and King IV.

(continued)

How the board spent its time

Strategy formulation and monitoring of implementation	Finance and operations (including monitoring performance, capital and liquidity)	Governance, compliance and risk Other
25%	50%	20%	5%

Composition and meeting attendance

		Board member since		Investec plc (8 meetings in the year)		Investec Limited (8 meetings in the year)
Members during the year	Independent	Investec plc	Investec Limited	Eligible to attend	Attended	Eligible to attend	Attended
F Titi (former chairman)*	On appointment	30 Jan 2004	30 Jan 2004	8	8	8	8
PKO Crosthwaite (chairman)**	Yes	18 Jun 2010	18 Jun 2010	8	8	8	8
ZBM Bassa	Yes	1 Nov 2014	1 Nov 2014	8	8	8	8
LC Bowden	Yes	1 Jan 2015	1 Jan 2015	8	8	8	8
GR Burger	Executive	3 Jul 2002	3 Jul 2002	8	8	8	8
CA Carolus	Yes	18 Mar 2005	18 Mar 2005	8	8	8	8
HJ du Toit	Executive	15 Dec 2010	15 Dec 2010	8	8	8	8
D Friedland	Yes	1 Mar 2013	1 Mar 2013	8	8	8	8
PA Hourquebie***	Yes	14 Aug 2017	14 Aug 2017	6	6	5	5
CR Jacobs	Yes	8 Aug 2014	8 Aug 2014	8	8	8	8
B Kantor	Executive	19 Mar 2002	8 Jun 1987	8	8	8	8
IR Kantor	No	26 Jun 2002	30 Jul 1980	8	8	8	8
S Koseff	Executive	26 Jun 2002	6 Oct 1986	8	8	8	8
Lord Malloch Brown KCMG	Yes	8 Aug 2014	8 Aug 2014	8	8	8	8
KL Shuenyane	Yes	8 Aug 2014	8 Aug 2014	8	8	8	8
PRS Thomas****	Yes	26 Jun 2002	29 Jun 1981	2	2	3	3

* F Titi stepped down as chairman of the board on 15 May 2018.

** PKO Crosthwaite was appointed as chairman of the board on 15 May 2018.

*** PA Hourquebie was appointed to the Investec boards with effect from 14 August 2017.

**** PRS Thomas stepped down from the Investec boards with effect from 10 August 2017.

Board activities
Areas of focus	What we did
Group strategy	The board: • formulated and monitored the implementation of its strategy • provided constructive challenge to management • monitored progress made with regard to agreed strategic initiatives
Group compliance, risk and corporate governance and audit	The board: • received and reviewed compliance reports in order to confirm that the group meets all internal and regulatory requirements • dialogued and approved the 2017/2018 risk appetite framework • regularly assessed the group's overall risk profile and emerging risk themes, receiving reports directly from the group risk manager and the chairman of the BRCC • received reports on the group's operational and technology capability, including specific updates on cyber risk capability and the strategy for technology and infrastructure services • received reports in respect of specific risks monitored within the group including updates in respect of GDPR, Advanced Internal Rating Based (AIRB), Foundation Internal Rating Based (FIRB) and International Financial Reporting Standards (IFRS) 9 • considered and approved capital plans • considered the impact of King IV, the JSE Listings Requirements and the revised UK Corporate Governance Code • adopted the group Anti-Money Laundering (AML) and Counter Terrorism Financing (CFT) Policy • approved the Recovery and Resolution Plans for the UK and South Africa • considered and confirmed the independence of the non-executive directors having regard to factors that might impact their independence • reviewed the Investec Bank plc and Investec Bank Limited's revised corporate governance structures • ensured the implementation of King IV • considered auditor independence, appointment and monitoring of audit quality and related parties activities
Leadership	The board: • considered regular updates by the various committees including the remco, nomdac, the audit committee, social and ethics committee (SEC) and BRCC • ensured that policies and behaviours set at board level are effectively communicated and implemented across the group
Effectiveness	The board: • considered the process for the 2018 board effectiveness review which took the form of a self-assessment followed by one-on-one meetings between the chairman and directors • amended/added questions to the board effectiveness self-assessment regarding risk and audit, the presentation of projects to the boards, IT and succession planning • noted that the 2018 effectiveness review showed good progress on those issues identified in the independently facilitated 2015 effectiveness review • in light of the outcome of the board effectiveness review, finalised topics for directors' development sessions

Board activities (continued)
Areas of focus	What we did
Remuneration	The board: • received a report from the remco chair at each meeting which covered a variety of topics including: – regulatory developments pertaining to remuneration • considered a communication plan for business to communicate their compliance with the UK Gender Pay Gap Reporting Requirements • in conjunction with remco revised the new remuneration policy
Relations with stakeholders	The board, in order to ensure satisfactory dialogue with shareholders, and to foster strong and open relationships with regulators, noted and discussed the key areas of feedback from these stakeholders, including feedback relating to: • board refreshment and succession • succession planning for the CEO, managing director and senior management • remuneration of executive directors • regular meetings and open dialogue with regulators • improving returns across its businesses
Corporate citizenship	The board discussed and monitored the various elements of good corporate citizenship including: • the promotion of equality, the prevention of unfair discrimination and the reduction of corruption • consideration of sponsorships, donations and charitable giving • environmental, health and public safety, including the impact of the group's activities and of its products and services • consumer relationships including the group's advertising, public relations and compliance with consumer protection laws • labour and employment – the group's standing in terms of the international labour organisation protocol on decent work and working conditions, employment relationships and its contribution towards the educational development of its employees The board: • satisfied itself that the Investec group's standing and commitment to the various elements of good corporate citizenship remained in place and was actively enforced • promoted the role Investec played in society
Subsidiary board and committee composition and governance	The board: • discussed succession planning including an update on senior management succession • received reports on the composition of the key subsidiaries of Investec plc and Investec Limited • received reports on suggested changes to Investec Bank plc's governance arrangements • received reports from the nomdac at each meeting covering the matters within its delegated authority for review and consideration • noted changes made to subsidiary boards on the recommendation of nomdac

Board activities (continued)
Areas of focus	What we did
Financial results, liquidity, solvency and viability statement	The board: • considered, reviewed and approved the financial results for the year ended 31 March 2018 for Investec plc and Investec Limited • considered, reviewed and approved the financial results for the half year ended 30 September 2017 • assessed, confirmed and satisfied itself of the group's viability statement (i.e. its ability to continue in operation and meet its liabilities taking into account the current position of the group, the board's assessment of the group's prospects and the principal risks it faces) • confirmed that the group was liquid and that the solvency and liquidity test has been satisfied (i.e. a company satisfies the solvency and liquidity test at a particular time if, considering all reasonably foreseeable financial circumstances at that time: the assets of the company, as fairly valued, equal or exceed the liabilities of the company, as fairly valued; and it appears that the company will be able to pay its debts as they become due in the ordinary course of business for a period of: – 12 months after date on which the test is considered; or – in the case of a dividend, 12 months following the distribution) • confirmed that adequate resources existed to support the group on a going concern basis
Management succession	and accordingly adopted the going concern concept The board: • considered matters relating to board succession and approved appointments to the board and board committees • has and is ensuring the orderly transition from the founding members to the new generation in accordance with the agreed management succession plan
Marketing initiatives	The board: • received regular updates in respect of marketing initiatives within the group
Terms of reference and policies	The board: • reviewed and received regular updates in respect of the various committees terms and references and policies within the group

(continued)

Corporate governance

Implementation of King IV

There have been significant corporate governance and regulatory developments, locally and internationally, since King III was issued in 2009, in South Africa which need to be taken into account. New global realities are testing the leadership of organisations on issues as diverse as inequality, globalised trade, social tensions, climate change, population growth, rapid technology and scientific advancements. In context of the above, the board has the challenge of steering the organisation to create value in a sustainable manner, to meet the needs of a growing population and the reality of dwindling natural resources.

The board welcomes the latest update of the King Code of Governance Principles, King IV, which was introduced to South Africa on 1 November 2016. Its outcomes driven approach to corporate governance corresponds with Investec's commitment to consistent improvement and value creation.

The board has applied the King Code of Governance Principles (King III) throughout Investec since its inception. In line with the approach of King IV, this corporate governance review includes the board's assessment, against the King IV principles applicable to Investec's business, of the outcomes our approach to corporate governance has achieved. The board recognise that this is the first step in Investec's King IV journey and will be spending time to further analyse Investec's practices to support the various principles and outcomes in terms of King IV.

A gap analysis between King III and King IV was conducted. The board is satisfied that based on the outcome of the gap analysis performed that King IV has been complied with.

Consistent with King IV's apply and explain approach to disclosure, Investec considers and applies the principles of corporate governance that are relevant to the group.

Below is a breakdown of the outcome of our endeavour to achieve good corporate governance in accordance with the principles of King IV:

King IV Principles Leadership, ethics and corporate citizen Principle 1 • The governing body should lead ethically and effectively • The board is the governing body of Investec and committed to the good corporate governance principles as set out in King IV, the South African Companies Act, the JSE Listings Requirements, and the South African Banks Act and the UK Corporate Governance Code. Investec's values of commitment, integrity, responsibility, innovation and connectivity guide the behaviour in the fulfilment of daily responsibilities and duties • A governance framework is in place between Investec and its subsidiaries in terms of which committees of the board assume responsibility for these subsidiaries Principle 2 • The governing body should govern the ethics of the organisation in a way that supports the establishment of an ethical culture • The board sets the tone from the top in the manner in which it conducts itself and oversees the governance framework and structures. Investec operates under a DLC structure and therefore considers the corporate governance principles and regulations of both the UK and South Africa prior to adopting the appropriate standard for the group • Investec's code of ethics and business conduct guides the ethical behaviour of all Investec employees and directors. The code is published on the Investec intranet, and incorporated by reference in employee contracts, employee induction and training programmes Principle 3 • The governing body should ensure that the organisation is and is seen to be a responsible corporate citizen • The SEC has been tasked with the responsibility for monitoring the overall responsible corporate citizenship performance of Investec • The board approves the strategy and priorities of Investec in accordance with its role of overseeing Investec's conduct as a responsible corporate citizen. The board oversees and monitors how operations and activities of Investec affect its status as a responsible corporate citizen. This is measured against agreed performance targets, which contains both financial and non-financial measures, so that Investec's core purpose and values, strategy and conduct are congruent with it being a responsible corporate citizen Strategy, performance and reporting Principle 4 • The governing body should appreciate that the organisation's core purpose, its risks and opportunities, strategy, business model, performance and sustainable development are all inseparable elements of the value creation process • The board is responsible for setting the strategy of the organisation. Strategy is discussed in depth at the annual board offsite. Senior management and executives present strategies to the board which the board in turn challenges and interrogates • The monitoring and evaluation of the strategy is done by the combined boards of Investec plc and Investec Limited. A review of performance against strategic objectives is included in the board pack for each meeting

King IV Principles continued
Strategy, performance and reporting continued
Principle 5 • The governing body should ensure that reports issued by the organisation enables stakeholders to make informed assessments of the organisation's performance and its short, medium and long-term prospects	• Investec's integrated annual report is published annually and is available online and in printed form • The board ensures that there are processes in place enabling complete, timely, relevant, accurate and accessible disclosures to stakeholders and monitors Investec's communication with all stakeholders and disclosures made to ensure transparent and effective communication • The DLC audit committee is tasked with the specific duty of considering whether the integrated annual report taken as a whole, was fair, balanced, and comprehensive and provided the information necessary for stakeholders to assess the group's performance. Corporate governance disclosures in terms of UK and South African governance codes, the integrated annual report as well as annual financial statements are published on Investec's website
Governing structures and delegation
Principle 6 • The governing body should serve as the focal point and custodian of corporate governance in the organisation	• The board sets the tone from the top in the manner in which it conducts itself and oversees the governance framework and structures. The board charter details the board's role, matters specifically reserved for the board, delegation to the CEO, membership requirements and procedural conduct at board meetings, amongst other things
Principle 7 • The governing body 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, with the assistance of nomdac, considers on an annual basis its composition in terms of balance of knowledge, skills, experience, diversity and independence and whether this enables it to effectively discharge its governance role and responsibilities objectively and effectively. The balance of executive and non-executive directors are such that there is a clear division of responsibility to ensure a balance of power. The board has more than one point of direct interaction with management • Directors are required to submit, in writing, disclosures detailing any actual or potential conflict for consideration
Principle 8 • The governing body should ensure that its arrangements for delegation within its own structures promote independent judgement, and assist with balance of power and the effective discharge of its duties	• The board has retained specific matters for decision making by the board, as per the board charter. To achieve its objectives, the board, in terms of defined terms of reference, has delegated certain of its duties and functions to various committees, group forums and the CEO. Membership of the committees are as recommended in King IV and the UK Corporate Governance Code
Principle 9 • The governing body 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	• The board continues to be committed to regularly evaluating its own effectiveness and that of its committees. The board undertakes an annual evaluation of its performance and that of its committees and directors, with independent external input into the process every third year • The company secretaries' performance is evaluated annually to ensure that there is an at arm's length relationship with the board. The board is satisfied that the company secretaries and the function that they oversee is performing well
Principle 10 • The governing body should ensure that the appointment of, and delegation to, management contribute to role clarity and the effective exercise of authority and responsibilities	• The board appoints the CEO who has the necessary powers and mandate to manage the group and conduct the affairs of the group in his discretion and as he deems fit, save for matters specifically reserved for the board, as per the board charter or agreed by the board from time to time, dealt with and provided for in the formally adopted terms of reference of a board committee or other recognised group forum. The CEO is a regular invitee at nomdac.

(continued)

King IV Principles continued

Governance functional areas

Principle 11

• The governing body should govern risk in a way that supports the organisation in setting and achieving its strategic objectives

• Risk management is embedded into day to day operations and culture. The Investec BRCC is tasked by the board to ensure that all decisions of the board on risk management policies and procedures are implemented and monitored throughout Investec • Independent risk management, compliance, financial control functions supplemented by internal audit, who reports independently to the audit committee, ensures the management

of risk. Business strategy, risk appetite and effective capital utilisation underpin the economic

• The board delegates responsibility to management and monitors progress through the IT strategy committee. The information and technology management charter and the IT governance framework define the structure to govern and manage IT, which is a subcommittee of Investec plc and Investec Limited and enables the setting of technology and information directions. A set of IT and information risk policies are defined for the group and

contraventions of, or non-compliance with, statutory obligations imposed on Investec

• There were no material or repeated regulatory penalties, sanctions or fines for

Principle 12

• The governing body should govern technology and information in a way that supports the organisation setting and achieving its strategic objectives

Principle 13

• The governing body should govern compliance with applicable laws and adopted, non-binding rules, codes and standards in a way that supports the organisation being ethical and good corporate citizen

Principle 14

• The governing body should ensure that the organisation remunerates fairly, responsibly and transparently so as to promote the achievement of strategic objectives and positive outcomes in the short, medium and long term

Principle 15

• The governing body should ensure that assurance services and functions enable an effective control environment, and that these support the integrity of information for internal decision-making and of the organisation's external reports

Stakeholders relations

Principle 16

• In its execution of its governance role and responsibilities, the governing body should adopt a stakeholder-inclusive approach that balances the needs, interests and expectations of material stakeholders in the best interests of the organisation over time

• The remco assumes responsibility for the governance of remuneration and sets the direction for how remuneration should be approached. Investec's overarching remuneration philosophy remains focused on employing and retaining the highest calibre individuals through the payment of industry competitive packages and long-term share awards, which ensure alignment with key stakeholders in Investec's business
• Refer to page 185 remuneration philosophy

value added (EVA) annual bonus allocation model

approved by the IT strategy committee

or the board during the year

• Attendance from external audit, internal audit, compliance and operational risk at audit committee enables an effective internal control environment to support the integrity of information used for internal decision-making and support the integrity of external reports. A combined assurance framework includes both coverage of significant risks and reporting of any issues raised relating to these risks
• An internal audit plan is presented annually for approval to the audit committee. The internal audit charter is reviewed every year. This charter defines the role and associated responsibilities and authority of internal audit, including addressing its role within combined assurance and the internal audit standards to be adopted
• Investec continually seeks to achieve an appropriate balance between risk and reward in our business, taking cognisance of all stakeholders' interests
• The SEC has been tasked by the board to ensure a stakeholder-inclusive approach is followed
• The independence of appointed non-executive directors promote the interest of stakeholders. Investec's reward programmes are administered to align directors' and employees' interests with those of all stakeholders and ensure the bank's short, medium- and long-term success. Our EVA model ensures that risk and capital management are embedded in key processes at both a bank and transaction level, which form the basis of the bank's performance related variable remuneration model, thus balancing the interests of all stakeholders. All users of capital operate within a strict philosophical framework that requires a balancing of risk and reward and that is designed to encourage behaviour in the interests of all stakeholders as opposed to just employees

(continued)

DLC nominations and directors' affairs committee report

The DLC nomdac, is pleased to present its report for the year ended 31 March 2018. During the past financial year, the committee focused on executive succession planning, board composition and ongoing directors' development.

The key objectives of the nomdac are designed to ensure the continued strengthening of the governance processes in the subsidiaries, not only for regulatory purposes, but also to enhance the effectiveness of the work performed by the boards.

At Investec, our culture and values are at the core of how we make decisions and how we are governed.

As such, the tone is set from the top and the board and committees alike live and demonstrate our values and integrity. In this respect, the nomdac's continued work on refreshing the subsidiary boards and director development was to ensure that the boards were able to fulfil their mandates with particular focus on the long-term success of the entities.

The nomdac was always cognisant of the imminent executive management changes – with particular reference to the founding members. We deliberated and debated the new management structure of Investec extensively and concluded that the succession of the aforementioned executives should be from within the organisation and therefore, no help was sought from external recruitment agencies.

We are proud of our achievements and successes during the financial year. However, while we strive to improve our processes and functions, we take mistakes made from inside and outside the organisation – as opportunities to grow and develop. This approach will undoubtedly encourage us to stay on top of our game and remain disciplined.

Finally, the nomdac would like to extend its congratulations to Perry Crosthwaite on his appointment as the chairman of nomdac. We also congratulate the new executive management appointed to various positions. We are confident that the group will benefit from their continued contribution.

Fani Titi Former chairman, DLC nomdac

12 June 2018

"At investec, our culture and values are at the core of how we make decisions and how we are governed"

DLC nomdac

Fani Titi

Former chairman of the DLC nomdac

Key achievements in FY 2018

• Succession planning

Areas of focus in FY 2019

• Strengthening the governance processes in the subsidiaries
• Enhance the effectiveness of the work performed by the board

DLC nominations and directors' affairs committee report

We are, pleased to report that Investec has entered a new era with the appointment of the new Joint CEOs, Fani Titi and Hendrik du Toit with effect from 1 October 2018. Leading up to the announcement of the new leadership, the nomdac was engaged in rigorous discussions around the new leadership of the organisation. Given Fani's role in the new leadership, the succession discussions were led by myself as senior independent director. The nomdac and the boards have every confidence that both Fani Titi and Hendrik du Toit will continue to grow Investec from strength to strength.

As part of the handover, the newly appointed and outgoing CEOs will meet regularly over the next six months to ensure a smooth transition and minimal disruptions. This would ensure continuity and stability within the organisation.

The group remains optimistic and confident in the new leadership. We wish to acknowledge and thank Stephen Koseff and Bernard Kantor for their hard work, commitment and endless dedication to Investec. Through the years and under their leadership, Investec became a market leader in several territories. We also wish to thank Glynn Burger for his contribution to the success of Investec. We wish them the very best in their future endeavors.

Following the implementation of the new management succession plan Khumo Shuenyane will be joining nomdac as Investec Bank Limited's representative, Philip Hourquebie as chairman of the remco and Lord Malloch-Brown as chairman of the SEC.

Going forward the nomdac will ensure the successful delivery of its mandate and strategic plans for the future.

Perry Crosthwaite Chairman DLC nomdac

12 June 2018

(continued)

How the nomdac works

Role

The nomdac is an essential part of the group's governance framework to which the board has delegated the following key functions:

• identification and nomination of candidates for board vacancies, as and when they arise
• evaluation of the adequacy of the group's corporate governance structure
• maintenance of the board directorship refreshment programme, which addresses succession planning
• consideration of other key matters relating to the election of directors, including the definition of key board roles, terms of appointment and regular review of the appropriateness of the boards' composition
• succession planning

Composition

The board has formed the opinion that the nomdac has the appropriate balance of knowledge and skills in order to discharge its duties. In particular, the majority of members are independent non-executive directors and all members have the relevant experience for them to be able to consider the issues that are presented to the committee.

Meeting schedule and attendance

In terms of the approved terms of reference for the nomdac, meetings of the committee shall be held at least three times per annum and as and when required on an ad hoc basis. During the financial year ended 31 March 2018, the committee met on five occasions.

How the committee spent its time

Succession planning/composition of boards and committees	Board effectiveness	Corporate governance and review of disclosures	Training and development
65%	15%	10%	10%

Composition and meeting attendance

			DLC (5 meetings in the year)
Members throughout the year	Committee member since	Eligible to attend	Attended
F Titi (former chairman)*	9 Sept 2010	5	5
PKO Crosthwaite (chairman)**	16 Sept 2014	5	5
ZBM Bassa***	1 April 2017	5	5
D Friedland***	16 Sept 2014	5	5
PRS Thomas****	9 Sept 2010	5	5
SE Abrahams*	9 Sept 2010	1	1

* F Titi stepped down as chairman of nomdac on 15 May 2018. F Titi recused himself from all discussions in relation to the appointment of the joint chief executive officer of the group.

** PKO Crosthwaite was appointed as chairman of nomdac on 15 May 2018.

*** In principle, it has been agreed that the chairs of the group's key governance committees (audit, board risk and capital, remuneration committees and social and ethics committees) be appointed to the nomdac.

**** PRS Thomas was appointed to the committee as a representative of Investec Bank Limited.

***** SE Abrahams as representative of Investec Bank Limited stepped down from nomdac at the Investec plc and Invested Limited AGM on 10 August 2017.

(continued)

Succession

A key area of focus for the nomdac has been with regard to succession planning. The nomdac has conducted formal succession appraisals for all key positions, and continues to ensure that succession plans are in place that will allow the managing director and the CEO to hand over operational responsibilities and leadership of the group to the next generation of leaders.

With regard to succession of the chairman, the nomdac considered whether an external search consultancy or advertising should be used. It concluded that, with the significant leadership changes being implemented in 2018, providing stability and continuity was of great importance. The nomdac considers that the appointment of the previous senior independent director (SID), Perry Crosthwaite, enhances the effectiveness of the board, and brings a new chairman who has strength of character, independence of mind and also has considerable knowledge and experience of the group.

The nomdac considers succession planning both in terms of ensuring that there are named individuals able to step in and provide cover in the event of an immediate vacancy, and in terms of ensuring that the group is increasing the internal pool of talented and skilled individuals by providing opportunities for individuals to develop and grow within the organisation.

Investec's approach to succession has been a successful one, the organisation has an excellent track record of developing talent and managing transition, and has never had a situation where it was unable to fill a key management position through internal resources.

Skills, knowledge and experience

The nomdac continually monitors the composition of the current board and considers what attributes, skills and experience are necessary in order for the board to effectively discharge its responsibilities. The nomdac has overseen the programme of directors' development to ensure that it includes training to keep directors up to speed with the latest relevant developments, including technology and cyber security.

Independence

Open and honest dialogue is part of Investec's culture. Robust independent challenge is a critical component of how the board operates. Investec has always been an organisation that places value on substance over form, and the nomdac therefore considers all relevant circumstances regarding directors' independence. However, its obligation is to ensure that directors, in fact demonstrate independence of character and judgement, and exhibit this in the boardroom by providing a challenge to the executive board members.

Nomdac considers tenure when considering independence, and when considering the composition of the board as a whole. The nomdac is mindful that there needs to be a balance resulting from the benefits brought on board by new independent directors, versus retaining individuals with valuable skills, knowledge, experience, and an understanding of Investec's unique culture that has been developed over time. For this reason, Investec has, over a number of years, operated a structured board refreshment programme whereby longer-serving members of the board step down and are replaced with new non-executive directors.

The nomdac continues to challenge and assess the independence and performance of directors, regardless of tenure, however, after nine years' service, non-executive directors are subjected to a rigorous test to establish whether they continue to demonstrate independence of character and judgement. Furthermore, all new appointments of non-executive directors are made for an initial period of three years with a clear understanding that they will be unlikely to serve for a period exceeding nine years.

There has been a significant amount of change and previous board effectiveness reviews clearly articulated the need to let these changes settle down before further changes to the composition of the board were considered.

Diversity

The nomdac, in considering the composition of the board, is mindful of all aspects of diversity. This includes gender, race, skills, experience and knowledge and a diversity policy as approved by the board. At Investec we embrace differences as a strength within our company. Having a diverse board is a clear benefit, bringing with it distinct and different outlooks, alternative viewpoints, and challenging mindsets.

With regard to race and gender diversity, Investec is cognisant of the recommendations of the Hampton-Alexander Review and the JSE Listings Requirements pertaining to the setting of a policy and, targets for the representation of women and people of colour on the board, and has an aspirational target of 33% female representation by 2020. However, Investec is a meritocracy, and believes that targets should be achieved without the setting of formal quotas. We therefore recognise the need to create opportunities for talented individuals to move up through the organisation. To assist with this, Investec undertakes a number of diversity initiatives across the organisation which promotes female board representation.

Investec has signed up to the 30% Club in both South Africa and the UK, which promotes female board representation, and in the UK, the bank has signed up to the Women in Finance Charter, which commits the bank to support the progression of woman into senior roles through focusing on the execution pipeline and mid-tier level.

Subsidiary board composition

In addition to considering the composition of the board, the nomdac reviewed the composition of a number of subsidiary boards including, Investec Bank plc, Investec Bank Limited, Investec Wealth & Investment Limited, Investec Securities Proprietary Limited, Investec Asset Management Limited and Investec Life Limited.

Related parties

Investec has processes and policies in place to govern the review, approval and disclosure of related party transactions entered into with directors, management and staff. Nomdac reviewed key related party transactions during the year and ensured that the appropriate policies had been complied with.

Committee activities
Areas of focus	What we did
Succession planning	The committee: • continually monitored, reviewed, discussed and assessed succession planning • received a forward looking report on future succession • implemented the appointment of: – Fani Titi and Hendrik du Toit as the designate Joint CEOs of Investec – Perry Crosthwaite as chairman of the Investec plc and Investec Limited boards – Zarina Bassa was appointed as SID of the group
Subsidiary board composition	The committee received reports on the composition of key subsidiaries of Investec plc and Investec Limited, including: • Investec Bank plc • Investec Bank Limited • Investec Wealth & Investment Limited • Investec Securities Proprietary Limited • Investec Asset Management Limited • Investec Life Limited The committee: • reviewed the composition of each of the key subsidiaries of Investec plc and Investec Limited • considered any vacancies, new appointments or changes that would enhance the effectiveness of the boards, with particular regard to group oversight and governance of subsidiary companies with due regard to local regulatory or legal requirements and best practice, and ensuring an appropriate level of independent scrutiny at subsidiary level • agreed on the following matters: – appointment of Khumo Shuenyane as the chairman of Investec Bank Limited – appointment of Brian Stevenson as the chairman of Investec Bank plc – Ciaran Whelan would succeed Glynn Burger as director of risk on 1 April 2019 – Kim McFarland would succeed Glynn Burger as finance and operations director from 1 April 2019
Corporate governance	The committee: • considered the independence of Investec plc, Investec Limited's and Investec Bank Limited's non-executive directors, with particular regard to: – directors who had served on the boards for a period longer than nine years – factors that might impact their independence – the directors contribution at board meetings and whether they in fact demonstrated independent challenge • specifically considered the independence of Cheryl Carolus who had served on the boards for a period exceeding nine years and concluded that it was satisfied that she remained independent and should be regarded as an independent non-executive director
Board diversity	The committee: • considered the target for the representation of women on the board of Investec Bank Limited, Investec Bank plc, Investec Limited and Investec plc and confirmed its support of the 33% target by the end of 2020 • noted governance requirements that required certain regulated entities to adopt a board diversity policy and a target for female representation on the board • approved amendments to its terms of reference in order to include these duties to ensure that Investec boards remained compliant

Committee activities continued
Areas of focus	What we did
Board effectiveness	The committee: • considered the process for the 2018 board effectiveness which took the form of a self assessment followed by one-on-one meetings between the chairman and directors • amended/added questions to the board effectiveness self-assessment regarding risk and audit, the presentation of projects to the boards, IT and succession planning • noted that the 2018 effectiveness review showed good progress on those issues identified in the independently facilitated 2016 effectiveness review
Directors' development	The committee: • considered dates and topics for future directors' development training and identified the following key topics affecting the business including: – UK Regulatory Requirements – King IV – amendments to the UK Corporate Governance Code – senior managers and certificate regime – Financial Conduct Authority (FCA) and topical subjects – Markets and Financial Instruments Directive (MiFID) II – cyber crime and IT governance – cryptocurrency – culture – client asset sourcebook (CASS) • considered the attendance of the subsidiary boards to the training sessions • the subsidiary boards would be included in the training as necessary

Looking ahead

The nomdac will continue to focus on how to further develop senior management in order to support our succession plans as well as provide oversight to ensure orderly transition from founders to new appointees.

Furthermore, the nomdac will ensure the robustness of the board effectiveness programme, with due consideration and challenge and interrogation of the independence of those directors who have served for longer than nine years. The committee continuously looks forward to the challenges and opportunities that the group will face, and will continue to review the composition of the board to ensure that it is optimally structured to drive forward the strategy that will enable the group to succeed.

The nomdac will continue to focus on the composition of the board with respect to race and gender diversity (especially in light of the new requirements as set out in King IV regarding the adoption of a diversity policy).

(continued)

DLC social and ethics committee report

The DLC SEC is pleased to present its report for the 2018 financial year.

The SEC is a committee which assists both the Investec plc and Investec Limited boards in monitoring the group's performance in terms of social, environmental and governance indicators. The report aims to explain how the SEC has discharged its duties across the group.

The environment in which the group operates has been challenging. We have seen the ethical behaviour of organisations and boards across all sectors of the economy being questioned and interrogated. At Investec, we aim to ensure that the tone set at board level is filtered across the organisation in order to drive ethical behaviour which is embedded in our culture.

We recognise that economic growth and societal transformation are vital to creating a sustainable future for all the communities in which we operate and that we play a meaningful role in enabling this. We have a number of projects in place that speak to youth employment, academic programmes and Corporate Social Investment (CSI) initiatives in all territories. Furthermore, the SEC considered the environmental impact that society, as a whole, was having on the environment. Please refer to the corporate responsibilty report on our website for comprehensive feedback on these activities.

Investec also recognises the contribution each employee makes towards the success of Investec. We aim to make the workplace a safe, non-biased environment in which each employee can flourish. The flat management structure at Investec is a mechanism which allows free and open discussions and enhances collaboration between divisions and employees. The committee reviewed our practices around creating a fair, diverse and inclusive working environment.

With this in mind, we placed focus on any race related matters, gender inequality and pay disparities.

We would like to congratulate Lord Malloch-Brown on his appointment as the new chairman of the SEC. We look forward to his valuable input to the committee.

Fani Titi Former chairman, DLC SEC

12 June 2018

"Investec lives in society and not off it"

DLC social and ethics committee

Fani Titi

Former chairman of the DLC SEC

Key achievements in FY 2018

• 1.2% CSI spend as a % of operating profit (March 2017: 1.2%) (target of >1%)
• Learning and development spend as a % of staff costs is 1.9% for the group (target of >1.5% for the group)
• One of the first signatories to Youth Employment Services (YES) programme

Areas of focus in FY 2019

• Oversight and coordination of group social, environmental and ethics matters
• Improved communication of the various group environmental, social and ethics efforts
• Intensify our engagement in South African society to support socioeconomic development
• Strong focus on sustainable development goals (SDGs)

(continued)

DLC social and ethics committee report

Dear Shareholder

Core to the objectives of the SEC are the values and principles of Investec and the desire to make a meaningful contribution to the world we live in. While our shareholders remain at the forefront of the board's attention, our purpose is not only about driving profits. We strive to be a distinctive and relevant specialist bank and asset manager, demonstrating cast iron integrity, moral strength and behaviour which promotes trust. Our core values include unselfishly contributing to society, valuing diversity and respecting others. Outstandingly empowered talent, entrepreneurial spirit and regard for the planet are other qualities that align our culture and our approach to responsible business.

There is a strong focus on Sustainable Development Goals (SDGs) which tackle the world's most pressing social, economic and environmental challenges and how companies align these 17 goals to their strategies. Investec undertook to establish a SDG forum which will drive the SDG agenda and monitor progress.

During the 2019 reporting period, the committee will continue to monitor Investec's environmental and social responsibilities. We are extremely proud of some of the initiatives we have in place across various territories, which include but are not limited to, academic programmes, reducing our environmental footprint, and improving our environmental social governance (ESG) policies and practices.

I would like to thank Fani Titi for his contributions made to this committee and I look forward to my new role as the chairman of the SEC.

Lord Malloch-Brown Chairman, DLC SEC 12 June 2018

(continued)

How the SEC works

Role

Our commitment to corporate responsibility means integrating social, ethical and environmental considerations. For Investec, being a good corporate citizen is about building our businesses to ensure we have a positive impact on the economy and social progress of communities and on the environment, while growing and preserving clients' and stakeholders wealth based on strong relationships and trust.

The SEC is an essential part of the group's governance framework to which the board has delegated the monitoring of the group's activities in relation to:

• social and economic development (including human rights)
• good corporate citizenship
• the Employment Equity Act and the Broad-Based Black Economic Empowerment Act
• ethical business practices
• improving our environmental social governance (ESG) policies and practices.

Composition

The nomdac and the board have formed the opinion that the SEC has the appropriate balance of knowledge and skills in order to discharge its duties. In particular, the majority of members are independent non-executive directors and all members have the relevant knowledge and experience for them to be able to consider the issues that are presented to the committee.

Meeting schedule and attendance

In terms of the approved terms of reference for the SEC, meetings of the committee shall be held quarterly, although the committee could determine that one of the scheduled meetings could be cancelled.

How the committee spent its time

DLC corporate responsibility	Policy matters	Employment matters	Reputational risk
35% 25%		20%	20%

Composition and meeting attendance

		(4 meetings in the year)
Members throughout the year	Committee member since	Eligible to attend	Attended
F Titi (former chairman)*	17 May 2012	4	4
Lord Malloch-Brown KCMG (chairman)**	8 August 2014	4	4
CA Carolus	17 May 2012	4	4
B Kantor	17 May 2012	4	4
S Koseff	17 May 2012	4	3
PRS Thomas***	17 May 2012	4	3

* F Titi stepped down as chairman of the SEC on 1 April 2018.

** Lord Malloch-Brown KCMG was appointed as chairman of the SEC on 1 April 2018.

*** PRS Thomas is a representative of Investec Bank Limited.

The composition of the committee is in accordance with the requirements of section 72(8) of the South African Companies Act, 2008, as amended, and its associated regulations.

Other regular attendees

• Head of sustainability and strategy
• Head of organisational development
• Head of human resources
• Head of investor relations
• Head of company secretarial and staff share schemes
• Head of Wealth & Investment
• Head of Investec Asset Management

Committee activities
Areas of focus	What we did
Social and economic development (including human rights)	The committee: • monitored the group's standing in terms of the goals and purposes of: – the 10 principles set out under the United Nations Global Compact Principles (UNGC). The committee remained committed to the 10 principles of the UNGC with respect to human rights, labour, environment and anti-corruption – the Organisation of Economic Co-Operation and Development (OECD) recommendations regarding corruption • ensured that the Investec group and its subsidiaries adhere to the relevant laws in all its jurisdictions and strive to advance the United Nations (UN) principles within its sphere of influence • submit a communication of progress to the UN Global Compact on an annual basis
Good corporate citizenship	The committee: • monitored various initiatives across the group • discussed and monitored the various elements of good corporate citizenship • satisfied itself that the group's standing and commitment to the various elements of good corporate citizenship remained in place and was actively enforced
The South African Employment Equity Act	The committee: • monitored Investec Limited and its subsidiaries' compliance with the relevant legislation • monitored progress made against Investec Limited's employment equity plans • engaged with the management of human resources to address challenges around matters such as diversity and employment equity targets • engaged with members of the employment equity forum • monitored and reviewed diversity across the group and considered any regulatory developments in this regard • satisfied itself that the group did take the appropriate measures in order to comply with the relevant legislation
The South African Broad-Based Black Economic Empowerment Act	The committee: • monitored Investec Limited and its subsidiaries' compliance with the relevant legislation • monitored Investec Limited's empowerment rating and discussed with management how to improve the rating • received and reviewed detailed information on recent developments with respect to the Department of Trade and Industry Codes, the Financial Sector Charter and the scorecards • satisfied itself that the group did take the appropriate measures in order to comply with the legislation • monitored complaints, if any, both internally and externally in respect of race-related matters, gender inequality and pay disparities
Contribution to the development of communities	The committee: • monitored Investec Limited and its subsidiaries' activities in contributing to the development of the communities in which its activities were predominantly conducted or within which its products and services are predominantly marketed • received regular reports on the group's corporate and social investment initiatives as well as the strategy and spend in respect thereof • satisfied itself that the Investec group contributed to the development of communities

(continued)

Committee activities continued
Areas of focus	What we did
Talent retention and attraction	The committee:
of employees	• agreed to the investment in learning and development opportunities for employees as well as individuals outside of the workplace
	• received regular reports on the learning opportunities and development of employees and others outside of the workplace
Culture and ethics	The committee:
	• received regular reports on the group's activities in respect of programmes offered to enhance its core values which included unselfishly contributing to society, valuing diversity and respecting others
	• satisfied itself that the Investec group's core values had a positive impact on the success and well-being of local communities, the environment and on overall macroeconomic stability
Reporting to shareholders of	The committee:
Investec plc and Investec Limited	• reported to the shareholders on matters within its mandate on its activities on an annual basis by means of the annual reports and at the annual general meeting of both companies
	• ensured that it complied with this principle

Looking ahead

The SEC will continue to monitor the economic, social and governance aspects of the organisation in accordance with best practice and statutory requirements in the jurisdictions the group operates in.

(continued)

DLC audit committee report

I am pleased to present you with the report of the DLC audit committee, the Investec plc audit committee and the Investec Limited and Investec Bank Limited audit committees (the INL audit committee) for the financial year ended 31 March 2018. For the purposes of this report, the term audit committees will be used to refer to the DLC audit committee, Investec plc audit committee and INL audit committee collectively.

Over the following pages we will share with you some key information about the role and functioning of Investec's audit committees. In addition to outlining the audit committees' structure, we have included some insight into how decisions are made and where judgement should be applied to the significant issues addressed by the audit committees during the financial year. Information has been provided under the following headings, which align to the key functions of the audit committees:

• financial reporting
• external audit
• internal controls.

Committee performance

The audit committees' performance was considered as part of the board effectiveness process conducted during the financial year, which was carried out using an internal selfassessment questionnaire. This process did not identify any material areas of concern about the functioning of the audit committees.

Role of the chair

The role of the chairman of the audit committees requires regular meetings with the heads of internal audit, compliance, legal, tax, operational and IT risk, credit, finance, the group head of corporate governance as well as the lead external audit partner and senior management outside of formal committee meetings in order to maintain and develop an understanding of the group's operations and the risks facing the business. These interactions are an essential part of the role of the chairman of the audit committees, as it provides an additional layer of assurance to gain comfort that these control functions are aligned in terms of their understanding of the risks facing the business and mitigation thereof.

The audit committees and the BRCC continue to be chaired by different independent nonexecutive directors. David Friedland chairs the BRCC. These committees have met all legal and regulatory requirements from a composition and independence perspective, and by so doing, provide an additional layer of independence between the said committees. Given the synergies and nature of matters considered by the committees, their membership is such that an element of commonality persists.

"Investec's robust governance framework is supported by its open and honest culture which helps to ensure any issues are escalated in a timely manner"

DLC audit committee

Zarina Bassa

Chairman of the DLC audit committee from 1 April 2017

Key achievements in FY 2018

• Implementation of IFRS 9
• Monitoring of audit quality, external audit and audit partner accreditation and results of quality reviews
• Putting into place additional local and international cross reviews to ensure both actual and perceived audit quality

Areas of focus in FY 2019

• IT risk and cyber security
• Business continuity
• Conduct
• Audit quality
• Auditor independence
• Monitoring and closing audit findings
• Related party processes and disclosures

(continued)

Looking ahead

In advancing the audit committees' efforts of the prior year, focus will be centred on further embedding the principles of King IV, specifically those pertaining to IT governance and cyber security, as well as the implementation of IFRS 9 and issues relating to conduct. The impact of the anticipated changes to UK Corporate Governance Code, as proposed by the Financial Reporting Council (FRC), will also feature as a key consideration on the agendas of the audit committees. Additionally, attention will be paid to the macro and micro impact of recent political events from both a UK and South African perspective, including the negotiation of post-Brexit arrangements and the investigation into the capture of the South African state. The South African Banks Act and South African Companies Act, respectively, call for the audit committee to ensure that the appointed auditors remain independent. To this end and in keeping with the South African Prudential Authority communicated "flavour of the year" topics, the audit committee will continue to consider auditor independence and audit quality measures.

Zarina Bassa Chairman, audit committees

12 June 2018

Corporate governance and corporate responsibility

How the audit committees work

Role

The audit committees are an essential part of the group's governance framework to which the board has delegated the following key functions:

• oversight of the group's financial reporting process and risks
• managing the relationship with the group's external auditor
• reviewing the group's internal controls and assurance processes, including those of internal audit.

Structure of the audit committees

In terms of Investec's DLC structure, the Investec plc board has mandated authority to the Investec plc audit committee and the Investec Limited board has mandated authority to the INL audit committee to be the audit committees for those respective companies and their subsidiaries.

The DLC audit committee, has responsibility for audit-related matters that are common to both Investec plc and Investec Limited. In particular, the combined group annual financial statements and year-end and interim results are considered and recommended for approval to the board by the DLC audit committee, Investec Bank plc. Investec Asset Management and Investec Wealth & Investment independently conducted audit committees report into the Investec plc and INL audit committee. The DLC audit chair attends these audit committee meetings.

Composition and meeting attendance

The audit committees are comprised entirely of independent non-executive directors who must meet predetermined skills, competency and experience requirements. The members' continuing independence are assessed annually by the nomdac, which in turn make a recommendation on the members' independence to the board. The nomdac and board have formed the opinion that the audit committees have the appropriate balance of knowledge and skills in order for them to discharge their duties. In particular, a majority of the members are chartered accountants and by virtue of their experience in the banking, financial services and audit sectors, members collectively have competence relevant to the sector in which the group operates. Further details of the experience of the members can be found in their biographies on pages 124 to 129.

Meeting schedule and attendance

During the financial year ended 31 March 2018, the DLC, Investec plc and INL audit committees each met four times, resulting in 12 meetings in aggregate. In addition, a number of specific meetings were convened to discuss external auditor quality, partner accreditation and independence. A further three meetings were convened to deliberate and conclude on IFRS 9.

			DLC (4 meetings in the year)		Investec plc (4 meetings in the year)		Investec Limited (4 meetings in the year)
Members throughout the year	Committee member since	Eligible to attend	Attended	Eligible to attend	Attended	Eligible to attend	Attended
ZBM Bassa	1 Nov 2014	4	4	4	4	4	4
LC Bowden*	1 Jan 2015	2	2	1	0	1	0
PA Hourquebie**	14 Aug 2017	2	2	3	3	3	3
KL Shuenyane	8 Aug 2014	4	4	4	4	4	4
PRS Thomas***	17 May 2006	2	2	1	1	4	4

* LC Bowden stepped down from the audit committees with effect from 16 August 2017.

** PA Hourquebie was appointed to the audit committees with effect from 14 August 2017.

*** PRS Thomas stepped down from the DLC and plc audit committees with effect from 10 August 2017, but remains a member for the INL audit committee representing Investec Bank Limited.

Other regular attendees

• Chairman of the group
• Chief executive officer of the group
• Managing director of the group
• Group risk and finance director of the group
• Head of compliance
• Head of IT
• Head of operational risk
• Head of internal audit
• Head of finance
• External auditors
• Head of company secretarial and staff share schemes
• Head of corporate governance
• Head of legal
• Head of tax
• Chief operational officers

Assurance functions, including group compliance, group legal, group finance, tax, internal audit, external audit and group risk

Audit committees How the committees spent their time

(continued)

Corporate governance

DLC
Financial reporting		External audit matters			Other (including governance matters)
50%		35%			5%
Investec plc
Financial reporting	External audit matters	Internal audit matters		Risk management and internal controls (including BCP, IT risk and cyber security)	Other (including macro issues and reports from subsidiary committees)
25%	25%	25%	15%		10%
INL
Financial reporting	External audit matters	Internal audit matters		Risk management and internal controls (including BCP, IT risk and cyber security)	Other (including macro issues and reports from subsidiary committees)
20%	35%	25%		15%	5%
IBP
Financial reporting	External audit matters	Internal audit matters		Risk management and internal controls (including BCP, IT risk and cyber security)	Other (including macro issues and reports from subsidiary committees)
25%	25%	25%	15%		10%

The agenda and meeting schedule for the audit committees' meetings was such that the Investec plc and INL audit committees spent more of their time throughout the annual cycle obtaining the required assurance of control and compliance functions, which in turn allows the DLC audit committee to focus on items which are within its mandate, including consideration of the annual financial statements and assessment of the external auditor.

(continued)

Financial reporting

Process

The audit committees' primary responsibility in relation to the group's financial reporting is to review with both management and the external auditor the appropriateness and accuracy of the half-year and annual financial statements.

In this process, amongst other matters, the audit committees consider:

• the appropriateness of accounting policies and practices and any areas of judgement
• significant issues that have been discussed with the external auditor
• the clarity of disclosures and compliance with financial reporting standards and other relevant financial and governance reporting requirements.

The audit committees receive reports from group finance and external audit at each of their quarterly meetings. The committee meetings afford the non-executive directors the opportunity to discuss with management the key areas of judgement applied and significant issues disclosed in the financial statements.

IFRS 9 implementation

The group adopted IFRS 9 on 1 April 2018. The audit committees have dedicated a substantial amount of time to understanding and challenging the IFRS 9 implementation programme. Three dedicated audit committee meetings, of a combined audit committee/BRCC, were convened to deliberate and conclude on IFRS 9.

Areas of judgement and significant issues

The audit committees have assessed whether suitable accounting policies have been adopted and whether management has made appropriate judgements and estimates. The main areas of judgement that have been considered by the audit committees to ensure that appropriate rigour has been applied are outlined below.

All accounting policies can be found on pages 32 to 40 in volume three of the 2018 integrated annual report of Investec plc and Investec Limited.

Significant judgements and issues	Committee review and conclusion
Impairments • Determining the appropriateness of impairment losses requires the group to make assumptions based on management judgement • Implementation of IFRS 9 and Day 1 adjustment	• the committee challenged the level of provisions made and the assumptions used to calculate the impairment provisions held by the group including assessing impairment experience against forecasts. Particular focus was given to the legacy portfolio and exposures which are affected by the current macro-economic environment • certain members of the audit committee attend the BRCC where impairment provisions are also challenged at a more granular level. The BRCC has oversight of the governance process pertaining to impairments • the committee was satisfied that the impairment provisions were appropriate • one of the key developments in accounting policy during the year was the preparation for the implementation of the IFRS 9 impairment standard on 1 April 2018 • the audit committee received updates and challenged the group's key judgements, scenarios and assumptions, in addition to the key features of the IFRS 9 impairment process and the impact on financial results, capital, stress testing and earnings volatility • three dedicated audit committee meetings of a combined audit committee/BRCC were convened to conclude on IFRS 9 • the audit committee is satisfied that the group has worked with industry guidance and has taken note of the best practice recommendations which have been issued
Valuations • The group exercises judgement in the valuation of complex/illiquid financial instruments, unlisted investments and embedded derivatives, particularly the level 3 instruments within the portfolio	• material individual positions, in particular the unlisted private equity investments, are challenged and debated by the committees with the most material noted as standing agenda items for each of the audit committees throughout the year • the committee debated the portfolio valuation adjustment which was recorded to take into account macro-economic risks on the South African private equity portfolio • at the year-end, prior to the audit committee meetings, the audit committee chair met with management and received a presentation on the material investments across the group including an analysis of the key judgements and assumptions used • the audit committee approved the valuation adjustments proposed by management for the year ended 31 March 2018
Uncertain tax positions • There are certain legacy structured transactions within Investec plc where there is uncertainty over the outcome of the tax positions and judgement is required over the calculation of the provision	• the audit committee receives regular updates on this topic from tax, group finance and legal to enable it to evaluate the appropriateness of the tax provision • the audit committee analyses the judgements and estimates made and discusses the potential range of outcomes that might arise • the committee confirmed the tax provisions and disclosures for the year end

Going concern

One of the key roles of the DLC audit committee is to review the going concern concept as presented by management and, if appropriate, make the necessary recommendation to the boards in this regard.

Whilst the liquidity and solvency of the Investec group is closely monitored on a daily basis by relevant individuals in the group's risk management division, the DLC audit committee and board expressly consider the assumptions underlying the going concern of the Investec group as part of the annual financial results approval.

The following areas are considered in order to make this statement:

• budgets and forecasts
• profitability
• capital
• liquidity
• solvency.

For the year ended 31 March 2018, the DLC audit committee recommended to the board that, based on its knowledge of the group, key processes in operation and enquiries, it is appropriate for the financial statements to be prepared on a going concern basis.

Fair, balanced and understandable

At the request of the board, the DLC audit committee has considered whether, in its opinion, the annual report and financial statements for the year ended 31 March 2018 are fair, balanced and understandable, and whether it provides the information necessary for shareholders to assess the group's position and performance, business model and strategy.

In forming its opinion, the DLC audit committee has:

• met with senior management to gain assurance that the processes underlying the compilation of the annual financial statements were appropriate
• conducted an in-depth, critical review of the annual financial statements and, where necessary, requested amendments to disclosure.

As such, the DLC audit committee has formed the view that the annual report and financial statements for the year ended 31 March 2018 are fair, balanced and understandable.

External audit

The DLC audit committee has responsibility for reviewing the group's relationship with its external auditors, including, considering audit fees, all Ernst & Young non-audit services and the independence and objectivity of the external auditors. In line with the conditions set out in section 94(8) of the South African Companies Act, and based on its assessment, using the criteria set out by King IV, the audit

committee confirms its satisfaction with the performance and quality of external audit, the external auditors and lead partners.

Auditor appointment

Investec's external auditors at the DLC level are Ernst & Young LLP and Ernst & Young Inc. (Ernst & Young). Ernst & Young and KPMG Inc. are joint auditors of the Investec Limited silo and Ernst & Young LLP are the auditors of the Investec plc silo. Ernst & Young have been the group's auditors since Investec's listing on the London Stock Exchange in 2002.

The DLC audit committee considers the re-appointment of the external auditors each year before making a recommendation to the board and shareholders. There will be a mandatory rotation for the 2025 audit and a competitive tender process will be conducted in advance of this time. See further information on re-election of auditors on page 157.

Auditor independence and objectivity

The DLC audit committee considers the independence of the external auditors on an ongoing basis. The external auditors are required to rotate the lead audit partner every five years and other senior audit staff every seven years. Partners and senior staff associated with the Investec audit may only be employed by the group after a cooling off period. The lead partners commenced their respective five-year rotation periods in 2014 and 2018 (Ernst & Young LLP: 1 July 2014 and Ernst & Young Inc: 31 January 2018).

Following due consideration, we continue to believe that the extent of audit cross reviews, both between the joint auditors on Investec Limited, of the additional cross reviews by the DLC auditors across the group supported by partner rotation, limitations on non-audit services including pre-approval of non-audit work and the confirmation of the independence of both Ernst & Young, KPMG Inc. and their respective audit teams are adequate safeguards to ensure that the audit process is both objective and effective.

The auditors have confirmed their independence and were requested to review and confirm the level of staff transactions with Investec, if any, to ensure that all auditors on the Investec audit meet the independence criteria.

Non-audit services

The audit committees have adopted a policy on the engagement of the external auditors to provide non-audit services. This policy, designed to safeguard auditor objectivity and independence, includes guidelines on permitted and non-permitted services and on services requiring specific approval by the audit committees. The audit committees review whether the level of non-audit fees could impact the independence of the auditors. This is monitored by reference to the level of fees paid for services, excluding services which are required to be provided by the external auditors due to their office, against the fees paid for the audit of the group. Total audit fees paid to all auditors for the year ended 31 March 2018 were £13.6 million (2017: £10.1 million), of which £2.6 million (2017: £2.8 million) related to the provision of non-audit services.

The summary of the nature of these services is set out in note 8 Operating cost of volume three.

Total non-audit fees for each of the auditing firms were approved by the audit committee at least quarterly. Ernst & Young non-audit service fees were pre-approved by the chairman of the audit committee prior to commencing the work in line with Ernst & Young policy.

The decision to approve the engagement of the external auditor for the services noted above was due to factors including synergies and efficiencies relating to the audit work and their existing knowledge of Investec which allowed work to commence quality and with minimal disruption.

On the basis of the abovementioned policy and reviews, the audit committees were satisfied that the quantity and type of non-audit work undertaken throughout the year did not impair the independence of Ernst & Young LLP, Ernst & Young Inc. or KPMG Inc.

Working with the external auditor

The audit committees meet with the external auditors to review the scope of the external audit plan, budgets, the extent of non-audit services rendered and all other audit matters. The external auditors are invited to attend audit committee meetings and have access to the audit committees' chairman.

The audit committees evaluated the effectiveness of the auditors through completion of a questionnaire which, amongst other things, assessed the audit partners, audit team and audit approach (planning and execution), during their presentations at audit committee meetings and ad hoc meetings held with the auditors throughout the year. Senior finance function executives also provided feedback to the audit committees.

Partner accreditation and audit quality

In terms of the amended JSE Listings Requirements, external audit Partner Accreditation, which was previously done by the Independent Regulatory Board for Auditors (IRBA), is now the responsibility of the audit committee, together with a specific responsibility around audit quality. In this regard separate meetings were held by the audit committees with both Ernst & Young and KPMG. The following was covered:

• transparency reports and reviews by each of the two firms covering their client base, client acceptance and continuance processes, and the approach to clients, if any, that did not meet the client continuance criteria;

(continued)

• the independence processes of the firm, including partner reward and remuneration criteria;
• interrogation of international and local firm audit quality control processes;
• detailed profiles of all partners and managers on the Investec assignment, including their relevant audit experience, were reviewed;
• each firm was requested to provide details of their respective succession plans to provide the audit committee with assurance as to the partner rotation, transition and continuity process;
• the results of the last firm-wide reviews carried out by regulatory bodies, both IRBA in South Africa as well as international bodies such as the Public Company Accounting Oversight Board (PCAOB); and
• the results of the last individual partner quality reviews carried out by the regulator; internal firm-wide quality control reviews carried out in respect of each partner;
• an audit quality questionnaire was also completed by each member of the audit committee and management, the results of which were that a robust audit is in place.

Regarding the challenges experienced by KPMG Inc. in South Africa, in the context of the SARS report and the resultant external independent investigation by SAICA (Ntsebeza Enquiry), a number of processes were initiated to ensure and confirm audit quality, both actual and perceived:

• separate audit committees and board meetings were held to consider and conclude on the group's approach to these matters;
• a number of meetings were held with KPMG leadership, both KPMG Inc. and KPMG International covering client acceptance and continuance, risk management, talent retention and continuity as well as our expectations of the international firm; and
• notwithstanding that the audit committee has been satisfied with the calibre and capability of the specific team engaged on Investec, KPMG was requested to put additional KPMG International file and technical reviews into place both for the interim and final audits.

The subsequent developments around KPMG and the VBS audit resulted in the audit committee requirement for the above-mentioned additional procedures being reconfirmed to KPMG Inc. and KPMG International, together with a request for independence reviews and confirmations in respect of all staff on the Investec engagement. Individual sessions with management, the internal auditors and each of the external auditors were undertaken as part of the year end audit committee meeting:

• partners from both Ernst & Young LLP and KPMG International attended the meeting to outline the enhanced and additional cross-reviews that had been undertaken and the results thereof, which had also been considered and reviewed by Ernst & Young Inc. the joint auditors of Investec Limited and by Ernst & Young LLP Inc., the DLC auditors;
• confirmations on independence by both firms were received; and
• assurance was received from KPMG Inc. and KPMG International that they were comfortable to sign off on the financial statements.

The committee concluded that it was satisfied that a robust audit process had been in place with deep levels of enhanced cross reviews by KPMG Inc., Ernst & Young Inc., KPMG International and Ernst & Young LLP.

Re-election of auditors

The board and audit committee is recommending the re-election of Ernst & Young Inc. and KPMG Inc. as joint auditors of Investec Limited and Investec Bank Limited at its annual general meeting in August 2018. In addition the board and the audit committee is recommending the re-election of Ernst & Young LLP as auditors of Investec plc at its annual general meeting in August 2018.

Our decision to retain KPMG Inc. as one of our joint auditors in South Africa was not taken lightly. The board is concerned about the failures of KPMG's internal controls and procedures as acknowledged by them. Of greater concern is the significant negative impact this has had on the country's audit profession, individual lives and the South African economy. Investec is a company that is strongly committed to its core values which require Investec employees, clients, suppliers and service providers to uphold the highest standards of ethical behaviour. We require KPMG International to hold individuals and KPMG Inc. accountable for involvement in the above-mentioned events in South Africa.

In making the recommendation for re-election of Investec Limited's and Investec Bank Limited's auditors, the board and audit committee have taken into consideration the South African Companies Act and the South African Prudential Authority requirements with respect to joint auditors and mandatory firm rotation. In addition, the need to ensure stability within the South African financial system and the audit profession at a time of uncertainty and volatility in the country as a whole is important. The board expects KPMG International to support KPMG Inc. and restore and rebuild confidence in KPMG South Africa.

The board will continue to monitor the situation closely and demand that the quality of work performed by KPMG for the group is of a high standard.

Internal controls

The Investec plc and INL audit committees have responsibility for assessing the adequacy of the group's internal controls. To fulfil this responsibility, the Investec plc and INL audit committees receive regular reports from risk management, compliance and internal audit including a written opinion from internal audit on the risk management framework, internal controls and internal financial controls. Outlined below are some of the key areas of focus of the Investec plc and INL audit committees over the past year in terms of their ongoing assessment of the adequacy of the group's internal controls.

Internal audit

In 2015, Grant Thornton were engaged to complete an external review on the effectiveness of the internal audit function. A recommendation of this review was to streamline the internal audit process and, in particular, reduce the number of lower level reviews. Since then, this has been a focus area for internal audit and an area of discussion at Investec plc and INL audit committee meetings. During the course of this year, challenge at committee meetings was centred on getting this balance right in terms of the number of audits, given the risk profile of business' activities. Delivery of the internal audit plan in a timeous manner has been another key area of focus by the Investec plc and INL audit committees. Monitoring the completion and close out of overdue audit findings and the resourcing of the internal audit function has also been addressed. Based on its review and the above actions, the audit committees concluded that the internal audit function continued to be effective.

Risk management

The Investec plc and INL audit committees receive regular reports from operational risk, information technology and compliance. During the course of the year, key topics that have been discussed and debated by the Investec plc and INL audit committees have been:

Business continuity

Consideration of the impact of the London office move in 2018 on the continuity of business operations

Information cyber security

Received and discussed the findings of a follow-up targeted attack simulation that was performed on Investec by an external provider

Regulatory compliance

Review and monitoring of results of regulatory compliance reviews

DLC board risk and capital committee report

As the chairman of the board risk and capital committee (the BRCC), during the financial year ended 31 March 2018, I am pleased to present our report.

The role of the committee is to review, on behalf of the board, management recommendations on a range of risks facing the business. We perform this function by considering the risk reports presented and question that either no management action is required or that existing actions taken by management following discussion are appropriate.

During the year under review all risk and capital measures remained within the board-approved risk appetite despite a number of emerging economic and political risks which presented itself. Investec Limited continued to make progress on the move towards the Advanced Internal Ratings Based (AIRB) approach in order to measure credit risk. The committee was actively involved in reviewing the various models of the AIRB project and special meetings were held where the various models were presented to the committee for approval. Following interaction with the South African Prudential Authority, the Foundation Internal Rating Based (FIRB) approach will be adopted for the wholesale portfolios and the application for retail portfolios will remain AIRB, with the intention to mitigate the wholesale portfolios from FIRB to AIRB in the foreseeable future.

Subject to regulatory approval the completion of the AIRB project is due in 2018 and is expected to have a positive impact on Investec Limited's capital ratios. Apart from the special meetings held to approve specific models, the committee regularly reviewed progress made on the timelines indicated in the AIRB and FIRB project plan. The committee reviewed and approved the capital plans for Investec Limited and Investec plc.

The committee monitored progress towards the full compliance with Investec Limited's Risk Data Aggregation and Risk Reporting (RDARR) by March 2018.

As a committee, we gained comfort in the fact that a detailed review of the risk appetite limits was conducted by the executives in policy executive risk review committee (Policy ERRF), who recommended the risk appetite limits to the committee for approval. We reviewed the risk appetite limits and challenged the assumptions contained therein.

Reports to the committee focus on the key risk disciplines of credit, operational, legal, conduct, reputational, capital, liquidity, market and investment risk and cyber security. However, due to the dynamic nature of the business environment in which Investec operates, the committee is flexible to consider other matters of relevance as they arise. For example, the committee requested a number of ad hoc reports in order to adequately assess risks that are due to once off events.

At each board meeting, a report is presented on the key matters discussed at the committee and focus in accordance with any new risks identified.

Committee performance

Evaluation of the committee's performance was conducted and no areas of concern in respect of the functioning of the committee were identified.

Role of the chair

During the year, meetings were held regularly with the heads of business, as well as heads of the risk disciplines outside of formal committee meetings in order to maintain and develop an understanding of the group's operations and risks facing the business. These interactions are an essential part of the role of the chairman, as it provides an additional layer of assurance to help gain comfort that these risks that are reported to the committee accurately reflect the risks facing the business.

The audit committee has the primary role in providing assurance to the board that enterprise wide risks have been correctly identified and appropriate controls are in place. Therefore, the audit committee will rely on the output of the BRCC to give assurance as regards enterprise wide risk. As it is essential that there are some synergies in membership of the DLC audit committee and BRCC, common membership will be retained by Zarina Bassa, as the chair of the DLC audit committee, Philip Hourquebie and Khumo Shuenyane.

Looking forward

In the year ahead, the committee will continue to focus on matters related to the impact of economic conditions on Investec, effective risk data aggregation, the implementation of regulatory requirements such as Twin Peaks, Financial Intelligence Centre Act (FICA) and King IV, information security, cyber crime and risks associated with the fast pace of regulatory change faced by the business and assessing the impact of external factors on the group's risk profile. Progress made towards to the AIRB project deadline will also be a regular agenda item.

The committee will continue to focus on the requirements in relation to the General Data Protection Regulations (GDPR) and the implementation of IFRS 9.

David Friedland Chairman, DLC BRCC 12 June 2018

"We believe that robust risk management systems and processes are in place to support the group strategy"

DLC board risk and capital committee

David Friedland Chairman of the DLC BRCC

Key achievements by FY 2018

• Review of successful targeted attack simulations to mitigate cyber crime risk
• Monitoring of progress of the AIRB project
• Monitoring of progress of RDARR Project
• Understanding and challenging the implementation of IFRS 9

Areas of focus by FY 2019

• Monitoring and continued mitigation of risks related to cyber crime and information security
• Monitoring of effective RDARR
• Effective risk data aggregation (fully compliant by 1 April 2018)
• Monitoring of Regulatory Developments:
  • Twin Peaks
  • FICA
• Impact of economic conditions on Investec
• The BRCC committee will adjust its meeting plan and focus in accordance with any new risks identified
• Monitoring and reviewing the progress made to migrate the wholesale portfolio from FIRB to AIRB

How the BRCC works

Role

The BRCC is an essential part of the group's governance framework to which the board has delegated the monitoring of the group's activities in relation to a number of risks and capital management. The BRCC is the most senior risk management committee of the group and comprises executive and non-executive membership (the majority of whom are non-executive directors). It covers each material banking, wealth management and asset management subsidiary company within the wider group.

The BRCC has to ensure that all risks are identified and properly mitigated and managed. Good client and market conduct is paramount in all the group does and the BRCC ensures a robust culture supported by oversight and management information to evidence good practice.

The BRCC is also the appointed board committee to meet the requirements of the South African Banks Act 94 of 1990 and the Capital Requirements Regulation and Directive (CRR/CRD IV), adopted by the European Commission and implemented in the UK. This requires the board of directors of a bank and a holding company to appoint a risk and capital committee.

The nomdac and the board have formed the opinion that the BRCC has the appropriate balance of knowledge and skills in order to discharge its duties. In particular, the majority of members are independent non-executive directors, as required in terms of King IV, and all members have the relevant knowledge and experience for them to be able to consider the issues that are presented to the committee.

Meeting schedule and attendance

BRCC meets at least six times every year. During the year ended 31 March 2018, the BRCC met six times.

A combined BRCC/audit committee meeting was held to receive a status update on the IFRS 9 project.

How the committee spent its time

Other (including legal, operational, group insurance, conduct risk business continuity, cyber crime and IT)	Capital	Balance sheet risk	Credit risk	Market risk
25%	25%	20%	20%	10%

Composition and meeting attendance

Eligible to
	Attended
6	6
6	5
6	6
6	5
6	6
4	4
6	5
6	6
6	6
6	6
6	4
6	6
	attend

* SE Abrahams is a representative of Investec Bank Limited.

** H Fukuda is a representative of Investec Bank plc.

*** B Stevenson is a representative of Investec Bank plc.

**** PRS Thomas is a representative of Investec Bank Limited.

(continued)

Other regular attendees

• Operational risk
• Head of IT security
• Investec Wealth & Investment Global Head
• Chief risk officer Investec Limited
• Chief risk officer Investec plc
• Investec Asset Management COO
• Investor relations representative
• Global head of governance and compliance
• CFO Private Bank Investec Limited (for AIRB meetings)
• AIRB project representative (for AIRB meetings)

Committee activities Areas of focus What we did Recovery and resolution plan The committee: • annually review the recovery and resolution plans for both Investec plc and Investec Limited • questioned the contents of the recovery and resolution plans which address how the board and management will recover from extreme financial stress to avoid liquidity and capital difficulties in Investec plc and Investec Limited • the committee gained comfort that adequate plans had been put in place for a scenario where Investec plc or Investec Limited was required to recover from extreme financial stress Operational risk Exposure to any instance where there is potential or actual impact to the group resulting from failed internal processes, people, systems, or from external events This risk includes fraud, legal risk, information and IT risk The committee: • monitored operational losses to ensure no further risk exits • reviewed the overall risk rating for the group • considered and reviewed the risk appetite limits for the group • monitored and reviewed regulatory compliance risk, information security risk, access risk and regulatory developments Capital management The progress/plan to achieving required regulatory and internal targets and capital and leverage ratios The committee: • measured key capital ratios against the internal and regulatory limits and what actions management planned to meet these ratios/limits • reviewed impending regulations on the management of capital – IFRS 9, AIRB, change in classification of IEP for capital purposes • the committee satisfied itself that Investec plc and Investec Limited were adequately capitalised and that progress was being made towards achieving impending regulatory amendments to capital ratios Market risk Market risk capital requirements The committee: • monitored risk appetite breaches and challenged management action which addressed these breaches • the committee gained comfort that the group had addressed breaches to limits appropriately Credit and counterparty risk Risk of an obligor failing to meet the terms of any agreement The committee: • monitored the risk appetite limit and queried management action taken in respect of breaches • the committee challenged the effectiveness of the management of such risks within the business Investment risk The probability or likelihood of occurrence of losses relative to the expected return of any particular investment The committee: • received regular reports regarding investment risk • reviewed and questioned the investment risk reports submitted to the committee

Committee activities continued
Areas of focus	What we did
Reputational risk Risk of damage to our reputation, name or brand	The committee: • monitored events which could potentially create reputational risk • gained comfort that reputational risk was mitigated as much as possible through detailed processes and governance escalation procedures from business units to the board, and from regular, clear communication with all stakeholders
Conduct risk Risk that detriment caused to the bank, its customers, its counterparties or the market as a result of inappropriate execution of business activities	The committee: • reviewed and questioned the conduct risk report which is discussed at each meeting • challenged the effectiveness of the management of such risks within the business
Balance sheet risk Financial risks relating to our asset and liability portfolios, comprising market liquidity, funding, concentration, non trading interest rate and foreign exchange, encumbrance and leverage risks	The committee: • reviewed a report which highlights bank activity, liquidity balances and key measures against thresholds and limits • challenged the effectiveness of the management of such risks within the business
Business continuity risk Strategy to be able to function in the event of a disaster	The committee: • reviewed, challenged and debated reports which highlight processes in place to manage this risk • challenged the effectiveness of the management of such risk within the business
Cyber crime risk Cyber crime risk is the risk the group is exposed to by criminal activities carried out by means of computers or the internet	The committee: • received regular reports regarding the cyber crime landscape, including lessons learnt from external cyber attacks • received the targeted attack simulation results and ensured that any remediation required was completed • gained comfort that the management of cyber crime was given the necessary priority

DLC remuneration committee report

For information on the decisions taken by the remuneration committee, refer to the remuneration report contained on pages 184 to 244.

		(11 meetings in the year)
Members during the year	Committee member since	Eligible to attend	Number of meetings attended
PKO Crosthwaite (former chairman)*	2 Feb 2011	11	11
PA Hourquebie (chairman)**	14 Aug 2017	7	7
ZBM Bassa	10 Sept 2015	11	11
CR Jacobs	8 Aug 2014	11	10
F Titi***	18 Sept 2013	10	10

* PKO Crosthwaite stepped down as chairman of the DLC remuneration committee with effect from 31 March 2018.

** PA Hourquebie was appointed to the DLC remuneration committee with effect from 14 August 2017 and was appointed chairman with effect from

1 April 2018. PA Hourguebie recused himself from any discussions in relation to the remuneration of the chairman of the DLC remuneration committee.

*** F Titi stepped down from the DLC remuneration committee with effect from 23 February 2018.

(continued)

Management committees

A number of management committees have been established to support management in their governance of the group. In particular, four key committees have been established to assist with the management and monitoring of the risks facing the group. These are the:

• Group risk and capital committee (GRCC)
• Review executive risk review forum (Review ERRF)
• Policy executive risk review forum (Policy ERRF)
• DLC capital committee.

Each of these committees have been established by the BRCC and the reporting line back into the board is outlined below, as well as the division of responsibilities.

Global forums/committees Including global credit committee and group investment committee

(continued)

Corporate governance and corporate responsibility

How we comply

Regulatory context

Investec operates under a dual listed companies (DLC) structure which requires compliance with the principles contained in the South African King IV Code of Corporate Governance Principle (available at www.iodsa.co.za) and the April 2016 edition of the UK Corporate Governance Code (available at www.frc.org.uk).

We believe that sound corporate governance depends on much more than mere compliance with regulations. Good conduct and ethical practice is embedded in everything that we do at Investec. By acting in accordance with our values and principles, we believe that good governance is ensured.

Statement of compliance UK Corporate Governance Code

During the year ended 31 March 2018, Investec has complied with all the provisions of the UK Corporate Governance Code.

King IV

The board is of the opinion that, based on the practices and outcomes disclosed throughout this report, which were in operation during the year under review, the group has applied the King IV principles.

Further refinement required to our governance processes as a result of King IV will be made during the course of the year ahead and reported against in next year's annual report.

Other statutory information

Viability statement

In addition to providing a going concern statement, the board is required, in terms of the UK Corporate Governance Code, to make a statement with respect to the group's viability (i.e. its ability to continue in operation and meet its liabilities) taking into account the current position of the group, the board's assessment of the group's prospects and the principal risks it faces. Following confirmation by the BRCC (comprising a majority of non-executive directors, which includes members of the audit committees), the audit committees recommended the viability statement for board approval.

The board has identified the principal and emerging risks facing the group and these are highlighted on pages 49 and 50.

Through its various sub-committees, notably the audit committees, the GRCC, the BRCC and the management and GRCC capital committees, the board regularly carries out a robust assessment of these risks, and their potential impact on the performance, liquidity and solvency of the group. The activities of these board sub-committees and the issues considered by them are described in this governance section of this report.

Taking these risks into account, together with the group's strategic objectives and the prevailing market environment, the board approved the overall risk appetite for the Investec group. The group's risk appetite statement sets broad parameters relating to the board's expectations around performance, business stability and risk management.

The board considers that prudential risk management is paramount in all it does. Protection of depositors, customers' interests, capital adequacy and shareholder returns are key drivers. To manage the group's risk appetite there are a number of detailed policy statements and governance structures in place. The board ensures that there are appropriate resources in place to manage the risks arising from running our business by having independent risk management, compliance, and financial control functions. These are supplemented by an internal audit function that reports independently to a non-executive audit committee chairman.

The board believes that the risk management systems and processes we have in place are adequate to support the group's strategy and allow the group to operate within its risk appetite framework. A review of the group's performance/ measurement against its risk appetite framework is provided at each BRCC meeting and at the main board meetings.

In terms of the South African Prudential Authority, the FCA and PRA requirements, the group is also required to meet regulatory standards with respect to capital and liquidity. In terms of these requirements, the group is required to stress its capital and liquidity positions under a number of severe stress conditions. Investec's stress testing framework is well embedded in its operations and is designed to identify and regularly test the group's key 'vulnerabilities under stress'.

Scenario modelling and rigorous daily liquidity stress tests are performed to measure and manage the group's respective banking entities' liquidity positions such that payment obligations can be met under a wide range of company specific and market-driven stress scenarios. The objective is to have sufficient liquidity, in an acute stress scenario, to continue to operate for a minimum period as detailed in the board-approved risk appetite and as required by the regulators. The group's risk appetite also requires each banking entity to maintain a minimum cash to customer deposit ratio of 25%, and ensure that the respective banking entities are not reliant on wholesale funding to fund core asset growth. Each banking entity is required to be fully self-funded. Our banking businesses in both the UK and South Africa exceed the regulatory requirements for the net stable funding ratio and liquidity coverage ratio. The group currently has £12.8 billion in cash and near cash assets, representing 41.4% of customer deposits.

The group develops annual capital plans that look forward over a three-year period. These plans are designed to assess the capital adequacy of the group's respective banking entities under a range of economic and internal conditions, with the impact on earnings, asset growth, risk appetite and liquidity considered. The output of capital planning allows senior management and the board to make decisions to ensure

that the group continues to hold sufficient capital to meet internal and regulatory capital targets over the medium term (i.e. three years). The group targets a minimum capital adequacy ratio of 14% to 17%, a common equity tier 1 ratio in excess of 10% and a leverage ratio in excess of 6% for each of its banking entities.

The parameters used in the capital and liquidity stresses are reviewed regularly, taking into account changes in the business environments and inputs from business units. A detailed 'bottom-up' analysis is performed in designing Investec's specific stress scenarios. The group also incorporates the South African Prudential Authority and Bank of England (BoE) annual cyclical stress scenarios into its capital and liquidity processes. As the group's banking entities are regulated separately and ringfenced from one another, different stress scenarios apply across the respective banking entities and jurisdictions.

Both Investec Limited and Investec plc run a number of stress scenarios, some of which are briefly highlighted below.

Investec Limited:

• A scenario which incorporates a global economic slowdown, possibility of further South African sovereign credit rating downgrades, Rand weakness, depressed confidence and investment measures and where South Africa experiences a V-shaped recession and a commodity price slump
• A scenario where there is a sovereign crises, persistent government service outages, sub-investment grade South African sovereign credit ratings, partial loss of private sector property rights under state custodianship and a global recession.

Investec plc:

• The BoE's annual cyclical stress scenario: this scenario incorporates a UK slowdown in GDP growth, a material slump in Pounds Sterling, increasing inflationary pressures which are combated by an increase in UK interest rates to 4%, in addition to a significant house price fall
• A scenario where there is a material stress on corporates and protracted weak global growth with low interest rates

• A scenario where there is increased political uncertainty and a domestic household shock incorporating a UK downturn, high UK interest rates and a UK housing market slump. In this scenario we assume that the international backdrop is benign with some slight negative spill over from the UK through various linkages to the Euro area, with Ireland most acutely exposed.

We also carry out 'reverse stress tests', i.e. those scenarios that would cause the group to breach its capital and liquidity requirements. These scenarios are considered highly unlikely, given the group's strong liquidity position and sound capital and leverage parameters.

Furthermore, the group is required to have a recovery and resolution plan for both Investec plc and Investec Limited. The purpose of the recovery plans are to document how the board and senior management will ensure that the group recovers from extreme financial stress to avoid liquidity and capital difficulties in its separately regulated companies.

The capital and liquidity plans, stress scenarios, recovery and resolution plans and the risk appetite statement are reviewed at least annually. In addition, senior management hosts an annual three-day risk appetite process at which the group's risk appetite framework is reviewed and modified to take into account risk experience and changes in the environment. Furthermore, strategic budget processes which focus on, amongst other things, the business and competitive landscape; opportunities and challenges; financial projections – take place within each business division at least annually. A summary of these divisional budgets, together with a consolidated group budget, is presented to the board during its strategic review process early in the year.

In assessing the group's viability, the board has taken all of the abovementioned factors, documents and processes into consideration. The directors can confirm that they have a reasonable expectation that Investec will continue to operate and meet its liabilities as they fall due over the next three years. The board has used a three-year assessment period as this is aligned to the group's medium-term capital plans which incorporate profitability, liquidity, leverage and capital adequacy projections

and include impact assessments from a number of stress scenarios. The board has assessed the group's viability in its 'base case' and stress scenarios. Detailed management information therefore exists to provide senior management and the board sufficient and realistic visibility of the group's viability over the next three years to 31 March 2021 under these various scenarios. In assessing the group's viability, a number of assumptions are built into its capital and liquidity plans. In the stress scenarios these include, for example, dividend payments being reduced and asset growth being curtailed.

The viability statement should be read in conjunction with the following sections in the annual report, all of which have informed the board's assessment of the group's viability:

• Pages 5 to 85, which shows a strategic and financial overview of the business
• Pages 42 and 50, which provide detail on the principal and emerging risks the group faces
• Page 11 in volume two, which highlights information on the group's risk appetite framework
• Page 6 to 8 and 12 to 16 in volume two, which provide an overview of the group's approach to risk management, and the processes in place to assist the group in mitigating its principal risks
• Pages 8, 18, 53, 60, 63 and 82 in volume two which highlight information on the group's various stress testing processes
• Pages 62 and 63 in volume two, which specifically focus on the group's philosophy and approach to liquidity management
• Pages 78 to 83 in volume two which explain the group's capital management framework.

This forward-looking viability statement made by the board is based on information and knowledge of the group at 12 June 2018. There could be a number of risks and uncertainties arising from (but not limited to) domestic and global economic and business conditions beyond the group's control that could cause the group's actual results, performance or achievements in the markets in which it operates to differ from those anticipated.

(continued)

Conflict of interest

Certain statutory duties with respect to directors' conflict of interest are in force under the UK Companies Act and the South African Companies Act. In accordance with these Acts and the Articles of Association (Articles) of Investec plc and the Memorandum of Incorporation (MOI) of Investec Limited, the board may authorise any matter that otherwise may involve the directors breaching their duty to avoid conflicts of interest. The board has adopted a procedure, as set out in the Articles and MOI that includes a requirement for directors to submit, in writing, disclosures detailing any actual or potential conflict for consideration, and if considered appropriate, approval.

External directorships

Outside business interests of directors are closely monitored and we are satisfied that all of the directors have sufficient to effectively discharge their duties.

Dealings in securities

Dealings in securities are subject to the personal account dealing policy. The policy is based on regulatory guidance and industry practice and is updated to ensure compliance with applicable regulations and industry best practice.

The policy is designed to discourage speculative trading and highlight potential conflicts of interest between the interest of employees and the Investec group or any of its clients, shareholders or potential shareholders. The UKLA's Disclosure and Transparency Rules require us to disclose transactions in shares and related securities by all persons discharging management responsibilities and their "connected persons". These include directors and senior executives of the group.

Staff are prohibited from dealing in all listed Investec securities during closed periods. Tradings are restricted in respect of all Investec Limited, Investec plc, Investec Property Fund Limited (IPF) and Investec Australia Property Fund Limited (IAPF) securities as well as any warrants, OTC and exchange traded derivatives on the said securities. Staff are restricted from exercising options through Investec Staff Share Schemes during closed periods.

The UK and South African Companies Acts require directors to disclose any direct or indirect material interest they have in contracts, including proposed contracts, which are of significance to the company's business. Directors are required to make these disclosures at board meetings, and all disclosures made are recorded in the minutes of that meeting.

Staff are required to undertake not to use any personal hedging strategies to lessen the impact of a reduction in value of any share award or any vested shares which are subject to a retention period following any vesting date. Any breach of this condition will result in the lapse of any unvested proportion of such reward, unless the DLC remuneration committee determines otherwise.

Directors' dealings

Directors dealings in the securities of Investec plc and Investec Limited are subject to a policy based on the Disclosure Guidance and Transparency Rules of the UKLA and the JSE Listings Requirements.

All directors' and company secretaries dealings require the prior approval of the compliance division and the chairman, the senior independent director or the chairman of the audit committee.

All dealings of persons discharging management responsibilities require approval by line management, the compliance division and the chairman.

Report to shareholders

This report to shareholders has been approved and authorised for issue to the shareholders of Investec plc and Investec Limited on 12 June 2018 and signed on its behalf by:

David Miller Company secretary

Investec plc

Niki van Wyk Company secretary

Investec Limited

Investec ordinary shares

As at 31 March 2018 Investec plc and Investec Limited had 669.8 million and 310.7 million ordinary shares in issue respectively.

Spread of ordinary shareholders as at 31 March 2018

Investec plc ordinary shares in issue

Number of shareholders	Holdings	% of total shareholders	Number of shares in issue	% of issued share capital
16 451	1 – 500	54.5%	3 066 804	0.5%
5 148	501 – 1 000	17.1%	3 921 349	0.6%
5 789	1 001 – 5 000	19.2%	12 820 080	1.9%
870	5 001 – 10 000	2.9%	6 322 860	0.9%
1 034	10 001 – 50 000	3.4%	24 032 663	3.6%
275	50 001 – 100 000	0.9%	19 574 644	2.9%
615	100 001 and over	2.0%	600 100 295	89.6%
30 182		100.0%	669 838 695	100.0%

Investec Limited ordinary shares in issue

Number of shareholders	Holdings	% of total shareholders	Number of shares in issue	% of issued share capital
3 655	1 – 500	44.6%	697 644	0.2%
1 286	501 – 1 000	15.7%	991 581	0.3%
1 759	1 001 – 5 000	21.4%	3 985 673	1.3%
378	5 001 – 10 000	4.6%	2 836 314	0.9%
626	10 001 – 50 000	7.6%	14 952 706	4.8%
181	50 001 – 100 000	2.2%	12 757 948	4.1%
317	100 001 and over	3.9%	274 500 878	88.4%
8 202		100.0%	310 722 744	100.0%

Geographical holding by benecial ordinary shareholder as at 31 March 2018

Investec Limited

South Africa	62.3%
UK	8.0%
USA and Canada	15.0%
Rest of Europe	1.9%
Asia	2.4%
Other countries and unknown	10.4%

(continued)

Largest ordinary shareholders as at 31 March 2018

In accordance with the terms provided for in section 793 of the UK Companies Act 2006 and section 56 of the South African Companies Act, 2008, as amended, the group has conducted investigations into the registered holders of its ordinary shares (including nominee and asset management companies) and the results are as disclosed below.

Investec plc

Shareholder analysis by manager group	Number of shares	% holding
1. Allan Gray (ZA)	71 494 791	10.7%
2. Coronation Fund Managers (ZA)	49 462 280	7.4%
3. Public Investment Corporation (ZA)	40 553 224	6.1%
4. BlackRock Inc (US & UK)	38 477 035	5.7%
5. Old Mutual (ZA)	34 052 783	5.1%
6. Prudential Group (ZA)	30 358 867	4.5%
7. The Vanguard Group, Inc (US & UK)	20 537 935	3.1%
8. Investec Asset Management* (ZA)	17 766 926	2.7%
9. T Rowe Price Associates (UK)	17 073 903	2.5%
10. State Street Corporation (US & UK)	16 865 642	2.5%
Cumulative total	336 643 386	50.3%

The top 10 shareholders account for 50.3% of the total shareholding in Investec plc. This information is based on a threshold of 20 000 shares. Some major fund managers hold additional shares below this, which may cause the above figures to be marginally understated.

* In custody, held on behalf of clients.

Investec Limited

Shareholder analysis by manager group	Number of shares	% holding
1. Allan Gray (ZA)	38 471 349	12.4%
2. Public Investment Corporation (ZA)	35 492 302	11.4%
3. Investec Staff Share Scheme (ZA)	14 674 608	4.7%
4. Old Mutual (ZA)	13 123 570	4.2%
5. BlackRock Inc (US & UK)	12 223 803	3.9%
6. Sanlam Group (ZA)	10 554 623	3.4%
7. The Vanguard Group, Inc (US & UK)	10 492 686	3.4%
8. Coronation Fund Managers (ZA)	10 186 937	3.3%
9. Dimensional Fund Advisors (UK)	8 276 719	2.7%
10. Entrepreneurial Development Trust (ZA)	5 547 362	1.8%
Cumulative total	159 043 959	51.2%

The top 10 shareholders account for 51.2% of the total shareholding in Investec Limited. This information is based on a threshold of 20 000 shares. Some major fund managers hold additional shares below this, which may cause the above figures to be marginally understated.

Shareholder classification as at 31 March 2018

	Number of Investec plc shares	% holding	Number of Investec Limited shares	% holding
Public*	644 874 220	96.2%	292 552 654	94.3%
Non-public	24 964 475	3.8%	18 170 090	5.7%
Non-executive directors of Investec plc/Investec Limited	1 144 683	0.2%	325	–
Executive directors of Investec plc/Investec Limited	10 651 547	1.6%	3 495 157	1.0%
Investec staff share schemes	13 168 245	2.0%	14 674 608	4.7%
Total	669 838 695	100.0%	310 722 744	100.0%

* As per the JSE Listings Requirements.

(continued)

Share statistics

Investec plc

For the year ended	31 March 2018	31 March 2017	31 March 2016	31 March 2015	31 March 2014	31 March 2013	31 March 2012
Closing market price per share
(Pounds Sterling)
– year ended	5.50	5.44	5.13	5.61	4.85	4.59	3.82
– highest	6.49	6.19	6.47	6.06	5.08	5.14	5.22
– lowest	4.61	4.19	4.03	4.91	3.66	3.10	3.18
Number of ordinary shares in issue (million)1	669.8	657.1	617.4	613.6	608.8	605.2	598.3
Market capitalisation (£'million)1	3 684	3 575	3 167	3 442	2 953	2 778	2 286
Daily average volumes of share traded ('000)	1 807	1 618	1 474	2 170	1 985	1 305	1 683
Price earnings ratio2	10.3	11.3	12.4	14.2	12.8	12.7	12.0
Dividend cover (times)2	2.2	2.1	2.0	2.0	2.0	2.0	1.9
Dividend yield (%)2	4.4	4.2	4.1	3.5	3.9	3.9	4.5
Earnings yield (%)2	9.7	8.9	8.1	7.0	7.8	7.9	8.3

Investec Limited

For the year ended	31 March 2018	31 March 2017	31 March 2016	31 March 2015	31 March 2014	31 March 2013	31 March 2012
Closing market price per share (Rands)
– year ended	92.28	91.46	109.91	100.51	84.84	64.26	47.16
– highest	105.62	112.11	121.90	107.35	85.04	69.89	57.36
– lowest	85.00	81.46	93.91	86.02	59.00	41.31	42.00
Number of ordinary shares in issue (million)3	310.7	301.2	291.4	285.7	282.9	279.6	276.0
Market capitalisation (R'million)3	90 486	87 646	99 886	90 388	75 652	56 857	41 232
Market capitalisation (£'million)3	5 393	5 213	4 662	5 045	4 325	4 061	3 340
Daily average volume of shares traded ('000)	1 031	1 149	963	739	810	980	1 033

1 The LSE only include the shares in issue for Investec plc, i.e. currently 669.8 million, in calculating market capitalisation, as Investec Limited is not incorporated in the UK.

2 Calculations are based on the group's consolidated earnings per share before goodwill, acquired intangibles and non-operating items; and dividends per share as prepared in accordance with IFRS and denominated in Pounds Sterling.

3 The JSE have agreed to use the total number of shares in issue for the combined group, comprising Investec plc and Investec Limited, in calculating market capitalisation, i.e. currently a total of 980.6 million shares in issue.

Investec preference shares

Investec plc, Investec Limited and Investec Bank Limited have issued preference shares.

Spread of preference shareholders as at 31 March 2018

Investec plc preference shareholders

Number of shareholders	Holdings	% of total shareholders	Number of preference shares in issue	% of issued preference share capital
50	1 – 500	14.0%	10 674	0.4%
48	501 – 1 000	13.5%	38 268	1.4%
176	1 001 – 5 000	49.3%	342 895	12.4%
30	5 001 – 10 000	8.4%	230 513	8.3%
41	10 001 – 50 000	11.5%	910 794	33.1%
9	50 001 – 100 000	2.5%	698 655	25.4%
3	100 001 and over	0.8%	522 788	19.0%
357		100.0%	2 754 587	100.0%

Investec plc (Rand-denominated) perpetual preference shareholders

Number of shareholders	Holdings	% of total shareholders	Number of preference shares in issue	% of issued preference share capital
52	1 – 500	52.0%	10 263	7.8%
17	501 – 1 000	17.0%	13 741	10.5%
26	1 001 – 5 000	26.0%	62 594	47.6%
3	5 001 – 10 000	3.0%	18 849	14.3%
2	10 001 – 50 000	2.0%	26 000	19.8%
–	50 001 – 100 000	–	–	–
–	100 001 and over	–	–	–
100		100.0%	131 447	100.0%

Investec Limited perpetual preference shareholders

Number of shareholders	Holdings	% of total shareholders	Number of preference shares in issue	% of issued preference share capital
1 083	1 – 500	18.8%	340 472	1.1%
1 321	501 – 1 000	23.0%	1 089 913	3.4%
2 470	1 001 – 5 000	43.0%	5 761 320	17.9%
431	5 001 – 10 000	7.5%	3 112 946	9.6%
363	10 001 – 50 000	6.3%	7 080 709	22.0%
44	50 001 – 100 000	0.8%	3 078 559	9.5%
35	100 001 and over	0.6%	11 750 580	36.5%
5 747		100.0%	32 214 499	100.0%

Investec Limited redeemable preference shareholders

Number of shareholders	Holdings	% of total shareholders	Number of preference shares in issue	% of issued preference share capital
44	1 – 500	59.5%	5 287	2.5%
4	501 – 1 000	5.4%	3 228	1.5%
16	1 001 – 5 000	21.6%	36 726	17.2%
3	5 001 – 10 000	4.0%	25 346	11.9%
7	10 001 – 50 000	9.5%	142 348	66.9%
–	50 001 – 100 000	–	–	–
–	100 001 and over	–	–	–
74		100.0%	212 935	100.0%

(continued)

Investec Bank Limited perpetual preference shareholders

Number of shareholders	Holdings	% of total shareholders	Number of preference shares in issue	% of issued preference share capital
760	1 – 500	21.2%	214 921	1.4%
891	501 – 1 000	24.9%	774 482	5.0%
1 422	1 001 – 5 000	39.8%	3 390 214	22.0%
256	5 001 – 10 000	7.2%	1 850 404	12.0%
208	10 001 – 50 000	5.8%	3 962 169	25.6%
21	50 001 – 100 000	0.6%	1 457 218	9.4%
17	100 001 and over	0.5%	3 798 222	24.6%
3 575		100.0%	15 447 630	100.0%

Investec Bank Limited redeemable preference shareholders

Number of shareholders	Holdings	% of total shareholders	Number of preference shares in issue	% of issued preference share capital
875	1 – 500	91.8%	110 916	32.5%
49	501 – 1 000	5.2%	32 880	9.6%
20	1 001 – 5 000	2.1%	36 347	10.6%
3	5 001 – 10 000	0.3%	17 249	5.1%
5	10 001 – 50 000	0.5%	82 499	24.1%
1	50 001 – 100 000	0.1%	61 826	18.1%
–	100 001 and over	–	–	–
953		100.0%	341 717	100.0%

Largest preference shareholders as at 31 March 2018

Shareholders holding beneficial interests in excess of 5.0% of the issued preference shares are as follows:

Investec plc perpetual preference shares

Hargreave Hale Nominees Limited 13.1%

Investec plc (Rand-denominated) perpetual preference shares

Private individual 9.9% Private individual 9.9% Private individual 5.9%

Investec Limited perpetual preference shares

Standard Chartered Bank – Coronation Strategic Income fund 5.0%

Investec Limited redeemable preference shares

Private individual 21.9% Private individual 12.5% Private individual 8.2% Private individual 7.5% Private individual 6.9% Private individual 5.1%

Investec Bank Limited perpetual preference shares

There were no shareholders holding beneficial interests in excess of 5.0% of the issued preference shares in Investec Bank Limited, as at 31 March 2018.

Investec Bank Limited redeemable preference shares

Saldanha Group Investments Proprietary Limited 18.1% Sirius Motor Corporation 5.9%

Corporate governance and corporate responsibility

Corporate responsibility business practices

Our corporate responsibility philosophy

Guided by our purpose to create sustained long-term wealth, we seek to be a positive influence in all our core businesses and in each of the societies in which we operate. We do this by empowering communities through entrepreneurship and education, and leveraging the value in our diversity. We recognise the challenges that climate change presents to the global economy and we support activities that either reduces the negative impact on, or prolongs the life of, our planet.

Investec as a responsible corporate citizen

At Investec we recognise that, while our shareholders remain at the forefront, our purpose ultimately is not only about driving profits. We strive to be a distinctive specialist bank and asset manager, demonstrating cast-iron integrity, moral strength and behaviour which promotes trust. Our core values include unselfishly contributing to society, valuing diversity and respecting others. Outstanding and empowered talent, entrepreneurial spirit and regard for the planet are other qualities that align with the culture of our organisation and our approach to responsible business.

Our culture and values demonstrate our belief that as an organisation we can and must have a positive impact on the success and well-being of communities local to our offices, the environment, and on overall macro-economic stability.

Our philosophy seeks to align the interests of shareholders and stakeholders over time, and provides the individual business units and regions with a basis from which to determine their own approach. The group's philosophy is not intended to be mutually exclusive or exhaustive, but allows us to

concentrate, for now, on key focus areas. Deliberately not driven on a top-down basis, the executive maintains responsibility for oversight, direction, coordination and integration of our corporate responsibility efforts while the individual business units provide the key drivers behind our activities, in a manner that best makes sense to each.

Please refer to the website for Investec's full corporate citizenship statement.

External recognition and group memberships

Although we are not driven by awards and recognition, Investec participates and has maintained its inclusion in the following world-leading indices. These indices have been designed objectively to measure the performance of companies that meet global-recognised corporate responsibility standards.

	2018	2017	2016
Carbon Disclosure Project (CDP) (Investec is a member and Investec Asset Management is a signatory investor)	B	A-	A
Code for Responsible Investing in South Africa (CRISA)	Signatory	Signatory	Signatory
Dow Jones Sustainability Investment Index* (score out of 100)	73	69	69
ECPI Index	Constituent	n/a	n/a
FTSE4Good Index	Included	Included	Included
FTSE/JSE Responsible Investment Index series	Constituent	Constituent	Constituent
MSCI Global Sustainability Index Series (Investec plc) – Intangible value assessment (IVA) rating	AAA	AAA	AAA
STOXX Global ESG Leaders Indices	Member	Member	Member
United Nations Global Compact	Participant	Active	Active
United Nations Principles for Responsible Investment (UNPRI)	Signatory	Signatory	Signatory

* Investec Limited ranked as one of four industry leaders on the DJSI Emerging Markets Index; Investec plc ranked as one of 15 industry leaders on the DJSI World and one of nine in the DJSI Europe indices.

Aris Prepoudis, CEO, RobecoSam: "I congratulate Investec whole heartedly for being included in The Sustainability Yearbook 2018. The companies included in the Yearbook are the world's most sustainable companies in their industry and are moving the ESG needle in ways that will help us realise the UN's Sustainable Development Goals by 2030"

(continued)

Communication and stakeholder engagement

Building trust and credibility among our stakeholders is vital to good business

The board recognises that effective communication is integral in building stakeholder value and is committed to providing meaningful, transparent, timely and accurate financial and non-financial information to primary stakeholders as defined below. The purpose is to help these stakeholders make meaningful assessments and informed investment decisions about the group.

We endeavour to present a balanced and understandable assessment of our position by addressing material matters of significant interest and concern.

We seek to highlight the key risks to which we consider ourselves exposed and our responses to minimise the impact of these risks.

Another objective is to show a balance between the positive and negative aspects of our activities in order to achieve a comprehensive and fair account of our performance.

As a requirement of our DLC structure, we comply with the disclosure obligations contained in the applicable listing rules of the UK Listing Authority (UKLA) the Johannesburg Stock Exchange (JSE) and other exchanges on which our shares are listed, and with any public disclosure obligations as required by the UK regulators and the South African Prudential Authority (previously known as the Banking Supervision Division of the South African Reserve Bank).

We also recognise that from time to time we may be required to adhere to public disclosure obligations in other countries where we have operations.

The Investor Relations division has a day-to-day responsibility for ensuring appropriate communication with stakeholders and, together with the Group Finance and Company Secretarial divisions, ensures that we meet our public disclosure obligations.

We have a board-approved policy statement in place to ensure that we comply with all relevant public disclosure obligations and uphold the board's communication and disclosure philosophy.

We engage regularly with our stakeholders listed below:

Employees	Investors and shareholders	Clients	Rating agencies
• Communication policy • Quarterly magazine • Staff updates hosted by executive management • Group and subsidiary fact sheets • Tailored internal investor relations training • Induction training for new employees	• Annual general meeting • Four investor presentations • Stock exchange announcements • Comprehensive investor relations website • Shareholder roadshows and presentations • Regular meetings with investor relations team and executive management • Annual meeting with investor relations team and group company secretarial, the chairman of the board, senior independent director and chairman of the remuneration committee • Regular email and telephone communication • Annual and interim reports	• Four investor presentations • Regular email and telephone communications • Comprehensive investor relations website • Regular meetings with executive management • Tailored presentations • Annual and interim reports • Client relationship managers in each business	• Four investor presentations • Regular email and telephone communications • Comprehensive investor relations website • Regular meetings with investor relations team, group risk management and executive management • Tailored presentations • Tailored rating agency booklet • Annual and interim reports
Government and regulatory bodies	Equity and debt analysts	Media	Suppliers
• Active participation in a number of policy forums • Response and engagement with all relevant bodies on regulatory matters • Industry consultative bodies	• Four investor presentations • Stock exchange announcements • Comprehensive investor relations website • Regular meetings with investor relations and executive management • Regular email and telephone communications • Annual and interim reports	• Regular email and telephone communications • Stock exchange announcements • Comprehensive investor relations website • Regular meetings with investor relations and executive management	• Centralised negotiation process • Ad hoc procurement questionnaires requesting information on suppliers' environmental, social and ethical policies

Key topics and concerns raised by stakeholders

Macro-economic environment and sustainable returns

Its been a difficult operating environment in both South Africa and the UK with the volatility expected to continue. We have been investing for long-term growth which may result in having to sacrifice some short-term returns. Hence, the focus has been on building resilience and creating franchise value that generates appropriate long-term returns.

We will continue to focus on the growth levers available to improve our returns, including growing our client base and core revenue drivers, leveraging off of our investment into the business, managing our liquidity and optimising our capital structure. We believe that our strategic priorities, together with the diversity of our business model that has been built over many years, will ensure the group is favourably positioned to grow in core markets, supporting future growth and delivering value to all our stakeholders.

Succession

Succession of the group's existing founder leaders has been an ongoing agenda item for most stakeholders over the past few years. In February 2018 we announced our succession plan which was well received by most stakeholders. It is acknowledged and accepted that the next year will be a time of transition as the previous leaders hand over and the next generation take up the helm as the new leadership of the group.

Executive remuneration

The updated executive remuneration policy will need to be voted in at our annual general meeting in August 2018. We have engaged extensively with shareholders to ascertain and incorporate their views on executive remuneration. Where appropriate, we will be reducing the quantum of executive remuneration as well as simplifying the structure to ensure stronger alignment to strategy with relevant targets and measurements in place for monitoring.

Board governance

There has been heightened scrutiny on board governance in general, particularly as corporate and audit firm scandals have increased over the past year. Investec has spent a significant time on board refreshment and composition, ensuring that the structure and shape of the board is appropriate.

Risk appetite

Rating agencies, in particular, are questioning if our risk appetite framework is relevant and appropriate given the volatile macro-economic environment. They are

less concerned that profitability may be lower and more interested in how we are managing asset quality, liquidity and capital in an unpredictable macro environment. We regularly review our risk appetite framework and are comfortable that we have robust risk management processes and systems in place.

Cyber crime

The financial services industry is a highly attractive target for cyber criminals and with increased digitalisation comes heightened vulnerability. Investec's cyber resilience strategy is based upon a threat-driven approach to cyber security, rather than the contemporary compliance-driven approach. Regular targeted attack simulations by specialist companies, against the group as a whole, is used to measure and improve our cyber defences. We also employ world class security professionals and believe that people, operating within a risk conscious culture, and not just technology, are key to maintaining resilience against security threats.

Gender and diversity

Stakeholders have been interested to find out how Investec is looking at various diversity issues, including gender and reporting on the gender pay gap as required by UK Companies Act. Investec signed up to the 30% Club in both South Africa and the UK committing Investec Limited and Investec plc to a target of 30% females on the board by 2020. Investec Bank plc and Investec Wealth & Investment UK have also signed up to the HM Treasury Women in Finance Charter which sets targets and links executive remuneration to deliverables.

Investec Asset Management has signed up as a founder member of The Diversity Project in the UK.

We also published our first gender pay gap report.

Transformation in South Africa

Stakeholders have been concerned about the challenges facing South Africa with very slow economic growth, rising political uncertainty, downgrades of sovereign debt and low business and consumer confidence. Investec welcomed the positive sentiment and message at the State of the Nation Address by President Cyril Ramaphosa in February 2018 to eradicate state capture, corruption and restore investor confidence and rule of law. Investec has been intimately involved in the CEO Initiative to, among other things, formulate the Youth Employment Service (YES) programme to address the unemployment issue among young people. Investec remains committed to black economic empowerment and over time achieving the targets set out in the revised Financial Sector Code (FS Code).

Reputation

State capture in South Africa and corporate and audit scandals have heightened the awareness around who we deal with and what process is taken to 'on-board' clients. A significant amount of time and resources have been spent on anti-money laundering (AML) training with 98% of South African, UK and Australian banking employees having passed with an average of above 80% during the past financial year.

New regulations

We have received a number of questions with respect to the regulatory and accounting frameworks in which we operate. The board has focused on a number of new regulations, policies and practices including IFRS 9, Markets in Financial Instrument Directive (MiFid) II, General Data Protection Regulation (GDPR), King IV and the Advanced Internal Ratings Based (AIRB) and FIRB approach to capital.

Non-financial reporting

There is increased expectations around social impacts and in particular nonfinancial benchmarking and reporting. The Financial Stability Board's Task Force on Climate-related Financial Disclosures (TCFD) recommendations relating to the disclosure of various financial exposures to climate risk are gaining momentum. We acknowledge the TCFD recommendations that were released during the past financial year and have embarked on a process to understand the relevance of potential climate scenario's for our business and will incorporate these recommendations in the 2019 financial reporting cycle.

We have also seen increased interest in the role that the private sector will play in advancing the United Nations Sustainable Development Goals (SDGs). Investec is committed to participate and collaborate with clients, investors and public stakeholders to support the delivery of the SDGs. Through our core activities, we contribute to a number of specific SDGs and targets and have included the intersections, where relevant, throughout this report. In South Africa, we are participating in an industry-wide initiative with the Bankers Association of South Africa (BASA) to review and map our business activities, products and programmes against the SDGs to assess where Investec, currently has the greatest contribution and to determine the potential opportunities to collaborate as a sector for maximum impact.

(continued)

Responsibility Reporting Assurance

The social and ethics committee is responsible for monitoring the non-financial elements.

Refer to pages 146 to 150 for

The mandate of this committee is to assist the board in monitoring the group's performance in terms of social, environment and governance indicators.

further information.

We also have employees in each of the major geographies in which we operate who drive our corporate responsibility objectives.

Feedback on relevant corporate responsibility issues is provided to board members at board meetings.

Our approach to corporate responsibility is documented throughout this integrated annual report with further detail available in a more extensive corporate responsibility report on our website.

Our approach to reporting has followed guidance from the King Code of Governance Principles for South Africa (King IV) and in accordance with the Global Reporting Initiative's (GRI) Standards core sustainability reporting guidelines.

An index of these indicators together with our response to each of them can be found in our separate corporate responsibility report on our website.

Investec Internal Audit performed a limited review of the quantitative and qualitative corporate responsibility information disclosed in the 2018 corporate responsibility report on our website.

KPMG has provided a limited assurance review for the environmental KPIs. For a better understanding of the scope of KPMG's assurance process, refer to the 2018 corporate responsibility report on our website.

Investec's corporate responsibility encompasses three key areas of people, planet and profit, including our contribution to the six capitals and our commitment to the Sustainable Development Goals (SDGs).

Corporate governance and corporate responsibility

Our people

At Investec we position our culture as a strategic differentiator. We prize our flat structure and meritocratic approach and uphold an environment that encourages self-starters to drive their careers in line with business objectives. We employ passionate and talented people who are empowered and able to perform extraordinarily.

Our people strategy is to …

… attract, retain, develop and motivate people who can perform extraordinarily	… retain and drive performance through appropriate aspirational remuneration and reward structures	… ensure that performance management is motivational and constructive
We invest significantly in a number of opportunities for developing and upskilling employees, and in leadership programmes to enable current and future leaders of the group.	We reward people meaningfully for performance and contribution.	Our culture of open and honest dialogue promotes immediate and direct performance-related feedback between the leader and his or her team, to help individuals identify and address their development needs.
Learning and development spend as a % of staff costs is 1.9% for the group (target of >1.5% for the group)	5% of Investec shares are held by staff (excluding directors' holdings) Voluntary staff turnover rate: • South Africa: 8.8% • UK: 8.4%	All employees engage in some type of formal or informal performance discussion every year

Working at Investec

The policies and business practices of Investec are outlined in Becoming Acquainted with Investec (and regional equivalents) and in the compliance handbook (which are easily accessible to employees in all of Investec's locations). These are intended to guide conduct and ensure our actions and attitudes reflect the group's values and philosophies at all times.

Human rights We remain committed to the 10 principles of the United Nations (UN) Global Compact and support the international agenda to abolish human trafficking, slavery, forced and child labour including the legislated UK Modern Slavery Act 2015.	10 principles of the United Nations (UN) Global Compact
Freedom of association We fully support employees' rights to freedom of association.	Zero trade unions
Whistle-blowing policy and protected disclosures We require employees to conduct all internal and external dealings with integrity, consistently and uncompromisingly displaying moral strength and behaviour which promotes trust.	Integrity and confidentiality are critical to our reputation and sustainability
Employee wellness Investec values the physical, financial and psychological health, welfare and safety of our people. We provide employees with bespoke employee assistance and wellness programmes.	72% employees in South Africa participated in one or more employee wellness initiatives (2017: 66%)

(continued)

Learning and development

We invest significantly in a number of opportunities for the development and upskilling of our employees, and in leadership programmes to enable current and future leaders of the group.

External learning

Investec's external learning includes public programmes, conferences, seminars and courses which provides employees with development opportunities to enable the acquisition of knowledge and skills necessary for career development within Investec.

Investec's educational bursary scheme provides employees with focused educational opportunities to further their qualifications.

Internal learning

This includes general staff induction, bespoke induction for new learners, personal and interpersonal skills, technical and professional skills, leadership programmes, mentoring and coaching as well as our learnerships and chartered accountant (CA) trainee programmes.

9.7% of full time South African employees granted bursaries in the last year (2017: 9.2%)

21 qualified CAs completed the CA programme in the past year and all were retained in the business (239 graduated since inception)

Promoting equity and diversity in the workplace

A diverse workforce is essential to our ability to be an innovative organisation that is able to adapt and prosper in a fast changing world.

The group's approach is to recruit and promote on the basis of aptitude and attitude, with the deliberate intent to build a diverse workforce and promote an inclusive workplace, appropriately and fully representative of the jurisdiction's population. We endeavour to prevent and/or eliminate any form of discrimination based on gender, race, ethnicity, religion, age, disability, nationality and sexual preference. People with disabilities are an essential part of a diverse talent pool and are always considered, with every effort made to accommodate and facilitate an accessible environment. In the event of employees becoming disabled while in our employ, we are committed to ensuring their continued employment. We have various processes to encourage debate and dialogue around valuing diversity and difference. Emerging and established leaders are invited to participate in discussions with the executive leadership around all issues related to talent management and diversity. There have been three alleged incidents of discrimination reported in the past financial year, two of which have been reviewed through the appropriate internal grievance procedure and were subsequently dismissed by an independent chairman. The third alleged incident is under investigation at the time of writing this report.

Our diversity principles

While we have actively tried to increase the diversity of our senior leadership, we recognise that across our organisation we have more work to do. That is why we have put together our own set of diversity principles to help define the framework for that journey.

• We believe in the importance and benefits of diversity and foster a culture that is supportive and inclusive of different perspectives and experiences
• As a global specialist bank and asset manager, diversity ensures that we represent the diversity of our global client base
• Our commitment to diversity is fundamentally about 'doing the right thing'
• We are progressing towards a working environment that is more agile and responsive to the needs of all individuals, with flexible work arrangements encouraged where appropriate
• In terms of diversity, we commit to equal compensation on a like-for-like basis
• We will work proactively to rebalance our organisation in line with the societies in which we operate by empowering communities through entrepreneurship and education, and leveraging the value in our diversity
• We will measure and track progress annually
• We will work towards achieving our targets through concrete actions (refer to pages 239 and 240)

Refer to pages 238 to 240 for more details on our gender pay gap analysis.

49% female employees

20% females on our board Investec is a member of the 30% club in both the UK and South Africa committing to a goal of 30% women on the board and has made good progress towards the target of 33% female representation by 2020, per the Hampton-Alexander Review

Investec Bank plc and Investec Wealth & Investment UK have signed up to the UK HM Treasury Woman in Finance Charter

Investec Asset Management has signed up as a founder member of The Diversity Project in the UK

Transformation in South Africa

In South Africa, Investec remains committed to black economic empowerment.

Our approach involves:

• using our entrepreneurial expertise to foster the creation of new black entrepreneurial platforms
• serving as a leading source of empowerment financing
• investing significantly in learning and development opportunities for both our employees as well as other South Africans
• encouraging internal transformation by bringing about greater representivity in our workplace
• continually striving to achieve greater representation at all levels of the business through the effective implementation of our employment equity plan.

YES initiative

Through the CEO Initiative in South Africa, the Youth Employment Service (YES) programme, in partnership with a number of corporates, government and SMEs, has committed to finding employment opportunities for unemployed youth via paid internships. Investec CEO, Stephen Koseff, is a co-convenor of this initiative.

This initiative was launched in March 2018 and the first 20 youth were employed by Investec in partnership with the Sabi Sands Pfunanani Trust from 1 April 2018. Investec has committed to finding employment for approximately 1 200 youth annually for the next three years.

Khulasande Capital Partnership II

Khulasande Capital Partnership II was launched during the year as a partnership between Investec Limited and the Entrepreneurship Development Trust (EDT). Khulasande Capital is a black-owned and controlled private equity and investment vehicle that contributes to the broad-based South African society and economy. EDT is a charitable trust with black beneficiaries focusing on the development of the South African economy through educational and entrepreneurial activities.

Izandla Property Fund

The Izandla Property Fund was launched in June 2017. Izandla Property is a majority black owned property company supported by Investec Property and Investec Property Fund. It aims to create value to fund the initiatives of the EDT, their majority shareholder, which is a broad-based charitable trust that focuses on educational and entrepreneurial initiatives, by accessing quality real estate assets and providing our property clients with a B-BBEE partner who will own, manage and develop their property assets. Investec Property will support Izandla Property with the skills, expertise and knowledge while Investec Property Fund will serve as the capital partner of Izandla Property.

Although we are not driven by awards and recognition, we are proud to be recognised for our efforts.

• Voted second most attractive employer by professionals and fourth by students in South Africa in the 2017 Universum Awards
• Investec CEO, Stephen Koseff won the Lifetime Achievement Award presented by the 2018 African Banker Awards

Highlights for the year

• The appointment of Fani Titi as Joint CEO of Investec from 1 October 2018
• Investec will be rated under the revised Financial Sector Code (FS Code) for the first time in 2018
• Investec was one of the first signatories to the Youth Employment Service (YES) initiative
• R5 million initial capital allocated to set up the Promaths Bursary Fund in 2017 and a further R3 million allocated in the past financial year
• Khulasande Capital Partnership II was launched during the year
• Launched Izandla Property Fund

(continued)

Our communities

Our Corporate Social Investment (CSI) endeavours are central to the group's values of making an unselfish contribution to society, nurturing an entrepreneurial spirit, valuing diversity and respecting others, and underpin Investec's aim of being a responsible corporate citizen. Our approach to CSI focuses on education, entrepreneurship and the environment. We believe this aligns with our purpose and is the most effective way to create opportunities for employment, wealth creation and stimulating socio-economic growth.

In keeping with our business model of independent, highly autonomous business units, supported by a strong centre, there is no single overriding approach to social investment within the group, although clear commonalities exist. Each of the regions has pursued social investment as deemed appropriate to their circumstances and where they are in the evolution of their business.

Wherever possible, we seek to collaborate with partners, so as to leverage resources and expertise and help ensure a lasting impact as well as long-term sustainability for our projects.

The active involvement of our people, through volunteering, remains at the core of our social investment strategy. We have many well-established

stakeholders

partnerships and volunteering initiatives to support these partners. Further, we make donations to charities in response to requests for assistance across all regions and business areas within the group. This allows us to allocate meaningful grants in areas which might not fall within our main focus areas.

CSI spend as a % of operating prot*

Educated and skilled people are able to get employment or create their own business employing others (entrepreneurship)

We target a minimum of 1.0% group CSI spend as a % of operating profit*

* Before goodwill, acquired intangibles, non-operating items, taxation and after other non-controlling interests.

To become economically active, people need to be educated and skilled

Highlights for the year

81% of South Africa's CSI spend was allocated to education

Promaths contributed 4.8% and 5.0% of South Africa's mathematics and science distinctions respectively

R5 million initial capital allocated to set up the Promaths Bursary Fund in 2017 and a further R3 million allocated in the past financial year

Education

Our strategy in South Africa focuses on the support and empowerment of talented individuals within a defined continuum of interactions through school and university to the workplace.

Our strategy in the UK focuses on partnerships with the following enterprises:

• Arrival Education
• La Mare De Carteret Primary School
• Morpeth Secondary School
• Marino College

20 learners (in Year 9) on the Morpeth Young Apprentice programme

Entrepreneurship

Investec encourages the growth of young South African entrepreneurs. We support the Junior Achievement South Africa (JASA) 23 week long entrepreneurship academy programme for grade 11 learners. We also run a programme for young entrepreneurs to gain global exposure, network and support.

In the UK we partner with the Bromley by Bow Centre which focuses on economic regeneration in the London Borough of Tower Hamlets. In 2011 we became the sole funder of the centre's Beyond Business programme.

Investec's Liverpool office supports Young Enterprise, one of the UK's leading enterprise and financial education charities, since 2014.

Environment

In South Africa, we have two conservation programmes that focus on educating communities about conservation and the value of wildlife.

In the UK we support Trees for Cities, a charity which engages local communities and schools to plant trees, shrubs and to grow food, reconnecting urban areas with nature.

Highlights for the year

55 entrepreneurs given global exposure through four sector specific trips abroad

Bromley by Bow: 86% of launched enterprises continue to trade beyond their third year

Highlights for the year

51% increase in number of children reached through our Coaching for Conservation programme (approximately 12 000 reached since 2012)

Five of our UK offices have volunteered with Trees for Cities, helping to deliver 14 urban community greening projects

(continued)

Volunteering

Through our staff volunteerism programme we support and encourage staff participation and engagement as we believe that far more can be achieved through our collective knowledge, expertise and influence than through cash donations alone. Our people play a pivotal role in our corporate social investment programmes giving selflessly of their time, money, goods and skills to support our communities.

9 000 hours spent on volunteering (2017: >7 400 hours)

South Africa >4 700 hours (2017: >3 400 hours)

UK >4 400 hours (2017: >4 000 hours)

Although we are not driven by awards and recognition, we are proud to be recognised for our efforts.

• Winner of the Business of the Year award by Business Charity Awards 2017 (for Beyond Business)
• Winner of the Community Impact Award 2017 for our flagship programme the Beyond Business social enterprise incubator we run in partnership with Bromley by Bow Centre
• Winner of the National CSR Awards 2017, in the individual Community (Legacy) category Project Award (for Beyond Business)
• Winner of the Community Partners award in the Lord Mayor's Dragon Awards 2017
• Reaccredited winner (for Beyond Business) in the Responsible Business Awards 2017
• Received the Financial Innovation Awards 2017 Innovation in Sustainability or Social Responsibility Awards for our Invest for Success programme that we run in partnership with Arrival Education
• The coordinator of the Investec Coaching for Conservation kids programme at Good Work Foundation won a silver in the Eco-Logic awards in the category 'Eco-Youth'

Corporate governance and corporate responsibility

Corporate responsibility

(continued)

Our planet

Investec's environmental policy takes into account the challenges that climate change presents to the global economy and we consider any meaningful activity that either reduces the negative impact on, or prolongs the life of, our planet. We believe that as a niched specialised financial services organisation, and given our position in the developed and emerging worlds, we can make a meaningful impact in addressing climate change.

Direct operational impact

In recognising that we have a responsibility to understand and manage our wider carbon footprint, our approach is focused on limiting our direct operational impact and creating awareness to encourage positive sustainable behaviour. Acknowledging that we cannot continue consuming natural resources at the current rate, we are focusing on ways to ensure the security of natural resources in all our operations.

The key focus areas to reduce our carbon footprint include:

• reducing energy consumption
• reducing overall waste
• reducing water usage
• increasing waste recycling rates
• promoting sustainable travel
• promoting sustainable procurement.

Breakdown of group emissions

Over the past six years our intensity indicators have remained relatively constant. In 2015 we enhanced our data collection processes to cover a broader scope of our operations. Since then, in South Africa and the UK we have reduced our electricity consumption as a result of electricity reduction initiatives, even though our headcount increased. Travel emissions reduced due to a change in the emission factors and through continuous collaboration through video conferencing and effective leveraging of international teams.

Highlights for the year

• Group carbon emissions reduced by 6.1% (2017: 7.9%)
• Collaborated with the Entrepreneurship Development Trust and Innovation Africa to bring water to rural South Africa

Investec's response to the Cape Town Day Zero water crisis:

• R2.5 million spent on water initiatives to ensure continuity of business
• Donated R400 000 for boreholes in the Khayelitsha community in the Cape
• Staff donated 105 250 litres of water from offices around South Africa to 152 identified care homes in the Cape to assist the disabled, mentally disabled and those with health risks

Emissions per average employee for the group

13 14 15 16 17 18 7.31 8.03 8.44 8.20 6.23 7.05 0 2 4 6 8 10 Tonnes of CO2 Tonnes of CO2

Emissions per m2 ofce space for the group

Although we are not driven by awards and recognition, we are proud to be recognised for our efforts.

• Investec group was awarded a B for the Carbon Disclosure Project (CDP) climate scoring
• Investec's Energy Management System that covers 23 of our physical buildings in the UK, Ireland and Channel Islands was certified to the international energy standard ISO 50001
• Our UK head office, Environment Management System retained the international environment standard ISO 14001
• Our UK head office, won the top prize the Chairman's Cup for its waste management processes in the Corporation of London's Clean City Award Scheme for 2017

Corporate governance and corporate responsibility

Corporate responsibility

(continued)

Carbon footprint for the group

Assessment parameters
Consolidation approach:	Operational control
Emission factor data source:	DEFRA (2017), IEA and Eskom (for South African electricity)
Intensity ratio:	Emissions per average employee
	Emissions per office space m2
Independent assurance:	Limited assurance provided by KPMG for the year ending 31 March 2017 and 31 March 2018

				31 March 2018		31 March 2017
		Units	Tonnes of CO2 equivalent	Consumption in unit of measure	Tonnes of CO2 equivalent	Consumption in unit of measure	Variance in tonnes of CO2 equivalent	Notes
Scope 1			2 168		1 710		26.8%
Energy	Natural gas	kWh	462	2 508 683	431	2 341 511	7.2%
	LPG stationary	L	24	16 055	36	23 978	(33.3%)
	CO2 purchased	kg	1	567	–	452	100.0%
	Diesel	L	44	17 113	268	102 395	(83.6%)	1
Refrigerant	Refrigerant	kg	1 433	884	766	404	87.1%	2
Employee travel	Vehicle fleet	km	204	1 100 363	209	1 092 169	(2.4%)
Scope 2			32 394	42 096 188	35 192	43 407 612	(8.0%)
Energy	Electricity consumption	kWh	32 394	42 096 188	35 192	43 407 612	(8.0%)	3
Scope 3			26 018		27 604		(5.7%)
Paper	Paper consumption	t	404	411	499	506	(19.0%)
Waste	General waste	t	18	53	15	47	20.0%
Employee travel	Rail travel	km	71	1 624 080	128	2 675 459	(44.5%)
	Road business travel	km	216	1 184 132	248	1 325 898	(12.9%)
	Taxi	km	36	217 033	32	175 321	12.5%
	Commercial airlines	km	25 273	83 234 230	26 682	75 891 968	(5.3%)	4
Total emissions			60 580		64 506		(6.1%)
No scope
Water	Water consumption	kl		108 108		115 372
Recycled waste	Recycled waste	t		869		794
Intensity
Emissions per average employee			6.23*		7.05*
Emissions per m² office space			0.36		0.39
Water consumption per average employee			11.11		12.60

1. Diesel consumption reduced significantly as less power outages were experienced.

2. Refrigerant consumption in South Africa increased due to milk fridge's installed in the pause areas thereby stopping 6 300 plastic milk bottles from going to landfill every month.

3. Energy consumption declined as a result of electricity reduction initiatives, despite a headcount increase.

4. Travel emissions reduced due to a change in the emission factors and through continuous collaboration through video conferencing and effective leveraging of international teams.

* Includes permanent and temporary employees

For more information refer to our 2018 corporate responsibility report on our website.

Green business impact

Investec has a holistic approach to environmental sustainability which is not limited to our daily operational activities. We recognise the opportunities that the Sustainable Development Goals (SDGs) holds and are evaluating key focused SDGs within our various core capabilities to have a long-term sustainable environmental contribution.

Our green business impact recognises the opportunities for our clients and businesses in cleaner and renewable energy sources, energy efficiency, protecting natural resources, responsible lending and investing and responsible property management.

Investec recognises the risks of climate change and is committed to support the transition to a clean and energy-efficient global economy. We believe that the widest and most positive influence Investec can have is to support our clients and stakeholders as they move as quickly and smoothly as possible towards a low-carbon economy.

An important aspect of our approach is a deliberate focus on financing infrastructure solutions that promote renewable energy and we have developed a strong expertise in this sector. In the US, Investec is recognised as the go-to funding source in the roof-top solar industry.

Investec has also provided capital investment to Engenie, a London-based company specialising in electric vehicle rapid charging, which will allow Engenie to reach its network target of 1 500 rapid chargers across the UK. This is an indication of how we are contributing to Sustainable Development Goal 11 (Sustainable Cities) and will significantly improve the pollution problem in the city of London.

Refer to our corporate responsibility report on our website for details on how our businesses are contributing to our environment.

Highlights for the year

• 88% of our energy lending portfolio is clean energy (which also features biomass, wind, waste, solar and hydro projects)
• Participated in £1.2 billion of renewable energy projects around the world
• Eight Investec funded projects have an installed capacity of approximately 1 450MW of clean energy
• Investec Property Fund implemented two rooftop solar projects for two malls in South Africa reducing both the cost of electricity and the demand from the country grid
• Trained 195 frontline staff on environmental, social and governance practices in South Africa and the UK

Protecting our environment

Investec recognises that a clean, resource-rich natural environment supports the growth of business and the economy and is vital for healthy communities.

Given Investec's African heritage, we are passionate about ensuring the continued existence of a number of African species. We fund a number of biodiversity projects which help to ensure the sustainable existence of South Africa's rich wildlife:

• Investec Rhino Lifeline was established in 2012 to respond to the rhino poaching crisis
• Support of BirdLife South Africa's research of the environmental impact of renewable energy on the local birdlife in South Africa
• Support of the Endangered Wildlife Trust's (EWT) Carnivore Conservation Programme and its research and monitoring of critically endangered African wild dogs in the Northern Kruger National Park (KNP)
• Sponsorship by Investec Asset Management of the Tusk Conservation Awards for the past six years

Highlights for the year

• 51% increase in number of children reached through our Coaching for Conservation programme (12 000 reached since inception in 2013)
• Supported the rescue of 70 rhino since 2012
• Renewed our EWT wild dog sponsorship with wild dog populations in the KNP increasing 46% since 2012 (Investec supported since 2013)

184 Investec integrated annual report 2018

Remuneration report

Statement by the outgoing and incoming chairs of the remuneration committee

On behalf of the board remuneration committee (the committee) we are pleased to present the report on directors' remuneration for the 2018 financial year. This report was compiled on behalf of the board remuneration committee and approved by the board.

Remuneration philosophy remains unchanged

Our overarching remuneration philosophy has remained unchanged from prior years. We continue to maintain focus on employing and retaining the highest calibre individuals through the payment of industry competitive packages and long-term share awards, which ensure alignment with key stakeholders in our business.

Our incentive rewards continue to be distributed from pools of realised earnings generated in excess of targeted thresholds which reflect usage of risk-adjusted capital. This economic value-added model has been in operation for about 19 years and ensures that risk and capital management

form the basis for key processes at both a group and transaction level thus balancing the rewards between all stakeholders.

We recognise that financial institutions have to distribute the return from their enterprises between the suppliers of capital and labour and the societies in which they do business, the latter through taxation and corporate social responsibility activities. Our group wide remuneration philosophy seeks to maintain an appropriate balance between the interests of these stakeholders, and is closely aligned to our culture and values which include risk consciousness, meritocracy, material employee ownership and an unselfish contribution to colleagues, clients and society.

Diversity and inclusion, including gender pay gap reporting

At Investec we are committed to attracting and retaining a diverse team of people. A diverse workforce is essential to our ability to be an innovative organisation that is able to adapt and prosper in a fast changing world. We recognise the benefits of a diverse workforce being able to contribute alternative perspectives and challenge the status quo, which is integral to the Investec culture.

Gender pay gap legislation was introduced in the UK to encourage employers to make greater advances in addressing the disparity of earnings between men and women over their careers. The gender pay gap measures the difference between the average amounts men and women are paid across all of our employee categories. This is different from Equal Pay legislation in the UK which requires individuals to be paid equally for performing work of equal value. We would like to make clear that we give men and women equal pay for the same roles and have appropriate practices in place to ensure fairness, which are regularly reviewed by the committee.

We report on our gender pay gap on page 238. We are confident that across our organisation men and women are paid equally for doing the same job. Our gender pay gap occurs primarily because there is a lower proportion of women in senior leadership and revenue-generating roles which attract higher market levels of pay. We are dedicated to improving our position in line with our commitment to promote diversity. We know that while we have worked to address greater representation of women, we have more to do. We have measures in place to improve this and we are committed to advancement and holding ourselves publicly accountable.

	Year ended 31 March	Year ended 31 March
Group performance metrics	2018	2017	% change
Adjusted earnings attributable to shareholders before goodwill, acquired intangibles,
non-operating items and after non-controlling interests	£491.1 million	£434.5 million	13.0%
Adjusted earnings per share	53.2 pence	48.3 pence	10.1%
Dividends per share	24.0 pence	23.0 pence	4.3%
Return on equity	12.1%	12.5%
Annuity income as a % of total operating income	76.2%	72.0%
Return on average risk-weighted assets	1.45%	1.45%
Operating margin of the combined asset management and wealth and
investment businesses	29.3%	30.1%
Total capital adequacy ratio, Investec plc	15.4%	15.1%
Total capital adequacy ratio, Investec Limited	14.6%	14.1%
Common equity tier 1 capital ratio, Investec plc	11.0%	11.3%
Common equity tier 1 capital ratio, Investec Limited	10.2%	9.9%
Leverage ratio, Investec plc	8.5%	7.8%
Leverage ratio, Investec Limited	7.5%	7.3%
Liquidity coverage ratio, Investec plc	306.0%	654.0%
Liquidity coverage ratio, Investec Limited	132.8%	136.5%
Net stable funding ratio, Investec plc	142.0%	not disclosed
Net stable funding ratio, Investec Limited	109.3%	not disclosed
Total shareholder return, Investec plc (Pounds Sterling)	5.4%	10.9%
Total shareholder return, Investec Limited (Rands)	4.7%	(12.5%)
Variable remuneration pool	£418 million	£390 million	7.3%

Business context and outcomes for the year under review

The executive directors' remuneration policy was approved at the 2015 annual general meeting. The policy remained in place and was applied for the 2018 financial year.

The committee continues to place great importance on ensuring that there is clear alignment between remuneration and delivery of the group's key strategic objectives.

During the 2018 financial year the group achieved satisfactory operating performance against a challenging economic backdrop in its two core geographies.

The group's performance against key metrics is shown in the table on the previous page.

In terms of the executive short-term incentive plan as approved by shareholders and reflected on pages 201 to 202, the remuneration committee approved an annual bonus of £2.023 million each for Stephen Koseff and Bernard Kantor, and £1.759 million for Glynn Burger. Stephen Koseff, Bernard Kantor and Glynn Burger receive 30% of their bonus in cash, 30% in shares upfront, with the balance deferred in shares. Malus and clawback arrangements apply to these awards.

Hendrik du Toit was awarded a bonus of £5.637 million, determined solely in relation to the performance of Investec Asset Management as set out on page 204. Hendrik du Toit invested approximately 20% of his bonus in Investec plc shares, to be held for three years.

The board agreed to recommend an inflationary increase in fees for the forthcoming year for the non-executive directors, with market linked adjustments for the chair and members of the audit committee.

Looking forward: our revised remuneration philosophy

Investec's existing remuneration policy was last voted on by shareholders in 2015 and we are submitting a revised remuneration policy for approval by shareholders at the annual general meeting on 8 August 2018, as required by regulations. In summary, our proposed remuneration policy:

• Incorporates certain amendments which are intended to address the feedback previously received from shareholders
• Incorporates required regulatory changes
• Given the management succession announced in February 2018, it focuses on our remuneration arrangements within the year of transition.

The group's succession plan has focused on ensuring a smooth transition from the "founders" (current CEO, managing director and group risk and finance director) of Investec to the next generation of leadership. The need to ensure a steady handover of knowledge and experience of our "founders" was considered critical in this succession plan. This has resulted in a phased transition "handover" time line from 1 April 2018 to 31 March 2019.

The board has ensured clear accountability of roles during this period. There is however, a focus on shared (and appropriate) accountability for the performance of the group during the transition period which is linked to remuneration to reflect this accountability.

The Joint CEO appointment is appropriate for our group structure and positioning and was a logical development for Investec. We operate under a dual listed companies structure with listings on the LSE and JSE, large businesses in both South Africa and the UK covering three businesses

(comprising banking, asset management and wealth management) with different regulatory environments.

Furthermore, the group will split the risk director and finance director role into two roles as requested by the regulators, with effect from 1 April 2019.

Further information on the group's succession is provided on page 121.

The remuneration committee has considered all these matters in proposing its new remuneration policy whilst at the same time ensuring that total executive remuneration is not increased during this transition period.

The committee believes that the proposals it has included in its proposed remuneration policy address a number of matters previously raised by shareholders, notably:

• 1. Reduction in total compensation levels for executive directors:
  2. An approximate 30% reduction in total compensation levels is achieved using the proposed new fixed pay and short and long-term measures and metrics applied to 31 March 2018 performance.
• 1. Better alignment between pay awards and the performance of Investec:
  2. We are making changes to the short-term incentive measures and implementing tougher performance levels
  3. Financial measures performance weightings have been increased to 80% of the total in the determination of the short-term incentive
  4. In the long-term incentive tougher performance levels have been introduced for certain measures
  5. The remuneration committee will review the performance measures on an annual basis.

• 1. Simplification in pay structures and the assessment of executive director performance:
  2. We are replacing the role based allowances for new executive directors with a single fixed pay award of cash and shares
  3. The short-term measures have been simplified and reduced from nine to six.
• 1. Treatment of unvested long-term incentive plan awards for departing executive directors:
  2. The departing CEO, managing director and group risk and finance director will have their unvested longterm incentive awards pro-rated to reflect their period of service relative to the performance periods of such awards
  3. The new policy will clarify that unvested long-term incentive awards will be pro-rated going forward.

Perry Crosthwaite Philip Hourquebie Chairman, DLC remuneration committee Chairman, DLC remuneration committee (to 31 March 2018) (from 1 April 2018)

12 June 2018 12 June 2018

We have engaged our largest shareholders and shareholder representative organisations to ensure that their views were taken into consideration in the determination of our proposed remuneration policy.

Whilst the committee proposes that the new remuneration policy remains in place for three years, the committee will keep the policy under review and assess its appropriateness, particularly in light of the executive management transition process.

We are seeking shareholder approval at the 2018 annual general meeting for:

• Our directors' remuneration report for the year ended 31 March 2018 (pages 192 to 217)
• Our directors' remuneration policy, commencing 1 April 2018 (pages 218 to 231)
• Our non-executive directors' remuneration (pages 203 and 208)

Signed on behalf of the board

(continued)

At a glance

Summary of key changes for Investec's proposed remuneration policy

The new policy:

• incorporates certain amendments which are intended to address the feedback previously received from shareholders, and regulatory changes; and
• focuses on our remuneration arrangements within the year of transition given the management succession currently underway.

Reduction in total compensation levels for executive directors	• An approximate 30% reduction in total compensation levels (if the proposed new fixed pay and short- and long-term measures and metrics were applied to 31 March 2018 performance, see page 229)
Better alignment between pay awards and the performance of Investec	• Changes to short-term incentive measures and tougher performance levels that are expected to see a reduction in the short-term incentive on like-for-like historic performance • Financial measures performance weighting increased to 80% of the total in the determination of the short-term incentive • In the long-term incentive tougher performance levels introduced for certain measures • Annual review of "achievement levels" to determine rewards at target, threshold and stretch performance
Simplification in pay structures and the assessment of executive director performance	• Replacement of fixed allowances for new executive directors with a single fixed pay award of cash and shares • Short-term incentive financial measures for annual bonus awards reduced from five to three and non-financial measures simplified
Treatment of unvested long-term incentive awards for departing executive directors	• Unvested long-term incentive awards of the "founder" executive directors will be pro-rated to reflect their period of service, relative to the performance period of the award • The new policy will clarify that unvested long-term incentive awards will be pro-rated going forward

(continued)

Navigating this report

To help shareholders navigate the remuneration report, a brief summary of key content is set out below.

Where to find details of the key remuneration information	Page/s
Compliance and governance statement	189
A summary of the remuneration decisions made during the year ended 31 March 2018	190
Annual report on directors' remuneration	192
Statement of implementation of remuneration policy for the year ending 31 March 2019	193
Remuneration proposals for the new executive directors	194
Non-executive directors	203
Executive directors' single total figure of remuneration (audited)	204
Executive short-term incentives – achievement of performance targets	205
Non-executive directors' single total figure of remuneration (audited)	208
Directors' shareholdings, options and long-term incentive awards (audited)	209
Shareholder dilution	214
Total shareholder return performance graph	215
CEO remuneration table and percentage change in CEO remuneration	216
Ratio of CEO remuneration to average remuneration of employees and relative importance of spend on remuneration	216
Statement of voting at 2017 annual general meeting	217
Additional remuneration disclosures (unaudited)	217
Directors' remuneration policy for the year ending 31 March 2019 and subsequent years	218
Benchmarks	219
Impact of CRD IV on executive directors' remuneration arrangements	219
Executive directors' remuneration policy table	220
Remuneration table for incoming executive directors	223
How will executive directors' performances be assessed?	226
Differences between the remuneration policy of the executive directors and the policy for all employees	226
Policy for the recruitment of new executive directors	226
Service contracts and terms of employment	227
Illustrative scenarios for executive remuneration	228
Proposed remuneration payout profile for Joint CEOs	229
Comparison of overall executive directors' compensation costs	229
Remuneration policy for non-executive directors	230
Shareholder and employee views	231
Diversity and inclusion, including gender pay gap reporting	238
Additional remuneration disclosures (unaudited)	241
Remuneration Code and Pillar III disclosures	241
Pillar III remuneration disclosures	243

Executive directors

The current executive directors whose remuneration is disclosed in this report are referred to as follows:

• Stephen Koseff chief executive officer (CEO)
• Bernard Kantor managing director (MD)
• Glynn Burger group risk and finance director (GRFD)
• Hendrik du Toit chief executive officer of Investec Asset Management (CEO of IAM).

Compliance and governance statement

The remuneration report complies with the provisions of Schedule 8 of the Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013, the UK Corporate Governance Code, the UK Companies Act 2006, the Rules of the UK Listing Authority, the UK Financial Conduct Authority rules, the PRA and FCA Remuneration Code, the South African King IV Code of Corporate Practice and Conduct, the South African Companies Act 2008, the JSE Limited Listings Requirements, the South African Notice on the Governance and Risk Management Framework for Insurers,

2014 and Pillar III remuneration disclosure requirements.

The remuneration report comprises the annual statement from the committee chair, the directors' remuneration policy that sets out our remuneration policy for the three years beginning 1 April 2018 and the differences between the future policy and the policy operated in the 2018 financial year and the annual report on remuneration that explains how the policy has been implemented in the 2018 financial year. The report also contains Pillar III disclosures as mandated by the UK's PRA and the South African Prudential Authority (previously known as the Banking Supervision Division of the South African Reserve Bank), and a section covering gender pay gap reporting.

A summary of the remuneration decisions made during the year ended 31 March 2018

Remuneration philosophy

Our philosophy, which remains unchanged from prior years, is to:

• Employ the highest calibre individuals who are characterised by integrity, intellect and innovation and who adhere and subscribe to our culture, values and philosophies
• Strive to inspire entrepreneurship by providing a working environment that stimulates extraordinary performance, so that executive directors and employees may be positive contributors to our clients, communities and the group
• Provide staff share ownership through participation in our employee share schemes to align interests with those of our owners

• Continue to acknowledge the importance of the appropriate division of the returns generated by our business between our owners, our workforce and the societies in which we operate.

Value add contribution

In summary, we estimate our total economic return has been divided between government through taxation, owners through dividends, communities through donations and investment and employees through total compensation as follows:

The total cost of compensation is managed through staff compensation ratios which are reviewed regularly. The total staff compensation ratios are as follows:

		Staff compensation ratios
	Year ended 31 March 2018	Year ended 31 March 2017
Total for the group	47.5%	46.1%
Asset Management	46.3%	46.8%
Wealth & Investment	53.7%	54.0%
Specialist Banking	45.1%	43.9%

Outcomes for executive directors during the year

The following table summarises awards made to executive directors for the year. A further breakdown of these awards can be found on page 204.

	Total cash benefits, salary, non-deferred bonus				Total deferred bonus*		Fixed allowance payable in shares subject to retention^		Total remuneration not subject to future performance conditions		Value of LTIPs awarded – not vested and still subject to performance conditions^^		Value of LTIPs that will be forfeited**	Total remuneration awarded in current period***
£'000	31 March 2018	31 March 2017	31 March 2018	31 March 2017	31 March 2018	31 March 2017	31 March 2018	31 March 2017	31 March 2018	31 March 2017	31 March 2018	31 March 2018	31 March 2017
CEO	1 694	1 639	809	773	1 000	1 000	3 503	3 412	1 480	1 480	(1 480)	3 503	4 892
MD	1 694	1 639	809	773	1 000	1 000	3 503	3 412	1 480	1 480	(1 480)	3 503	4 892
GRFD	1 391	1 344	704	672	1 000	1 000	3 095	3 016	1 336	1 336	(1 336)	3 095	4 352
CEO IAM	4 961	4 171	1 127	930	–	–	6 088	5 101	–	–	–	6 088	5 101

^ 20% released each year for a period of five years.

^^ As discussed on page 213, the awards were made on 31 May 2018 and the amount reflected in the table represents the number of awards made

multiplied by the grant share price. These awards vest in three to seven years and are still subject to performance conditions being met.

* The bonuses for the CEO, MD and GRFD have an amount deferred as per the schedules on the next page while the CEO IAM invested approximately 20% of his bonus in Investec plc shares to be held for three years.

** On termination of employment outstanding long-term incentive awards will be pro-rated based on time served relative to the performance period of the award. In this regard two-thirds of the 2018 award and one-third of the 2017 award will be forfeited.

*** These are the figures for single remuneration figure purposes.

(continued)

The payment and deferral profile of the remuneration awarded to S Koseff (CEO) and B Kantor (MD) during the 2018 financial year is as follows:

		Received in
£'000	Awarded in 2018	Current year (2018)	Year 1	Year 2	Year 3	Year 4	Year 5	Year 6	Year 7
Remuneration awarded in 2018 not subject to future performance conditions	3 503	1 694	294	294	324	324	324	124	125
Salary and benefits Fixed allowance payable in shares Short-term incentive	480 1 000 2 023	480 – 1 214	– 200 94	– 200 94	– 200 124	– 200 124	– 200 124	– 124	– 125
Long-term incentive awarded in 2018 still subject to future performance conditions	1 480	–	–	–	296	296	296	296	296
Long-term incentive awarded in 2018 and 2017 that will be forfeited**	(1 480)	–	–	(99)	(296)	(296)	(296)	(296)	(197)
Total remuneration	3 503	1 694	294	195	324	324	324	124	224

The payment and deferral profile of the remuneration awarded to GR Burger (GRFD) during the 2018 financial year is as follows:

		Received in
£'000	Awarded in 2018	Current year (2018)	Year 1	Year 2	Year 3	Year 4	Year 5	Year 6	Year 7
Remuneration awarded in 2018 not subject to future performance conditions	3 095	1 392	291	291	304	304	304	105	104
Salary and benefits Fixed allowance payable in shares	336 1 000	336 –	– 200	– 200	– 200	– 200	– 200	– –	– –
Short-term incentive	1 759	1 056	91	91	104	104	104	105	104
Long-term incentive awarded in 2018 still subject to future performance conditions	1 336	–	–	–	267	267	267	267	268
Long-term incentives awarded in 2018 and 2017 that will be forfeited**	(1 336)	–	–	(89)	(267)	(267)	(267)	(267)	(179)
Total remuneration	3 095	1 392	291	202	304	304	304	105	193

** On termination of employment outstanding long-term incentive awards will be pro-rated based on time served relative to the performance period of the award. In this regard two-thirds of the 2018 award and one-third of the 2017 award will be forfeited.

Hendrik du Toit invested approximately 20% of his bonus in Investec plc shares, to be held for three years.

Annual report on directors' remuneration

The Investec group aims to apply remuneration policies to executive directors and employees that are largely consistent across the group, but recognises that certain parts of the group are governed by local regulations that may contain more onerous requirements in certain respects.

Composition and role of the committee

Perry Crosthwaite served as the chairman of the committee for the financial year ended 31 March 2018. Perry stepped down as the chairman with effect from 31 March 2018, and remains as a committee member. Philip Hourquebie succeeded Perry with effect from 1 April 2018. Philip joined the committee in August 2017. Fani Titi served as a member during the financial year, but stepped down with effect from 23 February 2018, in line with his new role as Joint CEO Designate and recused himself from discussions relating to the proposed directors' remuneration policy. The other members of the committee are Charles Jacobs and Zarina Bassa.

Current members of the committee are deemed to be independent as discussed on page 133.

Two members of the committee are also members of the group's board risk and capital committee and the group's audit committee (as discussed on page 159), thus bringing risk and control mechanisms into the committee's deliberations.

The committee's principal responsibilities and objectives are to:

• Determine, develop and agree with the board, the framework for the remuneration of executive directors and executive management (comprising individuals discharging managerial responsibilities, who are the global heads of our core areas of activity and are members of our global operations forum)
• Commission and consider the results of an annual internal review of remuneration policy implementation
• Ensure that qualified and experienced management and executives are provided with appropriate incentives to encourage enhanced performance and are, in a fair and responsible manner, rewarded for their contribution to the success of the group and alignment with the corporate objectives and business strategy
• Review and approve the design of and determine targets and objectives for any performance-related remuneration schemes operated by the group and approve the aggregate annual payouts under such schemes
• Review and approve, within the terms of the agreed policy, the total individual remuneration packages of executive directors and persons discharging managerial responsibilities and Material Risk Takers including, where appropriate, bonuses, incentive payments and share scheme awards
• Review and approve, within the terms of the agreed policy, the total individual remuneration packages of members of the Internal Audit, Risk and Compliance functions as well as the company secretaries
• Oversee any major changes in our employee benefit structures
• Ensure that the recommendations and rules within the UK and South Africa pertaining to remuneration are adhered to, as appropriate.

The committee is authorised by the board to seek any information it requires from any employee in order to perform its duties.

The committee's terms of reference are subject to annual review and are available on our website.

Meetings

The remuneration committee met 12 times during the financial year. Each member attended all of the meetings that they were eligible to attend, with the exception of Charles Jacobs who attended 10.

The company secretary of Investec plc acts as the secretary. Executive directors do not attend meetings of the committee, unless invited or required to do so by the chairman of the committee. The chairman of the committee reports on the activities of the committee at each meeting of the board.

Advisers to the committee and the company

Where appropriate, the committee has access to independent executive remuneration consultants. The selection of the advisers is at the discretion of the committee and Investec funds any expenses relating to their appointment.

During the financial year, the committee engaged the services of Korn Ferry as its principal advisers, which among other things reviewed and provided information on industry consultation papers, regulations and developments with respect to remuneration practices and our alignment to them. In addition, they continued to review and provide information on appropriate benchmarks, industry and comparable organisations' remuneration practices. Their recommendations are valued in the ongoing review of our remuneration practices. Korn Ferry is a signatory to the UK Remuneration Consultants Group's Code of Conduct and does not conduct any material work for the company other than for the committee. The committee, on an annual basis, formally evaluates the advice received from Korn Ferry to ensure that it is both objective and independent, and considers whether this service should be retained for the forthcoming year. Total fees paid to Korn Ferry for the year amounted to £23 904 (based on their standard hourly rates).

The company retained the services of PricewaterhouseCoopers to assist with the development of the proposed remuneration policy for executive directors. This information was also shared with the committee.

Certain specialist divisions within the group, for example, human resources and the staff shares schemes division, provide supporting information and documentation relating to matters that are presented to the committee. This includes, for example, comparative data and motivations for proposed salary, bonus and share awards. The variable remuneration pools are determined by our finance teams and subject to review as part of the audit process taking into account risk-adjusted capital requirements and after eliminating unrealised gains. The employees within these specialist divisions, which provide support to the committee, are not board directors and are not appointed by the committee.

Statement of implementation of remuneration policy for the year ending 31 March 2019

Executive directors

Pending approval at the 2018 annual general meeting on 8 August 2018 the remuneration policy for the executive directors will be implemented for the year ending 31 March 2019 as follows:

Remuneration proposals for the current CEO, MD and GRFD

In terms of the group's succession announcement made on 6 February 2018, Stephen Koseff (current CEO) and Bernard Kantor (current MD) will step down from these roles on 1 October 2018. They will remain executive directors until 31 March 2019. Glynn Burger will remain as the group's GRFD until 31 March 2019.

Values and operation	Changes, deferrals and performance targets
Base salary and benefits
• £480 000 for the CEO • £480 000 for the MD • £336 375 (i.e. R4 500 000 Rand portion and £90 300 Pounds Sterling portion) for the GRFD • Benefits are funded by sacrificing a portion of fixed pay	No change
Fixed allowance
• £1 000 000 for each of the three executive directors subject to CRD IV (CEO, MD and GRFD) • An allowance granted in shares to ensure an appropriate mix between fixed and variable remuneration	• No change • Payable in shares • Vests on award • Retention period: – Released over five years – 20% each year
STI (short-term incentive)
• Incentive pool for CEO, MD, GRFD: – 0.23% each of adjusted operating profit for CEO and MD – 0.20 % of adjusted operating profit for GRFD – Subject to a maximum of 100%* of fixed remuneration	• New performance measures, as outlined on page 196 have been introduced • This will result in a reduction in quantum on a like-for-like historic performance when comparing the proposed policy against the existing policy • The CEO and MD will waive their entitlement to a bonus for the second half of the year, and their bonuses will be pro-rated to reflect this • The GRFD will receive a bonus for the full 2019 performance year • Performance against all of the measures will be tested at the end of the 2019 performance year • Malus and clawback provisions apply • Deferral period: 30% of bonus received upfront in cash; 30% received upfront in shares; the remaining 40% is deferred • The 40% deferred amount is treated as follows: an amount that ensures 60% of total variable remuneration (short-term incentive plus long-term incentive) is deferred over three to seven years, vests 20% per annum commencing on the third anniversary: with the balance deferred equally over one and two years • All shares are subject to a 12 month retention period after vesting
LTI (long-term incentive)
• Annual award of 100% of aggregate fixed remuneration • Paid entirely in shares	• Award for the 2018 performance period will be made in June 2018, with two thirds being forfeited in line with our pro-rating policy (explained below) • The CEO, MD and GRFD will waive entitlement to an award in respect of the 2019 performance year • The award being granted in June 2018 and all unvested awards will be pro-rated for time served during the performance period • Awards are subject to performance criteria as set out on pages 199 and 200 • Deferral period: equal vesting over years three to seven, subject to 12 month retention period • Malus and clawback provisions apply

* Cap defined in line with EBA discounting rules which allow, when 25% of variable remuneration is deferred over at least five years, a slightly higher cap than 2x fixed remuneration, depending on the length of deferral, inflation and interest rates. This is currently 244.2% of fixed remuneration. These limits will be in line with this cap.

(continued)

Remuneration proposals for the new executive directors

In terms of the group's succession announcement made on 6 February 2018, Hendrik du Toit and Fani Titi have been appointed as Joint CEO designates with effect from 1 April 2018. Ciaran Whelan will assume the risk director role and Kim McFarland the group finance and operations director role with effect from 1 April 2019; these executive director roles will be remunerated at the same level as set out below. Further information on our succession plan is provided on page 121.

Values and operation	Changes, deferrals and performance targets
Fixed pay
• Fixed pay award delivered equally in cash and shares • £1 332 000 for the Joint CEO designates (£666 000 in cash and the balance in shares) • £1 066 000 for the other executive directors (£533 000 in cash and the balance in shares) • Benefits are funded by sacrificing a portion of fixed pay and comprise: – Pension contribution and/or allowance – Private medical insurance and other benefits in line with the broader employee population	• 50% paid in cash monthly • 50% delivered in shares which vest immediately, but are released in equal portions after one and two years • Total fixed pay for the Joint CEO designates is 90% of the total fixed remuneration of the current CEO and managing director • Total fixed pay for the other executive directors is 80% of the total fixed pay of the Joint CEO designates
STI (short-term incentive)
• Incentive pool for the Joint CEO designates – 0.23% each of adjusted operating profit • Incentive pool for the other executive directors – 0.18% each of adjusted operating profit • Subject to a maximum of 100%* of fixed remuneration	• New performance measures, as outlined on page 196 have been introduced • This will result in a reduction in quantum on like-for-like historic performance when comparing the proposed policy against the existing policy • Performance against all of the measures will be tested at the end of the 2019 performance year • Malus and clawback provisions apply • Deferral period: 30% of bonus received upfront in cash; 30% received upfront in shares; the remaining 40% is deferred • The 40% deferred amount is treated as follows: an amount that ensures 60% of total variable remuneration (short-term incentive plus long-term incentive) is deferred over three to seven years, vests 20% per annum commencing on the third anniversary: with the balance deferred equally over one and two years • All shares are subject to a 12 month retention period after vesting
LTI (long-term incentive)
• Annual award of 100% of aggregate fixed remuneration • Paid entirely in shares	• Award subject to performance criteria as set out on pages 199 and 200 • Deferral period: equal vesting over years three to seven, subject to 12 month retention period • Malus and clawback provisions apply • The first award will be made in June 2019

* Cap defined in line with EBA discounting rules which allow, when 25% of variable remuneration is deferred over at least five years, a slightly higher cap than 2x fixed remuneration, depending on the length of deferral, inflation and interest rates. This is currently approximately 244.2% of fixed remuneration. These limits will be in line with this cap.

Investec aims to maintain an appropriate balance between revenue earned from capital light activities and revenue earned from capital intensive activities.

The group's specialist banking business contributes approximately 60% to the group's pre-tax operating profit; with the asset management and wealth and investment businesses contributing approximately 40%.

We believe our short-term incentive measures should thus appropriately reflect the mix of businesses and at the same time ensure that the group's risks are appropriately managed.

As a result we are proposing the following changes to the short-term incentive plan:

• Performance measures have been reduced from nine to six (financial measures from five to three, and non-financial measures from four to three)
• A new financial measure will be used that reflects the operating margin of the combined asset management and wealth management businesses
• The multiplier at stretch performance has been reduced from 200% to 150%
• The financial measures weighting has been increased to 80%
• The non-financial measures and prudential measures weighting has been reduced from 40% to 20%
• New non-financial measures under the short-term incentive to include:
  • Culture, values and co-operation related measures
  • "ESG" related measures
  • Prudential and risk management related measures
• The short-term incentive measures will now largely differ to those used under the long-term incentive.

Comparison of executive director's proposed short-term incentive (STI) measures and weightings

Existing policy STI measures and weightings New proposed STI measures and weightings

* Non-nancial measures in existing policy equally weighted between: Culture and values; Franchise development; Governance and regulatory and shareholder relationships; Employee relationship and developments

** Where ESG refers to Environmental, Social and Governance related matters

(continued)

Further details on the proposed executive directors' short-term incentive plan:

• The total on-target short-term incentive pool** for the group executive director team (Joint CEOs*, financial director (FD) and group risk director (GRD)) is 0.82% of adjusted operating profit for the group; distributed 0.23% each to the Joint CEOs*; 0.18% each to the other new executive directors^.
• The short-term incentive pool is modified by a performance multiplier comprising weightings and performance scores relative to financial and non-financial measures.
• Weightings and score ranges for financial and non-financial measures are as follows:

Measure	Weighting	Score range	Achievement levels
Financial measures	80%	0% – 150%	Threshold (0%) Target (100%) Stretch (150%)#
Non-financial measures	20%	0% – 150%	Threshold (0%) Target (100%) Stretch (150%)#

• Adjusted operating profit is defined as operating profit before taxation, goodwill, acquired intangibles and non-operating items and after non-controlling interests.
• * In the management transition period the same sharing percentage as in the existing scheme applies to the current CEO and MD i.e. 0.23% and the GRFD sharing percentage remains the same as in the existing scheme at 0.20%.
• ** Our current remuneration policy sharing percentage for the "incentive pool" was set at 0.66% of adjusted operating profit (as defined above) for the CEO, MD and GRFD. There is a leverage multiplier of 180% in the existing scheme which effectively means that the sharing percentage was a minimum of 0.66% and a maximum of 1.18%. We are removing the leverage multiplier.
• ^ Remuneration set at 80% of the Joint CEOs.
• # Total short-term incentive is subject to a maximum regulatory cap. Cap defined in line with EBA discounting rules which allow, when 25% of variable remuneration is deferred over at least five years, a slightly higher cap than 2x fixed remuneration (i.e. total variable pay to fixed pay), depending on the length of deferral, inflation and interest rates. This is currently 244.2% of fixed remuneration. These limits will be in line with this cap. Stretch achievement levels reduced from 200% to 150%.

Each financial and non-financial measure has set threshold levels below which no short-term incentive will be earned and stretch levels whereby the pool for short-term incentives earned will be increased, but to a level subject to the maximum regulatory cap. The committee believes that these stretch levels are demanding and will result in an incentive pool which will reflect actual performance and align the interests of the executive directors with the interests of shareholders. Achievement levels for the short-term incentive will be reviewed annually by the committee.

Proposed executive short-term incentive plan: financial measures, weightings and achievement levels for the year ending 31 March 2019

The weightings for each financial measure for the year ending 31 March 2019 are as follows:

Measure	Weighting
Financial measures	80%
Return on risk-weighted assets1	30%
Return on equity2	30%
Operating margin of the combined asset management and wealth
and investment businesses3	20%

1. Return on risk-weighted assets is defined as adjusted earnings/average risk-weighted assets, where adjusted earnings are earnings attributable to ordinary shareholders after taxation, non-controlling interests and preference dividends, but before goodwill, acquired intangibles and non-operating items.

2. Return on equity is defined as adjusted earnings/average ordinary shareholders' equity (excluding preference share capital).

3. Operating margin is defined as the combined operating margin of the asset management and wealth and investment businesses.

The achievement levels for each of the financial measures which determine threshold, target and stretch performance are set by the committee following a careful and detailed review of our business strategy and goals, taking into account regulations and our risk appetite framework. Targets will be set by the committee based on a range of internal and external factors including public financial and non-financial targets, internal benchmarks and hurdles, and economic and market conditions. Achievement levels for the short-term incentive will be reviewed annually by the committee.

Threshold, target and stretch performance levels for the financial measures set by the committee for the short-term incentive for the year ending 31 March 2019 are as follows:

Measure Weighting		Achievement levels
Financial measures	80%	Threshold (0%)	Target (100%)	Stretch (150%)
Return on risk-weighted assets	30%	1.3%	1.6%	1.8%
Return on equity	30%	12.0%	14.0%	16.0%
Operating margin of the combined asset management and wealth and investment
businesses	20%	28.0%	30.0%	31.5%

Stretch achievement levels for all three measures are considered to be demanding:

• The group's adjusted earnings for the year ended 31 March 2018 amounted to £491.1 million
• In order to achieve the stretch achievement level for return on risk-weighted assets, the group's adjusted earnings for the year ended 31 March 2018 would have needed to be 24.2% larger at £610.0 million ceteris paribus
• In order to achieve the stretch achievement level for the return on equity, the group's adjusted earnings for the year ended 31 March 2018 would have needed to be 32.4% higher at £650.0 million ceteris paribus

Proposed executive short-term incentive plan: non-financial measures, weightings and achievement levels for the year ending 31 March 2019

The committee believes that it is appropriate to incentivise executive directors to attend to important matters on which the long-term performance of the company depends, but which cannot in any one performance period be directly linked to financial returns. Without a meaningful weighting and target score for non-financial measures, the executives would not be rewarded in any significant way for activities which the committee and the board regard as essential to the reputation, risk profile, capability and overall long-term sustainability of the company. The committee considers that both the short- and long-term incentive schemes should properly reflect the board's view of the proper balance of responsibilities for the executive directors.

The committee assesses achievement against objectives for the non-financial measures on a six-point scale and will award scores of 0 (0%) and 6 (150%) only in exceptional circumstances.

The areas of focus, weightings and objectives for the non-financial measures will be reviewed annually by the committee, and are as follows:

Measure	Weighting	Achievement levels
Non-financial measure	20%	0%	25%	50%	75%	100%	125%	150%1
Culture, values and co
operation related measures	7%	0	1	2	3	4	5	6
"ESG" related measures	5%	0	1	2	3	4	5	6
Prudential and risk
management related
measures	8%	0	1	2	3	4	5	6

1. The score range has been reduced from 0% to 200% to 0% to 150%.

Proposed executive short-term incentive plan: non-financial measures – areas of focus for the year ending 31 March 2019

The committee has set the following areas of focus in respect of the non-financial performance conditions:

Areas of focus	Factors to be assessed
Culture, values and co-operation related measures	• Management visible and proactive in demonstrating appropriate behaviour. • Monitoring of the culture of the group. • Management driving co-operation between the various geographic and business sectors of the group. • Management driving co-operation between the executive director team and other senior management teams in the group. • Quality of brand, development of client base and progress in building the firm. • Acting with integrity, supporting the community, developing people and maintaining good relations with key stakeholders.

(continued)

Areas of focus	Factors to be assessed
"ESG" related	Human capital
measures	We depend on the experience and proficiency of our people to perform and deliver superior client service.
	• Priorities include:
	– Providing a safe and healthy work environment that values physical as well as psychological well-being
	– Investing in employee learning and development and growing talent and leadership. We target 1.5% of total staff costs to be spent on learning and development of our employees
	– Retaining and motivating staff through appropriate remuneration and reward structures
	– Respecting and upholding human rights by entrenching a values-driven culture through the organisation that is supported by strong ethics and integrity
	– Focusing on diversity and promoting equality. We have set a number of targets in this regard. Refer to page 240. In addition, we would over time aim to achieve the employment equity targets as set out in the South African Financial Sector Code.
	Intellectual capital
	• We use our specialist financial skills and expertise to provide efficient solutions for clients and have a robust risk management process in place.
	• Priorities include:
	– Leveraging our expertise in risk management to protect value
	– Ensuring solid and responsible lending and investing activities.
	Social and relationship capital
	• We leverage key stakeholder relationships to enhance our impact on society and the macro-economy. • Priorities include:
	– Building deep durable relationships with our clients and creating new client relationships
	– Investing in our distinctive brand and providing a high level of service by being nimble, flexible and innovative
	– Unselfishly contributing to society through our corporate social investment (CSI) programmes. We target to spend at least 1% of our pre-tax operating profit on CSI programmes
	– Focusing on diversity and inclusiveness (particularly with respect to gender) and promoting equality
	– Contributing to the transformation of the financial sector in South Africa.
	Natural capital
	• We support the transition to a low-carbon economy and believe we can make a meaningful impact in addressing climate change. We consider any meaningful activity that either reduces the negative impact on, or prolongs the life of, our planet.
	• Priorities include:
	– Limiting our direct operational carbon impact
	– Protecting biodiversity through various conservation activities
	– Funding and/or participating in renewable energy
	– Ensuring the security of natural resources in all our operations.
Prudential and	• Performance driven, transparent and risk conscious organisation.
risk management related measures	• Maintain an appropriate balance between revenue earned from capital light and capital intensive activities: building a balanced, diversified and resilient business model.
	• Managing key risk metrics within the context of our balanced risk appetite framework as published. These include for example:
	– We are a lowly leveraged firm and target a leverage ratio in all our banking subsidiaries in excess of 6%
	– We intend to maintain a sufficient level of capital to satisfy regulatory requirements and our internal target ratios. We target a capital adequacy ratio range of between 14% and 17% on a consolidated basis for Investec plc and Investec Limited and we target a minimum tier 1 ratio of 11.0% and a common equity tier 1 ratio above 10.0%
	– We target a credit loss ratio on core loans of less than 0.5% of average core advances, and we target defaults net of impairments less than 2% and 1.5% of total net core loans for Investec plc and Investec Limited, respectively
	– We carry a high level of liquidity in all our banking subsidiaries in order to be able to cope with shocks to the system, targeting a minimum cash to customer deposit ratio of 25%

– We intend to maintain a sufficient level of liquidity to satisfy regulatory requirements and our internal target ratios.

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Further details on the proposed executive directors' long-term incentive plan

• The long-term incentive plan comprises annual awards equal to a maximum of 100% fixed pay, paid entirely in shares with equal vesting over years three to seven, subject to a 12 month retention period thereafter.
• Long-term incentive awards will be pro-rated for the period of service relative to the performance period of the award, should an executive director resign or retire prior to awards vesting (subject to good leaver principles).
• No changes have been made to the existing policy with the exception of adjusting achievement levels for return on risk-weighted assets and lowering the payouts for achieving stretch in the non-financial measures.
• The vesting of awards for the executive directors will be conditional on performance weighted as to financial and non-financial performance and measured against prescribed achievement levels.
• The number of shares awarded will be decreased or increased by a performance multiplier comprising weightings and achievement scores within score ranges for the financial and non-financial measures, as follows:

Measures	Weighting	Score range	Achievement levels*
Financial measures	75%	0% – 150%	Threshold (0%) Target (100%) Stretch (150%)
Non-financial measures	25%	0% – 150%**	Threshold (0%) Target (100%) Stretch (150%)2

* If stretch achievement levels for both the financial and non-financial measures are satisfied the number of shares vesting will be increased and capped at a maximum of 135% of the number of shares awarded at the time of grant.

** Stretch achievement level reduced from 200% to 150%.

Proposed executive long-term incentive plan: financial measures, weightings and achievement levels for the year ending 31 March 2019

The achievement levels for each financial measure which determine threshold, target and stretch performance for the three-year performance period applicable to each annual award will be reviewed annually by the committee in advance of the award being made after a careful review of our business strategy and goals, taking into account regulations and our risk appetite framework. Targets will be set by the committee based on a range of internal and external factors including public financial and non-financial targets, internal benchmarks and hurdles, and economic and market conditions.

• The weightings for each of the financial measures are expected to remain constant going forward, but achievement levels will be reviewed annually.
• The awards will be tested over the three financial years preceding the first date of vesting against the achievement levels set on grant and the number of shares to be received will be determined by reference to the combined total which has been achieved.
• Threshold, target and stretch achievement levels for the financial measures for the year ending 31 March 2019 will be set as follows:

Measure Weighting		Achievement levels
Financial measures	75%	Threshold (0%)	Target (100%)	Stretch (150%)
Growth in tangible net asset value^	40%	15%	30%	45%
Return on risk-weighted assets^^	35%	1.4%	1.7%	1.9%

^ The growth in tangible net asset value is expressed per share, based on neutral currency and after adding back dividends and will be measured cumulatively over the three financial years preceding the first date of vesting.

^^ Return on risk-weighted assets is defined as adjusted earnings/average risk-weighted assets, where adjusted earnings are earnings attributable to ordinary shareholders after taxation, non-controlling interests and preference dividends, but before goodwill, acquired intangibles and non-operating items, and will be measured over the three financial years preceding the first date of vesting by averaging the actual return on risk-weighted assets achieved for each of those three financial years.

(continued)

Proposed executive long-term incentive plan: non-financial measures, weightings and achievement levels for the year ending 31 March 2019

• The non-financial measures and associated objectives for the three-year performance period applicable to each annual award will be reviewed annually by the committee, in advance of the award being made, taking into account the group's strategic and operational objectives.
• The committee assesses achievement against objectives for the non-financial measures on a six-point scale and will award scores of 0 (0%) and 6 (150%) only in exceptional circumstances.
• The non-financial measures for the year ending 31 March 2019 are as follows:

Measure	Weighting	Achievement levels
Non-financial measures	25%	0%	25%	50%	75%	100%	125%	150%1
Culture and values	4%	0	1	2	3	4	5	6
Franchise development	13%	0	1	2	3	4	5	6
Governance and regulatory and shareholder relationships	4%	0	1	2	3	4	5	6
Employee relationship and development	4%	0	1	2	3	4	5	6

1. Score range reduced from 0% to 200% to 0% to 150%.

The areas of focus for the non-financial measures for the year ending 31 March 2019 will be as follows:

Culture and values	Franchise development	Governance and regulatory and shareholder relationships	Employee relationship and development
• Management visible and proactive in demonstrating appropriate behaviour • Performance-driven, transparent and risk conscious organisation • Acting with integrity, supporting the community, developing people and maintaining good relations with key stakeholders • Continual monitoring of the culture of the group	• Quality of brand, development of client base, commitment to the community and progress in building the firm • Delivering appropriate and sustainable products with high levels of service and responsiveness • Environmental and other sustainability issues	• Maintaining open and transparent relations with regulators • Regulators should have confidence that the firm is being properly governed and managed • Shareholders should have confidence that the firm is being properly managed	• Succession and the development of the next generation • Continued development of people – both on the job and extramurally • Focus on diversity and inclusiveness (particularly with respect to gender) and promoting equality • Transformation of the financial sector in South Africa

Details on the executive directors' short-term incentive plan: financial measures, weightings and achievement levels for the year ended 31 March 2018

The financial measures which determined threshold, target and stretch performance under the short-term incentive and the achievement levels against each of the financial measures for the year ended 31 March 2018 are outlined on the next page. The threshold, target and stretch performance levels for the financial measures set by the committee, for the year ended 31 March 2018 are outlined below. Achievement levels for the year ended 31 March 2018 are shown on page 205.

Measure	Weighting	Achievement levels
Financial measure	85%	Threshold (0%)	Target (100%)	Stretch (200%)
Return on risk-weighted assets1	35%	0.9%	1.2%	1.6%
Return on equity2	25%	9%	12%	15%
Tier 1 capital adequacy3	12.5%	9.5%	10.5%	12%
Liquidity cover ratio4	6.25%	115%	132.5%	162.5%
Net stable funding ratio4	6.25%	82%	89.5%	99.5%

1. Return on risk-weighted assets is defined as adjusted earnings/average risk-weighted assets, where adjusted earnings are earnings attributable to ordinary shareholders after taxation, non-controlling interests and preference dividends, but before goodwill, acquired intangibles and non-operating items.

2. Return on equity is defined as adjusted earnings/average ordinary shareholders' equity (excluding preference share capital).

3. Tier 1 capital adequacy condition is a blend of the underlying tier 1 capital adequacy ratios for Investec plc and Investec Limited (50% plc: 50% Limited).

4. The liquidity measures (liquidity cover ratio and net stable funding ratio) are a blend of the underlying liquidity measures weighted by region (55% South Africa: 45% UK).

Measure	South Africa	UK
Geographical weighting	55%	45%
Liquidity cover ratio
Threshold	55%	150%
Target	65%	175%
Stretch	75%	225%
Net stable funding ratio
Threshold	65%	95%
Target	75%	100%
Stretch	85%	110%

Executive short-term incentive plan – non-financial measures, weightings and achievement levels for the year ended 31 March 2018

The areas of focus, weightings and objectives for the non-financial measures for the year ended 31 March 2018 were assessed on a fourpoint scale as follows:

Measure	Weighting	Achievement levels
Non-financial measures	15%	0%	50%	100%	150%	200%
Culture and values	3.75%	0	1	2	3	4
Franchise development	3.75%	0	1	2	3	4
Governance and regulatory and shareholder relationships	3.75%	0	1	2	3	4
Employee relationship and developments	3.75%	0	1	2	3	4

The committee set the following areas of focus for the year ended 31 March 2018 in respect of the non-financial performance conditions:

• Culture and values
  • Management visible and proactive in demonstrating appropriate behaviour
  • Performance-driven, transparent and risk-conscious organisation
  • Delivering appropriate and sustainable products with high levels of service and responsiveness
  • Acting with integrity, supporting the community, developing people and maintaining good relations with key stakeholders
  • Continual monitoring of the culture of the group.
• Franchise development
  • Quality of brand, development of client base, commitment to the community and progress in building the firm
  • Environmental and other sustainability issues.
• Governance and regulatory and shareholder relationships
  • Maintaining open and transparent relations with regulators
  • Regulators should have confidence that the firm is being properly governed and managed
  • Shareholders should have confidence that the firm is being properly managed
  • Delivering appropriate and sustainable products with high levels of service and responsiveness
• Employee relationship and development
  • Succession and the development of the next generation
  • Diversity and black economic empowerment initiatives and results
  • Continued development of people – both on the job and extramurally.

Details on the executive directors' long-term incentive plan for the year ended 31 March 2018

The vesting of awards for the executive directors will be conditional on performance weighted as to financial and non-financial performance and measured against prescribed achievement levels.

The number of shares awarded will be decreased or increased by a performance multiplier comprising weightings and achievement scores within score ranges for the financial and non-financial measures, as follows:

Measure	Weighting	Score range	Achievement levels
Financial measures	75%	0 – 150%
			Target (100%)
			Stretch (150%)
Non-financial measures	25%	0 – 200%	Threshold (0%)
			Target (100%)
			Stretch (200%)

The number of shares which vest against both the financial and non-financial performance conditions depend on whether threshold (0%), target (100%) or stretch (150% or 200%) levels are achieved, with awards vesting on a linear basis between each level.

If the stretch achievement levels for both the financial and non-financial measures are satisfied, the number of shares vesting will be increased and capped at a maximum of 135% of the number of shares awarded at the time of grant.

Executive long-term incentive plan: financial measures, weightings and achievement levels for the year ended 31 March 2018

Threshold, target and stretch achievement levels for the financial measures for awards made in relation to the year ended 31 March 2018 are as follows:

Measure	Weighting	Achievement levels
Financial measures	75%	Threshold (0%)	Target (100%)	Stretch (150%)
Growth in tangible net asset value1	40%	15.0%	30.0%	45.0%
Return on risk-weighted assets2	35%	0.7%	1.2%	1.6%

1. The growth in tangible net asset value is expressed per share, based on neutral currency and after adding back dividends and will be measured cumulatively over the three financial years preceding the first date of vesting.

2. Return on risk-weighted assets is defined as adjusted earnings/average risk-weighted assets, where adjusted earnings are earnings attributable to ordinary shareholders after taxation, non-controlling interests and preference dividends, but before goodwill, acquired intangibles and non-operating items, and will be measured over the three financial years preceding the first date of vesting by averaging the actual return on risk-weighted assets achieved for each of those three financial years.

The awards will be tested over the three financial years prior to the first vesting. The number of shares to be received will be determined by reference to the combined total which has been achieved.

Executive long-term incentive plan: non-financial measures, weightings and achievement levels for the year ended 31 March 2018

The non-financial measures for awards made in relation to the year ended 31 March 2018 are as follows:

Measure	Weighting	Achievement levels
Non-financial measures	25%	0%	50%	100%	150%	200%
Culture and values	4%	0	1	2	3	4
Franchise development	13%	0	1	2	3	4
Governance and regulatory and shareholder relationships	4%	0	1	2	3	4
Employee relationship and development	4%	0	1	2	3	4

Non-executive directors

The fee structure for non-executive directors for the period ending 31 August 2018 and 2019 is shown in the table below:

Non-executive directors' remuneration	Period ending 31 August 2018	As proposed by the board for the period from 1 September 2018 to 31 August 2019
Chairman's total fee	£435 000 per year	£450 000 per year
Basic non-executive director fee	£73 000 per year	£75 000 per year
Senior independent director	£10 000 per year	£10 000 per year
Chairman of the DLC audit committee	£65 000 per year	£80 000 per year
Chairman of the DLC remuneration committee	£46 000 per year	£47 000 per year
Chairman of the DLC social and ethics committee	–	£30 000 per year
Chairman of the board risk and capital committee	£45 000 per year	£46 000 per year
Member of the DLC audit committee	£19 000 per year	£25 000 per year
Member of the DLC remuneration committee	£17 000 per year	£17 500 per year
Member of the DLC nominations and directors' affairs committee	£12 500 per year	£13 000 per year
Member of the DLC social and ethics committee	£12 500 per year	£13 000 per year
Member of the board risk and capital committee	£15 000 per year	£15 500 per year
Member of the Investec Bank plc board (also member of main board)	£14 000 per year	£14 500 per year
Member of the Investec Bank plc board	£56 000	£58 000 per year
Independent director of Investec Capital and Investments (Ireland) Limited	€50 000 per year	€65 000 per year
Member of the Investec Bank Limited board (also member of main board)	R320 000 per year	R340 000 per year
Member of the Investec Bank Limited board	R470 000	R500 000 per year
Per diem fee for additional work committed to the group	£2 000/R30 000	£2 000/R30 000

Note: Value-Added Tax (VAT), at the prevailing rate, where applicable, will be added to the above-mentioned fees to the extent they are paid in South Africa. Two binding general rulings were issued by the South African Revenue Service (SARS) in early 2017 confirming the South African Value-Added Tax (VAT) law that requires non-executive directors of companies to register for and charge VAT in respect of any directors' fees earned for services rendered as a non-executive director that exceed the prescribed threshold. These rulings were effective 1 June 2017.

(continued)

Executive directors' single total figure of remuneration (audited)

The table below provides a single total remuneration figure for each executive director over the financial period.

Executive directors	Salary £	Retire ment benefits £	Total other taxable benefits £	Fixed allowance £	Gross remune ration £	STI – upfront cash and upfront shares £	STI – deferred £	Total remu neration not subject to future perfor mance conditions £	Value of LTIP – not vested and still subject to perfor mance conditions £	Value of exercised LTIPs £	Value of LTIPs that will be forfeited	Total remune ration £
S Koseff (CEO)
– 2018	396 174	73 845		9 981 1 000 000 1 480 000 1 213 737			809 158		3 502 895 1 480 000		– (1 480 000) 3 502 895
– 2017	399 530	69 668		10 802 1 000 000 1 480 000 1 159 216			772 810		3 412 026 1 480 000	–		– 4 892 026
B Kantor (MD)
– 2018	425 636	38 614		15 750 1 000 000 1 480 000 1 213 737			809 158		3 502 895 1 480 000		– (1 480 000) 3 502 895
– 2017	434 845	38 330		6 825 1 000 000 1 480 000 1 159 216			772 810		3 412 026 1 480 000	–		– 4 892 026
GR Burger (GRFD)
– 2018	290 884	39 212		6 279 1 000 000 1 336 375 1 055 424			703 616		3 095 415 1 336 375		– (1 336 353) 3 095 437
– 2017	292 493	36 652		7 164 1 000 000 1 336 309 1 008 014			672 008		3 016 331 1 336 309	–		– 4 352 640
HJ du Toit
(CEO IAM)
– 2018	440 950	–	10 481	–		451 431 4 509 600 1 127 400		6 088 431	–	–		6 088 431
– 2017	440 950	–	10 242	–		451 192 3 720 000	930 000	5 101 192	–	–		– 5 101 192

Salary and benefits

• Gross remuneration of S Koseff and B Kantor (excluding the fixed allowance of £1 million) remained unchanged from the previous year at £480 000. The gross remuneration for HJ du Toit largely remained the same as the prior year. The gross remuneration of GR Burger (excluding the fixed allowance of £1 million) is largely determined in Rands and converted into Pounds Sterling. In Rand terms GR Burger's Rand-based gross remuneration remained unchanged at R4 500 000 and his Pound-based gross remuneration was £90 300.

• The executive directors receive other benefits which may include pension schemes; life, disability and personal accident insurance; medical cover; and fixed allowances, on similar terms to other senior executives. These amounts are funded out of gross remuneration.

• To ensure compliance with the requirements of CRD IV, the CEO, MD and GRFD have received fixed allowances, payable in shares. The fixed allowance of £1 million each to S Koseff, B Kantor and GR Burger was last year awarded in the form of 170 358 forfeitable Investec plc shares to each of the directors which vested immediately on award. These shares are, however, subject to a retention period in terms of which 20% of shares will be free from retention restrictions each year over a period of five years. The 170 358 Investec plc shares for each of the directors is included in their beneficial and non-beneficial interest holding on page 209.

• Retirement benefits: None of the directors belong to a defined benefit pension scheme and all are members of one of the defined contribution pension or provident schemes. The amounts reflected in the table above represent the contribution to these schemes payable by the company.

Short-term incentive (STI)

• • As in prior years, the remuneration for HJ du Toit for the year ending 31 March 2018 was determined and delivered in respect of his role as the CEO of IAM. Accordingly the remuneration benefits due to him were subject to the remuneration policies, rules and regulations applicable to employees of IAM. He was not classified as a Material Risk Taker by PRA regulations and, as a result, his compensation arrangements were not affected by a cap on variable remuneration.
• • IAM reported an increase in operating profit before non-controlling interest of 8.0% to £178.0 million. Assets under management amounted to £103.9 billion, with £5.4 billion in net flows.
• • The CEO of IAM is entitled to a short term incentive of 1.85% of the earnings of IAM before variable compensation and tax. HJ du Toit has, however, regularly elected not to accept the full 1.85% of earnings of IAM before variable compensation and tax to which he was entitled. For the year ended 31 March 2018, the final year of his participation in this scheme, the full 1.85% amounting to £5.637 million was paid to HJ du Toit.
• • In the prior financial year HJ du Toit had 20% of his bonus deferred into the IAM Deferred Bonus Plan as outlined on page 235. This year, given his transition to the Joint CEO designate role, he invested approximately 20% of his bonus in Investec plc shares, to be held for three years.
• • His remuneration arrangements going forward will be fully aligned with the group and remuneration will be paid in accordance with the proposals set out on page 194.
• S Koseff, B Kantor and GR Burger are classified as PRA Material Risk Takers.
• The annual bonus for the year ended 31 March 2018 for S Koseff, B Kantor and GR Burger was determined with reference to performance against financial and non-financial measures as set out below and described in detail on pages 201 to 203.
• Further information on the short-term incentives is set out on pages 201 to 203 and as discussed on page 193 a portion of bonuses are paid in cash and a portion is deferred. The portion deferred is deferred in shares.

The determination of bonuses for the CEO, MD and GRFD are set out below:

• The target short-term incentive pool available for the CEO, MD and GRFD for the year ended 31 March 2018 amounted to 0.66% of the group's adjusted operating profit, defined as operating profit before taxation, goodwill, acquired intangibles and non-operating items and after non-controlling interests. If the target performance conditions are achieved, distribution of the pool at target performance is as follows: 0.23% to the CEO, 0.23% to the MD and 0.20% to the GRFD.
• The pool is decreased or increased by a performance multiplier comprising weightings and achievement scores within score ranges for the financial and nonfinancial performance measures described in the table below. The maximum aggregate pool, if all financial and non-financial stretch levels are achieved, would be 180% of (adjusted operating profit x 0.66%), subject to the remuneration cap as approved by shareholders.

Long-term incentive awards

• Long-term incentive awards were granted to S Koseff, B Kantor and GR Burger during the 2018 financial year. No LTIPs for S Koseff, B Kantor and GR Burger vested in 2018.
• • On termination of employment outstanding long-term incentive awards will be pro-rated based on time served relative to the performance period of the award. In this regard two-thirds of the 2018 award will be forfeited and one-third of the 2017 award.

(continued)

Executive short-term incentives – achievement of performance targets

The determination of the bonus for S Koseff and B Kantor is shown below:

Adjusted operating profit at 31 March 2018 (£'000) 583 688

CEO/MD 'incentive pool' at 0.23% (£'000) 1 342

Maximum leverage at 180%, i.e. maximum potential bonus before application of the remuneration cap (£'000) 2 416

Maximum bonus subject to remuneration cap, whereby variable remuneration cannot exceed 244.2% of fixed remuneration (£'000)1 2 134

				Achievement levels
Financial measures	Weighting	Actual achieve ment at 31 March 2018	Threshold 0%	Target 100%	Stretch 200%	Actual allocation achieved £'000	Actual weighting achieved % vs target
Return on risk-weighted assets	35%	1.45%	0.9%	1.2%	1.6%	763	162.4%
Return on equity	25%	12.1%	9%	12%	15%	343	102.1%
Tier 1 capital adequacy	12.5%	12.0%	9.5%	10.5%	12.0%	330	196.7%
LCR	6.25%	210.7%	115%	132.5%	162.5%	168	200.0%
NSFR	6.25%	123.9%	82%	89.5%	99.5%	168	200.0%
Total	85%					1 772	155.2%

1. The cap is calculated in line with EBA discounting rules which allow, when 25% of variable remuneration is deferred over at least five years, a slightly higher cap than 2x fixed remuneration, depending on the length of deferral, inflation and interest rates. It has been independently calculated at 244.2% for awards made in respect of the 2018 financial year.

The portion of the 2017 bonus 'achieved' for financial measures amounted to £1 707 000 (£758 000 for return on risk-weighted assets; £384 000 for return on equity; £233 000 for tier 1 capital adequacy; £166 000 for the LCR; and £166 000 for the NSFR).

Non-financial measures

Following an assessment of these measures (as described on pages 206 to 207) the remuneration committee decided to allocate an award of £251 715 (2017: £224 658) for performance against non-financial measures. A score of 3 (i.e. weighting of 150%) was awarded to the 'culture and values' category, a score of 2 (i.e. weighting of 100%) was awarded to the 'franchise development' category, a score of 1 (i.e. weighting of 50%) was awarded to the 'Governance and regulator and shareholder relationships category', and a score of 4 (i.e. weighting of 200%) was awarded to the 'employee relationship and development category'. Further information is provided on pages 201, 202, 206 and 207.

Final bonus awarded to S Koseff and B Kantor

The results of the performance assessment against financial and non-financial measures (reflected above) yield a bonus of £2 022 895. The short-term incentive and long-term incentive combined are subject to a cap of 244.2% of fixed remuneration, as above, and the awards to S Koseff and B Kantor fall within that cap.1 The committee considered whether it is appropriate to apply malus and clawback to executive director awards and determined that neither malus or clawback should apply.

The determination of the bonus for GR Burger is shown below:

Adjusted operating profit at 31 March 2018 (£'000)	583 688
GRFD 'incentive pool' at 0.20% (£'000)	1 167
Maximum leverage at 180%, i.e. maximum potential bonus before application of the remuneration cap (£'000)	2 101
Maximum bonus subject to remuneration cap whereby variable remuneration cannot exceed 244.2% of fixed remuneration (£'000)1	1 927

Achievement levels
--------------------

Financial measures	Weighting	Actual achieve ment at 31 March 2018	Threshold 0%	Target 100%	Stretch 200%	Actual allocation achieved £'000	Actual weighting achieved vs % target
Return on risk-weighted assets	35%	1.45%	0.9%	1.2%	1.6%	663	162.4%
Return on equity	25%	12.1%	9%	12%	15%	298	102.1%
Tier 1 capital adequacy	12.5%	12.0%	9.5%	10.5%	12.0%	287	196.7%
LCR	6.25%	210.7%	115%	132.5%	162.5%	146	200.0%
NSFR	6.25%	123.9%	82%	89.5%	99.5%	146	200.0%
Total	85%					1 540	155.2%

1. The cap is calculated in line with EBA discounting rules which allow, when 25% of variable remuneration is deferred over at least five years, a slightly higher cap than 2x fixed remuneration, depending on the length of deferral, inflation and interest rates. It has been independently calculated at 244.2% for awards made in respect of the 2018 financial year.

(continued)

The portion of the 2017 bonus achieved for financial measures amounted to £1 485 000 (£659 000 for return on risk-weighted assets; £333 000 for return on equity; £203 000 for tier 1 capital adequacy; £145 000 for the LCR; and £145 000 for the NSFR).

Non-financial measures

Following an assessment of these measures (as described below) the remuneration committee decided to allocate an award of £218 883 (2017: £195 355) for performance against non-financial measures. A score of 3 (i.e. weighting of 150%) was awarded to the 'culture and values' category, a score of 2 (i.e. weighting of 100%) was awarded to the 'franchise development' category, a score of 1 (i.e. weighting of 50%) was awarded to the 'Governance and regulator and shareholder relationships category', and a score of 4 (i.e. weighting of 200%) was awarded to the 'employee relationship and development category'. Further information is provided on pages 201, 202, 206 and 207.

Final bonus awarded to GR Burger

The results of the performance assessment against financial and non-financial measures (reflected above) yield a bonus of £1 759 040. The short-term incentive and long-term incentive combined are subject to a cap of 244.2% of variable remuneration, and the bonus awarded to GR Burger falls within that cap. The committee considered whether it is appropriate to apply malus and clawback to executive director awards and determined that neither malus or clawback should apply.

An assessment of non-financial measures

The following aspects were taken into consideration in the assessment of performance against the non-financial measures for the CEO, MD and GRFD.

Areas of focus as set out on page 200	Achievements during the year
Culture and values:
• Management visible and proactive in demonstrating appropriate behaviour	• The executive have worked closely with the board to ensure a steady handover of knowledge and experience from the "founders" to the incoming executives
• Performance-driven, transparent and risk conscious organisation	• The executives focused on ensuring that there was a strong pipeline of leaders in the organisation ready to take over from the "founders"
• Delivering appropriate and sustainable products with high levels of service and responsiveness • Acting with integrity, supporting the community, developing people and maintaining good relations with key stakeholders • Continual monitoring of the culture of the group	• The executive have engaged in activities with employees at all levels through, for example, management hosted breakfasts, management panels, induction presentations, and facilitating discussions on a number of aspects, including culture and values. The executive hosted and attended multiple functions with new and future leaders during the year
	• Our Human Resources and Organisational Development divisions continued to actively work with the executive and our management teams to ensure our values are lived and entrenched into our day-to-day activities
Governance and regulatory and shareholder relationships:
• Maintaining open and transparent relations with regulators • Regulators should have confidence that the firm is being properly governed and managed • Shareholders should have confidence that the firm is being properly managed • Delivering appropriate and sustainable products with high levels of service and responsiveness	• We have strong relationships with the governing bodies and regulators in all of the jurisdictions in which we operate • The executive together with senior employees, the group chairman and the chairman of the remuneration committee meet regularly with shareholders and shareholder representative organisations. These engagements are important and contribute directly to decisions made by the remuneration committee • The remuneration committee is mindful of the fact that some shareholders are unhappy with the relationship between company performance and the level of executive pay • The executive worked with the remuneration committee and provided input to the drafting of the proposed new remuneration policy for executive directors
	• Investec Limited continues to cooperate with the Competition Commission Authorities in South Africa with respect to their ongoing investigation into alleged collusion in relation to foreign exchange.

(continued)

Areas of focus as set out on page 200	Achievements during the year
Franchise development:
• Quality of brand, development of client base, commitment to the community and progress in building the firm • Environmental and other sustainability issues	• We continue to receive very positive feedback from clients regarding our service • We continued to grow our client base and invest in our franchise businesses • Investec and Stephen Koseff have been very pro-active in South Africa in multi-party democracy and free enterprise • Investec maintained its inclusion in a number of international sustainability indices • Our core values include unselfishly contributing to society. During the year we spent £7.2 million on social investment initiatives (2017: £7.1 million), exceeding our target of at least 1% of pre-tax operating profit spent on such initiatives • Our flagship educational initiative in South Africa, Promaths, continues to outpace the national average for Mathematics and Science • The Financial Times of London has recognised Investec Private Banking and Wealth & Investment as the best private bank and wealth manager in South Africa – for the fourth consecutive year – at the Global Private Banking Awards • Winner of the Business of the Year award by Business Charity Awards 2017 (for Beyond Business) • Winner of the Community Impact Award 2017 for our flagship programme the Beyond Business social enterprise incubator we run in partnership with Bromley by Bow Centre • Winner of the National CSR Awards 2017, in the individual Community (Legacy) category Project Award (for Beyond Business) • Reaccredited winner (for Beyond Business) in the Responsible Business Awards 2017 • Received the Financial Innovation Awards 2017 – Innovation in Sustainability or Social Responsibility Awards for our Invest for Success programme run in partnership with Arrival Education • Investec group was awarded a B for the CDP climate scoring • Investec's Energy Management System that covers 23 of our physical buildings in the UK, Ireland and Channel Islands was certified to the international energy standard ISO 50001
Employee relationship and development:
• Succession and development of the next generation	• The outgoing executive have worked closely with, and supported, the board with the transition to the new executive.
• Diversity and black economic empowerment initiatives and results	• The outgoing executive have ensured that a smooth and proactive transition has taken place
• Continued development of people – both on the job and extramurally	• Investec was voted the second most attractive employer by professionals in South Africa in the 2017 Universum Awards
	• Investec is a member of the 30% Club in South Africa and the UK committing to a goal of 30% woman on the board, and has made good progress towards the target of 33% female representation by 2020, per the Hampton-Alexander Review
	• Investec has signed up to the Women in Finance Charter in the UK, pledging to promote gender diversity by having a senior executive team member responsible and accountable for gender diversity and inclusion, setting internal targets for gender diversity at senior management levels, publishing progress annually against these targets, and linking the pay of senior executives to delivery against these gender diversity targets
	• In South Africa, Investec remains committed to black economic empowerment. We remain committed to achieving greater representation at all levels of the business through the effective implementation of our employment equity plan.
	• In 2018 we invested £22.5 million in the learning and development of our employees, compared to £22.9 million in the prior year, exceeding our target spend of at least 1.5% of staff costs
	• The executive have supported the development of the Women in Business initiative, an initiative aimed at promoting the support and advancement of women in the workplace, while also focusing on supporting our female clients

(continued)

Non-executive directors' single total remuneration figure (audited)

The table below provides a single total remuneration figure for each non-executive director over the financial period.

	Total	Total
	remuneration	remuneration
	2018	2017
Name	£	£
Non-executive directors
F Titi (chairman)	430 850	425 000
ZBM Bassa	206 105	137 561
LC Bowden	79 000	90 000
CA Carolus	84 877	84 000
PKO Crosthwaite	242 133	221 627
D Friedland	226 913	310 861
PA Hourquebie1	75 299	–
CR Jacobs	89 377	88 500
IR Kantor	89 415	88 500
Lord Malloch-Brown KCMG	84 876	88 000
KL Shuenyane	123 337	133 149
PRS Thomas2	136 315	200 879
Total in Pounds Sterling	1 868 497	1 868 077

1. PA Hourquebie appointed on 14 August 2017.

2. PRS Thomas resigned on 10 August 2017.

Payments to past directors and payments for loss of office (audited)

No such payments have been made.

Directors' shareholdings, options and long-term incentive awards (audited)

The company's register of directors' interests contains full details of directors' shareholdings, options and long-term incentive awards. The tables that follow provide information on the directors' shareholdings, options and long-term incentive awards for the year ended 31 March 2018.

Directors' shareholdings in Investec plc and Investec Limited shares at 31 March 2018 (audited)

		Beneficial and non-beneficial interest Investec plc1	% of shares in issue1 Beneficial and Investec non-beneficial interest plc Investec Limited1			% of shares in issue1 Investec Limited
Name	31 March 2018	1 April 2017	31 March 2018	31 March 2018	1 April 2017	31 March 2018
Executive directors
S Koseff2	5 936 212	5 295 775	0.9%	962 841	1 234 399	0.3%
B Kantor2/3	1 507 271	1 164 359	0.2%	1 600 500	2 300 500	0.5%
GR Burger2	3 208 064	3 488 675	0.5%	327 076	327 076	0.1%
HJ du Toit	–	–	–	604 740	604 740	0.2%
Total number	10 651 547	9 948 809	1.6%	3 495 157	4 466 715	1.1%
Non-executive directors
F Titi (chairman)	–	–	–	–	–	–
ZBM Bassa	–	–	–	–	–	–
LC Bowden	–	–	–	–	–	–
CA Carolus	–	–	–	–	–	–
PKO Crosthwaite	115 738	115 738	–	–	–	–
D Friedland	–	–	–	–	–	–
Philip Hourquebie	–	–	–	–	–	–
CR Jacobs	–	–	–	–	–	–
IR Kantor	1 009 045	1 009 045	0.2%	325	325	–
Lord Malloch-Brown KCMG		–	–	–	–	–
KL Shuenyane	19 900	19 900	–	–	–	–
Total number	1 144 683	1 144 683	0.2%	325	325	–
Total number	11 796 230	11 093 492	1.8%	3 495 482	4 467 040	1.1%

The table above reflects holdings of shares by current directors.

1. The number of shares in issue and share prices for Investec plc and Investec Limited over the period is provided on page 213.

2. The beneficial and non-beneficial holdings of S Koseff, B Kantor and GR Burger, include 170 358 Investec plc shares which relate to the awards to each of the directors of shares in respect of a £1 million fixed allowance on 8 June 2017 (as explained on page 220). These shares are, however, subject to a retention period in terms of which 20% of shares will be free from retention restrictions each year over a period of five years.

3. Bernard Kantor entered into a zero premium/cost option arrangement and purchased put options over 600 000 Investec Limited ordinary shares at a strike price of R100.00 per share and a call option over 600 000 Investec Limited ordinary shares at a strike price of R120.00 per share. 600 000 Investec Limited ordinary shares have been pledged as security with the writer of those options.

In addition, as outlined on page 213, awards were granted to S Koseff, B Kantor and GR Burger on 31 May 2018.

Directors' interest in preference shares at 31 March 2018 (audited)

	Investec plc			Investec Limited	Investec Bank Limited
Name	31 March 2018	1 April 2017	31 March 2018	1 April 2017	31 March 2018	1 April 2017
Executive director
S Koseff	12 139	12 139	3 000	3 000	4 000	4 000

• The market price of an Investec plc preference share at 31 March 2018 was R88.00 (2017: R81.00).

• The market price of an Investec Limited preference share at 31 March 2018 was R67.50 (2017: R75.00).

• The market price of an Investec Bank Limited preference share at 31 March 2018 was R71.56 (2017: R82.00).

(continued)

Directors' interest in options at 31 March 2018 (audited)

Investec plc shares

The directors do not have any interest in options over Investec plc shares.

Investec Limited shares

The directors do not have any interest in options over Investec Limited shares.

Directors' interests in the Investec plc Executive Incentive Plan 2013 at 31 March 2018 (audited)

Awards made in respect of the financial year ending 31 March 2013

Name	Number of Investec plc shares awarded on 16 Sept 2013	Exercise price	Perform ance period	Perform ance conditions met (Y/N)	Additional shares awarded for performance conditions being met	Shares exercised during the year to 31 March 2018	Balance at 31 March 2018	Period exercisable	Retention period
S Koseff	600 000	Nil	1 April 2013 to 31 March 2016	Yes	204 617	603 462	201 155	75% was exercisable on 16 September 2017; and 25% is	A further six months after vesting date A further six
								exercisable on 16 September 2018	months after vesting date
B Kantor	600 000	Nil	1 April 2013 to 31 March 2016	Yes	204 617	603 462	201 155	75% was exercisable on 16 September 2017; and 25% is exercisable on 16 September 2018	A further six months after vesting date A further six months after vesting date
GR Burger	600 000	Nil	1 April 2013 to 31 March 2016	Yes	204 617	603 462	201 155	75% is exercisable on 16 September 2017; and 25% on 16 September 2018	A further six months after vesting date A further six months after vesting date

The Executive Incentive Plan 2013 and the awards made on 16 September 2013 were approved at the July 2013 annual general meeting in terms of which 600 000 nil cost options each were awarded to S Koseff, B Kantor and GR Burger.

The performance criteria in respect of these awards were met and detailed in Investec's 2016 integrated annual report. These awards have now vested subject to the retention periods reflected above. These awards formed part of their variable remuneration in respect of the year ending 31 March 2013.

The value of shares exercised are not included in the single remuneration table on page 204, as they were included in these disclosures in the year the award was granted.

(continued)

Directors' interests in the Investec plc Executive Incentive Plan 2013 at 31 March 2018 (audited)

Long-term share awards granted in respect of the 2016 financial year

Name	Date of grant	Exercise price	Number of Investec plc shares at 1 April 2017	Conditional awards made during the year	Balance at 31 March 2018	Perform ance period	Period exercisable	Retention period	Treatment on termination of employment
S Koseff	2 June 2016	Nil	314 225	–	314 225	1 April 2016 to 31 March 2019	One third is exercisable on 2 June 2019; one third on 2 June 2020 and the final third on 2 June 2021 subject to performance criteria being met	A further six-month retention after vesting date	Will be pro rated based on service over the performance period, relative to the performance period of the award
B Kantor	2 June 2016	Nil	314 225	–	314 225	1 April 2016 to 31 March 2019	One third is exercisable on 2 June 2019; one third on 2 June 2020 and the final third on 2 June 2021 subject to performance criteria being met	A further six-month retention after vesting date	Will be pro rated based on service over the performance period, relative to the performance period of the award
GR Burger	2 June 2016	Nil	277 801	–	277 801	1 April 2016 to 31 March 2019	One third is exercisable on 2 June 2019; one third on 2 June 2020 and the final third on 2 June 2021 subject to performance criteria being met	A further six-month retention after vesting date	Will be pro rated based on service over the performance period, relative to the performance period of the award

The remuneration policy was approved at the August 2015 annual general meeting.

On 2 June 2016, 314 225 conditional awards were awarded to S Koseff and B Kantor, and 277 801 to GR Burger. These awards formed part of their variable remuneration in respect of the financial year ending 31 March 2016.

The performance criteria in respect of these awards are detailed on pages 202 and 203. Vesting starts at 0% for threshold performance. These awards have not yet vested. The face value at grant for these awards was equivalent to 100% of fixed remuneration and amounted to £1 480 000 for S Koseff and B Kantor, and £1 308 000 for GR Burger based on the share price for Investec plc at the time of grant.

(continued)

Directors' interests in the Investec plc Executive Incentive Plan 2013 at 31 March 2018 (audited)

Long-term share awards granted in respect of the 2017 financial year

Name	Date of grant	Exercise price	Number of Investec plc shares at 1 April 2017	Conditional awards made during the year	Balance at 31 March 2018	Perform ance period	Period exercisable	Retention period	Treatment on termination of employment
S Koseff	8 June 2017	Nil	–	252 130	252 130	1 April 2017 to 31 March 2020	20% is exercisable on 8 June each year, commencing on 8 June 2020 until 8 June 2024, subject to performance criteria being met	A further six-month retention after vesting date	Will be pro rated based on service over the performance period, relative to the performance period of the award, and accordingly one third will be forfeited
B Kantor	8 June 2017	Nil	–	252 130	252 130	1 April 2017 to 31 March 2020	20% is exercisable on 8 June each year, commencing on 8 June 2020 until 8 June 2024, subject to performance criteria being met	A further six-month retention after vesting date	Will be pro rated based on service over the performance period, relative to the performance period of the award, and accordingly one third will be forfeited
GR Burger`	8 June 2017	Nil	–	227 651	227 651	1 April 2017 to 31 March 2020	20% is exercisable on 8 June each year, commencing on 8 June 2020 until 8 June 2024, subject to performance criteria being met	A further six-month retention after vesting date	Will be pro rated based on service over the performance period, relative to the performance period of the award, and accordingly one third will be forfeited

The remuneration policy was approved at the August 2015 annual general meeting.

On 8 June 2017, 252 130 conditional awards were awarded to S Koseff and B Kantor, and 227 651 to GR Burger. These awards formed part of their variable remuneration in respect of the financial year ending 31 March 2017. The value of these awards is reflected in the table on page 204.

The performance criteria in respect of these awards are detailed on pages 202 and 203. Vesting starts of 0% for threshold performance. These awards have not yet vested. The face value at grant for these awards was equivalent to 100% of fixed remuneration, and amounted to £1 480 000 for S Koseff and B Kantor, and £1 336 309 for GR Burger based on the average of the closing share price for Investec plc from 2 June 2017 to 7 June 2017.

(continued)

Directors' interests in the Investec plc Executive Incentive Plan 2013 at 31 March 2018 (audited)

Long-term share awards granted in respect of the 2018 financial year

Name	Date of grant	Exercise price	Number of Investec plc shares at 1 April 2017	Conditional awards made during the year	Balance at 31 March 2018	Perform ance period	Period exercisable	Retention period	Treatment on termination of employment
S Koseff	31 May	Nil	–	264 759	264 759	1 April 2018	20% is	A further	Will be pro
	2018					to 31 March	exercisable	six-month	rated based on
						2021	on 31 May	retention after	service over the
							each year,	vesting date	performance
							commencing		period,
							on 31 May		relative to the
							2021 until		performance
							31 May 2025,		period of the
							subject to		award, and
							performance		accordingly two
							criteria being		thirds will be
							met		forfeited
B Kantor	31 May	Nil	–	264 759	264 759	1 April 2018	20% is	A further	Will be pro
	2018					to 31 March	exercisable	six-month	rated based on
						2021	on 31 May	retention after	service over the
							each year,	vesting date	performance
							commencing		period,
							on 31 May		relative to the
							2021 until		performance
							31 May 2025,		period of the
							subject to		award, and
							performance		accordingly two
							criteria being		thirds will be
							met		forfeited
GR Burger 31 May		Nil	–	239 066	239 066	1 April 2018	20% is	A further	Will be pro
	2018					to 31 March	exercisable	six-month	rated based on
						2021	on 31 May	retention after	service over the
							each year,	vesting date	performance
							commencing		period,
							31 May 2021		relative to the
							until 31 May		performance
							2025, subject		period of the
							to performance		award, and
							criteria being		accordingly two
							met		thirds will be
									forfeited

The remuneration policy was approved at the August 2015 annual general meeting.

On 31 May 2018, 264 759 conditional awards were awarded to S Koseff and B Kantor, and 239 066 to GR Burger. These awards formed part of their variable remuneration in respect of the financial year ending 31 March 2018. The value of these awards is reflected in the table on page 204. The performance criteria in respect of these awards are detailed on pages 202 and 203. Vesting starts at 0% for threshold performance. These awards have not yet vested. The face value at grant for these awards was equivalent to 100% of fixed remuneration, and amounted to £1 480 000 for S Koseff and B Kantor, and £1 336 375 for GR Burger based on the share price for Investec plc at the time of grant.

The number of shares in issue and share prices for Investec plc and Investec Limited are provided below: Summary: Investec plc and Investec Limited share statistics

	31 March 2018	31 March 2017	High over the year	Low over the year
Investec plc share price	£5.50	£5.44	£6.49	£4.61
Investec Limited share price	R92.28	R91.46	R105.62	R85.00
Number of Investec plc shares in issue (million)	669.8	657.1
Number of Investec Limited shares in issue (million)	310.7	301.2

(continued)

Shareholder dilution

Summary of Investec's share option and long-term incentive plans

Maximum award per individual	Vesting period	Options/ shares granted during the year2	Total issued at 31 March 20183/4/5/6
Investec 1 Limited Share Incentive Plan – 16 March 2005 – Investec plc
• Cumulative limit of 2 500 000 across all option plans	• Long-term incentive awards – Nil Cost Options: • Non-material Risk Takers: Vesting 75% end year four and 25% end year five • Material Risk Takers: Vesting 75% end of three and a half years and 25% at the end of four and a half years with six month retention	–	9 235 506 0.94% of issued share capital of company
• Excluding deferred bonus share awards	• Long-term share awards: forfeitable shares and Conditional Shares • One third vesting at the end of years three, four and five for non-Material Risk Takers	5 486 220	8 655 149 0.88% of issued share capital of company
• In any financial year: 1x remuneration package1	• Market strike options: 25% vesting end of years two, three, four and five	94 650	281 267 0.03% of issued share capital of company
• Cumulative limit of 2 500 000 across all option plans • Excluding deferred bonus share awards • In any financial year: 1x remuneration package1	• Long-term share awards: • Junior Material Risk Takers: Vest one third at the end of two, three and four years • FCA Designated Senior Managers: Vest one third at the end of two, three and a half and five years • Risk Managers: Vest one third after two and a half, three and a half and five years • Of prior year June awards, the first third vests in the February after two years and nine months, the next third after three years and ten months and the final third after four years and three months • PRA Designated Senior Managers: Vest 25% per annum from three to seven years • All have a 12 month retention period thereafter, with the exception of Risk Managers who have a six month retention period	2 104 051	4 293 866 0.44% of issued share capital of company
• Cumulative limit of 2 500 000 across all option plans	• Long-term incentive awards: Nil Cost Options • Vesting 75% at end year four and 25% at end year five	–	13 916 968 1.42% of issued share capital of company
• Excluding deferred bonus share awards • In any financial year: 1x remuneration package1	• Long-term share awards: forfeitable shares and Conditional shares • Vesting one third at the end of years three, four and five	7 087 012	14 225 369 1.45% of issued share capital of company
		Investec plc Executive Incentive Plan – 2013 Investec Limited Share Incentive Plan – 16 March 2005 – Investec Limited	The limits for allocations to employees and executive management during a financial year may be exceeded if the directors determine that exceptional

circumstances make it desirable that awards should be granted in excess of that limit.

2. This represents the number of awards made to all participants. For further details, see pages 57 and 58 in volume three. More details on the directors' shareholdings are also provided in tables accompanying this report.

3. Dilution limits: Investec is committed to following the Investment Association principles of remuneration and accordingly, as from the date of the implementation of our DLC structure (29 July 2002), the maximum number of new shares which may be issued by the company under all of the share plans (in respect of grants made after July 2002) may not exceed 10% of the issued share capital of the company over a rolling 10-year period. We have, since our listing date, complied with both the 10% in 10 years guideline for discretionary and non-discretionary awards in aggregate as well as the 5% in 10 year guideline for discretionary awards. The committee regularly monitors the utilisation of dilution limits and available headroom to ensure that these guidelines are complied with. Shares issued in terms of the group's deferred bonus scheme are paid for by the respective division at the time of the award and are not included in these dilution calculations as they have been issued for full value. The issued share capital of Investec plc and Investec Limited at 31 March 2018 was 669.8 million shares and 310.7 million shares, respectively.

4. The market price of an Investec plc share at 31 March 2018 was £5.50 (2017: £5.44), ranging from a low of £4.61 to a high of £6.49 during the financial year.

5. The market price of an Investec Limited share at 31 March 2018 was R92.28 (2017: R91.46), ranging from a low of R85.00 to a high of R105.62 during the financial year.

6. The rules of these long-term incentive plans do not allow awards to be made to executive directors. The table above excludes details of the Investec plc Executive Incentive Plan 2013 on pages 210 to 213.

(continued)

Directors' remuneration – alignment of interests with shareholders (unaudited)

Performance graph: total shareholder return

We recognise that remuneration is an area of particular interest to shareholders and that in setting and considering changes to remuneration it is important that we take their views into account. Accordingly, a series of meetings are held each year with our major shareholders and shareholder representative groups. The remuneration committee chairman attends these meetings, accompanied by senior Investec employees and the group chairman. This engagement is meaningful and helpful to the committee in its work and contributes directly to the decisions made by the committee.

We have implemented a DLC structure, in terms of which we have primary listings in London and Johannesburg. The listing on the London Stock Exchange (LSE) took place on 29 July 2002. We have been listed in South Africa since 1986.

Schedule 8 of the UK Large and Mediumsized Companies and Groups (Accounts and Report) Regulations 2008 (as amended) requires this report to include a performance graph of Investec plc's total shareholder return (TSR) performance against that of a broad market index. A number of companies within the FTSE 350 General Finance Index conduct similar activities to us, although they do not necessarily have the same geographical profile. Nevertheless, to date this has been the most appropriate index against which to measure our performance on the LSE. Although we are not currently included in the FTSE 100, we were part of that index between 2010 and 2011 and we have included the total shareholder return of that index for illustrative purposes.

The graph below shows the cumulative shareholder return for a holding of our shares (in purple) in Pounds Sterling on the LSE, compared with the average total shareholder return of other members of the FTSE 350 General Finance Index and the FTSE 100 Index. It shows that, at 31 March 2018, a hypothetical £100 invested in Investec plc at 31 March 2009 would have generated a total return of £168 compared with a return of £320 if invested in the FTSE 350 General Finance Index and a return of £151 if invested in the FTSE 100 Index.

During the period from 1 April 2017 to 31 March 2018, the return to shareholders of Investec plc (measured in Pounds Sterling) and Investec Limited (measured in Rands) was 5.4% and 4.7%, respectively.

This compares to a 10.6% return for the FTSE 350 General Finance Index, a return of 0.2% for the FTSE 100 Index and a return of 11.0% for the JSE Top 40 Index.

The market price of our shares on the LSE was £5.50 at 31 March 2018, ranging from a low of £4.61 to a high of £6.49 during the financial year. The market price of our shares on the JSE Limited was R92.28 at 31 March 2018, ranging from a low of R85.00 to a high of R105.62 during the financial year.

Performance graph

(continued)

Table of CEO remuneration

In addition, the table below provides an nine-year summary of the total remuneration of the CEO. For the purpose of calculating the value of the remuneration of the CEO, data has been collated on a basis consistent with the 'single remuneration figure' methodology as set out on page 204.

Year ended 31 March	2010	2011	2012	2013	2014	2015	2016	2017	2018
CEO single figure of total remuneration (£'000)	2 660	3 425	450	4 602	2 420	3 970	4 364	4 892	3 503
Salary, benefits, fixed allowance and bonus (£'000)*	2 660	3 425	450	1 950	2 420	3 970	2 884	3 412	3 503
Long-term incentives granted (value reflects share price multiplied by number of shares awarded at
date of award)** (£'000)	–	–	–	2 652	–	–	1 480	1 480	1 480
Long-term incentives forfeited**	–	–	–	–	–	–	–	–	(1 480)
% maximum of short-term incentive	n/a^	n/a^	n/a^	n/a^	50%	65%	95%	92%	95%

* The fixed allowance is granted in shares which are released over five years.

** On termination of employment outstanding long-term incentive awards will be pro-rated based on time served relative to the performance period of the award. In this regard two-thirds of the 2018 award will be forfeited and one-third of the 2017 award. Incentives awarded on 2 June 2016, 8 June 2017 and 31 May 2018 (as reflected in the March 2016, March 2017 and March 2018 information respectively) are still subject to performance conditions and have not yet vested.

^ Historically annual bonuses were not determined in terms of a formulaic approach where maximum and minimum awards could be derived.

Percentage change in the CEO's remuneration

The table below shows how the percentage change in the CEO's salary and annual bonus between 2017 and 2018 compares with the percentage change in each of those components of remuneration for Investec plc employees and Investec Limited employees.

	Salary and benefits	Annual bonus
CEO (in Pounds Sterling)	0.0%	4.7%
Increase in total costs for Investec plc employees (in Pounds Sterling)	9.0%	4.0%
Increase in total costs for Investec Limited employees (In Rands)	12.1%	8.2%

Ratio of CEO remuneration to average remuneration for all employees

	Ratio of CEO remuneration to average remuneration for all employees1
CEO versus employees	27.15 times

1. Calculated as the CEO single figure of remuneration divided by the total personnel costs divided by the average headcount for the year.

Relative importance of spend on remuneration

Our value-added statement is provided on page 14. In summary, the relative importance of remuneration and distributions to shareholders is shown below:

£'000	31 March 2018	31 March 2017	% change
Group compensation costs	1 191 691	1 079 701	10.4%
– Fixed	773 802	690 161	12.1%
– Variable	417 889	389 540	7.3%
Dividends to shareholders	261 435	242 440	7.8%
– Ordinary shares	227 908	216 602	5.2%
– Preference shares	33 527	25 838	29.8%

(continued)

Statement of voting at 2017 annual general meeting

The combined results on each of the two remuneration resolutions passed at the 2017 annual general meetings of Investec plc and Investec Limited were as follows:

	Number of votes cast 'for' resolution	% of votes 'for' resolution	Number of votes cast 'against' resolution	% of votes 'against' resolution	Number of abstentions
To approve the directors' remuneration report	558 785 555	78%	158 582 833	22%	8 324 931
To approve the non-executive directors' remuneration	710 110 316	98%	11 956 517	2%	3 626 365

Statement of voting at 2015 annual general meeting

The results of the resolution approving the current remuneration policy at the 2015 annual general meetings of Investec plc and Investec Limited were as follows:

	Number of votes cast 'for' resolution	% of votes 'for' resolution	Number of votes cast 'against' resolution	% of votes 'against' resolution	Number of abstentions
To approve the directors' remuneration policy	505 159 546	75%	167 830 111	25%	2 303 178

Additional remuneration disclosures (unaudited)

South African Companies Act, 2008 disclosures

In compliance with regulatory developments in South Africa, Investec Limited is required to disclose the remuneration of those individuals that are defined by the South African Companies Act, No 71 of 2008 (as amended), read together with the Companies Regulations 2011 (together the Act), as prescribed officers.

In keeping with the group's integrated global management structure as well as the three distinct business activities of the group, i.e. Asset Management, Wealth & Investment and Specialist Banking, the prescribed officers for Investec Limited for the year ended 31 March 2018, as per the Act, are the following heads of the group's three distinct business activities:

• Asset Management – Hendrik du Toit
• Wealth & Investment – Steve Elliott
• Specialist Banking – David van der Walt
  • Ciaran Whelan

Hendrik du Toit is one of the executive directors of Investec Limited and his remuneration is disclosed on page 204.

Steve Elliott is remunerated by Investec Wealth & Investment Limited (a UK domiciled company and subsidiary of Investec plc), and David van der Walt and Ciaran Whelan are employed by Investec Bank plc (a UK domiciled company and a subsidiary of Investec plc). As a result, they are not required to disclose their remuneration under the South African Companies Act.

Remuneration report

Directors' remuneration policy for the year ending 31 March 2019 and subsequent years

The directors' remuneration policy was last approved by shareholders three years ago at the AGM in August 2015, and as such we are required to get approval from shareholders for our proposed policy at the AGM on 8 August 2018, as required by regulations.

In summary our proposed remuneration policy:

• Incorporates certain amendments which are intended to address the feedback previously received from shareholders; and
• Given the management succession it focuses on our remuneration arrangements within the year of transition.

We have consulted extensively with our key shareholders in drafting the proposed policy, and the committee believes that the proposals it has included in its proposed remuneration policy address a number of matters previously raised by shareholders, as outlined in the Statement by the remuneration committee chair on pages 185 to 187.

The committee believes that the proposed remuneration policy:

• Reduces the total remuneration paid to the new executive directors
• Introduces tougher performance targets that are weighted more towards financial measures
• Achieves a better and simpler alignment between executive remuneration and the performance of Investec
• Appropriately addresses the total level of remuneration paid in the succession transition period.

Whilst we are proposing a three year policy, the committee will keep the policy under review and assess its appropriateness, particularly in light of the executive management transition process.

Scope of our remuneration policy

The Investec group aims to apply remuneration policies to executive directors and employees that are largely consistent across the group, but recognises that certain parts of the group are governed by local regulations that may contain more onerous requirements in certain respects.

In those cases, the higher requirements are applied to that part of the group. This is relevant to Investec plc and its subsidiary companies that are subject to the PRA and FCA Remuneration Code (as a level 2 organisation as defined therein), and in particular in relation to Material Risk Takers. Additionally, where any aspect of our remuneration policy contravenes local laws or regulations, the local laws or regulations shall prevail.

The following Investec plc group entities are separately regulated by the PRA and/or FCA and as such maintain their own remuneration policies separate from the Investec group policy and in line with such entity's own risk profile and business activities:

• Investec Asset Management Limited
• Investec Wealth & Investment Limited
• Investec Bank plc

Under the PRA and FCA Remuneration Code, Investec Bank plc is the only group entity which is classified as being level 2. It should be noted that our Asset Management and Wealth Management businesses have been classified as level 3 entities under the proportionality rules of the PRA and FCA Remuneration Code.

More details of the remuneration policies applied in each of our subsidiary companies can be found on pages 231 to 237.

Remuneration philosophy

Our philosophy, which remains unchanged from prior years, is to employ the highest calibre individuals who are characterised by integrity, intellect and innovation and who adhere and subscribe to our culture, values and philosophies. We strive to inspire entrepreneurship by providing a working environment that stimulates extraordinary performance so that executive directors and employees may be positive contributors to our clients, their communities and the group.

Remuneration principles

Remuneration policies, procedures and practices, collectively referred to as the 'remuneration policy', are designed, in normal market conditions, to:

• Be in line with the business strategy, objectives, values and long-term interests of the Investec group
• Be consistent with and promote sound and effective risk management, and not encourage risk taking that exceeds the level of tolerated risk of the Investec group
• Ensure that payment of variable remuneration does not limit the Investec group's ability to maintain or strengthen its capital base
• Target gross fixed remuneration (base salary and benefits including pension) at median market levels to contain fixed costs
• Ensure that variable remuneration is largely economic value added (EVA) – based and underpinned by our predetermined risk appetite and capital allocation
• Facilitate alignment with shareholders through deferral of a portion of shortterm incentives into shares and longterm incentive share awards
• Target total compensation (base salary, benefits and incentives) to the relevant competitive market at upper quartile levels for superior performance.

Given our stance on maintaining a low fixed cost component of remuneration, our commitment to inspiring an entrepreneurial culture, and our risk-adjusted return on capital approach to EVA, we do not apply an upper limit on variable rewards other than in respect of Material Risk Takers (as discussed hereunder).

We reward employees generally for their contribution through:

• An annual gross remuneration package (base salary and benefits) providing an industry competitive package
• A variable short-term incentive related to performance (annual bonus)
• A long-term incentive (share awards) providing long-term equity participation
• Certain of our Material Risk Takers receive fixed monthly cash allowances (where appropriate for the role) and a commensurate reduction of variable short-term incentive.

The existing CEO, MD and GRFD receive a fixed allowance in shares, as outlined in the table on page 204. The incoming executive directors will receive fixed pay, half of which will be delivered in shares, as outlined on page 223.

Benchmarks

The short-term incentive initially allocated to the CEO and pool (as reflected in our policy) was arrived at after benchmarking against the remuneration of: (i) chief executive officers, and (ii) groups of executive directors for a bespoke peer group (and sub-groups of South African and non-South African peers) comprising: Barclays Africa Group, Alliance Bernstein, Close Brothers Group, FirstRand, Julius Baer, Macquarie Group, Nedbank Group, Schroders, Standard Bank Group and Standard Life Aberdeen plc.

The levels of CEO profit share, the pool and total remuneration are more compatible with international reward levels than South African reward levels. The committee believes this is appropriate, given the complexity of Investec and the challenges involved in managing a group operating across three businesses in two core geographies.

The pool is decreased or increased by a performance multiplier comprising weightings and achievement scores within score ranges for the financial and non-financial performance measures (as discussed on pages 196 to 198).

Impact of CRD IV on executive directors' remuneration arrangements

CRD IV is EU regulation that has been effective from 1 January 2014. The main feature of CRD IV that impacts directors' remuneration at Investec is the application of a cap on variable remuneration that can be awarded to Material Risk Takers (including executive directors). At the 2014 annual general meeting, shareholders approved a maximum variable remuneration: fixed remuneration ratio of 2:1, which applied to variable remuneration awarded in respect of the 2015 performance year and thereafter.

This cap is defined in line with European Banking Authority (EBA) discounting rules which allow, when 25% of variable remuneration is deferred over at least five years, a slightly higher cap than 2:1, depending on the length of deferral, inflation and interest rates. This is currently 244.2% of fixed remuneration.

(continued)

Executive directors' remuneration policy table

The table below sets out the proposed remuneration policy for directors and explains each element and how it operates. This section of the report will be subject to a binding shareholder vote at our AGM on 8 August 2018.

Remuneration policy table for existing executive directors (current CEO, MD and GRFD) for the period to 31 March 2019

In terms of the group's succession announcement made on 6 February 2018, Stephen Koseff (current CEO) and Bernard Kantor (current MD) will step down from these roles on 1 October 2018. They will remain executive directors until 31 March 2019. Glynn Burger will remain as the group's GRFD until 31 March 2019.

Purpose and link to strategy	Operation	Maximum value and performance targets	Changes from prior year
Fixed remuneration
Salary
• To provide an industry competitive package so that we are able to recruit and retain the people that we need to develop our business • Salaries reflect the relative skills and experience of, and contribution made by, the individual	• Salaries of executive directors are reviewed and set annually by the remuneration committee • Salaries are benchmarked against relevant comparator groups.1	• Targeted at median market levels when compared with relevant comparator groups1 • Annual increases in salaries are referenced to the average increase awarded to other employees, unless the remuneration committee deems adjustments to be made relating to market factors	• None
Fixed allowances
• To provide competitive remuneration recognising the breadth and depth of the role	• Fixed allowance reviewed by the remuneration committee every three years or on a change of role • Paid in shares • Deferred over a five-year period with 20% being released each year	• £1 million per annum paid in shares	• None
Benefits
• To provide a market competitive package	• Benefits are benchmarked against relevant comparator groups1 • Executive directors may elect to sacrifice a portion of their annual gross remuneration in exchange for benefits such as travel allowances and medical aid	• Benefits include: life, disability and personal accident insurance; medical cover; and other benefits, as dictated by competitive local market practices • There is no maximum value but the value of benefits provided will generally be in line with market comparators	• None
Pension/provident
• To enable executive directors to provide for their retirement	• Executive directors participate in defined contribution pension/ provident schemes • Only salaries, not fixed allowances or annual bonuses, are pensionable	• The individual can elect what proportion of fixed remuneration is allocated as their pension/provident contribution	• None

1. Refer to page 222.

Executive directors' remuneration policy table (continued)

Remuneration policy table for existing executive directors (current CEO, MD and GRFD) for the period to 31 March 2019 (continued)

Purpose and link to strategy	Operation	Maximum value and performance targets	Changes from prior year
Variable remuneration
Short-term incentive
• Alignment with key business objectives • Deferral structure provides alignment with shareholders	• Establishment of a short-term incentive pool-based on the group's adjusted operating profit (AOP)2 • Receive 30% in cash immediately; 30% in upfront shares; • The remaining 40% is deferred; of this portion, an amount that ensures 60% of total variable remuneration (short term incentive plus long-term incentive) is deferred over three to seven years, vests 20% per annum commencing on the third anniversary • The remaining portion vests equally after one and two years • Shares must be retained for a period of 12 months after vesting • Dividends and dividend equivalents are not earned on the deferred share portion • The remuneration committee retains discretion to reduce the amount payable to ensure that incentives truly reflect performance and are not distorted by an unintended formulaic outcome • Awards are subject to malus of unvested shares and clawback on the entire award • Malus can be applied for up to seven years and clawback for up to 10 years after grant	• Based on a balanced scorecard of financial and non-financial performance measures with achievement levels that correspond with our short-term objectives3 • 80% based on financial measures comprising: – Return on risk-weighted assets (30%); – Return on equity (30%); and – Operating margin of the combined asset management and wealth and investment businesses (20%) • 20% based on non-financial measures comprising: – Culture and values and cooperation related measures (7%); – "ESG" related measures (5%); and – Prudential and risk management related measures (8%) • If target performance conditions are achieved, distribution will be as follows: 0.23% of AOP to CEO; 0.23% of AOP to MD; and 0.2% of AOP to GRFD2 • The performance achievement level is 0% for threshold performance, 100% for target performance and 150% for stretch performance • If all financial and non-financial stretch levels are met, up to 150% of the target may be awarded, subject to an overall maximum of variable remuneration (including LTIPs) being within the remuneration cap4 • The remuneration committee will review the achievement levels for the short-term incentive on an annual basis	• Performance measures reduced from nine to six; financial from five to three and non financial from four to three • A new financial measure that reflects the operating margin of the combined asset management and wealth and investment businesses has been introduced • The weighting of the financial measures has been increased from 60% to 80% • The non-financial and prudential measures have been reduced from 40% to 20% • New non-financial measures have been included, comprising culture, values and cooperation related measures; "ESG" related measures; and prudential and risk management related measures • The short-term incentive measures are now largely different to those used under the long-term incentive

2, 3, 4 Refer to page 222.

(continued)

Executive directors' remuneration policy table (continued)

Remuneration policy table for existing executive directors (current CEO, MD and GRFD) for the period to 31 March 2019 (continued)

Purpose and link to strategy	Operation	Maximum value and performance targets	Changes from prior year
Long-term incentive
• Clear link between performance and remuneration • Embeds alignment with shareholder returns • Performance targets aligned with business objectives • Non-financial measures take into account the group's strategic and operational objectives	• Conditional awards of shares subject to performance conditions measured over three financial years • Awards vest 20% per annum commencing on the third anniversary and ending on the seventh anniversary of grant • Vested shares are subject to a further 12 month retention period • Dividends and dividend equivalents are not earned on unvested shares • Awards are subject to malus of unvested shares and clawback of vested shares • Malus can be applied for up to seven years, and clawback for up to 10 years after grant • The remuneration committee retains discretion to adjust the level of awards vesting to ensure that incentives truly reflect performance and are not distorted by an unintended formulaic outcome • The existing executive directors have waived their rights to a long-term incentive award for the 2019 financial year given the succession transition	• Annual award of 100% of aggregate fixed remuneration • Awards are subject to the following performance measures and weightings3 : – Growth in tangible net asset value per share (40%); – Return on risk-weighted assets (35%); – Non-financial measures (25%) • Targets for financial performance measures and non-financial measures will be set annually by the remuneration committee in advance of the award being made • The performance achievement level is 0% for threshold performance, 100% for target performance and 150% for stretch performance • If the stretch achievement levels for both the financial and non-financial measures are satisfied, the number of shares vesting will be increased and capped at a maximum of 135% of the number of shares awarded at the time of grant	• The non-financial measures assessment scale changes from a four point scale to a six point scale, and the maximum potential score reduces from 200% to 150% for both the financial and non-financial measures • Clarification that all awards will be pro rated based on time served relative to the performance period on termination of employment

Notes to the preceding table:

• 1. Peer group companies include Barclays Africa Group, Alliance Bernstein, Close Brothers Group, FirstRand, Julius Baer, Macquarie Group, Nedbank Group, Schroders, Standard Bank Group and Standard Life Aberdeen plc.
• 2. AOP defined as operating profit before taxation, goodwill, acquired intangibles and non-operating items and after non-controlling interests.
• 3. The performance measures have been selected based on our business strategy and goals, taking into account regulations and our risk appetite framework. Targets will be set by the committee based on a range of internal and external factors including public financial and non-financial targets, internal benchmarks and hurdles, and economic and market conditions.
• 4. Cap defined in line with EBA discounting rules which allow, when 25% of variable remuneration is deferred over at least five years, a slightly higher cap than 2x fixed remuneration (currently 244.2% of fixed remuneration dependent on interest rates and inflation). These limits will be in line with this EBA cap.

(continued)

Remuneration policy table for the incoming executive directors

In terms of the group's succession announcement made on 6 February 2018, Hendrik du Toit and Fani Titi have been appointed as Joint CEO designates with effect from 1 April 2018. Ciaran Whelan will assume the risk director role and Kim McFarland the group finance and operations director role with effect from 1 April 2019; these executive director roles will be remunerated at the same level as set out below. Further information on our succession plan is provided on page 121.

Purpose and link to strategy	Operation	Maximum value and performance targets	Changes from prior year
Fixed remuneration
• To provide an industry competitive package so that we are able to recruit and retain the people that we need to develop our business • The fixed remuneration reflects the relative skills and experience of, and contribution made by, the individual • Delivery of half in shares to ensure alignment with shareholders	• Fixed pay award • 50% delivered in cash, paid monthly • 50% delivered in shares, which vest immediately but only released equally after one year and two years • These share awards are made annually in early June each year • The first awards for incoming executive directors will be made in August 2018 following shareholder approval of the remuneration policy • Fixed remuneration is benchmarked against relevant comparator groups1	• Targeted at median market levels when compared with relevant comparator groups1 • Annual increases in salaries are referenced to the average increase awarded to other employees, unless the remuneration committee deems adjustments to be made relating to market factors	• Replacement of separate cash base salary and fixed allowance with single fixed pay • Delivered half in cash and half in shares • The total quantum for the Joint CEO designates is 90% of the salary and fixed allowance of the existing CEO and MD • The total quantum for the other executive directors is 80% of fixed pay of the Joint CEO designates
Benefits
• To provide a market competitive package	• Benefits are benchmarked against relevant comparator groups1 • Executive directors may elect to sacrifice a portion of their annual gross remuneration in exchange for benefits such as travel allowances and medical aid	• Benefits include: life, disability and personal accident insurance; medical cover; and other benefits, as dictated by competitive local market practices • There is no maximum value but the value of benefits provided will generally be in line with market comparators	• None
Pension/provident
• To enable executive directors to provide for their retirement	• Executive directors participate in defined contribution pension/ provident schemes • Only the cash element of fixed remuneration, not annual bonuses, is pensionable	• The individual can elect what proportion of fixed remuneration is allocated as their pension/provident contribution	• None

1. Refer to page 225.

(continued)

Executive directors' remuneration policy table (continued)

Remuneration policy table for the incoming executive directors for the period to 31 March 2019 (continued)

Purpose and link to strategy	Operation	Maximum value and performance targets	Changes from prior year
Variable remuneration
Short-term incentive
• Alignment with key business objectives • Deferral structure provides alignment with shareholders	• Establishment of a short-term incentive pool-based on the group's adjusted operating profit (AOP)2 • Receive 30% in cash immediately; 30% in upfront shares; • The remaining 40% is deferred; of this portion, an amount that ensures 60% of total variable remuneration (short-term incentive plus long-term incentive) is deferred over three to seven years, vests 20% per annum commencing on the third anniversary • The remaining portion vests equally after one and two years • Shares must be retained for a period of 12 months after vesting • Dividends and dividend equivalents are not earned on the deferred share portion • The remuneration committee retains discretion to reduce the amount payable to ensure that incentives truly reflect performance and are not distorted by an unintended formulaic outcome • Awards are subject to malus of unvested shares and clawback on the entire award • Malus can applied for up to seven years and clawback for up to 10 years after grant	• Based on a balanced scorecard of financial and non-financial performance measures with achievement levels that correspond with our short-term objectives3 • 80% based on financial measures comprising: – Return on risk-weighted assets (30%); – Return on equity (30%); and – Operating margin of the combined asset management and wealth and investment businesses (20%) • 20% based on non-financial measures comprising: – Culture and values and cooperation related measures (7%); – ESG related measures 5%; and – Prudential and risk management related measures (8%) • If target performance conditions achieved, distribution will be as follows: 0.23% of AOP to each of the Joint CEO designates; 0.18% to each of the other executive directors2 • The performance achievement level is 0% for threshold performance, 100% for target performance and 150% for stretch performance • If all financial and non-financial stretch levels are met, up to 150% of the target may be awarded, subject to an overall maximum of variable remuneration (including LTIPs) being within the remuneration cap4 • The remuneration committee will review the achievement levels for the short-term incentive on an annual basis	• Performance measures reduced from nine to six; financial from five to three and non financial from four to three • A new financial measure that reflects the operating margin of the combined asset management and wealth and investment businesses has been introduced • The weighting of the financial measures has been increased from 60% to 80% • The non-financial and prudential measures have been reduced from 40% to 20% • New non-financial measures have been included, comprising culture, values and cooperation related measures, "ESG" related measures and prudential and risk management related measures • The short-term incentive measures are now largely different to those used under the long term incentive

Remuneration report

2, 3, 4 Refer to page 225.

Executive directors' remuneration policy table (continued)

Remuneration policy table for the incoming executive directors for the period to 31 March 2019 (continued)

Purpose and link to		Maximum value and performance	Changes from prior
strategy	Operation	targets	year
Variable remuneration
Long-term incentive
• Clear link between performance and remuneration • Embeds alignment with shareholder returns • Performance targets aligned with business objectives • Non-financial measures take into account the group's strategic and operational objectives	• Conditional awards of shares subject to performance conditions measured over three financial years • Awards vest 20% per annum commencing on the third anniversary and ending on the seventh anniversary of grant • Vested shares are subject to a further 12 month retention period • Dividends and dividend equivalents are not earned on unvested shares • Awards are subject to malus of unvested shares and clawback of vested shares • Malus can be applied for up to seven years, and clawback for up to 10 years after grant • The remuneration committee retains discretion to adjust the level of awards vesting to ensure that incentives truly reflect performance and are not distorted by an unintended formulaic outcome • These long-term incentive awards are made annually following the completion of the financial year	• Annual award of 100% of aggregate fixed remuneration • Awards are subject to the following performance measures and weightings3 : – Growth in tangible net asset value per share (40%); – Return on risk-weighted assets (35%); – Non-financial measures (25%) • Targets for financial performance measures and non-financial measures will be set annually by the remuneration committee in advance of the award being made • The performance achievement level is 0% for threshold performance, 100% for target performance and 150% for stretch performance • If the stretch achievement levels for both the financial and non-financial measures are satisfied, the number of shares vesting will be increased and capped at a maximum of 135% of the number of shares awarded at the time of grant	• The non-financial measures assessment scale changes from a four point scale to a six point scale, and the maximum potential score reduces from 200% to 150% for both the financial and non-financial measures • Clarification that all awards will be pro-rated based on time served over the measurement period

Notes to the preceding table:

• 1. Peer group companies include Barclays Africa Group, Alliance Bernstein, Close Brothers Group, FirstRand, Julius Baer, Macquarie Group, Nedbank Group, Schroders, Standard Bank Group and Standard Life Aberdeen plc.
• 2. AOP defined as operating profit before taxation, goodwill, acquired intangibles and non-operating items and after non-controlling interests.
• 3. The performance measures have been selected based on our business strategy and goals, taking into account regulations and our risk appetite framework. Targets will be set by the committee based on a range of internal and external factors including public financial and non-financial targets, internal benchmarks and hurdles, and economic and market conditions.
• 4. Cap defined in line with EBA discounting rules which allow, when 25% of variable remuneration is deferred over at least five years, a slightly higher cap than 2x fixed remuneration (currently 244.2% fixed remuneration dependent on interest rates and inflation). These limits will be in line with this EBA cap.

(continued)

How will executive directors' performances be assessed?

The short-term and long-term incentives are subject to performance conditions.

A detailed explanation of these performance measures is provided on pages 220 to 225.

The performance measures have been selected taking into account:

• Key stakeholders' requirements (including shareholders and regulators) which were assessed through extensive consultations on the matter
• The preference of the committee and the board is for a range of financial and non-financial measures that ensure an appropriate balance between measures which drive profitability and prudential measures. In addition, the remuneration committee believes that it is right to include non-financial measures in determining levels of awards as directors should be incentivised to attend to important matters on which the longterm performance of the company depends, but which cannot in any one performance period be directly linked to financial returns.

Differences between the remuneration policy of the executive directors and the policy for all employees

We apply consistent remuneration principles and philosophies across the whole employee population and are cognisant of these when considering executive directors' remuneration. The quantum of salary and benefits paid to executive directors is benchmarked against appropriate comparator groups (as discussed on page 219), however, the annual increase in such remuneration is referenced to the average increase awarded to employees in South Africa and the UK, respectively. Although this has not been the case of late, the remuneration committee may, under certain circumstances, make adjustments outside these parameters, particularly in cases when there have been large adjustments in the comparator group referenced.

As is the case with other employees, the short-term incentive is performance-based, however, there are a number of specific performance criteria that apply in the case

of determining the annual bonus for the executive directors. Short-term incentives for executive directors and employees defined as Material Risk Takers are subject to deferral, malus and clawback requirements. The specific remuneration structural requirements of CRD IV are only applicable to the executive directors and to some employees in the UK Specialist Bank who are classified as Material Risk Takers.

More details of the approach to employee remuneration can be found on pages 231 to 237.

Policy for the recruitment of new executive directors

It is intended that the approach to the recruitment of new executive directors will be in line with the current remuneration policy for executive directors as outlined above and below. However, the remuneration committee will consider levels of remuneration for new recruits that are competitive for the skills and experience of the individual being recruited. The treatment of each element of remuneration on recruitment will be as set out below.

Element	Commentary	Maximum value
Fixed pay	Determined by market conditions, market practice and ability to recruit If fixed pay below market level on recruitment or promotion, remuneration committee may realign fixed pay over transitional period with higher than normal increases	In line with policy
Pension	In line with normal policy: these are agreed deductions from fixed pay	15% of salary
Other benefits	Offered in line with normal policy: these are agreed deductions from fixed pay	In line with policy
STI	In line with normal policy	150% of fixed remuneration subject to remuneration cap*
LTIP	In line with normal policy	135% of fixed remuneration subject to remuneration cap*
Buy-outs	The remuneration committee can buy out a bonus or incentive awards that the new executive director has forfeited as a result of accepting the appointment, subject to proof of forfeiture where applicable As required by the PRA and FCA Remuneration Code, any award made to compensate for forfeited remuneration should be broadly no more generous than, and should aim to mirror the value, timing, form of delivery and performance adjustment (malus and clawback) conditions of the forfeited remuneration

* Cap defined in line with EBA discounting rules which allow, when 25% of variable remuneration is deferred over at least five years, a slightly higher cap than 2x fixed remuneration (currently 244.2% of fixed remuneration dependent on interest rates and inflation). These limits will be in line with this EBA cap.

Service contracts and terms of employment

The terms of service contracts and provision for compensation for loss of office for executive directors is set out below.

Executive directors

Indefinite service contracts of employment, terminable by either party with six months' written notice

Fixed pay, benefits and pension payable for period of notice

No provision for compensation payable on early termination

Outstanding deferred short-term incentive shares or long-term incentive awards lapse on resignation or termination for gross misconduct

Deferred share awards may be retained if the director is considered a 'good leaver' (e.g. retirement with a minimum of 10 years' service, disability or ill health)

On termination of employment outstanding long-term incentive awards may be retained if the director is considered a 'good leaver' and will be pro-rated based on time served relative to the performance period of the award

In the event of a takeover or major corporate event, the remuneration committee has the discretion to determine whether all outstanding awards vest at the time of the event or whether they continue in the same or revised form

Executive directors are required to build and maintain a shareholding of 200% of the cash element of fixed remuneration over a reasonable timeframe.

Executive directors are permitted to accept outside appointments on external boards or committees provided these are not deemed to interfere with the business of the company. Any fees earned by executives in this regard are forfeited to Investec.

Copies of the service contracts are available for inspection at the company's registered office.

The terms of appointment for non-executive directors are set out below.

On appointment non-executive directors are provided with a letter of appointment. On the recommendation of the nominations and directors affairs' committee (nomdac), non-executive directors will be appointed for an expected term of nine years (three times three-year terms) from the date of their first appointment to the board. No compensation is payable on termination of directorship. Copies of their letters of appointment are available for inspection at the company's registered office.

How does executive directors' remuneration change based on performance?

Illustrative scenarios for the incoming executive directors' remuneration

The charts on page 228 show the potential value of the remuneration arrangements under this policy in three performance scenarios:

• 'Minimum' fixed remuneration only
• 'At target' fixed remuneration and the 'at target' variable short-term annual incentive and 'at target' value of any long-term incentives that may be awarded
• 'At stretch' fixed remuneration and the 'stretch' achievement levels that may be awarded for variable short-term annual incentive and 'stretch' value of any longterm incentives that may be awarded.

The scenarios do not reflect share price movement between award and potential vesting, nor are any dividends or dividend equivalents taken into account.

For the incoming executive directors based on the remuneration policy proposed for the year ending 31 March 2019:

• Fixed remuneration includes fixed pay, company pension contributions and benefits receivable (i.e. as proposed for the year ending 31 March 2019). Fixed remuneration is paid partly in cash and partly in shares
• Target variable short-term incentive is 0.23% each for the Joint CEO designates and 0.18% each for the other executive directors of adjusted operating profit (after total non-controlling interests) based on £583.7 million as reported for the financial year ended 31 March 2018 and maximum variable short-term incentive is 150% of target (subject to an overriding maximum in terms of

the remuneration cap as approved by shareholders and depending on the length of deferral, inflation and interest rates; the current maximum is variable remuneration of 244.2% of fixed remuneration)

• Target long-term incentive is equal to one times fixed remuneration. Maximum long-term incentive is 135% of target (subject to an overriding maximum in terms of the remuneration cap as approved by shareholders and depending on the length of deferral, inflation and interest rates; the current maximum is variable remuneration of 244.2% of fixed remuneration)

(continued)

Illustrative payouts for the Joint CEOs

Illustrative payouts for the new Joint CEOs The graph below illustrates the total remuneration at the target and stretch achievement levels for the Joint CEOs.

Total compensation costs for New Executive Director (Risk Direcor Illustrative payouts for the other incoming executive directors

Desigante) and Group Financial Director designate The graph below illustrates the total remuneration at the target and stretch achievement levels for the other incoming executive directors.

• * Cap defined in line with EBA discounting rules which allow, when 25% of variable remuneration is deferred over at least five years, a slightly higher cap than 2x fixed remuneration, depending on the length of deferral, inflation and interest rates. This is currently 244.2% of fixed remuneration. These limits will be in line with this cap.
• ^ Based on operating profit earned at 31 March 2018 and assuming that the "at target" achievement level is achieved for each financial and non-financial measure in the proposed short-term and long-term schemes.
• ^^ Based on operating profit earned at 31 March 2018 and assuming that the "at stretch" achievement level is achieved for each financial and non-financial measure in the proposed short-term and long-term schemes.

(continued)

Proposed remuneration payout prole for Joint CEOs

The graph below illustrates the timing of payments for each component of total reward.

ˆ Based on operating prot earned at 31 March 2018 and assuming that the "at target" achievement level is achieved for each nancial and non-nancial measure in the proposed short-term and long-term schemes.

Comparison of overall executive directors' compensation costs

The tables below summarise the total spend for members of the executive board before, during and after the management succession transition period.

IAM CEO Total	6 088 20 485	Outgoing MD GRFD New executive director	2 151 2 503 3 182	Director of finance, operations and IT Total	3 182 14 376
CEO^ MD^ GRFD^	4 983 4 983 4 431	Joint CEO Joint CEO Outgoing CEO	4 006 4 006 2 151	Joint CEO Joint CEO Director of risk	4 006 4 006 3 182
	Year ended 31 March 2018 Total compensation USING CURRENT SCHEME £'000		Year ending 31 March 2019 Total compensation ESTIMATE^^ "AT TARGET ACHIEVEMENT LEVELS" USING PROPOSED SCHEME £'000		Year ending 31 March 2020 Total compensation ESTIMATE^^ "AT TARGET ACHIEVEMENT LEVELS" USING PROPOSED SCHEME £'000

^ These amounts reflect remuneration prior to deducting the value of long-term incentives that will be forfeited, as explained on page 204. This is to ensure a like-for-like comparison.

^^ Based on operating profit earned for the year ended 31 March 2018 and assuming that the "at target" achievement level is achieved for each financial and non-financial measure in the proposed short-term incentive scheme.

Remuneration policy for non-executive directors

The board's policy is that fees should reflect individual responsibilities and membership of board committees. The increase in non-executive directors' fees for the forthcoming year reflects current market conditions and additional time commitment required. Their fee structure covers the dual roles that the directors perform for the UK-listed Investec plc and the South African-listed Investec Limited boards and are awarded equally between the two companies. There are no proposed changes to the overall policy.

Purpose and link to strategy	Operation	Maximum value and performance targets
Non-executive directors' remuneration
Fees
To provide industry competitive fees to attract non-executive directors with appropriate skills and experience	• Fees of non-executive directors are reviewed annually by the board taking into account market data and time commitment • The fee structure covers the dual roles that the directors perform for the UK-listed Investec plc and the South African-listed Investec Limited boards • In addition to fees for board membership, fees are payable to the senior independent director, and for chairmanship and membership of major DLC board committees, membership of the Investec Bank Limited and Investec Bank plc and other subsidiary company boards and for attendance at certain committee meetings	• Fee increases will generally be in line with inflation and market rates • Aggregate fees payable by Investec plc are subject to an overall maximum of £1 million under the Investec plc articles unless specifically approved by shareholders • Refer to page 203 for further information

Note: South Africa Value-Added Tax (VAT), at the prevailing rate, where applicable, will be added to the fees payable by Investec Limited. Two binding general rulings were issued by the South African Revenue Service (SARS) confirming the South African Value-Added Tax (VAT) law requires non-executive directors of companies to register for and charge VAT in respect of any directors' fees earned for services rendered as a non-executive director that exceed the prescribed threshold with effect from 1 June 2017.

Fees are also payable for any additional time committed to the group, including attendance at certain other meetings.

There is no requirement for non-executive directors to hold shares in a group company. The group has left this choice to the discretion of each non-executive director.

The policy as described above will be taken into account in the recruitment of new non-executive directors.

Copies of the letters of appointment are available for inspection at the company's registered office.

(continued)

Shareholder and employee views

Shareholder views in the consideration of executive directors' remuneration arrangements

We recognise that remuneration is an area of particular interest to shareholders and shareholder representative bodies, and that in setting and considering changes to remuneration, it is important that we take their views into account. Accordingly, we meet regularly with our major shareholders and shareholder representative groups. The remuneration committee chairman attends these meetings, accompanied by senior Investec employees and the group chairman. This engagement is meaningful and helpful to the committee in its work and contributes directly to the decisions made by the committee.

The remuneration committee and the board believe in effective and transparent communication with key stakeholders, and will continue to engage on matters that may arise and are of importance and/or concern to stakeholders.

Statement of consideration of employment conditions elsewhere in the group

The remuneration policy of executive directors has been drawn up in line with our group wide remuneration philosophy and principles (refer below), subject to the requirements of CRD IV. The committee is mindful of the remuneration arrangements across the group.

Additional remuneration disclosures (unaudited)

Remuneration policy and principles for employees

Our policy with respect to the remuneration of employees has remained unchanged during the year ending 31 March 2018. Investec Bank plc currently has 56 Material Risk Takers, of which a number receive a fixed monthly cash allowance where appropriate for the role.

All remuneration payable (salary, benefits and incentives) is assessed at a group, business unit and individual level. This framework seeks to balance both financial and non-financial measures of performance to ensure that the appropriate factors are considered prior to making awards, and

that the appropriate mix of cash and share-based awards are made.

We reward employees generally for their contribution through:

• An annual gross remuneration package (base salary and benefits) providing an industry competitive package
• A variable short-term incentive related to performance (annual bonus)
• A long-term incentive (share awards) providing long-term equity participation
• Certain of our Material Risk Takers receive fixed monthly cash allowances (where appropriate for the role) and a commensurate reduction of variable short-term incentive
• The CEO, MD and GRFD received a fixed allowance in shares, as outlined in the table on page 204.
• The incoming executive directors will receive a fixed pay award of cash and shares.

We consider the aggregate of the above as the overall remuneration package designed to attract, retain, incentivise and drive the behaviour of our employees over the short, medium and longer term in a risk-conscious manner. Overall, rewards are considered as important as our core values of work content (greater responsibility, variety of work and high level of challenge) and work affiliation (entrepreneurial feel to the company and unique culture) in the attraction, retention and motivation of employees.

We have a strong entrepreneurial, merit and values-based culture, characterised by passion, energy and stamina. The ability to live and perpetuate our culture and values in the pursuit of excellence in a regulated industry and within an effective risk management environment is considered paramount in determining overall reward levels.

The type of people the organisation attracts, and the culture and environment within which they work, remain crucial in determining our success and longterm progress. Our reward programmes are clear and transparent, designed and administered to align directors' and employees' interests with those of all stakeholders and ensure the group's short-, medium- and long-term success. Our reward programmes also recognise potential in our people.

We target total compensation (base salary, benefits and incentives) to the relevant competitive market at upper quartile levels for superior performance.

Given our stance on maintaining a low fixed cost component of remuneration, our commitment to inspiring an entrepreneurial culture, and our risk-adjusted return on capital approach to EVA, we do not apply an upper limit on variable rewards other than in respect of executive directors and other Material Risk Takers (as discussed on page 219).

The fixed cost component of remuneration is, however, designed to be sufficient so that employees do not become dependent on their variable compensation as we are not contractually (and do not consider ourselves morally) bound to make variable remuneration awards. Investec has the ability to pay no annual bonuses and make no long-term incentive awards should the performance of the group or individual employees require this.

We do not pay remuneration through vehicles that facilitate avoidance of applicable laws and regulations.

Furthermore, employees must undertake not to use any personal hedging strategies or remuneration or liability-related contracts of insurance to undermine the risk alignment effects embedded in their remuneration arrangements. Group Compliance maintains arrangements designed to ensure that employees comply with this policy.

No individual is involved in the determination of his/her own remuneration rewards and specific internal controls and processes are in place to prevent conflicts of interest between Investec and its clients from occurring and posing a risk to the group on prudential grounds.

In summary, we recognise that financial institutions have to distribute the return from their enterprises between the suppliers of capital and labour and the societies in which they do business, the latter through taxation and corporate social responsibility activities. Our group wide remuneration philosophy seeks to maintain an appropriate balance between the interests of these stakeholders, and is closely aligned to our culture and values which include risk consciousness, meritocracy, material employee ownership and an unselfish contribution to colleagues, clients and society.

Determination of remuneration levels

Qualitative and quantitative considerations form an integral part of the determination of overall levels of remuneration and total compensation for each individual.

Factors considered for overall levels of remuneration at the level of the group include:

• Financial measures of performance:
  • Risk-adjusted EVA model
  • Affordability.
• Non-financial measures of performance:
  • Market context
  • Specific input from the group risk and compliance functions.

Factors considered to determine total compensation for each individual include:

• Financial measures of performance
  • Achievement of individual targets and objectives
  • Scope of responsibility and individual contributions.
• Non-financial measures of performance
  • Alignment and adherence to our culture and values
  • The level of cooperation and collaboration fostered
  • Development of self and others
  • Attitude displayed towards risk consciousness and effective risk management
  • Adherence to internal controls procedures
  • Compliance with the group's regulatory requirements and relevant policies and procedures, including treating customers fairly
  • The ability to grow and develop markets and client relationships
  • Multi-year contribution to performance and brand building
  • Long-term sustained performance
  • Specific input from the group risk and compliance functions
  • Attitude and contribution to sustainability principles and initiatives.

Remuneration levels are targeted to be commercially competitive, on the following basis:

• The most relevant competitive reference points for remuneration levels are based on the scope of responsibility and individual contributions made
• The committee recognises that we operate an international business and compete with both local and international competitors in each of our markets
• Appropriate benchmark, industry and comparable organisations' remuneration practices are reviewed regularly
• For employees generally, combinations of firms from the JSE Financial 15 and the FTSE 350 General Finance sector have offered the most appropriate benchmarks
• In order to avoid disproportionate packages across areas of the group and between executives, adjustments may be made at any extremes to ensure broad internal consistency. Adjustments may also be made to the competitive positioning of remuneration components for individuals, in cases where a higher level of investment is needed in order to build or grow or sustain either a business unit or our capability in a geography.

The following section outlines our remuneration policy in more detail for each element of total compensation as it applies to employees.

Gross remuneration: base salary and benefits

Salaries and benefits are reviewed annually and reflect the relative skills and experience of, and contribution made by, the individual. It is the group's policy to seek to set base salaries and benefits (together known as gross remuneration) at median market levels when compared like for like with peer group companies.

The human resources division provides guidelines to business units on recommended salary levels for all employees within the organisation to facilitate the review. These guidelines include a strategic message on how to set salary levels that will aid Investec in meeting its objectives while remaining true to corporate values, and incorporate guidance on increasing levels to take account of the change in the cost of living over the year to ensure that salary levels always allow employees to afford a reasonable standard of living and do not encourage a reliance on variable remuneration.

Advisers are often engaged by either the human resources division or the business units to obtain general benchmark information or to benchmark specific positions to ensure that gross remuneration levels are market-driven and competitive so that levels of remuneration do not inhibit our ability to recruit the people we need to develop our business.

Benefits are targeted at competitive levels and are delivered through flexible and tailored packages. Benefits include pension schemes; life, disability and personal accident insurance; medical cover; and other benefits, as dictated by competitive local market practices. Only salaries, not annual bonuses or Material Risk Takers' role based allowances, are pensionable.

Variable short-term incentive: annual bonus

All employees are eligible to be considered for a discretionary annual bonus, subject inter alia to the factors set out above in the section dealing with the determination of remuneration levels. The structure of shortterm incentives varies between employees of our three operating divisions: Asset Management, Wealth & Investment and the Specialist Bank. This reflects differing regulatory requirements on the different legal entities and also differing competitive pressures in each distinct market.

Specialist Banking: variable short-term incentive

Risk-weighted returns form basis for variable remuneration levels

In our ordinary course of business we face a number of risks that could affect our business operations, as highlighted on pages 42 to 48.

Group risk management is independent from the business units and monitors, manages and reports on the group's risk to ensure it is within the stated risk appetite as mandated by the board of directors through the board risk and capital committee (BRCC). The group monitors and controls risk exposure through credit, market, liquidity, operational and legal risk divisions/ forums/committees.

Risk consciousness and management is embedded in the organisational culture from the initiation of transactional activity through to the monitoring of adherence to mandates and limits and throughout everything we do.

The BRCC (comprising both executive and non-executive directors) meets six times per annum and sets the overall risk appetite for the Investec group and determines the categories of risk, the specific types of risks and the extent of such risks which the group should undertake, as well as the mitigation of risks and overall

(continued)

The DLC capital committee is a subcommittee of the BRCC and provides detailed input into the group's identification, quantification and measurement of its capital requirements, taking into account the capital requirements of the banking regulators. It determines the amount of internal capital that the group should hold and its minimum liquidity requirements, taking into account all the associated risks plus a buffer for any future or unidentified risks. This measure of internal capital forms part of the basis for determining the variable remuneration pools of the various operating business units (as discussed above).

The policy executive risk review forum (Policy ERRF) and review executive risk review forum (Review ERRF), comprising members of the executive and the heads of the various risk functions, meet weekly. These committees responsibilities include approving limits and mandates, ensuring these are adhered to and that agreed recommendations to mitigate risk are implemented.

The bank's central credit and risk forums provide transaction approval independent of the business unit on a deal-by-deal basis. The riskiness of business undertaken is evaluated and approved prior to initiation of the business through various central forums and committees, deal forum, credit committee, investment committee and new product forum and is reviewed and ratified at review ERRF and policy ERRF on a regular basis. These central forums provide a level of risk management by ensuring that risk appetite and various limits are being adhered to and that an appropriate interest rate and, by implication, risk premium is built into every approved transaction. The approval of transactions by these independent central forums ensures that every transaction undertaken by the group results in a contribution to profit that has already been subject to some risk adjustment.

Our EVA model as described in detail below is principally applied to realised profits against predetermined targets above risk and capital weighted returns. In terms of the EVA structure, capital is allocated based on risk and therefore the higher the risk, the

higher the capital allocation and the higher the hurdle return rate required. This model ensures that risk and capital management are embedded in key processes at both a group and transaction level, which form the basis of the group's performancerelated variable remuneration model, thus balancing the interests of all stakeholders.

Further, both the risk and compliance functions are also embedded in the operating business units and are subject to review by the internal audit and compliance monitoring teams. The risk and compliance functions also provide, on an exception-only basis, information relating to the behaviour of individuals and business areas if there has been evidence of non-compliance or behaviour which gives rise to concerns regarding the riskiness of business undertaken.

EVA model: allocation of performance-related bonus pool

Our business strategy and associated risk appetite, together with effective capital utilisation, underpin the EVA annual bonus allocation model.

Business units share in the annual bonus pool to the extent that they have generated a realised return on their allocated riskadjusted capital base in excess of their target return on equity. Many of the potential future risks that the firm may face are avoided through ensuring that the bonus pools are based on actual realised risk-adjusted profits.

The bonus pools for non-operating business units (central services and head office functions) are generated partly by a levy payable by operating businesses on their operating profit, and is supplemented by a discretionary allocation as determined by the executive directors, and agreed by the remuneration committee.

Our EVA model has been consistently applied for a period of about 19 years and encompasses the following elements:

• The profitability of each operating business unit is determined as if they are a stand-alone business. Gross revenue is determined based on the activity of the business, with arm's length pricing applicable to inter-segment activity. Profits are determined as follows:
  • Realised gross revenue (net margin and other income)
  • Less: Funding costs
  • Less: Impairments for bad debts
• Add back: Debt coupon or preference share dividends paid out of the business (where applicable)
• Less: Direct operating costs (personnel, systems, etc.)
• Less: Group-allocated costs and residual charges (certain independent group functions are provided on a centralised basis, with an allocation model applied to charge out costs incurred to business units. Costs allocated are based on the full operational costs for the particular central service area, inclusive of the variable remuneration cost of the central service. Allocation methodologies generally use cost drivers as the basis of allocation)
• Less: Profits earned on retained earnings and statutory held capital
• Add: Notional profit paid by centre on internal allocated capital
• Equals: Net profit
• Capital allocated is a function of both regulatory and internal capital requirements, the risk assumed within the business and our overall business strategy
• The group has always held capital in excess of minimum regulatory requirements, and this principle is perpetuated in our internal capital allocation process. This process ensures that risk and capital discipline is embedded at the level of deal initiation and incorporates independent approval (outside of the business unit) of transactions by the various risk and credit committees.
  • A detailed explanation of our capital management and allocation process is provided on pages 78 to 83 in volume two.
• Internal capital comprises the regulatory capital requirement taking into account a number of specified risks plus a capital buffer which caters, inter alia, for any unspecified or future risks not specifically identified in the capital planning process. The Investec group then ensures that it actually holds capital in excess of this level of internal capital
• Internal capital is allocated to each business unit via a comprehensive analysis of the risks inherent within that business and an assessment of the costs of those risks
• Hurdle rates or targeted returns are determined for each business unit based

on the weighted average cost of capital (plus a buffer for trading businesses to take into account additional risks not identified in the capital allocation process) applied to internal capital

• Targeted returns differ by business unit reflecting the competitive economics and shareholder expectation for the specific area of the business, and are set with reference to the degree of risk and the competitive benchmarks for each product line
• In essence, varying levels of return are required for each business unit reflecting the state of market maturity, country of operation, risk, capital invested (capital intensive businesses) or expected expense base (fee-based businesses)
• Growth in profitability over time will result in an increasing bonus pool, as long as it is not achieved at the expense of capital efficiency
• Target returns must be reflective of the inherent risk assumed in the business. Thus, an increase in absolute profitability does not automatically result in an increase in the annual bonus pool. This approach allows us to embed risk and capital discipline in our business processes. These targets are subject to annual review
• The group's credit and risk forums provide transaction approval independent of the business unit on a deal-by-deal basis adding a level of risk consciousness to the predetermined (and risk-adjusted) capital allocation and required hurdle rates and thus ensure that each transaction generates a return that is commensurate with its associated risk profile.

In terms of our EVA process, if business and individual performance goals are exceeded, the variable element of the total remuneration package is likely to be substantially higher than the relevant target benchmark. This ensures that overall remuneration levels have the potential to be positioned at the upper quartile level for superior performance, in line with our overarching remuneration policy.

In circumstances where an operating business unit does not have an EVA pool (e.g. when it incurs a loss or when it is a start-up), the executive directors may consider a discretionary allocation to allow for a modest bonus for those staff who were expected to contribute to the longerterm interests of that business unit or the

group, despite the lack of EVA profits in the short term, e.g. control functions, support staff and key business staff.

It should be noted the salaries and proposed bonuses for employees responsible for risk, internal audit and compliance are not based on a formulaic approach and are independent of any revenues or profits generated by the business units where they work. The level of rewards for these employees are assessed against the overall financial performance of the group; objectives based on their function; and compliance with the various non-financial aspects referred to above.

Key elements of the bonus allocation process are set out below:

• A fixed predetermined percentage of any return in excess of the EVA hurdle accrues to the business units' EVA pool
• A portion of the total EVA pool is allocated towards the bonus pool for central service and head office employees
• These bonus pools are reviewed regularly by the appropriate management and non-executive committees to ensure that awards are only paid when it is appropriate to do so, considering firm-wide performance against non-financial risk (both current and future) and compliance-based objectives and in order to ensure that the payment of such discretionary bonuses does not inhibit the group's ability to maintain/raise its capital levels. All users of capital operate within a strict philosophical framework that requires a balancing of risk and reward and that is designed to encourage behaviour in the interests of all stakeholders as opposed to just employees
• The EVA pools are calculated centrally by the group's finance function and subject to audit as part of the year-end audit process
• Line managers in each business unit will make discretionary bonus recommendations for each team member taking into consideration qualitative and quantitative criteria (as mentioned above)
• Bonus recommendations are then subject to an extensive geographic review involving human resources, local management and local remuneration committees
• Thereafter, these recommendations are subject to a global review by

executive management before the remuneration committee's review and approval process.

The group remuneration committee specifically reviews and approves the individual remuneration packages of the executive directors, persons discharging managerial responsibilities, and Material Risk Takers. The committee also reviews the salaries and performance bonuses awarded to a number of other senior and higher paid employees across the group. In addition, the committee specifically reviews and approves the salaries and performance bonuses awarded to each employee within the Internal Audit, Compliance and Risk functions, both in the business units and in the central functions, ensuring that such packages are competitive and are determined independently of the other business areas. In making these decisions the committee relies on a combination of external advice and supporting information prepared internally by the group.

Deferral of annual bonus awards: other than Material Risk Takers within the Specialist Bank

All annual bonus awards exceeding a predetermined hurdle level are subject to 60% deferral in respect of that portion that exceeds the hurdle level. The deferred amount is awarded in the form of: short term share awards vesting in three equal tranches over a period of approximately three years; or cash released in three equal tranches over a period of approximately three years. Where shares are being awarded to employees as part of the deferral of performance bonus awards, these are referred to as short-term share awards. The entire amount of the annual bonus that is not deferred is payable upfront in cash.

Deferral of variable remuneration awards: UK Material Risk Takers within the Specialist Bank

• Material Risk Takers include senior management, risk takers, staff engaged in certain central functions and any other employees whose professional activities have a material impact on Investec's risk profile within Investec plc
• Individual awards to Material Risk Takers are determined based on EVA pools in the same manner as is applicable to all staff (as set out above), and subject to the group remuneration policy and governance processes (also set out above)
• Annual bonus awards to Material Risk Takers (excluding executive directors who are employees of a separately regulated firm) and all annual bonus awards where total variable remuneration exceeds £500 000 are subject to 60% deferral
• All other annual bonus awards to Material Risk Takers are subject to 40% deferral
• The 40% not deferred in the former instance or the 60% not deferred in the latter instance will be awarded all in cash
• The upfront short-term share awards will vest immediately, but will only be released after a period of 12 months
• Variable remuneration awards for Material Risk Takers who are not exempted by the de minimis concession are subject to 40% deferral (60% if total variable remuneration exceeds £500 000) after taking into account the value of share awards granted to each staff member in the applicable financial year and which are included in deferred variable remuneration. The deferred portion of discretionary awards to Material Risk Takers will, at the election of the staff member, be made either entirely in the form of short-term share awards, or 50% in short-term share awards and 50% in cash
• All deferrals in the form of short-term share awards (being either 50% or 100% of such deferral) vest over periods of up to seven years and are then subject to an appropriate period of retention, being 12 months, for all Material Risks Takers, with the exception of Risk Managers, for which it is six months

IAM: variable incentive

The Investec Asset Management (IAM) remuneration committee is responsible for considering, agreeing and overseeing all elements of remuneration and the overall remuneration philosophy, principles and policy of IAM. The proposals from this committee are subject to final approval by the DLC remuneration committee.

IAM operates the following annual bonus schemes which may result in annual payments to employees:

• Annual Discretionary Cash Bonus Scheme (ADCBS) (all employees of IAM are currently eligible to be considered for a cash bonus payment under this scheme)
• Deferred Bonus Plan (DBOP) (participation in this scheme is determined on an annual basis at the discretion of IAM based on the roles of individual employees).

The percentage of profit allocated to the variable remuneration pool has been agreed (at a fixed participation rate) and approved by both the DLC and IAM remuneration committees. The same fixed participation rate has been applied consistently for many years. This structure has been a key contributor to the long-term success of IAM and encourages the staff to behave like owners. We believe in aligning the long-term interests of clients, shareholders and staff.

Individual annual bonus awards are approved by the IAM remuneration committee and the DLC remuneration committee annually.

Annual Discretionary Cash Bonus Scheme (ADCBS)

Awards under the ADCBS are payable entirely in cash. The purpose of the cash bonus is to reward behaviour and effort against objectives and values, and retain key employees. The cash bonus pool determination is based on the profitability of IAM only. In principle, there would be no cash bonus payments should IAM be loss-making (although this would be reviewed where it was considered that bonus payments were necessary in order to retain staff and protect the business in the long-term even if the business had been loss-making in the short-term).

Management information is provided to the IAM remuneration committee to ensure that IAM's financial results are put into the context of the risk appetite of the business

and the IAM remuneration committee is able to risk-adjust the cash bonus pool should they believe this is required given the risk taken and the overall financial results.

Deferred Bonus Plan (DBOP)

As noted above, participation in the DBOP is determined on an annual basis at the discretion of IAM based on the roles of individual employees. The purpose of the DBOP is both to retain key employees and to provide better alignment of the interests with clients and to manage potential, currently unknown future risks.

The conditions for participation in the DBOP are approved by the IAM remuneration committee annually, based on the remuneration requirements in the year being considered. This will take into consideration local market remuneration practices and relevant and required regulations.

The DBOP awards are made in the form of investments into various funds managed by IAM and with specific allocations for the portfolio managers into their own funds. The deferral period is just over three years and awards are only paid out under specific listed conditions. The award does not accrue to the employee until the end of the deferral period and as such both the asset and liability remain on the balance sheet of IAM until that time. Employees forfeit their allocations if they resign or their employment terminates (other than at the discretion of IAM for redundancy, retirement, death or disability) prior to the vesting date.

Payments can only be made to participants prior to a scheduled vesting date with the consent of the IAM executive committee and ultimately by the IAM remuneration committee.

IAM's governance processes, operating within the context of the broader Investec group's processes, ensure robust oversight of reward and effective management of any potential conflicts of interest while reflecting the need to link remuneration decisions with IAM's risk appetite.

The head of the IAM Risk Committee assesses the risk appetite, risk tolerance level and risk management for IAM and feeds her views into the remuneration decision-making process, including sending a risk report to the IAM remuneration committee for consideration when making remuneration decisions. IAM HR and Compliance are responsible for ensuring that remuneration processes are compliant with applicable regulations.

In addition, IAM HR and Compliance are responsible for ensuring that the IAM remuneration committee takes into consideration financial and non-financial criteria, risk and compliance reports, and any other relevant information in making decisions around remuneration.

The primary determinant of the variable compensation pool available for distribution is IAM's own annual profit. There is an annual budget against which the business is measured.

The variable compensation pool is allocated to business divisions and then to individuals based on divisional performance and the individual's performance. This ensures that staff are rewarded appropriately for meeting their objectives and keeping within the values of the business.

The oversight of conflicts of interest and the link between risk and reward is achieved through a combination of effective remuneration components, designed to incorporate risk and of the dual operation of the DLC remuneration committee and IAM remuneration committee in ensuring appropriate and, where necessary, independent oversight of both remuneration policy and outcomes.

Employee equity ownership

In August 2013, 40 employees of IAM acquired a 15% stake in the IAM business, ultimately through a trust structure in which each employee owns a portion of the underlying trust assets. This stake has since increased to 18%. Each employee funded their portions through a combination of existing deferred compensation (for which vesting was accelerated), personal debt and personal cash. This structure locks in key talent and aligns employees' interests with the interests of the firm as a whole, our shareholders and our clients.

Employees' portion holdings are governed by the terms of a trust deed to which all portion holders have agreed. In summary, various pre-emption provisions apply to the transfer of employees' portions. On leaving, an employee is required to offer their portions for sale (save in limited circumstances where part of the portion holding may be retained). Good leaver/ bad leaver provisions apply to determine the price at which the portions must be offered for sale.

Hendrick du Toit and Kim McFarland are participants in the trust. Given the potential conflicts of interest inherent in this given their newly appointed executive roles, it is our intention that this situation is resolved by 30 September 2018.

Investec Wealth & Investment in the UK: variable short-term incentive

Investec Wealth & Investment recognises Investec's obligation to ensure that all businesses within the group satisfy their obligations under the PRA and FCA Remuneration Code. Wealth & Investment recognises that the policy, procedures and practices it has adopted should not conflict with the group's obligations under the PRA and FCA Remuneration Code. The Wealth & Investment remuneration committee is responsible for considering, agreeing and overseeing all elements of remuneration and the overall remuneration philosophy and policy of Wealth & Investment within the context of the Investec group's agreed remuneration philosophy and policy. The proposals from this committee are subject to final approval by the DLC remuneration committee.

Wealth & Investment operates the following performance-related discretionary remuneration plans:

• Core incentive plan for those in clientfacing roles and administrative staff who support them directly
• Bonus plan for those in non-clientfacing, central services and support functions
• Growth plan for staff primarily in client-facing roles who generate income directly.

Funding is at the discretion of the remuneration committee. Under the core incentive plan, an incentive pool is derived from a formula that is directly related to the profitability of a team or business unit. The pool is distributed to the members of the team or business unit on a discretionary basis.

Funding for the bonus plan is related to the overall profitability of the Wealth & Investment business and is awarded to individuals on a discretionary basis.

The growth plan incentivises growth in revenues, net of the impact of market movements. Awards relate to performance for each year to 28 February, are payable in cash, and are deferred over a three-year period. Payments do not attract employer pension contributions.

Under the core incentive and bonus plans, awards relate to performance for the financial year ending 31 March. An interim payment on account of the annual award is considered at the half-year.

Non-financial performance is reviewed, and where individuals fall below the standards expected, awards may be deferred or forfeited, in part or in full. Payments are made entirely in cash and do not attract employer pension contributions. The award may be paid directly to the individual (subject to the deduction of income tax and national insurance) or, at Wealth & Investment discretion, as an additional employer pension contribution.

Wealth & Investment executive directors participate in the bonus plan, and where an individual's role is primarily client-facing that director will also be eligible to participate in the core incentive and growth plans.

Investec Wealth & Investment South Africa: variable short-term incentive

As there are no overriding regulatory requirements applicable to the business, the policies applicable to the Specialist Bank are applied to this business unit as set out on pages 232 to 234.

Other information on deferred awards and clawback provisions within the group

Employees who leave the employment of Investec prior to vesting of deferred incentive awards will lose their deferred bonus short term share awards other than as a result of death and disability, subject to the group's normal good leaver provisions and approval process in exceptional cases.

The deferred share awards for Material Risk Takers are subject to malus and clawback adjustments. The assessment of whether any malus adjustment should be made to an individual's unvested award will be undertaken within the following framework:

• Where there is reasonable evidence of employee misbehaviour
• Where the firm or operating business unit suffers a material downturn in its financial performance
• Where the firm or business unit suffers a material failure of risk management.

In these cases, management and the remuneration committee will take into account the following factors in determining the extent (if any) to which the quantum of deferred awards should be subject to clawback:

• The extent to which the individual had control over the outcome
• Failure of internal control systems

• The impact of the risk profile of the relevant member of the group or business unit
• Any violation of the group's culture and values
• The long-term impact of the outcome on the group or relevant business unit
• External factors including market conditions
• Any other relevant factors.

Specifically for deferred bonus share awards, where profits used to determine the original EVA bonus are materially reduced after the bonus determination, the awards will be recalculated for such reduction and consideration given to clawback (if any) to the extent that the prior period's EVA pool is reduced and the extent to which it affected each employee.

The deferred share awards of non-Material Risk Takers are subject to malus adjustments.

Long-term incentive: share awards

We have a number of share option and long-term share incentive plans that are designed to align the interests of employees with those of shareholders and long-term organisational interests, and to build material share ownership over the long term through share awards. These share option and incentive plans are also used in appropriate circumstances as a mechanism for retaining the skills of key talent.

Awards are made in the form of forfeitable share awards for non-Material Risk Takers other than for countries where the taxation of such awards is penal. In these cases awards are made in the form of conditional awards or market strike options.

Awards are made in the form of conditional awards for Material Risk Takers.

In principle all employees are eligible for long-term incentives. Awards are considered by the remuneration committee and made only in the 42-day period following the release of our interim or final financial results in accordance with the Investment Association principles of remuneration. These awards comprise three elements, namely:

• 'New starter' awards are made based on a de facto non-discretionary basis using an allocation table linked to salary levels

• 'General allocation' awards are also de facto non-discretionary awards of the same quantum as new starter awards and are made to employees who have not had any other share award in a three-year period
• 'Top up' awards are made at the discretion of line management primarily to ensure multi-year performance and long-term value generation.

All proposed long-term incentive awards are recommended by business unit management, approved by the staff share executive committee and then the remuneration committee before being awarded. Awards of Investec plc forfeitable shares, or conditional shares where appropriate, are made to employees of Investec plc and awards of Investec Limited forfeitable shares for employees of Investec Limited. At IAM, long-term awards are only generally considered for employees who do not participate in the DBOP and/or the IAM equity ownership scheme.

Forfeitable shares for non-Material Risk Takers are subject to one-third vesting after approximately three, four and five years, which we believe is appropriate for our business requirements. Long-term incentive awards to Material Risk Takers are subject to performance conditions and to vesting over a period of two and a half to five years, or three to seven years, determined by regulatory requirements, and are then subject to a 12 month retention period, with the exception of Risk Managers, for which it is six months. The awards are forfeited on termination, but 'good leaver' discretion is applied in exceptional circumstances.

Retention is addressed through the long-term nature of awards granted, which provides an element of 'lock-in' for employees throughout the vesting period and allows for multi-year contribution to performance and brand building.

Other remuneration structures

Guaranteed variable remuneration

Guaranteed variable remuneration comprises all forms of remuneration whose value can be determined prior to award. This includes, but is not limited to sign-on, buy-out and guarantee awards. Guaranteed variable awards will not be awarded, paid or provided to any individual within the group unless they are:

• Exceptional
• In the context of hiring new staff
• Limited to the first year of service.

The remuneration committee pre-approve all guaranteed awards above a defined threshold, and has oversight of all other guaranteed awards above a lower defined threshold.

Retention awards

Investec only pays retention awards to serving staff in exceptional circumstances. In all such cases, human resources shall review proposed payments to ensure that they are in line with this policy and any other relevant regulation. Additionally, for Material Risk Takers and those above a particular threshold, the remuneration committee shall review and approve all proposed awards. Circumstances where the group will consider making retention awards include the case of a major restructuring of the company or any subsidiary or one of its business units (for instance in the start-up of a new business line, or the closure of a business line) where the retention of individuals is essential to the completion of the task. A valid business case for the retention of the individual must be presented in order for a retention award to be approved and the PRA should be notified prior to the retention award being made to Material Risk Takers, and should consider seeking guidance on the appropriateness of retention awards for certain individuals.

Severance awards

Severance payments for the early termination of a contract are at executive management's absolute discretion and must reflect performance achieved over time and be designed in a way that does not reward failure. Severance payments for Material Risk Takers shall be subject to approval by the DLC remuneration committee.

Discretionary extended pension benefits policy

All proposed extended pension payments made to employees upon reaching retirement will be reviewed by the remuneration committee for alignment with appropriate laws, policy and regulation.

Diversity and inclusion, including gender pay gap reporting

Foreword

At Investec, we are committed to attracting, developing and retaining a diverse team of people. A diverse workforce is essential to our ability to be an innovative organisation that is able to adapt and prosper in a fast changing world. We recognise the benefits of a diverse workforce being able to contribute alternative perspectives and challenge the status quo, which is integral to the Investec culture.

We seek to be a positive influence in all our core businesses and in each of the societies in which we operate. Embedded in our corporate responsibility philosophy is that we are an organisation that lives in society, not off it. We do this by empowering communities through entrepreneurship and education, and leveraging the value in our diversity. We believe that this will ensure the best outcome for all stakeholders. We want to be a company that does the right thing by its people and the places where we operate.

We are confident that across our organisation men and women are paid equally for doing the same job. Our gender pay gap occurs primarily because there is a lower proportion of women in senior leadership and revenue-generating roles which attract higher market levels of pay.

We are dedicated to improving this in line with our commitment to promoting diversity. We know that while we have worked to address greater representation of women, we have more to do. We have established targets and have the measures in place needed to meet these as set out in this report. We are committed to advancement and holding ourselves publicly accountable.

The details of our 2017 gender pay gap are set out below. We have published information for our three UK employing entities, Investec Bank plc; Investec Wealth & Investment UK and Investec Asset Management Limited as part of the UK government's requirements for all UK companies with over 250 employees to report their gender pay gap. This information is provided on our website. Further information for the Investec group is provided alongside.

What is the gender pay gap?

Gender pay gap legislation was introduced in the UK to encourage employers to make greater advances in addressing the disparity of earnings between men and women over their careers. The gender pay gap measures the difference between the

average amounts men and women are paid across all of our employee categories.

This is different from Equal Pay legislation in the UK which requires individuals to be paid equally for performing work of equal value. We would like to make clear that we give men and women equal pay for the same roles and have appropriate practices in place to ensure fairness, which are regularly reviewed by our remuneration committee.

Our diversity principles

While we have actively tried to increase the diversity of our senior leadership, we recognise that across our organisation we have more work to do. That is why we have put together our own set of diversity principles to help define the framework for that journey. These apply across the global business and while this report is specifically about the Gender Pay Gap in the UK, our diversity principles apply to all our efforts, including transformation in South Africa.

• We believe in the importance and benefits of diversity and foster a culture that is supportive and inclusive of different perspectives and experiences
• As a global specialist bank and asset manager, diversity ensures that we represent the diversity of our global client base
• Our commitment to diversity is fundamentally about 'doing the right thing'

Hourly and bonus pay gap

• We are progressing towards a working environment that is more agile and responsive to the needs of all individuals, with flexible work arrangements encouraged where appropriate
• In terms of diversity, we commit to equal compensation on a like-for-like basis
• We will work proactively to rebalance our organisation in line with the societies in which we operate by empowering communities through entrepreneurship and education, and leveraging the value in our diversity
• We will measure and track progress annually
• We will work towards achieving our targets through concrete actions (refer to pages 239 and 240).

Investec gender pay gap results

The Investec group's (comprising Investec plc and Investec Limited) gender pay gap statistics are shown below.

The below data is based on a snapshot of hourly rates of pay in the pay period encompassing 5 April 2017, and bonuses paid during the 12 months to 5 April 2017.

The methodology utilised is based on the UK gender pay gap legislation but differs slightly where local practices dictate, and where required to more accurately reflect the gap at Investec.

	Investec plc		Investec Limited
	Mean %	Median %	Mean %	Median %
Hourly gap	40.3	41.2	34.4	29.3
Bonus gap	73.9	74.1	73.3	34.1

Mean – The mean figure represents the difference between the average of men's and women's pay expressed as a percentage of the average male pay.

Median – The median represents the difference between the midpoints in the ranges of men's and women's pay expressed as a percentage of the male midpoint.

Proportion receiving a bonus

	Investec plc	Investec Limited
	Percentage	Percentage
Male	82.3	78.1
Female	83.8	78.3

Proportion of men and women within each pay quartile

Each quartile represents an equal number of employees

Investec plc

Investec Limited

Investec UK gender pay gap results

The official UK gender pay gap results, required under the UK gender pay gap legislation are published on our website.

Why does Investec have a gender pay gap?

The gender and bonus pay gaps are calculated on averages across the whole of an organisation and do not take into consideration factors such as the type of role and level of seniority. Our gender gap occurs primarily because there is a higher proportion of women in junior roles and a lower proportion of women in senior leadership, revenue-generating and clientfacing roles. The pay levels and higher ratio of variable to fixed remuneration for these senior roles magnifies the pay and bonus gaps. We are confident that men and women are paid fairly and equitably relative to their role, skills and experience, and this is central to our reward philosophy.

All of our employees are eligible to receive a discretionary bonus. Our reward structure is performance linked and gender-neutral by design. Employees are typically eligible for a bonus after a minimum period of employment has been completed. The key reason for differences between the percentage of men and women receiving a bonus is due to the timing of new hires and whether the minimum period of employment has been completed prior to our financial year end.

We acknowledge that we have a gender pay gap and are committed to making material progress in narrowing this gap. We are taking steps to achieve greater female representation in senior leadership and client facing roles within the organisation and are dedicated to reducing the gender pay and bonus differential over time.

How are we addressing our gender pay gap?

Across our organisation we are committed to ensuring that women fulfil their career ambitions. We recognise that addressing the gender pay gap will take time, and we have established a number of initiatives in order to achieve our aspirational goals and targets.

⁽continued)

(continued)

Commitment to our core values

Our core philosophies value diversity and respect for individuals. We endeavour to prevent and/or eliminate any form of discrimination based on gender, race, religion, age and sexual preference. We support and respect the protection of internationally proclaimed human rights standards and welcome the legislated UK Modern Slavery Act 2015. We have various processes to encourage debate and dialogue around appreciating diversity and different cultures.

Gender balanced recruitment

We are taking a proactive approach to ensure that we are able to attract as diverse a pool of candidates as possible. For example, we are committed to balanced and diversified shortlists for all open roles. We believe this gives us a better chance of hiring the best person for the role. We are working with both internal and external recruiters to ensure that shortlists and interview panels are appropriately balanced. We also work hard to ensure that our graduate recruitment focuses on building a diverse and balanced pipeline of talent for our business.

Learning and development

We invest significantly in a number of opportunities for developing and upskilling employees and in leadership programmes to develop current and future leaders of the group. Investec's HR learning and development team is mandated to develop and retain people who can perform extraordinarily in support of business objectives in a manner consistent with Investec's culture and values. We support a number of external learning programmes and have developed many internal learning programmes.

We are creating ways to deliver mentoring across the group. Our aim is to support our colleagues, in particular, in shaping and progressing their careers. Investec Inspire is a network for women at Investec which enables the exchange of knowledge and experiences in order to improve the opportunities for career success.

Family-friendly policies and work practices

We have a number of policies and practices that help to balance family needs. We are also progressing towards a more agile environment, with flexible work encouraged where appropriate.

Diversity awareness programmes

We are implementing a range of internal diversity awareness programmes. We have piloted our "Zebra Crossing" initiative for senior leaders and the Investec Inspire executive committee, and are extending it to a broader audience. The Zebra Crossing initiative explores the complexities of diversity at a personal, interpersonal and an institutional level. We want our people to think deeply about diversity and inclusion and understand how decisions and behaviours are driven.

Measurement and accountability

To help us measure the pace of change, we have set a number of goals and targets. The group has signed up to the 30% Club in both South Africa and the UK promoting female board representation. We also support the target of 33% female representation on the board by 2020, as oer the Hampton-Alexander Review. Having a diverse board is a clear benefit, bringing with it distinct and different outlooks, alternative viewpoints, and challenging mindsets

Each of our UK employing entities have adopted their own specific targets in order to reinforce our commitment to gender diversity:

• Investec Bank plc and Investec Wealth & Investment UK have signed up to the Women in Finance Charter and in doing so have committed to: having a senior executive team member responsible for diversity and inclusion; meeting set targets for diversity; publishing progress reports annually; and linking pay of senior executives to delivery of these targets
• Investec Asset Management have publically committed to achieving a target of 30% of women in senior leadership by 2023 and beyond

Experience shows that genuine progress can take longer to achieve than we might otherwise like. We believe that these measures are realistic. Progress against our objectives will be reviewed regularly by the relevant executive management and boards.

PRA and FCA Remuneration Code and Pillar III disclosures

In terms of the PRA's Chapter on Disclosure Requirements and Part 8 of the Capital Requirements Regulation the bank in the UK is required to make certain quantitative and qualitative remuneration disclosures on an annual basis with respect to Material Risk Takers.

Material Risk Takers are defined as those employees (including directors) whose professional activities could have a material impact on the bank's risk profile. A total of 56 individuals were Material Risk Takers in 2018.

The bank's qualitative remuneration disclosures are provided on pages 185 to 237.

The information contained in the tables below sets out the bank's quantitative disclosures in respect of Material Risk Takers for the year ended 31 March 2018.

Aggregate remuneration by remuneration type awarded during the financial year

	Senior management	Other Material Risk Takers	Total
Fixed remuneration	14.9	10.7	25.6
– Cash	11.9	10.7	22.6
– Shares	3.0	–	3.0
Variable remuneration*	19.8	10.4	30.2
– Cash	4.8	3.0	7.8
– Deferred cash	1.3	1.7	3.0
– Deferred shares	5.4	2.3	7.7
– Deferred shares – long-term incentive awards**	8.3	3.4	11.7
Total aggregate remuneration and deferred incentives (£'million)	34.7	21.1	55.8
Number of employees***	25	25	50
Ratio between fixed and variable pay	0.8	1.0	0.8

* Total number of employees receiving variable remuneration was 48.

** Value represents the number of shares awarded multiplied by the applicable share price. These awards were made during the period but have not yet vested. These awards are subject to performance conditions and vest over a period of two and a half to four and a half years, up to three to seven years, determined by regulatory requirements. They are also subject to a six or 12 month retention period after vesting.

*** This excludes non-executive directors.

Material Risk Takers received total remuneration in the following bands:

	Number of Material Risk Takers
£800 000 – £1 200 000	10
£1 200 001 – £1 600 000	10
£1 600 001 – £2 000 000	3
£2 000 001 – £2 400 000	–
£2 400 001 – £2 800 000	–
£2 800 001 – £3 200 000	1
£3 200 001 – £3 600 000	1
£3 600 001 – £4 000 000	1
£4 000 001 – £4 400 000	–
£4 400 001 – £4 800 000	1
£4 800 001 – £5 200 000	2
> £5 200 001	–

(continued)

Additional disclosure on deferred remuneration

£'million	Senior management	Other Material Risk Takers	Total
Deferred unvested remuneration outstanding at the beginning of the year	22.9	34.7	57.6
Deferred unvested remuneration adjustment – employees no longer Material Risk Takers and reclassifications	(0.9)	(0.4)	(1.3)
Deferred remuneration awarded in year	15.0	7.4	22.4
Deferred remuneration reduced in year through performance adjustments	–	–	–
Deferred remuneration reduced in year through malus and clawback adjustments^^	–	–	–
Deferred remuneration vested in year	(4.7)	(12.7)	(17.4)
Deferred unvested remuneration outstanding at the end of the year	32.3	29.0	61.3

^^ All employees are subject to malus and clawback provisions as discussed on page 234. No remuneration was reduced for ex post implicit adjustments during the year.

£'million	Senior management	Other Material Risk Takers	Total
Deferred unvested remuneration outstanding at the end of the year
– Equity	29.6	24.1	53.7
– Cash	2.7	4.9	7.6
	32.3	29.0	61.3

£'million	Senior management	Other Material Risk Takers	Total
Deferred remuneration vested in year
– For awards made in 2016 financial year	1.1	1.3	2.4
– For awards made in 2015 financial year	2.2	4.4	6.6
– For awards made in 2014 financial year	1.4	7.0	8.4
	4.7	12.7	17.4

Other remuneration disclosures

£'million	Senior management	Other Material Risk Takers	Total
Sign-on payments
Made during the year (£'million)	–	–	–
Number of beneficiaries	–	–	–
Severance payments
Made during the year (£'million)	–	0.2	0.2
Number of beneficiaries	–	1.0	1.0
Guaranteed bonuses
Made during the year (£'million)	–	–	–
Number of beneficiaries	–	–	–

(continued)

Pillar lll remuneration disclosures

The bank in South Africa is required to make certain quantitative and qualitative remuneration disclosures on an annual basis in terms of the South African Prudential Authority's Basel Pillar III disclosure requirements.

The bank's qualitative remuneration disclosures are provided on pages 185 to 237.

The information contained in the tables below sets out the bank's quantitative disclosures for the year ended 31 March 2018.

In the tables below senior management are defined as members of our South African general management forum, excluding executive directors. Material risk takers are defined as anyone (not categorised above) who is deemed to be responsible for a division/function (e.g. lending, balance sheet management, advisory and transactional banking activities) which could be incurring risk on behalf of the bank. Furthermore, financial and risk control staff are defined as everyone in central group finance and central group risk as well as employees responsible for Risk and Finance functions within the operating business units.

Aggregate remuneration by remuneration type awarded during the financial year

	Senior management	Material risk takers	Financial and risk control staff	Total
Fixed remuneration (all cash based and no portion is deferred)	50.6	50.8	198.3	299.7
Variable remuneration*	266.1	203.4	187.0	656.5
– Cash	94.1	85.6	101.6	281.3
– Deferred shares	59.7	52.2	10.0	121.9
– Deferred cash	25.2	–	–	25.2
– Deferred shares – long-term incentive awards**	87.1	65.6	75.4	228.1
Total aggregate remuneration and deferred
incentives (R'million)	316.7	254.2	385.3	956.2
Number of employees	19	21	242	282
Ratio of fixed and variable pay	0.19	0.25	1.1	0.46

* Total number of employees receiving variable remuneration was 274.

** Value represents the number of shares awarded multiplied by the applicable share price. These awards were made during the period but have not yet vested. These vest one third at the end of years three, four and five.

Additional disclosure on deferred remuneration

R'million	Senior management	Material risk takers	Financial and risk control staff	Total
Deferred unvested remuneration outstanding at the beginning
of the year Deferred unvested remuneration adjustment – employees that are	462.0	424.9	199.9	1 086.8
no longer employed by the bank and reclassifications	77.0	(94.5)	118.8	101.3
Deferred remuneration awarded in year	172.0	117.8	85.4	375.2
Deferred remuneration reduced in year through performance adjustments	–	–	–	–
Deferred remuneration reduced in year through malus adjustments	–	–	–	–
Deferred remuneration vested in year	(200.9)	(123.2)	(117.4)	(441.5)
Deferred unvested remuneration outstanding at the end of the year	510.1	325.0	286.7	1 121.8

R'million	Senior management	Material risk takers	Financial and risk control staff	Total
Deferred unvested remuneration outstanding at the end of the year
– Equity	433.1	325.0	286.7	1 044.8
– Cash	77.0	–	–	77.0
	510.1	325.0	286.7	1 121.8

(continued)

R'million	Senior management	Material risk takers	Financial and risk control staff	Total
Deferred remuneration vested in year
– For awards made in 2017 financial year	23.4	14.7	1.5	39.6
– For awards made in 2016 financial year	22.2	15.7	2.7	40.6
– For awards made in 2015 financial year	67.3	45.4	30.6	143.3
– For awards made in 2014 financial year	79.3	43.7	75.2	198.2
– For awards made in 2013 financial year	8.7	3.7	7.4	19.8
	200.9	123.2	117.4	441.5

Other remuneration disclosures: special payments

	Senior	Material risk	Financial and risk control
R'million	management	takers	staff	Total
Sign-on payments
Made during the year (R'million)	–	2.7	–	2.7
Number of beneficiaries	–	1	–	1
Severance payments
Made during the year (R'million)	3.2	1.9	–	5.1
Number of beneficiaries	1	1	–	2
Guaranteed bonuses
Made during the year (R'million)	–	2.7	–	2.7
Number of beneficiaries	–	1	–	1

Definitions

Definitions

Adjusted earnings per ordinary share before goodwill, acquired intangibles and non-operating items

Refer to page 61 in volume three

Adjusted shareholders' equity

Refer to calculation on page 66

Core loans and advances

Net loans and advances to customers plus net own originated securitised assets

Refer to calculation on page 35 in volume two

Cost to income ratio

Operating costs divided by operating income (net of depreciation on leased assets). Depreciation on operating leased assets has been netted off against operating income

Dividend cover

Adjusted earnings per ordinary share before goodwill and non-operating items divided by dividends per ordinary share

Earnings attributable to ordinary shareholders before goodwill, acquired intangibles and non-operating items (i.e. adjusted earnings)

Refer to page 61 in volume three

Effective operational tax rate

Tax on profit on ordinary activities (excluding non-operating items) divided by operating profit (excluding share of post taxation profit of associates)

Market capitalisation

Total number of shares in issue (including Investec plc and Investec Limited) multiplied by the closing share price of Investec plc on the London Stock Exchange

Net tangible asset value per share

Refer to calculation on page 64

Non-operating items

Reflects profits and/or losses on termination, restructuring or disposal of group operations and acquisitions made

Operating profit

Operating income less operating costs, impairment losses on loans and advances and depreciation on operating leased assets. This amount is before goodwill, acquired intangibles and non-operating items

Operating profit per employee

Refer to calculation on page 70

Annuity income

Net interest income plus net annuity fees and commissions expressed as a percentage of total operating income

Return on average adjusted shareholders' equity

Refer to calculation on page 66

Return on average adjusted tangible shareholders' equity

Refer to calculation on page 66

Return on risk-weighted assets

Adjusted earnings divided by average risk-weighted assets

Risk-weighted assets

Calculated as the sum of risk-weighted assets for Investec plc and Investec Limited (converted into Pounds Sterling) as reflected on page 64

Staff compensation to operating income ratio*

All staff compensation costs expressed as a percentage of operating income

Third party assets under management

Includes third party assets under administration managed by the Wealth & Investment, Asset Management and Property businesses

Total capital resources

Includes shareholders' equity, subordinated liabilities, Other Additional Tier 1 securities in issue and non-controlling interests

Total equity

Total shareholders' equity including Other Additional Tier 1 securities in issue and non-controlling interests

Weighted number of ordinary shares in issue

The number of ordinary shares in issue at the beginning of the year increased by shares issued during the year, weighted on a time basis for the period during which they have participated in the income of the group less treasury shares. Refer to calculation on page 61 in volume three

^* Investec Asset Management (IAM) operates schemes for staff whose bonuses are deferred into collective investment schemes that are managed by IAM. Any resulting profit or loss arising from these schemes is attributable to the employee in respect of whom the investment was made. As such, any rise or fall in the value of the assets held is offset to an equal but opposite degree by the change in the liability (expense) to the employee. Therefore the profit or loss on these investments and the corresponding expense to employees are offset in arriving at the staff compensation ratio for IAM and hence for the group as a whole.

Corporate information

Investec plc and Investec Limited

Secretary and registered office

Investec plc

David Miller

30 Gresham Street London EC2V 7QP United Kingdom Telephone (44) 20 7597 4000 Facsimile (44) 20 7597 4491

Investec Limited

Niki van Wyk

100 Grayston Drive Sandown Sandton 2196 PO Box 785700 Sandton 2146 Telephone (27) 11 286 7000 Facsimile (27) 11 286 7966

Internet address

www.investec.com

Registration number

Investec plc

Registration number 3633621

Investec Limited

Registration number 1925/002833/06

Auditors

Ernst & Young LLP Ernst & Young Inc.

Registrars in the UK

Computershare Investor Services plc The Pavilions Bridgwater Road Bristol BS99 6ZZ United Kingdom Telephone (44) 370 707 1077

Transfer secretaries in South Africa

Computershare Investor Services Proprietary Limited Rosebank Towers 15 Biermann Avenue Rosebank 2196 PO Box 61051 Marshalltown 2107 Telephone (27) 11 370 5000

Sponsors

Investec Bank Limited

100 Grayston Drive Sandown Sandton 2196 PO Box 785700 Sandton 2146

Directorate

Contact details

For contact details for Investec offices internationally refer to pages 143 and 146 in volume three.

Notes

Notes

Notes

Notes

AR

|

2018

V.2

Investec risk disclosures report

Specialist Banking | Asset Management | Wealth & Investment

Annual Report Investec risk disclosures Volume 2

2018

The 2018 integrated annual report covers the period 1 April 2017 to 31 March 2018 and provides an overview of the Investec group.

This report covers all our operations across the various geographies in which we operate and has been structured to provide stakeholders with relevant financial and nonfinancial information.

Volume 1 Volume 2 Volume 3

Strategic report incorporating governance, corporate responsibility and remuneration report

Risk disclosures

Annual financial statements

Feedback

We value feedback and invite questions and comments on our reporting. To give feedback or request hard copies of our reports, please contact our Investor Relations division.

For queries regarding information in this document

Investor Relations

Telephone (27) 11 286 7070 (44) 20 7597 5546 e-mail: Investorrelations@investec.com

Internet address:

www.investec.com/en_za/welcome-to-Investec/about-us/investor-relations.html

Cross reference tools

Audited information

Denotes information in the risk and remuneration reports that forms part of the group's audited annual financial statements

Page references

Refers readers to information elsewhere in this report

Website

Indicates that additional information is available on our website: www.investec.com

Corporate responsibility

Refers readers to further information in our corporate responsibility report available on our website: www.investec.com

Reporting standard

Denotes our consideration of a reporting standard

Contents

Risk disclosures

Corporate information	4
Risk management	6
Credit ratings	92
Internal audit	93
Compliance	94
Definitions	96

Corporate information

Investec plc and Investec Limited

Secretary and registered office

Investec plc

David Miller 30 Gresham Street London EC2V 7QP

United Kingdom Telephone (44) 20 7597 4000 Facsimile (44) 20 7597 4491

Investec Limited

Niki van Wyk

100 Grayston Drive Sandown Sandton 2196 PO Box 785700 Sandton 2196 Telephone (27) 11 286 7000 Facsimile (27) 11 286 7966

Internet address

www.investec.com

Registration number

Investec plc

Registration number 3633621

Investec Limited

Registration number 1925/002833/06

Auditors

Ernst & Young LLP Ernst & Young Inc.

Registrars in the UK

Computershare Investor Services plc The Pavilions Bridgwater Road Bristol BS99 6ZZ United Kingdom Telephone(44) 370 707 1077

Transfer secretaries in South Africa

Computershare Investor Services Proprietary Limited Rosebank Towers 15 Biermann Avenue Rosebank 2196 PO Box 61051 Marshalltown 2107 Telephone (27) 11 370 5000

Sponsors

Investec Bank Limited

100 Grayston Drive Sandown Sandton 2196 PO Box 785700 Sandton 2196

Directorate

Refer to page 133 in volume one of the integrated annual report.

Group risk management objectives are to:

• Ensure adherence to our risk management culture
• Ensure the business operates within the board-approved risk appetite
• Support the long-term sustainability of the group by providing an established, independent framework for identifying, evaluating, monitoring and mitigating risk
• Set, approve and monitor adherence to risk parameters and limits across the group and ensure they are implemented and adhered to consistently
• Aggregate and monitor our exposure across risk classes
• Coordinate risk management activities across the organisation, covering all legal entities and jurisdictions
• Give the boards reasonable assurance that the risks we are exposed to are identified and appropriately managed and controlled
• Run appropriate risk committees, as mandated by the board.

Overview of disclosure requirements

Risk disclosures provided in line with the requirements of International Financial Reporting Standard 7 Financial Instruments: Disclosures (IFRS 7) and disclosures on capital required by International Accounting Standard 1 Presentation of Financial Statements (IAS 1) are included within this section of the integrated annual report on pages 9 to 92 with further disclosures provided within the annual financial statements section in volume three.

All sections, paragraphs, tables and graphs on which an audit opinion is expressed are marked as audited.

Information provided in this section of the integrated annual report is prepared on an Investec DLC consolidated basis (i.e. incorporating the results of Investec plc and Investec Limited), unless otherwise stated.

The group also publishes risk information for its 'silo' entity holding companies and its significant banking subsidiaries on a consolidated basis. This information is contained in the respective annual financial statements for those respective entities.

Furthermore, the group publishes separate Pillar III disclosure reports for Investec Limited, Investec plc, Investec Bank Limited and Investec Bank plc as required in terms of Regulation 43 of the regulations relating to banks in Southern Africa and Part 8 of the Capital Requirements Regulation pertaining to banks in the UK.

Statement from the chairman of the group risk and capital committee

Philosophy and approach to risk management

The board risk and capital committee (comprising both executive and nonexecutive directors) meets six times per annum and approves the overall risk appetite for the Investec group. The group risk and capital committee, comprising of executive directors and executive management is chaired by the CEO. All members and chairman of this committee are appointed by the board risk and capital committee. The group's risk appetite statement sets broad parameters relating to the board's expectations around performance, business stability and risk management. The board ensures that there are appropriate resources to manage the risk arising from running our businesses.

Our comprehensive risk management process involves identifying, quantifying, managing and mitigating the risks associated with each of our businesses.

Risk awareness, control and compliance are embedded in all our day-to-day activities. As fundamental to our values, we have a strong and embedded risk and capital management culture.

Group risk management monitors, manages and reports on our risks to ensure that they are within the stated risk appetite mandated by the board of directors through the board risk and capital committee.

We monitor and control risk exposure through independent credit, market, liquidity, operational, legal risk, internal audit and compliance teams. This approach is core to assuming a tolerable risk and reward profile, helping us to pursue controlled growth across our business.

Group risk management operates within an integrated geographical and divisional structure, in line with our management approach, ensuring that the appropriate processes are used to address all risks across the group. There are specialist divisions in the UK and Southern Africa and smaller risk divisions in other regions tasked with promoting sound risk management practices.

Risk management units are locally responsive yet globally aware. This helps to ensure that all initiatives and businesses operate within our defined risk parameters and objectives, continually seeking new ways to enhance techniques.

We believe that the risk management systems and processes we have in place are adequate to support the group's strategy (as explained on page 20 in volume one) and allow the group to operate within its risk appetite tolerance as set out on page 11.

This volume of our integrated annual report explains in detail our approach to managing our business within our risk appetite tolerance, across all principal aspects of risk.

A summary of the year in review from a risk perspective

Our executive management are integrally involved in ensuring stringent management of risk, liquidity, capital and conduct. The primary aim is to achieve a suitable balance between risk and reward in our business, particularly in the context of prevailing market conditions and group strategy.

Succession of the group's executive management team has been an ongoing focus area for the board with the group's initial announcement in this regard made in November 2015. Since that date, the board has implemented a number of processes to ensure an orderly management succession process. Leadership and talent development remain high priority areas for the board and management of Investec.

As part of the group's orderly succession plan to move from founding members to the next generation of leadership, a number of board and management changes have been announced. These are disclosed in detail on pages 5 to 8 in volume one of the group's integrated annual report.

(continued)

The process has been well managed and there has been no negative impact on the group's operations.

Although the macro-environment continues to present challenges, the group was able to maintain sound asset performance and risk metrics throughout the year in review. Our risk appetite framework as set out on page 11 continues to be assessed in light of prevailing market conditions and group strategy.

In the year under review, the UK continued to negotiate the terms under which it would leave the European Union. The UK economy continues to be resilient, reflected in the levels of client activity we continue to see. Certain areas of the UK economy are beginning to signal signs of pressure. We are able to adjust our risk appetite and closely monitor any new lending in areas that may come under pressure in the medium-term. We are closely monitoring political developments with respect to Brexit and have continued to evaluate any changes we may need to make to adapt to the new legal and regulatory landscape that emerges.

In September 2017, Investec Bank plc's long-term deposit rating was upgraded by Fitch to BBB+ (stable outlook) and Moody's changed both the outlook on the bank to positive (A2, positive outlook) and also the outlook on Investec plc's ratings to positive (Baa1, positive outlook).

In South Africa the economy faced major headwinds throughout 2017, driven by escalating political risks, which had negative effects on the real economy. Concerns over the South African economy persisted throughout the year and peaked ahead of the ANC National Elective Conference in December 2017. Subsequent to that, Cyril Ramaphosa was elected President of the ANC, the ruling party. The announcement of a change of leadership within the ruling party was favourably received by investors. In response to these developments, Moody's left Southern Africa's international long-term credit ratings unchanged at investment grade (Baa3), upgrading the sovereign's outlook from negative to stable, ending the review for downgrade that started in November 2017.

Investec Bank Limited's ratings continued to track rating adjustments to the South African sovereign rating during the course of the year. The bank's national long-term ratings remain sound at Aa1.za from Moody's, AA(zaf) from Fitch and za.AAfrom Standard & Poor's.

Our core loan book growth over the year in home currencies was 8.7% in South Africa, and 12.4% in the UK. Growth in our books has been well diversified across our residential owner-occupied mortgage portfolios, private client and corporate client lending portfolios as well as selective lending collateralised by property, with loan to values at conservative levels.

Our credit exposures are to a select target market, comprising high-income and high net worth individuals, established corporates, and medium-sized enterprises. Our risk appetite continues to favour lower risk, income-based lending, with exposures well collateralised and credit risk taken over a short to medium term.

Our focus over the past few years to realign and rebalance our portfolios in line with our risk appetite framework is reflected in the relative changes in asset classes on our balance sheet; showing an increase in private client and corporate and other lending, and a reduction in lending collateralised by property as a proportion of our book. Our core loan book remains well diversified with commercial rent producing property loans comprising approximately 12% of the book, other lending collateralised by property 6%, high net worth and private client lending 39.5% and corporate lending 43% (with most industry concentrations well below 5%).

The group has minimal exposure to the agriculture and construction sectors in South Africa, and our overall group exposure to mining and resources amounts to 2% of our credit and counterparty exposures.

Overall net defaults of the group are at a manageable level, amounting to 3.8% and 11.2% of our tier 1 equity in Investec Limited and Investec plc respectively, with total impairments amounting to 19.6% of the group's pre-provision operating profit. The percentage of default loans (net of impairments but before taking collateral into account) to core loans and advances amounted to 1.17% (2017: 1.22%). The ratio of collateral to default loans (net of impairments) remains satisfactory at 1.72 times (2017: 1.35 times).

We reported an increase in the level of impairments taken on our South African portfolio, but remain comfortable with the overall performance of the book, as the credit loss ratio amounted to 0.28% (2017: 0.29%). Default loans (net of impairments) as a percentage of core loans and advances improved from 1.02% to 0.56% with absolute levels of defaults decreasing year on year due to asset writeoffs mainly in the corporate portfolio.

In the UK, ongoing asset quality continues to reflect the solid performance of the book. The credit loss ratio on an ongoing basis amounted to 0.24% (2017: 0.27%). The legacy portfolio makes up 3.2% of net core loan exposures at 31 March 2018 (31 March 2017: 5.5%). Gross defaults on the overall UK book including legacy and ongoing totalled £360.6 million at 31 March 2018 (31 March 2017: £260.3 million) largely due to legacy loans. Defaulted exposures are well covered by impairments. The credit loss ratio on the overall UK book amounted to 1.14% (2017: 0.90%, 2016: 1.13%) in anticipation of accelerated exits on certain assets in the legacy portfolio.

Legacy exposures have reduced by 34.3% to £313 million (net of impairments) at 31 March 2018. Non-performing exposures are well covered by impairments and total net defaults in the legacy book amounted to £90 million.

Our client-driven private equity portfolios in the UK and Southern Africa delivered a sound performance. Overall, we remain comfortable with the performance of our investment and equity risk exposures which comprise 4.1% of total assets.

Market risk within our trading portfolio remains modest with value at risk and stress testing scenarios remaining at prudent levels. Proprietary risk is limited.

We continue to spend much time and effort focusing on conduct, reputational, operational, recovery and resolution risks. Financial and cyber crime remain high priorities, and Investec continually aims to strengthen its systems and controls in order to manage cyber risk as well as meet its regulatory obligations to combat money laundering, bribery and corruption.

Investec has continued to maintain a sound balance sheet with a low gearing ratio of 9.1 times and a core loans to equity ratio of 4.6 times. Our current leverage ratios for Investec Limited and Investec plc are at 7.5% and 8.5% respectively, ahead of the group's minimum 6% target level.

We have always held capital well in excess of regulatory requirements and we intend to perpetuate this philosophy. Investec plc's common equity tier 1 ratio is at 11.0% at 31 March 2018 and Investec Limited's improved to 10.2% ahead of our group CET 1 target of greater than 10% and in excess of regulatory minimums. Capital continued to grow and we are comfortable that credit growth is in line with our risk appetite framework and supported by sound risk metrics. We believe that a common equity tier 1 ratio in excess of 10% is appropriate for our businesses, given our sound leverage ratios and significant capital light revenues, and we will continue to build our business in a manner that achieves this target.

In South Africa, we have applied to the South African Prudential Authority (previously known as the Banking Supervision Division of the South African Reserve Bank) for approval to implement the Foundation Internal Ratings-Based (FIRB) approach for certain wholesale portfolios, a transitional step to implementing the Advanced Internal Ratings-Based (AIRB) approach. Subject to approval from the South African Prudential Authority, we expect to implement FIRB in 2019 in the calculation of credit risk regulatory capital. Through the preparation process for the application Investec has enhanced a number of rating systems and risk quantification models. In addition, once approved, we are expecting a positive impact on capital ratios in applying this approach.

Risk disclosures In December 2017, the Bank of England (BoE) re-confirmed the preferred resolution strategy for Investec Bank plc as the bank insolvency (special administration) procedure under the Investment Bank Special Administration Regulations 2011 – otherwise known as 'modified insolvency'. As the resolution strategy is 'modified insolvency', the BoE has therefore set Investec Bank plc's minimum requirement for own funds and eligible liabilities (MREL) requirement as equal to its regulatory capital requirements.

Holding a high level of readily available, high quality liquid assets remains paramount in the management of our balance sheet. We continue to maintain a low reliance on interbank wholesale funding to fund core lending asset growth. Cash and near cash balances amounted to £12.8 billion at year end, representing 41.4% of customer deposits.

In the UK, a strong liquidity position has continued to be maintained throughout the year with liabilities growing to support strong asset growth. Funding rates have continued to reduce as we benefitted from additional cost-effective term funding including drawings on the BoE's Term Funding Scheme. For Investec plc and Investec Bank plc (solo basis), the Liquidity Coverage Ratio (LCR) is calculated using our own interpretations of the EU Delegated Act. The LCR reported to the Prudential Regulation Authority (PRA) at 31 March 2018 was 306% for Investec plc and 301% for Investec Bank plc (solo basis) which is well ahead of the regulatory minimum of 100%. Ahead of the implementation of the final Net Stable Funding Ratio (NSFR) rules, the group has applied its own interpretations of regulatory guidance and definitions from the Basel Committee of Banking Supervision (BCBS) final guidelines, to calculate the NSFR which was 142% for Investec plc and 133% for Investec Bank plc (solo basis), well ahead of the future regulatory minimum of 100%. The reported LCR and NSFR may change over time with regulatory developments and guidance.

In South Africa, we maintained a strong liquidity position and continued to hold high levels of surplus liquid assets. During the past financial year Investec Bank Limited responded to external political uncertainty by concluding its \$600 million long-term foreign currency funding programme in September 2017. It raised a further \$550 million using a combination of repos, sub-debt issuances and long-term cross currency swaps. The majority of our foreign currency funding is used to augment our already strong cash balances. Investec grew its total customer deposits by 6.1% from R303 billion to R322 billion as at

31 March 2018. Cash and near cash balances amounted to R116.5 billion at 31 March 2018 (31 March 2017: R117.6 billion).

Investec Bank Limited (solo basis) ended the financial year with the three-month average of its LCR at 133.9%, which is well ahead of the minimum regulatory level of 90% required. The NSFR has become a regulatory requirement as of January 2018. The NSFR for Investec Bank Limited (solo basis) amounted to 108.4% as at 31 March 2018, comfortably above the 100% regulatory minimum.

On 11 December 2017 the group released an announcement on the Johannesburg Stock Exchange in relation to its exposures to Steinhoff International Holdings NV (Steinhoff), its subsidiaries and related entities. Trading and investment losses incurred in respect of these exposures amounted to R220 million (approximately £13 million) in the current financial year, less than the estimate referred to in the December announcement. As noted in that announcement, Investec has credit exposures largely to Steinhoff Africa Holdings Proprietary Limited subsidiaries and Steinhoff Africa Retail Limited, which represent a small portion of the group's balance sheet. Based on the information currently available to the group, Investec is not expecting to suffer any losses on these exposures.

Investec's stress testing framework is well embedded in its operations and is designed to identify and regularly test the group's key 'vulnerabilities under stress'. A fundamental part of the stress testing process is a full and comprehensive analysis of all the group's material business activities, incorporating views from risk, the business and the executive – a process called the 'bottom-up' analysis. Resulting from the 'bottom-up' analysis, the Investecspecific stress scenarios are designed to specifically test the unique attributes of the group's portfolio. The key is to understand the potential threats to our sustainability and profitability and thus a number of risk scenarios are developed and assessed. These Investec specific stress scenarios form an integral part of our capital planning process. The stress testing process also informs the risk appetite review process and the management of risk appetite limits and is a key risk management tool of the group. This process allows the group to proactively identify underlying risks and manage them accordingly.

During the year, a number of stress scenarios were considered and incorporated into our processes. These included, for example, the impact of a corporate stress and protracted weak growth; and a potential domestic political and household shock.

The board, through its various risk and capital committees, continued to assess the impact of its principal risks and the above mentioned stress scenarios on its business. The board has concluded that the group has robust systems and processes in place to manage these risks and that, while under a severe stress scenario business activity would be very subdued, the group would continue to maintain adequate liquidity and capital balances to support the continued operation of the group.

IFRS 9 is effective from 1 April 2018. IFRS 9 replaces IAS 39 and sets out the new requirements for the recognition and measurement of financial instruments. These requirements focus primarily on the classification and measurement of financial instruments and measurement of impairment losses based on an expected credit loss (ECL) model. Investec plc confirmed to the PRA and Investec Limited confirmed to the South African Prudential Authority that each will use the transitional arrangements to absorb the full impact permissible of IFRS 9 in regulatory capital calculations. Further information on the impact of IFRS 9 is provided in the accounting policies section in volume three of the group's integrated annual report on page 39. In addition, the group has published its detailed transitional disclosures on 29 June 2018 separately from its annual report and these can be found on the group's website.

Conclusion

The group has achieved a satisfactory operating performance, supported by solid levels of client activity and a robust recurring income base. We are comfortable that we have robust risk management processes and systems in place. Whilst the complexities of Brexit continue to cause uncertainty in the UK economy, the underlying book continues to perform well and in line with our risk appetite tolerance. The final quarter of the 2018 financial year has started to see an uplift in the South African economic outlook.

Signed on behalf of the board

Stephen Koseff Chairman of the group risk and capital committee 12 June 2018

(continued)

The group maintained a strong liquidity position well in excess of regulatory and internal policy requirements throughout the year

Geographic summary of the year in review from a risk perspective

This section should be read in conjunction with, and against the background provided in, the overview of the operating environment section on pages 34 to 39 in volume one.

Detailed information on key developments during the financial year in review is provided in the sections that follow:

Refer to page 24, page 61 and pages 69 and 70, with a high-level geographic summary of the most salient aspects provided below.

UK and Other

Credit risk

Underlying core assets continue to perform well. Net core loans and advances increased by 12.4% from £8.6 billion at 31 March 2017 to £9.7 billion at 31 March 2018, driven by our strategy to support corporate and private client lending activities. Growth has been well diversified across asset classes and we continue to remain client-focused in our approach.

Default loans (net of impairments) have increased from 1.55% to 2.16% of core loans and advances. The credit loss ratio amounted to 1.14% (2017: 0.90%), in anticipation of accelerated exits on certain assets in the legacy portfolio. Ongoing asset quality continues to reflect the quality of the underlying book. The credit loss ratio on an ongoing basis amounted to 0.24% included in the 1.14% above (2017: 0.27%).

Traded market risk

We continue to manage to a very low level of market risk with VaR at £0.5 million at 31 March 2018. Trading revenues were impacted by lower volatility in equity markets through 2017, however, there was continued growth in client activity particularly within the Financial Product business. Market risk exposures across all desks remained low throughout the year.

Balance sheet risk

Cash and near cash balances at 31 March 2018 amounted to £5.8 billion (2017: £5.0 billion) with total customer deposits increasing by 5.6% to £11.6 billion (2017: £11.0 billion). For Investec plc and Investec Bank plc (solo basis), the LCR is calculated using our own interpretations of the EU Delegated Act. The LCR reported to the PRA at 31 March 2018 was 306% for Investec plc and 301% for Investec Bank plc (solo basis) which is well ahead of the regulatory minimum of 100%. Ahead of the implementation of the final NSFR rules, the group has applied its own interpretations of regulatory guidance and definitions from the BCBS final guidelines, to calculate the NSFR which was 142% for Investec plc and 133% for Investec Bank plc (solo basis), well ahead of the future regulatory minimum of 100%. The reported LCR and NSFR may change over time with regulatory developments and guidance.

Southern Africa

Credit risk

Net core loans and advances grew by 8.7% to R257 billion (31 March 2017: R236 billion) with private client lending and corporate portfolios representing the majority of the growth for the financial year in review.

Default loans (net of impairments) as a percentage of core loans and advances improved from 1.02% to 0.56% with absolute levels of defaults decreasing year on year due to asset write-offs mainly in the corporate portfolio.

We reported an increase in the level of impairments taken, however, the credit loss ratio reduced to 0.28% (2017: 0.29%), remaining at the lower end of its long-term average trend.

Traded market risk

The local markets were impacted by various local factors, in particular, political policy uncertainty prior to the ANC elective conference in December 2017. The primary focus of the trading desks remains to facilitate the demand of our clients, with limited proprietary risk taken. This is reflected by the low levels of market risk exposures as well as VaR throughout the year. The 95% one-day VaR ended the year at R3.4 million, down R1.1 million from the previous year. Market risk exposures across all trading desks remained low throughout the year.

Balance sheet risk

During the past financial year, Investec Bank Limited responded to external political uncertainty by concluding its \$600 million long-term foreign currency funding programme in September 2017. It raised a further \$550 million using a combination of repos, sub-debt issuances and longterm cross currency swaps. The majority of our foreign currency funding is used to augment our already strong cash balances. Investec grew its total customer deposits by 6.1% from R303 billion to R322 billion as at 31 March 2018. Cash and near cash balances amounted to R116.5 billion (31 March 2017: R117.6 billion). Investec Bank Limited (solo basis) ended the financial year with the three-month average of its LCR at 133.9%, which is well ahead of the minimum regulatory level of 90% required. The NSFR has become a regulatory requirement as of January 2018. The NSFR for Investec Bank Limited (solo basis) amounted to 108.4% as at 31 March 2018, comfortably above the 100% regulatory minimum.

Salient features

A summary of key risk indicators is provided in the table below.

	UK and Other		Southern Africa		Investec group
Year to 31 March	2018 £	2017 £	2018 R	2017 R	2018 £	2017 £
Net core loans and advances (million)	9 687	8 621	256 702	236 225	25 132	22 707
Total assets (excluding assurance assets) (million)	20 547	18 652	476 639	456 836	49 129	45 807
Total risk-weighted assets (million)	14 411	13 312	338 484	329 808	34 777^	32 979^
Total equity (million)	2 341	2 032	51 279	46 571	5 428	4 809
Cash and near cash (million)	5 813	5 026	116 533	117 586	12 825	12 038
Customer accounts (deposits) (million)	11 624	11 013	321 823	303 470	30 987	29 109
Gross defaults as a % of gross core loans and advances	3.67%	2.98%	1.11%	1.52%	2.10%	2.08%
Defaults (net of impairments) as a % of net core loans and advances	2.16%	1.55%	0.56%	1.02%	1.17%	1.22%
Net defaults (after collateral and impairments) as a % of net core loans and advances	–	–	–	–	–	–
Credit loss ratio*	1.14%	0.90%	0.28%	0.29%	0.61%	0.54%
Credit loss ratio – ongoing book	0.24%	0.27%	0.28%	0.29%	0.26%	0.29%
Structured credit as a % of total assets**	1.34%	1.87%	0.24%	0.40%	0.70%	1.00%
Banking book investment and equity risk exposures as a % of total assets**	2.98%	3.33%	4.87%	4.75%	4.07%	4.15%
Level 3 (fair value assets) as a % of total assets**	3.64%	3.65%	0.60%	0.83%	1.87%	1.99%
Traded market risk: one-day value at risk (million)	0.5	0.5	3.4	4.5	n/a	n/a
Core loans to equity ratio	4.1x	4.2x	5.0x	5.1x	4.6x	4.7x
Total gearing ratio^^	8.8x	9.2x	9.3x	9.8x	9.1x	9.5x
Loans and advances to customers
to customer deposits	83.2%	78.2%	77.4%	75.0%	79.6%	76.2%
Capital adequacy ratio##	15.4%	15.1%	14.6%	14.1%	n/a	n/a
Tier 1 ratio##	12.9%	11.5%	11.0%	10.7%	n/a	n/a
Common equity tier 1 ratio##	11.0%	11.3%	10.2%	9.9%	n/a	n/a
Leverage ratio – current##	8.5%	7.8%	7.5%	7.3%	n/a	n/a
Return on average assets#	0.71%	0.92%	1.28%	1.04%	1.03%	1.02%
Return on average risk-weighted assets#	1.00%	1.36%	1.79%	1.46%	1.45%	1.45%

* Income statement impairment charge on core loans as a percentage of average advances.

** Total assets excluding assurance assets.

^ The group numbers have been 'derived' by adding Investec plc and Investec Limited (Rand converted into Pounds Sterling) numbers together. ^^ Total assets excluding assurance assets to total equity.

# Where return represents operating profit after taxation and non-controlling interests and after deducting preference dividends, but before goodwill, acquired intangibles and non-operating items. Average balances are calculated on a straight-line average.

## The capital adequacy disclosures follow Investec's normal basis of presentation so as to show a consistent basis of calculation across the jurisdictions in which the group operates. For Investec plc and IBP this does not include the deduction of foreseeable charges and dividends when calculating the CET 1 ratio as required under the Capital Requirements Regulation and European Banking Authority technical standards. The impact of this deduction totalling £65 million for Investec plc and £18 million for IBP would lower the CET 1 ratio by 45bps and 13bps respectively.

Certain information is denoted as n/a as these statistics are not applicable at a consolidated group level and are best reflected per banking entity.

(continued)

Overall group risk appetite

The group has a number of board-approved risk appetite statements and policy documents covering our risk tolerance and approach to our principal aspects of risk. In addition, a number of committees and forums identify and manage risk at a group level. The group risk appetite statement and framework sets out the board's mandated risk appetite. The group risk appetite framework acts as a guide to determine the acceptable risk profile of the group by the owners of the group's capital. The group risk appetite statement ensures that limits/targets are applied and monitored across all key operating jurisdictions and legal entities. The group risk appetite statement is a high-level, strategic framework that supplements and does not replace the detailed risk policy documents at each entity and geographic level. The group risk appetite framework is a function of business strategy, budget and capital processes, our stress testing reviews and the regulatory and economic environment in which the group is operating. The group risk appetite framework is reviewed (in light of the above aspects) and approved at least annually or as business needs dictate. A documented process exists where our risk profile is measured against our risk appetite and this positioning is presented to the group risk and capital committee, board risk and capital committee and the board.

The table below provides a high-level summary of the group's overall risk tolerance framework.

	Risk appetite and tolerance metrics	Positioning at 31 March 2018
•	We seek to maintain an appropriate balance between revenue earned from capital light and capital intensive activities. Ideally capital light revenue should exceed 50% of total operating income, dependent on prevailing market conditions	Capital light activities contributed 56% to total operating income and capital intensive activities contributed 44%
•	We have a solid annuity income base supported by diversified revenue streams, and target an annuity income ratio in excess of 65%	Annuity income amounted to 76.2% of total operating income. Refer to page 30 in volume one for further information
•	We seek to maintain strict control over fixed costs and target a group cost to income ratio of below 65%	The cost to income ratio amounted to 66.9%. Refer to page 33 in volume one for further information
•	We aim to build a sustainable business generating sufficient return to shareholders over the longer term, and target a long-term return on equity ratio range of between 12% and 16%, and a return on risk-weighted assets in excess of 1.2%	The return on equity amounted to 12.1% and our return on risk-weighted assets amounted to 1.45%. Refer to pages 33 and 64 in volume one for further information
•	We are a lowly leveraged firm and target a leverage ratio in all our banking subsidiaries in excess of 6.0%	We achieved this internal target; refer to page 91 for further information
•	We intend to maintain a sufficient level of capital to satisfy regulatory requirements and our internal target ratios. We target a capital adequacy ratio range of between 14% and 17% on a consolidated basis for Investec plc and Investec Limited and we target a minimum tier 1 ratio of 11% and a common equity tier 1 ratio above 10%	Investec plc and Investec Limited meet all these targets. Capital has grown over the period. Refer to page 91 for further information
•	We target a diversified loan portfolio, lending to clients we know and understand. We limit our exposure to a single/connected individual or company to 7.5% for Investec plc total common equity tier 1 and 5% of tier 1 capital for Investec Limited (up to 10% if approved by the relevant board committee). We also have a number of risk tolerance limits and targets for specific asset classes	We maintained this risk tolerance level in place throughout the year
•	There is a preference for primary exposure in the group's main operating geographies (i.e. Southern Africa and UK). The group will accept exposures where we have a branch or local banking subsidiary and tolerate exposures to other countries where we have developed a local understanding and capability or we are facilitating a transaction for a client who requires facilities in a foreign geography	Refer to page 17 for further information
•	We target a credit loss ratio on core loans of less than 0.5% of average core advances, and we target defaults net of impairments less than 2% and 1.5% of total net core loans for Investec plc and Investec Limited respectively	The credit loss ratio on core loans amounted to 0.61% (0.26% excluding the legacy portfolio) and defaults net of impairments amounted to 1.17% of total core loans (1.02% excluding the legacy portfolio). Refer to page 35 for further information
•	We carry a high level of liquidity in all our banking subsidiaries in order to be able to cope with shocks to the system, targeting a minimum cash to customer deposit ratio of 25%	Total cash and near cash balances amounted to £12.8 billion at year end representing 41.4% of customer deposits. Refer to page 65 for further information
•	We have modest market risk as our trading activities primarily focus on supporting client activity and our appetite for proprietary trading is limited. We set an overall tolerance level of a one-day 95% VaR of less than R15 million for Investec Limited and less than £5 million for Investec plc	We meet these internal limits; one-day 95% VaR was £0.5 million for Investec plc and R3.4 million for Investec Limited at 31 March 2018; refer to page 57 for further information
•	We have moderate appetite for investment risk, and set a risk tolerance of less than 30% of common equity tier 1 capital for our unlisted principal investment portfolio for Investec plc. For Investec Limited, a risk tolerance of less than 12.5% has been set, excluding the group's holding in the IEP Group Proprietary Limited (IEP Group)	Our unlisted investment portfolios amounted to R3 940 million and £417 million for Investec Limited (excluding the IEP group) and Investec plc respectively, representing 10.6% of total tier 1 for Investec Limited and 27.4% of common equity tier 1 for Investec plc. Refer to page 53 for further information
•	Our operational risk management teams focus on improving business performance and compliance with regulatory requirements through review, challenge and escalation. We have heightened focus on financial and cyber crime	Refer to pages 74 to 77 for further information
•	We have a number of policies and practices in place to mitigate reputational, legal and conduct risks	Refer to pages 77 and 78 for further information

An overview of our principal risks

In our daily business activities, the group enters into a number of risks that could have the potential to affect our business operations, financial performance and prospects.

These principal risks have been highlighted on pages 42 to 48 in volume one.

The sections that follow provide information on a number of these risk areas and how the group manages these risks.

Additional risks and uncertainties that are currently considered immaterial and not included in this report may in the future impact our business operations and financial performance.

Risk management framework, committees and forums

A number of committees and forums identify and manage risk at group level, as described more fully below. These committees and forums operate together with Group risk management and are mandated by the board.

A diagram of our governance and risk framework is provided on page 120 in volume one.

The group committees and forums listed below have mandated certain committees and forums within the jurisdictions in which the group operates to support them in their objectives:

Committee		Function
Audit committees Members: Independent non-executive directors Chairman: Zarina Bassa (Independent non executive director) Frequency: • DLC audit committee – four times a year • Investec Limited and Investec Bank Limited audit committee – four times a year • Investec plc audit committee – four times a year		• See pages 153 and 154 in volume one • The Internal Audit, Compliance and Operational Risk departments report to the audit committees
Members: Chairman: Frequency:	Board risk and capital committee (BRCC) Executive and non-executive directors (senior management by invitation) David Friedland (non-executive director) Six times a year	• See pages 159 to 161 in volume one
Members: Chairman: Frequency:	Group risk and capital committee (GRCC) Executive directors and senior management (non-executive directors by invitation) Stephen Koseff (CEO) Six times a year	• The purpose of the GRCC is to supplement the BRCC
DLC capital committee Members: Chairman: Frequency:	Executive and non-executive directors and senior management Stephen Koseff (CEO) At least four times a year	• The DLC Capital Committee is mandated by BRCC to be the Capital Committee of Investec Limited and Investec plc and their subsidiaries as regards: – Capital allocation and structuring – Capital planning and models – Performance measurement – Capital-based incentivisation
Global credit committee Members: Chairman: Frequency:	Executive directors and senior management Non-executive directors have a level of oversight which is exercised within the applicable committee Glynn Burger (group risk and finance director) Twice a week	• Considers and approves the granting of credit to counterparties in excess of the mandates granted to divisional and other credit forums on a global basis • Considers the level of acceptable counterparty and geographical exposures within the board-approved risk appetite framework • Reviews and approves changes to credit policies and methodologies
Members: Chairman: Frequency:	Group investment committee Executive directors and senior management Stephen Koseff (CEO) Weekly	• Is responsible for reviewing and approving: – acquisitions or disposals of strategic investments in which we act as principal and retain an equity interest (above predetermined thresholds) – capital expenditure or disposals (above predetermined thresholds)

(continued)

Committee	Function
New product and deal forum Members: Executive directors, senior management and representatives from the following BU's: ICIB Equity Structuring, Group Risk (including Credit Risk, ALCO, Credit Risk Operations), Compliance, Treasury, Group Legal, Exchange Control, Specialist Bank, Global Head of Corporate Governance/Compliance, ICIB Operational Risk and Tax Chairman: Glynn Burger (alternative: Justin Cowley) (South Africa) and Ruth Leas (alternative: Ian Wohlman/ Gary Laughton) (UK) Frequency: Weekly	• Consideration of new products • Consideration of large and non-standard transactions of significance to the group e.g. major mining or project finance transactions • Consideration of structured finance, financial products or specialised finance transactions where products are specifically tailored to be unique for the requirements of the client
Group market risk forum Members: Global heads of risk, market risk and the trading desks; senior management; members of the market risk teams and other members of Group risk management Chairman: Anant Patel and Rishaan Ramnarain Frequency: Weekly	• Reviews and recommends limit adjustments in all existing products and markets across all desks in the group • Recommends limits for new products and new markets • Recommends methodology as to how risks are measured
Global compliance forum Members: Compliance representatives of the Investec Limited and Investec plc businesses Chairman: Bradley Tapnack; Alternate: Kathryn Farndell and Noel Sumner Frequency: Half-yearly and on ad hoc request	• Review and approval of all group compliance policies across Investec Limited and Investec plc businesses • Establishing and standardising of group standards where applicable • Escalation of policies to Policy ERRF and the board for approval as required
Asset and liability committee (ALCO) Members: Executive directors, senior management, economist, treasurer, business heads and head of asset and liability monitoring Chairman: Glynn Burger (alternate: Kevin Kerr) (South Africa), Ruth Leas (UK) and Craig McKenzie (Mauritius) Frequency: Monthly (or ad hoc if required)	• Recommends and monitors our funding and liquidity policy and non-trading interest rate risk policy, which translates into a suite of limits that define our risk appetite • Directs the implementation of the methodology, techniques, models and risk measures for liquidity and non-trading interest rate risk management (in the banking book) • Reviews the structure of our balance sheet and business strategies, taking into account market conditions, including stress tests • Maintains liquidity contingency plans • The responsibilities of the liability product and pricing forum (a sub-committee of ALCO chaired by the Treasurer) are: – to consider and approve pricing of all liabilities issued and other group funding entities so as to achieve the most appropriate funding mix at the best possible cost within the balance sheet targets as set by ALCO – to review the liquidity, interest rate and concentration characteristics of all new products and approve their issuance – to monitor existing products, terms and rates – to reprice or close products where appropriate – to evaluate continuously the external rates environment including competitor analysis – to escalate to ALCO any information deemed to be relevant to ALCO's ability to fulfil its mandate – to consider the impact on the overall liquidity of all new liabilities to be issued by group funding entities and approve the issuance of such products

Committee		Function
Members: Chairman: Frequency:	Global operational risk committee Heads of operational risk, heads of risk, specialist banking, asset management and wealth and investment senior management Bradley Tapnack (global head of corporate governance and compliance) At a minimum half-yearly	operational risk policies and appetite the group relating to the framework
Group legal risk forum Members:	Executive directors, senior management and

Global operational risk committee		• Provides support to BRCC and Policy ERRF in the management of
Members: Chairman: Frequency:	Heads of operational risk, heads of risk, specialist banking, asset management and wealth and investment senior management Bradley Tapnack (global head of corporate governance and compliance) At a minimum half-yearly	operational risk • Reviews and approves the operational risk management framework, policies and appetite • Aligns operational risk policies, practices and reporting across the group • Challenge and recommend the Operational Risk Management Framework (ORMF) and promote jurisdictional alignment of practices relating to the framework • Approve policies as mandated and ensure, as far as possible, alignment of policies between jurisdictions • Recommend policies that require approval by Policy ERRF and BRCC • Consider matters relating to operational risk regulatory requirements as it pertains to policy development and approval • Consider opportunities to leverage skills across the group • The Committee has authority to: – request internal/external reports – investigate any matters within its terms of reference – mandate actions to be taken
Group legal risk forum Members: Chairman: Frequency:	Executive directors, senior management and divisional legal managers David Nurek (global head of legal risk) Ad hoc if required	• Considers and manages legal risks throughout the group
Members: Chairman: Frequency:	Social and ethics committee Executive and non-executive directors Fani Titi Quarterly	• See pages 148 to 150 in volume one.
Members: Chairman: Frequency:	Policy executive risk review forum (Policy ERRF) Executive directors and senior management Stephen Koseff (CEO) Weekly	Policy ERRF is mandated to: • Consider and recommend for approval relevant policies, which require board approval in terms of legislation or review by the executives • Consider and approve: – Proposed amendments to various risk appetite limits should these differ from the risk appetite framework – New business initiatives – Limit reviews approved at ERC (UK) and Review ERRF (South Africa) are noted at Policy ERRF, with significant changes to limits presented to Policy ERRF for review and approval – Investec Bank plc and Investec Bank Limited New Product and Deal Forum proposals, when the proposal is outside of the ordinary course of business and/or if referred to the Forum by Review ERRF or ERC for approval where deemed necessary – Terms of reference of global forums/committees – Systems, infrastructure and capital expenditure in excess of R30 million or £2 million – Funding plans and initiatives – Securitisation vehicles – Financial covenants provided by members of the group to third parties

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Committee		Function
Members: Chairman: Frequency:	Review executive risk review forum (Review ERRF) Executive directors, heads of market risk and heads of asset and liability monitoring Kevin Kerr (South Africa) and Ruth Leas (UK) Weekly	• See page 162 in volume one Review ERRF is mandated to: • Measure and monitor the enterprise wide risk of the group and ensure the necessary processes are in place to mitigate any risks • Approve of Investec Bank Limited New Product and Deal Forum proposals which are in the ordinary course of business • Review of group Insurance Policies • Consider and approve any other matter as requested by the group's CEO, as delegated to him under the Investec Limited and Investec plc board • The following key risk types that are considered by Review ERRF on a weekly basis are: – Market risk – Balance sheet liquidity and non-trading interest rate risk
Members: Chairman: Frequency:	Executive Risk Committee (ERC) Executive directors and senior management David van der Walt Weekly	ERC is mandated to: • To evaluate the most significant risks faced by IBP in the ordinary course of business • To review the risk models (including, but not limited to, credit models) which need to be incorporated by IBP appropriately into the allocation of capital • Review and approve the annual review of market risk limit letters for IBP, as well as any ad hoc requests to change such limits • To ensure that limits are adhered to by the relevant IBP divisions and that agreed recommendations to mitigate risk are implemented appropriately • To act as an agent of the IBP Board to ensure that all decisions of the IBP Board on risk management policies and procedures are implemented and monitored • To ensure that there is an ongoing process of risk and control identification within IBP, particularly in line with any changes to business objectives, such as the commencement of a new trading area or product stream • To review key decisions from Asset and Liability Management, Market Risk, New Product and Deal Forum and new business strategies
		• To consider and provide a recommendation to Policy ERRF on the Bank's adoption of Category A policies and terms of reference • To note key decisions from the IBP Policy Review Committee

Integrated global risk management structure

Group risk and finance director	Glynn Burger
Head of risk Southern Africa	Kevin Kerr
Head of risk UK	Ruth Leas

Divisional and geographic roles	Global	UK and Other	South Africa
Credit Risk	Ruth Leas/Kevin Kerr	Gary Laughton	Justin Cowley/Adriann Bergh
Traded Market Risk	Anant Patel/Rishaan Ramnarain	Anant Patel	Rishaan Ramnarain
Balance Sheet Risk Management	Cyril Daleski	Jana Moore	Cyril Daleski
Operational Risk	Chandre Griesel	Aaron McIntyre	Chandre Griesel
Legal Risk	David Nurek	Lauren Ekon	David Nurek
Internal Audit	Bradley Tapnack	Elizabeth Broughton	Stuart Mansfield
Compliance	Bradley Tapnack	Noel Sumner	Kathryn Farndell

In the sections that follow, the following abbreviations are used on numerous occasions:

ALCO	Asset and liability committee	FCA	Financial Conduct Authority
BCBS	Basel Committee of Banking Supervision	FSB	Financial Services Board
BIS	Bank for International Settlements	GRCC	Group risk and capital committee
BoE	Bank of England	PCCC	Prudential conduct and controls committee
BOM	Bank of Mauritius	Policy ERRF	Policy executive risk review forum
BRCC	Board risk and capital committee	PRA	Prudential Regulation Authority
EBA	European Banking Authority	Review ERRF	Review executive risk review forum
ECB ERC	European Central Bank Executive risk committee	South African Prudential Authority	South African Prudential Authority (previously known as the Banking Supervision Division of the South African Reserve Bank)

Credit and counterparty risk management

Credit and counterparty risk description

Credit and counterparty risk is defined as the risk arising from an obligor's (typically a client or counterparty) failure to meet the terms of any agreement. Credit and counterparty risk arises when funds are extended, committed, invested, or otherwise exposed through contractual agreements, whether reflected on- or off-balance sheet.

Credit and counterparty risk arises primarily from three types of transactions:

• Lending transactions through loans and advances to clients and counterparties creates the risk that an obligor will be unable or unwilling to repay capital and/or interest on loans and advances granted to them. This category includes bank placements, where we have placed funds with other financial institutions

• Issuer risk on financial instruments where payments due from the issuer of a financial instrument may not be received
• Trading transactions, giving rise to settlement and replacement risk (collectively counterparty risk):
  • Settlement risk is the risk that the settlement of a transaction does not take place as expected, with one party effecting required settlements as they fall due but not receiving the performance to which they are entitled
  • Replacement risk is the risk following defaults by the original counterparty resulting in the contract holder having to enter into a replacement contract with a second counterparty in order to fulfil the transaction.

The relevant credit committees will also consider wrong-way risk at the time of granting credit limits to each counterparty. In the banking book environment, wrongway risk occurs where the value of collateral to secure a transaction, or guarantor, is positively correlated with the probability of default of the borrower or counterparty. For counterparty credit risk resulting from transactions in traded products (such as OTC derivatives), wrong-way risk is defined as exposure to a counterparty that is adversely correlated with the credit quality of that counterparty. It arises when default risk and credit exposure increase together.

Credit and counterparty risk may also arise in other ways and it is the role of the global risk management functions and the various independent credit committees to identify risks falling outside these definitions.

Credit and counterparty risk governance structure

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review and oversight in the credit decisionmaking forums depending on the size and complexity of the deal. It is our policy that all centralised credit committees are comprised of voting members who are independent of the originating business unit. All decisions to enter into a transaction are based on unanimous consent.

In addition to the credit committees, the following processes assist in managing, measuring and monitoring credit and counterparty risk:

• Day-to-day arrears management and regular arrears reporting ensure that individual positions and any potential trends are dealt with in a timely manner
• Watchlist committees, which review the management of distressed loans, potential problem loans and exposures in arrears that require additional attention and supervision
• Credit watchlist forum, which reviews and manages exposures that may potentially become distressed as a result of changes in the economic environment or adverse share price movements, or that are vulnerable to volatile exchange rate or interest rate movements or idiosyncratic financial distress
• Arrears, default and recoveries forum specifically reviews and manages distressed loans and potentially distressed loans for private clients and corporates. This forum also reviews and monitors counterparties who have been granted forbearance measures.

Credit and counterparty risk appetite

The board has set a group risk appetite limit framework which regulates the maximum exposures we would be comfortable to tolerate in order to diversify and mitigate risk. This limit framework is monitored on an ongoing basis and reported to the GRCC, BRCC and the board on a regular basis. Should there be any breaches to limits, or where exposures are nearing limits, these exceptions are specifically highlighted for attention, and any remedial actions agreed.

There is a preference for primary exposure in the group's main operating geographies (i.e. Southern Africa and the UK). The group will accept exposures where we have a branch or local banking subsidiary (as explained on the following page) and tolerate exposures to other countries where we have developed a local understanding and capability or we are facilitating a

transaction for a client who requires facilities in a foreign geography.

Our assessment of our clients and counterparties includes consideration of their character, integrity, core competencies, track record and financial strength. A strong emphasis is placed on the historic and ongoing stability of income and cash flow streams generated by the clients. Our primary assessment method is therefore the ability of the client to meet their payment obligations.

We have little appetite for unsecured debt and require good quality collateral in support of obligations (refer to page 49 for further information).

Target clients include high net worth and/ or high-income individuals, professionally qualified individuals, established corporates, small and medium enterprises, financial institutions and sovereigns. Corporates must have scale and relevance in their market, an experienced management team, able board members, strong earnings and cash flow.

We are client-centric in our approach and originate loans with the intent of holding these assets to maturity, thereby developing a 'hands-on' and longstanding relationship.

Interbank lending is largely reserved for those banks and institutions in the group's core geographies of activity, which are systemic and highly rated. Direct exposures to cyclical industries and start-up ventures are generally avoided.

Concentration risk

Concentration risk is when large exposures exist to a single client or counterparty, group of connected counterparties, or to a particular geography, asset class or industry. An example of this would be where a number of counterparties are affected by similar economic, legal, regulatory or other factors that could mean their ability to meet contractual obligations are correlated.

Concentration risk can also exist where portfolio loan maturities are clustered to single periods in time. Loan maturities are monitored on a portfolio and a transaction level by Group risk management, Group Lending Operations as well as the originating business units.

Credit and counterparty risk is always assessed with reference to the aggregate exposure to a single counterparty or group of related parties to manage concentration risk.

Country risk

Country risk refers to the risk of lending to a counterparty operating in a particular country or the risk inherent in sovereign exposure, i.e. the risk of exposure to loss caused by events in other countries. Country risk covers all forms of lending or investment activity whether to/with individuals, corporates, banks or governments. This can include geopolitical risks, transfer and convertibility risks, and the impact on the borrower's credit profile due to local economic and political conditions.

To mitigate country risk, there is a preference for primary exposure in the group's main operating geographies. The group will accept exposures where we have a branch or local banking subsidiary, and tolerate exposures to other countries where we are facilitating a transaction for a client who requires facilities in a foreign geography and where we have developed a local understanding and capability.

Investec's credit risk appetite with regard to country risk is characterised by the following principles:

• Preference is to have exposure only to politically stable jurisdictions that we understand and have preferably operated in before
• There is no specific appetite for exposures outside of the group's pre-existing core geographies or target markets
• The legal environment should be tested, have legal precedent in line with OECD standards and have good corporate governance
• In certain cases, country risk can be mitigated by taking out political risk insurance with suitable counterparties, where deemed necessary and where considered economic.

While we do not have a separate country risk committee, the relevant credit committees as well as investment committees and Policy ERRF will consider, analyse and assess the appropriate limits to be recorded when required, to assume exposure to foreign jurisdictions.

Investec has a holistic approach to corporate responsibility, which runs beyond recognising our own footprint on the environment and includes our many corporate social investment activities and our lending and investing activities. This is not merely for business reasons, but based on a broader responsibility to our environment and society. Accordingly, corporate responsibility risk considerations are considered by the credit committee and investment committee when making lending or investment decisions. There is also oversight by the social and ethics committee (board committee) on social and environmental issues including climate related impact considerations. In particular the following factors are taken into account when assessing a transaction based on the outcome of the corporate responsibility considerations:

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considerations

• Environmental considerations (including animal welfare and climate – related impacts)
• Social considerations (including human rights)
• Macro-economic considerations.

Refer to our corporate responsibility report on our website.

Management and measurement of credit and counterparty risk

Fundamental principles employed in the management of credit and counterparty risk are:

• A clear definition of our target market
• A quantitative and qualitative assessment of the creditworthiness of our counterparties
• Analysis of risks, including concentration risk (concentration risk considerations include asset class, industry, counterparty and geographical concentration)
• Decisions are made with reference to risk appetite limits
• Prudential limits
• Regular monitoring and review of existing and potential exposures, once facilities have been approved
• A high level of executive involvement in decision-making with non-executive review and oversight.

Regular reporting of credit and counterparty risk exposures within our operating units is made to management, the executives and the board at the GRCC and BRCC. The board regularly reviews and approves the appetite for credit and counterparty risk, which is documented in risk appetite statements and policy documents. This is implemented and reviewed by Group Credit.

Despite strict adherence to the above principles, increased default risk may arise from unforeseen circumstances, particularly in times of extreme market volatility and weak economic conditions.

The group applies the standardised approach for calculating capital requirements in the assessment of its credit and counterparty exposures. The group's banking subsidiaries conduct their mapping of credit and counterparty exposures in accordance with the mapping procedures specified by the Central Bank, in the respective geographies in which the group operates.

A large proportion of the group's portfolios are not rated by external rating agencies. We place reliance upon internal consideration of counterparties and borrowers, and use ratings prepared externally, where available as support in our decision-making process. Within the credit approval process, internal and external ratings are included in the assessment of the client quality.

Exposures are classified to reflect the group's risk appetite and strategy. In our Pillar III disclosure, exposures are classified according to the Basel asset classes which include sovereign, bank, corporate, retail, equity, securitisation and specialised lending (which is further categorised into project finance; commodities finance; high volatility commercial real estate; and income-producing commercial real estate).

Internal credit rating models have been developed to cover all material asset classes.

In South Africa, internal credit rating models continue to be developed to cover all material asset classes. We have applied to the South African Prudential Authority for approval of the Foundation Internal Ratings-Based (FIRB) approach, a transitional step to implementing the Advanced Internal Ratings-Based (AIRB) approach. Subject to approval from the South African Prudential Authority, we expect to implement FIRB

in the calculation of credit risk regulatory capital. Through the preparation process for the application Investec has enhanced a number of rating systems and risk quantification models. In addition, once approved, we are expecting a positive impact on capital ratios in applying this approach.

Stress testing and portfolio management

Investec has embedded its stress testing framework which is a repeatable stress testing process, designed to identify and regularly test the bank's key 'vulnerabilities under stress'.

A fundamental part of the stress testing process is a full and comprehensive analysis of all the group's material business activities, incorporating views from risk, the business and the executive – a process called the 'bottom-up' analysis. Out of the 'bottom-up' analysis the Investec-specific stress scenarios are designed to specifically test the unique attributes of the bank's portfolio.

These Investec-specific stress scenarios form an integral part of our capital planning process. The stress testing process also informs the risk appetite review process, and the management of risk appetite limits and is a key risk management tool of the bank. This process allows the bank to identify underlying risks and manage them accordingly.

Notwithstanding the form of the stress testing process, the framework should not impede the group from being able to be flexible and perform ad hoc stress tests, which by their nature need to be completed on request and in response to emerging risk issues.

Reviews are also undertaken on all material businesses, where the portfolios are analysed to assess any migration in portfolio quality, highlight any vulnerabilities, identify portfolio concentrations and make appropriate recommendations, such as a reduction in risk appetite limits or specific exposures.

Credit and counterparty risk may also arise in other ways and it is the role of the global risk management function and the various independent credit committees to identify risks falling outside these definitions.

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Credit and counterparty risk – nature of activities

Credit and counterparty risk is assumed through a range of client-driven lending activities to private and corporate clients and other counterparties, such as financial institutions and sovereigns. These activities are diversified across a number of business activities.

Lending collateralised by property

Client quality and expertise are at the core of our credit philosophy. Our exposure to the property market is well diversified with strong bias towards prime locations for residential exposure and focus on tenant quality for commercial assets. Debt service cover ratios are a key consideration in the lending process supported by reasonable loan to security value ratios.

We provide senior debt and other funding for property transactions, with a strong preference for income producing assets supported by an experienced sponsor providing a material level of cash equity investment into the asset.

An analysis of the lending collateralised by property portfolio and asset quality information is provided on pages 42 to 45.

Private client activities

Our private banking activities target high net worth individuals, active wealthy entrepreneurs, high-income professionals, newly qualified professionals with high-income earning potential, selfemployed entrepreneurs, owner managers in small to mid-cap corporates and sophisticated investors.

Lending products are tailored to meet the requirements of our clients. Central to our credit philosophy is ensuring the sustainability of cash flow and income throughout the cycle. As such, the client base has been defined to include high net worth clients (who, through diversification of income streams, will reduce income volatility) and individuals with a profession which has historically supported a high and sustainable income stream, irrespective of the stage in the economic cycle.

Credit risk arises from the following activities:

• Personal Banking delivers products to enable target clients to create and manage their wealth. This includes private client mortgages, transactional banking, high net worth lending, offshore banking and foreign exchange
• Residential Mortgages provides mortgage loan facilities for high-income professionals and high net worth individuals tailored to their individual needs
• Specialised Lending provides tailored credit facilities to high net worth individuals and their controlled entities
• Portfolio Lending provides loans to high net worth clients against their investment portfolio, typically managed by Investec Wealth & Investment.

Corporate client activities

We focus on traditional client-driven corporate lending activities, in addition to customer flow related treasury and trading execution services.

Within the corporate lending businesses, credit risk can arise from corporate loans, acquisition finance, asset finance, power and infrastructure finance, assetbased lending, fund finance and resource finance. We also undertake debt origination activities for corporate clients.

The credit risk management functions approve specific credit and counterparty limits that govern the maximum credit exposure to each individual counterparty. In addition, further risk management limits exist through industry and country limits to manage concentration risk. The credit appetite for each counterparty is based on the financial strength of the principal borrower, its business model and market positioning, the underlying cash flow to the transaction, the substance and track record of management, and the security package. Political risk insurance, and other insurance is taken where they are deemed appropriate.

Investec has limited appetite for unsecured credit risk and facilities are typically secured on the assets of the underlying borrower as well as shares in the borrower.

A summary of the nature of the lending and/or credit risk assumed within some of the key areas within our corporate lending business is provided below:

• Corporate Loans: provides senior secured loans to mid-to-large cap companies. Credit risk is assessed against debt serviceability based upon robust cash generation of the business based on both historical and forecast information. We typically act as transaction lead or arranger, and have a close relationship with management and sponsors
• Corporate Debt Securities: these are tradable corporate debt instruments, based on acceptable credit fundamentals typically with a medium-term hold strategy where the underlying risk is to UK, European and South African corporates. This is a highly diversified, granular portfolio that is robust, and spread across a variety of geographies and industries
• Acquisition Finance: provides debt funding to proven management teams and sponsors, running small to mid-cap sized companies. Credit risk is assessed against debt serviceability based upon robust cash generation of the business based on both historical and forecast information. We typically lend on a bilateral basis and benefit from a close relationship with management and sponsors
• Asset Based Lending: provides working capital and secured corporate loans to mid-caps. These loans are secured by the assets of the business, for example, the accounts receivable, inventory and plant and machinery. In common with our corporate lending activities, strong emphasis is placed on supporting companies with scale and relevance in their industry, stability of cash flow, and experienced management
• Fund Finance: provides debt facilities to asset managers and fund vehicles, principally in private equity. The geographical focus is the UK, Western Europe, North America, Australia and Southern Africa where Investec can support experienced asset managers and their funds which show strong, long-term value creation and good custodianship of investors' money. Debt facilities to fund vehicles are secured against undrawn limited partner commitments and/

(continued)

or the funds underlying assets. Fund manager loans are structured against committed fund management cash flows, the managers' investment stake in their own funds and when required managers' personal guarantees

• Small Ticket Asset Finance: provides funding to small and medium-sized corporates to support asset purchases and other business requirements. The portfolio is highly diversified by industry and number of clients and is secured against the asset being financed and is a direct obligation of the company
• Large Ticket Asset Finance: provides the finance and structuring expertise for aircraft and larger lease assets, the majority of which are senior secured loans with a combination of corporate, cash flow and asset-backed collateral against the exposure
• Power and Infrastructure Finance: arranges and provides typically long-term financing for infrastructure assets, in particular renewable and traditional power projects as well as transportation assets, against contracted future cash flows of the project(s) from well-established and financially sound off-take counterparties. There is a requirement for a strong upfront equity contribution from an experienced sponsor
• Resource Finance: debt arranging and underwriting together with structured hedging solutions mainly within the mining sectors. The underlying commodities are mainly precious and base metals and coal. Our clients in this sector are established mining companies which are typically domiciled and publicly listed in one of the following geographies – the UK, North America and Australia as well as other countries where we are facilitating a transaction for a client who requires facilities in a foreign geography. All facilities are secured by the borrower's assets and repaid from mining cash flows
• Structured Credit: these are bonds secured against a pool of assets, mainly UK residential mortgages or European or US corporate leverage loans. The bonds are typically investment grade rated, which benefit from a high-level of credit subordination and can withstand a significant level of portfolio defaults
• Treasury Placements: the treasury function, as part of the daily management of the bank's liquidity, places funds with central banks and other commercial banks and financial institutions. These transactions are typically short-term (less than one month) money market placements or secured repurchase agreements. These market counterparties are mainly investment grade rated entities that occupy dominant and systemic positions in their domestic banking markets and internationally. These counterparties are located in the UK, Western Europe, North America, Southern Africa and Australia
• Corporate advisory and investment banking activities: counterparty risk in this area is modest. The business also trades approved shares on an approved basis and, in the UK, makes markets in shares where we are appointed corporate broker under pre-agreed market risk limits. Settlement trades are largely on a delivery versus payment basis, through major stock exchanges. Credit risk only occurs in the event of counterparty failure and would be linked to any fair value losses on the underlying security
• Customer trading activities to facilitate client lending and hedging: our customer trading portfolio consists of derivative contracts in interest rates, foreign exchange, commodities, credit derivatives and equities that are entered into, to facilitate a client's hedging requirements. The counterparties to such transactions are typically corporates, in particular where they have an exposure to foreign exchange

due to operating in sectors that include imports and exports of goods and services. These positions are marked to market, typically with daily margin calls to mitigate credit exposure in the event of counterparty default.

An analysis of the corporate client loan portfolio and asset quality information is provided on pages 42 to 45.

Wealth & Investment

Investec Wealth & Investment provides investment management services to private clients, charities, intermediaries, pension schemes and trusts. Wealth & Investment is primarily an agency business with a limited amount of principal risk. Its core business is discretionary and non-discretionary investment management services.

Settlement risk can arise due to undertaking transactions in an agency capacity on behalf of clients. However, the risk is not considered to be material as most transactions are undertaken with large institutional clients, monitored daily, and trades are usually settled within two to three days.

Asset Management

Through the course of its normal business, Investec Asset Management is constantly transacting with market counterparties. A list of approved counterparties is maintained and procedures are in place to ensure appointed counterparties meet certain standards in order to safeguard client assets being transacted with or undertaken with approved counterparties and this is enforced through system controls where possible. In addition to due diligence, other forms of risk management are employed to reduce the impact of a counterparty failure. These measures include market conventions such as 'Delivery versus Payment' (DVP), and where appropriate; use of collateral or contractual protection (e.g. under ISDA). Net exposure to counterparties is monitored by Investec Asset Management's Investment Risk Committee, and day-to-day monitoring is undertaken by a dedicated and independent Investment Risk Team.

Asset quality analysis – credit risk classification and provisioning policy

It is a policy requirement overseen by credit risk management that each operating division makes provision for specific impairments and calculates the appropriate level of portfolio impairments. This is in accordance with established group guidelines and in conjunction with the watchlist committee process. In the annual financial statements, credit losses and impairments are reported in accordance with International Financial Reporting Standards (IFRS).

Regulatory and economic capital classification	IFRS impairment treatment	Arrears, default and recoveries classification category	Description
Performing assets	For assets which form part of a homogeneous portfolio, a portfolio impairment is required which recognises asset impairments that have not been individually identified. The portfolio impairment takes into	Past due	An account is considered to be past due when it is greater than zero and less than or equal to 60 days past due the contractual/credit agreed payment date. Management however is not concerned and there is confidence in the counterparty's ability to repay the past due obligations.
account past events and does not cover impairments to exposures arising out of uncertain future events. By definition, this impairment is only calculated for credit exposures which are managed on a portfolio basis and only for assets where a loss trigger event has occurred.	Special mention	The counterparty is placed in special mention when that counterparty is considered to be experiencing difficulties that may threaten the counterparty's ability to fulfil its credit obligation to the group (i.e. watchlist committee is concerned) for the following reasons: • Covenant breaches • There is a slowdown in the counterparty's business activity • An adverse trend in operations that signals a potential weakness in the financial strength of the counterparty • Restructured credit exposures until appropriate watchlist committee decides otherwise. Ultimate loss is not expected, but may occur if adverse conditions persist. Reporting categories: • Credit exposures overdue 1 – 60 days • Credit exposures overdue 61 – 90 days.

Asset quality analysis – credit risk classification and provisioning policy (continued)

Regulatory and economic capital classification	IFRS impairment treatment	Arrears, default and recoveries classification category	Description
Assets in default (non-performing assets)	Specific impairments are evaluated on a case-by-case basis where objective evidence of impairment has arisen. In determining specific impairments, the following factors are considered: • Capability of the client to generate sufficient cash flow to service debt obligations and the ongoing viability of the client's business • Likely dividend or amount recoverable on liquidation or bankruptcy or business rescue • Nature and extent of claims by other creditors • Amount and timing of expected cash flows • Realisable value of security held (or other credit mitigants) • Ability of the client to make	Sub-standard	The counterparty is placed in sub-standard when the credit exposure reflects an underlying, well defined weakness that may lead to probable loss if not corrected: • The risk that such credit exposure may become an impaired asset is probable, • The bank is relying, to a large extent, on available collateral, or • The primary sources of repayment are insufficient to service the remaining contractual principal and interest amounts, and the bank has to rely on secondary sources for repayment. These secondary sources may include collateral, the sale of a fixed asset, refinancing and further capital. Credit exposures overdue for more than 90 days will at a minimum be included in 'sub-standard' (or a lower quality category).
	payments in the foreign currency, for foreign currency denominated accounts.	Doubtful	The counterparty is placed in doubtful when the credit exposure is considered to be impaired, but not yet considered a final loss due to some pending factors such as a merger, new financing or capital injection which may strengthen the quality of the relevant exposure.
		Loss	A counterparty is placed in the loss category when: • The credit exposure is considered to be uncollectible once all efforts, such as realisation of collateral and institution of legal proceedings, have been exhausted, or • Assets in this category are expected to be written off in the short-term since the likelihood of future economic benefits resulting from such assets are remote.

Credit risk mitigation

Credit risk mitigation techniques can be defined as all methods by which Investec seeks to decrease the credit risk associated with an exposure. Investec considers credit risk mitigation techniques as part of the credit assessment of a potential client or business proposal and not as a separate consideration of mitigation of risk. Credit risk mitigants can include any collateral item over which the bank has a charge over assets, netting and margining agreements, covenants, or terms and conditions imposed on a borrower with the aim of reducing the credit risk inherent to that transaction.

As Investec has a limited appetite for unsecured debt, the credit risk mitigation technique most commonly used is the taking of collateral, with a strong preference for tangible assets. Collateral is assessed with reference to the sustainability of value and the likelihood of realisation. Acceptable collateral generally exhibits characteristics that allow for it to be easily identified and appropriately valued and ultimately allowing Investec to recover any outstanding exposures.

Where a transaction is supported by a mortgage or charge over property, the primary credit risk is still taken on the borrower. For property backed lending such as residential mortgages, the following characteristics of the property are considered: the type of property; its location; and the ease with which the property could be re-let and/or resold. Where the property is secured by lease agreements, the credit committee prefers not to lend for a term beyond the maximum term of the lease. Commercial real estate generally takes the form of good quality property often underpinned by strong third party leases. Residential property

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is also generally of a high quality and based in desirable locations. Residential and commercial property valuations will continue to form part of our ongoing focus on collateral assessment. It is our policy to obtain a formal valuation of every commercial property offered as collateral for a lending facility before advancing funds. Residential properties are valued by desktop valuation and/or approved valuers, where appropriate.

In addition, the relevant credit committee normally requires a suretyship or guarantee in support of a transaction in our private client business. Other common forms of collateral in the retail asset class are motor vehicles, cash and share portfolios. Primary collateral in private client lending transactions can also include a high net worth individual's share/investment portfolio. This is typically in the form of a diversified pool of equity, fixed income, managed funds and cash. Often these portfolios are managed by Investec Wealth & Investment. Lending against investment portfolios is typically geared at conservative loan-to-value ratios, after considering the quality, diversification, risk profile and liquidity of the portfolio.

Our corporate, government and institutional clients provide a range of collateral including cash, corporate assets, debtors (accounts receivable), trading stock, debt securities (bonds), listed and unlisted shares and guarantees.

The majority of credit mitigation techniques linked to trading activity is in the form of netting agreements and daily margining. The primary market standard legal documents that govern this include the International Swaps and Derivatives Association Master Agreements (ISDA), Global Master Securities Lending Agreement (GMSLA) and Global Master Repurchase Agreement (GMRA). In addition to having ISDA documentation in place with market and trading counterparties in over-the-counter (OTC) derivatives, a Credit Support Annex (CSA) ensures that markto-market credit exposure is mitigated daily through the calculation and placement/ receiving of cash collateral. Where netting agreements have been signed, the

enforceability is supported by external legal opinion within the legal jurisdiction of the agreement.

Set-off has been applied between assets, subject to credit risk and related liabilities in the annual financial statements, where:

• A legally enforceable right to set-off exists
• There is the intention to settle the asset and liability on a net basis, or to realise the asset and settle the liability simultaneously.

In addition to the above accounting set-off criteria, banking regulators impose the following additional criteria:

• Debit and credit balances relate to the same obligor/counterparty
• Debit and credit balances are denominated in the same currency and have identical maturities
• Exposures subject to set-off are risk-managed on a net basis
• Market practice considerations.

For this reason there will be instances where credit and counterparty exposures are displayed on a net basis in these annual financial statements but reported on a gross basis to regulators.

Investec places minimal reliance on credit derivatives in its credit risk mitigation techniques. Periodically the bank will enter into Credit Default Swaps (CDS) in order to hedge a specific asset held or to create a more general or macro hedge against a group of exposures in one industry or geography. In these instances, the bank is deemed to be 'buying protection' against the assets. Depending on the perceived risk, or 'spread', of the underlying exposure, the CDS will fluctuate in value; increasing in value when the asset has become more risky and decreasing when risk has reduced. Occasionally, the bank will enter into trading/investment CDS positions where we buy protection or sell protection without owning the underlying asset. The total amount of net credit derivatives outstanding at 31 March 2018 amounts to £2.7 million, of which all is used for credit mitigation purposes. Total protection bought amounts to £1.9 million and total protection sold amounts to £0.8 million relating to credit derivatives used in credit mitigation.

Further information on credit derivatives is provided on page 62.

Investec endeavours to implement robust processes to minimise the possibility of legal and/or operational risk through good quality tangible collateral. The legal risk function in Investec ensures the enforceability of credit risk mitigants within the laws applicable to the jurisdictions in which Investec operates. When assessing the potential concentration risk in its credit portfolio, consideration is given to the types of collateral and credit protection that form part of the portfolio.

Credit and counterparty risk year in review

UK and Other

Underlying core assets continue to perform well. Net core loans and advances increased by 12.4% to £9.7 billion at 31 March 2018 from £8.6 billion at 31 March 2017, driven by our strategy to support corporate and private client lending activities.

Corporate client and other lending increased by 14.0% from £5.2 billion at 31 March 2017 to £5.9 billion at 31 March 2018. Growth has been well diversified across all asset classes. We continue to remain client-focused in our approach, with good quality corporates exhibiting strong cash flows and balance sheets.

High net worth and other private client lending increased by 20.1% year on year, driven by growth in the existing high net worth mortgage book as well as portfolio lending as the bank continues to focus on its holistic private client offering.

Lending collateralised by property has continued to reduce as a proportion of our net core loan exposures and totals £1.9 billion or 20.0% at 31 March 2018 (decrease from 22.0% at 31 March 2017). The bulk of property collateralised assets are located in the UK. Underwriting criteria remains conservative and we are committed to following a client-centric approach to lending, only supporting counterparties with strong balance sheets and requisite expertise.

Gross defaults, predominantly comprised of legacy exposures, totalled £360.6 million at 31 March 2018 (£260.3 million at 31 March 2017). Default loans (net of impairments) have increased to £208.8 million or 2.16% as a percentage of core loans and advances, up from 1.55% at 31 March 2017. The credit loss ratio is at 1.14% (2017: 0.90%, 2016: 1.13%) in anticipation of accelerated exits on certain assets in the legacy portfolio.

Ongoing asset quality continues to reflect the quality of the underlying book. The credit loss ratio on an ongoing basis amounted to 0.24% (2017: 0.27%). Defaulted exposures are considered well covered by impairments.

We have actively taken advantage of opportunities to further reduce the legacy portfolio. Legacy exposures have reduced by 34.3% to £313 million (net of impairments) or 3.2% of total core loan exposures (31 March 2017: 5.5%). Nonperforming exposures are significantly impaired and total net defaults in the legacy book amount to £90 million.

Southern Africa

The financial year in review has seen a combination of trends and factors impacting on the credit quality and assessment of credit and counterparty risk.

Further information is provided in the financial review on pages 34 to 39 in volume one.

The current macro-economic environment remains challenging and volatile with competitive pressure on margins. We have maintained a conservative lending approach. Our lending appetite is based on a client-centric approach with a strong focus on client cash flows underpinned by tangible collateral.

Growth in the core loan book was moderate and grew by 8.7% to R257 billion (31 March 2017: R236 billion) with high net worth and specialised lending and corporate portfolios representing the majority of the growth for the financial year in review.

Default loans (net of impairments) as a percentage of core loans and advances improved from 1.02% to 0.56%, with absolute levels of defaults decreasing year on year due to asset write-offs mainly in the corporate portfolio.

We reported an increase in the level of impairments taken, however, the credit loss ratio reduced to 0.28% (2017: 0.29%), remaining at the lower end of its long-term average trend.

Lending collateralised by property

The majority of the property assets are commercial investment properties and are located in South Africa. This portfolio decreased by 2% during the year. Loan to value remain conservative and transactions are generally supported by strong cash flows. We follow a clientcentric approach, backing counterparties with strong balance sheets and requisite expertise.

Private client activities

We have seen continued growth in our private client portfolio and client base as we actively focus on our business strategy to increase our positioning in this space.

Our high net worth client portfolio and residential mortgage book growth in particular has been encouraging with a total increase of 12.6% over the year.

Growth in both of these areas has been achieved with strong adherence to our conservative lending appetite.

Corporate client activities

We grew our corporate book by 6.8% as a result of increased lending activity by our mid-to-large corporate clients across a number of sectors. Our book remains well diversified across sectors and our State Owned Entities (SOEs) exposure is predominantly backed by government support.

(continued)

Credit and counterparty risk information

Pages 9 to 24 describe where and how credit risk is assumed in our operations.

The tables that follow provide an analysis of the credit and counterparty exposures.

An analysis of gross credit and counterparty exposures

Gross credit and counterparty exposures increased by 5.8% to £48.0 billion largely due to growth in loans and advances to customers as well as cash and near cash. Cash and near cash balances amount to £12.8 billion and are largely reflected in the following line items in the table below: cash and balances at central banks, loans and advances to banks, non-sovereign and non-bank cash placements and sovereign debt securities.

£'000 At 31 March	2018	2017	% change	Average*
Cash and balances at central banks	4 031 077	3 348 778	20.4%	3 689 928
Loans and advances to banks	2 165 533	3 191 041	(32.1%)	2 678 287
Non-sovereign and non-bank cash placements	601 243	536 259	12.1%	568 751
Reverse repurchase agreements and cash collateral on
securities borrowed	2 207 477	2 358 970	(6.4%)	2 283 224
Sovereign debt securities	4 910 027	3 804 627	29.1%	4 357 327
Bank debt securities	587 164	639 189	(8.1%)	613 177
Other debt securities	903 603	1 115 558	(19.0%)	1 009 581
Derivative financial instruments	926 443	933 881	(0.8%)	930 162
Securities arising from trading activities	538 490	359 324	49.9%	448 907
Loans and advances to customers (gross)	24 910 776	22 388 641	11.3%	23 649 709
Own originated loans and advances to customers securitised (gross)	459 472	517 524	(11.2%)	488 498
Other loans and advances (gross)	350 158	363 087	(3.6%)	356 623
Other securitised assets (gross)	8 668	12 851	(32.5%)	10 760
Other assets	247 040	214 277	15.3%	230 659
Total on-balance sheet exposures	42 847 171	39 784 007	7.7%	41 315 589
Guarantees^	658 858	966 539	(31.8%)	812 699
Contingent liabilities, committed facilities and other	4 518 292	4 651 733	(2.9%)	4 585 013
Total off-balance sheet exposures	5 177 150	5 618 272	(7.9%)	5 397 711
Total gross credit and counterparty exposures pre-collateral or
other credit enhancements	48 024 321	45 402 279	5.8%	46 713 300

* Where the average is based on a straight-line average.

^ Excludes guarantees provided to clients which are backed/secured by cash on deposit with the bank.

(continued)

An analysis of gross credit and counterparty exposures by geography

		UK and Other		Southern Africa		Total
£'000 At 31 March	2018	2017	2018	2017	2018	2017
Cash and balances at central banks	3 479 639	2 850 664	551 438	498 114	4 031 077	3 348 778
Loans and advances to banks	985 069	1 102 353	1 180 464	2 088 688	2 165 533	3 191 041
Non-sovereign and non-bank cash placements	–	–	601 243	536 259	601 243	536 259
Reverse repurchase agreements and cash collateral on securities borrowed	750 428	536 173	1 457 049	1 822 797	2 207 477	2 358 970
Sovereign debt securities	1 155 472	952 902	3 754 555	2 851 725	4 910 027	3 804 627
Bank debt securities	107 938	176 559	479 226	462 630	587 164	639 189
Other debt securities	278 474	398 278	625 129	717 280	903 603	1 115 558
Derivative financial instruments	513 836	554 710	412 607	379 171	926 443	933 881
Securities arising from trading activities	496 498	331 705 41 992		27 619	538 490 359 324
Loans and advances to customers (gross)	9 839 064		8 747 618 15 071 712 13 641 023 24 910 776 22 388 641
Own originated loans and advances to customers securitised (gross)	–	–	459 472	517 524	459 472	517 524
Other loans and advances (gross)	332 672	343 090	17 486	19 997	350 158	363 087
Other securitised assets (gross)	8 668	12 851	–	–	8 668	12 851
Other assets	44 707	49 894	202 333	164 383	247 040	214 277
Total on-balance sheet exposures	17 992 465	16 056 797	24 854 706	23 727 210	42 847 171	39 784 007
Guarantees^	21 709	27 204	637 149	939 335	658 858	966 539
Contingent liabilities, committed facilities and other	1 213 360	1 524 436	3 304 932	3 127 297	4 518 292	4 651 733
Total off-balance sheet exposures	1 235 069	1 551 640	3 942 081	4 066 632	5 177 150	5 618 272
Total gross credit and counterparty exposures
pre-collateral or other credit enhancements	19 227 534	17 608 437	28 796 787	27 793 842	48 024 321	45 402 279

^ Excludes guarantees provided to clients which are backed/secured by cash on deposit with the bank.

An analysis of gross credit and counterparty exposures by geography

A further analysis of our on-balance sheet credit and counterparty exposures

The table below indicates in which class of asset (on the face of the consolidated balance sheet) our on-balance sheet credit and counterparty exposures are reflected. Not all assets included in the balance sheet bear credit and counterparty risk.

£'000	Total credit and counterparty exposure	Assets that we deem to have no legal credit exposure	Note reference	Total balance sheet
At 31 March 2018
Cash and balances at central banks	4 031 077	9 435		4 040 512
Loans and advances to banks	2 165 533	–		2 165 533
Non-sovereign and non-bank cash placements	601 243	–		601 243
Reverse repurchase agreements and cash collateral on securities borrowed	2 207 477	–		2 207 477
Sovereign debt securities	4 910 027	–		4 910 027
Bank debt securities	587 164	–		587 164
Other debt securities	903 603	–		903 603
Derivative financial instruments	926 443	425 965		1 352 408
Securities arising from trading activities	538 490	895 901		1 434 391
Investment portfolio	–	885 499	1	885 499
Loans and advances to customers	24 910 776	(237 767)	2	24 673 009
Own originated loans and advances to customers securitised	459 472	(384)	2	459 088
Other loans and advances	350 158	(2 349)	2	347 809
Other securitised assets	8 668	139 719	3	148 387
Interest in associated undertakings	–	467 852	1	467 852
Deferred taxation assets	–	157 321		157 321
Other assets	247 040	1 629 076	4	1 876 116
Property and equipment	–	233 340		233 340
Investment properties	–	1 184 097		1 184 097
Goodwill	–	368 803		368 803
Intangible assets	–	125 389		125 389
Other financial instruments at fair value through profit and loss in respect
of liabilities to customers	–	8 487 776		8 487 776
Total on-balance sheet exposures	42 847 171	14 769 673		57 616 844

1. Largely relates to exposures that are classified as investment risk in the banking book. Further information is provided on pages 50 to 53.

2. Largely relates to impairments.

3. While the group manages all risks (including credit risk) from a day-to-day operational perspective, certain assets are within special purpose vehicles that ring-fence the assets to specific credit providers and limit security to the assets in the vehicle. The table above reflects the net credit exposure in the vehicles that the group has reflected in the 'total credit and counterparty exposure' with the maximum credit exposure referenced to credit providers external to the group in the column headed 'assets that we deem to have no legal credit exposure'. This also includes cash in the securitised vehicles.

4. Other assets include settlement debtors which we deem to have no credit risk exposure as they are settled on a delivery against payment basis.

(continued)

A further analysis of our on-balance sheet credit and counterparty exposures (continued)

£'000	Total credit and counterparty exposure	Assets that we deem to have no legal credit exposure	Note reference	Total balance sheet
At 31 March 2017
Cash and balances at central banks	3 348 778	2 924		3 351 702
Loans and advances to banks	3 191 041	–		3 191 041
Non-sovereign and non-bank cash placements	536 259	–		536 259
Reverse repurchase agreements and cash collateral on securities borrowed	2 358 970	–		2 358 970
Sovereign debt securities	3 804 627	–		3 804 627
Bank debt securities	639 189	–		639 189
Other debt securities	1 115 558	–		1 115 558
Derivative financial instruments	933 881	251 967		1 185 848
Securities arising from trading activities	359 324	1 017 344		1 376 668
Investment portfolio	–	835 899	1	835 899
Loans and advances to customers	22 388 641	(198 666)	2	22 189 975
Own originated loans and advances to customers securitised	517 524	(362)	2	517 162
Other loans and advances	363 087	(7 839)	2	355 248
Other securitised assets	12 851	136 113	3	148 964
Interest in associated undertakings	–	392 213	1	392 213
Deferred taxation assets	–	133 972		133 972
Other assets	214 277	1 686 203	4	1 900 480
Property and equipment	–	105 939		105 939
Investment properties	–	1 128 930		1 128 930
Goodwill	–	367 579		367 579
Intangible assets	–	143 261		143 261
Non-current assets held for sale	–	27 218	1	27 218
Other financial instruments at fair value through profit and loss in respect
of liabilities to customers	–	7 728 130		7 728 130
Total on-balance sheet exposures	39 784 007	13 750 825		53 534 832

1. Largely relates to exposures that are classified as investment risk in the banking book. Further information is provided on pages 50 to 53.

2. Largely relates to impairments.

3. While the group manages all risks (including credit risk) from a day-to-day operational perspective, certain assets are within special purpose vehicles that ring-fence the assets to specific credit providers and limit security to the assets in the vehicle. The table above reflects the net credit exposure in the vehicles that the group has reflected in the 'total credit and counterparty exposure' with the maximum credit exposure referenced to credit providers external to the group in the column headed 'assets that we deem to have no legal credit exposure'. This also includes cash in the securitised vehicles.

4. Other assets include settlement debtors which we deem to have no credit risk exposure as they are settled on a delivery against payment basis.

(continued)

£'000	Up to three months	Three to six months	Six months to one year	One to five years	Five to 10 years	>10 years	Total
Cash and balances at central banks	4 031 077	–	–	–	–	–	4 031 077
Loans and advances to banks	2 083 052	31 025	14 070	37 386	–	–	2 165 533
Non-sovereign and non-bank cash placements	601 243	–	–	–	–	–	601 243
Reverse repurchase agreements and cash collateral on securities borrowed	1 784 635	72 048	146 866	145 699	55 084	3 145	2 207 477
Sovereign debt securities	1 222 186	1 346 553	1 008 263	326 384	383 950	622 691	4 910 027
Bank debt securities	13 568	8 500	3 667	378 320	152 217	30 892	587 164
Other debt securities	12 485	5 421	49 271	517 085	99 980	219 361	903 603
Derivative financial instruments	261 962	111 287	125 520	297 302	59 245	71 127	926 443
Securities arising from trading activities	453	256	5 385	108 852	91 558	331 986	538 490
Loans and advances to customers (gross)	2 992 326	1 519 133		2 545 669 12 587 460	3 060 065		2 206 123 24 910 776
Own originated loans and advances to customers securitised (gross)	9	367	679	1 655	37 470	419 292	459 472
Other loans and advances (gross)	3 530	598	17 625	12 611	86 292	229 502	350 158
Other securitised assets (gross)	–	–	–	–	–	8 668	8 668
Other assets	247 040	–	–	–	–	–	247 040
Total on-balance sheet exposures	13 253 566	3 095 188		3 917 015 14 412 754	4 025 861		4 142 787 42 847 171
Guarantees^	347 564	65 634	105 613	110 117	16 104	13 826	658 858
Contingent liabilities, committed facilities and other	878 211	182 044	327 431	1 736 282	243 330	1 150 994	4 518 292
Total off-balance sheet exposures	1 225 775	247 678	433 044	1 846 399	259 434	1 164 820	5 177 150
Total gross credit and counterparty exposures pre-collateral or other
credit enhancements	14 479 341	3 342 866		4 350 059 16 259 153	4 285 295		5 307 607 48 024 321

Gross credit and counterparty exposures by residual contractual maturity at 31 March 2018

^ Excludes guarantees provided to clients which are backed/secured by cash on deposit with the group.

(continued)

Detailed analysis of gross credit and counterparty exposures by industry at 31 March 2018

£'000	High net worth and other professional individuals	Lending collateralised by property – largely to private clients	Agriculture	Electricity, gas and water (utility services)	Public and non business services	Business services	Finance and insurance
Cash and balances at central banks	–	–	–	–	4 031 077	–	–
Loans and advances to banks	–	–	–	–	–	–	2 165 533
Non-sovereign and non-bank cash
placements	–	–	1 062	–	–	110 914	132 466
Reverse repurchase agreements and
cash collateral on securities borrowed	39 583	–	–	–	–	5 329	2 104 291
Sovereign debt securities	–	–	–	–	4 910 027	–	–
Bank debt securities	–	–	–	–	–	–	587 164
Other debt securities	–	–	–	60 448	85 217	–	232 754
Derivative financial instruments	22 249	–	2 894	118 094	131	14 775	603 068
Securities arising from trading activities	–	–	–	5 141	381 490	2 881	113 097
Loans and advances to customers
(gross)	9 485 332	4 432 105	181 538	826 553	504 388	1 383 375	2 732 737
Own originated loans and advances to
customers securitised (gross)	459 472	–	–	–	–	–	–
Other loans and advances (gross)	–	–	–	–	–	–	119 884
Other securitised assets (gross)	–	–	–	–	–	–	–
Other assets	–	–	–	–	–	529	67 845
Total on-balance sheet
exposures	10 006 636	4 432 105	185 494	1 010 236	9 912 330	1 517 803	8 858 839
Guarantees^	282 151	59 096	–	56 941	36	67 184	10 339
Contingent liabilities, committed
facilities and other	2 171 003	574 230	47 426	211 450	84 385	121 725	486 006
Total off-balance sheet
exposures	2 453 154	633 326	47 426	268 391	84 421	188 909	496 345
Total gross credit and counterparty exposures pre-collateral or other
credit enhancements	12 459 790	5 065 431	232 920	1 278 627	9 996 751	1 706 712	9 355 184

^ Excludes guarantees provided to clients which are backed/secured by cash on deposit with the group.

(continued)

Retailers and wholesalers	Manufac turing and commerce	Construc tion	Corporate commercial real estate	Other residential mortgages	Mining and resources	Leisure, entertain ment and tourism	Transport	Com munication	Total
–	–	–	–	–	–	–	–	–	4 031 077
–	–	–	–	–	–	–	–	–	2 165 533
103 944	123 238	30 352	12 116	–	23 838	1 814	9 342	52 157	601 243
–	56 225	–	–	–	–	–	2 049	–	2 207 477
–	–	–	–	–	–	–	–	–	4 910 027
–	–	–	–	–	–	–	–	–	587 164
320	119 912	19 011	57 447	39 751	147 183	–	73 704	67 856	903 603
43 441	27 883	3 241	26 434	–	25 259	3 695	31 946	3 333	926 443
3 477	–	–	–	–	1 536	–	–	30 868	538 490
577 323	1 339 719	182 006	541 846	–	297 026	411 187	1 545 104	470 537	24 910 776
–	–	–	–	–	–	–	–	–	459 472
–	–	–	–	230 274	–	–	–	–	350 158
–	–	–	–	8 668	–	–	–	–	8 668
120 588	27 438	8 166	–	–	451	4 322	82	17 619	247 040
849 093	1 694 415	242 776	637 843	278 693	495 293	421 018	1 662 227	642 370	42 847 171
4 887	63 687	7 719	28 051	–	62 977	8 736	3 152	3 902	658 858
131 029	113 300	25 498	13 786	–	231 084	24 162	97 107	186 101	4 518 292
135 916	176 987	33 217	41 837	–	294 061	32 898	100 259	190 003	5 177 150
985 009	1 871 402	275 993	679 680	278 693	789 354	453 916	1 762 486	832 373	48 024 321

Detailed analysis of gross credit and counterparty exposures by industry at 31 March 2018

Lending collateralised by property – largely to private

^ Excludes guarantees provided to clients which are backed/secured by cash on deposit with the group.

(continued)

Detailed analysis of gross credit and counterparty exposures by industry at 31 March 2017

High net worth and other professional individuals	Lending collateralised by property – largely to private clients	Agriculture	Electricity, gas and water (utility services)	Public and non business services	Business services	Finance and insurance
10	–	33	–	4 011	37 874	126 993
34 965	–	–	–	–	9 790	2 264 943
–	–	–	–	3 804 627	–	–
–	–	–	–	–	–	639 189
–	–	–	48 297	107 204	551	322 303
13 638	–	439	100 925	18	19 246	661 652
–	–	–	26 364	151 477	–	154 677
8 111 205	4 381 588	178 181	806 932	501 071	939 860	2 373 580
517 524	–	–	–	–	–	–
–	–	–	–	–	–	118 507
–	–	–	–	–	–	–
–	–	–	–	–	3 676	87 820
8 677 342	4 381 588	178 653	982 518	7 917 186	1 010 997	9 940 705
225 219	65 961	10 674	38 656	103 973	41 060	224 730
	– – 2 017 395 2 242 614	– – 589 798 655 759	– – 17 922 28 596	– – 538 565 577 221	3 348 778 – 77 230 181 203	– – 95 568 136 628	– 3 191 041 452 205 676 935

^ Excludes guarantees provided to clients which are backed/secured by cash on deposit with the group.

(continued)

Retailers and wholesalers	Manufac turing and commerce	Construc tion	Corporate commercial real estate	Other residential mortgages	Mining and resources	Leisure, entertain ment and tourism	Transport	Com munication	Total
– –	– –	– –	– –	– –	– –	– –	– –	– –	3 348 778 3 191 041
93 070	149 321	14 730	11 991	–	45 205	–	32 962	20 059	536 259
–	46 832	–	–	–	–	–	–	2 440	2 358 970
–	–	–	–	–	–	–	–	–	3 804 627
–	–	–	–	–	–	–	–	–	639 189
195	137 851	–	42 247	74 338	184 769	2 775	43 434	151 594	1 115 558
23 646	53 399	704	21 618	–	15 412	6 821	12 585	3 778	933 881
2 313	1 771	–	–	2 892	–	1 958	3 037	14 835	359 324
582 349	1 327 533	288 548	444 365	–	314 266	381 762	1 228 453		528 948 22 388 641
–	–	–	–	–	–	–	–	–	517 524
–	–	–	48	244 532	–	–	–	–	363 087
–	–	–	–	12 851	–	–	–	–	12 851
87 658	16 305	15 968	–	–	–	2 363	9	478	214 277
789 231	1 733 012	319 950	520 269	334 613	559 652	395 679	1 320 480	722 132	39 784 007
59 008	58 763	5 598	5 134	–	110 676	7 454	3 815	5 818	966 539
195 699	116 151	32 105	24 343	–	309 786	24 046	118 571	42 349	4 651 733
254 707	174 914	37 703	29 477	–	420 462	31 500	122 386	48 167	5 618 272
1 043 938	1 907 926	357 653	549 746	334 613	980 114	427 179	1 442 866	770 299	45 402 279

Detailed analysis of gross credit and counterparty exposures by industry at 31 March 2017

Lending collateralised by property – largely to private

High net worth and other professional individuals

^ Excludes guarantees provided to clients which are backed/secured by cash on deposit with the group.

(continued)

Private client loans account for 56.7% of total gross core loans and advances, as represented by the industry classification 'high net worth and professional individuals and lending collateralised by property'

Summary analysis of gross credit and counterparty exposures by industry

A description of the type of private client lending and lending collateralised by property we undertake is provided on page 19, and a more detailed analysis of these loan portfolios are provided on pages 42 to 45.

The remainder of core loans and advances largely relate to corporate client lending and are evenly spread across industry sectors.

Other credit and counterparty exposures are largely reflective of cash and near cash balances held with institutions and central banks, thus the large balance reflected in the 'public and non-business services' and 'finance and insurance' sectors. These exposures also include off-balance sheet items such as guarantees, committed facilities and contingent liabilities, diversified across several industries.

A description of the type of corporate client lending we undertake is provided on pages 19 and 20, and a more detailed analysis of the corporate client loan portfolio is provided on pages 42 to 45.

	Gross core loans and advances		Other credit and counterparty exposures		Total
£'000 At 31 March	2018	2017	2018	2017	2018	2017
High net worth and professional individuals	9 944 804	8 628 729	2 514 986	2 291 227	12 459 790	10 919 956
Lending collateralised by property – largely to
private clients	4 432 105	4 381 588	633 326	655 759	5 065 431	5 037 347
Agriculture	181 538	178 181	51 382	29 068	232 920	207 249
Electricity, gas and water (utility services)	826 553	806 932	452 074	752 807	1 278 627	1 559 739
Public and non-business services	504 388	501 071	9 492 363	7 597 318	9 996 751	8 098 389
Business services	1 383 375	939 860	323 337	207 765	1 706 712	1 147 625
Finance and insurance	2 732 737	2 373 580	6 622 447	8 244 060	9 355 184	10 617 640
Retailers and wholesalers	577 323	582 349	407 686	461 589	985 009	1 043 938
Manufacturing and commerce	1 339 719	1 327 533	531 683	580 393	1 871 402	1 907 926
Construction	182 006	288 548	93 987	69 105	275 993	357 653
Corporate commercial real estate	541 846	444 365	137 834	105 381	679 680	549 746
Other residential mortgages	–	–	278 693	334 613	278 693	334 613
Mining and resources	297 026	314 266	492 328	665 848	789 354	980 114
Leisure, entertainment and tourism	411 187	381 762	42 729	45 417	453 916	427 179
Transport	1 545 104	1 228 453	217 382	214 413	1 762 486	1 442 866
Communication	470 537	528 948	361 836	241 351	832 373	770 299
Total	25 370 248	22 906 165	22 654 073	22 496 114	48 024 321	45 402 279

(continued)

An analysis of our core loans and advances, asset quality and impairments

Core loans and advances comprise:

• Loans and advances to customers as per the balance sheet
• Own originated loans and advances to customers securitised as per the balance sheet.

£'000
At 31 March	2018	2017
Loans and advances to customers as per the balance sheet	24 673 009	22 189 975
Add: own originated loans and advances securitised as per the balance sheet	459 088	517 162
Net core loans and advances to customers	25 132 097	22 707 137

The tables that follow provide information with respect to the asset quality of our core loans and advances to customers.

An overview of developments during the financial year is provided on page 24.

At 31 March	2018	2017
Gross core loans and advances to customers	25 370 248	22 906 165
Total impairments	(238 151)	(199 028)
Specific impairments	(137 711)	(136 177)
Portfolio impairments	(100 440)	(62 851)
Net core loans and advances to customers	25 132 097	22 707 137
Average gross core loans and advances to customers	24 138 207	20 605 765
Current loans and advances to customers	24 675 378	22 304 938
Past due loans and advances to customers (1 – 60 days)	102 983	88 167
Special mention loans and advances to customers (1 – 90 days)	59 165	37 080
Default loans and advances to customers	532 722	475 980
Gross core loans and advances to customers	25 370 248	22 906 165
Current loans and advances to customers	24 675 378	22 304 938
Default loans that are current and not impaired	63 091	14 836
Gross core loans and advances to customers that are past due but not impaired	267 372	221 041
Gross core loans and advances to customers that are impaired	364 407	365 350
Gross core loans and advances to customers	25 370 248	22 906 165
Total income statement charge for impairments on core loans and advances	(146 652)	(111 575)
Gross default loans and advances to customers	532 722	475 980
Specific impairments	(137 711)	(136 177)
Portfolio impairments	(100 440)	(62 851)
Defaults net of impairments	294 571	276 952
Aggregate collateral and other credit enhancements on defaults	505 610	451 817
Net default loans and advances to customers (limited to zero)	–	–
Ratios
Total impairments as a % of gross core loans and advances to customers	0.94%	0.87%
Total impairments as a % of gross default loans	44.70%	41.81%
Gross defaults as a % of gross core loans and advances to customers	2.10%	2.08%
Defaults (net of impairments) as a % of net core loans and advances to customers	1.17%	1.22%
Net defaults as a % of net core loans and advances to customers	–	–
Credit loss ratio (i.e. income statement impairment charge on core loans as a % of average gross
core loans and advances)	0.61%	0.54%

(continued)

An analysis of core loans and advances to customers and asset quality by geography

	UK and Other			Southern Africa	Total group
£'000 At 31 March	2018	2017	2018	2017	2018	2017
Gross core loans and advances to customers	9 839 064		8 747 618 15 531 184 14 158 547 25 370 248			22 906 165
Total impairments	(151 840)	(126 876)	(86 311)	(72 152)	(238 151)	(199 028)
Specific impairments	(89 863)	(83 488)	(47 848)	(52 689)	(137 711)	(136 177)
Portfolio impairments	(61 977)	(43 388)	(38 463)	(19 463)	(100 440)	(62 851)
Net core loans and advances to customers	9 687 224		8 620 742 15 444 873		14 086 395 25 132 097	22 707 137
% of total net core loans and advances to customers	38.5%	38.0%	61.5%	62.0%	100.0%	100.0%
% change of net core loans and advances to customers since March 2017	12.4%		9.6%		10.7%
Average gross core loans and advances
to customers	9 293 341	8 347 205	14 844 866 12 258 560		24 138 207 20 605 765
Current loans and advances to customers	9 401 028				8 416 683 15 274 350 13 888 255 24 675 378 22 304 938
Past due loans and advances to customers (1 – 60 days)	40 315	48 003	62 668	40 164	102 983	88 167
Special mention loans and advances to customers
(1 – 90 days)	37 085	22 585	22 080	14 495	59 165	37 080
Default loans and advances to customers	360 636	260 347	172 086	215 633	532 722	475 980
Gross core loans and advances to customers	9 839 064	8 747 618	15 531 184		14 158 547 25 370 248	22 906 165
Current loans and advances to customers	9 401 028				8 416 683 15 274 350 13 888 255 24 675 378 22 304 938
Default loans that are current and not impaired	50 224	6 993	12 867	7 843	63 091	14 836
Gross core loans and advances to customers that are past due but not impaired	135 830	105 645	131 542	115 396	267 372	221 041
Gross core loans and advances to customers that are impaired	251 982	218 297	112 425	147 053	364 407	365 350
Gross core loans and advances to customers	9 839 064				8 747 618 15 531 184 14 158 547 25 370 248 22 906 165
Total income statement charge for impairments	–		–		–
on core loans and advances	(105 864)	(74 995)	(40 788)	(36 580)	(146 652)	(111 575)
Gross default loans and advances to customers	360 636	260 347	172 086	215 633	532 722	475 980
Specific impairments	(89 863)	(83 488)	(47 848)	(52 689)	(137 711)	(136 177)
Portfolio impairments	(61 977)	(43 388)	(38 463)	(19 463)	(100 440)	(62 851)
Defaults net of impairments	208 796	133 471	85 775	143 481	294 571	276 952
Aggregate collateral and other credit enhancements	291 834	192 760	213 776	259 057	505 610	451 817
Net default loans and advances to customers (limited to zero)	–	–	–	–	–	–
Ratios
Total impairments as a % of gross core loans and advances to customers	1.54%	1.45%	0.56%	0.51%	0.94%	0.87%
Total impairments as a % of gross default loans	42.10%	48.73%	50.12%	33.46%	44.70%	41.81%
Gross defaults as a % of gross core loans and advances to customers	3.67%	2.98%	1.11%	1.52%	2.10%	2.08%
Defaults (net of impairments) as a % of net core loans and advances to customers	2.16%	1.55%	0.56%	1.02%	1.17%	1.22%
Net defaults as a % of net core loans and advances to customers	–	–	–	–	–	–
Credit loss ratio (i.e. income statement impairment charge on core loans as a % of average gross core loans and advances)	1.14%	0.90%	0.28%	0.29%	0.61%	0.54%

An analysis of gross core loans and advances to customers by country of exposure

£22 906 million

South Africa	56.9%
United Kingdom	27.5%
Europe (excluding UK)	5.5%
North America	3.1%
Australia	1.9%
Africa (excluding RSA)	1.8%
Asia	1.7%
Europe (Non-EU)	0.8%
Other	0.8%

An age analysis of past due and default core loans and advances to customers

£'000 At 31 March	2018	2017
Default loans that are current	173 487	142 810
1 – 60 days	182 725	194 221
61 – 90 days	37 568	15 097
91 – 180 days	54 129	92 027
181 – 365 days	72 719	58 985
>365 days	174 242	98 087
Past due and default core loans and advances to customers (actual capital exposure)	694 870	601 227
1 – 60 days	29 114	17 036
61 – 90 days	4 886	1 520
91 – 180 days	7 740	7 318
181 – 365 days	21 491	35 934
>365 days	95 051	68 437
Past due and default core loans and advances to customers (actual amount in arrears)	158 282	130 245

(continued)

A further age analysis of past due and default core loans and advances to customers

£'000	Current watchlist loans	1 – 60 days	61 – 90 days	91 – 180 days	181 – 365 days	> 365 days	Total
At 31 March 2018
Watchlist loans neither past due nor impaired
Total capital exposure	63 091	–	–	–	–	–	63 091
Gross core loans and advances to customers that are past due but not impaired
Total capital exposure	–	164 748	23 502	8 852	28 510	41 760	267 372
Amount in arrears	–	28 969	1 550	838	6 176	33 970	71 503
Gross core loans and advances to customers that are impaired
Total capital exposure	110 396	17 977	14 066	45 277	44 209	132 482	364 407
Amount in arrears	–	145	3 336	6 902	15 315	61 081	86 779
At 31 March 2017
Watchlist loans neither past due nor impaired
Total capital exposure	14 836	–	–	–	–	–	14 836
Gross core loans and advances to customers that are past due but not impaired
Total capital exposure	–	156 577	13 207	8 623	28 781	13 853	221 041
Amount in arrears	–	13 969	1 204	2 034	26 529	11 594	55 330
Gross core loans and advances to customers that are impaired
Total capital exposure	127 974	37 644	1 890	83 404	30 204	84 234	365 350
Amount in arrears	–	3 067	316	5 284	9 405	56 843	74 915

An age analysis of past due and default core loans and advances to customers at 31 March 2018 (based on total capital exposure)

£'000	Current watchlist loans	1 – 60 days	61 – 90 days	91 – 180 days	181 – 365 days	> 365 days	Total
Past due (1 – 60 days)	–	102 983	–	–	–	–	102 983
Special mention	–	37 147	22 018	–	–	–	59 165
Special mention (1 – 90 days)	–	37 147	6 317	–	–	–	43 464
Special mention (61 – 90 days and item well secured)	–	–	15 701	–	–	–	15 701
Default	173 487	42 595	15 550	54 129	72 719	174 242	532 722
Sub-standard	141 772	28 179	12 553	30 573	44 428	95 391	352 896
Doubtful	31 715	14 407	2 997	21 541	26 505	73 526	170 691
Loss	–	9	–	2 015	1 786	5 325	9 135
Total	173 487	182 725	37 568	54 129	72 719	174 242	694 870

An age analysis of past due and default core loans and advances to customers at 31 March 2018 (based on actual amount in arrears)

£'000	Current watchlist loans	1 – 60 days	61 – 90 days	91 – 180 days	181 – 365 days	> 365 days	Total
Past due (1 – 60 days)	–	26 940	–	–	–	–	26 940
Special mention	–	672	1 480	–	–	–	2 152
Special mention (1 – 90 days)	–	672	44	–	–	–	716
Special mention (61 – 90 days and item well
secured)	–	–	1 436	–	–	–	1 436
Default	–	1 502	3 406	7 740	21 491	95 051	129 190
Sub-standard	–	1 363	3 357	2 256	13 804	39 651	60 431
Doubtful	–	130	49	3 471	5 906	50 076	59 632
Loss	–	9	–	2 013	1 781	5 324	9 127
Total	–	29 114	4 886	7 740	21 491	95 051	158 282

An age analysis of past due and default core loans and advances to customers at 31 March 2017 (based on total capital exposure)

Current
watchlist loans	1 – 60 days	61 – 90 days	91 – 180 days	181 – 365 days	> 365 days	Total
–	88 167	–	–	–	–	88 167
–	29 017	7 831	50	23	159	37 080
–	29 017	51	50*	23*	159*	29 300
						7 780
142 810	77 037	7 266	91 977	58 962	97 928	475 980
47 404	45 097	5 377	56 142	39 276	55 888	249 184
94 868	31 927	1 886	34 291	18 788	34 198	215 958
538	13	3	1 544	898	7 842	10 838
142 810	194 221	15 097	92 027	58 985	98 087	601 227
	–	–	7 780	–	–	–

An age analysis of past due and default core loans and advances to customers at 31 March 2017 (based on actual amount in arrears)

£'000	Current watchlist loans	1 – 60 days	61 – 90 days	91 – 180 days	181 – 365 days	> 365 days	Total
Past due (1 – 60 days)	–	9 417	–	–	–	–	9 417
Special mention	–	472	885	3	16	21	1 397
Special mention (1 – 90 days)	–	472	2	3*	16*	21*	514
Special mention (61 – 90 days and item well
secured)	–	–	883	–	–	–	883
Default	–	7 147	635	7 315	35 918	68 416	119 431
Sub-standard	–	4 088	319	2 663	30 053	48 484	85 607
Doubtful	–	3 048	313	3 118	4 967	12 102	23 548
Loss	–	11	3	1 534	898	7 830	10 276
Total	–	17 036	1 520	7 318	35 934	68 437	130 245

* Largely relates to solvent deceased estates and bonds under registration at the deeds office. Due to the lengthy external process with respect to these exposures, which is outside of Investec's control, these exposures have been classified as special mention and will remain there until settled or their credit quality deteriorates.

(continued)

An analysis of core loans and advances to customers

£'000	Gross core loans and advances that are neither past due nor impaired	Gross core loans and advances that are past due but not impaired	Gross core loans and advances that are impaired	Total gross core loans and advances (actual capital exposure)	Specific impair ments	Portfolio impair ments	Total net core loans and advances (actual capital exposure)	Actual amount in arrears
At 31 March 2018
Current core loans and advances	24 675 378	–	–	24 675 378	–		(99 863) 24 575 515	–
Past due (1 – 60 days)	–	102 983	–	102 983	–	(238)	102 745	26 940
Special mention	–	59 165	–	59 165	–	(108)	59 057	2 152
Special mention (1 – 90 days) Special mention	–	43 464	–	43 464	–	(96)	43 368	716
(61 – 90 days and item well secured)	–	15 701	–	15 701	–	(12)	15 689	1 436
Default	63 091	105 224	364 407	532 722	(137 711)	(231)	394 780	129 190
Sub-standard	63 091	105 119	184 686	352 896	(51 739)	(231)	300 926	60 431
Doubtful	–	105	170 586	170 691	(79 069)	–	91 622	59 632
Loss	–	–	9 135	9 135	(6 903)	–	2 232	9 127
Total	24 738 469	267 372		364 407 25 370 248	(137 711)		(100 440) 25 132 097	158 282
At 31 March 2017 Current core loans and advances Past due (1 – 60 days)	22 304 938 –	– 88 167	– –	22 304 938 88 167	– –	(132)	(62 419) 22 242 519 88 035	– 9 417
Special mention	–	37 080	–	37 080	–	(91)	36 989	1 397
Special mention
(1 – 90 days) Special mention (61 – 90 days and item	–	29 300	–	29 300	–	(68)	29 232	514
well secured)	–	7 780	–	7 780	–	(23)	7 757	883
Default	14 836	95 794	365 350	475 980	(136 177)	(209)	339 594	119 431
Sub-standard Doubtful	14 836 –	95 794 –	138 554 215 958	249 184 215 958	(38 237) (90 119)	(209) –	210 738 125 839	85 607 23 548
Loss	–	–	10 838	10 838	(7 821)	–	3 017	10 276
Total	22 319 774	221 041		365 350 22 906 165	(136 177)		(62 851) 22 707 137	130 245

(continued)

An analysis of core loans and advances to customers and impairments by counterparty type

	Private			Public
	client		Insurance,	and		Total
	professional		financial	government		core loans
	and high net		services	sector	Trade	and advances to
£'000	worth individuals	Corporate sector	(excluding sovereign)	(including central banks)	finance and other	customers
At 31 March 2018
Current core loans and advances	13 855 753	7 159 300	2 729 759	495 264	435 302	24 675 378
Past due (1 – 60 days)	80 741	11 928	2 087	1 044	7 183	102 983
Special mention	46 923	11 225	586	69	362	59 165
Special mention (1 – 90 days)	33 211	10 253	–	–	–	43 464
Special mention (61 – 90 days and item
well secured)	13 712	972	586	69	362	15 701
Default	393 492	116 734	305	8 011	14 180	532 722
Sub-standard	257 526	95 057	133	180	–	352 896
Doubtful	131 884	16 935	119	7 573	14 180	170 691
Loss	4 082	4 742	53	258	–	9 135
Total gross core loans and
advances to customers	14 376 909	7 299 187	2 732 737	504 388	457 027	25 370 248
Total impairments	(164 319)	(59 759)	(1 232)	(3 863)	(8 978)	(238 151)
Specific impairments	(88 205)	(36 730)	(119)	(3 679)	(8 978)	(137 711)
Portfolio impairments	(76 114)	(23 029)	(1 113)	(184)	–	(100 440)
Net core loans and advances
to customers	14 212 590	7 239 428	2 731 505	500 525	448 049	25 132 097
At 31 March 2017
Current core loans and advances	12 504 888	6 577 096	2 371 037	491 441	360 476	22 304 938
Past due (1 – 60 days)	77 919	5 625	211	636	3 776	88 167
Special mention	31 558	5 123	3	69	327	37 080
Special mention (1 – 90 days)	24 579	4 721	–	–	–	29 300
Special mention (61 – 90 days and item
well secured)	6 979	402	3	69	327	7 780
Default	395 952	58 290	2 329	8 925	10 484	475 980
Sub-standard	235 645	11 080	2 172	192	95	249 184
Doubtful	153 199	43 946	119	8 305	10 389	215 958
Loss	7 108	3 264	38	428	–	10 838
Total gross core loans and
advances to customers	13 010 317	6 646 134	2 373 580	501 071	375 063	22 906 165
Total impairments	(142 841)	(41 943)	(1 168)	(4 277)	(8 799)	(199 028)
Specific impairments	(98 216)	(24 935)	(99)	(4 128)	(8 799)	(136 177)
Portfolio impairments	(44 625)	(17 008)	(1 069)	(149)	–	(62 851)
Net core loans and advances
to customers	12 867 476	6 604 191	2 372 412	496 794	366 264	22 707 137

(continued)

An analysis of core loans and advances by risk category at 31 March 2018

			UK and Other			Southern Africa
£'000	Gross core loans	Gross defaults	Aggregate collateral and other credit enhance ments on defaults	Balance sheet impair ments	Income state ment impair ments^	Gross core loans	Gross defaults	Aggregate collateral and other credit enhance ments on defaults	Balance sheet impair ments	Income state ment impair ments^
Lending collateralised
by property		1 988 385 248 008	207 059	(54 089)	(56 048)	2 443 720	52 057	55 755	(19 196)	(12 817)
Commercial real estate	1 149 140	74 714	43 681	(31 060)	(29 235)	2 212 426	41 818	39 667	(15 634)	(6 142)
Commercial real estate –
investment	953 388	48 495	35 199	(13 296)	(22 442)	1 981 913	40 511	38 290	(14 792)	(5 589)
Commercial real estate –
development Commercial vacant land	140 222	–	–	–	–	183 070	488	646	–	(163)
and planning	55 530	26 219	8 482	(17 764)	(6 793)	47 443	819	731	(842)	(390)
Residential real estate		839 245 173 294	163 378	(23 029)	(26 813)	231 294	10 239	16 088	(3 562)	(6 675)
Residential real estate – investment	243 675	46 937	42 205	(5 880)	(15 918)	–	–	–	–	–
Residential real estate
– development	524 893	97 475	90 151	(10 813)	(5 865)	182 608	8 778	15 357	(2 409)	(7 732)
Residential vacant land
and planning	70 677	28 882	31 022	(6 336)	(5 030)	48 686	1 461	731	(1 153)	1 057
High net worth and other
private client lending	1 918 168	11 186	13 277	(4 736)	(3 185)	8 026 636	82 241	116 070	(10 184)	(1 123)
Mortgages	1 481 355	6 601	10 069	(1 856)	(130)	4 095 474	52 782	64 971	(6 225)	(4351)
High net worth and
specialised lending	436 813	4 585	3 208	(2 880)	(3 055)	3 931 162	29 459	51 099	(3 959)	3 228
Corporate and other
lending		5 932 511 101 442	71 498	(31 038)	(26 498)	5 060 828	37 788	41 951	(18 468)	(7 989)
Corporate and acquisition
finance	1 534 815	18 102	14 202	(4 000)	(3 983)	841 345	7 063	7 150	(90)	(3 934)
Asset-based lending Fund finance	354 872 1 030 450	– –	– –	– –	– –	433 578 295 336	14 180 –	23 440 –	(8 981) –	(487) (366)
Other corporates and
financial institutions and
governments	650 312	–	–	–	(61)	2 885 198	9 641	9 255	(4 063)	685
Asset finance	1 872 821	79 272	53 589	(26 677)	(25 436)	161 089	–	–	–	(7)
Small ticket asset finance	1 386 610	15 177	6 320	(8 857)	(7 616)	133 845	–	–	–	–
Large ticket asset finance	486 211	64 095	47 269	(17 820)	(17 820)	27 244	–	–	–	(7)
Project finance	483 788	4 068	3 707	(361)	2 982	399 545	–	–	–	(121)
Resource finance	5 453	–	–	–	–	44 737	6 904	2 106	(5 334)	(3 759)
Portfolio impairments				(61 977)	(20 133)				(38 463)	(18 859)
Total		9 839 064 360 636	291 834			(151 840) (105 864) 15 531 184	172 086	213 776	(86 311)	(40 788)

^ Where a positive number represents a recovery.

(continued)

		Total group
Gross core loans	Gross defaults	Aggregate collateral and other credit enhance ments on defaults	Balance sheet impair ments	Income statement impair ments^
4 432 105	300 065	262 814	(73 285)	(68 865)
3 361 566	116 532	83 348	(46 694)	(35 377)
2 935 301	89 006	73 489	(28 088)	(28 031)
323 292	488	646	–	(163)
102 973	27 038	9 213	(18 606)	(7 183)
1 070 539	183 533	179 466	(26 591)	(33 488)
243 675	46 937	42 205	(5 880)	(15 918)
707 501	106 253	105 508	(13 222)	(13 597)
119 363	30 343	31 753	(7 489)	(3 973)
9 944 804 5 576 829	93 427 59 383	129 347 75 040	(14 920) (8 081)	(4 308) (4481)
4 367 975	34 044	54 307	(6 839)	173
10 993 339	139 230	113 449	(49 506)	(34 487)
2 376 160 788 450	25 165 14 180	21 352 23 440	(4 090) (8 981)	(7 917) (487)
1 325 786	–	–	–	(366)
3 535 510	9 641	9 255	(4 063)	624
2 033 910	79 272	53 589	(26 677)	(25 443)
1 520 455	15 177	6 320	(8 857)	(7 616)
513 455	64 095	47 269	(17 820)	(17 827)
883 333 50 190	4 068 6 904	3 707 2 106	(361) (5 334)	2 861 (3 759)
			(100 440)	(38 992)
25 370 248	532 722	505 610	(238 151)	(146 652)

An analysis of core loans and advances by risk category at 31 March 2018

^ Where a positive number represents a recovery.

(continued)

An analysis of default core loans and advances as at 31 March 2017

	UK and Other Southern Africa
£'000	Gross core loans	Gross defaults	Aggregate collateral and other credit enhance ments on defaults	Balance sheet impair ments	Income state ment impair ments^	Gross core loans	Gross defaults	Aggregate collateral and other credit enhance ments on defaults	Balance sheet impair ments	Income state ment impair ments^
Lending collateralised
by property Commercial real estate	1 963 754 1 190 836	227 515 80 987	167 972 48 998	(70 633) (31 989)		(45 114) 2 418 834 (21 748) 2 178 087	59 059 36 678	69 096 46 588	(12 727) (8 999)	(5 215) (2 947)
Commercial real estate –
investment	934 117	40 120	30 773	(9 347)	(12 373)	2 006 842	32 563	38 961	(7 943)	(4 173)
Commercial real estate – development	149 188	4 768	1 680	(3 088)	–	111 401	26	36	–	651
Commercial vacant land
and planning	107 531	36 099	16 545	(19 554)	(9 375)	59 844	4 089	7 591	(1 056)	575
Residential real estate	772 918	146 528	118 974	(38 644)	(23 366)	239 747	22 381	22 508	(3 728)	(2 268)
Residential real estate
– investment	262 844	46 841	43 018	(9 222)	(11 126)	–	–	–	–	–
Residential real estate – development	458 441	77 250	61 727	(19 754)	(10 615)	158 677	18 504	18 684	(2 501)	(2 375)
Residential vacant land
and planning	51 633	22 437	14 229	(9 668)	(1 625)	81 070	3 877	3 824	(1 227)	107
High net worth
and other
private client lending	1 598 801	18 458	17 139	(6 130)		(1 928) 7 029 928	90 920	133 041	(8 726)	(15 938)
Mortgages	1 228 877	4 906	6 957	(1 237)	(637)	3 660 780	43 244	59 486	(3 575)	(1 330)
High net worth and specialised lending	369 924	13 552	10 182	(4 893)	(1 291)	3 369 148	47 676	73 555	(5 151)	(14 608)
Corporate and other
lending	5 185 063	14 374	7 649	(6 725)		(5 965) 4 710 785	65 654	56 920	(31 236)	(10 219)
Corporate and acquisition
finance Asset-based lending	1 309 335 333 731	– –	– –	– –	(1 951) –	796 403 353 956	34 719 10 485	31 861 16 991	(7 866) (8 799)	(3 084) (2 294)
Fund finance	861 140	–	–	–	–	330 847	–	–	–	234
Other corporates and
financial institutions and governments	718 760	–	–	–	–	2 622 977	8 266	8 068	(4 309)	(1 785)
Asset finance	1 488 142	10 483	3 942	(6 541)	(5 630)	160 799	1 536	–	–	(515)
Small ticket asset finance	1 062 069	10 483	3 942	(6 541)	(5 630)	127 724	–	–	–	(515)
Large ticket asset finance	426 073	–	–	–	–	33 075	1 536	–	–	–
Project finance	464 142	3 891	3 707	(184)	(176)	382 436	–	–	–	35
Resource finance	9 813	–	–	–	1 792	63 367	10 648	–	(10 262)	(2 810)
Portfolio impairments				(43 388)	(21 988)				(19 463)	(5 208)
Total	8 747 618	260 347		192 760 (126 876)		(74 995) 14 158 547	215 633	259 057	(72 152)	(36 580)

^ Where a positive number represents a recovery.

(continued)

Total group
Gross core loans	Gross defaults	Aggregate collateral and other credit enhance ments on defaults	Balance sheet impair ments	Income statement impair ments^
4 381 588 3 368 923	286 574 117 665	237 068 95 586	(83 360) (40 988)	(50 329) (24 695)
2 940 959	72 683	69 734	(17 290)	(16 546)
260 589	4 794	1 716	(3 088)	651
167 375	40 188	24 136	(20 610)	(8 800)
1 012 665	168 909	141 482	(42 372)	(25 634)
262 844	46 841	43 018	(9 222)	(11 126)
617 118	95 754	80 411	(22 255)	(12 990)
132 703	26 314	18 053	(10 895)	(1 518)
8 628 729	109 378	150 180	(14 856)	(17 866)
4 889 657 3 739 072	48 150 61 228	66 443 83 737	(4 812) (10 044)	(1 967) (15 899)
9 895 848	80 028	64 569	(37 961)	(16 184)
2 105 738	34 719	31 861	(7 866)	(5 035)
687 687	10 485	16 991	(8 799)	(2 294)
1 191 987	–	–	–	234
3 341 737	8 266	8 068	(4 309)	(1 785)
1 648 941	12 019	3 942	(6 541)	(6 145)
1 189 793	10 483	3 942	(6 541)	(6 145)
459 148 846 578	1 536 3 891	– 3 707	– (184)	– (141)
73 180	10 648	–	(10 262) (62 851)	(1 018) (27 196)
22 906 165	475 980	451 817	(199 028)	(111 575)

An analysis of default core loans and advances as at 31 March 2017

^ Where a positive number represents a recovery.

(continued) Risk management

Additional information

Asset quality trends

<-- PDF CHUNK SEPARATOR -->

(continued)

An analysis of core loans and advances to customers and asset quality by geography – ongoing business

	UK and Other		Southern Africa		Total group
£'000	31 March 2018	31 March 2017	31 March 2018	31 March 2017	31 March 2018	31 March 2017
Gross core loans and advances to customers	9 412 611		8 169 901 15 531 184	14 158 547 24 943 795		22 328 448
Total impairments	(38 434)	(25 356)	(86 311)	(72 152)	(124 745)	(97 508)
Specific impairments	(37 357)	(12 393)	(47 848)	(52 689)	(85 205)	(65 082)
Portfolio impairments	(1 077)	(12 963)	(38 463)	(19 463)	(39 540)	(32 426)
Net core loans and advances to customers	9 374 177	8 144 545	15 444 873	14 086 395	24 819 050	22 230 940
% change of net core loans and advances to customers since March 2017	15.1%		9.6%		11.6%
Average gross core loans and
advances to customers	8 791 256	7 706 123	14 844 866	12 258 560	23 636 122	19 964 683
Total income statement charge for impairments
on core loans and advances	(21 198)	(20 690)	(40 788)	(36 580)	(61 986)	(57 270)
Gross default loans and advances to customers	157 203	34 166	172 086	215 633	329 289	249 799
Specific impairments	(37 357)	(12 393)	(47 848)	(52 689)	(85 205)	(65 082)
Portfolio impairments	(1 077)	(12 963)	(38 463)	(19 463)	(39 540)	(32 426)
Defaults net of impairments
before collateral held	118 769	8 810	85 775	143 481	204 544	152 291
Collateral and other credit enhancements	130 498	25 948	213 776	259 057	344 274	285 005
Net default loans and advances to customers (limited to zero)	–	–	–	–	–	–
Ratios:
Total impairments as a % of gross core loans and advances to customers	0.41%	0.31%	0.56%	0.51%	0.50%	0.44%
Total impairments as a % of gross default loans	24.45%	74.21%	50.12%	33.46%	37.88%	39.03%
Gross defaults as a % of gross core loans and
advances to customers	1.67%	0.42%	1.11%	1.52%	1.32%	1.12%
Defaults (net of impairments) as a % of net core loans and advances to customers	1.27%	0.11%	0.56%	1.02%	0.82%	0.69%
Net defaults as a % of net core loans and advances to customers	–	–	–	–	–	–
Credit loss ratio (i.e. income statement impairment charge on core loans as a % of average gross core loans and advances)	0.24%	0.27%	0.28%	0.29%	0.26%	0.29%

(continued)

A reconciliation of core loans and advances: statutory basis and ongoing basis

		Removal of:
	Statutory as disclosed^	UK Legacy business	Ongoing business
31 March 2018 (£'000)
Gross core loans and advances to customers	25 370 248	426 453	24 943 795
Total impairments	(238 151)	(113 406)	(124 745)
Specific impairments	(137 711)	(52 506)	(85 205)
Portfolio impairments	(100 440)	(60 900)	(39 540)
Net core loans and advances to customers	25 132 097	313 047	24 819 050
31 March 2017 (£'000)
Gross core loans and advances to customers	22 906 165	577 717	22 328 448
Total impairments	(199 028)	(101 520)	(97 508)
Specific impairments	(136 177)	(71 095)	(65 082)
Portfolio impairments	(62 851)	(30 425)	(32 426)
Net core loans and advances to customers	22 707 137	476 197	22 230 940

^ Refer to page 35.

Collateral

A summary of total collateral is provided in the table below.

	Collateral held against
£'000	Core loans and advances	Other credit and counterparty exposures*	Total
At 31 March 2018
Eligible financial collateral	4 758 573	1 800 827	6 559 400
Listed shares	4 519 966	1 118 074	5 638 040
Cash	238 607	121 868	360 475
Debt securities issued by sovereigns	–	560 885	560 885
Property charge	26 953 249	221 232	27 174 481
Residential property	14 732 804	218 260	14 951 064
Residential development	877 827	–	877 827
Commercial property developments	655 829	2 972	658 801
Commercial property investments	10 686 789	–	10 686 789
Other collateral	8 424 661	347 302	8 771 963
Unlisted shares^	1 075 757	–	1 075 757
Charges other than property	584 838	297 549	882 387
Debtors, stock and other corporate assets	3 921 474	–	3 921 474
Guarantees	2 069 015	–	2 069 015
Other	773 577	49 753	823 330
Total collateral	40 136 483	2 369 361	42 505 844
At 31 March 2017
Eligible financial collateral	4 572 543	2 156 905	6 729 448
Listed shares	4 260 613	1 019 427	5 280 040
Cash	311 930	195 295	507 225
Debt securities issued by sovereigns	–	942 183	942 183
Property charge	24 747 171	237 020	24 984 191
Residential property	12 818 367	228 102	13 046 469
Residential development	961 844	–	961 844
Commercial property developments	1 206 059	8 918	1 214 977
Commercial property investments	9 760 901	–	9 760 901
Other collateral	8 875 334	250 705	9 126 039
Unlisted shares^	1 120 814	1 312	1 122 126
Charges other than property	879 959	199 809	1 079 768
Debtors, stock and other corporate assets	3 542 058	–	3 542 058
Guarantees	2 382 407	–	2 382 407
Other	950 096	49 584	999 680
Total collateral	38 195 048	2 644 630	40 839 678

* A large percentage of these exposures (e.g. bank placements) are to highly rated financial institutions where limited collateral would be required due to the nature of the exposure.

^ Unlisted shares taken as collateral can include shares in companies in which the group also has an equity investment. Refer to pages 50 to 53 for additional information on the unlisted equity investments held at fair value.

(continued)

Investment risk in the banking book represents a moderate percentage of our total assets and is managed within appropriate risk limits

Investment risk in the banking book

Investment risk description

Investment risk in the banking book arises primarily from the following activities conducted within the group:

• Principal Investments: Principal Investments are normally undertaken in support of a client requiring equity to grow and develop an existing business, or the acquisition of a business from third parties. Investments are selected based on the track record of management, the attractiveness of the industry and the ability to build value for the existing business by implementing an agreed strategy. Investments in listed shares may arise on the IPO, or sale of one of our investments. Additionally,

listed investments may be considered where we believe that the market is mispricing the value of the underlying security

• IEP Group: Investec Bank Limited holds a 45.7% stake alongside third party investors and senior management of the business who hold the remaining 54.3%. The investment in the IEP Group is reflected as an investment in an associate.
• Lending transactions: The manner in which we structure certain transactions results in equity, warrant and profit shares being held, predominantly within unlisted companies
• Property activities: We source development, investment and trading opportunities to create value and trade for profit within agreed risk parameters.

Management of investment risk

As investment risk arises from a variety of activities conducted by the group, the monitoring and measurement thereof varies across transactions and/or type of activity. Independent credit and investment committees exist in each geography where we assume investment risk.

Nature of investment risk	Management of risk
Principal Investments	Investment committee, BRCC and GRCC
Listed equities	Investment committee, market risk management, BRCC and GRCC
Embedded derivatives, profit shares and investments arising from lending transactions	Credit risk management committees, BRCC and GRCC
Investment and trading properties	Investment committee, Investec Property group investment committee in South Africa, BRCC and GRCC
IEP Group	A number of our executive are on the board of the IEP Group, BRCC and GRCC

Risk appetite limits and targets are set to manage our exposure to equity and investment risk. An assessment of exposures against limits and targets as well as stress testing scenario analysis are performed and reported to GRCC and BRCC. As a matter of course, concentration risk is avoided and investments are well spread across geographies and industries.

(continued)

Valuation and accounting methodologies

For a description of our valuation principles and methodologies refer to pages 34 and 35 in volume three and pages 70 to 79 in volume three for factors taken into consideration in determining fair value.

We have a low level of assets exposed to the volatility of IFRS fair value accounting with level 3 assets amounting to 1.9% of total assets (excluding assurance assets).

Refer to page 66 in volume three for further information.

The tables below provide an analysis of income and revaluations recorded with respect to these investments.

	Income/(loss) (pre-funding costs)
For the year to 31 March 2018 £'000 Country/category	Unrealisedº	Realisedº	Dividends	Other	Total	Fair value through equity
Unlisted investments	2 211	57 807	16 736	–	76 754	(882)
UK and Other	17 471	32 981	10 169	–	60 621	(786)
Southern Africa	(15 260)	24 826	6 567	–	16 133	(96)
Listed equities	(36 490)	1 744	11 421	–	(23 325)	2 214
UK and Other	(9 716)	(1 667)	2	–	(11 381)	2 214
Southern Africa	(26 774)	3 411	11 419	–	(11 944)	–
Investment and trading properties	14 877	15 564	–	–	30 441	–
UK and Other	(10 977)	1 650	–	–	(9 327)	–
Southern Africa^	25 854	13 914	–	–	39 768	–
Warrants, profit shares and other
embedded derivatives	5 169	20 035	–	–	25 204	–
UK and Other	5 664	7 202	–	–	12 866	–
Southern Africa	(495)	12 833	–	–	12 338	–
IEP Group^^	–	–	–	44 523	44 523	–
Southern Africa	–	–	–	44 523	44 523	–
Total	(14 233)	95 150	28 157	44 523	153 597	1 332

^ For the purposes of the above analysis, the exposures arising from the consolidation of the Investec Property Fund have been reflected at the level of our economic ownership, being 26.8% in 2018. It is noted that the ultimate impact on the income statement reflects the group's net attributable earnings from the investment.

^^ As explained on page 50.

º In a year of realisation, any prior period mark-to-market gains/losses recognised are reversed in the unrealised line item.

(continued)

Risk disclosures

For the year to 31 March 2017 £'000						Fair value through
Country/category	Unrealisedº	Realisedº	Dividends	Other	Total	equity
Unlisted investments	19 579	44 430	24 258	–	88 267	529
UK and Other	24 391	38 512	11 066	–	73 969	624
Southern Africa	(4 812)	5 918	13 192	–	14 298	(95)
Listed equities	(28 157)	(162)	6 183	–	(22 136)	(5 451)
UK and Other	(20 442)	21	1 273	–	(19 148)	(2 831)
Southern Africa	(7 715)	(183)	4 910	–	(2 988)	(2 620)
Investment and trading properties	(21 539)	37 450	–	–	15 911	–
UK and Other	(14 892)	17 504	–	–	2 612	–
Southern Africa^	(6 647)	19 946	–	–	13 299	–
Warrants, profit shares and other
embedded derivatives	(8 012)	14 748	–	–	6 736	–
UK and Other	(7 035)	–	–	–	(7 035)	–
Southern Africa	(977)	14 748	–	–	13 771	–
IEP Group^^	–	–	–	16 453	16 453	–
Southern Africa	–	–	–	16 453	16 453	–
Total	(38 129)	96 466	30 441	16 453	105 231	(4 922)

^ For the purposes of the above analysis, the exposures arising from the consolidation of the Investec Property Fund have been reflected at the level of our economic ownership, being 27.9% in 2017. It is noted that the ultimate impact on the income statement reflects the group's net attributable earnings from the investment.

^^ As explained on page 50.

º In a year of realisation, any prior period mark-to-market gains/losses recognised are reversed in the unrealised line item.

Additional information

An analysis of the investment portfolio, warrants, prot shares and other embedded derivatives

31 March 2018

£920 million

Real estate	31.3%
Manufacturing and commerce	22.7%
Mining and resources	12.7%
Finance and insurance	11.5%
Communication	8.0%
Retailers and wholesalers	4.3%
Transport	3.1%
Electricity, gas and water (utility services)	2.8%
Other	1.5%
Business services	1.2%
Agriculture	0.9%

Summary of investments held and stress testing analyses

The balance sheet value of investments is indicated in the table below.

£'000 Country/category	On-balance sheet value of investments 2018	Valuation change stress test 2018*	On-balance sheet value of investments 2017	Valuation change stress test 2017*
Unlisted investments	653 906	98 086	625 748	93 862
UK and Other	416 835	62 525	383 267	57 490
Southern Africa	237 071	35 561	242 481	36 372
Listed equities	231 593	57 898	237 369	59 342
UK and Other	61 084	15 271	76 478	19 120
Southern Africa	170 509	42 627	160 891	40 222
Total listed equities and unlisted investments	885 499	155 984	863 117	153 204
UK and Other	477 919	77 796	459 745	76 610
Southern Africa	407 580	78 188	403 372	76 594
Investment and trading properties	708 007	98 311	685 519	96 556
UK and Other	113 461	21 242	143 648	27 280
Southern Africa^	594 546	77 069	541 871	69 276
Warrants, profit shares and other embedded derivatives	34 400	12 040	31 365	10 978
UK and Other	21 611	7 564	18 194	6 368
Southern Africa	12 789	4 476	13 171	4 610
IEP Group^^	371 810	55 771	322 804	48 421
Southern Africa	371 810	55 771	322 804	48 421
Total	1 999 716	322 106	1 902 805	309 159

* In order to assess our earnings sensitivity to a movement in the valuation of these investments, the stress testing parameters detailed below are applied. ^ For the purposes of the above analysis, the exposures arising from the consolidation of the Investec Property Fund have been reflected at the level of our economic ownership, being 26.8% in 2018 and 27.9% in 2017.

^^ As explained on page 50.

Stress test values applied
Unlisted investments and the IEP Group	15%
Listed equities	25%
Trading properties	20%
Investment properties	10%
Warrants, profit shares and other embedded derivatives	35%

Stress testing summary

Based on the information at 31 March 2018, as reflected above, we could have a £322 million reversal in revenue (which assumes a year in which there is a 'severe stress scenario' simultaneously across all asset classes). This would not necessarily cause the group to report a loss, but could have a significantly negative impact on earnings for that period. The probability of all these asset classes in all geographies in which we operate being negatively impacted at the same time is very low, although the probability of listed equities being negatively impacted at the same time is very high.

Capital requirements

In terms of Basel III capital requirements for Investec Limited, unlisted and listed equities within the banking book are represented under the category of 'equity risk' and investment properties, profit shares and embedded derivatives are considered in the calculation of capital required for credit risk. In terms of CRD IV capital requirements for Investec plc, unlisted and listed equities within the banking book, investment properties, profit shares and embedded derivatives are all considered in the calculation of capital required for credit risk. In the UK, the equity risk category is an exposure category within credit risk.

Refer to page 86 for further detail.

Securitisation/structured credit activities exposures

Overview

The group's definition of securitisation/ structured credit activities (as explained below) is wider than the definition as applied for regulatory capital purposes, which largely focuses on those securitisations in which the group has achieved significant risk transfer. We, however, believe that the information provided below is meaningful in that it groups all these related activities in order for a reviewer to obtain a fuller picture of the activities that we have conducted in this space. Some of the information provided below overlaps with the group's credit and counterparty exposure information.

Refer to page 27 for the balance sheet and credit risk classification.

The group applies the standardised approach in the assessment of regulatory capital for securitisation.

UK and Other

The primary focus for new securitisation transactions remains to provide a cost effective, alternative source of financing to the bank. During the year we did not undertake any new securitisation transactions.

We hold rated structured credit instruments. These exposures are largely in the UK and US and amount to £266 million at 31 March 2018 (31 March 2017: £339 million).

South Africa

In Southern Africa we engage in transactions that involve the use of both special purpose entities and asset securitisation structures. Securitisation represents a small proportion of our current funding profile, but provides additional flexibility and a source of liquidity. We do not depend on special purpose vehicles for funding in the normal course of business. These entities form part of the consolidated group balance sheet as reported.

We have securitised assets originated by our Private Client business in South Africa. The primary motivations for the securitisation of these assets are to:

• Provide an alternative source of funding
• Act as a mechanism to transfer risk
• Leverage returns through the retention of equity tranches in low default rate portfolios
• Continue to create marketable instruments through self-securitisation.

Total assets that have been originated and securitised by the Private Client division amount to R7.6 billion at 31 March 2018 (31 March 2017: R8.7 billion) and consist of residential mortgages. Within these securitisation vehicles loans greater than 90 days in arrears amounted to R37.6 million.

Further details of our various securitisation vehicles are highlighted below:

• Fox Street 1: R0.7 billion notes of the original R1.5 billion are still in issue. No notes are held internally
• Fox Street 2: R0.8 billion notes of the original R1.5 billion are still in issue. R246 million of the notes are held internally
• Fox Street 3: R1.2 billion notes of the original R2.0 billion are still in issue. R209 million of the notes are held internally
• Fox Street 4: R2.3 billion notes of the original R3.7 billion are still in issue. All notes are held internally
• Fox Street 5: R2.3 billion notes of the original R2.9 billion are still in issue. All notes are held internally.
• There is a clean-up call option that can be exercised at 10% of original notes issued. The margin on the notes increases at pre-specified intervals and coincides with the originator call option dates.

We have also sought out select opportunities in the credit/debt markets and traded in and purchased structured credit. These have largely been rated UK and European Residential mortgage backed securities (RMBS), totalling R0.2 billion at 31 March 2018 (31 March 2017: R0.9 billion) and unrated South African RMBS totalling R1.0 billion at 31 March 2018 (31 March 2017: R0.9 billion).

Accounting policies

Refer to page 35 in volume three.

Risk management

All existing or proposed exposures to a securitisation or a resecuritisation are analysed on a case-by-case basis, with final approval typically required from the relevant credit committee. The analysis looks through to the historical and expected future performance of the underlying assets, the position of the relevant tranche in the capital structure as well as analysis of the cash flow waterfall under a variety of stress scenarios. External ratings are presented, but only for information purposes since the bank principally relies on its own internal risk assessment. Overarching these transaction level principles is the boardapproved risk appetite policy, which details the group's appetite for such exposures, and each exposure is considered relative to the group's overall risk appetite. We can use explicit credit risk mitigation techniques where required, however, the group prefers to address and manage these risks by only approving exposures to which the group has explicit appetite through the constant and consistent application of the risk appetite policy.

In addition, securitisations of Investec own originated assets are assessed in terms of the credit risk management philosophies and principles as set out above.

Credit analysis

In terms of our analysis of our credit and counterparty risk, exposures arising from securitisation/structured credit activities reflect only those exposures to which we consider ourselves to be at risk. Assets that have been securitised by our Private Client division in Southern Africa are reflected as part of our core lending exposures and not our securitisation/structured credit exposures as we believe this reflects the true nature and intent of these exposures and activities.

At 31 March Nature of exposure/activity	Exposure 2018 £'million	Exposure 2017 £'million	Balance sheet and credit risk classification	Asset quality – relevant comments
Structured credit (gross exposure)*	345	457	Other debt securities and other loans and advances
Rated	276	390
Unrated	69	67
Loans and advances to customers and third party intermediary originating platforms (mortgage loans) – (net exposure)	146	160	Other loans and advances
Southern Africa – Private Client division assets which have been securitised	459	517	Own originated loans and advances to customers	Analysed as part of the group's overall asset quality on core loans and advances as reflected on page 35

* Analysed further below.

*Analysis of structured credit

		2018		2017
At 31 March £'million	Rated**	Unrated	Total	Rated	Unrated	Total
US corporate loans	135	–	135	136	–	136
UK and European ABS	–	–	–	4	–	4
UK and European RMBS	129	10	139	209	10	219
UK and European corporate loans	10	–	10	36	–	36
Australian RMBS	2	–	2	5	–	5
South African RMBS	–	59	59	–	57	57
Total	276	69	345	390	67	457
Investec plc	266	10	276	339	10	349
Investec Limited	10	59	69	51	57	108

**Further analysis of rated structured credit at 31 March 2018

							CCC and
£'million	AAA	AA	A	BBB	BB	B	below	Total
US corporate loans	54	65	16	–	–	–	–	135
UK and European RMBS	17	55	47	–	10	–	–	129
UK and European corporate loans	1	5	4	–	–	–	–	10
Australian RMBS	–	2	–	–	–	–	–	2
Total at 31 March 2018	72	127	67	–	10	–	–	276
Total at 31 March 2017	107	175	92	5	11	–	–	390

Market risk in the trading book

Traded market risk description

Traded market risk is the risk of potential changes in the value of the trading book as a result of changes in market risk factors such as interest rates, equity prices, exchange rates, commodity prices, credit spreads and their underlying volatilities where derivatives are traded. The trading book is defined as positions in financial instruments and commodities, including derivative products and other off-balancesheet instruments that are held within the trading businesses.

Traded market risk profile

The focus of our trading activities is primarily on supporting client activity. Our strategic intent is that proprietary trading should be limited and that trading should be conducted largely to facilitate client flow. Within our trading activities, we act as principal with clients or the market. Market risk exists where we have taken on principal positions resulting from market making, underwriting and facilitation of client business in the foreign exchange, interest rate, equity, credit and commodity markets.

Traded market risk governance structure

Traded market risk is governed by policies that cover the management, identification, measurement and monitoring of market risk. We have independent market risk teams in each jurisdiction where we assume market risk to identify, measure, monitor and manage market risk. These teams report into local risk management and Group Risk in the UK or South Africa. All limits are approved, managed and monitored centrally by group risk.

The market risk teams have reporting lines that are separate from the trading function, thereby ensuring independent oversight. A global market risk forum, mandated by the BRCC, manages market risk in accordance with approved principles, policies and risk appetite. Risk limits across all trading desks

are reviewed by the global market risk forum and recommended for approval at Review ERRF in Southern Africa and at ERC in the UK in accordance with the risk appetite defined by the board. Limit reviews approved at Review ERRF and ERC are noted at Policy ERRF with significant changes to limits presented to Policy ERRF for review and approval. The appropriateness of limits is continually re-assessed, with limits reviewed at least annually, in the event of a significant market event or at the discretion of senior management.

Measurement of traded market risk

A number of quantitative measures are used to monitor and limit exposure to traded market risk. These measures include:

• Value at Risk (VaR) and Expected Shortfall (ES) as portfolio measures of market risk exposure
• scenario analysis, stress tests and tools based on extreme value theory (EVT) that measure the potential impact on portfolio values of extreme moves in markets
• sensitivity analysis that measures the impact of individual market risk factor movements on specific instruments or portfolios, including interest rates, foreign exchange rates, equity prices, credit spreads and commodity prices, such as the effect of a one basis point change in interest rates. We use sensitivity measures to monitor and limit exposure across portfolios, products and risk types.

Stress and scenario analyses are used to add insight into the possible outcomes under severe market disruptions. The stress-testing methodology assumes that all market factors move adversely at the same time and that no actions are taken during the stress events to mitigate risk. Stress scenarios based on historical experience as well as hypothetical scenarios are considered and are reviewed regularly for relevance in ever-changing market environments. Stress scenarios are run daily with analysis presented weekly to Review ERRF or more often depending on market conditions.

Traded market risk management, monitoring and control

Market risk limits are set according to guidelines set out in our risk appetite policy. Limits are set at trading desk level with aggregate risk across all desks also monitored against overall market risk appetite limits. Current market conditions as well as stressed market conditions are taken into account when setting and reviewing these limits.

Market risk teams review the market risks in the trading book with detailed risk reports produced daily for each trading desk and for the aggregate risk of the trading book. The material risks identified are summarised in daily reports that are distributed to, and discussed with senior management. The production of risk reports allows for the monitoring of all positions in the trading book against prescribed limits. Documented policies and procedures are in place to ensure there is a formal process for recognition and authorisation for risk excesses incurred.

The risk management software is fully integrated with source trading systems, allowing valuation in risk and trading systems to be fully aligned. All valuation models are subject to independent validation by market risk ensuring models used for valuation and risk are validated independently of the front office.

(continued)

Value at Risk

VaR is a technique that estimates the potential losses as a result of movements in market rates and prices over a specified time horizon at a given level of confidence. The VaR model derives future scenarios from past time series of market rates and prices, taking into account inter-relationships between the different markets such as interest rates and foreign exchange rates. The VaR model used is based on full revaluation historical simulation and incorporates the following features:

• Two-year historical period based on an unweighted time series
• Daily movements in each risk factor e.g. foreign exchange rates, interest rates, equity prices, credit spreads and associated volatilities are simulated with reference to historical market rates and prices, with proxies only used when no or limited historical market data is available, and the resultant one-day VaR is scaled up using the square root of time for regulatory purposes
• Risk factor movements are based on both absolute and relative returns as appropriate for the different types of risk factors.

VaR numbers using a one-day holding period are monitored daily at the 95% and 99% confidence intervals, with limits set at the 95% confidence interval. Expected Shortfalls are also monitored daily at the 95% and 99% levels as is the worst case loss in the VaR distribution.

The table below contains the 95% one-day VaR figures for the trading businesses.

	31 March 2018				31 March 2017
	Year end	Average	High	Low	Year end	Average	High	Low
UK and Other (using 95% VaR)
Equities (£'000)	495	519	746	345	503	547	1 317	340
Foreign exchange (£'000)	18	17	80	1	13	34	162	1
Interest rates (£'000)	81	84	147	67	88	191	287	83
Credit (£'000)	23	90	184	16	179	171	232	136
Consolidated (£'000)*	502	509	740	311	547	586	1 364	373
Southern Africa (using 95% VaR)
Commodities (R'million)	–	0.1	1.5	–	0.1	0.1	0.5	–
Equities (R'million)	3.6	3.4	7.4	2.0	2.4	3.6	22.8	1.9
Foreign exchange (R'million)	1.7	2.9	9.1	0.9	3.7	1.7	5.3	0.9
Interest rates (R'million)	2.4	2.2	4.7	0.3	0.8	1.6	3.2	0.6
Consolidated (R'million)*	3.4	5.0	13.7	2.4	4.5	4.2	21.8	2.1

* The consolidated VaR for each entity is lower than the sum of the individual VaRs. This arises from the consolidation offset between various asset classes (diversification).

(continued)

Expected shortfall

The ES measure overcomes some of VaR's shortcomings. ES seeks to quantify losses encountered in the tail beyond the VaR level. The 95% one-day ES is the average loss given that the 95% one-day VaR level has been exceeded. The table below contains the 95% one-day ES figures.

	31 March 2018 Year end	31 March 2017 Year end
UK and Other 95% (one-day)
Equities (£'000)	655	731
Foreign exchange (£'000)	26	24
Interest rates (£'000)	113	118
Credit (£'000)	35	396
Consolidated (£'000)*	661	764
Southern Africa 95% (one-day)
Commodities (R'million)	0.1	0.1
Equities (R'million)	7.1	6.6
Foreign exchange (R'million)	3.7	4.6
Interest rates (R'million)	4.1	1.5
Consolidated (R'million)*	8.8	7.9

* The consolidated ES for each entity is lower than the sum of the individual ESs. This arises from the correlation offset between various asset classes (diversification).

Stressed VaR

Stressed VaR (sVaR) is calculated using the VaR model but based on a one year period through which the relevant market factors experienced stress. The information in the table below contains the 99% one-day sVaR as at 31 March 2018.

	31 March 2018 Year end	31 March 2017 Year end
UK and Other (£'000)
99% 1-day sVaR	1 541	1 322
Southern Africa (R'million)
99% 1-day sVaR	13.3	9.6

Backtesting

The performance of the VaR model is regularly monitored through backtesting. This is done by comparing daily hypothetical profit and loss against one-day VaR based on a 99% confidence level. Hypothetical profit and loss excludes items such as fees, commissions, valuation adjustments, provisions, recoveries and intra-day transactions. If a loss exceeds the one-day VaR, a backtesting exception is considered to have occurred. Over time we expect the average rate of observed backtesting exceptions to be consistent with the percentile of the VaR statistic being tested. This is conducted at an aggregate and desk level on a daily basis.

The graphs that follow show the result of backtesting the total daily 99% one-day VaR against the hypothetical profit and loss figures for our trading activities over the reporting period. Based on these graphs, we can gauge the accuracy of the VaR figures i.e. 99% of the time, the total trading activities are not expected to lose more than the 99% one-day VaR.

UK and Other

The average VaR for the year ended March 2018 was lower than the previous year, largely as a result of a reduction in risk in interest rates and credit. Using hypothetical profit and loss data for backtesting resulted in one exception over the year at the 99% confidence level, i.e. where the loss was greater than the 99% one-day VaR. This is less than expected at the 99% level and is due to modest volatility levels experienced in 2017.

99% one-day VaR backtesting

Southern Africa

Average VaR for the year ended March 2018 was higher than the previous year, primarily due to higher VaR utilisation on the foreign exchange and interest rate trading desks. The graph below is for the consolidated South African trading book and is based on hypothetical profit and loss, which excludes items such as fees, commissions, valuation adjustments, provisions, recoveries and intra-day transactions. The nine exceptions were primarily as a result of the Steinhoff share price collapse in December 2017 (refer to page 8 for additional information).

99% one-day VaR backtesting

(continued)

Stress testing

The table below indicates the potential losses that could arise if the portfolio is stress tested under extreme market conditions. The method used is known as extreme value theory (EVT), the reported stress scenario below calculates the 99% EVT which is a 1-in-8 year possible loss event. These numbers do not assume normality but rather rely on fitting a distribution to the tails of the VaR distribution.

	31 March 2018 Year end	31 March 2017 Year end
UK and Other (using 99% EVT)
Equities (£'000)	1 475	1 638
Foreign exchange (£'000)	66	114
Interest rates (£'000)	226	264
Credit (£'000)	83	1 223
Consolidated (£'000)#	1 441	1 949
Southern Africa (using 99% EVT)
Commodities (R'million)	0.2	0.2
Equities (R'million)	13.9	26.6
Foreign exchange (R'million)	20.1	8.1
Interest rates (R'million)	13.5	7.7
Consolidated (R'million)#	29.6	26.4

The consolidated stress testing for each entity is lower than the sum of the individual stress test numbers. This arises from the correlation offset between various asset classes (diversification).

Capital

In the UK, the market risk capital requirement is calculated using the standardised approach. For certain options, the group has obtained an article 329 permission from the PRA to use an internal model to calculate the delta for these positions. In addition the group was granted article 331 permission in January 2018 which allows sensitivity models to be used when calculating the market risk position for certain instruments. In South Africa, we have internal model approval from the South African Prudential Authority for general market risk for all trading desks and therefore trading capital is calculated as a function of the 99% 10-day VaR as well as the 99% 10-day sVaR together with standardised specific risk capital for issuer risk.

Profit and loss histograms

UK and Other

The histogram below illustrates the distribution of hypothetical profit and loss during the financial year for our trading businesses. The distribution is skewed to the profit side and the graph shows that positive trading revenue was realised on 135 days out of a total of 251 days in the trading business. The average daily trading revenue generated for the year to 31 March 2018 was £61 232 (2017: £88 299).

Prot and loss

Risk disclosures

(continued)

Southern Africa

The histogram below illustrates the distribution of hypothetical profit and loss during the financial year for our trading businesses. The distribution is skewed to the profit side and the graph shows that positive trading revenue was realised on 129 days out of a total of 248 days in the trading business. The average daily trading revenue generated for the year to 31 March 2018 was – R0.7 million (2017: R4.5 million) due to a higher number of tail losses at the end of 2017.

Prot and loss

Traded market risk year in review

In the UK, trading revenues were impacted by lower volatility in equity markets through 2017, however, there was continued growth in client activity particularly within the financial products business. Market risk exposures across all trading desks remained low throughout the year.

In South Africa, during the year the markets were impacted by local factors, in particular, political policy uncertainty prior to the ANC elective conference in December. The primary focus of the bank's trading desks remains to facilitate the demand of our clients with limited proprietary risk taken. This is reflected by the low levels of market risk exposures as well as VaR throughout the year. The 95% one-day VaR ended the year at R3.4 million, down R1.1 million from the previous year. Market risk exposures across all trading desks remained low throughout the year.

Revenue arising from customer ow trading activities

31 March 2018

Investec enters into various derivatives contracts, largely on the back of customer flow for hedging foreign exchange, interest rates, commodity, equity and credit exposures and to a small extent as principal for trading purposes. These include financial futures, options, swaps and forward rate agreements.

(continued)

Information showing our derivative trading portfolio over the reporting period on the basis of the notional principal and the fair value of all derivatives can be found on page 84 in volume three.

The notional principal indicates our activity in the derivatives market and represents the aggregate size of total outstanding contracts at year end. The fair value of a derivative financial instrument represents the present value of the positive or negative cash flows which would have occurred had we closed out the rights and obligations arising from that instrument in an orderly market transaction at year end. Both these amounts reflect only derivatives exposure and exclude the value of the physical financial instruments used to hedge these positions.

Balance sheet risk management

Balance sheet risk description

Balance sheet risk encompasses the financial risks relating to our asset and liability portfolios, comprising liquidity, funding, concentration, encumbrance and non-trading interest rate risk.

Balance sheet risk governance structure and risk mitigation

Investec plc (and its subsidiaries) are ring-fenced from Investec Limited (and its subsidiaries), and vice versa. Both legal entities are therefore required to be selffunded, and manage their funding and liquidity as separate entities.

Risk appetite limits are set at board level and reviewed at least on an annual basis. The size, materiality, complexity, maturity and depth of the market as well as access to stable funds are all inputs considered when establishing the liquidity and nontrading interest rate risk appetite for each geographic region. Specific regulatory requirements may further dictate additional restrictions to be adopted in a region.

Under delegated authority of the boards, the group has established Asset and Liability Committees (ALCOs) within each core geography in which it operates, using regional expertise and local market access as appropriate. The ALCOs are mandated to ensure independent supervision of liquidity risk and non-trading interest rate risk within the risk appetite.

ALCOs meet on at least a monthly basis to review the exposures that lie within the balance sheet together with market conditions, and decide on strategies to mitigate any undesirable liquidity and interest rate risk. The Treasury function within each region is mandated to holistically manage the liquidity mismatch and non-trading interest rate risk arising from our asset and liability portfolios on a day-to-day basis.

The Treasury function within each jurisdiction is required to exercise tight control of liquidity, funding, concentration, encumbrance and non-trading interest rate risk within the board-approved risk appetite limits. Non-trading interest rate risk and asset funding requirements are transferred from the originating business to the Treasury function.

The Treasury function, by core geography, directs pricing for all deposit products, establishes and maintains access to stable wholesale funds with the appropriate tenor and pricing characteristics, and manages liquid securities and collateral, thus providing prudential management and a flexible response to volatile market conditions. The Treasury function is the sole interface to the wholesale money market for both cash and derivative transactions.

We maintain an internal funds transfer pricing system based on prevailing market rates. Our funds transfer pricing system charges the businesses the price of short-term and long-term liquidity taking into account the behavioural duration of the asset. The costs and risks of liquidity are clearly and transparently attributed to business lines thereby ensuring that price of liquidity is integrated into business level decision-making and drives the appropriate mix of sources and uses of funds.

Balance sheet risk management teams are based within Group risk management in their respective geographies, and are responsible for independently identifying, quantifying and monitoring risks; providing daily independent governance and oversight of the treasury activities and the execution of the bank's policies.

There is a regular audit of the balance sheet risk management function, the frequency of which is determined by the independent audit committees.

Daily, weekly and monthly reports are independently produced highlighting bank activity, exposures and key measures against thresholds and limits and are distributed to management, ALCO, Treasury, Review ERRF, GRCC and BRCC as well as summarised reports for board meetings.

Liquidity risk

Liquidity risk description

Liquidity risk refers to the possibility that, despite being solvent, we have insufficient capacity to fund increases in assets, or are unable to meet our payment obligations as they fall due in normal and stressed conditions. This includes repaying depositors or maturing wholesale debt. This risk arises from mismatches in the timing of cash-flows, and is inherent in all banking operations and can be impacted by a range of institution-specific and market-wide events.

Liquidity risk is further broken down into:

• Funding liquidity: this relates to the risk that the bank will be unable to meet current and/or future cash flows or collateral requirements in the normal course of business, without adversely affecting its financial position or its reputation
• Market liquidity: this relates to the risk that the bank may be unable to trade in specific markets or that it may only be able to do so with difficulty due to market disruptions or a lack of market liquidity.

Management and measurement of liquidity risk

Cohesive liquidity management is vital for protecting our depositors, preserving market confidence, safeguarding our reputation and ensuring sustainable growth with established funding sources. Through active liquidity management, we seek to preserve stable, reliable and cost-effective sources of funding. As such, the group considers ongoing access to appropriate liquidity for all its operations to be of paramount importance, and our core liquidity philosophy is reflected in day-to-day practices which encompass the following robust and comprehensive set of policies and procedures for assessing, measuring and controlling the liquidity risk:

(continued)

• Our liquidity management processes encompass requirements set out within Basel Committee on Banking Supervision (BCBS) guidelines and by the regulatory authorities in each jurisdiction, namely the PRA, EBA, South African Prudential Authority, BOM, GFSC and FINMA
• The risk appetite is clearly defined by the board and each geographic entity must have its own board-approved policies with respect to liquidity risk management
• We maintain a liquidity buffer in the form of unencumbered cash, government or rated securities (typically eligible for repurchase with the central bank), and near cash well in excess of the regulatory requirements as protection against unexpected disruptions in cash flows
• Funding is diversified with respect to currency, term, product, client type and counterparty to ensure a varied overall funding mix
• We monitor and evaluate each banking entity's maturity ladder and funding gap (cash flow maturity mismatch) on a 'liquidation', 'going concern' and 'stress' basis
• The asset and liability team independently monitors key daily funding metrics and liquidity ratios to assess potential risks to the liquidity position, which further act as early warning indicators of potential market disruptions
• The maintenance of sustainable prudent liquidity resources takes precedence over profitability
• The group maintains adequate contingency funding plans designed to protect depositors, creditors and shareholders and maintain market confidence during adverse liquidity conditions.

We measure liquidity risk by quantifying and calculating various liquidity risk metrics and ratios to assess potential risks to the liquidity position. These include:

• Internal 'survival horizon' metric which models how many days it takes before the bank's cash position turns negative under an internally defined worst-case liquidity stress;
• Regulatory metrics for liquidity measurement:
  • Liquidity Coverage Ratio (LCR)
  • Net Stable Funding Ratio (NSFR)
• Modelling a 'business as usual' environment where we apply rollover

and reinvestment assumptions under benign market conditions;

• An array of further liquidity stress tests, based on a range of scenarios and using historical analysis, documented experience and prudent judgement to model the impact on the bank's balance sheet;
• Contractual run-off based actual cash flows with no modelling adjustments;
• Additional internally defined funding and balance sheet ratios; and
• Any other local regulatory requirements.

This suite of metrics ensures the smooth management of the day-to-day liquidity position within conservative parameters and further validates that we are able to generate sufficient liquidity to withstand a range of liquidity stresses or market disruptions.

The parameters used in stress scenarios are reviewed at least annually, taking into account changes in the business environments and input from business units. The objective is to analyse the possible impact of an economic event on cash flow, liquidity, profitability and solvency position, so as to maintain sufficient liquidity and to continue to operate for a minimum period as detailed in the board-approved risk appetite.

We further carry out reverse stress tests to identify business model vulnerabilities which tests 'tail risks' that can be missed in normal stress tests. The group has calculated the severity of stress required to breach the liquidity requirements. This scenario is considered highly unlikely given the group's strong liquidity position, as it requires an extreme withdrawal of deposits combined with the inability to take any management actions to breach liquidity minima that threatens Investec's liquidity position.

The group operates an industry-recognised third party risk modelling system in addition to custom-built management information systems designed to measure and monitor liquidity risk on both a current and forwardlooking basis. The system is audited by Internal Audit thereby ensuring integrity of the process.

Funding strategy

We maintain a funding structure of stable customer deposits and long-term wholesale funding well in excess of illiquid assets. We target a diversified funding base, avoiding undue concentrations by investor type, maturity, market source, instrument and currency. As a result, we are able to

generate funding from a broad range of sources in each geographic location, which ensures a varied overall funding mix to support loan growth.

We acknowledge the importance of our retail deposit client base as the principal source of stable and well diversified funding. We continue to develop products to attract and service the investment needs of our client base.

Entities within the group actively participate in global financial markets and our relationship is continuously enhanced through regular investor presentations internationally. Entities are only allowed to have funding exposure to wholesale markets where they can demonstrate that the market is sufficiently deep and liquid, and then only relative to the size and complexity of their business.

The group's ability to access funding at costeffective levels is influenced by maintaining or improving the entity's credit rating. A reduction in these ratings could have an adverse effect on the group's funding costs, and access to wholesale term funding. Credit ratings are dependent on multiple factors, including operating environment, business model, strategy, capital adequacy levels, quality of earnings, risk appetite and exposure, and control framework.

We remain confident in our ability to raise funding appropriate to our needs.

Liquidity buffer

To protect against potential shocks, we hold a liquidity buffer in the form of cash, unencumbered high quality liquid assets (typically in the form of government or rated securities eligible for repurchase with the central bank), and near cash, well in excess of the regulatory requirements as protection against disruptions in cash flows. These portfolios are managed within board-approved targets, and as well as providing a buffer under going concern conditions, also form an integral part of the broader liquidity generation strategy. Investec remains a net liquidity provider to the interbank market, placing significantly more funds with other banks than our short-term interbank borrowings. We do not rely on overnight interbank deposits to fund term lending.

From 1 April 2017 to 31 March 2018 average cash and near cash balances over the period amounted to £11.9 billion (£5.1 billion in UK and Other; R116.5 billion in South Africa).

(continued)

Total Investec group cash and near cash trend

Investec plc cash and near cash trend

Investec Limited cash and near cash trend

(continued)

Bank and non-bank depositor concentration by type at 31 March 2018

£12 945 million UK and Other

Individuals	50.1%
Non-nancial corporates	34.7%
Banks	10.1%
Small business	5.1%

R349 616 million Southern Africa

Other nancials	45.5%
Non-nancial corporates	18.6%
Individuals	17.6%
Banks	7.9%
Small business	5.9%
Public sector	4.5%

The liquidity position of the group remained sound with total cash and near cash balances amounting to £12.8 billion at year end

Contingency planning

The group maintains contingency funding plans which detail the course of actions that can be taken in the event of a liquidity stress. The plans help to ensure that cash flow estimates and commitments can be met in the event of general market disruption or adverse bank-specific events, while minimising detrimental long-term implications for the business. The plans include:

• Details on the required daily monitoring of the liquidity position;
• Description of the early warning indicators to be monitored, and process of escalation if required;
• Liquidity stress scenarios to be modelled for Contingency Funding Plan (CFP) purposes (over and above daily stress testing scenarios);
• Funding and management actions available for use in a stress situation;
• Roles and responsibilities;
• Details of specific escalation bodies and key contacts; and
• Internal and external communication plans.

Asset encumbrance

An asset is defined as encumbered if it has been pledged as collateral against an existing liability and, as a result, is no longer available to the group to secure funding, satisfy collateral needs or be sold to reduce the funding requirement.

Within the UK, Risk management monitors and manages total balance sheet encumbrance within a board-approved risk appetite limit. Asset encumbrance is one of the factors considered in the discussion of new products or new funding structures, and the impact on risk appetite is assessed.

The group uses secured transactions to manage short-term cash and collateral needs, and utilises securitisations in order to raise external term funding as part of its diversified liability base. Securitisation notes issued are also retained by the group which are available to provide a pool of collateral eligible to support central bank liquidity facilities, including the Bank of England's Funding for Lending and Term Funding Schemes.

Encumbered assets are identified in Investec plc in accordance with the

reporting requirements under European Capital Requirements Regulation (CRR), and regular reporting is provided to the EBA and PRA. Further disclosures on encumbered and unencumbered assets can be found within the Investec plc Pillar 3 document.

On page 81 in volume three we disclose further details of assets that have been received as collateral under reverse repurchase agreements and securities borrowing transactions where the assets are allowed to be resold or pledged.

Liquidity mismatch

The tables that follow show the liquidity mismatch across our core geographies.

With respect to the contractual liquidity table below, we record all assets and liabilities with the underlying contractual maturity as determined by the cash flow profile for each deal.

With respect to the behavioural liquidity gap, we adjust the contractual profile of certain assets and liabilities:

• • Liquidity buffer: the actual contractual profile of the assets in the liquidity buffer is of little consequence, as practically Investec would meet any unexpected net cash outflows by repo'ing or selling these highly liquid securities. Consequently, for the liquidity buffer:
  • The time horizon to monetise our regulatory liquid assets which are guaranteed by the central bank has been adjusted to 'on demand'; and
  • The time horizon for the cash and near cash portfolio of 'available-forsale' discretionary treasury assets has been set to one month where there are deep secondary markets for this elective asset class.
• • Customer deposits: the contractual repayments of many deposits are on demand, or at notice, but in reality withdrawals vary significantly from this. Historical observations of the products are used to model the behavioural lives, and this analysis has identified significant additional sources of structural liquidity in the form of core deposits that exhibit stable behaviour.

UK and Other

Contractual liquidity at 31 March 2018

£'million	Demand	Up to one month	One to three months	Three to six months	Six months to one year	One to five years	> Five years	Total
Cash and short-term funds – banks	4 081	344	22	14	9	22	–	4 492
Investment/trading assets	439	554	244	338	258	942	1 371	4 146
Securitised assets	–	2	–	–	1	11	118	132
Advances	94	554	535	817	1 440	4 541	2 067	10 048
Other assets	218	811	82	88	60	76	459	1 794
Assets	4 832	2 265	883	1 257	1 768	5 592	4 015	20 612
Deposits – banks	(131)	–	(17)	–	(82)	(1 078)	–	(1 308)
Deposits – non-banks	(3 509)	(785)	(2 555)	(1 137)	(1 269)	(2 256)	(126)	(11 637)
Negotiable paper	–	–	(25)	(24)	(32)	(1 434)	(826)	(2 341)
Securitised liabilities	–	–	(3)	(3)	(6)	(46)	(70)	(128)
Investment/trading liabilities	(54)	(87)	(26)	(9)	(28)	(199)	(402)	(805)
Subordinated liabilities	–	–	–	–	–	(580)	–	(580)
Other liabilities	(133)	(748)	(288)	(66)	(78)	(110)	(49)	(1 472)
Liabilities	(3 827)	(1 620)	(2 914)	(1 239)	(1 495)	(5 703)	(1 473)	(18 271)
Total equity	–	–	–	–	–	–	(2 341)	(2 341)
Contractual liquidity gap	1 005	645	(2 031)	18	273	(111)	201	–
Cumulative liquidity gap	1 005	1 650	(381)	(363)	(90)	(201)	–

Behavioural liquidity

As discussed on page 66.

£'million	Demand	Up to one month	One to three months	Three to six months	Six months to one year	One to five years	> Five years	Total
Behavioural liquidity gap	3 704	641	(125)	(109)	269	(4 366)	(14)	–
Cumulative	3 704	4 345	4 220	4 111	4 380	14	–

(continued)

Southern Africa

Contractual liquidity at 31 March 2018

R'million	Demand	Up to one month	One to three months	Three to six months	Six months to one year	One to five years	> Five years	Total
Cash and short-term funds – banks	23 724	3 487	940	–	165	491	–	28 807
Cash and short-term funds – non-banks Investment/trading assets and	9 418	304	271	–	–	–	–	9 993
statutory liquids	63 695	26 941	4 372	3 127	2 307	37 408	24 839	162 689
Securitised assets	60	9	48	104	166	1 717	5 825	7 929
Advances	7 200	5 257	11 779	15 676	25 543	121 239	62 643	249 337
Other assets	698	1 243	2 943	80	211	4 574	8 135	17 884
Assets	104 795	37 241	20 353	18 987	28 392	165 429	101 442	476 639
Deposits – banks	(868)	(1 140)	(2 196)	(396)	(7 389)	(15 229)	(575)	(27 793)
Deposits – non-banks	(135 962)^	(21 961)	(65 423)	(24 505)	(37 762)	(33 810)	(2 400)	(321 823)
Negotiable paper	(1)	(3)	(129)	(358)	(3 306)	(3 088)	–	(6 885)
Securitised liabilities	–	–	–	–	–	–	(2 274)	(2 274)
Investment/trading liabilities	(838)	(16 086)	(1 418)	(1 825)	(4 765)	(12 753)	(855)	(38 540)
Subordinated liabilities	–	(871)	(17)	(9)	–	(4 601)	(9 515)	(15 013)
Other liabilities	(2 507)	(916)	(700)	(125)	(1 129)	(155)	(7 500)	(13 032)
Liabilities	(140 176)	(40 977)	(69 883)	(27 218)	(54 351)	(69 636)	(23 119)	(425 360)
Total equity	–	–	–	–	(213)	–	(51 066)	(51 279)
Contractual liquidity gap	(35 381)	(3 736)	(49 530)	(8 231)	(26 172)	95 793	27 257	–
Cumulative liquidity gap	(35 381)	(39 117)	(88 647)	(96 878)	(123 050)	(27 257)	–

^ Includes call deposits of R126 billion and the balance reflects term deposits which have finally reached/are reaching contractual maturity.

Behavioural liquidity

As discussed on page 66.

R'million	Demand	Up to one month	One to three months	Three to six months	Six months to one year	One to five years	> Five years	Total
Behavioural liquidity gap	58 207	650	5 388	(520)	(8 605)	(147 399)	92 279	–
Cumulative	58 207	58 857	64 245	63 726	55 120	(92 279)	–

(continued)

Regulatory requirements

In response to the global financial crisis, the BCBS introduced a series of reforms designed to both strengthen and harmonise global liquidity standards to ensure strong financial risk management and a safer global economy.

Two minimum standards for funding liquidity were introduced:

• The liquidity coverage ratio (LCR) is designed to ensure that banks have sufficient high quality liquid assets to meet their liquidity needs throughout a 30-calendar day severe stress
• The net stable funding ratio (NSFR) is designed to capture structural issues over a longer time horizon by requiring banks to have a sustainable maturity structure of assets and liabilities.

UK and other

Since 1 January 2018, banks within the EU have been required to maintain a minimum LCR ratio of 100%. For both Investec plc and Investec Bank plc (solo basis), the LCR is calculated following the European Commission Delegated Regulation 2015/61 and our own interpretations where the regulation calls for it. The reported LCR may change over time with updates to our methodologies and interpretations.

The BCBS published their final paper on NSFR in October 2014. In November 2016, the European Commission released a number of proposals amending the CRR referred to as the 'CRR2/CRDV' package. This includes a number of EU specificities with respect to the NSFR. The implementation date of the ratio will be two years after the date entry into force of the proposed regulation, at which point banks will be required to maintain a minimum NSFR of 100%. The NSFR therefore remains subject to an observation period in advance of such implementation and we will continue to monitor these rules until final implementation. The internally calculated NSFR for Investec plc and Investec Bank plc (solo basis) is based upon the BCBS paper and our own internal interpretations, as such, it is subject to change in response to regulatory updates and our methodologies.

Investec plc undertakes an annual Individual Liquidity Adequacy Assessment Process (ILAAP) which documents the approach to liquidity management across the firm. This document is reviewed and approved

by the board before being provided to the PRA for use, alongside the Liquidity Supervisory Review and Evaluation Process, to determine the bank's Individual Liquidity Guidance, also known as a Pillar 2 requirement.

Southern Africa

South Africa, a member of the G20, has adopted the published BCBS guidelines for 'liquidity risk measurement standards and monitoring'.

There are certain shortcomings and constraints in the South African environment and the banking sector in Southern Africa is characterised by certain structural features such as:

• A low discretionary savings rate and a higher degree of contractual savings that are captured by institutions such as pension funds, provident funds and providers of asset management services
• There is currently no 'deposit protection scheme' in South Africa. However, the regulators plan to incorporate a deposit protection scheme within the broader amendments to the recovery and resolution framework
• Southern Africa has an insufficient supply of level 1 assets in domestic currency to meet the aggregate demand.

There are various regulatory and economic barriers that prevent liquidity from flowing out of the domestic economy. Namely, Southern Africa has exchange control that limits capital flows, along with prudential requirements on financial corporates.

A positive consequence of the above is that the Rand funding that the South African banks use is contained within the financial system and therefore the Rand is unlikely to be drained by currency withdrawal from offshore sources, or placements in offshore accounts.

To address this systemic challenge, the South African Prudential Authority exercised national discretion and has announced:

• The introduction of a Committed Liquidity Facility (CLF) whereby South African banks can apply to the Reserve Bank for the CLF against eligible collateral for a prescribed commitment fee. The CLF is limited to 40% of Net Outflows under the LCR. Investec Bank Limited does not make use of the CLF offered by the South African Prudential Authority

• A change to the available stable funding factor as applied to less than six months term deposits from the financial sector. The change recognises 35% of less than six months financial sector deposits which has the impact of reducing the amount of greater than six months term deposits required by local banks to meet the NSFR, and will therefore mitigate any increases in the overall cost of funds.

Despite the above constraints, Investec Bank Limited comfortably exceeds the LCR and NSFR liquidity ratio requirements, having embedded these ratio into our processes.

Balance sheet risk year in review

• Investec maintained its strong liquidity position and continued to hold high levels of surplus liquid assets
• Our liquidity risk management process remains robust and comprehensive.

UK and other

A strong liquidity position has continued to be maintained throughout the year with liabilities growing to support strong asset growth. Funding and liquidity continued to be raised through a diverse mix of customer liabilities by customer type, currency, channel and tenor, avoiding reliance on any particular channel and ensuring continued access to a wide range of deposits.

Additional cost-effective term funding has been raised during the year whilst limiting refinancing risks. In 2017/18, these have included drawings on the Bank of England Term Funding Scheme, refinancing and upsizing of syndicated term loans and the issuance of new Investec plc senior and Additional Tier 1 notes in the debt capital markets.

Funding costs have continued to fall, despite overall growth in liabilities, through ongoing active management of the liability channels and the deployment of a diverse range of funding channels.

The overall liquidity position at the year-end remains strong across a range of metrics in line with our overall conservative approach to balance sheet risk management and is well positioned to support asset growth in the new financial year.

In September 2017, Investec Bank plc's long-term deposit rating was upgraded by Fitch to BBB+ (stable outlook) and the outlook was changed to positive by

Moody's (A2, positive outlook). The outlook was also changed to positive on Investec plc's long-term issuer rating (Baa1, positive outlook) by Moody's.

Cash and near cash balances at 31 March 2018 amounted to £5.8 billion (2017: £5.0 billion). Total UK and Other customer deposits was £11.6 billion at 31 March 2018 (2017: £11.0 billion).

For Investec plc and Investec Bank plc (solo basis), the LCR is calculated using our own interpretations of the EU Delegated Act. The LCR reported to the PRA at 31 March 2018 was 306% for Investec plc and 301% for Investec Bank plc (solo basis) which is well ahead of the regulatory minimum of 100%. Ahead of the implementation of the final NSFR rules, the group has applied its own interpretations of regulatory guidance and definitions from the BCBS final guidelines, to calculate the NSFR which was 142% for Investec plc and 133% for Investec Bank plc (solo basis), well ahead of the future regulatory minimum of 100%. The reported LCR and NSFR may change over time with regulatory developments and guidance.

Southern Africa

The economy faced major headwinds throughout 2017, driven by escalating political risks, which had negative effects on the real economy. Certain ratings agencies responded to these risks by downgrading South Africa's local and foreign currency credit ratings to junk status. Concerns over the South African economy persisted throughout the year and peaked ahead of the ANC National Elective Conference in December 2017. Subsequent to that, Cyril Ramaphosa was elected President of the ANC, the ruling party. The announcement of a change of leadership within the ruling party was favourably received by investors. In response to these developments, Moody's left South Africa's key credit ratings at investment grade (Baa3) upgrading the sovereign's outlook from negative to stable.

Investec Bank Limited responded to these external challenges by concluding its \$600 million long-term foreign currency funding programme in September 2017. It raised a further \$550 million using a combination of repos, sub-debt issuances and long-term cross currency swaps. The majority of our foreign currency funding is used to augment our already strong cash

balance. Investec grew its total customer deposits by 6.1% from R303 billion to R322 billion as at 31 March 2018. Our Private Bank and Cash Investments fundraising channels grew deposits by 6.5% to R132 billion over the financial year. Over the same period the wholesale ZAR only channels increased funding from R179 billion to R190 billion.

Our liquidity position is sound. Its health is evidenced by strong liquidity ratios which are monitored daily and managed to levels well above the regulatory requirement. The three-month average LCR for Investec Bank solo ended the financial year at 133.9% which is well above the current minimum level of 90% required. The NSFR has become a regulatory requirement as of January 2018. The NSFR for Investec Bank solo amounted to 108.4% as of 31 March 2018, comfortably above the 100% regulatory minimum. We are confident of our ability to meet and exceed both of these ratios whilst continuing to meet planned asset growth targets.

We foresee a period of improved market sentiment in the 2018/19 financial year. We are well positioned to take advantage of a positive political and investment climate which will likely drive asset growth in our geography. We have worked hard to build a robust retail and wholesale funding structure which is well diversified and sufficiently malleable to meet potential challenges which may test our view over the course of the new financial year.

Non-trading interest rate risk

Non-trading interest rate risk description

Non-trading interest rate risk, otherwise known as interest rate risk in the banking book, arises from the impact of adverse movements in interest rates on both net interest earnings and economic value of equity.

Sources of interest rate risk include:

• Repricing risk: arises from the timing differences in the fixed rate maturity and floating rate repricing of bank assets, liabilities and off-balance sheet derivative positions. This affects the interest rate margin realised between lending income and borrowing costs when applied to our rate sensitive portfolios

• Yield curve risk: repricing mismatches also expose the bank to changes in the slope and shape of the yield curve
• Basis risk: arises from imperfect correlation in the adjustments of the rates earned and paid on different instruments with otherwise similar repricing characteristics
• Embedded option risk: arises from optional elements embedded in items where the bank or its customers can alter the level and timing of their cash flows.
• Endowment risk: refers to the interest rate risk exposure arising from the net differential between interest rate insensitive assets, interest rate insensitive liabilities and capital.

The above sources of interest rate risk affect the interest rate margin realised between lending income and borrowing costs, when applied to our rate sensitive asset and liability portfolios, which has a direct effect on future net interest earnings and the economic value of equity.

Measurement and management of non-trading interest rate risk

Non-trading interest rate risk is an inherent consequence of conducting banking activities, and arises from the provision of retail and wholesale (non-trading) banking products and services. The group considers the management of banking margin of vital importance, and our non-trading interest rate risk philosophy is reflected in our dayto-day practices.

The aim of non-trading interest rate risk management is to protect and enhance net interest income and economic value of equity in accordance with the boardapproved risk appetite, and to ensure a high degree of stability of the net interest margin over an interest rate cycle. Nontrading interest rate risk is measured and analysed by utilising standard tools of traditional interest rate repricing mismatch and NPV sensitivity to changes in interest rate risk factors:

• Income metrics capture the change in accruals expected over a specified time horizon in response to a change in interest rates
• Economic value metrics capture all future cash flows in order to calculate

(continued)

the bank's net worth and therefore can highlight risks beyond the short-term earnings time horizon.

These metrics are used to assess and to communicate to senior management the financial impact of possible future interest rate scenarios, covering (i) interest rate expectations and perceived risks to the central view (ii) standard shocks to levels and shapes of interest rates and yield curves (iii) historically-based yield curve changes.

The repricing gap provides a simple representation of the balance sheet, with the sensitivity of fair values and earnings to changes to interest rates calculated off the repricing gap. This also allows for the detection of interest rate risk concentration in specific repricing buckets. Net interest income sensitivity measures the change in accruals expected over the specified horizon in response to a shift in the yield curve, while economic value sensitivity and stress testing to macro-economic movement or changes to the yield curve measures the interest risk implicit change in net worth as a result of a change in interest rates on the current values of financial assets and liabilities. Economic value measures have the advantage that all future cash flows are considered and therefore can highlight risk beyond the earnings horizon.

Each geographic entity has its own boardapproved non-trading interest rate risk policy and risk appetite, which is clearly defined in relation to both income risk and economic value risk. The policy dictates that long-term (>1 year) non-trading interest rate risk is materially eliminated. Where natural hedges between banking book items do not suffice to reduce the exposure within defined limits, interest rate swaps are used to transform fixed rate assets and liabilities into variable rate items.

Operationally, daily management of interest rate risk is centralised within the Treasury of each geographic entity and is subject to local independent risk and ALCO review. Treasury mitigates any residual undesirable risk where possible, by changing the duration of the banking group's discretionary liquid asset portfolio, or through derivative transactions. The Treasury mandate allows for a tactical response to market volatility which may arise during changing interest rate cycles, in order to hedge residual exposures. Any resultant interest rate position is managed under the market risk limits. Balance sheet risk management independently monitors a broad range of interest rate risk metrics to changes in interest rate risk factors, detailing the sources of interest rate exposure.

We are exposed to automatic optionality

risk for those lending products where the bank applies a minimum lending rate. This is an income protection mechanism allowing for upward potential and no downside risk. We are not materially exposed to behavioural embedded option risk, as contract breakage penalties on fixed-rate items specifically cover this risk, while early termination of variable rate contracts has negligible impact on interest rate risk.

Investec has a relatively small endowment risk due to paying market rates on all deposits, compared to banks with significant low or non-interest-bearing current and cheque accounts. Endowment risk due to free funding, comprising mainly ordinary share capital and reserves, is managed passively, with the focus on measuring and monitoring. The endowment risk is included within our non-trading interest rate risk measures.

The group complies with the BCBS108 framework which is currently in force for assessing banking book (non-trading) interest rate risk, and is in the process of enhancing its existing framework to adhere to the new BCBS368 principles which come into effect in 2020.

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Interest rate sensitivity gap

The tables below show our non-trading interest rate mismatch. These exposures affect the interest rate margin realised between lending income and borrowing costs assuming no management intervention.

UK and Other – interest rate sensitivity gap at 31 March 2018

£'million	Not > three months	> Three months but < six months	> Six months but < one year	> One year but < five years	> Five years	Non-rate	Total non trading
Cash and short-term funds – banks	4 482	7	–	–	–	–	4 489
Investment/trading assets	1 371	193	77	224	66	471	2 402
Securitised assets	132	–	–	–	–	–	132
Advances	7 435	573	284	1 368	388	–	10 048
Other assets	–	–	–	–	–	1 743	1 743
Assets	13 420	773	361	1 592	454	2 214	18 814
Deposits – banks	(1 299)	(6)	–	(1)	–	–	(1 306)
Deposits – non-banks	(9 289)	(345)	(1 205)	(796)	(2)	–	(11 637)
Negotiable paper	(1 908)	(13)	–	(420)	–	–	(2 341)
Securitised liabilities	(128)	–	–	–	–	–	(128)
Investment/trading liabilities	(29)	(11)	(6)	–	–	–	(46)
Subordinated liabilities	–	–	–	(575)	–	(5)	(580)
Other liabilities	–	–	–	–	–	(435)	(435)
Liabilities	(12 653)	(375)	(1 211)	(1 792)	(2)	(440)	(16 473)
Total equity	–	–	–	–	–	(2 341)	(2 341)
Balance sheet	767	398	(850)	(200)	452	(567)	–
Off-balance sheet	(63)	–	–	378	(315)	–	–
Repricing gap	704	398	(850)	178	137	(567)	–
Cumulative repricing gap	704	1 102	252	430	567	–

Southern Africa – interest rate sensitivity gap at 31 March 2018

R'million	Not > three months	> Three months but < six months	> Six months but < one year	> One year but < five years	> Five years	Non-rate	Total non trading
Cash and short-term funds – banks	19 236	–	159	–	–	8 240	27 635
Cash and short-term funds – non-banks	9 785	–	–	–	–	208	9 993
Investment/trading assets and statutory liquids	46 587	27 818	16 566	7 390	5 959	31 904	136 224
Securitised assets	7 929	–	–	–	–	–	7 929
Advances	222 260	4 791	1 745	15 217	2 302	3 022	249 337
Other assets	–	–	–	–	–	17 884	17 884
Assets	305 797	32 609	18 470	22 607	8 261	61 258	449 002
Deposits – banks	(27 428)	(355)	–	(10)	–	–	(27 793)
Deposits – non-banks	(269 525)	(16 383)	(23 583)	(9 163)	(2 180)	(924)	(321 758)
Negotiable paper	(5 943)	(321)	(518)	(103)	–	–	(6 885)
Securitised liabilities	(2 272)	–	–	–	–	(2)	(2 274)
Investment/trading liabilities	(1 753)	–	–	(197)	(686)	(12 756)	(15 392)
Subordinated liabilities	(11 847)	(1 943)	–	(697)	–	(526)	(15 013)
Other liabilities	–	–	–	(57)	(27)	(12 948)	(13 032)
Liabilities	(318 768)	(19 002)	(24 101)	(10 227)	(2 893)	(27 156)	(402 147)
Intercompany loans	10 437	(1 381)	(2 884)	(898)	(96)	663	5 841
Total equity	–	–	(213)	–	(5 363)	(45 703)	(51 279)
Balance sheet	(2 534)	12 226	(8 728)	11 482	(91)	(10 938)	1 417
Off-balance sheet	3 429	33	9 275	(9 303)	(4 851)	–	(1 417)
Repricing gap	895	12 259	547	2 179	(4 942)	(10 938)	–
Cumulative repricing gap	895	13 154	13 701	15 880	10 938	–

Economic value sensitivity at 31 March 2018

As outlined above, non-trading interest rate risk is measured and monitored using an economic value sensitivity approach. The tables below reflect our economic value sensitivity to a 2% parallel shift in interest rates assuming no management intervention. The numbers represent the change to the value of the interest rate sensitive portfolios should such a hypothetical scenario arise. This sensitivity effect does not have a significant direct impact on our equity.

UK and Other

Sensitivity to the following interest rates (expressed in original currencies) million GBP USD EUR AUD ZAR Other (GBP) All (GBP) 200bps down (8.0) (3.2) 3.5 0.3 – (0.1) (5.0) 200bps up 7.3 2.9 (3.2) (0.3) – 0.1 4.5

Southern Africa

Sensitivity to the following interest rates (expressed in original currencies)

million	ZAR	GBP	USD	EUR	AUD	Other (ZAR)	All (ZAR)
200bps down	607.9	9.6	1.8	1.1	1.2	(1.8)	813.9
200bps up	(345.9)	(9.1)	(1.9)	(1.4)	(0.6)	–	(545.2)

Operational risk

Operational risk description

Operational risk is defined as the potential or actual impact as a result of failures relating to internal processes, people, systems, or from external events. The impacts can be financial as well as nonfinancial such as customer detriment, reputational or regulatory consequences.

Operational risk is an inherent risk in the ordinary course of business activity. The group aims to appropriately identify and manage operational risk within acceptable levels by adopting sound operational risk management practices which are fit for purpose.

The group's approach to manage operational risk operates in terms of a levels of defence model which reinforces accountability by setting roles and responsibilities for managing operational risk.

The levels of defence model is applied as follows:

• Level 1 Business line management: responsible for identifying and managing risks inherent in the products, activities, processes and systems for which it is accountable
• Level 2 Independent operational risk function: responsible for challenging the business lines' inputs to, and outputs

from, the group's risk management, risk measurement and reporting activities

• Level 3 – Independent review and challenge: responsible for reviewing and testing the application and effectiveness of operational risk management procedures and practices.

Risk appetite

Operational risk appetite is defined as the level of risk exposure that is acceptable to the board in order to achieve its business and strategic objectives. The board is responsible for setting and regularly reviewing risk appetite. The Operational Risk Tolerance policy defines the amount of operational risk exposure, or potential adverse impact of a risk event, that the group is willing to accept.

Operational risks are managed in accordance with the level of risk appetite. Any breaches of limits are escalated to the GRCC and the BRCC on a regular basis.

Management and measurement of operational risk

Regulatory capital

The group applies the standardised approach (TSA) for the assessment of regulatory capital.

As part of the 2017 Basel III Reforms, The Basel Committee has announced revisions to the calculations of capital requirements for operational risk. A single standardised approach will replace all existing approaches for the calculation of regulatory capital from January 2022.

The group will continue to work closely with regulators and industry bodies on the implementation of the revisions.

Operational risk management framework and governance

The operational risk management framework is embedded at all levels of the group, supported by the risk culture and enhanced on a continual basis in line with regulatory developments. Included in the framework are policies, practices and processes which facilitate the identification, assessment, mitigation, monitoring and reporting of operational risk.

The group's operational risk profile is reported on a regular basis to various operational risk forums and governance committees responsible for oversight.

Risk reports are used for ongoing monitoring of the operational risk profile which contributes to sound risk management and decision-making by the board and management.

Operational risk practices consist of the following:

Risk and control assessments

Forward-looking qualitative assessments performed on key business processes. These assessments allow business units to identify, manage and monitor operational risks and controls

Internal risk events

Internal risk events are analysed to enable business to identify and monitor trends in addition to addressing control weaknesses

External risk events

An external data service is used to provide operational risk events from other organisations. These events are analysed to enhance our control environment. The external risk events also informs operational risk scenarios

Key risk indicators

Metrics are used to monitor risk exposures against identified thresholds. The output provides predictive capability in assessing the risk profile of the business

Scenario analysis and capital calculation

Extreme, but plausible scenarios are assessed to identify and manage significant operational risk exposures. The output of this evaluation provides input to determine internal operational risk capital requirements

Description

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Operational risk year in review

The group continued to enhance its operational risk framework in line with regulatory developments and sound practices. Regular interaction with regulators promotes an understanding of regulatory expectations and informs the approach to regulatory developments and requirements. The awareness of sound practice is achieved through interaction with industry counterparts at formal industry forums.

Operational risk events

Overall risk events and losses are managed within appetite. The majority of operational risk events occurred in the process failure risk event category. The value of these events is driven by a few events which are significant in value.

The second largest risk event category was external fraud, mainly driven by credit card fraud. These losses remained within risk appetite despite an increase in credit card fraud across the industry.

Mitigation required to minimise the occurrence of these events remains an area of focus.

Looking forward

Key operational risk considerations for the year ahead

Definition of risk	Management, mitigation approach and priorities for 2018/2019
Business continuity
Risk associated with disruptive incidents which can impact premises, staff, equipment, systems, and key business processes	• Maintain continuity through appropriate resilience strategies that cater for all disruptions, irrespective of the cause. The strategies include, but are not limited to relocating impacted business to alternate processing sites, the application of high availability technology solutions and ensuring physical solutions for critical infrastructure components • Enhance the group's global resilience capability through a team of dedicated resources and robust governance processes • Incorporate resilience into business operations to lessen the impact of disruptions • Conduct ongoing validation of recovery strategies to ensure they remain effective and appropriate • Participate in regulatory and financial industry resilience activities to collaboratively minimise national systemic continuity risks
Cyber security
Risk associated with cyber attacks which can interrupt client services or business processes, or result in financial losses	• Maintain a risk-based cyber security strategy to ensure the group is adequately protected against advanced and targeted cyber attacks • Manage an adaptive cyber security architecture, supported by relevant policies and ongoing staff awareness • Continue to expand visibility, coverage, and proactive reporting of cyber controls to ensure they are effective and consistent • Improve and mature evolving cyber security prediction, prevention, detection and response capabilities • Establish secure IT system development and testing practices to ensure they are secure both by design and in operation • Enhance cyber resilience through effective, co-ordinated security incident response, aligned to disaster recovery and business continuity processes
Financial crime
Risk associated with fraud, bribery, corruption, theft, money laundering, terrorist financing, tax evasion, forgery and integrity misconduct by staff, clients, suppliers and other stakeholders	Anti-Money Laundering (AML), Terrorist Financing and Sanctions • Enhancement of AML and Sanctions control systems across the group • Policies, procedures and minimum standards are reviewed regularly to ensure they remain relevant, robust and current to prevent and detect AML related activities • Continuous monitoring of adherence to AML policies and legislative requirements • AML awareness remains a key component of the control environment. The awareness is supported by mandatory training for all staff and specialist training for AML roles • Participate at industry bodies to manage legislative requirements through engagements with regulators Fraud • Enhance the group's global approach to fraud management through a holistic framework and consistent policies, standards and methodologies • Maintain the Integrity Line to ensure staff is able to report regulatory breaches, allegations of bribery, fraud and corruption, and non-compliance with policies • Proactive monitoring of adherence to fraud prevention policies and embedding of practices which comply with regulations, industry guidance and best practice • Continue to focus on training staff and clients on fraud prevention and detection • Participate in industry working groups to gain an understanding of current trends in order to enhance the control environment

Definition of risk	Management, mitigation approach and priorities for 2018/2019
Information security
Risk associated with the compromise of information assets which can impact their confidentiality, integrity, or availability	• Identify high-value information assets based on confidentiality and business criticality • Implement strong security controls to protect information against unauthorised access or disclosure from both internal and external threats • Manage role-based access to systems and data in support of least-privilege and segregation of duty principles • Develop mechanisms to monitor for, identify, and guard against data loss • Establish effective security monitoring to proactively identify and swiftly respond to suspicious activity • Align practices and controls to ensure compliance with the rapidly changing legal and regulatory privacy requirements • Safeguard and monitor information flows to enhance visibility and to ensure that data remains accurate, relevant, and protected
Outsourcing and third party
Risk associated with the reliance on, and use of a service provider to provide services to the group	• Governance structures are in place to approve outsource and third-party arrangements • Policies and practices include adequate guidance over the assessment, selection, suitability and oversight of the outsource and third party providers • Continue to strengthen governance processes and relevant policies relating to how we identify, assess, mitigate and manage risks across the range of outsource and third party providers
Process failure
Risk associated with inadequate internal processes, including human errors and control failures within the business. This includes process origination, execution and operations	• Proactive assessment relating to new products and projects to implement adequate and effective controls including the management of change • Address human errors through training and continuous automation of processes • Segregation of incompatible duties and appropriate authorisation controls • Causal analysis is used to identify weaknesses in controls following the occurrence of risk events • Risk and performance indicators are used to monitor the effectiveness of controls across business units • Thematic reviews across business units to ensure consistent and efficient application of controls
Regulatory compliance
Risk associated with identification, implementation and monitoring of compliance with regulations	• Group Compliance and Group Legal assist in the management of regulatory and compliance risk which includes the identification and adherence to legal and regulatory requirements • Align regulatory and compliance approach to reflect new regulatory landscapes particularly the change of regulatory structures • Manage business impact and implementation challenges as a result of significant volumes of statutory and regulatory changes and developments (Refer to the Compliance section pages 94 to 95) • Monitoring remains focused appropriately as areas of conduct and regulatory risk develop • Ensure that the business is appropriately positioned to cope with the regulatory changes resulting from Brexit
Technology
Risk associated with the disruptions to the IT systems which underpin our critical business processes and client services	• Align architecture across the group to reduce technical complexity and leverage common functions and processes • Enhance operational processes to better control IT changes in order to minimise business impact and recurrence • Drive automation and proactive monitoring of the technology environment to reduce human error whilst enhancing efficiency • Implement strategic infrastructure and application roadmaps to improve technology capacity, scalability and resilience • Maintain and test IT recovery capabilities to withstand system failures and safeguard against service disruptions • Establish effective technology and operational monitoring for oversight of the adequacy and effectiveness of IT systems and processes

(continued)

Insurance

The group maintains adequate insurance to cover key insurable risks. The insurance process and requirements are managed by the group insurance risk manager. Regular interaction between group operational risk management and group insurance risk management ensures that there is an exchange of information in order to enhance the mitigation of operational risk.

Recovery and resolution planning

The purpose of the recovery plans are to document how the board and management will recover from extreme financial stress to avoid liquidity and capital difficulties in Investec plc and Investec Limited. The plans are reviewed and approved by the board on an annual basis.

The recovery plans for Investec plc and Investec Limited:

• Integrate with existing contingency planning
• Analyse the potential for severe stress in the group
• Identify roles and responsibilities
• Identify early warning indicators and trigger levels
• Analyse how the group could be affected by the stresses under various scenarios
• Include potential recovery actions available to the board and management to respond to the situation, including immediate, intermediate and strategic actions
• Assess how the group might recover as a result of these actions to avoid resolution.

UK and Other

A significant addition to the EU legislative framework for financial institutions has been the Bank Recovery and Resolution Directive (BRRD) which establishes a framework for the recovery and resolution of EU credit institutions and investment firms.

As implemented, the BRRD gives resolution authorities powers to intervene in and resolve a financial institution that is no longer viable, including through the transfers of business and, when implemented in relevant member states, creditor financed recapitalisation (bail-in within resolution) that allocates losses to shareholders and unsecured and uninsured creditors in their order of seniority, at a regulator determined point of non-viability that may precede insolvency. The concept of bail-in will affect the rights of unsecured creditors subject to any bail-in in the event of a resolution of a failing bank.

The BRRD also requires competent authorities to impose a Minimum Requirement for own funds and Eligible Liabilities (MREL) on financial institutions to facilitate the effective exercise of the bail-in tool.

The BRRD also requires the development of recovery and resolution plans at group and firm level. The BRRD sets out a harmonised set of resolution tools across the European Union, including the power to impose a temporary stay on the rights of creditors to terminate, accelerate or close out contracts.

The PRA has made rules that require authorised firms to draw up recovery plans and resolution packs. Recovery plans are designed to outline credible recovery actions that authorised firms could implement in the event of severe stress in order to restore their business to a stable and sustainable condition. The resolution pack contains detailed information on the authorised firm in question which will be used to develop resolution strategies for that firm, assess its current level of resolvability against the strategy, and to inform work on identifying barriers to the implementation of operational resolution plans.

In line with PRA and EU requirements, Investec plc maintains a resolution pack and a recovery plan.

Southern Africa

Financial Stability Board member countries are required to have recovery and resolution plans in place for all systemically significant financial institutions. The South African Prudential Authority has adopted this requirement and has to date required South African domestically significant banking institutions to develop recovery plans. Guidance issued by the Financial Stability Board and the South African Prudential Authority has been incorporated into Investec's recovery plan.

The South African Prudential Authority has continued to focus on finalising the recovery plans for the local banks and together with the South African Treasury are considering legislation to adopt a resolution framework.

We will be subject to this legislation once it is adopted.

Reputational and strategic risk

Reputational risk is damage to our reputation, name or brand. Reputational risk is often associated with strategic decisions made and also arises as a result of other risks manifesting and not being appropriately mitigated.

The group aspires to maintain an excellent reputation for entrepreneurship, strong risk management discipline, a client-centric approach and an ability to be flexible and innovative. The group recognises the serious consequences of any adverse publicity or damage to reputation, whatever the underlying cause.

We have various policies and practices to mitigate reputational risk, including strong values that are regularly and proactively reinforced. We also subscribe to sound corporate governance practices, which require that activities, processes and decisions are based on carefully considered principles. We are aware of the impact of practices that may result in a breakdown of trust and confidence in the organisation. The group's policies and practices are regularly reinforced through transparent communication, accurate reporting, continuous group culture and values assessment, internal audit and regulatory compliance review, and risk management practices. Strategic and reputational risk is mitigated as much as possible through these detailed processes and governance/ escalation procedures from business units to the board, and from regular, clear communication with shareholders, customers and all stakeholders. In addition, Investec's policy is to avoid any transaction, service or association which may bring with it the risk of potential damage to our reputation. Transaction approval governance structures such as credit, engagement and new product committees have therefore been tasked with this responsibility in relation to all new business undertaken. A disclosure and public communications policy has also been approved by the board.

Pension risk

Pension risk arises from obligations arising from defined benefit pension schemes, where Investec plc is required to fund any deficit in the schemes.

There is one remaining defined benefit scheme within Investec plc at 31 March 2018, which is closed to new business.

During the year the second defined benefit scheme entered into a buy-out with the assets and liabilities of the scheme being transferred to a third party insurer. Members now receive their pension from the third party insurer and Investec has no remaining liability relating to this scheme.

Pension risk arises if the net present value of future cash outflows is greater than the current value of the asset pool set aside to cover those payments.

Primary sources of risk include:

• A mismatch in the duration of the assets relative to the liabilities
• Market-driven asset price volatility
• Increased life expectancy of individuals leading to increased liabilities.

Investec plc monitors the position of the funds closely and regularly assesses potential adverse movements in the schemes in close conjunction with external independent advisers.

Further information is provided on pages 97 to 100 in volume three.

Legal risk management

Legal risk is the risk of loss resulting from any of our rights not being fully enforceable or from our obligations not being properly performed. This includes our rights and obligations under contracts entered into with counterparties. Such risk is especially applicable where the counterparty defaults and the relevant documentation may not give rise to the rights and remedies anticipated when the transaction was entered into.

Our objective is to identify, manage, monitor and mitigate legal risks throughout the group. We seek to actively mitigate these risks by identifying them, setting minimum standards for their management and allocating clear responsibility for such management to legal risk managers, as well as ensuring compliance through proactive monitoring.

The scope of our activities is continuously reviewed and includes, among other things, the following areas:

• Relationship contracts
• Legislation/governance
• Litigation
• Corporate events
• Incident or crisis management
• Ongoing quality control.

The legal risk policy is implemented through:

• Identification and ongoing review of areas where legal risk is found to be present
• Allocation of responsibility for the development of procedures for management and mitigation of these risks
• Installation of appropriate segregation of duties, so that legal documentation is reviewed and executed with the appropriate level of independence from the persons involved in proposing or promoting the transaction
• Ongoing examination of the interrelationship between legal risk and other areas of risk management, so as to ensure that there are no 'gaps' in the risk management process
• Establishing minimum standards for mitigating and controlling each risk. This is the nature and extent of work to be undertaken by our internal and external legal resources
• Establishing procedures to monitor compliance, taking into account the required minimum standards
• Establishing legal risk forums (bringing together the various legal risk managers) to ensure we keep abreast of developments and changes in the nature and extent of our activities, and to benchmark our processes against best practice.

Overall responsibility for this policy rests with the board. The board delegates responsibility for implementation of the policy to the global head of legal risk. The global head assigns responsibility for controlling these risks to the managers of appropriate departments and focused units throughout the group.

Conduct risk

UK and Other

The FCA in the UK has outlined its approach to managing firms' conduct.

By conduct risk we mean the risk that detriment is caused to the bank, its customers, its counterparties or the market, as a result of inappropriate execution of business activities.

The focus on conduct risk is intended to go beyond the current compliance monitoring

frameworks in order to move away from the culture of 'tick box' compliance. As a result, firms are expected to look across their business models and strategies and assess how to balance the pursuit of profits with good outcomes for clients and proper standards of market conduct. All firms will be expected to take a holistic approach to assessing their key conduct risks and to ensure that these are being managed in accordance with FCA's strategic objectives of protecting clients, ensuring markets function effectively and promoting competition.

The group's work on conduct risk, includes assessing key risks across the business, identifying key controls and ensuring that the board is receiving the right information to enable it to challenge effectively the management of such risks by the business.

South Africa

The South African financial sector regulatory landscape has been under review for the last few years. The new Twin Peaks regulatory structure came into effect on 1 April 2018, with the Prudential Authority (PA) being dedicated to prudential supervision and the Financial Sector Conduct Authority (FSCA), previously the Financial Services Board, being the dedicated conduct regulator for all financial institutions. Although the conduct of financial institutions is currently regulated under various pieces of legislation, this will change under the new regulatory structure. The resultant strategic and operational impact is expected to last for the next few years.

Capital management and allocation

Investec Limited (and its subsidiaries) and Investec plc (and its subsidiaries) are managed independently and have their respective capital bases ring-fenced, however, the governance of capital management is consistent across the two groups. The DLC structure requires the two groups to independently manage each group's balance sheet and capital is managed on the same basis. This approach is overseen by the BRCC (via the Investec DLC capital committee) which is a board sub-committee with ultimate responsibility for the capital adequacy of both Investec Limited and Investec plc.

(continued)

Regulatory capital – Investec Limited

Current regulatory framework – Investec Limited

Investec Limited is regulated by the South African Prudential Authority.

Investec Limited calculates capital resources and requirements using the Basel III framework, as implemented in Southern Africa by the South African Prudential Authority in accordance with the Regulations relating to Banks, Gazette No. 35950, 12 December 2012 – (The Regulations), Banks Act, 1990 (ACT NO. 94 OF 1990) – (The Act) and relevant published Banks Act Circulars, Guidance notes and Directives. In view of the implementation of the Basel III framework on 1 January 2013, the South African capital framework was legislated in Banks Act Directive 6 of 2016 that stipulates the various capital Tiers, together with various related elements specified in the Regulations and in the Basel III framework, including the systemic risk capital requirements (Pillar IIA), the bankspecific individual capital requirement (ICR, also known as Pillar IIB), and the phasing in of the related minimum requirements from 2016 up to 2019 and thereafter. The higher loss absorbency (HLA) requirement for domestic systemically important banks (D-SIB) is regarded as an extension of the capital conservation buffer (CCB) of which the first 50%, up to a maximum of 1% of risk weighted exposures (RWE), must be fully met by CET 1 capital. The South African Prudential Authority continuously assesses Investec Limited's ICR as part of its Supervisory Review and Evaluation Process (SREP) of which ICR may be based on the levels of economic capital Investec Limited holds to cover risks not regarded as Pillar 1 risks, as observed in the internal capital adequacy assessment process (ICAAP). In terms of the Regulations, Investec Limited is required to maintain an additional discretionary capital buffer above the specified minimum requirements to ensure that the execution of internal business objectives or the occurrence of adverse external environmental factors do not prevent the Group from operating above the relevant minima. In line with Banks Act Circular 6 of 2016, banks in South Africa should not disclose to the public their ICR or D-SIB requirements as these are bank-specific requirements that are based on a combination of various qualitative and quantitative factors that are not directly comparable across banks.

South Africa has not announced any CCyB buffer requirements. The institution specific CCyB requirement is calculated based on private sector non-bank exposures held in BCBS member jurisdictions in which a buffer rate has been set. As at 31 March 2018 Investec Limited is holding an institution specific CCyB of 0.016% of RWE. Investec Limited continues to hold capital in excess of relevant capital minima's and capital buffer requirements.

Investec Limited currently uses the standardised approach to calculate its credit and counterparty credit risk and operational risk capital requirements. Capital requirements for equity risk is calculated using the internal ratings-based (IRB) approach by applying the simple risk-weight method. The market risk capital requirement is measured using an internal risk management model, approved by the South African Prudential Authority.

Various subsidiaries of Investec Limited are subject to additional regulation covering various activities or implemented by local regulators in other jurisdictions. For capital management purposes, it is the prevailing rules applied to the consolidated Investec Limited group that are monitored most closely. Nevertheless, where capital is a relevant consideration, management within each regulated entity pays close attention to prevailing local regulatory rules as determined by their respective regulators. Management of each regulated entity, with the support of the group's capital management functions, ensures that capital remains prudently above minimum requirements at all times.

Regulatory capital – Investec plc

Current regulatory framework

Investec plc is authorised by the PRA and is regulated by the FCA and the PRA on a consolidated basis. Investec plc calculates capital resources and requirements using the Basel III framework, as implemented in the European Union through the Capital Requirements Directive IV (CRD IV).

In the UK banks are required to meet minimum capital requirements as prescribed by CRD IV for Pillar I, namely a CET 1 capital requirement of 4.5% of risk-weighted assets (RWAs), a tier 1 capital requirement of 6% of RWAs and a total capital requirement of 8% of RWAs. In addition banks are required to meet their individual capital guidance, as determined by the SREP, with at least 56% met with

CET 1 capital. The PRA buffer which is also determined as part of the ICAAP assessment must be supported with CET 1 capital and will be transitioned in at 25% per annum, until fully phased in by January 2019.

In August 2017, the PRA issued Investec plc with a revised Pillar IIA requirement of 1.51 % of RWAs, of which 0.84 % has to be met with CET 1 capital. In addition Investec plc continues to meet its PRA buffer, of which 75% is currently met with CET 1 capital.

In line with CRD IV, UK firms are required to meet a combined buffer requirement, which is in addition to the Pillar I and Pillar IIA capital requirements. The combined buffer includes the CCB and the CCyB and must be met with CET 1 capital. The buffer for global systemically important institutions (G-SIIs) and the systemic risk buffer do not apply to Investec plc and will not be included in the combined buffer requirement.

From 1 January 2016 Investec plc began phasing in the CCB at 0.625% of RWAs. An additional 0.625% of RWAs is phased-in each year until fully implemented on 1 January 2019 at 2.5% of RWAs. As at 31 March 2018 Investec plc holds a CCB, which is met with CET 1 capital, of 1.875% of RWAs.

At the 31 March 2018 Investec plc is holding an institution specific CCyB of 0.02% of RWAs. The institution specific CCyB requirement is calculated based on the relevant exposures held in jurisdictions in which a buffer rate has been set. In the UK, the Financial Policy Committee (FPC) confirmed in June 2017 the UK rate would increase from 0% to 0.5% effective from June 2018. Then in November 2017 the FPC confirmed that the rate would rise a further 0.5% to 1.0% effective November 2018. As at 31 March 2018, six jurisdictions have implemented countercyclical buffer rates: Norway 2.0%, Sweden 2.0%, Hong Kong 1.875%, Czech Republic 0.5%, Iceland 1.25% and Slovakia 0.5%. The Czech Republic rate is expected to rise to 1.0% from 1 July 2018 and the Slovakia rate will rise to 1.25%, effective 1 August 2018.

The Investec plc group continues to hold capital in excess of all the capital and buffer requirements.

Investec plc applies the standardised approach to calculate credit and counterparty credit risk, securitisation and operational risk capital requirements. Risk disclosures The mark-to-market method is used to calculate the counterparty credit risk exposure amount. The market risk capital requirement is calculated using the standardised approach. For certain options, the group has obtained an article 329 permission from the PRA to use an internal model to calculate the delta for these positions. In addition the group was granted an article 331 permission in January 2018 which allows sensitivity models to be used when calculating the market risk position for certain instruments.

Subsidiaries of Investec plc may be subject to additional regulations as implemented by local regulators in other relevant jurisdictions. Where capital is a relevant consideration, management within each regulated entity pays close attention to prevailing local regulatory rules as determined by their respective regulators. For capital management purposes, it is the prevailing rules applied to the consolidated Investec plc group that are monitored closely. With the support of the group's prudential advisory and reporting team, local management of each regulated entity ensures that capital remains prudently above minimum regulatory requirements at all times.

Regulatory considerations

The regulatory environment has continued to evolve during 2018, with a vast number of new consultations, regulatory technical standards, implementing technical standards and other proposals being published or adopted, notably by the PRA, the BCBS and the European Banking Authority (EBA) and the South African Prudential Authority.

International

In December 2017 the Basel Committee's oversight body, the Group of Central Bank Governors and Heads of Supervision endorsed the outstanding Basel III postcrisis regulatory reforms. The package of reforms endorsed now completes the global reform of the regulatory framework which began following the onset of the financial crisis. The aim of these reforms is to reduce excess variability in RWAs and improve comparability and transparency of banks' capital ratios. The endorsed package includes the following elements:

• A revised standardised approach for credit risk;
• Revisions to the internal ratings-based approach for credit risk and limiting the use of advanced internally modelled approaches for low-default portfolios;
• Revisions to the credit valuation adjustment (CVA) framework, including the introduction of a revised standardised approach;
• A revised standardised approach for operational risk, which replaced the existing standardised approach and the advanced measurement approaches;
• The measurement of the leverage ratio and leverage ratio buffer for G-SIBs, which will take the form of a tier 1 capital buffer set at 50% of a G-SIB's riskweighted capital buffer; and
• An aggregate output floor of 72.5% of RWAs as calculated using the Basel III standardised approaches for banks applying internal models. These banks will also be required to disclose their RWAs based on these standardised approaches.

The revised standards will take effect from 1 January 2022, with some standards subject to five year phase in arrangement. In addition, at the same meeting, it was agreed that the implementation date for the revised minimum capital requirements for market risk should be extended from 2019 to 1 January 2022. Deferring the implementation date for the revised market risk framework will align its start date with the revised reforms set out above. The EU and domestic implementation date for these reforms are yet to be confirmed.

In addition, during the year, the BCBS issued a number of other revisions or proposals, the following of which are relevant to Investec plc:

• Final guidelines on the identification and management of step-in risk, to be implemented in member jurisdictions by 2020;
• The final phase two Pillar III standards and the proposed phase three revisions and/or new disclosure requirements driven by the finalisation of the Basel III post-crisis regulatory reforms; and
• A discussion paper on the regulatory treatment of sovereign exposures.

South Africa

Banks Act Directive 5 of 2017 directs South African banks regarding the classification of impairments as either general (GP) or specific (SP) under IFRS 9 during the interim approach, the transitional arrangements of the ECL accounting provisions for regulatory capital purposes, the disclosure requirements relating to such transitional

arrangements as well as requirements regarding the auditing of the balances and adjustments that shall be implemented once IFRS 9 becomes effective. Banks that opt for a transition period shall follow a static approach (a once off calculation of the impact) and apply a three year transition period, amortised on a straight-line basis as specified in the Directive. Investec Limited will be applying the IFRS 9 transitional arrangements on regulatory capital from 1 April 2018. In addition, the South African Prudential Authority issued Banks Act Guidance note 3 of 2018 that specifies the proposed implementation dates of BCBS regulatory reforms relevant to Banks in South Africa. The Prudential Authority has agreed to preliminary implementation dates for each regulatory reform, based on industry comments, quantitative impact studies, global considerations and implementation complexity. Reforms that will impact Investec Limited in the short to medium term include: capital requirements for equity investments in funds, revisions to the securitisation framework, standardised approach for measuring counterparty credit risk and the new large exposures framework. The remainder of the regulatory reforms are likely to be implemented in Southern Africa in line with BCBS timelines on 1 January 2022. Investec Limited continues to assess and monitor the impact of new Regulations and regulatory reforms through participation of industry Quantitative Impact Studies (QIS) submissions to the Prudential Authority and presenting updates and impacts of the reforms to senior executives at the DLC Capital Committee and the Board.

UK

Investec Bank plc's resolution strategy, set by the Bank of England (BoE), remains set as modified insolvency with the minimum requirement for own funds and eligible liabilities (MREL) requirement equal to the Pillar I + Pillar IIA regulatory capital requirement. As noted in the statement of policy on the BoE approach to setting MREL, the actual approach taken to resolve an institution will depend on the circumstances at the time of its failure. The preferred resolution strategy may not necessarily be followed if a different approach would better meet the resolution objective at the time.

(continued)

In addition, during the year, the BoE and the PRA issued a number of other revisions to the regulatory framework. In particular:

• The PRA policy on refining the Pillar IIA capital framework, in particular the PRA's approach for firms using the standardised approach for credit risk;
• Changes to the group policy and double leverage framework; and
• The 'Dear CEO' letter setting out the PRA's views on the transitional arrangements to be applied to the impact of the IFRS 9 ECL accounting on regulatory capital and the requirement to notify the PRA of the firm's decision to apply the transitional arrangements.

Investec plc will be applying the IFRS 9 transitional arrangements applicable to ECL accounting on regulatory capital. The transitional arrangements are effective from 1 April 2018.

Europe

Changes to the BCBS framework are being implemented in Europe through changes to the Capital Requirements Directive and Regulation. Together, these changes are known as the 'CRRII/CRDV' package. The key CRRII/CRDV changes applicable to Investec plc include:

• A new standardised approach for calculating counterparty credit risk;
• Changes to the market risk framework under the Fundamental Review of the Trading Book; and
• The introduction of a 3% binding leverage ratio for all banks.

The CRRII/CRDV package is expected to be agreed during 2018 and will apply two years after the date of its entry into the official journal.

In December 2017 the European Union issued the final regulation setting out the IFRS 9 transitional arrangements firms may apply to minimise the impact of the IFRS 9 ECL accounting on regulatory capital. The arrangements will be phased in over five years, and take effect from 1 April 2018. In January 2018, the EBA issued final guidelines specifying the uniform template firm's should use to disclose the effect of the IFRS 9 transitional arrangements on own funds, RWAs and capital and leverage ratios.

On the 12 December 2017 the EU formally adopted the new securitisation rules. These rules are expected to apply from 1 January 2019.

Capital and leverage ratio targets

Capital

Over recent years, capital adequacy standards for banks have been raised as part of attempts to increase the stability and resilience of the global banking sector. Investec plc and Investec Limited have always held capital in excess of regulatory requirements and continues to remain well capitalised. Accordingly, we are targeting a minimum CET 1 capital ratio of above 10%, a tier 1 capital ratio of above 11% and a total capital adequacy ratio target in the range of 14% to 17%. These targets are set on a DLC basis and exclude the deduction of foreseeable changes and dividends as required under the CRR and EBA technical standards. These targets are continuously assessed for appropriateness.

Leverage

Investec is currently targeting a leverage ratio above 6%.

Management of capital and leverage

Capital

The DLC capital committee is responsible for ensuring that the impact of any regulatory change is analysed, understood and planned for. To allow the committee to carry out this function, the group's prudential advisory and reporting team closely monitor regulatory developments and regularly present to the committee on the latest developments and proposals. As part of any assessment, the committee is provided with analysis setting out the group's capital adequacy position, taking into account the most up-todate interpretation of the rule changes. In addition, regular sessions with the board are held to ensure that members are kept up to date with the most salient changes to ensure the impact on the group and its subsidiaries is monitored and understood.

Leverage

As with the governance of capital management, the DLC capital committee is responsible for ensuring that the impact of any regulatory changes on the leverage ratio is calculated, analysed and understood at all reporting levels.

The leverage exposure measure is calculated on a monthly and quarterly basis and is presented to the DLC capital committee on a regular basis. The DLC capital committee is responsible for monitoring the risk of excessive leverage.

Capital management

Philosophy and approach

Both the Investec Limited and Investec plc groups operate an approach to capital management that utilises both regulatory capital as appropriate to that jurisdiction and internal capital, which is an internal risk-based assessment of capital requirements. Capital management primarily relates to management of the interaction of both, with the emphasis on regulatory capital for managing portfolio level capital sufficiency and on internal capital for ensuring that returns are appropriate given the level of risk taken at an individual transaction or business unit level.

The determination of target capital is driven by our risk profile, strategy and risk appetite, taking into account the regulatory and market factors applicable to the group. At the most fundamental level, we seek to balance our capital consumption between prudent capitalisation in the context of the group's risk profile and optimisation of shareholder returns. Our internal capital framework is designed to manage and achieve this balance.

The internal capital framework is based on the group's risk identification, review and assessment processes and is used to provide a risk-based approach to capital allocation, performance and structuring of our balance sheet. The objectives of the internal capital framework are to quantify the minimum capital required to:

• Maintain sufficient capital to satisfy the board's risk appetite across all risks faced by the group;
• Provide protection to depositors against losses arising from risks inherent in the business;
• Provide sufficient capital surplus to ensure that the group is able to retain its going concern basis under relatively severe operating conditions; and
• Inform the setting of minimum regulatory capital through the SREP.

Risk reporting and 'business as usual' risk management Risk modelling and quantification Managed by Group Capital Management with oversight by DLC capital committee/BRCC Capital management and planning Scenario testing Internal capital Risk assessment Risk identification Ongoing risk management Group strategy Pricing and performance measurement Managed by each business unit and Group Risk departments with oversight by Review ERRF/Policy ERRF/BRCC/GRCC Stress testing

The (simplified) integration of risk and capital management

The DLC capital committee seeks to optimise the balance sheet such that capital held is in excess of internal capital. Internal capital performs a critical role in:

• Investment decision-making and pricing that is commensurate with the risk being taken;
• Allocating capital according to the greatest expected marginal risk-based return, and tracking performance on this basis;
• Determining transactional risk-based returns on capital;
• Rewarding performance, taking into account the relative levels of risk adopted by forming a basis for the determination of economic value added at a transactional level, and hence
• The basis for discretionary variable remuneration; and
• Comparing risk-based performance across business areas.

The framework has been approved by the board and is managed by the DLC capital committee, which is responsible for oversight of the management of capital on a regulatory and an internal capital basis.

In order to achieve these objectives, the internal capital framework describes the following approach to the integration of risk and capital management.

Capital planning and stress/scenario testing

A capital plan is prepared for each of the silos, Investec plc and Investec Limited and maintained to facilitate discussion of the impact of business strategy and market conditions on capital adequacy. This plan is designed to assess capital adequacy under a range of economic and internal conditions over the medium term (three years), with the impact on earnings, asset growth, risk appetite and liquidity considered. The plan provides the board (via the BRCC) with an input into strategy and the setting of risk

appetite by considering business risks and potential vulnerabilities, capital usage and funding requirements given constraints where these exist.

Three-month capital plans are prepared monthly, with regulatory capital being the key driver of decision-making.

The goal of capital planning is to provide insight into potential sources of vulnerability of capital adequacy by way of market, economic or internal events. As such, the three-year capital plans are stressed based on conditions most likely to cause Investec plc or Investec Limited duress.

The conditions themselves are agreed by the DLC capital committee after the key vulnerabilities have been determined through the stress testing workshops.

Such plans are used by management to formulate balance sheet strategy and agree management actions, trigger points and influence the determination of our risk appetite.

(continued)

Internal capital requirements are quantified by analysis of the potential impact of key risks to a degree consistent with our risk appetite

The output of capital planning allows senior management to make decisions to ensure that the group continues to hold sufficient capital to meet regulatory and internal capital targets. On certain occasions, especially under stressed scenarios, management may plan to undertake a number of actions. Assessment of the relative merits of undertaking various actions is then considered using an internal view of relative returns across portfolios which are themselves based on internal assessments of risk and capital.

Our capital plans are designed to allow senior management and the board to review:

• Changes to capital demand caused by implementation of agreed strategic objectives, including the creation or acquisition of new businesses, or as a result of the manifestation of one or more of the risks to which we are potentially susceptible;

• The impact on profitability of current and future strategies;
• Required changes to the capital structure;
• The impact of implementing a proposed dividend strategy;
• The impact of future regulation change; and
• The impact of alternate market or operating conditions on any of the above.

At a minimum level, each capital plan assesses the impact on our capital adequacy over expected case and downturn scenarios. On the basis of the results of this analysis, the DLC capital committee and the BRCC are presented with the potential variability in capital adequacy and are responsible, in consultation with the board, for considering the appropriate response.

(continued)

Capital structure and capital adequacy

	Investec plc*º	IBP*º	Investec Limited*^	IBL*^
At 31 March 2018	£'million	£'million	R'million	R'million
Tier 1 capital
Shareholders' equity	2 042	2 007	36 159	36 531
Shareholders' equity excluding non-controlling interests	2 075	2 012	39 342	38 065
Perpetual preference share capital and share premium	(25)	–	(3 183)	(1 534)
Deconsolidation of special purpose entities	(8)	(5)	–	–
Non-controlling interests	12	(3)	–	–
Non-controlling interests per balance sheet	16	(3)	9 503	–
Non-controlling interests excluded for regulatory purposes	–	–	(9 503)	–
Surplus non-controlling interest disallowed in common equity tier 1	(4)	–	–	–
Regulatory adjustments to the accounting basis	(7)	(4)	993	994
Defined benefit pension fund adjustment	(3)	–	–	–
Additional value adjustments	(4)	(4)	–	–
Cash flow hedging reserve	–	–	993	994
Deductions	(460)	(361)	(2 772)	(2 696)
Goodwill and intangible assets net of deferred tax	(447)	(348)	(624)	(583)
Investment in financial entity	–	–	(2 149)	(2 113)
Deferred tax assets that rely on future profitability excluding those
arising from temporary differences	(9)	(9)	–	–
Securitisation positions	(3)	(3)	–	–
Debit valuation adjustment	(1)	(1)	–	–
Common equity tier 1 capital	1 587	1 639	34 379	34 829
Additional tier 1 capital	274	200	2 785	963
Additional tier 1 instruments	274	200	5 617	1 884
Phase out of non-qualifying additional tier 1 instruments	–	–	(2 830)	(921)
Non-qualifying surplus capital attributable to non-controlling interest	–	–	(72)	–
Non-controlling interest in non-banking entities	–	–	70	–
Tier 1 capital	1 861	1 839	37 164	35 792
Tier 2 capital Collective impairment allowances Tier 2 instruments Non-qualifying surplus capital attributable to non-controlling interests Total regulatory capital Risk-weighted assets Capital ratios Common equity tier 1 ratio Tier 1 ratio Total capital adequacy ratio	359 – 446 (87) 2 220 14 411 11.0% 12.9% 15.4%	445 – 445 – 2 284 13 744 11.9% 13.4% 16.6%	12 348 635 15 013 (3 300) 49 512 338 484 10.2% 11.0% 14.6%	14 009 635 13 374 – 49 801 320 607 10.9% 11.2% 15.5%

* Where: IBP is Investec Bank plc consolidated. IBL is Investec Bank Limited. The information for Investec plc includes the information for IBP. The information for Investec Limited includes the information for IBL.

º The capital adequacy disclosures follow Investec's normal basis of presentation so as to show a consistent basis of calculation across the jurisdictions in which the group operates. For Investec plc and IBP this does not include the deduction of foreseeable charges and dividends when calculating the CET 1 ratio as required under the Capital Requirements Regulation and European Banking Authority technical standards. The impact of this deduction totalling £65 million for Investec plc and £18 million for IBP would lower the CET 1 ratio by 45bps and 13bps respectively.

^ Investec Limited's and IBL's capital information includes unappropriated profits. If unappropriated profits are excluded from capital information, Investec Limited's and IBL's common equity tier 1 ratio would be 25bps and 13bps lower respectively.

(continued)

Capital structure and capital adequacy (continued)

Tier 1 capital Shareholders' equity 1 981 1 973 32 317 33 631 Shareholders' equity per balance sheet 2 017 1 982 35 500 35 165 Perpetual preference share capital and share premium (25) – (3 183) (1 534) Deconsolidation of special purpose entities (11) (9) – – Non-controlling interests 11 (2) – – Non-controlling interests per balance sheet 15 (2) 8 987 – Non-controlling interests excluded for regulatory purposes – – (8 987) – Surplus non-controlling interest disallowed in common equity tier 1 (4) – – – Regulatory adjustments to the accounting basis (6) (4) 900 896 Defined benefit pension fund adjustment (2) – – – Additional value adjustments (4) (4) – – Cash flow hedging reserve – – 900 896 Deductions (478) (380) (720) (679) Goodwill and intangible assets net of deferred tax (464) (366) (720) (679) Deferred tax assets that rely on future profitability excluding those arising from temporary differences (10) (10) – – Securitisation positions (3) (3) – – Debit valuation adjustment (1) (1) – – Common equity tier 1 capital 1 508 1 587 32 497 33 848 Additional tier 1 capital 24 – 2 900 767 Additional tier 1 instruments 24 – 5 267 1 534 Phase out of non-qualifying additional tier 1 instruments – – (2 359) (767) Non-qualifying surplus capital attributable to non-controlling interest – – (69) – Non-controlling interest in non-banking entities – – 61 – Tier 1 capital 1 532 1 587 35 397 34 615 Tier 2 capital 475 560 11 153 13 501 Collective impairment allowances 321 321 Tier 2 instruments 560 560 13 805 13 180 Non-qualifying surplus capital attributable to non-controlling interests (85) – (2 973) – Total regulatory capital 2 007 2 147 46 550 48 116 Risk-weighted assets 13 312 12 716 329 808 313 010 Capital ratios Common equity tier 1 ratio 11.3% 12.5% 9.9% 10.8% Tier 1 ratio 11.5% 12.5% 10.7% 11.1%	At 31 March 2017	Investec plc*º £'million	IBP*º £'million	Investec Limited*^ R'million	IBL*^ R'million
	Total capital adequacy ratio	15.1%	16.9%	14.1%	15.4%

* Where: IBP is Investec Bank plc consolidated. IBL is Investec Bank Limited. The information for Investec plc includes the information for IBP. The information for Investec Limited includes the information for IBL.

º The capital adequacy disclosures follow Investec's normal basis of presentation so as to show a consistent basis of calculation across the jurisdictions in which the group operates. For Investec plc and IBP this does not include the deduction of foreseeable charges and dividends when calculating the CET 1 ratio as required under the Capital Requirements Regulation and European Banking Authority technical standards. The impact of this deduction totalling £60 million for Investec plc and £35 million for IBP would lower the CET 1 ratio by 45bps and 28bps respectively.

^ Investec Limited's and IBL's capital information includes unappropriated profits. If unappropriated profits are excluded from capital information, Investec Limited's and IBL's common equity tier 1 ratio would be 24bps and 13bps lower respectively.

Capital requirements

At 31 March 2018	Investec plc* £'million	IBP* £'million	Investec Limited* R'million	IBL* R'million
Capital requirements	1 153	1 099	37 656	35 668
Credit risk	842	822	29 389	28 870
Equity risk	6	6	2 797	2 521
Counterparty credit risk	51	52	653	655
Credit valuation adjustment risk	10	10	695	697
Market risk	77	77	609	502
Operational risk	167	132	3 513	2 423
At 31 March 2017
Capital requirements	1 064	1 017	35 454	33 649
Credit risk	790	776	26 008	25 529
Equity risk	6	6	4 900	4 730
Counterparty credit risk	39	39	574	574
Credit valuation adjustment risk	6	6	195	199
Market risk	71	68	500	413
Operational risk	152	122	3 277	2 204

Risk-weighted assets

At 31 March 2018	Investec plc* £'million	IBP* £'million	Investec Limited* R'million	IBL* R'million
Risk-weighted assets	14 411	13 744	338 484	320 607
Credit risk	10 521	10 271	264 171	259 494
Equity risk	78	79	25 140	22 663
Counterparty credit risk	639	652	5 867	5 887
Credit valuation adjustment risk	121	121	6 251	6 269
Market risk	965	965	5 477	4 515
Operational risk	2 087	1 656	31 578	21 779
At 31 March 2017
Risk-weighted assets	13 312	12 716	329 808	313 010
Credit risk	9 873	9 687	241 926	237 474
Equity risk	80	80	45 583	44 007
Counterparty credit risk	494	494	5 344	5 335
Credit valuation adjustment risk	78	78	1 817	1 848
Market risk	882	856	4 652	3 847
Operational risk	1 905	1 521	30 486	20 499

* Where: IBP is Investec Bank plc consolidated and IBL is Investec Bank Limited. The information for Investec plc includes the information for IBP. The information for Investec Limited includes the information for IBL.

(continued)

Investec plc

Movement in RWAs

Total RWAs have increased by 8.3% over the period, predominantly within credit risk RWAs.

Credit risk RWAs

We have adopted the standardised approach for calculating credit risk RWAs. Credit risk RWAs, which include equity risk, increased by £646 million. The increase is primarily attributable to a growth in secured corporate lending.

Counterparty credit risk RWAs and CVA risk

Counterparty credit risk and CVA RWAs increased by £188 million mainly due to increased facilitation of client activity within the Financial Products business.

Market risk RWAs

We apply the standardised approach for calculating market risk RWAs. Market risk RWAs increased by £83 million primarily due to increased facilitation of client activity within the Financial Products business.

Operational risk RWAs

Operational risk RWAs are calculated using the standardised approach increased by £182 million. The increase is due to a higher three year average operating income.

Investec Limited

Movement in RWAs

Total RWA grew by 2.6% over the period, with the reasons identified in the categories below.

Credit risk RWAs

Credit risk weights grew by R22.2 billion of which R13.1 billion is associated with book growth in the period. The downgrade of Southern Africa's credit rating to sub-investment and associated rating of South African exposures resulted in a further increase in RWA of R3 billion. Our regulatory treatment of certain investments were adjusted to that of an investment holding vehicle resulting in an increase in other asset risk weights (included in credit) of R9.1 billion.

Counterparty credit risk and CVA RWAs

Counterparty credit risk RWAs increased by R523 million, while CVA over the period increased by R4.4 billion. The increase is mainly attributable to a change in the mix of rated entities by external rating agencies in the portfolio. CVA was implemented as part of Basel III in Southern Africa and captures the risk of deterioration in the credit quality of banks OTC derivative counterparties. We currently apply the standardised approach to the calculation of the CVA capital requirement.

Equity risk RWAs

Equity risk decreased by R20.4 billion, mainly influenced by the change in regulatory treatment noted above in credit risk and a portion of exposure being treated as a capital deduction. The remaining movement follows change in net balance sheet equity exposures.

Market risk RWAs

Market risk RWAs are calculated using the Value at Risk (VaR) approach and has shown an increase, the increase is due to higher VaR and stressed VaR figures for the Equity Derivatives and Interest Rate Derivatives desks. The higher VaR and stressed VaR figures were primarily driven by an increase in market volatility.

Operational risk RWAs

Operational risk is calculated using the standardised approach and is driven by the levels of income over a three-year average period, applying specific factors applicable to the nature of the business generating the income.

(continued)

Leverage ratios

At 31 March 2018	Investec plc £'million*°	IBP £'million*°	Investec Limited R'million*^	IBL R'million*^
Exposure measure	21 772	21 335	495 670	466 846
Tier 1 capital	1 861	1 839	37 164	35 792
Leverage ratio** – current	8.5%	8.6%	7.5%#	7.7%#
Tier 1 capital fully loaded	1 837	1 839	35 350	35 179
Leverage ratio** – 'fully loaded'^^	8.4%	8.6%	7.1%#	7.5%#

At 31 March 2017	Investec plc £'million*°	IBP £'million*°	Investec Limited R'million*^	IBL R'million*
Exposure measure	19 689	19 417	483 775	457 030
Tier 1 capital	1 532	1 587	35 397	34 615
Leverage ratio** – current	7.8%	8.2%	7.3%#	7.6%#
Tier 1 capital fully loaded	1 508	1 587	33 108	33 848
Leverage ratio** – 'fully loaded'^^	7.7%	8.2%	6.8%#	7.4%#

* Where: IBP is Investec Bank plc consolidated and IBL is Investec Bank Limited. The information for Investec plc includes the information for IBP. The information for Investec Limited includes the information for IBL.

** The leverage ratios are calculated on an end-quarter basis.

º The capital adequacy disclosures follow Investec's normal basis of presentation so as to show a consistent basis of calculation across the jurisdictions in which the group operates. For Investec plc and IBP this does not include the deduction of foreseeable charges and dividends when calculating the CET 1 ratio as required under the Capital Requirements Regulation and European Banking Authority technical standards. The impact of this deduction totalling £65 million (31 March 2017: £60 million) for Investec plc and £18 million (31 March 2017: £35 million) for IBP would lower the CET 1 ratio by 45bps (31 March 2017: 45bps) and 13bps (31 March 2017: 28bps) respectively.

^ Investec Limited's and IBL's capital information includes unappropriated profits. If unappropriated profits are excluded from capital information, Investec Limited's and IBL's common equity tier 1 ratio would be 25bps and 13bps lower. At 31 March 2017, Investec Limited's and IBL's common equity tier 1 ratio would be 24bps and 13bps lower.

^^ The key difference between the 'reported' basis at 31 March 2018 and the 'fully loaded' basis is primarily relating to capital instruments that previously qualified as regulatory capital, but do not fully qualify under the CRD IV rules/South African Prudential Authority regulations. These instruments continue to be recognised on a reducing basis in the 'reported' figures until 2022. For IBP there is no difference between the 'reported' basis and the 'fully loaded' basis.

# Based on revised BIS rules.

(continued)

Total regulatory capital flow statement

At 31 March 2018	Investec plc* £'million	IBP* £'million	Investec Limited* R'million	IBL* R'million
Opening common equity tier 1 capital	1 508	1 587	32 497	33 848
New capital issues	71	–	925	–
Dividends	(113)	(57)	(2 569)	(1 437)
Profit after taxation	135	98	6 302	4 673
Treasury shares	(64)	–	(985)	–
Non-controlling interest relating to partial disposal of subsidiaries	9	–	–	–
Gain on transfer of non-controlling interest	–	–	103	–
Share-based payment adjustments	31	1	656	–
Movement in other comprehensive income	(9)	(10)	(590)	(336)
Investment in financial entity	–	–	(2 149)	(2 113)
Goodwill and intangible assets (deduction net of related taxation liability)	17	16	96	96
Deferred tax that relies on future profitability (excluding those arising
from temporary differences)	1	1	–	–
Deconsolidation of special purpose entities	2	3	–	–
Other, including regulatory adjustments and transitional arrangements	(1)	–	93	98
Closing common equity tier 1 capital	1 587	1 639	34 379	34 829
Opening additional tier 1 capital	24	–	2 900	767
New additional tier 1 issues	250	200	350	350
Other, including regulatory adjustments and transitional arrangements	–	–	(475)	(154)
Movement in minority interest in non-banking entities	–	–	10	–
Closing additional tier 1 capital	274	200	2 785	963
Closing tier 1 capital	1 861	1 839	37 164	35 792
Opening tier 2 capital	475	560	11 153	13 501
New tier 2 capital issues	–	–	3 287	2 273
Redeemed capital	–	–	(2 205)	(2 205)
Collective impairment allowances	–	–	314	314
Amortisation adjustments	(115)	(115)	–	–
Other, including regulatory adjustments and transitional arrangements	(1)	–	(201)	126
Closing tier 2 capital	359	445	12 348	14 009
Closing total regulatory capital	2 220	2 284	49 512	49 801

* Where: IBP is Investec Bank plc consolidated and IBL is Investec Bank Limited. The information for Investec plc includes the information for IBP. The information for Investec Limited includes the information for IBL.

(continued)

Total regulatory capital flow statement (continued)

At 31 March 2017	Investec plc* £'million	IBP* £'million	Investec Limited* R'million	IBL* R'million
Opening common equity tier 1 capital	1 187	1 434	29 524	31 475
New capital issues	174	–	986	–
Gain on preference share redemption	41	–	–	–
Dividends	(108)	(35)	(2 426)	(1 031)
Profit after taxation	160	118	5 064	3 229
Treasury shares	(50)	–	(1 165)	–
Acquisition of non-controlling interests	7	–	–	–
Gain on transfer of non-controlling interests	–	–	73	–
Share-based payment adjustments	26	–	549	–
Movement in other comprehensive income	19	53	786	1 104
Goodwill and intangible assets (deduction net of related taxation liability)	2	9	42	16
Deferred tax that relies on future profitability (excluding those arising
from temporary differences)	(1)	(1)	–	–
Deconsolidation of special purpose entities	11	9	–	–
Other, including regulatory adjustments and transitional arrangements	40	–	(936)	(945)
Closing common equity tier 1 capital	1 508	1 587	32 497	33 848
Opening additional tier 1 capital	130	–	3 418	920
Redeemed capital	(106)	–	–	–
Other, including regulatory adjustments and transitional arrangements	–	–	(505)	(153)
Movement in minority interest in non-banking entities	–	–	(13)	–
Closing additional tier 1 capital	24	–	2 900	767
Closing tier 1 capital	1 532	1 587	35 397	34 615
Opening tier 2 capital	535	590	10 253	10 726
New tier 2 capital issues	–	–	4 870	4 870
Redeemed capital	(37)	(18)	(2 519)	(2 519)
Collective impairment allowances	–	–	92	92
Amortisation adjustments	(12)	(12)	–	–
Other, including regulatory adjustments and transitional arrangements	(11)	–	(1 543)	332
Closing tier 2 capital	475	560	11 153	13 501
Closing total regulatory capital	2 007	2 147	46 550	48 116

* Where: IBP is Investec Bank plc consolidated and IBL is Investec Bank Limited. The information for Investec plc includes the information for IBP. The information for Investec Limited includes the information for IBL.

(continued)

A summary of capital adequacy and leverage ratios

As at 31 March 2018	Investec plcº*	IBPº*	Investec Limited*^	IBL*^
Common equity tier 1 (as reported)	11.0%	11.9%	10.2%	10.9%
Common equity tier 1 ('fully loaded')^^	11.0%	11.9%	10.2%	10.9%
Tier 1 (as reported)	12.9%	13.4%	11.0%	11.2%
Total capital adequacy ratio (as reported)	15.4%	16.6%	14.6%	15.5%
Leverage ratio** – current	8.5%	8.6%	7.5%#	7.7%#
Leverage ratio** – 'fully loaded'^^	8.4%	8.6%	7.1%#	7.5%#

As at 31 March 2017	Investec plcº*	IBPº*	Investec Limited*^	IBL*^
Common equity tier 1 (as reported)	11.3%	12.5%	9.9%	10.8%
Common equity tier 1 ('fully loaded')^^	11.3%	12.5%	9.9%	10.8%
Tier 1 (as reported)	11.5%	12.5%	10.7%	11.1%
Total capital adequacy ratio (as reported)	15.1%	16.9%	14.1%	15.4%
Leverage ratio** – current	7.8%	8.2%	7.3%#	7.6%#
Leverage ratio** – 'fully loaded'^^	7.7%	8.2%	6.8%#	7.4%#

* Where: IBP is Investec Bank plc consolidated and IBL is Investec Bank Limited. The information for Investec plc includes the information for IBP. The information for Investec Limited includes the information for IBL.

** The leverage ratios are calculated on an end-quarter basis.

º The capital adequacy disclosures follow Investec's normal basis of presentation so as to show a consistent basis of calculation across the jurisdictions in which the group operates. For Investec plc and Investec Bank plc this does not include the deduction of foreseeable charges and dividends when calculating the CET 1 ratio as required under the Capital Requirements Regulation and European Banking Authority technical standards. The impact of this deduction totalling £65 million (31 March 2017: £60 million) for Investec plc and £18 million (31 March 2017: £35 million) for IBP would lower the CET 1 ratio by 45bps (31 March 2017: 45bps) and 13bps (31 March 2017: 28bps) respectively.

^ Investec Limited's and IBL's capital information includes unappropriated profits. If unappropriated profits are excluded from capital information, Investec Limited's and IBL's common equity tier 1 ratio would be 25bps and 13bps lower. At 31 March 2017, Investec Limited's and IBL's common equity tier 1 ratio would be 24bps and 13bps lower.

^^ The key difference between the 'reported' basis at 31 March 2018 and the 'fully loaded' basis is primarily relating to capital instruments that previously qualified as regulatory capital, but do not fully qualify under the CRD IV rules/South African Prudential Authority regulations. These instruments continue to be recognised on a reducing basis in the 'reported' figures until 2022. For IBP there is no difference between the 'reported' basis and the 'fully loaded' basis.

# Based on revised BIS rules.

Credit ratings

In terms of our dual listed companies structure, creditors are ring-fenced to either Investec Limited or Investec plc as there are no crossguarantees between the companies. Capital and liquidity are prohibited from flowing between the two entities and thus capital and liquidity are not fungible. As a result the ratings agencies have assigned separate ratings to the significant banking entities within the group, namely Investec Bank plc and Investec Bank Limited. Rating agencies have also assigned ratings to the holding companies, namely, Investec plc and Investec Limited. Our ratings at 12 June 2018 are as follows:

Rating agency	Investec Limited	Investec Bank Limited – a subsidiary of Investec Limited	Investec plc	Investec Bank plc – a subsidiary of Investec plc
Fitch
Long-term ratings
Foreign currency	BB+^	BB+^		BBB+
National		AA(zaf)
Short-term ratings
Foreign currency	B^	B^		F2
National		F1+(zaf)
Viability rating	bb+^	bb+^		bbb+
Support rating	5	3		5
Moody's
Long-term ratings
Foreign currency		Baa3	Baa1	A2
National		Aa1.za
Short-term ratings
Foreign currency		P-3	P-2	P-1
National		P-1(za)
Baseline Credit Assessment (BCA) and adjusted BCA		baa3		baa2
S&P
Long-term ratings
Foreign currency		BB^
National		za.AA–
Short-term ratings
Foreign currency		B^
National		za.A-1+
Global Credit Ratings
Local currency
Long-term rating		AA(za)		BBB+
Short-term rating		A1+(za)		A2

^ Negatively impacted by the downgrade of the South African sovereign rating to non-investment grade.

Internal Audit

As a result of the regulatory responsibilities arising from the DLC structure, there are two group Internal Audit departments located in London and Johannesburg, responsible for Investec plc and Investec Limited respectively. Investec Bank plc's (Irish branch) has its own Internal Audit function reporting into Investec plc Internal Audit. In combination, the functions cover all the geographies in which Investec operates. These functions use a global risk-based methodology and cooperate technically and operationally.

The heads of Internal Audit report at each audit committee meeting and have a direct reporting line to the chairman of the audit committee as well as the appropriate chief executive officers. They operate independently of executive management, but have regular access to the local chief executive officers and to business unit executives. The heads of Internal Audit are responsible for coordinating internal audit efforts to ensure coverage is global and departmental skills are leveraged to maximise efficiency. For administrative purposes, the heads of internal audit also report to the global head of corporate governance and compliance. The functions comply with the International Standards for the Professional Practice of Internal Auditing, and are subject to an independent Quality Assurance Review (QAR) at appropriate intervals. The most recent independent QAR benchmarked the functions against the July 2013 publication by the Chartered Institute for Internal Auditors entitled Effective Internal Audit in the Financial Services Sector. The results were communicated to the audit committees in March 2014 and to the respective regulators. A QAR follow-up review was completed and results issued to the audit committees in January 2015 as well as to the respective regulators.

Annually, Internal Audit conducts a formal risk assessment of the entire business from which a comprehensive risk-based audit plan is derived. The assessment and programme are validated by executive management and approved by the responsible audit committee. Very high

risk businesses and processes are audited at least every 12 months, with other areas covered at regular intervals based on their risk profile. There is an ongoing focus on identifying fraud risk as well as auditing technology risks given Investec's dependence on IT systems. Internal Audit also liaises with the external auditors and other assurance providers to enhance efficiencies in terms of integrated assurance. The annual plan is reviewed regularly to ensure it remains relevant and responsive, given changes in the operating environment. The audit committee approves any changes to the plan.

Significant control weaknesses are reported, in terms of an escalation protocol, to the local assurance forums, where remediation procedures and progress are considered and monitored in detail by management. The audit committee receives a report on significant issues and actions taken by management to enhance related controls. An update on the status of previously raised issues is provided by Internal Audit to each audit committee. If there are concerns in relation to overdue issues, these will be escalated to the executive risk review forum to expedite resolution.

Internal Audit proactively reviews its practices and resources for adequacy and appropriateness to meet an increasingly demanding corporate governance and regulatory environment, including the requirements of King IV in South Africa. The audit teams comprise well-qualified, experienced staff to ensure that the function has the competence to match Investec's diverse requirements. Where specific specialist skills or additional resources are required, these are obtained from third parties. Internal Audit resources are subject to review by the respective audit committees.

Internal Audit's activity is governed by an internal audit charter which is approved by the group audit committees and is reviewed annually. The charter defines the purpose, authority and responsibilities of the function

Compliance

Regulatory change continues to be a key challenge in the financial sector with global political events adding to its uncertainty as to the shape of financial services regulation going forward.

Global regulators remain focused on countering market abuse with heightened scrutiny and regulatory attention in this area, including sustained focus on the EU's strengthened Market Abuse Regime.

This year, global regulators have continued to focus on promoting stability and resilience in financial markets, with sustained emphasis on recovery and resolution plans and structural reforms to the banking sector as well as customer and market conduct related reforms.

Investec remains focused on maintaining the highest levels of compliance in relation to regulatory requirements and integrity in each of our jurisdictions. Our culture is central to our compliance framework and is supported by robust policies, processes and talented professionals who ensure that the interests of our customers and shareholders remain at the forefront of everything we do.

Investec plc – year in review

Conduct risk

The FCA has continued to focus on advancing its three operational objectives: securing an appropriate degree of protection for consumers; protecting and enhancing the integrity of the UK financial system; and promoting effective competition in the interest of consumers. The FCA's aim is to ensure that clients' interests are at the forefront of firms' agendas and that their needs are placed at the heart of the firms' strategy. Firms are also expected to behave appropriately in the wholesale markets in which they operate with a view to conduct risk considerations.

The Investec board, along with senior management are ultimately responsible for Investec's conduct risk strategy. Investec has continued to focus over the period on delivering good customer outcomes and effectively managing conduct risk throughout our business. This has included continued and ongoing investment in and enhancement of our conduct risk framework and a sustained focus on maintaining the highest levels of regulatory compliance throughout our businesses.

Consumer protection

The FCA has continued to pursue its consumer protection objective. Over the period this has included issuing of significant fines and performing continued strategic reviews into areas such as: product design and sales practices, provision of advice, treatment of customers who suffered unauthorised transactions and product and service suitability.

Wholesale markets

The FCA continues a proactive and assertive approach, in identifying and addressing risks arising from firm's conduct in the wholesale markets.

This has included an increasingly intensive approach to supervisory activities and thematic reviews as well as several high profile referrals to enforcement.

Wholesale markets have also been the focus of significant regulatory reform over the past 12 months due to the implementation of the MiFID II reforms in the EU which came into effect in January 2018. These reforms represent a significant re-write of the rules applicable to investment firms in the EU and are expected, over time, to drive change across Investec Bank plc, Investec Asset Management and Investec Wealth and Investment.

Financial crime

Financial crime continues to be a regulatory focus with regulators globally encouraging firms to adopt a dynamic approach to the management of risk and to increase efforts around systems and controls to combat both money laundering and bribery and corruption. The FCA has stated that 'we see financial crime as a risk to the wider economy and market integrity'. The FCA Business Plan also highlights financial crime and anti-money laundering as one of their priorities for the regulator.

Brexit

On 29 March 2017, the UK government invoked Article 50 of the Treaty on the European Union starting the process for the UK to leave the European Union (EU) on 29 March 2019.

Prime Minister Theresa May announced that the UK would not seek permanent membership of the single market or the customs union after leaving the EU and promised to repeal the European

Communities Act of 1972 and incorporate existing European Union law into UK domestic law. The likely impact of Brexit is that UK firms will lose their ability to 'passport' into the EU from London and will be required to establish a regulatory platform within the EU to maintain access to EU financial services clients and markets. A transition period to December 2020 is expected to be implemented prior to March 2019 which will provide further time for firms and clients to complete their Brexit planning.

Brexit is not likely to have a material impact on the Investec group. However, the group's preparations for Brexit are well under way and on-track to ensure that the group is in a position to continue servicing its clients across the EU in the event of a hard Brexit.

Tax reporting (FATCA/CRS)

The Foreign Account Tax Compliance Act (FATCA) aims to promote cross-border tax compliance by implementing an international standard for the automatic exchange of tax information relating to US investors. The provisions call on tax authorities all over the world to obtain detailed account information from financial institutions relating to US investors and exchange that information automatically with the United States Internal Revenue Service on an annual basis. Australia, Channel Islands, Ireland, India, Hong Kong, Luxembourg, Singapore and the UK have entered into intergovernmental agreements with the USA and each has enacted local law/ regulation to implement FATCA. Separately, the intergovernmental agreement between the USA and Switzerland requires Swiss financial institutions to report to the US tax authorities (IRS).

The OECD has recently taken further steps to improve global cross-border tax compliance by releasing the Common Reporting Standard (CRS). The CRS is a set of global standards for the annual exchange of financial information by financial institutions pertaining to customers, to the tax authorities of the jurisdictions in which those customers are resident for tax purposes. CRS took effect on 1 January 2016 in India, Hong Kong, Ireland, the Channel Islands, Luxembourg and the UK with reporting commencing from 2017.

Investec plc is currently compliant with its obligations under FATCA and CRS.

Compliance

(continued)

Investec Limited – year in review

Changes to the regulatory landscape in South Africa

The South African financial sector regulatory developments are ongoing with some of the new regulatory structures expected to become effective from April 2018. Existing legislation continues to be applied in tandem with the review of pending legislation and regulatory requirements.

Conduct risk and consumer protection

The Financial Sector Regulation Act (FSRA), which introduces the Twin Peaks regulatory framework was signed into law in August 2017. The consequential amendments contained in the FSRA, become effective in staggered phases during 2018. Draft Regulations to the FSRA were published for public comment in December 2017. The draft Conduct of Financial Institutions Bill (CoFI) is expected to be published for public comment in 2018.

The Financial Advisory and Intermediary Services Act (FAIS) and subordinate legislation is also being amended. In particular, amendments to the Fit and Proper requirements became effective from April 2018. Draft amendments to the FAIS General Code of Conduct were published for comment in November 2017. The amendments to the Insurance Policyholder Protection Rules (PPR) became effective from January 2018. Internal controls established to ensure compliance continue to be implemented.

The Information Regulator established in terms of the Protection of Personal Information Act (PoPIA) has gazetted its draft Regulations in terms of PoPIA. Comments on the Regulations have been submitted. The draft Regulations was tabled at Parliament in the first quarter of 2018, and the anticipated date for publication of the final Regulations is the second quarter of 2018. Once the final Regulations are published in the Government Gazette and the Information Regulator is fully operational, the remaining sections of PoPIA will become effective.

The General Data Protection Regulation (GDPR) applies to organisations in the European Union (EU). The GDPR will also apply to organisations located outside

the EU in the context of selling goods or services to or monitoring the behaviour of individuals residing in the EU. Investec Limited will be impacted to the extent that it processes personal data belonging to individuals who reside in the EU. There is an ongoing effort to meet our obligations in terms of data protection and information management.

Financial crime

Financial crime continues to be a regulatory focus for 2018 and beyond. The South African Treasury Department in conjunction with the Financial Intelligence Centre promulgated the FIC amendment Act during May 2017 with a phased implementation period from 2 October 2017 to the 30 April 2019. Strict adherence to the set timeframes has been called for in preparation for the 2019 Financial Action Task Force's (FATF) Mutual evaluation. The South African Treasury Department remains under pressure to ensure that country deficiencies identified during the 2014 FATF country visit are corrected through implementation of the new legislative provisions. Meeting these key requirements will ensure continuation of Southern Africa's status as a FATF member country, dedicating efforts to combat money laundering and terrorist financing in its financial system.

These amendments require substantial changes in the Anti-Money Laundering and Combatting of Financing of Terrorism (AML CFT) regulatory framework with a key focus for Accountable Institutions to define their risk management and control programmes (RMCP). The RMCP requires Investec to understand and articulate its enterprise-wide risk-based approach, allowing the institution to determine its own risk appetite and tolerance levels in relation to client identification and verification. Further changes include the identification and verification of Ultimate Beneficial Ownership structures (UBO), widening the current Political Exposed Person's definition, removal of all exemptions previously applied to reduce documentary requirements for certain classes of clients posing a lesser degree of risk and extending the reporting obligations to all cross border transactions in or out of the Republic of South Africa.

Additionally the Financial Action Task Force Recommendation 16 requires all banks to screen full originator and beneficiary details

effective June 2019. This date has been postponed from June 2018 due to the National Payment industry initiative aimed at modernising the South African payment systems to support required changes. These changes will align both FATF global standards to country specific requirements which are a key focus areas for Southern Africa during 2018/19.

Tax reporting (FATCA/CRS)

The aim of FATCA and CRS are set out above in Investec plc's section on "year in review". From an Investec Limited perspective, in relation to FATCA Southern Africa and Mauritius have intergovernmental agreements in place with the USA and each have enacted local law/ regulation to implement FATCA locally. This allows Southern Africa and Mauritius to be treated as participating countries. This means that financial institutions in these countries report information annually on US clients (or non-compliant clients) to the South African Revenue Services and the local Mauritian authority respectively. These authorities in turn exchange information with the USA which reciprocates with similar information (on South African and Mauritian tax residents respectively who hold financial accounts in the US). Both Southern Africa and Mauritius are in the process of preparing their fourth annual FATCA reports.

The CRS became effective in Southern Africa on 1 March 2016. Southern Africa opted for the 'wider approach' which means all South African reporting financial institutions are required to collect taxrelated information on all clients, rather than only in respect of the 102 countries which have currently opted into CRS. Consistent with the FATCA reporting regime, CRS reportable information is submitted to SARS annually. SARS then exchanges this information with relevant countries in return for reciprocal information on South Africans with financial accounts in those countries. Southern Africa is in the process of preparing its 2nd annual CRS report.

Mauritius has indicated that it will opt into CRS reporting from 2018.

Definitions

Adjusted earnings per ordinary share before goodwill, acquired intangibles and non-operating items

Refer to page 61 in volume three

Adjusted shareholders' equity

Refer to calculation on page 66 in volume one

Core loans and advances

Net loans and advances to customers plus net own originated securitised assets

Refer to calculation on page 35

Cost to income ratio

Operating costs divided by operating income (net of depreciation on leased assets). Depreciation on operating leased assets has been netted off against operating income

Dividend cover

Adjusted earnings per ordinary share before goodwill and non-operating items divided by dividends per ordinary share

Earnings attributable to ordinary shareholders before goodwill, acquired intangibles and non-operating items (i.e. adjusted earnings)

Refer to page 61 in volume three

Effective operational tax rate

Tax on profit on ordinary activities (excluding non-operating items) divided by operating profit (excluding share of post taxation profit of associates)

Market capitalisation

Total number of shares in issue (including Investec plc and Investec Limited) multiplied by the closing share price of Investec plc on the London Stock Exchange

Net tangible asset value per share

Refer to calculation on page 64 in volume one

Non-operating items

Reflects profits and/or losses on termination, restructuring or disposal of group operations and acquisitions made

Operating profit

Operating income less operating costs, impairment losses on loans and advances and depreciation on operating leased assets. This amount is before goodwill, acquired intangibles and non-operating items

Operating profit per employee

Refer to calculation on page 70 in volume one

Annuity income

Net interest income plus net annuity fees and commissions expressed as a percentage of total operating income

Return on average adjusted shareholders' equity

Refer to calculation on page 66 in volume one

Return on average adjusted tangible shareholders' equity

Refer to calculation on page 66 in volume one

Return on risk-weighted assets

Adjusted earnings divided by average risk-weighted assets

Risk-weighted assets

Calculated as the sum of risk-weighted assets for Investec plc and Investec Limited (converted into Pounds Sterling) as reflected on page 64 in volume one

Staff compensation to operating income ratio*

All staff compensation costs expressed as a percentage of operating income

Third party assets under management

Includes third party assets under administration managed by the Wealth & Investment, Asset Management and Property businesses

Total capital resources

Includes shareholders' equity, subordinated liabilities, Other Additional Tier 1 securities in issue and non-controlling interests

Total equity

Total shareholders' equity including Other Additional Tier 1 securities in issue and non-controlling interests

Weighted number of ordinary shares in issue

The number of ordinary shares in issue at the beginning of the year increased by shares issued during the year, weighted on a time basis for the period during which they have participated in the income of the group less treasury shares. Refer to calculation on page 61 in volume three

^* Investec Asset Management (IAM) operates schemes for staff whose bonuses are deferred into collective investment schemes that are managed by IAM. Any resulting profit or loss arising from these schemes is attributable to the employee in respect of whom the investment was made. As such, any rise or fall in the value of the assets held is offset to an equal but opposite degree by the change in the liability (expense) to the employee. Therefore the profit or loss on these investments and the corresponding expense to employees are offset in arriving at the staff compensation ratio for IAM and hence for the group as a whole.

Specialist Banking | Asset Management | Wealth & Investment

AR Annual Report

Volume 2

2018

Investec risk disclosures

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2018

V.2

Investec risk disclosures report

AR

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2018

V.3

Investec annual financial statements

Specialist Banking | Asset Management | Wealth & Investment

Annual Report

Investec annual financial statements Volume 3

2018

The 2018 integrated annual report covers the period 1 April 2017 to 31 March 2018 and provides an overview of the Investec group.

This report covers all our operations across the various geographies in which we operate and has been structured to provide stakeholders with relevant financial and non-financial information.

Strategic report incorporating governance, corporate responsibility and remuneration report

Volume 1 Volume 2 Volume 3

Risk disclosures

Annual financial statements

Feedback

We value feedback and invite questions and comments on our reporting. To give feedback or request hard copies of our reports, please contact our Investor Relations division.

For queries regarding information in this document

Investor Relations

Telephone (27) 11 286 7070 (44) 20 7597 5546

e-mail: Investorrelations@investec.com

Internet address:

www.investec.com/en_za/#home/investor_relations.html

Cross reference tools

Audited information

Denotes information in the risk and remuneration reports that forms part of the group's audited annual financial statements

Page references Refers readers to information elsewhere in this report

Website

Indicates that additional information is available on our website: www.investec.com

Corporate responsibility

Refers readers to further information in our corporate responsibility report available on our website: www.investec.com

Reporting standard

Denotes our consideration of a reporting standard

Contents

Financial statements

Directors' responsibility statement	5
Approval of financial statements	5
Declaration by the company secretary	5
Directors' report	6
Schedule A to the directors' report	10
Independent auditor's report to members of Investec plc	13
Independent auditor's report to members of Investec Limited	22
Combined consolidated income statement	26
Combined consolidated statement of comprehensive income	27
Combined consolidated balance sheet	28
Combined consolidated cash flow statement	29
Combined consolidated statement of changes in equity	30
Accounting policies	32
Notes to the annual financial statements	41
Investec plc parent company accounts – Balance sheet	132
Investec plc parent company accounts – Statement of changes in shareholders' equity	133
Notes to Investec plc parent company accounts	134
Definitions	142
Contact details	143
Corporate information	146

Directors' responsibility statement

The following statement, which should be read in conjunction with the auditors' reports set out on pages 13 to 25, is made with a view to distinguishing for stakeholders, the respective responsibilities of the directors and of the external auditors in relation to the combined consolidated annual financial statements.

Financial

statements

The directors are responsible for the preparation, integrity and objectivity of the combined consolidated annual financial statements that fairly present the state of affairs of the group at the end of the financial year the net income and cash flows for the year, and other information contained in this report.

To enable the directors to meet these responsibilities:

• The board and management set standards and management implements systems of internal controls and accounting and information systems aimed at providing reasonable assurance that assets are safeguarded and the risk of fraud, error or loss is reduced in a cost-effective manner. These controls, contained in established policies and procedures, include the proper delegation of responsibilities and authorities within a clearly defined framework, effective accounting procedures and adequate segregation of duties
• The group's Internal Audit function, which operates unimpeded and independently from operational management, and has unrestricted access to the group audit committee, appraises and, when necessary, recommends improvements in the system of internal controls and accounting practices, based on audit

plans that take cognisance of the relative degrees of risk of each function or aspect of the business

• The group audit committees, together with Internal Audit, play an integral role in matters relating to financial and internal control, accounting policies, reporting and disclosure.

To the best of our knowledge and belief, based on the above, the directors are satisfied that no material breakdown in the operation of the system of internal control and procedures has occurred during the year under review.

The group consistently adopts appropriate and recognised accounting policies and these are supported by reasonable judgements and estimates on a consistent basis and provide additional disclosures when compliance with the specific requirements in International Financial Reporting Standards (IFRS) are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the group's financial position and financial performance.

The annual financial statements of the companies and the group have been prepared in accordance with the respective Companies Acts of the UK and South Africa and comply with IFRS and Article 4 of the IAS Regulation and comply with IFRS 101 in respect of Investec plc parent company accounts.

The directors are of the opinion, based on their knowledge of the companies, key processes in operation and enquiries that adequate resources exist to support the companies on a going concern basis over the next year. These annual financial statements have been prepared on that basis.

It is the responsibility of the external auditors to report on the combined consolidated annual financial statements. Their reports to the members of the companies are set out on pages 13 to 25. As far as the directors are aware, there is no relevant audit information of which the external auditors are unaware.

Approval of annual financial statements

The directors' report and the annual financial statements of the companies and the group, which appear on pages 6 to 12 and pages 26 to 141, were approved by the board of directors on 12 June 2018.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the companies' website. Legislation in the UK governing the preparation and dissemination of the annual financial statements may differ from legislation in other jurisdictions.

Signed on behalf of the board

Stephen Koseff Bernard Kantor Chief executive officer Managing director 12 June 2018

Declaration by the company secretary

In terms of section 88(2)(e) of the South African Companies Act, No 71 of 2008, as amended (the Act), I hereby certify that, to the best of my knowledge and belief, Investec Limited has lodged with the Companies and Intellectual Property Commission, for the financial year ended 31 March 2018, all such returns and notices as are required in terms of the Act and that all such returns and notices are true, correct and up to date.

Niki van Wyk Company secretary, Investec Limited

12 June 2018

Extended business review

We are an international specialist bank and asset manager that provides a diverse range of financial products and services to a select client base in three principal markets, UK and Europe, South Africa and Asia/Australia as well as certain other countries. Investec focuses on delivering distinctive profitable solutions for its clients in three core areas of activity namely, Asset Management, Wealth & Investment and Specialist Banking.

Section 414A of the UK Companies Act 2006 requires the directors to present a strategic report in the annual report and accounts. The company has chosen, in accordance with section 414C(11) of the Companies Act 2006, to include certain matters in its strategic report that would otherwise be disclosed in this directors' report. The strategic report on pages 20 to 22 in volume one provides an overview of our strategic position, performance during the financial year and details of likely future developments in the business.

The strategic report should be read in conjunction with the sections on pages 23 to 114 in volume one which elaborate on the aspects highlighted in this review.

The directors' report deals with the requirements of the combined consolidated Investec group, comprising the legal entities Investec plc and Investec Limited.

Authorised and issued share capital

Investec plc and Investec Limited

Details of the share capital are set out in note 42 to the annual financial statements.

Investec plc

During the year, the following shares were issued:

• 9 525 195 ordinary shares on 15 June 2017 at 587.00 pence per share
• 7 007 432 special converting shares on 15 June 2017 of £0.0002 each at par
• 1 810 386 ordinary shares on 22 September 2017 at 436.00 pence per share
• 2 550 138 special converting shares on 24 November 2017 of £0.0002 each at par

• 1 397 489 ordinary shares on 24 November 2017 at 503.00 pence per share.

Investec plc did not repurchase any of its ordinary shares during the financial year ended 31 March 2018. At 31 March 2018, Investec plc held 19 722 086 shares in treasury (2017: 18 293 688). The maximum number of shares held in treasury by Investec plc during the period under review was 21 451 568 shares.

Investec Limited

During the year, the following shares were issued:

• 9 525 195 special convertible redeemable preference shares of R0.0002 each on 15 June 2017 at par
• 7 007 432 ordinary shares on 15 June 2017 at R97.45 per share (R0.0002 par and premium of R97.4498 per share)
• 1 810 386 special convertible redeemable preference shares of R0.0002 each on 22 September 2017 at par
• 2 550 138 ordinary shares on 24 November 2017 at R94.94 per share (R0.0002 par and premium of R94.9398 per share)
• 1 397 489 special convertible redeemable preference shares of R0.0002 each on 24 November 2017 at par.

On 19 May 2017, the early redemption of 26 288 Class ILRP2 redeemable non-participating preference shares at R1 000.00 per share, took place (R0.01 par and premium of R999.99 per share). On 31 May 2017, the early redemption of a further 23 659 Class ILRP2 redeemable non-participating preference shares at R1 000.00 per share, took place (R0.01 par and premium of R999.99 per share).

Investec Limited did not repurchase any of its ordinary shares during the financial year ended 31 March 2018. At 31 March 2018, Investec Limited held 27 013 057 shares in treasury (2017: 31 354 669). The maximum number of shares held in treasury by Investec Limited during the period under review was 32 332 430 shares.

Financial results

The combined consolidated results of Investec plc and Investec Limited are set out in the annual financial statements and accompanying notes for the year

ended 31 March 2018. The preparation of these combined results was supervised by the group risk and finance director, Glynn Burger.

Ordinary dividends

Investec plc

An interim dividend of 10.5 pence per ordinary share (2016: 10 pence) was paid on 20 December 2017, as follows:

• 10.5 pence per ordinary share to non-South African resident shareholders registered on 8 December 2017
• To South African resident shareholders registered on 8 December 2017, through a dividend paid by Investec Limited on the SA DAS share, of 8 pence per ordinary share and 2.5 pence per ordinary share paid by Investec plc.

The directors have proposed a final dividend to shareholders registered on 27 July 2018, of 13.5 pence (2017: 13 pence) per ordinary share, which is subject to the approval of the members of Investec plc at the annual general meeting which is scheduled to take place on 8 August 2018 and, if approved, will be paid on 13 August 2018, as follows:

• 13.5 pence per ordinary share to non-South African resident shareholders (2017: 13 pence) registered on 27 July 2018
• To South African resident shareholders registered on 27 July 2018, through a dividend paid by Investec Limited on the SA DAS share, of 7 pence per ordinary share and 6.5 pence per ordinary share paid by Investec plc.

Investec Limited

An interim dividend of 200.0 cents per ordinary share (2016: 178.0 cents) was declared to shareholders registered on 8 December 2017 and was paid on 20 December 2017.

The directors have proposed a final dividend in respect of the financial year ended 31 March 2018 of 232 cents (2017: 225 cents) per ordinary share. The final dividend will be payable on Monday, 13 August 2018 to shareholders on the register at the close of business on Friday, 27 July 2018. The annual general meeting at which the proposed dividend will be considered for approval is scheduled to take place on Wednesday, 8 August 2018.

(continued)

Preference dividends

Investec plc

Non-redeemable, non-cumulative, non-participating preference shares

Preference dividend number 23 for the period 1 April 2017 to 30 September 2017, amounting to 6.26712 pence per share, was declared to members holding preference shares registered on 1 December 2017 and was paid on 11 December 2017.

Preference dividend number 24 for the period 1 October 2017 to 31 March 2018, amounting to 7.26027 pence per share, was declared to members holding preference shares registered on 8 June 2018 and will be paid on 18 June 2018.

Rand-denominated nonredeemable, non-cumulative, nonparticipating preference shares

Preference dividend number 13 for the period 1 April 2017 to 30 September 2017, amounting to 495.43151 cents per share, was declared to members holding rand-denominated non-redeemable, noncumulative, non-participating preference shares registered on 1 December 2017 and was paid on 11 December 2017.

Preference dividend number 14 for the period 1 October 2017 to 31 March 2018, amounting to 485.34589 cents per share, was declared to members holding preference shares registered on 8 June 2018 and will be paid on 18 June 2018.

Investec Limited

Non-redeemable, non-cumulative, non-participating preference shares

Preference dividend number 26 for the period 1 April 2017 to 30 September 2017, amounting to 405.57588 cents per share, was declared to shareholders holding preference shares registered on 8 December 2017 and was paid on 11 December 2017.

Preference dividend number 27 for the period 1 October 2017 to 31 March 2018, amounting to 397.31947 cents per share, was declared to shareholders holding preference shares registered on 8 June 2018 and will be paid on 18 June 2018.

Class ILRP2 redeemable nonparticipating preference shares

Preference dividend number 9 for the period 1 April 2017 to 30 June 2017, amounting to 1459.78410 cents per share, was declared to shareholders holding preference shares on 21 July 2017 and was paid on 24 July 2017.

Preference dividend number 10 for the period 1 July 2017 to 30 September 2017, amounting to 1448.90208 cents per share, was declared to shareholders holding preference shares on 20 October 2017 and was paid on 23 October 2017.

Preference dividend number 11 for the period 1 October 2017 to 31 December 2017, amounting to 1441.42330 cents per share, was declared to shareholders holding preference shares on 19 January 2018 and was paid on 22 January 2018.

Preference dividend number 12 for the period 1 January 2018 to 31 March 2018, amounting to 1408.96502 cents per share, was declared to shareholders holding preference shares on 20 April 2018 and was paid on 23 April 2018.

Redeemable cumulative preference shares

Dividends amounting to R22 987 563 (2017: R23 190 399) were paid on the redeemable cumulative preference shares.

Directors and secretaries

Details of directors and company secretaries of Investec plc and Investec Limited are reflected on pages 124 to 129 and 131 in volume one.

In accordance with the UK Corporate Governance Code, the entire board will offer itself for re-election at the 2018 annual general meeting.

The company secretary of Investec plc is David Miller and Niki van Wyk is the company secretary of Investec Limited.

Directors and their interests

Directors' shareholdings and options to acquire shares are set out on pages 209 to 213 in volume one.

The register of directors' interests contains full details of directors' shareholdings and options to acquire shares.

Corporate governance

The group's corporate governance board statement and governance framework are set out on pages 116 to 165 in volume one.

Share incentives

Audit committees

The audit committees comprising independent non-executive directors meet regularly with senior management, the external auditors, Operational Risk, Internal Audit, Compliance and the Finance division to consider the nature and scope of the audit reviews and the effectiveness of our risk and control systems.

Further details on the role and responsibility of the audit committees are set out on pages 151 to 157 in volume one.

Auditors

Ernst & Young LLP have indicated their willingness to continue in office as auditors of Investec plc and Ernst & Young Inc. and KPMG Inc. have indicated their willingness to continue in office as joint auditors of Investec Limited.

A resolution to reappoint them as auditors will be proposed at the annual general meeting scheduled to take place on 8 August 2018.

Contracts

Refer to pages 163 to 165 in volume one for details of contracts with directors.

Subsidiary and associated companies

Details of principal subsidiary and associated companies are reflected on pages 122 to 128 in volume three.

Major shareholders

The largest shareholders of Investec plc and Investec Limited are reflected on page 167 in volume one.

Special resolutions

Investec plc

At the annual general meeting held on 10 August 2017, special resolutions were passed in terms of which:

• A renewable authority was granted to Investec plc to acquire its own ordinary shares in accordance with the terms of section 701 of the UK Companies Act 2006
• A renewable authority was granted to Investec plc to acquire its own preference shares in accordance with the terms of section 701 of the UK Companies Act 2006.

Investec Limited

At the annual general meeting held on 10 August 2017, the following special resolutions were passed in terms of which:

• A renewable authority was granted to Investec Limited and any of its subsidiaries to acquire its own ordinary shares in terms of the provisions of the South African Companies Act, No 71 of 2008
• A renewable authority was granted to Investec Limited and any of its subsidiaries to acquire its own Class ILRP2 redeemable, nonparticipating preference shares, any other redeemable, non-participating preference shares and non-redeemable, non-cumulative, non-participating preference shares in terms of the provisions of the South African Companies Act, No 71 of 2008
• A renewable authority was granted to Investec Limited to provide financial assistance in order to comply with the provisions of sections 44 and 45 of the South African Companies Act, No 71 of 2008

• A renewable authority was granted to Investec Limited to approve the directors' remuneration in order to comply with the provisions of sections 65(11)(h), 66(8) and 66(9) of the South African Companies Act, No 71 of 2008.

Accounting policies and disclosure

Accounting policies are set having regard to commercial practice and comply with applicable UK and South African law and International Financial Reporting Standards. The parent company accounts of Investec plc are prepared under IFRS 101.

Financial instruments

Detailed information on the group's risk management process and policy can be found in the risk management report on pages 6 to 96 in volume two.

Information on the group's hedge accounting policy and the use of derivatives and hedges can be found on pages 36 and 37 and in note 53 in volume three.

Employees

Our policy is to recruit and promote on the basis of aptitude and ability, without discrimination of any kind. Applications for employment by disabled people are always considered bearing in mind the qualifications and abilities of the applicants. In the event of employees becoming disabled, every effort is made to ensure their continued employment. Our policy is to adopt an open management style, thereby encouraging informal consultation at all levels about aspects of our operations, and motivating staff involvement in our performance by means of employee share schemes.

We are committed to ensuring the health, safety and welfare of our employees and to providing and maintaining safe working conditions. We have health and safety policies in all regions of operation that cover all legislated requirements and additional benefits are provided for staff where possible. We constantly seek to improve both policies and the execution of health and safety standards in all our offices.

This takes the form of staff education, regular fire drills and maintenance of an open door policy with regard to dialogue on the issue. Where appropriate, the appointment of individuals responsible for various areas of health and safety is made.

Political donations and expenditure

Investec plc did not make any donations for political purposes in the UK or the rest of the EU, nor did it make any political donations to political parties or other political organisations, or to any independent election candidates, or incur any political expenditure during the year. Neither Investec Limited nor its subsidiaries made any political donations during the 2018 financial year (2017: R3.5 million).

Environment, including greenhouse gas emissions

We are committed to pursuing sound environmental policies in all aspects of our business, and seek to encourage and promote good environmental practice among our employees and within the community in which we operate.

Further information can be found on pages 171 to 183 in volume one.

Going concern

(continued)

Research and development

In the ordinary course of business, Investec develops new products and services in each of its business divisions.

Viability statement

Refer to pages 163 to 164 in volume one for the directors' viability statement.

Risk management policies

The group's policies for managing the financial risk to which it is exposed and exposure to price, credit, liquidity and cash flow risk are set out in the risk management section on pages 6 to 96 in volume two.

Additional information for shareholders

Schedule A to the directors' report is a summary of certain provisions of Investec plc's current Articles of Association and applicable English law concerning companies (the UK Companies Act 2006). The board considers that this integrated annual report and annual financial statements, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the group's performance, business model and strategy.

On behalf of the boards of Investec plc and Investec Limited.

Perry Crosthwaite Stephen Koseff Chairman Chief executive

12 June 2018

Additional information for shareholders

Set out below is a summary of certain provisions of Investec plc's current Articles of Association (the Articles) and applicable English law concerning companies (the UK Companies Act 2006). This is a summary only and the relevant provisions of the Articles or the UK Companies Act 2006 should be consulted if further information is required.

Share capital

The issued share capital of Investec plc at 31 March 2018 consists of 669 838 695 ordinary shares of £0.0002 each, 2 754 587 non-redeemable, non-cumulative, non-participating preference shares of £0.01each, 131 447 ZAR non-redeemable, non-cumulative, non-participating preference shares of R0.001 each, 310 722 744 special converting shares of £0.0002 each, the special voting share of £0.001, the UK DAN share of £0.001 and the UK DAS share of £0.001 (each class as defined in the Articles).

Purchase of own shares

Subject to the provisions of the Articles, the UK Companies Act 2006, the UK Uncertificated Securities Regulations 2001 and every other statute for the time being in force concerning companies and affecting Investec plc, the approval of shareholders as provided in the Investec plc Articles, and without prejudice to any relevant special rights attached to any class of shares, Investec plc may purchase, or may enter into a contract under which it will or may purchase, any of its own shares of any class, including without limitation any redeemable shares, in any way and at any price (whether at par or above or below par).

Dividends and distributions

Subject to the provisions of the UK Companies Act 2006, Investec plc may by ordinary resolution from time-to-time declare dividends not exceeding the amount recommended by the board. The board may pay interim dividends whenever the financial position of Investec plc, in the opinion of the board, justifies such payment.

The board may withhold payment of all or any part of any dividends or other monies payable in respect of Investec plc's shares from a person with a 0.25% or more interest in nominal value of the issued shares if such a person has been served with a notice after failure to provide Investec plc with information concerning interests in those shares required to be provided under the UK Companies Act 2006.

Voting rights

Subject to any special rights or restrictions attaching to any class of shares, at a general meeting, every member present in person has, upon a show of hands, one vote and, on a poll, every member who is present in person or by proxy has one vote for each share. In the case of joint holders of a share, the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders and for this purpose seniority shall be determined by the order in which the names stand in the register of members in respect of the share. Under the UK Companies Act 2006, members are entitled to appoint a proxy, who need not be a member of Investec plc, to exercise all or any of their rights to attend and vote on their behalf at a general meeting or class meeting. A member may appoint more than one proxy in relation to a general meeting or class meeting, provided that each proxy is appointed to exercise the rights attached to a different share or shares held by that member. A member that is a corporation may appoint an individual to act on its behalf at a general meeting or class meeting as a corporate representative. The person so authorised shall be entitled to exercise the same powers on behalf of such corporation as the corporation could exercise if it were an individual member of Investec plc.

Restrictions on voting

No member shall be entitled to vote either in person or by proxy at any general meeting or class meeting in respect of any shares held by him if any call or other sum then payable by him in respect of that share remains unpaid. In addition, no member shall be entitled to vote if he has been served with a notice after failure to provide Investec plc with information concerning interests in those shares required to be provided under the UK Companies Act 2006.

Deadlines for exercising voting rights

Votes are exercisable at a general meeting of Investec plc in respect of which the business being voted upon is being heard. Votes may be exercised in person, by proxy, or in relation to corporate members, by corporate representatives. The Articles provide a deadline for submission of proxy forms of not less than 48 hours before the time appointed for the holding of the meeting or adjourned meeting.

Variation of rights

Subject to the UK Companies Act 2006, the Articles specify that rights attached to any class of shares may be varied with the written consent of the holders of not less than three-fourths in nominal value of the issued shares of that class, or with the sanction of an extraordinary resolution passed at a separate general meeting of the holders of those shares. At every such separate general meeting the quorum shall be two persons or, if there is only one holder, that holder at least holding or representing by proxy at least one-third in nominal value of the issued shares of the class (calculated excluding any shares held as treasury shares). The rights conferred upon the holders of any shares shall not, unless otherwise expressly provided in the rights attaching to those shares, be deemed to be varied by the creation or issue of further shares ranking pari passu with them. Where, under the company's share incentive plan, participants are the beneficial owners of the shares, but not the registered owners, the participants are not entitled to exercise any voting rights until the shares are released to the participants. Under the company's employee trust, the trustee does not vote in respect of unallocated shares.

Transfer of shares

All transfers of shares may be effected by transfer in writing in any usual or common form or in any other form acceptable to the directors. The instrument of transfer shall be signed by or on behalf of the transferor and (except in the case of fully paid shares) by or on behalf of the transferee. Transfers of shares which are in uncertificated form are effected by means of the CREST system. The directors may, in the case of shares in certificated form, in their absolute discretion and without assigning any reason, refuse to register any transfer of shares (not being

Financial statements

Schedule A to the directors' report

(continued)

fully paid shares), provided that such discretion may not be exercised in such a way as to prevent dealings in the shares of that class from taking place on an open and proper basis. The directors may also refuse to register an allotment or transfer of shares (whether fully paid or not) in favour of more than four persons jointly. If the directors refuse to register an allotment or transfer they shall within two months after the date on which the letter of allotment or transfer was lodged with Investec plc send to the allottee or transferee a notice of the refusal. The directors may decline to recognise any instrument of transfer unless the instrument of transfer is in respect of only one class of share and, when submitted for registration, is accompanied by the relevant share certificates and such other evidence as the directors may reasonably require. Subject to the UK Companies Act 2006 and regulations and applicable CREST rules, the directors may determine that any class of shares may be held in uncertificated form and that title to such shares may be transferred by means of the CREST system or that shares of any class should cease to be so held and transferred.

A number of the company's employee share plans include restrictions on transfer of shares while the shares are subject to the plans, in particular, the share incentive plan.

Plc preference shares

The following are the rights and privileges which attach to the plc preference shares:

• On a return of capital, whether or not on a winding up (but not on a redemption or purchase of any shares by Investec plc) or otherwise, the plc preference shares will rank, pari passu inter se and with the most senior ranking preference shares of Investec plc in issue (if any) from time-to-time and with any other shares of Investec plc that are expressed to rank pari passu herewith as regards to participation in the capital, and otherwise in priority to any other class of shares of Investec plc
• Investec plc may, at its option, redeem all or any of the plc preference shares for the time being issued and outstanding on the first call date or any dividend payment date thereafter
• Holders of plc preference shares will not be entitled to attend and vote at general meetings of Investec plc. Holders will be entitled to attend and vote at a class meeting of holders of plc preference shares.

Non-redeemable, non-cumulative, nonparticipating preference shares

The following are the rights and privileges which attach to the perpetual preference shares:

• Each perpetual preference share will rank as regards to dividends and a repayment of capital on the winding up of Investec plc prior to the ordinary shares, the plc special converting shares, the UK DAN share, the UK DAS share, but pari passu with the plc preference shares. The perpetual preference shares shall confer on the holders, on a per perpetual preference shares and equal basis, the right to a return of capital on the winding up of Investec plc of an amount equal to the aggregate of the nominal value and premiums in respect of perpetual preference shares issued, divided by the number of perpetual preference shares in issue
• Each perpetual preference share may confer upon the holder thereof the right to receive out of the profits of Investec plc which it shall determine to distribute, in priority to the ordinary shares, the plc special converting shares, the UK DAN share and the UK DAS share, but pari passu with the plc preference shares, the preference dividend calculated in accordance with the Articles
• The holders of the perpetual preference shares shall be entitled to receive notice of and be present but not to vote, either in person or by proxy, at any meeting of Investec plc, by virtue of or in respect of the perpetual preference shares, unless either or both of the following circumstances prevail at the date of the meeting:
  • The preference dividend or any part thereof remains in arrears and unpaid as determined in accordance with the Articles after six months from the due date thereof; and/or
  • A resolution of Investec plc is proposed which directly affects the rights attached to the perpetual preference shares or the interests of the holders thereof, or a resolution of Investec plc is proposed to wind up or in relation to the winding up of Investec plc or for the reduction of its capital, in which event the preference shareholders shall be entitled to vote only on such resolution.

Rand-denominated non-redeemable, non-cumulative, nonparticipating perpetual preference shares (the ZAR perpetual preference shares)

The ZAR perpetual preference shares are subject to substantially similar terms and conditions as the existing Pounds Sterling non-redeemable, non-cumulative, non-participating preference shares, as outlined above, save that they are denominated in South African Rands.

Shares required for the DLC structure

Investec SSC (UK) Limited, a UK trust company, specially formed for the purpose of the DLC structure, holds the plc special voting share, the plc special converting shares, the UK DAN share and the UK DAS share. These shares can only be transferred to another UK trust company, in limited circumstances.

The plc special voting shares are specially created shares so that shareholders of both Investec plc and Investec Limited effectively vote together as a single decision-making body on matters affecting shareholders of both companies in similar ways, as set out in the Articles.

Prior to a change of control, approval of termination of the sharing agreement (which regulates the DLC), liquidation or insolvency of Investec plc, the plc special converting shares have no voting rights, except in relation to a resolution proposing the:

• (i) variation of the rights attaching to the shares or
• (ii) winding up, and they have no rights to dividends. The special converting shares are held on trust for the Investec Limited ordinary shareholders. Investec plc and Investec Limited have established dividend access trust arrangements as part of the DLC.

Investec plc has issued two dividend access shares, the UK DAS share and UK DAN share which enables Investec plc to pay dividends to the shareholders of Investec Limited. This facility may be used by the board to address imbalances in the distributable reserves of Investec plc and Investec Limited and/or to address

(continued)

the effects of South African exchange controls and/or if they otherwise consider it necessary or desirable.

Appointment and replacement of directors

Directors shall be no less than four and no more than 20 in number. A director is not required to hold any shares of Investec plc by way of qualification. Investec plc may by special resolution increase or reduce the maximum or minimum number of directors.

Powers of directors

Subject to the Articles, the UK Companies Act 2006, the CREST regulations and every other statute for the time being in force concerning companies and affecting Investec plc, and any directions given by ordinary or special resolution, the business of Investec plc will be managed by the board who may exercise all the powers of Investec plc.

The board may exercise all the powers of Investec plc to borrow money and to mortgage or charge any of its undertaking, property, assets and uncalled capital and to issue debentures and other securities, whether outright or as collateral security for any debt, liability or obligation of Investec plc or of any third party.

Significant agreements: change of control

The Articles of Investec plc and the Memorandum of Incorporation of Investec Limited ensure that a person cannot make an offer for one company without having made an equivalent offer to the shareholders of both companies on equivalent terms.

Pursuant to the terms of the agreements establishing the DLC structure, if either Investec plc or Investec Limited serves written notice on the other at any time after either party becomes a subsidiary of the other party or after both Investec plc and Investec Limited become subsidiaries of a third party, the agreements establishing the DLC structure will terminate.

All of Investec plc's share plans contain provisions relating to a change of control. Outstanding awards and options would normally vest and become exercisable on a change of control and, where applicable, subject to the satisfaction of any performance conditions at that time.

• the year then ended; • the group financial statements have been properly prepared in accordance with IFRS as adopted by the European Union; • the parent company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice (Including FRS 101 'Reduced Disclosure Framework'); and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006, and, as regards the group financial statements, Article 4 of the IAS Regulation.

• Investec plc's combined consolidated group financial statements and parent company financial statements (the 'financial statements') give a true and fair view of the state of the group's and of the parent company's affairs as at 31 March 2018 and of the group's profit for

We have audited the financial statements of Investec plc which comprise:

Group	Parent company
Combined consolidated balance sheet as at 31 March 2018	Balance sheet as at 31 March 2018
Combined consolidated income statement for the year then ended	Statement of changes in equity for the year then ended
Combined consolidated statement of comprehensive income for the year then ended	Related notes a to i to the financial statements
Combined consolidated statement of changes in equity for the year then ended
Combined consolidated cash flow statement for the year then ended
Related notes 1 to 58 to the financial statements

The financial reporting framework that has been applied in the preparation of the group financial statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. The financial reporting framework that has been applied in the preparation of the parent company financial statements is applicable law and United Kingdom Accounting Standards, including IFRS 101 Reduced Disclosure Framework (United Kingdom Generally Accepted Accounting Practice).

Basis for opinion

Opinion

In our opinion:

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report below. We are independent of the group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.

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

Conclusions relating to principal risks, going concern and viability statement

We have nothing to report in respect of the following information in the annual report, in relation to which the ISAs (UK) require us to report to you whether we have anything material to add or draw attention to:

• the disclosures in the annual report (set out on pages 42 to 48 of volume one) that describe the principal risks and explain how they are being managed or mitigated;
• the directors' confirmation (set out on page 42 of volume one) in the annual report that they have carried out a robust assessment of the principal risks facing the entity, including those that would threaten its business model, future performance, solvency or liquidity;
• the directors' statement (set out on page 163 of volume one) in the financial statements about whether they considered it appropriate to adopt the going concern basis of accounting in preparing them, and their identification of any material uncertainties to the entity's ability to continue to do so over a period of at least 12 months from the date of approval of the financial statements;
• whether the directors' statement in relation to going concern required under the Listing Rules in accordance with Listing Rule 9.8.6R(3) is materially inconsistent with our knowledge obtained in the audit; or
• the viability statement (set out on page 163 of volume one) in the annual report as to how they have assessed the prospects of the entity, over what period they have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that the entity will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions.

(continued)

Overview of our audit approach

Key audit matters	• Monitoring of credit quality and the appropriateness of the allowance for credit losses; • Valuation of level 3 complex/illiquid financial instruments, unlisted investments, investment properties and embedded derivatives; and • Provision for uncertain tax positions.
Audit scope	• We performed an audit of the complete financial information of six components and audit procedures on specific balances for a further three components. • The components where we performed full or specific audit procedures accounted for 99% of adjusted operating profit before impairment of goodwill and amortisation of acquired intangibles, 99% of revenue and 99% of total assets.
Materiality	We applied group materiality of £34.0 million, which represents 5% of adjusted operating profit before impairment of goodwill and amortisation of acquired intangibles.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. We also addressed the risk of management override of internal controls including whether there was evidence of bias by management or the directors that represented a risk of material misstatement due to fraud. These matters were addressed in the context of our audit of the financial statements as a whole, and in our opinion thereon, and we do not provide a separate opinion on these matters.

(continued)

Monitoring of credit quality and the appropriateness of the allowance for credit losses

Refer to the audit committee report (page 155 of volume one); accounting policies (page 40); and note 26 of the consolidated financial statements (page 85)

Loans and advances to customers and the associated allowance for credit losses are significant.

The appropriateness of the allowance for credit losses is subjective due to the high degree of judgement applied by management in determining the timing of recognition and estimation in size of loan impairment provisions at the balance sheet date. At year end the group reported total gross loans and advances of £24 910 million (2017: £22 388 million); impairment provisions of £238 million (2017: £198 million); and credit losses of £148 million (2017: £111 million).

In the Specialist Bank most of the provision is calculated specifically; for the Specialist Bank in South Africa there is also a provision calculated using models and, for the legacy business in the UK, a portfolio provision.

The largest loan portfolios represent lending to high net worth and professional individuals, lending collateralised by property, public and non-business services and finance and insurance. The most significant provisions are for lending collateralised by property in relation to the legacy portfolio; refer to page 85 of Volume One Report for the definition.

The risk has remained at a level consistent with the prior year.

Risk Our response to the risk

We evaluated the appropriateness of accounting policies and assessed the loan impairment methodologies applied, and compared these to the requirements of IAS 39 Financial Instruments: Recognition and Measurement.

We documented and tested management's processes and controls for credit origination and monitoring, as well as for assessing, calculating and accounting for the allowance for credit losses, including the governance over the provisioning process and the identification of impairment events. In particular we focused on the controls over the monitoring of loans with higher risk of default, loan credit file reviews and assessment and approval of impairment provisions including the valuation of collateral.

For provisions determined on specific assets our audit procedures included the following:

• We examined a sample of loans, selected after performing a risk assessment on the portfolio, to understand the latest developments which influence performance and recoverability;
• In making this assessment for the current year we also considered the impact of continued low commodity prices, including the impact on connected industries and stateowned entities in South Africa;
• We assessed the measurement of any impairment provision held where IAS 39 loss indicators were present. This is an inherently judgemental process and particularly important where management are pursuing bespoke workout strategies in the legacy portfolio. Where workout strategies require additional funding to execute we obtained evidence of the approval for such funding through bank management's risk governance process as well as assessing the track record of management approving the utilisation of the additional funding;
• In addition to the work performed on the non-performing and legacy portfolios we judgmentally selected a sample of loans classified as performing to assess whether all necessary impairments had been identified by management;
• We assessed management's assumptions about future cash flow projections and the valuation of collateral held, against our previous experience and available market information. As part of this testing we also assessed the legacy portfolio impairment;
• For loans where the recovery was dependent on collateral and there were no recent external valuations or where market data was not readily available we used our valuation specialists to test the collateral valuations supporting the recovery of the loans, in particular in relation to lending collateralised by property and assets connected to commodities.

For portfolios where model provisions are calculated, our audit procedures included the following, performed in conjunction with our risk specialists:

• We tested the appropriateness of the methodologies and assumptions underlying the provisioning models;
• We tested the information used in the models, back to source systems and input data;
• We performed a reasonableness assessment by comparing the impairments against an independent model estimate calculated using our independent challenger models applied to the entity's historical data.

We performed full scope audit procedures over this risk area in three components, which covered 99% (2017: 99%) of the risk amount.

Key observations communicated to the audit committee

We concluded for the key controls tested that they were designed and operating effectively; therefore we could place reliance on these key controls for the purposes of our audit.

Based on the testing performed we concluded that impairment provisions made by management were within a reasonable range of outcomes.

(continued)

Financial statements

Valuation of level 3 complex/illiquid financial instruments, unlisted investments and embedded derivatives

Refer to the audit committee report (page 155 of volume one); accounting policies (page 40); and note 14 of the consolidated financial statements (page 70)

There are £11 932 million (2017: £10 801 million) of assets that are required to be fair valued under the IFRS accounting framework. For level 3 instruments, such as unlisted investments in the private equity businesses, property lending-related profit-sharing arrangements and unlisted investments or large bespoke derivative structures there is necessarily a large degree of subjectivity surrounding the various inputs to their valuations. With volatility in the global financial markets and the lack of observable liquid market inputs, determining appropriate valuations continues to be highly judgemental. This may result in subjective fair value movements which are material.

At the year end the group reported level 3 assets of £920 million (2017: £913 million) and level 3 liabilities of £143 million (2017: £143 million).

The portfolios within level 3 with the greatest valuation uncertainty, which hence required the most significant accounting and auditing judgements, are the Hong Kong portfolio and the Southern Africa mining assets, including related lending activities.

Significant judgement is required by management due to the absence of verifiable third party information to determine the key inputs and assumptions in the valuation models.

These assets are standing items for discussion at the group audit committees.

Risk Our response to the risk

We tested the design and operating effectiveness of key controls for the valuation of level 3 financial instruments as well as over the Asset Management performance fees.

We performed a detailed examination of management's valuation methodologies and assessed the appropriateness and consistency of model inputs, key assumptions and underlying contracts. As part of this testing we used our valuation specialists.

Where such inputs and assumptions were not observable in the market we engaged our valuation specialists to critically assess whether they fell within an acceptable range based on relevant knowledge and experience of the market. In relation to the most material assets within the Hong Kong portfolio and the Southern Africa mining assets additional procedures were performed over and above those noted above including:

• Performing a site visit to inspect key assets
• Engaging our business valuations specialists to build an independent valuation model in addition to assessing the key inputs and assumptions. As part of this they also considered alternative inputs and assumptions; sensitivity analysis was performed on the most material inputs
• Verifying via external legal confirmations the enforceability of collateral held.

For certain unlisted investments in South Africa, management applies a portfolio valuation adjustment to account for estimation and macro-economic risks that are not included in the model valuations. Together with our valuation specialists, we have formed independent estimates for acceptable valuation ranges of these investments and compared these to management's estimate in assessing the appropriateness.

We performed full audit procedures over this risk area for six components, which covered 98% (2017: 98%) of the risk amount.

Key observations communicated to the audit committee

We concluded for the key controls tested that they were designed and operating effectively; therefore we could place reliance on these key controls for the purposes of our audit.

Based on the controls and substantive testing performed the valuation of the level 3 positions, as disclosed in the financial statements were concluded to be within a reasonable range of appropriate outcomes.

(continued)

Risk	Our response to the risk	Key observations communicated to the audit committee
Provision for uncertain tax positions Refer to the audit committee report (page 155 of volume one); accounting policies (page 40); and note 8 of the consolidated financial statements (page 59) There are certain legacy structured transactions within Investec plc where the outcome is uncertain and will only be determined upon the resolution of negotiation or, in some cases, litigation with HMRC. Consequently management make judgements about the size of potential liabilities which are subject to change in future periods as more information becomes available.	We have examined the latest court rulings and analysis performed by management which sets out the basis for the judgements in relation to material tax exposures. We have also examined the correspondence between the group and its external advisors and between the group and HMRC. Using our tax specialists, we have considered the matters in dispute and used our knowledge of the law to assess the available evidence and the provisions made by management. We have also evaluated the calculation of the exposure and the appropriateness of the disclosure in relation to the uncertain tax positions.	Based on the information that is currently available we concur with manage ment's judgement in respect of the level of pro visions held in respect of uncertain tax positions and the disclosure presented in the financial statements.
	We performed full scope audit procedures over this risk area in the component impacted by the risk.

The levels of from prior year.

of our audit

Tailoring the scope

be performed at each entity.

Of the nine components selected, we performed an audit of the complete financial information of six components ('full scope components') which were selected based on their size or risk characteristics. For the remaining three components ('specific scope components'), we performed audit procedures on specific accounts within that component that we considered had the potential for the greatest impact on

Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope for each entity within the group. Taken together, this enables us to form an opinion on the consolidated financial statements. We take into account size, risk profile, the organisation of the group and effectiveness of group-wide controls, changes in the business environment and other factors such as recent internal audit results when assessing the level of work to

An overview of the scope

the significant accounts in the financial statements either because of the size of these accounts or their risk profile.

Entity	Scoping
Investec Bank plc	Full
Investec Asset Management UK	Full
Investec Bank Limited	Full
Investec Property Fund	Full
Investec Asset Management SA	Full
Investec Life Limited	Specific
Investec Property Limited	Specific
Investec Securities Limited	Specific
Investec Limited consolidation
packs	Full

The reporting components where we performed audit procedures accounted for 99% (2017: 99%) of the group's adjusted operating profit before impairment of goodwill and amortisation of acquired intangibles, 99% (2017: 99%) of the group's revenue and 99% (2017: 99%) of the group's total assets. For the current year, the full scope components contributed 89% (2017: 95%) of the group's adjusted operating profit before impairment of goodwill and amortisation of acquired

intangibles, 95% (2017: 98%) of the group's revenue and 98% (2017: 99%) of the group's total assets. The specific scope components contributed 10% (2017: 4%) of the group's adjusted operating profit before impairment of goodwill and amortisation of acquired intangibles, 5% (2017: 2%) of the group's revenue and 2% (2017: 1%) of the group's total assets. The audit scope of these components may not have included testing of all significant accounts of the component but will have contributed to the coverage of significant accounts tested for the group.

The remaining component represents 1% of the group's adjusted operating profit before impairment of goodwill and amortisation of acquired intangibles and for that component we performed analytical review.

The charts below illustrate the coverage obtained from the work performed by our audit teams.

(continued)

Adjusted operating prot

Changes from the prior year

We have reassessed the scope of Investec Securities Limited during the year and changed the scope from full scope to specific scope, as the result of the relative contribution of Investec Securities Limited to the overall group. There were no other changes to the overall scope in the current year.

Involvement with component teams

In establishing our overall approach to the group audit, we determined the type of work that needed to be undertaken at each of the components by us, as the primary audit engagement team, or by component auditors from other EY global network firms and other audit firms operating under our instruction. Of the six full scope components, audit procedures were performed on none of these directly by the primary audit team. For the three specific scope components, where the work was performed by component auditors, we determined the appropriate level of involvement to enable us to determine that sufficient audit evidence had been obtained as a basis for our opinion on the group as a whole.

The primary audit engagement team interacted regularly with the component audit teams where appropriate throughout the course of the audit, which included planning meetings, maintaining regular communications on the status of the audits, year-end meetings (including review of key working papers) and taking responsibility for the scope and direction of the audit process.

The primary audit engagement team also participated in meetings with key management personnel in the components and, for the UK and South African locations, implemented a programme of planned visits. These visits involved discussing the audit approach with the component team and any issues arising from their work, as well as meeting with local management.

In response to developments during the period we enhanced the oversight procedures performed over components audited by other firms in South Africa. These enhancements included additional site visits by the primary team, direct involvement of the independent review partner with the component teams, enhanced independence procedures and review of the components' auditors' independent quality review process.

This, together with the additional procedures performed at group level, gave us appropriate evidence for our opinion on the group financial statements.

Our application of materiality

We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on the audit and in forming our audit opinion.

Materiality

The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence the economic decisions of the users of the financial statements. Materiality provides a basis for determining the nature and extent of our audit procedures.

We determined materiality for the group to be £34.0 million (2017: £32.9 million), which is 5% (2017: 5%) of adjusted operating profit before impairment of goodwill and amortisation of acquired intangibles. We believe that an adjusted operating profit before impairment of goodwill and amortisation of acquired intangibles provides us with the most appropriate measure to reflect the performance of the group. We have adjusted the operating profit before impairment of goodwill and amortisation of acquired intangibles for the double rent charges and the losses on the acceleration of the exit of certain legacy assets. During the course of our audit, we reassessed initial materiality and increased it from our initial level of £32.3 million in light of the underlying business performance.

(continued)

We determined materiality for the Parent Company to be £3.7 million (2017: £3.7 million), which is 5% (2017: 5%) of operating profit before impairment of goodwill and amortisation of acquired intangibles. There has been no change in the basis from the prior year.

Performance materiality

The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality.

On the basis of our risk assessments, together with our assessment of the group's overall control environment, our judgement was that performance materiality was 50% (2017: 50%) of our planning materiality, namely £17.0 million (2017: £16.4 million). We have set performance materiality at this percentage based on our understanding of the entity and past experience with the audit.

Audit work at component locations for the purpose of obtaining audit coverage over significant financial statement accounts is undertaken based on a percentage of total performance materiality. The performance materiality set for each component is based on the relative scale and risk of the component to the group as a whole and our assessment of the risk of misstatement at that component. In the current year, the range of performance materiality allocated to components was £1.7 million to £9.4 million.

Reporting threshold

An amount below which identified misstatements are considered as being clearly trivial.

We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess of £1.7m (2017: £1.6m), which is set at 5% of planning materiality, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds.

We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light of other relevant qualitative considerations in forming our opinion.

Other matter – Accounting developments effective 1 April 2018 – IFRS 9 Financial Instruments

IFRS 9 replaces the current financial instruments standard IAS 39 effective 1 April 2018. It represents a fundamental change to the way financial instruments are classified, measured and assessed for credit impairment. The group established a programme to implement the necessary changes as a result of this standard and disclosed the impact of transition on equity. Our audit work on this accounting change has been performed throughout the year, for the purpose of the transition disclosure included in the 2018 financial statements, and continues through 2019. Our procedures on the impact disclosed included:

• Assessing the key technical interpretations, judgements, assumptions and elections made by management for compliance with IFRS 9;
• Classification and measurement:
  • Testing the intent of holding the instruments and their contractual characteristics in order to assess their classification;
• Credit impairment:
  • Testing the assumptions and judgements used in the impairment models to calculate expected credit losses, including the incorporation of economic forecasts using our credit risk modelling and economic specialists, including any management overlays to these models;
  • Testing the data used to run the models; and
• Considered interim controls and governance processes related to the calculation and approval of the IFRS 9 transitional impact.

Other information

The other information comprises the information included in the annual report and accounts, including the strategic report (set out on pages 5 to 8 of volume one), corporate governance (set out on pages 116 to 165 of volume one) business review (set out on page 6), risk disclosure

(set out on pages 5 to 91 of volume two), additional information for shareholders (set out on page 9), definitions (set out on page 142), contact details (set out on pages 143 to 145), and corporate information (set out one page 146), other than the financial statements and our auditor's report thereon. The directors are responsible for the other information.

Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in this report, we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of the other information, we are required to report that fact.

We have nothing to report in this regard.

In this context, we also have nothing to report in regard to our responsibility to specifically address the following items in the other information and to report as uncorrected material misstatements of the other information where we conclude that those items meet the following conditions:

• Fair, balanced and understandable (set out on page 156 of volume one) – the statement given by the directors that they consider the annual report and financial statements taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the group's performance, business model and strategy, is materially inconsistent with our knowledge obtained in the audit; or
• Audit committee reporting (set out on pages 151 to 157 of volume one) – the section describing the work of the audit committee does not appropriately address matters communicated by us to the audit committee; or

(continued)

• Directors' statement of compliance with the UK Corporate Governance Code (set out on page 189 of

volume one) – the parts of the directors' statement required under the Listing Rules relating to the company's compliance with the UK Corporate Governance Code containing provisions specified for review by the auditor in accordance with Listing Rule 9.8.10R(2) do not properly disclose a departure from a relevant provision of the UK Corporate Governance Code.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, the part of the directors' remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006.

In our opinion, based on the work undertaken in the course of the audit:

• the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
• the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:

• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or

• the parent company financial statements and the part of the directors' remuneration report to be audited are not in agreement with the accounting records and returns; or
• certain disclosures of directors' remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.

Responsibilities of directors

As explained more fully in the directors' responsibilities statement (set out on page 5), the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the group and parent 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 or the parent company or to cease operations, or have no realistic alternative but to do so.

Auditors' responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the 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 (UK) 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 financial statements.

Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud

The objectives of our audit, in respect to fraud, are; to identify and assess the risks of material misstatement of the financial statements due to fraud; to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud, through designing and implementing appropriate responses; and to respond appropriately to fraud or suspected fraud identified during the audit. However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the entity and management.

Our approach was as follows:

• We obtained an understanding of the legal and regulatory frameworks that are applicable to the group and determined that the most significant are:
  • Companies Act 2006
  • The UK Corporate Governance Code
  • Tax Legislation (governed by HM Revenue and Customs
  • Financial Conduct Authority (FCA) rules
  • CRDIV (Basel III) and Prudential Regulatory Authority (PRA) rules
• We obtained a general understanding of how Investec plc complies with these legal and regulatory frameworks by making enquiries of management, internal audit, and those responsible for legal and compliance matters. We also reviewed correspondence between the Company and UK regulatory bodies; reviewed minutes of the Board and Risk Committee; and gained an understanding of the Company's approach to governance, demonstrated by the Board's approval of the Company's governance framework and the Board's review of the group's risk management framework and internal control processes.

(continued)

• For laws and regulations, we considered the extent of compliance with those laws and regulations as part of our procedures on the related financial statement items.
• For both direct and other laws and regulations, our procedures involved: making enquiry of those charged with governance and senior management for their awareness of any noncompliance of laws or regulations, inquiring about the policies that have been established to prevent noncompliance with laws and regulations by officers and employees, inquiring about the company's methods of enforcing and monitoring compliance with such policies, inspecting significant correspondence with the FCA and PRA.
• The group and company operates in the banking industry which is a highly regulated environment. As such the Senior Statutory Auditor considered the experience and expertise of the engagement team to ensure that the team had the appropriate competence and capabilities, which included the use of specialists where appropriate.
• We assessed the susceptibility of the entity's financial statements to material misstatement, including how fraud might occur, by considering the controls that the entity has established to address risks identified by the entity, or that otherwise seek to prevent, deter, or detect fraud. We also considered performance incentives and their potential to influence management to manage earnings.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at https://www.frc.org. uk/auditorsresponsibilities. This description forms part of our auditor's report.

Other matters we are required to address

• We were appointed by the company on 27 November 2000 to audit the financial statements for the year ending 31 March 2001 and subsequent financial periods.
• The period of total uninterrupted engagement including previous renewals

and reappointments is 18 years, covering the years ending 31 March 2001 to 31 March 2018.

• The non-audit services prohibited by the FRC's Ethical Standard were not provided to the group or the parent company and we remain independent of the group and the parent company in conducting the audit.
• The audit opinion is consistent with the additional report to the audit committee.

Use of our report

This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Andy Bates (Senior statutory auditor) for and on behalf of

Ernst & Young LLP Statutory Auditor

London 12 June 2018

Notes:

• 1. The maintenance and integrity of the Investec plc web site is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the web site.
• 1. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

To the shareholders of Investec Limited

Report on the audit of the combined consolidated and separate financial statements

Opinion

We have audited the accompanying combined consolidated annual financial statements of Investec Limited which comprise:

Combined consolidated financial statements	Reference (Volume 3)
Combined consolidated
income statement for the
year then ended	Page 26
Combined consolidated
statement of comprehensive
income for the year then
ended	Page 27
Combined consolidated
balance sheet as at
31 March 2018	Page 28
Combined consolidated
cash flow statement for the
year then ended	Page 29
Combined consolidated
statement of changes in
equity for the year then
ended	Page 30 – 31
Accounting policies	Pages 32-40
Notes 1 to 58 to the annual
financial statements	Pages 41-131
Specified disclosures in the
risk management section
marked as audited	Volume 2
Remuneration report	Volume 1

In our opinion, the combined consolidated annual financial statements present fairly, in all material respects, the combined consolidated financial position of Investec Limited as at 31 March 2018, its combined consolidated financial performance and combined consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa.

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 combined consolidated annual financial statements section of our report. We are independent of the group in accordance with the Independent Regulatory Board for Auditors Code of Professional Conduct for Registered Auditors (IRBA Code), the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants (IESBA Code) and other independence requirements applicable to performing the audit of Investec Limited. We have fulfilled our other ethical responsibilities in accordance with the IRBA Code, IESBA Code, and in accordance with other ethical requirements applicable to performing the audit of Investec Limited. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the combined consolidated annual financial statements of the current period. These matters were addressed in the context of our audit of the combined consolidated annual financial statements as a whole, and in forming our opinion thereon, we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.

We have fulfilled the responsibilities described in the Auditor's responsibilities for the audit of the combined consolidated annual financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the combined consolidated annual financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying combined consolidated annual financial statements.

(continued)

Key audit matter How the matter was addressed in the audit

Monitoring of credit quality and the appropriateness of the allowance for credit losses

The determination of the allowance for credit losses is subject to a high degree of judgement applied by management in determining the loan impairment provisions at the balance sheet date.

Collective impairments on portfolios of similar, homogenous assets are determined using sophisticated modelling techniques. The models used to determine credit impairments are complex, and certain inputs used are not fully observable. Significant judgements are applied to the modelling design and inputs.

The largest loan portfolios represent lending to high net worth and professional individuals, lending collateralised by property, public and non-business services and finance and insurance. The most significant impairments are for lending collateralised by property in relation to the legacy portfolio.

Specific impairment allowances are determined on specific financial assets. Significant estimates, judgements and assumptions have been made by management to estimate recoverability, including evaluating the adequacy and accessibility of collateral and determining the expected timing and amount of future cash flows.

Refer to the 'Impairments of financial assets held at amortised cost' accounting policy on page 35; and Notes 12 and 26 of the combined consolidated annual financial statements (pages 64 and 85).

Our audit included the following audit procedures, amongst others:

We evaluated the appropriateness of accounting policies and assessed the loan impairment methodologies applied, and compared these to the requirements of IAS 39 Financial instruments: Recognition and Measurement.

We evaluated and tested management's processes and key controls for credit origination and monitoring, as well as their processes and controls over the evaluation, calculation and recording of the allowance for credit losses. This included an assessment of their oversight and monitoring of the impairment process and the identification of impairment indicators. In particular we focused our assessment on the key controls over the monitoring of loans with higher risk of default, annual loan credit file reviews and assessment and approval of impairment provisions including the valuation of collateral.

For impairments determined on specific assets our audit procedures included the following:

• We examined a sample of specific assets, selected after performing a risk assessment on the portfolio, to understand the latest developments which influence performance and recoverability.
• In making this assessment for the current year we also considered the impact of continued low commodity prices, including the impact on connected industries and state owned entities in South Africa.
• We assessed the measurement of any impairment provision held where IAS 39 loss indicators were present. This is an inherently judgemental process and particularly important where management are pursuing bespoke workout strategies in the legacy portfolio. Where workout strategies require additional funding to execute we obtained evidence of the approval for such funding through the bank management's risk governance process as well as assessing the track record of management approving the utilisation of the additional funding.
• We performed sensitivity analyses on the expected performance of certain exposures which are affected by the current macroeconomic environment. Our independent judgement was based on available market information including continued/on commodity price and their impact on connected industries and state-owned entities.
• In addition to the work performed on the non-performing portfolios we judgementally selected a sample of performing loans to test whether the assessment by management was appropriate, based on our own knowledge and external evidence to support our conclusions.
• We evaluated management's assumptions about future cash flow projections and the valuation of collateral held, against our previous experience and available market information.
• For loans where the recovery was dependent on collateral and there were no recent external valuations or where market data was not readily available, we used our valuation specialists to test the collateral valuations supporting the recovery of the loans, in particular in relation to lending collateralised by property and assets connected to commodities.

For portfolios where model provisions are calculated, our audit procedures included the following, performed in conjunction with our credit risk specialists:

• We tested the appropriateness of the methodologies and assumptions underlying the provisioning models.
• We tested the information used in the models back to source systems and input data.
• We performed an independent assessment of the model estimate by comparing the impairments against an estimate calculated using our independent challenger models, applied to the entity's historical data.

(continued)

Key audit matter	How the matter was addressed in the audit
Risk of inappropriate revenue recognition – Valuation of level 3 complex/illiquid financial instruments, unlisted investments, investment properties, embedded derivatives and performance fees in the IAM business There are portfolios of financial assets which include complex/ illiquid financial instruments, unlisted investments and embedded derivatives that are required to be fair valued under the requirements of IAS 39. The valuation of these financial instruments requires a high level of judgement in applying appropriate valuation techniques, unobservable valuation inputs and assumptions. Financial instruments have an element of estimation uncertainty inherent in their balance sheet values. The estimation uncertainty is higher for the valuation of level 3 financial instruments, such as unlisted equity investments, which include significant unobservable inputs and for which there is necessarily a large degree of subjectivity surrounding the various inputs. With volatility in the global financial markets and the lack of observable liquid market inputs, determining appropriate valuations continues to be difficult and highly judgemental. This may result in subjective fair value movements which are material. Refer to the 'Financial Instruments' accounting policy (pages 34 to 37); notes 3, 4 and 5 of the combined consolidated annual financial statements (page 54 to 56) as well as note 14 (page 75) for sensitivities to assumptions made in respect of these valuations.	Our audit included the following audit procedures, amongst others: We tested the design, implementation and operating effectiveness of key controls identified in management's process for determining the valuation of financial instruments. We performed a detailed examination of management's valuation methodologies and assessed the appropriateness and consistency of model inputs, key assumptions and underlying contracts. We involved the auditor's valuation specialists in the performance of this examination. Where such inputs and assumptions were not observable in the market we engaged the auditor's valuation specialists to critically assess whether these inputs and assumptions fell within an acceptable range based on relevant knowledge and experience of the market. In relation to the most material assets within the Hong Kong portfolio and the Southern Africa mining assets, additional procedures were performed over and above those noted above, including: – Performing a site visit to key assets. – Engaging our business valuations specialists to build an independent valuation model in addition to assessing the key inputs and assumptions. As part of this they also considered alternative inputs and assumptions; and a sensitivity analysis was performed on the most material inputs. – Verifying via external legal confirmations the enforceability of the collateral held. For certain unlisted investments in South Africa, management applies a portfolio valuation adjustment to account for estimation and macroeconomic risks that are not included in the model valuations. Together with our valuation specialists, we have formed independent estimates for acceptable valuation ranges of these investments and compared these to management's estimate in assessing the appropriateness of the portfolio valuation adjustment.
Provision for uncertain tax positions There are certain legacy structured transactions within Investec plc where the outcome is uncertain and will only be determined upon the resolution of negotiation or, in some cases, litigation with HMRC. Consequently management	Our audit included the following audit procedures, amongst others: – We have examined the latest court rulings, analysis performed by management which set out the basis for the judgments in relation to material tax exposures and the correspondence between the group and its external advisors and between the group and HMRC. Using

cases, litigation with HMRC. Consequently management make judgments about the quantum of potential liabilities which are subject to change in future periods as more information becomes available.

Refer to the accounting policy on 'Taxation and deferred taxation' on page 38 as well as 'Key management assumptions' on page 40; and notes 8 and 29 of the combined consolidated annual financial statements (pages 59 and 60 and page 89 respectively).

the provisions made by management. – We have also evaluated the calculation of the exposure and the appropriateness of the disclosure in relation to the uncertain tax positions

our tax specialists, we have examined the matters in dispute and used our knowledge of the law to assess the available evidence and

Other information

The directors are responsible for the other information. The other information comprises the directors' report, the directors' responsibility statement, and the company secretary's declaration as required by the Companies Act of South Africa, and all other information included in the annual report that is not marked as audited. Other information does not include the combined consolidated annual financial statements, the sections marked as audited in the annual report our auditor's report thereon.

Our opinion on the combined consolidated annual 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 combined consolidated annual financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the combined consolidated annual financial statements, or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

If, based on the work we have performed on the other information obtained prior to the date of this auditor's report, 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.

When we read the Annual Report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance.

(continued)

Responsibilities of the directors for the combined consolidated and separate financial statements

The directors are responsible for the preparation and fair presentation of the combined consolidated annual 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 combined consolidated annual financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the combined consolidated annual financial statements, the directors are responsible for assessing the group'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 or to cease operations, or have no realistic alternative but to do so.

Auditors' responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the combined consolidated annual 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 combined consolidated annual 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 combined consolidated annual 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 internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.
• 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 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 combined consolidated annual 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 combined consolidated annual financial statements, including the disclosures, and whether the combined 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 combined consolidated annual 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, related safeguards.

From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the combined consolidated annual 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, and subsequent guidance, we report that Ernst & Young Inc. has been the auditor of Investec Limited for 43 years.

Ernst & Young Inc. Per Gail Moshoeshoe Director Chartered Accountant South Africa Registered Auditor

12 June 2018

Combined consolidated income statement

Fin
an
cia
l st
ate
me
nts

		Year to 31 March	Year to 31 March
£'000	Notes	2018	2017
Interest income		2 491 009	2 230 765
Interest expense		(1 730 611)	(1 550 870)
Net interest income	2	760 398	679 895
Fee and commission income	3	1 543 447	1 429 588
Fee and commission expense	3	(182 240)	(158 064)
Investment income	4	130 048	136 203
Share of post taxation profit of associates	28	46 823	18 890
Trading income/(loss) arising from
– customer flow		138 226	158 001
– balance sheet management and other trading activities		(4 307)	8 218
Other operating income	5	11 115	13 483
Total operating income before impairment losses on loans and advances		2 443 510	2 286 214
Impairment losses on loans and advances	26	(148 556)	(111 454)
Operating income		2 294 954	2 174 760
Operating costs	6	(1 632 740)	(1 513 231)
Depreciation on operating leased assets	6	(2 421)	(2 169)
Operating profit before goodwill and acquired intangibles		659 793	659 360
Impairment of goodwill	33	–	(4 749)
Amortisation of acquired intangibles	34	(16 255)	(17 197)
Operating profit		643 538	637 414
Additional costs on acquisition of subsidiary	35	(6 039)	–
Profit before taxation		637 499	637 414
Taxation on operating profit before goodwill and acquired intangibles	8	(59 099)	(118 488)
Taxation on acquired intangibles and acquisition/disposal/integration of subsidiaries	8	3 253	4 070
Profit after taxation		581 653	522 996
Profit attributable to other non-controlling interests		(52 288)	(60 239)
Profit attributable to Asset Management non-controlling interests		(23 817)	(20 291)
Earnings attributable to shareholders		505 548	442 466
Earnings per share (pence)
– Basic	9	51.2	50.8
– Diluted	9	49.8	48.8

Combined consolidated statement of comprehensive income

£'000	Notes	Year to 31 March 2018	Year to 31 March 2017
Profit after taxation		581 653	522 996
Other comprehensive income:
Items that may be reclassified to the income statement
Fair value movements on cash flow hedges taken directly to other comprehensive income	8	(5 746)	53 324
Gains on realisation of available-for-sale assets recycled to the income statement	8	(6 676)	(7 781)
Fair value movements on available-for-sale assets taken directly to other comprehensive income	8	20 051	54 863
Foreign currency adjustments on translating foreign operations		(25 300)	540 534
Items that will never be reclassified to the income statement
Re-measurement of net defined benefit pension asset	8	3 938	(43 580)
Total comprehensive income		567 920	1 120 356
Total comprehensive income attributable to ordinary shareholders		451 913	892 201
Total comprehensive income attributable to non-controlling interests		83 027	202 497
Total comprehensive income attributable to perpetual preferred securities		32 980	25 658
Total comprehensive income		567 920	1 120 356

Combined consolidated balance sheet

At £'000	Notes	31 March 2018	31 March 2017
Assets
Cash and balances at central banks	17	4 040 512	3 351 702
Loans and advances to banks	18	2 165 533	3 191 041
Non-sovereign and non-bank cash placements		601 243	536 259
Reverse repurchase agreements and cash collateral on securities borrowed	19	2 207 477	2 358 970
Sovereign debt securities	20	4 910 027	3 804 627
Bank debt securities	21	587 164	639 189
Other debt securities Derivative financial instruments	22 23	903 603 1 352 408	1 115 558 1 185 848
Securities arising from trading activities	24	1 434 391	1 376 668
Investment portfolio	25	885 499	835 899
Loans and advances to customers	26	24 673 009	22 189 975
Own originated loans and advances to customers securitised	27	459 088	517 162
Other loans and advances	26	347 809	355 248
Other securitised assets	27	148 387	148 964
Interests in associated undertakings	28	467 852	392 213
Deferred taxation assets	29	157 321	133 972
Other assets	30	1 876 116	1 900 480
Property and equipment	31	233 340	105 939
Investment properties	32	1 184 097	1 128 930
Goodwill	33	368 803	367 579
Intangible assets	34	125 389	143 261
Non-current assets held for sale		– 49 129 068	27 218 45 806 702
Other financial instruments at fair value through profit or loss in respect of liabilities to customers	36	8 487 776	7 728 130
		57 616 844	53 534 832
Liabilities
Deposits by banks		2 931 267	2 736 066
Derivative financial instruments	23	1 471 563	1 296 206
Other trading liabilities	37	960 166	978 911
Repurchase agreements and cash collateral on securities lent	19	655 840	690 615
Customer accounts (deposits)		30 987 173	29 109 428
Debt securities in issue	38	2 717 187	2 386 180
Liabilities arising on securitisation of own originated loans and advances	27	136 812	90 125
Liabilities arising on securitisation of other assets	27	127 853	128 838
Current taxation liabilities Deferred taxation liabilities	29	185 486 32 158	227 828 40 408
Other liabilities	39	2 012 268	1 910 830
		42 217 773	39 595 435
Liabilities to customers under investment contracts	36	8 484 296	7 725 604
Insurance liabilities, including unit-linked liabilities	36	3 480	2 526
		50 705 549	47 323 565
Subordinated liabilities	41	1 482 987	1 402 638
		52 188 536	48 726 203
Equity
Ordinary share capital	42	240	237
Perpetual preference share capital	43	31	31
Share premium	44	2 416 736	2 341 228
Treasury shares	45	(160 132)	(126 879)
Other reserves		(345 606)	(310 275)
Retained income Shareholders' equity excluding non-controlling interests		2 530 825 4 442 094	2 226 751 4 131 093
Other Additional Tier 1 securities in issue	46	304 150	32 798
Non-controlling interests	47	682 064	644 738
– Perpetual preferred securities issued by subsidiaries		92 312	91 492
– Non controlling interests in partially held subsidiaries		589 752	553 246
Total equity		5 428 308	4 808 629
Total liabilities and equity		57 616 844	53 534 832

Combined consolidated cash flow statement

		Year to 31 March	Year to 31 March
£'000	Notes	2018	2017
Profit before taxation adjusted for non-cash and non-operating items	49	859 745	835 216
Taxation paid		(127 503)	(126 406)
Increase in operating assets	49	(3 352 869)	(445 528)
Increase in operating liabilities	49	3 075 779	498 146
Net cash inflow from operating activities		455 152	761 428
Cash outflow on acquisition of group operations	35	(6 888)	(14 648)
Cash flow on net acquisition of associates		(13 643)	(8 848)
Cash flow on acquisition of property, equipment and intangible assets		(24 604)	(37 748)
Cash flow on disposal of property, equipment and intangible assets		7 336	1 629
Net cash outflow from investing activities		(37 799)	(59 615)
Dividends paid to ordinary shareholders		(227 908)	(216 602)
Dividends paid to other equity holders		(96 668)	(73 853)
Redemption of perpetual preference shares		–	(81 743)
Proceeds on issue of shares, net of related costs		125 240	228 086
Proceeds on issue of Other Additional Tier 1 securities		271 058	–
Cash flow on acquisition of treasury shares, net of related costs		(121 933)	(112 345)
Proceeds on issue of other equity instruments*		32 752	29 542
Proceeds from subordinated debt raised	41	190 940	432 919
Repayment of subordinated debt	41	(128 098)	(168 481)
Net cash inflow from financing activities		45 383	37 523
Effects of exchange rates on cash and cash equivalents		(54 085)	332 092
Net increase in cash and cash equivalents		408 651	1 071 428
Cash and cash equivalents at the beginning of the year		5 721 728	4 650 300
Cash and cash equivalents at the end of the year		6 130 379	5 721 728
Cash and cash equivalents is defined as including:
Cash and balances at central banks		4 040 512	3 351 702
On demand loans and advances to banks		1 488 624	1 833 767
Non-sovereign and non-bank cash placements		601 243	536 259
Cash and cash equivalents at the end of the year		6 130 379	5 721 728

* Includes equity instruments issued by subsidiaries and transactions with non-controlling interests.

Cash and cash equivalents have a maturity profile of less than three months.

Combined consolidated statement of changes in equity

	Ordinary share	Perpetual preference share	Share	Treasury
£'000	capital	capital	premium	shares
At 1 April 2016	228	153	2 239 364	(125 717)
Movement in reserves 1 April 2016 – 31 March 2017
Profit after taxation	–	–	–	–
Fair value movements on cash flow hedges taken directly to other
comprehensive income	–	–	–	–
Gains on available-for-sale assets recycled to the income statement	–	–	–	–
Fair value movements on available-for-sale assets taken directly to other
comprehensive income	–	–	–	–
Foreign currency adjustments on translating foreign operations	–	–	39 159	–
Remeasurement of net defined pension asset	–	–	–	–
Total comprehensive income for the year	–	–	39 159	–
Share-based payments adjustments	–	–	–	–
Dividends paid to ordinary shareholders	–	–	–	–
Dividends declared to perpetual preference shareholders and Other
Additional Tier 1 security holders	–	–	–	–
Dividends paid to perpetual preference shareholders included in non
controlling interests and Other Additional Tier 1 security holders	–	–	–	–
Dividends paid to non-controlling interests	–	–	–	–
Issue of ordinary shares	9	–	228 077	–
Repurchase of perpetual preference shares	–	(122)	(122 048)	–
Issue of equity by subsidiaries	–	–	–	–
Net equity impact of non-controlling interest movements	–	–	–	–
Movement of treasury shares	–	–	(40 812)	(71 533)
Transfer from share premium	–	–	(2 512)	–
Transfer to regulatory general risk reserve and other equity movements	–	–	–	–
Transfer from share-based payment reserve to treasury shares	–	–	–	70 371
At 31 March 2017	237	31	2 341 228	(126 879)
Movement in reserves 1 April 2017 – 31 March 2018
Profit after taxation	–	–	–	–
Fair value movements on cash flow hedges	–	–	–	–
Gains on realisation of available for sale assets recycled through the
income statement	–	–	–	–
Fair value movements on available for sale assets	–	–	–	–
Foreign currency adjustments on translating foreign operations	–	–	1 701	–
Pension fund actuarial losses	–	–	–	–
Total comprehensive income for the year	–	–	1 701	–
Share-based payments adjustments	–	–	–	–
Dividends paid to ordinary shareholders	–	–	–	–
Dividends declared to perpetual preference shareholders and Other
Additional Tier 1 security holders	–	–	–	–
Dividends paid to perpetual preference shareholders included in non
controlling interests and Other Additional Tier 1 security holders	–	–	–	–
Dividends paid to non-controlling interests	–	–	–	–
Issue of ordinary shares	3	–	125 237	–
Issue of Other Additional Tier 1 security instruments	–	–	–	–
Issue of equity by subsidiaries	–	–	–	–
Net equity impact of non-controlling interest movements	–	–	–	–
Movement of treasury shares	–	–	(51 430)	(70 503)
Transfer from capital reserve account	–	–	–	–
Transfer from regulatory general risk reserve	–	–	–	–
Transfer from share-based payment reserve to treasury shares	–	–	–	37 250
At 31 March 2018	240	31	2 416 736	(160 132)

Other reserves

Shareholders' equity excluding noncontrolling interests

Other Additional Tier 1 securities in issue

Combined consolidated statement of changes in equity

(continued)

	Other reserves
Available for-sale reserve	Regulatory general reserve	risk	Cash flow hedge reserve	Foreign currency reserves	Retained income	Share holders' equity excluding non controlling interests	Other Additional Tier 1 securities in issue	Non controlling interests	Total equity
(34 879)	39 078		(108 475)	(690 748)	2 030 310	3 360 287	26 031	472 989	3 859 307
–		–	–	–	442 466	442 466	–	80 530	522 996
–		–	53 324	–	–	53 324	–	–	53 324
(7 781)		–	–	–	–	(7 781)	–	–	(7 781)
54 863		–	–	–	–	54 863	–	–	54 863
–		–	260	372 381	–	411 800	6 767	121 967	540 534
–		–	–	–	(43 580)	(43 580)	–	–	(43 580)
47 082 –		– –	53 584 –	372 381 –	398 886 55 961	911 092 55 961	6 767 –	202 497 –	1 120 356 55 961
–		–	–	–	(216 602)	(216 602)	–	–	(216 602)
–		–	–	–	(25 658)	(25 658)	3 486	6 893	(15 279)
–		–	–	–	–	–	(3 486)	(6 893)	(10 379)
–		–	–	–	–	–	–	(48 195)	(48 195)
– –		– –	– –	– –	– 40 427	228 086 (81 743)	– –	– –	228 086 (81 743)
–		–	–	–	507	507	–	16 535	17 042
–		–	–	–	11 588	11 588	–	912	12 500
–		–	–	–	–	(112 345)	–	–	(112 345)
– –		– 729	– –	– –	2 512 (809)	– (80)	– –	– –	– (80)
–		–	–	–	(70 371)	–	–	–	–
12 203		39 807	(54 891)	(318 367)	2 226 751	4 131 093	32 798	644 738	4 808 629
–		–	–	–	505 548	505 548	–	76 105	581 653
–		–	(5 746)	–	–	(5 746)	–	–	(5 746)
(6 676) 20 051		– –	– –	– –	– –	(6 676) 20 051	– –	– –	(6 676) 20 051
–		56	–	(34 273)	–	(32 516)	294	6 922	(25 300)
–		–	–	–	3 938	3 938	–	–	3 938
13 375 –		56 –	(5 746) –	(34 273) –	509 486 69 218	484 599 69 218	294 –	83 027 –	567 920 69 218
–		–	–	–	(227 908)	(227 908)	–	–	(227 908)
–		–	–	–	(32 980)	(32 980)	9 335	7 909	(15 736)
–		–	–	–	–	–	(9 335)	(7 909)	(17 244)
– –		– –	– –	– –	– –	– 125 240	– –	(63 688) –	(63 688) 125 240
–		–	–	–	–	–	271 058	–	271 058
–		–	–	–	–	–	–	12 695	12 695
–		–	–	–	14 765	14 765	–	5 292	20 057
– –		– –	– –	– (6 222)	– 6 748	(121 933) –	– –	– –	(121 933) –
–		(1 995)	–	–	1 995		–	–	–
						–
– 25 578		– 37 868	– (60 637)	– (358 862)	(37 250) 2 530 825	– 4 442 094	– 304 150	– 682 064	– 5 428 308

Basis of presentation

The group annual financial statements are prepared in accordance with International Financial Reporting Standards (IFRS), as adopted by the European Union (EU) which comply with IFRSs as issued by the International Accounting Standards Board (IASB). At 31 March 2018, IFRS as endorsed by the EU are identical in all material respects to current IFRS applicable to the group, with differences only in the effective dates of certain standards.

The group annual financial statements have been prepared on a historical cost basis, except for investment properties, availablefor-sale investments, derivative financial instruments, financial assets and financial liabilities held at fair value through profit or loss or, subject to hedge accounting and liabilities for pension fund surpluses and deficits that have been measured at fair value.

The accounting policies adopted by the group are consistent with the prior year. Standards which became effective during the year did not have an impact on the group.

Presentation of information

Capital disclosures relating to the nature and extent of risks have been included in sections marked as audited in the risk management report on pages 84 to 91 in volume two

Certain disclosures required under IAS 24 Related Party Disclosures have been included in the section marked as audited in the remuneration report on pages 204 to 213 in volume one.

Basis of consolidation

Investec consists of two separate legal entities, being Investec plc and Investec Limited that operate under a dual listed company (DLC) structure (group). The effect of the DLC structure is that Investec plc and its subsidiaries and Investec Limited and its subsidiaries operate together as a single economic entity, with neither assuming a dominant role and accordingly are reported as a single reporting entity under IFRS.

All subsidiaries or structured entities are consolidated when the group controls an investee. The group controls an investee if it is exposed to, or has rights to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. The financial results of subsidiaries are

included in the consolidated annual financial statements of the group from the date on which control is obtained until the date the group can no longer demonstrate control.

The group performs a reassessment of control whenever there is a change in the substance of the relationship between Investec and an investee. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. The group also holds investments, in private equity investments, which give rise to significant, but not majority, voting rights. Assessing these voting rights and whether Investec controls these entities requires judgement that affects the date at which subsidiaries are consolidated or deconsolidated.

Entities, other than subsidiary undertakings, in which the group exercises significant influence over operating and financial policies, are treated as interests in associated undertakings. Interests in associated undertakings are accounted for using the equity method from the date that significant influence commences until the date that significant influence ceases. In circumstances where interests in associated undertakings or joint venture holdings arise in which the group has no strategic intention, these investments are classified as 'venture capital' holdings and are designated as held at fair value through profit or loss.

For equity accounted associates, the combined consolidated annual financial statements include the attributable share of the results and reserves of associated undertakings. The group's interests in associated undertakings are included in the consolidated balance sheet at cost plus the post-acquisition changes in the group's share of the net assets of the associate.

The consolidated balance sheet reflects the associated undertakings net of accumulated impairment losses.

All intergroup balances, transactions and unrealised gains or losses within the group, are eliminated in full regarding subsidiaries and to the extent of the interest in an associate.

Segmental reporting

An operating segment is a component of the group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the group's other components, whose operating results are reviewed regularly by chief operating decision-makers which include members of the board and for which discrete financial information is available.

The group's segmental reporting is presented in the form of a business analysis. The business analysis is presented in terms of the group's three principal business divisions namely, Asset Management, Wealth & Investment and Specialist Banking. Group costs that are disclosed separately largely relate to group brand and marketing costs and a portion of executive and support functions which are associated with group-level activities. These costs are not incurred by the operating divisions and are necessary to support the operational functioning of the group.

A geographical analysis is also presented in terms of the main geographies in which the group operates representing the group's exposure to various economic environments.

For further detail on the group's segmental reporting basis refer to pages 87 to 114 in volume one of the divisional review section of the integrated annual report.

Business combinations and goodwill

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at the acquisition date fair value and the amount of any prior non-controlling interest in the acquiree. For each business combination, the group measures the noncontrolling interest in the acquiree either at fair value or at the proportionate share of the acquiree's identifiable net assets. Acquisition costs incurred are expensed immediately in the income statement.

When the group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and the designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at each acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.

If the business combination is achieved in stages, the acquisition date fair value of the group's previously held equity interest in the acquiree is remeasured to fair value at each acquisition date through the income statement.

Any contingent consideration to be transferred by the group will be recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration, which is deemed to be an asset or liability, will be recognised in accordance with IAS 39 in the income statement. If the contingent

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consideration is classified as equity, it will not be remeasured until it is finally settled within equity.

Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration and amount recognised for non-controlling interest is less than the fair values of the identifiable net assets acquired, the discount on acquisition is recognised directly in the income statement as a gain in the year of acquisition.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. The group tests goodwill acquired in a business combination for impairment annually, irrespective of whether an indication of impairment exists and in accordance with IAS 36.

For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the group's cashgenerating units that are expected to benefit from the combination.

Where goodwill forms part of a cashgenerating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation.

Goodwill disposed of in these circumstances is measured based on the relative values of the operation disposed of and the portion of the cash-generating units retained.

Share-based payments to employees

The group engages in equity-settled sharebased payments in respect of services received from employees.

The fair value of the services received in respect of equity-settled share-based payments is determined by reference to the fair value of the shares or share options on the date of grant to the employee. The cost of the share-based payment, together with a corresponding increase in equity, is recognised in the income statement over the period the service conditions of the grant are met, with the amount changing according to the number of awards expected to vest. The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which

the vesting period has expired and the group's best estimate of the number of equity instruments that will ultimately vest.

Fair value measurements are based on option pricing models, taking into account the risk-free interest rate, volatility of the underlying equity instrument, expected dividends and current share prices.

Where the terms of an equity-settled award are modified, the minimum expense recognised in staff costs is the expense as if the terms had not been modified. An additional expense is recognised for any modification which increases the total fair value of the share-based payment arrangement, or is otherwise beneficial to the employee as measured at the date of modification.

Foreign currency transactions and foreign operations

The presentation currency of the group is Pounds Sterling, being the functional currency of Investec plc. The functional currency of Investec Limited is South African Rand.

Foreign operations are subsidiaries, interests in associated undertakings or branches of the group, the activities of which are based in a functional currency other than that of the reporting entity. The functional currency of group entities is determined based on the primary economic environment in which the entity operates.

Foreign currency transactions are translated into the functional currency of the entity in which the transactions arise, based on rates of exchange ruling at the date of the transactions.

At each balance sheet date foreign currency items are translated as follows:

• Monetary items (other than monetary items that form part of the net investment in a foreign operation) are translated using closing rates, with gains or losses recognised in the income statement
• Exchange differences arising on monetary items that form part of the net investment in a foreign operation are determined using closing rates and recognised as a separate component of equity (foreign currency translation reserve) upon consolidation and is reclassified to the income statement upon disposal of the net investment
• Non-monetary items that are measured at historical costs are translated using the exchange rates ruling at the date of the transaction. Non-monetary

items that are measured at fair value are translated using the exchange rate at the date of the valuation, with movements due to changes in foreign currency being presented in terms of the accounting policy for changes in the fair value movement of the respective item.

On consolidation, the results and financial position of foreign operations are translated into the presentation currency of the group, as follows:

• Assets and liabilities for each balance sheet presented are translated at the closing rate at the date of the balance sheet
• Income and expense items are translated at exchange rates ruling at the date of the transaction
• All resulting exchange differences are recognised in other comprehensive income (foreign currency translation reserve), which is recognised in the income statement on disposal of the foreign operation
• Cash flow items are translated at the exchange rates ruling at the date of the transactions.

Revenue recognition

Revenue consists of interest income, fee and commission income, investment income, trading income arising from customer flow, trading income arising from balance sheet management and other trading activities and other operating income.

Revenue is recognised when it can be reliably measured and it is probable that the economic benefits will flow to the entity. Revenue related to provision of services is recognised when the related services are performed. Revenue is measured at the fair value of the consideration received or receivable.

Interest income is recognised in the income statement using the effective interest rate method. Fees charged on lending transactions are included in the effective yield calculation to the extent that they form an integral part of the effective interest rate yield, but exclude those fees earned for a separately identifiable significant act, which are recognised upon completion of the act. Fees and commissions charged in lieu of interest are recognised as income as part of the effective interest rate on the underlying loan.

The effective interest rate method is based on the estimated life of the underlying instrument and, where this estimate is not readily available, the contractual life.

Fee and commission income includes fees earned from providing advisory services as well as portfolio management and includes rental income from investment properties. Investment advisory and management fees are accrued over the period to which the income relates. Performance fees are recognised when they become receivable. No revenue is recognised if there are significant uncertainties regarding recovery of the consideration due.

Investment income includes income, other than margin from securities held for the purpose of generating interest yield, dividends and capital appreciation.

Customer flow trading income includes income from trading activities arising from making and facilitating client activities.

Trading income arising from balance sheet management and other trading activities consists of proprietary trading income and other gains or losses arising from balance sheet management.

Trading profit includes the unrealised profit on trading portfolios, which are marked to market daily. Equity investments received in lieu of corporate finance fees are included in investment portfolio and valued accordingly.

Dividend income is recognised when the group's right to receive payment is established.

Included in other operating income is incidental rental income, gains on realisation of properties (other than investment properties which is included in investment income), operating lease income, income from interests in associated undertakings, income from assurance activities and revenue from consolidated private equity investments. Operating costs associated with these investments are included in operating costs in the income statement.

Fair value measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the group has access at that date. The fair value of a liability reflects its nonperformance risk.

When available, the group measures the fair value of an instrument using the quoted price in an active market for that instrument.

A market is regarded as active if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.

If there is no quoted price in an active market, then the group uses valuation techniques that maximise the use of relevant observable inputs and minimise the use of unobservable inputs. The chosen valuation technique incorporates all of the factors that market participants would take into account in pricing a transaction.

If an asset or a liability measured at fair value has a bid price and an ask price, then the group measures assets and long positions at a bid price and liabilities and short positions at an ask price.

The group classifies disclosed fair values according to a hierarchy that reflects the significance of observable market inputs.

A transfer is made between the hierarchy levels when the inputs have changed or there has been a change in the valuation method. Transfers are deemed to occur at the end of each semi-annual reporting period.

Financial instruments

Financial instruments are initially recognised at their fair value. For financial assets or financial liabilities not held at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial assets or financial liabilities are included in the initial measurement. All other transaction costs are recorded in the income statement immediately.

Regular way purchase and sales transactions in respect of financial assets that require delivery of a financial instrument within the timeframe established by market convention are recorded at trade date.

Financial assets and liabilities held at fair value through profit or loss

Financial instruments held at fair value through profit or loss include all instruments classified as held-for-trading and those instruments designated as held at fair value through profit or loss.

Financial instruments classified as heldfor-trading or designated as held at fair value through profit or loss are initially recorded at fair value on the balance sheet with changes in fair value subsequently recognised in the income statement. Financial instruments are classified as trading when they are held with the intention of short-term disposal, held with the intention of generating short-term profit, or are derivatives which are not designated as part of effective hedges. Financial

instruments designated as held at fair value through profit or loss are designated as such on initial recognition of the instrument and remain in this classification until derecognition.

Financial assets and liabilities are designated as held at fair value through profit or loss only if:

• it eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise from measuring assets or liabilities or recognising the gains and losses on them on different bases; or
• a group of financial assets, financial liabilities or both is managed and its performance is evaluated on a fair value basis in accordance with a documented risk management or investment strategy and information about the group is provided internally on that basis to the group's key management personnel; or
• a contract contains one or more embedded derivatives (which significantly modifies the cash flows that would be required by the contract and is not clearly prohibited from separation from the host contract) and the group has designated the entire hybrid contract as a financial instrument at fair value through profit or loss.

Held-to-maturity financial assets

Held-to-maturity financial assets are nonderivative financial instruments with fixed or determinable payments and maturity dates which the group has the intention and ability to hold to maturity. Subsequent to initial recognition, held-to-maturity assets are measured at amortised cost using the effective interest rate method, less impairment losses.

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees that are an integral part of the effective interest rate method. The amortisation is included in interest income in the income statement. The losses arising from impairment of such investments are recognised in the income statement.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and exclude the following:

• Those that the group intends to trade in, which are classified as held-for-trading and those that the group designates as at fair value through profit or loss
• Those that the group designates as available-for-sale

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• Those for which the group may not recover substantially all of its initial investment, other than because of credit deterioration, which is accounted for as available-for-sale instruments.

Subsequent to initial recognition, loans and receivables are measured at amortised cost, using the effective interest method, less impairment losses. The effective interest rate represents the rate that exactly discounts future projected cash flows over the expected life of the financial instrument, to the net carrying amount of the financial instrument. Included in the calculation of the effective interest rate, is any discount or premium on acquisition and fees that are an integral part of the effective interest rate.

Losses arising from impairment of such investments are recognised in the income statement line, 'impairment losses on loans and advances'.

Interest on impaired financial assets is recognised using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss.

Securitisation/credit investment and trading activities exposures

The group makes use of securitisation vehicles as a source of finance, as a means of risk transfer and to leverage returns through the retention of equity tranches in low default rate portfolios. The group predominantly focuses on the securitisation of residential and commercial mortgages and lease receivables. The group also trades in structured credit investments.

The structured entities are consolidated under IFRS 10 Consolidated Financial Statements when the group has exposure to or rights to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.

Loans and advances that are originated are transferred to structured entities, and the structured entities issue debt securities to external investors to fund the purchase of the securitised assets. When the group consolidates the structured entity, the group recognises the assets and liabilities on a gross basis. When the group does not consolidate the structured entity, the securitised assets are derecognised and only any position still held by the group in the structured entity is reflected.

Available-for-sale financial assets

Available-for-sale financial assets are those which are designated as such or do not qualify to be classified as designated at fair value through profit or loss, heldto-maturity, or loans and receivables. They include strategically held equity instruments that are not interests in associated undertakings, joint ventures or subsidiaries of the group. Further, certain debt instruments that are held at fair value due to being quoted on an active market, which are neither actively traded nor heldto-maturity instruments, are classified as available-for-sale financial assets.

Financial assets classified as availablefor-sale are measured at fair value with unrealised gains or losses recognised directly in other comprehensive income in the available-for-sale reserve. When the asset is disposed of, the cumulative gain or loss previously recognised in other comprehensive income is reclassified to the income statement. Interest earned while holding available-for-sale financial assets is reported in the income statement as interest income using the effective interest rate. Dividends earned while holding available-for-sale financial assets are recognised in the income statement when the right to payment has been established.

If an available-for-sale instrument is determined to be impaired, the respective cumulative unrealised losses previously recognised in other comprehensive income are included in the income statement in the period in which the impairment is identified. Impairments on available-for-sale equity instruments are not reversed once recognised in the income statement.

If, in a subsequent period, the fair value of a debt instrument classified as availablefor-sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in the income statement, the impairment loss is reversed, limited to the impairment value previously recognised in the income statement.

Financial liabilities

Financial liabilities are classified as nontrading, held-for-trading or designated as held at fair value through profit or loss.

Non-trading liabilities are recorded at amortised cost applying the effective interest rate method.

Held-for-trading liabilities or liabilities designated as held at fair value through profit or loss are measured at fair value.

All changes in fair value of financial liabilities are recognised in the income statement.

Day-one profit or loss

When the transaction price differs from the fair value of other observable current market transactions in the same instrument or based on the valuation technique whose variables include only data from observable markets, the difference between the transaction price and fair value is recognised immediately in the income statement. In cases where fair value is determined using data which is not observable, the difference between the transaction price and model value is only recognised in the income statement when the inputs become observable, when the instrument is derecognised or over the life of the transaction.

Impairments of financial assets held at amortised cost

Financial assets carried at amortised cost are impaired if there is objective evidence that the group would not receive cash flows according to the original contractual terms. Financial assets are assessed for impairment at each balance sheet date and when an indicator of impairment is identified. The test for impairment is based either on specific financial assets or collectively on a portfolio of similar, homogeneous assets. Over and above individual collective impairments raised at specific portfolio levels, the group recognises a collective impairment allowance at a central level (within the Specialist Banking business segment) that takes into account macro-economic factors, mainly driven by data related to the prevailing credit markets and which indicate incurred but not specifically identified losses across the loan portfolios (that is, exposures in all business segments). Assets specifically identified as impaired are excluded from the collective assessment.

Impairments are credited to an allowance account which is carried against the carrying value of financial assets. Interest continues to be accrued on the reduced carrying amount based on the original effective interest rate of the asset. Loans together with the associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realised or transferred to the group.

An allowance for impairment is only reversed when there is objective evidence that the credit quality has improved to the extent that there is reasonable assurance of timely collection of principal and interest in terms of the original contractual agreement.

The impairment is calculated as the difference between the carrying value of the asset and the expected cash flows (including net expected proceeds on realisation of collateral) discounted at the original effective rate. Impairments of financial assets held at amortised cost are recognised in the income statement.

To cater for any shortfall between regulatory provision requirements (in the respective jurisdictions) and impairments based on the principles above, a transfer is made from distributable to non-distributable reserves, being the regulatory general risk reserve. The non-distributable regulatory risk reserve ensures that minimum regulatory provisioning requirements are maintained.

Derecognition of financial assets and liabilities

A financial asset, or a portion thereof, is derecognised when the group's rights to cash flows have expired or when the group has transferred its rights to cash flows relating to the financial assets and either: (a) the group has transferred substantially all

the risks and rewards associated with the financial assets or (b) the group has neither transferred nor retained substantially all the risks and rewards associated with the financial assets but has transferred control of the assets.

A financial liability is derecognised when it is extinguished, that is when the obligation is discharged, cancelled or expired. When an existing financial liability is replaced or modified with substantially different terms, such a replacement or modification is treated as a derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the income statement.

Reclassification of financial instruments

The group may reclassify, in certain rare circumstances, non-derivative financial assets out of the held-for-trading category and into the available-for-sale, loans and receivables, or held-to-maturity categories. It may also reclassify, in certain circumstances, financial instruments out of the available-for-sale category and into the loans and receivables category. Reclassifications are recorded at fair value at the date of reclassification, which becomes the new amortised cost.

Derivative instruments

All derivative instruments of the group are recorded on the balance sheet at fair value. Positive and negative fair values are reported as assets and liabilities, respectively.

Derivative positions are entered into either for trading purposes or as part of the group's asset and liability management activities to manage exposures to interest rate and foreign currency risks. Both realised and unrealised profit or losses arising on derivatives are recognised in the income statement as part of trading income (other than circumstances in which cash flow hedging is applied as detailed in the hedge accounting section below).

Derivative instruments entered into as economic hedges which do not qualify for hedge accounting and derivatives that are entered into for trading purposes are treated in the same way as instruments that are held-for-trading.

Credit derivatives are entered into for trading purposes. Credit derivatives are initially recognised at their fair values, being the transaction price of the derivative. Subsequently the derivatives are carried at fair value, with movements in fair value through the income statement, based on the current market price or remeasured price. The counterparty risk from derivative transactions is taken into account when reporting the fair value of derivative positions. The adjustment to the fair value is known as the credit value adjustment (CVA).

Hedge accounting

The group applies either fair value or cash flow hedge or hedge of net investments in foreign operations accounting when the transactions meet the specified hedge accounting criteria. To qualify for hedge accounting treatment, the group ensures that all of the following conditions are met:

• At inception of the hedge, the group formally documents the relationship between the hedging instrument(s) and hedged item(s) including the risk management objectives and the strategy in undertaking the hedge transaction. Also at the inception of the hedge relationship, a formal assessment is undertaken to ensure the hedging instrument is expected to be highly effective in offsetting the designated risk in the hedged item. A hedge is expected to be highly effective if the changes in fair value or cash flows attributable to the hedged risk during the period for which the hedge is designated are expected to offset in a range of 80% to 125%
• For cash flow hedges, a forecasted transaction that is the subject of the hedge must be highly probable and must present an exposure to variations in cash flows that could ultimately affect the income statement
• The effectiveness of the hedge can be reliably measured, i.e. the fair value or cash flows of the hedged item that are attributable to the hedged risk and the fair value of the hedging instrument can be reliably measured
• The hedge effectiveness is assessed on an ongoing basis and determined actually to have been highly effective throughout the financial reporting periods for which the hedge was designated.

For qualifying fair value hedges, the change in fair value of the hedging instrument is recognised in the income statement. Changes in fair value of the hedged item that is attributable to the hedged risk are also recognised in the income statement.

For qualifying cash flow hedges in respect of non-financial assets and liabilities, the change in fair value of the hedging instrument relating to the effective portion is initially recognised directly in other comprehensive income in the cash flow hedge reserve and is included in the initial cost of any asset/liability recognised or in all other cases released to the income statement when the hedged firm commitment or forecasted transaction affects net profit. If the forecast transaction or firm commitment is no longer expected to occur, the balance included in other comprehensive income is reclassified to the income statement immediately and recognised in trading income from balance sheet management and other trading activities.

For qualifying cash flow hedges in respect of financial assets and liabilities, the change in fair value of the hedging instrument, which represents an effective hedge, is initially recognised in other comprehensive income and is reclassified to the income statement in the same period during which the relevant financial asset or liability affects the income statement. Any ineffective portion of the hedge is immediately recognised in the income statement.

Qualifying hedges of a net investment in a foreign operation including a hedge of a monetary item that is accounted for as part of the net investment are accounted for in a way similar to cash flow hedges. Changes in the fair value of the hedging instrument relating to the effective portion of the hedge are recognised in other comprehensive income while any gains or losses relating to the ineffective portion are recognised in the income statement. On disposal of the foreign operation, the cumulative value of any such gain or loss recorded in other comprehensive income is reclassified to the income statement.

Hedge accounting is discontinued when it is determined that the instrument ceases to be highly effective as a hedge; when the derivative expires, or is sold, terminated or exercised; when the hedged item matures or is sold or repaid; when a forecasted transaction is no longer deemed highly probable or when the designation as a hedge is revoked.

Embedded derivatives

To the extent that a derivative may be embedded in a hybrid contract and the hybrid contract is not carried at fair value with changes in fair value recorded in the income statement, the embedded derivative is separated from the host contract and accounted for as a standalone derivative if and only if:

• the economic characteristics and risks of the embedded derivative are not closely related to the economic characteristics and risks of the host contract; and
• a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative.

Offsetting of financial assets and liabilities

Financial assets and liabilities are offset when there is both an intention to settle on a net basis (or simultaneously) and a currently enforceable legal right to offset exists.

Issued debt and equity financial instruments

Financial instruments issued by the group are classified as liabilities if they contain a contractual obligation to deliver cash or another financial asset.

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Financial instruments issued by the group are classified as equity where they confer on the holder a residual interest in the group, and the group has no obligation to deliver either cash or another financial asset to the holder. The components of compound issued financial instruments are accounted for separately with the liability component separated first and any residual amount being allocated to the equity component.

Equity instruments issued by subsidiaries of Investec plc or Investec Limited are recorded as non-controlling interests on the balance sheet.

Equity instruments are initially measured net of directly attributable issue costs.

Treasury shares represent issued equity repurchased by the group which have not been cancelled. Treasury shares are deducted from shareholders' equity and represent the purchase consideration, including directly attributable costs. Where treasury shares are subsequently sold or reissued, net proceeds received are included in shareholders' equity.

Dividends on ordinary shares are recognised as a deduction from equity at the earlier of payment date or the date that it is approved by Investec plc (in relation to dividends declared by Investec plc) and Investec Limited (in relation to dividends declared by Investec Limited) shareholders.

Sale and repurchase agreements (including securities borrowing and lending)

Securities sold subject to a commitment to repurchase, at a fixed price or a selling price plus a lender's return, remain on balance sheet. Proceeds received are recorded as a liability on the balance sheet under 'repurchase agreements and cash collateral on securities lent'. Securities that are purchased under a commitment to resell the securities at a future date are not recognised on the balance sheet. The consideration paid is recognised as an asset under 'reverse repurchase agreements and cash collateral on securities borrowed'.

The difference between the sale and repurchase prices is treated as interest expense and is accrued over the life of the agreement using the effective interest method.

Securities borrowing transactions that are not cash collateralised are not included on the balance sheet. Securities lending and borrowing transactions which are cash collateralised are accounted for in the same manner as securities sold or purchased subject to repurchase commitments.

The cash collateral from agency-based scrip lending transactions are disclosed on a net basis, in accordance with master netting agreements and the intention to settle net.

Financial guarantees

Financial guarantee contracts issued by the group are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due, in accordance with the terms of a debt instrument. Financial guarantees are initially recognised at fair value, adjusted for the transaction costs that are directly attributable to the issuance of the guarantee.

Subsequent to initial recognition, the liability under each guarantee is measured at the higher of the amount recognised less cumulative amortisation and the best estimate of expenditure required to settle any financial obligation arising as a result of the guarantee. Subsequent to initial measurement, all changes in the balance sheet carrying value are recognised in the income statement.

Instalment credit, leases and rental agreements

The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset/assets, even if that right is not explicitly specified in an arrangement.

A finance lease is a lease that transfers substantially all of the risks and rewards incidental to ownership of an asset. An operating lease is a lease other than a finance lease.

Where classified as a finance lease, amounts outstanding on these contracts, net of unearned finance charges, are included in loans and advances where the group is the lessor and included in liabilities where the group is the lessee. Finance charges on finance leases and instalment credit transactions are credited or debited to the income statement in proportion to the capital balances outstanding at the rate implicit in the agreement.

Where classified as operating leases, rentals payable/receivable are charged/ credited in the income statement on a straight-line basis over the lease term. Contingent rentals are accrued to the income statement when incurred.

Property and equipment

Property and equipment are recorded at cost less accumulated depreciation and impairments.

Cost is the cash equivalent paid or the fair value of the consideration given to acquire an asset and includes other expenditures that are directly attributable to the acquisition of the asset. Depreciation is provided on the depreciable amount of each component on a straight-line basis over the expected useful life of the asset.

The depreciable amount related to each asset is determined as the difference between the cost and the residual value of the asset. The residual value is the estimated amount, net of disposal costs that the group would currently obtain from the disposal of an asset in similar age and condition as expected at the end of its useful life.

The current and comparative annual depreciation rates for each class of property and equipment is as follows:

• Equipment 10% 33%
• Furniture and vehicles 10% 25%
• Freehold buildings 2%
• Leasehold improvements*
• * Leasehold improvements depreciation rates are determined by reference to the appropriate useful life of its separate components, limited to the period of the lease. Leasehold property depreciation rates are determined by reference to the period of the lease.

No depreciation is provided on freehold land. However, similar to other propertyrelated assets, it is subject to impairment testing when an indication of impairment exists. Routine maintenance and service costs for group assets are expensed as incurred. Subsequent expenditure is only capitalised if it is probable that future economic benefits associated with the item will flow to the group.

Investment properties

Properties held for capital appreciation or rental yield are classified as investment properties. Investment properties are initially measured at cost plus transaction costs and subsequently carried at fair value, with fair value gains or losses recognised in the income statement in investment income.

Fair value of investment property is calculated by taking into account the expected rental stream associated with the property, and is supported by market evidence.

Trading properties

Trading properties are carried at the lower of cost and net realisable value.

Intangible assets

Intangible assets are recorded at cost less accumulated amortisation and impairments. Intangible assets with finite lives, are amortised over the useful economic life (currently three to 20 years) on a straightline basis. The depreciable amount related to each intangible asset is determined as the difference between the cost and the residual value of the asset.

Impairment of nonfinancial assets

At each balance sheet date, the group reviews the carrying value of non-financial assets, other than investment property, for indication of impairment. The recoverable amount, being the higher of fair value less cost of disposal and value in use, is determined for any assets for which an indication of impairment is identified. If the recoverable amount of an asset is less than its carrying value, the carrying value of the asset is reduced to its recoverable amount.

Impairment losses are recognised as an expense in the income statement in the period in which they are identified. Reversals of impairment losses are recognised in income in the period in which the reversals are identified, to the extent that the carrying value of the asset does not exceed the amount that would have been calculated without impairment.

Non-current assets held for sale

Non-current assets held for sale are carried at the lower of their carrying amount and fair value less costs to sell.

Trust and fiduciary activities

The group acts as a trustee or in other fiduciary capacities that result in the holding, placing or managing of assets for the account of and at the risk of clients. As these are not assets of the group, they are not recognised on the balance sheet but are included at market value as part of assets under administration.

Taxation and deferred taxation

Current taxation payable is provided for based on the amount expected to be payable on taxable profit at rates that are enacted or substantively enacted and applicable to the relevant period.

Deferred taxation is provided on temporary differences between the carrying amount of an asset or liability in the balance sheet and its tax base, except where such temporary differences arise from:

• the initial recognition of goodwill;
• the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction has no effect on the income statement or taxable profit; and
• in respect of temporary differences associated with the investments in subsidiaries and interests in associated undertakings, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred taxation assets or liabilities are measured using the taxation rates that have been enacted or substantively enacted at the balance sheet date.

Deferred taxation assets are recognised to the extent that it is probable that future taxable profit will be available against which the deferred taxation asset can be utilised. Items recognised directly in other comprehensive income are net of related current and deferred taxation.

Insurance contracts

Insurance contracts are those contracts in which the group assumes significant insurance risk. The deposit components of insurance contracts are unbundled and accounted for separately.

Insurance premiums are recognised in the period in which the group is entitled to the premium. Insurance claims are recognised in the income statement in the period in which a contractual obligation arises for the group to make payment under an insurance contract.

Reinsurance assets and liabilities and associated premiums/claims are not offset in the income statement or balance sheet. Insurance liabilities are measured at their actuarial values, and are tested for adequacy on an annual basis. Any deficiency identified is recognised in the income statement.

Insurance income is included in other operating income.

Employee benefits

The group operates various defined contribution schemes and two closed defined benefit schemes.

In respect of the defined contribution scheme, all employer contributions are charged to the income statement as incurred, in accordance with the rules of the scheme, and included under staff costs.

The assets of the defined benefit schemes are measured at their market value at the balance sheet date and the liabilities of the schemes are measured using the projected unit credit method. The discount rate used to measure the schemes' liabilities is the current rate of return on an AA corporate bond at the balance sheet date of equivalent term and currency to the liabilities. The extent to which the schemes' assets exceed or fall short of the schemes' liabilities is shown as a surplus (to the extent that it is considered recoverable) or deficit in the balance sheet.

Actuarial gains and losses related to the defined benefit asset or liability are recognised immediately directly in other comprehensive income. The group has no liabilities for other post-retirement benefits.

Short-term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected to be paid if the group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

Borrowing costs

Borrowing costs that are directly attributable to property developments which take a substantial period of time to develop are capitalised.

Provisions, contingent liabilities and contingent assets

Provisions are recognised when the group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The expense relating to a provision is presented in the income statement net of any reimbursement. Contingent assets and contingent liabilities are not recognised on the balance sheet.

Standards and interpretations issued but not yet effective

The following significant standards and interpretations, which have been issued but are not yet effective, are applicable to the group. These standards and interpretations have not been applied in these annual financial statements. The group intends to comply with these standards from the effective dates.

(continued)

IFRS 9 Financial Instruments

IFRS 9 Financial Instruments was issued in July 2014 and will replace certain key elements of IAS 39. The mandatory effective date for IFRS 9 is for annual periods beginning on or after 1 January 2018 with early adoption permitted.

IFRS 9 was endorsed by the European Union in November 2016. The two key elements that would impact the group's accounting policies include:

• classification and measurement of financial assets and financial liabilities: the standard requires that all financial assets be classified as either held at fair value through profit or loss, fair value through other comprehensive income or amortised cost. The amortised cost classification is only permitted where it is held within a business model where the underlying cash flows are held in order to collect contractual cash flows and that the cash flows arise solely from payment of principal and interest. Financial assets which are held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets (and whose contractual cash flows represent solely payments of principal and interest will be measured at fair value through other comprehensive income. The standard further provides that gains or losses on assets held at fair value are recognised in the income statement unless the entity has elected to recognise gains or losses on nontrading equity investments directly through other comprehensive income. With reference to financial liabilities held at fair value, the standard requires that changes to fair value attributable to own credit risk are recognised directly in other comprehensive income without recycling through the income statement;
• impairment methodology: the key change is related to a shift from an incurred loss to an expected loss impairment methodology. At initial recognition an allowance (or provision in the case of commitments and guarantees) is required for expected credit losses (ECL) resulting from default events that are possible within the next 12 months (12-month ECL). In the event of a significant increase in credit risk since initial recognition, IFRS 9 requires the recognition of lifetime expected credit losses. Impairment measurement will involve increased complexity and significant judgements on areas such as the estimation of probabilities of default, loss given default, unbiased future economic scenarios, estimation of

expected lives, estimation of exposures at default and assessing whether a significant increase in credit risk has occurred.

IFRS 9 also includes guidance on hedge accounting. The general hedge accounting requirements aim to simplify hedge accounting, creating a stronger link with risk management strategy and permitting hedge accounting to be applied to a greater variety of hedging instruments and risks. The standard does not address macro hedge accounting strategies, which are being considered in a separate project. To remove the risk of any conflict between existing macro hedge accounting practice and the new general hedge accounting requirements, IFRS 9 includes an accounting policy choice to remain with IAS 39 hedge accounting. The group intends to continue applying IAS 39's hedge accounting, although it will implement the amended IFRS 7 hedge accounting disclosure requirements, until the macro hedge accounting project has been completed.

On 12 October 2017, the IASB published an amendment to IFRS 9, relating to prepayment features with negative compensation; this amendment is effective from 1 January 2019 with early application permitted, however has yet to be endorsed by the EU. This amendment allows financial assets with such features to be measured at amortised cost or fair value through other comprehensive income provided the SPPI (solely payments of principal and interest) criteria in IFRS 9 are otherwise met. In addition the amendment to IFRS 9 clarifies that a financial asset passes the SPPI criterion regardless of the event or circumstance that cause the early termination of the contract, and irrespective of which party pays or receives reasonable compensation for the early termination of the contract. The group's loans with such prepayment features are present in some fixed rate loans, and are considered to meet the criteria for amortised cost under IFRS 9. This is because the prepayment features within these loans are consistent with the solely payments of principal and interest criteria if the prepayment feature substantially represents unpaid amounts of principal and interest and reasonable compensation for early termination of the contract.

Transitional impact

IFRS 9 is effective and will be implemented by the group from 1 April 2018. The group will provide its detailed transitional disclosures when it publishes its annual report for the year ended 31 March 2018 on 29 June 2018. The adoption of IFRS 9 has resulted in a decrease in shareholders' equity of £266 million at 1 April 2018.

Investec plc

Balance sheet impairment allowance and provisions

Total balance sheet impairment allowance and provisions increased by £106 million from £158 million as at 31 March 2018 to £264 million as at 1 April 2018. This is driven by an increase in legacy impairments of £58 million and an increase in ongoing impairments of £69 million, partially offset by a reduction of £21 million as a result of changes in classification and measurement of certain of the group's financial assets to fair value. The increase in impairment allowance and provisions reduced Investec plc's common equity tier 1 (CET 1) ratio by approximately 66bps on full adoption of IFRS 9, or approximately 3bps on a day one impact transitional basis.

Changes in classification and measurement of certain financial assets

Changes in classification and measurement to fair value of certain of the group's other financial assets resulted in a decrease to equity of £11 million (post taxation), with a 7bps impact on the CET 1 ratio.

Reclassification of subordinated liabilities to fair value

Following the adoption of IFRS 9 Investec plc has elected to designate its subordinated liabilities to fair value. From this designation, the interest rate portion of the subordinated debt reduced equity by £48 million (post taxation) with an approximate 37bps impact on the day one transitional CET 1 ratio which will come back into retained earnings over the duration of the remaining term of the instrument (maturing February 2022). In addition, an amount of £55 million (post taxation) has been transferred to an own credit reserve which does not have an impact on capital ratios.

Taken together, the adoption of IFRS 9 resulted in a decrease in Investec plc's transitional CET 1 ratio of approximately 47bps from 11.0% to 10.5%, ahead of the Investec group target and in excess of minimum regulatory requirements. Investec plc confirmed to the PRA that it will use the transitional arrangements to absorb the full impact permissible of IFRS 9 in regulatory capital calculations.

Investec Limited Balance sheet impairment allowance and provisions

Total balance sheet impairment allowance and provisions are increased by R655 million from R1.5 billion as at 31 March 2018 to R2.2 billion as at 1 April 2018. This is driven by an increase in stage 1, stage 2, and stage 3 impairments of R809 million, partially offset by a reduction of R154 million as a result of the changes in classification and measurement of certain of the group's financial assets to fair value. The increase in impairment allowance and provisions reduced the CET 1 ratio by 15bps on a fully loaded basis, or 4bps on a day one impact transitional basis.

Changes in classification and measurement of certain financial assets

In addition, changes in classification and measurement of certain of the group's other financial assets resulted in a decrease to equity of R423 million (post taxation), with a 16bps impact on the CET 1 ratio.

Taken together, the adoption of IFRS 9 resulted in a decrease in Investec Limited's transitional CET 1 ratio of 20bps from 10.2% to 10.0%, in line with the group's target and in excess of minimum regulatory requirements. Investec Limited confirmed to the South African Prudential Authority (previously know as the Banking Supervision Division of the South African Reserve Bank) that it will use the transitional arrangements to absorb the full impact permissible of IFRS 9 in regulatory capital calculations.

IFRS 15 Revenue from contracts with customers

In May 2014, the IASB issued IFRS 15 Revenue from Contracts with Customers. The standard is effective for annual periods beginning on or after 1 January 2018 with early application permitted. The standard was endorsed by the European Union in September 2016.

IFRS 15 provides a principles-based approach for revenue recognition and introduces the concept of recognising revenue for obligations as they are satisfied. Although the standard should be applied retrospectively, with certain practical expedients available, the group's current measurement and recognition principles are aligned to the standard and there is no impact to the measurement principles currently applied. The impact of the disclosure requirements of the standard is currently being finalised, however, no significant effect is expected.

IFRS 16 Leases

In January 2016, the IASB issued IFRS 16 Leases. The standard is effective for annual periods beginning on or after 1 January 2019 and is expected to be endorsed by the European Union in 2017. IFRS 16 results in lessees accounting for most leases within the scope of the standard in a manner similar to the way in which finance leases are currently accounted for under IAS 17 Leases. Lessees will recognise a 'right of use' asset and a corresponding financial liability on the balance sheet. The asset will be amortised over the period of the lease and the financial liability measured at amortised cost. Lessor accounting remains substantially the same as in IAS 17. The group is currently assessing the impact of this standard but it is not practicable to quantify the effect as at the date of the publication of these financial statements.

IFRS 17 Insurance contracts

IFRS 17 'Insurance contracts' was issued in May 2017, and sets out the requirements that an entity should apply in accounting for insurance contracts it issues and reinsurance contracts it holds. It applies to all types of insurance contracts, regardless of the type of entities that issue them, as well as to certain guarantees and financial instruments with discretionary participation features. A few scope exceptions will apply. The IFRS 17 is effective from 1 January 2021, and the group is considering its impact.

Key management assumptions

In preparation of the annual financial statements, the group makes estimations and applies judgement that could affect the reported amount of assets and liabilities within the next financial year. Key areas in which judgement is applied include:

• valuation of unlisted investments primarily in the private equity, direct investments portfolios and embedded derivatives. Key valuation inputs are based on the most relevant observable market inputs, adjusted where necessary for factors that specifically apply to the individual investments and recognising market volatility.
• The determination of impairments against assets that are carried at amortised cost and impairments relating to availablefor-sale financial assets involves the assessment of future cash flows which is judgemental in nature;

Details of unlisted investments can be found in note 25 with further analysis contained in the risk management section on pages 51 to 53 in volume two.

• valuation of investment properties is performed twice annually by directors who are qualified valuators. The valuation is performed by capitalising the budget net income of the property at the marketrelated yield applicable at the time. Properties in Investec Property Fund are valued according to the JSE Listings Requirements; and
  • Refer to note 32 for the carrying value of investment property with further analysis contained in the risk management section on pages 51 to 53 in volume two.
• the group's income tax charge and balance sheet provision are judgemental in nature. This arises from certain transactions for which the ultimate tax treatment can only be determined by final resolution with the relevant local tax authorities. The group has recognised in its current tax provision certain amounts in respect of taxation that involve a degree of estimation and uncertainty where the tax treatment cannot finally be determined until a resolution has been reached by the relevant tax authority. The carrying amount of this provision is often dependent on the timetable and progress of discussions and negotiations with the relevant tax authorities, arbitration processes and legal proceedings in the relevant tax jurisdictions in which the group operates. Issues can take many years to resolve and assumptions on the likely outcome would therefore have to be made by the group.

In making any estimates, management's judgement would be based on various factors, including any such transactions and events whose treatment for tax purposes is uncertain. In making any estimates, management's judgement has been based on various factors, including:

• the current status of tax audits and enquiries;
• the current status of discussions and negotiations with the relevant tax authorities;
• the results of any previous claims; and
• any changes to the relevant tax environments.

Where appropriate the group has utilised expert external advice as well as experience of similar situations elsewhere in making any such provisions.

• Determination of interest income and interest expense using the effective interest rate method involves judgement in determining the timing and extent of future cash flows.

(continued)

£'000	For the year to 31 March	Asset Management	Wealth & Investment	Specialist Banking	Group costs	Total group
1.	Combined consolidated
	segmental analysis
	Segmental business analysis –
	income statement
	2018
	Net interest income	5 471	10 744	744 183	–	760 398
	Net fee and commission income	537 134	382 463	441 610	–	1 361 207
	Investment income/(loss)	(15)	10 551	119 512	–	130 048
	Share of post taxation profit of associates	–	416	46 407	–	46 823
	Trading income/(loss) arising from
	– customer flow	–	537	137 689	–	138 226
	– balance sheet management and other trading activities	(5 077)	(150)	920	–	(4 307)
	Other operating income	2 165	236	8 714	–	11 115
	Total operating income before impairment on loans and advances	539 678	404 797	1 499 035	–	2 443 510
	Impairment losses on loans and advances	–	–	(148 556)	–	(148 556)
	Operating income	539 678	404 797	1 350 479	–	2 294 954
	Operating costs	(361 633)	(306 232)	(915 277)	(49 598)	(1 632 740)
	Depreciation on operating leased assets	–	–	(2 421)	–	(2 421)
	Operating profit/(loss) before goodwill and acquired intangibles	178 045	98 565	432 781	(49 598)	659 793
	Profit attributable to other non-controlling interests	–	–	(52 288)	–	(52 288)
	Operating profit/(loss) before goodwill,
	acquired intangibles and after other non controlling interests	178 045	98 565	380 493	(49 598)	607 505
	Profit attributable to Asset Management non controlling interests	(23 817)	–	–	–	(23 817)
	Operating profit/(loss) before goodwill, acquired intangibles and after
	non-controlling interests	154 228	98 565	380 493	(49 598)	583 688
	Selected returns and key statistics
	ROE (pre-tax)*	91.0%	38.7%	10.2%	n/a	13.5%
	Return on tangible equity (pre-tax)*	167.4%	162.7%	10.3%	n/a	15.3%
	Cost to income ratio	67.0%	75.7%	61.2%	n/a	66.9%
	Staff compensation to operating income	46.3%	53.7%	45.1%	n/a	47.5%
	Operating profit per employee (£'000)	109.7	56.0	58.1	n/a	61.2
	Total assets (£'million)	662	1 871	55 084	n/a	57 617

* Refer to calculation on page 68 in volume one.

(continued)

£'000	For the year to 31 March	Asset Management	Wealth & Investment	Specialist Banking	Group costs	Total group
1.	Combined consolidated
	segmental analysis (continued)
	Segmental business analysis –
	income statement
	2017
	Net interest income	5 118	11 968	662 809	–	679 895
	Net fee and commission income	484 872	343 708	442 944	–	1 271 524
	Investment income	143	2 269	133 791	–	136 203
	Share of post taxation profit of associates	–	1 509	17 381	–	18 890
	Trading income arising from
	– customer flow	–	1 028	156 973	–	158 001
	– balance sheet management and other trading activities	2 213	87	5 918	–	8 218
	Other operating income	5 644	–	7 839	–	13 483
	Total operating income before impairment
	on loans and advances	497 990	360 569	1 427 655	–	2 286 214
	Impairment losses on loans and advances	–	–	(111 454)	–	(111 454)
	Operating income	497 990	360 569	1 316 201	–	2 174 760
	Operating costs	(333 166)	(267 326)	(863 963)	(48 776)	(1 513 231)
	Depreciation on operating leased assets	–	–	(2 169)	–	(2 169)
	Operating profit/(loss) before goodwill, acquired intangibles	164 824	93 243	450 069	(48 776)	659 360
	Profit attributable to other non-controlling interests	–	–	(60 239)	–	(60 239)
	Operating profit/(loss) before goodwill, acquired intangibles and after other non
	controlling interests	164 824	93 243	389 830	(48 776)	599 121
	Profit attributable to Asset Management non controlling interests	(20 291)	–	–	–	(20 291)
	Operating profit/(loss) before goodwill, acquired intangibles and after
	non-controlling interests	144 533	93 243	389 830	(48 776)	578 830
	Selected returns and key statistics
	ROE (pre-tax)*	90.7%	35.7%	12.8%	n/a	15.9%
	Return on tangible equity (pre-tax)*	179.6%	173.0%	13.0%	n/a	18.5%
	Cost to income ratio	66.9%	74.1%	60.6%	n/a	66.3%
	Staff compensation to operating income	46.8%	54.0%	43.9%	n/a	46.1%
	Operating profit per employee (£'000)	103.1	56.6	63.8	n/a	64.1
	Total assets (£'million)	638	1 886	51 011	n/a	53 535

* Refer to calculation on page 68 in volume one.

(continued)

£'000	For the year to 31 March		Southern Africa	Total group
1.	Combined consolidated segmental analysis (continued)
	2018
	Segmental geographic analysis – income statement
	Net interest income	337 580	422 818	760 398
	Net fee and commission income	849 934	511 273	1 361 207
	Investment income	68 515	61 533	130 048
	Share of post taxation profit of associates Trading income/(loss) arising from	1 436	45 387	46 823
	– customer flow	114 402	23 824	138 226
	– balance sheet management and other trading activities	(2 069)	(2 238)	(4 307)
	Other operating income	10 421	694	11 115
	Total operating income before impairment on loans and advances	1 380 219	1 063 291	2 443 510
	Impairment losses on loans and advances	(106 085)	(42 471)	(148 556)
	Operating income	1 274 134	1 020 820	2 294 954
	Operating costs	(1 074 112)	(558 628)	(1 632 740)
	Depreciation on operating leased assets	(2 350)	(71)	(2 421)
	Operating profit before goodwill and acquired intangibles	197 672	462 121	659 793
	(Profit)/loss attributable to other non-controlling interests	1 684	(53 972)	(52 288)
	Operating profit before goodwill, acquired intangibles and after other
	non-controlling interests	199 356	408 149	607 505
	Profit attributable to Asset Management non-controlling interests	(14 763)	(9 054)	(23 817)
	Operating profit before goodwill, acquired intangibles and after
	non-controlling interests	184 593	399 095	583 688
	Amortisation of acquired intangibles	(13 273)	(2 982)	(16 255)
	Additional costs on acquisition of subsidiary	–	(6 039)	(6 039)
	Earnings attributable to shareholders before taxation	171 320	390 074	561 394
	Taxation on operating profit before goodwill	(38 509)	(20 590)	(59 099)
	Taxation on acquired intangibles and acquisition/disposal/integration
	of subsidiaries	2 418	835	3 253
	Earnings attributable to shareholders	135 229	370 319	505 548
	Selected returns and key statistics
	ROE (post-tax)*	6.9%	17.2%	12.1%
	Return on tangible equity (post-tax)*	8.9%	17.4%	13.7%
	Cost to income ratio	78.0%	52.5%	66.9%
	Staff compensation to operating income	55.1%	37.6%	47.5%
	Operating profit per employee (£'000)	46.2	72.7	61.2
	Effective operational tax rate	19.6%	4.9%	9.6%
	Total assets (£'million)	20 547	37 070	57 617

* Refer to calculation on page 67 in volume one.

(continued)

£'000	For the year to 31 March	UK and Other	Southern Africa	Total group
1.	Combined consolidated segmental analysis
	(continued)
	2017
	Segmental geographic analysis – income statement
	Net interest income	289 180	390 715	679 895
	Net fee and commission income	803 863	467 661	1 271 524
	Investment income	59 975	76 228	136 203
	Share of post taxation profit of associates	2 349	16 541	18 890
	Trading income arising from
	– customer flow	129 707	28 294	158 001
	– balance sheet management and other trading activities	8 671	(453)	8 218
	Other operating income	13 195	288	13 483
	Total operating income before impairment on loans and advances	1 306 940	979 274	2 286 214
	Impairment losses on loans and advances	(74 956)	(36 498)	(111 454)
	Operating income	1 231 984	942 776	2 174 760
	Operating costs	(1 005 130)	(508 101)	(1 513 231)
	Depreciation on operating leased assets	(2 141)	(28)	(2 169)
	Operating profit before goodwill and acquired intangibles	224 713	434 647	659 360
	(Profit)/loss attributable to other non-controlling interests	180	(60 419)	(60 239)
	Operating profit before goodwill, acquired intangibles and after other
	non-controlling interests	224 893	374 228	599 121
	Profit attributable to Asset Management non-controlling interests	(11 807)	(8 484)	(20 291)
	Operating profit before goodwill, acquired intangibles and after non controlling interests	213 086	365 744	578 830
	Impairment of goodwill	(3 134)	(1 615)	(4 749)
	Amortisation of acquired intangibles	(14 386)	(2 811)	(17 197)
	Earnings attributable to shareholders before taxation	195 566	361 318	556 884
	Taxation on operating profit before goodwill	(39 144)	(79 344)	(118 488)
	Taxation on acquired intangibles and acquisition/disposal/integration
	of subsidiaries	3 305	765	4 070
	Earnings attributable to shareholders	159 727	282 739	442 466
	Selected returns and key statistics
	ROE (post-tax)*	9.4%	16.0%	12.5%
	Return on tangible equity (post-tax)*	12.5%	16.3%	14.5%
	Cost to income ratio	77.0%	51.9%	66.3%
	Staff compensation to operating income	54.4%	35.1%	46.1%
	Operating profit per employee (£'000)	56.0	70.3	64.1
	Effective operational tax rate	17.6%	19.0%	18.5%
	Total assets (£'million)	18 652	34 883	53 535

* Refer to calculation on page 67 in volume one.

(continued)

For the year to 31 March £'000	UK and Other	Southern Africa	Total group
1. Combined consolidated segmental analysis (continued)
Segmental geographic and business analysis of operating profit before goodwill, acquired intangibles, non-operating items, taxation and after other non-controlling interests
2018
Asset Management	103 918	74 127	178 045
Wealth & Investment	69 269	29 296	98 565
Specialist Banking	59 958	320 535	380 493
	233 145	423 958	657 103
Group costs	(33 789)	(15 809)	(49 598)
Total group	199 356	408 149	607 505
Other non-controlling interest – equity			52 288
Operating profit			659 793
2017
Asset Management	91 262	73 562	164 824
Wealth & Investment	65 190	28 053	93 243
Specialist Banking	104 604	285 226	389 830
	261 056	386 841	647 897
Group costs	(36 163)	(12 613)	(48 776)
Total group	224 893	374 228	599 121
Other non-controlling interest – equity			60 239
Operating profit			659 360

(continued)

£'000	At 31 March	UK and Other	Southern Africa	Total group
1.	Combined consolidated segmental analysis
	(continued)
	2018
	Segmental geographic analysis – balance sheet assets and liabilities
	Assets
	Cash and balances at central banks	3 487 769	552 743	4 040 512
	Loans and advances to banks	985 069	1 180 464	2 165 533
	Non-sovereign and non-bank cash placements	–	601 243	601 243
	Reverse repurchase agreements and cash collateral on securities borrowed	750 428	1 457 049	2 207 477
	Sovereign debt securities	1 155 472	3 754 555	4 910 027
	Bank debt securities	107 938	479 226	587 164
	Other debt securities	278 474	625 129	903 603
	Derivative financial instruments	596 506	755 902	1 352 408
	Securities arising from trading activities	694 974	739 417	1 434 391
	Investment portfolio	477 919	407 580	885 499
	Loans and advances to customers	9 687 224	14 985 785	24 673 009
	Own originated loans and advances to customers securitised	–	459 088	459 088
	Other loans and advances	331 842	15 967	347 809
	Other securitised assets	130 388	17 999	148 387
	Interests in associated undertakings	77 059	390 793	467 852
	Deferred taxation assets	98 156	59 165	157 321
	Other assets	1 161 631	714 485	1 876 116
	Property and equipment	54 493	178 847	233 340
	Investment properties	14 500	1 169 597	1 184 097
	Goodwill	356 265	12 538	368 803
	Intangible assets	100 585	24 804	125 389
		20 546 692	28 582 376	49 129 068
	Other financial instruments at fair value through profit or loss in respect
	of liabilities to customers	–	8 487 776	8 487 776
		20 546 692	37 070 152	57 616 844
	Liabilities
	Deposits by banks	1 259 073	1 672 194	2 931 267
	Derivative financial instruments	514 499	957 064	1 471 563
	Other trading liabilities	103 496	856 670	960 166
	Repurchase agreements and cash collateral on securities lent	150 757	505 083	655 840
	Customer accounts (deposits)	11 624 157	19 363 016	30 987 173
	Debt securities in issue	2 303 027	414 160	2 717 187
	Liabilities arising on securitisation of own originated loans and advances	–	136 812	136 812
	Liabilities arising on securitisation of other assets	127 853	–	127 853
	Current taxation liabilities	152 355	33 131	185 486
	Deferred taxation liabilities	21 892	10 266	32 158
	Other liabilities	1 270 738	741 530	2 012 268
		17 527 847	24 689 926	42 217 773
	Liabilities to customers under investment contracts	–	8 484 296	8 484 296
	Insurance liabilities, including unit-linked liabilities	–	3 480	3 480
		17 527 847	33 177 702	50 705 549
	Subordinated liabilities	579 673	903 314	1 482 987
		18 107 520	34 081 016	52 188 536

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£'000	For the year to 31 March	UK and Other	Southern Africa	Total group
1.	Combined consolidated segmental analysis
	(continued)
	2017
	Segmental geographic analysis – balance sheet assets and liabilities
	Assets
	Cash and balances at central banks	2 853 570	498 132	3 351 702
	Loans and advances to banks	1 102 353	2 088 688	3 191 041
	Non-sovereign and non-bank cash placements	–	536 259	536 259
	Reverse repurchase agreements and cash collateral on securities borrowed	536 173	1 822 797	2 358 970
	Sovereign debt securities	952 902	2 851 725	3 804 627
	Bank debt securities	176 559	462 630	639 189
	Other debt securities	398 278	717 280	1 115 558
	Derivative financial instruments	598 959	586 889	1 185 848
	Securities arising from trading activities	522 759	853 909	1 376 668
	Investment portfolio	459 745	376 154	835 899
	Loans and advances to customers	8 620 742	13 569 233	22 189 975
	Own originated loans and advances to customers securitised	–	517 162	517 162
	Other loans and advances	336 781	18 467	355 248
	Other securitised assets	138 628	10 336	148 964
	Interests in associated undertakings	63 390	328 823	392 213
	Deferred taxation assets	89 941	44 031	133 972
	Other assets	1 258 317	642 163	1 900 480
	Property and equipment	60 528	45 411	105 939
	Investment properties	14 500	1 114 430	1 128 930
	Goodwill	355 155	12 424	367 579
	Intangible assets	112 943	30 318	143 261
	Non-current assets held for sale	–	27 218	27 218
		18 652 223	27 154 479	45 806 702
	Other financial instruments at fair value through profit or loss in respect
	of liabilities to customers	–	7 728 130	7 728 130
		18 652 223	34 882 609	53 534 832
	Liabilities
	Deposits by banks	623 144	2 112 922	2 736 066
	Derivative financial instruments	547 322	748 884	1 296 206
	Other trading liabilities	136 041	842 870	978 911
	Repurchase agreements and cash collateral on securities lent	223 998	466 617	690 615
	Customer accounts (deposits)	11 012 809	18 096 619	29 109 428
	Debt securities in issue	1 861 341	524 839	2 386 180
	Liabilities arising on securitisation of own originated loans and advances Liabilities arising on securitisation of other assets Current taxation liabilities Deferred taxation liabilities Other liabilities Liabilities to customers under investment contracts Insurance liabilities, including unit-linked liabilities Subordinated liabilities	– 128 838 143 585 26 236 1 258 189 15 961 503 – – 15 961 503 579 356 16 540 859	90 125 – 84 243 14 172 652 641 23 633 932 7 725 604 2 526 31 362 062 823 282 32 185 344	90 125 128 838 227 828 40 408 1 910 830 39 595 435 7 725 604 2 526 47 323 565 1 402 638 48 726 203

(continued)

£'000	For the year to 31 March	UK and Other	Southern Africa	Total	UK and Other	Southern Africa	Total
1.
	Combined consolidated
	segmental analysis
	(continued) Segmental business and geographic
	analysis – income statement
	2018
	Net interest income	242	5 229	5 471	5 181	5 563	10 744
	Net fee and commission income	355 230	181 904	537 134	296 907	85 556	382 463
	Investment income/(loss)	(47)	32	(15)	10 446	105	10 551
	Share of post taxation profit of associates	–	–	–	415	1	416
	Trading income/(loss) arising from
	– customer flow	–	–	–	1 032	(495)	537
	– balance sheet management and other
	trading activities	(5 189)	112	(5 077)	(7)	(143)	(150)
	Other operating income	2 131	34	2 165	235	1	236
	Total operating income before
	impairment losses on loans and advances	352 367	187 311	539 678	314 209	90 588	404 797
	Impairment losses on loans and advances	–	–	–	–	–	–
	Operating income	352 367	187 311	539 678	314 209	90 588	404 797
	Operating costs	(248 449)	(113 184)	(361 633)	(244 940)	(61 292)	(306 232)
	Depreciation on operating leased assets	–	–	–	–	–	–
	Operating profit/(loss) before goodwill
	and acquired intangibles	103 918	74 127	178 045	69 269	29 296	98 565
	(Profit)/loss attributable to other non controlling interests	–	–	–	–	–	–
	Operating profit/(loss) before goodwill,
	acquired intangibles and after other
	non-controlling interests	103 918	74 127	178 045	69 269	29 296	98 565
	Profit attributable to Asset Management
	non-controlling interests	(14 763)	(9 054)	(23 817)	–	–	–
	Operating profit/(loss) before goodwill,
	acquired intangibles and after
	non-controlling interests	89 155	65 073	154 228	69 269	29 296	98 565
	Selected returns and key statistics
	Cost to income ratio	70.5%	60.4%	67.0%	78.0%	67.7%	75.7%
	Staff compensation to operating income	52.1%	35.4%	46.3%	56.5%	43.8%	53.7%

Asset Management Wealth & Investment Specialist Banking Group costs

(continued)

Specialist Banking Group costs
UK and Southern UK and Southern Total Total Other Africa Other Africa
332 157 412 026 744 183 – – –
197 797 243 813 441 610 – – –
58 116 61 396 119 512 – – – 1 021 45 386 46 407 – – –
–
113 370 24 319 137 689 – – –
3 127 (2 207) 920 – – –
8 055 659 8 714 – – –
713 643 785 392 1 499 035 – – –
(106 085) (42 471) (148 556) – – –
607 558 742 921 1 350 479 – – –
(546 934) (368 343) (915 277) (33 789) (15 809) (49 598)
(2 350) (71) (2 421) – – –
58 274 374 507 432 781 (33 789) (15 809) (49 598)
1 684 (53 972) (52 288) – – –
59 958 320 535 380 493 (33 789) (15 809) (49 598)
– – – – – –
59 958 320 535 380 493 (33 789) (15 809) (49 598)
76.9% 46.9% 61.2% n/a n/a n/a

For the year to 31 March

1. Combined consolidated segmental analysis

£'000

(continued)

£'000	For the year to 31 March	UK and Other	Southern Africa	Total	UK and Other	Southern Africa	Total
1.	Combined consolidated
	segmental analysis
	(continued)
	Segmental business and geographic
	analysis – income statement
	2017
	Net interest income	111	5 007	5 118	4 368	7 600	11 968
	Net fee and commission income	308 084	176 788	484 872	267 847	75 861	343 708
	Investment income	–	143	143	2 169	100	2 269
	Share of post taxation profit of associates	–	–	–	1 509	–	1 509
	Trading income arising from
	– customer flow	–	–	–	740	288	1 028
	– balance sheet management and other
	trading activities	3 221	(1 008)	2 213	215	(128)	87
	Other operating income	5 312	332	5 644	–	–	–
	Total operating income before impairment losses on loans and
	advances	316 728	181 262	497 990	276 848	83 721	360 569
	Impairment losses on loans and advances	–	–	–	–	–	–
	Operating income	316 728	181 262	497 990	276 848	83 721	360 569
	Operating costs	(225 466)	(107 700)	(333 166)	(211 658)	(55 668)	(267 326)
	Depreciation on operating leased assets	–	–	–	–	–	–
	Operating profit/(loss) before goodwill
	and acquired intangibles	91 262	73 562	164 824	65 190	28 053	93 243
	(Profit)/loss attributable to other non
	controlling interests	–	–	–	–	–	–
	Operating profit/(loss) before goodwill,
	acquired intangibles and after other non-controlling interests	91 262	73 562	164 824	65 190	28 053	93 243
	Profit attributable to Asset Management
	non-controlling interests	(11 807)	(8 484)	(20 291)	–	–	–
	Operating profit/(loss) before goodwill,
	acquired intangibles and after
	non-controlling interests	79 455	65 078	144 533	65 190	28 053	93 243
	Selected returns and key statistics
	Cost to income ratio	71.2%	59.4%	66.9%	76.5%	66.5%	74.1%
	Staff compensation to operating income	53.4%	35.1%	46.8%	56.6%	45.5%	54.0%

Asset Management Wealth & Investment Specialist Banking Group costs

Total group

(continued)

Specialist Banking Group costs
UK and Southern UK and Southern Total Other Africa Total Other Africa Total group
284 701 378 108 662 809 – – – 679 895
227 932 215 012 442 944 – – – 1 271 524
57 806 75 985 133 791 – – – 136 203 840 16 541 17 381 – – – 18 890
128 967 28 006 156 973 – – – 158 001
5 235 683 5 918 – – – 8 218
7 883 (44) 7 839 – – – 13 483
713 364 714 291 1 427 655 – – – 2 286 214
(74 956) (36 498) (111 454) – (111 454)
638 408 677 793 1 316 201 – – – 2 174 760 (531 843) (332 120) (863 963) (36 163) (12 613) (48 776) (1 513 231)
(2 141) (28) (2 169) – – – (2 169)
104 424 345 645 450 069 (36 163) (12 613) (48 776) 659 360
180 (60 419) (60 239) – – – (60 239)
104 604 285 226 389 830 (36 163) (12 613) (48 776) 599 121
– – – – – – (20 291)
104 604 285 226 389 830 (36 163) (12 613) (48 776) 578 830
74.8% 46.5% 60.6% n/a n/a n/a 66.3%

For the year to 31 March

1. Combined consolidated segmental analysis

£'000

(continued)

			UK and Other		Southern Africa		Total group
£'000	For the year to 31 March 2018		Balance sheet Interest value income		Balance sheet value	Interest income	Balance sheet value	Interest income
2.	Net interest income Cash, near cash and bank debt and sovereign debt securities	1	6 486 676	26 413	8 025 280		425 715 14 511 956	452 128
	Core loans and advances Private client	2	9 687 224 3 785 828		518 070 15 444 873 161 107 10 426 762		1 366 945 25 132 097 916 099 14 212 590	1 885 015 1 077 206
	Corporate, institutional and other clients Other debt securities and other loans and advances		5 901 396 610 316	356 963 54 927	5 018 111 641 096	43 794	450 846 10 919 507 1 251 412	807 809 98 721
	Other interest-earning assets Total interest earning assets	3	– 16 784 216	–	17 999 599 410 24 129 248	55 145	17 999 1 891 599 40 913 464	55 145 2 491 009

		UK and Other	Southern Africa			Total group
For the year to 31 March 2018 £'000	Notes	Balance sheet value	Interest expense	Balance sheet value	Interest expense	Balance sheet value	Interest expense
Deposits by banks and other debt related
securities	4	3 712 857	(92 513)	2 591 437	(123 500)	6 304 294	(216 013)
Customer accounts		11 624 157		(113 972) 19 363 016		(1 247 509) 30 987 173	(1 361 481)
Other interest-bearing liabilities	5	–	–	136 812	(24 389)	136 812	(24 389)
Subordinated liabilities		579 673	(55 345)	903 314	(73 383)	1 482 987	(128 728)
Total interest-bearing liabilities		15 916 687		(261 830) 22 994 579	(1 468 781) 38 911 266		(1 730 611)
Net interest income			337 580		422 818		760 398
Net interest margin (local currency)			2.11%		1.84%**

Notes:

1. Comprises (as per the balance sheet) cash and balances at central banks; loans and advances to banks; non-sovereign and non-bank cash

placements; reverse repurchase agreements and cash collateral on securities borrowed; sovereign debt securities; and bank debt securities.

2. Comprises (as per the balance sheet) loans and advances to customers and own originated loans and advances to customers securitised.

3. Comprises (as per the balance sheet) other securitised assets. No securitised assets are held at amortised cost in UK and Other.

4. Comprises (as per the balance sheet) deposits by banks; debt securities in issue; repurchase agreements and cash collateral on securities lent. 5. Comprises (as per the balance sheet) liabilities arising on securitisation of own originated assets; liabilities arising on securitisation. No liabilities on securitisation are held at amortised cost in UK and Other.

** Impacted by debt funding issued by the Investec Property Fund in which the group has a 26.75% interest. Excluding this debt funding cost the net interest margin amounted to 1.99% (2017: 1.99%).

(continued)

			UK and Other		Southern Africa		Total group
£'000	For the year to 31 March 2017	Notes	Balance sheet value	Interest income	Balance sheet value	Interest income	Balance sheet value	Interest income
2.	Net interest income (continued)
	Cash, near cash and bank debt and sovereign debt securities	1	5 621 557	33 255	8 260 231		398 053 13 881 788	431 308
	Core loans and advances	2	8 620 742		471 547 14 086 395		1 188 974 22 707 137	1 660 521
	Private client		3 454 366	151 645	9 413 110		798 380 12 867 476	950 025
	Corporate, institutional and other clients		5 166 376	319 902	4 673 285	390 594	9 839 661	710 496
	Other debt securities and other loans and advances		735 059	58 552	735 747	58 244	1 470 806	116 796
	Other interest-earning assets	3	–	–	10 336	22 140	10 336	22 140
	Total interest-earning assets		14 977 358	563 354	23 092 709	1 667 411	38 070 067	2 230 765

			UK and Other	Southern Africa			Total group
For the year to 31 March 2017 £'000	Notes	Balance sheet value	Interest expense	Balance sheet value	Interest expense	Balance sheet value	Interest expense
Deposits by banks and other debt-related
securities Customer accounts (deposits)	4	2 708 483 11 012 809	(87 872)	3 104 378 (130 419) 18 096 619	(118 225) (1 087 496) 29 109 428	5 812 861	(206 097) (1 217 915)
Other interest-bearing liabilities	5	–	–	90 125	(13 050)	90 125	(13 050)
Subordinated liabilities		579 356	(55 883)	823 282	(57 925)	1 402 638	(113 808)
Total interest-bearing liabilities		14 300 648		(274 174) 22 114 404	(1 276 696) 36 415 052		(1 550 870)
Net interest income			289 180		390 715		679 895
Net interest margin (local currency)			1.96%		1.86%**

Notes:

1. Comprises (as per the balance sheet) cash and balances at central banks; loans and advances to banks; non-sovereign and non-bank cash placements; reverse repurchase agreements and cash collateral on securities borrowed; sovereign debt securities;

bank debt securities. 2. Comprises (as per the balance sheet) loans and advances to customers; own originated loans and advances to customers securitised.

3. Comprises (as per the balance sheet) other securitised assets. No securitised assets are held at amortised cost in UK and Other.

4. Comprises (as per the balance sheet) deposits by banks; debt securities in issue; repurchase agreements and cash collateral on securities lent.

5. Comprises (as per the balance sheet) liabilities arising on securitisation of own originated assets; liabilities arising on securitisation. In the current year no liabilities on securitisation are held at amortised cost in UK and Other.

(continued)

£'000	For the year to 31 March	UK and Other	Southern Africa	Total group
3.	Net fee and commission income
	2018
	Asset management and wealth management businesses net fee and commission income	652 137	267 460	919 597
	Fund management fees/fees for assets under management	743 670	232 550	976 220
	Private client transactional fees	54 629	42 348	96 977
	Fee and commission expense	(146 162)	(7 438)	(153 600)
	Specialist Banking net fee and commission income	197 797	243 813	441 610
	Corporate and institutional transactional and advisory services	192 579	216 216	408 795
	Private client transactional fees	14 757	46 698	61 455
	Fee and commission expense	(9 539)	(19 101)	(28 640)
	Net fee and commission income	849 934	511 273	1 361 207
	Annuity fees (net of fees payable)	662 924	439 834	1 102 758
	Deal fees	187 010	71 439	258 449
	2017
	Asset Management and Wealth Management businesses net fee and
	commission income	575 931	252 649	828 580
	Fund management fees/fees for assets under management	639 100	224 498	863 598
	Private client transactional fees	56 955	39 400	96 355
	Fee and commission expense	(120 124)	(11 249)	(131 373)
	Specialist Banking net fee and commission income	227 932	215 012	442 944
	Corporate and institutional transactional and advisory services	206 407	196 246	402 653
	Private client transactional fees	29 684	37 298	66 982
	Fee and commission expense	(8 159)	(18 532)	(26 691)
	Net fee and commission income	803 863	467 661	1 271 524
	Annuity fees (net of fees payable)	581 895	383 355	965 250
	Deal fees	221 968	84 306	306 274

Trust and fiduciary fees amounted to £0.3 million (2017: £0.3 million) and are included in Private client transaction fees.

£'000	For the year to 31 March		Southern Africa	Total group
4.	Investment income
	2018
	Realised	43 504	62 120	105 624
	Unrealised^	6 435	(15 769)	(9 334)
	Dividend income	10 171	18 107	28 278
	Funding and other net related income/(costs)	8 405	(2 925)	5 480
	Investment income	68 515	61 533	130 048
	2017
	Realised	50 335	51 070	101 405
	Unrealised^	(9 271)	6 940	(2 331)
	Dividend income	12 339	18 540	30 879
	Funding and other net related income/(costs)	6 572	(322)	6 250
	Investment income	59 975	76 228	136 203

^ In a year of realisation, any prior period mark-to-market gains/(losses) recognised are reversed in the unrealised line item.

(continued)

£'000	For the year to 31 March	Investment portfolio (listed and unlisted equities)*	Debt securities (sovereign, bank and other)	Investment properties	Other asset categories	Total
4.	Investment income^ (continued)
	The tables below analyse investment income
	generated by the asset portfolio shown on the
	balance sheet.
	2018 UK and Other
	Realised	38 516	5 779	(86)	(705)	43 504
	Unrealised^	13 419	2 730	–	(9 714)	6 435
	Dividend income	10 171	–	–	–	10 171
	Funding and other net related income	–	–	–	8 405	8 405
		62 106	8 509	(86)	(2 014)	68 515
	Southern Africa
	Realised	41 070	7 338	12 580	1 132	62 120
	Unrealised^	(42 529)	–	26 919	(159)	(15 769)
	Dividend income	17 986	–	–	121	18 107
	Funding and other net related (costs)/income	(4 695)	–	–	1 770	(2 925)
		11 832	7 338	39 499	2 864	61 533
	Total investment income	73 938	15 847	39 413	850	130 048
	2017
	UK and Other
	Realised	38 533	(8 482)	18 337	1 947	50 335
	Unrealised^	(3 086)	5 138	(10 008)	(1 315)	(9 271)
	Dividend income	12 339	–	–	–	12 339
	Funding and other net related income	–	–	–	6 572	6 572
		47 786	(3 344)	8 329	7 204	59 975
	Southern Africa
	Realised	20 483	6 360	22 003	2 224	51 070
	Unrealised^	(13 504)	2 255	22 989	(4 800)	6 940
	Dividend income	18 102	–	–	438	18 540
	Funding and other net related (costs)/income	(3 768)	–	–	3 446	(322)
		21 313	8 615	44 992	1 308	76 228
	Total investment income	69 099	5 271	53 321	8 512	136 203

* Including embedded derivatives (warrants and profit shares).

^ In a year of realisation, any prior period mark-to-market gains/(losses) recognised are reversed in the unrealised line item.

Notes to the annual
financial statements

(continued)

For the year to 31 March £'000	2018	2017
Other operating income
Rental income from properties	1 746	3 732
Income from government grants	2 997	–
Gains on realisation of properties	412	337
Unrealised gains on other investments	3 264	6 940
Income from operating leases	2 696 11 115	2 474 13 483
For the year to 31 March £'000	2018	2017
Operating costs
Staff compensation costs	1 160 300	1 054 998
– Salaries and wages (including directors' remuneration)	985 056	900 099
– Share-based payment expense	74 761	61 836
– Social security costs	53 629	51 382
– Pensions and provident fund contributions	46 854	41 681
– Training and other costs	31 391	24 703
Staff costs	1 191 691	1 079 701
Premises expenses (excluding depreciation)	59 442	80 083
Equipment expenses (excluding depreciation)	93 928	82 928
Business expenses*	190 385	177 057
Marketing expenses	70 911	70 625
Depreciation, amortisation and impairment on property, equipment and intangibles	26 383	22 837
	1 632 740	1 513 231
Depreciation on operating leased assets	2 421	2 169
The following amounts were paid by the group to the auditors in respect of the audit of the	1 635 161	1 515 400
financial statements and for other services provided to the group
Ernst & Young fees
Fees payable to the companies' auditors for the audit of the companies' accounts	899	601
Fees payable to the companies' auditors and its associates for other services:
– Audit of the companies subsidiaries pursuant to legislation	6 591	4 409
– Audit related assurance services	820	670
– Tax compliance services	90	400
– Tax advisory services	240	210
– Service related to corporate finance transactions	–	760
– Service related to information technology	60	–
– Other assurance services	240 8 940	80 7 130
KPMG fees
Fees payable to the companies' auditors for the audit of the companies' accounts	–	–
Fees payable to the companies' auditors and its associates for other services:
– Audit of the companies subsidiaries pursuant to legislation	3 500	2 160
– Audit related assurance services	186	450
– Tax compliance services	737	130
– Services related to corporate finance transactions	–	180
– Services related to other regulatory services	80	–
– Other assurance services	130 4 633	– 2 920
Total	13 573	10 050

The increase in audit fees during 2018 relates to IFRS 9 and inflationary adjustments.

* Business expenses mainly comprise insurance costs, consulting and professional fees, travel expenses and subscriptions.

Details of the directors' emoluments, pensions and their interests are disclosed in the remuneration report on pages 204 to 213 in volume one.

7. Share-based payments

The group operates share option and long-term share incentive plans for employees, which are on an equity-settled basis. The purpose of the staff share schemes is to promote an esprit de corps within the organisation, create an awareness of Investec's performance and provide an incentive to maximise individual and group performance by allowing all staff to share in the risks and rewards of the group.

Further information on the group share options and long-term incentive plans is provided in the remuneration report on page 237 in volume one of the integrated annual report and on our website.

For the year to 31 March £'000	Asset Management	Wealth & Investment	Specialist Banking	Group costs	Total group
Share-based payment expense 2018
Equity-settled	2 036	8 451	56 340	7 934	74 761
Total income statement charge	2 036	8 451	56 340	7 934	74 761
2017
Equity-settled	2 988	7 211	47 018	4 619	61 836
Total income statement charge	2 988	7 211	47 018	4 619	61 836

Included in the above income statement charge is an accelerated share-based payment charge as a result of modifications to certain options granted. This expense for the year was £8.3 million (2017: £nil).

For the year to 31 March £'000	2018	2017
Weighted average fair value of options granted in the year
UK schemes	42 444	29 213
South African schemes	39 734	31 806

	UK schemes				South African schemes
	2018			2017 2018			2017
Details of options outstanding during the year	Number of share options	Weighted average exercise price £	Number of share options	Weighted average exercise price £	Number of share options	Weighted average exercise price £	Number of share options	Weighted average exercise price £
Outstanding at the beginning of the year	25 991 607		0.06 28 760 479		0.07 35 944 931	–	37 773 545	–
Granted during the year	7 684 921	0.07	6 501 494	0.01	7 087 012	–	6 527 507	–
Exercised during the year^	(10 566 097)	0.04	(8 239 897)		0.03 (14 784 164)	–	(7 328 694)	–
Expired during the year	–	–	–	–	(1 431 562)	–	(1 027 427)	–
Options forfeited during the year	(644 643)	0.22	(1 030 469)	0.30	–	–	–	–
Outstanding at the
end of the year	22 465 788		0.07 25 991 607		0.06 26 816 217	–	35 944 931	–
Vested and exercisable
at the end of the year	160 252	–	12 250	–	359 963	–	9 413	–

^ The weighted average share price for options exercised during the year was £5.64 (2017: £5.09) for the UK schemes and R96.49 (2017: R94.43) for the South African schemes.

⁽continued)

(continued)

			UK schemes	South African schemes
	Additional information relating to options	2018	2017	2018	2017
7.	Share-based payments (continued) Additional information relating to options Options with strike prices
	Exercise price range	£4.31 – £6.00	£3.29 – £6.00	n/a	n/a
	Weighted average remaining contractual life	1.75 years	1.72 years	n/a	n/a
	Long-term incentive grants with no strike price
	Exercise price range	£nil	£nil	Rnil	Rnil
	Weighted average remaining contractual life	1.94 years	1.72 years	1.84 years	1.76 Years
	Weighted average fair value of options and long-term grants at measurement date	£5.52	£4.49	R96.61	R98.30
	The fair values of options granted were calculated using a Black-Scholes option pricing model. For options granted during the year, the inputs into the model were as follows:
	– Share price at date of grant	£5.03– £5.87	£4.36 – £5.20	R94.94 – R97.45	R89.97 – R105.30
	– Exercise price	£nil, £5.03 – £5.87	£nil, £4.36 – £5.20	Rnil	Rnil
	– Expected volatility	27.44% – 28.54%	30%	n/a	n/a
	– Option life	1.5 years – 7 years	2.5 – 5 years	4.75 years	4.5 – 5 years
	– Expected dividend yields	5.59% – 6.56%	5.90% – 6.75%	n/a	n/a
	– Risk-free rate	0.62% – 0.99%	0.82% – 1.44%	n/a	n/a

Expected volatility was determined based on the implied volatility levels quoted by the equity derivatives trading desk. The expected volatility is based on the respective share price movement over the last six months but also includes an element of forward expectation.

The expected attrition rates used were determined based on historical group data with an adjustment to actual attrition on final vesting.

£'000	For the year to 31 March	2018	2017
8.	Taxation
	Income statement tax charge
	Current taxation
	UK
	– in respect of current year	38 255	49 387
	– in respect of prior year adjustments	5 048	(5 238)
	Corporation tax before double tax relief	43 303	44 149
	– Double taxation relief	(213)	(308)
		43 090	43 841
	Southern Africa – in respect of current year	83 380	115 525
	– release of tax provisions no longer required	(43 292)	–
	– in respect of prior year adjustments	–	(6 844)
		40 088	108 681
	Europe	2 750	2 474
	Australia	1 274	976
	Other	1 408	932
	Withholding tax on companies	1 926	826
	Total current taxation	90 536	157 730
	Deferred taxation
	UK	(12 165)	(14 597)
	Southern Africa	(22 259)	(30 928)
	Europe	359	263
	Australia	(12)	(11)
	Other Total deferred taxation	(613) (34 690)	1 961 (43 312)
	Total taxation charge for the year	55 846	114 418
	Total taxation charge for the year comprises:
	Taxation on operating profit before goodwill	59 099	118 488
	Taxation on acquired intangibles and acquisition/disposal/integration of subsidiaries	(3 253)	(4 070)
		55 846	114 418
	Deferred taxation comprises:
	Origination and reversal of temporary differences	(35 218)	(42 192)
	Changes in tax rates	4 448	(971)
	Adjustment in respect of prior years	(3 920)	(149)
		(34 690)	(43 312)

£'000	For the year to 31 March	2018	2017
8.	Taxation (continued)
	The rates of corporation tax for the relevant years are:	%	%
	UK	19	20
	South Africa	28	28
	Europe (average)	10	10
	Australia	30	30
	Profit before taxation	637 499	637 414
	Taxation on profit before taxation	55 846	114 418
	Effective taxation rate (%)	8.76	17.95
	The taxation charge on activities for the year is different from the standard rate as detailed below:
	Taxation on profit on ordinary activities before taxation at UK rate of 19% (2017: 20%)	121 125	127 483
	Taxation adjustments relating to foreign earnings	(69 383)	(7 731)
	Goodwill and non-operating items	156	767
	Taxation relating to prior years	1 127	(5 387)
	Share options accounting expense	252	(171)
	Non-taxable income	(1 386)	(2 054)
	Net other permanent differences	5 583	20 526
	Unrealised capital losses	–	(5 402)
	Change in tax rate	4 448	(971)
	Capital gains – non-taxable/covered by losses	(1 564)	–
	Movement in unrecognised trading losses	(4 512)	(12 642)
	Total taxation charge as per income statement	55 846	114 418
	Other comprehensive income taxation effects
	Fair value movements on cash flow hedges taken directly to other comprehensive
	income	(5 746)	53 324
	Pre-taxation	(14 421)	72 072
	Taxation effect	8 675	(18 748)
	Gains on realisation of available-for-sale assets recycled through the income statement	(6 676)	(7 781)
	Pre-taxation	(7 640)	(4 627)
	Taxation effect	964	(3 154)
	Fair value movements on available-for-sale assets taken directly to other
	comprehensive income Pre-taxation	20 051 17 452	54 863 59 924
	Taxation effect	2 599	(5 061)
	Re-measurement of net defined benefit pension asset	3 938	(43 580)
	Pre-taxation Taxation effect	4 897 (959)	(53 575) 9 995
	Statement of changes in equity taxation effects
	Share-based payment adjustment	69 218	55 961
	Pre-taxation IFRS 2 option reserve Taxation effect	67 674 1 544	55 892 69
	Additional Tier 1 Capital	(5 709)	–
	Pre-taxation	(7 048)	–
	Taxation effect	1 339	–

(continued)

	31 March 2018	31 March 2017
Earnings per share
Earnings	£'000	£'000
Earnings attributable to shareholders	505 548	442 466
Preference dividends paid	(32 980)	(25 658)
Gain on redemption of preference shares	–	40 427
Earnings and diluted earnings attributable to ordinary shareholders	472 568	457 235
Weighted number of shares in issue
Weighted total average number of shares in issue during the year	973 676 967	947 161 346
Weighted average number of treasury shares	(50 193 338)	(46 715 508)
Weighted average number of shares in issue during the year	923 483 629	900 445 838
Weighted average number of shares resulting from future dilutive potential-shares	25 800 034	36 895 311
Adjusted weighted number of shares potentially in issue	949 283 663	937 341 149
Earnings per share – pence
Basic earnings per share is calculated by dividing the earnings attributable to the ordinary
shareholders in Investec plc and Investec Limited by the weighted average number of ordinary
shares in issue during the year.	51.2	50.8
Diluted earnings per share – pence
Diluted earnings per share is calculated by dividing the earnings attributable to the ordinary
shareholders of Investec plc and Investec Limited, adjusted for the effects of dilutive ordinary
potential shares, by the weighted average number of shares in issue during the year plus the weighted average number of ordinary shares that would be issued on conversion of the dilutive ordinary potential shares during the year.
	49.8	48.8
Adjusted earnings per share – pence
Adjusted earnings per share is calculated by dividing the earnings before deducting goodwill
impairment and non-operating items attributable to the ordinary shareholders, after taking into
account earnings attributable to perpetual preference shareholders, by the weighted average
number of ordinary shares in issue during the year.	53.2	48.3
	£'000	£'000
Earnings attributable to shareholders	505 548	442 466
Impairment of goodwill	–	4 749
Amortisation of acquired intangibles	16 255	17 197
Additional costs on acquisition of subsidiary	6 039	–
Taxation on acquired intangibles and acquisition/disposal/integration of subsidiaries	(3 253)	(4 070)
Preference dividends paid	(32 980)	(25 658)
Accrual adjustment on earnings attributable to other equity holders*	(547)	(180)
Adjusted earnings attributable to ordinary shareholders before goodwill, acquired
intangibles and non-operating items	491 062	434 504

* In accordance with IFRS, dividends attributable to equity holders are accounted for when a constructive liability arises i.e. on declaration by the board of directors and approval by the shareholders where required. Investec is of the view that EPS is best reflected by adjusting for earnings that are attributed to equity instruments (other than ordinary shares) on an accrual basis and therefore adjusts the paid dividend on such instruments to accrued in arriving at adjusted EPS.

(continued)

		31 March 2018	31 March 2017
9.	Earnings per share (continued)
	Headline earnings per share – pence
	Headline earnings per share has been calculated and is disclosed in accordance with the JSE Listing Requirements, and in terms of circular 2/2015 issued by the South African Institute
	of Chartered Accountants	48.7	48.2
		£'000	£'000
	Earnings attributable to shareholders	505 548	442 466
	Impairment of goodwill	–	4 749
	Preference dividends paid	(32 980)	(25 658)
	Gain on redemption of preference shares	–	40 427
	Property revaluation, net of taxation and non-controlling interests**	(15 409)	(21 777)
	Gains on available-for-sale instruments recycled through the income statement**	(6 676)	(7 781)
	Loss on non-current assets held for sale**	–	1 999
	Profit on realisation of associate	(836)	–
	Headline earnings attributable to ordinary shareholders**	449 647	434 425

** Taxation on headline earnings adjustments amounted to £5.3 million (2017: £7.4 million) with an impact of £20.9 million (2017: £26.6 million) on earnings attributable to non-controlling interests.

		2018		2017
	For the year to 31 March	Pence per share	Total £'000	Pence per share	Total £'000
10.	Dividends Ordinary dividend
	Final dividend for prior year Interim dividend for current year	13.0 10.5	123 230 104 678	11.5 10.0	123 341 93 261
	Total dividend attributable to ordinary shareholders recognised in current financial year	23.5	227 908	21.5	216 602

The directors have proposed a final dividend in respect of the financial year ended 31 March 2018 of 13.5 pence per ordinary share (31 March 2017: 13.0 pence).

This will be paid as follows:

• For Investec Limited shareholders, through a dividend payment by Investec Limited of 232 cents per ordinary share
• For Investec plc non-South African shareholders, through a dividend paid by Investec plc of 13.5 pence per ordinary share
• For Investec plc South African shareholders, through a dividend payment by Investec plc of 6.5 pence per ordinary share and through a dividend payment by Investec Limited on the SA DAS share of 7.0 pence per ordinary share.

The final dividend to shareholders registered on 27 July 2018 is subject to the approval of the members of Investec plc and Investec Limited at the annual general meeting which is scheduled to take place on 8 August 2018 and, if approved, will be paid on 13 August 2018.

(continued)

For the year to 31 March £'000 2018			2017
10.	Dividends (continued) Perpetual preference dividend
	Final dividend for prior year	12 246	10 403
	Interim dividend for current year	11 399	11 769
	Total dividend attributable to perpetual preference shareholders recognised in current financial year	23 645	22 172

* Perpetual preference share dividends from Investec Limited, Investec Bank Limited and Investec plc.

The directors have declared a final dividend in respect of the financial year ended 31 March 2018 of 7.26027 pence (Investec plc shares traded on the JSE Limited) and 7.26027 pence (Investec plc shares traded on the International Stock Exchange), 485.34589 cents (Investec plc Rand-denominated shares), 397.31947 cents (Investec Limited) and 425.72498 cents (Investec Bank Limited) per perpetual preference share. The final dividend will be payable to shareholders on the register at the close of business on Friday, 8 June 2018.

Dividends attributable to Additional Tier 1 securities in issue	9 335	3 486

The R550 000 000 Other Additional Tier 1 floating rate notes pay dividends at a rate equal to the three-month JIBAR plus 4.25% on a quarterly basis as set out in note 46.

The £250 000 000 Other Additional Tier 1 fixed rate securities pay a distribution at a rate of 6.75% as set out in note 46.

Total perpetual preference dividends and Other Additional Tier 1 securities distributions 32 980
-----------------------------------------------------------------------------------------------------

	For the year to 31 March
£'000		2018	2017
11.	Operating lease disclosures
	Operating lease expenses recognised in operating costs:
	Minimum lease payments	39 560	48 257
	Sublease payments	(2 586)	(3 070)
		36 974	45 187
	Operating lease income recognised in income:
	Minimum lease payments	102 946	93 208
		102 946	93 208
	The majority of the operating lease expenses in the group relate to leases on property.
	Rental income from leasing motor vehicles and properties is included in 'other operating income' and 'fee and commission income' respectively.
	Operating lease receivables
	Less than one year	83 489	84 403
	One to five years	200 116	200 584
	Greater than five years	55 558	59 830
		339 163	344 817

The group leases assets to third parties under operating and finance lease arrangements including transport assets, machinery and property. The leases typically run for a period of three years or longer. Lessees are entitled to the use of the properties leased to them for their own business purposes for the duration of the contracted lease period.

Refer to note 50 for detail on operating lease commitments.

Financial statements

(continued)

At fair value through profit
or loss

Financial liabilities at amortised cost

For the year to 31 March £'000	Trading	Designated at inception
12. Analysis of income and impairments by category
of financial instruments
2018
Net interest income	30 189	190 868
Fee and commission income	85 035	6 617
Fee and commission expense	–	(41)
Investment income	20 287	69 152
Share of post taxation operating profit of associates	–	–
Trading income arising from
– customer flow	129 015	491
– balance sheet management and other trading activities	21 564	(11 884)
Other operating income	–	6 062
Total operating income before impairment losses on loans and advances	286 090	261 265
Impairment losses on loans and advances	–	–
Operating income	286 090	261 265
2017
Net interest income	36 083	76 169
Fee and commission income	48 933	(612)
Fee and commission expense	–	(411)
Investment income	(17 367)	96 701
Share of post taxation operating profit of associates	–	–
Trading income arising from
– customer flow	153 901	6 285
– balance sheet management and other trading activities	21 609	(21 918)
Other operating income	–	5 596
Total operating income before impairment losses on loans and advances	243 159	161 810
Impairment losses on loans and advances	–	–
Operating income	243 159	161 810

(continued)

Total	Other fee income	Non financial instruments	Financial liabilities at amortised cost	Available for-sale	Loans and receivables	Held-to maturity
760 398	–	(30)	(1 582 043)	112 438	2 001 487	7 489
1 543 447	1 194 046	115 757	6 341	–	135 651	–
(182 240)	(168 821)	(4 327)	(3 716)	–	(5 335)	–
130 048	–	32 481	–	9 046	(918)	–
46 823	–	46 823	–	–	–	–
138 226	–	–	8 995	–	(275)	–
(4 307)	–	(3 068)	(1 322)	(63)	(9 534)	–
11 115	–	5 053	–	–	–	–
2 443 510	1 025 225	192 689	(1 571 745)	121 421	2 121 076	7 489
(148 556)	–	–	–	–	(148 556)	–
2 294 954	1 025 225	192 689	(1 571 745)	121 421	1 972 520	7 489
679 895	–	1 273	(1 340 180)	126 068	1 743 639	36 843
1 429 588	1 116 584	36 828	88 268	–	139 587	–
(158 064)	(148 534)	353	(5 611)	–	(3 861)	–
136 203	–	18 376	34 648	12 202	(8 357)	–
18 890	–	18 890	–	–	–	–
158 001	–	–	(2 200)	15	–	–
8 218	–	(18)	(1 912)	(54)	10 511	–
13 483	–	6 523	1 346	–	18	–
2 286 214	968 050	82 225	(1 225 641)	138 231	1 881 537	36 843
(111 454)	–	–	–	–	(111 454)	–
2 174 760	968 050	82 225	(1 225 641)	138 231	1 770 083	36 843

At fair value through profit or loss

For the year to 31 March

£'000 Trading

1. Analysis of income and impairments by category

(continued)

	At 31 March		Designated	Available	Total instruments
£'000		Trading	at inception	for-sale	at fair value
13.	Analysis of financial assets and
	liabilities by category of financial
	instruments
	2018
	Assets
	Cash and balances at central banks	7 784	–	–	7 784
	Loans and advances to banks	–	236 077	–	236 077
	Non-sovereign and non-bank cash placements	34 544	–	–	34 544
	Reverse repurchase agreements and cash collateral on
	securities borrowed	787 905	–	–	787 905
	Sovereign debt securities	165 090	2 469 826	2 066 727	4 701 643
	Bank debt securities	–	–	369 172	369 172
	Other debt securities	–	63 400	566 880	630 280
	Derivative financial instruments*	1 352 408	–	–	1 352 408
	Securities arising from trading activities	983 751	450 640	–	1 434 391
	Investment portfolio	–	849 490	36 009	885 499
	Loans and advances to customers	–	1 171 628	–	1 171 628
	Own originated loans and advances to customers securitised	–	–	–	–
	Other loans and advances	–	–	–	–
	Other securitised assets	–	130 388	–	130 388
	Interests in associated undertakings	–	–	–	–
	Deferred taxation assets	–	–	–	–
	Other assets	114 211	76 529	–	190 740
	Property and equipment	–	–	–	–
	Investment properties	–	–	–	–
	Goodwill	–	–	–	–
	Intangible assets	–	–	–	–
		3 445 693	5 447 978	3 038 788	11 932 459
	Other financial instruments at fair value through profit or loss
	in respect of liabilities to customers	–	–	–	–
		3 445 693	5 447 978	3 038 788	11 932 459
	Liabilities
	Deposits by banks	–	–	–	–
	Derivative financial instruments*	1 471 563	–	–	1 471 563
	Other trading liabilities	960 166	–	–	960 166
	Repurchase agreements and cash collateral on securities lent	90 049	–	–	90 049
	Customer accounts (deposits)	–	2 375 704	–	2 375 704
	Debt securities in issue	–	471 886	–	471 886
	Liabilities arising on securitisation of own originated loans
	and advances	–	–	–	–
	Liabilities arising on securitisation of other assets	–	127 853	–	127 853
	Current taxation liabilities	–	–	–	–
	Deferred taxation liabilities	–	–	–	–
	Other liabilities	17 533	–		17 533
		2 539 311	2 975 443	–	5 514 754
	Liabilities to customers under investment contracts	–	–	–	–
	Insurance liabilities, including unit-linked liabilities	–	–	–	–
		2 539 311	2 975 443	–	5 514 754
	Subordinated liabilities	–	–	–	–
		2 539 311	2 975 443	–	5 514 754

At fair value through profit or loss

Non-financial instruments or scoped

* Derivative financial instruments have been classified as held-for-trading and include derivatives held as hedges.

For more information on hedges, please refer to note 53 on pages 118 and 119.

(continued)

Financial statements

	Non-financial instruments	Insurance related linked	Total instruments	Financial liabilities at
	or scoped	instruments	at amortised	amortised	Loans and	Held
Total	out of IAS 39	at fair value	cost	cost	receivables	to-maturity
4 040 512	–	–	4 032 728	–	4 032 728	–
2 165 533	–	–	1 929 456	–	1 929 456	–
601 243	–	–	566 699	–	566 699	–
2 207 477	–	–	1 419 572	–	1 419 572	–
4 910 027	–	–	208 384	–	–	208 384
587 164	–	–	217 992	–	137 793	80 199
903 603	–	–	273 323	–	268 268	5 055
1 352 408	–	–	–	–	–	–
1 434 391 885 499	– –	– –	– –	– –	– –	– –
24 673 009	–	–	23 501 381	–	23 501 381	–
459 088	–	–	459 088	–	459 088	–
347 809	–	–	347 809	–	347 809	–
148 387	–	–	17 999	–	17 999	–
467 852 157 321	456 481	–	11 371	–	11 371	–
	157 321	–	–	–	–	–
1 876 116 233 340	446 045	–	1 239 331	–	1 239 331	–
1 184 097	233 340	–	–	–	–	–
	1 184 097 368 803	– –	– –	– –	– –	– –
368 803 125 389	125 389	–	–	–	–	–
49 129 068	2 971 476	–	34 225 133	–	33 931 495	293 638
	–	8 487 776	–	–	–	–
8 487 776 57 616 844	2 971 476	8 487 776	34 225 133	–	33 931 495	293 638
2 931 267	–	–	2 931 267	2 931 267	–	–
1 471 563	–	–	–	–	–	–
960 166	–	–	–	–	–	–
655 840	–	–	565 791	565 791	–	–
30 987 173	–	–	28 611 469	28 611 469	–	–
2 717 187	–	–	2 245 301	2 245 301	–	–
136 812	–	–	136 812	136 812	–	–
127 853	–	–	–	–	–	–
185 486	185 486	–	–	–	–	–
32 158	32 158	–	–	–	–	–
2 012 268	749 719		1 245 016	1 245 016
42 217 773	967 363	–	35 735 656	35 735 656	–	–
8 484 296	–	8 484 296	–	–	–	–
50 705 549	– 967 363	3 480 8 487 776	– 35 735 656	– 35 735 656	– –	– –
1 482 987	–	–	1 482 987	1 482 987	–	–
52 188 536	967 363	8 487 776	37 218 643	37 218 643	–	–

During the year ended 31 March 2009, the group reclassified certain financial instruments out of fair value through profit or loss. These assets were originally classified as held-for-trading but the group's intentions in regard to these assets changed and the group reclassified £112.3 million and £7.8 million to the loans and receivables and available-for-sale classifications, respectively. The amount reclassified reflected the fair value of the financial assets at the date of reclassification. As the majority of these assets have been written down by the current year end, the group does not deem it material to undertake any further disclosure in the annual financial statements for the current year and the prior year. The carrying value of the assets reclassified is £nil million (2017: £9.2 million) and the fair value is £nil million (2017: £3.5 million).

At fair value through profit or loss

At 31 March

£'000 Trading

1. Analysis of financial assets and

* Derivative financial instruments have been classified as held-for-trading and include derivatives held as hedges.

(continued)

At fair value through
profit or loss

				Total
At 31 March £'000	Trading	Designated at inception	Available for-sale	instruments at fair value
13. Analysis of financial assets and
liabilities by category of financial
instruments (continued)
2017
Assets
Cash and balances at central banks	2 497	–	–	2 497
Loans and advances to banks	–	200 364	–	200 364
Non-sovereign and non-bank cash placements	10	–	–	10
Reverse repurchase agreements and cash collateral on
securities borrowed	1 167 255	–	–	1 167 255
Sovereign debt securities	–	2 298 331	1 307 654	3 605 985
Bank debt securities	–	–	327 888	327 888
Other debt securities	13	111 112	625 933	737 058
Derivative financial instruments*	1 185 848	–	–	1 185 848
Securities arising from trading activities	1 123 200	253 468	–	1 376 668
Investment portfolio	–	782 370	53 529	835 899
Loans and advances to customers	–	921 991	–	921 991
Own originated loans and advances to customers securitised	–	–	–	–
Other loans and advances	–	–	–	–
Other securitised assets	–	138 628	–	138 628
Interests in associated undertakings	–	–	–	–
Deferred taxation assets	–	–	–	–
Other assets	217 667	65 545	–	283 212
Property and equipment	–	–	–	–
Investment properties	–	–	–	–
Goodwill	–	–	–	–
Intangible assets	–	–	–	–
Non-current assets held for sale**	–	27 218	–	27 218
	3 696 490	4 799 027	2 315 004	10 810 521
Other financial instruments at fair value through profit or loss
in respect of liabilities to customers	–	–	–	–
	3 696 490	4 799 027	2 315 004	10 810 521
Liabilities
Deposits by banks	–	–	–	–
Derivative financial instruments*	1 296 206	–	–	1 296 206
Other trading liabilities	978 911	–	–	978 911
Repurchase agreements and cash collateral on securities lent	137 861	–	–	137 861
Customer accounts (deposits)	–	2 046 340	–	2 046 340
Debt securities in issue	–	640 557	–	640 557
Liabilities arising on securitisation of own originated loans
and advances	–	–	–	–
Liabilities arising on securitisation of other assets	–	128 838	–	128 838
Current taxation liabilities	–	–	–	–
Deferred taxation liabilities	–	–	–	–
Other liabilities	43 813	–		43 813
	2 456 791	2 815 735	–	5 272 526
Liabilities to customers under investment contracts	–	–	–	–
Insurance liabilities, including unit-linked liabilities	–	–	–	–
	2 456 791	2 815 735	–	5 272 526
Subordinated liabilities	–	–	–	–
	2 456 791	2 815 735	–	5 272 526

* Derivative financial instruments have been classified as held-for-trading and include derivatives held as hedges.

** Non-current assets held for sale relates to an acquisition of a non-controlling interest in and entity management entered into negotiations to dispose of this interest in the 2017 year.

For more information on hedges, please refer to note 53 on pages 118 and 119.

Financial assets linked to investment contract liabilities

Non-financial instruments or scoped

(continued)

				Financial assets
Held	Loans and	Financial liabilities at amortised	Total instruments at amortised	linked to investment contract	Non-financial instruments or scoped
to-maturity	receivables	cost	cost	liabilities	out of IAS 39	Total
–	3 349 205	–	3 349 205	–	–	3 351 702
–	2 990 677	–	2 990 677	–	–	3 191 041
–	536 249	–	536 249	–	–	536 259
–	1 191 715	–	1 191 715	–	–	2 358 970
198 642 104 584	– 206 717	– –	198 642 311 301	– –	– –	3 804 627 639 189
12 309	366 191	–	378 500	–	–	1 115 558
–	–	–	–	–	–	1 185 848
–	–	–	–	–	–	1 376 668
–	–	–	–	–	–	835 899
– –	21 267 984 517 162	– –	21 267 984 517 162	– –	– –	22 189 975 517 162
–	355 248	–	355 248	–	–	355 248
–	10 336	–	10 336	–	–	148 964
–	–	–	–	–	392 213	392 213
–	–	–	–	–	133 972	133 972
–	1 165 779	–	1 165 779	–	451 489	1 900 480
–	–	–	–	–	105 939	105 939
– –	– –	– –	– –	– –	1 128 930 367 579	1 128 930 367 579
–	–	–	–	–	143 261	143 261
–	–	–	–	–	–	27 218
315 535	31 957 263	–	32 272 798	–	2 723 383	45 806 702
–	–	–	–	7 728 130	–	7 728 130
315 535	31 957 263	–	32 272 798	7 728 130	2 723 383	53 534 832
–	–	2 736 066	2 736 066	–	–	2 736 066
–	–	–	–	–	–	1 296 206
–	–	–	–	–	–	978 911
– –	– –	552 754 27 063 088	552 754 27 063 088	– –	– –	690 615 29 109 428
–	–	1 745 623	1 745 623	–	–	2 386 180
–	–	90 125	90 125	–	–	90 125
–	–	–	–	–	–	128 838
–	–	–	–	–	227 828	227 828
–	–	–	–	–	40 408	40 408
–	–	1 135 721 33 323 377	1 135 721 33 323 377	–	731 296 999 532	1 910 830 39 595 435
–	–	–	–	7 725 604	–	7 725 604
–	–	–	–	2 526	–	2 526
–	–	33 323 377	33 323 377	7 728 130	999 532	47 323 565
–	–	1 402 638	1 402 638	–	– 999 532	1 402 638 48 726 203
–	–	34 726 015	34 726 015	7 728 130

At fair value through profit or loss

At 31 March

£'000 Trading

1. Analysis of financial assets and

dispose of this interest in the 2017 year.

* Derivative financial instruments have been classified as held-for-trading and include derivatives held as hedges.

** Non-current assets held for sale relates to an acquisition of a non-controlling interest in and entity management entered into negotiations to

(continued)

14. Financial instruments at fair value

The table below analyses recurring fair value measurements for financial assets and financial liabilities. These fair value measurements are categorised into different levels in the fair value hierarchy based on the inputs to the valuation technique used. The different levels are identified as follows:

• Level 1 quoted (unadjusted) prices in active markets for identical assets or liabilities
• Level 2 inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices)
• Level 3 inputs for the asset or liability that are not based on observable market data (unobservable inputs)

Assets and liabilities related to the long-term assurance business attributable to policyholders have been excluded from the analysis as the change in fair value of related assets is attributable to policyholders. These are all classified as level 1.

		Fair value category
At 30 March £'000	Total instruments at fair value	Level 1	Level 2	Level 3
2018
Assets
Cash and balances at central banks	7 784	7 784	–	–
Loans and advances to banks	236 077	236 077	–	–
Non-sovereign and non-bank cash placements	34 544	–	34 544	–
Reverse repurchase agreements and cash collateral on securities borrowed	787 905	196 170	591 735	–
Sovereign debt securities	4 701 643	4 701 643	–	–
Bank debt securities	369 172	293 830	75 342	–
Other debt securities	630 280	256 255	357 256	16 769
Derivative financial instruments	1 352 408	–	1 308 208	44 200
Securities arising from trading activities	1 434 391	1 405 197	22 440	6 754
Investment portfolio	885 499	190 395	107 285	587 819
Loans and advances to customers	1 171 628	–	1 037 888	133 740
Other securitised assets	130 388	–	–	130 388
Other assets	190 740	190 740	–	–
	11 932 459	7 478 091	3 534 698	919 670
Liabilities
Derivative financial instruments	1 471 563	–	1 470 121	1 442
Other trading liabilities	960 166	863 123	97 043	–
Repurchase agreements and cash collateral on securities lent	90 049	–	90 049	–
Customer accounts (deposits)	2 375 704	–	2 375 704	–
Debt securities in issue	471 886	–	457 687	14 199
Liabilities arising on securitisation of other assets	127 853	–	–	127 853
Other liabilities	17 533	–	17 533	–
	5 514 754	863 123	4 508 137	143 494
Net financial assets/(liabilities) at fair value	6 417 705	6 614 968	(973 439)	776 176

(continued)

		Fair value category
At 31 March £'000	Total investments at fair value	Level 1	Level 2	Level 3
Financial instruments at fair value (continued)
2017
Assets
Cash and balances at central banks	2 497	2 497	–	–
Loans and advances to banks	200 364	200 364	–	–
Non-sovereign and non-bank cash placements Reverse repurchase agreements and cash collateral on securities borrowed	10 1 167 255	– 176 189	10 991 066	– –
Sovereign debt securities	3 605 985	3 605 985	–	–
Bank debt securities	327 888	245 015	82 873	–
Other debt securities	737 058	385 999	344 628	6 431
Derivative financial instruments	1 185 848	–	1 126 751	59 097
Securities arising from trading activities	1 376 668	1 341 112	26 485	9 071
Investment portfolio	835 899	209 584	39 988	586 327
Loans and advances to customers	921 991	–	835 509	86 482
Other securitised assets	138 628	–	–	138 628
Other assets	283 212	283 212	–	–
Non-current assets held for sale	27 218	–	–	27 218
	10 810 521	6 449 957	3 447 310	913 254
Liabilities
Derivative financial instruments	1 296 206	1 676	1 293 482	1 048
Other trading liabilities	978 911	900 355	78 556	–
Repurchase agreements and cash collateral on securities lent	137 861	–	137 861	–
Customer accounts (deposits)	2 046 340	–	2 046 340	–
Debt securities in issue	640 557	–	627 875	12 682
Liabilities arising on securitisation of other assets	128 838	–	–	128 838
Other liabilities	43 813	–	43 813	–
	5 272 526	902 031	4 227 927	142 568
Net financial assets/(liabilities) at fair value	5 537 995	5 547 926	(780 617)	770 686

Transfers between level 1 and level 2

The were no transfers between level 1 and level 2 in the current and prior year.

(continued)

14. Financial instruments at fair value (continued)

Level 2 financial assets and financial liabilities

The following table sets out the group's principal valuation techniques as at 31 March 2018 used in determining the fair value of its financial assets and financial liabilities that are classified within level 2 of the fair value hierarchy.

	Valuation basis/techniques	Main assumptions
Assets
Non-sovereign and non-bank cash placements	Discounted cash flow model	Yield curves
Reverse repurchase agreements and cash collateral on securities borrowed	Discounted cash flow model, Hermite interpolation, Black-Scholes	Yield curves Volatilities
Bank debt securities	Discounted cash flow model	Yield curves NCD curves
Other debt securities	Discounted cash flow model	Yield curves and NCD curves, external prices, broker quotes
Derivative financial instruments	Discounted cash flow model, Hermite interpolation, industry standard derivative pricing models including Black-Scholes	Yield curves, risk free rate, volatilities, forex forward points and spot rates, interest rate swap curves and credit curves
Securities arising from trading activities	Standard industry derivative pricing model Adjusted quoted price	Interest rate curves, implied bond spreads, equity volatilities Liquidity adjustment
Investment portfolio	Discounted cash flow model, relative valuation model Comparable quoted inputs	Discount rate and fund unit price, net assets
Loans and advances to customers	Discounted cash flow model	Yield curves
Liabilities
Derivative financial instruments	Discounted cash flow model, Hermite interpolation, industry standard derivative pricing models including Black-Scholes	Yield curves, risk free rate, volatilities, forex forward points and spot rates, interest rate swap curves and credit curves
Other trading liabilities	Discounted cash flow model	Yield curves
Repurchase agreements and cash collateral on securities lent	Discounted cash flow model, Hermite interpolation	Yield curves
Customer accounts (deposits)	Discounted cash flow model	Yield curves
Debt securities in issue	Discounted cash flow model	Yield curves
Other liabilities	Discounted cash flow model	Yield curves

(continued)

14. Financial instruments at fair value (continued)

Level 3 instruments

The following table is a reconciliation of the opening balances to the closing balances for fair value measurements in level 3 of the fair value hierarchy:

For the year to 31 March £'000	Total level 3 financial instruments
Balance at 1 April 2016	690 903
Total gains or losses	74 898
– In the income statement	77 099
– In the statement of comprehensive income	(2 201)
Purchases	170 894
Sales	(167 297)
Issues	(16 226)
Settlements	(51 847)
Transfers into level 3	6 168
Transfers out of level 3	(16 312)
Foreign exchange adjustments	79 505
Balance at 31 March 2017	770 686
Total gains or losses	52 226
– In the income statement	49 490
– In the statement of comprehensive income	2 736
Purchases	208 531
Sales	(144 027)
Settlements	(13 790)
Transfers into level 3	7 165
Transfers out of level 3	(73 192)
Foreign exchange adjustments	(31 423)
Balance at 31 March 2018	776 176

During the year, £55.3 million has been transferred to level 2 due to an observable input becoming available to the valuation model.

In addition £17.9 million has been transferred to level 2 due to valuation methodologies being reviewed and observable inputs being used to determine the fair value.

£7.1 million has been transferred into level 3 due to inputs to valuation methods becoming unobservable.

For the year ended 31 March 2017, a level 3 investment of £16.3 million had been transferred to level 2 due to the nature of the asset changing, resulting in a change in valuation method. In addition £6.2 million has been transferred to level 3 due to valuation inputs becoming unobservable.

The group transfers between levels within the fair value hierarchy when the significance of the unobservable inputs change or if the valuation methods changes.

(continued)

14. Financial instruments at fair value (continued)

The following table quantifies the gains or (losses) included in the income statement and other comprehensive income recognised on level 3 financial instruments:

For the year to 31 March
£'000	Total	Realised	Unrealised
2018
Total gains or (losses) included in the income statement for the year
Net interest income	1 613	1 613	–
Fee and commission income	93	–	93
Investment income	49 759	54 119	(4 360)
Trading loss arising from customer flow	(3 598)	(488)	(3 110)
Trading income arising from balance sheet management and other
trading activities	1 623	40	1 583
	49 490	55 284	(5 794)
Total gains or (losses) recognised in other comprehensive income for
the year
Gains on realisation of available-for-sale assets recycled through the income statement	8 092	8 092	–
Fair value movements on available-for-sale assets taken directly to other
comprehensive income	2 736	–	2 736
	10 828	8 092	2 736
2017
Total gains included in the income statement for the year
Net interest income	1 831	1 831	–
Fee and commission income	11 732	11 443	289
Investment income	36 887	35 527	1 360
Trading income arising from customer flow	26 649	16	26 633
	77 099	48 817	28 282
Total gains or (losses) recognised in other comprehensive income for
the year
Gains on realisation of available-for-sale assets recycled through the income
statement	16 377	16 377	–
Fair value movements on available-for-sale assets taken directly to other
comprehensive income	(2 201)	–	(2 201)
	14 176	16 377	(2 201)

14. Financial instruments at fair value (continued)

Sensitivity of fair values to reasonably possible alternative assumptions by level 3 instrument type

The fair value of financial instruments in level 3 are measured using valuation techniques that incorporate assumptions that are not evidenced by prices from observable market data. The following table shows the sensitivity of these fair values to reasonably possible alternative assumptions, determined at a transactional level:

31 March 2018	Balance sheet value £'000	Significant unobservable input	Range of unobservable input used	Favourable changes £'000	Unfavourable changes £'000
Assets Other debt securities	16 769	Potential impact on income statement Cash flow adjustments EBITDA Other^	CPR 8.3% – 10% (5%)/5% ^	729 254 327 148	(840) (363) (327) (150)
Derivative financial instruments	44 200	Potential impact on income statement Volatilities Cash flow adjustments EBITDA WACC Other^	4% – 9% CPR 8% – 10% (10%)/10% 19.5% – 48.5% ^	6 507 356 154 131 4 049 1 817	(8 729) (356) (140) (131) (5 750) (2 352)
Securities arising from trading activities	6 754	Potential impact on income statement Cash flow adjustments	CPR 8%	1 180	(1 080)
Investment portfolio	587 819	Potential impact on income statement Price earnings multiple EBITDA Precious and industrial metals prices Property prices WACC Cash flows Other^ Potential impact on other comprehensive income Price earnings multiple Other^	5.0 x – 10 x * (10%)/6% (10%)/10% 19.5% – 48.5% ^ 4.0 x – 5.5 x ^	125 231 6 159 50 197 2 420 2 046 12 799 2 301 49 309 2 138 175 1 963	(138 497) (6 120) (43 893) (4 081) (2 046) (23 769) (2 483) (56 105) (2 113) (246) (1 867)
Loans and advances to customers	133 740	Potential impact on income statement EBITDA Other^	10% ^	15 490 10 349 5 141	(16 771) (10 349) (6 422)
Other securitised assets*	130 388	Potential impact on income statement Cash flow adjustments	CPR 8%	875	(733)
Total level 3 assets Liabilities	919 670			152 150	(168 763)
Derivative financial instruments	(1 442)	Potential impact on income statement Cash flow adjustments Volatilities	CPR 10% 8%	(110) (107) (3)	122 119 3
Debt securities in issue	(14 199)	Potential impact on income statement Volatilities	6%	(157)	157
Liabilities arising on securitisation of other assets*	(127 853)	Potential impact on income statement Cash flow adjustments	CPR 8%	(236)	231
Total level 3 liabilities	(143 494)			(503)	510
Net level 3 assets	776 176

* The sensitivity of the fair value of liabilities arising on securitisation of other assets has been considered together with other securitised assets.

^ Other – The valuation sensitivity for the private equity, other equity investments and embedded derivatives (profit share) portfolios has been assessed by adjusting various inputs such as expected cash flows, discount rates, earnings multiples rather than a single input. It is deemed appropriate to reflect the outcome on a portfolio basis for the purposes of this analysis as the sensitivity of the investments cannot be determined through the adjustment of a single input.

** The EBITDA and cash flows have been stressed on an investment-by-investment basis in order to obtain favourable and unfavourable valuations.

(continued)

14. Financial instruments at fair value (continued)

At 31 March 2017	Balance sheet value £'000	Significant unobservable input changed	Range which unobservable input has been stressed	Favourable changes £'000	Unfavourable changes £'000
Assets
Other debt securities	6 431	Potential impact on income statement Price earnings multiple	(10%)/10%	965	(129)
Derivative financial instruments	59 097	Potential impact on income statement Volatilities EBITDA Cash flow adjustments	4% – 9.5% 5% – 6 % CPR 6.25% – 8.4%	6 692 2 465 63 648	(5 016) (1 537) – (1 086)
		Property values Other^	(10%)/10% ^	60 3 456	(60) (2 333)
Securities arising from trading activities		Potential impact on income statement
	9 071	Cash flow adjustments	CPR 9%	1 290	(1 074)
Investment portfolio	586 327	Potential impact on income statement Price earnings multiple	3 x – 10.3 x	81 819 5 430	(76 204) (5 788)
		Precious and industrial metal prices EBITDA Other^	(10%)/10% ^^ ^	15 403 20 862 40 124	(17 215) (17 532) (35 669)
		Potential impact on other comprehensive income Price earnings multiple Other^	4.0 x – 4.5 x ^	6 228 630 5 598	(2 655) (301) (2 354)
Loans and advances to customers	86 482	Potential impact on income statement EBITDA Other^	10% ^	9 825 5 681 4 144	(9 716) (5 681) (4 035)
Other securitised assets*	138 628	Potential impact on income statement Cash flow adjustments	CPR 6.25%	48	(38)
Non current assets held for sale	27 218	Potential impact on income statement Price earnings multiple	(10%)/10%	3 876	(3 459)
Total level 3 assets	913 254			110 743	(98 291)
Liabilities Derivative financial instruments	1 048	Potential impact on income statement Cash flow adjustments	CPR 8.4%	(794)	983
Debt securities in issue	12 682	Potential impact on income statement Volatilities	7%	(608)	401
Liabilities arising on securitisation of other assets*		Potential impact on income statement
Total level 3 liabilities	128 838 142 568	Cash flow adjustments	CPR 6.25%	(847) (2 249)	931 2 315
Net level 3 assets	770 686

* The sensitivity of the fair value of liabilities arising on securitisation of other assets has been considered together with other securitised assets.

^ Other – The valuation sensitivity for the private equity and embedded derivatives (profit share) portfolios has been assessed by adjusting

various inputs such as expected cash flows, discount rates, earnings multiples rather than a single input. It is deemed appropriate to reflect the outcome on a portfolio basis for the purposes of this analysis as the sensitivity of the investments cannot be determined through the adjustment of a single input.

^^ The EBITDA has been stressed on an investment by investment basis in order to obtain a favourable and unfavourable valuation.

(continued)

14. Financial instruments at fair value (continued)

In determining the value of level 3 financial instruments, the following are the principal inputs that can require judgement:

Credit spreads

Credit spreads reflect the additional yield that a market participant would demand for taking exposure to the credit risk of an instrument. The credit spread for an instrument forms part of the yield used in a discounted cash flow calculation. In general a significant increase in a credit spread in isolation will result in a movement in fair value that is unfavourable for the holder of a financial instrument.

Discount rates

Discount rates (including WACC) are used to adjust for the time value of money when using a discounted cash flow valuation method. Where relevant, the discount rate also accounts for illiquidity, market conditions and uncertainty of future cash flows.

Volatilities

Volatility is a key input in the valuation of derivative products containing optionality. Volatility is a measure of the variability or uncertainty in returns for a given derivative underlying. It represents an estimate of how much a particular underlying instrument, parameter or index will change in value over time.

Cash flows

Cash flows relate to the future cash flows which can be expected from the instrument and requires judgement.

EBITDA

A company's earnings before interest, taxes, depreciation and amortisation. This is the main input into a price earnings multiple valuation method.

Price earnings multiple

The price-to-earnings ratio is an equity valuation multiple. It is a key driver in the valuation of unlisted investments.

Property value and precious and industrial metals

The property value and the price of precious and industrial metals in a key driver of future cash flows on these investments.

(continued)

				Fair value category
	At 31 March	Carrying
£'000		amount	Fair value	Level 1	Level 2	Level 3
15.	Fair value of financial
	instruments at amortised
	cost
	The following table sets out the fair value of financial instruments held at amortised cost when the carrying value is not a reasonable approximation of fair value: 2018
	Assets
	Loans and advances to banks	1 929 456	1 929 497	1 537 083	383 186	9 228
	Reverse repurchase agreements and cash collateral
	on securities borrowed	1 419 572	1 419 659	634 367	785 292	–
	Sovereign debt securities	208 384	208 034	208 034	–	–
	Bank debt securities	217 992	229 095	103 424	125 671	–
	Other debt securities	273 323	270 801	28 468	125 466	116 867
	Loans and advances to customers	23 501 381	23 496 971	391 526	13 396 602	9 708 843
	Other loans and advances	347 809	344 894	–	220 288	124 606
	Other assets	1 239 331	1 235 276	733 526	298 342	203 408
	Liabilities
	Deposits by banks	2 931 267	2 937 012	335 931	2 601 081	–
	Repurchase agreements and cash collateral on securities lent	565 791	565 629	361 965	203 664	–
	Customer accounts (deposits)	28 611 469	28 646 834	13 883 362	14 763 472	–
	Debt securities in issue	2 245 301	2 334 351	612 346	1 717 769	4 236
	Other liabilities	1 245 016	1 240 548	872 348	303 960	64 240
	Subordinated liabilities	1 482 987	1 696 778	1 696 739	39	–
	2017
	Assets
	Reverse repurchase agreements and cash collateral
	on securities borrowed	1 191 715	1 191 744	523 896	667 848	–
	Sovereign debt securities	198 642	193 693	193 693	–	–
	Bank debt securities	311 301	326 488	162 533	163 955	–
	Other debt securities	378 500	373 209	4 016	275 917	93 276
	Loans and advances to customers	21 267 984	21 262 727	304 340	12 349 034	8 609 353
	Other loans and advances	355 248	337 419	22 760	186 907	127 752
	Other assets	1 165 779	1 165 721	776 559	261 991	127 171
	Liabilities
	Deposits by banks	2 736 066	2 771 467	390 490	2 380 977	–
	Repurchase agreements and cash collateral on securities lent	552 754	554 915	400 270	154 645	–
	Customer accounts (deposits)	27 063 088	27 157 559	15 237 228	11 903 738	16 593
	Debt securities in issue	1 745 623	1 777 485	479 288	1 291 766	6 431
	Other liabilities	1 135 721	1 135 426	762 252	333 595	39 579
	Subordinated liabilities	1 402 638	1 575 575	1 575 536	39	–

For financial assets and financial liabilities that are liquid or have a short-term maturity (less than three months) it is assumed that the carrying amounts approximate their fair value and have been reflected in level 1. This assumption also applies to demand deposits and savings accounts without a specific maturity which are included in customer accounts (deposits) and variable rate financial instruments.

(continued)

15. Fair value of financial instruments at amortised cost (continued) Financial instruments for which fair value does not approximate carrying value

Fixed-rate financial instruments

The fair value of fixed-rate financial assets and financial liabilities carried at amortised cost are estimated by comparing spreads earned on the transactions with spreads earned on similar new transactions entered into by the group. The estimated fair value of fixed interest-bearing deposits is based on discounted cash flows, using prevailing money market interest rates for debts with similar credit risk and maturity. For quoted sub-debt issued, the fair values are calculated based on quoted market prices. For those notes issued where quoted market prices are not available, a discounted cash flow model is used based on a current interest rate yield curve appropriate for the remaining term to maturity.

The following table sets out the group's principal valuation techniques used in determining the fair value of its financial assets and financial liabilities:

Loans and advances to banks	Calculation of the present value of future cash flows, discounted as appropriate.
Reverse repurchase agreements and cash collateral on securities borrowed	Calculation of the present value of future cash flows, discounted as appropriate.
Bank debt securities	Valued using a cash flow model of the bonds, discounted by an observable market credit curve.
Other debt securities	Priced with reference to similar trades in an observable market as well as calculation of the present value of future cash flows, discounted as appropriate.
Loans and advances to customers	Calculation of the present value of future cash flows, discounted as appropriate.
Other loans and advances	Calculation of the present value of future cash flows, discounted as appropriate.
Other assets	Calculation of the present value of future cash flows, discounted as appropriate.
Deposits by banks	Calculation of fair value using appropriate funding rates. Calculation of the present value of future cash flows, discounted as appropriate.
Repurchase agreements and cash collateral on securities lent	Calculation of the present value of future cash flows, discounted as appropriate.
Short-term customer accounts (deposits)	Where the deposits are short term in nature, carrying amounts are assumed to approximate fair value. Where deposits are of longer-term maturities, they are valued using a cash flow model, discounted as appropriate.
Debt securities in issue	Where the debt securities are fully collateralised, fair value is equal to the carrying value. Other debt securities are valued using a cash flow model, discounted as appropriate to the securities for funding and interest rates.
Other liabilities	Where the other liabilities are short-term in nature, carrying amounts are assumed to approximate fair value.
Subordinated liabilities	Valued with reference to market prices.

16. Designated at fair value: loans and receivables and financial liabilities

		Fair value adjustment		Change in fair value attributable to credit risk
At 31 March £'000	Carrying value	Year to date	Cumulative	Year to date	Cumulative	Maximum exposure to credit risk
Loans and receivables designated at fair value through profit or loss 2018
Loans and advances to customers	1 171 628	16 371	(4 781)	–	–	1 155 994
Other securitised assets	130 388	7 468	(9 220)	7 468	(9 220)	130 388
	1 302 016	23 839	(14 001)	7 468	(9 220)	1 286 382
2017
Loans and advances to
customers	921 991	(6 090)	(23 795)	–	–	921 991
Other securitised assets	138 628	5 222	(18 095)	5 222	(18 095)	138 628
	1 060 619	(868)	(41 890)	5 222	(18 095)	1 060 619

			Fair value adjustment		attributable to credit risk
At 31 March £'000	Carrying value	Remaining contractual amount to be repaid at maturity	Year to date	Cumulative	Year to date	Cumulative
Financial liabilities designated at fair value through profit or loss 2018
Customer accounts (deposits)	2 375 704	2 360 648	9 713	15 068	–	–
Debt securities in issue	471 886	492 533	6 479	23 278	3 130	6 176
Liabilities arising on securitisation of other assets	127 853	130 870	(6 791)	3 818	(7 722)	3 014
	2 975 443	2 984 051	9 401	42 164	(4 592)	9 190
2017
Customer accounts (deposits)	2 046 340	2 041 032	15 015	5 307	–	–
Debt securities in issue	640 557	641 766	38 821	46 578	10 453	4 691
Liabilities arising on securitisation of other assets	128 838	139 572	(6 563)	10 998	(6 563)	10 998
	2 815 735	2 822 370	47 273	62 883	3 890	15 689

Changes in fair value due to credit risk are determined as the change in the fair value of the financial instrument that is not attributable to changes in other market inputs.

Change in fair value

(continued)

£'000	As at 31 March	2018	2017
17.	Cash and balances at central banks
	The country risk of cash and balances at central banks lies in the following geographies:
	South Africa	540 847	487 172
	United Kingdom	3 389 267	2 797 953
	Europe (excluding UK)	98 503	55 618
	Other	11 895	10 959
		4 040 512	3 351 702

£'000	As at 31 March	2018	2017
18.	Loans and advances to banks
	The country risk of loans and advances to banks lies in the following geographies:
	South Africa	612 693	960 599
	United Kingdom	711 081	812 957
	Europe (excluding UK)	357 730	531 617
	Australia	93 711	67 091
	Asia	66 098	115 297
	United States of America	257 999	522 457
	Other	66 221	181 023
		2 165 533	3 191 041

£'000	As at 31 March	2018	2017
19.	Reverse repurchase agreements and cash collateral on securities borrowed and repurchase agreements and cash collateral on securities lent
	Assets
	Reverse repurchase agreements	1 572 627	1 728 937
	Cash collateral on securities borrowed	634 850	630 033
		2 207 477	2 358 970
	As part of the reverse repurchase and securities borrowing agreements the group has received securities that it is allowed to sell or re-pledge. £190.2 million (2017: £689.8 million) has been re-sold or re-pledged to third parties in connection with financing activities or to comply with commitments under short sale transactions.
	Liabilities
	Repurchase agreements	539 969	543 772
	Cash collateral on securities lent	115 871	146 843
		655 840	690 615

The assets transferred and not derecognised in the above repurchase agreements are fair valued at £628.2 million (2017: £536.6 million). They are pledged as security for the term of the underlying repurchase agreement.

(continued)

£'000	As at 31 March	2018	2017
20.	Sovereign debt securities
	Bonds	1 034 188	1 037 799
	Government securities	297 856	191 480
	Treasury bills	3 577 983	2 575 348
		4 910 027	3 804 627
	The country risk of the sovereign debt securities lies in the following geographies:
	South Africa	3 754 555	2 825 481
	United Kingdom	885 716	613 605
	Europe (excluding UK)*	22 445	12 127
	United States of America	247 311	327 170
	Other	–	26 244
	Total	4 910 027	3 804 627

* Where Europe (excluding UK) includes securities held largely in Germany and France.

£'000	As at 31 March		2017
21.	Bank debt securities
	Bonds	401 950	358 908
	Floating rate notes	155 360	250 123
	Asset-based securities	29 854	30 158
		587 164	639 189
	The country risk of the bank debt securities lies in the following geographies:
	South Africa	286 961	259 021
	United Kingdom	182 111	208 882
	Europe (excluding UK)	50 132	98 994
	United States of America	61 541	62 947
	Other	6 419	9 345
	Total	587 164	639 189

As at 31 March £'000			2017
22.	Other debt securities
	Bonds	595 435	805 545
	Commercial paper	–	24 531
	Floating rate notes	168 485	151 043
	Liquid asset bills	–	17 770
	Asset-based securities	137 515	109 164
	Other investments	2 168	7 505
		903 603	1 115 558
	The country risk of other debt securities lies in the following geographies:
	South Africa	319 420	404 126
	United Kingdom	75 976	189 386
	Europe (excluding UK)	345 433	328 825
	Australia	8 699	11 789
	United States of America	37 642	94 024
	Other	116 433	87 408
		903 603	1 115 558

(continued)

23. Derivative financial instruments

The group enters into various contracts for derivatives both as principal for trading purposes and as customer for hedging foreign exchange and interest rate exposures. These include financial futures, options, swaps and forward rate agreements. The risks associated with derivative instruments are monitored in the same manner as for the underlying instruments. Risks are also measured across the product range in order to take into account possible correlations.

In the tables that follow notional principal amounts indicate the volume of business outstanding at the balance sheet date and do not represent amounts at risk. The fair value of a derivative financial instrument represents the present value of positive or negative cash flows which would have occurred had the rights and obligations arising from that instrument been closed out by the group in an orderly market transaction at balance sheet date.

		2018			2017
At 31 March £'000	Notional principal amounts	Positive fair value	Negative fair value	Notional principal amounts	Positive fair value	Negative fair value
Foreign exchange derivatives
Forward foreign exchange contracts	20 660 781	378 011	256 556	18 610 552	297 618	246 584
Currency swaps	2 969 822	152 162	198 904	1 613 133	219 907	341 284
OTC options bought and sold	3 836 718	110 655	91 644	14 323 079	87 271	54 704
Other foreign exchange contracts	112	22	24	57	208	189
OTC derivatives	27 467 433	640 850	547 128	34 546 821	605 004	642 761
Interest rate derivatives
Caps and floors	6 472 519	18 276	5 534	5 898 931	27 422	11 025
Swaps	37 378 697	239 592	299 246	30 156 329	209 890	258 866
Forward rate agreements	96 267	3 150	861	77 522	944	1 163
OTC options bought and sold	63 104	2 079	1 851	^	1 415	1 399
Other interest rate contracts	397 361	13	23 836	373 614	26 905	2 040
OTC derivatives	44 407 948	263 110	331 328	36 506 396	266 576	274 493
Exchange traded futures	17 409	–	4	–	–	–
	44 425 357	263 110	331 332	36 506 396	266 576	274 493
Equity and stock index derivatives
OTC options bought and sold	9 205 748	413 132	304 067	21 144 620	256 441	260 862
Equity swaps and forwards	3 700 016	63 107	86 918	2 004 532	20 695	57 279
OTC derivatives	12 905 764	476 239	390 985	23 149 152	277 136	318 141
Exchange traded futures	357 508	(1 391)	–	277 250	107	–
Exchange traded options	7 481 444	(68)	56 322	7 208 932	3 440	–
Warrants	136 338	–	355 255	184 179	479	305 526
	20 881 054	474 780	802 562	30 819 513	281 162	623 667
Commodity derivatives
OTC options bought and sold	32 411	4 228	1 976	39 026	518	477
Commodity swaps and forwards	1 139 019	50 738	40 150	652 431	23 353	14 905
OTC derivatives	1 171 430	54 966	42 126	691 457	23 871	15 382
Credit derivatives	1 607 611	15 195	23 878	1 195 882	16 673	17 479
Embedded derivatives*		34 400			30 886
Cash collateral		(130 893)	(275 463)		(38 324)	(277 576)
Derivatives per balance sheet		1 352 408	1 471 563		1 185 848	1 296 206

* Mainly includes profit shares received as part of lending transactions.

^ Less than £1 000.

(continued)

As at 31 March £'000 2018
24.	Securities arising from trading activities
	Bonds	186 168	233 758
	Floating rate notes	–	377
	Government securities	346 206	130 714
	Listed equities	896 983	1 006 080
	Unlisted equities	5 034	5 739
		1 434 391	1 376 668

£'000	As at 31 March	2018	2017
25.	Investment portfolio
	Listed equities	231 593	237 369
	Unlisted equities*	653 906	598 530
		885 499	835 899

* Unlisted equities includes loan instruments that are convertible into equity.

As at 31 March £'000	2018	2017
Loans and advances to customers and
other loans and advances
Gross loans and advances to customers	24 910 776	22 388 641
Impairments of loans and advances to customers	(237 767)	(198 666)
Net loans and advances to customers	24 673 009	22 189 975
Gross other loans and advances to customers	350 159	364 419
Impairments of other loans and advances to customers	(2 350)	(9 171)
Net other loans and advances to customers	347 809	355 248
For further analysis on loans and advances refer to pages 35 to 48
in volume two in the risk management section. Specific and portfolio impairments
Reconciliation of movements in specific and portfolio impairments
Loans and advances to customers
Specific impairment
Balance at beginning of year	136 148	154 015
Charged to the income statement	128 976	97 543
Reversals and recoveries recognised in the income statement	(21 369)	(13 389)
Utilised	(106 261)	(115 782)
Transfers	1 266	445
Exchange adjustment	(1 158)	13 316
Balance at end of year	137 602	136 148

As at 31 March £'000		2018	2017
26.	Loans and advances to customers and
other loans and advances	(continued)
Portfolio impairment
Balance at the beginning of the year		62 518	32 236
Charge to the income statement		39 027	27 209
Transfers		(1 266)	(258)
Exchange adjustment		(114)	3 331
Balance at the end of the year		100 165	62 518
Other loans and advances
Specific impairment
Balance at the beginning of the year		7 229	6 606
Charge/release to the income statement		370	(64)
Utilised		(7 071)	(126)
Transfers		(37)	5
Exchange adjustment		(6)	808
Balance at the end of the year		485	7 229
Portfolio impairment
Balance at the beginning of the year		1 942	1 899
Release to the income statement		(62)	(57)
Transfers		37	(192)
Exchange adjustment		(52)	292
Balance at the end of the year		1 865	1 942
Total specific impairments		138 087	143 377
Total portfolio impairments		102 030	64 460
Total impairments		240 117	207 837
	Interest income recognised on loans that have been impaired	1 148	1 857
Reconciliation of income statement charge:
Loans and advances to customers		146 634	111 363
Specific impairment charge to income statement		107 607	84 154
Portfolio impairment charge to income statement		39 027	27 209
Securitised assets (refer to note 27)		18	212
Specific impairment charge to income statement		53	225
Portfolio impairment release to income statement		(35)	(13)
Other loans and advances		308	(121)
	Specific impairment charge/(release) to income statement	370	(64)
Portfolio impairment release to income statement		(62)	(57)
Other assets		1 596	–
Specific impairment charge to income statement		1 596	–
Portfolio impairment charge to income statement		–	–
Total income statement charge		148 556	111 454

£'000	As at 31 March	2018	2017
27.	Securitised assets and liabilities
	arising on securitisation
	Gross own originated loans and advances to customers securitised	459 472	517 524
	Impairments of own originated loans and advances to customers securitised	(384)	(362)
	Net own originated loans and advances to customers securitised	459 088	517 162
	Other securitised assets are made up of the following categories of assets:
	– Cash and cash equivalents	17 999	10 336
	– Loans and advances to customers	123 388	131 370
	– Other debt securities	7 000	7 258
	Total other securitised assets	148 387	148 964
	The associated liabilities are recorded on balance sheet in the following line items:
	Liabilities arising on securitisation of own originated loans and advances	136 812	90 125
	Liabilities arising on securitisation of other assets	127 853	128 838
	Specific and portfolio impairments
	Reconciliation of movements in specific and portfolio impairments of assets that have been securitised:
	Specific impairment
	Balance at the beginning of the year	29	16
	Charge to the income statement	53	225
	Utilised	–	(280)
	Transfers	24	–
	Exchange adjustment	3	68
	Balance at the end of the year	109	29
	Portfolio impairment
	Balance at the beginning of the year	333	283
	Release to the income statement	(35)	(13)
	Transfers	(24)	–
	Exchange adjustment	1	63
	Balance at the end of the year	275	333
	Total portfolio and specific impairments on balance sheet	384	362

As at 31 March £'000	2018	2017
28. Interests in associated undertakings
Analysis of the movement in interests in associated undertakings:
At the beginning of the year	392 213	267 099
Exchange adjustments	3 310	65 800
Disposals	(12 784)	(6 141)
Acquisitions	1 142	–
Increase in investment	31 000	–
Return of capital	(4 651)	–
Acquisition of non-controlling interests	–	5 528
Advance of loan	10 996	–
Transfer from investment portfolio	–	43 362
Share of post taxation profit of associates	46 823	18 890
Dividends received	(197)	(2 325)
At the end of the year	467 852	392 213
£'000	2018	2017
Details of material associated companies
IEP Group Proprietary Limited
Summarised financial information (£'000):
For the year to 31 March
Revenue	679 542	310 191
Profit after taxation	111 929	36 510
Total comprehensive income	110 530	36 510
At 31 March
Assets
Non-current assets	1 255 174	1 187 330
Current assets	372 064	315 324
Liabilities
Non-current liabilities	577 757	458 874
Current liabilities	184 908	303 135
Net asset value	864 573	740 645
Non-controlling interest	140 915	113 596
Shareholders' equity	723 658	627 049
Effective interest in issued share capital	45.7%	45.0%
Net asset value	330 856	282 172
Goodwill	40 953	40 632
Carrying value of interest – equity method	371 810	322 804

(continued)

As at 31 March £'000	2018	2017
Deferred taxation
Deferred taxation assets	157 321	133 972
Deferred taxation liabilities	(32 158)	(40 408)
Net deferred taxation assets	125 163	93 564
The net deferred taxation assets arise from:
Deferred capital allowances	43 179	33 098
Income and expenditure accruals	71 442	50 538
Asset in respect of unexpired options	21 043	23 584
Unrealised fair value adjustments on financial instruments	1 147	4 128
Losses carried forward	22 052	18 923
(Liabilities)/assets in respect of pensions surplus	48	(7 883)
(Liabilities)/assets in respect of pension contributions	(208)	8 675
Deferred tax on acquired intangibles	(19 783)	(22 468)
Revaluation of property	(17 588)	(24 445)
Finance lease accounting	4 169	3 804
Other temporary differences	(338)	5 610
Net deferred taxation assets	125 163	93 564
Reconciliation of net deferred taxation assets:
At the beginning of the year	93 564	56 649
Charge to income statement – current year taxation	34 690	43 312
Charge directly in other comprehensive income	(2 502)	1 831
Acquisition	–	(4 939)
Other	153	49
Exchange adjustments	(742)	(3 338)
At the end of the year	125 163	93 564

Deferred taxation assets are recognised to the extent it is likely that profits will arise in future periods. The assessment of the likelihood of future profits is based on past performance and current projections. Deferred taxation assets are not recognised in respect of capital losses and excess management expenses as crystallisation of capital gains and the eligibility of potential losses is uncertain.

There are trading losses carried forward of £200.2 million (2017: £216.1 million), capital losses carried forward of £41.9 million (2017: £41.9 million) and excess management expenses of £9.5 million (2017: £9.5 million) on which deferred tax assets have not been recognised due to uncertainty regarding future profits against which these losses can be utilised.

The Finance Act 2015 reduced the main rate of corporate taxation to 19% with effect from 1 April 2017. In addition, the bank corporation tax surcharge of 8% effective from 1 January 2016 was enacted in November 2015.

On 16 March 2016, the Chancellor of the Exchequer announced a further reduction of the corporation tax rate to 17% effective from 1 April 2020. The effect of these legislative changes is reflected in the above calculation of the deferred taxation asset as the rate was substantially enacted before 31 March 2018.

£'000	As at 31 March	2018	2017
30.	Other assets
	Settlement debtors	853 124	879 803
	Dealing properties	275 106	280 039
	Prepayments and accruals	165 262	152 547
	Pension assets (refer to note 40)	2 627	2 076
	Trading initial margin	96 887	194 518
	Investec Import Solutions debtors	169 581	111 038
	Corporate tax assets	6 639	10 196
	Other	306 890	270 263
		1 876 116	1 900 480

(continued)

At 31 March £'000	Freehold properties	Leasehold improve ments	Furniture and vehicles	Equipment	Operating leases*	Total
Property and
equipment
2018
Cost
At the beginning of the year	49 039	72 145	22 076	93 011	9 546	245 817
Exchange adjustments	–	(3 725)	(76)	2 393	–	(1 408)
Additions	128 007	3 320	2 432	14 074	2 484	150 317
Disposals	–	(4 614)	(1 549)	(5 590)	(1 272)	(13 025)
Reclassification	–	–	310	2 887	–	3 197
At the end of the year	177 046	67 126	23 193	106 775	10 758	384 898
Accumulated depreciation
At the beginning of the year	(3 448)	(44 022)	(19 795)	(67 678)	(4 935)	(139 878)
Exchange adjustments	–	206	35	2 511	71	2 823
Disposals	–	1 629	1 153	5 907	1 181	9 870
Depreciation for the year	(632)	(7 085)	(1 171)	(9 867)	(2 421)	(21 176)
Reclassification	–	–	( 310)	(2 887)	–	(3 197)
At the end of the year	(4 080)	(49 272)	(20 088)	(72 014)	(6 104)	(151 558)
Net carrying value	172 966	17 854	3 105	34 761	4 654	233 340
2017
Cost
At the beginning of the year	49 039	59 576	21 314	88 292	9 220	227 441
Exchange adjustments	–	4 367	75	5 052	–	9 494
Additions	–	9 485	1 676	11 638	3 197	25 996
Disposals	–	(1 283)	(989)	(11 971)	(2 871)	(17 114)
At the end of the year	49 039	72 145	22 076	93 011	9 546	245 817
Accumulated depreciation
At the beginning of the year	(2 816)	(36 792)	(18 941)	(72 714)	(5 290)	(136 553)
Exchange adjustments	–	(676)	(6)	4 437	–	3 755
Disposals	–	538	766	8 147	2 524	11 975
Depreciation for the year	(632)	(7 092)	(1 614)	(7 548)	(2 169)	(19 055)
At the end of the year	(3 448)	(44 022)	(19 795)	(67 678)	(4 935)	(139 878)
Net carrying value	45 591	28 123	2 281	25 333	4 611	105 939

* These are assets held by the group, in circumstances where the group is the lessor.

On 3 December 2010 the group acquired a portfolio of operating leased assets comprising motor vehicles. The operating lease income from this portfolio has been included in other operating income (note 5) and the depreciation of these operating leased assets has been shown separately on the face of the income statement.

(continued)

£'000	As at 31 March	2018	2017
32.	Investment properties
	At the beginning of the year	1 128 930	938 879
	Additions	52 136	48 239
	Disposals	(34 299)	(115 453)
	Fair value movement	26 919	22 989
	Exchange adjustment	10 411	234 276
	At the end of the year	1 184 097	1 128 930

All investment properties are classified as level 3 in the fair value hierarchy.

For total gains and losses recognised in the income statement, refer to note 4.

For all investment property that is measured at fair value, the current use of the property is considered the highest and best use. Properties are valued under the income capitalisation method and discounted cash flow method (DCF).

Under the income capitalisation method a property's fair value is estimated based on the normalised net operating income generated by the property, which is divided by the capitalisation rate.

Under the DCF method a property's fair value is estimated using explicit assumptions about the benefits and liabilities of ownership over the asset's life including an exit or terminal value. This involves the projection of a series of cash flows and to this an appropriate, market-derived discount rate is applied to establish the present value of the income stream.

Valuation techniques used to derive level 3 fair values

For all classes of investment property, the significant unobservable inputs listed below are used in the income capitalisation method to determine the fair value measurement at the end of the reporting period.

The following factors influence the equivalent yield applied by management when determining the fair value of a building:

• Vacancy rate
• Expected rental
• Lease term.

Further analysis of investment properties is in the risk management section on pages 51 to 53 in volume two.

The table below includes the following descriptions and definitions relating to key unobservable inputs made in determining fair value:

Significant unobservable inputs	Definitions
Expected Rental Value (ERV)	The rent at which space could be let in the market conditions prevailing at the date of valuation.
Equivalent yield	The equivalent yield is defined as the internal rate of return of the cash flow from the property, assuming a rise to ERV at the next review, but with no further rental growth.
Long-term vacancy rate	The ERV of the expected long-term average structural vacant space divided by ERV of the whole property. Long-term vacancy rate can also be determined based on the percentage of estimated vacant space divided by the total lettable area.

There are inter-relationships between ERV, the long-term vacancy and the equivalent yield. However, a lower/(higher) vacancy rate would increase/(decrease) the ERV for a property.

Significant unobservable inputs	Relationship between unobservable inputs and fair value measurement
Expected Rental Value (ERV)	Increases/(decreases) in ERV would increase/(decrease) estimated fair value.
Equivalent yield	Increases/(decreases) in the equivalent yield would result in decreases/(increases) in the estimated fair value.
Long-term vacancy rate	Increases/(decreases) in the long-term vacancy rate would result in decreases/ (increases) in the estimated fair value.

(continued)

£'000	As at 31 March	2018	2017
33.	Goodwill
	Cost
	At the beginning of the year	422 254	398 504
	Acquisition of subsidiaries	849	148
	Exchange adjustments	1 288	23 602
	At the end of the year	424 391	422 254
	Accumulated impairments
	At the beginning of the year	(54 675)	(30 465)
	Income statement amount	–	(4 749)
	Exchange adjustments	(913)	(19 461)
	At the end of the year	(55 588)	(54 675)
	Net carrying value	368 803	367 579
	Analysis of goodwill by line of business and geography:
	UK and Other
	Asset Management	88 045	88 045
	Wealth & Investment	243 343	243 169
	Specialist Banking	24 877	23 941
		356 265	355 155
	South Africa
	Wealth & Investment	2 175	2 061
	Specialist Banking	10 363	10 363
		12 538	12 424

Total group 368 803 367 579

Goodwill is tested annually for impairment, or more frequently if evidence exists that goodwill might be impaired, by comparing the carrying value to its recoverable amount.

The recoverable amount of goodwill is determined based on expected cash flows within the cash-generating units of the group to which the goodwill is allocated. Key assumptions within the calculation include discount rates, growth rates in revenue and related expenditure and loan impairment rates.

Discount rates are based on pre-tax rates that reflect current market conditions, adjusted for the specific risks associated with the cash-generating unit. Growth rates are based on industry growth forecasts. Cash flow forecasts are based on the most recent financial budgets for the next financial year and are extrapolated for a period of three to five years, adjusted for expected future events.

(continued)

33. Goodwill (continued)

UK, Europe and Australia

The two most significant cash-generating units giving rise to goodwill are Investec Asset Management and Investec Wealth & Investment, which includes the business of Williams de Broë (acquired in 2012 as part of the Evolution Group) which was merged with Investec Wealth & Investment in August 2012.

For Investec Wealth & Investment goodwill of £243.3 million has been tested for impairment on the basis of the cash flow projections for the next three years discounted at 8.8% (2017: 8.8%), which incorporates an expected revenue growth rate of 2% in perpetuity (March 2017: 2%). The valuation is based on the value in use of the business. Sensitivity analysis has been carried out and it has been concluded that no reasonably possible change in the key assumptions would cause an impairment to be recognised.

For Investec Asset Management, goodwill of £88.0 million has been tested for impairment on the basis of a valuation of the business based on 3% of funds under management. The valuation is based on management's assessment of appropriate external benchmarks to estimate the fair value less cost to sell the business. Valuing an asset management business as a percentage of funds under management, taking into account asset mix, is in line with market practice and the percentage used by management reflects external transactions that are comparable to Investec Asset Management. The valuation would be level 3 in the fair value hierarchy.

Sensitivity analysis has been carried out and it has been concluded that no reasonably possible change in the key assumptions would cause an impairment to be recognised.

South Africa

Goodwill attributed to the South African operations relates to Investec Import Solutions group and Investec Wealth and Investment group.

The goodwill relating to Investec Import Solutions has been tested for impairment, taking into account profitability, being the budgeted profits and the future profit growth for the next five years. The valuation is based on management's assessment of appropriate profit forecast and discount rate to estimate the fair value. Discount rate applied of 6.90% is determined using the South African inter-bank lending rate, adjusted for business specific risk.

The valuation would be level 3 in the fair value hierarchy.

Movement in goodwill

2018

There were no significant movements in goodwill during the year.

2017

An impairment of £3.1 million was recognised in relation to a historic acquisition in the Specialist Banking businesses, due to a change in the nature of the ongoing business. An impairment of £1.6 million was recognised in the Asset Management business in South Africa.

(continued)

£'000	At 31 March	Acquired software	Internally generated software	Management contracts	Client relationships	Total
34.	Intangible assets
	2018
	Cost
	At the beginning of the year	76 469	8 042	583	212 935	298 029
	Exchange adjustments	47	1 326	22	155	1 550
	Additions	6 096	558	–	–	6 654
	Disposals	( 775)	(5 773)	–	–	(6 548)
	At the end of the year	81 837	4 153	605	213 090	299 685
	Accumulated amortisation and impairments
	At the beginning of the year	(61 736)	(4 267)	( 372)	(88 393)	(154 768)
	Exchange adjustments	(41)	(1 326)	(17)	(37)	(1 421)
	Disposals	65	5 711	–	–	5 776
	Amortisation	(6 420)	(1 208)	(142)*	(16 113)*	(23 883)
	At the end of the year	(68 132)	(1 090)	(531)	(104 543)	(174 296)
	Net carrying value	13 705	3 063	74	108 547	125 389
	2017
	Cost
	At the beginning of the year	67 525	5 688	520	207 126	280 859
	Exchange adjustments	122	–	63	5 809	5 994
	Additions	9 370	2 382	–	–	11 752
	Disposals	(548)	(28)	–	–	(576)
	At the end of the year	76 469	8 042	583	212 935	298 029
	Accumulated amortisation and impairments
	At the beginning of the year	(56 333)	(4 037)	(196)	(72 013)	(132 579)
	Exchange adjustments	(107)	–	(37)	678	534
	Disposals	397	28	–	–	425
	Amortisation	(5 693)	(258)	(139)	(17 058)	(23 148)
	At the end of the year	(61 736)	(4 267)	(372)	(88 393)	(154 768)
	Net carrying value	14 733	3 775	211	124 542	143 261

Client relationships all relate to the acquisition of Rensburg Sheppards plc in June 2010 and Evolution Group in December 2011, Investec Capital Asia Limited in April 2011, NCB Group in June 2012 and Investec Import Solutions group in July 2015.

* Amortisation of acquired intangibles as disclosed in the income statement £16.3 million (2017: £17.2 million).

(continued)

35. Acquisitions and disposals

A deferred consideration of £6 million which was based on profitability criteria, was paid in the current year relating to the acquisition of the Investec Import Solutions group, previously Blue Strata group. This was recognised as an expense in the income statement.

There were no significant acquisitions or disposals of subsidiaries during the year ended 31 March 2018 and during the year ended 31 March 2017.

As at 31 March £'000	2018	2017
Long-term assurance business attributable
to policyholders
Liabilities to customers under investment contracts
Investec Life Limited	37 761	32 857
Investec Assurance Limited	8 446 535	7 692 747
Insurance liabilities, including unit-linked liabilities – Investec Life Limited	3 480	2 526
	8 487 776	7 728 130
Investec Life Limited
The assets of the long-term assurance fund attributable to policyholders are detailed below:
Investments	41 241	35 383
	41 241	35 383
Investments above comprise:
Interest-bearing securities	12 094	8 587
Stocks, shares and unit trusts	23 646	10 913
Deposits	5 501	15 883
	41 241	35 383
Investec Assurance Limited
The assets of the long-term assurance fund attributable to policyholders are detailed below:
Investments	8 374 054	7 630 368
Debtors and prepayments	28 657	27 746
Other assets	43 824	34 633
	8 446 535	7 692 747
The linked assets are classed as level 1 financial instruments with the linked liabilities also classed as level 1.
Assets of long-term assurance fund attributable to policyholders
Investments shown above comprise:
Interest-bearing securities	2 269 280	1 993 067
Stocks, shares and unit trusts	5 415 047	5 107 676
Deposits	689 727	529 625
	8 374 054	7 630 368

The business of Investec Assurance Limited is that of linked business with retirement funds. The retirement funds hold units in a pooled portfolio of assets via a linked policy issued by the company. The assets are beneficially held by Investec Assurance Limited. Due to the nature of a linked policy, Investec Assurance Limited's liability to the policyholders is equal to the market value of the assets underlying the policies.

	As at 31 March
£'000		2018	2017
37.	Other trading liabilities
	Deposits	97 042	78 557
	Short positions
	– Equities	802 531	831 417
	– Gilts	60 593	68 937
		960 166	978 911
£'000	As at 31 March	2018	2017
38.	Debt securities in issue
	Bonds and medium-term notes repayable: Less than three months	29 392	66 299
	Three months to one year	227 861	359 991
	One to five years	1 616 276	1 173 080
	Greater than five years	843 658	786 810
		2 717 187	2 386 180
As at 31 March
£'000		2018	2017
39.	Other liabilities
	Settlement liabilities	828 960	897 977
	Other creditors and accruals	786 274	748 617
	Other non-interest-bearing liabilities	397 034	264 236
		2 012 268	1 910 830

Pension commitments Income statement charge Defined benefit obligations net income included in net interest income (51) Defined benefit net costs included in administration costs 81 Cost of defined contribution schemes included in staff costs 46 854 Net income statement charge in respect of pensions 46 884 The group operates pension schemes throughout its areas of operation. The majority of the schemes are defined contribution schemes with the exception of one scheme in the United Kingdom the Investec Asset Management Pension scheme (IAM scheme). The scheme is a final salary pension plan with assets held in a separate trustee administered fund. The plan is subject to UK regulations, which require the trustees to agree a funding strategy and contribution schedule for the plan. The role of the trustees is to ensure that the schemes are administered in accordance with the scheme rules and relevant legislation, and to safeguard the assets in the best interest of all members and beneficiaries. The trustees are solely responsible for setting investment policy and for agreeing funding requirements with the employer through the triennial valuation process. The scheme is closed to new members and the accrual of service ceased on 31 March 2002. The scheme has been valued at 31 March 2018 by qualified independent actuaries in accordance with IAS 19. There were no unpaid contributions in relation to the defined contribution scheme outstanding at the year end. During the year the group's previous other defined benefit scheme, Guinness Mahon Pension Fund (GM scheme) entered into a buy-out with the assets and liabilities being transferred to the insurer Aviva. Members now receive their pension from Aviva and Investec has no remaining liability relating to the GM scheme. The major assumptions used were: Discount rate 2.65% Rate of increase in salaries 2.10% Rate of increase in pensions in payment 1.90% – 3.10% Inflation (RPI) 3.10% Inflation (CPI) 2.10% Demographic assumptions One of the most significant demographic assumptions underlying the valuation is mortality. The specific mortality rates used are based on the 2017 Club Vita base tables with allowance for future improvements in line with CMI 2016 core projections and a long term improvement of 1.25% per annum. The life expectancies underlying the valuation are as follows:	As at 31 March £'000	2018	2017
			(1 631)
			998
			41 681
			41 048
			2.50%
			3.20%
			1.80% – 3.00%
			3.20%
			2.10%
Years			Years

Male aged 65	88.7	88.4
Female aged 65	88.9	91.0
Male aged 45	89.5	90.2
Female aged 45	90.7	92.9

(continued)

40. Pension commitments (continued)

Sensitivity analysis of assumptions

Historically sensitvities have only been presented for the GM scheme as the equivalent increases/decreases in assumptions for the IAM scheme did not have a material impact. As the GM scheme has been bought out and there is no remaining liability, the sensitivies below are now presented for the IAM scheme.

If the discount rate were 0.25% higher, the scheme liabilities would decrease by approximately £615,000 if all the other assumptions remained unchanged.

If the inflation assumption were 0.25% higher, the scheme liabilities would increase by approximately £324,000. In this calculation all assumptions related to the inflation assumption have been appropriately adjusted, that is the salary, deferred pension and pension in payment increases. The other assumptions remain unchanged.

If the pension increases assumptions were 0.25% higher, the scheme liabilities would increase by approximately £305,000 if all the other assumptions remained unchanged.

If life expectancies were to increase by 1 year, the scheme liabilities would increase by approximately £645,000 if all the other assumptions remained unchanged.

The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

The sensitivity analysis has been performed on the basis that the relevant assumption would occur in isolation, holding other assumptions constant.

In presenting the above sensitivity analysis, the present value of the defined benefit obligation has been calculated using the same methodology that applied in calculating the defined benefit obligation liability recognised in the balance sheet.

Risk exposures

A description of the risks which the pension scheme expose Investec can be found in the Risk Management report on pages 77 and 78. The group ultimately underwrites the risks relating to the defined benefit plan. If the contributions currently agreed are insufficient to pay the benefits due, the group will need to make further contributions to the plan.

At 31 March
£'000	2018	2017
GM scheme
Bulk annuity insurance agreement	–	141 419
Cash	–	2 914
Total market value of assets	–	144 333
IAM scheme
Managed funds	18 653	21 637
Cash	80	12
Total market value of assets	18 733	21 649

There are no assets in the IAM scheme which are unquoted.

None of the group's own assets or properties occupied or used by the group held within the assets of the scheme.

2018 2017

(continued)

Total
10

£'000	At 31 March	GM	IAM	Total	GM	IAM	Total
40.	Pension commitments (continued)
	Recognised in the balance sheet
	Fair value of fund assets	–	18 733	18 733	144 333	21 649	165 982
	Present value of obligations	–	(16 106)	(16 106)	(148 862)	(19 573)	(168 435)
	Net asset/(liability) (recognised in
	other liabilities/other assets)	–	2 627	2 627	(4 529)	2 076	(2 453)
	Recognised in the income statement
	Net interest income	–	51	51	1 473	158	1 631
	Administration costs	–	(81)	(81)	(887)	(111)	(998)
	Net amount recognised in the
	income statement	–	(30)	(30)	586	47	633
	Recognised in the statement of comprehensive income
	Return on plan assets (excluding amounts in net interest income)	–	(129)	(129)	27 769	(886)	26 883
	Actuarial (gain)/loss arising from changes in financial assumptions	–	(452)	(452)	23 139	3 553	26 692
	Remeasurement of scheme due to buy out	(4 316)	–	(4 316)	–	–	–
	Remeasurement of defined benefit
	(asset)/liability	(4 316)	(581)	(4 897)	50 908	2 667	53 575
	Deferred tax	868	91	959	(9 497)	(498)	(9 995)
	Remeasurement of net defined
	benefit (asset)/liability	(3 448)	(490)	(3 938)	41 411	2 169	43 580

At 31 March
£'000	GM	IAM	Total
Changes in the net asset/(liability) recognised in the balance sheet
Opening balance sheet asset/(liability) at 1 April 2016	41 776	4 696	46 472
Expenses charged to the income statement	586	47	633
Amount recognised in other comprehensive income	(50 908)	(2 667)	(53 575)
Contributions paid	4 017	–	4 017
Opening balance sheet asset/(liability) at 1 April 2017	(4 529)	2 076	(2 453)
Expenses charged to the income statement	–	(30)	(30)
Amount recognised in other comprehensive income	–	581	581
Remeasurement of scheme due to buy-out	4 529	–	4 529
Closing balance sheet asset at 31 March 2018	–	2 627	2 627

(continued)

£'000	At 31 March	GM	IAM	Total
40.	Pension commitments (continued)
	Changes in the present value of defined benefit obligations
	Opening defined benefit obligation at 1 April 2016	129 467	17 275	146 742
	Interest expense	4 266	568	4 834
	Remeasurement gains and losses:
	– Actuarial gain/(loss) arising from changes in financial assumptions	23 139	3 553	26 692
	Benefits and expensed paid	(8 010)	(1 823)	(9 833)
	Opening defined benefit obligation at 1 April 2017	148 862	19 573	168 435
	Interest expense	–	455	455
	Remeasurement gains and losses:
	– Actuarial gain/(loss) arising from changes in financial assumptions	–	(452)	(452)
	Benefits and expensed paid	–	(3 469)	(3 469)
	Remeasurement of scheme due to buy-out	(148 862)	–	(148 862)
	Closing defined benefit obligation at 31 March 2018	–	16 107	16 107
	Changes in the fair value of plan assets
	Opening fair value of plan assets at 1 April 2016	171 243	21 971	193 214
	Interest income	5 739	726	6 465
	Remeasurement gain/loss:
	– Return on plan assets (excluding amounts in net interest income)	(27 769)	886	(26 883)
	Contributions by the employer	4 017	–	4 017
	Benefits and expenses paid	(8 010)	(1 934)	(9 944)
	Administration expenses	(887)	–	(887)
	Opening fair value of plan assets at 1 April 2017	144 333	21 649	165 982
	Interest income	–	505	505
	Remeasurement gain/loss:
	– Return on plan assets (excluding amounts in net interest income)	–	129	129

There is no restriction on the pension surplus as Investec has an unconditional right to a refund of the surpluses assuming the gradual settlement of the plan over time until all members have left the scheme.

Administration expenses – (3 550) (3 550) Remeasurement of scheme due to buy-out (144 333) – (144 333) Closing fair value of plan assets at 31 March 2018 – 18 733 18 733

The triennial funding valuation of the schemes was carried out as at 31 March 2015. The IAM scheme is fully funded.

The weighted average duration of the IAM scheme's liabilities at 31 March 2018 is 17 years (31 March 2017: 19 years). This includes average duration of deferred pensioners of 20.6 years and average duration of pensioners in payment of 13.3 years.

	2018	2017
Subordinated liabilities
Issued by Investec Bank plc
Subordinated fixed rate medium-term notes	579 673	579 356
Issued by Investec Bank Limited
IV08 fixed rate subordinated unsecured callable upper tier bonds	12 033	11 926
IV09 variable rate subordinated unsecured callable upper tier bonds	12 033	11 926
IV015 variable rate subordinated unsecured callable bonds	–	35 839
IV019 indexed rate subordinated unsecured callable bonds	7 755	6 162
IV019A indexed rate subordinated unsecured callable bonds	22 136	21 732
IV022 variable rate subordinated unsecured callable bonds	–	38 050
IV023 variable rate subordinated unsecured callable bonds	–	51 284
IV024 variable rate subordinated unsecured callable bonds	–	6 321
IV025 variable rate subordinated unsecured callable bonds	60 167	59 632
IV026 variable rate subordinated unsecured callable bonds	45 125	44 724
IV030 indexed rate subordinated unsecured callable bonds	26 723	23 726
IV030A indexed rate subordinated unsecured callable bonds	25 284	25 023
IV031 variable rate subordinated unsecured callable bonds	30 083	29 816
IV032 variable rate subordinated unsecured callable bonds	48 735	48 302
IV033 variable rate subordinated unsecured callable bonds	9 567	9 482
IV034 fixed rate subordinated unsecured callable bonds	6 077	6 023
IV035 variable rate subordinated unsecured callable bonds	88 325	87 540
IV036 variable rate subordinated unsecured callable bonds	1 925	1 908
IV037 variable rate subordinated unsecured callable bonds	71 105	74 844
IV038 variable rate subordinated unsecured callable bonds	21 058	20 871
IV039 indexed rate subordinated unsecured callable bonds	9 982	9 205
IV040 variable rate subordinated unsecured callable bonds	35 438	35 123
IV041 fixed rate subordinated unsecured callable bonds	11 432	11 330
IV042 variable rate subordinated unsecured callable bonds	3 008	2 982
IV043 fixed rate subordinated unsecured callable bonds	9 025	8 945
IV044 variable rate subordinated unsecured callable bonds	14 440	14 312
IV045 indexed rate subordinated unsecured callable bonds	96 494	88 984
IV046 variable rate subordinated unsecured callable bonds	72 200
IV047 variable rate subordinated unsecured callable bonds	64 584
Issued by Investec Limited
INLV02 variable rate subordinated unsecured callable bonds	16 606	16 459
INLV03 variable rate subordinated unsecured callable bonds	5 656	5 605
INLV04 variable rate subordinated unsecured callable bonds	15 343	15 206
INB001 variable rate subordinated unsecured callable bonds	60 975
	1 482 987	1 402 638
Remaining maturity:
In one year or less, or on demand	72 800	131 490
In more than one year, but not more than two years	187 354	23 852
In more than two years, but not more than five years	1 192 931	997 550
In more than five years	29 902	249 746
	1 482 987	1 402 638
Reconciliation from opening balance to closing balance:
Opening balance	1 402 638	1 134 883
Subordinated debt raised	190 940	264 438
Repayment of subordinated debt	(128 098)	(150 205)
Consumer price index/effective interest rate adjustment	7 307	(12 699)
Exchange adjustments	10 200	166 221
Closing balance	1 482 987	1 402 638

(continued)

41. Subordinated liabilities (continued)

The only event of default in relation to the subordinated debt is the non-payment of principal or interest. The only remedy available to the holders of the subordinated debt in the event of default is to petition for the winding up of the issuing entity. In a winding up no amount will be paid in respect of the subordinated debt until all other creditors have been paid in full.

Medium-term notes

Subordinated fixed rate medium-term notes (denominated in Pounds Sterling)

On 17 February 2011 Investec Bank plc issued £500 000 000 of 9.625% subordinated notes due 2022 at a discount (2022 notes). Interest is paid annually. The notes are listed on the London Stock Exchange. The notes are redeemable at par on 17 February 2022. On 29 June 2011 Investec Bank plc issued £75 000 000 of 9.625% subordinated notes due 2022 at a premium (2022 notes) (to be consolidated and form a single series, and to be fungible, with the £500 000 000 2022 Notes issued on 17 February 2011).

IV08 fixed rate subordinated unsecured callable upper tier 2 bonds

R200 million Investec Bank Limited IV08 locally registered subordinated unsecured callable bonds without a maturity date. Interest is paid six monthly in arrears on 31 October and 30 April at a rate of 13.735% per annum until 30 April 2018. The company has the option to call the bonds from 30 April 2013 or on any interest payment date falling after 30 April 2018. If not called by 30 April 2018, the bonds will pay interest of 5.625% above JIBAR payable quarterly in arrears until called. The bonds were called on 30 April 2018.

IV09 variable rate subordinated unsecured callable upper tier 2 bonds

R200 million Investec Bank Limited IV09 locally registered subordinated unsecured callable bonds without a maturity date. Interest is paid quarterly in arrears on 31 July, 31 October, 31 January and 30 April at a rate equal to three-month JIBAR plus 3.75% until 30 April 2018. The company has the option to call the bonds from 30 April 2013 or on any interest payment date falling after 30 April 2018. If not called by 30 April 2018, the bonds will pay interest of 5.625% above JIBAR payable quarterly in arrears until called. The bonds were called on 30 April 2018.

IV015 variable rate subordinated unsecured callable bonds

Rnil (2017: R601 million) Investec Bank Limited IV015 locally registered subordinated unsecured callable bonds are due in September 2022. Interest is payable quarterly in arrears on 20 December, 20 March, 20 June and 20 September at a rate equal to three-month JIBAR plus 2.65% basis points until 20 September 2017. From and including 20 September 2017 up to and excluding 20 September 2022 interest is paid at a rate equal to three-month JIBAR plus 4.00%. The maturity date is 20 September 2022, but the company has the option to call the bonds upon regulatory capital disqualification or from 20 September 2017. The bonds were called on 20 September 2017.

IV019 indexed rate subordinated unsecured callable bonds

R129 million (2017: R103 million) Investec Bank Limited IV019 locally registered subordinated unsecured callable bonds are due in March 2028. Interest on these inflation-linked bonds is payable semi-annually on 31 March and 30 September at a rate of 2.60%. The IV019 is a replica of the R210 South African government bond. The maturity date is 31 March 2028, but the company has the option to call the bonds upon regulatory capital disqualification from 3 April 2023.

IV019A indexed rate subordinated unsecured callable bonds

R368 million (2017: R364 million) Investec Bank Limited IV019A locally registered subordinated unsecured callable bonds are due in March 2028. Interest on these inflation-linked bonds is payable semi-annually on 31 March and 30 September at a rate of 2.60%. The IV019A is a replica of the R210 South African government bond. The maturity date is 31 March 2028, but the company has the option to call the bonds upon regulatory capital disqualification or from 3 April 2023.

IV022 variable rate subordinated unsecured callable bonds

Rnil (2017: R638 million) Investec Bank Limited IV022 locally registered subordinated unsecured callable bonds are due in April 2022. Interest is payable quarterly on 2 January, 2 April, 2 July and 2 October at a rate equal to the three-month JIBAR plus 2.50% up to and excluding 2 April 2022. The maturity date is 2 April 2022, but the company has the option to call the bonds upon regulatory capital disqualification or from 2 April 2017. The bonds were called on 2 April 2017.

(continued)

41. Subordinated liabilities (continued)

IV023 variable rate subordinated unsecured callable bonds

Rnil (2017: R860 million) Investec Bank Limited IV023 locally registered subordinated unsecured callable bonds are due in July 2022. Interest is payable quarterly on 11 January, 11 April, 11 July and 11 October at a rate equal to the three-month JIBAR plus 2.50% up to and excluding 11 July 2022. The maturity date is 11 July 2022, but the company has the option to call the bonds upon regulatory capital disqualification or from 11 July 2017. The bonds were called on 11 July 2017.

IV024 variable rate subordinated unsecured callable bonds

Rnil (2017: R106 million) Investec Bank Limited IV024 locally registered subordinated unsecured callable bonds are due in July 2022. Interest is payable quarterly on 27 January, 27 April, 27 July and 27 October at a rate equal to the three-month JIBAR plus 2.70% up to and excluding 27 July 2022. The maturity date is 27 July 2022, but the company has the option to call the bonds upon regulatory capital disqualification or from 27 July 2017. The bonds were called on 27 July 2017.

IV025 variable rate subordinated unsecured callable bonds

R1 000 million Investec Bank Limited IV025 locally registered subordinated unsecured callable bonds are due in September 2024. Interest is payable quarterly on 12 December, 12 March, 12 June and 12 September at a rate equal to the three-month JIBAR plus 2.50% up to and excluding 12 September 2024. The maturity date is 12 September 2024, but the company has the option to call the bonds upon regulatory capital disqualification or from 12 September 2019.

IV026 variable rate subordinated unsecured callable bonds

R750 million Investec Bank Limited IV026 locally registered subordinated unsecured callable bonds are due in September 2024. Interest is payable quarterly on 27 December, 27 March, 27 June and 27 September at a rate equal to the three-month JIBAR plus 2.45% up to and excluding 27 September 2024. The maturity date is 27 September 2024, but the company has the option to call the bonds upon regulatory capital disqualification from 27 September 2019.

IV030 indexed rate subordinated unsecured callable bonds

R444 million (2017: R398 million) Investec Bank Limited IV030 locally registered subordinated unsecured callable bonds are due in January 2025. Interest on these inflation-linked bonds is payable semi-annually on 31 January and 31 July at a rate of 2.00%. The IV030 is a replica of the I2025 South African government bond. The maturity date is 31 January 2025, but the company has the option to call the bonds upon regulatory capital disqualification from 31 January 2020.

IV030A indexed rate subordinated unsecured callable bonds

R420 million (2017: R420 million) Investec Bank Limited IV030A locally registered subordinated unsecured callable bonds are due in January 2025. Interest on these inflation-linked bonds is payable semi-annually on 31 January and 31 July at a rate of 2.00%. The IV030A is a replica of the I2025 South African government bond. The maturity date is 31 January 2025, but the company has the option to call the bonds upon regulatory capital disqualification from 31 January 2020.

IV031 variable rate subordinated unsecured callable bonds

R500 million Investec Bank Limited IV031 locally registered subordinated unsecured callable bonds are due in March 2025. Interest is payable quarterly on 11 December, 11 March, 11 June and 11 September at a rate equal to the three-month JIBAR plus 2.95% up to and excluding 11 March 2025. The maturity date is 11 March 2025, but the company has the option to call the bonds upon regulatory capital disqualification from 11 March 2020.

IV032 variable rate subordinated unsecured callable bonds

R810 million Investec Bank Limited IV032 locally registered subordinated unsecured callable bonds are due in August 2023. Interest is payable quarterly on 14 November, 14 February, 14 May, 14 August at a rate equal to the three-month JIBAR plus 2.95%. The maturity date is 14 August 2023, but the company has the option to call the bonds upon regulatory capital disqualification from 14 August 2018.

IV033 variable rate subordinated unsecured callable bonds

R159 million Investec Bank Limited IV033 locally registered subordinated unsecured callable bonds are due in February 2026. Interest is payable quarterly on 11 May, 11 August, 11 November and 11 February at a rate equal to the three-month Jibar plus 4.25% up to and excluding 11 February 2026. The maturity date is 11 February 2026, but the company has the option to call the bonds upon regulatory capital disqualification or from 11 February 2021.

(continued)

41. Subordinated liabilities (continued)

IV034 fixed rate subordinated unsecured callable bonds

R101 million Investec Bank Limited IV034 locally registered subordinated unsecured callable bonds are due in February 2026. Interest is payable semi-annually on 11 February and 11 August at a rate equal to 12.47% up to and excluding 11 February 2026. The maturity date is 11 February 2026, but the company has the option to call the bonds upon regulatory capital disqualification or from 11 February 2021.

IV035 variable rate subordinated unsecured callable bonds

R1 468 million Investec Bank Limited IV035 locally registered subordinated unsecured callable bonds are due in April 2027. Interest is payable quarterly on 7 April, 7 July, 7 October and 7 January at a rate equal to the three-month JIBAR plus 4.65% up to and excluding 7 April 2027. The maturity date is 7 April 2027, but the company has the option to call the bonds upon regulatory capital disqualification or from 7 April 2022.

IV036 variable rate subordinated unsecured callable bonds

R32 million Investec Bank Limited IV036 locally registered subordinated unsecured callable bonds are due in April 2026. Interest is payable quarterly on 22 April, 22 July, 22 October and 22 January at a rate equal to the three-month Jibar plus 4.25% up to and excluding 22 July 2026. The maturity date is 22 July 2026, but the company has the option to call the bonds upon regulatory capital disqualification or from 22 July 2021.

IV037 variable rate subordinated unsecured callable bonds

\$125 million Investec Bank Limited IV037 locally registered subordinated unsecured Tier II callable bonds are due in October 2026 and were issued at an issue price of \$91 million. The notes will automatically convert from zero coupon notes to floating rate notes on the first optional redemption date, being 19 October 2021. The implied zero coupon yield is 6.29961713% nacq (ACT/360) up until 19 October 2021. If the Issuer does not exercise the option to redeem the notes on 19 October 2021, then interest on the floating rate notes shall commence on 19 October 2021 and is payable quarterly on 19 January, 19 July, 19 April and 19 October at a rate equal to the three-month USD Libor plus 5.5% up to and excluding 19 October 2026. The maturity date is 19 October 2026, but the company has the option to call the bonds upon regulatory capital disqualification or from 19 October 2021.

IV038 variable rate subordinated unsecured callable bonds

R350 million Investec Bank Limited IV038 locally registered subordinated unsecured callable bonds are due in September 2026. Interest is payable quarterly on 23 March, 23 June, 23 September and 23 December at a rate equal to the three-month Jibar plus 4.25% up to and excluding 23 September 2026. The maturity date is 23 September 2026, but the company has the option to call the bonds upon regulatory capital disqualification or from 23 September 2021.

IV039 indexed rate subordinated unsecured callable bonds

R166 million (2017: R154 million) Investec Bank Limited IV039 locally registered subordinated unsecured callable bonds are due in January 2027. Interest on these inflation-linked bonds is payable quarterly on 31 January, 30 April, 31 July and 31 October at a rate of 2.75%. The IV039 is a replica of the R212 South African government bond. The maturity date is 31 January 2027, but the company has the option to call the bonds upon regulatory capital disqualification or from 31 January 2022.

IV040 variable rate subordinated unsecured callable bonds

R589 million Investec Bank Limited IV040 locally registered subordinated unsecured callable bonds are due in September 2026. Interest is payable quarterly on 29 March, 29 June, 29 September and 29 December at a rate equal to the three-month Jibar plus 4.25% up to and excluding 29 September 2026. The maturity date is 29 September 2026, but the company has the option to call the bonds upon regulatory capital disqualification or from 29 September 2021.

IV041 fixed rate subordinated unsecured callable bonds

R190 million Investec Bank Limited IV040 locally registered subordinated unsecured callable bonds are due in September 2026. Interest is payable quarterly on 29 March, 29 June, 29 September and 29 December at a rate of 11.97% up to and excluding 29 September 2026. The maturity date is 29 September 2026, but the company has the option to call the bonds upon regulatory capital disqualification or from 29 September 2021.

IV042 variable rate subordinated unsecured callable bonds

R50 million Investec Bank Limited IV042 locally registered subordinated unsecured callable bonds are due in November 2026. Interest is payable quarterly on 18 February, 18 May, 18 August and 18 November at a rate equal to the threemonth Jibar plus 4.25% up to and excluding 18 November 2026. The maturity date is 18 November 2026, but the company has the option to call the bonds upon regulatory capital disqualification or from 18 November 2021.

(continued)

41. Subordinated liabilities (continued)

IV043 fixed rate subordinated unsecured callable bonds

R150 million Investec Bank Limited IV042 locally registered subordinated unsecured callable bonds are due in November 2026. Interest is payable quarterly on 21 February, 21 May, 21 August and 21 November at a rate of 12.50% up to and excluding 21 November 2026. The maturity date is 21 November 2026, but the company has the option to call the bonds upon regulatory capital disqualification or from 21 November 2021.

IV044 variable rate subordinated unsecured callable bonds

R240 million Investec Bank Limited IV044 locally registered subordinated unsecured callable bonds are due in January 2027. Interest is payable quarterly on 31 January, 30 April, 31 July and 31 October at a rate equal to the three-month Jibar plus 4.15% up to and excluding 31 January 2027. The maturity date is 31 January 2027, but the company has the option to call the bonds upon regulatory capital disqualification or from 31 January 2022.

IV045 indexed rate subordinated unsecured callable bonds

R1 603 million (2017: R1 492 million) Investec Bank Limited IV045 locally registered subordinated unsecured callable bonds are due in January 2027. Interest on these inflation-linked bonds is payable quarterly on 31 January, 30 April, 31 July and 31 October at a rate of 2.75%. The IV045 is a replica of the R212 South African government bond. The maturity date is 31 January 2027, but the company has the option to call the bonds upon regulatory capital disqualification or from 31 January 2022.

IV046 variable rate subordinated unsecured callable bonds

R1 200 million (2017: Rnil) Investec Bank Limited IV046 locally registered subordinated unsecured callable bonds are due in June 2027. Interest is payable quarterly on 21 September, 21 December, 21 March and 21 June at a rate equal to the three-month Jibar plus 3.90%. The maturity date is 21 June 2027, but the company has the option to call the bonds upon regulatory capital disqualification or from 21 June 2022.

IV047 variable rate subordinated unsecured callable bonds

\$116 million (2017: Rnil) Investec Bank Limited IV047 locally registered subordinated unsecured Tier II callable bonds are due in June 2027 and were issued at an issue price of \$86 million. The notes will automatically convert from zero coupon notes to floating rate notes on the first optional redeption date, being 30 June 2022. The implied zero coupon yield is 5.915966% nacq (ACT/360) up until; the 30 June 2022. If the issuer does not exercise the option to redeem the notes on 30 June 2022, then interest on the floating rate notes shall commence on 30 June 2022 and is payable quarterly on 30 September, 30 December, 30 June at a rate equal to the three-month USD Libor plus 4.5% up to and excluding 30 June 2027. The maturity date is 30 June 2027, but the company has the option to call the bonds upon regulatory capital disqualification or from 30 June 2022.

INLV02 variable rate subordinated unsecured callable bonds

R276 million Investec Limited INVL02 locally registered subordinated unsecured callable bonds are due in October 2025. Interest is payable quarterly on 20 January, 20 April, 20 July and 20 October at a rate equal to the three-month Jibar plus 3.7% up to and excluding 20 October 2025. The maturity date is 20 October 2025, but the company has the option to call the bonds upon regulatory capital disqualification or from 20 October 2020.

INVL03 variable rate subordinated unsecured callable bonds

R94 million Investec Limited INVL03 locally registered subordinated unsecured callable bonds are due in February 2026. Interest is payable quarterly on 11 May, 11 August, 11 November and 11 February at a rate equal to the three-month Jibar plus 4.35% up to and excluding 11 February 2026. The maturity date is 11 February 2026, but the company has the option to call the bonds upon regulatory capital disqualification or from 11 February 2021.

INVL04 fixed rate subordinated unsecured callable bonds

R255 million Investec Limited INVL04 locally registered subordinated unsecured callable bonds are due in February 2026. Interest is payable quarterly on 11 May, 11 August, 11 November and 11 February at a rate equal to 12.77% up to and excluding 7 April 2027. The maturity date is 11 February 2026, but the company has the option to call the bonds upon regulatory capital disqualification or from 11 February 2021.

INB001 variable rate subordinated unsecured callable bonds

\$113 million (2017: Rnil) Investec Limited INB001 locally registered subordinated unsecured Tier II callable bonds are due in December 2027 and were issued at an issue price of \$84 million. The notes will automatically convert from zero coupon notes to floating rate notes on the first optional redeption date, being 28 December 2022. The implied zero coupon yield is 5.86482% nacq (ACT/360) up until the 28 December 2022. If the issuer does not exercise the option to redeem the notes on 28 December 2022, then interest on the floating rate notes shall commence on 28 December 2022 and is payable quarterly on 28 March, 28 June, 28 September, 28 December at a rate equal to the three-month USD Libor plus 4% up to and excluding 28 December 2027. The maturity date is 28 December 2027, but the company has the option to call the bonds upon regulatory capital disqualification or from 28 December 2022.

(continued)

At 31 March	2018	2017
Ordinary share capital
Investec plc
Issued, allotted and fully paid
Number of ordinary shares	Number	Number
At the beginning of the year	657 105 625	617 418 864
Issued during the year	12 733 070	39 686 761
At the end of the year	669 838 695	657 105 625
Nominal value of ordinary shares	£'000	£'000
At the beginning of the year	132
Issued during the year	2
At the end of the year	134
Number of special converting shares	Number	Number
At the beginning of the year	301 165 174	291 363 706
Issued during the year	9 557 570	9 801 468
At the end of the year	310 722 744	301 165 174
Nominal value of special converting shares	£'000	£'000
At the beginning of the year	59
Issued during the year	3
At the end of the year	62
Number of UK DAN shares	Number	Number
At the beginning and end of the year	1
Nominal value of UK DAN share	£'000	£'000
At the beginning and end of the year	*
Number of UK DAS shares	Number	Number
At the beginning and end of the year	1
Nominal value of UK DAS share	£'000	£'000
At the beginning and end of the year	*
Number of special voting shares	Number	Number
At the beginning and end of the year	1
Nominal value of special voting share	£'000	£'000
At the beginning and end of the year	*

* Less than £1 000.

(continued)

At 31 March	2018	2017
Ordinary share capital (continued)
Investec Limited
Authorised
The authorised share capital of Investec Limited is R1 960 002 (2017: R1 960 002), comprising 450 000 000 (2017: 450 000 000) ordinary shares of R0.0002 each, 48 091 681 (2017: 48 091 681) redeemable, non-participating preference shares with a par value of R0.01 each, 408 319 (2017: 408 319) class ILRP1 redeemable, non-participating preference shares of R0.01 each, 1 500 000 (2017: 1 500 000) Class ILRP 2 redeemable, non participating preference shares of R0.01 each, 20 000 000 (2017: 20 000 000) non-redeemable, non-participating preference shares of R0.01 each, 50 000 (2017: 50 000) variable rate redeemable cumulative preference shares of R0.60 each, 100 000 000 (2017: 100 000 000) non-redeemable, non-cumulative, non-participating preference shares of R0.01 each, 1 (2017: 1) Dividend Access (South African resident)
redeemable preference share of R1.00, 1 (2017: 1) Dividend Access (non-South African resident) redeemable preference share of R1.00, 700 000 000 (2017: 700 000 000) special convertible redeemable preference shares of R0.0002 each (special converting shares).
Issued, allotted and fully paid
Number of ordinary shares	Number	Number
At the beginning of the year	301 165 174	291 363 706
Issued during the year	9 557 570	9 801 468
At the end of the year	310 722 744	301 165 174
Nominal value of ordinary shares	£'000	£'000
At the beginning of the year	46
Issued during the year	*
At the end of the year	46
Number of special converting shares	Number	Number
At the beginning of the year	657 105 625	617 418 864
Issued during the year	12 733 070	39 686 761
At the end of the year	669 838 695	657 105 625
Nominal value of special converting shares	£'000	£'000
At the beginning of the year	5
Issued during the year	*
At the end of the year	5
Number of SA DAN shares	Number	Number
At the beginning and end of the year	1
Nominal value of SA DAN share	£'000	£'000

* Less than £1 000.

(continued)

At 31 March 2018		2017
42.	Ordinary share capital (continued) Number of SA DAS shares		Number
	At the beginning and end of the year	1	1
	Nominal value of SA DAS share		£'000
	At the beginning and end of the year	*	*
	Nominal value of issued, allotted and fully paid called up share capital of Investec plc and Investec Limited:
	Total called up share capital	247	242
	Less: held by Investec Limited	(2)	(2)
	Less: held by Investec plc	(5)	(3)
	Total called up share capital	240	237

* Less than £1 000.

The Investec Limited shares were issued in South African Rand. The amounts recorded above were calculated by reference to historic Pounds Sterling: Rand exchange rates. In terms of the DLC structure shareholders have common economic and voting rights as if Investec Limited and Investec plc were a single company. These include equivalent dividends on a per share basis, joint electorate and class right variations. The UK DAS share, UK DAN share, SA DAS share, the SA DAN share and the special converting shares have been issued to achieve this.

The unissued shares are under the control of the directors until the next annual general meeting.

Staff share scheme

The group operates a share option and a share purchase scheme for employees. The number of ordinary shares conditionally allocated to employees are disclosed in note 7.

Movements in the number of share options issued to employees are as follows (each option is in respect of one share):

For the year to 31 March	Number 2018	Number 2017
Opening balance	61 936 538	66 534 024
Issued during the year	14 771 933	13 029 001
Exercised	(25 350 261)	(15 568 591)
Lapsed	(2 076 205)	(2 057 896)
Closing balance	49 282 005	61 936 538

The purpose of the staff share scheme is to promote an esprit de corps within the organisation, create an awareness of Investec's performance and provide an incentive to maximise individual and group performance by allowing all staff to share in the risks and rewards of the group.

The group makes awards available to staff members via the underlying share trusts. The particular instrument used varies from time to time depending on taxation legislation and factors affecting the group structure. Nevertheless, whatever the instrument chosen, its underlying value depends solely on the performance of the groups' share price.

At present, the practice of the group is to grant all permanent staff members a share allocation based on their annual package after completing six months of employment. In line with the objective of providing a long-term incentive for staff, these share awards vest over periods varying from three to five years.

After the initial allocation referred to above, additional allocations are made to staff members at the discretion of group management and depending on the individual performance and contribution made by the respective staff members.

The extent of the directors' and staff interests in the incentive scheme is detailed on pages 204 to 213 and 241 to 244 in volume one.

£'000	As at 31 March	2018	2017
43.	Perpetual preference shares of holding company
	Perpetual preference share capital	31	31
	Perpetual preference share premium (refer to note 44)	218 595	252 822
		218 626	252 853
	Issued by Investec Limited
	32 214 499 (2017: 32 214 499) non-redeemable, non-cumulative, non-participating
	preference shares of one cent each, issued at various premiums:
	– Preference share capital	2	2
	– Preference share premium	193 830	228 057
	Preference shareholders will be entitled to receive dividends if declared, at a rate limited to 77.77% of South African prime overdraft rate on R100 being the deemed value of the issue price of the
	preference share held. Preference shareholders receive dividends in priority to any payment of
	dividends to the holder of any other class of shares in the capital of the company not ranking prior
	or pari passu with the preference shares.
	An ordinary dividend will not be declared by Investec Limited unless the preference dividend
	has been declared. If declared, preference dividends are payable semi-annually at least seven
	business days prior to the date on which Investec Limited pays its ordinary dividends, if any, but
	shall be payable no later than 120 business days after 31 March and 30 September respectively.
	Issued by Investec plc
	2 754 587 (2017: 2 754 587) non-redeemable, non-cumulative, non-participating preference
	shares of £0.01 each, issued at a premium of £8.58 per share.
	– Preference share capital	29	29
	– Preference share premium	23 607	23 607
	Preference shareholders will receive an annual dividend if declared based on the coupon rate
	(being equivalent to the base rate plus 1%) multiplied by the deemed value on a daily basis and
	payable in two semi-annual instalments.
	An ordinary dividend will not be declared by Investec plc unless the preference dividend has
	been declared.
	If declared, preference dividends are payable semi-annually at least seven business days prior
	to the date on which Investec plc pays its ordinary dividends, if any, but shall be payable no later
	than 120 business days after 31 March and 30 September respectively.
	On the 27 July 2016 the company announced that 12 176 826 sterling Preference Shares
	had been purchased for cash consideration resulting from the company's tender offer to the
	preference shareholders. The sterling purchase price of £5.75096 comprised of a principle amount
	of £5.70 per share and an amount equal to the accrued but undeclared and unpaid dividend from
	1 April 2016 to settlement date. The purchased shares have been cancelled.
	A further 149 736 sterling preference shares were purchased under the same terms as above on
	2 November 2016.

As at 31 March £'000	2018	2017
43. Perpetual preference shares of holding company (continued) Issued by Investec plc – Rand-denominated
131 447 (2017: 131 447) non-redeemable, non-cumulative, non-participating perpetual preference shares of R0.001 each, issued at an average premium of R99.999 per share. – Preference share capital – Preference share premium	* 1 158	* 1 158
Rand-denominated preference shareholders will receive a dividend if declared based on the coupon rate (being equivalent to South African prime rate multiplied by 95%) multiplied by the deemed value on a daily basis and payable in two semi-annual instalments.
An ordinary dividend will not be declared by Investec plc unless the Rand preference dividend has been declared.
If declared, Rand-denominated preference dividends are payable semi-annually at least seven business days prior to the date on which Investec plc pays its ordinary dividends, if any, but shall be payable no later than 120 business days after 31 March and 30 September respectively.
On the 27 July 2016 the company announced that 1 994 493 Rand Preference Shares had been purchased for cash consideration resulting from the company's tender offer to the preference shareholders. The sterling purchase price of R103.38877 comprised of a principle amount of R100 per share and an amount equal to the accrued but undeclared and unpaid dividend from 1 April 2016 to settlement date. The purchased shares have been cancelled.
A further 150 000 Rand preference shares were purchased under the same terms as above on 2 November 2016.
	218 626	252 853

* Less than £1 000.

As at 31 March £'000 2018		2017
44.	Share premium
	Share premium account – Investec plc	1 474 172	1 403 338
	Share premium account – Investec Limited	723 969	685 068
	Perpetual preference share premium	218 595	252 822
		2 416 736	2 341 228

At 31 March			2017
45.	Treasury shares
		£'000	£'000
	Treasury shares held by subsidiaries of Investec Limited and Investec plc	160 132	126 879
		Number	Number
	Investec plc ordinary shares held by subsidiaries	19 722 086	18 293 688
	Investec Limited ordinary shares held by subsidiaries	27 013 057	31 354 669
	Investec plc and Investec Limited shares held by subsidiaries	46 735 143	49 648 357
	Reconciliation of treasury shares:	Number	Number
	At the beginning of the year	49 648 357	40 299 466
	Purchase of own shares by subsidiary companies	23 783 241	26 622 616
	Shares disposed of by subsidiaries	(26 696 455)	(17 273 725)
	At the end of the year	46 735 143	49 648 357
	Market value of treasury shares:	£'000	£'000
	Investec plc	108 393	99 518
	Investec Limited	148 464	170 569
		256 857	270 087

£'000	As at 31 March	2018	2017
46.	Other Additional Tier 1 securities in issue Issued by Investec Limited Other Additional Tier 1 securities
	R550 million Other Additional Tier 1 floating rate notes pay interest quarterly on 12 August, 12 November, 12 February and 12 May at a rate equal to the three-month JIBAR plus 4.25%. There is no maturity date but the issuer has the option to redeem on 12 August 2024 and on every interest payment date thereafter. The interest is payable at the option of the issuer.	33 091	32 798
	Investec Limited issued R350 million Other Additional Tier 1 floating rate notes on 22 March 2018. Interest is payable quarterly on 22 June, 22 September, 22 December and 22 March at a rate equal to the three-month JIBAR plus 5.15%. There is no maturity date but the issuer has the option to redeem on 22 March 2023 and on every interest payment date thereafter. The interest is payable at the option of the issuer.	21 059	–
	Issued by Investec plc
	Other Additional Tier 1 securities	250 000	–
	On 5 October 2017, the Investec plc issued £250 million Fixed Rate Reset Perpetual Additional Tier 1 Write Down Capital Securities ("AT1 securities") at par. The securities are perpetual and pay a distribution rate on 5 March, June, September and December, commencing from 5 December 2017. At each distribution payment date, the company can decide whether to pay the distribution rate, which is non-cumulative, in whole or in part. The distribution rate is 6.75% per annum until 5 December 2024; thereafter, the distribution rate resets every five years to a rate 5.749% per annum plus the benchmark gilts rate. The AT1 securities will be automatically written down and the investors will lose their entire investment in the securities should the Common Equity Tier 1 capital ratio of the Investec plc group as defined in the PRA's rules fall below 7%. The AT1 Securities are redeemable at the option of the company on 5 December 2024 or on each distribution payment date thereafter. No such redemption may be made without the consent of the PRA.
		304 150	32 798

(continued)

As at 31 March
£'000	2018	2017
47. Non-controlling interests
Perpetual preferred securities issued by subsidiaries	92 312	91 492
Non-controlling interests in partially held subsidiaries	589 752	553 246
	682 064	644 738
Perpetual preferred securities issued by subsidiaries
Issued by an Investec Limited subsidiary	92 312	91 492
15 447 630 (2017: 15 447 630) non-redeemable, non-cumulative, non-participating preference shares of one cent each issued at various premiums.
Preference shareholders will be entitled to receive dividends, if declared, at a rate of 83.33% of South African prime overdraft rate on R100 being the deemed value of the issue price of the preference share held. Preference shareholders receive dividends in priority to any payment of dividends to the holder of any other class of shares in the capital of the company not ranking prior or pari passu with the preference shares.
An ordinary dividend will not be declared by Investec Bank Limited unless the preference dividend has been declared.
If declared, preference dividends are payable semi-annually at least seven business days prior to the date on which Investec Bank Limited pays its ordinary dividends, if any, but shall be payable no later than 120 business days after 31 March and 30 September respectively.
	92 312	91 492

The following table summarises the information relating to the group's subsidiary that has material non-controlling interests:

	Investec Asset Management Limited*	Holdings Proprietary	Investec Asset Management Limited**		Investec Property Fund Limited*
	2018	2017	2018	2017	2018	2017
Non-controlling interests (NCI) (%)	17.0%	16.0%	17.0%	16.0%	73.2%	72.1%
Summarised financial information (£'000)
Total assets	8 649 980	7 874 880	430 272	409 429	1 165 336	1 105 719
Total liabilities	8 551 578	7 799 941	317 660	301 526	404 602	380 233
Revenue	187 319	181 261	352 367	316 729	73 749	85 321
Profit before taxation	53 672	51 591	86 516	76 041	72 570	84 237
Carrying amount of NCI	17 276	14 700	19 919	17 000	554 236	521 193
Profit allocated to NCI	9 054	8 484	14 763	11 807	52 649	59 865

* Investec Asset Management Holdings Proprietary Limited and Investec Property Fund Limited (IPF) are subsidiaries of Investec Limited. ** Investec Asset Management Limited is an indirect subsidiary of Investec plc.

During the year the group sold an additional 1% of its Asset Management business to the senior management of the business, on the exercise of the option granted in July 2013 as part of the sale of the original 15% stake and additional 1% in the year ended 31 March 2017.

The reduction in the shareholding of IPF is as a result of shares issued to fund investment acquisitions which increased the net asset value of the business.

(continued)

		2018		2017
At 31 March £'000		Total future minimum payments	Present value	Total future minimum payments	Present value
48.	Finance lease disclosures Finance lease receivables included in loans and advances to customers
	Lease receivables due in:
	Less than one year	330 904	303 234	295 110	236 651
	One to five years	491 318	419 588	417 092	363 155
	Greater than five years	4 202	3 593	6 780	5 987
		826 424	726 415	718 982	605 793
	Unearned finance income	100 009		113 189

At 31 March 2018, unguaranteed residual values accruing to the benefit of Investec were £1.7 million (2017: £2.0 million). Finance leases in the group mainly relate to leases on property, equipment and motor vehicles.

£'000	As at 31 March	2018	2017
49.	Notes to the cash flow statement
	Profit before taxation adjusted for non-cash items is derived as follows:
	Profit before taxation	637 499	637 414
	Additional costs on acquisition of subsidiary	6 039	–
	Impairment of goodwill	–	4 749
	Adjustment for non-cash items included in net income before taxation:
	Amortisation of acquired intangible assets	16 255	17 197
	Depreciation and impairment of property, equipment and intangibles	28 804	25 006
	Impairment of loans and advances	148 556	111 454
	Share of post taxation profit of associates	(46 823)	(18 890)
	Dividends received from associates	197	2 325
	Share-based payment charges	69 218	55 961
	Profit before taxation adjusted for non-cash items	859 745	835 216
	Increase in operating assets
	Loans and advances to banks	673 180	205 423
	Reverse repurchase agreements and cash collateral on securities borrowed	151 506	603 154
	Sovereign debt securities	(1 050 352)	(53 465)
	Bank debt securities	44 387	395 694
	Other debt securities	209 693	(27 237)
	Derivative financial instruments	(163 792)	612 250
	Securities arising from trading activities	(54 279)	(93 633)
	Investment portfolio	(34 898)	(95 222)
	Loans and advances to customers	(2 538 436)	(2 054 965)
	Securitised assets	61 478	44 414
	Other assets	32 333	315 187
	Investment properties	(43 622)	56 502
	Assurance assets	(666 582)	(328 846)
	Non-current assets held for sale	26 515	(24 784)
		(3 352 869)	(445 528)
	Increase in operating liabilities
	Deposits by banks	192 421	(130 107)
	Derivative financial instruments	162 389	(449 113)
	Other trading liabilities	(26 514)	(161 518)
	Repurchase agreements and cash collateral on securities lent	(30 363)	(416 135)
	Customer accounts (deposits)	1 761 938	1 464 461
	Debt securities in issue	330 283	(48 527)
	Securitised liabilities	43 312	(8 246)
	Other liabilities	(28 206)	(81 515)
	Assurance liabilities	670 519	328 846
		3 075 779	498 146

(continued)

As at 31 March £'000	2018	2017
50. Commitments
Undrawn facilities	3 971 566	3 913 541
Other commitments	60 320	111 662
	4 031 886	4 025 203
	The group has entered into forward foreign exchange contracts and loan commitments in the normal course of its banking business for which the fair value is recorded on balance sheet.
Operating lease commitments
Future minimum lease payments under non-cancellable operating leases:
Less than one year	36 714	57 087
One to five years	112 776	225 346
Greater than five years	118 091	119 537
	267 581	401 970

	Carrying amount of pledged asset		Related liability
£'000	2018	2017	2018	2017
Pledged assets
Other loans and advances	284 656	351 650	277 646	209 550
Loans and advances to customers	2 915	5 031	2 843	2 998
Loans and advances to banks	96 335	112 096	66 823	65 907
Sovereign debt securities	754 085	401 852	653 448	346 050
Bank debt securities	145 369	61 947	114 134	50 478
Other debt securities	51 423	47 987	38 827	38 412
Securities arising from trading activities	658 918	434 128	519 703	436 483
	1 993 701	1 414 691	1 673 424	1 149 878

The assets pledged by the group are strictly for the purpose of providing collateral for the counterparty. To the extent that the counterparty is permitted to sell and/or re-pledge the assets, they are classified on the balance sheet as reverse repurchase agreements and cash collateral on securities borrowed.

(continued)

£'000	As at 31 March	2018	2017
51.	Contingent liabilities Guarantees and assets pledged as collateral security:
	– Guarantees and irrevocable letters of credit	1 159 006	1 551 735
		1 159 006	1 551 735

The amounts shown above are intended only to provide an indication of the volume of business outstanding at the balance sheet date.

Guarantees are issued by Investec plc and Investec Limited on behalf of third parties and other group companies.

The guarantees are issued as part of the banking business.

Financial Services Compensation Scheme

The Financial Services Compensation Scheme (FSCS), the UK's statutory fund of last resort, provides compensation to customers of UK authorised financial institutions in the event that an institution which is a participating member of the FSCS is unable, or is likely to be unable, to pay claims against it.

The FSCS raises annual levies from participating members based on their level of participation (in the case of deposits, the proportion that their protected deposits represent of total protected deposits) as at 31 December of the year preceding the scheme year.

Following the default of a number of deposit takers in 2008, the FSCS has borrowed from HM Treasury to fund the compensation costs for customers of those firms. Although the majority of this loan is expected to be repaid from funds the FSCS receives from asset sales, surplus cash flow or other recoveries in relation to the assets of the firms that defaulted, any shortfall will be funded by deposit-taking participants of the FSCS.

Investec Bank plc is a participating member of the FSCS and the bank has accrued £1.2 million for its share of levies that will be raised by the FSCS. The accrual is based on estimates for the interest the FSCS will pay on the loan and estimates of the level of the bank's market participation in the relevant periods. Interest will continue to accrue to the FSCS on the HM Treasury loan and will form part of future FSCS levies.

At the date of these financial statements, it is not possible to estimate whether there will ultimately be additional levies on the industry, the level of Investec's market participation or other factors that may affect the amounts or timing of amounts that may ultimately become payable, nor the effect that such levies may have upon operating results in any particular financial period.

Legal proceedings

Investec operates in a legal and regulatory environment that exposes it to litigation risks. As a result, Investec is involved in disputes and legal proceedings which arise in the ordinary course of business. These claims, if any, cannot be reasonably estimated at this time but Investec does not expect the ultimate resolution of any of the proceedings to which Investec is party to have a significant adverse effect on the financial position of the group.

Specifically, a claim has been made in the Royal Court of Guernsey against, ITG Limited, a subsidiary of Investec plc, for breach of equitable duty for skill and care with a related claim for liability for the debts of a client trust. These claims are currently the subject of appeals before the Judicial Committee of the Privy Council. The outcome of these claims cannot reasonably be estimated at this time but Investec does not expect the ultimate resolution of the proceedings to have a material adverse effect on the financial position of the group. On Monday, 23 April 2018, The Privy Council rejected all of the client trust claims against ITG Limited in their entirety.

(continued)

£'000	As at 31 March	2018	2017
52.	Related party transactions
	Transactions, arrangements and agreements involving directors and others:
	Transactions, arrangements and agreements involving directors with directors and connected persons and companies controlled by them, and with officers of the company, were as follows:
	Directors, key management and connected persons and companies controlled by them
	Loans
	At the beginning of the year	26 715	34 062
	Increase in loans	15 311	6 352
	Repayment of loans	(4 831)	(10 232)
	Exchange adjustment	132	(3 467)
	At the end of the year	37 327	26 715
	Guarantees
	At the beginning of the year	6 092	11 330
	Additional guarantees granted	309	80
	Guarantees cancelled	(6 010)	(5 884)
	Exchange adjustment	11	566
	At the end of the year	402	6 092
	Deposits
	At the beginning of the year	(36 238)	(25 711)
	Increase in deposits	(12 223)	(21 130)
	Decrease in deposits	19 610	12 023
	Exchange adjustment	247	(1 420)
	At the end of the year	(28 604)	(36 238)

The above transactions were made in the ordinary course of business and are on the same terms, including interest rates and security, as for comparable arms length transactions with persons of a similar standing or, where applicable, with other employees. The transactions did not involve more than the normal risk of repayment. None of these loans have been impaired.

Where related parties have investment products (that may be included in funds under management) offered to clients on terms and conditions in the ordinary course of business, these have not been included above as the group does not carry any exposure relating to these transactions (they are at client risk).

For the year to 31 March
£'000	2018	2017
Transactions with other related parties
Loan from Investec Bank (Mauritius) Limited to Forty Two Point Two	–	32 899
The loan arises from Investec's portion of funding in relation to the original 15% acquisition of Investec Asset Management by senior management of the business.
The group has an investment in a private equity vehicle in which a previous Investec director has a significant influence. The group has made an investment of £70.6 million (2017: £36.3 million) and has committed further funding of £32.6 million to the vehicle. The terms and conditions of the transaction were no more favourable than those available, or which might be expected to be available on similar transactions to non-related entities on an arm's length basis.
Transactions with associates
Amounts due from associates and their subsidiaries	11 371	278 764
Interest income from loans to associates	652	5 463
Fees and commission income from associates	–	–

The above outstanding balances arose from the ordinary course of business and are on the same terms, including interest rates and security, as for comparable transactions with third party counterparties.

(continued)

53. Hedges

The group uses derivatives for the management of financial risks relating to its asset and liability portfolios, mainly associated with non-trading interest rate risks and exposures to foreign currency risk. Most non-trading interest rate risk is transferred from the originating business to the Central Treasury in the Specialist Bank. Once aggregated and netted, Central Treasury, as the sole interface to the wholesale market for cash and derivative transactions, actively manages the liquidity mismatch and non-trading interest rate risk from our asset and liability portfolios. In this regard, Treasury is required to exercise tight control of funding, liquidity, concentration and non-trading interest rate risk within defined parameters.

The accounting treatment of accounting hedges is dependent on the classification between fair value hedges and cash flow hedges and in particular, accounting hedges require the identification of a direct relationship between a hedged item and hedging instrument. This relationship is established in limited circumstances based on the manner in which the group manages its risk exposure. Below is a description of each category of accounting hedges achieved by the group.

Fair value hedges

Fair value hedges are entered into mainly to hedge the exposure of changes in fair value of fixed rate financial instruments attributable to interest rates.

At 31 March £'000	Description of financial instrument being hedged	Fair value of hedging instrument	Cumulative gains or (losses) on hedging instrument	Current year gains or (losses) on hedging instrument	Cumulative gains or (losses) on hedged item	Current year gains or (losses) on hedged item
2018
Assets	Interest rate swap	(6 691)	(23 831)	35 265	26 338	(22 209)
Liabilities	Interest rate swap	382	382	(6 279)	(252)	6 326
		(6 309)	(23 449)	28 986	26 086	(15 883)
2017
Assets	Interest rate swap	(66 210)	(56 631)	92 717	50 706	(78 434)
Liabilities	Interest rate swap	6 661	6 661	(4 427)	(6 578)	4 424
		(59 549)	(49 970)	88 290	44 218	(74 010)

(continued)

53. Hedges (continued)

Cash flow hedges

The group is exposed to variability in cash flows on future liabilities arising from changes in base interest rates. The aggregate expected cash flows are hedged based on cash flow forecasts with reference to terms and conditions present in the affected contractual arrangements. Changes in fair value are initially recognised in other comprehensive income and reclassified to the income statement when the cash flow occurs.

At 31 March £'000	Description of financial instrument being hedged	Fair value of hedging instrument	Period cash flows are expected to occur and affect income statement
2018
Assets	Cross-currency swap	(31 155)	Three months
		(31 155)
2017
Assets	Cross-currency swap	(70 905)	Three months
		(70 905)

There was no ineffective portion recognised in the income statement.

Releases to the income statement for cash flow hedges of £69.4 million (2017: £174.3 million) are included in net interest income.

Hedges of net investments in foreign operations

Investec Bank Limited entered into foreign exchange contracts to hedge its balance sheet exposure to its net investment, in US Dollars, in Investec Bank (Mauritius) Limited, these were closed out in the current financial year.

At 31 March £'000	Hedging instrument fair value
2018	–
2017	(8 911)

There was no ineffective portion recognised in the income statement in the current and the prior year.

Investec Bank plc has entered into foreign exchange contracts to hedge its balance sheet exposure to its net investment, in Australian Dollars, in the Australian operations of the group.

At 31 March £'000	Hedging instrument fair value
2018	628
2017	(36)

There was no ineffective portion recognised in the income statement for the current or prior year.

(continued)

54. Liquidity analysis of financial liabilities based on undiscounted cash flows

At 31 March		Up to
£'000	Demand	one month
2018
Liabilities
Deposits by banks	140 142	468 028
Derivative financial instruments	1 067 691	19 157
– held-for-trading	1 008 057	–
– held for hedging risk	59 634	19 157
Other trading liabilities	960 170	–
Repurchase agreements and cash collateral on securities lent	205 921	284 998
Customer accounts (deposits)	10 650 622	3 362 847
Debt securities in issue	–	40 243
Liabilities arising on securitisation of own originated loans and advances	–	4 627
Liabilities arising on securitisation of other assets	–	–
Other liabilities	368 981	852 892
Subordinated liabilities	–	28 706
Total on balance sheet liabilities	13 393 527	5 061 498
Contingent liabilities	176 012	2 525
Commitments	512 594	79 046
Total liabilities	14 082 133	5 143 069
2017
Liabilities
Deposits by banks	228 322	200 227
Derivative financial instruments	825 233	21 294
– held-for-trading	812 150	–
– held for hedging risk	13 083	21 294
Other trading liabilities	978 911	–
Repurchase agreements and cash collateral on securities lent	284 705	253 487
Customer accounts (deposits)	10 845 458	3 751 590
Debt securities in issue	85	53 602
Liabilities arising on securitisation of own originated loans and advances	–	–
Liabilities arising on securitisation of other assets	–	–
Other liabilities	408 640	842 538
Subordinated liabilities	–	45 214
Total on balance sheet liabilities	13 571 354	5 167 952
Contingent liabilities	78 049	2 636
Commitments	549 440	106 819
Total liabilities	14 198 843	5 277 407

The balances in the above table will not agree directly to the balances in the consolidated balance sheet as the table incorporates all cash flow on an undiscounted basis relating to both principal and those associated with all future coupon payments (except for trading liabilities and trading derivatives). Furthermore, loan commitments are generally not recognised on the balance sheet. Trading liabilities and trading derivatives have been included in the 'Demand' time bucket and not by contractual maturity, because trading liabilities are typically held for short periods of time. For an unaudited analysis based on discounted cash flows refer to page 67 and 68 of volume 2.

Three months to six months

(continued)

One month to three months	Three months to six months	Six months to one year	One year to five years	Greater than five years	Total
140 296	38 138	443 962	1 740 757	24 153	2 995 476
54 522	29 138	42 107	272 405	61 418	1 546 438
–	–	–	–	–	1 008 057
54 522	29 138	42 107	272 405	61 418	538 381
–	–	–	–	–	960 170
241	318	36 471	83 314	44 580	655 843
6 158 303	2 665 160	3 702 833	4 488 948	210 990	31 239 703
80 857	121 783	354 175	1 934 960	465 988	2 998 006
3 855	4 811	45 721	86 457	31 184	176 655
3 641	3 494	6 776	52 190	78 834	144 935
360 229	192 355	38 954	152 827	46 119	2 012 357
10 100	16 610	85 539	1 578 482	51 194	1 770 631
6 812 044	3 071 807	4 756 538	10 390 340	1 014 460	44 500 214
499 240	91 949	167 054	204 511	91 131	1 232 422
367 866	126 138	238 872	1 423 516	1 284 948	4 032 980
7 679 150	3 289 894	5 162 464	12 018 367	2 390 539	49 765 616
108 994	83 768	398 444	1 609 403	129 431	2 758 589
51 392	21 077	35 991	243 033	146 639	1 344 659
–	–	–	–	–	812 150
51 392	21 077	35 991	243 033	146 639	532 509
–	–	–	–	–	978 911
171	8 462	57 485	82 829	5 965	693 104
5 471 723	2 342 119	2 417 644	4 188 633	376 280	29 393 447
111 358	389 172	249 461	1 209 818	604 763	2 618 259
516	–	–	–	89 668	90 184
7 644	3 521	5 851	66 081	86 891	169 988
335 355	52 551	35 456	175 881	60 991	1 911 412
8 162	110 158	81 761	1 400 009	279 826	1 925 130
6 095 315	3 010 828	3 282 093	8 975 687	1 780 454	41 883 683
410 182	251 655	83 177	675 781	105 537	1 607 017
388 612	117 129	239 639	1 332 705	1 290 829	4 025 173
6 894 109	3 379 612	3 604 909	10 984 173	3 176 820	47 515 873

1. Liquidity analysis of financial liabilities based on undiscounted cash flows

The balances in the above table will not agree directly to the balances in the consolidated balance sheet as the table incorporates all cash flow on an undiscounted basis relating to both principal and those associated with all future coupon payments (except for trading liabilities and trading derivatives). Furthermore, loan commitments are generally not recognised on the balance sheet. Trading liabilities and trading derivatives have been included in the 'Demand' time bucket and not by contractual maturity, because trading liabilities are typically held for short periods of time. For an unaudited analysis based on discounted cash flows refer to page

67 and 68 of volume 2.

(continued)

55. Principal subsidiaries and associated companies – Investec plc

			Interest
At 31 March	Principal activity	Country of incorporation	2018	2017
Direct subsidiaries of Investec plc
Investec 1 Limited	Investment holding	England and Wales	100.0%	100.0%
Investec Holding Company Limited	Investment holding	England and Wales	100.0%	100.0%
Indirect subsidiaries of Investec plc
Investec Asset Finance plc	Leasing company	England and Wales	100.0%	100.0%
Investec Asset Management Limited	Asset management	England and Wales	83.0%	84.0%
Investec Bank plc	Banking institution	England and Wales	100.0%	100.0%
Investec Bank (Channel Islands) Limited	Banking institution	Guernsey	100.0%	100.0%
Investec Bank (Switzerland) AG	Banking institution	Switzerland	100.0%	100.0%
Investec Capital Asia Limited	Investment banking	Hong Kong	100.0%	100.0%
Investec Capital & Investments (Ireland) Limited Financial services		Ireland	100.0%	100.0%
Investec Finance Limited	Debt issuer	England and Wales	100.0%	100.0%
Investec Group (UK) Limited	Holding company	England and Wales	100.0%	100.0%
Investec Group Investments (UK) Limited	Investment holding	England and Wales	100.0%	100.0%
Investec Holdings (Australia) Limited	Holding company	Australia	100.0%	100.0%
Investec Investments (UK) Limited	Investment holding	England and Wales	100.0%	100.0%
Investec Ireland Limited	Financial services	Ireland	100.0%	100.0%
Investec Securities (US) LLC	Financial services	USA	100.0%	100.0%
Investec Trust Holdings AG	Investment holding	Switzerland	100.0%	100.0%
Investec Wealth & Investment Limited	Stockbroking and portfolio management	England and Wales	100.0%	100.0%
Reichmans Geneva SA	Trading company	Switzerland	100.0%	100.0%
Rensburg Sheppards plc	Holding company	England and Wales	100.0%	100.0%
Williams de Broë Limited	Stockbroking and portfolio management	England and Wales	100.0%	100.0%

All of the above subsidiary undertakings are included in the consolidated accounts.

The subsidiaries listed above are only in relation to subsidiary undertakings whose results or financial position, in the opinion of the directors, principally affected the financial statements.

A complete list of subsidiary and associated undertakings as required by the Companies Act 2006 is included in note i to the Investec plc company accounts on pages 137 to 141.

			Interest
At 31 March	Principal activity	Country of incorporation	2018	2017
Principal associated companies Hargreave Hale Limited	Stockbroking and portfolio management	England and Wales	–	35.0%

For more details on associated companies refer to note 28.

55. Principal subsidiaries and associated companies – Investec plc (continued)

Consolidated structured entities

Investec plc has no equity interest in the following structured entities which are consolidated. Typically a structured entity is an entity in which voting or similar rights are not the dominant factor in deciding control. The judgements to assess whether the group has control over these structures include assessing the purpose and design of the entity, considering whether the group or another involved party with power over the relevant activities is acting as a principal in its own right or as an agent on behalf of others.

Name of principal structured entity	Type of structured entity
Bedrock CMBS GMBH	Structured commercial real estate loan assets
Foundation CMBS Limited	Structured commercial real estate loan assets
Landmark Mortgage Securities No 2 plc	Securitised Residential Mortgages
Residential Mortgage Securities 23 plc	Securitised Residential Mortgages
Tamarin Securities Limited	Structured debt and loan portfolios
Temese Funding 1 plc	Securitised receivables
Temese Funding 2 Plc	Securitised receivables
Yorker Trust	Structured debt and loan portfolios

For additional detail on the assets and liabilities arising on securitisation refer to note 27. For details of the risks to which the group is exposed through all of its securitisations are included in the risk management report on pages 54 to 55 in volume two.

The key assumptions for the main types of structured entities which the group consolidates are summarised below:

Securitised residential mortgages

The group has securitised residential mortgages in order to provide investors with exposure to residential mortgage risk and to raise funding. These structured entities are consolidated due to the group's holdings of equity notes combined with its control over servicing activities. The group is not required to fund any losses above those incurred on the notes it has retained, such losses are reflected in any impairment of securitised mortgages as those assets have not been derecognised.

Structured debt and loan portfolios

The group has structured debt and loan portfolios for the purpose of issuing asset-backed securities. These structured entities are consolidated due to the group's retention of equity notes and because it continues to act as the collateral manager. The group is not required to fund any losses above those incurred on the notes it has retained.

Structured commercial real estate loan assets

The group has securitised a number of commercial real estate loan assets. These structured entities are consolidated as the group has retained all of the notes issued. The group continues to recognise the commercial real estate loan assets on its balance sheet. The group is not required to fund any losses above those incurred on the notes it has retained.

Securitised receivables

The group has securitised a portfolio of medium-term lease and hire purchase receivables. These structured entities are consolidated as the group has retained the equity notes and control over servicing activities. The group is not required to fund any losses above those incurred on the notes it has retained.

Other structured entities – commercial operations

The group also consolidates a number of structured entities where control arises from rights attached to lending facilities and similar commercial involvement. These arise primarily in the areas of aircraft funds where the group has rights which allow it to maximise the value of the assets held and investments in mining projects due to its exposure to equity like returns and ability to influence the strategic and financial decision-making.

The group is not required to fund any losses above those which could be incurred on debt positions held or swaps which exist with these structured entities. The risks to which the group is exposed from these structured entities are related to the underlying assets held in the structures. The total assets held in structured entities arising from commercial operations is £77.9 million (2017: £130.0 million).

(continued)

55. Principal subsidiaries and associated companies – Investec plc (continued)

Significant restrictions

As is typical for a large group of companies there are restrictions on the ability of the group to obtain distributions of capital, access the assets or repay the liabilities of members of the group due to the statutory, regulatory and contractual requirements of its subsidiaries.

These are considered below:

Regulatory requirements

Subsidiary companies are subject to prudential regulation and regulatory capital requirements in the countries in which they are regulated. These require entities to maintain minimum capital, leverage and exposure ratios restricting the ability of these entities to make distributions of cash or other assets to the parent company. Regulated subsidiaries of the group are required to maintain liquidity pools to meet PRA and local regulatory requirements. The main subsidiaries affected are: Investec Bank plc, Investec Bank (Channel Islands) Limited and Investec Bank (Switzerland) AG which must maintain compliance with the regulatory minimum.

Capital management within the group is discussed in the risk management report on pages 81 and 82 in volume two.

Statutory requirements

The group's subsidiaries are subject to statutory requirements not to make distributions of capital and unrealised profits and generally maintain solvency. These requirements restrict the ability of subsidiaries to remit dividends, except in the case of a legal capital reduction or liquidation.

Contractual requirements

Asset encumbrance – the group uses its financial assets to raise finance in the form of securitisations and through the liquidity schemes of central banks. Once encumbered, the assets are not available for transfer around the group. The assets typically affected are disclosed in note 27.

Structured associates

The group has investments in a number of structured funds specialising in aircraft financing where the group acts as adviser or fund manager in addition to holding units within the fund. As a consequence of these roles and funding, the group has significant influence over the fund and therefore the funds are treated as associates.

The group applies the venture capital exemption to these holdings and, as such, the investments in the funds are accounted for at fair value and held within the investment portfolio on the balance sheet.

Type of structured entity	Nature and purpose	Interest held by the group
Aircraft investment funds	To generate fees from managing assets on behalf of third party investors	Investments in units issued by the fund
	These vehicles are financed through the issue of units to investors	Management fees

The table below sets out an analysis of the carrying amounts of interests held by the group in structured associate entities.

31 March 2018	Line on the balance sheet	Carrying value £'000	Maximum exposure to loss	Income earned from structured entity	£'000
Aircraft investment funds	Investment portfolio	11 307	Limited to the carrying value Investment income		2 501

31 March 2017	Line on the balance sheet	Carrying value £'000	Maximum exposure to loss	Income earned from structured entity	£'000
Aircraft investment funds	Investment portfolio	19 963	Limited to the carrying value Investment income		33 020

55. Principal subsidiaries and associated companies – Investec plc (continued)

Unconsolidated structured entities

At 31 March 2018

The table below describes the types of structured entities that the group does not consolidate but in which it holds an interest and originally set up. In making the assessment of whether to consolidate these structured entities, the group has concluded that it does not have control after consideration in line with the accounting policies as set out on pages 32 to 40.

Type of structured entity	Nature and purpose	Interest held by the group
Investment funds To generate fees from managing assets on behalf of third party investors.		Investments in units issued by the fund
	These vehicles are financed through the issue of units to investors	Management fees
Residential mortgage securitisations	To generate a return for investors through providing exposure to residential mortgage risk	Investments in notes
	These vehicles are financed through the issue of notes to investors.

The table below sets out an analysis of the carrying amounts of interests held by the Group in unconsolidated structured entities.

The maximum exposure to loss is the carrying amount of the assets held.

At 31 March 2018	Line on the balance sheet	Carrying value £'000	Maximum exposure to loss of the group	Total assets of the entity £'000	Income earned from structured entity	£'000
Investment funds	Investment portfolio	3 059	Limited to the carrying value	63 862	Investment expense	(571)
Residential mortgage securitisations	Sovereign debt securities	2 145	Limited to the carrying value	2 145	Investment loss	(2)
	Other debt securities	4 498	Limited to the carrying value	85 148	Net interest expense	(25)
					Investment income	217
	Other loans and advances	8 702	Limited to the carrying value	141 559	Net interest income	254

At 31 March 2017	Line on the balance sheet	Carrying value £'000	Maximum exposure to loss of the group	Total assets of the entity £'000	Income earned from structured entity	£'000
Investment funds	Investment portfolio	4 916	Limited to the carrying value	166 896	Investment income	329
Residential mortgage	Other debt	15 349	Limited to the carrying value	214 081	Investment income	530
securitisations	securities				Net interest income	12
	Other loans and advances	31 641	Limited to the carrying value	271 591	Net interest income	112

(continued)

55. Principal subsidiaries and associated companies – Investec plc (continued)

Financial support provided to the unconsolidated structured entities

There are no contractual agreements which require the group to provide any additional financial or non financial support to these structured entities.

During the year the group has not provided any such support and does not have any current intentions to do so in the future.

Sponsoring

The group considers itself a sponsor of a structured entity when it facilitates the establishment of the structured entity. The table below sets out information in respect of structured entities that the group sponsors, but in which the group does not have an interest.

Structured entities with no interest held

	2018	2017
	Structured CDO and CLO securitisations	Structured CDO and CLO securitisations^
Why its considered a structured entity	This is a CDO and CLO securitisation where Investec has no continuing interest as the notes previously held have been redeemed or fully written off. The entity is considered structured as the vehicle was set up so that the variable return do not follow the shareholding.	This is a CDO and CLO securitisation where Investec has no continuing interest as the notes previously held have been redeemed or fully written off. The entity is considered structured as the vehicle was set up so that the variable return do not follow the shareholding.
Income amount and type	Nil	Nil
Carrying amount of all assets transferred	£222 million of CDO and CLO assets	£222 million of CDO and CLO assets

^ Collateralised debt obligation (CDO) and collateralised loan obligation (CLO).

Interests in structured entities which the group has not set up

Purchased securitisation positions

The group buys and sells interest in structured entities that it has not originated as part of its trading activities, for example, residential mortgage securities, commercial mortgage securities, loans to corporates and resecuritisations. In such cases the group typically has no other involvement with the structured entity other than the securities it holds as part of its trading activities and its maximum exposure to loss is restricted to the carrying value of the asset. Details of the value of these interests is included in the risk management report on pages 54 and 55 in volume two.

(continued)

			Interest
At 31 March	Principal activity	Country of incorporation	2018	2017
Direct subsidiaries of Investec Limited
Investec Asset Management Holdings Proprietary Limited	Investment holding	South Africa	83.0%	84.0%
Investec Bank Limited	Banking	South Africa	100.0%	100.0%
Investec Employee Benefits Holdings Proprietary Limited	Investment holding	South Africa	100.0%	100.0%
Investec International Holdings (Gibraltar) Limited	Investment holding	Gibraltar	100.0%	100.0%
Investec Securities Proprietary Limited	Registered stockbroker	South Africa	100.0%	100.0%
Fedsure International Proprietary Limited	Investment holding	South Africa	100.0%	100.0%
Investec Property Group Holdings Proprietary Limited	Investment holding	South Africa	100.0%	100.0%
Investec Investments Proprietary Limited	Investment company	South Africa	100.0%	100.0%
Investec Specialist Investments (RF) Limited	Investment holding	South Africa	100.0%	100.0%
Indirect subsidiaries of Investec Limited
Investec Asset Management Proprietary Limited	Asset management	South Africa	83.0%	84.0%
Investec Fund Managers SA (RF) Proprietary Limited	Unit trust management	South Africa	83.0%	84.0%
Investec Bank (Mauritius) Limited	Banking	Mauritius	100.0%	100.0%
Investec Property Proprietary Limited	Property trading	South Africa	100.0%	100.0%
Reichmans Holdings Proprietary Limited	Trade financing	South Africa	100.0%	100.0%
Investec Life Limited	Long-term insurance	South Africa	100.0%	100.0%
Investec Assurance Limited	Insurance company	South Africa	83.0%	84.0%
Investec Property Fund Limited	Engage in long-term immovable property investment	South Africa	26.8%	27.9%
Investec Import Solutions Proprietary Limited	Import logistics and trade finance	South Africa	100.0%	100.0%
			Interest
At 31 March	Principal activity	Country of incorporation	2018	2017

56. Principal subsidiaries and associated companies – Investec Limited

For additional details on associated companies refer to note 28.

The following subsidiaries are not consolidated for regulatory purposes:

Investec Assurance Limited

Investec Employee Benefits Holdings Proprietary Limited and its subsidiaries

There are no subsidiaries which are consolidated for regulatory, but not for accounting purposes.

The group considers that it has control over Investec Property Fund Limited as a result of a number of common directors with the holding company and the impact this has on the beneficial returns. Any change in the holding in Investec Property Fund Limited would require a reassessment of the facts and circumstances.

IEP Group Proprietary Limited Private equity South Africa 45.7% 45.0%

(continued)

56. Principal subsidiaries and associated companies – Investec Limited (continued)

Consolidated structured entities

Investec Limited has residual economic interests in the following structured entities which are consolidated. Typically a structured entity is an entity in which voting or similar rights are not the dominant factor in deciding control. The judgements to assess whether the group has control over these structures include assessing the purpose and design of the entity, considering whether the group or another involved party with power over the relevant activities is acting as a principal in its own right or as an agent on behalf of others.

Name of principal structured entity	Type of structured entity
Fox Street 1 (RF) Limited	Securitised residential mortgages
Fox Street 2 (RF) Limited	Securitised residential mortgages
Fox Street 3 (RF) Limited	Securitised residential mortgages
Fox Street 4 (RF) Limited	Securitised residential mortgages
Fox Street 5 (RF) Limited	Securitised residential mortgages
Integer Home Loans Proprietary Limited	Securitised third-party originated residential mortgages

The key assumptions for the main types of structured entities within the group consolidates are summarised below:

Securitised residential mortgages

The group has securitised residential mortgages in order to provide investors with exposure to residential mortgage risk and to raise funding. These structured entities are consolidated due to the group's holdings of subordinated notes. The group is not required to fund any losses above those incurred on the notes it has retained; such losses are reflected in any impairment of securitised mortgages as those assets have not been derecognised.

Securitised third party originated residential mortgages

The group has a senior and subordinated investment in a third party originated structured entity. This structured entity is consolidated due to the group's exposure to residual economic benefits. The group is not required to fund any losses above those incurred on the investment made.

Interests in Asset Management and Wealth & Investment funds

Management has concluded that the investment funds in the Asset Management and Wealth & Investment businesses do not meet the definition of structured entities as the group does not hold material interests in these funds and currently does not provide financial support or other support. Transactions with these funds are conventional customer-supply relationships.

For additional detail on the assets and liabilities arising on securitisation refer to note 27. For details of the risks to which the group is exposed through all of its securitisations are included in the risk management report on pages 54 and 55 in volume two.

		Amounts subject to enforceable netting arrangements
		Effects of offsetting on-balance sheet			Related amounts not offset
£'000	At 31 March	Gross amounts	Amounts offset	Net amounts reported on the balance sheet	Financial instruments (including non-cash collateral)	Cash collateral	Net amount
57.	Offsetting
	2018
	Assets
	Cash and balances at central banks	4 040 512	–	4 040 512	–	–	4 040 512
	Loans and advances to banks	2 440 996	(275 463)	2 165 533	–	(156 445)	2 009 088
	Non-sovereign and non-bank cash placements	601 243	–	601 243	–	–	601 243
	Reverse repurchase agreements and cash
	collateral on securities borrowed	2 207 477	–	2 207 477	(84 465)	(15 301)	2 107 711
	Sovereign debt securities	4 910 027	–	4 910 027	(420 636)	–	4 489 391
	Bank debt securities	587 164	–	587 164	(145 369)	–	441 795
	Other debt securities	903 603	–	903 603	(51 423)	–	852 180
	Derivative financial instruments	1 683 488	(331 080)	1 352 408	(212 968)	(394 966)	744 474
	Securities arising from trading activities	1 434 391	–	1 434 391	(527 984)	–	906 407
	Investment portfolio	885 499	–	885 499	–	–	885 499
	Loans and advances to customers	24 790 728	(117 719)	24 673 009	–	–	24 673 009
	Own originated loans and advances to customers securitised	459 088	–	459 088	–	–	459 088
	Other loans and advances	347 809	–	347 809	–	–	347 809
	Other securitised assets	148 387	–	148 387	–	–	148 387
	Other assets	1 895 381	(19 265)	1 876 116	–	–	1 876 116
		47 335 793	(743 527)	46 592 266	(1 442 845)	(566 712)	44 582 709
	Liabilities
	Deposits by banks	3 062 160	(130 893)	2 931 267	–	(141 152)	2 790 115
	Derivative financial instruments	1 947 273	(475 710)	1 471 563	(269 234)	(349 743)	852 586
	Other trading liabilities	960 166	–	960 166	(84 465)	–	875 701
	Repurchase agreements and cash
	collateral on securities lent	675 105	(19 265)	655 840	(426 588)	(14 463)	214 789
	Customer accounts (deposits)	31 104 892	(117 719)	30 987 173	–	(8 390)	30 978 783
	Debt securities in issue	2 717 187	–	2 717 187	(460 564)	(10 175)	2 246 448
	Liabilities arising on securitisation of own originated loans and advances	136 812	–	136 812	–	–	136 812
	Liabilities arising on securitisation of
	other assets	127 853	–	127 853	–	–	127 853
	Other liabilities	2 012 268	–	2 012 268	–	–	2 012 268
	Subordinated liabilities	1 482 987	–	1 482 987	–	–	1 482 987
		44 226 703	(743 587)	43 483 116	(1 240 851)	(523 923)	41 718 342

(continued)

Amounts subject to enforceable netting arrangements

Effects of offsetting on-balance sheet Related amounts not offset

£'000	At 31 March	Gross amounts	Amounts offset	Net amounts reported on the balance sheet	Financial instruments (including non-cash collateral)	Cash collateral	Net amount
57.	Offsetting
	2017
	Assets
	Cash and balances at central banks	3 351 702	–	3 351 702	–	–	3 351 702
	Loans and advances to banks	3 468 617	(277 576)	3 191 041	–	(195 242)	2 995 799
	Non-sovereign and non-bank cash
	placements	536 259	–	536 259	–	–	536 259
	Reverse repurchase agreements and cash
	collateral on securities borrowed	2 358 970	–	2 358 970	(131 867)	(53 187)	2 173 916
	Sovereign debt securities	3 804 627	–	3 804 627	(276 180)	–	3 528 447
	Bank debt securities	639 189	–	639 189	(61 949)	–	577 240
	Other debt securities	1 115 558	–	1 115 558	(47 988)	–	1 067 570
	Derivative financial instruments	1 381 688	(195 840)	1 185 848	(375 960)	(188 518)	621 370
	Securities arising from trading activities	1 376 668	–	1 376 668	(425 548)	–	951 120
	Investment portfolio	835 899	–	835 899	–	–	835 899
	Loans and advances to customers	22 290 621	(100 646)	22 189 975	–	–	22 189 975
	Own originated loans and advances to
	customers securitised	517 162	–	517 162	–	–	517 162
	Other loans and advances	355 248	–	355 248	–	–	355 248
	Other securitised assets	148 964	–	148 964	–	–	148 964
	Other assets	1 901 247	(767)	1 900 480	–	–	1 900 480
		44 082 419	(574 829)	43 507 590	(1 319 492)	(436 947)	41 751 151
	Liabilities
	Deposits by banks	2 774 390	(38 324)	2 736 066	–	(211 802)	2 524 264
	Derivative financial instruments	1 731 297	(435 091)	1 296 206	(375 960)	(66 240)	854 006
	Other trading liabilities	978 911	–	978 911	(131 867)	–	847 044
	Repurchase agreements and cash
	collateral on securities lent	691 125	(510)	690 615	(529 670)	(21 404)	139 541
	Customer accounts (deposits)	29 210 074	(100 646)	29 109 428	–	(21 145)	29 088 283
	Debt securities in issue	2 386 180	–	2 386 180	(263 236)	(40 264)	2 082 680
	Liabilities arising on securitisation of own originated loans and advances	90 125	–	90 125	–	–	90 125
	Liabilities arising on securitisation of other assets	128 838	–	128 838	–	–	128 838
	Other liabilities	1 911 087	(258)	1 910 830	–	–	1 910 830
	Subordinated liabilities	1 402 638	–	1 402 638	–	–	1 402 638
		41 304 665	(574 829)	40 729 837	(1 300 733)	(360 855)	39 068 249

(continued)

Transfers of financial assets that do not result in derecognition

The group has been party to securitisation transactions whereby assets continue to be recognised on balance sheet (either fully or partially) although they have been subject to legal transfer to another entity. Securitisations may, depending on the individual arrangement, result in continued recognition of the securitised assets and the recognition of the debt securities issued in the transaction.

		2018	2017
No derecognition achieved £'000	Carrying amount of assets that are continued to be recognised	Carrying amount of associated liabilities	Carrying amount of assets that are continued to be recognised	Carrying amount of associated liabilities
Loans and advances to customers	292 322	–	295 182	–
Other loans and advances	129 773 422 095	– –	141 136 436 318	– –

For transfer of assets in relation to repurchase agreements see note 19.

Investec plc parent company accounts

Balance sheet

At 31 March £'000	Notes	2018	2017
Assets
Fixed assets
Investments in subsidiary undertakings	b	1 772 805	1 817 840
Securities issued by subsidiary undertaking	c	200 000	–
		1 972 805	1 817 840
Current assets
Amounts owed by group undertakings		495 325	488 592
Taxation		10 719	12 867
Prepayments and accrued income		475	22
Cash at bank and in hand
– with subsidiary undertakings		281 832	104 978
– balances with other banks		613	605
		788 964	607 064
Current liabilities
Creditors: amounts falling due within one year
Derivative financial instruments		–	6
Amounts owed to group undertakings		267 275	477 161
Other liabilities		1 475	1 130
Accruals and deferred income		3 286	8 297
Net current assets		516 928	120 470
Creditors: amounts falling due after one year
Debt securities in issue	d	407 740	324 089
Net assets		2 081 933	1 614 221
Capital and reserves
Called-up share capital	g	195	191
Perpetual preference shares	g	29	29
Share premium account		1 317 115	1 246 282
Capital reserve		180 606	180 606
Other Additional Tier 1 securities in issue	g	250 000	–
Retained income		334 048	187 113
Total capital and reserves		2 081 993	1 614 221

The notes on pages 135 to 141 form an integral part of the financial statements.

The company's profit for the year, determined in accordance with the Companies Act 2006, was £259 317 000 (2017: £93 027 000).

Approved and authorised for issue by the board of directors on 12 June 2018 and signed on its behalf by:

Stephen Koseff Chief executive officer 12 June 2018

(continued)

Statement of changes in shareholders' equity

						Shareholders
						equity excluding	Other Additional
		Perpetual				non	Tier 1	Total
	Share	preference	Share	Capital	Retained	controling	securities	shareholders'
£'000	capital	shares	premium	reserve	income	interests	in issue	equity
Balance at 31 March
2016	182	151	1 194 257	180 483	160 459	1 535 532	–	1 535 532
Issue of ordinary shares	9	–	174 073	–	–	174 082	–	174 082
Redemption of preference
shares	–	(122)	(122 048)	123	40 427	(81 620)	–	(81 620)
Total comprehensive
income	–	–	–	–	93 816	93 816	–	93 816
Dividends paid to
preference shareholders	–	–	–	–	(1 862)	(1 862)	–	(1 862)
Dividends paid to ordinary
shareholders	–	–	–	–	(105 727)	(105 727)	–	(105 727)
At 31 March 2017	191	29	1 246 282	180 606	187 113	1 614 221	–	1 614 221
Issue of ordinary shares	4	–	70 833	–	–	70 837	–	70 837
Issue of Other Additional
Tier 1 security instruments	–	–	–	–	–	–	250 000	250 000
Total comprehensive
income	–	–	–	–	259 318	259 318	–	259 318
Dividends paid to
preference shareholders	–	–	–	–	(421)	(421)	–	(421)
Dividends declared to
Other Additional Tier 1
security instruments	–	–	–	–	(5 709)	(5 709)	5 709	–
Dividends paid to other
Additional Tier 1 security
instruments	–	–	–	–	–	–	(5 709)	(5 709)
Dividends paid to ordinary shareholders	–	–	–	–	(106 253)	(106 253)	–	(106 253)
At 31 March 2018	195	29	1 317 115	180 606	334 048	1 831 993	250 000	2 081 993

a Accounting policies

Basis of preparation

The parent accounts of Investec plc are prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (IFRS 101) and in accordance with applicable accounting standards. The company is incorporated and domiciled in England and Wales and the company's accounts are presented in Pounds Sterling and all values are rounded to the nearest thousand (£'000), except where otherwise indicated.

The accounts have been prepared on the historical cost basis. The principal accounting policies adopted are set out below.

The company has taken advantage of the following disclosure exemptions under IFRS 101 where applicable to the company:

• The requirements of paragraphs 45(b) and 46-52 of IFRS 2 Share-based Payment
• The requirements of paragraphs 62, B64(d), B64(e), B64(g), B64(h), B64(j) to B64(m), B64(n)(ii), B64(o)(ii), B64(p), B64(q)(ii), B66 and B67of IFRS 3 Business Combinations. Equivalent disclosures are included in the consolidated financial statements of Investec plc in which the entity is consolidated
• The requirements of paragraph 33(c) of IFRS 5 Non-current Assets Held for Sale and Discontinued Operations
• The requirements of IFRS 7 Financial Instruments: Disclosures
• The requirements of paragraphs 91– 99 of IFRS 13 Fair Value Measurement
• The requirement in paragraph 38 of IAS 1 Presentation of Financial Statements to present comparative information in respect of: (i) paragraph

79(a)(iv) of IAS 1, (ii) paragraph 73(e) of IAS 16 Property, Plant and Equipment (iii) paragraph 118(e) of IAS 38 Intangibles Assets, (iv) paragraphs 76 and 79(d) of IAS 40 Investment Property and (v) paragraph 50 of IAS 41 Agriculture

• The requirements of paragraphs 10(d), 10(f), 16, 38A to 38D, 40A to 40D,111 and 134-136 of IAS 1 Presentation of Financial Statements
• The requirements of IAS 7 Statement of Cash Flows
• The requirements of paragraphs 30 and 31 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
• The requirements of paragraphs 17 and 18A of IAS 24 Related Party Disclosures
• The requirements in IAS 24 Related Party Disclosures to disclose related party transactions entered into between two or more members of a group, provided that any subsidiary which is a party to the transaction is wholly owned by such a member.

As permitted by IFRS 101, the company has taken advantage of the disclosure exemptions available under that standard in relation to share-based payments, financial instruments, capital management, presentation of a cash flow statement, presentation of comparative information in respect of certain assets, standards not yet effective, impairment of assets, business combinations, discontinued operations and related party transactions.

Where required, equivalent disclosures are given in consolidated financial statements of the group.

Foreign currencies

Monetary assets and liabilities in foreign currencies are translated into Pounds Sterling at exchange rates ruling at the balance sheet date. All foreign currency transactions are translated into Pounds Sterling at the exchange rate ruling at the time of the transaction. Forward foreign exchange contracts are revalued at the market rates ruling at the date applicable to their respective maturities. Any gain or loss arising from a change in exchange rates subsequent to the date of the transaction is included as an exchange gain or loss in the income statement.

Investments

Investments in subsidiaries and interests in associated undertakings are stated at cost less any accumulated impairment in value.

Income

Dividends from subsidiaries are recognised when received. Interest is recognised on an accrual basis.

Taxation

Current tax payable is provided on the amount expected to be payable on taxable profit at rates that are enacted or substantively enacted and applicable to the relevant period.

Deferred taxation is provided using the balance sheet method on temporary differences between the carrying amount of an asset or liability in the balance sheet and its tax base, except where such temporary differences arise from:

• The initial recognition of goodwill
• The initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction has no effect on the income statement or taxable profit

(continued)

• In respect of temporary differences associated with the investments in subsidiaries and interests in associated undertakings, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future
• Deferred tax assets or liabilities are measured using the tax rates that have been enacted or substantively enacted at the balance sheet date
• Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the deferred tax asset can be utilised

• Items recognised directly in other comprehensive income are net of related current and deferred taxation.

Company's own profit and loss account

The company has taken advantage of the exemption in section 408 of the Companies Act 2006 to not present its own profit and loss account.

Financial assets

Financial assets are recorded at amortised cost applying the effective interest rate method where they are classified as loans and receivables or fair value through profit and loss.

Financial liabilities

Financial liabilities are recorded at amortised cost applying the effective interest rate method.

b Investments in subsidiary undertakings

£'000	2018	2017
At beginning of year	1 817 840	1 817 840
Additions	165 000	–
Disposals	(210 035)	–
At end of year	1 772 805	1 817 840

On 29 March 2018, Investec 1 Limited issued 16 500 000 ordinary shares of £0.001 each for a cash consideration of £10.00 per share.

Also, Investec Holding Company Limited reduced their capital by reducing the number of shares held from 5 846 to 3 000,20p ordinary shares and settled by intercompany.

(continued)

c Securities issued by subsidiary undertaking

On 16 October 2017, the company acquired £200 million Fixed Rate Reset Perpetual Additional Tier 1 Write Down Capital Securities ("AT1 securities") issued by Investec Bank plc. The securities are perpetual and pay a distribution rate on 5 March, June, September and December, commencing from 5 December 2017. At each distribution payment date, Investec Bank plc can decide whether to pay the distribution rate, which is non-cumulative, in whole or in part. The distribution rate is 6.75% per annum until 5 December 2024; thereafter, the distribution rate resets every five years to a rate 5.749% per annum plus the benchmark gilts rate. The AT1 securities will be automatically written down and the company will lose their entire investment in the securities should the Common Equity Tier 1 capital ratio of the Investec Bank plc group as defined in the PRA's rules fall below 7%. The AT1 Securities are redeemable at the option of Investec Bank plc on 5 December 2024 or on each distribution payment date thereafter. No such redemption may be made without the consent of the PRA.

d Debt securities in issue

On 5 May 2015, the company issued £300 million 4.50% Senior Unsecured Notes from its European Medium Term Note programme ("EMTN"). The notes mature on 5 May 2022 and pay interest at a fixed rate annually in arrears. On 7 August 2017 the company issued a further £100 million of the 4.5% Senior Unsecured Notes due 2022, at a premium of 108.479%, which has been consolidated with and form a single series with the existing Notes.

The company has redeemed a Euro denominated note of €25 million issued on 14 February 2014, which paid interest at a fixed rate of 3.48% semi-annually in arrears. The Notes matured on 29 September 2017.

e Audit fees

Details of the company's audit fees are set out in note 6 of the group financial statements.

f Dividends

Details of the company's dividends are set out in note 10 of the group financial statements.

g Share capital

Details of the company's ordinary share capital are set out in note 42 of the group financial statements. Details of the perpetual preference shares are set out in note 43 of the group financial statements. Details of the Other Additional Tier 1 securities in issue are set out in note 46 of the group financial statements.

h Audit opinion

The audit opinion on the financial statements of the Investec plc parent company is included in the combined consolidated financial statements of Investec plc and Investec Limited for the year ended 31 March 2018. The information as detailed here for Investec plc parent company is a summary. For detailed notes refer to the Investec plc group and company annual financial statements.

(continued)

i Subsidiaries

At 31 March 2018	Principal activity	Interest held
* Directly owned by Investec plc
United Kingdom
Registered office: 30 Gresham Street, London, EC2V 7QP, UK
Investec 1 Limited *	Investment holding	100%
Investec Holding Company Limited *	Investment holding	100%
Investec (UK) Limited	Holding company	100%
Investec Group (UK) Limited	Holding company	100%
Guinness Mahon Group Limited	Holding company	100%
Guinness Mahon Pension Fund Trustees Limited	Pension fund trustee	100%
Guinness Mahon Holdings Limited	Holding company	100%
Investec Bank plc	Banking institution	100%
Rensburg Sheppards plc	Holding company	100%
Anston Trustees Limited	Non trading	100%
Bell Nominees Limited	Non trading	100%
Carr Investment Services Nominees Limited	Non trading	100%
Carr PEP Nominees Limited	Non trading	100%
Click Nominees Limited	Non trading	100%
Ferlim Nominees Limited	Nominee services	100%
Investec Click & Invest Limited	Investment management services	100%
Investec Wealth & Investment Trustees Limited	Trustee services	100%
Investment Administration Nominees Limited	Non trading	100%
IWI Fund Management Limited	Non trading	100%
PEP Services (Nominees) Limited	Non trading	100%
R & R Nominees Limited	Non trading	100%
R S Trustees Limited	Non trading	100%
Rensburg Client Nominees Limited	Nominee services	100%
Scarwood Nominees Limited	Non trading	100%
Spring Nominees Limited	Non trading	100%
Tudor Nominees Limited	Non trading	100%
Williams De Broe Limited	Non trading	100%
Rensburg Investment Management Limited	Non trading	100%
PIF Investments Limited (previously G. P. International Limited)	Dormant	100%
Beeson Gregory Index Nominees Limited	Dormant nominee company	100%
CF Corporate Finance Limited	Leasing company	100%
EVO Nominees Limited	Dormant nominee company	100%
Evolution Securities Nominees Limited	Dormant nominee company	100%
Investec Asset Finance (Capital No. 3) Limited	Leasing company	100%
Investec Asset Finance (Management) Limited	Leasing company	100%
Mann Island Finance Limited	Leasing company	100%
MI Vehicle Finance Limited	Leasing company	100%
The Leasing Acquisition General Partnership	Leasing partnership
Investec Bank (Nominees) Limited	Nominee company	100%
Investec Finance Limited (previously Investec Finance plc)	Debt issuance	100%
Investec Group Investments (UK) Limited	Investment holding company	100%
ICF Investments Limited	Investment holding company	100%
Investec Capital Solutions No 1 Limited	Lending company	100%
Investec Capital Solutions Limited	Lending company	100%

(continued)

i Subsidiaries (continued)

At 31 March 2018	Principal activity	Interest held
Registered office: 30 Gresham Street, London, EC2V 7QN, UK (continued)
Diagonal Nominees Limited	Nominee company	100%
F&K SPF Limited	Property company	100%
Via Novus Limited	Investment holding company	49.93%
GFT Holdings Limited	Holding company	100%
Investec Investment Trust plc	Debt issuer	100%
Investec Investments (UK) Limited	Investment holding company	100%
Panarama Properties (UK) Limited	Property holding company	100%
Inv – German Retail Limited (previously Canada Water	Property company	100%
(Developments) Limited)
Investec Securities Limited	Investment holding company	100%
PEA Leasing Limited	Dormant	100%
Quantum Funding Limited	Leasing company	100%
Quay Nominees Limited	Nominee company	100%
Technology Nominees Limited	Nominee	100%
Torteval LM Limited	Investment holding company	100%
Torteval Funding LLP	Financing company	100%
Tudor Tree Properties Limited	Property company	100%
Willbro Nominees Limited	Nominee company	100%
Evolution Capital Investment Limited	Investment holding company	100%
Investec Investments Limited	Investment holding	100%
Registered office: 30 Gresham Street, London, EC2V 7QN, UK
Investec Wealth & Investment Limited	Investment management services	100%
Registered office: Reading International Business Park,
Reading, RG2 6AA, UK
Investec Asset Finance plc	Leasing company	100%
Registered office: Woolgate Exchange, 25 Basinghall Street, London, EC2V 5HA, UK
Investec Asset Management Limited	Investment management services	83%
Investec Fund Managers Limited**	Management company	100%
Australia
Registered office: Level 23, The Chifley Tower,
2 Chifley Square, Sydney, NSW 2000, Australia Investec Asset Management Australia Proprietary Limited **	Sales and distribution	100%
IEC Funds Management Proprietary Limited	Fund manager	100%
Investec Propco Proprietary Limited	Property fund trustee	100%
Investec Property Limited	Property fund trustee	100%
Investec Property Management Proprietary Limited	Property fund manager	100%
Investec Wentworth Proprietary Limited	Security trustee	100%
Investec Holdings Australia Limited	Holding company	100%
Investec Australia Property Investments Proprietary Limited	Investment company	100%
Investec Australia Finance Proprietary Limited	Lending company	100%
Investec Australia Limited	Financial Services	100%
Bowden (Lot 32) Holdings Proprietary Limited	Holding company	100%
Bowden (Lot 32) Proprietary Limited	Development company	100%
Investec Australia Direct Investment Proprietary Limited	Investment company	100%
Investec CWFIH Proprietary Limited	Dormant	100%
Mannum Powerco Proprietary Limited	Dormant	100%
Tungkillo Powerco Proprietary Limited	Dormant	100%
Investec Australia Financial Markets Proprietary Limited	Dormant	100%
Investec Australia Funds Management Limited	Aviation trustee company	100%
Investec (Australia) Investment Management Proprietary Limited	Aviation fund company	100%
Investec Wentworth Private Equity Proprietary Limited	Inactive private equity	100%
IWPE Nominees Proprietary Limited	Custodian	100%

(continued)

i Subsidiaries (continued)

At 31 March 2018	Principal activity	Interest held
Wentworth Associates Proprietary Limited	Dormant	100%
British Virgin Islands
Registered office: Palm Grove House, PO Box 438, Road Town, Tortola, British Virgin Islands
Finistere Directors Limited	Corporate director	100%
GFT Directors Limited	Corporate director	100%
Registered office: PO Box 186 Road Town, Tortola, British Virgin Islands
Curlew Investments Limited	Investment holding company	100%
Canada
Registered office: One Brunswick Square, Suite 1500, PO Box 1324, Saint John, New Brunswick, Canada E2L 4H8
Curlew Group Holdings Limited	Investment holding company	42.50%
Registered office: 44 Chipman Hill Suite 1000, Saint John NB, E2L 4S6, Canada
Investec North America Limited	Trading company	100%
Cayman Islands
Registered office: 190 Elgin Avenue, George Town, Grand Cayman, KY1-9005
Investec Pallinghurst (Cayman) LP	Investment holding partnership	58.30%
Guernsey
Registered office: Glategny Court, Glategny Esplanade, St. Peter Port, GY1 1WR, Guernsey, Channel Islands
Investec Asset Management Guernsey Limited**	Management company and global distributor	100%
Investec Africa Frontier Private Equity Fund GP Limited**	General partner to funds	100%
Investec Africa Private Equity Fund 2 GP Limited**	General partner to funds	100%
Investec Wealth & Investment (Channel Islands) Limited	Investment management services	100%
Torch Nominees Limited	Nominee services	100%
Investec Bank (Channel Islands) Limited	Banking institution	100%
Bayeux Limited	Corporate trustee	100%
Finistere Limited	Corporate nominee	100%
Finistere Secretaries Limited	Corporate secretary	100%
ITG Limited	Trust and company administration	100%
Investec Bank (Channel Islands) Nominees Limited	Nominee company	100%
Registered office: PO Box 290, Glategny Court, Glategny Esplanade, St Peter Port, Guernsey, GY1 3RP, Channel Islands
Hero Nominees Limited	Nominee services	100%
Registered office: P.O. Box 188, Glategny Court, Glategny Esplanade, St Peter Port, Guernsey, GY1 3LP, Channel Islands
Investec Asset Finance (Channel Islands) Limited	Leasing company	100%
Registered office: Heritage Hall, Le Marchant Street, St Peter Port, Guernsey, GY1 4JH, Channel Islands

Financial statements

Notes to Investec plc parent company accounts

(continued)

i Subsidiaries (continued)

At 31 March 2018	Principal activity	Interest held
Investec Captive Insurance Limited	Captive insurance company	100%
Registered office: Western Suite, Ground Floor, Mill Court, La Charroterie, St Peter Port, Guernsey, GY1 1EJ, Channel Islands
HEV (Guernsey) Limited	Investment holding company	100%
Hong Kong
Registered office: Suites 3609 – 3614, 36/F, Two International
Finance Centre, 8 Finance Street, Central, Hong Kong
Investec Asset Management Hong Kong Limited **	Sales and distribution	100%
Registered office: Room 3609-3613, 36/F, Two International Finance Centre, 8 Finance Street, Central, Hong Kong
Investec Capital Asia Limited	Investment banking	100%
Investec Capital Markets Limited	Investment banking	100%
India Registered office: A 607, The Capital, Bandra Kurla Complex,
Mumbai – 400 051, INDIA
Investec Capital Services (India) Private Limited	Trading company	75%
Ireland
Registered office: The Harcourt Building,
Harcourt Street, Dublin 2, Ireland
Aksala Limited	Property company	100%
Investec Holdings (Ireland) Limited	Holding company	100%
Investec Ireland Limited	Financial services	100%
Investec International Limited	Aircraft leasing	100%
Neontar Limited	Holding company	100%
Investec Securities Holdings Ireland Limited	Holding company	100%
Investec Capital & Investments (Ireland) Limited	Wealth management and investment services	100%
Aurum Nominees Limited	Nominee company	100%
Investec (Airtricity) Nominees Ireland Limited	Nominee company	100%
Investec (CapVest) Ireland Limited	Nominee company	100%
Investec (Development) Nominees Ireland Limited	Nominee company	100%
Investec (Placings) Ireland Limited	Nominee company	100%
Investec (Thomas Street) Nominees No 2 Limited	Nominee company	100%
Investec Broking Nominees Ireland Limited	Nominee company	100%
Investec Corporate Finance (Ireland) Limited	Corporate finance (inactive)	100%
Investec Ventures Ireland Limited	Venture capital	100%
Venture Fund Principals Limited	Special partner	100%
Investec Europe Limited	Investment services	100%
Jersey
Registered office: One The Esplanade, St Helier, Jersey, JE2 3QA, Channel Islands
Investec Finance (Jersey) Limited*	Share trust	100%
Registered office: PO Box 344 One The Esplanade St Helier
Jersey JE4 8UW, Channel Islands
Investec GP (Jersey) Limited	Investment holding company	100%
Luxembourg
Registered office: 560, rue de Neudorf, L-2220 Luxembourg
Investec Finance SARL	Dormant	100%
Investec Asset Management Luxembourg S.A.**	Management company	100%
Singapore
Registered office: 8 Wilkie Road, #03-01 Wilkie Edge,
Singapore 228095
Investec Asset Management Singapore Pte. Limited**	Sales and distribution	100%
Investec Singapore Pte Limited	Securities services	100%
Registered office: 80 Robinson Road, #02-00, Singapore, 068898
Sunco Holdings Pte Limited	Holding company	100%

(continued)

i Subsidiaries (continued)

At 31 March 2018	Principal activity	Interest held
Sunhold Pte Limited	Holding company	100%
Switzerland
Registered office: Seefeldstrasse 69, 8008 Zurich, Switzerland
Investec Asset Management Switzerland GmbH **	Sales and distribution	100%
Registered office: 23 Avenue de France, CH – 1202, Geneva, Switzerland
Reichmans Geneva SA	Trading company	100%
Registered offices: Löwenstrasse 29, CH-8001 Zurich, Switzerland
Investec Bank (Switzerland) AG	Banking institution	100%
Registered office: c/o Dr. Leo Granziol, Bahnhofstrasse 32, 6300 Zug, Switzerland
Investec Trust Holdings AG	Investment holding company	100%
United States of America
Registered office: 2711 Centerville Road, Suite 400, Wilmington, New Castle, DE 19808, USA
Investec Asset Management North America, Inc. **	Sales and distribution	100%
Registered office: 10 E. 53rd St., 22nd floor, New York, NY 10022, USA
Investec USA Holdings Corporation Inc	Holding company	100%
Investec Inc	Investment holding company	100%
Fuel Cell IP 1 LLC	Investment holding company	100%
Fuel Cell IP 2 LLC	Investment holding company	100%
Investec Securities (US) LLC	Financial services	100%

** 100% owned by Investec Asset Management Limited which is itself 83% owned

Associates

At 31 March 2018	Principal activity	Interest held
United Kingdon
Registered office: Dee House Lakeside Business Village, St. Davids Park, Ewloe, Deeside, Clwyd, CH5 3XF
Virtual Lease Services	Lease services provider	49%
Australia
Registered office: Point Cook Road, Point Cook, Victoria, Australia
Point Cook (Trust Project No 9)	Property development	50%
British Virgin Islands
Registered office: Vistra Corporate Service Centre, Wickhams Cay II, Road Town, Tortola VG1110, British Virgin Islands
imarkets (Holdings) Limited	Online trading platform	33%
Guernsey
Registered office: Glategny Court, Glategny Esplanade, St. Peter Port, GY1 1WR, Guernsey, Channel Islands
Growthpoint Investec African Property Management Limited**	Management company	50%
Luxembourg
Registered office: 15, Rue Bender, L-1229 Luxembourg
Investec GLL Global Special Opportunities Real Estate Fund	Property development	5%
Registered office: 19, Rue Eugene Ruppert, L-2453 Luxembourg
Grovepoint S.a.r.l.	Investment and advisory	42%

Definitions

Adjusted earnings per ordinary share before goodwill, acquired intangibles and non-operating items

Refer to page 61

Adjusted shareholders' equity

Refer to calculation on page 66 in volume one

Core loans and advances

Net loans and advances to customers plus net own originated securitised assets

Refer to calculation on page 35 in volume two

Cost to income ratio

Operating costs divided by operating income (net of depreciation on leased assets). Depreciation on operating leased assets has been netted off against operating income

Dividend cover

Adjusted earnings per ordinary share before goodwill and non-operating items divided by dividends per ordinary share

Earnings attributable to ordinary shareholders before goodwill, acquired intangibles and non-operating items (i.e. adjusted earnings)

Refer to page 61

Effective operational tax rate

Tax on profit on ordinary activities (excluding non-operating items) divided by operating profit (excluding share of post taxation profit of associates)

Market capitalisation

Total number of shares in issue (including Investec plc and Investec Limited) multiplied by the closing share price of Investec plc on the London Stock Exchange

Net tangible asset value per share

Refer to calculation on page 64 in volume one

Non-operating items

Reflects profits and/or losses on termination, restructuring or disposal of group operations and acquisitions made

Operating profit

Operating income less operating costs, impairment losses on loans and advances and depreciation on operating leased assets. This amount is before goodwill, acquired intangibles and non-operating items

Operating profit per employee

Refer to calculation on page 70 in volume one

Annuity income

Net interest income plus net annuity fees and commissions expressed as a percentage of total operating income

Return on average adjusted shareholders' equity

Refer to calculation on page 66 in volume one

Return on average adjusted tangible shareholders' equity

Refer to calculation on page 66 in volume one

Return on risk-weighted assets

Adjusted earnings divided by average risk-weighted assets

Risk-weighted assets

Calculated as the sum of risk-weighted assets for Investec plc and Investec Limited (converted into Pounds Sterling) as reflected on page 64 in volume one

Staff compensation to operating income ratio*

All staff compensation costs expressed as a percentage of operating income

Third party assets under management

Includes third party assets under administration managed by the Wealth & Investment, Asset Management and Property businesses

Total capital resources

Includes shareholders' equity, subordinated liabilities, Other Additional Tier 1 securities in issue and non-controlling interests

Total equity

Total shareholders' equity including Other Additional Tier 1 securities in issue and non-controlling interests

Weighted number of ordinary shares in issue

The number of ordinary shares in issue at the beginning of the year increased by shares issued during the year, weighted on a time basis for the period during which they have participated in the income of the group less treasury shares. Refer to calculation on page 61

^* Investec Asset Management (IAM) operates schemes for staff whose bonuses are deferred into collective investment schemes that are managed by IAM. Any resulting profit or loss arising from these schemes is attributable to the employee in respect of whom the investment was made. As such, any rise or fall in the value of the assets held is offset to an equal but opposite degree by the change in the liability (expense) to the employee. Therefore the profit or loss on these investments and the corresponding expense to employees are offset in arriving at the staff compensation ratio for IAM and hence for the group as a whole.

Contact details

Australia, Brisbane

Level 36, Riparian Plaza 71 Eagle Street Brisbane QLD 4001 Australia Telephone (61) 7 3018 8106 e-mail australia@investec.com.au

Australia, Melbourne

Level 13 120 Collins Street Melbourne GPO Box 2280 VIC 3001 Telephone (61) 2 9293 6300 Facsimile (61) 2 9293 6301 e-mail australia@investec.com.au

Australia, Sydney

Level 23, The Chifley Tower 2 Chifley Square Phillip Street Sydney GPO Box 4411 NSW 2000 Australia Telephone (61) 2 9293 6300 Facsimile (61) 2 9293 6301 e-mail australia@investec.com.au

Botswana, Gaborone

Plot 64511, Unit 5 Fairgrounds Gaborone Telephone (267) 318 0112 Facsimile (267) 318 0114 e-mail info@investec.com

Guernsey

Glategny Court Glategny Esplanade, GY1 1WR Channel Islands Telephone +(44) 1481 706 950 Facsimile +(44) 1481 741 147 e-mail enquiries@investec-ci.com

Hong Kong

Suite 3609 36/F Two International Finance Centre 8 Finance Street Central Hong Kong Telephone (852) 3187 5000 Facsimile (852) 2524 3360 e-mail investec.asia@investecmail.com

Suites 2604 – 06 Tower 2 The Gateway Harbour City Tsimshatsui Kowloon Hong Kong Telephone (852) 2861 6888 Facsimile (852) 2861 6861

India, Mumbai

607-A, The Capital A – Wing, Bandra Kurla Complex Bandra East, 400051 India Telephone (91) 226 136 7400

Ireland, Dublin

The Harcourt Building Harcourt Street, 2 Dublin Ireland Telephone (353 1) 421 0000 Facsimile (353 1) 421 0500 e-mail info@investec.ie

Ireland, Cork

One Albert Quay Cork Ireland Telephone (353 21) 237 3800 e-mail corkinfo@investec.ie

Italy, Milan

Corso Venezia 44 20121, Milano Italy Telephone (39 02) 3658 1590

Jersey

One The Esplanade, St Helier Jersey JE2 3QA Channel Islands Telephone (44) 1534 512 650 Facsimile (44) 1534 285 174 e-mail enquiries@investec-ci.com

Luxembourg

32/36 Boulevard d'Avranche L-1160 Luxembourg Telephone (352 264) 979 8000 Facsimile (352 264) 979 8888

Mauritius, Port Louis

6th Floor Dias Pier Building Le Caudan Waterfront Caudan Port Louis Telephone (230) 207 4000 Facsimile (230) 207 4002 e-mail info@investec.com

Namibia, Windhoek

Office 1 Ground floor Heritage Square Building 100 Robert Mugabe Avenue Windhoek Telephone (264 61) 389 500 Facsimile (264 61) 249 689 e-mail info@investec.com

Singapore

25 Duxton Hill #03-01 Singapore 089608 Telephone (65) 6653 5550 Facsimile (65) 6653 5551 e-mail investec.sg@investecmail.com

South Africa, Cape Town

36 Hans Strijdom Avenue Foreshore Cape Town 8001 PO Box 1826 Cape Town 8000 Telephone (27 21) 416 1000 Facsimile (27 21) 416 1001

South Africa, Durban

5 Richefond Circle Ridgeside Office Park Umhlanga Durban 4319 PO Box 25278 Gateway Durban 4321 Telephone (27 31) 575 4000 Facsimile (27 865) 009 901

South Africa, East London

Cube 1 Cedar Square Bonza Bay Road Beacon Bay East London 5241 Telephone (27 43) 709 5700 Facsimile (27 43) 748 1548

South Africa, Johannesburg

100 Grayston Drive Sandown Sandton 2196 PO Box 785700 Sandton 2146 Telephone (27 11) 286 7000 Facsimile (27 11) 286 7777 e-mail, South African offices

• Recruitment queries: recruitment@investec.co.za
• Client queries:
  • Asset management: comcentre@investecmail.com
  • Institutional Securities: securities@investec.co.za
  • Private Client Securities: iso@investec.co.za
  • Property Group: ipg@investec.co.za
  • Private Bank: privatebank@investec.co.za
  • Capital Markets: capitalmarketssa@investec.co.za

South Africa, Knysna

TH24/TH25 Long Street Ext Thesen Harbour Town Knysna 6571 Telephone (27 44) 302 1800 Facsimile (27 44) 382 4954

South Africa, Pietermaritzburg

48 Bush Shrike Close Victoria Country Club Estate Montrose Pietermaritzburg 3201 PO Box 594 Pietermaritzburg 3200 Telephone (27 33) 264 5800 Facsimile (27 33) 342 1561

South Africa, Port Elizabeth

Waterfront Business Park, Pommern Street Humerail, Port Elizabeth, 6045 PO Box 13434 Humewood, Port Elizabeth 6057 Telephone (27 41) 396 6700 Facsimile (27 41) 363 1667

South Africa, Pretoria

Corner Atterbury and Klarinet Streets Menlo Park Pretoria 0081 PO Box 35209 Menlo Park 0102 Telephone (27 12) 427 8300 Facsimile (27 12) 427 8310

South Africa, Stellenbosch

Office 401, Mill Square, 4th Floor 12 Plein Street, Stellenbosch 7600 PO Box 516 Stellenbosch 7599 Telephone (27 21) 809 0700 Facsimile (27 21) 809 0730

Switzerland, Lausanne

Rue Pèpinet 1 1003 Lausanne, Switzerland Telephone (41 21) 644 2130 Facsimile (41 44) 226 1010 e-mail info@investecbank.ch

Switzerland, Zurich

Loewenstrasse 29 Zurich, CH-8001 Switzerland Telephone (41 44) 226 1000 Facsimile (41 44) 226 1010 e-mail info@investecbank.ch

United Kingdom, Bath

Royal Mead, Railway Place Bath, BA1 1SR, UK Telephone (44122) 534 1580 Facsimile (44122) 534 1581

Northern Ireland, Belfast

5th Floor Centrepoint 58-60 Bedford Street, Belfast BT2 7DR, Northern Ireland Telephone (44 2890) 321 002 Facsimile (44 2890) 244 852

United Kingdom, Birmingham

Colmore Plaza, Colmore Circus Birmingham, B4 6AT, UK Telephone (44121) 232 0700 Facsimile (44121) 232 0701

United Kingdom, Bournemouth

Midland House, 2 Poole Road Bournemouth, BH2 5QY, UK Telephone (44120) 220 8100 Facsimile (44120) 220 8101

United Kingdom, Cheltenham

Festival House Jessop Avenue Cheltenham GL50 3SH, UK Telephone (44 1242) 514 756 Facsimile (44 1242) 583 936

United Kingdom, Edinburgh

Quartermile One, 15 Lauriston Place Edinburgh EH3 9EN, UK Telephone (44 131) 226 5000 Facsimile (44 131) 226 5700

United Kingdom, Exeter

Keble House, Southernhay Gardens Exeter, EX1 1NT, UK Telephone (44139) 220 4404 Facsimile (44139) 242 6176

United Kingdom, Glasgow

4th Floor, 5 George Square Glasgow, G2 1DY, UK Telephone: (44141) 333 9323 Facsimile (44141) 332 9920

United Kingdom, Guildford

Unit 4, The Billings, 3 Walnut Tree Close Guildford, GU1 4UL, UK Telephone (44148) 330 4707 Facsimile (44148) 345 5271

United Kingdom, Leeds

Quayside House, Canal Wharf Leeds, LS11 5PU, UK Telephone (44113) 245 4488 Facsimile (44113) 245 1188

United Kingdom, Liverpool

The Plaza 100 Old Hall Street Liverpool L3 9AB, UK Telephone (44 151) 227 2030 Facsimile (44 151) 227 2444

United Kingdom, London

30 Gresham Street, London EC2V 7QP, UK Telephone (44 207) 597 4000 Facsimile (44 207) 597 4070

30 Gresham Street, London EC2V 7QN, UK Telephone (44 207) 597 1234 Facsimile (44 207) 597 1000

25 Basinghall Street, London EC2V 5HA, UK Telephone (44 207) 597 1900 Facsimile (44 207) 597 1919

United Kingdom, Manchester

3 Hardman Street Spinningfields Manchester M3 3HF UK Telephone (44 161) 832 6868 Facsimile (44 161) 832 1233

Investec Asset Finance plc Reading International Business Park RG2 6AA, UK Telephone (03 30) 123 9613

United Kingdom, Reading

United Kingdom, Reigate

43 London Road Reigate, Surrey RH2 9PW, UK Telephone (44 173) 722 4223 Facsimile (44 173) 722 4197

United Kingdom, Sheffield

Beech House 61 Napier Street Sheffield S11 8HA, UK Telephone (44 114) 275 5100 Facsimile (44 114) 270 1109

United States, New York

10 East 53rd Street 22nd Floor New York, NY 10022 United States of America Telephone (212) 259 5610 Facsimile (917) 206 5103

Corporate information

Investec plc and Investec Limited

Secretary and registered office

Investec plc

David Miller

30 Gresham Street London EC2V 7QP United Kingdom Telephone (44) 20 7597 4000 Facsimile (44) 20 7597 4491

Investec Limited

Niki van Wyk

100 Grayston Drive Sandown Sandton 2196 PO Box 785700 Sandton 2196 Telephone (27) 11 286 7000 Facsimile (27) 11 286 7966

Internet address

www.investec.com

Registration number

Investec plc

Registration number 3633621

Investec Limited

Registration number 1925/002833/06

Auditors

Ernst & Young LLP Ernst & Young Inc.

Registrars in the UK

Computershare Investor Services plc The Pavilions Bridgwater Road Bristol BS99 6ZZ United Kingdom Telephone(44) 370 707 1077

Transfer secretaries in South Africa

Computershare Investor Services Proprietary Limited Rosebank Towers 15 Biermann Avenue Rosebank 2196 PO Box 61051 Marshalltown 2107 Telephone (27) 11 370 500

Sponsors

Investec Bank Limited 100 Grayston Drive

Sandown Sandton 2196 PO Box 785700 Sandton 2196

Directorate

Refer to page 133 in volume one of the integrated annual report.

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Notes

Notes

Financial statements

Specialist Banking | Asset Management | Wealth & Investment

AR

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2018

2018

Volume 3

Annual Report Investec annual financial statements

V.3

Investec annual financial statements